Senate Passes Ocean Shipping Bill; Path to Reconciling With House Bill Unclear

Senate Passes Ocean Shipping Bill; Path to Reconciling With House Bill Unclear

April 01, 2022  | Jeff Davis

Yesterday, the Senate passed legislation (S. 3580) reauthorizing the Federal Maritime Commission and making changes in ocean shipping law designed to make force ocean carriers to move goods in and out of U.S. ports more quickly and efficiently.  The legislation, which was assembled by Sens. Amy Klobuchar (D-MN) and John Thune (R-SD), passed the Senate by unanimous consent.

The Senate bill must now be reconciled with different House legislation. The House has now passed its ocean shipping bill not once, not twice, but three times:

  • As its own individual piece of legislation (H.R. 4996), on December 8, 2021, by a vote of 364 to 60;
  • As Division S of the America COMPETES Act (H.R. 4521, the China competition/microchip bill to which the House attached all manner of unrelated stuff) on February 4; and
  • As Title IV of the FY 2023 Coast Guard reauthorization bill (H.R. 6865), which passed the House on March 29 by a vote of 378 to 46.

Senate Majority Leader Chuck Schumer (D-NY) said, immediately after the bill passed:

When the cost of shipping is higher, the cost of the goods are higher, and people have to pay too much–a whole lot more.
At the end of the day, it is the American consumer that pays the higher price. Thankfully, this bill will make it harder for ocean carriers to unreasonably refuse American goods at our ports while strengthening the Federal Maritime Commission’s ability to step in and prevent harmful practices by carriers.

A key focus of both bills is charges for “detention and demurrage” in container shipping – detention being the money that ports charge importers for not returning empty containers on time, and demurrage being the charges that shipping lines charge importers for not picking up their full containers on time. With U.S. seaports in such backlogged chaos in recent months, more importers than ever were complaining that they were being charged for D&D when it wasn’t their fault, and that it was difficult to impossible to dispute individual D&D charges.

D&D changes have bipartisan support, in part because they mostly align with an interpretive rule the FMC put in place under the Trump Administration, in May 2020. But having the force of law would allow significantly better enforcement, with both versions of the bill ramping up possible financial penalties.

There are other major differences between the House and Senate bills, listed below. It is not yet known which legislative route committee leaders will try to use to get a final bill through Congress this year, out of the three options they currently have.

Some Major Differences Between House and Senate Ocean Shipping Reform Bills
House Bill (H.R. 4996) Senate Bill (S.3580)
Service Contracts Allows FMC to set terms and minimum contract requirements, plus requires carriers to “establish, observe, and enforce just and reasonable regulations and practices relating to” the same. Allows FMC to set terms and minimum contract requirements.
Declining Cargo Carriers shall not “engage in practices that unreasonably reduce shipper accessibility to equipment necessary for the loading or unloading of cargo” Carriers shall not “unreasonably refuse cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods”
Declining Cargo Carriers shall not “unreasonably decline export cargo bookings if such cargo can be loaded safely and timely, as determined by the Commandant of the Coast Guard, and carried on a vessel scheduled for the immediate destination of such cargo”
Definition of “Unreasonable” FMC shall initiate a rulemaking to define “unreasonably decline” No provision
Detention & Demurrage (D&D) Carriers must certify their D&D charges are correct, maintain all records for 5 years, and bear the burden of establishing the reasonableness of their fees during ay complaint, or pay penalties. Carriers cannot invoice for D&D unless the invoice includes all pertinent data and statements, and FMC can issue penalties and order refunds for inaccurate invoices. Failure to include the information eliminates the obligation of the charged party to pay the charge.
D&D Rulemaking FMC shall initiate a rulemaking on D&D which shall address issues identified in the May 2020 final rule, including 11 specific issues. FMC shall issue a rulemaking on D&D which shall only seek to clarify reasonable rules and practices relating to D&D to address issues in the May 2020 rule.
Minimum Service Standards Rulemaking FMC shall initiate a rulemaking to include obligations related to furnishing adequate equipment, vessel space, and accommodations; duty to perform contract of carriage with reasonable dispatch; requirement to carry US export cargo; and requirement for contingency plans during times of port congestion. FMC shall initiate a rule dealing only with unreasonable refusal to negotiate with respect to vessel space accommodations.
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