Ocean Shipping’s Supply Chain Disruptions on the Economy and the Logistics Industry
In a whirlwind legislative effort, Congress passed a bill for the President’s signature in record time. The bill passed with record bi-partisan support, which the President signed within a week.
On the surface, this looks like a positive development. We can conclude that Washington works when it comes to important issues. Bi-partisanship still carries the day and is the way ahead in passing bills into laws.
However, as we dive deeper into the new law, the Ocean Shipping Reform Act of 2022 (OSRA-22). We’ll examine who’s impacted and whether it addresses inflation or supply chain disruptions.
To answer these questions, this post will:
- Identify the key points of OSRA-22
- Identify supporters and critics of OSRA-22
- The near-term outlook for ocean shipping.
As you might infer, this law has far-reaching consequences that are not clear-cut.
Issues the OSRA of 2022 intends to remedy or address
The shipping of agriculture failed to ship because of container constraints.
- Lack of cargo space because of prioritization favoring the return of containers to China for shipping higher-value goods.
- Reverses the burden of proof of “demurrage and detent” on” from shippers to carriers.
- That a “demurrage and detent” on” charges comply with federal regulations under the force of penalties.
- Common carriers must report to the Federal Maritime Commission (FMC) the number of empty containers carriers are shipping.
- Outlaw retaliation against shippers or threatening to refuse cargo.
- Establish the FMC Office of Consumer Affairs and Dispute Resolution Services.
- Improve chassis management by requiring the Bureau of Transportation Statistics.
- Commission a study aimed at developing best practices of chassis management.
- Authorizes the FMC to collect data in times of emergency, such as severe congestion.
These issues are wide-ranging. They run from improving performance to regulating prices. OSRA-22 addresses gaps in U.S. maritime law. It does so by regulating commerce.
“… eliminate unfair charges, prevent unreasonable denial of American exports, and improve the oversight and enforcement tools needed to crack down on unfair practices facing American consumers.”
Strong Popular Support for OSRA-22
OSRA-22 targets primarily foreign ocean carriers. The administration’s sights are Maersk, MSC, CMA CGM, Cosco, Evergreen, HMM, Hapag-Lloyd, ONE, and Yang Ming. These concentrate on trans-pacific trade that dominates the bulk of ocean shipping.
These carriers have come under fire because their rates have increased to 1000%. That suggests collusion in price-fixing that limits competition.
Supporters include farmers, truckers, logistics service providers, trade associations, retailers, and bankers. You can find a complete list of supporters here.
But not everyone agrees that OSRA-22 is the answer to inflation or congestion,
On May 31, 2022, the FMC itself issued a final report: Fact-Finding Investigation 29 Final Report that contradicBiden’sn’s charges of collusion. The Final Report concluded competition was not limited and was, in fact, vigorous. It further stated that Trans-Pacific trade was not concentrated and that “… Trans-Atlantic trade was only minimally concentrated.”
In case you didn’t notice, FMC issued this Final Report only two weeks before the passing of OSRA-22. The ink was barely dry.
Also, the World Shipping Council (WSC) questioned the administration’s charges. In equally strident language, the WSC came out swinging.
The WSC state:
“We are appalled by the continued mischaracterization of the industry by U.S. government representatives and concerned about the disconnect between hard data and inflammatory rhetoric. The 22 (not nine) international carriers that serve the American people, industry, and government in the Asia – United States trade are part of the global supply chain that has built this country, importing and exporting food, medicine, electronics, chemicals, and everything else we depend on.”
In short, the WSC disagrees that OSRA-22 will remedy port congestion. It believes intermodal improvements are necessary along with investment in landside logistics infrastructure.
So amid the harsh language is an offer of conciliation. It indicates a deep understanding of the complexity of ocean shipping.
It recognizes that global stakeholders must find a holistic solution to address the root causes of this issue. Only then can the industry make enduring progress. Also, to accomplish that implies doing so cooperatively in partnership.
Will OSRA-22 remedy inflation and supply chain congestion? Or will it trigger retaliatory actions that further disrupt supply chains?
The Near-term Outlook for Ocean Shipping and Supply Chain Disruptions
Everyone hopes for a positive outcome. However, you must base your shipping decisions on reality rather than hope. The industry is moving toward fact-based decision makinIt’st’s also moving towards long-term partnerships to resolve long-standing issues. Cooperation, collaboration, and coordination epitomize the future of logistics operations.
These modernized ways of working reflect how to thrive in the New Normal.
Likewise, American Global Logistics already leverages these modernized ways of working.
Specifically, AGL operates on fac-based decision-making. We also adopt close relationships with our partners. And we seek long-term partnerships.
Contact us if you’re considering a long-term partnership with a 3PL in today’s world of uncertainty. We’re positioned to thrive in any economic or political climate.