Revision of the Ocean Shipping Reform Act (OSRA) in 2022

Exploring the Revision of the Ocean Shipping Reform Act (OSRA) in 2022: Impact and Implications

The Ocean Shipping Reform Act is a set of regulations devised by the US government and implemented by the Federal Maritime Commission (FMC) to ensure fair trade practices in the US. Due to supply chain disruptions during the global pandemic, ocean shipping has suffered a setback. Shippers are facing various shipping challenges, including cost-effective shipping using vessel transport. To solve the maritime problems shippers face, especially US exporters and logistics service providers, FMC has sought to establish laws that enforce fair trade. Let us learn more about OSRA 2022. 

About ocean shipping in the US 

Sea transportation is one of the significant modes of shipping goods across international borders. Importers and exporters prefer sea transport routes as they are cost-effective and efficient. The diverse network of sea routes allows vessels to travel large distances and ship LCL and FCL shipments seamlessly. The US is the largest importer and the second largest exporter of cargo, raw materials and finished products. Shipping ports in the US are of global importance as they are significant hubs for transporting shipments. Therefore, the US government must collaborate with various organisations that consider maritime shipping to protect the interests of shippers, importers, and exporters and help their national economy flourish. 

What is the Ocean Shipping Reform Act? 

OSRA, or the Ocean Shipping Reform Act of June 2022, was introduced by US President Joe Biden to address the shipping challenges of importers and exporters involved in trade with the country. It was implemented and supervised by the Federal Maritime Commission (FMC) to manage trade activities and address challenges suffered by shipping parties during ocean shipping with the US. The law passed by the US government is focused on building an authorial place for the US export business using ocean transportation. The FMC enforces trade regulations to control fluctuating shipping charges and the detention and demurrage charges that keep shippers from adopting ocean shipping. Considering global inflation, a view of decongesting shipping ports, and improving global trade, the OSRA was introduced. Let us learn more about the Ocean Shipping Reform Act 2022 initiatives. 

Reasons for OSRA 2022 

The US government introduced the Ocean Shipping Reform Act 2022 for US exports due to the following reasons- 

  1. Pandemic– The global pandemic of 2020 brought a massive wave of setbacks to the shipping industry. The maritime sector was unprepared for such a vast-scale geopolitical event in shipping. Lockdowns, restricted movement of ships, and labour shortages caused continual delays and disruptions in the supply chain, especially in the e-commerce industry. Post-pandemic, the shipping rates multiplied exponentially, causing unfair and burdening prices for shippers. 
  2. D&D charges– During trade fluctuations, the shortage and surplus of containers at ports led to extravagant demurrage and detention charges. Exporters, including American farmers, suffered as ocean carriers refused to ship their goods in time. Container terminals, quays, and container depots were overloaded with containers and ports were overloaded with ships waiting for offloading. In such circumstances, traders were forced to pay a high D&D fee. 
  3. Global alliance of ships—Shipping companies have collaborated to form shipping alliances and gained significant control over global container shipping. These alliances control and have access to the most significant trade routes, making them dictators of shipping rates. Over the last years, shipping rates have risen, making it challenging for traders who want to trade between the US and Asia. 

In response to the unfair rise in shipping rates and the uncontrolled levying of demurrage and detention fees, the Federal Maritime Commission decided to control unfair trade practices in maritime. This way, the foremost ocean shipping companies will be prevented from dominating unauthorised control over American importers and exporters. 

Key objectives of the ocean shipping reform act 

The guidelines of the Ocean Shipping Reform Act will ensure the following- 

  1. Prevent ocean carriers across the globe from declining any American cargo for unreasonable causes. 
  2. Establish control over charging detention and demurrage charges to shippers. 
  3. Allow the FMC to access ocean shipping data during emergencies and have the authority to implement improvements. 
  4. Improve the pace of complaint resolutions made by American importers and exporters. 
  5. Prevent the retaliation of international shipping companies against traders, which leads to extra shipping charges. 
  6. Improving the transparency in American exports, especially agricultural goods. 
  7. Supervise all ocean carriers and keep an account of their records to report the number of empty containers moving regularly. 
  8. Promote fair trade practices by supervising ocean carriers’ activities and implementing laws to prevent unjust D&D charges. This allows the FMC to prevent unfair practices that undermine the industry. 

How does OSRA aim to achieve its objectives? 

Implementing the OSRA is one thing; keeping it working is another. The FMC is dedicated to achieving the above-stated objectives.  

  1. It helps extend the scope of the role and authority of the Federal Maritime Commission and allows it to investigate carrier behaviour. 
  2. The FMC Office of Consumer Affairs and Dispute Resolution Service will investigate the complaints and assist American businesses, making it easier for traders to file complaints. 
  3. OSRA helps implement rigid rules to define detention and demurrage and govern its fair use. 
  4. It helps to encourage and obligate the ocean carriers to support the US exports. 

Following the above, the FMC, in collaboration with the US government, aims to establish fair trade in America and its trading countries. 

Impact of OSRA on the maritime industry 

The implementation of OSRA in 2024 has impacted the logistics and transportation industry in the maritime sector. Let us learn more about it. 

  1. Before OSRA 2022, 3PL service providers such as freight forwarders and freight consolidators endured high detention and demurrage costs levied by ocean carriers on unfair terms. Due to pandemic delays, they also had to bear late fees and cancellation charges as they failed to comply with the shipping contract. 
  2. Shippers are continuously concerned about rising freight rates, impacting their profit margin immensely. Cargo damage was also a concerning cause that led to a loss of revenue. 
  3. Shipping companies are facing the challenge of empty container repositioning and imbalance in container availability.  

The Ocean Shipping Reform Act will help improve the plight of shipping companies, shippers, and 3PL or 4PL service providers and offer better supply chain management. 

These objectives and impacts of the Ocean Shipping Reform Act 2022 will ensure an increase in US exports and elevate the shipping experience of shippers and logistics service providers. 

LOTUS Containers is a global marketer of shipping container solutions. We sell new shipping containers in various sizes, have partnered with more than 300 container depots, and lease different types of shipping containers.

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