Shippers and market observers have expressed scepticism at the passing of the Ocean Shipping Reform Act (OSRA) by the US House of Representatives on 8 December in Washington DC passed a bipartisan bill designed to strengthen shipping supply chains. OSRA was passed by 364 votes, while 60 house members voted against it.
OSRA obliges shipping companies to adhere to “minimum service standards that meet the public interest” and prevents them from rejecting cargoes without good reasons.
Democrat representative Kurt Schrader stated, “This legislation works to address unfair shipping practices by tackling the worst instances of abuse from bad actors in the shipping industry in an effort to boost our country’s global competitiveness.”
However, responding in a written statement, World Shipping Council president John Butler said that OSRA is not designed to fix the port congestion that the world is experiencing, and the act will not and cannot fix that congestion. It is now estimated that around 100 ships are now waiting for a berth outside the US West Coast ports of Los Angeles and Long Beach.
Butler said, “The bill is a political statement of frustration with supply chain challenges – frustrations that ocean carriers share. The World Shipping Council will continue to work with the Congress to seek real solutions that further strengthen the ocean transportation system that has supported the US economy throughout the pandemic.”
Agreeing, Linerlytica analyst Tan Hua Joo said OSRA will not do anything to improve the logjams or the upward pressure on freight rates that have seen some shippers signing multi-year shipping contracts with liner operators to secure shipping space.
He told Container News, “It does nothing to change the current situation. Shippers are free to not accept the multi-year terms and opt to pay the higher spot rates. The reason some shippers have chosen to sign longer term contracts is because they were given discounts to the current spot rates and/or higher space guarantees.”
OSRA will also call for the setting up of a registry to collect data and reports. The Federal Maritime Commission will also get 10% more in funds and will have to release an annual report on liner operators and port operators.
Freight analytics specialist Xeneta’s chief analyst, Peter Sand told Container News that OSRA appears to blame ocean carriers for clogging up the US logistics system, and would not solve the current issues.
“US shippers have cried foul for more than 15 months now and apparently, they are well connected in Washington DC. What this bill could do, is actually increase congestion around the ports to a higher level than we see today,” explains Sand. “Changes like this will have an equally bad impact on US importers, that will end up, being short on equipment and face prolonged high freight costs.”
Author: Martina Li
Photo: Underawesternsky / Shutterstock.com