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US liner regulations – shots across China's bow

Photo: Unsplash View of US Capitol building
The team that pushed the legislation that ultimately became the Ocean Shipping Reform Act of 2022 (OSRA 2022), have liner shipping in their sights again.

The bipartisan Congressional duo of Dusty Johnson (Republican from South Dakota) and John Garamendi (Democrat from California), have introduced a new bill- which they’ve dubbed “Ocean Shipping Reform 2.0”, or, more precisely, “The Ocean Shipping Reform Implementation Act”.

The bill’s introduction comes at a time of increased anti-China sentiment in the United States, which had been bubbling gently for several years, but reached something of a boiling point in early February with the incursion of the high-altitude balloon that traversed North America and was ultimately shot down off the South Carolina coastline.

The new legislation’s stated purpose is to: “<give> the Federal Maritime Commission (FMC)  the authority to protect US ports, shippers, and manufacturers from the CCP’s influence.”

OSRA 2022 greatly expanded the reach of the FMC to pursue claims on behalf of cargo interests who believed themselves to be harmed by the actions of carriers. Many of the claims stemmed from situations where supply chain issues delayed or prevented movements of cargo out of terminals- resulting in demurrage and detention charges.

It is important to note that the initial impetus for the OSRA legislation came from agricultural export shippers who had benefited from the availability of empty containers. As front-haul rates into the States surged, the carriers sent the empty boxes back to Asia, primarily. Now, Johnson and Garamendi, both representing districts where agriculture is important, have crafted a bill that reflects the hardened attitudes towards China, a view which extends well beyond the agricultural realm in the US.

According to a release from Representative Johnson’s office,  the new bill: “…prohibits US ports from using Chinese state-sponsored LOGINK <National Transportation Logistics Public Information Platform> software, allows the FMC to investigate foreign shipping exchanges like the Shanghai Shipping Exchange to pre-empt improper business practices, and authorizes the FMC to streamline data standards for maritime freight logistics.”

The existing OSRA 2022 language clamped down on carriers and included provisions for regulation, or exemption, of shipping platforms both digital or “over the counter” going forward with a three year timeline.

The wording in the 2023 proposal, though addressed very specifically at the Shanghai marketplace, would give the FMC authority to investigate complaints against exchanges. The new bill’s wording states: “Not later than one year after the date of the enactment of this Act, the Secretary of Transportation shall enter into an agreement with an appropriate independent entity described in subsection (d) to conduct a study and assessment of the business practices of the Shanghai Shipping Exchange, including any anticompetitive advantages benefitting the Shanghai Shipping Exchange; and the ability of the Ministry of Transport of the People’s Republic of China and the Shanghai Shipping Exchange to manipulate container freight markets.”

 In discussing the potential investigation, which could be conducted by the FMC, but also by the Transportation Research Board or by the Government Accountability Office, the probe would address: “(1) The influence of the government of the People’s Republic of China on the Shanghai Shipping Exchange, and the impact of such business practices or influence on American consumers and businesses.” Readers should be reminded that, in its Fact-Finding Report 29, the FMC found no evidence of collusion by carriers when looking at the heightened rate environment of 2021-2022.

The press release from Representative Johnson includes endorsements from several oft-quoted agricultural influencers, but the scope of the bill goes well beyond the agricultural realm. The proposal includes politically charged rhetoric which includes wording that would add “state-controlled enterprises” to the FMC’s list of “controlled carriers”- subject, potentially, to increased scrutiny, and presently including COSCO and OOCL. Buried beneath that, the proposal also seeks to advance the FMC’s efforts to create a standard to exchange data among supply chain participants. The objectives of the data initiative include “… the arrival, unloading, loading, and departure of vessels; cargo availability and pick up reservation, and chassis availability,”  and seeks to develop performance-based, technology neutral, and vendor neutral, <that is>  interoperable, allowing for the exchange and use of data between devices and systems”