If it has any effect at all, it might even make things worse.
If it has any effect at all, it might even make things worse.
O n December 8, the House of Representatives passed the Ocean Shipping Reform Act (OSRA), by a vote of 364 to 60. Given the large, bipartisan majority that supported it, it will likely pass the Senate and go on to receive the president’s signature. A White House statement from November 17 spoke positively of the bill.
With port congestion harming America’s supply chains, a bill to reform ocean shipping might seem like a solution to what ails us. But the OSRA isn’t it. The bill is nonresponsive to the causes of our current problems, and if it has any effect at all on port congestion, it might make it worse.
The 21-page bill (they don’t have to all be 2,000 pages long, you know) makes a series of changes to the federal regulations on ocean shipping. As a top-line matter, the Act gives the body that currently regulates ocean shipping — the Federal Maritime Commission (FMC) — more power.
It adds the promotion of “reciprocal trade” to the FMC’s mission. It tightens the rules on detention and demurrage charges, which are fees charged when containers don’t get moved on time. It requires the agency to publish more information about its actions regularly on its website, too.
The bill also gives the FMC the power to initiate a rulemaking that would require ocean carriers to carry American exports “if such cargo can be loaded safely and timely and carried on a vessel scheduled for such cargo’s immediate destination.” Under the OSRA, the agency would also have the power to “address the unreasonableness of ocean common carriers prioritizing the shipment of empty containers while excluding, limiting, or otherwise reducing the shipment of full, loaded containers.”
That’s why the National Retail Federation, the Farm Bureau, and every American Association of [Insert Exporting Industry Here] issued a statement praising the OSRA’s passage in the House. The bill shifts the burden of proof in regulatory disputes away from exporters and puts it on to the ocean carriers, while requiring carriers to take American exports if they are reasonably able.
The bill was championed in the House by John Garamendi (D., Calif.) and Dusty Johnson (R., S.D.). What’s important to keep in mind, though, is that partisan labels on this bill are less important than the industries in the relevant states — say, California’s logistics and South Dakota’s agriculture. Indeed, support for the bill predated the current shipping crisis and turned mostly on corporate interest.
Rob Quartel, who was a member of the FMC from 1990 to 1992, tells National Review that “the commercial relationship between the shipper and the carrier” is at the core of everything the FMC does. “When I got there . . . the first people to visit me were all of the carriers, so I got that side of the story for a long time,” Quartel says. Then, he spoke with shippers, who “had a totally different view of all this than the carriers.”
Based on his experience with the FMC, Quartel says, “I concluded that the main purpose of the FMC was to protect the foreign oceangoing cartels.” By that he means the three major alliances of ocean carriers that control nearly all ocean trade in the world. Not one ocean carrier is American, largely due to centuries of protectionist policies that have made American shipping prohibitively expensive.
Those issues are separate from the supply-chain crisis we are currently enduring. “These jokers on the Hill don’t know what they’re talking about,” says Quartel. “This bill will not do anything at all to improve the supply-chain problem. It has nothing to do with it, nor will the FMC. There’s nothing the FMC can do.”
Our ports are currently clogged because of imports, not exports. (For perspective, the price to ship a container from East Asia to the West Coast is about $15,000; the price to ship a container from the West Coast to East Asia is about $900.) There are myriad other issues at play — such as warehouse space, truck-chassis access, and the power of organized labor — that this bill doesn’t even touch.
The ball was already rolling for the OSRA in early summer, before the shipping crisis hit in full force. A news report at the time said that the bill was “in response to mounting complaints by U.S. agricultural shippers that unscrupulous business practices by foreign container ship operators are causing them to lose money and market share overseas.” It was only later on that politicians and interest groups mentioned the supply-chain crisis as a way to garner attention and support for it.
If the OSRA has any effect at all on the supply-chain crisis, it might be a negative one. By forcing ocean carriers to prefer U.S. exports over empty containers, it could further slow the return of containers back to Asia to be filled with more imports.
Matt Schrap, the head of the Harbor Trucking Association, told Bloomberg on December 10 that empty containers are the top problem in Los Angeles/Long Beach. “We are drowning in empty containers here in this harbor and in our trucking yards,” Schrap said. Many empty containers are stored on chassis, which means those chassis can’t be used to pick up other containers, further aggravating the congestion. Schrap estimated there were 115,000 empty containers in the port complex and another 10,000 in truck yards throughout the Southwest.
U.S. exporters saw that ocean carriers were getting bad press and used it as an opportunity to push regulatory changes that they have wanted for a long time. Nobody will shed a tear for the foreign ocean-carrier cartels (nor should they), but these issues are totally separate from port congestion. The OSRA is classic Washington corporate-interest politics, not a response to the supply-chain crisis.