The impact of OSRA_2022 on the shipping market

1. Overview

Last year, President Biden signed an executive order to crack down on container detention charges (detension and demerge) charged by shipping companies to shippers, and the U.S. Department of Justice and the Federal Maritime Commission (FMC) have strengthened cooperation.
Inflation, which has been seriously pointed out recently, is cited as the main cause of this issue. In the midst of the supply chain imbalance crisis triggered by COVID-19, shipping companies are looking for opportunities through capacity adjustments. The profitability was maximized through 1) increase in cargo volume due to China's rapid recovery 2) Suez Canal accident 3) decrease in port labor force due to re-emergence of mutant virus 4) port identity due to severe demurrage in North America.
Biden notes that the soaring freight rates from shipping companies have eventually passed on to US consumers, which is causing the current extreme inflation.

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2. Progress

• (July 21) Signed President Biden's 'Executive Order to Prevent Unfair Competition'
• (March 22) The amendment to the Overseas Port Shipping Reform Act (OSRA 2022) proposed by the U.S. Senate was passed unanimously by lawmakers
• (June 22) Passed the Bill Amendment Bill with overwhelming support in the U.S. House of Representatives (369 in favor, 42 against)
• (June 16, 22) Biden finally signs the Ocean Shipping Reform Act passed by Congress

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3. Purpose

Ocean Shipping Reform Act (OSRA) 2022

1. Strengthen the investigation authority of the FMC and force shipping companies to impose incidental surcharges in accordance with federal law.
2. confirmed that shipping companies’ application of demurrage charges complies with federal regulations, and strengthened management supervision by transferring the burden of proving the reasonableness of the fee to shipping companies, not the claimant.
3. The Federal Maritime Commission (FMC) may ban the operation of a shipping company if it is unfairly deprived of an opportunity to ship U.S. goods/and may force ocean shipping companies to report their total import/export tons on a quarterly basis.
4. The purpose of product price reduction by alleviating supply chain bottlenecks.
5. The Federal Maritime Commission is investigating the current situation of late fees imposed by shipping companies and port terminals to prevent container companies from unfairly refusing to ship cargo. If the opportunity to ship U.S. exports is unfairly deprived, the shipping company may be banned from operation.

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4. Expected Impact

1) Logistics difficulties aggravated
If the shipping alliance is torn apart in the future due to sanctions from the US authorities, there is concern that shipping companies will be concentrated on large ports due to the burden of rising costs. It is judged that shipping companies that have been able to visit small and medium sized ports through the naval alliance will not allocate ships to small and medium-sized ports at any cost if the naval alliance is disbanded.

2) Concerns about further rise in inflation
It is pointed out that the burden of late fees for high Demmurage/Detention imposed by liners and terminals is passed on to consumers, and the possibility of inflation is pointed out. In other words, there is a risk that the cost felt by these shipping companies as a loss will eventually be transferred to sea freight rates, raising inflation further.

Thanks.