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NITL Pushes Shipping Act Reform

May 21, 2021
Shippers react to unprecedented disruption in the ocean shipping network.

The National Industrial Transportation League (NITL), the nation’s oldest trade association representing industrial freight transportation shippers, is calling on Congress to modernize the Shipping Act of 1984, particularly in regard to landside equipment quality and demurrage issues.

NITL has taken this position following months of congestion at seaports in the United States and unprecedented disruption to the ocean shipping network. “The ongoing ocean shipping turmoil has wreaked havoc on U.S. exporters and importers, costing them billions in higher shipping costs, demurrage and detention charges, and lost business, with still no clear end in sight,” NITL said.

According to the league, the inability of U.S. companies to timely access marine containers and chassis and secure sufficient vessel bookings to meet their business requirements has upended the ocean cargo shipping and delivery network. “These unprecedented challenges have exposed gaps in the law governing ocean carrier services that warrant immediate action.”

A legislative proposal drafted by NITL recommends modifications to address these challenges by providing remedies for importers and exporters who are experiencing escalating shipping costs, are unable to obtain adequate ocean transportation service to meet their cargo delivery needs, and are concerned about unfair business practices.

The NITL’s four main recommendations to modify the Shipping Act are:

• Establish rules prohibiting common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention rules and practices by codifying the industry guidance issued by the Federal Maritime Commission (FMC) in the spring of 2020, and shifting the burden of proof for complaints onto the service providers to show that their practices are reasonable and comply with the rules.

• Clarify the obligations of common carriers with respect to equipment and vessel space allocations and contract performance by requiring them to adhere to minimum service standards that meet the public interest. Ocean carriers would also be required to develop contingency service plans during periods of port congestion to mitigate supply chain disruptions.

• Modify the prohibited acts to address unfair business practices related to the instrumentalities required to perform the transportation services, including access to, allocation of, and interchange of equipment, and any unreasonable allocations of vessel space by ocean common carriers considering foreseeable import and export demand.

• Expand the FMC’s authority to act upon complaints filed against anticompetitive agreements between ocean carriers that operate with antitrust immunity, such as alliances, and allowing third-party intervenors to participate in court proceedings initiated by the FMC against such agreements.

“We have seen a substantial deterioration in service by the ocean carriers,” said Lori Fellmer, league board member and Ocean Committee chair. “The lack of timely access to marine equipment and vessel sailings has caused adverse ripple effects throughout U.S. companies’ supply chains, leading to material shortages, empty store shelves and business interruption.”

As a result, she contends that the inability of exporters and importers to effectively address these challenges commercially means the time has come to update the Shipping Act to reflect current day circumstances.

“The NITL proposal addresses many of the problems faced by the shipping community and seeks to address gaps in the current law,” said Fellmer. “While the League strongly commends the regulatory efforts in recent years initiated by the FMC, we believe the agency and shipping industry would benefit greatly from these proposed reforms that are targeted to address present day challenges.”

The league stressed that it was instrumental in the efforts leading up to the 1998 amendments to the Shipping Act and intends to work with Congress, the FMC and all industry stakeholders to address the critical challenges faced by importers and exporters.

Truckers Weigh In

American Trucking Associations’ president Chris Spear told a Senate hearing in early May that infrastructure legislation should include projects designed to alleviate congestion at the nation’s ports, particularly on the West Coast. He noted that these supply chain issues have created problems for American exporters, especially in agriculture, by making it more difficult for producers to get products to overseas markets.

“The increased cargo volumes at ports and the resulting bottlenecks have demonstrated the importance of reliable, well-maintained infrastructure to handle the intermodal aspect of international trade, which will continue to grow in the coming years,” he told the senators.

“Without question, additional resources are needed to facilitate truck drivers’ timely access to ports, as well as their ability to obtain equipment to load and unload containers in a timely fashion.”

Last year, the ATA Intermodal Motor Carrier Conference filed suit with the FMC in an effort to protect truck drivers from being forced to use what it described as overpriced chassis that are not always up to safety standards. It chalked up these problems to a lack of competition among chassis providers at ports.

At that time, the association said the failure to provide adequate quality equipment by major container lines and chassis managers caused $1.8 billion in damages between 2017 and 2019. ATA also complained this year about higher tariffs imposed on Chinese equipment.

Following a series of hearings, the U.S. Department of Commerce and the International Trade Commission sided with the American chassis manufacturers. The upshot is that for the next five years chassis and sub-assemblies imported from China will be hit with tariffs totaling over twice the value of the chassis.

ATA expressed concern that the action will further limit the already short supply of chassis. Other truckers also took issue with the tariff action, including California’s Harbor Trucking Association.

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