Navigating the Ocean Shipping Reform Act, Part Two: New Rules and Big Changes

February 28, 2023

After the June 2022 enactment of the Ocean Shipping Reform Act (OSRA), the Federal Maritime Commission (FMC) issued a notice of proposed rulemaking (NPRM) in October 2022, relating to demurrage and detention billing requirements.

The FMC proposed several actions in the NPRM, including adopting a list of minimum information that common carriers must include in demurrage or detention invoices, as mandated in OSRA and codified at 46 U.S.C. 41104(d)(2), and additional information to be included in or with a demurrage or detention invoice; further defining prohibited practices by clarifying which parties may be billed for demurrage or detention charges; and establishing practices that billing parties must follow when invoicing for demurrage or detention charges.

The FMC also acted quickly to seek public comment in August 2022 on whether the conditions in the supply chain warranted the issuance of an emergency order requiring the sharing of information pursuant to Section 18 of OSRA. Indeed, in the weeks following the passage of OSRA, the FMC took numerous actions, including issuing a request for public comment regarding a plan to gather import and export information from vessel operating common carriers (VOCCs); establishing an interim process for submitting charge complaints; establishing a Bureau of Enforcement, Investigations, and Compliance; issuing notices regarding OSRA; and publishing its Fact Finding 29 report. The request for input on the issuance of an emergency order netted more than 40 comments, but the FMC has not taken action or issued an emergency order to date.

As OSRA requires the FMC to initiate three rulemakings, the FMC also issued an NPRM in September 2022 to define what qualifies as an unreasonable refusal to deal or negotiate with respect to vessel space under 46 U.S.C. § 41104(a)(10). Comments from the Retail Industry Leaders Association and Consumer Brands Association highlighted the challenges facing importers and exporters.

From the importer side, the Retail Industry Leaders Association noted importers’ experiences, including complaints that during the pandemic, VOCCs stopped providing previously contracted-for space, forcing importers to purchase space on the spot market at extraordinarily high rates. Then, importers faced challenges negotiating or procuring new service contracts. Thus, the Retail Industry Leaders Association has urged the FMC to take two actions in its rulemaking: (1) Make it explicit that the unreasonable refusal to deal or negotiate applies at any point in the parties’ dealings, and (2) amend the final rule to conform the unreasonable refusal to deal or negotiate to closely track the OSRA burden-shifting charge-complaint procedure.

From the exporters’ viewpoint, the Consumer Brands Association’s comments noted pandemic-related experiences of canceled bookings and asked the FMC to shift the burden of proof to the ocean common carrier. The Consumer Brands Association also asked for a time-restrictive element for carriers to respond to a complaint.  The comment period expired, but the FMC recently stated it would issue a supplemental NPRM and seek additional comments on the unreasonable refusal to deal.

In only a few months after the passage of OSRA, the FMC issued NPRMs, sought public comment on multiple issues, and issued several industry advisories. The FMC also announced interim procedures to review, investigate, and adjudicate charge complaints, and asked shipping lines to provide information on how they are complying with the anti-retaliation provisions of OSRA. The FMC has shown no sign of slowing down. In short, expect a continued, rapid succession of rulemaking and developments as the FMC continues to follow the mandates and deadlines of OSRA.

For an overview of OSRA, see McGuireWoods’ Feb. 7 legal alert “Navigating the Ocean Shipping Reform Act, Part One — The Overview.” For further insights on this topic, see “Navigating the Ocean Shipping Reform Act, Part Three: Litigation and Rough Waters Ahead.”