John Padgett Discusses Proposed Ocean Shipping Reforms in Law360

April 22, 2022

Law360 turned to McGuireWoods partner John Padgett for extensive analysis in an April 15, 2022, story on challenges facing the ocean shipping industry in a post-pandemic economy.

The story covered ocean shipping reform legislation moving through Congress and potential new rules aimed at easing supply chain bottlenecks and escalating costs for shippers and consumers.

The story noted that Congress is working to rewrite a decades-old shipping law that would strengthen the Federal Maritime Commission’s oversight authority to address increasing complaints of ocean carriers engaging in allegedly unscrupulous business practices.

Padgett, managing partner of McGuireWoods’ Norfolk office and founding leader of the firm’s transportation industry team, told Law360 that the “devil will always be in the details.”

“So we’ve got this old tool we’re now trying to sharpen and use for these wide range of concerns that the current administration has,” Padgett said. “And maybe they’ll be up for the challenge, but I don’t think the regulations are going to solve the problems. They’re going to kick the problems to the Federal Maritime Commission or another regulatory agency.”

The FMC is considering new rules requiring common carriers and marine terminal operators to provide certain information concerning demurrage and detention billings, which industry stakeholders can assess for delays in moving cargo off container carriers and out of terminals. The commission is seeking input on what data should be included in bills, reasonable timeframes for billing and response, and whether other charges should be included in billing regulation.

The challenge, Padgett said, “is how to come up with a policy that balances the needs of the shippers, the carriers, the terminals, because there are reasons that the detention and demurrage charges were put in place and that was to make sure shippers showed up and moved their cargo off quickly.”

The industry was dealing with intense competition, an oversupply of vessels and thin margins for years before the COVID-19 pandemic, Law360 noted. Now demand has outstripped capacity and driven up shipping costs.

“So, the policymakers are saying, ‘We’re going after the people making the money, and we’re going to get to the bottom of it,'” Padgett said. “So there will be some smoke around all of those initiatives because it provides political cover. But I don’t think it’s going to be a quick fix. And I do think you risk damaging a successful trend of privatization by over-regulating the industry again, which I don’t think will be helpful long term for a global economy.”