With the Ocean Shipping Reform Act (OSRA) 2022 signed into law, the new legislation awards more power to the Federal Maritime Commission (FMC) and is supposed to help mitigate the ongoing disruption to U.S. supply chains.
We sat down with Brian Whitlock, Senior Director Analyst with the Gartner Supply Chain practice to discuss the short and long term implications of OSRA for the logistics industry. Members of the media who would like to speak with Brian further on this issue can contact Barbara Ruane to schedule an interview.
Q: What do logistics leaders who ship using ocean freight need to know about the new Ocean Shipping Reform Act (OSRA) of 2022?
A: OSRA provides certain powers to, and directs, the FMC to take a more proactive role in investigating carrier behavior, establishing rules governing fairness in detention and demurrage charges and enforcing carriers obligations to support U.S. exports. The legislation also shifts the burden of proof to carriers in the case of disputes, which is a huge benefit to shippers who did not file complaints in the past due to this burden.
While the Act provides these and other benefits, the impact OSRA will have on ocean shipping in the U.S. will rest squarely on the FMC, and how they enforce the new rules. For example, fining one carrier $2 million for unfair detention charges when their quarterly EBIT exceeds $4 billion is hardly going to make a dent in ocean carrier behavior.
Q: Will OSRA result in improvements in port congestion or lower shipping costs?
A: OSRA will bring benefits to shippers long term, but it will not have any effect - today or in the future - on the market challenges logistic leaders face, including port congestion and high shipping rates. These issues are more structural in nature and rates are a function of high demand and low supply, neither of which OSRA will resolve.
Q: How should logistics leaders address current challenges in light of OSRA.
A: Given that impacts are unlikely to be felt in the near term, shippers need to continue managing detention and demurrage as closely as possible. Implementing visibility tools to better manage this effort is critical to drive improvements. Shippers should also focus on building better relationships with carriers and tighten agreements to lock in allocations and gain commitments to improved service with more predictable cost.
Related research for Gartner clients is available in the “Monthly Supply Chain Alert: May 2022”.
If you are a member of the media who would like to speak further on this topic with Brian Whitlock, please contact Barbara Ruane at email@example.com. Members of the media can reference this material in their articles with proper attribution to Gartner.