Background
The Ocean Shipping Reform Act (OSRA), which amends the Shipping Act, was signed into law by U.S. President Joseph Biden in 2022 to alleviate certain measures taken by shipping companies in the midst of supply chain delays. As we have previously noted, the recent high-profile complaint filed before the Federal Maritime Commission (FMC) by Bed Bath & Beyond against Overseas Orient Container Line has brought to the attention of the shipping community a continuing trend of charge complaints submitted under OSRA’s newly amended procedures (more than 175 during the second half of 2022).
What does OSRA do?
OSRA is intended to prevent unfair charges levied against shippers (that is, merchants and other businesses that ship goods) and unreasonable denial by common carriers (that is, shipping companies that are contracted to deliver those goods) of cargo space by providing the FMC authority to enhance its supervision of common carriers. Chief among the issues at the heart of OSRA are the demurrage and detention charges imposed by common carriers and whether they are charged in a way that is fair.
What are demurrage and detention charges?
Demurrage and detention charges both refer to a fee imposable by the common carrier akin to liquidated damages when there is a delay by the shipper in loading and delivery of the container for an export or pick-up, unloading and return of the empty container for an import. Demurrage occurs when the shipper exceeds the free time period for the use of the container within the terminal, and detention occurs when such free period is exceeded outside of the terminal.
What should shippers know about OSRA?
OSRA has provided for a procedure whereby shippers can submit information concerning the charges assessed by common carriers directly to the FMC, which reduces cost and time burdens associated with challenging detention and demurrage charges. The FMC’s website has detailed information on the charge complaints procedure (see https://www.fmc.gov/osra-2022-implementation/). The FMC may conduct an investigation on detention and demurrage invoices and could impose penalties on or require refunds by the common carrier. In addition, OSRA has instituted a statutory framework to prohibit retaliation by a common carrier against a shipper by refusing cargo space accommodation.
What should carriers know about OSRA?
OSRA requires common carriers to submit invoices including detailed information to the FMC each time demurrage and detention charges are imposed. The common carrier has the burden of proving the reasonableness of any demurrage or detention charges. The FMC may order that a common carrier in violation of the requirements of the Shipping Act (as amended by OSRA) pay a fine or refund all or part of a charge.
Questions?
The attorneys on the Seward & Kissel Maritime Practice Team have extensive experience with a vast array of maritime regulatory issues. If there are any questions, please contact any attorney on the Seward & Kissel Maritime Practice Team.
