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The rationale behind the U.S. Ocean Shipping Reform
Act, or OSRA, was that there was no indigenous
shipping industry anymore to protect so why have
anti-trust immunity for the benefit of foreign
owners? It was argued that the Shipping Act
should serve the interests of American shippers, not
foreign shipowners. So OSRA was conceived and
initiated by CITA’s big sister organization, the
NIT-League, using its well-organized political
machinery in Washington. It was a major change to
U.S. shipping laws and was applauded by all parties as
a successful example of how different players in
industry got together and actually got their
government to change laws.
Almost everyone got something out of it in what was
described as a “carefully crafted compromise”. I say
“almost” because the NVOCCs, or non-vessel-operating
common carriers, in the United States did not get the
tariff filing exemption and are not too happy that
they still have to file their tariffs with the Federal
Maritime Commission while the ocean carriers don’t.
On top of that, they now have to post a bond with the
FMC to the tune of $75,000 U.S. for a domestic NVOCC
and $150,000 for a foreign NVOCC doing business with
American importers and exporters.
Tariff
filing means that there is no freedom of confidential
contract and tariff violators are subject to heavy
fines. Under OSRA, a foreign-based NVOCC was fined
$1.2 million dollars U.S. by the FMC for ignoring its
regulations and undercharging shippers! You heard me
right. I said undercharging shippers. Allegedly, the
NVOCC was undercutting his own published rates and
consistently failed to file tariff revisions with the
FMC. Of course, the fine was a symbolic reprimand for
flouting U.S. laws but the foreign NVOCC lost his
license to operate in the United States together with
his $150,000 bond. It seems the much touted freedom
of contract under OSRA is not free for all.
I
guess the best way to describe the impact of OSRA in
the U.S. is to say that regulated common carriage has
been transformed into de-regulated private carriage,
except for the NVOCCs, which remain very tightly
regulated common carriers. There are no more publicly
filed tariffs by shipping lines. Most carriage is now
performed under yearly “service contracts” between a
shipper and a carrier at privately negotiated
confidential rates and guaranteed empty container
availability and vessel space.
Under the old system of common carriage, it was more
or less a system of first come first served with
priority going to the highest paying cargo if space
was tight. Under the service contract scheme, a
contract is a contract and there are provisions for
liquidated damages on both sides for broken promises.
Though hardly enforced due to the many escape clauses,
the intent nevertheless is for both sides to respect
the terms of the contract if one were to have a long
term partnership relationship. Last year the FMC
reported a resounding success after the first year
review of OSRA. Some 47,629 new service contracts and
182,403 amendments were filed in its first year of
inception.
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