11-12. NovDec 2021 issue.qxp_Pages-12-40-JanFeb WPD 13/12/2021 16:20 Page 13
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Transportation industry coalesces against the Ocean Shipping Reform Act of 2021 Claire Instone reports on the pending Ocean Shipping Reform Act of 2021 and how it will impact the ongoing congestion issue across global ports.
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ongestion in the supply chain has reached remarkable levels. Increased consumer demand, rising shipping costs, driver shortages and shrinking warehouse space are all contributing factors leading to bottlenecks at every point along the chain especially at ports.
For example, from 2011 - 2019, the average annual container TEU volume increase for the Ports of Los Angeles and Long Beach combined was 3.9%. However, when looking at the TEU growth for the first eight months of 2019 vs. 2021 (using 2019, as 2020 was artificially impacted by COVID), the increase is 20%. In recent weeks, both the aforementioned ports announced they would be testing extended operating hours at truck gates to try to mitigate congestion. However, the lack of available labour and truck drivers would jeopardise the efficacy of this approach. So, what other measures can be taken? According to the lower house of the United States Congress, the Ocean Shipping Reform Act 2021 (HR 4996) is needed…
The bill On August 10th 2021, two members of the US House of Representatives introduced the Ocean Shipping Reform Act 2021 (HR 4996). A component of the bill aims to address terminal congestion by reducing beneficial cargo owners (BCOs’) responsibility to collect cargo from marine terminals. Before one container can come into a space, another has to be removed. When containers are unloaded from ships, they are allowed a period of “free time” on the terminal. However, when containers are not picked up within the agreed-upon time, the BCOs are charged. These charges demurrage and detention - are critical incentives for BCOs to pick up cargo. In essence, the legislation - if passed - would undermine financial incentives for BCOs to move their cargo from terminals in a timely manner. This presents issues to an already hurting supply chain that has witnessed remarkable growth and is currently facing a labour shortage. Negative unintentional consequences Stakeholders have warned that key components of the proposed Ocean Shipping Reform Act of 2021 (HR 4996) would have unintended negative consequences. As a result, more than two dozen prominent transportation entities have joined together to oppose the proposed
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legislation, citing that removing the ability for terminals to charge BCOs for extended demurrage and detention will only lead to more congestion. Furthermore, with the current growth and labour shortages the supply chain and surrounding economy will struggle. The legislation would undermine the demurrage and detention charges BCOs and importers would be required to pay, which as a result, would encourage these organisations to store containers on the terminal, further clogging ports and impacting the ability to keep freight moving. Without these charges incentivising retailers and importers to pick up cargo, the supply chain would suffer additional setbacks from delays in inbound shipments and exports. When discussing the potential of increasing storage of containers across terminals, it is essential to note that at ports on the West and East Coasts of the United States, terminals are considered full when filled to 80% capacity. Many terminals on the West Coast have been at 95% capacity in 2021. Increased consumer demands, shortages of labour and equipment, and complex global trade and travel constraints resulting from the pandemic have caused record-breaking container volumes and “dwell times” at ports - the time a container sits on the terminal. For example, the local
