OSRA 2.0 bill targets China, leaves shipping antitrust exemption untouched

Recently passed US House legislation amending landmark shipping reform that was enacted in 2022 shows the lack of appetite Congress has in reigning in the limited antitrust exemption container lines use to participate in alliances. Nor does the Ocean Shipping Reform Implementation Act, also known as OSRA 2.0, clarify which federal agency regulates rail storage fees when the ocean carriers are responsible for final delivery.

Rather, the bill is more of a vehicle for shoring up US scrutiny of Chinese influence in shipping than its originally intended purpose of making technical corrections to the Ocean Shipping Reform Act of 2022 (OSRA-22). In a larger sense, OSRA 2.0 reflects fading interest in government intervention into shipping now that pandemic-driven port congestion and soaring rates are over. Its future, however, is dependent on a distracted Senate.

OSRA 2.0 heeds the political winds on Capitol Hill, coming just a month after the Biden administration sounded the alarm on Chinese-made cranes and the Maritime Administration (MARAD) warned about Chinese port management software. On Monday, the US indicted seven Chinese nationals accused of cyberattacks against individuals working at the White House and various departments, members of the House and Senate on both sides of the aisle and key industries, including defense and telecommunications.

The bill, passed via a roll call vote of 393-24 on March 21, seeks to ban US marine terminals from using LOGINK, the China-developed software installed in ship-to-shore cranes and flagged by MARAD. If signed into law, OSRA 2.0 would also increase scrutiny of container lines funded by so-called nonmarket economy countries or countries the US Trade Representative is investigating for anti-competitive practices.

That will help in "stopping Chinese state-controlled companies from ripping off our country and gutting our manufacturing jobs," Rep. John Garamendi (D-Calif.), co-author of OSRA-22 and the latest update, said in a statement following OSRA 2.0's passage. US tariffs imposed by the Trump administration on Chinese chassis manufacturers drove production out of China. President Joe Biden on Feb. 21 announced plans to spend $20 billion to foster US production off ship-to-shore cranes, with the help of a subsidiary of Japan-based shipbuilding giant Mitsui E&S.

"Our bill seeks to get tough on China. It protects US ports and shippers from the influence of the Chinese Communist Party," Rep. Dusty Johnson, a South Dakota Republican, told fellow House members March 21.

Protecting, standardizing data

OSRA 2.0 creates a mechanism encouraging shippers to report suspected market manipulation by shipping exchanges and encourages a probe of the Shanghai Shipping Exchange, a provider of spot and contract rate indices. Results of the investigation into the exchange, which is jointly funded by the Chinese government, would then be reported to Congress.

As mandated by OSRA-22, the US Federal Maritime Commission (FMC) must create rulemaking on monitoring shipping exchanges by June 2025. What exactly within those exchanges — from Freightos to the New York Shipping Exchange — needs to be monitored is less clear.

Through the latest bill, work done by FMC Commissioner Carl Bentzel and the agency's National Shipping Advisory Committee (NSAC) to create a data standard for the maritime industry would be pushed forward, with Congress asking them to seek a third-party to develop a new standard with industry input. OSRA 2.0 would also mandate two new committees, one comprised of marine terminal operators and port authorities, and another for ocean carriers.

For the shipping industry, the significance of what's not in the bill is arguably more important than what's in it. Language calling for the repeal of limited antitrust immunity, as spearheaded by Rep. Jim Costa (D-Calif.) and co-sponsored by Johnson and Garamendi, is conspicuously absent. The bill also doesn't heed the suggestion by Bentzel and fellow FMC Commissioner Max Vekich to give the agency the power to legally block working agreements between ocean carriers on anti-competitive grounds, rather than relying on courts to take such action.

Rail demurrage's regulatory resolution off track

Notably, the House also shied away from finally clearing up the regulatory grey area for shippers and consignees who feel they've been unfairly charged for rail demurrage but have no government recourse. Garamendi is drafting separate legislation to empower the FMC to regulate rail demurrage when the carrier is responsible for door-to-door delivery, but any such legislation faces a steep climb — beyond finding a Republican co-sponsor. Johnson, whose South Dakota electorate includes soybean exporters that depend on rail access, is sitting this one out, according to several people familiar with the matter.

Rail demurrage isn't regulated by the US Surface Transportation Board due to an exemption for intermodal services, and some members of the FMC, notably Chairman Daniel Maffei, view through-fare ladings as falling under the agency's remit. But Class I railroads have long-standing clout in Congress, discouraging some members from joining Garamendi's cause. Even if the FMC regulates the specific conditions for rail storage, ocean carriers would face the unenviable task of seeking reimbursements from their railroad partners.

The issues the House left alone are unwieldly, with the antitrust exemption alone involving at least three Congressional committees, whereas most lawmaking involves just one. Legislators may have blasted the alleged greed of ocean carriers during the height of US port disruption, but grilling the likes of Microsoft and TikTok has overwhelmingly taken priority in recent months.

The path forward for OSRA 2.0 is narrow, with little sign of appetite within the Senate Commerce Committee to draw up its own version. There's also the reality that the Congressional calendar this summer leaves few windows for senators to work on a bill even if they wanted to. Given that OSRA-22 is just two years old and the FMC is still working through mandated rulemaking, there's an argument to hold off until more required technical changes become apparent. Final rules for detention and demurrage as required by OSRA-22 and issued by the FMC on Feb. 23, for example, have yet to take effect.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.