Examining OSRA's Impact
Welcome to the 110th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, guest contributor Jonah McIntire of Transporeon broke down Microsoft’s recent supply chain management software announcement. This week, another guest contributor, maritime attorney Lauren Beagan, helps us understand whether the new OSRA law is serving the purpose for which it was designed.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.
The US Federal Maritime Commission (FMC) is cleaning up the industry, but in an industry that enjoyed a significant deregulation of the industry in 1998 (with the Ocean Shipping Reform Act of 1998), pulling in the reins is a delicate balance.
The Shipping Act of 1984 (46 U.S.C. §§ 40101 – 41309), created by US Congress, regulates the movement of ocean borne cargo and delegates the regulatory authority over this industry to the FMC, an independent regulatory agency situated in Washington, DC.
Congestion wasn’t a new problem solely brought on by the COVID-19 pandemic; rather the FMC recognized congestion becoming a problem in 2015, with their staff report U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges, released in July 2015 after hosting FMC port forums throughout 2014.
These forums engaged port and industry stakeholders and identified six major themes: “(1) investment and planning; (2) chassis availability and related issues; (3) vessel and terminal operations; (4) port drayage and truck turn-time; (5) extended gate hours, PierPASS and congestion pricing; and (6) collaboration and communication.”
The report also identified “free-time, demurrage and detention (D&D); the Class I railroads; the role of federal partners in the supply chain; and congestion costs” as issues presented during the FMC Port Forums, with the report notably stating, “[a]lthough congestion was not discussed at length like some of the other topics, it did generate a great deal of discontent from cargo interests and motor carriers who appeared to be incurring demurrage and detention fees when containers had been delayed or equipment prevented from being returned for reasons well beyond their ability to control.” Hmm. Sounds familiar, doesn’t it?!
So why do I bring up this historical context? Simply to point out that despite Congress claiming a win on fixing container related congestion through the Ocean Shipping Reform Act of 2022 (OSRA 22), the FMC was on the hunt, well before COVID-19 and its associated spike in imports (read: congestion) was a thing.
So, the FMC had been investigating and coming up with a plan for how to address congestion, and methodically and systematically tackling the issues. Notably around detention and demurrage. In May 2020, the FMC released a Final Rule, Interpretive Rule on Demurrage and Detention Under the Shipping Act, introducing and solidifying the incentive principle, stating that D&D should “serv[e] their intended purposes as financial incentives to promote freight fluidity.”
Fast forward to 2022, and the FMC released their Advance Notice of Proposed Rulemaking (ANPRM) on Demurrage and Detention Billing Requirements. It’s important to mention that leading up to this rulemaking was FMC Commissioner Rebecca Dye working tirelessly to lay the foundation for this point. Commissioner Dye was the investigative officer for FMC Fact Finding 28 and 29, where she and her team reviewed challenges facing the supply chain in deeper detail, ultimately releasing Final Reports in both Fact Finding initiatives. It should be noted that a rulemaking addressing D&D was one of those recommendations.
The FMC is careful with its movements. It isn’t overly fast, but it is purposeful with its actions. They want to help the industry and they want to get it right. They recognize that shippers have had a tough time recently, but the FMC is also fair and truly intends to create a fair playing field for the industry. The FMC wants to help and has been building toward this moment since well before 2015.
So, what is this moment? An open rulemaking on detention and demurrage soliciting the industry’s feedback. You heard that right, you have a chance to influence the FMC’s D&D rulemaking text. And its simple to do so.
Here is the link: https://www.regulations.gov/document/FMC-2022-0066-0090 and comments are due by December 13, 2022.
This open rulemaking is the FMC’s Notice of Proposed Rulemaking on Demurrage and Detention Billing Requirements – and is a culmination of multiple initiatives. First, and most obviously, it is a continuation of the FMC’s previous ANPRM on Demurrage and Detention Billing Requirements released last Spring 2021. The FMC received more than 80 comments during that stage of the rulemaking, and now they are moving forward with their responses, their adoptions, and their departures from those comments.
But this rulemaking is more – it is also a directive from OSRA 22 – a directive straight from Congress. The FMC is required under OSRA 22 to “initiate a rulemaking further defining prohibited practices by common carriers, marine terminal operators, shippers, and ocean transportation intermediaries under section 41102(c) of title 46, United States Code, regarding the assessment of demurrage or detention charges.” It continues and instructs the FMC to further clarify the assessment of D&D under the FMC’s May 2020 Interpretive Rule.
That’s not all though. Also contained in OSRA 22 is a specific list of 13 items that were immediately required upon OSRA 22’s signing into law. Generally, these were items that you would likely assume were required on all D&D invoices, but until this point, specifics of that degree had not been required. Included in the 13 items were “total amount due” and “start date of free time” and “end date of free time” – simple things. But also included was a requirement for the contact information for questions or dispute and the applicable rule that the D&D rate is based on.
The FMC’s NPRM – the open D&D rulemaking – addresses these OSRA requirements too. Like I said, it’s a culmination of a few different initiatives. Ultimately that makes this open rulemaking the culmination of not only Congress’ recent weigh-in through OSRA 22, but almost 10 years of FMC investigative work. So, yeah, it’s an important moment for the industry.
So where are we now? It’s time to get your thoughts together and have your voice heard. Read the proposed D&D rulemaking text in the NPRM. Determine what it may mean for you, or better yet, how it would operationally work in your sector of the industry. Let the FMC know through filed comments. This is the moment we were begging for in the middle of peak congestion. Let’s not let it pass us by.
Note: Guidance here is general and for educational purposes only. Despite Lauren Beagen being a maritime attorney, this article should not be construed to be legal advice and there is no attorney-client privilege created by this article. If you need an attorney, contact an attorney.
TPM23 Focus
Given the topic of this week’s newsletter was OSRA, I’ll call attention to what will be surely be a key session at TPM23. My colleague Peter Tirschwell will lead this one.
TPMTech Spotlight
As for TPMTech, automation will be a foundational theme at this year’s event and one of the sessions I’m most excited about is a one-on-one with LogTech pioneer John Motley, CEO of LOG-NET. John has forgotten more about logistics technology than most people will ever learn, and he and I will discuss where automation is happening, where it’s not, and how people without a technology background can understand and strategize the impact of automation in the industry. New registrants can use the code EJTPM25 to get 25% off TPMTech, TPM23, or a bundle registration to both events.
Neal Peart Lyrics of the Week
All around that dull gray world
From Moscow to Berlin
People storm the barricades
Walls go tumbling in
The counter-revolution
People smiling through their tears
Who can give them back their lives
And all those wasted years?
All those precious wasted years
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
Obviously the big news in LogTech land this week was Maersk and IBM shuttering TradeLens. Everyone has their pet theory (or set of theories) about why this happened, but I delved into some of the roadblocks that proved too challenging here. I think we’ll definitely have some sort of TradeLens post-term in this newsletter at some point.
The inimitable Lars Jensen thinks TradeLens is not an anomaly, but rather the tip of the LogTech iceberg, as he posits here in a JOC commentary. I’m not so certain myself that TradeLens’ struggles were representative of the industry at large, but then again, betting against Lars is often a foolish game.
Cathy Morrow Roberson and I wrote about how retailers were taking final mile into their own hands in the wake of pandemic demand increases.
On that same note, I wrote this week about OneRail’s pretty sizable series B round. It also gave me a chance to talk to CEO Bill Catania for the first time.
Some upcoming events I’ll be involved in:
If you missed my chat on LogTech Live this morning with Chadd Olesen, CEO of automation specialist AVRL, you absolutely want to check it. Chadd pulls zero punches, but also gives very practical insights into where automation is happening now, how to prepare for where things are going, and what red flags set him off with potential customers. Click here to subscribe to the show.
Delighted to join Container xChange at 7 am ET/1 pm CET for a 2023 container shipping outlook webcast. More details on how to register here.
Disclaimer: This newsletter is in no way affiliated with the Journal of Commerce or S&P Global, and any opinions are mine only.