To confront the latest tsunami of logistics challenges, non-vessel-operating carriers (NVOs), freight forwarders, and customs brokers need US maritime regulators and government policymakers to exercise a special kind of informed leadership and vision.
Since the first Shipping Act in 1916, maritime regulation has sought to protect the shipper while encouraging carrier competition. It’s been well over 20 years since Congress passed the last major reform of the landmark legislation. Since then, the world of ocean shipping has changed dramatically, from a system of rates set by tariffs to a market-driven rate system.
Major legislation to reform the Shipping Act of 1984 has passed the House of Representatives with the good objective of addressing current abuses, such as the assessment of detention and demurrage when they do not fulfill their stated purpose to incentivize the movement of cargo. This would add to the legal underpinning of the US Federal Maritime Commission’s masterful guidance on unreasonable practices based on the “incentive principle.”
Maritime regulators and legislation should also embrace the principles of transparency in ocean shipping charges and accountability in aligning performance with the services promised. The 1984 Shipping Act still requires asset-based carriers and non-vessel-operating carriers (NVOs) to maintain publicly available automated tariffs.
But industry experts say a small fraction of base ocean transportation is moving under tariff rates. An elaborate system of surcharges now exists and adds to the uncertainty of the final cost of the ocean freight movement.
It would seem that the tariff system has outlived its usefulness and become a weapon used against the shipper. Certainly, it undermines transparency. Any ocean shipping reform legislation should amend this requirement. It should also align costs more closely with responsibility. Additional costs related to service failures should be borne by the party creating those failures.
Changes to regulations or law should not be driven by an overreaction to current market conditions, but instead should promote a framework that will create a competitive, efficient, and economical system that carries US exporters and importers into the future.