Decoding OSRA – Section 7. Common Carriers
Introduction
We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.
We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.
Previously covered in this series:
Obviously, that means today we’re covering Section 7 of OSRA. Let’s see exactly what it says and changes…
Quick Overview
Section 7 is the longest section of OSRA we’ve covered so far. But while it looks daunting, it’s not too difficult to read through. OSRA section 7 amends section 41104 of Title 46, which deals with common carriers.
The first half is mostly editing the code, making changes and replacements that definitely seem to be in favor of U.S. shippers over ocean freight carriers. That’s something of a theme, or at least a motif, in OSRA so far. The second half of this section is whole new additions to the common carriers section of the shipping code.
Section 7 Text
SEC. 7. COMMON CARRIERS.
(a) In General.--Section 41104 of title 46, United States Code, is
amended--
(1) in subsection (a)--
(A) in the matter preceding paragraph (1), by
striking ``may not'' and inserting ``shall not'';
(B) by striking paragraph (3) and inserting the
following:
``(3) unreasonably refuse cargo space accommodations when
available, or resort to other unfair or unjustly discriminatory
methods;'';
(C) in paragraph (5), by striking`` in the matter of
rates or charges'' and inserting ``against any commodity
group or type of shipment or in the matter of rates or
charges'';
(D) in paragraph (10), by adding ``, including with
respect to vessel space accommodations provided by an
ocean common carrier'' after ``negotiate'';
(E) in paragraph (12) by striking ``; or'' and
inserting a semicolon;
(F) in paragraph (13) by striking the period and
inserting a semicolon; and
(G) by adding at the end the following:
``(14) <<NOTE: Assessment.>> assess any party for a charge
that is inconsistent or does not comply with all applicable
provisions and regulations, including subsection (c) of section
41102 or part 545 of title 46, Code of Federal Regulations (or
successor regulations);
``(15) invoice any party for demurrage or detention charges
unless the invoice includes information as described in
subsection (d) showing that such charges comply with--
``(A) all provisions of part 545 of title 46, Code
of Federal Regulations (or successor regulations); and
``(B) applicable provisions and regulations,
including the principles of the final rule published on
May 18, 2020, entitled `Interpretive Rule on Demurrage
and Detention Under the Shipping Act' (or successor
rule); or
``(16) for service pursuant to a service contract, give any
undue or unreasonable preference or advantage or impose any
undue or unreasonable prejudice or disadvantage against any
commodity group or type of shipment.''; and
(2) by adding at the end the following:
``(d) Detention and Demurrage Invoice Information.--
``(1) Inaccurate invoice. –
<<NOTE: Determination. Applicability.>> If the Commission
determines, after an investigation in response to a submission
under section 41310, that an invoice under subsection (a)(15)
was inaccurate or false, penalties or refunds under section
41107 shall be applied.
``(2) Contents of invoice.--An invoice under subsection
(a)(15), unless otherwise determined by subsequent Commission
rulemaking, shall include accurate information on each of the
following, as well as minimum information as determined by the
Commission:
``(A) Date that container is made available.
``(B) The port of discharge.
``(C) The container number or numbers.
``(D) For exported shipments, the earliest return
date.
``(E) The allowed free time in days.
``(F) The start date of free time.
``(G) The end date of free time.
``(H) The applicable detention or demurrage rule on
which the daily rate is based.
``(I) The applicable rate or rates per the
applicable rule.
``(J) The total amount due.
``(K) The email, telephone number, or other
appropriate contact information for questions or
requests for mitigation of fees.
``(L) A statement that the charges are consistent
with any of Federal Maritime Commission rules with
respect to detention and demurrage.
``(M) A statement that the common carrier's
performance did not cause or contribute to the
underlying invoiced charges.
``(e) Safe Harbor.--If a non-vessel operating common carrier passes
through to the relevant shipper an invoice made by the ocean common
carrier, and the Commission finds that the non-vessel operating common
carrier is not otherwise responsible for the charge, then the ocean
common carrier shall be subject to refunds or penalties pursuant to
subsection (d)(1).
``(f) Elimination of Charge Obligation.--Failure to include the
information required under subsection (d) on an invoice with any
demurrage or detention charge shall eliminate any obligation of the
charged party to pay the applicable charge.''.
(b) <<NOTE: 46 USC 41102 note.>> Rulemaking on Demurrage or
Detention.--
(1) <<NOTE: Deadlines.>> In general.--Not later than 45
days after the date of enactment of this Act, the Federal
Maritime Commission shall 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. The
Federal Maritime Commission shall issue a final rule defining
such practices not later than 1 year after the date of enactment
of this Act.
(2) Contents. – <<NOTE: Determination.>> The rule under
paragraph (1) shall only seek to further clarify reasonable
rules and practices related to the assessment of detention and
demurrage charges to address the issues identified in the final
rule published on May 18, 2020, entitled ``Interpretive Rule on
Demurrage and Detention Under the Shipping Act'' (or successor
rule), including a determination of which parties may be
appropriately billed for any demurrage, detention, or other
similar per container charges.
(c) <<NOTE: Deadline. 46 USC 41104 note.>> Rulemaking on Unfair or
Unjustly Discriminatory Methods.--Not later than 60 days after the date
of enactment of this Act, the Federal Maritime Commission shall initiate
a rulemaking defining unfair or unjustly discriminatory methods under
section 41104(a)(3) of title 46, United States Code, as amended by this
section. The Federal Maritime Commission shall issue a final rule not
later than 1 year after the date of enactment of this Act.
(d) <<NOTE: Deadlines.>> Rulemaking on Unreasonable Refusal to Deal
or Negotiate With Respect to Vessel Space Accommodations.--Not
later <<NOTE: Consultation.>> than 30 days after the date of enactment
of this Act, the Federal Maritime Commission, in consultation with the
Commandant of the United States Coast Guard, shall initiate a rulemaking
defining unreasonable refusal to deal or negotiate with respect to
vessel space under section 41104(a)(10) of title 46, as amended by this
section. The Federal Maritime Commission shall issue a final rule not
later than 6 months after the date of enactment of this Act.
Original Title 46 Text
§41104. Common carriers (a) In General.—A common carrier, either alone or in conjunction with any other person, directly or indirectly, may not— (1) allow a person to obtain transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or any other unjust or unfair device or means; (2) provide service in the liner trade that is— (A) not in accordance with the rates, charges, classifications, rules, and practices contained in a tariff published or a service contract entered into under chapter 405 of this title, unless excepted or exempted under section 40103 or 40501(a)(2) of this title; or (B) under a tariff or service contract that has been suspended or prohibited by the Federal Maritime Commission under chapter 407 or 423 of this title; (3) retaliate against a shipper by refusing, or threatening to refuse, cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods because the shipper has patronized another carrier, or has filed a complaint, or for any other reason; (4) for service pursuant to a tariff, engage in any unfair or unjustly discriminatory practice in the matter of— (A) rates or charges; (B) cargo classifications; (C) cargo space accommodations or other facilities, with due regard being given to the proper loading of the vessel and the available tonnage; (D) loading and landing of freight; or (E) adjustment and settlement of claims; (5) for service pursuant to a service contract, engage in any unfair or unjustly discriminatory practice in the matter of rates or charges with respect to any port; (6) use a vessel in a particular trade for the purpose of excluding, preventing, or reducing competition by driving another ocean common carrier out of that trade; (7) offer or pay any deferred rebates; (8) for service pursuant to a tariff, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage; (9) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage with respect to any port; (10) unreasonably refuse to deal or negotiate; (11) knowingly and willfully accept cargo from or transport cargo for the account of a non-vessel-operating common carrier that does not have a tariff as required by section 40501 of this title, or an ocean transportation intermediary that does not have a bond, insurance, or other surety as required by section 40902 of this title; (12) knowingly and willfully enter into a service contract with an ocean transportation intermediary that does not have a tariff as required by section 40501 of this title and a bond, insurance, or other surety as required by section 40902 of this title, or with an affiliate of such an ocean transportation intermediary; or (13) continue to participate simultaneously in a rate discussion agreement and an agreement to share vessels, in the same trade, if the interplay of the authorities exercised by the specified agreements is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost. (b) Rule of Construction.—Notwithstanding any other provision of law, there is no private right of action to enforce the prohibition under subsection (a)(13). (c) Agreement Violation.—Participants in an agreement found by the Commission to violate subsection (a)(13) shall have 90 days from the date of such Commission finding to withdraw from the agreement as necessary to comply with that subsection.
Amended Text
Now let’s see how the common carriers section of Title 46 reads after the changes are made. To add attention to the changes, I’ve bolded them in text below.
§41104. Common carriers
(a) In General.—A common carrier, either alone or in conjunction with any other person, directly or indirectly, shall not—
(1) allow a person to obtain transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or any other unjust or unfair device or means;
(2) provide service in the liner trade that is—
(A) not in accordance with the rates, charges, classifications, rules, and practices contained in a tariff published or a service contract entered into under chapter 405 of this title, unless excepted or exempted under section 40103 or 40501(a)(2) of this title; or
(B) under a tariff or service contract that has been suspended or prohibited by the Federal Maritime Commission under chapter 407 or 423 of this title;
(3) unreasonably refuse cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods;
(4) for service pursuant to a tariff, engage in any unfair or unjustly discriminatory practice in the matter of—
(A) rates or charges;
(B) cargo classifications;
(C) cargo space accommodations or other facilities, with due regard being given to the proper loading of the vessel and the available tonnage;
(D) loading and landing of freight; or
(E) adjustment and settlement of claims;
(5) for service pursuant to a service contract, engage in any unfair or unjustly discriminatory practice against any commodity group or type of shipment or in the matter of rates or charges with respect to any port;
(6) use a vessel in a particular trade for the purpose of excluding, preventing, or reducing competition by driving another ocean common carrier out of that trade;
(7) offer or pay any deferred rebates;
(8) for service pursuant to a tariff, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage;
(9) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage with respect to any port;
(10) unreasonably refuse to deal or negotiate, including with respect to vessel space accommodations provided by an ocean common carrier;
(11) knowingly and willfully accept cargo from or transport cargo for the account of a non-vessel-operating common carrier that does not have a tariff as required by section 40501 of this title, or an ocean transportation intermediary that does not have a bond, insurance, or other surety as required by section 40902 of this title;
(12) knowingly and willfully enter into a service contract with an ocean transportation intermediary that does not have a tariff as required by section 40501 of this title and a bond, insurance, or other surety as required by section 40902 of this title, or with an affiliate of such an ocean transportation intermediary;
(13) continue to participate simultaneously in a rate discussion agreement and an agreement to share vessels, in the same trade, if the interplay of the authorities exercised by the specified agreements is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost;
(14) <<NOTE: Assessment.>> assess any party for a charge that is inconsistent or does not comply with all applicable provisions and regulations, including subsection (c) of section 41102 or part 545 of title 46, Code of Federal Regulations (or successor regulations);
(15) invoice any party for demurrage or detention charges unless the invoice includes information as described in subsection (d) showing that such charges comply with--
(A) all provisions of part 545 of title 46, Code of Federal Regulations (or successor regulations); and
(B) applicable provisions and regulations, including the principles of the final rule published on May 18, 2020, entitled `Interpretive Rule on Demurrage and Detention Under the Shipping Act' (or successor rule); or
(16) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage against any commodity group or type of shipment.''; and
(b) Rule of Construction.—Notwithstanding any other provision of law, there is no private right of action to enforce the prohibition under subsection (a)(13).
(c) Agreement Violation.—Participants in an agreement found by the Commission to violate subsection (a)(13) shall have 90 days from the date of such Commission finding to withdraw from the agreement as necessary to comply with that subsection.
(d) Detention and Demurrage Invoice Information.--
(1) Inaccurate invoice. –
<<NOTE: Determination. Applicability.>> If the Commission determines, after an investigation in response to a submission under section 41310, that an invoice under subsection (a)(15) was inaccurate or false, penalties or refunds under section 41107 shall be applied.
(2) Contents of invoice.--An invoice under subsection (a)(15), unless otherwise determined by subsequent Commission rulemaking, shall include accurate information on each of the following, as well as minimum information as determined by the Commission:
(A) Date that container is made available.
(B) The port of discharge.
(C) The container number or numbers.
(D) For exported shipments, the earliest return date.
(E) The allowed free time in days.
(F) The start date of free time.
(G) The end date of free time.
(H) The applicable detention or demurrage rule on which the daily rate is based.
(I) The applicable rate or rates per the applicable rule.
(J) The total amount due.
(K) The email, telephone number, or other appropriate contact information for questions or requests for mitigation of fees.
(L) A statement that the charges are consistent with any of Federal Maritime Commission rules with respect to detention and demurrage.
(M) A statement that the common carrier's performance did not cause or contribute to the underlying invoiced charges.
(e) Safe Harbor.--
If a non-vessel operating common carrier passes through to the relevant shipper an invoice made by the ocean common carrier, and the Commission finds that the non-vessel operating common carrier is not otherwise responsible for the charge, then the ocean common carrier shall be subject to refunds or penalties pursuant to subsection (d)(1).
(f) Elimination of Charge Obligation.--
Failure to include the information required under subsection (d) on an invoice with any demurrage or detention charge shall eliminate any obligation of the charged party to pay the applicable charge.
(b) <<NOTE: 46 USC 41102 note.>> Rulemaking on Demurrage or Detention.--
(1) <<NOTE: Deadlines.>> In general.-- Not later than 45 days after the date of enactment of this Act, the Federal Maritime Commission shall 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. The Federal Maritime Commission shall issue a final rule defining such practices not later than 1 year after the date of enactment of this Act.
(2) Contents. – <<NOTE: Determination.>> The rule under paragraph (1) shall only seek to further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in the final rule published on May 18, 2020, entitled ``Interpretive Rule on Demurrage and Detention Under the Shipping Act'' (or successor rule), including a determination of which parties may be appropriately billed for any demurrage, detention, or other similar per container charges.
(c) <<NOTE: Deadline. 46 USC 41104 note.>> Rulemaking on Unfair or Unjustly Discriminatory Methods.--Not later than 60 days after the date of enactment of this Act, the Federal Maritime Commission shall initiate a rulemaking defining unfair or unjustly discriminatory methods under section 41104(a)(3) of title 46, United States Code, as amended by this section. The Federal Maritime Commission shall issue a final rule not later than 1 year after the date of enactment of this Act.
(d) <<NOTE: Deadlines.>> Rulemaking on Unreasonable Refusal to Deal or Negotiate With Respect to Vessel Space Accommodations.--Not later <<NOTE: Consultation.>> than 30 days after the date of enactment of this Act, the Federal Maritime Commission, in consultation with the Commandant of the United States Coast Guard, shall initiate a rulemaking defining unreasonable refusal to deal or negotiate with respect to vessel space under section 41104(a)(10) of title 46, as amended by this section. The Federal Maritime Commission shall issue a final rule not later than 6 months after the date of enactment of this Act.
Summary of Subparagraph (1)
Paragraph (a) simply tells us the section in Title 46 we’re amending, so we can jump straight to the meat in the subparagraphs.
The first change, which comes in subparagraph (A), looks small, but Congress changed “may” to the legally stronger word “shall.” Cornell Law School’s website sheds some light on the significance of this word change:
The word “may” is an expression of possibility, a permissive choice to act or not, and ordinarily implies some degree of discretion. This contrasts with the word “shall,” which is generally used to indicate a mandatory provision.
“Shall not” makes it clear that perpetrating any of the actions to follow would be illegal and make common carriers subject to penalty for such an offense.
Subparagraph (B) is an interesting change that could have serious ramifications. This paragraph used to be be about carriers refusing space on ships in retaliation. Retaliation was dealt with in Section 5 of OSRA, so lawmakers felt comfortable getting rid of retaliation here and went with something stronger. Well, broader. Carriers are not to “unreasonably withhold space.” Now we’re talking about any reason the Federal Maritime Commission (FMC) ends up deeming unreasonable, not just cases of retaliation. And then to make sure the scope is as fully broad and vague as possible, the lawmakers throw in a second part: “or resort to other unfair or unjustly discriminatory methods.” That’s something to be defined by the FMC, which we’ll come back to later.
Subparagraph (C) adds commodity groups and types of shipments to the rates and charges that common carriers cannot “engage in any unfair or unjustly discriminatory practice” against, pursuant to service contracts. Yes, it’s more for carriers to be careful about.
Subparagraph (D) makes specific mention of vessel space accommodations as something on which ocean carriers can’t unreasonably refuse to deal or negotiate.
Subparagraphs (E) and (F) just make small grammatical and punctuation changes because lawmakers are extending the list of things carriers shall not do.
Subparagraph (G) gives us three items to be added to the list of things carriers shall not do. Items (14) and (15) are about preventing carriers from assessing charges, including detention and demurrage fees, that don’t comply with updated regulation on these. When I covered Section 6 of OSRA, I included the pertinent text on detention and demurrage fees for you to check out.
The last list item, (16), given in Subparagraph (G) is aimed at stopping carriers from giving unfair preference to commodity groups or types of shipment. This is something U.S. agricultural exporters complained about, particularly during the pandemic. Carriers were giving preference to more lucrative Asia to U.S. shipments, even refusing service to U.S. agricultural exporters in many circumstances. Congress seems to be trying to address exporters’ complaints here, which the FMC is also trying to do with its proposed (and controversial) refusal of service rules.
Summary of Subparagraph (2)
Subparagraph (2) is all addition to Title 46. At the end of subparagraph (1), we saw a transition from Congress editing to straight adding law to the legal code. Now the transition is complete, and the lawmakers really focus in on invoices and charges, particularly detention and demurrage fees, which have been contentious things in the international shipping industry for a long, long time.
Paragraph (d) is about detention and demurrage invoices. Its subparagraph (1) states that detention and demurrage invoices the FMC determines are false or inaccurate will result in penalties or refunds. Its subparagraph (2) just states invoices will contain all the information laid out in subparagraphs (A) through (M), which would just be redundant to repeat here. That said, the obvious goal is to make it more difficult for carriers to charge shippers with unfair detention and demurrage fees.
Paragraph (e), titled Safe Harbor, protects NVOCCs, which are your 3rd party logistics companies or freight forwarders. Liability for penalties or refunds on fees that NVOCCs pass on from ocean carriers to shippers, which the NVOCCs are not otherwise responsible for, falls upon the ocean carrier with which those fees originated. This keeps the middleman from getting stuck paying refunds or penalties on unfair fees from ocean carriers.
Shippers should like paragraph (f). If carriers fail to include any of the information listed in subparagraphs (A) through (M), shippers don’t have to pay that invoice.
The final things subparagraph (2) adds to Title 46 are notes (b), (c), and (d).
Summary of (b), (c), and (d) Notes
Note (b) focuses on rulemaking around detention and demurrage, and it has two subparagraphs. Subparagraph (1) simply sets a time period for the FMC to complete additional rulemaking around the topic of detention and demurrage fees. Subparagraph (2) lays out that the rulemaking referred to in the first subparagraph is to clarify the already created “Interpretive Rule on Demurrage and Detention Under the Shipping Act” from the FMC.
Note (c) lays out more rulemaking for the FMC. This time, the FMC rulemaking is meant to define “unfair or unjustly discriminatory methods.” I told you we’d come back to that. The FMC was given a year to do this.
Note (d) tells the FMC to complete rulemaking on “Unreasonable Refusal to Deal or Negotiate With Respect to Vessel Space Accommodations.” Interestingly, this time, the FMC is told to do its rulemaking in consultation with the Commandant of the United States Coast Guard. For all the others, the FMC is given no such consultation instruction. As mentioned earlier, we’re still looking at a proposed version of this rule, despite the fact that this subparagraph says a final rule shall be published no later than 6 months after OSRA is enacted.
Conclusion
Section 7 of OSRA continues Congress’s attempts to redress shippers’ complaints with ocean freight carriers. This section attempts to make it harder for carriers to charge unfair fees, particularly detention and demurrage ones. But it also attempts to prevent refusal of service from carriers, at least of the unfair variety. Again, Congress keeps pointing to the FMC as the authority on these matters.
If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.
Stay tuned for when Decoding OSRA continues, examining Section 8….
