The U.S. Senate has passed the Ocean Shipping Reform Act 22 (OSRA 22) and will seek to pass the bill’s final version with the House of Representatives before President Biden signs the legislation into law. The Act is designed to increase the federal oversight of ocean carriers and seeks to address the logjams in U.S. ports and the ensuing supply chain woes. The bipartisan bill gives the government more authority at ports and allows federal agencies to investigate unfair practices.
However, several shipping operators and cargo owners have expressed concerns over the Act. The World Shipping Council (WSC) wants the supply chain woes to be addressed even as imports continue at record levels, with the ports and workers on land finding it challenging to process the cargo.
Rising levels of consumption
In February 2022, the Port of Los Angeles processed 857,764 TEUs, a 7.3 percent increase compared to last year. The busiest month in its 115-year old history, this is followed by a track record of record-breaking months from the beginning of 2022. “NRF expects retail sales to increase in 2022, as consumers are ready to spend and have the resources to do so,” says Matthew Shay, President, and CEO of the National Retail Federation.
“We should see durable growth this year given consumer confidence to continue this expansion, notwithstanding risks related to inflation, COVID-19, and geopolitical threats.” The National Retail Federation has pegged retail sales in 2022 between $4.86 trillion and $4.95 trillion. This figure is 14% of the annual growth rate in 2021, the highest in more than 20 years. With the National Retail Federation expecting a stupendous growth in 2022 and the Port of Los Angeles recording its best-ever container handling in February, U.S. consumer spending shows an upward trend despite Covid, inflation, rising fuel prices, and the war situation. Given this background, the OSRA 22 is attracting disapproval from shipping operators.
Discontentment over OSRA 22
“Ocean carriers have deployed every vessel and container available and are moving more goods than at any point in history, but the U.S. landside logjams are keeping vessels stuck outside U.S. ports,” asserted WSC in response to the Act. “This import congestion is also consuming the capacity and space needed to ensure the uninterrupted flow of U.S. exports. The American people are looking for solutions to supply chain congestion resulting from the impacts of Covid-19. Unfortunately, the Ocean Shipping Reform Act of 2022, S.3580, addresses none of the root causes of the U.S. landside congestion.”
WSC has also stressed that the bill would worsen the existing congestion while the Senate bill passed in 2021 provides regulators enough authority to get the final rules right. The Council has further emphasized, “Instead of passing legislation that would do nothing to address the nation’s supply chain congestion, Congress should seek real solutions that take a comprehensive, forwardlooking view. That means continued investment in port infrastructure and promoting communication, innovation, and collaboration across sectors to strengthen further the intermodal transportation system that has supported the U.S. economy throughout the pandemic. The World Shipping Council will continue to partner with Congress and other stakeholders on these worthwhile efforts.”
Freight Logistics Optimization Works (FLOW)
Freight Logistics Optimization Works (FLOW) is the new initiative by the Biden administration for regulating supply chains. A fact sheet issued by the White House explains that FLOW is an information-sharing initiative to pilot key freight information exchange between parts of the supply chain. The commitment to moving the transportation logistics system to 21st-century digitization follows the commitment to move toward 24/7 operations many made last fall.
A slight dip in shipping rates
The Asia-US West Coast prices dropped by a meager 2% to $15,908/FEU. However, it has to be noted that the figure is up 170 percent from 2021. As lockdowns were imposed in China’s major export hubs like Shanghai and Shenzhen, minor effects have been on the supply chains. North Asia to the west coast of North America dipped below $9,000/FEU for the first time since December 14, 2021, and was assessed at $8,000/FEU on a FAK basis on March 18, S&P said in its report.
Congestion lessens in Long Beach/Los Angeles (LA/LB)
Total container ships backed up across the ports of Los Angeles/Long Beach was 42 as of March 22, 2022 – a new low, and 67 fewer than the record of 109 on January 9, 2022. “The 42 container ships backed up to include 3 container ships at anchor off the ports of LA/LB, plus 0 loitering within 25 miles, plus 39 slow speed steaming or loitering outside the Safety and Air Quality Area (SAQA),” according to data from Captain J. Kipling (Kip) Louttit, Executive Director, Marine Exchange of Southern California & Vessel Traffic Service Los Angeles and Long Beach San Pedro, CA.
According to an analysis by Sea- Intelligence, the decline in ships queued outside LA/LB ports is just the start. “What we saw during January appeared to be a kind of steady-state balance between the desire to operate the required vessels and the need to blank sailings due to the vessels being unavailable. Hence, more realistically, we might be back to the 100-105 vessels in the queue by the time we get to April.”