Decoding OSRA – Section 4. Shipping Exchange Registry
Introduction
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 4 of OSRA. Let’s see exactly what it says and changes…
Quick Overview
Section 4 of OSRA is the largest section we’ve covered so far. However, it makes no edits to sentences or paragraphs of Title 46 like we’ve seen in previous section. Rather, Section 4 adds a whole new section at the end of Chapter 405 of Title 46.
This section creates a new requirement for shipping exchanges to register with the Federal Maritime Commission (FMC). However, it leaves it to the FMC to create the regulations around this registration rather than creating them itself.
Section 4 Full Text
SEC. 4. SHIPPING EXCHANGE REGISTRY.
(a) In General.--Chapter 405 of title 46, United States Code, is
amended by adding at the end the following:
``Sec. 40504. <<NOTE: 46 USC 40504.>> Shipping exchange registry
``(a) In General.--No person may operate a shipping exchange
involving ocean transportation in the foreign commerce of the United
States unless the shipping exchange is registered as a national shipping
exchange under the terms and conditions provided in this section and the
regulations issued pursuant to this section.
[[Page 136 STAT. 1273]]
``(b) Registration. – <<NOTE: Regulations.>> A person shall register
a shipping exchange by filing with the Federal Maritime Commission an
application for registration in such form as the Commission, by rule,
may prescribe, containing the rules of the exchange and such other
information and documents as the Commission, by rule, may prescribe as
necessary or appropriate to complete a shipping exchange's registration.
``(c) Exemption.--The Commission may exempt, conditionally or
unconditionally, a shipping exchange from registration under this
section if the Commission finds that the shipping exchange is subject to
comparable, comprehensive supervision and regulation by the appropriate
governmental authorities in a foreign country where the shipping
exchange is headquartered.
``(d) Regulations. – <<NOTE: Deadline. Standards.>> Not later than 3
years after the date of enactment of the Ocean Shipping Reform Act of
2022, the Commission shall issue regulations pursuant to subsection (a),
which shall set standards necessary to carry out subtitle IV of this
title for registered national shipping exchanges. For consideration of a
service contract entered into by a shipping exchange, the Commission
shall be limited to the minimum essential terms for service contracts
established under section 40502 of this title.
``(e) Definition of Shipping Exchange.--In this section, the term
`shipping exchange' means a platform (digital, over-the-counter, or
otherwise) that connects shippers with common carriers for the purpose
of entering into underlying agreements or contracts for the transport of
cargo, by vessel or other modes of transportation.''.
(b) <<NOTE: Effective date. 46 USC 40504 note.>> Applicability.--
The registration requirement under section 40504 of title 46, United
States Code (as added by subsection (a)), shall take effect on the date
on which the Federal Maritime Commission states the rule is effective in
the regulations issued under such section.
(c) Clerical Amendment.--The analysis for chapter 405 of title 46,
United States Code, <<NOTE: 46 USC 40501 prec.>> is amended by adding
at the end the following:
``40504. Shipping exchange registry.''.
Portion of Title 46 Section 4 Amends
As mentioned earlier, Section 4 doesn’t edit text in Title 46 so much as add an additional section to Chapter 405 of the shipping law. However, I’ll still provide the full text of the chapter so you can see everything it covered before the additional section was added to it and how that section fits in.
CHAPTER 405—TARIFFS, SERVICE CONTRACTS, REFUNDS, AND WAIVERS Sec. 40501. General rate and tariff requirements. 40502. Service contracts. 40503. Refunds and waivers. §40501. General rate and tariff requirements (a) Automated Tariff System.— (1) In general.—Each common carrier and conference shall keep open to public inspection in an automated tariff system, tariffs showing all its rates, charges, classifications, rules, and practices between all points or ports on its own route and on any through transportation route that has been established. However, a common carrier is not required to state separately or otherwise reveal in tariffs the inland divisions of a through rate. (2) Exceptions.—Paragraph (1) does not apply with respect to bulk cargo, forest products, recycled metal scrap, new assembled motor vehicles, waste paper, or paper waste. (b) Contents of Tariffs.—A tariff under subsection (a) shall— (1) state the places between which cargo will be carried; (2) list each classification of cargo in use; (3) state the level of compensation, if any, of any ocean freight forwarder by a carrier or conference; (4) state separately each terminal or other charge, privilege, or facility under the control of the carrier or conference and any rules that in any way change, affect, or determine any part or the total of the rates or charges; (5) include sample copies of any bill of lading, contract of affreightment, or other document evidencing the transportation agreement; and (6) include copies of any loyalty contract, omitting the shipper's name. (c) Electronic Access.—A tariff under subsection (a) shall be made available electronically to any person, without time, quantity, or other limitation, through appropriate access from remote locations. A reasonable fee may be charged for such access, except that no fee may be charged for access by a Federal agency. (d) Time-Volume Rates.—A rate contained in a tariff under subsection (a) may vary with the volume of cargo offered over a specified period of time. (e) Effective Dates.— (1) Increases.—A new or initial rate or change in an existing rate that results in an increased cost to a shipper may not become effective earlier than 30 days after publication. However, for good cause, the Federal Maritime Commission may allow the rate to become effective sooner. (2) Decreases.—A change in an existing rate that results in a decreased cost to a shipper may become effective on publication. (f) Marine Terminal Operator Schedules.—A marine terminal operator may make available to the public a schedule of rates, regulations, and practices, including limitations of liability for cargo loss or damage, pertaining to receiving, delivering, handling, or storing property at its marine terminal. Any such schedule made available to the public is enforceable by an appropriate court as an implied contract without proof of actual knowledge of its provisions. (g) Regulations.— (1) In general.—The Commission shall by regulation prescribe the requirements for the accessibility and accuracy of automated tariff systems established under this section. The Commission, after periodic review, may prohibit the use of any automated tariff system that fails to meet the requirements established under this section. (2) Remote terminals.—The Commission may not require a common carrier to provide a remote terminal for electronic access under subsection (c). (3) Marine terminal operator schedules.—The Commission shall by regulation prescribe the form and manner in which marine terminal operator schedules authorized by this section shall be published. (Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1532.) [Historical and Revision Notes chart omitted.] In subsection (b)(3), the words “ocean freight forwarder” are substituted for “ocean transportation intermediary, as defined in section 1702(17)(A) of this Appendix” because the definition of “ocean transportation intermediary” in section 1702(17)(A) contains a definition of “ocean freight forwarder” which is restated as a separate definition. In subsection (e), the word “calendar” is omitted as unnecessary. In subsection (f)(1), the words “subject to section 1709(d) of this Appendix” are omitted as unnecessary. §40502. Service contracts (a) In General.—An individual ocean common carrier or an agreement between or among ocean common carriers may enter into a service contract with one or more shippers subject to the requirements of this part. (b) Filing Requirements.— (1) In general.—Each service contract entered into under this section by an individual ocean common carrier or an agreement shall be filed confidentially with the Federal Maritime Commission. (2) Exceptions.—Paragraph (1) does not apply to contracts regarding bulk cargo, forest products, recycled metal scrap, new assembled motor vehicles, waste paper, or paper waste. (c) Essential Terms.—Each service contract shall include— (1) the origin and destination port ranges; (2) the origin and destination geographic areas in the case of through intermodal movements; (3) the commodities involved; (4) the minimum volume or portion; (5) the line-haul rate; (6) the duration; (7) service commitments; and (8) the liquidated damages for nonperformance, if any. (d) Publication of Certain Terms.—When a service contract is filed confidentially with the Commission, a concise statement of the essential terms specified in paragraphs (1), (3), (4), and (6) of subsection (c) shall be published and made available to the general public in tariff format. (e) Disclosure of Certain Terms.— (1) Definitions.—In this subsection, the terms “dock area” and “within the port area” have the same meaning and scope as in the applicable collective bargaining agreement between the requesting labor organization and the carrier. (2) Disclosure.—An ocean common carrier that is a party to or is otherwise subject to a collective bargaining agreement with a labor organization shall, in response to a written request by the labor organization, state whether it is responsible for the following work at a dock area or within a port area in the United States with respect to cargo transportation under a service contract: (A) The movement of the shipper's cargo on a dock area or within the port area or to or from railroad cars on a dock area or within the port area. (B) The assignment of intraport carriage of the shipper's cargo between areas on a dock or within the port area. (C) The assignment of the carriage of the shipper's cargo between a container yard on a dock area or within the port area and a rail yard adjacent to the container yard. (D) The assignment of container freight station work and container maintenance and repair work performed at a dock area or within the port area. (3) Within reasonable time.—The common carrier shall provide the information described in paragraph (2) to the requesting labor organization within a reasonable period of time. (4) Existence of collective bargaining agreement.—This subsection does not require the disclosure of information by an ocean common carrier unless there exists an applicable and otherwise lawful collective bargaining agreement pertaining to that carrier. A disclosure by an ocean common carrier may not be deemed an admission or an agreement that any work is covered by a collective bargaining agreement. A dispute about whether any work is covered by a collective bargaining agreement and the responsibility of an ocean common carrier under a collective bargaining agreement shall be resolved solely in accordance with the dispute resolution procedures contained in the collective bargaining agreement and the National Labor Relations Act (29 U.S.C. 151 et seq.), and without reference to this subsection. (5) Effect under other laws.—This subsection does not affect the lawfulness or unlawfulness under this part or any other Federal or State law of any collective bargaining agreement or element thereof, including any element that constitutes an essential term of a service contract. (f) Remedy for Breach.—Unless the parties agree otherwise, the exclusive remedy for a breach of a service contract is an action in an appropriate court. The contract dispute resolution forum may not be controlled by or in any way affiliated with a controlled carrier or by the government that owns or controls the carrier. (Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1533.) [Historical and Revision Notes chart omitted.] In subsection (e)(5), the words “the National Labor Relations Act [29 U.S.C. 151 et seq.], the Taft-Hartley Act [29 U.S.C. 141 et seq.], the Federal Trade Commission Act [15 U.S.C. 41 et seq.], the antitrust laws” are omitted as unnecessary because of the reference to “any other Federal or State law”. References in Text The National Labor Relations Act, referred to in subsec. (e)(4), is act July 5, 1935, ch. 372, 49 Stat. 449, which is classified generally to subchapter II (§151 et seq.) of chapter 7 of Title 29, Labor. For complete classification of this Act to the Code, see section 167 of Title 29 and Tables. §40503. Refunds and waivers The Federal Maritime Commission, on application of a carrier or shipper, may permit a common carrier or conference to refund a portion of the freight charges collected from a shipper, or to waive collection of a portion of the charges from a shipper, if— (1) there is an error in a tariff, a failure to publish a new tariff, or an error in quoting a tariff, and the refund or waiver will not result in discrimination among shippers, ports, or carriers; (2) the common carrier or conference, before filing an application for authority to refund or waive any charges for an error in a tariff or a failure to publish a tariff, has published a new tariff setting forth the rate on which the refund or waiver would be based; and (3) the application for the refund or waiver is filed with the Commission within 180 days from the date of shipment. (Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1535.) [Historical and Revision Notes chart omitted.] In paragraph (1), the words “an error in a tariff, a failure to publish a new tariff” are substituted for “an error in a, in failing to publish a new tariff” to correct an obvious error in the underlying statute. In paragraph (2), the words “or waive” are added for consistency with the reference to a waiver later in the paragraph.
Visible Changes
“40504. Shipping exchange registry.” is added to the list of sections at the beginning of the chapter.
The section, as quoted above, is added to the end of Chapter 405.
Let’s go through the section paragraph by paragraph…
Paragraph (a)
The first paragraph of the new section reads as follows:
(a) In General.--Chapter 405 of title 46, United States Code, is amended by adding at the end the following: ``Sec. 40504. <<NOTE: 46 USC 40504.>> Shipping exchange registry
This paragraph just inserts the title headline of the new section.
Subparagraph (a)
Subparagraph (a) of the new section reads as follows:
In General.--No person may operate a shipping exchange involving ocean transportation in the foreign commerce of the United States unless the shipping exchange is registered as a national shipping exchange under the terms and conditions provided in this section and the regulations issued pursuant to this section.
This paragraph is straight forward, requiring the registration of a shipping exchange as a national shipping exchange in order for anyone to operate that shipping exchange. Explicitly, it is referring to shipping exchanges involving foreign trade of the U.S.
Subparagraph (b)
Subparagraph (b) of the new section reads as follows:
``(b) Registration. – <<NOTE: Regulations.>> A person shall register a shipping exchange by filing with the Federal Maritime Commission an application for registration in such form as the Commission, by rule, may prescribe, containing the rules of the exchange and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate to complete a shipping exchange's registration.
Registration will be with the FMC. The rules for registration, both how to apply for registration and the information and documents required in the registration, shall be determined by the FMC. While Congress leaves it up to the FMC to decide what is “necessary or appropriate” in the registration, legislators do include one thing for the registration to include: “the rules of the exchange.”
Subparagraph (c)
Subparagraph (c) of the new section reads as follows:
``(c) Exemption.--The Commission may exempt, conditionally or unconditionally, a shipping exchange from registration under this section if the Commission finds that the shipping exchange is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in a foreign country where the shipping exchange is headquartered.
This paragraph gives the FMC authority to exempt exchanges from registering under a special condition. If the shipping exchange is headquartered in a different country, it doesn’t have to register with the FMC as long as the exchange is “subject to comparable, comprehensive supervision and regulation” by the governmental authorities in that country. However, it’s up to the FMC to decide if that shipping exchange is exempt. The commission could choose to require the exchange to register anyway.
Subparagraph (d)
Subparagraph (d) of the new section reads as follows:
``(d) Regulations. – <<NOTE: Deadline. Standards.>> Not later than 3 years after the date of enactment of the Ocean Shipping Reform Act of 2022, the Commission shall issue regulations pursuant to subsection (a), which shall set standards necessary to carry out subtitle IV of this title for registered national shipping exchanges. For consideration of a service contract entered into by a shipping exchange, the Commission shall be limited to the minimum essential terms for service contracts established under section 40502 of this title.
This paragraph gives the FMC 3 years to come up with its regulations for registering shipping exchanges.
This paragraph also includes an interesting limitation in that it might not be much of a limitation at all. Service contracts entered into by a shipping exchange that the FMC considers, because they presumably must be registered like service contracts between ocean common carriers and shippers, can only be required to have the same minimum essential terms listed in Section 40502 of Title 46.
The reason I say this might not be much of a limitation at all is because, as we covered in the previous post on this series, Congress added to the list of essential terms “any other essential terms” the FMC decides are “necessary or appropriate.”
Essentially, the FMC could add anything it wants to the list of required terms shipping exchange service contracts must include when registering. The FMC just has to make those required for service contracts between carriers and shippers as well.
Subparagraph (e)
Paragraph (e) of the new section reads as follows:
``(e) Definition of Shipping Exchange.--In this section, the term `shipping exchange' means a platform (digital, over-the-counter, or otherwise) that connects shippers with common carriers for the purpose of entering into underlying agreements or contracts for the transport of cargo, by vessel or other modes of transportation.''.
This paragraph defines what shipping exchanges are. The definition is rather broad. That it includes “by vessel or other modes of transportation” in the prepositional phrase modifying “the transport of cargo” could potentially broaden the FMC’s authority beyond maritime or ocean shipping.
Paragraph (b)
Paragraph (b) reads as follows:
(b) <<NOTE: Effective date. 46 USC 40504 note.>> Applicability. – The registration requirement under section 40504 of title 46, United States Code (as added by subsection (a)), shall take effect on the date on which the Federal Maritime Commission states the rule is effective in the regulations issued under such section.
To put it simply, this new shipping exchange registration goes into effect when the FMC says so.
Paragraph (c)
Paragraph (c) reads as follows:
(c) Clerical Amendment.--The analysis for chapter 405 of title 46, United States Code, <<NOTE: 46 USC 40501 prec.>> is amended by adding at the end the following: ``40504. Shipping exchange registry.''.
This is where Section 4 adds the “Shipping exchange registry” name to the list of sections in Chapter 405 of Title 46. No law change here.
Additional Observation
This section of OSRA, like the only other section so far to make actual rule changes to the United States’ shipping law, gives the FMC more authority and rule- and regulation-creating responsibility.
Again, no oversight is given to the FMC when it comes to this section. The FMC appears to be the final authority on the matter covered in Section 4, as it was in the matter covered in Section 3. No checks. No balances.
Conclusion
Section 4 deals with shipping exchanges, specifically requiring them to register with the FMC.
The FMC is to come up with the rules around this registration and has 3 years to do so.
Ultimately, this will create more paperwork for shipping exchanges. It could make it easier for the government, and the FMC specifically, to shut down their operation in the U.S.
How difficult or extensive the registration process will be shall be up to the FMC. This section could end up protecting shippers from potentially problematic shipping exchanges. It could also make the use or operation of shipping exchanges more difficult or more costly. Only time will tell the effects.
It is notable that the first two real legislative changes in OSRA increase the authority and power of the FMC.
If you have any thoughts on this section of OSRA that I didn’t cover, please share them.
Stay tuned for when Decoding OSRA continues, examining Section 5…
