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Ocean Shipping Reform Act

Like every industry, the maritime industry is strongly governed by antitrust laws. In theory, antitrust laws act to level the playing field and keep open competition by restricting monopolies and banning collusion to fix prices or divide markets. These laws allow for the best prices at the highest quality.

The Shipping Act of 1984

The Ocean Shipping Reform Act of 1998, or OSRA, was enacted to reform and update the Shipping Act of 1984, or Shipping Act. Under the Shipping Act, there was greater reliance on the free market to determine pricing in the shipping industry. Notably, the Shipping Act allowed for the private negotiation of contracts. Prior to the Shipping Act, the maritime process required that the Federal Maritime Commission, or FMC, approve such contracts. With the advent of the Shipping Act, privately-negotiated contracts were in force unless the FMC rejected to those contracts within 45 days.

Another significant Shipping Act modification was with respect to the Conference System. Historically, “conferences,” which are groups of maritime businesses operating in the same area, would set the rates for specific markets. Under the Shipping Act, carriers were allowed to operate outside of conferences, adding to the free market nature of the maritime industry. This would foster competition and remove monopolies from the industry and in turn would provide the best service at the best price.

The shipping industry is still governed, in large part, by the Shipping Act. The OSRA was established to update certain standards, especially with regard to increased globalization. Much of the shipping industry today operates under the Shipping Act.

Ocean Shipping Reform Act

With the ideals of market-driven economics, Congress passed the OSRA in 1998. Under the OSRA, licensing, bonding, and tariffs were updated to reflect the new global market and its relationship with the maritime industry. The OSRA also clearly updated regulations with respect to transportation intermediaries, including Ocean Freight Forwarders, or Freight Forwarders, and Non Vessel Operating Common Carriers, or NVOCC. Freight Forwarders are entities that book and dispatch shipments via waterways; NVOCC are common carriers that provide and take responsibility for transportation of cargo but are not the owners or operators of the ships.

  • Licensing-under these new regulations, even Freight Forwarders and NVOCCs must obtain licenses from the FMC, to operate their businesses in the United States. Note that foreign NVOCCs may, but are not required to, obtain an FMC license.
  • Bonding-the OSRA places a requirement upon Freight Forwarders and NVOCCs to obtain surety bonds before operating in the maritime industry. Note that the bond must be filed under the same company name as the license.
  • Freight Forwarders and NVOCCs must publish their tariff information on the FMC’s website. The goal is to create a transparent tariff regime that is open access to all. There is also a requirement to publish tariff information from the previous two years on the website.

Involved in shipping? Increased globalization confuses you? Speak with an attorney who has both the experience and knowledge in the maritime field. Contact the Kolodny Law Firm.

(image courtesy of Clem Onojeghuo)

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