OSRA after one year: The jury's still out

By Staff -- Logistics Management, 6/1/2000

The Ocean Shipping Reform Act of 1999 (OSRA) took effect on May 1 of last year. That law was designed to introduce more freedom and flexibility for shippers to obtain and ocean carriers to offer rates and services. Has it succeeded?

The response from most quarters: It's too soon to tell. Most of last year's service contracts were signed before the new law took effect, so there were few changes before the current round of contracts was negotiated. Still, there are signs that the maritime industry is changing.

Some of the largest shippers have taken advantage of their ability to negotiate multi-route agreements directly with carriers rather than be restricted to collective negotiations with ocean carrier conference members in individual trade lanes. They also are proposing deals that go beyond ocean transportation to include integrated services that can cross the line into the realm of freight forwarding and third-party logistics.

OSRA also has created some previously unheard-of collaborations. For example, a group of small and medium-sized shippers with no specific business connections has formed the National Unaffiliated Shippers Association (NUSA), based in Warwick, R.I., to pool their resources and negotiate group contracts with carriers.

Another unusual affiliation was announced in April, when DuPont Global Logistics and BDP International, the Philadelphia-based international freight forwarder and customs broker, unveiled a joint venture that would allow small and medium-sized shippers to take advantage of DuPont's enormous buying power. BDP Transport LLC will essentially be a shippers association that has DuPont as its anchor member. The chemical shipper will contribute its negotiating clout as well as its expertise in transportation negotiations and hazardous-materials safety. BDP, meanwhile, will manage and operate the joint venture, as well as provide a wide range of logistics services.

Although it's clearly still early in the game, critics of OSRA already are questioning the law's impact. In March, House Judiciary Committee Chairman Henry Hyde (R-Ill.) held hearings on a bill he filed last year in response to certain provisions of OSRA. Hyde's bill, which would repeal ocean carriers' antitrust immunity while retaining requirements for filing essential terms of service contracts and carrier discussion agreements, has made no progress in Congress to date. Just last month, House Coast Guard and Maritime Subcommittee Chairman Wayne Gilchrest (R-Md.) held hearings that were designed to provide a look at OSRA's successes and shortcomings. Testimony by carriers and large shippers generally was favorable, but intermediaries such as consolidators and forwarders expressed concern that OSRA gave ocean carriers numerous unfair advantages, particularly in regard to contract negotiations and tariff publication.