During the peak of the pandemic, free time extensions were granted within service contracts between ocean carriers and shippers. As demand and cargo volumes increase, these extensions are becoming less manageable from an ocean carrier standpoint. Free time extensions are expensive given the use of space, adding to delivery problems and creating a ripple effect for U.S. supply chains. Shippers have to navigate through varying challenges, outside of just free time extensions: the absence of chassis, inabilities to return empty containers, rail congestion, warehouse capacity, and more.
FEDERAL MARINE COMMISSION (FMC) OPINION ON FREE TIME POLICIES
The Ocean Shipping Reform Act of 2022 (OSRA-22) was signed in June 2022, giving more authority to the Federal Marine Commission (FMC), including the evaluation of these free time policies.
An FMC official stated, “Under the D&D interpretive rule, you say it’s not fair to require boxes to be picked up when they can’t be picked up due to a situation completely outside the shipper’s control. But there is a flip side to that if you take the interpretive rule to its logical conclusion. If you look at the reverse and say if a carrier offers weeks and weeks and weeks of free time, as an incentive, that is not incentivizing moving cargo either. It’s the reverse but the principle should still hold.”
Ocean carriers, ports, and shippers need to collaborate across the supply chain this holiday season in order to find a solution to these challenges.
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