NO OSRA SURPRISES

NO OSRA SURPRISES

s it enters its second year of operation, is the Ocean Shipping Reform Act of 1998 working? How much and how well depends on who's talking, as was evident at a hearing last week of the House Subcommittee on Coast Guard and Maritime Transportation.

Ocean carriers and major shippers, to no one's surprise, say OSRA is working well. Smaller shippers and ocean-transportation intermediaries such as non-vessel-operating common carriers say it has major problems. That's no surprise, either, for understandable reasons.In the end what emerged on OSRA, which took effect May 1, 1999, was pretty much what was expected - and what is best at this point. That was a generally encouraging progress report, with little likelihood of immediate changes but the rock-hard certainty of continued monitoring and continuing pressure for amendment.

It's been clear from the very beginning that OSRA couldn't and wouldn't satisfy everyone. Compromises never do, and OSRA is definitely a compromise. Passed in October 1998 after nearly four years of intense political wrangling, OSRA reformed liner shipping rather than fully decontrolling it. The law opened the door to market forces, but not all the way.

Its key provision allowed ocean carriers and shippers to negotiate and sign confidential, one-on-one contracts that met the individual needs of each. That was a fundamental change in what had long been a common-carrier environment dominated by carrier rate-setting conferences and government regulation. But OSRA also continued carriers' antitrust immunity; even though their conferences have been neutered, shipping lines can still meet in discussion groups and set voluntary rate and service guidelines for themselves.

And as the result of other horse-trading centered on the longstanding antipathy between labor and NVOs, the non-vessel-operating carriers do not share the vessel operators' ability to contract confidentially with their customers. Add the resentment and anxiety over that hurdle together with the fears of low-clout small shippers that they'll end up paying the tab for the deals big shippers and carriers reach, and the result is a determined drive to alter OSRA, especially by deleting carriers' antitrust immunity.

Both positions were on display last week.

In a joint statement on behalf of the 29-member Ocean Carrier Working Group, American President Lines Chairman Timothy J. Rhein and Maersk Inc. Chairman John P. Clancey praised the new law. They noted that individual contracting has surged while conference power has shrunk markedly.

''OSRA is fulfilling the purposes for which it was intended, the primary one being to create an atmosphere in which the liner industry becomes even more responsive to market forces and to the commercial needs of shippers and carriers,'' they declared.

There were equally concise summations from the other side of the issue. Richard J. Gutierrez, vice president of Footner and Co., an NVO and forwarder, offered a trenchant observation as he called for Congress to level the playing field for his sector.

''The new act appears to have created a system of contract carriage . . . for shippers and carriers, but retains the leftover common-carrier obligations from the Shipping Act of 1984 for NVOCCs,'' he noted. ''In the end, what we have is a system where the NVOCC is left holding the common-carrier bag.''

What were perhaps the most farsighted comments came from Edward M. Emmett, president of the National Industrial Transportation League, the country's largest shipper organization. The NIT League is in a carefully balanced position. It led the drive for deregulation, including the lifting of antitrust immunity. But it ultimately took a pragmatic position, giving in on immunity to gain on decontrol.

The league, Emmett explained, ''believes that, whether or not antitrust immunity is retained in its present form as a matter of U.S. statute, carrier pricing that flows from collective activities should quickly become much less significant in the marketplace as one-on-one contracting flourishes.''

But, he added, ''if antitrust immunity leads to serious interference with the one-on-one contractual relationships that OSRA intended and encouraged, then it will need to be carefully reviewed.''

In other words, market forces will resolve the situation. It's a perceptive position and should prove to be an accurate prediction. And it doesn't call for blind faith; it requires - and promises - watchfulness and concern. That kind of thing will be part of shipping reform for a long while to come.

In addition to the monitoring by the Coast Guard and Maritime Transportation panel, the Federal Maritime Commission is undertaking a detailed study on OSRA's impact that should be completed by next summer. House Judiciary Committee Chairman Henry Hyde, a champion of intermediaries, continues to push a bill to take away carrier antitrust immunity. And on a global level, shipping antitrust immunity will come under a spotlight later this month in Paris from the Organization for Economic Cooperation and Development, the industrial nations' think tank.

All of that promises continued attention to shipping reform, and that's positive. But ultimately, as Emmett pointed out, market forces should do the trick. OSRA opened the door to them. And that progress shouldn't be compromised or reversed as the review and debate proceed.