*This article was written by Maritime Executive, published on 4 March 2022 on Maritimeexectutive.com
The battle lines are being drawn between the container shipping industry and regulators as both sides respond to the calls to investigate the practices of the carriers in the wake of their record profits in 2021. Industry lobbying groups are responding to the latest round of regulatory actions, including President Joe Biden’s singling out the shipping industry in the annual State of the Union Address to the United States Congress.
Faced with rampant inflation, economic pressures, and shortages of goods, the Biden administration fired its most direct shot at the shipping industry. At the beginning of the week, the White House announced an enhanced focus by the U.S. Department of Justice, its lawyers and antitrust teams, working with the Federal Maritime Commission to enforce antitrust laws and stop any abusive practices by the large carriers that were raising costs and hurting American exporters.
The President is also calling on Congress to pass reforms to the Ocean Shipping Act that regulates the business practices of the carriers. The U.S. House of Representatives passed an overhaul of the act in December 2021 which would provide the Federal Maritime Commission with greater authority to regulate the international shipping companies and require additional transparency and reporting from the carriers on fees, export versus empty container volumes, and quarterly volumes entering and exiting U.S. ports.
Yesterday, the U.S. Senate’s Committee on Commerce, Science, and Transportation held its first full committee hearing on the Senate’s version of the Ocean Shipping Reform Act. In advance of the hearing, Committee Chair Senator Maria Cantwell said. “Too many farmers, manufacturers, and other American businesses have been hit by skyrocketing shipping fees, unprecedented delays, and schedule changes, while foreign shipping companies reap record profits. Congress must take bipartisan action to protect our agriculture producers and export businesses from unfair ocean carrier practices so they can get their goods to the global marketplace, and we can further relieve port congestion, reduce supply chain backlogs, and lower prices for consumers.”
On the other side of Congress, two congressional oversight panels, the Select Subcommittee on the Coronavirus Crisis, and the Subcommittee on Economic and Consumer Policy, launched investigations into “dramatic price hikes.” They are including spot and freight contract rates and fees that they believe may have fueled inflation while the carriers “collectively reaped total annual profits of $150 billion in 2021, nine times greater than the year before.”
Representatives James Clyburn and Raja Krishnamoorthi heading their respective subcommittees sent joint letters to three of the largest carriers, Maersk, CMA CGM, and Hapag-Lloyd, requesting documents and information from each company explaining their decision to increase shipping rates well beyond their costs. They cited reports of “exorbitant fees and surcharges, which have led to increased costs throughout the supply chain, contributing to inflation and hurting U.S. consumers and businesses.,” along with President Biden’s crackdown on shipping companies overcharging American businesses and consumers.
“Affordable shipping rates are critical to ensuring that small- and medium-sized business owners can continue to make a living and provide goods and services to consumers at reasonable prices,” the Chairs wrote. “We are deeply concerned that [Maersk, CMA CGM, and Hapag-Lloyd] may have engaged in predatory business practices during the pandemic, making scores of essential goods needlessly expensive for consumers and small businesses.”
The companies were given two weeks to respond. Among the materials the subcommittees are requesting are lists of price rate changes to customers for both spot and freight contracts since January 1, 2020, and all documents related to rates, fees, and surcharges. They are asking for internal and external communications with customers.
Industry associations have been quick to respond to the latest push by regulators. The lobby group the World Shipping Council issued a statement after the State of the Union saying disruptions in America’s supply chain have thrust container shipping, the industry’s finances, and its operations into the public eye. They said the claims made by President Biden during his speech are not indicative of the industry or market dynamics saying that the carrier alliances were only an operational tool for efficiency and expanding reach, not pricing.
“It is disappointing that unfounded allegations are being levied against an industry that is moving more cargo right now than at any time in history in order to meet the unprecedented demand for imported goods during the pandemic,” said John Butler, President and CEO of the World Shipping Council. “The legislative proposals currently before Congress would upend the global transportation system, reducing service for U.S. importers and exporters and raising costs for American consumers and businesses.”
Many of the individual trade associations representing manufacturers, agricultural interests, and related industries, however, were quick to hail the growing tide of regulatory efforts after nearly two years of complaints and repeated calls for regulators to look into the practices of the major carriers.
“We are pleased that the Biden Administration is taking long-overdue steps to limit the power of the ocean shipping cartel to hurt American businesses and consumers,” said Jonathan Eisen, Director of Intermodal Motor Carrier Conference at the American Trucking Association. “ATA and IMCC have long been fighting against the predatory practices of these foreign-owned companies and we appreciate President Biden shining a light on this critical issue.”
Many of the trade organizations announced their support for the Ocean Shipping Act reform bill when it was introduced into the U.S. Senate. Some of the organizations have already filed complaints at the Federal Maritime Commission mostly focusing on the D&D fees and increases they experienced while the agricultural associations enlisted the support of the Department of Agriculture and Transportation Department which a joint letter to the carriers earlier this year demanding improvements in service for U.S. exports or saying that they would also seek action from the Federal Maritime Commission.
Comments