The Federal Maritime Commission will consider taking regulatory action against ocean carriers that are not providing sufficient services to U.S. exporters and their overseas markets.
The FMC announced the stepped-up pressure on Monday as part of an expansion of the agency’s Vessel-Operating Common Carrier Audit Program, which the FMC launched last year to assess the market power of the nine largest container carriers operating in U.S. markets.
The audit program will begin evaluating how shipping lines are serving U.S. export shippers in addition to its initial focus on detention and demurrage policies.
“American exporters deserve access to ocean transportation to sell to international markets every bit as much as overseas sellers get access to U.S. markets,” said FMC Chairman Daniel Maffei.
“If the shipping companies continue the cooperative attitude they have by and large shown the Audit Team to date, I am confident we can make progress on some of the issues that have frustrated exporters. That said, the Commission is committed to an ocean transportation system that serves exporters as well as importers and I will not rule out any action within the bounds of the law that helps us achieve that goal.”
Special attention to ‘pop-up’ carriers
As part of the expanded audit, the FMC’s Bureau of Enforcement (BoE) will begin looking into the services offered to U.S. exporters by five independent container ship lines that do not traditionally operate in U.S. trade lanes — they recently entered the market in response to historically high rates shippers are paying for U.S. imports.
“All ocean carriers calling the United States have an equal obligation to conduct themselves in accordance with the law,” Maffei said. “New entrants to the market — including the so-called pop-up carriers — have all the same responsibilities as companies that have served the U.S. trades for decades. We are especially interested in how the identified companies plan to serve the U.S. export market and how those business models comply with requirements under statute.”
In a separate statement, FMC Commissioner Carl Bentzel said that after visiting the Port of Long Beach earlier this month, he was concerned that such new market entrants are providing only import service and choosing to move empty containers back to China instead of filling them with exports.
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“These carriers could be behaving in a manner that violates common carriage protections of the law,” Bentzel warned.
Loaded exports at the adjacent Port of Los Angeles in February were down 5.7% from the same period last year. Exports at the port have declined 36 of the past 40 months. At the same time, empty containers shipped back to Asia for reloading jumped 18.6% compared to last year due to the heavy demand for American imports.
Exporters log impacts
U.S. exporters, meanwhile, have conducted their own survey to illustrate the effects that the market and corresponding economic decisions being made by the container lines are having on their business.
The survey, conducted by the Agriculture Transportation Coalition (AgTC), measured “carrier service reliability, carrier communication, acceptance of export cargo, freight rates, additional charges (demurrage/detention), chassis shortages, marine terminal congestion, and other factors” affecting agribusiness exports in 2021.
It found that roughly 20% of total confirmed export sales were lost due to carrier undependability, declining export cargo or uneconomic pricing (for the U.S. seller and overseas buyer), and predatory add-on fees. The value of the lost sales ranged from $120,000 to as high as $65 million.
The survey also found that 85% of U.S. agriculture exporters report that overseas customers have shifted some of their purchases to other countries due to lack of dependable delivery time and additional costs. Most of the companies reporting lost sales noted that they are then “forced to sell on the domestic market, generally at significantly lower prices, often at a loss,” according to the survey.