The Federal Maritime Commission asked lawmakers to boost its budget to help enforce Shipping Act regulations governing detention and demurrage practices as the agency intensifies its oversight of container lines.
Testifying on his agency’s FY2022 budget before the House Transportation & Infrastructure Committee on Wednesday, FMC Chairman Daniel Maffei said it is seeking $30.8 million — $1 million more than authorized for FY2021 — to bolster resources dedicated to the agency’s Bureau of Enforcement and Office of Consumer Affairs and Dispute Resolution Services. The money would fund a new export advocate position for a person solely responsible for helping export shippers move cargo.
“I am concerned that we need more enforcement capacity to really take on the big carriers when they do something that is against the Shipping Act,” Maffei testified. “That’s why my emphasis has been so much on enforcement, auditing, and more and more scrutiny of these carriers.”
The hearing was held a day after Maffei announced that the FMC was starting an audit of demurrage and detention practices of the nine carriers with the greatest U.S. market share.
“We don’t have the authority to go after rates, but we do have the authority to go after [ancillary] fees if they’re unreasonable. Some of these fees we believe are being charged — like detention — even though there’s no way the shipper can do anything. That’s what we’re really trying to get at.”
Rep. Salud Carbajal, D-Calif., questioned FMC’s enforcement oversight over the past several years, asking Maffei why fines and penalties levied by the agency in 2020 amounted to just $103 compared with $660,000 in 2019 and $1.1 million in 2018. “The commission must have been asleep at the wheel; somebody was not working,” Carbajal said. “In a year of unprecedented claims of wrongdoing, how can you explain this downward trend?”
Maffei responded that the pandemic slowed the pipeline of cases to be adjudicated. “Just like carriers get backed up, so do these cases,” he said. He added that most of the fines before 2020 were not levied on carriers or large terminals and were technical violations not related to service problems.
“Those numbers need to improve, but there are other issues I’m doing my best to address, and I believe the other commissioners are doing as well.”
FMC’s stepped-up oversight of the container lines has come as spiking demand for imports has pushed cargo rates to record highs, Maffei testified. “The U.S. imported more containers in the first five months of 2021 than any previous entire year,” he said, pointing out that the July spot rate to move a container from Shanghai to Los Angeles is approaching $10,000 compared with a pre-pandemic $2,000 in July 2019.
“Rates only tell part of the story. There is not enough space on ships for all the shippers that want space, so some are having to wait for a future sailing.” It can be a delay of days or weeks before cargo on a ship reaches its destination, he said.
“Furthermore, exporters are finding themselves in the frustrating position of having to deal with the fact that a carrier is making so much more money on a container full of imports than exports that it is often in the carrier’s best short-term economic interest to get more empty containers back to Asian factories faster rather than carrying more export containers.”