The inclusion of ocean shipping in President Joe Biden’s executive order issued Friday encouraging competition across several sectors will add urgency to the Federal Maritime Commission’s pursuit of unfair carrier practices, particularly in the area of detention and demurrage. The executive order takes aim at the container shipping industry, where 85% of capacity is controlled by about 10 major carriers.
The FMC already believes that certain carrier actions - such as a blanket refusal to carry exports - violates the Shipping Act of 1984. Last fall, the FMC began proactively investigating unfair detention and demurrage practices without requiring a formal complaint from a shipper, which it had required in the past, signaling a more aggressive approach to an issue that for years has defied easy solutions.
The order encourages the FMC to ensure vigorous enforcement of rules so exporters aren’t hit with “exorbitant charges.” FMC Chairman Daniel Maffei said in a statement Friday, “We have increased our scrutiny of the ocean carrier alliances to identify evidence of anti-competitive behavior regarding rates and capacity, and we will continue to do so as the Covid-19 and import surge crisis continues."
Carriers Respond to the Executive Order
Ocean carriers claimed that these global supply chain issues are driven by raised import demands from US consumers with 11 of the past 12 months having seen consumer spending growth of more than 10%.
The pandemic has given the the container carriers a huge advantage over their customers: Almost all vessels are sailing fully loaded, and there’s more demand than capacity to carry goods, particularly from the U.S.
The liner lobby group World Shipping Council (WSC) argued that the only way to successfully deal with congestion in US supply chains is through “normalized demand, not regulation," also stating that ocean carriers are deploying all available capacity to manage operational disruptions brought on by the pandemic and other global shipping challenges.
Lastly, the WSC concluded that competition in the ocean sector was alive with over 50 carriers operating more than 1,000 ships on 180 services for US shippers.
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