US ponders forcing shipping lines to take US export container bookings

The global logistics crisis in the container sector has begun to have political ramifications. US politicians have been discussing the possibility of forcing the major global shipping line to take all US export container bookings.

Both a Republican and a Democrat have put the idea before the influential US House Transportation & Infrastructure Committee. They claimed earlier this week that US exporters were being discriminated against by carriers who were instead taking empty boxes back to Asia rather than wait for US exporters – led by the agricultural community – to fill them up.

Californian Democrat congressman John Garamendi accused ocean carriers of being “price gougers”.

John Butler, CEO of liner lobbying group the World Shipping Council, testified to the Committee that “what’s really driving these problems is the massive increase in US imports”. He said that this had caused the US container imbalance with Asia jump from two-to-one to three-to-one in recent months.

Because there is currently a huge price difference between cargoes travelling the Pacific to the US and returning from the US, and because there is a shortage of containers in Asia, liners have been keen to get boxes back to Asia as quickly as possible – with a speedily returned empty container generating more profit than a slowly returned full one.

The bipartisan proposal has called for changes to be made to the US Shipping Act to strengthen the powers of the Federal Maritime Commission, and to ban liners from dismissing export cargo bookings.

The hearing on June 15th examined the shipping container shortages caused by heightened demand for consumer products arriving from Asia, as well as how overstretched supply chains have affected the nation’s ports.

Testimony at the committee hearing included Federal Maritime Commission Chairman Daniel Maffei as well as Commissioner Rebecca Dye. Other speakers addressing the committee included the World Shipping Council, the International Longshore & Warehouse Union, and representing American ports, Gene Seroka, Executive Director of the Port of Los Angeles.

FMC chairman Daniel Maffei said that “I think we should discuss the specific provisions to make sure there are no unintended consequences. I would also say we can’t just scapegoat the carriers. There are good eggs and bad eggs in all of these baskets”.

As long ago as March a letter signed by more than 100 members of Congress called on the chair of the FMC to act quickly to stem the tide of empty containers, stating that “should it be found that (carriers) are predatory or unreasonable in refusing to export these American agricultural products or imposing unreasonable fees, they must be held accountable”.

Meanwhile, the US National Retail Federation (NRF) has sent an open letter to President Biden asking for a meeting to discuss port congestion, container shortages and the logistical implications of Covid-19. NRF President and CEO Matthew Shay wrote in his letter that “the supply chain disruption issues, especially the congestion affecting our key maritime ports, are causing significant challenges for America’s retailers. The congestion issues have not only added days and weeks to our supply chains but have led to inventory shortages, impacting our ability to serve our customers. In addition, these delays have added significant transportation and warehousing costs for retailers.”

The NRF said that 97% of retailers reported being impacted by port and shipping delays, citing a lack of carrier capacity and containers overseas as the largest problems beyond the congestion in the ports.

While they had added two to three weeks to their supply chains, 85% of retailers reported that nevertheless they were experiencing inventory shortages because of the disruptions. Three-quarters reported that they are being forced to pass along cost increases to consumers.