The Federal Maritime Commission (FMC) investigation into the carrier’s alleged refusal to carry US export cargo has found some evidence that lines are not meeting their regulatory obligations, according to commissioner Carl Bentzel.
Allegations from US exporters, particularly from the agricultural industry, that the lines have refused to carry cargo, preferring instead to rush containers back to Asia for the more lucrative eastbound Pacific trade, in contravention of the common carrier regulatory requirement, has led to an FMC investigation.
Under the FMC rules shipping lines operating within the US market must offer services to all shippers equally, and while this requirement is not “unfettered”, it does mean that shipping lines cannot refuse to carry export cargo without a reasonable excuse for refusing the cargo.
“We have found some evidence that this [a refusal to carry cargo] has occurred,” said Bentzel, but he added, that while there was some evidence of email communications that showed a possible breach of the regulations, this evidence needs to be independently reviewed and the attorneys will take some time to complete their investigations.
“We must also take into account the transportation realities, there has always been an imbalance in the Asia to US trade,” Bentzel added.
In the opinion of the FMC, the carrier alliances have allowed the lines to manage capacity much better than in the past and this has led to higher rates, but it is “tough to prove that the rate increases are unreasonable.”
Nevertheless, commissioners Bentzel and Daniel Maffei wrote to the World Shipping Council (WSC) president and CEO John Butler outlining the concerns of the export community and the reasoning behind the FMC investigation.
Writing earlier this month to the carrier representatives the commissioners said they were expressing their, “Growing concern about reports that ocean carriers are refusing the carriage of US exports. While we understand the current surge of import cargoes into the United States has stretched our supply chain’s capacity to handle cargo in certain seaports, it is of great concern, if true, that focus on the delivery of surge import cargoes works to the detriment of US exporters.”
According to the letter common carriage regulations have been in place for more than 100 years and that while the lines are constrained in some ways by operational issues in the market, such as a shortage of drayage due to a lack of chassis, and further shortages to port labour and inland warehousing space, the carriers must “Not lose sight of their common carriage obligations to provide service to US exporters.”
A response from the WSC has yet to materialise, though a spokeswoman said the WSC will respond before the end of the year. However, Bentzel told Container News that the FMC has discussed the issue of common carrier rules with some lines individually. “They’re not challenging the common carrier requirement,” said Bentzel, but the discussions are around how to meet the needs of exporters in what is a challenging market. “The lines need to pay more attention to exporters,” he added.
If the FMC investigation does find that the lines in general or an alliance is refusing to carry export cargo as a matter of policy then the FMC will launch proceedings. However, Bentzel did also emphasise that the common carrier regulation was not unfettered, and this meant that certain realities needed to be considered.
An imbalance of containers is not new in the US market, but the US relies a lot on the manufacture of new containers by the Chinese box manufacturer CIMC and they had stopped production earlier this year due to the spread of Covid-19. According to Bentzel CIMC has been slow to ramp up its production of new boxes.
While Bentzel concedes that the manufacture of new boxes is dependent on orders from the lines, he believes the lines were taken by surprise by the upsurge in demand in the second half this year, as were chassis manufacturers and lessors.
Asked about the MDS Transmodal and Global Shipper’s Forum contention that the lines and others would be aware of the number of containers coming into and out of the US he believes that the lines, container lessors and chassis owners and manufacturers were “not very good at accounting.” A charge which both the importers and exporters may find unpalatable, but at least it is an explanation for the current predicament.
Nick Savvides
Managing Editor
