FMC Testifies on Ocean Shipping Reform Act; Senators Say Ag Exporters Need Protection
The Federal Maritime Commission is planning to issue an advance notice of proposed rulemaking on container return and "earliest return date" practices by carriers, Commissioner Rebecca Dye told the Senate Commerce Committee. She also said there will be an advance notice of proposed rulemaking on detention and demurrage billing practices.
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Dye gave an example of multiple exporters who were charged for storage when the ship their goods were waiting for hadn't even arrived. She said the FMC talked to carriers, and their response was: "Oh, we don't charge for that." She said, "Then don't send a bill!"
She was testifying during a hearing on the Ocean Shipping Reform Act, a bill that members hope will stop what they see as abuses by carriers toward agricultural customers who need containers to send their products overseas. A House version was included in the House's China package.
Co-sponsor Sen. John Thune, R-S.D., said the bill would clarify the FMC's authority to confront unreasonable and uncompetitive behavior, and is co-sponsored by 24 senators. He said a lack of data sharing compounds the problems that shippers face. Co-sponsor Sen. Amy Klobuchar, D-Minn., said, "We can’t let ocean carriers slow down our supply chain while they’re shaking down our producers for profit." She said she was glad President Joe Biden brought up the issue in his State of the Union speech earlier in the week.
While the argument that carriers are exploiting the surge in demand by gouging small businesses and agricultural exporters was popular among Democrats on the committee, the commissioners cautioned that market conditions, not manipulation, are to blame for the high cost of importing and exporting now.
FMC Chairman Dan Maffei, who also testified at the March 3 hearing, said, "The situation defies easy answers." Although several Republican senators blamed the lack of automation in U.S. ports for congestion, Maffei defended the throughput, saying that productivity at the Los Angeles and Long Beach ports was not to blame.
He said the backups -- which continue, even after the Christmas rush -- are "largely a manifestation of inland cargo problems." He said there are shortages of chassis and other equipment, shortages of warehouse workers and shortages of truckers.
Most of the senators asked about problems for agricultural exporters, and Maffei said agricultural exporters "are put at the greatest disadvantage due to the scarcity of equipment in agricultural regions and the unpredictability of when ships will come into ports."
The commissioners said they continue to have the problem that shippers complain about how they are being treated, but, Maffei said, "people aren't willing to put their names on it."
Sen. Mike Lee, R-Utah, who said he will not support the bill, suggested that Biden and other Democrats' arguments that market concentration has led to predatory pricing are flawed. Maffei acknowledged that a surge in demand spurred the higher prices for containers, and said that there is no evidence that carriers are restricting supply. Maffei also acknowledged that the FMC has the authority to confront anti-competitive behavior, though he said the legal standard is high.
"The ocean shipping reform act is being presented as something that would address these [supply chain] issues," Lee said, but said it doesn't address the lack of container storage, equipment storage and other logistics issues.
High antidumping duties ended the import of Chinese chassis. Sen. Tammy Baldwin, D-Wis., who represents a domestic chassis maker, said the federal government should pay that company to expand production. "You noted that improving the availability of chassis would be critical," she told Dye.
Sen. Jon Tester, D-Mont., expressed frustration that the FMC can't force ships to take U.S. exports as they return to China. "It doesn’t make any sense to allow ships to leave empty," he said. He also complained that carriers can "charge whatever they want, and not allow that information to get out so people know how badly they are getting taken to the cleaners. The Senate doesn't fix much, but man, if we fix this, it would be a giant step forward. Somebody needs to get out a big baseball bat and educate some folks."
But Lee said he's concerned that if the Ocean Shipping Reform Act passes, it could slow the ability to move empty containers out of port, which would worsen the backlog.
Maffei responded, "There are some that advocate an export quota. That would sound good on the surface but that could lead to problems." He said container ships might avoid export ports like Oakland and Houston, and if the FMC tried to force them to visit those ports, they might just serve the U.S. less.
He told Lee that he's right to worry that government intervention could make things worse, but said that he feels the Ocean Shipping Reform Act has the right balance.