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The Federal Maritime Commission (FMC) has threatened to use all of its possible powers to overturn international carriers' decision to drop agricultural exports in favour of repositioning empty containers from the US.
Container shortages and market forces have led some carriers to cut allocations from traditional US exporters in a bid to alleviate some of the severe problems being felt in the supply chain. The move is having a drastic impact on agricultural exports from the US, with reports of some shippers having their allocations cut from 300 to three containers a month.
After intense lobbying from the Agriculture Transportation Coalition and its partners, the FMC has announced that it is opening an investigation into these measures.
“Some ocean carriers – not all – have stated that they will no longer deploy – that is – reposition empty containers to the US interior agricultural areas. Instead, they are expediting empties back to Asia,” FMC Chairman Michael Khouri told the Global Maritime Conference.
“This abandonment of a significant US export industry – the American agricultural industry – is shutting them out of global markets. We are looking into all potential – I repeat – all potential responsive actions, including a review of whether such ocean carriers’ actions are in full compliance with the Shipping Act and more specifically the various “Prohibited Acts” sections of the Act,” he said.
With US imports from China generating revenues of more than US$5,000/FEU, including surcharges and freight rates compared to US$406/FEU for exports, market forces are clearly behind the move.
At the end of last month, there was a 28% increase in freight rates on the return leg from the US west coast to China. Shippers are increasingly being asked to pay for empty repositioning to reduce the chances of their cargo being rolled over for imports from China.
“Carriers have been prioritising rapid empty container returns over those containing US export, prompting a US regulatory investigation into the practice, and possibly contributing to this week's 28% spike in US West Coast-Asia backhaul rates to more than US$500/FEU,” says Eytan Buchman, chief marketing officer of Freightos.
The FMC is exerting its authority on shipping lines by forcing the main alliances to report more frequently on changes in its services and freight rates as well as opening an investigation led by Commissioner Rebecca Dye into allegations of abuses by carriers in the implementation of demurrage fees that have cost shippers and trucking companies US$150 million in the ports of Los Angeles/Long Beach and New York & New Jersey.
The moves by the FMC have been welcomed by Peter Friedmann, executive director of the Agriculture Transportation Coalition. “The commission is taking the first steps that it can take quickly and easily. We will thank them for doing so and be clear that we are standing by for FMC action which will generate real change in Carrier practices in the very near future.”
Rainbow Blue Nelson
Americas Correspondent
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