US regulator has limited tools to address current ocean space and price issues

The Federal Maritime Commission has limited ability to solve the supply chain issues facing US agricultural exporters as container shortages and high freight rates have led to calls for action.

“I am in touch with these exporters and [know] how frustrating it is right now,” said chairman Dan Maffei. “The cost of a container has gone right up, the ability to get equipment has gone way down.

“It is particularly frustrating being at the FMC right now and wanting to help. We have a pretty limited set of tools we can use.”

But it was a market characterised by working at maximum capacity that was leading to high rates, he said at an event hosted by the Port of Los Angeles.

“They key word is capacity,” Mr Maffei said. “When you’re at or beyond the capacity of the system, it is difficult to prove the prices would be lower. It is simple supply and demand. If demand is that high and supply remains limited, that is what happens.”

The FMC had already launched an enforcement investigation into detention and demurrage practices, but Mr Maffei said it still needed to do more for exporters.

He is planning to appoint a dedicated person in the FMC that can assist exporters in understanding the law and determining if anything is being done wrong by carriers.

He also wants continued enhanced enforcement following Fact Finding 29, where appropriate, over the denial of containers.

“In many cases, there won’t be anything we can find that is unreasonable; it’s just the market,” he said. “But where there is, we need to get to the bottom of that.”

He will also recommend that the commission revisit its detention and demurrage rule to see if it can be strengthened for exporters.

One issue is earliest return dates for containers being moved. This can lead to agricultural products ageing, and can also see detention and demurrage costs being added.

Beyond that, however, there is little that can be done.

“We’re too small an agency to expect that we’ll automatically catch everything that goes wrong,” he said.

Fact finding missions were not a solution in themselves, “but if there is enough consequence enough of the time, there will be a deterrent”.

Los Angeles chief executive Gene Seroka said that the disconnect between imports and exports was adding to the container equipment shortage.

“Most imports go to major metropolitan areas where we live as consumer but most exports emanate from rural America,” he said. “Round trip economics are very important for the asset providers. How do we connect these two important markets to ensure we continue the velocity of these assets?”

Exports of empty equipment from Los Angeles were up 82% year on year in April, a picture mirrored by other US west coast ports.

“There are plenty of containers, just not in the right location,” Mr Seroka said.

Here, too, there was little comfort for shippers from the FMC. Carriers returning empties to Asia for economic reasons are not committing an offence under the Shipping Act.

“A high price is not a violation of the Shipping Act,” Mr Maffei said. “If it is not offered or there was no way to get a container even if a shipper were willing to pay for it, that might be a violation as a refusal to deal, but if it is simply a price the shipper doesn’t want to pay, it is not a violation.” 

The FMC could not set rates and could not dictate the levels of service carriers provide.

“We can ensure that alliances don’t, because of their existence, unreasonably diminish service or increase costs,” he said. “We have, however, looked into that extensively, and have upped our monitoring of the alliances but so far there is just not the evidence that the alliances are engaging in any behaviour that would allow us to take them to court.”