President Biden Released Executive Orders Affecting Ocean Container Shipping.
On Friday, July 9th, President Biden released executive orders affecting ocean container shipping. Biden’s orders encourage competition across several sectors, prompting the Federal Maritime Commission, or FMC, to pursue unfair carrier practices in the area of detention and demurrage.
Prior to Biden’s recent orders, the FMC already began investigating detention and demurrage practices they found unfair such as the refusal to carry exports, which violated the Shipping Act of 1984. The FMC also aims to strictly enforce rules so exporters aren’t excessively charged. The container shipping industry already faced two main issues that the President’s orders disappointingly did not change. Firstly, politically influential exporters have complaints about poor access to capacity. Secondly, there have been allegations of unfair detention and demurrage bills since before the recent orders, however, the pandemic made these issues even more evident when congestion at ports and railheads worsened.
According to White House Press Secretary Jen Psaki, the FMC is welcome to “work with the Justice Department to investigate and punish anti-competitive conduct,” but how this would be accomplished remains unclear. Despite investigations of container line collusion, the main issues regarding shipping practices such as alleged unreasonable export practices and the hefty financial impact of the pandemic are still relevant.
Executive Orders Call for New FMC Rules
Shippers argue that despite FMC’s 2020 rule stating that importers, exporters, intermediaries, and truckers should not receive punishment when they are incapable of retrieving containers from or returning containers to, marine terminals due to circumstances outside of their control, they have not noted any change in behavior by carriers or marine terminal partners. Because of this, the FMC is attempting to more strictly initiate investigations on detention and demurrage rather than waiting for complaints to occur.
Biden’s orders call on the FMC to “vigorously enforce the prohibition of unjust and unreasonable detention and demurrage charges,” in addition to creating further rules based on recommendations from the National Shipper Advisory Committee to improve detention and demurrage practices.
Global Supply Chain Issues Worsened by Pandemic
An increase in import demands from U.S. consumers plays a big role in the present global supply chain issues. Consumer spending has increased by 10% in 11 months of the past year. Surprisingly, the pandemic helped the container carriers gain an advantage over their consumers in that all ships are sailing fully stocked. In the U.S., there is more demand than shipping capacity onboard the vessels. The World Shipping Council, or WSC, urges for normalized demand over-regulation with the argument that ocean carriers are expanding all available resources to overcome disruptions caused by the COVID-19 pandemic and other global shipping issues.
Shippers have criticized carriers about the capacity of their ships, but carriers responded that there is no extra capacity available to handle the spike in demand. The WSC representing container lines said, “Ocean carriers are employing all available capacity and pulling out all the stops to manage the operational disruptions brought on by COVID-19. This is not the fault of any supply chain actor. Supply chains simply cannot efficiently handle this extreme demand surge.”
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