President Biden has announced an agreement between the Department of Justice (DOJ) and the Federal Maritime Commission (FMC) to protect U.S. businesses and consumers from exaggerated ocean freight price increases.
Remedying an Abuse of Power
As only three global alliances of foreign companies control the vast majority of cargo shipping, prices have been largely subject to their whims. The beginning of the pandemic marked a dramatic and steady rise in rates and fees. Since January 2020 rates from Asia to the U.S. have increased by more than 100%, while the rates from the U.S. to Asia have soared over 1000%.
The pandemic and other recent events in the logistics industry lend some grounds to these increases; however, the seven-fold increase in ocean carrier company profits shows a possible abuse of power during one of the modern world’s most difficult moments. Moreover, profit margins increased even more dramatically over the two-year window, from just 3.7% to 56%.
In addition to the price increases, these powerful ocean carrier alliances can take advantage of U.S. businesses by imposing fees, making changes to bookings without notice, and even refusing to take U.S. imports on their way back to Asia. Such unpredictable changes make delivering timely orders a challenge for U.S. businesses while damaging the relationships that many U.S. businesses have built with overseas partners. This is particularly true for farmers dealing in sensitive agricultural products.
The New Agreement
The new joint initiative between the DOJ and the FMC will promote competition in the ocean logistics system. With the support of attorneys and economics from the DOJ, the FMC will be able to better respond to Shipping Act violations and other related issues. Likewise, with FMC support and expertise in the industry, the DOJ will be able to better enforce the Sherman Act and Clayton Act, preventing businesses from forming monopolies and thereby manipulating market prices for personal gain. The agreement arises from the “whole of government approach” that the President’s July Executive Order on Promoting Competition established in the summer of 2021. Per this original approach and the new agreement, the FMC will continue increasing its oversight of the global shipping industry. Since summer 2021, it has:
Established an audit program to address complaints against carriers
Confronted carriers about their fee hikes
Launched investigative cases for port congestion charges
Taken steps to address barriers preventing the filing of complaints
Launched a data initiative for identifying data constraints
Developed fees for ocean carrier companies that let cargo sit at docks for more than nine days
These actions have already decreased the number of delayed containers at docks by more than 70% and the number of empty containers at the Port of Los Angeles by over 25%. Continuing to improve the competitiveness and fluidity of the freight system will further strengthen the U.S.’s businesses that depend on moving their products around the globe. Like President Biden’s initiatives to help U.S. businesses, ClearFreight stands ready to help you navigate today’s turbulent global supply chain. Contact our team to hear how our customizable supply chain solutions can help make logistics easier for you.