Commissioner Maffei Remarks at AgTC Major Midyear Meeting

Before I begin, I must mention that the views I express are mine alone as one individual commissioner and not the position of the FMC as a whole. Certainly, for me, the shortage of containers for agriculture exports is a huge concern – having once served as a Congressman from a soybean and dairy products exporting district.

Part of the mission of the FMC is to “support the U.S. economy and protect the public from unfair and deceptive practices.” The Shipping Act also includes the “promot[ion] of the growth and development of [U.S.] exports” as one of the purposes for the regulation of ocean shipping.

The good news is that – while I only speak for myself – I do believe all five commissioners take this responsibility seriously and are deeply concerned about the scarcity of export containers.

The bad news is that the situation is complicated by the vagaries of the legislation covering international ocean shipping. The statutory mechanisms for the FMC to address the industry’s current issues are not as clearly established as I would like.

The Shipping Act prohibits conduct that is unreasonable, unfair, or unjust. But the powers of the Commission in this area are heavily couched in the definitions of subjective terms such as “reasonableness” and “unfairness.”

Furthermore, while – as I mentioned – the Shipping Act says the Act is to promote and develop U.S. exports, it encourages “reliance on the marketplace” to meet this goal.  But the market alone doesn’t always produce the best results in the long run.

The Act does prohibit carriers from entering into arrangements that are exclusionary to certain shippers, and it is very important that the FMC deeply scrutinize carriers and alliances to make sure they are providing a non-discriminatory system of common carriage.

However, so far, we do not have sufficient evidence that there is any collaborative behavior or discriminatory conduct. The carriers are handling the situation differently – even if the ultimate result is the same – and the dearth of containers for export does not seem to be tied to any specific type of commodity or individual entity. And indeed, it is not a problem that’s limited to the United States. I have also heard from shippers who are struggling to get containers out of other countries that are as different from each other as Canada and Vietnam.

That said, what I am hearing about conditions in the industry is upsetting. We hear of allotments of containers – seemingly guaranteed in contracts – being cut more than 95% in some cases.  We hear of little or no notice being given when expected containers are not made available, making it impossible to get containers even if the exporter is willing to pay a high premium. And we see that there are stacks of empties accumulating at terminals when, at the same time, exporters are begging for them. The newsletter Splash247.com reported that “new research shows a clear kink in the box supply chain – empty containers are spending 45 days on average in depot – and in China, the average time each box is sitting useless is above two months.”

To get to the bottom of this, the Commission recently increased the frequency of mandated reporting for alliances and voted unanimously to expand Commissioner Dye’s investigation related to the effects of COVID-19 to specifically examine this issue.

But it’s not just Commissioner Dye. My fellow Commissioner, Carl Bentzel, and I will be issuing a letter to the World Shipping Council in the next few days, encouraging their member carriers to follow their obligations as common carriers and making sure they know we are serious about scrutinizing them for it. My other colleague, Lou Sola, has fully supported these efforts and said to CNBC recently, “if we continue to focus to be a nation of consumers of imports, and neglect to ensure exporters are protected, our economy’s foundation is as doomed as ancient Rome.”

And our Chairman, Michael Khouri, has also shown real leadership on the issue. Just yesterday, he stated at the Global Maritime Conference that, as a Commission, “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.”

I am hoping the industry knows how serious we are and more carriers will open lines of discussion and try to work with you to come up with solutions. If not, we will have to consider additional action.

But perhaps it is also time that Congress take a hard look at whether the law covering ocean shipping – mostly written more than a third of a century ago – adequately addresses the modern realities of the shipping industry. It was written in an era when it was assumed that the marketplace could resolve most problems and there were more than two dozen common carriers competing – some of which were U.S.-based.

Both Congress and we at the FMC should consider the lessons learned in this current crisis and make sure the Shipping Act is made robust enough to accomplish its stated purposes – not the least of which is promoting American exports.

Daniel B. Maffei is a Commissioner with the U.S. Federal Maritime Commission. The thoughts and comments expressed here are his own and do not represent the position of the Commission.