The Federal Maritime Commission, the U.S. agency that regulates maritime trade, announced an investigation on Friday into the business practices of foreign owned shipping companies, amid complaints from US exporters and truckers that they often face disadvantages in ports.
The investigation is focused on alliance shipping companies calling the ports of Long Beach, Los Angeles, New York and New Jersey, according to Commissioner Rebecca Dye, who leads the investigation.
US agriculture, in particular, has long complained to Capitol Hill that foreign transport companies are refusing their exports to return empty containers to be filled with Chinese goods. This trend emerged shortly after China’s transportation authorities reportedly met with major airlines calling for prices to be cut and some canceled trips resumed.
The first airline to announce the refusal to export was Hapag-Lloyd, based in Germany in October. Other airlines that recently followed suit include Evergreen, headquartered in China, and ZIM, based in Israel. CNBC has requested a comment.
The reason the airlines reject US agricultural exports is for a simple reason: money and the lack of containers required to move Chinese exports around the world. US agricultural exports are cheaper to move and take longer to unload, which means less money. Freight forwarders can make a bigger profit by sending the empty boxes back to China and filling them with Chinese exports. These boxes can then be charged the higher rate on the transpacific waterway.
Peter Friedmann, executive director of the Agriculture Transportation Coalition, said the FMC’s decision to open an investigation was welcome news for an industry already battered by the trade war.
“Refusing to export can damage the reputation of US industry as a reliable trading partner,” Friedmann said. “It also slows down the release of US exports and makes them more expensive.”
Friedmann explained that if an export is rejected, the exporter will have to find alternative routes and ports and pay for additional trucks, chassis rental, storage costs as well as detention and idle times.
“The FMC’s announcement is a step in the right direction to fix the broken supply chain system,” said Friedmann. “If these exports don’t run out or if they slow down significantly, it can have an impact on the entire US trade deficit.”
The US trade deficit hit a 14-year high in August. Louis Sola, a commissioner for the FMC, said the agency’s investigation into foreign shipping companies will help protect American exporters.
“If we continue to focus on being a nation of import consumers and fail to protect exporters, the foundation of our economy will be as doomed as ancient Rome,” Sola said.
The FMC is also investigating penalties imposed by foreign carriers for failing to collect cargo within the stipulated time, known as berth, and fees for not returning empty containers within the allotted time, known as detention. American truckers are particularly hard hit by these penalties.
“This supplementary order, if correctly followed by all sides, would deal with 98% of incarceration and incarceration cases,” said Sola. “Today’s enforcement action will ensure that all parties are acting in good faith.”
The investigation falls under the The new guidelines from FMC Here the mooring and detention practices of the sea freight carriers and ship terminal operators are examined to determine whether they are “appropriate”. The FMC could impose civil penalties if it determines that the carriers are in breach of these regulations.
Weston LaBar, CEO of the Harbor Trucking Association, said the southern California logistics community has paid over $ 100 million in fines this year. The HTA has led a coalition calling for redress for these allegations. They argue that the airlines created the perfect scenario to capitalize on inefficiency.
“The airlines benefit from their restrictions,” said LaBar. “They set the rules for when you can return or pick up your container, reject this container and charge you for keeping it. In any other industry, detention would be prohibited.”
LaBar said while the HTA welcomes the FMC’s actions, it is not replacing the money lost, especially for small US importers.
“We spoke to small American importers whose entire third-quarter profit margins were wiped out by unreasonable detentions and berths,” LaBar said. He accused ocean carriers of turning imprisonment and berth sentences into a source of income instead of using these practices to promote a more efficient international shipping system as intended.
“We have the largest consumer economy in the world and it is a privilege to do business here,” said LaBar. “The airlines only blame themselves. It is time to fix this broken system and protect American businesses and consumers.”