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US ag exporters demand Biden administration crack down on ocean freight carriers found profiteering on COVID-19
21 October 2021IHS Markit Agribusiness Expert
Ag and food groups pen letter to Biden administration
complaining of ocean carrier practices that decline cargo to
Asia.
US agriculture exports have become stranded, derailing timely
delivery to foreign customers, they say.
Groups call the issue a crisis and demand carriers be held to
Federal Maritime Commission guidelines.
A broad swath of the US agriculture industry wrote to President
Joe Biden last week demanding ocean freight carriers be held to
guidelines - issued last year by the Federal Maritime Commission
(FMC) - for doing business with US export customers during the
COVID-19 pandemic.
Signed by 71 agricultural and food industry trade groups, the
letter accuses ocean container carriers - none headquartered in the
US - of actions "including declining to carry our export cargo ….
[and] preventing us from delivering affordably and dependably to
international markets."
The industry groups call the situation a "crisis" demanding
prompt government attention.
"We have had members report to us that their shipments have been
denied or severely limited due to space constraints," says Andrew
Walmsley, congressional relations director at American Farm Bureau
Federation (AFBF), which is signatory to the Biden letter. "Some
estimate that over 50% of requested bookings are denied." Players
like Hapag-Lloyd, Maersk, and Yang Ming, he says, "have essentially
said, 'we're not open for business.'"
Empty carriers prioritized over US ag exports
Ocean carriers are "enjoying their most profitable period in
decades by controlling capacity and charging unprecedented freight
rates, imposing draconian fees on our exporters and importers, and
frequently refusing to carry U.S. agricultural exports," the letter
continues. It contends that carriers' actions have dramatically
increased costs to US exporters, "making foreign sales inefficient
and uneconomical, rendering farmers and processors (for the first
time), unreliable suppliers to the global supply chain."
According to the Agriculture Transportation Coalition (AGTC),
which spearheaded the letter to Biden, current freight charges from
Asia to the US are as high as $10,000 to $12,000 per container
laden with high-value consumer goods. In comparison, an export
container carrying agricultural and forest products back to Asia
commands just $400 to $1,800 in freight charges, the group
says.
So, instead of letting a container from Asia be loaded with ag
and forest products for the return trip, AGTC says, ocean carriers
will decline that export cargo. Carriers would rather return empty
containers to Asia to quickly load US-bound imports, they say,
generating high freight revenue. US agriculture exports become
stranded, derailing timely delivery to foreign customers.
The number of carriers willing to carry US products has dropped
from 20 to nine in the past 25 years, notes Thomas Parks of the
Corn Refiners Association (CRA). In mid-October 2020, he says,
"carriers notified agricultural exporters that not only would they
prioritize empty export containers over agricultural exports, but
that they would increase prices on US agricultural exports if the
commodities were transported. This is unacceptable for an industry
that relies heavily on healthy, free-flowing international trade,
and harmful to our nation's farmers and agricultural
producers."
The letter to Biden says that although FMC last year issued a
rule setting forth guidelines for reasonable carrier practices,
"none have been implemented by the carriers, deepening the crisis.
While the FMC is undertaking further efforts to gain compliance,
the damage being done to our agriculture and forest products
industries is severe, increasing, and with lost foreign markets,
may be irreversible."
Industry group Consumer Brands Association, which is signatory
to the Biden letter, says it has briefed FMC commissioners on
current port congestion, container availability, and shipping
challenges, and believes those concerns were heard. But they also
note an imbalanced playing field during the pandemic that they say
favors the carrier community and permits business behavior damaging
to US companies, farmers, and interests.
"While the FMC has made some noise about investigating carriers'
activities in 2020, actual action is lacking," says Jared Vineyard
of U.S. freight-forwarding company, Universal Cargo.
For years, Vineyard says, global ocean freight industry
consolidation has generally been allowed by regulators, including
FMC, and that has shrunk competition and raised rates.
"We really saw that come to fruition in 2020 when carriers
manipulated capacity, dropping it below demand, and pushing freight
rates way up," Vineyard says. And while no one anticipated the
skyrocketing demand that occurred as the world went into pandemic
lockdown, "It's still hard to believe carriers did not go beyond
what was reasonable, especially when they started pushing no-roll
premiums on shippers when carriers' reliability reached terrible
lows despite the record high rates they were charging," he
says.
But, where US agricultural exporters really have a complaint,
Vineyard says, is carriers withholding shipping containers and
services.
"It seems pretty clear that carriers prioritized getting
shipping containers back to Asia, where they were making more money
on eastbound transpacific routes, delivering goods from China to
the US especially, over getting containers to US exporters,"
Vineyard says.
FMC declined to comment on the letter to Biden, but a
spokesperson cited a February 17 order that will: "require carriers
and MTOs [marine terminal operators] to provide information on
their policies and practices related to container returns and
container availability for exporters. Failure … to operate in a way
consistent with [last year's guidelines] … might constitute a
violation of 46 USC 41102(c) which prohibits unjust and
unreasonable practices and regulations related to, or connected
with, receiving, handling, storing, or delivering property."
"Congress should make violations of these guidelines statutory
'Prohibited Acts' under the Shipping Act," Walmsley says. "The
Commission must self-initiate, not wait for an injured exporter to
file a complaint. The Commission must be converted into a consumer
protection agency, with the US exporter, freight forwarder,
importer, trucker as the consumer. The Commission must recognize
that these 'consumers' are not equal in negotiating stature to the
nine global ocean carriers, upon which our economy is now
dependent."
CRA's Parks agrees, saying, "While we are appreciative of the
important work FMC does, we feel that more can be done to hold
carriers accountable."
The Shipping Act provides the FMC with the authority to prohibit
unreasonable, unjust practices, and "to promote the growth and
development of US exports through competitive and efficient ocean
transportation," the letter to Biden says. "Given the urgency of
this situation in commerce, we ask that these tools and any others
available to our government be immediately applied to stem the
current ocean carrier practices that are so damaging our
agriculture exports."