As we reported last week, President Biden signed the Ocean Shipping Reform Act of 2022 into law on June 16.
In doing so, the White House, after more than 24 months of clogged ports, skyrocketing costs, and a broken supply chain, is suggesting the law will rock the boats of the 10 or so largest owners of shipping companies that dominate the transportation of goods by boat.
If you like getting into the weeds, click here to read the bill in full.
Those of us in furnitureland are sadly all too familiar with the overwhelming spike in container costs as well as with the unacceptable lead times it is taking to get goods from offshore to retailer’s shelves.
Commenting on the need for the bill, President Biden said, “During the pandemic, ocean carriers increased their prices by as much as 1,000%. And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers — and our economy — a lot of money.”
On paper, this appears to be a real turning of the tide, especially after more than two years of ocean freight disruptions, constant price increases, clogged ports, and more. But we would be naïve to think that this new law is going to immediately persuade the ocean freight owners to chart a new, more reasonable course.
The reality here is that the law while making a wonderful statement, is not some silver bullet, that when fired into the hulls of these big ships, will magically drown their appetites for both consolidations and for the unholy profits they’ve become accustomed to.
I’ll let the numbers speak for themselves. Back in 2000, the top ten shipping carriers controlled less than 13% of the market. However, by last year, those ten shipping titans were controlling more than 80% of the market.
With that kind of clout, it is easy to see why there were — and are — able to demand whatever rates they wanted to ship goods. And let’s not forget the ridiculously high fees (known as demurrage and detention charges) they also demanded be paid while their boats were sitting idle at backed-up ports waiting to be either unloaded or loaded.
A recent report from Container xChange found that these charges skyrocketed more than 100% in one year at the world’s largest ports.
So, you ask, what happens now?
Now, we all sit back and wait to see what the Federal Maritime Commission, the agency empowered to enforce the bill, does.
If you do a little homework on the Federal Maritime Commission, you will discover a few things. One is that, like many government agencies, they are understaffed and underfunded.
The other thing, according to many shippers, is that, in the past, the FMC has not earned a track record for being quick to respond when it comes to regulating the shipping sector.
One bit of good news — the Ocean Shipping Reform Act allocates almost $33 million this year and some $42 million next year to enable the Federal Maritime Commission to conduct investigations associated with the law.
But, even with the allocation of funds, to be fair to the FMC, the problems with inflation, cost increases, port congestions, labor shortages, and the like, cannot all be placed at the feet of the agency or even at the feet of the ocean freight companies, ports, shippers, trucking companies and others responsible for moving goods from start to finish.
The recent law is a shot over the bows of the ocean carriers.
But from where I sit, we better be prepared to batten down the hatches as we begin to navigate unchartered waters.
Stay tuned.
