FMC final report absolves carriers of profiteering blame -

FMC final report absolves carriers of profiteering blame

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FMC final report absolves carriers of profiteering blame

The Federal Maritime Commission's (FMC) Rebecca Dye has released her final report from the Fact Finding 29 investigation, concluding that carriers have not been profiteering and that the high freight rates are the result of a surge in demand.

According to a report by gCaptain, Fact Finding 29 was ordered by the FMC in March 2020, to investigate the effects of COVID-19 on the ocean shipping supply chain, which saw congestion and bottlenecks at ports that posed a serious threat to the U.S. economy.

During the investigation, American importers and exporters highlighted two recurring pandemic-related concerns: the high cost of shipping cargo with accusations of anti-competitive behavior and excessive demurrage and detention charges.

However, in her final report, Dye suggested that high prices in ocean transportation were not caused by a lack of competition, describing ‘competition among ocean common carriers, among the three major alliances [as] vigorous’ with “the market for ocean services remains [remaining] highly contestable, particularly in Trans-Pacific trade.”

Rather, she pointed out that high rates were “exacerbated by the pandemic, an unexpected and unprecedented surge in consumer spending, particularly in the United States, and supply chain congestion, and are the product of market forces of supply and demand.”

On the issue of detention and demurrage charges, the Commissioner expressed some concern that some carriers weren’t in full compliance with the “incentive principle” of the FMC’s Interpretive Rule on Demurrage and Detention. 

“I look forward to implementation by the Commission of my Final Recommendations, which I believe will provide badly needed clarity and consistency in certain port and supply chain operations, especially involving ‘earliest return dates’ and ‘empty container return’”, she commented. 

In addition, the FMC Commissioner assessed the shipping alliances’ alleged “exemption” from antitrust laws under the Shipping Act of 1984. Her investigation determined that ‘blank sailing’ and “reduced service by ocean carriers was driven by port congestion rather than a desire to reduce capacity”.

She concluded that “based on the information gathered, the Fact Finding Officer further believes that the most productive path forward for shippers and ocean carriers alike would be to enter mutually enforceable and binding service contracts […] that are enforceable commercial documents.”

These comments come two months after the U.S. passed its Ocean Shipping Reform Act of 2022, which, if signed by the House of Representatives, would give the FMC greater regulatory authority. 

FMC Chairman Daniel B. Maffei commended the Commissioner for her work, describing it as “invaluable in determining ways the FMC can best assist importers and exporters to manage the supply chain challenges linked with the COVID-19 pandemic.”

To read the FMC Commissioner’s final report and the 12 recommendations she provided for the industry, click here.

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