Shipping company: High demand is the culprit for high freight and delays! U.S. signs agreement to strengthen supervision of shipping companies

It is reported that the US Federal Maritime Commission and the Antitrust Department of the Department of Justice signed an agreement to strengthen the economic supervision of shipping companies.


On Monday, the two agencies signed the first ever memorandum of understanding on law enforcement responsibilities and announced that they will strengthen cooperation.


Although the agreement is not legally binding and can be terminated by any agency, it shows that the Biden administration is taking serious complaints from US exporters and legislators that the container shipping company charges excessive fees, unreasonable charges, and refusals in the US service.


US President Biden issued an executive order last Friday aimed at curbing potential anti-competitive behavior in 72 industries, including monopolistic pricing practices for shipping and freight railroads.


These agencies stated that Monday’s memorandum of understanding is based on an executive order to establish procedures for reviewing competition law enforcement and regulatory matters affecting the shipping industry, and to share information and expertise. This memorandum of understanding is a follow-up to the relevant executive order issued by President Biden on July 9.


The announcement also sent a clear signal to ocean carriers that US regulators will conduct stricter inspections on shipping. 


However, the World Shipping Commission (WSC), which represents 90% of the world’s container shipping capacity, raised objections to the allegations of anti-competitive behavior.


"No matter by any standard, the industry is still competitive, and the current situation is not caused by a lack of competition. There are more than 50 ocean carriers operating more than 1,000 ships and providing approximately 180 liner services to U.S. importers and exporters. ," WSC said in a statement issued after Biden issued an executive order.


"Price changes in the market are driven by supply and demand and are the result of market competition. The capacity of ships deployed across the Pacific is at the highest level in history, and all available ships are carrying cargo. However, the large number of sustained import growth in the United States has actually exceeded This has increased the available capacity and caused the freight rate to soar."


WSC pointed out that “during the epidemic, the structure and concentration of the container shipping market have not changed. If anything, the actions of carriers indicate that the market is functioning well and the barriers to entry are low: new services are launched, new carriers enter the market, and ship orders in the first half of the year. The volume exceeds the sum of 2019 and 2020, reaching the highest level in 20 years."


▍High demand is the culprit of high freight and delays in the United States


Faced with the unprecedented high freight rates, delays and bottlenecks in the container industry, according to the World Shipping Council, it is mainly driven by the extreme demand for imported goods by consumers in the United States and that country. As long as the large demand in the United States continues to exist, these problems will continue living.


"This is not the fault of any supply chain participant. The supply chain simply cannot respond effectively to this extreme surge in demand," said John Butler, President and CEO of the World Shipping Council.


He pointed out that the current supply chain disruption is the result of a historic surge in American demand for overseas commodities. After the new crown pneumonia pandemic, the demand for consumer goods has risen sharply, especially in Western countries, where the demand for consumer goods transported by containers from Asia to the United States has soared.


"All supply chain participants are working hard to clean up this system, but the fact is that as long as the large import demand of American companies and consumers continues, the challenge will continue," John Butler added.




▍Ship company: solve port infrastructure problems


The chief executives of major container shipping companies such as Maersk, Hapag-Lloyd, and ONE have previously criticized the US port infrastructure and work model, which prevented ports from importing goods as quickly as Asian ports.


After Biden delivered a speech last Friday announcing the executive order, Hapag-Lloyd reiterated that the extreme situation was caused by infrastructure problems in the United States.


"All carriers are doing their best to deal with this problem, and all carriers are meeting customer needs. If regulations are intended, they should aim to alleviate infrastructure problems." A Hapag-Lloyd spokesperson said .


Doug Morgante, vice president of US Government Relations at Maersk, pointed out that the alliance recently helped create flexible solutions. Only through true partnerships-including regulators and policy makers-can we make progress towards a more stable and efficient port ecosystem.


"Because the commoditization of shipping also leads to market volatility, managing the global supply chain is essentially a complex collaborative work. As we have seen, when everything works like a clockwork, the lean operating model will only work, not Put pressure on the supply chain."


"In order to find a lasting solution, all stakeholders in the market need to accept it. Only through real partnerships-including regulators and policymakers-can we make progress in a more stable and stable direction. ." Morgante continued.


▍The European Commission pays close attention to


The Biden administration is particularly concerned about the fact that the three major container shipping alliances currently control more than 80% of the market.


Specifically, the alliance includes the 2M alliance between Maersk and MSC, the THE alliance formed by Hapag-Lloyd, Yangming and ONE, and the ocean alliance formed by COSCO, Evergreen, OOCL and CMA CGM.


After the US President announced the news, Arianna Podesta, a spokesperson for the European Commission, said that he is staying vigilant and closely monitoring the shipping industry to determine possible measures that will help the market resume normal operations.