Testimony of Chairman Maffei before Congress: “Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain”
Chairman Daniel B. Maffei
Federal Maritime Commission
Committee on Transportation and Infrastructure
Subcommittee on Coast Guard and Maritime Transportation
U.S. House of Representatives
Good morning Chairman Carbajal, Ranking Member Gibbs, Chairman DeFazio, Ranking Member Graves, and members of the Subcommittee.
I appreciate your invitation today and I want to thank this subcommittee for the sustained attention to our ocean freight system and how to make it better.
Most of the time, of course, the public pays little notice to how ocean freight moves consumer goods, commodities, and manufacturers’ inputs to and from the United States. Now, concern is growing as the COVID-pandemic and the ensuing record import surge threaten the reliability of the system and drive up the costs.
When President Biden designated me Chair of the Federal Maritime Commission on March 29, the ocean freight system was already at or beyond capacity with volumes up dramatically at virtually every port in America… and rates already at record levels.
The cost of a container has gone up to four times what it cost last year (and sometimes more). Just finding space on a carrier is very difficult. And even if a shipper’s box does make it on the ship, there will likely be substantial delays in transit time.
Of particular concern to me is the increases in price and shortage of available containers affecting exporters. While carriers are actually moving more exports than in previous years, the increase does not match the boom in imports.
Moreover, the amount a carrier makes moving an import container is so much compared to what they make on an export box that, in some cases, a ship will carry fewer containers full of exports than its capacity in order to more rapidly move empty containers back to foreign ports and fill them with new U.S.-bound imports.
So, what is the FMC doing about all this?
Last year, the FMC unanimously approved a rule on detention and demurrage to make clear when assessment of these charges on a shipper is unreasonable and violates the shipping act.
Last Fall, the FMC increased the reporting requirements for the three major alliances of steamship lines to ensure that these carriers are not violating their agreements or the law.
Last Fall, we also launched a formal investigation of issues examining detention & demurrage practices, container return requirements and lack of containers available for export. This investigation is called Fact Finding 29 and is led by our most experienced Commissioner, Rebecca Dye – who with my full support is here to report directly to you.
Also – where appropriate, I and others have reached out directly to carriers to persuade them that it is in their long-term best interest to accept as many exports as possible.
Finally, the FMC voted last month to implement our new National Shipper Advisory Committee so we can hear directly from shippers on an ongoing basis.
There’s always more to do, but it is also vital to understand the nature of the current crisis and the ocean freight system to assess what the FMC can and cannot do.
First, the difficulties are global. Congestion, reliability, and cost issues are hitting ports, businesses, and ocean-linked transportation networks not just in America but worldwide.
Second, the crisis does not just affect ocean shipping but the entire supply chain. Attention has been focused on ports because this is where we see dramatic pictures of lines of ships and piles of containers. But outdated infrastructure, equipment and labor shortages, railroad issues, and limited warehousing all diminish our capacity to move containers.
Third, the primary reason for the congestion, high prices and lack of reliability is that demand for cargo shipping has outstripped the supply.
For years, the increasing supply of cargo space on bigger and bigger ships kept ocean freight rates on the low side. Now, COVID and its effects have created record demand for shipping and record freight rates as well.
The demand for imports will likely not diminish until 2022. But the supply of space on ships has not increased enough to keep pace even though virtually every usable ship is in service.
Because of these three factors – the global nature of trade, challenges throughout the supply chain, and the vast increase in demand for ocean transportation – the Federal government is limited in ways to help.
We can put in measures to improve the overall capacity of the system – increase the supply in the supply-demand chart – through infrastructure improvements and more data & information sharing. Shippers need more information than they currently get and providing it to them would greatly improve efficiency.
However, these are not immediate solutions.
In the meantime, the FMC will continue to help exporters and other U.S. shippers navigate the system and file complaints.
We will communicate with various stakeholders in the supply chain to help them work together to make the system more efficient and reliable.
We will keep in touch with other Federal agencies and you in Congress and stay open-minded to finding new ways of making the situation better.
And we will work hard to make sure nobody makes a profit from this current crisis in a way that violates the Shipping Act.
And I know Commissioner Dye will say more on those efforts.
Thank you and I look forward to your questions.
Chairman Maffei also submitted full testimony for the record to the Subcommittee.