FMC Investigates Carriers for Withholding Containers From U.S. Farmers

containers farmers
File image courtesy IMO

Published Dec 8, 2020 9:15 PM by The Maritime Executive

The chairman of the Federal Maritime Commission, Michael A. Khouri, said Tuesday that the FMC is responding to complaints that ocean carriers are no longer supplying containers to agricultural exporters in the inland United States. The commission is looking at regulatory tools it can bring to bear on the situation, Khouri said. 

“Some ocean carriers – not all – have stated that they will no longer . . . reposition empty containers to the U.S. interior agricultural areas. Instead, they are expediting empties back to Asia. This abandonment of a significant U.S. export industry – the American agricultural industry – is shutting them out of global markets," said Khouri, speaking at the (virtual) Global Maritime Conference. "We are looking into all potential – I repeat – all potential responsive actions, including a review of whether such ocean carriers’ actions are in full compliance with the Shipping Act."

FMC has already launched an investigation into ocean carriers' practices on detention and demurrage, container return and container availability for U.S. export cargoes - particularly at the Port of Los Angeles, the Port of Long Beach, and the Port of New York and New Jersey. In October, the agency also signaled its plans to scrutinize carriers' definition of the term "merchant" in their bills of lading. Many stakeholders have told FMC that shipping lines are using an expansive definition of the term - which traditionally applies only to the beneficial cargo owner - in order to charge demurrage and detention fees to 3PLs, truckers and forwarders, who never contracted for the fees and might not legally be required to pay.  The Commission’s Bureau of Enforcement is conducting an investigation into these practices. 

Ocean carriers have a powerful incentive to collect empty containers in the U.S. and reposition them to Asian markets as quickly as possible. Asia-to-US freight rates have skyrocketed over the last 12 months, rising to an astonishing $3900 per forty-foot equivalent unit (FEU) from Shanghai to the U.S. West Coast and $4700 to the U.S. East Coast as of early December. Changing buying patterns in the United States and the approach of the holiday season have boosted carriers' fortunes, but the rush has also created a dire shortage of empty containers in the Asian market. Empty boxes repositioned from the U.S. will be delivered to Asian shippers, who need more containers if they are going to book more (lucrative) headhaul bookings back to the U.S. market.

For American farmers, the sudden disappearance of empties from the U.S. market presents a significant challenge. "This disrupts the food supply chain,” said Bob Sinner, chair of the Specialty Soya and Grain Association's competitive shipping action team. “Companies in those countries rely on us for their food manufacturing. We’ve got our new crop harvested and we’re making significant and consistent bookings with carriers to get our products shipped quickly and as soon as possible.”