(Source: American Shipper)
FMC Chairman Richard Lidinsky and several shipper and carrier representatives testified to members of the House Subcommittee on Coast Guard and Maritime Transportation this month, about the adequacy of vessel space to meet the needs of U.S. importers and exporters. Lidinsky told the congressmen "We are seriously concerned with the current situation, particularly with reports of U.S. exporters unable to obtain space". In January and February the ports of Los Angeles and Long Beach, saw liner exports increase 32 percent and imports increase 13 percent over the same period in 2009.
Commissioner Rebecca F. Dye will lead the FMC investigation that Lidinsky said he believed "will shed valuable light on the capacity issue and inform further action or policy improvements by the FMC and Congress."
Robert Sappo, senior vice president for APL said in testimony that carriers were taken by surprise by the robust demand for space on ships and continued it was "not clear whether the recent spike in import demand reflects a long term recovery or short-term restocking".
However several exporters and trade groups told the committee they are having a tough time getting their goods to market from the USA.
Chris Mullally, president of Mohawk Trading Co., Inc., an exporter of hides based in Albany, New York, explained that the challenges presented to exporters of all goods from the U.S. are enormous "and in many cases impossible to overcome." He said industry wide about 48,000 containers containing 31 million hides worth $2 billion are exported each year from the US, mostly through West Coast ports to buyers in China and other Asian countries.
These hides are produced far from major cities and ports, and Mullally said "most ocean carriers today are no longer willing to provide the required empty ocean containers at the required locations where they are needed by most agricultural exporters. Instead ocean carriers have chosen to simply send back empty by rail to the US West Coast shipping ports where they are then put on vessels - still empty - in order to support the needs of foreign exporters mainly in the Asian markets for importing their finished goods to the United States."
But Lidinsky said the FMC, the U.S. Department of Agriculture and transpacific carriers are discussing the creation of an information system that would help shippers find carriers with empty equipment.
However Mullally went on to highlight other problems such as getting the boxes actually loaded on board an ocean vessel. He pointed out that instead of giving one week's notice to book space, "in to-day's shipping environment the minimum time required to reserve this same vessel space is now minimum four to six weeks in advance to popular foreign shipping ports and for some unpopular foreign shipping ports it can be even longer than this."
He also complained that carriers are canceling reservations with "no concern whatsoever as to possible consequences and damage it can cause an exporter."
Carriers' Response - "Ghost Bookings"
Robert Sappio for the carrier APL contended that his company has a policy to honor any bookings it takes and noted that the industry has a problem with shippers booking space but who then fail to show up with the cargo. He went on to say that historically 20 per cent of export bookings are such "ghost bookings."
Problems facing exporters "can be addressed, but the solutions depend on a return to market stability, accurate forecasting, robust demand and sustainable compensatory rates for both imports and exports" Sappio said.
He continued that export capacity on container ships is less than for imports for several reasons, including the fact that export cargo generally weighs about twice as much as imported cargo; 21.3 metric tons per inbound 40 foot equivalent unit compared with 10.3 metric tons per outbound FEU on the transpacific route. He also said that there has been a sharp demand in recent years for space on container ships by agricultural goods exporters who had traditionally shipped in bulk ships.
Sappio said that consequently some owners of bulk ships have "pursued more lucrative business in foreign to foreign trades." For example much of the global bulk transportation capacity is redeployed carrying commodities from Brazil and Australia to China. APL and other container carriers have tried to help by providing exporters with an alternative for moving some of their goods. As a result there has been a dramatic increase in agricultural products carried in containers.
Shippers' Concern - Anti-Trust Immunity and "Rolled" Boxes
Hayden Swofford, executive director of the Pacific Northwest Asia Shippers Association whose 16 member companies exported and imported 16,250 FEUs in 2009 said container carriers are not adequately addressing US commerce.
Michael Berzon, chairman of Ocean Transportation Committee of the National Industrial Transportation League (NITL) the nation's largest shipper organization maintains that limited antitrust immunity that carriers enjoy allows them to form discussion agreements such as the Transpacific Stabilization Agreement or the Westbound Transpacific Stabilization Agreement which he says results "in general rates increases and surcharges established by discussion agreements serve as benchmarks for service contract negotiations."
He added that "recent pricing practises of TSA members are straining the commercial relationships between carriers and shippers."
According to anecdotal information from NITL members, capacity reductions in the transpacific "have forced many shippers to pay TSA's emergency charges in order to secure space for their cargo on the carriers' vessels. Some importers have reported that their refusal to pay the emergency charges, even if based on protections against price increases contained in their contracts, resulted in their cargo being left on the docks or 'rolled' from confirmed vessel saiings to a later sailing."
Berzon said the NIT League believes "continuation of limited antitrust immunity for ocean carriers remains a barrier to achieving and even more robust, competitive and efficient maritime industry."
Swofford also noted there is no significant participation of U.S. carriers in the transpacific market .
Further meetings are planned to examine in more depth the state of the U.S. flagged fleet.
