Transportation Subcommittee Asks FMC Why They Aren't Addressing Exporters' Complaints

Members of Congress told the Federal Maritime Commission that they are hearing again and again about exporters being denied the opportunity to send their goods across the water, either directly, or with last-minute cancellations or unreasonable expectations on time to load, and so they asked why the FMC cannot solve these problems.

They are also frequently getting complaints that even with the FMC's detention and demurrage rule, exporters are getting unreasonable charges. Some members even asked the FMC if they could reverse the sharp hike in costs to export agricultural products. The June 15 hearing was called "Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain."

FMC Chairman Daniel Maffei and FMC Commissioner Rebecca Dye told the House Transportation subcommittee that covers maritime issues that they do not need any more authority. Dye, in her opening statement, said, "No further regulatory or statutory action is necessary for us to enforce the Commission’s Demurrage and Detention Rule." But, she said, "We do require, like any other law enforcement agency, facts involving a potential violation. Our Bureau of Enforcement and investigators simply need evidence, such as a bill of lading number, and a brief description of facts surrounding a potential violation to begin an investigation."

Dye and Maffei said that although members are hearing lots from constituents, there have not been many filing complaints, as they are worried about retaliation. "We would take prompt and decisive action if we heard about any carrier retaliating against any supply chain member," Dye said, but because of this fear, the FMC has had to self-initiate investigations. None have been concluded yet.

Maffei said he thought more shippers would bring cases if they saw a case won by the FMC on unreasonable charges. He told one member, "We do have to present evidence in court. The law is fairly vague about what it means to be reasonable. Those things do take some time."

Dye said, "We are not happy with the behavior of some of the [carriers]. But some of them are in compliance and are in close contact about the [detention and demurrage] rule."

Maffei also noted that carriers are transporting more export containers this year than in past years, even if they are not returning as full as they could if they waited longer to load. In his written testimony, he said he wanted to look at billing and appeal policies for detention and demurrage charges, and rapidly shifting earliest return dates, which can be unworkable for exporters.

Some witnesses on the second panel, which included a West Coast port operator, agricultural exporters and the union that represents port workers, said that extended hours are needed to help with the backlogs. They said that other countries operate ports 24/7 while U.S. ports only operate 12 to 16 hours a day.

Maffei said New York and New Jersey do have extended hours, and work weekends as needed. He said that more operational hours "wouldn’t be the be all and end all."

Alexis Jacobson, a hay farmer and member of the U.S. Forage Export Council, told the subcommittee that her farm is a four-hour drive from the port of Tacoma, Washington, and often they're only given one day's notice to pick up an empty container and return it back the next day. She said the lines are so long at the port that truckers max out their legal hours before getting off the property.

She said that it's difficult and time-consuming to challenge demurrage charges. "Our hay becomes less competitive in a global market every day," she said, with the higher cost of container space and more expensive trucking fees.

Even as exporters are paying more for containers, their payments pale in comparison to what Asian exporters are paying. Rep. Doug LaMalfa, R-Calif., said that the average exporter to the U.S. from Shanghai is paying $6,000 for a container, while the U.S. exporter is paying just under $800.

That disparity is why some ships would prefer to leave sooner, even if they are leaving with more empty containers.

Maffei told the subcommittee that when he talks to carrier CEOs, "what they say is they’ll talk about what they’re doing is for economic reasons. I will argue it might cost you a little bit … but in the long run, frankly you will look better to Congress and the American public and that will be helpful to you and your industry."

He said the executives are generally receptive, but that doesn't mean practices change on the ground. "It’s deeds not words," he said. "We need to keep the pressure on them, in terms of scrutinizing the carrier lines."

While Maffei said he doesn't need more authority, he might need more money so that he could hire enough staff to do regular enforcement audits of detention and demurrage charges at the nine carriers.

He did explain that the FMC has no authority to regulate the prices charged for space on the ship, since that is a market-based decision.

He suggested that Congress might want to consider whether penalties levied for unreasonable detention and demurrage charges could go to exporters, rather than to the Treasury. Rep. Dusty Johnson, R-S.D., said he would consider that.

Rep. John Garamendi, D-Calif., said he and Johnson are working on legislation that would prohibit ocean carriers from refusing export shipments, and require that they provide a statement of compliance.

World Shipping Council CEO John Butler, on the second panel, said that the market will moderate as demand returns to normal, and that only 15% of agricultural exports go in containers, while most go in bulk ships. He said that while there are problems, some of the legislative ideas that have been floated recently "add paperwork and nothing else and some would invite the FMC to micromanage the global shipping system."

He said investment in infrastructure is the best thing the federal government can do to help, but that's not an immediate solution.

National Pork Producers Council President Jen Sorenson said exporters have hundreds of instances of carriers declining or canceling export bookings, "often at the last minute, when the cargo is loaded in a container, already on train to the ports. Ultimately, these additional costs are passed down the supply chain to farmers. The main problem is carriers are not shipping back as many fully loaded containers as they are receiving. At the Port of Long Beach alone, the number of empty containers departing outnumbers loaded containers by more than two to one.

"Frequent, last-minute cancellations of U.S. pork shipments have undermined shipment certainty and eroded trust with buyers our industry has invested heavily to earn. We have already heard of large international retailers and restaurant chains looking at sourcing pork from other countries rather than waiting for U.S. product."