A letter from more than 30 shipper groups sent last week to House Transportation and Infrastructure Committee James L. Oberstar signals that the tensions between shippers and ocean carriers that flared on the docks in Shanghai and in grain shipping centers in North Dakota are moving to an entirely new level, one likely to lead to a changed regulatory regime for ocean transport sometime in the future.
Whether that future is soon or far off is now what’s really under debate in Washington, because looking at when Congress might act will say a lot about what lawmakers might do.
With their letter to Oberstar, the 32 shipper groups — they include the National Retail Federation, the Agriculture Transportation Coalition and the National Industrial Transportation League — rekindled the arguments over ocean carrier antitrust immunity that had seemed to die down late this summer as vessel capacity returned to increasingly busy container trade lanes.
Calling for reform of the Shipping Act, the groups wrote, “Congress must now take steps to insure that an environment exists so that contracts are honored and that ocean exports and imports can move at rates that are determined solely by competitive market conditions rather than by foreign-based companies acting in concert.”
They were endorsing a bill that didn’t formally exist yet, although trade officials in Washington say privately the letter was prepared only after lengthy and detailed legislation aimed at amending the Shipping Act was prepared and ready to be introduced in the U.S. House.
The shippers believe ocean carriers clearly colluded to manipulate prices and capacity in the wake of the downturn that produced billions of dollars of losses across the industry, and the anger over that is deep and unyielding.
“We had visits from the (Transpacific Stabilization Agreement) and the (Westbound Transpacific Stabilization Agreement) in which they said, ‘You need to prepare your members — they are going to have to pay more for freight this coming year in their contracts,’ ” the NITL’s Peter Gatti said. “We had never heard that type of rhetoric displayed in any other industry.”
To the carriers, the actions were a matter of survival.
“All sectors of the liner shipping industry had difficulties adjusting to the rapid and unexpected growth in trade volumes following the unprecedented and financially disastrous year of 2009,” the World Shipping Council said in a statement.
More importantly, the carrier group said, the market has adjusted: “Ocean carriers have added sufficient capacity to handle all U.S. imports. Capacity presently deployed to carry U.S. exports far exceeds shipper demand.” The result is that spot rates actually have declined in recent weeks.
Those recent developments, Gatti said, “are a blip out there” for legislation aimed at addressing the broad fundamentals of the ocean container shipping market.
Carrier officials won’t argue about that: It’s the reason, they say, any change in the law should be debated openly, carefully and with everyone with a stake in the supply chain at the table.
Shippers may believe carriers want to slow-steam the legislation away, betting that a change in party control of Congress will bury the bill. But any change in fundamental regulation of an industry should be able to stand the test of time.