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FMC, Congress, & Shippers Must Prevent Global Supply Chain Groundhog Day

Yesterday, I had the opportunity to appear before the Federal Maritime Commission (FMC) to discuss the ongoing concerns with shipping movements through the Red Sea and Suez Canal and the impacts on the global supply chain as they relate to ACD member companies. In preparing for the hearing, I spent a lot of time researching and reading a host of supply chain publications, tracking service updates, and listening to member feedback. I came to the conclusion that the global supply chain is well on its way to being in a bigger mess over the next several months, even more than this time four years ago, albeit for a variety of different reasons.

The uncertainty of the continuing drought and water levels with the Panama Canal compounded with the challenging issue of protecting U.S. and foreign-flagged ships going through the Red Sea makes every shipper and receiver anxious to say the least. Even with potential support from U.S. allies and our own Navy, shipments through the Red Sea have pretty much come to a standstill because the risk of Houthi pirates commandeering vessels is simply too great.  We recognize some increases in costs and transit times are justified and we want ocean carriers to do everything they can to ensure the safety of their employees, vessels, and cargo. However, ocean carriers must also do everything they can to ensure the global marketplace and the American economy are not needlessly damaged by their response.

We continue to receive reports about the poor communication by the carriers informing ACD members where their containers are and the potential for delays if traveling around the Cape of Good Hope. One member informed me that they were in panic mode as they thought a shipment from India heading to Algiers was going to risk the Red Sea route only to learn a few days later that it would indeed go around Africa. In a world of 24-7 global communications, where anyone can make contact with another person in seconds, it defies logic that in 2024 we still have members holding their breath waiting for ocean carriers to tell them the location of their containers. We track planes flying around the globe every minute of the day. And if I can place an order from Amazon and know exactly where it is in the supply chain – from purchase to arrival – there is zero reason why carriers cannot provide similar tracking capabilities.

During my testimony, I highlighted FMC Commissioner Carl Bentzel’s Maritime Transportation Data Initiative as a great means to eliminate some of this chicanery by the carriers. I also underscored that we are once again seeing historic increases in the spot rate market, which includes the Asia to Europe route jumping by 350%, the Asia to East Coast routes jumping by 130%, and the Asia to West Coast routes jumping by nearly 100%. We are seeing these ocean carriers invent new surcharge names like “Emergency Freight,” and “Panama Canal” among the list of fees being assessed to our member companies. These conditions are all too familiar to what we saw in the early stages of the COVID-19 pandemic. Sadly, the rate of cost increases today is outpacing what we saw four years ago.

In response to the delays, rate increases, and historic profits made by carriers as a result of COVID-19, Congress overwhelmingly passed the Ocean Shipping Reform Act (OSRA), thereby giving the FMC expanded oversight and power to regulate the ocean carrier community. Yet, ocean carriers continue to ignore the sound business practices of clear communications to customers and following these regulations. They do as they wish with little regard for the impact on businesses up and down the supply chain.

This sounds like a rendition of Bill Murray’s “Groundhog Day,” right? Well, if we don’t want to keep waking up to that alarm clock at a bed and breakfast in Punxsutawney, a number of actions must take place.

First, the FMC must be vigilant in overseeing special permission requests and surcharges levied by ocean carriers.

Second, the FMC has the authority to, and must, address unreasonable surcharges.

Third, the FMC must proceed with the Maritime Transportation Data Initiative as a means to improve data transparency and cargo movements.

Fourth, Congress must conduct hearings and consider legislation to once again force carriers to be held accountable for their actions.

Finally, shippers and receivers must raise concerns to the FMC and ACD when it comes to the actions taken by carriers.

In Washington, there is an old adage of never letting a crisis go to waste. We must not let the ocean carrier community take advantage of what has transpired in the Red Sea as an opportunity to financially benefit at the expense of the American supply chain, businesses small and large, American consumers, and ultimately, the American economy.

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