Veronica Taubas, Argentina
President Joe Biden recently made a statement highlighting concerns about high freight rates and placing the blame on carriers. The statement regarding the excessive rise in maritime freight is striking in light of what was ruled by the Federal Maritime Commission (FMC) and the United States Department of Justice a few weeks ago.
Indeed, the FMC, after almost two years of market research, concluded in its final report (Fact Finding 29) of 5/31/22, according to what its Commissioner Rebecca F. Dye said:
“The historically high freight rates experienced recently by U.S. exporters and importers have been devastating to many, but I want to emphasize that the Commission has done its job during the COVID-19 pandemic to enforce our competition authority. Our markets are competitive and the high ocean freight rates have been determined by unprecedented consumer demand, primarily in the United States, that overwhelmed the supply of vessel capacity. Congestion further constrained available capacity”.[N1]
The final report concluded that:
“Based on information and research gathered during this second phase, the Fact Finding Officer has concluded that, using established antitrust analytical tools also used by our sister competition agencies (the Department of Justice and the Federal Trade Commission) – and notwithstanding certain misconceptions – the current market for ocean liner services in the Trans-Pacific trade is not concentrated and the Trans-Atlantic trade is only minimally concentrated. Competition among ocean common carriers, 1 among the three major alliances and among the members in each of these alliances, is vigorous. The market for ocean services remains highly contestable, particularly in the Trans-Pacific trade”.
On the other hand, the new Ocean Shipping Reform Act (OSRA22) has recently been approved by the United States Congress (with only the signature of President Biden remaining to pass it into law), and in this modification, no mention is made of tariffs or regulation, nor to competition between shipping companies. [Ed Note: the OSRA was signed into law on 17 June 2022 after this article went to publication.]
Therefore, we might surmise that President Biden’s statement:
1) It was just a political act to try to shift some of the responsibility for rising inflation in the US onto ocean carriers; at the same time echoing the growing claims of shippers, to ingratiate him with them and with consumers.
2) It is the prelude to new regulations that (if we take into account the deadlines set by OSRA22 to enter into force) will take a long time to see the light.
Lastly, beyond the attempts by the North American authority to justify the disproportionate increase in maritime freight rates and due competition between shipping companies, it is unavoidable that in Latin America several shipping companies are carrying out express actions against Freight Forwarders and Logistics Operators, notifying them that they will not accept any more cargo from them, denying them space or conditioning it so that they contract their related and/or ground transportation services with them.
If we add to this the fact that 10 shipping companies (among 3 alliances) concentrate more than 84% of the international movement of containers and that several of them have Freight Forwarding companies, are owners or have agreements with Port Terminals, provide Land Transport services and, even some have already bought aircrafts, it is evident that the international transport of goods is becoming dangerously concentrated and is being left at the mercy of the shipping companies which, clearly, are abusing the current favorable context and their dominant position in the market.
At #ALACAT (www.alacat.org), we are working at the regional level to counteract these abusive practices, highlighting antitrust legislation and actions against operators by shipping companies in the different Latin American countries with the aim to formulate clear norms and policies that serve as a model for the region against these practices.
[N1] https://www.fmc.gov/commissioner-dye-releases-final-report-for-fact-finding-no-29/