Trade Calls for Antitrust Reform at Vessel Capacity Hearing

Hearing Due to Trade Concerns on Capacity/Rates, Goal of Doubling Exports

The subcommittee believes its hearing is timely as it coincides with the recent Executive Order creating a National Export Initiative (NEI¹) to double U.S. exports over the next five years. It also coincides with the following recent complaints by the trade:

Shortages, roll-overs, long wait times. There have been widely reported complaints from the trade on the lack of vessel capacity, especially on U.S.-Asia trade routes. Chairman Oberstar adds that there have also been reports of container shortages in inland areas of the U.S., cargo being rolled over for several weeks, perishable and non-perishable cargo being left on the docks and increased wait times to load cargo due to limited vessel space.

Freight rates up as much as 35%. There have also been reports of increased freight rates from ocean carriers. According to information prepared by the committee, carriers in the Transpacific Stabilization Agreement (TSA) agreed to increase freight rates in 2010, with some shippers claiming increases as high as 35%. On top of these rates, some liners have reportedly introduced interim emergency charges for moving cargo in the Trans-Pacific.

NITL, Shipper Association Call for Antitrust Reform

According to testimony by a National Industrial Transportation League (NITL) spokesman, Congress should review the international shipping regulatory structure, as more reform is needed. NITL believes that international shipping regulation must evolve to ensure that U.S. transportation policies promote competition among carriers and depend on the forces of supply and demand to determine rates and charges.

In related testimony by the Pacific Northwest Asia Shippers Association, antitrust immunity for ocean carriers is a concept that was relevant and effective in a different environment, but shippers now find themselves in a market that has restricted capacity by the carriers, both individually and collectively, which has extreme effects on the ability to deliver goods to market.

FMC Working with WTSA on Agriculture Shipper Concerns, New Investigation

Chairman of the Federal Maritime Commission Lidinsky also testified, stating that FMC staff had met recently with Department of Agriculture staff and the Westbound Transpacific Stabilization Agreement (WTSA) in an effort to develop an information system that would enable agricultural shippers to identify the locations of available empty shipping containers. FMC will also be submitting a list of exporter concerns to the WTSA and asking for a response.

Chairman Lidinsky also noted that FMC had recently voted to launch an investigation into vessel space and equipment shortages and explore the ways in which the agency can help resolve the current situation. (See ITT's Online Archives or 03/18/10 news, 10031805, for BP summary of FMC's investigation.)

APL Says Solution is Market Stability, Rates & Demand Plummeted Last Year

A representative of American President Lines, Ltd., Robert Sappio, testified that APL believes the capacity problems can be addressed, but that the solutions depend on a return to market stability, accurate forecasting, robust demand and sustainable compensatory rates for both imports and exports.

Large 2009 rate drops. Sappio noted that 2009 was the worst year in liner shipping, and that in 2009, APL's rates dropped on average 35% for imports and almost 40% for exports in the U.S. trades. APL and other liners were forced to move aggressively to cut costs by laying up ships, slowing them down to reduce fuel costs, etc. They believe it is still unclear whether the recent spike in import demand reflects a long term recovery or short term restocking.

(See APL testimony for description of the complex factors APL believes are beyond the control of carriers and shippers and which constrain U.S. container exports, such as the U.S.'s historical imbalance of exports and imports, weight limitations, etc.)

¹The House Committee on Transportation and Infrastructure's Subcommittee on Coast Guard and Maritime Transportation.

²The NEI Executive Order calls on the Federal Government to support the goal of doubling U.S. exports in five years by removing trade barriers abroad, helping firms overcome hurdles to entering new export markets, assisting with financing, pursuing a Government-wide approach to export advocacy abroad, etc. (See ITT's Online Archives or 03/12/10 news, 10031205, for BP summary of the NEI Executive Order.)

Hearing information, including witness testimony and Webcast, available at http://transportation.house.gov/hearings/hearingDetail.aspx?NewsID=1127