Biden confronts consolidation, unfair pricing in container shipping

The Biden administration has issued a new executive order tackling the consolidation in the container shipping industry as well as anti-competitive pricing, among others.

Illustration. Image Courtesy: Port of Los Angeles
Illustration. Image Courtesy: Port of Los Angeles

Over the past few years, the container shipping industry consolidated into a small number of giant foreign-owned lines and alliances, which can disadvantage American exporters, the White House statement reads.

In the Executive Order on Promoting Competition in the American Economy, President Joe Biden has encouraged the US Federal Maritime Commission (FMC) to “ensure vigorous enforcement against shippers charging American exporters exorbitant charges”.

Specifically, the order comes as the President wants to promote competition in the US economy and enable faster economic growth.

In the liner shipping sector, the global marketplace has rapidly consolidated. In 2000, the ten largest shipping companies controlled 12% of the market. Today, it is more than 80%, leaving domestic manufacturers who need to export goods at these large foreign companies’ mercy.

This has let powerful container shippers charge exporters exorbitant fees for the time their freight was sitting waiting to be loaded or unloaded. These fees, called “detention and demurrage charges,” can add up to hundreds of thousands of dollars.

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I applaud President Biden for his leadership in calling “all hands on deck” to ensure fair competition across the supply chain,” Daniel B. Maffei, FMC Chairman, said following the signing ceremony for the executive order.

“In recent months, we have increased our scrutiny of the ocean carrier alliances to identify evidence of anticompetitive behavior regarding rates and capacity, and we will continue to do so as the COVID-19 and import surge crisis continues. We welcome the assistance and cooperation from other agencies, including the Department of Justice.

With regard to detention and demurrage charges, it remains a top priority of the agency to identify and take action against those who flout the Commission’s recent interpretive rule on reasonable regulations and practices. The President’s action today reinforces these efforts and indicates his prioritization of a fair and reliable supply-chain.