The White House has raised concerns about the lack of competition in global container shipping, caused by the domination of the market by the three container alliances.
2M, Ocean Alliance and THE Alliance have created a monopoly situation in global liner shipping, according to a blog post on the White House website, while nine carriers that have been organised into the aforementioned three alliances control about 80% of the global shipping market and 95% on the East-West trade lanes. The three liner groupings only controlled 29% of the market as recently as 2011, noted the White House.
2M Alliance is the largest alliance in the industry, comprising Maersk Line and MSC, Ocean Alliance includes CMA CGM, COSCO and Evergreen, while Hapag-Lloyd, ONE, Yang Ming and HMM are the members of THE Alliance.
“This lack of competition leaves American businesses at the mercy of just three alliances,” commented the Biden-Harris Administration. “Retailers are charged fees for their containers remaining on the docks, even if there is no way to move their containers. If the alliances decide to not accept exports, agricultural exporters will not be able to fulfill their contracts, and farmers’ perishable products may be left to rot.”
In July, Joe Biden, the President of the United States, called attention to these problems in his Executive Order on Promoting Competition in the American Economy, which encouraged the Federal Maritime Commission (FMC) to enforce the prohibition against ocean carriers charging unfair fees to exporters and importers.
FMC, which has jurisdiction to regulate the carriers, should use all of the tools at its disposal to ensure free and fair competition and it has already launched an inquiry into excessive shipping fees that are charged when the importer or exporter cannot plausibly move the container, said the White House in the blog post.
The FMC needs more resources to oversee an industry with the size and scope of global shipping, while its annual budget is just around US$30 million, according to the blog post, which stated that current laws also do not require even basic transparency in this sector. For example, there is no public reporting of the detention and demurrage fees carriers are charging their customers.
Therefore, the Biden-Harris Administration believes that Congress should also assist by providing the FMC with an updated toolbox to protect exporters, importers, and consumers from unfair practices.
“There is bipartisan support for doing this, including a bipartisan bill sponsored by California Democrat John Garamendi and South Dakota Republican Dusty Johnson. Their proposed legislation includes good first steps towards the type of longer-term reform to shipping laws that would strengthen America’s global competitiveness,” said the White House.
“We look forward to working with members of both parties in Congress to ensure that we have a system of maritime regulation that boosts instead of reduces American competitiveness for both importers and exporters,” it added.