At the end of May America’s official maritime regulator concluded there was no sign of collusion or price gauging by global liners following a two-year investigation. Within days however a shipper from Illinois has cried foul, alleging two Asian carriers have operated in ways that contravene the Shipping Act, seeking millions of dollars for the exorbitant shipping costs it has had to fork out during the pandemic.
MSRF, a gourmet food producer, has filed an official complaint with the Federal Maritime Commission (FMC) against HMM and Yang Ming, claiming the pair have colluded, broken earlier agreed contracts and manipulated prices.
“[Liners] have continued policies and practices that manipulate prices and deliver unprecedented windfall profits to them by forcing shippers into an artificially inflated spot market,” the MSRF complaint states, pointing out that a container that in 2019 might have cost approximately $2,700 to ship from China to the west coast of the United States now might cost $25,000 or more on the spot market.
MSRF claimed it has experienced “misconduct” by global ocean carriers firsthand. The complaint alleges that HMM and Yang Ming agreed to service contracts with MSRF and then refused to provide more than a fraction of the cargo capacity that MSRF requested. The pair of carriers were then accused of proceeding to engage in a practice of refusing to perform their full commitments even under those limited service contracts, instead forcing MSRF to buy space on the inflated spot market. MSRF’s written service contracts with each carrier included minimum quantity commitments.
MSRF claims the two shipping lines changed their practices “in parallel and seemingly coordinated fashion”, forcing MSRF to shell out on the expensive spot market. This practice was also carried out against other shippers, MSRF alleges, claiming that the financial damages it has suffered from being forced onto the spot market have exceeded $2.2m thus far.
“As a result of the collective conduct and profiteering by Respondents and, upon information and belief, by their fellow global ocean carriers, ocean carriage costs on the spot market have risen to crisis levels, threatening shippers’ businesses and generating price inflation to support massive windfalls for the carriers at the expense of the public. This conduct is unjust, unreasonable, and unlawful,” the complaint asserts, going on to take aim at the three main “collusive” alliances.
Both HMM and Yang Ming are readying their defences of the allegations levelled against them with the FMC setting a December 22 deadline to rule on the case.
At the end of May Rebecca Dye, a commissioner at the FMC, released her final report after a two-year investigation into how the pandemic affected liner transportation, in which she suggested the global carrier market was competitive, and that massive American consumer demand was the root of the supply chain pain felt since 2020.
US politicians have moved to give the FMC greater powers recently with the passing of the Ocean Shipping Reform Act, while many involved in American supply chains are urging politicians to act on the findings of a recent global port productivity report issued by the World Bank, in which America’s main gateway terminals were listed as among the worst performing ports in the world.
American shippers took advantage of carriers for 25 years and the carriers carried their cargoes at a loss. Nobody complained and they had enjoyed low freight for a quarter of century. The shipping industry cannot sustain continued losses. The American ports are just like Newark airport. Third world standard.
We now harvest what we once planted: low production costs in far east made everyone run theirs productions in cheap countries and depended themselves on “supply chains” that were broken. This now is the real cost of production abroad, phantasy times are over.