US Congress FINALLY acts on shipping containers to prevent shipping firms from price-gouging, and locking out American exports!

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Bravo! It’s about time! this is the main reason for the global supply shortage, and inflation! QUOTE: U.S. exporters, already angered by soaring prices, say that carriers are hitting them with unfair fees for failing to return cargo containers that they cannot deliver to ships due to intense congestion at ports. Exporters also claim that carriers are increasingly leaving U.S. ports without taking their goods back with them.

“In many cases, shippers are being charged through no fault of their own,” said Brian Whitlock, a logistics expert at consulting firm Gartner. “They can’t physically return the containers back to the ports.”

In response, agricultural and business interests are pushing lawmakers to prioritize the Ocean Shipping Reform Act, a bill that would empower the Federal Maritime Commission (FMC) to develop new rules to require carriers to take U.S. exports and prevent carriers from slapping exporters with unfair fees for failing to return containers.

The bill, sponsored by Reps. Dusty Johnson (R-S.D.) and John Garamendi (D-Calif.), sailed through the House with the support of more than 360 lawmakers in December.

The Senate is expected to unveil its own bill within the next two weeks.
thehill.com/business-a-lobbying/592397-shipping-giants-under-fire-for-record-profits-fees-as-pandemic-continues

This is what happens when demand temporarily changes. The effect magnifies with each tier of the supply chain as every supplier adds an extra buffer to their order to be on the safe side. Minute changes in customer demand can therefore result in huge extra demand for raw materials. This is called the bullwhip effect. As with a whip, a small flick of the wrist can lead to a big crack at the other end.

The bullwhip effect can be from demand suddenly falling as well as rising, and during the pandemic, these forces have sometimes combined. For instance, a combination of the crash in demand for new cars and higher demand for devices like laptops and games consoles for lockdown entertainment contributed to the semiconductor-chip shortage.

With modern cars sometimes containing 3,000 chips, carmakers are major customers for chips. But as car sales plummeted in 2020, supplies of chips were redirected to manufacturers of smaller electronic goods. When demand for cars picked up again a few months later, there were not enough chips to go around. Carmakers were forced to stop production lines and couldn’t make enough cars to satisfy demand. They also started hoarding chips, making the shortages worse.

Other imbalances in today’s supply chains are larger than competing companies or industries. Shipping containers move some 1.9 billion tonnes per year by sea alone, including virtually all imported fruits, gadgets, and appliances. Normally containers are continually loaded, shipped, unloaded, and loaded again, but severe trade disruptions resulting from lockdowns and border closures broke that cycle.

Containers were left in wrong locations as trade shifted, shipping capacity was reduced and vessels couldn’t land where and when they intended. Coupled with congested ports and problems with timely unloading and onward transportation, a typical container now spends 20% longer in transit than before the pandemic.

Shipping rates have soared in this environment. Prices on major east-west trade routes have increased by 80% year on year, which is bad news for economic recovery. Even a 10% increase in container freight rates can reduce industrial production by around 1%.

gcaptain.com/shipping-shortages-2022-inventory/
Food prices have skyrocketed globally because of disruptions in the global supply chain, adverse weather and rising energy prices, increases that are imposing a heavy burden on poorer people around the world and threatening to stoke social unrest.

The increases have affected items as varied as grains, vegetable oils, butter, pasta, beef and coffee. They come as farmers around the globe face an array of challenges, including drought and ice storms that have ruined crops, rising prices for fertilizer and fuel, and pandemic-related labor shortages and supply chain disruptions that make it difficult to get products to market.

A global index released on Thursday by the United Nations Food and Agriculture Organization showed food prices in January climbed to their highest level since 2011, when skyrocketing costs contributed to political uprisings in Egypt and Libya. The price of meat, dairy and cereals trended upward from December, while the price of oils reached the highest level since the index’s tracking began in 1990.

Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics who was formerly chief economist at the International Monetary Fund, said that food price increases would strain incomes in poorer countries, especially in some parts of Latin America and Africa, where some people may spend up to 50 or 60 percent of their income on food.
www.nytimes.com/2022/02/03/business/economy/food-prices-inflation-world.html

Shipping lines repositioned a record 1.85 million containers in the country in 2021 as demand for exports surged and exporters continued to be hurt by an acute shortage of containers, according to lobbying body Container Shipping Lines Association (CSLA).

Repositioning of containers is getting an empty container from a port of surplus to one where they are scarce.

Shipping lines had to resort to this strategy as container shortage soared across the world as several container ships got stuck in ports amid the pandemic and various restrictions even as merchandise exports from India grew 105% year-on-year to $354 billion in 2021.

economictimes.indiatimes.com/industry/transportation/shipping-/-transport/shortage-forces-shipping-lines-to-reposition-1-85-million-containers/articleshow/89083345.cms

February 4, 2022:

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Following the passing of the Ocean Shipping Reform Act (OSRA) in December 2021 by the United States House of Representatives by a convincing 364-40 vote, the bill was introduced yesterday in the Senate by Senator Amy Klochubar (D-Minn.) and Senator John Thune (R-S.D.).

The main objectives of the bill, according to Klochubar and Thune, is to update federal regulations for the global shipping industry, adding that the bill “would level the playing field for American exporters by making it harder for ocean carriers to unreasonably refuse goods ready to export at ports, and it would give the Federal Maritime Commission (FMC) greater rulemaking authority to regulate harmful practices by carriers.”

Key components of the Ocean Shipping Reform Act of 2021 include:

requiring ocean carriers to certify that late fees —“detention and demurrage” charges—comply with federal regulations or face penalties;

shifting burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier;

prohibiting ocean carriers from unreasonably declining shipping opportunities for U.S. exports, as determined by the FMC in new required rulemaking;

requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and 20-foot equivalent units (loaded/empty) per vessel that makes port in the United States;

www.logisticsmgmt.com/article/klochubar_and_thune_introduce_ocean_shipping_reform_act_in_the_senate

The U.S. Senate is set to take up reform of the federal regulations for the global shipping industry focusing on the challenges that American exporters have been experiencing due to port congestion and disruptions in the global supply chain. On Thursday, Senators John Thune of South Dakota and Amy Klobuchar of Minnesota introduced the Ocean Shipping Reform Act following the U.S. House of Representatives passage of its version of the bill in December 2021. The bill, which represents the first reform of the Federal Maritime Commission and its authorities in decades, has already met with strong criticism from the shipping industry.

The Senate version of the bill, which has wide support from a broad coalition from the agricultural sector as well as manufacturers and related businesses such as trucking, is similar to the House version that passed with a strong partisan vote. According to the senators, the bill would level the playing field for American exporters by making it harder for ocean carriers to unreasonably refuse goods ready to export at ports, and it would give the FMC greater rulemaking authority to regulate the carriers’ business practices.

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase four-fold in just two years. Meanwhile, ocean carriers have reported record profits,” said Klobuchar. “This legislation will level the playing field by giving the Federal Maritime Commission greater authority to regulate harmful practices by carriers and set rules on what fees carriers can reasonably charge shippers and transporters.”

Among the specific provisions contained in the draft are rules to prohibit ocean carriers from “unreasonably” declining U.S. exports. The FMC would be given greater authority to oversee the export practices as well as to register the shipping exchanges focusing on contract negotiations. The FMC would also be able to self-initiate investigations into the business practices of the carriers as well as enforcement actions. To create greater transparency, carriers would be required to report quarterly to the FMC on their import and export volumes and the number of containers brought to the U.S. on each vessel.
www.maritime-executive.com/article/ocean-shipping-reform-act-to-strength-fmc-reaches-u-s-senate

The U.S. Senate introduced on Thursday its version of legislation aimed at promoting U.S. exports while curbing carriers’ power over both container service and equipment fees charged to shippers.

The Ocean Shipping Reform Act (OSRA) is similar to legislation that passed overwhelmingly late last year in the U.S. House, though it lacks some of the specifics of the earlier bill. Both bills would give the Federal Maritime Commission authority to initiate rulemakings, making it more difficult for ocean carriers to refuse service to American exporters.

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase fourfold in just two years. Meanwhile, ocean carriers have reported record profits,” said Sen. Amy Klobuchar, D-Minn., who cosponsored the bill with Sen. John Thune, R-S.D.

“This legislation will level the playing field by giving the [FMC] greater authority to regulate harmful practices by carriers and set rules on what fees carriers can reasonably charge shippers and transporters.”

The Senate’s version of OSRA would:

Prohibit ocean carriers from unreasonably declining opportunities for U.S. exports, as determined by the FMC in a new required rulemaking.
Promote transparency by requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and twenty-foot equivalent units (loaded or empty) per vessel that makes port in the United States.
Authorize the FMC to self-initiate investigations of ocean common carriers’ business practices and apply enforcement measures, as appropriate.
Establish new authority for the FMC to register shipping exchanges to improve the negotiation of service contracts.
Language in the Senate bill is not as strong as the House version on imposing import-export reciprocity on carriers. However, both bills include certification requirements for carriers when imposing demurrage and detention fees.
www.freightwaves.com/news/senate-introduces-ocean-shipping-reform-bill

December 2021:

h/t Digital mix guy

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