Fresh off blaming the oil and gas industry for his policy mistakes, Joe Biden is after the shipping industry for the high cost of shipping, even though they aren’t the problem. It’s not just him – it’s Congress.
Another Scapegoat?
Scapegoat # 1,438
— Maze (@mazemoore) June 17, 2022
The Shipping Act
Last summer, amid clogged ports and skyrocketing international shipping rates, irate U.S. exporters called on Congress to act. The result was The Ocean Shipping Reform Act of 2022 (OSRA). It was passed with bipartisan support in Congress and signed into law by President Joe Biden on June 16.
The law is supposed to reform U.S. shipping law to provide fair treatment for American exporters. It’s just another mess, Reason suspects.
The bill addresses the high detention and demurrage (late fees) charged by the ocean carriers and terminals which are paid by importers and exporters. These charges are then passed on to the consumer, adding to inflation. The problem is the shipping industry isn’t the problem.
After people came off the pandemic, they put a tremendous demand on the supply chain. Suddenly, the many policy failings were exposed.
Prices rose because of costs, not gouging. Politicians claimed the ocean shipping sector lacked competition and should be investigated.
The Federal Maritime Commission (FMC) followed up with a report contradicting the prevailing narrative: It actually found the market for ocean services is highly competitive.
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While the bill has some good features, the OSRA makes no attempt to open up the domestic shipping market to expanded competition.
It buys into the mercantilist sentiment of prioritizing exports over imports, Reason believes.
The OSRA may be a political win as Congress “did something”. But it is not a serious attempt to improve the United States’ ability to meet its shipping needs, Reason states.
This act will probably end up cutting the wages of union dock workers.
The World Shipping Council Responds
In its statement, the WSC referenced the Federal Maritime Commission’s recent Fact Finding 29 investigation conducted over the past two years and cited it as saying: “Our markets are competitive and the high ocean freight rates have been determined by unprecedented consumer demand, primarily in the United States, that overwhelmed the supply of vessel capacity. Congestion further constrained available capacity.”
“Until the import congestion is remedied, export congestion will persist,” the statement concludes. “The World Shipping Council will continue to work with federal and state policymakers, as well as other parties, to pursue the necessary lasting solutions – such as continued investment in port infrastructure – that can have real impact in strengthening the intermodal transportation system that has supported the U.S. economy through the pandemic. Ocean carriers continue to move record volumes of cargo and have invested heavily in new capacity – America needs to make the same commitment and invest in its landside logistics infrastructure.”
Marine Link has hope:
Conclusion. Like anything else, we will wait and see what the overall impact will be with respect to the above issues, especially with the short-term resources which are mainly addressing the havoc of unreasonable application of demurrage and detention charges. It is our sense that the basic issues relating to Port Congestion are more reflections of economic realities, and these could change on their own, but the D&D issues will remain with us, but in less drastic formats than we have been experiencing. There should now be accessible tools to deal with those issues.
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