Ocean cargo/global logistics: FMC Scrutinizes Carrier Rates and Capacity

As the Federal Maritime Commission ramps up its investigation of ocean carrier price-fixing, it is also keeping a vigilant watch on capacity and equipment shortages.
In a speech given before the Virginia Maritime Association last month, FMC commissioner Michael Khouri noted that U.S. exporters of agricultural products are particularly exercised about the impact of capacity limitation, equipment unavailability and rate increases on their ability to compete internationally.

“The capacity, equipment availability and rate increase issues and their impact on U.S. shippers are of great concern to the FMC,” said Khouri. “Last March, the Commissioners voted to initiate a Non-Adjudicatory Fact Finding Investigation into the current conditions concerning vessel and equipment availability in the U.S. export and import liner trades.”

Meanwhile, Khouri and his colleagues are concentrating on rate inflation too.

“Recent reports of increases in annual transpacific contract rates have heightened shipper concerns that these rate hikes are facilitated by carriers using, first, their legal authority to discuss voluntary general rate guidelines with, second, discussions to agree on capacity restriction,” he said. “The first discussion would be legal under the Shipping Act. The second discussions — if they occurred — would be outside of the Shipping Act purview and would therefore be a violation of the Sherman Act.”
While the FMC’s Fact Finding is not focused on the vessel operator’s antitrust immunity, the Commission is mindful of these concerns and plans to closely monitor the carriers’ collective activities. If there is any indication that capacity issues and higher freight rates are credibly linked to any improper use of antitrust immunity by foreign-flag or U.S. flag liner carriers, the Commission will take action, said Khouri. He said shippers may also see renewed attention by Congress and the Administration.