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March 2, 2022 5:37 PM, EST

Biden Calls for Changes to Shipping Act to Improve Competition

President Joe Biden, with Vice President Kamal Harris (left) and Speaker Nancy PelosiPresident Joe Biden, with Vice President Kamala Harris (left) and Speaker Nancy Pelosi, outlined measures he would take against anti-competitive actions. (Saul Loeb/Bloomberg News)

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President Joe Biden and some members of Congress are calling for ocean carriers to lose their limited antitrust immunity under legislation that has been introduced in the House of Representatives.

The move comes as many international shipping companies have seen their revenue and profits double and triple as the cost of shipping goods from overseas to American ports has skyrocketed and economic experts say that’s fueling inflation.



In his State of the Union Address on March 1, Biden outlined steps he says would crack down on suspected anti-competitive actions, which the administration says add to the cost of moving products.

“When corporations don’t have to compete, their profits go up, your prices go up, and small businesses and family farmers and ranchers go under,” Biden said. “We see it happening with ocean carriers moving goods in and out of America. During the pandemic, these foreign-owned companies raised prices by as much as 1,000% and made record profits. Tonight, I’m announcing a crackdown on these companies overcharging American businesses and consumers.”

I’m announcing a crackdown on these companies overcharging American businesses and consumers.

President Joe Biden

Just hours before Biden went to Capitol Hill, the White House released what it said is a fact sheet that said the steps would loosen container carrier control over the shipping market.

“These companies have formed global alliances — groups of ocean carrier companies that work together — that now control 80% of global containership capacity and control 95% of the critical East-West trade lines,” the White House said. “Right now, three global alliances, made up entirely of foreign companies, control almost all of ocean freight shipping, giving them power to raise prices for American businesses and consumers, while threatening our national security and economic competitiveness.”

Rep. Jim Costa

Costa

In the House, Rep. Jim Costa (D-Calif.) has introduced what he said is the bipartisan Ocean Shipping Antitrust Enforcement Act, which Costa believes would change federal antitrust laws and addresses unfair practices that harm American businesses.

“I am committed to working with the Biden administration to ensure fair trade practices in the ocean carrier industry, which is a crucial step in lowering prices for American consumers and creating a level playing field for American exporters,” Costa said.

American Trucking Associations’ Intermodal Motor Carriers Council said it supports the move.

Jonathan Eisen

Eisen

We are pleased that the Biden administration is taking long-overdue steps to limit the power of the ocean shipping cartel to hurt American businesses and consumers,” IMCC Director Jonathan Eisen said. “ATA and IMCC have long been fighting against the predatory practices of these foreign-owned companies, and we appreciate President Biden shining a light on this critical issue.”

The National Association of Chemical Distributors, which represents the chemical shipping industry, also said it backs the move.

As a result of the surge in shipping profits, ports including the Port of Oakland in 2021 saw their container volumes decline dramatically. Many of the ocean carriers skipped their usual intermediate stop in Oakland and instead returned to Asia empty to quickly refill and return to Long Beach and Los Angeles. This resulted in a surge of ships sitting in San Pedro Bay for sometimes as long as two weeks waiting for a slot so their goods could be unloaded.

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Because of language in the U.S. code, foreign container shippers that operate in the U.S. have some antitrust immunity, not available to other companies, especially pertaining to rates and capacity issues, which are designed to keep the market stable. However, lawmakers and the White House contend that this immunity has allowed carriers to increase their shipping rates and profits with little or no accountability.

“With a major supply chain disruption because of the COVID-19 pandemic, we must hold foreign shipping companies accountable for their actions that harm American businesses and make everyday goods more expensive,” Costa said. “I am proud of the president’s commitment to this issue and urge my fellow congressional colleagues to support this bipartisan legislation.”

In 2021, the Federal Maritime Commission and Justice Department approved a memorandum of understanding that the agencies said would improve competition in the shipping industry by sharing resources. The World Shipping Council, which represents some of the biggest shipping lines in the world, said the administration and congressional action to change the law will harm the flow of goods worldwide at a time when container and other product volumes have never been higher.

FMC-DoJ Memorandum of Understanding by Transport Topics on Scribd

“The truth is, that with demand for ocean transportation services into the U.S. at record levels, market dynamics are influencing prices — not carrier alliances,” WSC President John Butler said in a statement. “The legislative proposals currently before Congress would upend the global transportation system, reducing service for U.S. importers and exporters and raising costs for American consumers and businesses. We urge the administration and Congress to enact measures that will relieve the current congestion and set America’s supply chain up for long-term success.”

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