NITL Upset With FMC Over Investigation

This story appears in the Dec. 20 & 27 print edition of Transport Topics.

The National Industrial Transportation League expressed “profound disappointment” over an investigation by the Federal Maritime Commission into numerous U.S. importer and exporter complaints of “perceived malpractices” by ocean carriers that caused supply-chain service disruptions and rate and surcharge increases from in 2009 and 2010.

NITL President Bruce Carlton said in a statement that FMC’s investigation was lacking in substantial details and public analysis. The investigation was launched after the agency received complaints from shippers who perceived that ocean carriers took advantage of capacity shortages when container traffic rebounded from the freight recession.

“The commission appears to have concluded that these problems were simply a misunderstanding between carriers and their customers,” Carlton said in a Dec. 10 statement.

Unsatisfied with the agency’s public statement on the investigation, Carlton said that NITL expects the FMC to release the full report, or at least substantially more details.

“If the full report is not forthcoming, we will certainly consider filing a request to see it under the Freedom of Information Act, with all appropriate redactions to protect the identities of those interviewed,” Carlton said.

Peter Gatti, NITL’s executive vice president, told Transport Topics that his association does not suspect anyone acted illegally during the capacity crunch, but that the FMC’s one-page news release did not explain the basis for its recommendations.

“If you’re looking for solutions, long-term solutions, to avoid a repeat of this, the release doesn’t give shippers any comfort,” Gatti said.

Brian Conrad, executive administrator of the Transpacific Stabilization Agreement, an association that represents Asian ocean carriers, said in a statement that its members “intend to cooperate fully” with the FMC and shippers, but added that there are no easy or immediate solutions to the capacity problem.

“The early months of 2010 were extremely difficult for shippers and carriers alike,” Conrad said. “Now, with conditions much improved, lines believe it is time to move forward and to begin individually addressing service issues and exploring best practices with customers in support of expanded transpacific trade.”

FMC officials declined to comment beyond the agency’s written statement on the nine-month investigation. The investigation relied on voluntary interviews, and the agency did not issue subpoenas.

The FMC statement said the tensions between ocean carriers and their customers resulting from vessel capacity and equipment shortages “revealed a lack of mutual understanding between the parties regarding their contractual obligations.”

Those contracts cover 99% of ocean shipments, according to the agency, which did not release any details of an estimated 170 interviews with a wide variety of international ocean-shipping market participants.

FMC said it was starting “rapid response teams” to hear customer complaints and was forming a committee “to focus attention on the most pressing issues revealed during the investigation.”

Carriers, shippers and agency officials would be part of that committee, the agency announced.

In addition, the agency said it would enhance oversight of international shipping alliances and carrier groups that meet to set base rates for transpacific shipments, without giving any details.

In testimony last month before the Senate Committee on Commerce, Science and Transportation, FMC Commissioner Rebecca Dye said the international container shipping industry experienced, from late 2008 through late 2009, an unprecedented drop in international trade volumes, with ocean carriers laying up roughly 575 vessels worldwide, roughly 12% of the world’s container fleet.

“By early 2010, increases in export and import volumes collided with previous vessel capacity reductions,” Dye said. “The resulting supply and demand mismatch created serious supply chain disruptions for American importers and exporters.”

In a speech to the Northeast Cargo Symposium, Dye said the investigation, which she oversaw, indicated that some shippers believed that ocean carriers are continuing to withhold vessel capacity from the market in a collective effort to raise prices by leveraging access to scarce capacity and equipment.

But the FMC release hinted that investigators did not find any illegal activity on the part of ocean carriers.

In a separate ruling, FMC officials said the agency would crack down on brokers that arrange international household goods shipments and announced voluntary steps to address pricing and capacity complaints by commercial cargo shippers.

The Dec. 9 ruling regarding brokers followed an agency investigation that was begun after an average of 500 complaints annually were received over the past five years.

Complaints included lost freight, bogus insurance charges and threats to withhold delivery unless additional charges were paid.

Among the steps FMC outlined were more consumer information on its website, working more closely with other government agencies, enhancing cooperation with trade associations and developing “best practices” for brokered international household goods shipments.