Congress Can’t Fix the Ocean Shipping Crisis, But Data and Integrations Might.

Editor’s Note: Brian Glick, is Founder and CEO, Chain.io

The fight over maritime container space and rates charged for ocean shipping service, which has been steadily growing more fractious throughout 2021, has suddenly spilled into the halls of Congress.

With freight shippers clamoring over market imbalance, claiming carriers are wrongly abusing their market position, a bi-partisan duo in the U.S. House has introduced a bill that would, if passed, implement a punch-list of reforms aimed at rebalancing the shipper-carrier dynamic and requiring more equitable treatment for containers of imports and exports.

The Ocean Shipping Reform Act of 2021, introduced Aug. 10, would beef up the Federal Maritime Commission’s (FMC) role in ensuring fair trade practices by attempting to reign in excessive detention and demurrage charges, block maritime carriers from declining U.S. exports without good reason, require carriers to report their import and export tonnage each quarter, and give FMC broader authority to take up investigations of abuses by carriers. It also stipulates that carriers “adhere to minimum service standards that meet public interest.”

However, industry onlookers contend these reforms, while well intentioned, likely would do little to fix the issues plaguing shipper-carrier relationships in the near-term. And longer-term, they could actually build more rigid walls between the two segments, rather than the bridges needed to truly solve the cascading crises that led to the current breakdown in the maritime shipping sector.

“Regulation will be limited in its ability to fix any of the issues we’re seeing now at the ports and in the maritime market,” said Nimesh Modi, CEO of BookYourCargo, which works with both shippers and carriers on solving capacity shortages and container backlogs constraining drayage operations at ports across the world. Rather, he says, data and greater integrations between shippers and carriers are paramount to handling the current capacity crises and to establish a more sustainable working relationship between maritime freight shippers and carriers.

“There has never been a more important time to find efficiencies than right now in 2021,” Modi said. “With the surge of imports, shrinking capacity, and lack of drivers creating drayage issues globally, the current environment is exposing antiquated manual processes in drayage that make life extremely difficult for drayage providers.”

Even if the legislation does come to pass, shippers will be limited in their ability to take advantage of any new regulations preventing excessive charges without meaningful industry transformation.

Putting the onus on carriers to provide data about overcharges, which the Ocean Shipping Reform Act bill does, is like asking a fox to guard a henhouse.

In order for there to be real detention and demurrage reform, shippers need to have accurate data that they control. In a more closely regulated environment, shippers can only take action if they know if they were overbilled, and many shippers currently don’t have those processes in place.

Maritime container carriers throughout 2021 have been reaping the rewards of a global freight market bursting at the seams with demand — with capacity out of whack and crimped by overwhelmed ports on both sides of the Pacific. Rolling shutdowns in China due to COVID outbreaks, weather events, and labor shortages (such as drivers at drayage carriers) have only exacerbated the backlog ports face.

This has driven container pricing higher and higher amid this ongoing market tumult.

In earnings reports and forecasts released in recent months by major maritime container carriers, the numbers shed light on their buoyed fortunes in 2021 and beyond. Motson, ONE, Maersk, SHIP, and others reported bulging revenues and profits, in some cases shattering company records.

Likewise, a report from forecaster Drewry issued in May said the maritime container carriers this year could reach as high as $100 billion in profit — so much that the companies in the segment “will be set up for years to come,” the report states.

On the flip side of that dynamic, shippers relying on maritime operators to get their goods to market have been slammed. Whereas container carriers are looking at 50%-plus percentage gains in revenue, shippers are fretting over transportation budgets that have been torn to shreds, and their products still aren’t moving to market in anything resembling a timely fashion. They’re not only at the whim of carriers’ pricing and availability, but they’re paying record-high rates to move their products back and forth across the pacific — with little accountability by carriers in timely or reasonable service, they argue.

Beyond pricing, another major pain point for shippers is the availability of container space heading back to Asia for exports from the U.S.

For example, pork producers and other ag commodity exporters in the U.S. have been particularly vocal on this issue. Unpredictable delays by maritime carriers and lack of available container space has forced pork producers to freeze their pork exports rather than ship them chilled. With Chinese markets demanding chilled, fresh pork — not frozen — pork producers are being forced to charge a lot less for their products exported to Asia.

Reps. Dusty Johnson (R-South Dakota) and John Garamendi (D-California), who introduced the Ocean Shipping Reform Act, say those are the types of issues their bill aims to address “Foreign businesses’ access to the American market and its consumers is a privilege, not a right. California’s agricultural exporters and other businesses are willing to pay to ensure that American-made products reach key markets in the Asia-Pacific. In turn, companies looking to offload foreign-made products at West Coast ports must provide opportunities for American exports. Even during a global pandemic, trade must be mutually beneficial, and that is exactly what our bipartisan bill ensures,” said Garamendi.

The bill has broad support from a coalition of trade groups and retailers in the U.S., and it could gain traction should the current supply chain crisis worsen in the coming months during the typical peak shipping season.

Nonetheless, the act’s pitfalls can’t be ignored, says Glick, and the maritime industry should take note of the need for greater use of data and integrations in solving the upheaval that’s been building over the past 18 months.

Shippers need to align their TMS or ERP with independent data sources from ports, truckers, marine traffic, and AIS, as well as third-party sources. If this regulation moves forward and shippers haven’t done this sort of groundwork, they will not be able to tell if they’re actually benefiting from the improvements and regulatory environment.

Maersk, while recently touting its record-setting second quarter of 2021, also said it’s actively trying to integrate with its shipper customers out of necessity to help alleviate the “congestion and bottlenecks [continuing] to drive up rates.”

“That’s the only realistic path forward,” said Modi. “Visibility and holistic solutions that connect shippers and carriers with agnostic data sets that help both parties track data and maintain records that can be used during disputes over detention and demurrage.”

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