Maersk in Discussion With Stakeholders To Resolve Prevailing Export Issues

As the shipping industry enters 2021, it is currently grappling with congestion at seaports and export issues. Maersk, the global integrated logistics company, is holding meetings with concerned stakeholders to resolve this issue. Let’s take a closer look at what led Maersk to enter into a dialogue with the stakeholders to subsidize the supply chain struggles. 

In the latter half of 2020, the shipping industry was troubled by two prominent challenges: equipment availability and port capacity being the other, thereby leading to congestion at the ports. Looking at this scenario, the logistic community expects the bottlenecks to carry forward into 2021 until Lunar New Year at the minimum.

Last week, Maersk statedOpens a new window that it is coordinating with the stakeholders to solve the issues of U.S. export and port congestion, which have now come to light due to the on-going surge in imports that are seen in the U.S. seaports.

The news of Maersk working with the stakeholders surfaced over a week after two Federal Maritime Commission (FMC) commissioners sent a letter to the World Shipping Council expressing concern over the reports that U.S. exporters are facing the problem of cargo refusal by top ocean carriers.

Refusing U.S. Export Cargo: Violation of Shipping Act

U.S. agricultural exporters have been battling with prevailing export problems for weeks. Recently, it has been observed that the export market out of Asia has stood strong as the U.S. retailers generally import and restock. This has caused the cargo rates to soar that depart from China, and at the same time, the rates for cargo out of the U.S have been at a standstill. The movement of empty containers has been prioritized by the ocean carriers as they have planned to send them to Asian exporters rather than U.S. exporters.

These issues have led to “a lot of complaints” for the FMC for the past couple of months, Carl Bentzel, the FMC commissioner said.

“We were getting repeated meetings where people were talking about the frustrations with container access,” Bentzel said. “We started to hear that the results of this lack of equipment was that the carriers were increasingly moving to try to get containers, in particular, back and positioned in Asia.”

Bentzel further added that he’s come across communications from carriers to exporters where the carriers are elaborating that they have a policy not to pick up any more export cargo. 

Daniel Maffei, another FMC commissioner, said some complaints also show that carriers are only providing 1% to 5% of the containers initially agreed upon in contracts initially signed with the exporters.

“There are certainly some [shippers] who would be willing to pay more just in this particular instance, but they’re not even being asked … their containers are being cut without any negotiation,” Maffei saidOpens a new window in an interview. “I believe they all potentially could be violations of the Shipping Act,” he said. “Again, if they’re actually occurring.”

Shippers are open to bringing in complaints against carriers through the FMC. These claims would be heard and dealt with by the Administrative Law Judges, and the agency can then impose fines or take legal action against those complaints. Besides, the agency’s Bureau of Enforcement can take similar steps against potential carriers.

However, the exporters have not filed formal complaints so far, Bentzel said.

“They have a relationship with these carriers and are very concerned that if they make any sort of formal complaints, that they will be harmed in terms of their future relationship with the carrier,” Maffei said.

Amidst this chaos, FMC commissioners hope that the carriers will start to see their long-term best interest to provide containers to U.S. exporters, thereby avoiding the violation of the Shipping Act.

FMC Investigation: Scrutiny of Carriers

The ideal situation for the shipping industry would be to work out a solution to the issue, Maffei said. Maersk has been open about talking with exporters in the past few weeks, as they have had an executive talk with exporters at the Agriculture Transportation Coalition mid-year meeting in December 2020.

However, suppose these meetings do not turn out as intended. In that case, the FMC could take action and launch a more in-depth investigation into it, depending on the outcome, which could eventually lead to penalties or fines.

“And as we look into it, it may be something that Congress may act on,” Maffei said. In this case, Congress could modify the Shipping Act, though if legislators take this step, it likely wouldn’t be until the next Congress, Maffei said. “It may very well be changed to allow us or some other government group to do something to make sure that there’s sufficient containers for exporters because it’s just so important.”

The FMC stepped up its scrutiny of the carriers, as Bentzel and Maffei, the two Democratic Commissioners, sent a letterOpens a new window to the World Shipping Council expressing their worry over U.S. exporter’s cargo being refused by major ocean carriers. Further, FMC Commissioner Rebecca Dye metOpens a new window with CEOs of six ocean carriers in December 2020 to discuss container issues. And the FMC expanded the scope of Fact Finding 29Opens a new window , led by Dye, for investigating the container practices of carriers operating in alliances that call the California ports of Long Beach and Los Angeles, or the Port of New York and New Jersey.

This FMC investigation warned the carriers of their failure to provide containers to exporters that could inevitably violate the Shipping Act.

Stakeholders Call for Dual Transactions

Stakeholders have hinted towards opting for more dual transactions as it could help with container flow through ports. This will ensure that each truck arriving at a port terminal with an empty container leaves with a load. The California ports of Los Angeles and Long Beach have also confirmed that they’re working to increase dual transactions.

Harbor Trucking Association (HTA) CEO Weston LaBar has been calling for increased dual transactions since October 2020, when C.H. Robinson warnedOpens a new window its customers of severe congestion at California ports due to the surge of volumes from Asia into the Pacific Southwest (PSW). Maersk said it was in “daily contact” with LaBar.

The Road to 2021

Members of the shipping community have acknowledged the problems of equipment availability and congestion. However, they remain skeptical if the issues may resolve overnight, as they foresee the situation to live-on at least during the initial months of 2021.

“Every ocean carrier is undertaking a massive effort to reposition containers to Asia to meet the elevated demands,” Matson CEO Matt Cox said in NovemberOpens a new window 2020. “We don’t expect the equipment demand and the port congestion factors to change in the near future.”

The imports may continue to swell-up in the first two weeks of 2021, as the volume at the Port of Los Angeles is expected to be up an average of 88% YoYOpens a new window during this period.

“As the global integrator of container logistics, we are confident we can find workable solutions that will alleviate supply chain pain points,” A.P. Moller, Maersk CEO Soren Skou, saidOpens a new window in a statement in December 2020.

In Conclusion

Though Maersk is currently in talks with the stakeholders on resolving export issues and port congestion, it did not provide specifics on how it is working to improve export flow beyond its discussions with stakeholders. Yet, the carrier did disclose its goal of improving the rate of dual transactions at APM Terminals’ Pier 400 in Los Angeles, as it noted that about 65% of its transactions are already dual transactions.

Do you think Maersk’s discussion with stakeholders will resolve the prevailing export issues and port congestion problems faced by supply chains? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!