The two US ministers directly shouted that shipping companies should pay attention to the export of agricultural products, otherwise

Last Friday, the U.S. Secretary of transportation and the Secretary of agriculture jointly wrote to 12 U.S. line shipping companies, calling on them to receive more goods exported from the United States, suggesting that they should link up with some underused American West terminals to restore routes and help the smooth export of American agricultural products. After the US House of Representatives quickly passed the reform draft of the 2021 shipping law a few weeks ago, the Biden administration once again spoke for agricultural exporters and directly urged shipping companies to pay attention to US exports.



What is the background of these two things? What does the adoption of the 2021 draft maritime law reform mean for the future US line?



As we all know, the import and export volume of the US line is seriously unbalanced, and the import has been far greater than the export. In the early stage, the ratio of 2 to 1 expanded even more after the trade war and the epidemic. The U.S. economy is driven by consumption, and consumption depends on a large number of imports, ranging from daily necessities, clothing, shoes and hats to furniture and household appliances. The high cost of the United States determines that consumer goods must rely on imports. On the contrary, the largest export product of the United States is agricultural products, but in terms of volume, it is far from comparable to imports. The early "three wastes" (waste hardware, waste plastic and waste paper) products were once the main force of U.S. exports and the largest source of goods for major ship owners of American line westbound.



Due to the excess capacity of the market, the freight of eastbound on the US line was low for a long time in the past, and the lowest freight between the US and Western countries was $800 per large container, The highest price was about 2600 US dollars (compared with the current price, it's almost the price of cabbage). However, the freight of westbound on the US line has been hovering around 300 US dollars for so many years (from the US West to China's basic port), which is difficult to rise. In order to compete for limited export goods, avoid all empty containers (commonly known as "air transportation") )In addition to the extremely low freight, shipowners also gave many guests up to a month's free container period at the port of destination.



It's better to "transport the air" back after calculating the account: if you go back directly, the cabinet can be unloaded and used by the guests on the export route immediately without waiting for another 30 days. The origin of American agricultural products is mostly inland. If the IPI import volume of ship owners is not enough, they have to specially cross the empty container to pick up the export business from the origin of agricultural products, but the sea freight for export is not enough to cover the cost of crossing the air. In conclusion, the freight of TP westbound itself is far lower than the cost. For so many years, it has been a free ride by TP eastbound. The owner's American line is also supported by eastbound's income. When the freight of eastbound cannot pay the cost, The only result is huge losses and company bankruptcy (see the outcome of Han Jin). It can be said that American exporters have always enjoyed the dividend of ultra-low sea freight.



Until 2020, the epidemic changed the ecology of the US Line: the freight of eastbound increased by 10 times, The freight of westbound is still about $600 (from the United States to the basic port of China). The choice before the ship owner is: cross the empty container back as soon as possible to earn $10000-15000 of eastbound or other high freight charges, or charge a cabinet exported from the United States. The freight is $600. After arriving at the port of destination, it will take two weeks for the empty container to be reused.



This is a very realistic business problem. If you were a ship owner, what would you choose? Of course, the ship owners did not completely give up the export of the United States, and each ship owner still has the cargo volume target of westbound to complete.



Go back to this letter. The two ministers pointed out that since the outbreak of the epidemic, shipping companies have given fewer cabinets to U.S. exporters, the time for returning cabinets has been changing constantly, and many unreasonable fees have been charged. They require shipowners to treat exporters and importers equally. In view of the current difficulties, the two ministers wrote a prescription for major shipping companies: don't go to LA / lb, go to Oakland, Portland or other ports in the west of the United States. This can not only avoid blocking LA / lb, but also help agricultural exporters ship smoothly. Because of the port jam, many shipowners stopped or reduced the route of Oakland. Oakland is a very important port for U.S. exports. Many exporters have to pull their goods out of LA / lb. The return of the route to Oakland can also reduce the pressure of long-distance trucks from LA / lb to Oakland. Sounds beautiful, doesn't it?



The actual situation is much more complicated. Shipowners will not only consider the needs of export to arrange routes, especially when the freight of import is dozens of times that of export routes, shipowners must comprehensively consider the income. Moreover, the import volume of Oakland cannot be compared with LA / lb, and the input capacity is naturally less. If you have to skip the port to resume the shipping schedule, most will choose not to go to Oakland. As for other ports in the western United States, they do not have the ability to operate large ships. In addition, the local frame and trailer transport capacity can not handle a large number of imported cabinets in a short time. At present, the ships attached to the west American small wharf are small boats, many of which are multi-functional ships, and the container loading capacity is small. More importantly, the guests or chartering freight forwarders have enough Trailer capacity to handle the transportation after the port. It's really hard to imagine a 12000teu ship going to dock with other small docks.



The industry believes that the Biden government's high-profile appeal to shipping companies to pay attention to export is because agricultural exporters have put great pressure on the government. The tone of the letter is still polite, because the government has no right to order what private enterprises should do. However, there is a trace of threat at the end of the text: it is unacceptable to refuse to accept the export booking when there are empty counters. If the situation does not improve, FMC will take further action.



In fact, without waiting for the FMC, the US House of Representatives passed the Ocean Shipping Reform Act of 2021 (OSRA 2021) by a majority vote a few weeks ago. It is extremely rare to see how fast members can move from the introduction of a bill to its passage. In order to let you feel the political atmosphere of the passage of the bill, take a look at what Rep. dusty Johnson, a Republican congressman from South Dakota, one of the sponsors of the bill, said: "China and the foreign flagged ocean carriers are't playing fair, and accountabilities long overlap. If you want to do business with American ports, you need to play by our basic rules." Chinese and foreign shipping companies have been in trouble for a long time. It's time to set new rules for them.



The draft mainly includes several contents: the shipping company shall not reject the export booking within a reasonable time; The burden of proof for the reasonableness of collecting terminal demurrage and demurrage is transferred to the shipping company; FMC is allowed to initiate its own investigation into the business behavior of the shipping company, rather than passively responding to the complaints of the cargo owner.



With regard to prohibiting shipowners from rejecting export space booking, if the policy is implemented, a predictable result may be that the sea freight of westbound will rise sharply, because if shipping companies are forced to accept export space booking, they can't continue to use eastbound to subsidize westbound. Westbound will also make profits and have to increase the price. How will American exporters react at that time?



Sigh here, it's really one moment after another. The last major reform of the U.S. shipping law was in 1998. At that time, APL and Sealand were strong representatives of shipping companies in the United States. The compromise between the two sides resulted in the government deregulation and allowing shipping companies to sign confidentiality contracts with customers. Another result of deregulation is the end of the era of the American wire Association. By 2021, there will be only a few smaller shipping companies in the United States. Compared with the increasingly loud dissatisfaction of shippers, shipping companies seem to be difficult to get the sympathy of parliamentarians, and the bill establishing rules for ship owners has almost no resistance to pass quickly.

The next step is up to the Senate, which is expected to present their own draft next month. According to sources, the Senate version is similar to that of the house of Representatives, which requires that the charges of demurrage / detention of shipping companies must comply with the explanatory regulations issued by FMC in 2020. The spirit of the regulations is as follows: the collection of demurrage / detention must be based on the incentive principle so that customers can pick up and return the cabinets in time. Violation of this principle can be considered as unreasonable charges. Unfortunately, this year, there were several cases in which cargo owners complained to FMC about demurrage / detention charges. FMC did not make a ruling, but handed the case to a civil judge. Many cases have finally been settled out of court. So far, we have not seen the FMC's clear ruling on demurrage / detention.



An epidemic has greatly changed the ecology of the US line. In order to take care of an interested party in the whole trade ecology, based on the situation of abnormal times, they do not hesitate to intervene in business actions by means of legislation. As everyone knows, the bill is universal. Is this law still applicable after an extraordinary period? Trade and logistics are a whole. Taking care of an interest group unilaterally may bring unexpected results, which may be counterproductive in the end.



Source: Roger sees wine as shipping



In this article, except for the pictures indicating the source, the rest are from online public channels, and their source cannot be identified. If there is a copyright dispute, please contact our company.