Supply Chain Problems : Normal Demand, Not More Regulation, what’s next ?

The World Shipping Council (WSC) is coming to the defense of ocean liners after President Biden issued an executive order addressing anti-competitive behavior in shipping and other industries, suggesting it is the unprecedented demand for imports that has thrown supply chains into disarray rather than any fault of the liners.

The United States has faced unprecedented cargo congestion since the second half of last year when the U.S. and global economy began emerging from COVID-19 shut-downs.

According to the WSC, carriers are already deploying all available capacity to help meet demand for imports by U.S. consumers and U.S. businesses. Rather, it’s a lack of rail and truck capacity, warehouse space, and ports that are bursting at the seams with cargo that are creating the biggest disruptions in the supply chain.

“This is not the fault of any given supply chain actor. Supply chains simply cannot efficiently handle this extreme demand surge, thus resulting in the delays, disruptions and capacity shortages felt across the chain,” said John Butler, President & CEO of World Shipping Council, which represents liner shipping interests. “All supply chain players are working to clear the system, but the fact is that as long as the massive import demand from U.S. businesses and consumers continues, the challenges will remain.”

The WSC also points out that it’s not a lack of competition in the industry that is causing unprecedented surge in freight rates, as was suggested by a White House fact sheet on the executive order, rather it’s supply-demand imbalances as well as supply chain bottlenecks caused by Covid-19.

President Biden’s executive order specifically targeted exorbitant detention and demurrage charges, which are charged by carriers to cover the use of shipping containers beyond a free time period in order to encourage timely pickup and return of cargo and equipment. The WSC said that while the FMC has ample authority to handle detention and demurrage disputes, contracts between shippers and carriers clearly lay out mutually agreed conditions for the charges.

“We agree with the White House that the FMC has the tools to investigate and is the appropriate authority to take action on any issues when it comes to detention and demurrage. Shippers can report any irregularities so that they are properly investigated, and action taken against any improper practices,” said Butler.

If anything, normalized demand, not more regulations, will fix the problem in the supply chains, according to the World Shipping Council.

“The current supply chain disruptions are the result of an historic surge in demand by Americans for goods from overseas. There is no market concentration ‘problem’ to ‘fix’, and punitive measures levied against carriers based on incorrect economic assumptions will not fix the congestion problems. Only normalized demand and an end to Covid-related operational challenges will solve the bottlenecks in the supply chain,” explains Butler.

“We are dealing with a market aberration brought on by the pandemic and the resulting shifts in Americans’ consumption patterns. There are real and negative effects across the supply chain from those events, and ocean carriers are as anxious to return to a more predictable market as anyone. In the interim we urge everyone to make decisions based on the real facts about the situation before we create long-term negative results through ill-considered regulatory changes to handle a temporary situation,” said Butler.

Mr Mike Schuler