Before the pandemic, you could ship a 40ft container across the ocean for around $1,300. By September 2021, that price had jumped to $11,000.
Although shipping costs are down today from that peak, high prices and port congestion remain. According to President Joe Biden, controlling these freight costs is an integral part of reducing inflation.
In June, Biden signed into law the Shipping Reform Act, and virtually overnight, the Federal Maritime Commission went from a relatively unknown agency to a vanguard against inflation and unfair shipping practices. .
The law empowers the commission to do all sorts of things at U.S. ports, including preventing international shipping carriers from unreasonably refusing U.S. freight and charging unfair fees.
Federal Maritime Commission Chairman Daniel Maffei joined Marketplace’s Kai Ryssdal to talk about what it will take to fix international shipping. An edited transcript of their conversation is below.
Kai Rysdal: So, for those in the audience who aren’t familiar with what you do for a living, what is the 30-second elevator pitch on the Federal Maritime Commission?
Daniel Maffei: The Federal Maritime Commission is an independent commission that is part of the government and regulates the commercial aspects of international shipping in and out of the United States. So, you know, those big, huge ships with a lot of containers on them, we regulate that.
Rysdal: And as we all know, those have been for – I was going to say several months, but obviously it’s been over two years now – a key source of friction in this economy. The law in question that I referred to in the introduction passes, President Biden looks at you and says, “Dan, I need you to fix the inflation in the shipping and supply chain .” What do you do when he tells you that?
Maffe: Well, I say, “Yes, Mr. President, I’ll do my best.” And that’s what we’ve done. We have already begun to implement many aspects of the bill. Currently we are enforcing the rule that ensures exporters and importers can also get a box on a ship unless there is a reasonable reason why the ship can refuse that box. Many people don’t know this, but these big shipping companies make a lot more money bringing goods into the United States than they take out of the United States. But they should be taking our exports, and this law helps us make that happen.
Rysdal: The president has said more than once—I think I’m paraphrasing here, but only vaguely—that global shipping is a scam. Do you agree?
Maffe: I think it has been in many ways. And I’ll give you an example. So we don’t regulate tariffs, but what these companies do is they often pass these fees on to the importer or the exporter. And often no one knows exactly where they come from. They charge congestion fees for example. There was a carrier that charged value added fees. I couldn’t understand why. It wasn’t about wrapping gifts in these huge container boxes. All these different charges, it’s like when you get your cable bill and you think you ordered the $79.99 package, but you pay $150. Well, that’s how it is.
Rysdal: Well, let me ask you this, using the cable bill analogy, right? I mean, the reason you end up paying $150 on a $79.99 bundle on a cable bill is because they can, right? And it seems to me that with basically three huge conglomerates controlling most trading specifically across the Pacific, the answer is because they can. How is the government of the United States – which, for all its dynamism in the global economy, is just one of many in the global economy – how do you control that?
Maffe: Well, we control it by making sure that when there’s abuse of the system, we sue them, and we can fine them. And we’re trying to say, “Look, we’re not going to demand this now. But here’s what you can do to make sure your rules are compliant. And we’ve had pretty good success with that. Now, are they still following that? No. And sometimes we have to prosecute the abuse. And sometimes the abuse goes all the way to the highest levels of the company. But sometimes it’s someone mid-level and the company leader will say, you know, “Thank you, thank you for doing what you’re doing.” Because, you know, if you don’t have a referee, they get out of hand. And that’s what we’ve seen amid COVID.
Rysdal: With all due respect, do they really say thank you for what you do?
Maffe: No, they don’t. You are right to call me on this. But they are not always unpleasant.
Rysdal: Fair enough. How far does your authority extend inland? Because a big part of the problem–and you know, I’ve been down at the ports of Long Beach and Los Angeles several times over the last two years, and you can’t turn around without hitting an empty container or a stack of containers – how much of the shipping infrastructure is under your responsibility?
Maffe: Well, those are two separate questions. As for our authority, it actually depends on the shipment. In other words, if the box goes to the ocean, or comes from the ocean, even if it makes it all the way to Chicago, that’s within our jurisdiction. Our jurisdiction does not stop at the water’s edge. However, we don’t have much control over much of this interior infrastructure. Actually, you know, we don’t do infrastructure in general. But once you get to warehouses, railroad and trucking, that’s where we see a lot of the problem. And I’ll tell you Kai, it’s kind of like a broken sink. You say your sink is broken and you call the plumber. But the plumber does not throw away the sink or the sink fittings. He repairs the pipes. And a lot of the backup hasn’t been in ports. Yeah, ports have their problems, and they solve them. But a bridge being built in Chicago makes me happy because it will make my job easier.
Rysdal: Yeah. So on the theory that the global economy is – maybe not ever, but it’s going to be a very long time before things get back to how they were before, just as a benchmark – do you expect global shipping to normalize from one way or another to an acceptable level of service?
Maffe: You know, that’s a hard question to answer because what is normal? It will reach a kind of new normal. We have already started to see this. There is still a lot of congestion, but volatility around the world is on the rise even in terms of shipping. And there are people who will be negotiating rates tomorrow or in a month, and it might be more or less expensive, and there’s nothing I can tell them that would give them a clue on that.
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