Transport giants under fire for record profits and costs as pandemic continues

The shipping giants have been criticized by US business groups and watchdogs for raking in record profits on the back of soaring prices from unprecedented port congestion.

Each of the largest shipping carriers has seen profits more than triple in the past year, according to research by liberal watchdog group Accountable.US, which noted that all companies have dramatically raised prices amid demand. growing.

The industry, which is dominated by a handful of large freight companies, is currently lobbying senators to reject a bipartisan bill passed by the House that seeks to crack down on anti-competitive shipping practices, which , according to carriers, would only exacerbate supply chain problems.

“Many highly profitable industries are using the pandemic as an excuse to defraud consumers or impose exorbitant fees, and the shipping industry is no exception,” Accountable.US president Kyle Herrig said in a statement.

“Despite breaking profit records last year, big shippers are trying to convince Congress that their outrageously high fees are essential, even as they fan the flames of inflation.”

New contracts with carriers for freight transport are about twice as expensive as they were in 2020, when the pandemic momentarily slumped demand. With the United States now importing roughly three times as much cargo as it sends, and congested ports forcing ships to wait weeks to unload shipments, there has never been more demand for sea ​​carriers.

Such circumstances led to record profits.

Danish carrier Maersk expects to report $24 billion in profit before tax and depreciation in 2021, triple its 2020 haul. Shanghai-based Cosco Shipping reported $14 billion in annual profit, nine times its 2020 profits. Germany’s Hapag-Lloyd AG said on Tuesday its pre-tax income more than quadrupled to $12.8 billion last year.

Experts say rising transportation costs are contributing to soaring inflation in the United States because they are passed on to customers. Consumer prices rose 7% in 2021, the biggest increase in about four decades, according to data from the Labor Department.

The White House lamented that the shipping industry is highly concentrated and expressed concern that carriers could use their market power to charge higher prices. Today, only nine carriers control 80% of the global shipping market.

US exporters, already angered by soaring prices, say carriers are charging them unfair fees for not returning cargo containers they cannot deliver to ships due to intense port congestion. Exporters also say carriers are increasingly leaving US ports without bringing their goods back with them.

“In many cases, shippers are billed through no fault of their own,” said Brian Whitlock, logistics expert at consulting firm Gartner. “They cannot physically return containers to ports.”

In response, agricultural and business interests are pushing lawmakers to prioritize the Ocean Shipping Reform Act, a bill that would empower the Federal Maritime Commission (FMC) to craft new rules to compel carriers to accept U.S. exports. and prevent carriers from slapping exporters with unfair charges. for failing to return the containers.

The bill, sponsored by Rep. Dusty Johnson (RS.D.) and John GaramendiJohn Raymond Garamendi Shipping giants under fire for record profits and fees as pandemic continues Balance/sustainability – Skiers adapt to climate change House passes bill to strengthen transportation supply chain (D-Calif.), swept through the House with the support of more than 360 lawmakers in December.

The Senate is expected to unveil its own bill within the next two weeks.

Carriers are pressuring lawmakers to oppose the bill, arguing it will do nothing to address supply chain issues that are driving up prices. Port congestion is caused by a shortage of truck drivers and truck chassis, as well as a lack of warehouse space, among other issues.

“The issues causing congestion are on the land side, not the ocean side, so the bill, by its very structure, is not capable of addressing the operational issues that we face,” said John Butler, President and CEO of the World Shipping Council, which represents major carriers.

“The sooner we get back to a more normal flow of freight and solve these inland congestion issues, the sooner we’ll get that fluidity back, and that’s what’s going to drive prices down,” he added.

The World Shipping Council spent nearly $222,000 on federal lobbying in 2021, up 150% from the previous year, according to OpenSecrets. The group paid Crossroads Strategies $50,000 in the fourth quarter to send 13 lobbyists on the issue, including former Sen. John Breaux (D-La.).

Still, the council competes with dozens of influential and better-funded lobby groups that support the bill, including the National Retail Federation, the American Farm Bureau Federation and the Consumer Brands Association.

Some business and agricultural groups say the legislation doesn’t go far enough, arguing that lawmakers must strip shipping giants of an antitrust exemption enacted by Congress more than a century ago that allows carriers to share ships to deliver products to ports they might otherwise avoid on their own.

Gary Shapiro, president and CEO of the Consumer Technology Association, which represents tech and electronics companies such as Amazon and Samsung, said in a December statement that the exemption “gives overseas shippers a free pass.” -pass free to get along and raise prices at the expense of US consumers.”

The Justice Department has previously urged lawmakers to scrap the exemption, arguing the industry doesn’t need it to function properly, a request Congress has largely ignored until recently.

Sen. Amy KlobucharAmy KlobucharDemocrats urge top pharma rep on price hikes Big Tech libertarian’s cursed religious ideas Five things to know about Ukrainian President Zelensky MORE (D-Minn.), a member of the Senate Judiciary Committee who is proposing several antimonopoly bills, is working on antitrust legislation related to the shipping industry, according to his office.

The Biden administration, meanwhile, has encouraged the FMC to address anti-competitive shipping practices through executive action. The White House said in November that the agency can challenge antitrust agreements if they “produce an unreasonable reduction in transportation service or an unreasonable increase in transportation costs or … materially lessen competition.”