It costs how much to ship that? How one commission is tackling inflation at the ports
It costs how much to ship that? How one commission is tackling inflation at the ports
Before the pandemic, you could ship a 40-foot container across the ocean for about $1,300. By September of 2021, that price tag had ballooned to $11,000.
While shipping fees today have come down from that peak, high prices and congestion at the ports remain. According to President Joe Biden, taming these freight costs is an integral part of bringing inflation back down.
In June, Biden signed into law the Ocean Shipping Reform Act, and practically overnight, the Federal Maritime Commission was elevated 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 American ports, including stopping international ocean carriers from unreasonably declining American cargo and imposing unjust fees.
Daniel Maffei, chairman of the Federal Maritime Commission, 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 Ryssdal: So for those in the audience who are not familiar with what you do for a living, what’s the 30-second elevator pitch on the Federal Maritime Commission?
Daniel Maffei: The Federal Maritime Commission is an independent commission that’s part of the government that regulates the commercial aspects of international ocean shipping coming into and going out of the United States. So, you know, those big, huge ships with lots of containers on them, we regulate that.
Ryssdal: And as we all know, those have been for — I was gonna say many a month, but it’s obviously been more than two years now — a key source of friction in this economy. The law in question that I referred to up in the introduction gets passed, President Biden looks at you and says, “Dan, I need you to fix inflation in the shipping and supply chain.” What do you do when he says that to you?
Maffei: Well, I say, “Yes, Mr. President, I will do my very best.” And that’s what we’ve been doing. We’ve already started implementing a lot of aspects of the bill. Right now, we’re doing the rule that ensures that exporters and importers as well can get a box on a ship unless there’s some reasonable reason why the ship can decline that box. A lot of people don’t know this, but these big carrier companies make a lot more money bringing stuff into the United States than they do bringing stuff out of the United States. But they should be taking our exports, and this law helps us make sure that happens.
Ryssdal: The president has said more than once — I believe that I’m paraphrasing here, but only loosely — that global shipping is a rip-off. Do you agree?
Maffei: I think it has been in many aspects. And I’ll give you an example. So we don’t regulate rates, but what these companies do is they often charge the importer or exporter these fees. And often nobody knows exactly where they come from. They charge congestion fees for instance. There was one carrier that charged a value-added fee. I couldn’t figure out why. They weren’t gift wrapping these huge container boxes. All these different fees, it’s like when you get your cable bill, and you thought you ordered the $79.99 package, but you’re paying $150. Well, it’s like that.
Ryssdal: Well, but let me ask you this, going with the cable bill analogy, right? I mean, the reason you wind up paying $150 on a $79.99 package on a cable bill is because they can, right? And it seems to me with basically three huge sipping conglomerates controlling most of the trades specifically off across the Pacific, that the answer is because they can. How’s the United States government — which for all of its oomph in the global economy, is only one of many in the global economy — how do you control that?
Maffei: Well, we control it by making sure that when there is an abuse of the system, we bring a case against them, and we can fine them. And we try to say, “Look, we’re not going to require this right now. But here’s what you can do to make sure that your rules are in compliance.” And we’ve had pretty good success with that. Now, do they always follow that? No. And sometimes we do have to go after the abuses. And sometimes the abuses go to the highest levels of the company. But sometimes it’s somebody midlevel and the company executive will say, you know, “Gee, thank you for doing what you do.” Because, you know, if you don’t have a referee, they do get out of hand. And that’s what we saw in the midst of COVID.
Ryssdal: With all possible respect, do they really say thank you for doing what you do?
Maffei: No, they don’t. You’re right to call me on that. But they’re not always unpleasant.
Ryssdal: Fair enough. How far inland does your authority extend? Because a big part of the problem — and you know, I went down to the ports of Long Beach and Los Angeles a number of times over the past couple of years, and you can’t turn around without hitting an empty container or a stack of containers — how much of the infrastructure of shipping is under your purview?
Maffei: Well, those are two separate questions. In terms of where our authority lies, it actually lies with the shipment. In other words, if the box is going to the ocean, or coming from the ocean, even if it comes all the way into Chicago, that is under our jurisdiction. Our jurisdiction does not stop at the water’s edge. However, we do not have a lot of control over a lot of that inland infrastructure. Actually, you know, we don’t do infrastructure generally. But once you get to the warehouses and the rail and the trucking, that’s where we’re seeing a lot of the problem. And I’ll tell you Kai, it’s a little bit like a broken sink. You say your sink is broken, and you call the plumber. But the plumber doesn’t throw away the sink or the sink fixture. He fixes the pipes. And a lot of the backup actually has not been at the ports. Yeah, the ports have their issues, and they’re working those out. But a bridge being built in Chicago makes me happy because it’s gonna make my job incrementally easier.
Ryssdal: Yeah. So on the theory that the global economy is — maybe not never, but it’s going to be a very long time before things go back to the way they were in the before times just as a baseline — do you anticipate that global shipping somehow normalizes at an acceptable level of service?
Maffei: You know, it’s a tough question to answer because what is normal? It’ll get to a kind of a new normal. We’ve already started to see that. There’s still a lot of congestion, but the volatility in the world is up even in terms of shipping. And there’s people who will negotiate rates tomorrow or in a month, and it could be more expensive or could be less, and there’s nothing I can tell them that would give them a clue on that.
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