European Commission (EC) in Talks With Carriers 28/06/21

Faced with the ongoing container shipping crisis, the US Congress is currently drafting legislation to change US maritime law for the first time since 1998. If passed, the legislation would require carriers to include a statement of compliance with US maritime regulations, bar carriers from refusing exports and would require the Federal Maritime Commission (FMC) to publicly disclose false certifications and resulting penalties.

Regulatory scrutiny is also being applied in China and South Korea.

Meanwhile, European shipper and forwarder groups have urged regulators to investigate carrier practices. They accuse carriers of:

• Violating existing contracts
• Establishing unreasonable container booking conditions
• Unilaterally setting rates far in excess of contractual agreements

The European Commission (EC) has now confirmed that it has met with carriers to discuss the current market situation and to identify any scope for intervention that can facilitate a return to normal operations.

Over the course of the last year, driven on by the effects of the COVID-19 pandemic, container shipping service levels have taken a significant dive. Strong demand has resulted in congestion at North European hubs, long delays for importers and soaring freight rates on the Asia-North Europe trade.

This week, spot rate levels reached $5,589 per TEU on the China-North Europe trade, which is a 600% increase on the same week during 2019.

Schedule reliability was also at just 24.4% in April 2021, down from 72% in April 2020. Poor reliability is driving further congestion and delays, resulting in carriers omitting key ports from their Europe rotations.

As an executive branch of the European Union (EU), very different to the US FMC, it is not yet clear what options the EC will have for intervention in the container shipping sector.

Source: The Journal of Commerce (JOC)