Contracts, Pricing and the Freight Market

On 16 June 2022 the Ocean Shipping Reform Act was signed into law in Washington. It was a response to two years in which, as shippers saw it, the contracts that were supposed to govern the trade had stopped meaning anything. In 2021 the container lines earned more than in the previous several decades combined, by most estimates, and spot rates on the transpacific ran at several times the rates in annual contracts signed the spring before (Chapter 3). Carriers met their contract commitments as far as it suited them. Boxes booked at contract rates were rolled to later sailings while space was sold at spot or at premium "guaranteed" rates; some importers were told that their contract allocation was full and that more space was available at the market price.

Exporters had a different complaint. With Asian factories paying whatever it took to ship, carriers rushed empty containers back across the Pacific rather than wait to load American farm exports, and agricultural shippers in particular reported bookings refused or cancelled. Importers and truckers faced a third grievance. Terminals at Los Angeles and Long Beach were so congested that they often would not accept empty containers back or give appointments to collect full ones, yet carriers and terminals kept billing demurrage, for boxes left inside the terminal past their free time, and detention, for carrier equipment kept outside it. Charges meant to make cargo move were levied on parties who could not move it. The two ports' proposal for a "container excess dwell fee", announced in October 2021, was postponed repeatedly, never charged and dropped in January 2023 (reported).

The act gave the Federal Maritime Commission new powers. It shifted the burden of proving that demurrage and detention charges were reasonable onto the carriers, required invoices to carry specific information, prohibited carriers from unreasonably refusing export cargo or cargo space, and widened the commission's enforcement authority; the commission's implementing rules on billing and on unreasonable refusals followed in 2023 and 2024 (reported). The FMC had already said, in a 2020 interpretive rule, that charges which cannot change behaviour, such as fees for boxes a closed terminal would not accept, may be unreasonable. What the act did not do was set rates. It treated the boom as a failure of contracts, not of prices.