Two congressional oversight panels have opened an investigation of three major ocean carriers, alleging that their dramatic rate hikes charged to shippers may have fueled inflation.
Leaders of the Select Subcommittee on the Coronavirus Crisis and the Subcommittee on Economic and Consumer Policy — which operate under the House Committee on Oversight and Reform — sent letters on Wednesday to heads of Maersk, CMA CGM and Hapag-Lloyd requesting information about their container rate increases and reports over the past year of exorbitant fees and surcharges.
The carriers are among 10 foreign-owned container ship operators controlling nearly 85% of the world’s container capacity, the committees stated. Using this market power, the 10 carriers “appear to have raised shipping rates in 2021 far more than any increase in costs,” resulting in $150 billion in annual profits, or nine times greater than 2020.
“Affordable shipping rates are critical to ensuring that small- and medium-sized business owners can continue to make a living and provide goods and services to consumers at reasonable prices,” wrote the committees’ chairmen, James Clyburn, D-S.C., and Raja Krishnamoorthi, D-Ill.
“We are deeply concerned that [Maersk, CMA CGM and Hapag-Lloyd] may have engaged in predatory business practices during the pandemic, making scores of essential goods needlessly expensive for consumers and small businesses.”
In their letter to Maersk CEO Søren Skou, they note that the world’s second-largest ocean carrier’s operating costs increased by 21% last year, but that the company increased its average shipping rates by 83%. “These price increases were particularly acute for the U.S. economy because the largest increases were in shipping rates between Asia and the United States.”
CMA CGM also generated a significant gap between profit and cost increases, the committee chairmen pointed out. CMA CGM’s profits of more than $11 billion in the first nine months of 2021 were more than the company earned in the prior 10 years combined.
“CMA CGM itself acknowledged that its increase in operating costs has been ‘far more than compensated by the growth of shipping revenue, thus explaining the sharp increase in profitability’,” they wrote to CMA CGM CEO Rodolphe Saadé.
For Hapag-Lloyd’s trans-Pacific route for U.S. imports from Asia, the company increased freight rates by a “startling” 75.3%,” they wrote to Hapag-Lloyd CEO Rolf Habben Jansen.
“Charging these staggering rates, the company’s revenues rose by approximately 71% during the first nine months of 2021 compared to revenue growth during the same period a year before, and overall profit generated during this period was roughly $6.6 billion — approximately 1000% of the amount Hapag-Lloyd generated during the same period in 2020.”
President Joe Biden emphasized that figure during his State of the Union address on Tuesday.
Watch: Could profiteering cost the carriers? (3/2/22)
To help with their investigation, the committees asked the three companies to produce by March 16 documents from Jan. 1, 2020, to the present, including:
- A list of price rates charged to customers, including spot rates for 20-foot and 40-foot containers and any fees and surcharges connected with shipping materials along trans-Pacific or Atlantic shipping routes or with holding those materials at any port.
- All documents — including communications with other ocean shipping carriers — related to trans-Pacific or Atlantic shipping rates, including fees and surcharges, and how the company sets those rates.
- All documents related to the impact of trans-Pacific or Atlantic shipping rate increases, including increases in fees and surcharges, on the companies’ revenue, dividends, stock buybacks or executive compensation.
- All documents concerning communications with customers regarding trans-Pacific or Atlantic shipping rates.
- A list of all multiyear contracts the companies have entered into with customers, including the price rates and duration.
- A list of all U.S. investigations related to the companies’ trans-Pacific or Atlantic rates and all documents produced to U.S. law enforcement as part of the investigations.
The investigation comes just days after Biden announced his administration’s intent to crack down on shipping company profiteering, along with recent legislation proposed that would strip away ocean carriers’ antitrust immunity.
- DOJ expands scrutiny of possible supply-chain profiteers
- Ocean shipping lobby grilled on carrier profits
- Vessel group rejects allegations of threats against US exporters
Makes 💵$340 to 💵$680 per day online work and I received 💵$21894 in one month online acting from home. I am a daily student and work simply one to a pair of hours in my spare time. Everybody will do that job and online ask extra cash by simply
copy and open this site .…………>> 𝗪𝘄𝘄.𝗡𝗘𝗧𝗖𝗔𝗦𝗛𝟭.𝗖𝗼𝗺
While they are at it, they need to open a investigation on price gouging in commercial insurance and commercial truck sales. Prices have increase between 200%-400% in some cases. Along with double and triple brokering in 2021…yet you hear crickets when brought to regulators attention.
Finally! I have been in the Import/Export business for the past 35 years and the last 12 months, ocean rates have “mysteriously” ballooned without any explanation whatsoever. It’s almost as if these ocean carriers all got together and artificially created a crisis. Shame on them all for their greediness. Glad the Feds will get involved so that rates return to normal.
Comments are closed.