The overwhelming bipartisan effort will eventually hit the shipping cartel.

Stephen B. Morton/Associated Press Photo

On September 29, 2021, the Ever Far container ship on the left bank sailed downstream through the Port of Savannah in Savannah, Georgia.

The inflation rate reached a peak of 6.8%. Real wages are falling, especially for the middle class. Republicans smell blood and hope to make price increases the core of their mid-term strategy. Democrats surrendered, accusing the opposition of opposing the economy for political gain, rather than helping to solve the problem.

With all this in mind, you might easily overlook the most concentrated key driver of inflation that passed the House of Representatives with 364 votes last Wednesday.

The Maritime Transport Reform Act of 2021 (OSRA 2021) is the first update to maritime transport rules in nearly 25 years. It began to reverse the punitive deregulation of maritime transport in the supply chain in the 1990s. It is unique in several ways: the anti-monopoly initiative from the federal government has been tolerated at best for decades, and at worst is the active promotion of monopoly, the intense efforts of the two parties in a polarized and toxic Congress, and the expansion of regulatory powers. To build a market to break the federal prejudice against self-regulation and laissez-faire attitude.

"It all started with an almond orchard and a paddy field," its co-author told me.

Representative John Garmendi (D-CA), representing the vast agricultural region of Northern California, explained that the exporter posed a question to him earlier this year. "They said,'We can't buy a container, if we get one, we can't afford it,'" Caramendi told me in an interview.

At the same time, Rep. Dusty Johnson (R-SD) heard exactly the same thing from an exporter in his hometown. The local supplier Valley Queen Cheese sold more than 2 million pounds of lactose to stakeholders in New Zealand who have been waiting for six weeks of empty containers. According to Johnson's office, the shipping time from dock to dock has increased from 50-60 days to 120 days. And the price of getting a place on the ship has risen tenfold.

"We quickly learned that this is a completely collapsed market," said Rep. John Caramendi.

Importers have also encountered similar problems. Garamendi told me that a company in his area sells plastic Christmas decorations; their imported goods are stacked on the bottom of seven other containers in the port. The company was charged millions of dollars in "demurrage and detention fees" for the purpose of clearing cargo from the port terminal and returning the container to the ship, even though the company was unable to remove the cargo from the terminal.

Garamendi said: "We quickly learned that this is a market that has collapsed." He worked with Johnson to solve this problem and launched OSRA 2021 in August. Within three months, it passed the House of Representatives by an overwhelming majority. Sens. Amy Klobuchar (D-MN) and John Thune (R-SD) have stated that they will introduce a fellow Senate, and last week’s Senate hearings showed bipartisan interest in this issue. The White House has approved the bill.

To find the root cause, you must go back to how ocean carriers use their concentrated power to exploit anyone who wants to ship goods anywhere. As Matt Stoller explained last month, for most of the 20th century, the shipping industry was regulated as a utility, of course because it was beneficial to all of us to bring goods to the market quickly.

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Under the old rules, ocean carriers can legally form alliances to set prices and manage routes, but all prices and fees must be transparent; services must be provided on equal terms, without personal rebates, bulk discounts, or geographic discrimination; any Exclusive behavior, such as promises of certain cargo space. Subsidies to the domestic shipbuilding industry ensure that US aircraft carriers will play a vital role.

The goal is to expand trade by allowing a reasonable flow of trade, provide affordable channels for freight forwarders, and provide stable business for ocean carriers. With the passage of the Ocean Shipping Reform Act in 1998, this is all over. Shipping contracts have become proprietary and secret transactions, while the antitrust immunity of the carrier alliance still exists. At the same time, domestic shipbuilding subsidies disappeared.

As a result, compared with 1998, the top ten ocean carriers controlled more than twice the market share, exceeding 80%. They are divided into three major carrier alliances, giving exporters fewer choices. None of the major operators are located in the United States. With the integration of carriers, they built larger ships that could not dock at smaller ports, thus concentrating transportation in larger ports (this is why the ports of Los Angeles and Long Beach accounted for 40% of all U.S. imports. %). They have reached volume discount deals with large retailers to ensure that the supply exceeds that of smaller competitors.

With the promulgation of the Maritime Reform Act in 1998, shipping contracts have become proprietary and secret transactions, while antitrust exemptions still exist.

In addition, as Carmendi pointed out, China joined the WTO last week 20 years ago and has quickly become a leading country in commodity manufacturing. This extraordinary production shift has increased the world’s dependence on this narrow-band ocean carrier. "They were able to collude, and many of them did it," Carmendi said.

During the COVID period, exploitation has expanded and profit takes precedence over access or fairness. Carmendi heard from voters that containers containing Chinese imports were taken to the United States, unloaded, and then immediately shipped back to Asia, bypassing ports where they could be exported. Although this seems to be a lost opportunity, "we have found that sea shippers can make more money by flipping containers than waiting for agricultural exporters to load them and return them to the ship," Garamendi said.

These conditions are very lucrative for ocean carriers, and at the same time debilitating for exporters and consumers. Maersk is the world's largest airline and achieved its largest profit in 117 years last quarter. The record profits call into question whether the shipping industry is interested in solving the supply chain crisis, rather than profiting from it.

This is where the updated shipping reform bill comes in. The scope of the bill is both mild and very radical. In 1998, the Federal Maritime Commission (FMC) was deprived of most of its ability to investigate and supervise ocean carrier contracts. According to the new legislation, FMC can investigate the practices of the shipping industry and formulate enforcement measures.

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It can also apply minimum service standards to transportation contracts, and if third parties find that the contractual agreements are anti-competitive, they can challenge these agreements. The bill also changed FMC's mission to one of reciprocal trade, and required ocean carriers to accept cargo that can be loaded into containers, not just air freight.

Although FMC is currently investigating demurrage and detention fees, according to OSRA 2021, these fees will be regulated and must be reasonable, thus ending the practice of charging companies for failing to ship goods that cannot be shipped out of the terminal (the widespread As indicated by the FMC Fact Survey in 2018, problems before the pandemic). Records of these expenses must also be kept, and a new procedure will be established to challenge these expenses, and FMC will play an active role.

"This supply chain tightening has exposed many inefficiencies in today's market, and we have the opportunity to solve these inefficiencies," Johnson said in a speech last Wednesday.

Other lawmakers from both parties heard about the same problem from their voters, which drove reform. Over 360 state and local groups support OSRA 2021. It also helps, as is often done in Washington, for large special interest groups to join the complaint and balance the large ocean carriers. "Just last week, I received a call from Wal-Mart," Carmendi told me. "It's Amazon in a few hours." This alliance can withstand the opposition of the World Shipping Council.

In general, OSRA 2021 attempts to shift the balance of power from maritime cartels to democratic interest groups in a smaller way, and these interest groups can play a role in constructing fair rules. The bill depends on whether the FMC has enough enthusiasm and sufficient funds; Garamendi said he will pay close attention to next year's budget to see if the agency has the resources needed to complete the work.

In addition, infrastructure legislation passed earlier this year provided funds to improve ports and the network for transporting goods. More broadly, competition policy to resolve this imbalance of power must also be on the government's menu. "The market system cannot operate under cartel or collusion," Carmendi said. "We have been neglected for more than 30 years. No one has the right to enter the American market, but everyone should have a fair opportunity in the market."

This legislation encourages anti-monopolists because it actually intervenes in the public interest in an apparently failed market. Quietly, Congress is rediscovering its power to actually operate in this way.

David Dayen is the executive editor of Prospect. His works have appeared in The Intercept, The New Republic, HuffPost, Washington Post, Los Angeles Times, etc. His most recent book is "Monopoly: Life in the Age of Corporate Power."

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