Freight News, Sea

FMC’s Bentzel Weighs Red Sea-Panama Canal Probe

[ February 21, 2024   //   ]

U.S. Federal Maritime Commissioner Carl Bentzel said he is considering an investigation into the impact of impeded access for merchant vessels attempting to traverse the Suez and Panama canals.
During an FMC hearing Feb. 7 on the impacts resulting from conditions in the Red Sea and Gulf of Aden regions, Bentzel suggested including the “equally challenging impacts” of reduced transit through the drought-stricken Panama Canal.
“Not since, the days of the Barbary Pirates have we faced such a challenge in the protection of our shipping. It is a clear violation of international law, and it will have global implications, Bentzel said.
“What is at stake is severe international economic disruption,” Bentzel said in prepared remarks. “The United States is still recovering from the aftershock of the pandemic-induced supply chain disruptions that saw 30 percent increases of imported container shipping, resulting in congestion suppressing delivery of critical supplies to health care providers, consumers and the manufacturing industry.
“In my view, the impacts of inflation were largely caused by the delays in shipping. I believe that most Americans still do not fully understand the level of importance that international ocean shipping plays to our economy,” he said.

‘A Lot at Stake’

Bentzel noted that “U.S. retailers are heavily dependent on the trade, U.S. manufacturers rely on just in-time delivery of multiple components necessary for end manufacturing, food and grocery products are imported or require packaging or additives for domestic shipment, critical medical supplies and chemicals are provided by overseas shipment. U.S. exporters of agricultural and other manufactured products are just as heavily dependent on ocean shipping as the U.S. consumer.”
As ocean shipping accounts for 90 percent of international trade, “there is a lot at stake as we consider the impacts of what is approaching to be closure of one of the major maritime superhighways, and 50 percent reductions of the other,” he continued.
Bentzel said he talked with “every major shipping line providing shipping services into and out of the United States,” and is making his way through shippers, ports and other intermodal shipping interests for perspectives.
There is good news, he said, as cargo is moving slowly, capacity remains at marine terminals and equipment providers and intermodal rail and trucking are facing the pending challenges at ocean carriers adjust. Ocean carriers have orders for new ships that can “be plugged in to help address reducing shipping capacity as ocean carriers will have to order diversions because of circumstances” in the Suez and Panama canals.
All major container lines have suspended service through the Suez Canal and Red Sea, while drought conditions have reduced the Panama Canal’s transit ability by 50 percent.
“The longer these impacts linger, the greater the economic impact. Already we are hearing of factory closures of automobile manufacturing in Europe as a result of shipping related supply chain disruption, and we are just in the beginning of this challenge,” Bentzel said.

Enforcement Needed

The attacks emanating from Yemen “are clear violations of the International Law of the Sea … and Article 17 provisions protecting innocent passage of merchant shipping, even in time of war, he said.
“Accordingly, I am evaluating the potential applications of either the provisions of section 19 of the Merchant Marine Act, 1920, or the Foreign Shipping Practices Act to assess whether we could initiate an investigation to determine whether the actions in Yemen cause “unfavorable conditions to shipping in the foreign commerce.”
While Bentzel said the shipping industry didn’t cause the events impacting the global supply chain. However, the commission “has the duty and requirement to protect the public from unreasonable shipping practices, and while I understand the need for price increases to reflect additional shipping operational costs caused by the ‘Trans-Oceanic Canal’ crisis, the FMC may be called upon to question the legitimacy of new charges or other shipping practices.”
The Ocean Shipping Reform Act of 2022, in addition to new regulatory authorities, have provided additional funding for enforcement resources to protect the shipping public, “So, I feel that we are in a good position to ensure that we can police against potential market abuse.”
“Because of the general level of regional instability there could be challenges to the application of the law, however, I believe that the international importance of protection of navigational freedom provides an overriding impetus to evaluate a potential investigation,” Bentzel concluded.

Carl Bentzel, U.S. Federal Maritime Commissioner