United States: Window on Washington: Container Crunch

This article originally appeared in the Benedict Maritime Bulletin for the second quarter of 2021. Reprinted with permission. The opinions expressed in this article are not those of Winston & Strawn or its customers. The opinions expressed in this article are those of the author only.

Like so many others in life, the true impacts of the COVID-19 pandemic on the shipping industry will likely only become clear in hindsight. At the onset of the pandemic, industry stakeholders gathered on and off Capitol Hill, as well as with key federal agencies, to discuss what types of assistance were needed and when. As the cherry blossoms around DC’s famous Tidal Basin reached their full bloom, it became clear that the pandemic was going to impact different segments of the industry in very different and unique ways. The cruise and passenger industry quickly came under a crippling shipping ban, but as the majority of these ships and operators are flagged outside the United States, it has become evident that any type federal aid would be controversial. People staying at home and traveling at a standstill, haulage, haulage and tankers discussed the request for federal assistance, as did some bulk carriers. Container carriers, however, expressed hesitation and began to question the outlook surrounding any request for relief.

Early signs suggested that things might not be so bad in the box business. Locked at home on the couch with an unlimited diet of streaming videos, American consumers grabbed their phones and bought stuff. Many things. Stuff that happened to them in containers. They bought PPE. They have amassed the sane and the bizarre. Spending more time at home, many concluded that it was time to spruce up the place, improve the kitchen, remove a wall. Many have built new outdoor and partially outdoor spaces, which have become increasingly necessary for socially distanced interaction. Big-box sales took off, supply chains became strained, and shippers began to complain. Large importers with variable volume service contracts have been able to demand more and more volume under their agreements, in some cases doubling their demands for space. They still couldn’t get enough. As they consumed more volume, even less space was available for smaller contract shippers and non-binding spot shippers. Rates eastward from China have gone from $ 1,500 a box to $ 4,000 a box, and in some cases more, in a single season of service contract. Small shippers complained that carriers were waiving their commitments under service contracts with penalties of $ 1,000 in damages and doubling their profits, even if damages were recovered.

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