MCS Sued Cosco And MSC for the Increase of Sea Freight in 2021
In recent times, countries around the world have been implementing policies to promote the development of their economic markets, and these policies have always followed a very basic principle, which is the decentralization of state funds to ensure the regular operation of the various industries in the economic market.
But such policies do still bring some adverse and negative effects, so that the world get into the crisis of inflation. Thus, this year’s international markets still have not succeeded in dissipating the effects of last year’s global epidemic.
This is indeed reflected in all aspects, for example, the current industrial development in the United States is very unfavorable. The U.S. has withdrawn a large amount of funds from the Federal Reserve, the issuer of the U.S. dollar, but based on the characteristics of the U.S. market industry itself and the status of the U.S. dollar in the current international market, the U.S. economy has recovered very little this year. Therefore, the United States also began to embark on a path of relying on imported goods to run the economic market development.
Increase of Sea Freight Soared 455%, the United States Can’t Stand it
Since this year, the Chinese economic industrial structure of the changes have been very obvious. This is actually a very harsh requirement for the development of economic industries in various countries. Countries around the world not only need to make a certain degree of transformation in various areas of economic industry, but also to gradually improve the strength of recovery in many industrial areas. This is also an inevitable result of the development of the current era.
Under the influence of such environmental factors, some international industries are also undergoing unusual changes respectively. Nowadays, many industry service rates and commodity prices have risen to different degrees, and the industry with the largest increase in the world is the shipping industry. This year’s shipping industry has increased to an almost unprecedented extent.
According to the results of the market adjustment, this year, some Chinese sea transport companies have increased the transportation costs of many major world routes by almost 300% points. This figure is not absolute, depending on the route, the price increase is also slightly different. Let’s take one of the North American routes to see,because of the difference in demand, China’s North American route transport ships are basically standard large container cargo ships. Originally before the outbreak of the epidemic, a 40-foot standard container transport price can reach $ 2,700.
In recent times, the transportation price of a container space has risen to about 15,000 U.S. dollars, up by almost more than 12,000 U.S. dollars, the overall rate of increase of up to 455%. This figure is also very impressive.
As for the reason of rising ship transportation prices, basically it is also inseparable from the role of supply and demand factors in the market. From the aspect of supply, China is now the most important exporter of trade goods on the international market. This is also because our country’s economic and industrial recovery is faster, and the epidemic situation has been basically controlled.
Other countries in the world have not fully recovered from the impact of the epidemic, so there is not much export trade activity. This has led to the hoarding of containers in some countries around the world, which is difficult to use for other purposes.
So the degree of supply of shipping containers in the world has been relatively very shortage, shipping prices will also have a certain degree of increase. In addition, we then look at the demand side. Nowadays, countries around the world need to be faster for the construction of the market industry, so they also need a lot of raw material imports to support. And some industries in society are still very depressed, it is difficult to ensure the supply of many basic commodities, so it is necessary to import a large number of goods to China to maintain the living needs of their own people.
The world’s current import demand has risen, but the supply of marine transport carriers has not increased at all. With this, China’s maritime transport industry has become the last “life-saving straw” in the current international market, the price is naturally all the way up, a substantial and endless rise and go. The feeling of American importers is the most obvious.
We do a calculation in accordance with the current price, a standard container ship can carry the limit of box space can almost reach about 4,000. We assume that some U.S. companies need a ship full of goods, then before the outbreak of the epidemic will need to spend about 10.8 million dollars. After the current increase, U.S. companies would need to pay about $60 million to ensure the arrival of the cargo. The overall price increase has more than quadrupled, and the U.S. is saying it can’t sit still.
Due to Increase of Sea Freight,USA Sues China’s Shipping Company
As we all know, the challenges faced by the United States this year are almost the most enormous in history. The United States on the one hand to ensure the rapid recovery of the country’s economic industry, regular development, on the other hand, but also to offset the adverse effects of currency devaluation and inflation brought about by the policy impact, can be said to be in a situation of deep water. The United States is also taken a lot of ways, one of the ways is a large number of shopping in the international market.
In the current situation, the international market can be eligible for commodity exports only China, so the United States has to import a large number of Chinese goods and various raw materials. In this way, U.S. companies need to pay large amounts of trade transportation costs.
According to the current market research results, the U.S. has imported nearly $1.64 trillion worth of goods into China. And the U.S. trade deficit with China is already approaching $450 billion.
In such a situation, the U.S. part of the business of course feel anxious. And these companies “can’t stand it”, a way is to choose to China’s current largest shipping company to the international court. At present, China’s largest domestic shipping company is China COSCO Group, in addition to COSCO Group, the United States of these companies also filed a lawsuit against another shipping company. Here we are also looking at the specific situation.
On August 3rd of this year, according to the world’s media, an American household goods company, MCS, was unable to accept the current skyrocketing prices of shipping and the unmet demand for ship positions.
As a result, two of China’s largest shipping companies, China Ocean Shipping Group and Mediterranean Shipping Company, were sued in court. The U.S. Federal Maritime Commission also accepted MCS’s lawsuit, which, according to the transfer, involved an amount of $600,000.
Among other things, MCS claimed that they had large business dealings with the shipping companies being sued, and had entered into bilateral consensus trade contracts. Therefore, unlike many smaller companies,MCS is required to pay the current market price for trade shipments.
It is sufficient to pay only the prices described in the current contract. However, because of the current price increases in the maritime industry, several shipping companies have refused to negotiate contracts with MCS and have not provided MCS with a guarantee of stable container space.
The MCS is also very angry about these conditions and accuses the national shipping companies of reaching an almost secret consensus. Behind the scenes, they have been manipulating the price changes in the shipping market, making the current maritime transport trade prices rise to the extent we mentioned above, and China Ocean Shipping Group and Mediterranean Shipping Company Limited are the culprits behind the scenes. The incident so far, the U.S. Federal Maritime Commission is also not yet given a clearer judgment, which still needs to be closely monitored.
The Follow-up of the Incident
In fact, the follow-up development of this incident is likely to end. After all, the current U.S. demand for China’s commodity imports will continue to be maintained. We look at the current situation, the development of various fields of industry in the United States has not yet formed a good inward cycle, but also need some goods and raw materials for industrial development support.
Another point is that Chinese goods do have a very strong competitive strength, and it is almost difficult to find some products that can replace Chinese goods. So it seems that our import and export trade exchanges with the United States will remain for a long time.
For this MCS prosecution, the Global Shippers Forum executive James Hockheim is also said that this case will test the courage of the U.S. Federal Maritime Commission and the relevant regulatory agencies. Indeed, under the influence of such a situation, if China really completely stop the supply of goods exported to the United States, then the United States economic and industrial development will lose a strong and powerful support.
In fact, China has indeed begun to do so. At present, many Chinese companies that receive orders to the hand have begun to stop foreign orders business. Because of their own development or a lot of difficulties, on the one hand, they want to ensure the development of their own enterprises, increase their own orders. On the other hand, they have to deal with the current rise in cost prices, almost also the more they do, the more losses.
Summary
The current international situation is indeed rather complicated. In the face of the rising costs of a number of commodity industries, as well as the expansion of production capacity of each industry is weak, all enterprises in the world should hold a normal and calm mindset, multilateral foreign cooperation development strategy. This will be able to better solve the current problem of rising costs and prices in the international market.
In addition, relative to the current MCS, what is really needed is not to prosecute the maritime transport industry of each country, but to carry out a regulation and reform on their current situation. The development of the world situation is not a company can influence, but any industry will not change the standard of the whole market because of the complaints of one company.
MCS’s move to sue has basically made the industry lose its so-called social attributes. The FMC will make a preliminary decision by August 3, 2022, and its final decision will not be made until February 17, 2023. What will be the outcome of this smokeless war between shippers and carriers? We’ll see.
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