Over the past three years, more than 2,800 new non-vessel-operating common carriers (NVOs) have obtained approval of the US Federal Maritime Commission (FMC) to serve US trade lanes. Will the drop in volumes and freight rates cause an equal number to quit this business in 2023? Or will many of these newcomers hang in there?
The spectacular rise in freight rates for containerized cargo in US trade lanes during the supply chain crisis, combined with strong volumes, made the NVO business very attractive from mid-2020 through mid-2022. According to the FMC’s 2019 fiscal year report, at the close of FY2019 there were 5,716 NVOs with FMC approval to operate in US trade lanes. This grew to 6,932 at the close of FY2021 and soared to 8,582 as of November 2022, according to FMC data.
With freight rates hitting record-setting highs and cargo owners desperately seeking container space on fully booked vessels, the opportunities for new NVOs in US trade lanes were extremely attractive. Many firms that previously limited their business to ocean forwarding took the steps required to become FMC-approved NVOs.
As freight rates fall back to earth and volumes decline sharply, will most of these NVOs exit US trades? It seems likely, but there is another reason for this growth in FMC-approved NVOs that may cause many to hang in there. Over the past three years, several ocean carriers adopted new policies that make it difficult for ocean forwarders outside the US to obtain bookings and freight rates unless the forwarder is an FMC-approved NVO. Many China-based forwarders advise that without a valid FMC registration, it is now impossible to obtain competitive rates for their US-bound shipments. For this reason, many new NVOs may hold on to their FMC registration.