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Amazon FMC License Impacts American Importers

Amazon FMC License Impacts American Importers

The Chinese subsidiary of Amazon.com been awarded a license by the Federal Maritime Commission to operate as an ocean freight forwarder, or non-vessel operating common carrier in the United States, marking the first step Amazon is making into the Asia-USA ocean shipping market.

The Federal Maritime Commission that regulates the U.S.-international ocean transportation system, said a business named Beijing Century Joyo Courier Service, with the trade names Amazon China, Amazon.CN and Amazon Global Logistics China, was registered in its database to provide ocean freight services. Amazon China submitted its registration request to the FMC on Nov. 9. The FMC Commission said it was reviewed and registered on Nov. 13. A quick turnaround and not openly publicized at the time.

In this strategic plan Amazon is cutting out middlemen to save billions in shipping costs and gain more control over shipping products from Chinese factories to U.S. shoppers. It has been reported that Amazon paid about $8 billion in 2015 having an deep affect in Amazon’s profits.

In addition, this move would provide Amazon’s ocean freight services to Chinese retailers who through Amazon’s fulfillment services could reach more American buyers and gain a price competitive edge over American-based manufacturers. Amazon is positioned to have full control from the point of Chinese manufacturing to delivery to U.S. consumer overseeing product quality, packaging, delivery, and price.

The Amazon's FMC license is for non-asset owners. Amazon doesn’t plan to purchase and own vessels. Amazon still would need to purchase container space on the existing container vessel lines servicing the Asia-US trade. It is too early to know the impact on ocean freight rates and space capacity. All of these containers are already moving on the vessel lines. The new dimension will be the increase in cargo volume when Amazon starts to attract more Chinese companies eager to enter into the US market.

There are many questions to be answered. What will be the impact on available cargo capacity? Is this move associated with the new mega-ships scheduled to service the Asia-US trade lane? Demand vs. supply will container rates increase or decrease? How will 3PL's and NVOCCs strategically compete with Amazon? How will the talk about import tariffs in the 2016 Presidential election impact China-US trade? Donald Trump is quoted as saying "Since China joined the WTO, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs." What will American manufacturers do to maintain and regain their competitiveness?

And, in a larger picture Alibaba vs. Amazon: how will these two online shopping giants impact global manufacturing and trade, you and me as consumers?

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