Container shortages have placed a heavy strain on agricultural exporters, leaving them without access to international markets and no guarantee that their product will be delivered on time, explains House chair of the subcommittee on Coast Guard and Maritime Transportation Salud Carbajal, D-Calif., during Tuesday’s hearing titled, “Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain.”
Carbajal notes these shortages also cause backups in port terminals, where containers are stacking higher than ever, making it more difficult for truckers to move containers across the country.
House Committee on Transportation and Infrastructure Chairman Peter DeFazio, D-Ore., adds the average cost of transporting a shipping container has increased nearly 195% over the past year. Concurrently, consumer demand for foreign made imports has grown exponentially, and ocean carriers are struggling to keep up.
“This asymmetric demand for imports means that it is more profitable for shippers to carry high-value goods from overseas rather than lower value domestic exports,” DeFazio says. “These conditions are taking a toll on West Coast exporters, including producers of citrus, almonds, walnuts, tomatoes, timber, seed and hay, just to name a few. And with many agricultural products requiring refrigeration, delays in shipment could spell significant losses.”
At issue is the continued behavior of ocean carriers to decline to carry U.S. agriculture commodity exports and instead return empty containers to Asian markets to fill them with more lucrative consumer goods to export back to the U.S. USDA estimates that the $141.6 billion in U.S. agricultural export value in 2019 generated an additional $160 billion in economic activity for a total of $301.6 billion in economic output.
Further, ocean carriers and marine terminal operators are charging excessive and unreasonable detention and demurrage fees assessed on U.S. importers and exporters for the failure of these importers and exporters to either retrieve a container from a marine terminal or return one within a specified amount of time, even if delays in retrieving or returning containers are beyond the control of the importer or exporter. The North American Meat Institute underscored these concerns in written testimony provided ahead of the hearing.
National Pork Producers Council President Jen Sorenson testifies these disruptions could lead to serious bottlenecks for pork and other agriculture exports. U.S. hog farmers annually shipping more than $7 billion to foreign destinations.
All U.S. ports are experiencing shipping delays, but the West Coast is the most heavily impacted since it sends product to Asian-Pacific destinations. The Asia-Pacific region is one of U.S. pork’s top markets, due to its cultural preference for pork and recent trade agreements with China and Japan. “Shipping delays to the Asia-Pacific region are increasing costs and positioning the United States as an unreliable trading partner. If left unaddressed, this may also negatively impact future trade agreements with Southeast Asian trading partners as we seek better market access for U.S. pork,” she adds.
“Compounding the situation, carriers are failing to provide accurate notice to exporters of arrival/departure and cargo loading times, and then impose financial penalties on exporters for ‘missing’ those loading windows,” Sorenson testifies. Those financial penalties, which are paid to the very carriers that are cancelling the orders, have been deemed unreasonable by the Federal Maritime Commission. “Ultimately, these additional costs are passed down the supply chain to farmers.”
“Failure to hold these carriers accountable could have long-lasting, detrimental effects for the trade-dependent U.S. meat and poultry industry and agriculture sector which has caused $1.5 billion in lost revenue,” says Julie Anna Potts, president and CEO of the North American Meat Institute. “If current ocean carrier practices persist, and are not subject to oversight, then the U.S. meat and poultry industry, its workers and the communities it supports will struggle to access these vital markets that have been cultivated over decades.”
Among recommendations to alleviate the port bottlenecks, Sorenson urges for expanded operating hours for U.S. ports and expedited FMC enforcement preventing unreasonable financial penalties for exporters.
“U.S. pork producers need Congress and the administration to work together to quickly engage and address these shipping delays, enabling hog farmers to continue to lead the way as a vibrant American farm sector that is critical to the rural and overall U.S. economy,” Sorenson concludes.
U.S. Dairy Export Council President and CEO Krysta Harden says while receiving testimony and answers from FMC Chair Dan Maffei and Commissioner Rebecca Dye is a step forward in resolving the issues the U.S. dairy industry faces, the dairy industry urged House T&I leadership to ensure this oversight action results in tangible action to alleviate and resolve the challenges exporters face.
“Dairy producers throughout the country are feeling the consequences of port congestion as delays in loading U.S. dairy exports onto carriers creates a chilling effect on farm-gate milk prices,” says Jim Mulhern, National Milk Producers Federation president and CEO.
Specifically, USDEC and NMPF believe the FMC should require ocean carriers to certify that they are complying with the agency’s guidelines. Additionally, the organization urge Congress to allocate sufficient resources to the FMC to ensure complaints of carrier malpractice are prioritized and investigations are expedited to prevent shipping carriers from engaging in unfair trade practices.
Alexis Jacobson, international accounts manager, Bossco Trading LLC on behalf of U.S. Forage Export Council and the Agriculture Transportation Coalition, testifies, “The Federal government can help us – please give the FMC teeth to make carriers obey their demurrage and detention rule, make the FMC a resource to help us when dealing with the ocean carriers, and encourage the carriers to carry our export cargo rather than depart with empty containers.”
Specifically Jacobson suggests to amend the Shipping Act to allow for much better Federal Maritime Commission enforcement of the detention and demurrage rules and other “unreasonable” acts; amend the Shipping Act to encourage ocean carriers to maintain carriage of American exports; and encourage U.S. Terminals to operate additional hours to work through the terminal congestion with ocean carriers paying the additional marine terminal fees associated.