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US ag exporters frustrated by global shipping delays and
disruptions, warn situation is getting worse.
Ag interests want Congress to intervene and provide Federal
Maritime Commission with new authorities to expedite trade
flow.
Industry experts and regulators counter that situation is a
global one, caution that US won't be able to solve problems on its
own.
Global shipping issues are harming US agricultural exports and
intervention by Congress is urgently needed to address delays and
congestion at US ports, ag interests told the House Transportation
Coast Guard and Maritime Transportation Subcommittee.
Prompted by the onset of the coronavirus pandemic early last
year, an array of ocean shipping supply chain issues have combined
to play havoc with US exports. Driven initially by a shortage of
shipping containers, maritime trade has become increasingly
unpredictable for US exporters. As US consumers have ramped up
spending in the past year, ocean carriers have declined to carry US
ag commodity exports, opting instead to return empty containers to
Asian markets to fill them with consumer goods to export back to
the US.
Delays and Fees
The North American Meat Institute (NAMI) contends shipping
issues have cost the ag industry more than $1.5 billion in lost
revenue, warning in testimony to the subcommittee that if current
ocean practices persist US producers will lose access to vital
export markets.
House Transportation Committee Chairman Peter DeFazio (D-Ore.)
noted that 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,"
he explained. "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. 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."
It is not just container shortages confounding exporters, but
delays and additional costs - known as demurrage fees - when
shipments are held in ports longer than expected. Ag producers and
other exporters contend ocean carriers and marine terminal
operators are charging unreasonable detention and demurrage fees
and that US regulators should intervene.
"Today there is no predictability, continual changes and
confusion," said Oregon farmer Alexis Jacobson, who testified on
behalf of the US Forage Export Council, the National Hay
Association and the Agriculture Transportation Coalition.
National Pork Producers Council (NPPC) President Jen Sorenson
said there are "hundreds of documented instances of ocean carriers
declining or canceling export bookings, often at the last minute,
when the cargo is loaded in a container, already on train to the
ports."
"Ultimately, these additional costs are passed down the supply
chain to farmers," she told the subcommittee.
The entire transportation system is feeling the effect, she
explained, as containers sit at terminals, incurring detention and
demurrage fees.
"The domino effect continues, tying up equipment at the ports,
signaling packing plants that they need to adjust harvest capacity,
and backing up supply all the way to the farm," Sorenson said.
"This same scenario is being replicated throughout all of
agriculture."
"It is not just Asian markets seeing these delays," she added.
"Hapag-Lloyd, the world's fifth-largest container line, recently
halted all bookings coming from Latin America. The situation seems
to be worsening as bottlenecks continue."
Sorenson called for expanded port hours and for the FMC to ramp
up enforcement of fees imposed by carriers and terminal
operators.
"The federal government can help us," Jacobson told the
subcommittee. "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."
Congress should amend the Shipping Act to bolster FMC's
enforcement powers and encourage ocean carriers to maintain
carriage of American exports, she said, and press US ports to
operate additional hours to work through terminal congestion.
"Every day, our exporters and our truckers struggle through
these challenges," Jacobson said. "Our harvest season is quickly
approaching. Many exporters are very worried as we begin to harvest
our crops soon what challenges the market will begin, especially
for those with carryover from the 2020 harvest. We need action
soon.'
Republicans on the subcommittee said they were drafting
legislation that could help the ag industry.
"We have a problem where the shipping industry is able to
discriminate against American exporters," said Rep. John Garamendi
(R-Calif.), who touted work on a bill to amend the Shipping Act to
require ocean carriers to include a statement of compliance with
Shipping Act regulations. The legislation would also bar ocean
carriers from declining all cargo bookings for exports, require FMC
to disclose findings of false certifications and encourage the
commission to ensure export opportunities for US exporters and
promote reciprocal trade.
"What's currently happening to American exporters is not fair
and not justified," Garamendi said.
Power and global pressures
FMC Commissioner Daniel Maffei said he would work with lawmakers
on their proposal, noting that the FMC has limited power to take
actions against a carrier or a terminal unless they engage in
prohibited anticompetitive behavior, discriminatory practices
against US companies or products, unlawful deception, or some other
unreasonable practice.
"The law does not allow us to set rates or set a ceiling for
what it costs to move an ocean container," he told lawmakers. "It
does not allow us to demand that ships service certain ports, carry
particular products, or establish a quota for the number of export
containers it must accommodate. If a sky-high cost for shipping a
container is due simply to the laws of supply and demand, we have
no authority to change that."
In response to the current crisis, Maffei said the FMC has
launched a formal investigation of issues at ports in Los Angeles,
Long Beach, New York and New Jersey. But beyond ensuring compliance
with the Shipping Act, there is little the US can do to address the
underlying issues, he said.
"The nature of the current crisis and the ocean freight system
make it impossible for the FMC - or even the US government as a
whole - to alter or counteract much of the current situation," he
explained. "Congestion, reliability, and cost issues are impacting
ports, businesses, and ocean linked transportation networks not
just in the United States but in Europe, Asia, the Indian
Sub-Continent, Australia. Point to a spot on the map and you will
find a portion of the world's ocean cargo system struggling."
"Problems overseas create problems here and vice versa," Maffei
added. "That is of no comfort to a US-based importer or exporter
trying to move their cargo, but it does point to the enormity of
the underlying problems. It also illustrates that solutions, if
there are any to be had, will not be US-derived ones alone."
Consumer demand
The head of the World Shipping Council challenged the criticism
that ocean carriers are taking advantage of the situation.
"What's really driving these problems is the massive increase in
US imports," said John Butler, president and CEO of the council.
"Some people have characterized that as essentially Asian exporters
pushing product to the US. But on the shipping side, the majority
of import cargo is contracted by US importers - they are US
companies bringing these goods to the US for US consumers."
Butler highlighted the interconnected network that makes up the
global shipping industry and pushed back at the idea that US ag
exports have been unfairly hit by disruptions.
"US government data does not support such claims," he said,
pointing to USDA statistics that find US ag exports are at record
levels.
The problems with maritime shipping were not caused by "any one
part of the supply chain, and no part of the system has been
untouched," Butler added. "To the contrary, all parts of the chain
are affected, and all parties are working overtime to keep cargo
moving. And while there are obviously disruptions, costs, and
delays, the fact is that the international ocean and U.S.
intermodal transportation system is moving more cargo right now
than at any time in history. The system has bent, but it has not
broken."
Posted 21 October 2021 by Jonathan Pegg, US Correspondent, IHS Markit