RT @DanielYergin: Now available on-demand: The Great Supply Chain Disruption will continue into 2022. Pleased to chair a panel of experts l…
US ag exporters demand Biden administration crack down on ocean freight carriers found profiteering on COVID-19
- Ag and food groups pen letter to Biden administration complaining of ocean carrier practices that decline cargo to Asia.
- US agriculture exports have become stranded, derailing timely delivery to foreign customers, they say.
- Groups call the issue a crisis and demand carriers be held to Federal Maritime Commission guidelines.
A broad swath of the US agriculture industry wrote to President Joe Biden last week demanding ocean freight carriers be held to guidelines - issued last year by the Federal Maritime Commission (FMC) - for doing business with US export customers during the COVID-19 pandemic.
Signed by 71 agricultural and food industry trade groups, the letter accuses ocean container carriers - none headquartered in the US - of actions "including declining to carry our export cargo …. [and] preventing us from delivering affordably and dependably to international markets."
The industry groups call the situation a "crisis" demanding prompt government attention.
"We have had members report to us that their shipments have been denied or severely limited due to space constraints," says Andrew Walmsley, congressional relations director at American Farm Bureau Federation (AFBF), which is signatory to the Biden letter. "Some estimate that over 50% of requested bookings are denied." Players like Hapag-Lloyd, Maersk, and Yang Ming, he says, "have essentially said, 'we're not open for business.'"
Empty carriers prioritized over US ag exports
Ocean carriers are "enjoying their most profitable period in decades by controlling capacity and charging unprecedented freight rates, imposing draconian fees on our exporters and importers, and frequently refusing to carry U.S. agricultural exports," the letter continues. It contends that carriers' actions have dramatically increased costs to US exporters, "making foreign sales inefficient and uneconomical, rendering farmers and processors (for the first time), unreliable suppliers to the global supply chain."
According to the Agriculture Transportation Coalition (AGTC), which spearheaded the letter to Biden, current freight charges from Asia to the US are as high as $10,000 to $12,000 per container laden with high-value consumer goods. In comparison, an export container carrying agricultural and forest products back to Asia commands just $400 to $1,800 in freight charges, the group says.
So, instead of letting a container from Asia be loaded with ag and forest products for the return trip, AGTC says, ocean carriers will decline that export cargo. Carriers would rather return empty containers to Asia to quickly load US-bound imports, they say, generating high freight revenue. US agriculture exports become stranded, derailing timely delivery to foreign customers.
The number of carriers willing to carry US products has dropped from 20 to nine in the past 25 years, notes Thomas Parks of the Corn Refiners Association (CRA). In mid-October 2020, he says, "carriers notified agricultural exporters that not only would they prioritize empty export containers over agricultural exports, but that they would increase prices on US agricultural exports if the commodities were transported. This is unacceptable for an industry that relies heavily on healthy, free-flowing international trade, and harmful to our nation's farmers and agricultural producers."
The letter to Biden says that although FMC last year issued a rule setting forth guidelines for reasonable carrier practices, "none have been implemented by the carriers, deepening the crisis. While the FMC is undertaking further efforts to gain compliance, the damage being done to our agriculture and forest products industries is severe, increasing, and with lost foreign markets, may be irreversible."
Industry group Consumer Brands Association, which is signatory to the Biden letter, says it has briefed FMC commissioners on current port congestion, container availability, and shipping challenges, and believes those concerns were heard. But they also note an imbalanced playing field during the pandemic that they say favors the carrier community and permits business behavior damaging to US companies, farmers, and interests.
"While the FMC has made some noise about investigating carriers' activities in 2020, actual action is lacking," says Jared Vineyard of U.S. freight-forwarding company, Universal Cargo.
For years, Vineyard says, global ocean freight industry consolidation has generally been allowed by regulators, including FMC, and that has shrunk competition and raised rates.
"We really saw that come to fruition in 2020 when carriers manipulated capacity, dropping it below demand, and pushing freight rates way up," Vineyard says. And while no one anticipated the skyrocketing demand that occurred as the world went into pandemic lockdown, "It's still hard to believe carriers did not go beyond what was reasonable, especially when they started pushing no-roll premiums on shippers when carriers' reliability reached terrible lows despite the record high rates they were charging," he says.
But, where US agricultural exporters really have a complaint, Vineyard says, is carriers withholding shipping containers and services.
"It seems pretty clear that carriers prioritized getting shipping containers back to Asia, where they were making more money on eastbound transpacific routes, delivering goods from China to the US especially, over getting containers to US exporters," Vineyard says.
FMC declined to comment on the letter to Biden, but a spokesperson cited a February 17 order that will: "require carriers and MTOs [marine terminal operators] to provide information on their policies and practices related to container returns and container availability for exporters. Failure … to operate in a way consistent with [last year's guidelines] … might constitute a violation of 46 USC 41102(c) which prohibits unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing, or delivering property."
"Congress should make violations of these guidelines statutory 'Prohibited Acts' under the Shipping Act," Walmsley says. "The Commission must self-initiate, not wait for an injured exporter to file a complaint. The Commission must be converted into a consumer protection agency, with the US exporter, freight forwarder, importer, trucker as the consumer. The Commission must recognize that these 'consumers' are not equal in negotiating stature to the nine global ocean carriers, upon which our economy is now dependent."
CRA's Parks agrees, saying, "While we are appreciative of the important work FMC does, we feel that more can be done to hold carriers accountable."
The Shipping Act provides the FMC with the authority to prohibit unreasonable, unjust practices, and "to promote the growth and development of US exports through competitive and efficient ocean transportation," the letter to Biden says. "Given the urgency of this situation in commerce, we ask that these tools and any others available to our government be immediately applied to stem the current ocean carrier practices that are so damaging our agriculture exports."
- Global supply and demand trade flow of green ammonia
- Top 5 seed market drivers
- Should unsustainable food be taxed?
- Challenging scenario for Argentina soybean complex in 2021/22
- Excellence on display among winners of Crop Science Awards
- Regev – a broad-spectrum hybrid fungicide for disease control
- Global vegetable seeds market is increasingly fragmented and diversified
- Agriculture interests press Congress to tackle shipping delays
RELATED INDUSTRIES & TOPICS
This session covered common misconceptions, guidance on accommodations, and ways to support individuals with disabi… https://t.co/EwOe6ghspZ
Founded in December 2020, EnABLE has hosted a range of dynamic events. Most recently, we hosted a session with our… https://t.co/5S1xPLdIrd