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Momentum building to address ocean shipping woes

iStock ocean shipping containers iStock840803148.jpg
CONGESTION HEADACHES: New legislation looks to address shipping challenges many U.S. ag exporters face as they seek to remain competitive in the global market.
Ag groups call on Biden to take steps on port crisis and support growing for House bipartisan ocean reform bill.

More than 70 agricultural associations called on President Joe Biden to address ocean carrier practices that are causing increased costs and delays for American businesses. In addition, support continues to swell for a bipartisan House bill to address many of the problems contributing to the port crisis impacting agricultural exports.

The cost to ship a container has increased between 300 and 500% in the past two years. Meanwhile, U.S. producers are losing from 10-40% of their export value to these added costs and an informal survey suggests that U.S. agriculture exporters’ inability to perform is leading to a loss of 22% of their sales, the organizations explain.

Since early 2021, agriculture exporters have been facing unprecedented challenges in securing shipping container space on ocean vessels while contending with an accumulation of exorbitant detention and demurrage fees. Foreign-owned and operated ocean carriers have been driving this crisis by providing unpredictable and unreasonable timelines for exporters to load agricultural goods and by exacerbating pressure on supply chains by opting to return empty containers rather than allowing time for them to be loaded with Asian-bound goods for the vessel’s return journey. As a result, over 70% of containers are leaving West Coast ports empty, an all-time record.

Carriers are increasingly declining or cancelling export cargo bookings, while frequent ship delays and cancellations with little or no notice to exporters, is delaying shipments by weeks or even months. The resulting inability of shippers to deliver their products on schedule affects the reliability of American exports, and subsequently decreases export values and market share.

To underscore the urgency of this crisis, and the need for immediate action from a broad cross-section of stakeholders, the organizations also delivered the letter to Agriculture Secretary Tom Vilsack, Transportation Secretary Pete Buttigieg, Chair of the Council of Economic Advisers Cecilia Rouse, U.S. Attorney General Merrick Garland and Federal Maritime Commission Chair Dan Maffei.

Despite some positive steps implemented by the administration, “the problem not only persists, but is becoming more dire,” said the groups in the letter.

The letter identified concrete near-term steps the administration and Federal Maritime Commission could take to hold ocean carriers accountable for their actions that are burdening American workers and companies with unprecedented, onerous costs and logistical challenges. Recommendations detailed in the letter include establishing an interagency working group focused on facilitating agricultural exports and providing federal support for deployment of port and national data-sharing portals, among other suggested steps.

The dairy industry shared specifically delays and an intentional lack of transparency and flexibility from ocean carriers have cost American dairy exporters over $300 million dollars through just the first half of the year, or 12% of total export value. In addition to this added cost, continued delays put at risk critical trading relationships with Asian importers as the U.S. increasingly risks becoming viewed as an unreliable supplier.

Krysta Harden, U.S. Dairy Export Council president and CEO, says, “Unfortunately, the shipping crisis only continues to grow as container availability becomes scarcer with the ocean carriers’ increasing refusal to export American-made products. To further its goals of supporting the workers and companies producing Made-In-America products, we are urging the White House to take a more active role in ensuring that foreign carriers are not permitted to dictate U.S. export flows and put our established trading relationships in jeopardy.

“Right now, imports seem to be enjoying the equivalent of an eight-lane highway while our exports have been relegated to narrow country roads; that’s not right and we know that Congress and the Administration can take steps to create fairer trading practices,” Harden says.

Jim Mulhern, National Milk Producers Federation president and CEO, adds, “Without question, ocean carriers are abusing a unique situation created by the pandemic and the lack of sufficient regulatory action to enforce reasonable shipping practices.”

Mulhern says he recognizes that increased import demand has driven higher rates for shipping, but it does not warrant the cancellations, refusal to load U.S. dairy and agriculture products, and unreasonable detention and demurrage practices that ocean carriers have turned into an additional revenue stream.

“It is imperative that the administration takes immediate steps to work with Congress and the FMC to limit these unfair practices and ensure our exporters can reach their customers around the world,” Mulhern says.

Ocean reform bill support growing

The North American Meat Institute and a growing number of ag groups expressed its strong support for the Ocean Shipping Reform Act of 2021 by signing a letter to Reps. John Garamendi, D-Calif., and Dusty Johnson, R-S.D., who introduced the legislation last month. If passed, the legislation, among other things, would prohibit ocean carriers from unreasonably declining export cargo bookings if the cargo can be loaded in a safe and timely manner and would require that carriers comply with the FMC’s Interpretive Rule on Demurrage and Detention.

Johnson says support from agricultural groups continues to grow for their ocean reform solution. “Every week or 10 days we get another tranche of people who acknowledge that this is a huge issue, and that we need to be paying more attention to it,” Johnson says.

The bipartisan solution offered by Garamendi and Johnson he says is a “great example of two-party cooperation on an issue that is critically important for the American economy.”

Johnson remains hopeful components of the bill could be included in Coast Guard reauthorization yet this year.  

TAGS: Policy
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