By Tracey Chow, Government Affairs Specialist
The COVID-19 pandemic has foisted new challenges onto producers with foreign-bound exports. Since late 2020, the global shipping system has been dealing with skyrocketing demand for cargo containers, extreme port congestion, and higher shipping costs. Many industry veterans have described the conditions as ‘unprecedented,’ while others have compared it to the infamous labor dispute-related port slowdown in 2014. In the West, countless agricultural exporters that rely on the gateway ports of Los Angeles, Long Beach, and Oakland to reach customers overseas are straining to adjust.
Why is this happening?
The abrupt global economic slowdown and subsequent ramp up created a perfect storm of conditions in the ocean supply chain. Consumer demand on both sides of the Pacific Ocean has tied up significant container space, especially as it comingled with typical holiday surges and peak shipping seasons for products like tree nuts and citrus. COVID-impacted labor constraints at the terminals continue to slow ship loading and unloading. Additionally, the sheer economic weight and demand from China has made bringing in imports far more lucrative for shipping lines than moving out exports, making for an expensive environment for agricultural exporters to compete. This has also led to carriers opting to ship more empty containers back to Asia at the expense of leaving U.S. agricultural shipments stranded.
This is reflected in recent port statistics. From July to December, Los Angeles/Long Beach ports loaded inbound containers rose 19% compared to in 2019. Empty outbound container volumes rose as well, by 23%. In contrast, outbound loaded volumes fell 4% year-on-year.
What is the impact?
Throughout this period, perishable commodity shippers have encountered several types of problems. For some, the challenge is eating higher freight costs or spending more time finding cargo appointments. It is battling to get accurate status updates from carriers or terminals on when and where to take outbound product. Others are seeing less bookings being accepted, and existing bookings being delayed or cancelled with no re-booking, even as empty containers continue to ship out. Additionally, carriers continue to questionably impose costly congestion-related surcharges and detention/demurrage (D&D) fees. The egregious use of D&D fees, as well as the many reports of empty containers, have become concerning enough that the Federal Maritime Commission (FMC), which has jurisdiction over maritime shipping, launched an investigation to determine if these practices are violating existing shipping law.
Looking ahead, the fallout of the current crisis may impact overseas buyers’ confidence in U.S. products for months to come. The logistical unreliability undercuts our export-reliant commodities that are seeking to regain lost overseas markets. There is growing concern that carriers will continue to push the envelope with their questionable practices, even after this immediate crunch is over.
When will it end?
This situation remains fluid with no clear end in sight. We may not see relief until June or even mid-fall.
What is Western Growers doing?
As was done during the 2014 slowdown, Western Growers is proactively engaging with state and federal agencies on the crisis’s impact on its members. WG is working with the broader agricultural transportation community to elevate the issue with Congress and the Biden Administration. While there is no silver bullet solution, we support FMC’s investigation and have publicly urged it to clamp down on D&D fees and ensure more timely notifications from carriers.
What can exporters do?
For our exporting members, we reiterate that these conditions are not expected to dissipate quickly, and we encourage you to remain diligent in planning ahead and consider the following actions:
• Closely review carrier agreements for equipment type and availability, free time, early return dates, and (if applicable) D&D stipulations. Communicate early as possible with carrier representatives about their shipment schedule for the upcoming weeks.
• Be as flexible as possible with container type. For example, 20-foot containers are in short supply for some ocean carriers, but they may be able to offer 40-foot or dry reefer containers.
• Communicate early with drayage carriers (e.g. truckers) about equipment needed and delivery dates. Some may have street turn agreements and can assist with equipment type requirements.
• If you are encountering questionable or problematic carrier behaviors, please reach out to WG, as there may be an opportunity to elevate concerns directly to the FMC.
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