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November 11, 2021

TRADE PRACTICES: Supply Chain Chaos Causing Quite the Freight

By Matthew Allen, Vice President, State Government Affairs
By Tracey Chow, Federal Government Affairs Specialist

The Story

Problems at the Ports of Los Angeles, Long Beach and Oakland are stacking up, and the transportation and logistics bottleneck continues to get worse.

Context please.

The Southern California ports account for 40 percent of all shipping containers entering the United States. As of late October 2021, it was reported that a record-breaking 100 ships were waiting to dock and unload. In pre-pandemic times, the average number of vessels idling would be less than 20.

What’s happening?

Since late 2020, U.S. agricultural exporters have faced extreme challenges getting products out to overseas markets, including record-breaking congestion and delays at ports, inaccurate or late notice of arrival/departure and cargo loading times, excessive financial penalties and other fees, and skyrocketing freight rate costs.

Tell me more.

The abrupt global economic slowdown caused by the COVID-19 pandemic and subsequent ramp up created a perfect storm of conditions in the supply chain:

  • Factories and ports around the world shut down causing supply shortages
  • COVID-impacted labor constraints at the terminals slowed ship loading and unloading
  • E-commerce sales soared and consumer demand on both sides of the Pacific Ocean tied up significant container space
  • China’s economic weight and demand made bringing in imports far more lucrative for shipping lines than moving out exports

To top this off, the ongoing shortage of truck drivers to move cargo has worsened, with a shortage of 80,000 drivers, according to the American Trucking Association.

What are people saying?

President Joe Biden launched a Supply Chain Disruptions Task Force this summer to address short-term supply chain discontinuities. Four months later, the Biden Administration convened leaders from business, ports and unions in California to discuss these challenges and identify actions each partner could take to improve the situation.

The result? The White House announced that the ports of Los Angeles and Long Beach would both be expanding operations to 24 hours-7 days a week. With the addition of new nighttime and weekend shifts, the number of available hours to move cargo should double. In conjunction with the ports’ actions, large retailers and logistic companies have committed to utilizing the expanded hours to move more cargo off the docks and allowing for quicker ship docking and container availability.

Shortly after Biden’s move, California Governor Gavin Newsom signed an executive order directing state agencies to coordinate with the federal Supply Chain Disruptions Task Force to address state, national and global supply chain challenges. The executive order also directs state agencies to develop longer-term solutions that support port operations and goods movement for consideration in the January 10 Governor’s Budget Proposal.

How is Western Growers helping?

Federal Action:

  • WG has participated in several industry letters to, and meetings with, the Biden Administration to consider its existing powers and determine how it can assist with the transportation needs of U.S. ag exporters in overcoming the current challenges in shipping.
  • With its allies and the Agricultural Transportation Coalition, WG pressed the U.S. House Committee on Transportation and Infrastructure to formally examine this ongoing crisis. A hearing was held in June, marking the first time in many years the committee had looked closely at this issue, and with several Members of Congress calling for stronger action on behalf of U.S. ag exporters.
  • WG continues to press for action from the Administration to engage the marine transport supply chain—particularly the shipping lines and terminals—to find solutions and relief.

State Action:

  • At a recent state-level supply chain summit, WG attended as a representative for the ag exporters to provide the industry’s perspective on challenges and opportunities for short-term action and relief.
  • Prior to the release of Newsom’s executive order in October, WG and other business organizations sent a letter to the governor urging him to coordinate with President Biden’s efforts to address the urgent crisis at the California ports.

Some of the key requests in the letter include:

1.  Declare a State of Emergency at the ports and the associated transportation links to enable quick action to resolve bottlenecks as they arise;

2.  Suspend AB 5 and allow independent truckers to operate in and through California until the supply chain has normalized;

3.  Provide flexibility on existing Air Resources and local port drayage truck regulations, and ensure upcoming deadlines on new regulations take into account delays in manufacturing and delivery of new trucks;

4.  Suspend local and regional mandates that interfere or limit goods movement, including local prohibitions on unloading goods at stores after hours; and

5.  Expedite the California Environmental Quality Act and permitting processes, including conditional use permits, for warehouses, rail line and other critical components of goods movement.

What’s next?

Unfortunately, this situation remains fluid with no clear end in sight. Based on current projections, we may not see a return to normal until mid-2022, all but guaranteeing tough months ahead for those commodities with peak shipping seasons between September and March. WG continues to track this issue closely, and we encourage you to reach out if your operation is experiencing any supply chain challenges.