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Cash Market Moves 03/01 10:39
Ag Container Shippers Ask President Biden to Intervene in Export Crisis
The lack of containers available for agriculture shippers has been ongoing
since last year and has become a crisis, according to shippers.
Mary Kennedy
DTN Basis Analyst
In a joint letter written to President Biden on Feb. 24, 2021, the Specialty
Soya & Grains Alliance (SSGA), Agriculture Transportation Coalition and 70
other agriculture associations made an urgent plea, asking for intervention
into the container shipping crisis that has severely injured food and other
U.S. ag and forestry exports that our international customers are depending on.
The letter points out that ocean carriers are enjoying their most profitable
period in decades, "charging unprecedented freight rates (and) imposing
draconian fees on our exporters and importers," while potentially irreversible
damage is being done to the U.S. companies that ship containerized agricultural
products.
"One of the great commercial challenges of the ongoing pandemic has been
actions of ocean container carriers, including declining to carry our export
cargo, severely injuring U.S. agriculture, food and forestry product exporters,
preventing us from delivering affordably and dependably to international
markets," wrote the ag groups. "This is a crisis: unless the Shipping Act and
other tools available to our government are applied promptly, agriculture
industries will continue to suffer great financial losses; these carrier
practices will render U.S. agriculture noncompetitive for years to come," wrote
shippers.
https://www2.dtn.com/ag/assets/Ag-Association-Letter-to-President-Biden-02-24-20
21.pdf
The letter was also sent to USDA Secretary Tom Vilsack, who was confirmed on
Wednesday, along with Transportation Secretary, Pete Buttigieg, Council of
Economic Advisors Chair Cecilia Rouse and Federal Maritime Commissioner Michael
Khouri.
SSGA, which represents exporters of identity-preserved grains, peas,
lentils, food-grade soybeans and other agricultural products that move in
containers, said in a news release that agricultural exporters' access to
international markets is being jeopardized by lack of communication and this
unprecedented dysfunction and cost of ocean transportation services, which
includes unreasonable and unjust practices, such as the rejection of U.S.
agricultural cargo by ocean carriers who are shipping empty containers back
overseas to keep up with the high demand for U.S.-bound imported goods.
After struggling through the pandemic-related disruptions that began in
March 2020, the situation got much worse in October. Bruce Abbe, SSGA strategic
adviser for trade and transportation told DTN that unprecedented import demand
and high rates for container shipments from Asia to the West Coast led ocean
carriers to begin to avoid handling U.S. exports and to route empty containers
directly back to China and other Asian manufacturing centers.
"The import demand is being driven by an explosion in ecommerce and big
retailers needing to restock. Instead of the normal two-way haul, carriers
became focused on repositioning their empty equipment as quickly as possible
back to Asia to take advantage of skyrocketing spot rates. "They started
avoiding taking full containers with U.S. agriculture exports and instead
preferred to ship air in empties for the lucrative head haul," said Abbe.
"The current imbalance in import and export container flows has gradually
developed into a congested system in the U.S. from key West Coast ports, mostly
in southern California, and back to inland rail terminals and distribution
centers. With so much of the imports coming into LA Long Beach, the Port became
clogged, causing backups of ships waiting to unload," added Abbe.
"The West Coast ports took precautions, but COVID-19 has also impacted dock
workers, causing a current shortage of labor to meet the ramped-up demand,"
said Abbe. "Vessel delays and congestion at the ports have meant Midwest
exporters have had to grapple with continual last-minute booking cancellations
and cargo rolled to later ships, in those cases when they actually can get
containers moved to the ports."
It's not just food soybeans and grains that are affected. Abbe said that
meat, fruit, vegetable and other perishable food exporters have seen spoilages
because their products did not get moved in a timely manner, costing those
exporters to lose product and in turn money.
"The ultimate kick in the teeth is when exporters are charged detention and
demurrage penalties for problems that ocean carriers and port terminals
themselves caused," said Abbe, referring to fees that carriers levy for
containers that sit at the ports after free storage time elapses, or for the
late return of equipment.
SHIPPERS WAIT FOR HELP FROM FEDERAL MARITIME COMMISSION
In October 2020, SSGA was among the first of the national agriculture
associations to shine a light on the disruption of the food supply chain and
other critical problems facing containerized ag exports, reporting that
shipments of agricultural products by containers were discontinued by some
major shipping lines. In November 2020, agricultural exporters requested
official action from the Federal Maritime Commission (FMC) to investigate
denied and canceled container bookings among other serious issues still causing
them difficulties to ship ag commodities.
On Nov. 19, the FMC approved a supplemental order that expanded the
authority of Fact Finding 29, "International Ocean Transportation Supply Chain
Engagement." The supplemental order authorized Commissioner Rebecca F. Dye, as
the designated fact-finding officer, to investigate ocean carriers operating in
alliances and calling the Port of Long Beach, the Port of Los Angeles or the
Port of New York and New Jersey. The expanded commission investigation would
seek to determine if the policies and practices of those shipping companies
related to detention and demurrage, container return and container availability
for U.S. export cargoes violate the May 18 final Interpretive Rule on Demurrage
and Detention Under the Shipping Act.
In December 2020, FMC Commissioners Carl W. Bentzel and Daniel B. Maffei
sent a letter to World Shipping Council President and CEO John Butler,
expressing concern about reports that ocean carriers are refusing the carriage
of U.S. exports. FreightWaves reported in a Dec. 16 article that Bentzel told
them separately that the letter was meant as a "shot across the bow" of the
container lines because the number of complaints he was receiving was up to
four to five per day.
"We want to stress the point that in responding to import cargo challenges,
ocean carriers should not lose sight of their common carriage obligations to
provide service to U.S. exporters. We urge vigorous action, consistent within
the bounds of existing law and regulation, to protect U.S. exporters. As our
ports experience unprecedented cargo surges, it is imperative that we strive
for a balanced trade to keep our supply chain fully effective and efficient,
while maintaining vital export opportunities for the U.S. agriculture and
manufacturing bases," wrote the commissioners.
The commissioners added that, "Common carriage obligations have been in
place for U.S. transportation interests since the passage of the Interstate
Commerce Act of 1887 and were imported into international ocean transportation
with the passage of the Shipping Act of 1916. These obligations remain."
The Shipping Act specifically codifies the requirements to provide common
carriage and ensure shipper access to ocean transportation in section
41104(a)(10): common carriers may not "unreasonably refuse to deal or
negotiate," as well as prohibitions against concerted actions in section 41105:
two or more common carriers may not "boycott or take any other concerted action
resulting in an unreasonable refusal to deal or engage in conduct that
unreasonably restricts the use of intermodal services or technological
innovations."
In a news release from SSGA sent to DTN, Darwin Rader, international
marketing manager for major exporter Zeeland Farm Services, who also serves as
SSGA's secretary/treasurer and competitive shipping action team chair said,
"The only way to get out of this is for ocean carriers to return to previous
levels of taking containerized exports out of the U.S. instead of such a high
percentage of empty containers," Rader said. "There's a lot of frustration
among U.S. exporters. We have to keep pushing as hard as we can for carriers to
treat U.S. exporters fairly to help restore the balance of trade."
Interpretive Rule on Demurrage and Detention Under the Shipping Act:
https://www.federalregister.gov/documents/2020/05/18/2020-09370/interpretive-rul
e-on-demurrage-and-detention-under-the-shipping-act
Mary Kennedy can be reached at mary.kennedy@dtn.com
Follow her on Twitter @MaryCKenn
(c) Copyright 2021 DTN, LLC. All rights reserved.
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