[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
IMPACTS OF SHIPPING CONTAINER SHORTAGES,
DELAYS, AND INCREASED DEMAND ON THE
NORTH AMERICAN SUPPLY CHAIN
=======================================================================
(117-18)
REMOTE HEARING
BEFORE THE
SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JUNE 15, 2021
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-529 PDF WASHINGTON : 2021
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri ELEANOR HOLMES NORTON,
DON YOUNG, Alaska District of Columbia
ERIC A. ``RICK'' CRAWFORD, Arkansas EDDIE BERNICE JOHNSON, Texas
BOB GIBBS, Ohio RICK LARSEN, Washington
DANIEL WEBSTER, Florida GRACE F. NAPOLITANO, California
THOMAS MASSIE, Kentucky STEVE COHEN, Tennessee
SCOTT PERRY, Pennsylvania ALBIO SIRES, New Jersey
RODNEY DAVIS, Illinois JOHN GARAMENDI, California
JOHN KATKO, New York HENRY C. ``HANK'' JOHNSON, Jr.,
BRIAN BABIN, Texas Georgia
GARRET GRAVES, Louisiana ANDRE CARSON, Indiana
DAVID ROUZER, North Carolina DINA TITUS, Nevada
MIKE BOST, Illinois SEAN PATRICK MALONEY, New York
RANDY K. WEBER, Sr., Texas JARED HUFFMAN, California
DOUG LaMALFA, California JULIA BROWNLEY, California
BRUCE WESTERMAN, Arkansas FREDERICA S. WILSON, Florida
BRIAN J. MAST, Florida DONALD M. PAYNE, Jr., New Jersey
MIKE GALLAGHER, Wisconsin ALAN S. LOWENTHAL, California
BRIAN K. FITZPATRICK, Pennsylvania MARK DeSAULNIER, California
JENNIFFER GONZALEZ-COLON, STEPHEN F. LYNCH, Massachusetts
Puerto Rico SALUD O. CARBAJAL, California
TROY BALDERSON, Ohio ANTHONY G. BROWN, Maryland
PETE STAUBER, Minnesota TOM MALINOWSKI, New Jersey
TIM BURCHETT, Tennessee GREG STANTON, Arizona
DUSTY JOHNSON, South Dakota COLIN Z. ALLRED, Texas
JEFFERSON VAN DREW, New Jersey SHARICE DAVIDS, Kansas, Vice Chair
MICHAEL GUEST, Mississippi JESUS G. ``CHUY'' GARCIA, Illinois
TROY E. NEHLS, Texas ANTONIO DELGADO, New York
NANCY MACE, South Carolina CHRIS PAPPAS, New Hampshire
NICOLE MALLIOTAKIS, New York CONOR LAMB, Pennsylvania
BETH VAN DUYNE, Texas SETH MOULTON, Massachusetts
CARLOS A. GIMENEZ, Florida JAKE AUCHINCLOSS, Massachusetts
MICHELLE STEEL, California CAROLYN BOURDEAUX, Georgia
KAIALI`I KAHELE, Hawaii
MARILYN STRICKLAND, Washington
NIKEMA WILLIAMS, Georgia
MARIE NEWMAN, Illinois
TROY A. CARTER, Louisiana
------ 7
Subcommittee on Coast Guard and Maritime Transportation
SALUD O. CARBAJAL, California, Chair
RICK LARSEN, Washington BOB GIBBS, Ohio
JAKE AUCHINCLOSS, Massachusetts, DON YOUNG, Alaska
Vice Chair RANDY K. WEBER, Sr., Texas
SEAN PATRICK MALONEY, New York MIKE GALLAGHER, Wisconsin
ALAN S. LOWENTHAL, California JEFFERSON VAN DREW, New Jersey
ANTHONY G. BROWN, Maryland NICOLE MALLIOTAKIS, New York
CHRIS PAPPAS, New Hampshire SAM GRAVES, Missouri (Ex Officio)
PETER A. DeFAZIO, Oregon (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ v
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Salud O. Carbajal, a Representative in Congress from the
State of California, and Chair, Subcommittee on Coast Guard and
Maritime Transportation, opening statement..................... 1
Prepared statement........................................... 3
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, opening statement.............................. 3
Prepared statement........................................... 4
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure, opening statement.............................. 4
Prepared statement........................................... 5
Hon. Bob Gibbs, a Representative in Congress from the State of
Ohio, and Ranking Member, Subcommittee on Coast Guard and
Maritime Transportation, opening statement..................... 6
Prepared statement........................................... 7
Hon. Jefferson Van Drew, a Representative in Congress from the
State of New Jersey, prepared statement........................ 77
WITNESSES
Panel 1
Hon. Daniel B. Maffei, Chairman, Federal Maritime Commission,
oral statement................................................. 8
Prepared statement........................................... 10
Hon. Rebecca F. Dye, Commissioner, Federal Maritime Commission,
oral statement................................................. 14
Prepared statement........................................... 15
Panel 2
John W. Butler, President and Chief Executive Officer, World
Shipping Council, oral statement............................... 35
Prepared statement........................................... 37
Alexis Jacobson, International Accounts Manager, BOSSCO Trading
LLC, on behalf of the U.S. Forage Export Council, National Hay
Association, and Agriculture Transportation Coalition, oral
statement...................................................... 45
Prepared statement........................................... 46
Frank Ponce De Leon, Coast Committeeman, Coast Longshore
Division, International Longshore and Warehouse Union, oral
statement...................................................... 53
Prepared statement........................................... 55
Eugene D. Seroka, Executive Director, Port of Los Angeles,
California, oral statement..................................... 57
Prepared statement........................................... 58
Jen Sorenson, President, National Pork Producers Council, oral
statement...................................................... 62
Prepared statement........................................... 63
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Bob Gibbs:
Chart, ``Shipping Challenges Cause Medical Supply Delays,''
developed by the Health Industry Distributors Association.. 78
Statement of Ian Jefferies, President and Chief Executive
Officer, Association of American Railroads................. 78
Statement of Julie Anna Potts, President and Chief Exective
Officer, North American Meat Institute..................... 81
Letter of May 18, 2021, from Eric R. Byer, President and
Chief Executive Officer, National Association of Chemical
Distributors............................................... 83
Article entitled, ``What Do Agriculture Exporters Need From
Congress?'' Journal of Commerce, June 13, 2021, by Peter
Friedmann, Executive Director, Agriculture Transportation
Coalition (AgTC)........................................... 85
``Proposed Legislation to Address Ocean Shipping Crisis,''
offered by the Agriculture Transportation Coalition........ 86
``Overview: The Current Ocean Export Crisis,'' offered by the
Agriculture Transportation Coalition....................... 86
Letter of April 27, 2021, from the Agriculture Transportation
Coalition et al............................................ 86
Letter of February 24, 2021, from the Agriculture
Transportation Coalition et al............................. 90
Letter of March 9, 2021, from Hon. Adrian Smith, Member of
Congress et al............................................. 91
Letter of March 8, 2021, from Hon. Peter A. DeFazio, Chair,
House Committee on Transportation and Infrastructure et al. 94
Letter of March 2, 2021, from Hon. John Thune, U.S. Senator
et al...................................................... 95
Letter of February 25, 2021, from Hon. Roger F. Wicker,
Ranking Member, U.S. Senate Committee on Commerce, Science,
and Transportation et al................................... 96
Press Release, ``Rep. Schrier Sends Letter to Federal
Maritime Commission About Increasing Uncertainty for
Washington State Exporters''............................... 97
Article entitled, ``Carriers Rejected at Least $1.3 Billion
in Potential U.S. Agricultural Exports From July to
December,'' CNBC.com, March 15, 2021, by Lori Ann LaRocco.. 98
Article entitled, ``COVID-19 Even Affects Apples: Washington
Farm Exports Crimped by Cargo-Container Shortage,'' Seattle
Times, March 9, 2021, by Paul Roberts, Seattle Times
Business Reporter.......................................... 100
Submissions for the Record by Hon. Alan S. Lowenthal:
Presentation, ``The Anatomy of the Container Terminal
Logistics Supply Chain Congestion Issues at the San Pedro
Bay Ports During the COVID-19 Pandemic,'' prepared by
Martin Associates, June 30, 2021........................... 102
Research Summary, ``The Anatomy of the Container Terminal
Logistics Supply Chain Congestion Issues at the San Pedro
Bay Ports During the COVID-19 Pandemic,'' prepared by John
Martin, Ph.D., July 2021................................... 102
APPENDIX
Questions to Hon. Daniel B. Maffei, Chairman, Federal Maritime
Commission, from:
Hon. Julia Brownley.......................................... 105
Hon. Dusty Johnson........................................... 105
Questions to Hon. Rebecca F. Dye, Commissioner, Federal Maritime
Commission, from:
Hon. Alan S. Lowenthal....................................... 107
Hon. Dusty Johnson........................................... 108
Questions from Hon. John Garamendi to Frank Ponce De Leon, Coast
Committeeman, Coast Longshore Division, International Longshore
and Warehouse Union............................................ 111
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
June 11, 2021
SUMMARY OF SUBJECT MATTER
TO: LMembers of Congress, Subcommittee on Coast Guard
and Maritime Transportation
FROM: LStaff, Subcommittee on Coast Guard and Maritime
Transportation
RE: LHearing on ``Impacts of Shipping Container
Shortages, Delays, and Increased Demand on the North American
Supply Chain.''
_______________________________________________________________________
PURPOSE
The Subcommittee on Coast Guard and Maritime Transportation
will hold a hearing on Tuesday, June 15, 2021, at 11:00 a.m.
EDT to examine shipping container shortages and impacts on the
North American supply chain. The hearing will take place in
2167 Rayburn House Office Building and via Zoom. The
Subcommittee will hear testimony from two panels which include
the Federal Maritime Commission (FMC), the World Shipping
Council, the U.S. Forage Export Council, the International
Longshore & Warehouse Union, the Port of Los Angeles, and the
National Pork Producers Council.
BACKGROUND
COVID-19 AND THE MARITIME SUPPLY CHAIN
In 2016, containerization of goods via maritime
transportation comprised seventy-six percent of all U.S. trade,
and foreign trade at American ports and was valued at $1.5
trillion.\1\ Since the onset of the coronavirus pandemic,
however, the global rotation of shipping containers has been
severely disrupted. American demand for imported consumer
goods, manufacturing parts, and commodities produced in Asia
has fueled massive backlogs and delays.\2\ In addition, China's
export capabilities have recovered more quickly than the United
States' capabilities, resulting in a shortage of containers and
increased global competition for scarce freight capacity, which
is expected to continue beyond the first half of 2021.\3\
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\1\ National Oceanic and Atmospheric Administration: Office for
Coastal Management. ``Fast Facts: Ports.'' https://coast.noaa.gov/
states/fast-facts/ports.html. Accessed on June 3, 2021.
\2\ CNBC. ``Suez Canal blockage is delaying an estimated $400
million an hour in goods.''
https://www.cnbc.com/2021/03/25/suez-canal-blockage-is-delaying-an-
estimated-400-million-
an-hour-in-goods.html. Accessed June 9, 2021.
\3\ Forbes. ``How the Shipping Container Crisis Demonstrates the
Risk of Imbalance In Global Trade.'' https://www.forbes.com/sites/
forbesbusinessdevelopmentcouncil/2021/05/25/how-the-
shipping-container-crisis-demonstrates-the-risk-of-imbalance-in-global-
trade/?sh=372c0d941090. Accessed June 3, 2021.
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During the COVID-19 pandemic, peloton exercise bikes,
refrigerators, lawn chairs, and home gym equipment are a few
examples of the thousands of consumer products Americans
ordered from manufacturers in China and low-cost producers in
Vietnam, Indonesia, and Bangladesh.\4\ The overwhelming flow of
goods has been from China to the United States, and this
heightened demand coupled with labor shortages has resulted in
significant port congestion beyond what is normally seen,
especially on the West Coast of the United States.
Additionally, carriers have chosen to ship empty containers
back to Asia rather than carry U.S. exports when it is more
profitable to do so.
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\4\ Quartz. ``Cheap Chinese exercise bikes are beating US
tariffs.'' https://qz.com/1899691/cheap-chinese-exercise-bikes-are-
beating-us-tariffs/. Accessed June 9, 2021.
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As a result, traffic volumes from the U.S. to China are
historically low.\5\ According to Maersk, the world's largest
container shipping corporation, its East (Asia)-West (North
America) trade has been the most impacted route in the
market.\6\ Currently, for every three containers that China
exports to the U.S. West Coast, only one is imported back,
exacerbating the trade imbalance.\7\ This uneven recovery has
caused container shortages where they are needed most, and
exporters across Asia are responding to these shortages by
bidding high on freight rates. As a result, global container
rates jumped nearly 195 percent, from an average of $1,377 per
40-foot container in March 2020 to $4,045 in March 2021.\8\ For
comparison, as of June 3, 2021, container rates from Los
Angeles to Shanghai were at only $779 compared to $5,952 from
Shanghai to Los Angeles, corresponding to a 72 percent and 255
percent annual change respectively (Table 1).\9\ U.S. seaborne
imports had increased 20 percent by the beginning of the first
quarter of 2020, with the growth in household appliances
increasing 80.9 percent, while consumer electronics and home
furnishings grew by 17.2 percent and 34.4 percent
correspondingly.\10\ \\
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\5\ Reuters. ``Boxed out: China's exports pinched by global run on
shipping containers.'' https://
www.reuters.com/article/us-global-shipping-container/boxed-out-chinas-
exports-pinched-by-global-run-on-shipping-containers-idUSKBN28K0UA.
Accessed June 3, 2021.
\6\ Financial Times. ``How coronavirus is changing global shipping
routes.'' https://www.youtube.com/watch?v=MvG8c8v5Nfw Accessed June 3,
2021.
\7\ Reuters. ``Boxed out: China's exports pinched by global run on
shipping containers.'' https://
www.reuters.com/article/us-global-shipping-container/boxed-out-chinas-
exports-pinched-by-global-run-on-shipping-containers-idUSKBN28K0UA.
Accessed June 3, 2021.
\8\ Forbes. ``Container Ship Operators Are On A Tear As Freight
Rates Skyrocket.'' https://
www.forbes.com/sites/greatspeculations/2021/03/25/container-ship-
operators-are-on-a-tear-
as-freight-rates-skyrocket/?sh=2b9c31b439a6. Accessed June 3, 2021.
\9\ Drewry Supply Chain Advisors. ``World Container Index--03
Jun.'' https://www.drewry.co.uk/
supply-chain-advisors/supply-chain-expertise/world-container-index-
assessed-by-drewry. Accessed June 9, 2021.
\10\ Panjiva Market Intelligence. ``The $10 billion shipping
inflation problem and corporate cost concerns.'' https://panjiva.com/
research/the-10-billion-shipping-inflation-problem-and-corporate-cost-
concerns/39259, Accessed June 3, 2021.
\11\ Drewry Supply Chain Advisors. ``World Container Index--03
Jun.'' https://
www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-
container-index-
assessed-by-drewry. Accessed June 9, 2021.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Table 1. Spot freight rates across eight major East-West trade routes.
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Source: Drewry Supply Chain Advisors.\11\
While COVID-19 restrictions triggered a shift in consumer
spending that carriers could not have predicted, this
disruption has exposed the gaps in port productivity across the
country.\12\ As of February 20, 2021, nearly a year into the
pandemic, 35 container ships sat idle awaiting cargo discharge
outside the Ports of Los Angeles and Long Beach.\13\ And during
this surge, West Coast ports' productivity has increased 50
percent.\14\ Almost every ship and container has been deployed
into the market since the Fall of 2020.\15\ In the race to
build containers, logistics companies are finding that orders
for many new containers were canceled or delayed in the first
half of 2020 during the global lockdown, resulting from a
depleted supply of steel and lumber needed for container
construction.\16\
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\12\ The Journal of Commerce. ``ONE's Nixon says US port
productivity gaps mean congestion for months.'' https://www.joc.com/
port-news/us-ports/tpm21-one%E2%80%99s-nixon-says-us-port-
productivity-gaps-mean-congestion-months_20210302.html. Accessed June
3, 2021.
\13\ The Seattle Times. ``Seattle and Tacoma are a rarity among
U.S. ports right now, with room for more ships.'' https://
www.seattletimes.com/business/international-trade/seattle-and-tacoma-
are-a-rarity-among-u-s-ports-right-now-with-room-for-more-ships/.
Accessed June 9, 2021.
\14\ Vice News. ``What an Ocean Traffic Jam Looks Like.'' https://
www.youtube.com/watch?v=y48LHkGX0hg. Accessed June 3, 2021.
\15\ The New York Times. ``I've Never Seen Anything Like This:
Chaos Strikes Global Shipping.'' https://www.nytimes.com/2021/03/06/
business/global-shipping.html. Accessed June 7, 2021.
\16\ CNBC. ``An aggressive fight over containers is causing
shipping costs to rocket by 300%.'' https://www.cnbc.com/2021/01/22/
shipping-container-shortage-is-causing-shipping-costs-to-rise.html.
Accessed June 7, 2021.
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Earlier in 2021, West Coast ports saw a rise in COVID-19
cases amongst its longshore workers.\17\ This month, an entire
terminal at the world's fourth-busiest container port in
Shenzhen, China was closed for multiple days following high
COVID-19 positivity rates among its dock workers.\18\
Additionally, the limited availability of truck drivers and
dock workers means more extended wait periods in unloading and
packing ships.
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\17\ CNBC. ``An aggressive fight over containers is causing
shipping costs to rocket by 300%.'' https://www.cnbc.com/2021/01/22/
shipping-container-shortage-is-causing-shipping-costs-to-rise.html.
Accessed June 7, 2021.
\18\ Bloomberg. ``China Port Delays Threaten New Disruptions in
Global Trade.'' https://www.bloomberg.com/news/newsletters/2021-06-07/
supply-chains-latest-china-port-delays-
add-disruptions-to-trade. Accessed June 7, 2021.
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Accessibility continues to be a significant issue for
truckers and other transporters in the supply chain. For
example, the lack of appointments to enter terminal gates to
repossess import containers for U.S.-based exporters has
severely affected how port distribution centers are accepting
containers.\19\ Containers are filling terminals and storage
locations, making it difficult for truckers to return
containers to a terminal, or move them geographically out of a
given zone.\20\ Currently, some containers have been sitting
idle for up to 30 days, representing a significant opportunity
cost.\21\
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\19\ Agriculture Transportation Coalition. ``Overview: The Current
Export Crisis.'' https://soyagrainsalliance.org/wp-content/uploads/
2021/02/AgTC-The-Current-Export-Crisis_02-12-21.pdf. Accessed June 2,
2021.
\20\ The Journal of Commerce. ``Import deluge fills LA-LB terminals
to capacity.'' https://www.joc.com/port-news/us-ports/import-deluge-
fills-la-lb-terminals-capacity_20201209.html. Accessed June 7, 2021.
\21\ The Journal of Commerce. ``FMC reviewing whether ag export
booking rejections violate Shipping Act.'' https://www.joc.com/print/
3647481. Accessed June 7, 2021.
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U.S. AGRICULTURE EXPORTERS
As the average container turnaround time has increased from
60 to 100 days, no sector has felt the pain of overstretched
supply chains more than American agricultural exporters.\22\
The perishable commodities are not only delayed in their Asian
market arrivals, but spot rates have caused carriers to prefer
shipping back empty containers as quickly as they can.
Deferring the return of their containers over low-value exports
to Asia has made it more difficult for American exports to
secure the needed equipment, particularly for inland
shipments.\23\
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\22\ Reuters. ``Boxed out: China's exports pinched by global run on
shipping containers.'' https://
www.reuters.com/article/us-global-shipping-container/boxed-out-chinas-
exports-pinched-
by-global-run-on-shipping-containers-idUSKBN28K0UA. Accessed June 3,
2021.
\23\ Cargo-Link International. ``Carriers file rate increases on US
agriculture exports to Asia.'' https://www.cargolink.com/carriers-file-
rate-increases-on-us-ag-exports-to-asia/. Accessed June 3, 2021.
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The current state of affairs may be circumstantial due to
the COVID-19 pandemic, but U.S. agriculture exporters view the
crisis as a designed effect of the foreign ownership of ocean
carriers who face minimal regulation.\24\ Further, the industry
has gone from over 20 Pacific-route ocean carriers 25 years
ago; several of whom were U.S. owned, managed, crewed and
operated, to only nine shipping companies today.\25\ For U.S.
agriculture exporters who need refrigerated containers, there
is only one foreign carrier servicing the Pacific route,
rendering them wholly reliant upon foreign carriers.\26\
Beginning in October 2020, German container transportation
company Hapag-Lloyd informed soybean exporters that it would
not be receiving their export loads from the Midwest.\27\ Like
most ocean carriers, it opted instead to maximize the volume of
imports to the United States. This is because freight rates for
U.S. agriculture and forest product exports earn $400 to $1,800
per container, compared to $10,000 to $12,000 per container on
goods from China to the United States.\28\
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\24\ Agriculture Transportation Coalition. ``Overview: The Current
Export Crisis.'' https://
soyagrainsalliance.org/wp-content/uploads/2021/02/AgTC-The-Current-
Export-Crisis_02-12-21.pdf. Accessed June 2, 2021.
\25\ Id.
\26\ Id.
\27\ The Journal of Commerce. ``Ag shippers slam carriers for
refusing some export loads.'' https://www.joc.com/maritime-news/
container-lines/ag-shippers-slam-carriers-refusing-some-export-
loads_20201023.html. Accessed June 6, 2021.
\28\ See Footnote 13.
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The previous U.S. peak farming season saw agriculture
exporters face significant barriers to deliver on time to
foreign customers in Asia, the bulk of their clienteles.
Moreover, thousand-dollar general rate increases (GRI) in
Forty-Foot Equivalent Units (FEUs) have created transportation
costs so high that exporters cannot compete in the foreign
marketplace.\29\ And in situations in which agriculture
exporters could pay the increased fees, shipping carriers have
often rejected the product. In October and November of 2020,
ocean carriers rejected 177,930 Twenty-Foot Equivalent Units
(TEU), totaling $632 million in export trade losses.\30\ In
response, agriculture exporters under the Agriculture
Transportation Coalition called on the FMC to address these
carriers who were refusing their bookings through February
2021.\31\ According to Hayden Swofford a representative of the
independent Pacific Northwest Asia Shippers Association, ocean
carriers are increasing westbound rates through ``peak-season
surcharges (PSS),'' despite exporters having contracts for
specific weekly exports.\32\ Carriers refuse to load
agriculture and forest exports unless a PSS is paid, which
exporters characterize as ``extortion.'' \33\
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\29\ The Journal of Commerce. ``Trans-Pacific carriers push third
GRI in a month.'' https://
www.joc.com/maritime-news/container-lines/trans-pacific-carriers-push-
third-gri-month_
20200630.html. Accessed June 6, 2021.
\30\ CNBC. ``Shipping carriers rejected tons of U.S. agricultural
exports, opting to send empty containers to China.'' https://
www.cnbc.com/2021/01/26/shipping-carriers-rejected-us-agricultural-
exports-sent-empty-containers-to-china.html. Accessed June 7, 2021.
\31\ The Journal of Commerce. ``FMC reviewing whether ag export
booking rejections violate Shipping Act.'' https://www.joc.com/print/
3647481. Accessed June 7, 2021.
\32\ Id.
\33\ Id.
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The FMC did not address the surcharges and heightened rates
as extortion, but a ruling they issued in April 2020 set
guidelines for reasonable practices for ocean carriers, which
ultimately was never adopted by the industry.\34\ In response,
over seventy agriculture trade associations and exporters sent
a letter in February 2021 to the Biden Administration, urging
the President to apply subtitle IV of title 46, United States
Code, popularly known as the Shipping Act.\35\ By November
2020, the FMC initiated an expanded investigation, and in March
2021, 24 senators sent a letter to the FMC's then Chairman,
Michael Khouri, expressing support for the Commission's efforts
to investigate the potential violations of the Shipping
Act.\36\ In a similar letter, Committee on Transportation and
Infrastructure Chair Peter DeFazio (D-OR), Ranking Member Sam
Graves (R-MO), Subcommittee on Coast Guard and Maritime
Transportation Chair Salud Carbajal (D-CA), and Subcommittee
Ranking Member Bob Gibbs (R-OH) called on the FMC to ensure
that ocean carriers are abiding by U.S. law and are not
engaging in unjust and unreasonable shipping practices
resulting from the COVID-19 pandemic.\37\
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\34\ Federal Maritime Commission. ``Commission Issues New Guidance
on Detention & Demurrage.'' https://www.fmc.gov/new-guidance-detention-
demurrage/. Accessed June 7, 2021.
\35\ Agriculture Transportation Coalition et al. ``Letter to
President Biden from 70+ Ag Organizations.'' Accessed June 3, 2021.
\36\ United States Senate to Federal Maritime Commission. ``Letter
from 24 Senators to FMC Chair.'' Accessed June 3, 2021.
\37\ Committee on Transportation and Infrastructure. ``Committee
Leaders Urge Protection of American Shippers from Unjust Shipping
Practices Resulting from COVID-19 Pandemic.'' https://
transportation.house.gov/news/press-releases/committee-leaders-urge-
protection-of-
american-shippers-from-unjust-shipping-practices-resulting-from-covid-
19-pandemic. Accessed June 9, 2021.
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However, prior to the expansion of the investigation, FMC
Commissioners Carl Bentzel and Daniel Maffei sent a letter to
the World Shipping Council (WSC) expressing apprehension of the
ocean carrier's practices. While the WSC cannot legally enforce
the Shipping Act on its members, the Commissioners stated that
it was necessary to inform them since the ``carriers [were]
providing 1 percent to 5 percent of the containers originally
agreed upon in contracts.'' \38\ Through the FMC, exporters
have the right to file a formal complaint if their contracts
are not being honored, yet according to the Commissioners, no
shippers came forward. According to then-Commissioner and now
Chairman Maffei, exporters, ``they have a relationship with
these carriers, and are very concerned that . . . if they make
any sort of formal complaints, that they will be harmed in
terms of their future relationship with the carrier.'' \39\
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\38\ Supply Chain Dive. ``Refusing US export cargo may violate
Shipping Act; FMC warns in letter to carrier association.'' Accessed
June 6, 2021.
\39\ Id.
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Nevertheless, U.S. shipping groups are pushing the FMC to
act against unreasonable detention and demurrage fees, charges
in which are imposed by the shipper the use of the container
within the terminal beyond the free time period (demurrage) or
for the use of the container outside of the terminal or depot,
beyond the free time period (detention). These groups state
that a lack of clarity from operators and the FMC alike on such
charges has created a situation in which detention and
demurrage are utilized as revenue generators, rather than
assuring the pickup of import containers and a quicker return
of empty ones.\40\ In response, the FMC is examining whether
these fees are reasonable in their Fact Finding 29
investigation.\41\
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\40\ The Journal of Commerce. ``Top US maritime regulator wants to
strengthen enforcement.'' https://www.joc.com/regulation-policy/top-us-
maritime-regulator-wants-strengthen-enforcement_
20210512.html. Accessed June 9, 2021.
\41\ Federal Maritime Commission. ``Fact Finding 29.'' https://
www.fmc.gov/fact-finding-29/. Accessed June 9, 2021.
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CONCLUSION
According to an April 2021 letter from the Agriculture
Transportation Coalition to the Department of Transportation
Secretary, Pete Buttigieg, foreign markets are the destination
of twenty percent of the U.S. agriculture industry.\42\ And
while most trade economists forecast that container and
capacity shortages will diminish once the pandemic-related
cargo surge subsides, there are also concerns that these
markets may not come back for U.S. agriculture exporters.\43\
American almonds, walnuts, timber, citrus, and hay that are
traditionally exported to Asian markets are now facing
competition from Australia, South Africa, and Chile.\44\ U.S.
agricultural exporters to China have worked hard to develop
their market, outliving a previous tariff war and trade-related
tensions to sustain a trade relationship between the world's
two largest economies.\45\ However, if exporters continue to
face challenges in securing equipment or freight rates, they
may ultimately lose their customers. U.S. agricultural
exporters are imploring the Administration and Congress to
level this imbalanced trade relationship.
---------------------------------------------------------------------------
\42\ Agriculture Transportation Coalition et al. ``Agriculture
Transportation Coalition to Secretary Buttigieg.'' Accessed June 3,
2021.
\43\ The Seattle Times. ``COVID-19 affects even apples--Washington
farm exports crimped by cargo-container shortages.'' Accessed June 3,
2021.
\44\ West Coast Nut. ``California's Ag and Food Industry has born
the brunt of the trade war.'' http://www.wcngg.com/2021/04/01/
californias-ag-and-food-industry-has-borne-the-brunt-of-the-
trade-war/. Accessed June 10, 2021.
\45\ Office of the United States Trade Representative. ``Foreign
Trade Barriers.'' Accessed June 8, 2021.
---------------------------------------------------------------------------
While the pandemic has shed a light on the monopolization
of the shipping industry and the delicate balance this supply
chain must preserve to remain competitive with Asia, it also
raises the issue of U.S. port productivity. According to the
World Bank, not a single U.S. port is listed in the
international top 50 container ports for productivity.\46\ It
takes 24 seconds to move a container at Chinese ports compared
to 48 seconds at West Coast ports. Moreover, shocks to the
supply chain system are becoming more common, as evidenced by
the Suez Canal blockage in March 2021. These episodes
illustrate the need for ocean carriers and logistics companies
to adopt more resilient measures, along with digital solutions
such as mobile apps and real-time container tracking for
truckers and exporters.\47\
---------------------------------------------------------------------------
\46\ Wall Street Journal. ``Behind Your Long Wait for Packages.''
https://www.wsj.com/
articles/behind-your-long-wait-for-packages-11622653994. Accessed June
7, 2021.
\47\ Freight Waves. ``The causes of port congestion--and tactics to
improve efficiency.'' https://
www.freightwaves.com/news/viewpoint-the-causes-of-port-congestion-and-
tactics-to-improve-
efficiency. Accessed June 8, 2021.
---------------------------------------------------------------------------
WITNESS LIST
PANEL 1:
LThe Honorable Daniel B. Maffei, Chairman, Federal
Maritime Commission
LMs. Rebecca Dye, Commissioner, Federal Maritime
Commission
PANEL 2:
LMr. John Butler, President and Chief Executive
Officer, World Shipping Council
LMs. Alexis Jacobson, International Accounts
Manager, BOSSCO Trading LLC, on behalf of U.S. Forage Export
Council
LMr. Frank Ponce De Leon, Coast Committeeman,
International Longshore & Warehouse Union
LMr. Eugene D. Seroka, Executive Director, Port of
Los Angeles
LMs. Jen Sorenson, President, National Pork
Producers Council
IMPACTS OF SHIPPING CONTAINER SHORTAGES, DELAYS, AND INCREASED DEMAND
ON THE NORTH AMERICAN SUPPLY CHAIN
----------
TUESDAY, JUNE 15, 2021
House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 11:03 a.m. in
room 2167 Rayburn House Office Building and via Zoom, Hon.
Salud O. Carbajal (Chair of the subcommittee) presiding.
Members present in person: Mr. Carbajal, Mr. DeFazio, Mr.
Larsen, Ms. Brownley, Mr. Garamendi, Mr. Gibbs, Mr. Graves of
Missouri, and Ms. Malliotakis.
Members present remotely: Mr. Auchincloss, Mr. Lowenthal,
Mr. Pappas, Dr. Van Drew, Mr. LaMalfa, and Mr. Johnson of South
Dakota.
Mr. Carbajal. I ask unanimous consent that the chair be
authorized to declare a recess at any time during today's
hearing.
Without objection, so ordered.
I also ask unanimous consent that Members not on the
subcommittee be permitted to sit with the subcommittee at
today's hearing, and ask questions.
Without objection, so ordered.
For Members participating remotely, please let committee
staff know as soon as possible if you are experiencing
connectivity issues or technical problems.
To avoid any inadvertent background noise, I request that
every Member please keep their microphone muted when not
seeking recognition to speak. Should I hear any inadvertent
background noise, I will request that the Member please mute
their microphone.
And finally, to insert a document into the record, please
have your staff email it to DocumentsT&I@mail.house.gov.
With that, I will proceed with my remarks.
Good morning, everyone, and welcome to today's Coast Guard
and Maritime Transportation Subcommittee hearing on ``Impacts
of Shipping Container Shortages, Delays, and Increased Demand
on the North American Supply Chain.''
Today we will hear from witnesses who can speak to the
unprecedented conditions in the container shipping market. This
is an important issue, and requires our attention not only to
determine the root causes of the problem, but also to hear
potential solutions to alleviate the strain on our supply chain
and prevent disruptions in the future.
In every sector of international commerce, the COVID-19
pandemic is having long-lasting consequences, and it is
drastically disrupting global and domestic supply chains.
The shift to work from home for many Americans resulted in
a significant increase in online shopping. A heightened demand
for imported consumer goods, manufacturing parts, and
commodities produced in Asia, coupled with periodic labor
shortages due to COVID outbreaks, has fueled massive backlogs
and price increases in the shipping container market.
The increased flow of goods has primarily been from China
to the United States, and has resulted in significant port
congestion, especially on the U.S. west coast. South of my
district, at the Ports of Los Angeles and Long Beach, there are
as many as 60 ships anchored off the coast, which doesn't
include even more ships that were unable to anchor offshore,
due to a lack of overflow space. This is a major problem.
In addition, carriers have often chosen to ship empty
containers back to Asia, rather than carry U.S. exports, since
it is more profitable to do so. As of June 3rd, container rates
from Los Angeles to Shanghai were only $779, compared to $5,952
from Shanghai to Los Angeles, highlighting just how massively
imbalanced the market is.
Container shortages have placed a heavy strain on our
agricultural exporters, leaving them without access to
international markets, and no guarantee that their product will
be delivered on time. These shortages also cause backups in
port terminals, where containers are stacking higher than ever,
making it more difficult for truckers to move containers across
the country.
Longshore workers are burning both ends of the candle
trying to keep pace with the deluge of imports. And all the
while, American workers have been exposed to numerous COVID-19
outbreaks in ports, making their health and welfare all the
more uncertain.
Delays are also costly, not only in time lost, but also in
the application of detention and demurrage fees for lengthy
container storage times, both on ships and on docks. For
example, container turnaround times have nearly doubled, from
60 to 100 days. Add to that peak-season surcharges, and it
becomes very difficult for our exporters to compete in the
global marketplace.
On March 10th, I sent a bipartisan letter to the Federal
Maritime Commission, along with Chairman DeFazio, Ranking
Member Graves, and Ranking Member Gibbs, to ensure that ocean
carriers are abiding by the Shipping Act of 1984, and not
engaging in unjust and unreasonable shipping practices.
I look forward to hearing from the FMC, who is currently
conducting Fact Finding 29, an investigation to identify
operational solutions to cargo delivery system challenges
related to COVID-19.
Today I look forward to hearing from diverse interests,
including international carriers, domestic exporters, labor,
and ports, as well as from the FMC, on how they are addressing
this issue.
[Mr. Carbajal's prepared statement follows:]
Prepared Statement of Hon. Salud O. Carbajal, a Representative in
Congress from the State of California, and Chair, Subcommittee on Coast
Guard and Maritime Transportation
Good morning, and welcome to today's Coast Guard and Maritime
Transportation Subcommittee hearing on ``Impacts of Shipping Container
Shortages, Delays, and Increased Demand on the North American Supply
Chain''. Today, we will hear from witnesses who can speak to the
unprecedented conditions in the container shipping market. This is an
important issue and requires our attention not only to determine the
root causes of the problem, but also to hear potential solutions to
alleviate the strain on our supply chain and prevent disruptions in the
future.
In every sector of international commerce, the COVID-19 pandemic is
having long-lasting consequences and is drastically disrupting global
and domestic supply chains. The shift to work from home for many
Americans resulted in a significant increase in online shopping. A
heightened demand for imported consumer goods, manufacturing parts, and
commodities produced in Asia coupled with periodic labor shortages due
to COVID outbreaks has fueled massive backlogs and price increases in
the shipping container market.
The increased flow of goods has primarily been from China to the
United States and has resulted in significant port congestion,
especially on the U.S. West Coast. South of my district at the Ports of
Los Angeles and Long Beach, there are as many as 60 ships anchored off
the coast, which doesn't include even more ships that were unable to
anchor offshore due to a lack of overflow space. This is a major
problem.
In addition, carriers have often chosen to ship empty containers
back to Asia rather than carry U.S. exports since it is more profitable
to do so. As of June 3rd, container rates from Los Angeles to Shanghai
were only $779 compared to $5,952 from Shanghai to Los Angeles,
highlighting just how massively imbalanced the market is.
Container shortages have placed a heavy strain on our agricultural
exporters, leaving them without access to international markets and no
guarantee that their product will be delivered on time. These shortages
also cause backups in port terminals, where containers are stacking
higher than ever, making it more difficult for truckers to move
containers across the country. Longshore workers are burning both ends
of the candle trying to keep pace with the deluge of imports. And all
the while, American workers have been exposed to numerous COVID-19
outbreaks in ports, making their health and welfare all the more
uncertain.
Delays are also costly, not only in time lost, but also in the
application of detention and demurrage fees for lengthy container
storage times both on ships and on docks. For example, container
turnaround times have nearly doubled from 60 to 100 days. Add to that
peak-season surcharges, and it becomes very difficult for our exporters
to compete in the global marketplace.
On March 10th, I sent a bipartisan letter to the Federal Maritime
Commission along with Chair DeFazio, Ranking Member Graves, and Ranking
Member Gibbs to ensure that ocean carriers are abiding by the Shipping
Act of 1984 and not engaging in unjust and unreasonable shipping
practices. I look forward to hearing from the FMC, who is currently
conducting Fact Finding 29, an investigation to identify operational
solutions to cargo delivery system challenges related to COVID-19.
Today, I look forward to hearing from diverse interests, including
international carriers, domestic exporters, labor, and ports; as well
as from the FMC on how they are addressing this issue.
Mr. Carbajal. I now call on Ranking Member Graves for an
opening statement.
Mr. Graves of Missouri. Thank you, Chairman Carbajal, and
also I want to add my thanks to our witnesses here today.
I am very interested to hear what our witnesses have to say
about the impact of the current cargo surge on the availability
of containers for agricultural products, agricultural exports,
imports, and the capacity to move agricultural products,
obviously, to U.S. ports.
I represent a very heavily agricultural district, and
exports represent life and death for my district's economy. I
understand that the Federal Maritime Commission doesn't approve
ocean carrier routes, or require the availability of equipment
on those routes. But I am very interested to hear about Federal
Maritime Commissioner Dye's Fact Finding No. 29, as the
chairman pointed out, when those results, obviously, become
available.
I am also looking forward to hearing from Chairman Maffei
about whether the Federal Maritime Commission has the authority
it needs to take effective enforcement actions when unfair and
unreasonable practices are identified.
I am looking forward to this hearing. Thanks for having it.
And with that, Mr. Chairman, I will yield back.
[Mr. Graves of Missouri's prepared statement follows:]
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chair Carbajal, and thank you to our witnesses for being
here today.
I am very interested to hear what the witnesses have to say about
the impact of the current cargo surge on the availability of containers
for agricultural exports, and the capacity to move agricultural
products to U.S. ports for export. I represent a heavily agricultural
district, and exports represent life and death for my district's
economy.
I understand that the Federal Maritime Commission does not approve
ocean carrier routes or require the availability of equipment on those
routes. But I am very interested to hear about Federal Maritime
Commissioner Dye's Fact Finding #29, and when the results of that
effort will be available.
I'm also looking forward to hearing from Chairman Maffei about
whether the Federal Maritime Commission has the authority it needs to
take effective enforcement actions when unfair and unreasonable
practices are identified.
Thank you, Chair Carbajal. I yield back.
Mr. Carbajal. Thank you. I will now recognize Chairman
DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. I support what the
ranking member just said, in terms of potentially moving toward
a solution to this issue. I know a lot of us--Sam has, and I
have, and many Members have heard from constituents who are
concerned about the supply chain disruptions. In fact, today,
one of my constituents, Alexis Jacobson, the international
accounts manager for BOSSCO Trading LLC, located in Tangent,
Oregon, will be testifying on issues, and sharing her
experience as an agricultural exporter operating on the west
coast.
I don't think this hearing could have come at a more
appropriate time. I am not going to belabor some of the points
that were made earlier about how critical the maritime supply
chain is, but there was a 195-percent increase in the cost of
transporting a shipping container in 1 year, somewhat caused by
consumer demand here in the United States.
But, the problem is, this is an asymmetric demand for
imports. It means that shippers are focusing on carrying high-
value goods from overseas, and not so much on our critical, but
lower cost exports, particularly in the agricultural sector.
This has included citrus, almonds, walnuts, tomatoes, timber,
seed, hay, straw, just to name a few.
Some of these things require refrigeration, and delays can
cause tremendous losses. In Oregon last year, the recycling
industry exported 280,000 metric tons of product worth $176
million. And in the U.S., more than 30 percent of our recycled
material is exported. Container shortages and rate increases
have resulted in a year-over-year decline in those exports in
February of this year, the most recent statistics we have.
The ports have become more productive. They have doubled
their productivity. But the lines of ships go over the horizon,
backed up, waiting to get in. We had, obviously, COVID
disruptions, and other things. Then we had some labor shortages
because of that. We are recovering from those things. But these
delays are increasing costs for smaller exporters, and
exporters of, again, these products that are not the highest
value.
Last year this subcommittee held a hearing on the maritime
supply chain, how to rebuild it following COVID-19. We did
many, many rescue packages, but we never helped the ports in
any significant way. We passed the Maritime Transportation
System Emergency Relief Authority, but it failed to get funded,
which could have helped mitigate or prevent some of these
problems this year.
I have heard from ports, I have heard from shippers,
shipping companies, and labor on potential solutions. And I am
hopeful that today's hearing will lead us in a direction where
we can take corrective action. And hopefully, this year, if it
requires Federal appropriations, get the money spent, and solve
this problem. It is absolutely critical to our economy.
Thank you for holding this hearing, Mr. Chairman.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
Thank you, Chair Carbajal, for holding this important hearing today
to focus on delays and disruptions within the maritime supply chain due
to the COVID-19 pandemic and its effects on U.S. shippers.
Like many of my colleagues, I've been hearing from constituents
about concerns regarding supply chain disruptions and the ongoing
shipping delays. These stakeholders range from farmers to retailers to
recyclers, all of whom are experiencing delays or even cancellations of
everyday deliveries to their consumers.
In fact, one of my constituents, Alexis Jacobson, International
Accounts Manager for BOSSCO Trading LLC located in Tangent, Oregon, is
testifying on the second panel. I want to thank Ms. Jacobson for
joining us for this hearing and sharing her experiences as an
agricultural exporter operating on the West Coast. This hearing could
not come at a more appropriate time.
The maritime supply chain is critical to America's economy and
national security, and that point could not be more evident than it is
today. Sometimes it takes a major disruption to highlight
vulnerabilities. For years, we've been warned of the fragility of this
system, and I've continually pushed for investment in the maritime
supply chain to increase productivity and enhance resilience.
The average cost of transporting a shipping container has increased
nearly 195 percent over the past year. Concurrently, consumer demand
for foreign made imports has grown exponentially, and ocean carriers
are struggling to keep up. This asymmetric demand for imports means
that it is more profitable for shippers to carry high-value goods from
overseas rather than lower value domestic exports. These conditions are
taking a toll on West Coast exporters, including producers of citrus,
almonds, walnuts, tomatoes, timber, seed, and hay, just to name a few.
And with many agricultural products requiring refrigeration, delays in
shipment could spell significant losses.
In my home state of Oregon, the recycling industry exported 283,992
metric tons of product in 2020, worth $176.1 million. And in the U.S.,
more than 30 percent of the recycled material is exported. Container
shortages and rate increases, however, have resulted in a 6.7 percent
year-over-year decline in export volume as of February 2021.
Despite more than doubling their productivity over previous years,
West Coast ports remain congested with vessels anchored offshore and
containers stacking up in marine terminals. This has resulted in delays
in the transportation of these goods across the country. In addition,
COVID-19 outbreaks earlier this year resulted in labor shortages that
we're still recovering from. These delays mean costly penalties that
smaller exporters simply cannot pay.
Last Congress, this subcommittee held a hearing on the maritime
supply chain and how to rebuild it following the COVID-19 pandemic. At
the time, Chinese factories were shut down, and shipping was at an all-
time low. We heard from witnesses that not only foreshadowed the
impending strains on the supply chain that we're currently seeing, but
also compelled action to help the industry emerge even stronger.
As we know, that didn't happen, and what we see today is the result
of inaction. While nothing could prevent the surge in consumer demand
for foreign made products, investments in the Maritime Transportation
System Emergency Relief Authority could have helped ports and marine
terminals respond to the impacts of COVID-19.
I've heard from ports, shippers, shipping companies, and labor on
potential solutions. I hope this hearing today will provide a
productive conversation on the ongoing issues in the supply chain and
will also present helpful guidance on a path forward.
Mr. Carbajal. Thank you, Chairman DeFazio. I now recognize
Ranking Member Gibbs.
Mr. Gibbs. Thank you, Mr. Chairman.
First, before I start, I want to ask unanimous consent that
the following items be inserted in the record: a chart from the
Health Industry Distributors Association, a statement from the
Association of American Railroads, a statement from the North
American Meat Institute, a letter from the National Association
of Chemical Distributors, and a dozen items from the
Agriculture Transportation Coalition.
I understand that these have all been provided
electronically to the subcommittee legislative system.
Mr. Carbajal. Without objection, submitted.
[Items submitted for the record by Hon. Gibbs are on pages
78-102.]
Mr. Gibbs. Yes, thank you.
Thank you, Chairman Carbajal and our witnesses, for being
here today. Since the beginning of the traditional peak
shipping season, starting last August, United States ports have
been experiencing a record surge in cargo imports. This surge
is expected to continue at least through 2021, and some say the
second quarter of 2022, as we recover from COVID, and also
consumer behavior changes. More than 30 container vessels
routinely wait for space at the Ports of L.A. and Long Beach,
and the Port of L.A. had its biggest month on record in May.
The surge is attributed to pent-up demand from the reduced
cargo flow earlier in 2020, changes in consumer spending
patterns given increased staying-at-home time in 2020 and 2021,
increases in pandemic-related items like personal protective
equipment, and decreased port throughput because of COVID's
impact on port operations, including increased testing, COVID
infections in workers, and quarantining. I look forward to
hearing from the witnesses if they agree with these popular
explanations of the cargo surge.
The real-world pressure test for the U.S. port capacity has
led to container shortages for certain U.S. exports,
particularly ag exports; pressure on intermodal rail
connections; delays in receipt of merchandise for certain
importers; shortages of chassis for drayage; and accusations of
abuses regarding detention and demurrage charges, which, I will
note, ocean carriers and terminal operators deny.
Prior to the container surge, the Federal Maritime
Commission was already conducting Fact Finding No. 29 regarding
detention and demurrage. I understand that the factfinding is
now also looking at container shortages in some export markets.
I look forward to Commissioner Dye's update on the status of
Fact Finding No. 29.
I understand the Commissioner is the former staff director
of this subcommittee, and I'm also interested in learning more
about her work on supply chain data transparency.
In addition, the Commission has issued interpretive
guidance on detention and demurrage to ocean carriers and
marine terminal operators, but the Hill continues to hear
complaints, though I understand few complaints have been filed
with the Commission.
I joined the chairman and ranking member of the full
committee and subcommittee Chairman Carbajal in writing the FMC
to urge vigorous enforcement of subtitle IV of title 46,
popularly known as the Shipping Act, if any violations are
found.
I hope recommendations for industry practices to deal with
future cargo surges will emerge from today's hearing.
The health of U.S. agricultural exports are life and death
economic issues in rural districts across America. Therefore, I
would like to strengthen the system to assure sufficient
capacity in the supply chain to protect U.S. ag exports in the
future.
Thank you, Chairman Carbajal, and I yield back.
[Mr. Gibbs' prepared statement follows:]
Prepared Statement of Hon. Bob Gibbs, a Representative in Congress from
the State of Ohio, and Ranking Member, Subcommittee on Coast Guard and
Maritime Transportation
Thank you, Chair Carbajal, and thank you to our witnesses for being
here today.
Since the beginning of the traditional peak shipping season
starting last August, United States ports have been experiencing a
record surge in cargo imports. This surge is expected to continue at
least through 2021, and some say into the second quarter of 2022. More
than thirty container vessels routinely wait for space at the Ports of
L.A. and Long Beach, and the Port of L.A. had its biggest month on
record in May.
The surge is attributed to pent-up demand from the reduced cargo
flow earlier in 2020, changes in consumer spending patterns given
increased staying-at-home time in 2020 and 2021, increases in pandemic-
related items like personal protective equipment, and decreased port
throughput because of COVID's impact on port operations, including
increased testing, COVID infections in workers, and quarantining. I
look forward to hearing if the witnesses agree with these popular
explanations of the cargo surge.
This real-world pressure test of U.S. port capacity has led to
container shortages for certain U.S. exports, particularly ag exports;
pressure on intermodal rail connections; delays in receipt of
merchandise for certain importers; shortages of chassis for drayage;
and accusations of abuses regarding detention and demurrage charges--
which I'll note--ocean carriers and terminal operators deny.
Prior to the container surge, the Federal Maritime Commission was
already conducting Fact Finding #29 regarding detention and demurrage.
I understand that Fact Finding is now also looking at container
shortages in some export markets. I look forward to Commissioner Dye's
update on the status of Fact Finding #29. I understand the Commissioner
is the former Staff Director of this Subcommittee, and I'm also
interested in learning more about her work on supply chain data
transparency.
In addition, the Commission had issued interpretive guidance on
detention and demurrage to ocean carriers and marine terminal
operators, but the Hill continues to hear complaints, although I
understand few complaints have been filed with the Commission. I joined
the Chair and Ranking Member of the Full Committee and Subcommittee
Chair Carbajal in writing the FMC to urge vigorous enforcement of
subtitle IV of title 46, popularly known as the Shipping Act, if any
violations are found.
I hope recommendations for industry practices to deal with future
cargo surges will emerge from today's hearing. The health of U.S.
agricultural exports are life and death economic issues in rural
districts such as Ohio's Seventh District. Therefore, I'd like to
strengthen the system to assure sufficient capacity in the supply chain
to protect U.S. ag exports in the future.
Mr. Carbajal. Thank you, Ranking Member Gibbs. I would now
like to welcome the witnesses on our first panel.
First, we have the Honorable Daniel B. Maffei, Chairman,
Federal Maritime Commission.
And second, we have the Honorable Rebecca Dye,
Commissioner, Federal Maritime Commission.
Thank you both for being here today. I look forward to your
testimony.
Without objection, our witnesses' full statements will be
included in the record.
Since your written testimony has been made part of the
record, the subcommittee requests that you limit your oral
testimony to 5 minutes.
With that, we will commence with Chairman Maffei.
You may proceed.
TESTIMONY OF HON. DANIEL B. MAFFEI, CHAIRMAN, FEDERAL MARITIME
COMMISSION; AND HON. REBECCA F. DYE, COMMISSIONER, FEDERAL
MARITIME COMMISSION
Mr. Maffei. Thank you, Chairman Carbajal, Ranking Member
Gibbs, and full committee Ranking Member Graves, and members of
the subcommittee. I am also very glad to see the full committee
chairman, Peter DeFazio. He was very kind to me when I was a
Member of Congress. I won't necessarily assume he will be as
kind to me in this new role.
I appreciate your invitation today, and I particularly
appreciate how this subcommittee has paid attention to our
ocean freight system. Some of the things I may say will sound
repetitive, but that is only because you were so well informed
in your opening statements.
Now, most of the time, of course, the public pays little
notice to how ocean freight moves consumer goods, commodities,
and manufacturers' inputs to and from our country. But now
concern is growing, as the COVID pandemic and the ensuing
record import surge threatens the reliability of the system and
drives up costs.
When President Biden designated me Chair of the FMC on
March 29th, the ocean freight system was already at or beyond
capacity, with volumes up dramatically at virtually every port
in America, and rates already at record levels. The cost of a
container has gone up four times what it cost last year, and
sometimes more. Just finding a space on a carrier is very
difficult. And even if a shipper's box does make it on the
ship, there will likely be substantial delays in transit time.
Of particular concern to me is the increase in price and
the shortage of available containers affecting exporters. While
carriers are actually moving more exports, overall, than in
previous years, the increase in exports does not match the boom
in imports.
Moreover, the amount a carrier makes moving an import
container is so much, compared to what they make on an export
box. But in some cases, a ship will carry fewer containers full
of exports than its capacity, to more rapidly move empty
containers back to foreign ports to fill them with new, U.S.-
bound imports.
So what is the FMC doing about all of this? Last year FMC
unanimously approved the rule on detention and demurrage to
make clear when assessment of these charges on a shipper is
unreasonable and violates the Shipping Act. Last fall, the FMC
increased the reporting requirements for the three major
alliances of steamship lines to ensure that these carriers are
not violating their agreements or the law.
Last fall, we also launched a formal investigation of
issues examining detention and demurrage, container return
requirements, and lack of containers available for export. This
investigation is called Fact Finding 29, and is led by our most
experienced Commissioner, Rebecca Dye, who, with my full
support, is here to report directly to you.
Also, where appropriate, I and others have reached out
directly to the carriers to persuade them that it is in their
long-term best interest to accept as many exports as possible.
Finally, the FMC voted last month to implement our new
National Shipper Advisory Committee so we can hear directly
from shippers on an ongoing basis. That committee is half
exporters.
There is always more to do, but it is vital to understand
the true nature of this crisis to assess what the FMC can and
can't do.
First, the difficulties are global. Congestion,
reliability, and cost issues are hitting ports, businesses, and
ocean-linked transportation networks, not just in America, but
worldwide.
Second, the crisis does not just affect shipping, but the
entire supply chain. Attention has been focused on the ports
because this is where we see the dramatic pictures of ships
lining up, and piles of containers. But outdated
infrastructure, equipment, and labor shortages, rail issues,
and limited warehouses all diminish our capacity.
And third, the primary reason for the congestion, high
prices, and lack of reliability is the demand for cargo
shipping has outstripped the supply. For years, the increasing
supply of cargo space on bigger and bigger ships kept ocean
freight rates on the low side. But now COVID and its effects
have created record demand for shipping, and record freight
rates, as well. The demand for imports will likely not diminish
until 2022, as the ranking member pointed out. But the supply
of space on ships has not increased enough to keep track with
that.
Beyond these three factors--the global nature of trade,
challenges throughout the supply chain, and the vast increase
in demand--the Federal Government is limited in ways that it
can help. Of course, we can do investments into infrastructure,
both physical infrastructure and informational infrastructure.
We can put in more measures to get more information to shippers
than they currently get, which would definitely improve
efficiency. But these are not immediate solutions.
So, in the meantime, the FMC will continue to help
exporters and other U.S. shippers navigate the system and file
complaints. We will communicate with various stakeholders in
the supply chain, and help them work together to make the
system more efficient and reliable. We will keep in touch with
Federal agencies and you in Congress, and we will stay open-
minded to finding new ways of making the situation better, and
we will work hard to make sure nobody makes a profit from this
current crisis in a way that violates the Shipping Act.
And I know that Commissioner Dye will say a lot more on
these efforts, so I thank you, and I look forward to your
questions.
[Mr. Maffei's prepared statement follows:]
Prepared Statement of Hon. Daniel B. Maffei, Chairman, Federal Maritime
Commission
Good morning Chairman Carbajal, Ranking Member Gibbs, and members
of the Subcommittee. I appreciate having the opportunity to speak with
you today about our ocean freight system.
The American economy is dependent upon ocean freight. Container
ships move commodities, consumer goods, and inputs necessary for
manufacturers. The events of recent months have highlighted just how
critical overseas shipping is to all Americans and how invaluable the
contribution of ocean transportation is to economic competitiveness and
our way of life.
When President Biden designated me Chair on March 29, I stepped
into the position in the midst of the largest import boom in U.S.
history. Key U.S. gateways for container shipping have handled cargo
volumes that have been high and frequently record breaking. The Port of
Long Beach recently announced that it has had ten consecutive months of
breaking cargo movement records.\1\ Similarly the Port of Los Angeles
reported the best April in the port's history and that the complex has
set records for volumes six of the last nine months.\2\ The Port of New
York & New Jersey set a ``new all-time monthly record'' in March,
superseding the one they set in just October 2020.\3\ The Port of
Virginia set a new record in April for monthly volumes,\4\ South
Carolina reported a record breaking April \5\, Georgia a record
breaking March,\6\ and Oakland handled 100,000 import containers in a
single month (April) for the first time in its history.\7\ In short,
the system is at or beyond capacity.
---------------------------------------------------------------------------
\1\ ``Strongest April on Record at the Port of Long Beach'', Port
of Long Beach Press Release, May 12, 2021 https://polb.com/port-info/
news-and-press/strongest-april-on-record-at-port-of-long-beach-05-12-
2021/
\2\ ``Robust April Volume Breaks Another Record at Port of Los
Angeles'', Port of Los Angeles Press Release, May 13, 2021 https://
www.portoflosangeles.org/references/2021-news-releases/
news_051321_aprilvolume
\3\ ``Strong Consumer Demand Drives March Volume to All-Time
High'', Breaking Waves Blog, Port of New York & New Jersey, May 5,
2021. https://www.portbreakingwaves.com/strong-consumer-demand-drives-
march-volume-to-all-time-high/
\4\ ``All-Time Record Volume, Strong Service Levels Continue at the
Port of Virginia'', Port of Virginia Press Release https://
www.portofvirginia.com/who-we-are/newsroom/all-time-record-volume-
strong-service-levels-continue-at-the-port-of-virginia/
\5\ ``SC Ports handles record cargo volumes in April'', South
Carolina Ports Press Release, May 11, 2021 https://scspa.com/news/sc-
ports-handles-record-cargo-volumes-in-april/
\6\ ``GPA's March container trade leaps 48 percent''. Georgia Ports
Authority Press Release, April 15, 2021 https://gaports.com/press-
releases/gpas-march-container-trade-leaps-48-percent/
\7\ ``Port of Oakland passes milestone, sets all-time cargo
record'', Port of Oakland Press Release, May 13, 2021 https://
www.portofoakland.com/press-releases/port-of-oakland-passes-milestone-
sets-all-time-cargo-record/
---------------------------------------------------------------------------
With such high demand for overseas imports, container shipping
prices have rocketed up. The Shanghai Containerized Freight Index
indicated that for May average freight costs are three times as high as
they were this time last year.\8\ An individual shipper needing to find
a container on the spot market will likely pay an even higher multiple.
And cost certainly is not the only challenge. For many shippers,
finding a container and/or space on a ship has been sometimes
impossible at any cost. And many other shippers have not been able to
get their products to foreign markets in a reliable timeframe or get
goods manufactured abroad to their American customers without
substantially higher than average delays.
---------------------------------------------------------------------------
\8\ Alphaliner Monthly Monitor, May 2021
---------------------------------------------------------------------------
Of particular concern to me is the effect of the import boom on
U.S. exports and the increases in price and lack of availability of
containers for export. While it may surprise some of you to find out
that the carriers are actually transporting more containers of our
exports than in previous years, the number pales in comparison to the
boom in imports and there is some truth that ocean carriers will carry
fewer containers of American exports than they otherwise would have in
order to get empty containers more rapidly back to Asian ports to fill
with higher value import loads.
Under my predecessor, then-Chairman Michael Khouri, the FMC had
already started taking steps to address the many aspects of this
crisis.
Last Spring, the Commission unanimously approved an interpretive
rule on detention and demurrage. This measure had already worked its
way through much of the rulemaking process before COVID hit but the
Commission knew it could become even more important as the pandemic
emerged. The rule addressed how the FMC will assess the reasonableness
of detention and demurrage regulations and practices of ocean carriers
and marine terminal operators (MTOs). The Commission stated it will
consider the extent to which detention and demurrage charges and
policies serve their primary purpose of incentivizing the movement of
cargo and promoting freight fluidity.
Last fall, the Commission increased alliance reporting requirements
and is considering whether additional changes are needed.\9\ Monitoring
requirements might be further amended to demand more information and
data of use to Commission economists, analysts, and lawyers in their
work.
---------------------------------------------------------------------------
\9\ ``Federal Maritime Commission Increases Global Alliances'
Information Monitoring Report Requirements'', Federal Maritime
Commission Press Release, November 25, 2021. https://www.fmc.gov/
federal-maritime-commission-increases-global-alliances-information-
monitoring-report-requirements/
---------------------------------------------------------------------------
We have launched a formal investigation of issues at LA/LB and NY/
NJ involving detention demurrage practices, container return
requirements and lack of containers being made available for export.
This investigation is called Fact Finding 29 and is led by our most
experienced Commissioner, Rebecca Dye, and it could lead to a formal
enforcement proceeding. Because it is an ongoing investigation, I am
limited in what details I can give you. That said, one of the focuses
of the investigation involves the Interpretive Rule on Detention and
Demurrage which the commission unanimously put in place a year ago. We
must make sure that rule is being heeded and, where it is not, we will
bring enforcement actions. being heeded, root out the non-compliance.
Once I became Chairman, I was able to help the FMC build on these
existing efforts in several ways:
1) As Commissioner Dye's investigation got to the stage of
analyzing data from the carriers and potentially developing enforcement
cases--I made sure that she has the appropriate staff resources that
she needs. This investigation is a vital part of the FMC's overall
effort to deal with this crisis and that is why I am so glad that you
have invited Commissioner Dye as well so she can give you a report on
the progress of that investigation. Know that she has my full trust as
the investigation officer.
2) I have started examining the industry response to last year's
detention and demurrage rule to determine whether additional rulemaking
would be useful in deterring the sort of practices that seem to be
making the current situation worse. Personally, I want to look at the
billing and appeal policies for detention and demurrage (D&D) charges,
issues involving where & when containers can be returned, and rapidly
shifting Earliest Return Dates (ERDs) which can become unworkable for
exporters.
3) I am also taking a good look at the way the FMC enforces the
authority Congress has provided, and have provided some preliminary
direction. It is vital that our enforcement capability provides a
sufficient deterrent to abusive practices in the industry. I have
directed the career staff at the Federal Maritime Commission to be open
minded in applying the authorities we do have to make things better.
Circumstances are different today and just because the FMC has not
taken certain kinds of enforcement action in the past does not mean we
should not now.
4) Where appropriate, Commissioners are reaching out informally to
carriers and terminal operators to encourage the industry to be as
flexible as possible given the situation. As we have spoken to
companies depending on ocean shipping, shipping groups, and their
members, we have relayed their general concerns and observations to the
carriers. We have also done outreach to other supply chain stakeholders
such as truckers, retailers, port authorities, terminal operators, and
labor unions.
5) The Commission recently voted to implement our new National
Shipper Advisory Committee. This will be a body of 24 shippers--divided
equally between importers and exporters--who will advise the Commission
on policies relating to the competitiveness, reliability, integrity,
and fairness of the international ocean freight delivery system.
The steps that I list here is not an exhaustive list and, if
members want to suggest additional actions, I would welcome
suggestions.
That said, it's important to understand that the nature of the
current crisis and the ocean freight system make it impossible for the
FMC--or even the U.S. government as a whole--to alter or counteract
much of the current situation.
First, the difficulties are global. Congestion, reliability, and
cost issues are impacting ports, businesses, and ocean linked
transportation networks not just in the United States but in Europe,
Asia, the Indian Sub-Continent, Australia. Point to a spot on the map
and you will find a portion of the world's ocean cargo system
struggling. Problems overseas create problems here and vice-versa. That
is of no comfort to a U.S.-based importer or exporter trying to move
their cargo, but it does point to the enormity of the underlying
problems. It also illustrates that solutions, if there are any to be
had, will not be U.S. derived ones alone.
Second, the crisis is really one that does not just affect ocean
shipping but goes up and down an interconnected U.S. supply chain.
Attention has been focused on ports but that is because this is where
inefficiencies with our freight transportation networks manifest
themselves in pictures of large container ships lining up and bigger
and bigger piles of containers. However, issues related to increased
port congestion and diminished ocean carrier performance stretch far
from the dockside of any marine terminal and deep into the United
States interior. Insufficient landside infrastructure, whether roads or
rail, means cargo cannot move. A lack of chassis, trucks, or truck
drivers means cargo cannot move. Warehouses and distribution centers
that are full means cargo has no place to go, and therefore cannot
move. The underlying issues that are causing congestion in the freight
delivery system are not new. Current events have only put into stark
relief what are the systemic flaws and shortcomings in the Nation's
freight transportation capabilities.
If an interconnected system becomes overwhelmed, a problem in one
part of it becomes a compound problem. The once in a century snowstorm
in Texas disrupted rail traffic for six weeks causing issues related to
the availability of intermodal rail cars to serve Southern California
ports.\10\ A crack in the I-40 bridge over the Mississippi River takes
out an important intermodal truck route to and from railheads in
Memphis and the time and expense added to ground moves ripples at the
ports.\11\ Congestion at Mid-West container yards causes a loss of
income for drivers and they quit in frustration, potentially reducing
the capacity to move containers.\12\ These are just some of the issues
that happen far from a port but impact operations at marine terminals
and the ability to handle ocean containers. They contribute to
congestion, diminish capacity, erode capability, add costs, and
exacerbate problems everywhere.
---------------------------------------------------------------------------
\10\ ``Dallas intermodal ramp flows recover after paralyzing winter
storm'', Journal of Commerce, Ari Ashe, May 26, 2021 https://
www.joc.com/rail-intermodal/class-i-railroads/bnsf-railway/dallas-
intermodal-ramp-flows-recover-after-paralyzing-winter-
storm_20210526.html
\11\ ``Memphis' cracked I-40 bridge creates headache for traffic,
shipping'', NBCNews.com, the Associated Press, May 12, 2021 https://
www.nbcnews.com/news/us-news/memphis-cracked-i-40-bridge-creates-
headache-traffic-shipping-n1267187
\12\ ``US drayage drivers quitting as rail ramp congestion crimps
pay'', Journal of Commerce, Ari Ashe, May 19, 2021 https://www.joc.com/
trucking-logistics/drayage/drayage-divers-quitting-rail-ramp-
congestion-crimps-pay_20210519.html
---------------------------------------------------------------------------
Third, the primary reason for the congestion, high prices, and lack
of reliability is that the demand for cargo shipping has outstripped
the supply.
For years, the increasing supply of space with the continued
ordering of bigger and bigger ships kept ocean freight rates on the low
side. And now it is COVID-induced demand that is largely the reason for
the high freight rates. The drop in cargo volumes for the first half of
2020 dramatically reversed beginning in July or August of 2020 when
American consumers began an unrestrained buying spree that continues
today. Ports that lost volumes in early months of 2020 ended their
years equaling their 2019 totals. In other words, a large portion of 12
months of volume moved in what turned out to be an approximately four-
month period. The demand for imported goods has not waned and all
indications are that demand will not diminish until 2022 at the
earliest.
Meanwhile, the supply of space on ships has not increased enough to
keep pace. If this supply were being artificially limited by the
carriers, there would be a clear path for the Federal Maritime
Commission and/or the Justice Department to intervene. However, all
indications are that the lines are trying to increase their capacities
as quickly as possible. According to an Alphaliner report published in
May 2021, there are only 60 idle ships representing less than 1% of the
world's available container ship fleet. Also, reports that the order
book for new builds represents another 4 million TEU of capacity,
approximately 18% of the current world's fleet total capacity.
Similarly, ocean carriers and intermodal equipment lessors have been
buying new containers to increase the supply of boxes available to ship
goods. Furthermore, we have seen increased use of extra loaders,
additional capacity on strings, and vessel sharing agreements that have
resulted in some expanded capacity. These are all positive developments
they simply are not that substantial when compared with the
overwhelming demand.
Because of these three factors--global nature of trade, integrated
nature of the supply chain, and the largely demand driven causes--we
are limited in what can be done.
We can put in measures to improve the overall capacity of the
system--increase the supply in the supply-demand chart. Certainly,
efforts to improve our physical infrastructure at our ports but also
rail, truck networks, and inland ports would greatly improve capacity
of the system.
Another initiative is to convene parties across the supply chain to
establish better data sharing. One way to prevent bottlenecks,
especially at facilities that are limited in ability to grow, is to
have better communication about ERDs, container availability and key
other key operational information. Such transparency would assist
preventing avoidable D&D charges, and help shippers adjust their
schedule. Shippers need more information than they currently get and
providing it to them can only help the freight delivery system. I
believe there is a role for the FMC to act as a convener and possibly
to formulate incentives to encourage the adoption of more open data and
information policies among carriers, terminals, ports, and land
transportation.
However, improvements to our physical and informational
infrastructure are long-term solutions that will take years to develop.
In the meantime, I as Chairman and the Federal Maritime Commission
have been getting pleas to force carriers to provide more export
containers, ban all detention and demurrage charges in certain ports
and DO something about these outrageously high prices including
revoking the limited anti-trust exemption for carrier alliances. I
cannot help but empathize with the frustrations of shippers and
beneficial cargo owners--many of which are small and medium-sized
businesses. When I served in Congress, I represented a district with
agricultural exporters and know how vital it is that they can transport
their goods to foreign markets.
Nonetheless, the legislation governing ocean shipping and
determining the powers of the Federal Maritime Commission limits the
actions we can take. The law allows us to take action against a carrier
or terminal if they engage in a prohibited anticompetitive behavior,
discriminatory practices again U.S. companies or products, unlawful
deception, or some other unreasonable practice. It allows us to take
action against an alliance of carriers but only under certain
circumstances when the alliance has broken its own agreement or is
clearly resulting in an unreasonably higher price or lower level of
service than otherwise would be the case.
The law does NOT allow us to set rates or set a ceiling for what it
costs to move an ocean container. It does not allow us to demand that
ships service certain ports, carry particular products, or establish a
quota for the number of export containers it must accommodate. If a
sky-high cost for shipping a container is due simply to the laws of
supply and demand, we have no authority to change that.
What we can do and are doing is to work hard every single day to
make sure nobody makes a profit from this current crisis in a way that
violates the Shipping Act. We can help exporters and other U.S.
shippers navigate the system and file complaints. We can communicate
with various stakeholders in the supply chain to help them work
together to make the system more efficient and reliable. And we can
stay in close touch with other agencies of the Federal government and
you in the Congress to find new ways of making this COVID pandemic and
its aftermath easier to live with.
I am happy to take your questions.
Mr. Carbajal. Thank you, Chairman Maffei. And now we will
move to Commissioner Dye.
You may proceed.
[Pause.]
Mr. Carbajal. Commissioner Dye, you may proceed.
Ms. Dye. Thank you. Thank you so much, Mr. Chairman,
Ranking Member Gibbs, Chairman DeFazio, and Ranking Member
Graves. Of course, members of the subcommittee. I am pleased to
be with you today to discuss my Fact Finding 29 investigation
dealing with the effects of COVID-19 on the United States
international ocean freight delivery system.
Thank you for your support of the Commission's National
Shipper Advisory Committee, enacted as part of the Elijah
Cummings Coast Guard Authorization Act. We are currently
soliciting for 12 exporters, and 12 exporters for the
committee. I have included a summary describing my
investigation to date as part of my testimony today.
The Fact Finding 29 investigation is my fourth major
Commission investigation, and I very much appreciate the strong
support I have received from Chairman Maffei.
My focus in Fact Finding 29 is how to strengthen the
performance of the overall United States international freight
delivery system. This requires closer coordination and
visibility among exporters, importers, truckers, ocean
carriers, marine terminals and ports, longshore labor,
railroads, chassis providers, and shipping intermediaries.
There are three major obstacles to resolving this port
congestion hardship. The problems we are experiencing are not
new. They occur in every cargo surge or peak season. No supply
chain actor alone, not ocean carriers or ports, can develop a
solution without a coordinated approach with other supply chain
actors. The lack of mutual commitment between parties to
freight delivery systems keeps parties from achieving
enforceable agreements.
The Commission order on Fact Finding 29 authorizes me to
form FMC Supply Chain Innovation Teams to develop commercial
solutions to port congestion and related supply chain
challenges. Fact Finding 29 used 9 small teams to identify
several major supply chain bottlenecks for future work. These
small teams are composed of industry leaders with the knowledge
and experience and, most important, the willingness to work to
change the system. I hope to convene these teams in person in
the near future.
I would like to emphasize one final thing about the current
state of Fact Finding 29, and the Supplemental Order the
Commission issued to me last November. Our Bureau of
Enforcement staff are currently investigating cases of
potential unreasonable and detention charges involving the most
common situation affecting exporters: confusion concerning the
earliest return date. More investigations will follow, perhaps
involving other potentially unreasonable practices.
No further regulatory or statutory action is necessary for
us to enforce the Commission's demurrage and detention rule. We
do require, like any other law enforcement agency, facts to
investigate a potential violation. Our Bureau of Enforcement
needs just evidence, a brief description of facts surrounding a
potential violation, and a bill of lading number to begin an
investigation.
Finally, Mr. Chairman, our U.S. international ocean freight
delivery system is unprepared to deal with growing volumes of
cargo going through our major ports. If we don't change, we
can't grow.
In 2017, our FMC Supply Chain Innovation Teams recommended
a national port information system to provide end-to-end
visibility in our international ocean freight delivery system.
Now is the time to move forward with this recommendation,
harmonize our supply chain, leap over existing problems, and
boost American competitiveness and our economy.
Thank you, Mr. Chairman. I would be glad to discuss my
preliminary recommendations from my investigation with you and,
of course, answer your questions. Thank you very much.
[Ms. Dye's prepared statement follows:]
Prepared Statement of Hon. Rebecca F. Dye, Commissioner, Federal
Maritime Commission
Thank you, Chairman Carbajal, Mr. Gibbs, and Members of the
Subcommittee.
It is a pleasure to be here with you today, to discuss my Fact
Finding 29 Investigation, dealing with the global effects of COVID-19
on the U.S. international ocean freight delivery system.
Thank you for your support of the Commission's National Shipper
Advisory Committee, enacted as part of the Elijah Cummings Coast Guard
Authorization Act. I plan to recommend an FMC Advisory Committee for
ports and ocean carriers as one of my upcoming Fact Finding 29
recommendations to the Commission.
I have included a summary describing our Fact Finding 29
Investigation to date, as part of my testimony today.
The Fact Finding 29 Investigation is my fourth major Commission
investigation and I appreciate the strong support I have received from
Chairman Maffei.
My focus in Fact Finding 29 is how to strengthen the reliability
and resilience of the U.S. international freight delivery system. This
requires the involvement of everyone engaged in international ocean
freight delivery, including exporters, importers, truckers, ocean
carriers, seaports, longshore labor, marine terminals, railroads,
equipment providers, and shipping intermediaries.
There are three major obstacles to resolving the major port
problems identified by our ten Innovation Teams in Fact Finding 29:
1) These problems are not new. They occur in every cargo ``surge''
or ``peak season;''
2) No supply chain actor alone can provide a solution without a
coordinated approach; and
3) The lack of mutual commitment between parties to freight
delivery agreements mitigates against an enforceable agreement.
Our primary approach to resolving these problems is our FMC Supply
Chain Innovation Teams. These teams are composed of industry leaders
with the knowledge and the experience and, most important, the
willingness to work to change the system. I hope to convene in-person
teams in the near future.
I'd like to emphasize one final thing about the current state of
Fact Finding 29 and the investigations ongoing under the Supplemental
Order the Commission issued to me last November.
Our Bureau of Enforcement staff are actively investigating cases of
potential unreasonable demurrage and detention charges involving the
most common situation affecting exporters. More investigations will
follow, perhaps involving the other potentially unreasonable practices
under section 41102(c) of title 46, United States Code, formerly
section 10(d)(1) of the Shipping Act of 1984.
No further regulatory or statutory action is necessary for us to
enforce the Commission's Demurrage and Detention Rule interpreting
section 41102(c), which already requires common carriers and marine
terminal operators to establish, observe and enforce reasonable
practices.
We do require, like any other law enforcement agency, facts
involving a potential violation. Our Bureau of Enforcement and
investigators simply need evidence, such as a bill of lading number,
and a brief description of facts surrounding a potential violation to
begin an investigation.
Finally, our U.S. international ocean freight delivery system is
unprepared to deal with the growing volumes of cargo, fueled by
ecommerce, imports and exports, flowing through our major ports.
Mr. Chairman, if we don't change, we can't grow.
In 2017, our FMC Innovation Teams recommended a National Port
Information System to provide end-to-end visibility in our
international ocean freight delivery system.\1\
---------------------------------------------------------------------------
\1\ https://www.fmc.gov/wp-content/uploads/2019/03/SCITFinalReport-
reduced.pdf
---------------------------------------------------------------------------
Now is the time to move forward with this recommendation, harmonize
our supply chain, leap over existing problems, and boost American
competitiveness and our economy.
Thank you, Mr. Chairman. I will be glad to answer your questions.
Mr. Carbajal. Thank you, Commissioner Dye. We will now move
on to Member questions. Each Member will be recognized for 5
minutes. And I will start with Chairman DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman, I appreciate the
opportunity. And listen, I want to commend you for the work
that you did for the Commission's rule. It provided for
demurrage and detention guidelines, so ocean carriers can know
what is reasonable, what is not.
But I am told by many shippers that the detention and
demurrage rule is very good, but we also find that the carriers
continue to issue the same demurrage and detention charges,
which the rule declares to be unreasonable.
And you just said you don't need further authority. How do
we get enforcement?
Ms. Dye. Well, I have a couple of recommendations. It is
unfortunate that the good carriers are going to suffer, as well
as the ones that we know are not following the rule. How do we
know? Because they tell their customers, who immediately tell
us.
Plus, we had a huge information demand. We will follow
those up with law enforcement interviews from all of them.
I am going to recommend that all of our ocean carriers have
what corporate organizations have called compliance officers,
someone who can work directly with us, not part of their
general counsel's office, who is accountable and responsible
for Government compliance.
And there are a couple other recommendations along those
lines, but, as I said, we didn't get as many complaints as we
wanted, because our exporters are concerned about retaliation.
Mr. DeFazio. Right.
Ms. Dye. Now, I can assure you and the members of the
subcommittee and all of my export colleagues that that is a
violation of the Shipping Act, currently. And we would take
prompt and decisive action if we heard about any carrier
actually retaliating against any exporter or any other supply
chain actor for coming to the FMC. So we encourage them to
provide us with the complaints and, as I said, we are going to
continue our law enforcement actions.
And also, I haven't--this is very resource-intensive, and
so I haven't actually discussed this with the Chairman, fully.
But I believe we also need regular Bureau of Enforcement audits
of ocean carriers, especially for demurrage and detention, so
we can continually be aware of their behavior.
Thank you so much, Mr. Chairman.
Mr. DeFazio. Yes, I have heard the same thing about
intimidation. I appreciate your strong words.
Ms. Dye. Of course.
Mr. DeFazio. That is a very clear violation, and that you
will, in those cases, take action.
Can FMC--and this is either to you or the Chair--can you
self-initiate?
Ms. Dye. Yes.
Mr. DeFazio. You can self-initiate?
Ms. Dye. Yes. In fact, we are doing it now.
Mr. DeFazio. OK.
Ms. Dye. We got started----
Mr. Maffei. Yes----
Ms. Dye. Please go ahead, Mr. Chairman.
Mr. Maffei. Yes, we can self-initiate. And I might add that
I think self-initiating, in some cases, is essential here,
because one of the things that would help bring more cases from
those shippers and private parties is if they saw that they
could actually win cases, and how to win those cases. And so,
naturally, they may not want to stick their neck out to be one
of the first ones, but once we show that--there are also some
other rules that we have that I do think would make it easier.
I have said for a long time that the way we interpret this
particular part of the Shipping Act, we require that a
plaintiff prove that the wrong occurred on a ``normal,
customary, and continuous basis.'' So if they can prove it
happened, but it only happened once, or even a couple of times,
but the carrier can say, ``Look, you know, that wasn't our
actual practice, that was just a mistake,'' they might not win
the case. They probably wouldn't win the case. So that also
could be changed.
But, as Commissioner Dye points out, we do already have
that authority. It may be useful to have Congress weigh in, but
we do have that authority already.
Mr. DeFazio. OK. Well, thanks.
Mr. Chairman, I regret that I am not going to be--I have,
unfortunately, an appointment which I must keep shortly, so I
won't be able to hear much of the second panel. But I am hoping
to hear interesting ideas and potential solutions from them,
and also at any point from the Chair or Commissioner Dye,
because we just can't continue down this path.
Thank you, Mr. Chairman.
Mr. Carbajal. Thank you, Chairman DeFazio. Next we will
move on to Ranking Member Gibbs.
Mr. Gibbs. Thank you, Chairman. Thank you to the witnesses
for being here.
I have a chart I find kind of interesting. It is the Port
of Los Angeles monthly container volumes, and it has 2019,
2020, and 2021, now. And, obviously, we saw a drop-off in 2020,
the first 6 to 7 months of the year, from 2019, and then a
surge happened in late July, early August of last year, and the
surge continues, and the surge continues here through April of
this chart, significantly higher in 2019.
So I guess my first question is, do you see structural
changes in our supply chain where you could anticipate that
these volumes of cargo are going to stay where they are at, or
do you think they will come back down after we work through
some backlogs? Or do you think there has been enough consumer
behavioral changes, and just dynamic changes, that we are going
to see higher volumes, consistently higher than what we had in
2019, before the pandemic?
I guess I would ask the Chairman first.
Mr. Maffei. Thank you, Ranking Member Gibbs. Yes, you are
quite right. Most ports in this country have seen about 12
months of cargo volume go through in about 4 months. And a lot
of that is due to backlog. But it is also due to a continually
high demand.
Of course, it always depends exactly what you mean by
structural changes, but I don't see anything structural. I
think a lot of this has to do with our economy, which, you
know, thanks in part to Congress, and the former President, and
the current President, you have kept very strong, and the
demand for exports, as people were sitting at home. The problem
is now they are demanding exports because they are going back
out in the world, and seeing each other.
And my 7-year-old daughter is probably going to get twice
as many Christmas presents this year, because last year her
grandparents couldn't see her, and this year they can.
So, for all of those reasons, I expect demand to continue
to be high into next year. But the structure hasn't changed.
And indeed, this is a volatile industry. As Commissioner Dye
pointed out, it has always had highs and lows, and will,
indeed--the rates will eventually come down as the demand goes
down.
Mr. Gibbs. OK, so you are saying--you said the rates are
going to come down? We have seen rates, in some instances, like
triple-digit increases in the rates.
Mr. Maffei. They may still go up more before they go down,
but they will eventually go down.
Your question with--is there some sort of structural change
in the way imports and exports work, and I don't think so. I
think this particular pandemic is--we have never had anything
like this in the history of modern shipping, and so it is an
anomaly. I don't think it changes the overall economics of
trade.
Mr. Gibbs. Yes, also, a question came up about maybe we
have more limited hours of operation in our ports in the United
States, compared to our ports around the world that maybe work
24/7. Is that true, that our ports don't work 24/7, or is that
an issue?
Mr. Maffei. Yes, certainly compared to countries like
China, with different labor systems, et cetera.
But--and it would be helpful, I think--I was just in the
New York-New Jersey Port last week, and they do have extended
hours, and are going into weekends as needed. Part of the
problem is a chicken-and-egg problem. If they open up the port
for more hours, sometimes people aren't used to going, and then
they stop, and the trucking companies and the shippers don't
necessarily adjust their schedules permanently, unless they
know it is going to be permanent. So you have got that little
issue there.
But it would certainly help. It wouldn't be the be-all and
end-all, though, because up and down the supply chain----
Mr. Gibbs. I am running out of time, so I want to jump over
to Commissioner Dye.
With your Fact Finding 29, are you seeing ways you think
that we could squeeze more capacity out of our ports and our
intermodal relationships?
Ms. Dye. Well, Mr. Gibbs, I just wanted to add one--
concerning capacity, I just wanted to add one thing to the
Chairman's remarks.
I found, from an organization called Sea-Intelligence--they
are a very well-regarded organization, and they believe that
the boom and United States demand is not declining. It may be
softening in the rest of the world, interestingly. But if that
is the case, then our ocean carriers, who can move their ships
anywhere to get cargo, may increase their capacity in the
United States trades. And that will be good for the demand.
Mr. Gibbs. Thanks. I have just got one quick question I
want to get into. Ms. Dye, our smaller shippers are facing huge
freight rate increases and outright refusal to deal with the
shippers. What action has the FMC planned to address concerns
of smaller shippers, so they don't get pushed out of the
market?
Ms. Dye. Yes, Mr. Gibbs, I know, as far as those violations
of the law are concerned, our general counsel is very seriously
considering all of those allegations.
But as far as small shippers go, there is a very unused
section of the Shipping Act concerning shippers associations.
We encourage our small shippers to band together to leverage
their cargo volumes, and get better rates and other things of--
the parts of service that they may want to get for motion
carriers. So thank you for that.
Mr. Gibbs. Thank you, Mr. Chairman, for your indulgence. I
yield back.
Mr. Carbajal. Thank you, Mr. Gibbs.
Mr. Maffei, we have recently gotten reports of shipping
companies refusing to carry cargoes, charging excessive
detention and demurrage fees, and canceling contracts. Do these
actions violate the Shipping Act?
If so, why hasn't the FMC taken more meaningful action?
Mr. Maffei. I mean, it certainly depends on the
circumstances of all of those different actions. But I am very
concerned that many of those things are violations of the
Shipping Act, particularly if a carrier is refusing to even
offer a container at any price to an exporter. That, to me, is
refusing to deal.
And I should say that these are my own opinions. I would
not drag Commissioner Dye, necessarily, into these or the full
Commission. It is a Commission of five independent members. But
my own opinion is that would be a violation of the Shipping
Act.
I also think the detention and demurrage practices that we
have seen, at least the ones we have heard about, are certainly
violations.
And in terms of the contracts, that is a little more
tricky. I will say that the Commission is not allowed to,
according to the current Shipping Act, adjudicate whether
contracts have been broken. You may want to take a look at
that. I do believe that the Commission should maybe have a
bigger role in reviewing contracts for clauses that are
violations of the Shipping Act, and it may be helpful if
there--you know, in practice it is more blurry about whether
something is a contract violation or a violation of the
Shipping Act within the contract.
In terms of what we are doing, Commissioner Dye is running
a very vigorous investigation of all these things. You have to
have evidence. There is the Administrative Procedure Act. We do
have to present evidence in court. We do have to be able to
prove that these things are violations. And the law is fairly
vague about what it means to be reasonable, so those things do
take some time. But I have every confidence in Commissioner Dye
and our team, that we will get to the bottom of all of these
instances.
Mr. Carbajal. Let me continue on that. Why has it taken so
long for the FMC to get more involved and yield a better result
to date?
And, two, what can we do to enhance the communication with
the shipping carriers to get to a better result?
Mr. Maffei. Yes, why has it taken so long to resolve?
We have been working hard since the beginning. I think that
it is difficult for these things to emerge. Again, there are
these barriers. They are not in a law, but there are certainly
barriers, like fear of retaliation, that is keeping individual
shippers from filing their own complaints. They don't have to
wait for us, but they are not doing it, so that then we
definitely want to step in.
I do think that resources, when you have this much
information flow coming in, resources are important. I made
sure, as soon as I became Chairman, that Commissioner Dye had
the exact people that she needed, and the resources she needed.
But, like her--and we have discussed this--I would like to do a
full audit of each and every of the nine main container lines,
a forensic audit, whether or not we have gotten complaints
about them, particularly on their detention and demurrage
practices, to sort of see what they are doing in terms of
billing, in terms of other kinds of things that are causing
havoc for the shippers.
But I don't know if we have the resources for that. So that
is part of it.
In terms of what we can do to make things more accessible,
we do have a Department of Consumer Affairs and Dispute
Resolution Services. It can be very effective. But to be
perfectly honest with you, most of the calls it gets are from
passengers, not from shippers. And so I have been looking into
ways to make it more--people--more communicating with shippers
and truckers.
One thing I will do, if I can make sure I can get enough
consensus--but I think I can--is to have a particular go-to
person, probably based in CADRS, where, particularly, exporters
can go, call that one person, and that one person will be an
expert on various things they can do, and all of their options.
Another thing we can do is try to publicize better our
CADRS program. It is always a little thorny when Federal
agencies publicize themselves, but I do think that that would
be helpful, if we can do it in a targeted way.
Mr. Carbajal. Thank you. In your testimony you said that
you ``want to look at the billing and appeal policies for
detention and demurrage charges.'' How is this different than
Commissioner Dye's Fact Finding 29?
Mr. Maffei. It isn't different. I think it works with her
factfinding, as well. But basically, her factfinding is an
investigative factfinding.
And I would also want to look into what we can do to maybe
clarify things further.
There have been some proposals out there that we do an
additional rule on detention and demurrage, and I think that
might be valuable. It wouldn't necessarily--we would need to
still do all the similar enhancements in our enforcement
capability. But things like sending bills out on detention and
demurrage, billing a----
[Unmuted indistinct voice.]
Mr. Maffei. I am sorry, billing a shipper----
[Unmuted indistinct voice.]
Mr. Maffei. I am sorry, can I be heard OK?
Mr. Carbajal. Yes.
Mr. Maffei. OK, I will sit a little closer, just in case.
But we want to--you know, these carriers sometimes bill a
shipper, and we don't believe, sometimes, that--or at least the
shipper doesn't believe that they should have been billed,
because the detention and demurrage is unreasonable. So they
complain, and they go through a big complaining process.
And indeed, in the end, the carrier often says, ``Oh, we
were wrong, sorry,'' but they sent the bill out, they had a
fairly complicated appeal system. I think that, in itself, may
be unreasonable. If it is unreasonable to make the charge, then
it is unreasonable to send the bill, except in very rare
instances.
And so that is one thing that both Commissioner Dye and I
have discussed what we can do about that.
Mr. Carbajal. Thank you. I am running out of time here, so
I am trying to get one last question in here for Commissioner
Dye.
Mr. Maffei. My memory is the chairman never runs out of
time.
Mr. Carbajal. It is true, but we try to adhere to the
timeframe.
Ms. Dye, in the second panel Ms. Jacobson is going to
testify that, even after containers have been loaded on the
terminal dock, carriers have changes, return dates, which incur
demurrage charges. That seems unreasonable to me.
Why hasn't the FMC addressed this issue?
Ms. Dye. You are exactly right, Mr. Chairman. The confusion
between ocean carriers and marine terminals persists, and
exporters get caught in the middle. This is one of the four
major problems that our nine teams addressed at the beginning
of the factfinding.
So, since this is the major problem for exporters, the
investigations that our Bureau of Enforcement is conducting
now, features in this problem. And so, we look forward to the
results of the investigation, because we decided that this
was--I am not involved in the actual investigations, or the
choosing of carriers who may be investigated. But I did insist
that this problem with earliest return date and demurrage
unreasonably, potentially, in these situations, should be our
highest priority. And we have already started those
investigations [inaudible]. Thank you.
Mr. Carbajal. Commissioner Dye, what other authority does
the FMC need in order to enforce your demurrage and detention
rule in an expeditious manner?
Ms. Dye. I don't believe we need any more. We will work
with you on whatever you would like for us to consider. But I
don't think that we need more.
We decided to use an interpretative rule, because it is
flexible. For instance, we have heard about waivers that many
carriers have granted on demurrage and detention in certain
circumstances, and we didn't discuss waivers in the rule
itself. But obviously, a complete waiver during congestion is
reasonable.
And so I will be delighted to talk to you more about this,
but I think we are OK for now. Thank you.
Mr. Carbajal. Thank you, Commissioner Dye. I do encourage
you and your Commission to give that a little bit more thought,
because, at the end of the day, if there is delay, it comes
back to you, saying you need no more authority, you got
everything you have----
Ms. Dye. Yes, sir.
Mr. Carbajal. And yet delays occur. It is going to be back
on you. So I really encourage you to give that question a
little bit more thought.
Ms. Dye. Thank you, Mr. Chairman.
Mr. Carbajal. With that I would move on to Representative
Lowenthal.
Mr. Lowenthal. Thank you, Chairman. My first question is
for Chairman Maffei.
First of all, it is good to see you, Mr. Chairman. We
served together in the Congress before, and I am just honored
to watch your progression at the FMC.
My question is just some elaboration of what you have
already talked about. Through this pandemic, have you received
the support and the encouragement that you need from both the
ocean carriers and the terminal operators? Have they been
supportive of your investigatory process?
Mr. Maffei. Well, thank you for the question, Congressman
Lowenthal. It is great to see you, as well. I do hope to get
out to Los Angeles at some point in the near future, now that
this pandemic has lifted somewhat, sometime this summer.
I would say that they have definitely made themselves
accessible to us. I don't think there is any doubt about that.
When myself--we call--try to get on the phone, it may take a
day or so, but we usually can get not only the U.S. CEO, but
usually the global CEO on the phone.
Whether they have given us support, I think it is difficult
for me to try to put myself into their place. What they say is,
basically, they will talk about how what they are doing is for
economic reasons, and then particularly a question like
exports, which I have made a couple of rounds of calls, I will
argue that, OK, well, it might cost you a little bit for that
opportunity cost of that empty container, but in the long run
you will have a better, more reliable export customer. And
frankly, you will look better to the Congress and the American
public, and that will help both your line and the industry.
I would say they are pretty receptive to that. But these
are big organizations, big businesses, and you don't always get
that receptiveness trickling down to every level of the
company. So while I would say that they have been receptive and
supportive--it is deeds, not words. We need to do what
Commissioner Dye is doing, and we need to keep the pressure on
them, in terms of making sure that we are scrutinizing the
carrier lines, to make sure there is no violation of the
Shipping Act, and the alliances.
Mr. Lowenthal. Thank you. Before I get to Commissioner
Dye--I have a question for her--I just wanted to say that I do
represent the Port of Long Beach. And during this pandemic, I
just want to say, the ports, our partners in labor, and so many
others have worked heroically during this crisis. Large amounts
of the pandemic have impacted our ports, yet they have come
through.
We need more investments in ports, as Chairman DeFazio has
said. And I am hoping that the FMC moves forward swiftly, and
if there are bad actors, holds them accountable. And I am
hoping that with our reopening and our global vaccine efforts,
we are going to restore stability throughout the world.
I mean, we are still not out of it. But I want to make sure
that our system is resilient, and I am going to ask some of the
others in the second panel about that resiliency.
But Commissioner Dye--and I understand that you are not
able to comment on the ongoing investigation--but can you
provide the committee with when we can expect to hear the
findings, or the conclusions from your findings?
Ms. Dye. Well, we really haven't set--the order to me from
the Commission doesn't have a date, because we had no idea, and
still don't really know how long the pandemic will last. In the
very beginning we were engaged in getting storage at ports for
cargo that was on the water. There was nowhere to put it,
because we were closed.
And so there have been several phases of the investigation.
I am free to discuss my own recommendations, several of which
the Chairman has mentioned. Of course, those would take final
Commission action. But my team is working expeditiously, and
you can be sure that we are not dragging our feet.
Mr. Lowenthal. Good, good.
Ms. Dye. One thing that I wanted to point out, I believe in
rewarding good behavior, as well as bad behavior. And several
of the ocean carrier CEOs, U.S.A., have had rolled up their
sleeves and gotten very involved in helping us, the major ocean
carriers, especially on the problems with container return. And
we always appreciate that, want more of it.
Mr. Lowenthal. Here is a question. It may be very
oversimplified. Both you and the Chairman have talked about
some of the violations, or the problems with detention and
demurrage charges. Can you elaborate for the committee? What
specifically have you been hearing about those kinds of
violations?
Ms. Dye. I can emphasize to you that, if we were going to
roll out--one of the largest things, one of the most major
things the FMC has ever done, for the first time in the world,
these charges--shippers everywhere I have ever been,
internationally, complained bitterly about these charges, and
we took it on.
But we certainly would not have chosen to roll it out
during a pandemic, when everybody was working from home, and we
were unable to travel to talk directly to companies about the
rule.
But I think that it is clear, and, as I said, we are
taking--because we didn't get factual complaints that are
necessary to move forward in investigations from very many
entities, I think----
Mr. Carbajal. Thank you, Commissioner Dye. If you could
just wrap up----
Ms. Dye. OK, sorry.
Mr. Carbajal [continuing]. We have to move on.
Ms. Dye. Of course, of course. But we are moving forward.
Thank you, Mr. Lowenthal.
Mr. Lowenthal. Thank you, and I yield back.
Mr. Carbajal. Thank you. We will move on to Representative
Brownley.
Ms. Brownley. Thank you, Mr. Chair. I appreciate you
allowing me to be here today. This is not my normal committee,
but I am here because of my farmers in my district.
My district in Ventura County in California is heavily a
farming community. And many of my farmers rely on export
markets, and are paying triple the price. So I know that FMC is
supposed to ensure fair shipping practices. We are talking
about that.
So I just--my question is, is FMC doing anything around
agriculture, specifically in terms of trying to resolve these
high prices?
We do feed our country.
Mr. Maffei. Yes, Congresswoman Brownley, you certainly do.
I am not sure if you remember, but when I was in Congress, my
district, which had a city in it, but also had substantial
agricultural exports--I am from New York, but I am from upstate
New York, and we had a lot of dairy, soybeans, and other kinds
of fruit, particularly apples. So I really empathize with these
exporters.
We are trying to do things in terms of--I mentioned the
calls that I am making, and I mentioned that we are taking very
careful scrutiny about whether carriers are refusing to deal.
They are not allowed to do that. You have to at least make a
container available.
That said, though, it is important to note that, while in
the purposes section of our legislation it does say that we are
to promote the growth and development of United States exports,
it says that we are to promote the growth and development of
exports through competitive and efficient ocean transportation,
and by placing a greater reliance on the marketplace.
The 1984 act was enacted at a time of deregulation and
reliance in the marketplace. And, by and large, it has worked
for us, in that one of the reasons why exporters have been able
to succeed is that shipping rates have been relatively low
through most of the last 20 years.
That said, though, now that they are much higher, we don't
have very many tools to address those costs. It would be--we
were not allowed to interfere in the market, or set rates. And
so that can be very frustrating for someone like me, who does
very much value those exporters, and trying to find a way to
help them.
Certainly, the stuff we have already discussed about
improving our consumer affairs outreach to exporters so that we
can take each--each individual exporter may have very different
circumstances, depending on what they grow, and where they are
in the country, et cetera. But we can at least give them
individual guidance as to what their options are. But we are a
little bit tied by that provision, for better or worse, but the
provision that keeps us out of the market, from interfering in
the market.
Ms. Brownley. Thank you. Thank you for that. And, by the
way, it is good to see you, and thank you for what you are
doing in your position today.
I guess the other question that I have is, do you do any
kind of engagement with the U.S. Trade Representative, in terms
of some of these prices?
Some may be able to be mitigated somewhat through trade
policy.
Mr. Maffei. Yes. The truth is that I think we need to do
more. I have been in touch with the Office of the USTR when I
was a Commissioner, particularly on some of the China issues
that we were seeing in the last couple of years in terms of--we
have, under other acts, some responsibilities in terms of
making sure that there is not discrimination against U.S.
trade.
That said, I think it would be very helpful for us to have
more contact with them. And I will take your question as an
impromptu request on your part for me to get in touch with them
and discuss that. So I appreciate the suggestion.
Ms. Brownley. Well, thank you. Thank you for that, and my
time is about to run out.
Both of you were talking about your ability to self-
initiate. Roughly, can you give me a number, in terms of how
many self-initiated claims are underway at this moment in time?
Mr. Maffei. I will defer to Commissioner Dye, but I imagine
that will be a difficult question for her to give you a
specific on.
Ms. Dye. We have quite a few, thank you.
Ms. Brownley. Thank you, Mr. Chairman----
Mr. Maffei. Congresswoman Brownley----
Ms. Brownley [continuing]. I yield back.
Mr. Maffei [continuing]. We will get back to you, when
appropriate, to----
Ms. Dye. Yes, thank you.
Ms. Brownley. Great, thank you. I yield back, Mr. Chairman.
Mr. Carbajal. Thank you. We will now move on to
Representative Johnson.
Mr. Johnson of South Dakota. Thank you, Mr. Chairman, I
appreciate that. My questions will be for Commissioner Dye.
Commissioner Dye, you just mentioned that there are a
number of self-referred complaints, or investigations. Have
there been any enforcement actions on the actual penalties
handed down?
Ms. Dye. No, no, not yet. But this is a new way for us to
deal with this particular section of the law. But we were not
content to wait any longer for particular complaints. So we use
what we have had, and we are using them in--those are--they are
violations of the Shipping Act actions, and they are under
investigation now.
Mr. Johnson of South Dakota. So what about unreasonable
detention and demurrage?
I mean, you guys had----
Ms. Dye. That----
Mr. Johnson of South Dakota [continuing]. An interpretive
rule. I mean, do they deal more with that, or do they deal with
the refusal of foreign-flagged shippers to take American,
particularly agricultural, exports to Asia?
Ms. Dye. They deal with the demurrage and detention
charges, as the result of the confusion in the marketplace.
Mr. Johnson of South Dakota. So, Commissioner--and just
palms up here--I mean, Congressman Garamendi and I have been
talking about some potential legislative solutions that we
think would give FMC some additional powers, I think, to better
respond to this marketplace.
Now, you have said today that you don't think you need
additional authority. And so I just want to get my arms around
that a bit more. I mean, it seems like the ocean shippers, they
don't think you have the authority. I mean, they don't appear
to be running scared, they don't appear to be living up to the
letter of the law, either in what we hear are relatively
widespread refusal to accept American exports, and then also
related to the detention and demurrage issue you mentioned.
So when they are not obeying the law, shouldn't that give
us cause to believe that they think you don't have the power to
hold them accountable?
Ms. Dye. Well, I appreciate that perspective, because we
are certainly not happy with the behavior of some of them, but
some of them are in compliance, and keep in close touch on the
application of the rule. And so we want to make sure that we
target the people who are not complying, and make sure they
know that we mean it.
So I always am careful when I am interviewing our shippers
to say, ``Wait a minute, all of them?''
And they will say, ``Well, no, not all.''
We understand people are furious. I have to say the stories
that I have heard about canceling bookings make us furious,
too. But these people are longtime colleagues of ours.
Mr. Johnson of South Dakota. So----
Ms. Dye. We are----
Mr. Maffei. Congressman, could I ask your indulgence to----
Ms. Dye. We are going----
Mr. Maffei [continuing]. Address that, as well?
Mr. Johnson of South Dakota. Oh, yes, Mr. Chairman, go
ahead, certainly.
Mr. Maffei. Yes. So, one, I think what Commissioner Dye has
been saying is we have the authority to enforce the detention
and demurrage piece of this.
Ms. Dye. Correct.
Mr. Maffei. I think it is another question that we will
leave to another congressman, or whatever, if we have the
authority to do all these things, particularly the exports, et
cetera. So that is a different question.
I do want to, though, quickly say on whether the lines
believe this or not, I do think it depends on the line, and
sometimes the people within the line. But I will say this. We
need to get these cases done, we need to get them through, and
the reason is we need to set a credible deterrent. The only way
they are really going to believe it--it doesn't matter what we
write or what we say, what we clarify--is there needs to be
instances where they do it and it ends up not paying on them.
Mr. Johnson of South Dakota. So----
Mr. Maffei. So it is very, very important that we do that
deterrent.
And one thing you might want to consider is if we were
allowed to not just get fines that would go to the U.S.
Treasury, but reparations that would actually go back to the
aggrieved shipper. That is vague, or not really--I mean, that
is confusing. That would be a useful change in the Shipping
Act.
Thank you for letting me address it.
Mr. Johnson of South Dakota. Oh, yes, sure. Thank you,
Commissioner and thank you, Mr. Chairman.
I would say a few things with the time I have left. Number
one, I agree wholeheartedly, we need a credible deterrent. It
does seem like there continue to be bad actions and bad actors
within this space. And, as we have talked about a fair amount
today, it has had a substantial ripple impact throughout the
American manufacturing, and particularly agricultural, sectors.
Number two, I take to heart your suggestion, Mr. Chairman,
that perhaps some additional authority around this trade
equivalency for U.S. exports could be helpful for FMC. And then
I also take to heart your suggestion that perhaps Congressman
Garamendi and I could also look at some reparation, making
whole some of the harm that has been caused, just opposed to
penalties.
Thank you very much. That is very helpful. And the
congressman and I will absolutely continue to move forward in
those areas.
Thank you, Mr. Chairman. I yield back.
Mr. Carbajal. Thank you. We will now move on to
Representative Garamendi.
Mr. Garamendi. Thank you, Mr. Chairman, for the hearing,
and for the Commissioners.
And Chairman Maffei, thank you. It is a delight to see you
on the screen. I would love to see you in person here, next
time out.
We have got a problem, folks. We have got a problem in
which the shipping industry is able to discriminate against
American exporters, plain and simple. It may be because they
can make a heck of a lot more money sending those containers
empty, rather than back to the Western Pacific, than allowing
them to be here long enough to be loaded up with American
exports. It is a serious problem. It has been discussed here by
others.
I want to follow up on the issues raised by my colleague,
Mr. Johnson of South Dakota. And this goes directly to Mr.
Maffei.
Can you please confirm whether the Federal Maritime
Commission currently lacks the legal authority and the
statutory directive to ensure export opportunities for U.S.
exporters, and promote reciprocal trade, foreign commerce, in
your regulation under the current Shipping Act?
Mr. Maffei. Certainly, the act does not have any provision
to give us the tools to provide for reciprocal trade. That
doesn't necessarily mean that I think that that is where it
should go. That, obviously, does involve other segments of the
Government, like the USTR, et cetera.
But I will--let me just say that I am happy to answer that
in more detail, either in a smaller meeting or in writing. But
I will just say that we don't have the tools to really address
any of that--the market issues that involve the exports--that
carriers make so much less on exports so they can do other----
Mr. Garamendi. Thank you for that confirmation. You do not
have the tools presently. Who was it--Adam Smith said the
invisible hand of the market, yes, and most people don't read
the next chapter, which is there may be the necessity to
regulate that market, so that it actually performs, so that
there is a balance of power--in this case, a balance of power
between the importers, who are able to receive several times
more pay for a container moving from the Western Pacific to
America than an exporter from the United States.
So, Mr. Johnson has already brought to our attention that
he and I are working on a draft piece of legislation that I
would expect would give you the power to look at and to provide
the necessary regulation, as Adam Smith said, might be
necessary under certain circumstances, that there be a proper
balance in the free market system.
We would suggest that there are several things--I will put
this on the table now--requiring ocean carriers to include
statement of compliance with the regulations, prohibiting ocean
carriers from declining all cargo bookings for exports. I note
that Hapag-Lloyd told the soybean exporters, American soybean
exporters, ``Sorry, but we are not going to ship, period.''
That must not happen in the future. And so we would prohibit
that in our draft legislation, and perhaps in the final law
that we would hope would become a result of that.
Also requiring the FMC to post publicly on its website all
findings of false certifications by ocean carriers and
penalties that the FMC might have under the current law, and
also establishing ongoing duty responsibilities for the FMC to
ensure export opportunities for U.S. exporters, and promote
reciprocal trade.
Yes, there ought to be a law. And we are going to work on
that, Mr. Johnson and I, together with others on this
committee--that what is currently happening to American
exporters is not fair. It is not justified, except if you want
to be a price gouger, which, apparently, some of these shippers
want to be, taking advantage of the Asian exporters who are
willing to pay anything to get their products to the United
States, and immediately return that container empty so they can
do it once again, to the detriment of American exporters. So we
are going to proceed with that.
Mr. Maffei, you seem to be amenable to such an action.
Would you care to comment? Should we or should we not take
steps to carry out Adam Smith's second chapter? Sometimes there
needs to be a regulatory balance.
Mr. Carbajal. If you could do that briefly, we are running
out of time.
Mr. Maffei. Let me just say that I certainly want to work
with you on that. I think it is important to take on the issue.
I think we should discuss the specific provisions to make sure
there is minimal unintended consequences as possible.
But I will also say that it isn't--we can't just scapegoat
the carriers. I know that they are an easier scapegoat. Some of
the so-called price gouging is going on in just a few of these
intermediaries who purchase space on the ship, and then resell
it for huge premiums to exporters who just need that, or
sometimes importers, as well. So there are good eggs and bad
eggs in all of these baskets, and certainly it would be good to
have more tools for the FMC.
So I look forward to working with you and your colleague,
Mr. Johnson, on that.
Mr. Garamendi. Thank you. I yield back.
Mr. Carbajal. Thank you. We will now move on to
Representative Van Drew.
Dr. Van Drew. Good morning, Mr. Maffei and Ms. Dye. Thank
you for coming to testify before this committee on issues that
are so critical to the United States: our supply chain
security. We have heard about it over and over again, with good
reason.
Over the past year, thousands of ships have left American
ports, devoid of cargo. These vessels go to China, fill up with
steel, clothing, electronics, toys. You name it, they have got
it. They come to the west coast of the United States, unload
these cheap Chinese products, and then head back to China as
quickly as they possibly can. Once again, they leave with
absolutely nothing, zero made in America.
This phenomenon is extremely troubling to all of us. This
seems symptomatic of a deep and fundamental weakness in our
supply chain. That fundamental weakness in our supply chain,
and really, the entire global supply chain, is exponentially
increasing dependence on China.
Here are some of the statistics on the Chinese market
share, focusing just on maritime commerce industry. Over the
last year, China's export container volume increased by 20
percent only in 1 year. China produces--this is an unbelievable
statistic to me--China produces 96 percent of the world's
shipping containers. China controls just about 50 percent of
the world's shipbuilding market.
These trends, combined with the current state of the
American maritime industry, present not only an economic
threat, but a national security threat. As evidenced in World
War II, a nation's industrial power can quickly be shifted to
military production. This is particularly true of shipbuilding.
In the event of a conflict with China in Taiwan or in the
South China Sea, the United States needs a strong industrial
base independent of Chinese supply chains. I can hope, only
hope, that you can explain to me how this has all happened,
what it means for our country and the world, and whether we are
prepared for the worst.
So my first question would be how has China established
such dominance of the shipbuilding and container shipping
industries?
Mr. Maffei. I think you mean container building industries.
Dr. Van Drew. Correct.
Mr. Maffei. I mean, that is pretty much outside of----
Dr. Van Drew. Well, actually, both.
Mr. Maffei. Yes, exactly, both. The--in terms of the
manufacturing, it is for the same reasons that China is
manufacturing so many other things, because you can manufacture
stuff anywhere and, actually, for years, ship it for very, very
low cost. Even now, with these huge costs for importing, you
are still talking about the ocean shipping cost costing about,
say, 60 cents for a pair of shoes.
Now, 2 years ago it was 15 cents for a pair of shoes. Now
it is 60 cents. But that very inexpensive shipping cost has
allowed China to gain advantages from low labor, low materials
cost, low regulations, and almost no regulations in some areas.
So that is beyond our purview, but it is one of the reasons why
China has gained that.
I will tell you, Congressman, that one of the silver
linings to the very dark cloud of all of these record-high
freight rates is, with rates--particularly, sometimes, going
to, say, $10,000 a container, in some cases, to go from
Shanghai to L.A.--the silver lining is I have heard that there
are some consumer goods and large shippers that are now
contemplating manufacturing at least some of those products in
America again.
So part of the reason, frankly--you asked why this
happened. It is actually the low shipping rates for all those
years that has allowed it to happen.
China isn't exactly dominant because--I mean, for instance,
carriers based in Switzerland and Denmark, each one of those
has more of the market share worldwide than China's carrier
does.
Dr. Van Drew. Not to interrupt you----
Mr. Maffei. Yes.
Dr. Van Drew. Thank you. Thank you for your answer so far.
Dr. Van Drew. Yes.
Dr. Van Drew. But why, with even containers, I mean, 96
percent of the world's shipping containers?
And I know you say it is beyond our purview, but I think it
has to be under our purview in some way, because we place
regulations upon ourselves of all types, but we exempt China.
We place regulations on ourselves that reduce our productivity,
but we don't do that to China. We place regulations on
ourselves that really hurt our economy in many ways, and yet we
don't do that to Russia or many other countries.
So I, quite frankly, don't understand that, and I know I am
going to deviate a little, but we can't build a pipeline, but
Russia can. I don't understand that. I don't understand why we
have a two-tiered system here. One is they can do anything and
we can do nothing. And I know that is not all your fault, but
it is under our purview in a sense, because it concerns us, and
it concerns us into the future, quite frankly, for the future
of the Nation.
Mr. Maffei. Yes, sorry. I am not implying that it is not
under your purview, or the purview of the country or the
Congress. It is simply not in the FMC set of responsibilities
that you have given us. It goes more to trade, trading policy,
et cetera.
So--but I will tell you this. I am certainly concerned
about China's dominance in building in these areas, and it does
affect the industry, and we do monitor that.
Dr. Van Drew. In what ways might China leverage its growing
influence in our maritime commerce----
Mr. Carbajal. Mr. Van Drew, you are out of time. If you
could just finish your question----
Dr. Van Drew. I am sorry----
Mr. Carbajal [continuing]. So he could submit an answer for
the record.
Dr. Van Drew. I could talk about this forever. It is a
really huge, dominant problem that we cannot ignore. It is
under our purview. And I thank you, Chairman, for your
latitude, and I yield back.
Mr. Carbajal. Thank you. With that we will move on to
Representative Larsen.
Mr. Larsen. Thank you, Mr. Chairman. And it is good to see
the Chairman of the FMC, as well, a former colleague. I
appreciate seeing you, as well as Commissioner Dye. Good to see
both of you.
I have a little bit different twist on this question. First
off, the comments from Mr. Johnson and Mr. Garamendi are right
up the alley with what I am hearing in my district. And the
first question I have--and you may have covered this earlier, I
apologize for being late--does this problem tend to be focused
in the natural resources industry, or is this going
tomanufactured goods, as well?
People I hear from in my district, it is mainly lumber that
is getting, you know, kicked out of containers. So what is the
record from the FMC on this?
Mr. Maffei. Yes, I will--if you are looking for actual
statistics, we will have to get back to you. But it is mostly,
yes, agricultural-type goods, the kind of goods that are very
heavy, and are sometimes more difficult to get to the ports
because you have to transport them. Certainly, lumber is in
that category. Manufactured goods, obviously, there are far,
far fewer of those being exported from the United States, but
we have not--at least I have not heard, anecdotally, many
complaints from those folks. The higher paid exports, the
higher value exports do still have to pay a lot more for a
container, but those are the ones that actually are going.
As I mentioned, exports, overall, are up. They are just not
up compared to how much the imports are up. And they do--they
are also--they are up, but it does tend to be those higher
value exports that are getting those containers, because they
are the ones that can pay the highest premium, as opposed to,
unfortunately, some of these agricultural exporters, who just
have very low margins. I mean, that is the sad thing about
American agriculture.
Mr. Larsen. Yes, and I am also trying to piece some of this
together, because I am getting complaints in my district from a
couple of different areas, where containerships are using
federally recognized anchorages in order to anchor until they
get a spot at the Port of Seattle, or even the Port of
Vancouver in BC. And so we are getting complaints, because
these containerships are showing up in places they have never
showed up before.
And I was wondering about whether or not the FMC can take a
stricter approach to existing contracts or contractors between
exporters and shippers in order--would that help solve this
supply chain problem? Would that help move containerships
faster, in order to get them out of these places where they
have been using federally recognized anchorages, in order to
alleviate that problem?
Mr. Maffei. Yes, you are a bit out of my lane, Congressman
Larsen, in terms of the anchorages and how they are used. That
is more of a Coast Guard or, potentially----
Mr. Larsen. Yes.
Mr. Maffei [continuing]. Maritime Administration.
But in terms of your question about contracts, I will admit
it is hard to draw a direct A and B and say, ``Well, if we had
more authority over maritime contracts, it would lead to fewer
ship lines.''
But I will say that, as I have mentioned, some
clarification of the FMC's ability to review contracts and take
steps if we feel those contracts are not reasonable, or have
provisions that aren't reasonable, would be helpful. As I say,
now the current law says that contract disputes have to go to a
different venue. It was well meaning, and I certainly
understand that, we don't want to become a contract court here.
That would lead to volumes that just don't make any sense of
cases.
But that said, though, we need to have some additional
flexibility, I think, to look at those contracts, and to take
action when they are violative of the Shipping Act.
Mr. Larsen. All right, that is fine. I was just looking for
solutions in a very tight supply chain----
Mr. Maffei. Yes.
Mr. Larsen [continuing]. Environment right now.
Mr. Maffei. Yes.
Mr. Larsen. So I appreciate that.
Mr. Maffei. The best thing we can do is, frankly, to
continue to try to increase the capacity, so there just aren't
those ship lines.
I mean, nobody wins in those ship lines. Everybody loses.
Mr. Larsen. Yes.
Mr. Maffei. The shippers lose, the ports lose, the carriers
lose. They don't want their ships idle, either. So that is the
main thing.
Mr. Larsen. And we get the phone calls.
Mr. Maffei. Yes.
Mr. Larsen. As you are aware.
Mr. Maffei. Yes, I have heard them.
[Laughter.]
Mr. Larsen. Right, OK. That is it for me.
Thank you, Mr. Chair, I yield back.
Mr. Carbajal. Thank you. We will go to Representative
LaMalfa next.
Mr. LaMalfa. Well, thank you, Mr. Chairman. I appreciate
being able to sit in on the committee today, on this extremely
important topic towards [inaudible] I think, especially for
California and California agriculture. I am pleased we could
have this opportunity to talk about this container situation.
It is really crippling a lot of our ability to export.
So, you know, there has been a lot of good conversation
already in committee here. But one area I wanted to underline a
little bit, too is on--it really affects everybody across the
board, whether it is agriculture, getting their products
actually through the port system into the hands of the people
that are supposed to be purchasing it, especially under our
trade deals we have with China. And those trade deals don't
really seem to be being held up, not meeting the mark. So that
has the effect on the producer.
But let's talk about the truckers for a moment. They are
really caught in the middle on this, as well. If they cannot
get their cargo that they brought in loaded and off their back,
then they start running into fees, based on waiting in line at
the port for a long time. The trucker, the driver themselves,
has the challenge of hours--their hours are curtailed, because
they are on duty. So they are running into fees and fines
because of that situation.
And then, if they don't get to unload at the port, then
they got to wait somewhere with all that. So this certainly
does have a ripple effect through a lot of people in the field,
in the trucking, as well as what we have with the port.
But let me move to something more specific on the issue.
Let me ask Commissioner Dye--thank you for being here.
Ms. Dye. Thank you.
Mr. LaMalfa. Our markets are pretty open to foreign
imports, but we don't seem to have the same level of
enforcement, or the goodwill, I guess, to require them to take
our goods back with them in the turnaround at the ports. As I
was mentioning on the trade deals we have, they don't seem to
be honoring them.
When you have a situation where--the statistics I have--if
a container comes from Shanghai to L.A., the exporter of
Chinese or Asian products is paying nearly $6,000 for the use
of that container on that ship. And my figures are the
container returning from L.A. to Shanghai, the price for that
container is just under $800, so a difference between $6,000
and $800. So we are caught at a disadvantage. The incentive
isn't to fill the container in our port with our stuff, but to
just get it back to China and other Asian areas as fast as
possible. That is, obviously, what we are talking about, what
we are battling here. So we suffer here. Our ag suffers, our
products that are made in America suffer.
So if we can't require them to take our items back on
export, then what is the best way to stop this unfair
situation, Commissioner Dye? Can we hit them with fees and
fines on that, are there other ways to penalize this problem?
Again, I don't think they are upholding the spirit or maybe
the technical efforts of our trade agreements by doing it this
way. And our people are left holding the bag. Is it just a
matter of the American consumer, that they need to somehow be
educated on buying less imports, and somehow more domestically
produced products? It seemed like that was a pretty strong
emphasis until recently. What do you think on that?
Ms. Dye. Well, I appreciate that. I think that some of our
ocean carriers carry a lot of exports, it is their business
model, and some don't. And of course, that can change,
depending on prices. I agree with you that some of these prices
are incredible. As the chairman said, these spot rates are
outline.
Mr. LaMalfa. Yes, correct.
Ms. Dye. And our exporters suffer from that. And this
problem with container----
Mr. LaMalfa. Real quickly, can we put our finger on the
scale somehow in order to tilt that back in our favor a bit?
Ms. Dye. That is probably beyond the Shipping Act itself,
as a policy issue, but, as the Chairman said, we will be glad
to talk to you and look at anything that you may like us to
consider.
We are looking at going back to container depots to--there
is a new collapsible container that many say will be to the
advantage of exporters, because they can carry more. And so, in
2010 I was looking at load boards in trucking stops to see if
we could use that technology. But we have several things we are
going to look at, because we agree with you about the problem.
Mr. LaMalfa. Well, thank you, Commissioner, I would
appreciate the chance to follow up with you on that.
Ms. Dye. Thank you.
Mr. LaMalfa. I like that, I like those thoughts. Thank you.
Ms. Dye. Thank you very much.
Mr. LaMalfa. Thank you, Chairman.
Mr. Carbajal. Thank you. Are there any further questions
from members of the subcommittee for this panel?
Representative Gibbs?
Mr. Gibbs. Yes, yes. Thank you.
Commissioner Dye, I have a followup, I think, on Mr.
Larsen's question about your data transparency initiative.
Would that help on the dwell time for vessels?
It seems to me, vessels waiting at anchorage and for
logistical challenges, if we made that so they would know what
is going to happen, your transparency initiative, could you
just reflect quickly how----
Ms. Dye. Yes.
Mr. Gibbs [continuing]. That might be helpful?
Ms. Dye. Yes, Mr. Gibbs. You are exactly right. The end-to-
end supply chain visibility that we considered in 2016 and
2017, after the L.A. transportation congestion in 2016 and
2017, it is a great idea. We are dedicated to it. Los Angeles
has done a lot of work on that, and we talked to a lot of
experts who believe that, if you tell people what they need to
know, when they need to know it, then they behave rationally.
And a lot of these lines and bottlenecks can go away.
So thank you for that question.
Mr. Gibbs. Thank you. Thank you. I yield back.
Mr. Maffei. Congressman, could I actually--could you--could
he indulge me, just to address the same question?
Mr. Carbajal. Sure.
Mr. Maffei. I actually want to echo it, because I think
that this is absolutely key of the--yes, physical
infrastructure is important. But this--informational
infrastructure is what I call it--is maybe the solution to
avoid this happening again, at least as bad, if we ever do have
this kind of surge in imports. The national port information
system would provide end-to-end visibility, and this better
data management system, the more information-sharing, would be
absolutely essential to shippers being able to get their stuff
to the port at the right time if they are exporters, to pick it
up at the right time.
Congressman LaMalfa mentioned how truckers are just getting
caught in the middle. That is so true. And a lot of that is
because they don't have information soon enough in order to
plan when they are going to drop things off, or they are not
allowed to drop things off and pick them up at the same time.
So I just want to echo this, in terms of your thinking. It,
obviously, won't be done overnight, so it doesn't necessarily
help an exporter right now. But this is key to improving and
increasing the supply part of the supply and demand equation.
Thank you.
Mr. Carbajal. Thank you. Seeing no further questions, I
would like to thank our first panel of witnesses for their
testimony.
Your contribution to today's discussion has been very
informative and helpful.
As there are no further questions, I will now call up panel
2. I ask the witnesses on the panel 2 to please turn their
camera on, and keep them on for the duration of the panel.
I would now like to welcome our next panel of witnesses.
First we have Mr. John Butler, president and chief
executive officer for the World Shipping Council.
Two, we have Ms. Alexis Jacobson, international account
manager for BOSSCO Trading LLC, on behalf of the U.S. Forage
Export Council.
Then we have Mr. Frank Ponce De Leon, coast committeeman
for the International Longshore and Warehouse Union.
Four, we have Mr. Eugene D. Seroka, executive director for
the Port of Los Angeles.
And last we have Ms. Jen Sorenson, president of the
National Pork Producers Council.
Thank you for being here today, and I look forward to your
testimony.
Without objection, our witnesses' full statements will be
included in the record.
Since your written testimony has been made part of the
record, the subcommittee requests that you limit your oral
testimony to 5 minutes.
With that, Mr. Butler, you may proceed.
TESTIMONY OF JOHN W. BUTLER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, WORLD SHIPPING COUNCIL; ALEXIS JACOBSON, INTERNATIONAL
ACCOUNTS MANAGER, BOSSCO TRADING LLC, ON BEHALF OF THE U.S.
FORAGE EXPORT COUNCIL, NATIONAL HAY ASSOCIATION, AND
AGRICULTURE TRANSPORTATION COALITION; FRANK PONCE DE LEON,
COAST COMMITTEEMAN, COAST LONGSHORE DIVISION, INTERNATIONAL
LONGSHORE AND WAREHOUSE UNION; EUGENE D. SEROKA, EXECUTIVE
DIRECTOR, PORT OF LOS ANGELES, CALIFORNIA; AND JEN SORENSON,
PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL
Mr. Butler. Thank you, Chairman Carbajal, Ranking Member
Gibbs, and thanks also to the full committee chairman Mr.
DeFazio and Ranking Member Graves, and, of course, members of
the subcommittee. I very much appreciate the invitation to
testify today.
The record-setting containerized import levels that we have
seen over the past year have taxed every link in the global
supply chain, and I would just like to touch on a few of the--
--
Mr. Carbajal. Mr. Butler, could you put your microphone
closer to your mouth, because we can't hear you.
Mr. Butler. Certainly. Is that any better?
Mr. Carbajal. That is better.
Mr. Butler. OK. First question: How did we get here?
The title of this hearing really contains the answer, and
that is increased demand. Starting in the summer and fall of
2020, and continuing today, Americans with disposable income
shifted their spending away from services like restaurants and
travel to the purchase of all sorts of goods. And that is from
electronics to furniture, and other goods to create home
offices and to remodel homes. Most of those goods came to the
United States on containerships.
In 2020 the international containerized supply chain
essentially moved a year's worth of cargo in 6 months, and
demand remains at record levels today. Ports throughout the
world are congested, including here, with ships backed up in
anchorages, waiting for berths so that they can offload and
onload cargo.
Inland transportation by truck and rail is also
overwhelmed, and cargo is sitting in containers at warehouses,
waiting to be unloaded, and the empty equipment returned so
that another shipper can use it. Every part of the supply chain
is affected.
Second, what have ocean carriers done to respond to this?
Ocean carriers have responded by deploying every available
ship. As we speak, 99 percent of the global container fleet is
in service. The only ships not at sea are either between
charter contracts or in shipyards. Ocean carriers have also
bought or leased and deployed every available shipping
container.
Third, I want to address agricultural exports. There is
tremendous interest in this, and ocean carriers fully recognize
that individual U.S. agricultural exporters have had difficulty
getting equipment.
Unfortunately, this is also true for almost every type of
shipper in almost every country, and U.S. agricultural
exporters are not being singled out. Ocean carriers are working
with their customers to make sure that contractual obligations
are met. And again, not to minimize individual problems, but
U.S. Government data show that agricultural exports are up from
pre-COVID levels.
In addition, it is important to note that less than 15
percent of all agricultural exports move in containers. Most
seaborne ag exports move in bulk ships. The point is not that
we don't have problems to address--we absolutely do--but simply
to say that we need to understand the context in which those
problems arise, so that we can respond appropriately.
Fourth and finally, there have been some legislative ideas
floated by various organizations in recent days. Some of those
proposals, frankly, would add paperwork and do nothing else.
And some would invite the FMC to micromanage the international
transportation system. Neither approach would make things
better.
We have heard some proposals from Members today, and I look
forward to the opportunity to talk further with you about those
proposals.
We do agree that the best solution, really, is through
supply chain partners working together on a commercial basis.
And when that is not enough, as you have heard a lot about
today, the FMC has ample authority to address any unreasonable
behavior. And I can say, sitting where I do, that the
Commission has made it very clear that it will exercise that
power.
One thing we have to keep in mind is that the markets will
moderate, as demand and consumption patterns return to normal.
In the interim, I can commit to you that the ocean carriers
that transport this country's international commerce will do
everything in our power to continue to move the historic
volumes of cargo that we are moving today.
I look forward to your questions.
[Mr. Butler's prepared statement follows:]
Prepared Statement of John W. Butler, President and Chief Executive
Officer, World Shipping Council
1. Introduction: The World Shipping Council and the Liner Shipping
Industry
Chairman Carbajal, Ranking Member Gibbs, and Members of the
Subcommittee, thank you for the invitation to testify today. My name is
John Butler. I am President and CEO of the World Shipping Council \1\
(``WSC'' or the ``Council''). WSC is a non-profit trade association
whose goal is to provide a coordinated voice for the liner shipping
industry in its work with policymakers, the public, and other industry
groups with an interest in international transportation.
---------------------------------------------------------------------------
\1\ A complete list of WSC members and more information about the
Council can be found at www.worldshipping.org.
---------------------------------------------------------------------------
WSC members comprise an industry that has invested hundreds of
billions of dollars in the vessels, equipment, and marine terminals
that are in worldwide operation today. Approximately 1,200 ocean-going
liner vessels, mostly containerships, make more than 28,000 calls at
ports in the United States during a given year--almost 80 vessel calls
a day. This industry provides American importers and exporters with
door-to-door delivery service for almost any commodity to and from
roughly 190 countries. Approximately 35 million TEU \2\ of
containerized cargo are currently imported into or exported from the
United States each year. The container shipping industry is one of the
most important facilitators of the nation's growth and ongoing economic
activity. Ocean shipping is also--by far--the most fuel-efficient form
of transportation on the planet.
---------------------------------------------------------------------------
\2\ A TEU is a twenty-foot equivalent unit. Many containers are 40
feet in length and equal 2 TEUs
---------------------------------------------------------------------------
The World Shipping Council (WSC) and its members are fully aware of
and working hard to help resolve the disruptions to the U.S.
international ocean transportation system that have been caused by a
confluence of consumer demand and disruption. Simply put, and as
further described below, we do not have a container supply problem, we
have a container movement problem.
2. Record Consumer Demand Has Pressurized Every Link in the Supply
Chain
The U.S. is experiencing unprecedented import cargo demand due to
pandemic-altered consumer spending patterns. U.S. consumers made a
dramatic shift from services to goods, resulting in a stay-at-home
surge of ordering imported electronics, furniture and other home office
and household items. This surge was paid for using disposable income
that would normally have been spent on travel and restaurants and was
subsequently spurred on by U.S. government economic stimulus measures.
Most recently, the surge is being accelerated by vaccinated U.S.
consumers and businesses rapidly emerging from COVID-19 and eager to
get back to normal, to include fulfilling backorders and restocking
inventory. This much-welcomed economic recovery is resulting in record
import volumes and is putting pressure not just on ocean carriers, but
on every link in the complex global and North American supply chain.
Ports are congested, causing ocean liners to back up at anchor and
drift offshore, wreaking havoc on their precisely planned routes and
berth arrival times. It is important to note that vessel delays caused
by port congestion are not attributable just to waiting times at U.S.
ports. There are COVID-19 and congestion delays at ports in other parts
of the world as well, and the location of the port delay is largely
immaterial to the overall impact on vessel schedules. Most recently,
for example, delays are being reported in south China ports such as
Yantian because of COVID-19 work restrictions. This has a major impact
on the Transpacific trade, thus affecting the U.S.
Vessels arriving off Los Angeles, Long Beach and Oakland are
experiencing wait times to berth and offload cargo averaging one to two
weeks or more. The graph below illustrates how these wait times have
been driven by the current import surge.\3\ From January through May
2019, the number of ships at berth or waiting to come into Los Angeles/
Long Beach averaged 14.9 ships per day. In comparison, from January 1
through May 25, 2021, the average rose to 53.9 ships per day.
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\3\ Source: American Shipper, Wed. May, 26, 2021.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Labor has at times been at reduced capacity when COVID-19 protocols
have limited the number of longshoremen permitted to work each vessel.
Railcars are in short supply due to a lack of chassis required to
offload containers from rail to trucks at intermodal rail hubs
including Dallas, Chicago, Memphis, and Kansas City. Truck chassis and
truck drivers are also in short supply and major trucking companies
report that the average dwell time (the time that customers hold
equipment before emptying that equipment and returning it) is up 30%
year-over-year in May.\4\
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\4\ https://www.joc.com/trucking-logistics/trucking-equipment/
truckers-hike-fees-crack-down-excessive-dwell-trailers-
containers_20210607.html
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The bottom line is that congestion exists at each of these
intermodal links in the supply chain. Container shortages--the subject
of this hearing--are being caused by the fact that thousands and
thousands of containers are stuck aboard ships at anchor, on port
terminals waiting to be picked up, on railcars and trucks, waiting to
be unloaded, and at inland warehouses and distribution centers that
cannot process cargo fast enough to empty containers and put them back
in circulation. Therefore, it is taking much longer to move cargo, and
until the cargo moves, the equipment it sits upon is idled and cannot
be used to move additional cargo. The problem is not so much that there
are not enough containers, but rather that containers are not moving
through the supply chain as they should. This situation of course
frustrates ocean carriers, and all other participants in the supply
chain, who are in the business of serving their customers by
efficiently transporting and timely delivering the goods those
customers have ordered or sold.
3. Ocean Carriers are Taking Every Available Action within their
Control to Increase Capacity and Maximize Efficiency
Ocean carriers are dealing with these highly unusual conditions by
engaging all available equipment and vessels to move this massive
amount of cargo and partnering with shipper customers and intermodal
facilities and transportation providers to work through the challenges
posed by the cargo surge. As cargo volumes rebounded since mid-2020,
ocean carriers mitigated network stress by deploying all available
vessels and working with marine terminals and logistics providers to
increase capacity and equipment as quickly as possible to meet demand.
Alphaliner, which monitors the global liner vessel fleet, reported in
April that the number of idle container vessels amounted to less than
1% (0.8) of global fleet capacity, and most of those ships were under
repair.\5\
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\5\ Alphaliner Weekly Newsletter 2021 Issue 16
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As inland transportation, marine terminal, and warehousing
operations have been hit by volume overloads, the positioning, use and
return of containers within the global supply chain has slowed.
Carriers and other supply chain participants are working to improve
access to container equipment through the repositioning of empty
containers along with the purchasing, leasing, repairing, and
dispatching of all available containers. Carriers are also encouraging
their customers to promptly remove their goods from containers after
delivery so that those containers can be used to carry other waiting
cargo. Because the volume surge has affected every part of the supply
chain, however, there is no single set of actors--ocean carriers, rail
carriers, truckers, marine terminals, or cargo owner warehouses and
distribution centers--that can clear the bottlenecks single-handedly.
The congestion has occurred because all parts of the system are
overwhelmed, and the congestion will clear when all parts of the chain
return to normal.
As a measure of the magnitude of the U.S. import cargo surge and
impact of these combined bottlenecks that prevent the free flow of
cargo, industry analyst Sea-Intelligence published two articles on June
6, 2021, that are relevant. The first article analyzed global import
growth and U.S. import growth year-over-year comparing 2019 (pre-COVID)
to 2021.\6\ The result of that analysis was that the United States'
import growth far outstripped global import growth (which on average
was modest). The growth in U.S. imports averaged out to ten percent per
year over the course of the two-year period examined, but most of that
twenty percent total growth has occurred just since the middle of 2020.
In other words, the epicenter of the import cargo surge and import/
export imbalance is the United States.
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\6\ Sea-Intelligence Sunday Spotlight, Issue 517, June 6, 2021;
``There is No Global Demand Boom--There is an American Boom'',
available at www.sea-intelligence.com
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The other relevant finding from the June 6, 2021, Sea-Intelligence
analysis is that approximately 20% of the capacity deployed on
Transpacific January-April 2021 has been soaked up by vessel delays.\7\
That compares to 2-4% of capacity being lost to schedule delays in
normal times. Just as the ``container shortage'' is not primarily about
the number of containers (but rather the fact that containers are not
moving freely), there is not a problem of a lack of ocean vessels, but
rather a systemic inability of the entire supply chain to absorb the
volumes of cargo that U.S. businesses and consumers are buying. When
vessels cannot unload import cargo, load export cargo, and maintain
their schedules because they are waiting for a berth, the practical
effect is the same as if those vessels did not exist at all. The same
as idled trucks and trains on land, ocean vessels are not productive
when they are sitting still. As it has been said, ``A ship in harbor is
safe, but that is not what ships are built for.''
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\7\ Sea-Intelligence Sunday Spotlight, Issue 517, June 6, 2021;
``Removal of all ULCVs from the Market'', available at www.sea-
intelligence.com
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4. U.S. Agricultural Exports have Increased to Record Levels; Exports
are not being Arbitrarily Rejected by Ocean Carriers.
All shippers, both importers and exporters, have been affected by
the bottlenecks that have been caused by this import-induced supply
chain congestion. There have been allegations that exporters of
agricultural products have been disproportionately affected. U.S.
government data does not support such claims; rather, despite the
challenges in the supply chain, U.S. agricultural exports are at record
levels. The U.S. Department of Agriculture just reported U.S.
agricultural exports in fiscal year 2021 are projected at $164.0
billion, up $7.0 billion from the February forecast.\8\ Six months into
the fiscal year, U.S. shipments of soybeans, corn, tree nuts, beef,
wheat and chicken have remained at record levels, while total U.S.
exports to China reached $22.2 billion, 179 percent higher than the
same period last year, and are forecast to rise to $35 billion. U.S.
grain and feed exports are forecast at a record $41.2 billion, up $3.4
billion from the February forecast. Soybean exports are projected up
$1.5 billion to $28.9 billion, with volumes at record levels due to
strong demand from China. Corn exports are forecast $3.2 billion higher
to $17.2 billion. Pork exports are forecast up $400 million; beef, veal
and poultry are projected up $200 million. Cotton exports are forecast
up $200 million.
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\8\ U.S. Department of Agricultural Outlook for Agricultural Trade:
May 2021, available at www.fas.usda.gov/data/quarterly-agricultural-
export-forecast.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
By way of context, containerized cargo is a small percentage of
total agricultural exports. Exports to Canada and Mexico move almost
entirely by land transportation. For agricultural exports moving by
sea, the overwhelming majority are exported on bulk freighters.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]>
Moreover, there is a huge variation among commodities in terms of
what travels in containers, e.g., less than 5% of soybeans, corn
(maize), and wheat travel by container.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
On the other hand, by necessity, exports requiring refrigeration
such as pork, beef, and dairy travel almost exclusively by container.
Containerized exports of pork and pork products, as well as dairy
exports, continue to be higher than pre-COVID levels.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
High value Ag commodities such as tree nuts are also shipped via
container, and exports remain at high levels.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The California Almond Board reports that almonds, which are
California's most valuable export, are up almost 24 percent through
March over the previous year, and more than 6 percent higher from pre-
Covid 2019-2020. California walnuts, which are the State's fifth most
valuable export, are on a record-setting pace to ship 80,000 more tons
this year than last year, and pistachios are also exporting at high
levels.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Within the category of agricultural exports that move in
containers, there has been an assertion that more containers should be
set aside for agricultural exports. Although it is understandable that
all shippers would prefer to have a favored position in the market, it
is not possible to arbitrarily favor one group of customers without
disrupting the functioning of the entire system, to the detriment of
all. When overall U.S. import volume surges and overall U.S. export
volume remains relatively flat--as has been the case since mid-2020--
this results in an increase of empty containers in the U.S. that need
to be repositioned to overseas locations to be filled with U.S. import
cargo. Without that repositioning of empty containers to the origin
countries from which U.S. importers purchase goods, U.S. importers
would not be able to meet the demands of U.S. businesses and consumers
that purchase those imported products.
The containerized ocean transportation system is not two
disconnected import and export systems. Rather, it is one system
comprised of a single interconnected network employing the same ships
and containers in continuous service loops, and that network must be
managed to keep all types of cargo moving. And, while there is no doubt
that agricultural exporters--like all sectors--have been stressed by
COVID-19's impact on the supply chain, U.S. agricultural exports are
not only being transported, but in many cases in record volumes.
5. The Federal Maritime Commission (FMC) has the Necessary Authority
and is Actively Regulating the U.S. International Transportation System
In challenging trade conditions, it is not uncommon for there to be
complaints of unreasonable behavior. If there are problems that run
afoul of the Shipping Act, the FMC is there to see that everyone
behaves reasonably. The FMC is actively investigating allegations of
Shipping Act violations through its ``Fact Finding 29, International
Ocean Transport Supply Chain Engagement'', in order to identify
operational and regulatory solutions to cargo delivery system
challenges related to COVID-19.\9\ Just last year, in May 2020, the FMC
published its ``Interpretive Rule on Demurrage and Detention Under the
Shipping Act'' \10\ providing guidance on how the FMC would assess
whether detention and demurrage charges and policies may be
unreasonable in certain factual situations.\11\ The Interpretative Rule
followed FMC's completion of its extensive ``Fact Finding 28''
investigation into detention and demurrage practices. Detention and
demurrage charges are used to ensure that shippers expeditiously pick
up their cargo and promptly return empty containers so the equipment
can be used by the next customer. This keeps the supply chain moving
and enhances service efficiency, reliability and predictability. The
Commission has been especially focused on detention and demurrage
charges recently, both because these mechanisms are necessary to
maintaining the free flow of cargo, and also because cargo volumes and
related congestion have raised questions about how charges are applied
in some cases.
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\9\ See www.fmc.gov/fact-finding-29
\10\ Federal Maritime Commission, Interpretative Rule on Demurrage
and Detention Under the Shipping Act, 85 Fed. Reg. 29638, at 29647 (May
18, 2020).
\11\ See www.fmc.gov/fact-finding-28
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The FMC's active engagement and oversight demonstrate that the FMC
is uniquely positioned and has ample authority to address these issues.
The Commission has repeatedly confirmed that questions about detention
and demurrage are inherently fact-specific, and adjudication of any
complaints is the sort of task to which administrative agencies, with
their adjudicative and investigatory resources, are well suited to
handle. To date, there have been very few formal complaints filed with
the FMC, and the Commission has the authority to undertake enforcement
actions on its own initiative if it finds cause to do so.
6. Conclusion
Every sector of the global supply chain remains under tremendous
stress, and that stress is more acute in the United States than
anywhere else on the globe. That is the case because of the historical
surge in U.S. import cargo. The record-level import surge has clogged
international ports as well as some of the nation's ports, the inland
transportation system, and warehouses and distribution centers. Those
landside back-ups mean that we have ports where ships are waiting for
long periods of time to unload and load cargo, thus reducing the
effective capacity of the world's containership fleet. The import surge
has also exacerbated an existing imbalance between import and export
volumes, which increases the need to reposition empty containers in
order to meet the continuing demand from U.S. importers. All of these
factors build upon one another to cause the situation that we find
ourselves in today.
Everyone experiencing these unprecedented conditions has been
impacted by the business challenges, costs and delays resulting from
the pandemic and its cargo demand surge. As testimony from all
witnesses today will show, this is not a situation caused by the
failure of any one part of the supply chain, and no part of the system
has been untouched. To the contrary, all parts of the chain are
affected, and all parties are working overtime to keep cargo moving.
And while there are obviously disruptions, costs, and delays, the fact
is that the international ocean and U.S. intermodal transportation
system is moving more cargo right now than at any time in history. The
system has bent, but it has not broken.
The supply chain challenges that we face require logistical and
management solutions, as well as a return to a more normal volume and
balance of import and export cargo, which will happen over time.
Necessary solutions are being provided through the common purpose and
efforts of many of the supply chain actors represented here today:
ports, labor, carriers and shippers. These are operational and
commercial challenges that must be addressed first and foremost by the
commercial service providers and customers involved, with a steady
regulatory backstop provided by the Federal Maritime Commission. The
ocean common carrier community is committed to serving the
international trade of the United States, and the historical volume of
cargo that we continue to move is the evidence of that commitment.
Mr. Carbajal. Thank you, Mr. Butler.
We will next go to Ms. Alexis Jacobson.
Ms. Jacobson. Chairman Carbajal, Ranking Member Gibbs, and
members of the committee, I appreciate the opportunity to
discuss these issues facing agriculture exports today. My name
is Alexis Jacobson. I am presenting to you from our farm in
Tangent, Oregon, specifically outside the hay storage barn, on
behalf of the U.S. Forage Export Council, National Hay
Association, and Agriculture Transportation Coalition, as well.
Before getting into the specifics, can I give you a quick
overview?
You will see in my submitted testimony the daily challenges
that our Nation's agriculture exports face today, including
these.
First, the lack of ocean carrier commitment to our American
exporters. Ocean carriers continue to leave American exports in
the dust, as our terminals become overcrowded with loaded
import containers, and empty containers are sent back on ocean
vessels, rather than loaded with our goods. Vessel commitments
are often being canceled close to the last receiving date,
leaving exporters and their goods stranded. All too often we
are given only 1 day's notice to pick up an empty container and
return it to a marine terminal. And frequently, that is
impossible.
Particularly for farms like ours, a 4-hour drive each way
to Tacoma and Seattle, we need steady vessel schedules, steady
earliest receiving dates, and steady final receiving dates in
order to return cargo and be successful in shipping our goods.
Second, we understand that the COVID-19 pandemic has
exacerbated underlying inefficiencies in our supply chain and
led to this current situation. However, ocean carriers should
not be profiting from these challenges with huge detention and
demurrage charges that the FMC has already said are
unreasonable.
And it is so difficult and time-consuming for us, a small--
and large, and all the exporters to challenge these charges. We
need the FMC to have more power to prevent these invoices in
the first place. We are getting nickeled and dimed and
penalized more and more for just trying to ship our goods to
our customers. Between increases in ocean freight and increases
in trucking costs, our hay becomes less competitive in a global
market every day. Australian hay products will soon out-compete
our American hay products.
Our truckdrivers are spending more time in the lines at the
port, causing them to max out their legal hours of service. The
next step is to hire additional drivers, but we are already
heading into a driver shortage. Truckers for shippers that are
farther from grain terminals already stretched these legal
hours of service, as it is, and we are paying more than ever
for record-low customer service from the ocean carriers.
One simple fix for us to help marine terminals and
truckdrivers be a little bit more efficient would simply be to
add 1 or 2 hours of flex time, from 6 a.m. to 8 a.m. at the
marine terminal. We support this idea, which we first heard
about at an Agriculture Transportation Coalition meeting with a
west coast terminal operator.
All of us exporters have been trying really hard to survive
a really difficult shipping situation. We have been telling
anyone who will listen. I am pretty knowledgeable in shipping
hay and seed, but I am not an expert in ocean shipping laws and
regulations. That is why I am here today, in hopes that you
will write whatever laws need to be written.
We are all glad that the ITC is making proposals to improve
this situation. As I said, exactly how the laws are written and
would work legally is not my expertise. But we do like the
objective: to stop these unfair detention and demurrage
charges; to have carriers carry our export cargo, instead of
heading back with empty containers; and to increase the help
the FMC can provide when we need to resolve a particular matter
with a carrier.
I would like to work with you and the FMC to achieve these
objectives.
The U.S. exported nearly $1.4 billion in forage last year,
generating jobs in rural communities, where employment is
really needed. Competing internationally is tough enough,
without the extra burdens imposed by ocean carriers and
terminal operators. Through the efforts of companies like
ourselves, we offer high-quality forage to overseas dairy farms
and cattle ranches. But this means very little if we cannot get
our product to our customers.
Thank you all. I am happy to try and answer any questions
that you may have.
[Ms. Jacobson's prepared statement follows:]
Prepared Statement of Alexis Jacobson, International Accounts Manager,
BOSSCO Trading LLC, on behalf of the U.S. Forage Export Council,
National Hay Association, and Agriculture Transportation Coalition
Introduction:
Thank you Mr. DeFazio for inviting me. I am presenting to you from
our farm in Tangent, Oregon, specifically in the hay storage barn.
Chairman Carbajal, Ranking Member Gibbs, and members of the committee,
I appreciate the opportunity to discuss these issues facing agriculture
exporters.
Today, I am representing the nation's hay producers--the largest
volume containerized ag export cargo through West Coast ports, and it
moves over all other coasts as well. In addition to the National Hay
Association and the US Forage Export Council, I am representing all the
members of the Agriculture Transportation Coalition--hay, seeds,
almonds, beef, soybeans, fresh fruit, cotton, paper, and so on, located
in every state. We are all struggling to survive the ocean shipping
crisis, to get our product to foreign customers, and it is getting
harder every day.
As the AgTC says: ``there is nothing we produce in agriculture here
in the US, that cannot be sourced elsewhere in the world. If we can't
deliver it to our foreign customers, dependably and affordably, they
will turn to other countries, and we lose those customers.'' That is
definitely true for forage. If we cannot meet our customers' demands,
they will, and they have, sought out replacing our American forage with
Australian forages instead.
The Federal government can help us--please give the FMC teeth to
make carriers obey their demurrage and detention rule, make the FMC a
resource to help us when dealing with the ocean carriers, and encourage
the carriers to carry our export cargo rather than depart with empty
containers. Please consider the AgTC's proposals, which I am attaching
to my testimony.
Now, I would like to give you a window into what an agriculture
exporter is going through now, to get our products to our foreign
customers. For true insight into the daily life of an exporter, I will
outline each step of the process, from obtaining the commitment from
the ocean carrier for our cargo to arrival at final destination. This
will include what normal operation looks like, and what current
operation status looks like.
Ocean Carrier Commitment
Normal Operation:
Similar to when purchasing a plane ticket, exporters ask ocean
carriers for a commitment of a certain number of containers on a
certain ocean vessel to a particular destination. We refer to these
commitments as a ``booking'' or ``bookings,'' and we utilize contracts
with the ocean carriers to make the container space commitment. Our
contract states the ocean freight price to get a container from a Port
of Loading or Port of Receiving to the Port of Discharge. Sometimes the
Port of Receiving is different than the Port of Loading if your booking
originates out of a container yard that will utilize the rail or a
truck to get the container from one loading point to the final port of
loading. For example, Port of Portland has the capacity for receiving
export containers to load on the rail to be loaded onto a vessel in
Seattle or Tacoma, and they also have the ability to load onto a vessel
through their marine terminal.
Delivering our cargo by truck to a marine terminal at the Port of
Loading is useful, as it can provide quicker transit from our plant,
with less risk; but a rail container yard located closer to our plant
allows for more flexibility for those of us further from the Port of
Loading. To continue with the air travel example, using a rail terminal
is like using a smaller airport to get to a bigger airport for your
international flight. From Albany, Oregon, we could fly out of Eugene,
Oregon's airport to go to bigger destinations, but it typically means a
layover at a larger airport, like Portland, Oregon or Seattle,
Washington. Layovers can be risky with plane rides because you may miss
the next flight if something goes wrong or the schedule is too tight,
and the same goes for containers leaving from a rail terminal to the
marine terminal.
In normal operations, exporters are able to negotiate our prices
and services depending on our needs and needs of the ocean carrier. We
negotiate with the ocean carrier's sales staff. Exporters rely on these
negotiations to make the best decision for which carrier to use. When
an exporter needs a booking, they can typically find something close to
what the exporter and our overseas customer needs, and we only need to
do this two to four weeks before the final date cargo can be received,
often referred to ask the ``cut date'' or ``cutoff date.''
Operations during the Ocean Export Crisis:
During the current Ocean Export Crisis, the American agricultural
exporter has little to no negotiating power when it comes to our ocean
carrier contracts and relationships. We are forced to be price takers,
who are receiving no added benefits to our increased costs. Rates have
increased significantly in six short months, as ocean carriers have
implemented ``General Rate Increases'' (GRIs) nearly every month and
added new fees and surcharges.
Exporters and freight forwarders must book space commitments on
vessels as soon as they ``open,'' otherwise the space is unlikely to be
available. Most ocean carriers open vessels 6-8 weeks ahead. However,
with the rapidly changing ocean freight prices, what may be the
cheapest option today, could be your most expensive option in 6-8
weeks. In addition, ocean vessel on-time performance has been very
unpredictable, meaning that the schedule shown in a vessel space
commitment confirmation may very well be very incorrect as it
approaches. The vessel space commitment does not guarantee that an
ocean carrier will have empty containers available. We have to hold
onto vessel space commitments as soon as they become available. This
means we may not always have the cheapest ocean freight option
available, may not have access to vessel space that matches the
customer's needs. Most orders end up delayed either due to vessel delay
from previous or future calls, vessel delaying berth due to terminal
congestion, or transshipment delay when a container is not directly
shipped from loading port to destination.
Some ocean carriers limit export customers on how much vessel space
they can have either per vessel or per week, and they will not budge on
these limits. If a customer needs 7 containers on a vessel, but our
allocation is only 5 containers, we will have to either reduce our
order or ship 5 containers on one vessel and 2 containers on another
vessel, adding extra import fees to the overseas customer.
As much as the vessel space commitment should reserve space on a
vessel, we have learned it does not guarantee that the ocean carrier
holds the space for an export. There is a chance the ocean carrier
could cancel the booking, and we may not find out until one week before
containers are supposed to be turned into the marine terminal gate.
Sometimes, we receive advance notice; however, sometimes, we don't find
out until the trucker has begun to pick up containers for the order.
These days, a carrier's vessel space commitment does not guarantee
that all containers will sail on the same vessel. Particularly an issue
when shipping to Port of Loading via rail, if an order or some
containers in an order do not make it to the Port of Loading in time,
the ocean carrier will delay the order to the next vessel or split the
order to the original vessel and the late containers to a new vessel. A
split booking is costly to overseas customers, as they will have to pay
for extra documentation fees and extra import fees. While split
bookings occurred seasonally during normal years, the ocean export
crisis has drastically increased their occurrence, as marine terminals
are congested with import containers and there are fewer rail services
to move containers from the terminals.
Trucking & Containerization of Product:
Normal Operations:
Within 10-14 days of the last day containers can be turned into the
marine terminal, an exporter arranges trucking. It requires verifying
information with all three parties--the ocean carrier, the terminal,
and the exporter--before arranging a pick-up of an empty container,
loading the container with our hay, and returning the container to the
marine terminal. Shippers must repeatedly verify this information to
check for any vessel delays and ensure final customer approval of the
details. A booking must be released for pickup before a trucker can
begin to get containers under its confirmation.
Inland rail terminals typically have the most limitations on
available empty container equipment for exporters, so it is not unusual
that container shortages to happen throughout the year. However, it
ebbs and flows with a normal import season. As empty import containers
are returned after big shopping holidays, like Christmas, typically
more become available.
Once a trucker picks up a container under a vessel commitment
booking for an exporter, they will get the container loaded and wait
for the approved first day to return the container to the terminal,
also known as the earliest return date (ERD). If containers are
returned before the ERD, the exporter or trucker can be penalized with
costs. These costs are known as demurrage charges, which are imposed if
a container is in the terminal longer than the contracted free number
of days. In contrast, if a trucker picks up a container too early, they
can receive detention charges if the container is not returned to the
terminal before detention `free days' expire.
Operations during the Ocean Export Crisis:
Today there is no predictability, continual changes and confusion.
Truckers are still verifying information on earliest days to return and
final day containers can be returned with the parties as mentioned
above; however, these verifications must be made constantly, as the
information is constantly changing. It takes much more time to verify
this information, and frequently these changes to the return dates
happen even after the first day to return containers. This means
containers could already be on the terminal dock, waiting to load, when
the carrier changes the return date, leading to the exporter receiving
demurrage charges.
As export customers are left with minimal vessel space commitment,
the ocean carriers also leave them with few empty containers for
export. Ocean carriers often send containers back on vessels empty to
allow for a quicker turn around for more import cargo back to the
United States. They chose to cancel or deny export bookings to favor
those empty containers away from the United States. As a result, truck
drivers tend to spend much more time in the terminals due to congestion
or lack of empty export containers. Truckers then have to charge export
customers with wait time charges for the extra time spent in the
terminal. These charges add up quickly, with additional truck fees if
the driver cannot pick an empty container due to lack of equipment or
terminal congestion. With inconsistent vessel arrival schedules,
increasing vessel voids, and overall hassle of container shipping, some
trucking companies are having to rely on diversification of their
business to other trucking opportunities in order to keep truck drivers
busy.
Despite complying with the free time limit an exporter has in their
contract for holding a container outside the terminal and returning a
container to the terminal, export customers and drayage truckers are
constantly receiving incorrect invoices from the ocean carriers for
detention or demurrage charges. Some exporters have invoices like this
to fight daily, and it takes weeks to resolve. Smaller exporters, like
ourselves, see these invoices almost weekly. Exporters and truckers are
forced to fight or pay these invoices, or there is a chance the
customer overseas will not be able to pick up their cargo.
Customer Satisfaction:
Despite best efforts to make schedules, the ocean carriers make it
very difficult to keep our customers satisfied. As a result of the
challenges mentioned above, many exporters are forced to focus on the
absolute minimum needs of their customers, because that is the only
vessel space commitment we can consistently find. It is very difficult
to begin any new export business, unless you are able to give up a
long-term customer's needs.
Shipments along the West Coast were extremely delayed for anything
shipped between December and late February. Many of our shipments
during that time arrived to our overseas customers at the same time as
some of our March orders, creating huge inventories for them. In the
United States, many of our farmers are able to store product in large
storage barns. However, in many of the forage destinations, they do not
have access for large storage barns. Customers only order what they
need because they do not have the warehouse storage space for anything
additional.
They had to work through that inventory before ordering more hay.
The result was that overseas customers reduced their orders, and we and
other hay exporters lost export business. This was all through no fault
of our own, and no fault of our customers, but it illustrates how the
US exporter is being hurt by the ocean shipping delays and
unpredictability.
Solutions:
1. Amend the Shipping Act to allow for much better Federal
Maritime Commission enforcement of the detention and demurrage rules
and other ``unreasonable'' acts.
2. Amend the Shipping Act to encourage ocean carriers to maintain
carriage of American exports.
3. Encourage US Terminals to operate additional hours to work
through the terminal congestion with ocean carriers paying the
additional marine terminal fees associated.
Conclusion
There are few steps of the process where ocean carriers have not
proposed a challenge for agriculture exporters trying to market
American goods, and we need the help of the Federal Government in order
to begin the recovery and normalization process. Every day, our
exporters and our truckers struggle through these challenges. Our
harvest season is quickly approaching. Many exporters are very worried
as we begin to harvest our crops soon what challenges the market will
begin, especially for those with carryover from the 2020 harvest. We
need action soon.
As mentioned in the attached proposal from the Agriculture
Transportation Coalition, we need to give the FMC the ability to fight
for the American shipper. I encourage you to read through their
proposal attached, as well as the additional letters regarding the
ocean export crisis that I have included in my testimony. I thank you
for your time and look forward to a solution soon.
Attached Documents:
1. Updated Legislative Action Package by AgTC
2. AgTC Overview: The Current Export Crisis
attachment # 1: updated legislative action package by agriculture
transportation coalition
Proposed Legislation to Address Ocean Shipping Crisis
The on-going ocean shipping crisis has created an unsustainable
environment threatening US agriculture and forest products exporters,
nationwide. Over 150 Members of Congress have expressed their concern
in letters to the Federal Maritime Commission, 70+ national agriculture
organizations and over 300 agriculture exporters have sought
intervention by the Secretaries of Agriculture and Transportation.
Click here [https://agtrans.org/wp-content/uploads/2021/06/Ocean-
Shipping-Crisis-Materials_06_10.pdf] to see these letters and a 2 page
overview of the crisis and possible avenues to address it.
The founding principal of the Agriculture Transportation Coalition,
dubbed by the Journal of Commerce as ``the principal voice of
agriculture exporters in US transportation policy'', is very much in
play today:
``there is nothing in agriculture or forest products that we
produce here in the US, that cannot be sourced elsewhere in the
world; if we cannot deliver it to our customers affordably and
dependably, they will find those other sources. Once we lose a
foreign market, it is often not possible to regain it.''
Today, ag exporters are often unable to get carriers to accept
their cargo, or are being assessed such extra costs (even those
declared unreasonable by the FMC) as to make the sale of ag to be
uneconomic:
To address this crisis, the AgTC offers two amendments to the
Shipping Act, an Appropriations provision, and a joint initiative to
increase the hours of operation of marine terminal gates:
Page 2.\\ Amendment to gain enforcement of FMC's Detention
and Demurrage Rule
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it appears in its original format at https://docs.house.gov/meetings/
PW/PW07/20210615/112764/HHRG-117-PW07-Wstate-JacobsonA-20210615.pdf
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Page 3. Amendment to Prioritize FMC's Service to US Exporters,
Importers and Others
Page 4. Amendment to Maintain Carriage of US Exports
Opening the Ports: Responding to ocean carrier executives who have
identified the relatively limited hours of operation of US marine
terminals, the AgTC is reaching out to key stakeholders--ILWU, terminal
operators, port authorities to achieve additional gate hours at West
Coast ports. This may require Congressional and/or Executive Branch
intervention, but we believe can be achieved without legislation.
Amendment to gain enforcement of FMC's Detention and Demurrage Rule
Explanation: After several years' investigation, the Federal
Maritime Commission found that ocean carriers and terminal operators
were unfairly issuing penalties (called demurrage--for leaving a
container on a marine terminal longer than allowed, and detention--
maintaining possession of a container longer than allowed). Following
notice and hearings, the Interpretive Rule on Demurrage and Detention
Under the Shipping Act [https://www2.fmc.gov/readingroom/docs/19-05/19-
05_fnl_rul_fr.pdf/] provided guidance to carriers as to ``reasonable''
practices, conforming to the Shipping Act.
However, the carriers and terminals have failed to follow that
guidance, routinely imposing the demurrage and detention charges ($175
to $750/per container per day) cumulatively hundreds of millions of
dollars, even greater than the freight charges), often in circumstances
where the delay is beyond the control of the shipper (exporter or
importer), and thus unreasonable per the FMC Rule. Many shippers are
struggling under millions of dollars of such penalty charges.
When the carrier imposes such a charge, the burden falls on the
shipper to submit penalty waiver requests to that carrier, explaining
why the charge is unreasonable, even though the relevant information
(location of the vessel, vessel schedule and notices, cargo cut times,
terminal hours, etc.), is the carrier's own operations information. It
is extremely burdensome for the shipper to find the data, carriers make
submission of complaints difficult, they are frequently rejected by
carriers without explanation. Also, while the shipper must pay the
charges immediately, carriers can take months to process the requests
for waiver, if they do so at all.
The proposed Amendment would require the carriers or terminals to
simply confirm, when imposing a detention or demurrage charge, that it
complies with the FMC's Rule. Such certification would accompany the
charge. There is no requirement that the certification be filed with
the Commission. The only certifications the Commission would review
would be those a shipper goes to the effort to submit, with Bill of
Lading and other information, if it believes that the charge violates
the FMC's Rule. The FMC would develop an expedited informal submission
process to receive such submissions. Then investigate. If finding the
carrier's certification false and in violation of the Rule, Shipping
Act penalties would be imposed (in addition to mandating prompt refund
of collected charges). The Commission would also have authority to
self-initiate investigation of carrier practices in this regard, and
apply enforcement measures.
Proposed Amendment:
``The Ocean Shipping Reform Act of 1998, Section 10 Prohibited Acts. Is
amended at 46 USC 41104 (a) Common carriers. No common carrier or
marine terminal operator, either alone or in conjunction with any other
person, directly or indirectly, may--
(14) invoice any party for detention and/or demurrage charges, unless
such invoice is accompanied by a certification by the common carrier
that such charge complies with all provisions of 46 CFR 545. The
charged party shall include such certification in any complaint to the
Commission, under an expedited informal process to be developed by the
Commission to receive and investigate such submissions. Should the
certification be found to be false, and the carrier not in compliance
with the provisions of 46 CFR 545, the carrier shall be subject to
penalty as set forth in Section 13 (b)(1) of the Act. The Commission is
authorized to self-initiate, without receiving a complaint,
investigation of carrier practices in this regard, and undertake
enforcement as it deems appropriate, including Section 13 (b)(1)
penalties.''
Amendment to Prioritize FMC's Service to US Exporters, Importers and
Others
Explanation: International ocean shipping is complex, with numerous
transactions and documents, some of which serve to facilitate payment
and transfer of ownership of the cargo itself, etc. With ocean carrier
finance, operations decisions made at overseas headquarters, and
customer service functions for most carriers located overseas, the
challenge for exporters is to gain cooperation from the ocean carrier
to resolve practical (non-policy) problems, such as, for example,
finding or replacing a missing document, etc. (which if not recovered
timely, threatens the entire sale of the cargo. Or questioning a
charge. For most US exporters, importers, freight forwarders, and
truckers, CADRS has been the place at the FMC where they can,
informally and affordably, without hiring lawyers, have support in
gaining a carrier's focus and effort to resolve such problems, in a
timely manner. Thus CADRS plays an essential, valued role for the US
shipping public (exporters, importers, forwarders, truckers, etc.),
which would benefit by additional staffing and authority. This
amendment will provide such resources and direction.
NOTE: How the funds are appropriated, either as an additional
amount above current FMC appropriations, or as a percentage of the
total FMC appropriation, is to be determined by the relevant
Congressional committees. Following are two options.
Proposed Amendment (for Appropriations for Federal Maritime
Commission):
``Office of Consumer Affairs and Dispute Resolution Services (CADRS)
shall be provided
$X in addition to amounts otherwise appropriated to the Federal
Maritime Commission
or (two options for Congress to consider)
an allocation of not less than 10% of the total annual appropriation to
the Federal Maritime Commission.
The funds are to be dedicated to achieve the following functions of
CADRS: to protect and advance the interests of US consumers of ocean
transportation services provided by MTO's and VOCC's. Such consumers
include shippers, OTI's and truckers, for whom CADRS staff shall
provide assistance and solve practical problems. The Chairman of the
Commission shall provide Reports, every 6 months beginning 6 months
after enactment of this provision, to the Appropriations Committees,
describing specifically the assistance provided by CADRS to US
shippers, OTI's and truckers.''
Amendment to Maintain Carriage of US Exports
Explanation: Carriers are too frequently declining to carry US
exports, in favor of returning to Asia with empty containers, causing
significant lost export sales for US agriculture and forest products
producers. Today, a lower percentage of containers returning to Asia
are loaded with export cargo, while exporters have more cargo they need
to ship. According to carriers, they decline export cargo in order to
expedite the return of empty containers back to Asia, to quickly load
higher value cargo from factories in Asia for the much more lucrative
eastbound voyage back to the US. Thus, too often US agriculture/forest
products are left stranded here in the US, unable to be delivered to
foreign markets. US agriculture exporters are reporting, on average a
loss of 22% of sales. While the ocean carriers are private businesses
(as are other regulated industries such as airlines, railroads, etc.),
recognizing their essential function for US commerce, they have been
regulated, to protect the US shipping public (importers and exporters),
since 1916. A purpose of The Ocean Shipping Reform Act of 1998 is set
forth in Section 2 (4): ``to promote the growth and development of
United States exports through competitive and efficient ocean
transportation . . . .''
Proposed Amendment:
``The Ocean Shipping Reform Act of 1998, Section 10 Prohibited Acts is
amended by adding at 46 USC 41104 (a) Common carriers. No common
carrier, either alone or in conjunction with any other person, directly
or indirectly, may--
unreasonably decline export cargo bookings if such cargo can be safely
and timely loaded and carried on vessels scheduled for that cargo's
destination. Violation of this provision shall be subject to penalty as
set forth in Section 13 (b)(1) of the Act.''
attachment # 2: agriculture transportation coalition overview: the
current export crisis
Twenty-five years ago, 20+ ocean carriers carried containerized US
imports and exports. Today, that number is down to 10, in some key
trade routes for export cargoes (refrigerated, etc.) only one carrier
serves that route. US exporters do not have many choices, they are
completely dependent on these carriers to deliver our ag and forest
products to overseas customers. Currently, these carriers are
frequently declining to carry US export cargo, and when they do, they
continue to impose very large additional charges, even though deemed
unreasonable by the Federal Maritime Commission.
Since last summer, import cargo has been flooding into the US, in
unprecedented volumes. The import volumes overwhelm marine terminals at
our ports, delaying ship arrivals, loading, unloading, due to:
congestion in and around the terminals
unlike foreign ports, ours are not fully operational 24/7
terminals so full they cannot accept the return of emptied
containers, or containers loaded with exports
lack of sufficient labor and automation to allow the marine
terminals to load/unload efficiently
lack of information as to locations of containers, the times when
they are available
ocean carriers' failure to provide accurate notice of arrival and
departure
lack of appointments for truckers to enter terminal gates to
retrieve import containers, or bring in containers with export cargo,
or empty containers
ocean carrier+chassis company agreements causing chassis shortages
at inland and port terminals.
lack of capacity of near-port distribution centers to accept/
process massive volumes of import cargo.
Demurrage and Detention--FMC Intervenes Against Unreasonable Ocean
Carrier and Marine Terminal Practices
Ocean carriers are charging truckers, importers and exporters daily
fees, known as ``detention'' or ``per diem'', when they do not return
the carrier's container to the terminal within the time allotted under
the contract of carriage. The carriers and marine terminals also charge
``demurrage'' when the trucker or shipper does not remove an import
container from a terminal quick enough, or returns the container to the
terminals before the terminal wants it. (Exporters are frequently
stymied from moving containers to the ships by the carriers' and
terminals' own actions.) These charges are now, in aggregate, in the
hundreds of millions of dollars. Most disconcerting, the carriers and
terminals are charging these fees ($125 to $425/container/day) even
when it is not possible for the truckers or shipper to actually access
the terminal to return or retrieve the container. These fees are
jeopardizing the financial viability of exporters and importers.
These charges have become so egregious that after 2 year
investigation, the Federal Maritime Commission issued a Rule [https://
www2.fmc.gov/readingroom/docs/19-05/19-05_fnl_rul_fr.pdf/] providing
carriers and terminals guidance as to what would be reasonable
demurrage and detention practices. To date the terminals and carriers
have failed to implement these reasonable practices, thus continuing to
collect millions of dollars of extremely burdensome and unfair charges.
We now seek to have those unreasonable practices stopped; if the FMC
cannot, shipper groups are proposing legislation to statutorily
prohibit these practices.
Limited US Port Operations Creating Congestion and Delay
The Presidents of some ocean carriers have pointed to the limited
hours of terminal gate operations at US ports, as a primary reason that
carriers are unable to maintain schedule integrity, and thus
congestion, as the terminals are unable to handle the massive volumes
of imports, arriving on the mega-ships. Worldwide ports operate 24/7,
while US terminal gates operate 5 days a week, fewer than 12 hours
daily. Currently an expanding coalition lead by agriculture exporters
and labor, is working to dramatically increase these hours, which may
require Congressional persuasion.
Stranding US Exports
Historically, containers filled with imports (i.e., consumer goods,
auto and manufacturing components) are railed east--particularly
Chicago, Memphis, Kansas City, Dallas. Then once unloaded, the empty
containers (which must eventually be returned to the West Coast ports
to return to Asia) are filled with ag export cargoes; many of the
containers must be `repositioned' (by truck or rail) to the rural ag
origin points, for loading, before proceeding back to the West Coast
ports. [NOTE: the same process occurs for containers bringing imports
to East Coast or Gulf ports. However, the port dysfunction, carrier
demurrage/detention charges, while significant at some East Coast
ports, has not been as pronounced as at West Coast ports.]
Freight rates for imported cargo (consumer goods/manufacturing
components) are higher (reflecting the high value of that cargo) than
freight rates for our US exports (ag and forest products which
typically are valued far less). With the current eCommerce economy, the
volume of imports is so great that every container, on every ship is in
demand for cargo moving eastbound Pacific. Currently freight charges
from Asia to the US have been driven as high as $10,000 or $12,000 per
container. Compare this to the export container carrying ag and forest
products back to Asia, earning $400 to $1,800 freight charges.
Now, instead of letting a container move inland to be loaded with
ag and forest products (often in rural areas), ocean carriers are
declining that export cargo, in favor of immediately returning empty
containers to Asia in order to quickly load US-bound imports which
command unprecedented high freight revenue. Stranding our agriculture
exports here in the US, making it impossible to deliver timely to
foreign customers.
Exporters have hundreds of documented instances of ocean carriers
declining or cancelling export bookings, often at the last minute,
after the cargo is loaded in a container, already on train to the
ports. Some carrier communications explicitly say their HQ want the
containers back to Asia . . . not to accept US westbound (export)
freight.
The data shows this is a broad and continuing trend. It is not a
matter of a shortage of containers, because the containers are on the
ships heading back to Asia; however, so many are empty. Typically,
about 65%+ of containers on a ship leaving US ports for Asia will be
loaded with cargo. Today the number is often much lower, 50% or less,
because carriers continue to turn down the export cargo that could be
filling those containers. This CNBC article provides data and insight:
https://www.cnbc.com/2021/01/26/shipping-carriers-rejected-us-
agricultural-exports-sent-empty-containers-to-china.html
What Can FMC or Congress Do? Steps Worth Considering:
a. Adopt the FMC's Detention/Demurrage Rule as statutory
requirements; carrier/terminal must certify compliance as prerequisite
to any demurrage or detention charge imposed on an importer or
exporter.
b. Prohibit carriers from refusing or cancelling export bookings
when the ship has capacity to safely carry export cargo. Burden of
proof (to show lack of capacity) shall be on the carrier.
c. Establish and fund the FMC's Office of Consumer Affairs &
Dispute Resolution Services (CADRS) to assist and protect the interests
of US consumers (shippers, OTI's and truckers) of the ocean
transportation services provided by MTO's and VOCC's.
d. Convene the parties to begin full 24/7 operation of ports
(including gates).
e. Ocean carriers prohibited from entering into agreements that
restrict availability of container chassis.
f. Mandate that ocean carriers provide and update accurate
Earliest Return Date, so exporter can know when to return container to
terminal.
Mr. Carbajal. Thank you, Ms. Jacobson.
We will now proceed to Mr. Frank Ponce De Leon.
Mr. Ponce De Leon. Good morning, Chairman Carbajal, Ranking
Members Graves and Gibbs, and members of the subcommittee.
Thank you for inviting me to testify today. My name is Frank
Ponce De Leon, I am the International Longshore and Warehouse
Union coast committeeman serving on our highest executive body
within the ILWU Coast Longshore Division.
I began working as a registered longshoreman in 1982. In my
40 years on the waterfront, I have worked nearly every position
on the docks, capping my career as a highly skilled crane
operator of the massive ship-to-shore hammerhead cranes.
In speaking today, I speak for over 22,000 men and women
represented by the ILWU's Coast Longshore Division, working at
all 29 ports on the west coast. The cargo our members unload
ends up in every congressional district in the United States.
The ILWU Coast Longshore Division shares the subcommittee's
concerns about port congestion and container shortages. We
believe these problems are linked to the declining investment
in both our infrastructure and American port workers. The
foreign conglomerates, who lead the vast majority of America's
marine terminals, terminals that are almost all publicly owned,
consistently put their own profits over maximizing
efficiencies. No one is questioning their right to make money,
but they are making those profits operating in public ports
built on public money, and with our taxpayer dollars.
The ILWU believes that the public infrastructure that makes
up our Nation's freight supply chain should be used to
prioritize the American economy and the American workers. We
believe the Federal Government has a responsibility to stop the
slow degrading of our ports and the skilled workforce that has
made these ports the best in the world.
For example, chassis management and maintenance needs to be
brought back to the waterfront. In 2015 the terminal operators
divested from the ownership and control of the chassis needed
to move containers. This move saved them money, and has caused
systematic delays, shortages of chassis, and extra steps that
haulage carriers have to take. What is ironic, in fact, we
currently have a terminal operating under the old chassis model
that now is charging shippers a premium for this expedited
service.
Next, while continuously setting records over the past
year, even during the pandemic, we still face manpower shortage
at the port, and our employers have now acknowledged that there
is a need for a higher skilled set of workers. Terminal
operators have overly relied on the temporary casual workers.
Casuals are junior workers who make lower wages and receive no
benefits. These workers are also not trained in higher skilled
positions. To effectively meet the demands of the pandemic and
other fluctuations in our industry, the ILWU Coast Longshore
Division believes that there needs to be an investment in the
promoting and training of longshore workers for long-term
employment.
ILWU welcomes expanding gate hours. Terminal operators
already have the right to extend hours, but often don't do it.
Once again, those decisions seem driven by short-term cost-
cutting measures. Extra gate hours, supported by extended
operations at connecting points in the supply chain, may come
at an individual cost, but they are critical in reducing cargo
backlogs.
We also believe the FMC needs the powers to oversee and
enforce new rules for demurrage and detention. Our current
rules were supposed to lead to faster removal and return of
containers. These days the rules are frequently gamed by the
powerful players in the supply chain. Big shippers avoid the
fees by signing contracts that give them priority to unload
their containers first, a practice that further slows the
overall processing of cargo. In the end, small shippers are
left to wait and pay demurrage.
In conclusion, our freight system was once the envy of the
world, not just because we invested wisely in our
infrastructure, but because we also valued our workers. I value
our supply chain workers, the men and women of the ILWU who
continue to put their lives on the line to ensure that our
ports remain at being the best, despite all the challenges.
Thank you for inviting me to testify today, and I welcome
any of your questions.
[Mr. Ponce De Leon's prepared statement follows:]
Prepared Statement of Frank Ponce De Leon, Coast Committeeman, Coast
Longshore Division, International Longshore and Warehouse Union
Chairman Carbajal, Ranking Member Gibbs, and Members of the
Subcommittee, thank you for the invitation to testify today. I am Frank
Ponce De Leon, and I am a Coast Committeeman serving on the highest
executive body within the International Longshore and Warehouse Union's
(ILWU) Coast Longshore Division (ILWU Coast Longshore Division).
I began my career as a longshore worker at the Ports of Los Angeles
and Long Beach in 1982. Three generations of my family have worked at
these southern California ports, which combined are America's largest
port complex. In my almost 40 years on the waterfront I have worked in
nearly every position possible on the docks, capping my career as a
highly skilled operator of Hammerhead Cranes, the massive ship-to-shore
cranes that are the iconic structures within every major container port
in the world.
I am speaking today on behalf of the more than 22,000 men and women
who are represented by the ILWU Coast Longshore Division. Our union
represents the hardworking longshore workers, marine clerks, foremen/
walking bosses and casuals at all 29 West Coast ports. The ILWU also
represents thousands more working in warehouses further within our
freight supply chain. The cargo we move off of ships on the Pacific
Coast ultimately arrives in every Congressional District in the United
States.
The ILWU Coast Longshore Division shares the Subcommittee's
concerns about congestion and related issues caused by declining
investment in both infrastructure and the American workers who have
made our ports and our supply chain the most productive in the Western
Hemisphere. This hearing is a timely reminder of the consequences of
neglecting to hire and train the skilled workers that make our economy
globally competitive. Make no mistake, the shortage of containers and
delays in goods movement are a direct result of rent seeking by the
foreign conglomerates who lease the vast majority of America's marine
terminals, terminals that are in fact mostly publicly owned. They have
consistently prioritized their own, short-term profits over the
domestic benefits of operational efficiency and the greater good of
benefitting America's economy. I do not question their right to pursue
profits, but they are making those profits by operating in public
ports, built and dredged with local, state and federal taxpayer funds.
They operate along roads, canals and rail spurs built by American
taxpayers. We believe that we have a responsibility to ensure that our
national freight supply chain is used to benefit all Americans
including the port workers the ILWU Coast Longshore Division
represents.
There are solutions to the challenges our ports and our port
customers are facing. If we fail to act now we will unquestionably face
a continuing decline in the resiliency of our supply system and
increasing delays and bottlenecks. Here are some examples:
Chassis--The ILWU Coast Longshore Division supports restoring the
handling of chassis to the practices used on the West Coast prior to
2015. Under that long established system, the chassis required to move
containers by truck and rail into and out of ports remained on the
waterfront and were maintained and readily available on the waterfront.
That meant chassis inventories were efficiently managed and quick to
locate and repair. In 2015, the terminal operators divested from the
ownership and repair of chassis to third parties. Since that time, we
have regular chassis shortages and a backlog of out of service
equipment. No chassis mean trucks cannot pick up the containers that
are stacked in our ports. Separate ownership of chassis also means
truckers must often make separate stops to pick up and return the
required chassis, significantly slowing the movement of containers. In
fact, we currently have a terminal at the Port of Los Angeles operating
under the old model that is charging shippers a premium for this
``expedited'' service. We believe federal policy should press at a
minimum for a return of chassis repair and pickup to the waterfront as
soon as possible.
Labor--One of the ILWU Coast Longshore Division's primary roles is
to provide the workers as requested by the employer to move goods. The
number of workers called to work is 100 percent determined by the
terminal operators that lease our port properties. Crew size is
determined by these largely foreign-based operators, who try to
complete the work at the lowest possible cost. We frequently see
scenarios in which calling larger crews, or additional workers in key
positions, would substantially increase the number of moves a crew can
make. When lower operational costs are more important than overall
productivity, congestion increases and the larger economy suffers.
Night and weekend gates--The ILWU Coast Longshore Division supports
expanding the times for night and weekend gates. Our workers welcome
the additional work, and opening the ports around the clock would go a
long way to easing the congestion and keep cargo flowing. Expanding
gate times, however, is not our decision. We also note that simply
expanding gate hours will have no benefit if the next points out into
the supply chain are closed for the night or weekend. Night and weekend
gates work best when they are part of a coordinated effort to move
goods.
Expand the workforce--Steady growth in cargo volumes would be
expected to be matched by expanding the longshore workforce. This has
not been the case on the West Coast. Terminal operators have resisted
adding new members to the permanent (or registered) longshore workforce
to keep pace with ever-growing cargo volumes. Instead they have relied
increasingly on temporary workers, known as casuals, who make lower
wages and do not qualify for benefits. These more junior workers can
spend years working at a port and still not be a registered worker.
This disincentive prevents us from growing and training for the longer
term the experienced longshore workers needed to remain competitive.
Invest in training--Terminal operators have systemically
underinvested in training the longshore workforce. Even our employers
association has acknowledged that there is now a shortage of higher-
skilled workers. That is because the employers have continually made
the decision to not hire, train and order sufficient numbers of
workers. To effectively meet the demands of the pandemic and other
fluctuations in the industry, the ILWU Coast Longshore Division
believes that the training and staffing should increase to meet the
peaks, not the valleys. We welcome the long overdue hiring of over
3,000 new workers at the Ports of Los Angeles and Long Beach over the
past year. Roughly 90 percent of the new hires, however, were casuals
who can only perform basic functions such as the lashing of containers
on vessels and driving yard tractors. They cannot operate cranes, top
handlers, side picks, and other container handling equipment because
they lack the hours of experience to first earn their registration
status, and only then do they begin the weeks-long process to train to
operate complex equipment.
Review demurrage and detention rules--Demurrage and detention rules
were established to encourage timely removal and return of containers.
In recent years it has increasing become a profit center for carriers
and terminal operators. Carriers have increased their fees annually
even during the pandemic. Larger volume shippers can often avoid the
fees due to preference handling provisions in their contracts that
grant priority movement of that shipper's containers. This premium
service is yet another profit center for carriers, but also complicates
and slows the overall processing of cargo. The ILWU Coast Longshore
Division believes Congress needs to equip the Federal Maritime
Commission with sufficient resources and authorities to effectively
referee the demurrage playing field. Action is required to restore a
priority for efficient movement of goods through America's ports.
Automation--Automation has downsides that can disrupt the national
supply chain and hurt our economy: Human-powered ports cannot be hacked
like automated infrastructure can. Longshore workers move cargo with
record-breaking results, we support our communities and pay U.S. taxes.
Automation primarily benefits the Asian and European terminal operators
that lease our public port terminals.
Automation myths--Finally, we are seeing increasing calls for
automation of maritime terminals and also for government subsidies for
automation. Advocates for automation are trying to sell a fantasy that
automation can solve congestion. We do not have to debate whether that
statement is true. We already know it is wrong based on the track
record of automated terminals around the world. In December 2018, the
global consulting firm McKinsey studied the performance of the world's
leading automated terminals. The report McKinsey prepared was designed
to promote automation projects. Despite that pro-automation bias, the
report concludes that automated port terminals are on average seven to
15 percent less efficient. The report acknowledges that many industry
stakeholders who have worked with automated technology--including the
ILWU Coast Longshore Division--actually believe the drop in efficiency
is between 30 and 50 percent. Automation is not only slow, but it also
lacks the flexibility to respond to surges in cargo like we are
currently experiencing. It is far more expensive to build and equip
than modern manned facilities, and all of the automated equipment on
the market is foreign manufactured.
Promoters of automation in fact have one goal, to cut labor costs.
These same advocates are clamoring for taxpayers' subsidies because
without them the high capital costs for automation projects makes them
bad investments. The ILWU Coast Longshore Division strongly opposes
these frankly stupid proposals to use American taxpayer dollars to gift
a subsidy to foreign conglomerates to buy foreign built automated
equipment in order to lay off American workers at publicly owned and
funded ports that also results in making those very same American ports
dramatically less efficient.
I thank the Subcommittee and its members for giving me this
opportunity to testify today, and I would be happy to answer any
questions that you may have for me.
Mr. Carbajal. Thank you.
We will now move on to Mr. Eugene D. Seroka.
Mr. Seroka. Good morning, Chairman Carbajal, Ranking
Members Graves and Gibbs, and other distinguished Members of
Congress. I would also like to thank the subcommittee and
Chairman DeFazio.
I am Eugene D. Seroka, executive director at the Port of
Los Angeles, with more than 33 years of experience in maritime
shipping logistics, both here in the United States and abroad.
Thank you for inviting me to participate today.
I appreciate the topic of today's hearing. When our supply
chains work as they should, they operate unnoticed, delivering
essential goods, creating jobs and economic prosperity across
our Nation.
As America's busiest container port, the Port of Los
Angeles has an outsized responsibility to move the country's
cargo. While one-third of our cargo is consumed within the
southern California region, fully two-thirds goes to the
national market, reaching every congressional district in the
United States. Changes in consumer behavior, trading patterns,
and manufacturing supply chains are reflected in our volume.
A year ago, after nationwide stay-at-home orders went into
effect, cargo volume here at the port dropped 20 percent. There
was plenty of space available at our marine terminals, and we
saw a large number of canceled vessel sailings. Now, a year
later, we find ourselves 11 months into an unprecedented import
surge, while export volume continues to languish. Import volume
has taken off, as consumers shifted from spending on services
to goods. This was also fueled by stimulus dollars. As a
result, the Port of Los Angeles has averaged more than 900,000
container units per month every month since last July; 900,000
used to be a strong month in our peak season.
Just last week we commemorated handling our 10 millionth
container in fiscal year 2021, a first for any port in the
Western Hemisphere. And today I will announce 1 million TEUs
crossed our docks in the month of May. To give you a sense of
scale, 10 million containers, laid end to end, would wrap
around the world 1\1/2\ times. By any measure, it is an amazing
accomplishment for our terminal operators and longshore workers
alike.
Productivity at the port has never been higher. Before the
pandemic we averaged 10 containerships at berth per day. During
this surge we are handling 15 ships daily. Longshore women and
men are filling 50,000 work shifts a week, well above our 3-
year running average. Still, the massive influx of cargo we
have seen has placed enormous strain on the entire system. Our
tarmacs remain 95 percent utilized, when 80 percent is
considered full. As a result, truck turn times have increased.
With terminals full, ships take longer to process, and incoming
arrivals are directed straight to anchor.
At its peak, we had 40 container vessels at anchor back in
February, waiting an average of nearly 8 days. Today, through a
lot of hard work and collaboration, we have reduced that
backlog by 75 percent, with an average wait time of 5 days.
Today at the port we are working 15 ships, with 12 at anchor in
the San Pedro Bay, 10 of those destined to Los Angeles.
Despite nearly 2 billion square feet of warehouses in our
region, those facilities filled up, and our importers have
resorted to using containers as temporary storage. That
equipment is not cycling back into the system fast enough. On-
terminal boxes are averaging 4 days until pickup, versus 2,
pre-surge. Marine terminal utilization remains well above
designed capacity. Containers waiting to be loaded on trains
now sit for 9 days on average, when in normal times they would
wait 2 days.
All of this leads to increased complexity and shipping
costs, the impacts to exporters who have been challenged on
three fronts: our own trade policy, strength of the U.S.
dollar, and supply-demand issues pushing record numbers of
empty containers back to Asia.
In summary, there are just a few points I would like to
emphasize.
First, while these supply chain issues are global, this is
still a relationship-based business. We continue to work
closely with the Agriculture Transportation Coalition, the
California secretary of agriculture, and so many other industry
stakeholders to drive solutions and improve.
Second, robust investment in our freight system is needed,
especially in the area of digitization. We have rolled out four
such digital products in response to user needs, and I have
advocated for a nationwide adoption of port community systems,
which can help businesses and service providers improve their
supply chains.
Third, we need a national strategy to enhance
competitiveness of our supply chains, including getting
American products to export markets, and supporting key
industries here at home, like agriculture and manufacturing.
With that, I will conclude my comments. Thank you for
joining today, and I will be happy to answer any questions you
may have.
[Mr. Seroka's prepared statement follows:]
Prepared Statement of Eugene D. Seroka, Executive Director, Port of Los
Angeles, California
Introduction
Good morning Chairman DeFazio, Chairman Carbajal, Ranking Member
Graves, Ranking Member Gibbs, Members of the House Subcommittee on
Coast Guard and Maritime Transportation, and other distinguished
Members of Congress. Thank you for the invitation to participate in
this important hearing.
I am Eugene D. Seroka, Executive Director at the Port of Los
Angeles. I concurrently serve as President of the California
Association of Port Authorities and as a Board member of the American
Association of Port Authorities. In addition to spending the last seven
years at the Port of Los Angeles, I have more than 33 years of
experience in the maritime shipping industry, both in the United States
and abroad. Our industry is very much a relationship-based business
and, throughout my career, I have been privileged to engage with every
link of our global supply chain.
I greatly appreciate the purpose of today's hearing because I
believe a well-functioning supply chain is in the national interest.
When our supply chains work well, they operate largely unnoticed,
delivering essential goods, creating jobs, and driving economic growth
and prosperity across the nation. However, congestion at major trade
gateways around the world, and high-profile incidents, such as the
grounding of the Ever Given in the Suez Canal, have drawn public
attention to widespread supply chain disruptions and their impact on
American consumers and businesses.
Today, I hope to share some observations from our unique vantage
point and suggest some courses of action that can position the United
States to reassert leadership and convert its supply chains into a
competitive advantage.
The Port of Los Angeles
The Port of Los Angeles is the busiest container port in the
nation. In 2020, the Port handled 9.2 million twenty-foot equivalent
units (TEUs, the standard measure of container cargo). For the 12-month
period ending this month, we will have moved over 10 million TEUs--a
record amount for a Western Hemisphere port. The operational scale of
the Port of Los Angeles is immense: 27 terminals, 270 berths, roughly
200,000 unique shippers, 1,654 annual ship calls, 100 daily trains, and
60,000 daily truck moves. We also operate cruise, liquid bulk, and
automobile business lines, however container cargo is the largest share
of our business.
Together with our neighboring port in Long Beach, we comprise the
San Pedro Bay Port Complex, which handles nearly 40 percent of all
containerized imports and 30 percent of all containerized exports for
the United States. Cargo through this complex flows to and from 160
countries across the globe and reaches every Congressional district
across the nation. In fact, only one-third of the cargo handled at the
Port is consumed within the LA region, while fully two-thirds of our
cargo is destined for the national market. As a result, changes in
consumer behavior, trading patterns, and manufacturing supply chains
show up in our volumes.
An Unprecedented Consumption Surge
In order to contain the spread of the novel coronavirus, the
Chinese central government shut down manufacturing in early 2020. As
the virus spread to the United States, emergency stay-at-home orders
effectively shut down large parts of the economy. The resultant effect
of these non-pharmaceutical interventions was a huge drop in cargo
volumes--an 18.5 percent decrease year-over-year (May 2019 to May
2020). At this time, our terminals saw very little activity and we
observed a large number of cancelled sailings.
As goods consumption resumed, businesses first worked down
inventories that were well-stocked with goods forwarded in advance of
tariff milestones imposed between August and December 2019. By the
middle of 2020, personal consumption expenditure shifted away from
services and into goods consumption. This was further fueled by federal
stimulus checks. Online purchases doubled over 11 months as quarantined
shoppers acquired everything from exercise equipment to athleisure wear
to new furniture. By August, cargo volumes began to surge as businesses
began to replenish inventories.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Dating back to July 2020, the Port has experienced and average
monthly container volume of 900,000 TEUs. Comparing the first four
months of 2021 to previous years, they are 42 percent higher than 2020
volumes and 20 percent above 2019 volumes. In cargo value, overall
trade in the first quarter rose more than 25 percent year over year,
from $56.3 billion in Q1 of 2020, to $70.6 billion this year. This
pandemic-induced surge is the main reason we have pierced the 10
million TEU mark for a single year.
Handling this amount of cargo is, by any measure, an amazing
accomplishment for our terminal operators as well as our longshore
women and men. Productivity at the Port has never been higher. Before
the pandemic, we averaged 10 ships a day; during this surge, we have
averaged 16 to 17 ships a day. Our longshore workforce has been
averaging 50,000 work shifts a week, well above the 3-year average,
even amidst the pandemic.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Supply Chain Impacts
The surge in volumes has placed strain on the system:
Warehouses: Despite nearly 2 billion square feet of
warehouses in our region, these facilities filled up and resorted to
using containers as temporary storage. The amount of time it takes for
a container and chassis to cycle back to the Port--what we call
``street dwell''--went from an average of 3 days to 7 days.
Marine Terminals: Shippers need to continue to pick up
their boxes here at the Port, as the terminals continue to fill up with
containers. The duration of time a container remains in a terminal
before it is moved, is currently 4 days, a decrease from five days
previously recorded, and 4 days pre-pandemic. Marine terminal
utilization remains elevated with terminal tarmacs 95% utilized (80% is
considered ``full'').
Turn Times: When terminal tarmacs are stacked with
containers, it takes longer for trucks to pick up the boxes, so ``truck
turn times'' increase. Ships also take longer to process, causing
incoming ships to be directed to anchor.
Ships at Anchor: Typically, ships arrive and are assigned
a berth for unloading and loading of cargo; however, in a congestion
scenario, ships are directed to anchor off the coast of California. At
peak, we had 40 ships at anchor, waiting an average of nearly 8 days.
Today, through a lot of hard work, we are hovering around 20 ships,
waiting an average of 5 days.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Rail: To further compound the situation, the Arctic Blast
that hit much of the country earlier this year caused a shortage of
rail cars. The time that containers sit, waiting to be loaded on to a
train--what we call ``rail dwell time''--increased from 2 to 8.6 days.
At peak, rail dwell was at 11.6 days in March.
In this kind of environment, shippers experience tremendous
hardship, which has exacerbated an already challenging situation. Our
export community, for example, has already been by the onset of tariffs
and retaliatory tariffs in 2018.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Moving Forward
I would emphasize three points in support of supply chain
competitiveness:
Development of Policy Alignment: First, the supply chain
disruptions we see are a global phenomenon, driven by the surge in
consumer demand for goods. However, an effort to align policies and
programs toward competitiveness of the nation's supply chains is a
worthwhile effort. Clearly, a well-functioning supply chain is in the
national interest, but effective federal support to improve the
performance of our supply chains must be developed with a solutions-
oriented approach and with representation from relevant federal
agencies and supply chain stakeholders, including cargo owners (import
and export), port authorities, liner carriers, marine terminals,
trucking, railroads, warehouses, and customs brokers and freight
forwarders.
Importance of Information Sharing: Second, our freight system
requires robust freight infrastructure investment, and importantly,
this investment should include accelerated and integrated
digitalization of the supply chain. For example, port community
systems--which are already in use in the advanced economies of Asia and
Europe--should be used in our major gateway ports, and these systems
should be interconnected. Such integrated digital platforms can equip
cargo owners and service providers with the information they need to
optimize their supply chains and enhance resilience to future supply
chain disruption.
In 2020, the Port of Los Angeles used its port community system,
the Port Optimizer, to share real-time information on incoming cargo
volumes (the Signal), equipment return (the Return Signal), and overall
port performance (the Control Tower).
National, Sector-Based Supply Chain Strategy: Third, we must
revisit a national strategy that targets infrastructure investment and
supply chain performance to key industrial sectors of our economy. Such
a strategy should focus on exports of American products, but also on
procurement of essential goods for American businesses and consumers.
For example, we must reverse the impact that retaliatory tariffs have
had on our agricultural exporters.
We must enhance their connectivity to major trade gateways through
infrastructure investment and leverage digital solutions that make it
easier for them to marshal the equipment necessary to reach foreign
markets. At present, the Port of Los Angeles is working with
stakeholders in California's Central Valley to improve connectivity to
our trade gateway and enhance the competitiveness of the California
agricultural community. Such a model can be replicated at the national
level.
Thank you for your consideration.
Mr. Carbajal. Thank you.
We will conclude our panel presentation with Ms. Jen
Sorenson.
Ms. Sorenson. Thank you so much, Mr. Chairman, Ranking
Member Gibbs, Congressman Graves, Congressman DeFazio, thank
you for the opportunity to testify on an issue of critical
importance to agriculture and to the U.S. pork industry.
I am the communications director for Iowa Select Farms in
Iowa, and I am president of the National Pork Producers
Council, an association representing over 60,000 U.S. pork
producers.
Expansion of export markets is so critical to the continued
success of our industry. As the world's top exporter, U.S. pork
annually ships more than $7 billion to foreign destinations.
The past few years have been incredibly difficult for U.S. hog
farmers. After more than 3 years of trade retaliation that has
limited pork producers' ability to compete effectively around
the globe, the COVID pandemic unleashed unprecedented
challenges for all of us, for the entire food supply chain.
Now, just as producers and production has returned to some
sense of normalcy, shipping delays at our international ports
are causing serious issues for U.S. pork producers and other
agricultural exporters. If not addressed soon, these delays
have the potential to cause significant backup at our
processing plants and to our hog farms, once again placing
producers in a difficult situation, not to mention the animal
welfare implications caused by the backup of animals on our
farms.
On an annual basis, U.S. pork producers have historically
exported more than one-quarter of production to over 100
countries. These countries include those in Latin America and
the Asia Pacific region, and they have come to trust our
affordable, safe, and reliable pork supply. And like other
sectors of the U.S. economy, we rely on vessel operating common
carriers to ship product overseas.
Typically, shipping containers loaded with imported goods
are unloaded, sent to rural areas, filled with U.S. pork and
other agricultural commodities, and then shipped abroad.
However, the COVID pandemic, as we know and have talked about,
has increased these shipping issues as the United States
imported higher amounts of consumer goods, causing a backlog at
ports throughout the country. This backlog is due to numerous
factors, including congestion in and around the terminals and
limited hours of operation.
West coast ports, ports which served a growing Asia Pacific
market, are being significantly impacted by this backlog.
Currently, there are over 1,000 containers of pork sitting at
west coast ports, waiting to be exported. Compounding the
situation, carriers are failing to provide accurate notice to
exporters of arrival, departure, and cargo loading times, and
then imposing financial penalties on exporters for missing
these loading windows. These financial penalties, which are
paid to the very carriers that are canceling the orders, have
been deemed unreasonable by the Federal Maritime Commission.
Ultimately, these additional costs are passed down the supply
chain to farmers.
Shipping delays are affecting all of U.S. agriculture,
including pork. The Asia Pacific region is among our top
market, due to its cultural preference for pork. Thanks to
recent trade agreements with China and Japan, spearheaded by
NPPC, U.S. pork exports to those countries saw a significant
uptick in 2020. In fact, in 2020, U.S. pork sent 52 percent of
all exports--worth $3 billion--through west coast ports in Long
Beach, L.A., and Oakland, California, as well as Seattle and
Tacoma, Washington. These shipping delays to the Asia Pacific
region are increasing costs to U.S. pork, and positioning the
United States as an unreliable trading partner. If left
unaddressed, this might also negatively impact future trade
agreements with Southeast Asia trading partners.
The Agriculture Transportation Coalition, of which NPPC is
a member, has compiled three solutions: number one, expand
hours for U.S. ports; number two, mandate that ocean carriers
transport export cargo at safe capacity levels; and number
three, support and expedite the Federal Maritime Commission
enforcement of a rule that declared the penalties being imposed
on exporters as unreasonable.
I would like to thank you for the opportunity to testify,
and I look forward to questions.
[Ms. Sorenson's prepared statement follows:]
Prepared Statement of Jen Sorenson, President, National Pork Producers
Council
Introduction
Chairman Carbajal, Ranking Member Gibbs, and members of the
committee, I appreciate the opportunity to discuss an issue of critical
importance that impacts U.S. pork producers and all of U.S.
agriculture.
My name is Jen Sorenson. I am the communications director for Iowa
Select Farms in West Des Moines, Iowa, and president of the National
Pork Producers Council (NPPC), a national association representing the
interests of more than 60,000 U.S. pork producers.
The U.S. pork production system, the most advanced in the world, is
characterized by robust competition, innovation and efficiency. Last
year, our producers marketed more than 131 million hogs despite
significant disruptions caused by the coronavirus pandemic. Those
animals provided more than $22 million in farm-level income. Expansion
of export markets is crucial to the continued success of the U.S. pork
industry. As the world's top exporter, U.S. pork annually ships more
than $7 billion to foreign destinations.
The past few years have been incredibly difficult for hog farmers.
After more than three years of the trade retaliation that limited pork
producers' ability to compete effectively around the globe, the COVID
pandemic unleashed unprecedented challenges for the entire food supply
chain. Now, just as producers are returning to normalcy, shipping
delays at our international ports are causing serious issues for U.S.
hog farmers and other agriculture exporters. If not addressed soon, the
delays have the potential to cause significant backups from our
processing plants to hog farms, once again placing producers in a
tenuous situation.
The Situation
On an annual basis, U.S. pork producers have historically exported
more than one quarter of production to more than 100 countries. Key
export markets include countries in Latin America and the Asia-Pacific
region. Countries around the world have come to trust the supply of our
affordable, safe and reliable pork.
Like other sectors of the U.S. economy, U.S. pork relies on vessel-
operating common carriers (VOCCs) to ship product overseas. The COVID-
19 pandemic has exacerbated shipping issues, as the United States
imported higher amounts of consumer goods, causing a backlog at the
ports. This backlog at U.S. ports, overwhelming marine terminals,
delaying ship arrivals and loading/unloading, is due to a variety of
factors including:
Congestion in and around the terminals;
Limited hours of operation. The lack of 24/7 operation is
unique to U.S. terminals;
Terminals that are too full to handle the containers;
Lack of sufficient labor and automation to allow the
marine terminals to load/unload efficiently;
Lack of information as to locations of containers or the
times when they are available; and
Lack of capacity of near-port distribution centers to
accept/process massive volumes of import cargo.
While East Coast ports are experiencing similar issues, the impact
has been more severely felt on the West Coast.
Previously, shipping containers loaded with imported goods were
unloaded, sent to rural areas, filled with U.S. pork and other
agricultural commodities, and then shipped abroad. However, due to the
above-mentioned factors, in addition to lucrative freight rates paid by
the import cargo, many VOCCs are immediately returning empty containers
to their overseas ports of origin, stranding U.S. agriculture
commodities and making it impossible to deliver timely product to
foreign customers.
Compounding the situation, carriers are failing to provide accurate
notice to exporters of arrival/departure and cargo loading times, and
then imposing financial penalties on exporters for ``missing'' those
loading windows. These financial penalties--which are paid to the very
carriers that are cancelling the orders--have been deemed unreasonable
by the Federal Maritime Commission. Exporters have hundreds of
documented instances of ocean carriers declining or cancelling export
bookings, often at the last minute, when the cargo is loaded in a
container, already on train to the ports. Ultimately, these additional
costs are passed down the supply chain to farmers.
The main problem is carriers are not shipping back as many fully
loaded containers as they are receiving. At the Port of Long Beach
alone, the number of empty containers departing outnumbers loaded
containers by more than two to one.\1\ Unfortunately, this is causing a
cascading effect on the entire transportation system. Since containers
are not loaded onto a vessel and instead sit at terminals, they incur
significant detention and demurrage fees at the port. The domino effect
continues, tying up equipment at the ports, signaling packing plants
that they need to adjust harvest capacity, and backing up supply all
the way to the farm. This same scenario is being replicated throughout
all of agriculture.
---------------------------------------------------------------------------
\1\ https://polb.com/port-info/wave-weekly-advance-volume-estimate/
---------------------------------------------------------------------------
It is not just Asian markets seeing these delays. Hapag-Lloyd, the
world's fifth-largest container line, recently halted all bookings
coming from Latin America. The situation seems to be worsening as
bottlenecks continue.
As seen in the chart below, the problem has only grown worse in the
last year. At first glance, while it can appear the situation has
improved the past few months at the Los Angeles/Long Beach port, in
truth there were fewer ships there in May due to carriers being
diverted to less congested ports. Of course, that does not resolve the
issue; it just expands the bottlenecks to other ports throughout the
country.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Pork Impacts
As mentioned, the U.S. pork industry has historically exported more
than one-quarter of annual production. The Asia-Pacific region is among
our top markets due to its cultural preference for pork. Thanks to
recent trade agreements with China and Japan--spearheaded by NPPC--U.S.
pork exports to those countries saw a significant uptick in 2020 by 75
percent and 6.7 percent respectively, compared to 2019.
In 2020, U.S. pork sent 52 percent of all exports--worth $3
billion--through West Coast ports in Long Beach, Los Angeles and
Oakland, Calif., as well as Seattle and Tacoma, Wash. These shipping
delays to the Asia-Pacific region are increasing costs to U.S. pork and
positioning the United States as an unreliable trading partner.
Frequent, last-minute cancellations of U.S. pork shipments have
undermined shipment certainty and eroded trust with buyers our industry
has invested heavily to earn. We have already heard of large
international retailers and restaurant chains looking at sourcing pork
from other countries rather than waiting for U.S. product. If these
shipping delays continue, more retailers are likely to follow suit.
If left unaddressed, this may also negatively impact future trade
agreements with Southeast Asian trading partners, as we seek better
market access for U.S. pork.
High domestic demand for U.S. pork over the past year--due to COVID
restrictions and more consumers eating at home--has helped offset some
of the harmful impacts of these international shipping delays. However,
now that the United States is lifting its COVID restrictions and pork
is in higher demand in more countries, we may soon find ourselves in a
situation where we are not able to fill orders on time.
The Solutions
As I have outlined, the shipping delays at our nation's ports are
caused by myriad factors. Addressing them requires urgent attention, as
this impacts all of U.S. agriculture, a significant source of revenue
for our nation's economy.
Because these shipping delays affect a wide variety of agricultural
commodities, the Agriculture Transportation Coalition (AgTC) has helped
coalesce likeminded associations to address concerns and develop
suggested solutions. AgTC, of which NPPC is a member, has sent
correspondence to the administration over the past few months, urging
for a quick resolution to this matter.
Among solutions, AgTC and NPPC recommend the following:
Expand hours for U.S. ports: The U.S. marine terminal
gates typically are open and operating between 8 and 16 hours a day,
five or six days per week, compared to Asian terminals that work 24/7.
To relieve congestion, U.S. ports must expand their operating hours.
Mandate ocean carriers carry export cargo at safe
capacity levels: Typically, about 100% of the containers on an
eastbound (e.g., Asian imports to North America) ship are loaded with
cargo, while approximately 70-75% of the westbound (e.g., U.S. exports)
containers are loaded, with the remainder left empty; and
Support and expedite the Federal Maritime Commission
(FMC) enforcement of its detention and demurrage rule: FMC has found
that carriers and terminal operators were issuing unreasonable
penalties for leaving a container or maintaining possession of a
container in a marine terminal for longer than allowed. Despite FMC
ruling the penalties were unreasonable, the carriers and terminals have
failed to follow this guidance, continuing to cumulatively issue
hundreds of millions of dollars of demurrage and detention invoices to
U.S. exporters/importers.
We urge congress and the administration to remain engaged, working
with all parties to find a solution to ensure the continued,
uninterrupted supply of U.S. pork and other agricultural products to
our overseas customers.
Conclusion
Expanding market access is critical to the success and future
growth of U.S. pork producers. Over the last decade, the United States
has been the top exporter of pork in the world. In any given year, the
U.S. pork industry ships product to more than 100 countries.
U.S. pork producers need Congress and the administration to work
together to quickly engage and address these shipping delays, enabling
hog farmers to continue to lead the way as a vibrant American farm
sector that is critical to the rural and overall U.S. economy.
appendix
Previous correspondence to administration officials on shipping
delays:
Feb. 24, 2021 letter to President Biden from 70+
agriculture organizations; \2\
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\2\ https://agtrans.org/wp-content/uploads/2021/03/Ag-Association-
Letter-to-President-Biden-02-24-21_Final.pdf
---------------------------------------------------------------------------
Feb. 25, 2021 letter to Federal Maritime Commission (FMC)
Chairman Khouri from Sens. Boozman and Wicker; \3\
---------------------------------------------------------------------------
\3\ https://www.commerce.senate.gov/services/files/82EFDBA7-CFFF-
424F-968A-8DE9F31F3ED9
---------------------------------------------------------------------------
March 2, 2021 letter to FMC Chairman Khouri from 24
senators \4\;
---------------------------------------------------------------------------
\4\ https://agtrans.org/wp-content/uploads/2021/03/
03.02.21_Thune_Klobuchar_Final_with_
signatures.pdf
---------------------------------------------------------------------------
March 2, 2021 letter from Rep. Schrier to FMC \5\;
---------------------------------------------------------------------------
\5\ https://agtrans.org/wp-content/uploads/2021/03/Schrier-Letter-
to-FMC-For-IMMEDIATE-Release.pdf
---------------------------------------------------------------------------
March 8, 2021 letter to FMC Chairman Khouri from senior
members of the House Transportation & Infrastructure Committee and the
Coast Guard & Maritime Subcommittee \6\;
---------------------------------------------------------------------------
\6\ https://agtrans.org/wp-content/uploads/2021/03/2021-03-08-Big-
4-Letter-to-FMC-on-Container-Shortages-and-Agriculture-Exports-003.pdf
---------------------------------------------------------------------------
March 9, 2021 letter to Federal Maritime Commission
Chairman Khouri by 111 House members \7\; and
---------------------------------------------------------------------------
\7\ https://agtrans.org/wp-content/uploads/2021/03/FMC-VOCC-final-
letter-3.9.21-003.pdf
---------------------------------------------------------------------------
April 27, 2021 letter to Department of Transportation
Secretary Pete Buttigieg from nearly 300 U.S. agriculture and forest
products companies \8\.
---------------------------------------------------------------------------
\8\ https://agtrans.org/wp-content/uploads/2021/06/
Ag_Export_Letter_to_Secretary_
Buttigieg_04_28_2021.2.pdf
---------------------------------------------------------------------------
Mr. Carbajal. Thank you.
We will now move on to Member questions. Each Member will
be recognized for 5 minutes, and I will start by recognizing
myself.
Mr. Butler, I understand that at the marine terminals the
ocean carriers ultimately pay the wages of the longshoremen
through port fees. If the terminal gates are operating longer
hours, as sought by some carriers you represent, are they
willing to pay for training and additional hours?
Mr. Butler. Mr. Chairman, the World Shipping Council is not
the employer representative for those labor relations, so I
would hesitate to talk about what people would be willing to
pay.
But I do know that there [inaudible] to extend hours, and
that is something some of the other witnesses have addressed.
It means everybody in the supply chain would have to be on-
board with the program.
Mr. Carbajal. Thank you. I have gotten reports of shipping
companies reneging on contractual agreements with shippers in
order to request more money, or ship higher value cargo. Is
that true, from your understanding, as well?
Mr. Butler. We have heard the same complaints. I don't have
visibility into individual contracts.
The only thing that I would say, Mr. Chairman, is when you
hear a complaint like that, it is very important to get all of
the facts, because--and Commissioner Dye referred to this a
little bit earlier--there is a bit of a problem with the entire
contracting structure, historically, in that there is a lack of
commitment on both sides.
Frankly, shippers, cargo owners, don't want to commit large
parts of their volume to a contract. Historically, they have
done quite well playing the spot market. And so, when somebody
tells you that the contract has not been fulfilled, you need to
ask the question, ``Well, was your minimum specified quantity
covered,'' and now we are talking about something beyond that.
Essentially, are you in the spot market?
So it is very critical to get all the facts, and I can't
tell you about any given contract. I can tell you that ocean
carriers are quite serious about fulfilling their end of the
bargain with their service contract. That is how they keep
relationships with their customers.
Mr. Carbajal. Mr. Butler, from your understanding, what
could we put in place to get to that information that you are
talking about, the full set of facts?
Mr. Butler. Well, I think the only way you get the full set
of facts in any particular situation is really through the
complaint and/or FMC-initiated enforcement process.
There are, as you know, millions and millions of
containers, millions and millions of transactions, and
thousands of service contracts floating around in this market.
There is no way to have visibility into all of it at once. And
I understand that it is frustrating to people. But the fact of
the matter is, if you are going to examine a commercial
relationship and whether both sides are keeping up their end,
you have to look at that particular relationship on a
transactional basis. And the FMC is in a position to accept
those complaints, and also to initiate actions of its own.
And incidentally on this, I categorically reject the idea
that shippers are being threatened with retaliation for
bringing complaints. I just don't buy that.
Mr. Carbajal. Thank you. In your written statement you said
that, in reference to placing a priority on agriculture
cargoes, ``it is not possible to arbitrarily favor one group of
customers without disrupting the functioning of the entire
system, to the detriment of all.'' I agree with your statement,
but isn't that exactly what is happening with the
prioritization of Asian imports by shipping empty containers at
the detriment of west coast exporters?
Mr. Butler. Mr. Carbajal, the shipping industry takes the
cargo that is presented to it. And as a number of the
witnesses, including myself, have said today, what is really
driving these problems at root is the massive increase in U.S.
imports. And some people today have characterized that as
essentially Asian exporters pushing product to the United
States. But the fact of the matter is, from the shipping side,
the majority of import cargo is contracted by U.S. importers.
They are U.S. companies bringing these goods to the United
States for U.S. consumers.
On the issue of the trade imbalance, there is no question
whatsoever that that exacerbates things. In normal times it is
2 to 1, imports to exports, into the U.S. Right now we are
basically at 3 to 1, imports to exports. And if you are going
to keep the whole system moving, you do have to send empty
containers back to those other origins. Otherwise, the whole
thing stops.
Mr. Carbajal. Thank you, Mr. Butler.
Ms. Sorenson, could you comment on that? Are carriers
taking your products? You have no issue or challenge going on?
Ms. Sorenson. We are having challenges right now. And the
Agriculture Transportation Coalition's informal survey of ag
commodities on average says 22 percent of ag export sales are
not being performed, due to capacity issues.
This is about lost opportunities and an erosion of
relationships. You look at Japan, and they have very discerning
tastes. They want chilled pork. And when we have to freeze that
pork down, and deliver it frozen, we lose a tremendous amount
of value to U.S. hog farmers. And not only value, we erode that
relationship that we have built over time with Japan. So we are
definitely losing opportunities, and we are losing,
collectively, as agriculture, 22 percent of our export sales.
Mr. Carbajal. Thank you very much. I have run out of time,
so now I am going to go to Ranking Member Gibbs.
Mr. Gibbs. Thank you, Chairman. The first question would be
to Mr. Butler, and then maybe also specifically to Mr. Seroka
of the Port of Los Angeles. But my first question is, we know
how much the containers' volumes have increased, even over
2019, but do we track--I suppose they do--what percentage of
those containers are going back to Asia out of the Port of L.A.
that, in general, for Mr. Butler, are empty? Do we know that
data?
Mr. Butler. Mr. Gibbs, I expect Mr. Seroka, being a little
closer to the port, probably has a better idea on that.
What I would repeat is something I mentioned a moment ago,
and that is we have gone from an import to export ratio, in
normal times of 2 to 1, to about 3 to 1 today. So there is no
question that, in order to keep the entire system moving, we
are absolutely sending back more empties, simply because that
is what you have to do to ultimately keep the entire round-trip
balanced.
But as to a particular number, I do not have that.
Mr. Gibbs. Mr. Seroka, do you have any idea what is going
on with Port of Los Angeles, empty containers leaving?
Mr. Seroka. Yes, I do have a pretty good idea, Congressman.
On average, during the course of the last 12 months, we have
seen empty repositioning be about 30 to 35 percent of our
overall lift. Correspondingly, imports have increased by 50
percent from Asia to the United States, with the bulk of them
coming from China.
The difficulty here in normal times is that imports
traditionally move to major metropolitan areas, where most of
us U.S. consumers are located. Exports emanate from rural
America. So how we square that circle, how we can create round
trip, and what we call in the industry triangulated economics,
are really the formula that has to be cracked here.
Mr. Gibbs. OK. The reason I was asking this, I am kind of
pursuing--on our first panel, two of my colleagues were
proposing--are drafting a bill, and I have a little bit of
heartburn because I don't--I have a concern that the past
legislation that mandates to shippers that you have to take
cargo or you don't, or whatever, that kind of goes against, you
know, our fundamental principles. But, obviously, there is an
issue here.
So I am trying to figure out a way--how you either
incentivize shippers through price to make this work without
mandates, because I have a problem with that. And obviously, we
have questions on more transparency, and data transparency, and
more information, whether our systems, logistically, are set up
enough to do that. We have got to improve that. And so that is
where I was kind of going on this.
So I guess, back to Mr. Butler, carriers, obviously, they
make their money by making trips back and forth across the
Pacific. What incentives or what things would you think would
help this issue without penalizing them too badly, especially
with the possibility of a cloud hanging over them, that there
could be legislation that might not be favorable to their
operations?
Mr. Butler. Well, Congressman, first, I agree, there are
real problems when you start talking about mandating to carry
this particular product or that particular product. You are
pretty quickly, frankly, into rate regulation and price
mandates, because none of this operates independently of the
economics.
I think some of the things that have been raised today,
operationally, are probably where we need to go, where our
shipper colleagues and others on the hearing have mentioned the
need for better information, and more timely information, and I
think that is something that both ocean carriers and others in
the supply chain can do better, because if we tell somebody to
be at a certain place at a certain time to put their cargo on
the ship, and then you can't handle it, for whatever reason,
that causes a real problem.
So I think we should be looking at those operational
issues, and encouraging everyone to have better communications,
frankly. A lot of it comes down to that.
Mr. Gibbs. Mr. Seroka, I do want to ask the question about
hours of operation at your port. What are the hours of
operation?
Mr. Seroka. We run, traditionally, nine shifts of work per
week at the Port of Los Angeles, Monday through Friday, 8 to 5;
Monday through Thursday evening, 6 p.m. to 3 a.m. During the
surge, and even predating COVID-19, many of our terminal
operators ran Saturday and Sunday gates, additional nighttime
gates, in an attempt to keep up with volume. That work is
necessary, not only based on sheer volume, but also to connect
the other nodes of the supply chain.
As was stated earlier, truckers have federally mandated
hours of service. Warehouses are open for certain hours during
the course of time, and our western railroads run 24/7. So
syncing all of those up are very important.
But also today, Congressman, 30 percent of our truck
appointments go unused on our nightside shifts. It is our job,
collectively as industry, to squeeze every hour of productivity
that we can offer to our customers.
Mr. Gibbs. I got to conclude here, I am out of time, but I
would think on the--I understand the intermodal questions on
trucking and rail and all that, but when it is unloading and
loading containerships, vessels, I would think that would be a
24/7 operation. But maybe--I guess it is not at L.A. Is that
what you are saying?
Mr. Seroka. It is not, because there is only so much space.
Mr. Gibbs. OK.
Mr. Seroka. And as I mentioned in my comments, we are full
well over capacity, still to this day. When the next ship comes
in, sir, there is no room to put the cargo. We have implored,
and in some cases encouraged our importers to get the cargo out
of the port, and push it through the supply chain. That is very
important to us.
Mr. Gibbs. OK, that's very helpful, thank you. I yield
back.
Mr. Carbajal. Thank you. We will now move on to
Representative Auchincloss, and the vice chair of the
subcommittee.
Mr. Auchincloss. Thank you, Mr. Chair, and I appreciate the
time and expertise our witnesses have provided.
As we debate in Congress the big, ambitious infrastructure
investments that we can make to create a more prosperous and
more inclusive and more productive economy going forward, I
wanted to ask a couple of questions about maritime
infrastructure to our assembled experts here. I know that
volume growth has especially impacted our west coast ports, and
we are seeing them really kind of bulging at the seams.
I represent Massachusetts and, in my research for this
hearing, talked to a number of experts who have pointed out
that while, of course, the water route from Asia Pacific to the
east coast is longer, it can be more economical to ship goods
to the east coast ports if it shortens the overland routes. And
up to two-thirds of the American consumer market can be reached
quicker overland from east coast ports than from west coast
ports, for example. So, while the total overwater shipping may
be longer, the total shipping costs might be substantially
lower, if you are able to dock at east coast ports. This is
especially, I think, salient now that the Panama Canal has been
widened for the bigger containerships.
So I would like to start with Mr. Butler, but anybody can
weigh in here, in helping me think about, for east coast port
infrastructure, what are some improvements that would make
these ports better able to handle incoming cargo. And I will
list out a few that we have explored: on-dock rail transfer;
inland ports to take away some of the pressure at the actual
gate; interchanges, or exits and roads that improve egress and
ingress; additional container terminal automation; new
terminals--I think Charleston was the first new one in 12 years
that we have had on the east coast; and then dredging, as well,
to accommodate larger container vessels. And I am sure there
are others that I am missing here.
I would love to hear your thoughts--and others on this
panel--about what infrastructure improvements east coast ports
can do to attract more cargo.
Mr. Butler. Congressman, it is a great question, because it
puts the emphasis where it really needs to be, which is on the
whole system. Frankly, the five or six ideas that you have
listed would probably be the top of my list, as well. So I am
not sure I can improve much on that.
But just to, if you will, reinforce your thinking--and Mr.
Seroka knows this, perhaps painfully--there has been, with the
widening of the Panama Canal, a shifting of some cargo that
would ordinarily come over the west coast to east coast ports.
And so we have seen that happen, and we have seen east coast
ports, frankly, expand and respond to that demand.
So I think this is something that you will see more of. And
I think having multiple gateways with that kind of capacity can
only help when we see surges in the future, because we will.
Mr. Auchincloss. Mr. Seroka, I want to give you a chance to
weigh in, as well.
Mr. Seroka. Yes, Congressman, a great outline that you just
gave, and Mr. Butler's response, as well. But I will have you
know that, in the last 10 years, the Federal Government has
out-invested the west coast ports by a number of 10 to 1,
nearly 11 billion U.S. dollars invested in east and gulf coast
ports, versus a little more than $1 billion on the west coast.
An applied approach, as we talk about infrastructure, that
has a better balanced investment across these gateways would be
my recommendation.
But your other outlines are very important. The
densification of rail, the ability to move from ship to that
rail to the inland point destination is important, as well. And
the overall look at cost is something that we in the industry
take full view of on a regular basis. And while transits to the
east coast of the United States may be some 10 to 14 days
longer, if there are bottlenecks in the supply chain, it gums
up the whole works.
So to have our ports fluid is extremely important, no
matter what the coast, so it gives the cargo owners choice of
gateways in the United States.
Mr. Auchincloss. I appreciate that.
And Mr. Chair, I will yield back the balance of my time.
Mr. Carbajal. Thank you. We will now move on to
Representative Johnson.
Mr. Ponce De Leon. Mr. Chairman?
Mr. Johnson of South Dakota. Oh, sorry, Mr. Ponce De Leon,
did you have something before my time began?
Mr. Ponce De Leon. To Chairman Carbajal, if I may respond
to the last speaker's questions regarding a couple things that
he mentioned.
Mr. Carbajal. We usually don't do this, but we will make an
exception, Mr. Ponce De Leon.
Mr. Ponce De Leon. Well, thank you. I mean, we are talking
about the movement of cargo to the west coast and the inland
transit to the east coast.
You know, typically, you are looking at 22 days of transit
through the canal, all the way to the east coast. If you are
coming to Los Angeles, it is a 14-day transit on water, and 4
days into Chicago, another 3 days into the east coast ports.
And it is typically a more viable solution, and it is a cheaper
solution. However, with the problems in the rails, and the
availability of rails, and the railroad taking the advantage on
increasing their prices because of the pandemic, and because of
this stuff, it has created a problem, where individuals are
looking for other sources, and not just a ship to the west
coast.
There are a whole lot of ships coming to the west coast
because it is quicker, and it has always been quicker with
inland transit. And that is a fact, whether it is in Los
Angeles, San Francisco, or Seattle-Tacoma.
The other part about automation that you bring up is that
automation is a vehicle to improve capacity is a farce. And we
have seen it in our--it doesn't improve capacity. All it does
is it is a cost-saving measure to reduce labor. And that is a
fact.
Mr. Carbajal. Thank you, Mr.----
Mr. Ponce De Leon. You can come on down to the Port of
L.A.-Long Beach, and we will show you, on the [inaudible] per
hour in some of the ports, it----
Mr. Carbajal. Thank you, Mr. Ponce De Leon.
Mr. Ponce De Leon. Thank you, but I needed to say that.
Mr. Carbajal. Thank you. Thank you. We will now move on to
Representative Johnson, who was so gracious to wait.
Mr. Johnson of South Dakota. Thank you, Mr. Chairman. I
will start with Ms. Sorenson.
I thought you did a good job, ma'am, of outlining for some
of us some of the impacts, economically, to pork producers, and
the broader pork industry. You mentioned specifically us being
viewed as an unreliable trade partner, and then specifically
the southeastern businesses, and consumers maybe purchasing
American pork, if they view us as unreliable, they may go find
other sources for their pork.
Do you have any sense of how ripe those two issues are?
I mean, on a scale from 1 to 10, 10 being the damage is
currently being done, contracts being canceled, and 1 being
people are only beginning to get a sense of concern, how ripe
you think those concerns are?
Ms. Sorenson. Well, I would be remiss if I didn't say 10.
But, you know, last year exports added almost $60 to the
average price producers received for every U.S. hog marketed.
And two problems arise when we are only able to sell frozen,
and not fresh pork, which is what Japan loves, and Japan loves
our loins. And it is really hard to find a buyer for pork
loins, if you can believe it. But they love them, and they love
them chilled.
And so farmers would get less value for the hog if our
market in Japan started to erode. This is especially difficult
after struggling over the few years with tariffs and nontariff
barriers to many of our important markets, so that has affected
the price of our product. And then----
Mr. Johnson of South Dakota. Ms. Sorenson, how much of a
discount--I mean, just give us a ballpark. And obviously,
production ag is an incredibly tight-margined business, and
even in good times that can be the case. When you go from
chilled to frozen, what kind of a discount does that impose?
Ms. Sorenson. I can't speak to the specific higher premium.
That, you know, that is private information between the
companies and the exporters. But if we can't deliver the
product, we lose the market. And, you know, when we pulled out
of TPP and didn't have access to an FTA in Japan, we saw a
major retailer switch from buying U.S. pork to buying Canadian
pork. And our foreign markets are extremely competitive with
Brazil and Canada and the European Union. United States needs
to stay competitive in the global pork market.
Mr. Johnson of South Dakota. OK, and then Mr. Seroka,
shifting to you, because Mr. Sorenson mentioned in her
testimony expanding extra gate hours, and then Mr. Ponce De
Leon mentioned a willingness, at least on behalf of labor, for
the extra gate hours. You seemed to indicate that physical
space was the real choke point, the real limiting factor. I
mean, is that the case? There is nothing that additional work
hours, extra gate hours, could do to physically clear the space
of ports?
Mr. Seroka. Sir, there are a number of causals to what we
see today, physical space being one. The lack of velocity of
containers moving in and out of the port is second. The ability
to match up all the nodes of the supply chain, as I mentioned.
Drivers of trucks have specific hours of operations that are
federally mandated. They need to match up with the ports'
operations, as we do with the warehouse operations.
So it is all folks working together to get on a calendar
that would make sense for additional hours of operation at the
one node, being the port.
Mr. Johnson of South Dakota. But just----
Mr. Seroka. And that is something that we continue to
explore, and work with other folks----
Mr. Johnson of South Dakota. It----
Mr. Seroka. I am sorry, sir.
Mr. Johnson of South Dakota. It seems like when I talk to
others involved with the other parts of the intermodal
universe, they really view the ports as the choke point. I
think your point about getting everybody synced up is good. But
I mean, at some point you have got truckdrivers and you have
got railroads who are kind of delivering--they are not
delivering product more quickly than you can handle it. They
are delivering it only as quickly as you can handle it.
So if you all are the limiting factor, is there anything
that can be done to expand gate hours?
Mr. Seroka. Yes. And number one, I would defer to Mr. Ponce
De Leon. There is specific language in the collective
bargaining agreement between the employers and the dockworkers
that speak to how we can do that right now.
Second, the port's growth--and I mentioned earlier on in my
comments that our vessel productivity, in large part due to
longshore labor, is up 50 percent during this pandemic. We are
welcoming 50 percent more vessels in port every day. We have
eclipsed 10 million container units and 1 million for the
month. Never before has that been done at a Western Hemisphere
port. But we all have to have this inertia to improve in all
areas.
And, as has been highlighted here today, information
technology will allow us to shine a light with greater
transparency. Think of it as a heat map. Where are the
bottlenecks? Where can we attack them quickly? What is coming
at us, so we can prepare our assets and our staffing? And flip
to the other side, where the buyer of these services, the cargo
owners, importers and exporters, can make choices to clear the
paths in their supply chains.
Mr. Johnson of South Dakota. Thank you very much, Mr.
Chairman. I see my time has expired.
Mr. Carbajal. Thank you. Not seeing any more questions, I
need to ask is there any more questions by the subcommittee?
Mr. Johnson of South Dakota. Well, Mr. Chairman, if it is
not too much of an imposition, could I ask a followup?
Mr. Carbajal. By all means.
Mr. Johnson of South Dakota. Thank you.
I mean, I think all your comments are well said, sir. And I
realize--I mean--and I know you guys know this, it is not like
you need Congress to tell any of you about the strain. But the
strain is very real. And I don't know whether it is a 10, like
Ms. Sorenson said or not, but it is a high number, regardless
of what it is. And I know that the systems are running
generally well, they are handling volumes that have never
before been seen in the Western Hemisphere. I don't doubt any
of that.
But I do think it is going to take an extraordinary effort,
something far beyond normal, to be able to chew through some of
these bottlenecks. And I think, if we want America to remain
competitive, and if we want to be able to meet the demands of
the world for this unbelievably high-quality American food, we
are really going to need everybody, you know, labor, and ports,
and shippers, and carriers, and everybody to get this done.
And so I would just--and Mr. Seroka, I would, of course,
give you an opportunity to respond. But I would just say, if
there is any barrier that Congress can remove to allow all of
you to enact that extraordinary effort, please know that we
stand ready to listen to your pleas and respond, because
business as usual is simply not going to get this done.
What am I missing, sir?
Mr. Seroka. No, we understand, and we are in lockstep with
you, Congressman. Again, I will put it into three major
categories.
The investment in this port and infrastructure system, as
was stated earlier, is both of the physical and the digital. We
need deeper involvement in our road and street connectors, also
densification of rail. The technology is such now that we can
not only get to our major cities by rail from the west coast of
the United States, but we need to get to the secondary and
tertiary cities with that on-dock rail capability.
The second is what you said. And what we call it in the
industry is supply chain optimization, looking at all these
opportunities, from labor to the employer, hours of operation,
and how we mesh in with the truckers, the rail providers, and
others. We are doing that on the ground every day. There was a
time, prerecession days, where we were stuck at 8 million
container units a year. Now we are piercing through 10 to 11,
and we will continue to find those ways to continuously
improve.
And the third piece is what I have called for, a national
export policy, not regulation, not binding people down, but
finding a way to get the 8 to 9 million folks back on the job,
creating incentives, whether they be on the tax structure, the
ability to access markets, or other means that the Federal
Government holds to get our exporters in contact with their
customers.
And what Jen is talking about, lastly, is extremely
important, but it is a very specialized service of refrigerated
containers, either chilled or frozen, that we can carve out as
an industry and put an extra spotlight on to assist her
constituents and members outside of the normal path of a dry
container.
Lastly, it is all about round-trip economics, sir. At the
end of this torrid surge in American consumer buying, we will
level off as we start flying again, going to see our
grandparents, going to ball games and movies. And the industry
will need the American exporter.
So your timing is perfect to gear up that conversation, so
we can preplan and pre-position our wares to make sure that the
American exporter can rise up again.
Mr. Johnson of South Dakota. Thank you, Mr. Chairman, I
appreciate the extra time.
Mr. Carbajal. Thank you. Next I will recognize myself.
Mr. Seroka, if Congress were to make a significant
investment in port infrastructure like that proposed in the
American Jobs Plan, how would that funding be used, and how
would that help alleviate situations like this in the future?
Mr. Seroka. Well, there is a lot to like about the American
Jobs Plan. With more than $621 billion proposed for
transportation, I would say the $17 billion proposed for ports
and waterways could be increased a little bit. I talk not only
about Los Angeles, which has the wherewithal and resources to
make most of its investment, but to really double down on how
we can improve our competitiveness on the global stage. It is
what I just mentioned. It is about the physical infrastructure,
the rail on-dock, the rail connectors, the roadways, to be able
to move cargo out more seamlessly and quicker.
Again, with 7,500 acres of property, and 43 miles of
waterway, I commend the United States Congress for passing the
Water Resources Development Act of 2020, back in December,
which recapitulated the thought of the Harbor Maintenance Trust
in allowing for donor equity, expanded uses, while not taking
any money away from smaller ports and harbors. That, we
believe, should be the kick start to a broader infrastructure
play.
In addition to that, the digital infrastructure that we
continue to talk about has been proven here, at the Port of Los
Angeles. We need a nationwide system that allows for
visibility, transparency, and, more importantly, in situations
like this, what we call exception management. How can we move
vessels around quicker? How can we get cargo moved in and out?
And, when we have an issue like we do today in Los Angeles,
with 30 percent of our truck appointments going unused, we can
shine a light on that immediately, move cargo to where those
additional capacities lie, and move the cargo more fluidly.
In addition, there are carve-outs for electrification,
broadband throughout the United States, as well as grid
resiliency. All of those can be used quite well here, even with
small carve-outs at the Nation's largest port.
Mr. Carbajal. Thank you very much.
To conclude our questions, Ms. Sorenson, in your testimony
you recommend a mandate to require ocean carriers to carry your
cargo. Practically, how would that work? Who would determine
that rate, from your perspective?
Ms. Sorenson. I believe the Agriculture Transportation
Coalition can provide a little bit more detail, but it is my
understanding that the carriers are going back under that 70 to
75 percent capacity level, which has been deemed as safe. So
that was my comment around, you know, when the carriers go back
filled with ag exports, fill them to what has been deemed as
the safe capacity level of 70 to 75 percent.
Mr. Carbajal. Thank you very much. I am going to work on
that issue with Ranking Member Gibbs. I think he has some
innovative concepts that we can explore. So I look forward to
working with Representative Gibbs on that issue. Thank you.
In closing, that concludes our hearing for today. I want to
thank all the witnesses for your testimony.
I ask unanimous consent that the record of today's hearing
remain open until such time as our witnesses have provided
answers to any questions that may be submitted to them in
writing.
I also ask unanimous consent that the record remain open
for 15 days for any additional comments and information
submitted by Members or witnesses to be included in the record
for today's hearing.
Without objection, so ordered.
The subcommittee stands adjourned.
[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
Submissions for the Record
----------
Prepared Statement of Hon. Jefferson Van Drew, a Representative in
Congress from the State of New Jersey
Good morning Mr. Maffei and Ms. Dye. Thank you for coming to
testify before this committee on an issue so critical to the United
States' Supply Chain Security.
Over the past year, thousands of ships have left American ports,
devoid of cargo. These vessels go to China, fill up with steel,
clothing, electronics, toys, you name it. They come to the West Coast
of the United States, unload those cheap Chinese products, and then
head back to China as quickly as they can. Once again, they leave with
absolutely nothing made in America.
This phenomenon is extremely troubling. This seems symptomatic of a
deep and fundamental weakness in our Supply Chain. That fundamental
weakness in our Supply Chain, and really the entire global supply
chain, is the exponentially increasing dependence on China.
Here are some statistics on Chinese market share, focusing just on
the maritime commerce industry:
Over the last year, China's export container volume
increased by 20 percent.
China produces 96 percent of the world's shipping
containers.
China controls nearly 50 percent of the world's
shipbuilding market.
These trends, combined with the current state of the American
maritime industry, presents not only an economic threat but a national
security threat. As evidenced in World War II, a nation's industrial
power can quickly be shifted to military production. This is
particularly true of shipbuilding.
In the event of conflict with China in Taiwan or the South China
Sea, the United States needs a strong industrial base independent of
Chinese supply chains. I hope that you can explain to me how this has
happened, what it means for our County and the world, and whether we
are prepared for the worst.
questions:
How has China established such dominance of the
shipbuilding and container shipping industries?
In what ways might China leverage its growing influence
in maritime commerce to coerce the United States and our allies?
In the event of conflict with China, is the United
States' Merchant Marine and industrial shipbuilding capacity sufficient
to meet the needs of a wartime economy?
Congressman Van Drew requests responses to these questions.
Chart, ``Shipping Challenges Cause Medical Supply Delays,'' developed
by the Health Industry Distributors Association, Submitted for the
Record by Hon. Bob Gibbs
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Statement of Ian Jefferies, President and Chief Executive Officer,
Association of American Railroads, Submitted for the Record by Hon. Bob
Gibbs
On behalf of the members of the Association of American Railroads
(AAR), thank you for the opportunity to submit this statement for the
record. AAR members account for the vast majority of America's freight
railroad mileage, employees, revenue, and traffic.
Freight railroads operating in the United States are the best in
the world, connecting businesses with each other across the continent
and with markets overseas over a network spanning close to 140,000
miles.
There is tremendous strength and flexibility in our nation's
freight transportation systems. That said, our supply chains are facing
serious challenges today. These challenges result from a variety of
factors, including unforeseen, and unforeseeable, shortages of raw
materials and other inputs due to past and current covid outbreaks; a
largely unexpected surge in transportation demand as consumer spending
moved away from services and toward goods; higher demand and limited
supply in a wide variety of industries and consumer sectors; and
imbalances here and abroad as economies and industries recover at
different rates and supply bottlenecks form and dissipate. Railroads
and all other transportation providers have felt the associated
instabilities.
Another crucial factor preventing the supply chain from becoming
more fluid is the limited hours and days of operation at some freight
transportation customers that prevent transportation providers from
``catching up'' and that limit the ability of transportation customers
themselves to load or unload containers, truck trailers, and railcars
quickly. Major railroads are 24/7 operations, but many firms in the
supply chain are not. Noel Hacegaba, the deputy executive director of
administration and operations for the Port of Long Beach, recently told
the Los Angeles Daily News, ``Given everything we've experienced in the
last 12 months, it's time we take a serious look at what it will take
to transition to a 24/7 supply chain.''
After falling sharply when the pandemic began in the spring of
2020, rail volumes have since rebounded. However, these rebounds have
not been uniform across all rail traffic categories. The most notable
increase over the past year has been in rail intermodal. Historically,
intermodal has been the fastest-growing major rail traffic category,
with volumes rising from 5.6 million containers and trailers in 1990 to
9.0 million in 2000 to 11.1 million in 2010. In 2018, U.S. rail
intermodal volume was a record 14.5 million units (Figure 1).
Intermodal today accounts for around 25 percent of revenue for major U.
S. railroads, more than any other single traffic group.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Because of weakness in the manufacturing sector, as well as trade
disputes that disrupted global trade flows, intermodal volume began
trending down in early 2019. Those declines accelerated in early 2020
when the pandemic hit, with U.S. intermodal volume falling between 12%
and 17% on a year-over-year basis in March 2020 through May 2020
(Figure 2). There was a great deal of uncertainty back then regarding
what would happen with the economy, but it was widely expected that
intermodal volumes would stay weak for months to come because demand
for transportation would stay weak.
Instead, intermodal volumes rose sharply in the summer of 2020,
surpassing 2019's level by August 2020 and continuing to grow from
there. Measured by weekly average volume, November 2020 broke the all-
time monthly record for intermodal. That record was subsequently broken
in January 2021 and again in April 2021 (Figure 3). Year-to-date
intermodal volume in 2021 through May was far higher than ever before
for the same period.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
These significant gains in intermodal volumes parallel gains in
activity at our nation's ports, which in turn are rooted in a rapid
recovery in demand for consumer goods (Figure 4)--a large proportion of
which are imported. Roughly half of U.S. intermodal volume consists of
imports and exports, and there is a very close correlation between port
volumes and U.S. intermodal volumes. As activity at ports has risen
sharply since last spring, so has rail intermodal (Figure 5) and so has
demand for containers.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
In aggregate, the factors discussed above have resulted in supply
chain disruptions involving every part of the logistical chain.
For their part, railroads are working hard to resolve issues over
which they have control. For example, railroads are working diligently
to ensure they have the appropriate assets in place to handle the
traffic they are called upon to haul.\1\ Today, railroads are confident
they have the people, equipment, and capacity in place to serve their
customers' needs and are also able to adjust to meet future
transportation demand, whatever the future may bring. This is largely
because of the railroads' massive spending, averaging some $25 billion
per year in recent years--paid for by railroads themselves, not by
taxpayers--to support railroad infrastructure and equipment.
---------------------------------------------------------------------------
\1\ This goal is made more difficult to achieve when extraordinary
events occur. The nature of railroading is such that bad weather--like
the severe winter storms that struck the Southwest and elsewhere in
February of this year--and many other events can and do inhibit
railroads' ability to function effectively for days, weeks, or, in the
worst cases, even months.
---------------------------------------------------------------------------
Some rail critics mistakenly argue that railroads brought problems
onto themselves by shedding too much track, equipment, and workers. It
is true that over the past few years, rail employment and active
locomotive counts have fallen. This is partly due to reduced traffic
levels (a result of macroeconomic and market trends that in some cases
pre-date the pandemic) and partly due to railroad efforts to become as
safe, reliable, and productive as possible. Virtually every firm in
every industry wants and needs to make the best use of limited
available resources. Higher productivity means incremental capacity
gains; it frees up funds that can be used for other purposes; and it
often means a lower operating cost structure that allows the firm to be
competitive in more markets. More efficient operations have helped make
railroads better able to confront a shifting transportation landscape
and prepared them for future growth and improved customer service.
What clearly is needed is enhanced cooperation by all parties in
the supply chain. Individual entities--whether steamship lines, ports,
trucking firms, railroads, freight forwarders, equipment providers,
transportation customers, or others--can't restore fluidity to the
supply chain on their own, but working together they are far more
likely to determine what actions are needed to improve supply chain
performance in areas such as container availability, port congestion,
cargo bottlenecks, and much else. This is not a new way of doing things
for railroads: they work closely with their customers, their
transportation partners, and others on an ongoing basis to understand
and meet expected service needs. Railroads will continue to do this.
Policymakers can help make sure the necessary conversations take
place, help remove impediments to effective solutions, and encourage
the use of emerging technologies to enhance safety and operational
effectiveness. Freight railroads have always been at the forefront in
the use of new technologies and are eager to expand their use to
improve overall safety, efficiency, and the fluidity of their
operations.
To conclude, the freight supply chain is a complex, interconnected
system of ports, roadways, railroads, waterways, and shipper and
receiver facilities. Railroads and other transportation providers rely
on all parts of this supply chain to deliver freight safely,
efficiently, and when expected.
America's freight railroads are an indispensable part of this chain
and are a tremendous national resource. With highway congestion
becoming more acute and with public pressure growing to combat climate
change, conserve fuel, and promote safety, railroads are likely to be
called upon to do even more in the years ahead, given their substantial
advantages in these areas over other transportation modes. And as our
economy evolves, railroads will continue to be called upon to make
additional investments in their networks to provide the safe,
efficient, reliable, and cost-effective freight transportation service
that their customers, and our nation, need to prosper. Put another way,
railroads are prepared to continue doing their part to deliver freight
upon which their customers and the country depend.
For that to happen, members of this committee and others must craft
appropriate policies. Freight railroad stand ready to work with you and
others to ensure that our nation's transportation needs are met in a
safe, responsible and environmentally sound manner.
Statement of Julie Anna Potts, President and Chief Exective Officer,
North American Meat Institute, Submitted for the Record by Hon. Bob
Gibbs
On behalf of the North American Meat Institute (NAMI or the Meat
Institute), based in Washington, DC, thank you for the opportunity to
testify regarding the ongoing challenges confronting our members, and
the broader agriculture sector, at U.S. ports. The Meat Institute is
the United States' oldest and largest trade association representing
packers and processors of beef, pork, lamb, veal, turkey, and processed
meat products. NAMI member companies account for more than 95 percent
of red meat output and 70 percent of turkey production in the U.S. The
Meat Institute provides legislative, regulatory, international affairs,
public relations, technical, scientific, and educational services to
the meat and poultry packing and processing industry.
An efficient, dependable transportation network has always been
essential to America's agricultural economy. Over the past year,
however, America's ports, a critical part in that network, have
experienced increasing pressure caused by a myriad of factors that have
hampered U.S. agricultural trade with devastating consequences for
farmers, ranchers, truckers, manufacturers, food industry workers, and
rural communities. In addition to contending with perennial challenges,
including delays and congestion at many U.S. marine terminals, U.S.
agricultural importers, exporters, truckers, and producers have
experienced the near-constant predatory and unreasonable behavior of
vessel-operating common carriers (called common carriers or ocean
carriers from this point forward). This behavior has exacerbated
existing delays and congestion concerns, and has gone largely
unchecked, with no sign of abating.
Perhaps the most egregious action perpetrated by ocean carriers is
their growing proclivity to decline to carry U.S. agricultural
commodity exports, including meat and poultry exports, instead choosing
to hasten empty containers to Asian markets to fill them with more
lucrative consumer goods to export to the U.S. In some instances,
common carriers are collecting freight rates as high as $12,000 per
container to carry cargo from Asia to the U.S., while containers
carrying U.S. agriculture exports earn only $1,800. Typically,
containers filled with imported goods are unloaded, sent to rural areas
in the U.S. to receive agricultural commodities, and shipped to foreign
export markets. By electing to send empty containers back to their
points of origin rather than carry U.S. exports, ocean carriers are
wielding enormous power in dictating which cargo is carried, to the
disadvantage of U.S. agriculture, and are inflating freight rates. To
make matters worse, U.S. exporters must rely on fewer than a dozen
foreign-owned carriers to deliver our agricultural products to overseas
customers. Because these carriers face few consequences for their
actions, many appear impervious to U.S. oversight.
Failure to hold these carriers accountable could have long-lasting,
detrimental effects for the trade-dependent U.S. meat and poultry
industry and agriculture sector. For instance, the U.S. Department of
Agriculture estimates that the $141.6 billion in U.S. agricultural
export value 2019 (the last data set available) generated an additional
$160 billion in economic activity for a total of $301.6 billion in
economic output. Agricultural exports also supported 1.96 million full-
time civilian jobs, including 604,000 jobs in the nonfarm sector.
The U.S. meat and poultry industry, meanwhile, is the economic
engine powering the agriculture sector, accounting for $1.02 trillion
in total economic output or 5.6 percent of gross domestic product,
according to an economic impact analysis conducted by John Dunham &
Associates. The meat and poultry industry is directly or indirectly
responsible for 5.4 million jobs and $257 billion in wages, the report
found. The domestic U.S. meat and poultry industry's long-term economic
viability depends on robust international trade, particularly as
domestic per capita consumption of meat and poultry remains relatively
stable.
However, as the data reveal, if current ocean carrier practices
persist, and are not subject to oversight, then the U.S. meat and
poultry industry, its workers, and the communities it supports will
struggle to access these vital markets cultivated over decades. This
threat is particularly concerning because Asia accounts for a
significant portion of U.S. meat and poultry trade, with China, Japan,
and Korea among the top markets for both beef and pork annually. The
U.S. meat and poultry industry has earned the reputation of being a
reliable supplier of safe, high-quality products to these export
markets. But the European Union, Australia, and countries in South
America are ready to fill the void left by the U.S.'s absence--an
absence resulting directly from ocean carriers' nefarious actions. Once
foreign competitors seize previously held U.S. market share, it becomes
increasingly difficult, if not impossible, to recapture the same level
of hard-earned access.
The U.S. meat and poultry industry counts on these markets to send
products that otherwise would not be consumed, or would be consumed in
extremely low quantities, by Americans. As a result, the U.S. domestic
market would not easily absorb these products, placing undue economic
pressure on livestock producers, packers, and processors, and the
communities they support. Moreover, it would be cost prohibitive for
many of these businesses to reengineer supply chains or to find
alternative buyers to fulfill overseas contracts. Continued port
disruptions could also undermine the U.S.'s food supply, which relies
on imports to fill gaps in U.S. production. This would inevitably
curtail consumer choice.
Because meat and poultry exports are perishable, with a relatively
short shelf-life in the case of chilled meat products, the decision by
ocean carriers to cancel export bookings or bypass carrying U.S.
agriculture products altogether is particularly consequential. These
exports cannot withstand extensive disruptions or delays, and should
not be forced to if there is sufficient space available on a vessel.
Yet, often ocean carriers are departing U.S. ports with vessels loaded
at less than 50 percent capacity--a stark contrast to the near 100
percent capacity observed on vessels making the journey to the U.S.
These cancellations and delays are costing U.S. meat and poultry
companies millions, as they are forced to downgrade, discard, or divert
product in the case of exports, and source from non-traditional
suppliers at extremely high prices in the case of imports.
Those costs are compounded by excessive and unreasonable detention
and demurrage fees assessed on U.S. importers and exporters by ocean
carriers and marine terminal operators for the failure of these
importers and exporters to either retrieve a container from a marine
terminal or return one within a specified amount of time. The Federal
Maritime Commission (FMC) has found that ocean carriers and marine
terminal operators regularly issue these costly penalties even if
delays in retrieving or returning containers are beyond the control of
the importer or exporter. Although the FMC has deemed such charges to
be ``unreasonable,'' and in violation of the Shipping Act, ocean
carriers and marine terminal operators have faced few, if any,
consequences for imposing these exorbitant, punitive costs. The Meat
Institute, along with many of its counterparts in the agriculture
sector, supported FMC's investigation Fact Finding No. 29,
``International Ocean Transportation Supply Chain Engagement,'' to
address ocean carriers' predatory or unreasonable behavior, and its
attendant Interpretive Rule setting forth guidelines for detention and
demurrage. It is now essential that FMC be granted the proper authority
to enforce this rule and stem the practices it identified that continue
to hamper U.S. agricultural trade.
Taken together, the costs outlined in this testimony have forced
smaller businesses that rely on trade, both imports and exports, to
shutter, and have cost the U.S. agriculture sector more than $1.5
billion in lost revenue. In the process, jobs have been lost, wages
depressed, and communities gutted. As the U.S. emerges from the
economic hardship inflicted by the COVID-19 pandemic, our farmers,
ranchers, agricultural producers, manufacturers, and food industry
workers need functioning ports, and the access to export markets and
critical inputs they afford.
NAMI appreciates the attention this issue has garnered in Congress,
including the strong bipartisan support for a resolution to many of the
concerns described in this testimony. More urgent action is necessary
to ensure the continued competitiveness of U.S. agriculture exports
abroad and to preserve the jobs of millions of hardworking Americans
employed by the trade-dependent agriculture sector and meat and poultry
industry. The ambiguity of FMC's authority to apply enforcement
measures in response to abusive ocean carrier practices has only
accelerated the carriers' exploitative behavior. Granting the FMC
explicit statutory authority to enforce its detention and demurrage
rule could help stem future abuses. American importers and exporters
would also benefit from efforts to shift the burden of proof to
carriers and terminals to confirm detention and demurrage charges
comply with FMC's rule. It is equally important to prevent ocean
carriers from declining export cargo bookings if such cargo can be
safely loaded on vessels in an appropriate timeframe; the fate of U.S.
agriculture exports should not solely be determined by carriers.
Addressing this crisis not only involves holding ocean carriers
accountable for their actions, it also requires improving port
efficiencies, including expanding the hours U.S. marine terminals
operate and ensuring an adequate supply of labor to staff the
additional gate hours. The Meat Institute is ready to work with members
of Congress on solutions to these concerns.
Thank you again for the opportunity to provide this testimony.
Letter of May 18, 2021, from Eric R. Byer, President and Chief
Executive Officer, National Association of Chemical Distributors,
Submitted for the Record by Hon. Bob Gibbs
May 18, 2021.
Commissioner Rebecca Dye,
Federal Maritime Commission,
800 North Capitol Street, N.W., Washington, DC 20573.
Dear Commissioner Dye:
I am writing on behalf of the National Association of Chemical
Distributors (NACD) regarding the ongoing, time-consuming, and
expensive shipping challenges our members are facing in both importing
and exporting products critical to the U.S. and world economies. NACD
requests the Federal Maritime Commission (FMC) to utilize its full
authority to take immediate and definitive actions to address this dire
situation.
NACD appreciates the Commission's attention and focus on the
shipping crisis in both Fact Finding 28 and the current Fact Finding 29
and believes many of the findings in ``29'' will be similar to those of
``28,'' if not further exacerbated by the COVID-19 pandemic and other
challenges. We look forward to seeing those results. More importantly,
we expect the FMC and other governmental bodies, including Congress,
the Surface Transportation Board (STB), and other federal agencies, to
address the results with quantifiable actions that not only provide
data, but also take quantifiable enforcement actions to support the
many businesses, both small and large, that import and export and keep
our economy competitive in the global marketplace.
After hearing of continued concerning reports from NACD members, we
conducted a survey to provide clear data on the challenges chemical
distributors are facing. Because of port congestion, container
shortages, and soaring costs, inventories of chemicals have been
falling to their lowest levels since the great recession, which has led
to shortages, particularly of those chemicals imported via the West
Coast. This includes integral chemicals no longer produced in this
country but critical to U.S. consumers. At the time of our survey in
late March, 83.7 percent of respondents were experiencing average
delays of 11 days or more, and that number has only increased in
following weeks. International shipping has become much less reliable,
with delays for some shipments reported to be as much as 150 days, with
the average length of the longest delays at nearly 46.5 days.
To provide an example, one NACD member was shipping product from
Shanghai to Chicago. Typically, this route would take around 23 days,
including 14 to reach Prince Rupert in Vancouver, Canada, followed by
nine traveling by train to Chicago. However, a recent shipment of three
containers on one vessel departed Shanghai January 12 but did not
arrive in Vancouver until February 26. The container ship had been
rerouted and sat offshore for a week before being delayed at Anchorage
and Seattle. The containers did not reach Chicago until March 10,
taking a full two months to reach the customer. These longer transit
times and frequent delays have become common-place and have a huge
ripple effect on the overall economy, with enormous cost
ramifications--costs are up an average of 80.5 percent since the
outbreak of COVID-19. NACD's survey also showed that 85.2 percent of
our members have lost revenue as a direct result of these delays, with
half of the respondents losing more than $100,000. For small companies.
this is a dire crisis that can put them out of business and make
America less competitive in the global marketplace.
As another example of skyrocketing freight rates, 55.7 percent of
NACD members responding to our survey said they were being charged
additional ``premiums'' by carriers above the normal tariff or contract
rates. These additional ``premiums'' are for service resulting in
products arriving at their final destinations weeks, if not months,
late.
Port infrastructure and related supply-chain processes have clearly
not kept up with demand and U.S. industry's needs in a competitive
global economy. We are living with a relic of the past. The FMC must
step up and advocate for a more modern supply-chain. The FMC must also
work to ensure that neither the activities of ocean-liner shipping
groups nor foreign government laws or regulations impose unfair costs
on American exporters importers, or ultimately on American consumers of
imported goods.
Over the past five decades, international ocean transportation has
changed dramatically. The FMC, an independent expert agency charged
with regulating liner shipping in U.S. trades, must adapt to and evolve
with those changes. The FMC's responsibility is to ``its mission to
ensure a competitive and reliable international ocean transportation
supply system that supports the U.S. economy and protects the public
from unfair and deceptive practices.'' Shippers that are the
cornerstone of our nation's economy are being asked to do and pay more
for inefficiencies, not efficiencies, in this ongoing supply-chain
fiasco. NACD urges the FMC to exercise your authority and take concrete
action to protect American importers, exporters, and consumers from
ongoing unfair and deceptive shipping practices.
We believe there is enough evidence among NACD members, as well as
other shippers, to suggest that the shipping lines have taken advantage
of importers and exporters, imposing unfair and exorbitant costs on
those who depend on their services. This is a situation that demands
the FMC investigate and take appropriate actions to protect consumers
and U.S. interests.
Additionally, ocean carriers must not be allowed to dismissively
and unscrupulously assess detention and demurrage charges when
terminals/ports are not operating and unloading containers, are not
open for business, or have considerable backlogs and delays lasting
days and weeks. These indiscriminate charges should not fall on the
receivers who want nothing more than to get their products efficiently
unloaded, so they can transport them to their customers in a timely and
more predictable and cost-effective manner. The ocean carriers are now
blatantly taking advantage of U.S. businesses in the supply-chain,
forcing them to pay for ``premium'' services that are nothing more than
camouflaged late-delivery charges for something outside of their
control.
In addition to these actions we believe the FMC can and should take
today, NACD and its membership will encourage the Biden administration
and Congress to invest dedicated infrastructure dollars wisely in
intermodal freight bottlenecks, critical to both the import and export
of goods to make our nation more competitive in the global marketplace.
NACD will also encourage the investment in real-time tracking of
vessels to customers from ship to port, truck, and rail. Better
communication and transparency are needed, as well as full utilization
of the U.S. Customs and Border Protection's Automated Commercial
Environment system to streamline import paperwork and processing. The
administration and Congress should also support the U.S. manufacturing
base for shipping containers and chassis, currently controlled by and
subsidized by the Chinese government, and create incentives to
encourage more people to enter into the longshoreman and related port
worker trades, to include trucking, especially with a shortage of truck
drivers.
Finally, but integral to these issues, NACD urges the FMC to
coordinate an emergency joint meeting with the STB to address both
ocean carrier and rail policies with relevant stakeholders to include
shippers.
Again, we look forward to the results of your Fact Finding 29
exercise, but more-importantly, NACD would appreciate the FMC moving
beyond fact-finding to advancing solutions that protect our U.S.-based
importers and exporters--the businesses that are the backbone to our
economy and make America most-competitive in the global marketplace.
Regards,
Eric R. Byer,
President and CEO, National Association of Chemical Distributors.
CC: FMC Chairman, Daniel B. Maffei
Commissioner Carl W. Bentzel
Commissioner Michael A. Khouri
Commissioner Louis E. Sola
Surface Transportation Board (STB)
Article entitled, ``What Do Agriculture Exporters Need From Congress?''
Journal of Commerce, June 13, 2021, by Peter Friedmann, Executive
Director, Agriculture Transportation Coalition (AgTC), Submitted for
the Record by Hon. Bob Gibbs
What do agriculture exporters need from Congress?
Journal of Commerce, June 13, 2021
by Peter Friedmann, Executive Director, Agriculture Transportation
Coalition (AgTC)
https://www.joc.com/maritime-news/container-lines/what-do-agriculture-
exporters-need-shipping-industry_20210613.html
Twenty-two percent of US ag exports that could be shipped, are not
being shipped due to container shipping restraints, according to AgTC.
Following are two highest priorities of US agriculture exporters.
Currently shippers are pursuing congressional mandate (legislation),
including AgTC's own proposals described below. However, if ocean
carriers are genuinely interested in addressing these, the door is
open--we invite ocean carriers to sit down with ag exporters, to find
solutions. But time is running short.
Detention and Demurrage: Shippers (exporters and importers) are
reluctant to file complaints, for good reason--do you really want to
start a legal action against a carrier, when you desperately need a
booking from that carrier, a container, space on the ship? It's not
difficult to understand why virtually no complaints have been filed,
even after the Federal Maritime Commission (FMC) issued a very good
rule setting standards for demurrage and detention charges. And the
complaint process at the FMC, as at the Surface Transportation Board,
is neither quick or inexpensive, and requires lawyers. So the aim of
the AgTC proposal is to reduce the number of detention and demurrage
charges, without the need to file a complaint at the FMC--better for
shippers, worse for lawyers. The AgTC proposal would incentivize
carriers to ``self-police''--to confirm (``certify'') for themselves
and the shipper, before imposing a detention or demurrage charge, that
it complies with the FMC Rule. In other words, the burden of compliance
would be on the carriers who issue the charges, not on the shipper or
trucker which receives them. By requiring the certification to be given
to the shipper along with the charge, the burden shifts to the
carriers--they would simply issue fewer detention/demurrage charges.
While the AgTC proposal facilitates FMC enforcement (by holding
carriers to their certifications, with substantial penalties if they
have deviated) we feel a far more important role of this provision
would be to dramatically reduce the frequency of detention and
demurrage charges in the first place, and thus the need for complaints
and enforcement actions.
Carriage of export cargo. A top priority of the AgTC. Can the
government regulate carriers to carry more exports? Yes. The US has a
long history of regulating private transportation companies to serve
the public interest--airlines, railroads for examples. So it's
consistent that the FMC assure that ocean carriers carry US export
cargo, it's even one of the stated purposes of the Shipping Act. The
economic incentive of carriers to decline to carry our export cargo in
favor of taking containers back to Asia empty, in order to gain
additional loaded import voyages, at much higher freight rate revenue,
is obvious. But the Shipping Act (as well as aviation and rail laws)
exist to balance between carriers' desire to maximize revenue, and what
is in the public interest. Over 150 Members of Congress and several FMC
Commissioners have emphatically stated that carrying our exports is in
the public interest.
Our proposed legislation would mandate that carriers take export
shipments if they can be carried safely, on ships scheduled for the
export destination. Enforcement would require the FMC undertake a very
different role than it has, since the Shipping Act of 1916. It would
not wait for a complaint to be filed, but rather, self-initiate.
Frankly, everyone--port directors, longshore labor, truckers, terminal
operators--can attest to the large numbers of empty containers being
loaded, even while exporters' bookings are being denied or cancelled.
In fact, carriers have been honest, either publicly stating policies to
decline export bookings in order to expedite the return of containers
to Asia, or informing shippers individually when declining or
cancelling export cargo bookings. Once FMC investigators confirm this
is happening, that the cargo could be safely and timely loaded and
carried on vessels scheduled for that cargo's destination, the
Commission could initiate enforcement. No doubt, this is an entirely
new approach and function for the FMC, but urgently needed as our
informal surveys of ag exporters find that about 22 percent of US ag
exports that could be shipped, are not--for some companies the number
is lower, for others it is higher. It is devastating for some
companies, terrible for our economy. Getting more export cargo on the
ships is a top priority for AgTC.
Mandate or collaboration?
As shippers pursue Congressional intervention, including AgTC's own
proposals, the door is still open. If ocean carriers are genuinely
interested in addressing the detention/demurrage charges and export
carriage, the door is open--we invite ocean carriers to sit down with
us, to find solutions. Time is running short.
Peter Friedmann, executive director, Agriculture Transportation
Coalition (AgTC), can be reached at executivedirector@agtrans.org
``Proposed Legislation to Address Ocean Shipping Crisis,'' offered by
the Agriculture Transportation Coalition, Submitted for the Record by
Hon. Bob Gibbs
[Witness Alexis Jacobson, testifying on behalf of the Agriculture
Transportation Coalition et al., included this proposed legislation as
attachment 1 in her written testimony. See pages 49-51.]
``Overview: The Current Ocean Export Crisis,'' offered by the
Agriculture Transportation Coalition, Submitted for the Record by Hon.
Bob Gibbs
[Witness Alexis Jacobson, testifying on behalf of the Agriculture
Transportation Coalition et al., included this overview as attachment 2
in her written testimony. See pages 52-53.]
Letter of April 27, 2021, from the Agriculture Transportation Coalition
et al., Submitted for the Record by Hon. Bob Gibbs
April 27, 2021.
The Honorable Pete Buttigieg,
United States Secretary of Transportation,
1200 New Jersey Avenue, SE, Washington, DC 20590.
Dear Secretary Buttigieg:
We are concerned with challenges imposed by vessel-operating common
carriers (VOCCs), who are declining to ship U.S. agricultural commodity
exports from U.S. ports, and imposing hundreds of millions of dollars
of punitive charges already determined to be unreasonable by the
Federal Maritime Commission. The burden on hardworking exporters,
manufacturers, farmers, ranchers and our rural communities is
overwhelming. We urge the Department of Transportation to utilize all
existing authorities to remedy the challenges experienced by U.S.
agricultural exporters.
The last three decades in the ocean shipping industry have brought
consolidation to a sector that once had dozens of carriers. A result of
that consolidation is complete reliance on less than a dozen foreign
carriers to deliver our agricultural products overseas. The tenuous
nature of this arrangement is evident as VOCCs are delivering massive
volumes of imported shipments to U.S. ports and then electing to leave
without refilling empty containers with American goods and products.
Whereas shipping containers filled with imported goods are normally
unloaded, sent to rural areas, filled with agricultural commodities and
then shipped abroad, the lucrative freight rates paid by the import
cargo, combined with congestion and delay at ports on our West and East
Coasts are leading VOCCs to immediately return empty containers to
their overseas ports of origin. The situation is exacerbated by
carriers' failure to provide accurate notice to our exporters of
arrival/departure and cargo loading times, and then imposing draconian
financial penalties on the exporters for ``missing'' those loading
windows--a practice that the FMC has found to be unreasonable.
Foreign markets are critical to American farmers and ranchers with
more than 20 percent of agricultural production going abroad. It is
cost prohibitive for producers to rework the supply chain and find
alternative means of fulfilling their overseas contracts. This
impossibility coupled with significant pricing increases explains
estimates of nearly $1.5 billion in lost agriculture exports. These
losses come on the heels of trade conflict and pandemic that have wiped
away markets globally. The mounting frustration of U.S. agriculture
explains why a vast array of food and agriculture associations
supported the Federal Maritime Commission's investigation Fact Finding
No. 29, ``International Ocean Transportation Supply Chain Engagement'',
to address VOCCs predatory or unreasonable behavior, and its Rule
setting forth guidelines for Detention and Demurrage.
We need action now; not additional studies. We ask the Department
of Transportation to assist the Commission in expediting its
enforcement options. Additionally, we urge the Department of
Transportation to consider its existing authorities to determine how it
can assist with the transportation needs of the U.S. exporters and the
farmers and ranchers they serve, in overcoming the current challenges
in shipping goods and products. Thank you for your attention to this
urgent matter and for considering our views.
CC: Secretary, U.S. Department of Agriculture, Tom Vilsack
Maria Cantwell, Chair, Senate Committee on Commerce, Science and
Transportation
Roger Wicker, Ranking Member
Gary Peters, Chair, Subcommittee on Surface Transportation, Maritime,
Freight & Ports
Deb Fischer, Ranking Member
Peter DeFazio, Chair, House Transportation & Infrastructure Committee
Sam Graves, Ranking Member
Salud Carbajal, Chair, Subcommittee on Coast Guard & Maritime
Transportation
Bob Gibbs, Ranking Member
Sincerely,
Agriculture Transportation Coalition.
AddTran Logistics, Inc.
Aden Brook Agri Sales USA, Inc.
ADM.
Ag West.
Agri Green Ent.
Agri-Mark, Inc.
AgriBilt Building Systems.
Agricultural & Food Transporters Conference of ATA.
Allbright Cotton.
Allports Forwarding Inc.
Almond Alliance of California.
American Bakers Association.
American Cotton Shippers Association.
American Dairy Products Institute.
American Farm Bureau Federation.
American Feed Industry Association.
American Forest & Paper Association.
American Log Exporters Coalition.
American Pulse Association.
American Seed Trade Association.
American Sheep Industry Association.
Andersen & Sons Shelling.
Anderson Hay and Grain.
Anderson Northwest LLC.
Bains Farming, LP.
Bartelson Transport.
Beecher Lane Walnut, Inc.
BelGioioso Cheese, Inc.
Bell Bacon Farms.
Blue Sun Farms, Inc.
Border Valley Trading.
BOSSCO Trading LLC.
Brandt Farms, Inc.
C K International, Ltd.
Calaway Trading, Inc.
California Citrus Mutual.
California Cotton Ginners and Growers Association.
California Dairies, Inc.
California Farm Bureau Federation.
California Fresh Fruit Association.
California League of Food Producers.
California Prune Board.
California Table Grape Commission.
California Walnut Commission.
Capay Canyon Ranch.
Carriere Family Farms.
Cascade Foothills Farmland Association.
Cascade Organic Farms.
Cascade Organic Flour.
Cascade Shippers Association.
Castle Shipping Lines, Inc.
Central Washington Railroad.
Chairman Madera County Board of Supervisors.
Charles T. Creech Inc.
ClearFreight.
Clemens Food Group.
Columbia Basin Railroad.
Columbia River Customs Brokers and Forwarders Association.
Consumer Brands Association.
Corn Refiners Association.
Cotton Warehouse Association of America.
Crain Marketing, Inc.
Creekside Farming Co.
Crest Container Lines Inc.
Croll Farms.
Customs Brokers & International Freight Forwarders Association of
Washington State.
Customs Brokers and Forwarders Association of Northern California.
D&C Distributors.
D&D Ag Services LLC.
Dairy Farmers of America.
DairyAmerica.
Dale Packing, Inc.
Darigold.
Dart Hay.
Davis Hay & Straw.
Dayka & Hackett LLC.
Derco Foods.
Diamond Foods, LLC.
Distilled Spirits Council of the United States.
DLF Pickseed.
Dunlea Farms Ltd.
Eckenberg Farms Inc.
EFI Logistic Inc.
Eight Star Commodities.
El Toro Export, LLC.
El Toro Land and Cattle Company.
Excel International, LLC.
Farmers' Rice Cooperative.
Firehorse Farms.
Foodlinx, Inc.
Forage Export Transport Company.
Forage Exporter and Diamond E Transport.
Fornazor International, Inc.
Freeburg Hay LLC.
Fresno County Farm Bureau.
GFI Hay Processing.
Gold Dust Potato Processors, Inc.
Golden Valley Farms.
Grain Millers Inc.
Grassland Dairy Products, INC.
Greenfield LLC.
Griffin Seed International LLC.
Grove Services.
Grower Direct Nut Company.
Hajny Trading.
Hardwood Federation.
Hay Day Farms of Arizona LLC.
Hay Day Farms of California LLC.
Hazelnut Growers of Oregon.
Heidel Hollow Farm, Inc.
High Desert Milk.
Horizon Nut Company.
Hughson Nut.
Hulbert Farms, Inc.
Idaho Potato Commission.
Idaho Pulse Crops Commission.
Idaho-Oregon Fruit and Vegetable Association.
IMC InterMarket Co. Inc.
Infinity Intermodal.
Inland Empire Milling Co., Inc.
Institute of Shortening and Edible Oils.
International Dairy Foods Association.
International Express, LLC.
International Ingredient Corporation.
J.C. Janssen Farm.
James Farrell & Co.
Jasmine Vineyards.
JBF Distribution.
Kevin Fox Farms.
Kingsburg Orchards.
Kintetsu World Express.
L&M.
Land O'Lakes Inc.
Larsen Hay.
Leather & Hide Council of America.
Leprino Foods Company.
Lindsey Forwarders, Inc.
Los Angeles Customs Brokers and Freight Forwarders Association.
Lyons Cotton, Inc.
MacMillan-Piper.
Madera County Farm Bureau.
Mariani Nut Company.
Markarian Family LP.
Marner Hay & Cattle Co.
Maryland & Virginia Milk Producers Cooperative Association.
MCT Dairies, Inc.
Meat Import Council of America.
MetaFoods LLC.
Michigan Milk Producers Association.
MidWay Straw Company LLC.
Milk Specialties Global.
Mohawk Trading Co., Inc.
Montana Pulse Crops Committee.
Monterey County Farm Bureau.
Multi Fruit USA.
National Aquaculture Association.
National Association of Egg Farmers.
National Association of State Departments of Agriculture.
National Beef Packing Company.
National Chicken Council.
National Cotton Council.
National Council of Farmer Cooperatives.
National Fisheries Institute.
National Milk Producers Federation.
National Oilseed Processors Association.
National Onion Association.
National Pork Producers Council.
National Potato Council.
National Raisin Company.
National Sorghum Producers.
National Turkey Federation.
Neigel Vintners LLC.
Norseman Inc.
North American Blueberry Council.
North American Meat Institute.
North American Millers' Association.
North American Renderers Association.
North Dakota Dry Pea and Lentil Council.
North Dakota Grain Growers Association.
Northeast Dairy Farmers Cooperatives.
Northern California District Export Council.
Northern Pulse Growers Association.
Northpoint Logistic.
Northwest Horticultural Council.
Nugget International Inc.
Number 9 Hay Trading Co. LLC.
NuPhY, Inc.
O-AT-KA Milk Products Cooperative, Inc.
OBI Seafoods, LLC.
Ohio Dairy Producers Association.
OL-USA.
Olam Cotton.
Olive Glen Orchards.
Ontario Dehy Inc.
Oregon Hay.
Oxbow Animal Health.
P-R Farms, Inc.
Pacific Northwest Asia Shippers Association.
Pacific Soybean & Grain.
Pacific Valley Foods, Inc.
Pandol Bros., Inc.
Paul Price Farms.
Pearl Crop.
Pet Food Institute.
PolyExcel.
Poppelreiter Farms.
Produce Marketing Association.
Proteus Commodities Inc.
Puris.
Purnell Farms.
Quality Trading Company, LLC.
Randi B Farms.
Ray-Mont Logistics America Inc.
RB International.
Rural & Agriculture Council of America.
S.A. International, Inc.
Sacramento Packing, Inc.
Sage Hill NW.
Salida Valley Ranch.
San Diego Customs Brokers Association.
Sartori Company.
SB&B Foods, LLC.
ShoEi Foods USA, Inc.
Skagit Seed Services, Inc.
Smith Seed Services.
South Dakota Pulse Growers Assn.
Southeast Milk, Inc.
Southwest Council of Agribusiness.
Specialty Soya & Grains Alliance.
Standlee Premium Western Forage.
Steffen Hay Inc.
Stevens Hay Exports.
Stewart & Jasper Marketing, Inc.
Stutzman Farms Inc.
SunnyGem LLC.
Sunrise Acres Egg Farm.
Sunrise Trading.
Sunsweet.
Superior Farms.
TenCate Geosynthetics Americas.
Terra Nova Trading, Inc.
TGS Logistics.
The Calaway Group of Companies.
The Fertilizer Institute.
The Gavilon Group, LLC.
The Pacific Coast Council of Customs Brokers and Freight Forwarders
Assns. Inc.
The Propeller Club of Northern California.
Toyo Cotton Company.
Triple I Press.
TTS--Worldwide.
Turley Cotton Co., Inc.
Tyson Foods, Inc.
U.S. Dairy Export Council.
U.S. Forage Export Council.
U.S. Meat Export Federation.
U.S. Pea & Lentil Trade Association.
U.S. Shippers Association.
United Egg Producers.
United States Egg Marketers, Inc.
Upstate Niagara Cooperative, Inc.
US Apple Export Council.
US Nisshin Shokai.
USA Dry Pea and Lentil Council.
USA Poultry & Egg Export Council.
USA Rice.
Valley View Foods, Inc.
Valley Worldwide Logistics Solutions.
Ward Rugh, Inc.
Warkentin Farms LLC.
Washington Grain Commission.
Washington Pulse Crops Commission.
Washington State Potato Commission.
Washington State Short Line Railroad Coalition.
Washington State Tree Fruit Association.
WeFARM Organics.
Western Ag Enterprises, Inc.
Western Agricultural Processors Association.
Western Growers Association.
Western Nut Company.
Western Pulse Growers Association.
Whitby Ag Enterprises, LLC.
Wilbur-Ellis Nutrition.
Windrow Baling Products Inc.
Woodlyn Acres Farm, LLC.
Zeeland Farm Services, Inc.
Zen-Noh Hay, Inc.
ZFS Creston, LLC.
ZFS Ithaca, LLC.
5 Rivers Ag.
5G Rice Partnership.
Letter of February 24, 2021, from the Agriculture Transportation
Coalition et al., Submitted for the Record by Hon. Bob Gibbs
February 24, 2021.
President Joseph R. Biden,
The White House,
1600 Pennsylvania Avenue NW, Washington, DC 20500.
Dear President Biden,
As is being widely reported, one of the great commercial challenges
of the on-going pandemic has been actions of ocean container carriers,
including declining to carry our export cargo, severely injuring US
agriculture, food and forestry product exporters, preventing us from
delivering affordably and dependably to international markets. 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
US agriculture noncompetitive for years to come.
According to their own public reports, the 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.
These refusals and charges by the ocean carriers dramatically
increase costs to our exporters, making foreign sales inefficient and
uneconomical, rendering farmers and processors (for the first time),
unreliable suppliers to the global supply chain. The international
ocean container carriers which carry over 99% of our foreign commerce,
are headquartered overseas--perhaps unaware of the injury their actions
are causing to the US economy, as they profit from the pandemic.
The situation is so egregious that the Federal Maritime Commission
(FMC) last year issued a Rule setting forth guidelines as to what would
be reasonable carrier practices--however, 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.
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 . . .''. 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.
Sincerely,
1. Agriculture Transportation Coalition.
2. African-American Farmers of California.
3. Agricultural & Food Transporters Conference of ATA (American
Trucking Association).
4. Almond Alliance of California.
5. American Farm Bureau Federation.
6. American Feed Industry Association.
7. American Forest & Paper Association.
8. American Potato Trade Alliance.
9. American Pulse Association.
10. American Seed Trade Association.
11. California Cotton Ginners and Growers Association.
12. California Farm Bureau Federation.
13. California Fresh Fruit Association.
14. California Prune Board.
15. California Rice Commission.
16. California Trucking Association.
17. California Walnut Commission.
18. Cascade Shippers Association.
19. Colorado Corn Growers Association.
20. Consumer Brands Association.
21. Corn Refiners Association.
22. DairyAmerica Inc.
23. Dairy Farmers of America.
24. Darigold.
25. Harbor Trucking Association.
26. Hardwood Federation.
27. Idaho Potato Commission.
28. Intermodal Motor Carriers Conference of ATA.
29. International Association of Refrigerated Warehouses.
30. International Dairy Foods Association.
31. Leather and Hide Council of America.
32. Meat Import Council of America.
33. National Association of Egg Farmers.
34. National Chicken Council.
35. National Cotton Council.
36. National Council of Farmer Cooperatives.
37. National Fisheries Institute.
38. National Hay Association.
39. National Milk Producers Federation.
40. National Onion Association.
41. National Pork Producers Council.
42. National Turkey Federation.
43. Nisei Farmers League.
44. North American Meat Institute.
45. North American Renderers Association.
46. North Dakota Grain Growers Association.
47. Oregon Potato Commission.
48. Oregon Seed Association.
49. Pacific Coast Council of Customs Brokers & Freight Forwarders
Associations.
50. Pacific Northwest Asia Shippers Association.
51. Pet Food Institute.
52. Potato Growers of Michigan, Inc.
53. Potato Growers of Washington, Inc.
54. Produce Marketing Association.
55. Specialty Crop Trade Council.
56. Specialty Soya & Grains Alliance.
57. U.S. Apple Association.
58. U.S. Dairy Export Council.
59. U.S. Meat Export Federation.
60. U.S. Pea and Lentil Trade Association.
61. United Fresh Produce Association.
62. United States Cattlemen's Association.
63. US Forage Export Council.
64. USA Dry Pea and Lentil Council.
65. USA Poultry & Egg Export Council.
66. USA Rice.
67. Washington Farm Bureau.
68. Washington State Hay Growers Association.
69. Washington State Potato Commission.
70. Western Agricultural Processors Association.
71. Western Growers Association.
72. Wine and Spirits Shippers Association.
73. Wisconsin Potato & Vegetable Growers Association.
CC: Secretary, U.S. Department of Agriculture, Tom Vilsack
Secretary, U.S. Department of Transportation, Peter Buttigieg
Chair, Council of Economic Advisors, Cecilia Rouse
Chair, Federal Maritime Commission Michael Khouri
Letter of March 9, 2021, from Hon. Adrian Smith, Member of Congress et
al., Submitted for the Record by Hon. Bob Gibbs
March 9, 2021.
The Honorable Michael A. Khouri,
Chairman,
Federal Maritime Commission, 800 North Capitol Street, NW, Washington,
DC 20573.
Dear Chairman Khouri:
We are writing you today to share our mounting concern over reports
that certain vessel-operating common carriers (VOCCs) are declining to
ship U.S. agricultural commodity exports from our ports. These VOCCs
serve as an integral link between American producers and overseas
customers, without which contracts cannot be met and the ability to
compete in or even access foreign markets is threatened. We appreciate
the steps already taken by the Federal Maritime Commission to
investigate these alarming reports and urge the Commission to resolve
this matter. In the meantime, we call on the Commission to provide
monthly updates to Congress until the matter is resolved.
Over the past year, American producers, exporters, and entire
economic sectors have grappled with widespread delays, bottlenecks, and
increasing fees at our ports. These challenges are exacerbated by
reports that VOCCs are delivering shipments to U.S. ports and then
electing to leave without refilling empty containers with American
goods for export. Such activity constricts entire supply chains and
propels trade to move only in an inbound direction. These conditions
are unsustainable for exporters, put significant strain on the U.S.
economy, and simply unacceptable.
The American agricultural sector, in particular, stands to be hit
hard by the delays, congestion, and the reported discriminatory
practices by VOCCs. With more than 20 percent of U.S. agricultural
production aimed for export, reaching foreign markets is essential to
American producers and the viability of our agricultural sector at
large. It is cost prohibitive for producers of these agricultural
commodities, particularly perishable products, to use alternative
methods to fulfill overseas contracts in a dependable and affordable
manner. Should it be found that VOCCs are predatory or unreasonable in
refusing to export these American agricultural products or imposing
unreasonable fees, they must be held accountable by the Commission for
the harm they are causing our producers.
We appreciate and support Fact Finding No. 29, ``International
Ocean Transportation Supply Chain Engagement,'' launched by the
Commission in March 2020, as well as its expansion in November 2020 to
include reports of the practices listed above by certain VOCCs. As the
nation and world grapples with the ongoing effects of the COVID-19
pandemic, it is essential that port operators and VOCCs honor their
responsibilities and adhere to the laws that govern their roles in the
global economy. Continued and largely unrestricted access to American
ports means trade opportunities should be reciprocal. Should the
investigation reveal any wrongdoing, we urge the Commission to take
appropriate enforcement actions to end such practices swiftly and
decisively.
Thank you for your attention to this urgent matter and for
considering our views. Time is a critical factor and we urge the
Commission to expedite its fact finding and consideration of
enforcement options. We look forward to the Commission providing
monthly updates as Fact Finding No. 29 and other related Commission
efforts progress.
Sincerely,
Adrian Smith,
Member of Congress.
Jim Costa,
Member of Congress.
Rodney Davis,
Member of Congress.
John Garamendi,
Member of Congress.
Dusty Johnson,
Member of Congress.
Troy E. Nehls,
Member of Congress.
Kevin McCarthy,
House Republican Leader.
Jimmy Panetta,
Member of Congress.
Mike Thompson,
Member of Congress.
Sam Graves,
Member of Congress.
David Scott,
Member of Congress.
Glenn `GT' Thompson,
Member of Congress.
Sanford Bishop,
Member of Congress.
Kevin Hern,
Member of Congress.
Eric A. `Rick' Crawford,
Member of Congress.
David Rouzer,
Member of Congress.
Mike Quigley,
Member of Congress.
Darin LaHood,
Member of Congress.
Doug LaMalfa,
Member of Congress.
Ann McLane Kuster,
Member of Congress.
Dan Bishop,
Member of Congress.
Austin Scott,
Member of Congress.
Dan Newhouse,
Member of Congress.
Don Bacon,
Member of Congress.
David G. Valadao,
Member of Congress.
Mike Bost,
Member of Congress.
Billy Long,
Member of Congress.
Barry Moore,
Member of Congress.
A. Drew Ferguson IV,
Member of Congress.
Lloyd Smucker,
Member of Congress.
Steve Womack,
Member of Congress.
Devin Nunes,
Member of Congress.
Tom Reed,
Member of Congress.
Chris Jacobs,
Member of Congress.
Josh Harder,
Member of Congress.
Ashley Hinson,
Member of Congress.
Julia Brownley,
Member of Congress.
Russ Fulcher,
Member of Congress.
Dan Meuser,
Member of Congress.
W. Gregory Steube,
Member of Congress.
Trent Kelly,
Member of Congress.
Cathy McMorris Rodgers,
Member of Congress.
Troy Balderson,
Member of Congress.
Tom O'Halleran,
Member of Congress.
Jim Banks,
Member of Congress.
Brian Fitzpatrick,
Member of Congress.
Vicky Hartzler,
Member of Congress.
Angie Craig,
Member of Congress.
Anthony Gonzalez,
Member of Congress.
Ken Calvert,
Member of Congress.
John Rose,
Member of Congress.
Andy Harris,
Member of Congress.
Ron Kind,
Member of Congress.
Markwayne Mullin,
Member of Congress.
Ro Khanna,
Member of Congress.
Darrell Issa,
Member of Congress.
Jodey C. Arrington,
Member of Congress.
Tracey Mann,
Member of Congress.
John Katko,
Member of Congress.
James Comer,
Member of Congress.
Cheri Bustos,
Member of Congress.
Bruce Westerman,
Member of Congress.
Ami Bera,
Member of Congress.
Jackie Walorski,
Member of Congress.
Pete Stauber,
Member of Congress.
Bill Huizenga,
Member of Congress.
Suzan DelBene,
Member of Congress.
Randy Feenstra,
Member of Congress.
Kim Schrier,
Member of Congress.
Kelly Armstrong,
Member of Congress.
Ann Kirkpatrick,
Member of Congress.
Michael Cloud,
Member of Congress.
Kat Cammack,
Member of Congress.
Frank Lucas,
Member of Congress.
Carol D. Miller,
Member of Congress.
Mark Pocan,
Member of Congress.
Jack Bergman,
Member of Congress.
Barbara Lee,
Member of Congress.
Antonio Delgado,
Member of Congress.
Ben Cline,
Member of Congress.
Michelle Fischbach,
Member of Congress.
Cindy Axne,
Member of Congress.
James R. Baird,
Member of Congress.
Jason Smith,
Member of Congress.
Randy K. Weber,
Member of Congress.
Derek Kilmer,
Member of Congress.
Henry Cuellar,
Member of Congress.
Sharice L. Davids,
Member of Congress.
Bob Gibbs,
Member of Congress.
Brad R. Wenstrup,
Member of Congress.
J. French Hill,
Member of Congress.
Young Kim,
Member of Congress.
Elise M. Stefanik,
Member of Congress.
Tom Emmer,
Member of Congress.
Rick Allen,
Member of Congress.
Kurt Schrader,
Member of Congress.
Doris Matsui,
Member of Congress.
Jerry McNerney,
Member of Congress.
Raul Ruiz,
Member of Congress.
Robert B. Aderholt,
Member of Congress.
Jeff Fortenberry,
Member of Congress.
John Rutherford,
Member of Congress.
Jim Hagedorn,
Member of Congress.
Emanuel Cleaver II,
Member of Congress.
Jefferson Van Drew,
Member of Congress.
David Kustoff,
Member of Congress.
Daniel T. Kildee,
Member of Congress.
J. Luis Correa,
Member of Congress.
Jahana Hayes,
Member of Congress.
Stacey E. Plaskett,
Member of Congress.
Abigail D. Spanberger,
Member of Congress.
Cc: The Honorable Rebecca F. Dye, Commissioner, Federal Maritime
Commission
The Honorable Daniel B. Maffei, Commissioner, Federal Maritime
Commission
The Honorable Louis E. Sola, Commissioner, Federal Maritime
Commission
The Honorable Carl W. Bentzel, Commissioner, Federal Maritime
Commission
Letter of March 8, 2021, from Hon. Peter A. DeFazio, Chair, House
Committee on Transportation and Infrastructure et al., Submitted for
the Record by Hon. Bob Gibbs
March 8, 2021.
The Honorable Michael A. Khouri,
Chairman,
Federal Maritime Commission, 800 North Capitol Street, NW, Washington,
DC 20573.
Dear Chairman Khouri:
As you are aware, the COVID-19 pandemic completely upended the
shipping industry, resulting in severe backups at ports and disrupting
every link in the maritime supply chain.\1\ Unprecedented demand for
imported products due to the consumer shift toward mass home delivery
has exacerbated our trade imbalance with foreign countries.\2\
---------------------------------------------------------------------------
\1\ Marketplace. Record port backups hit California as U.S.
consumers supercharge purchases (January 29, 2021) available at https:/
/www.marketplace.org/2021/01/29/record-port-backups-hit-california-as-
u-s-consumers-supercharge-purchases/
\2\ The Wall Street Journal. Global Outlook Brightens as U.S.
Consumer Imports Reach Pre-Pandemic Levels (October 6, 2020) available
at https://www.wsj.com/articles/u-s-trade-gap-in-august-was-largest-
since-2006-11601988513
---------------------------------------------------------------------------
In response, many ocean carriers have prioritized higher value
foreign goods over U.S. agricultural products.\3\ These carriers have
elected to ship empty containers back to foreign ports while increasing
charges on agricultural exports up to $500 per container to China and
other Asian countries, resulting in limited shipping capacity for U.S.
farm exporters.\4\ This has led to widespread spoilage of produce and
threatens not only the financial wellbeing of our farmers, but also the
reliability of our domestic agriculture industry as an international
trade partner, the delivery schedules for other intermodal components
of the supply chain, the lifeblood of our rural communities, and the
broader U.S. economy.
---------------------------------------------------------------------------
\3\ CNBC. California asks Federal Maritime Commission to take
action on agricultural shipping delays (February 2, 2021) available at
https://www.cnbc.com/2021/02/02/california-asks-federal-maritime-
commission-to-take-action-on-shipping-delays-.html
\4\ Id.
---------------------------------------------------------------------------
Sales of U.S. agricultural products to foreign markets account for
one-fifth of U.S. agricultural production, representing $136 billion
and approximately 8 percent of total U.S. exports in FY 2020.\5\ The
economic benefits of agricultural exports also extend across rural
communities, while overseas farm sales help to buoy a wide array of
industries linked to agriculture, including transportation, processing,
and farm input suppliers.\6\ Further, the U.S. Department of
Agriculture's Economic Research Service forecasts inflation-adjusted
U.S. net cash farm income to decrease $10.4 billion and for U.S. net
farm income to decrease $12.0 billion in 2021.\7\
---------------------------------------------------------------------------
\5\ Congressional Research Service. Major Agricultural Trade Issues
in the 117th Congress (January 8, 2021) available at https://
www.crs.gov/Reports/R46653?source=search&guid=
de388c374cf24f6e9e8c94e536ca9e17&index=5
\6\ Id.
\7\ USDA Economic Research Service. U.S. farm sector profits
forecast to fall in 2021 (February 5, 2021) available at https://
www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/
?chartId=100436
---------------------------------------------------------------------------
We are writing to ask that the Federal Maritime Commission takes
immediate action to ensure that ocean carriers are abiding by subtitle
IV, Regulation of Ocean Shipping, of title 46, United States Code,
popularly known as the Shipping Act. Specifically, we would like to
know:
1. If Commissioner Dye's Fact Finding 29 investigation on
International Ocean Transportation Supply Chain Engagement found that
the carriers and MTOs are operating in compliance with the Interpretive
Rule on Detention and Demurrage that became effective on May 18,
2020.\8\
---------------------------------------------------------------------------
\8\ Fed. Maritime Com. FF no. 29, 85 Fed. Reg. 19146 (April 6,
2020).
---------------------------------------------------------------------------
2. Whether there have been any violations of 46 U.S.C. 41102(c),
which prohibits unjust and unreasonable ocean shipping practices and
regulations related to, or connected with, receiving, handling,
storing, or delivering property.
If you have questions, please contact Matt Dwyer, Democratic Staff
Director, Subcommittee on Coast Guard and Maritime Transportation or
John Clark Rayfield, Republican Staff Director, Subcommittee on Coast
Guard and Maritime Transportation. We appreciate your attention to this
matter and look forward to hearing any updates from the Federal
Maritime Commission.
Sincerely,
Peter A. DeFazio,
Chair, House Committee on Transportation and Infrastructure.
Sam Graves,
Ranking Member, House Committee on Transportation and
Infrastructure.
Salud O. Carbajal,
Chair, Subcommittee on Coast Guard and Maritime Transportation.
Bob Gibbs,
Ranking Member, Subcommittee on Coast Guard and Maritime
Transportation.
Letter of March 2, 2021, from Hon. John Thune, U.S. Senator et al.,
Submitted for the Record by Hon. Bob Gibbs
March 2, 2021.
The Honorable Michael Khouri,
Chairman,
Federal Maritime Commission, 800 North Capitol Street, NW, Washington,
DC 20573.
Dear Chairman Khouri:
We write to express concern with the reported practices of certain
vessel-operating common carriers (VOCCs) related to the denial of
carriage for agricultural commodities. If the reports are true, such
practices would be unreasonable and would hurt millions of producers
across the nation by preventing them from competing in overseas
markets. We support the Federal Maritime Commission's current efforts
to investigate these reports, and call on the Commission to quickly
resolve this critical issue.
As you know, ports across the United States are experiencing
unprecedented congestion and record container volumes, which alone pose
significant challenges for agricultural exporters seeking to deliver
their products affordably and dependably to foreign markets. In the
midst of this challenge, reports that certain VOCCs are returning to
their origin with empty containers rather than accepting U.S.
agriculture and forestry exports not only greatly exacerbates the
problem, but potentially violates the Shipping Act as an unjust and
unreasonable practice.\1\
---------------------------------------------------------------------------
\1\ 46 USC Sec. 41102(c)
---------------------------------------------------------------------------
We understand that the Commission in March 2020 initiated Fact
Finding No. 29--led by Commissioner Rebecca Dye--which was expanded in
November 2020 to investigate reports of potentially unjust and
unreasonable practices by certain VOCCs discussed above. We support
this investigative effort, and--in the event that unjust or
unreasonable practices by certain VOCCs are discovered--urge the
Commission to take appropriate enforcement actions under the Shipping
Act to put an end to such practices.
The need is urgent, especially with record container volumes at the
nation's major ports. These volumes, and the resulting congestion, will
only grow as the global economy recovers from the coronavirus pandemic.
Producers rely on competitive access to foreign markets, and the
reported actions by certain VOCCs to undermine this access pose
significant ramifications for agricultural exporters and the industry
at large.
We look forward to reviewing the findings of Fact Finding No. 29
and other related FMC proceedings, and to working with the Commission
to address this growing problem.
Sincerely,
John Thune,
United States Senator.
Amy Klobuchar,
United States Senator.
James M. Inhofe,
United States Senator.
Dianne Feinstein,
United States Senator.
Chuck Grassley,
United States Senator.
Patty Murray,
United States Senator.
John Cornyn,
United States Senator.
Ron Wyden,
United States Senator.
John Barrasso,
United States Senator.
Debbie Stabenow,
United States Senator.
Jerry Moran,
United States Senator.
Tammy Duckworth,
United States Senator.
John Hoeven,
United States Senator.
Tina Smith,
United States Senator.
Deb Fischer,
United States Senator.
Raphael Warnock,
United States Senator.
Tom Cotton,
United States Senator.
Steve Daines,
United States Senator.
M. Michael Rounds,
United States Senator.
Thom Tillis,
United States Senator.
Joni Ernst,
United States Senator.
Marsha Blackburn,
United States Senator.
Cynthia Lummis,
United States Senator.
Roger Marshall,
United States Senator.
cc: The Honorable Rebecca F. Dye, Commissioner, Federal Maritime
Commission
The Honorable Daniel B. Maffei, Commissioner, Federal Maritime
Commission
The Honorable Louis E. Sola, Commissioner, Federal Maritime
Commission
The Honorable Carl W. Bentzel, Commissioner, Federal Maritime
Commission
Letter of February 25, 2021, from Hon. Roger F. Wicker, Ranking Member,
U.S. Senate Committee on Commerce, Science, and Transportation et al.,
Submitted for the Record by Hon. Bob Gibbs
February 25, 2021.
The Honorable Michael Khouri,
Chairman,
Federal Maritime Commission, 800 North Capitol Street, NW, Washington,
DC 20573.
Dear Chairman Khouri:
We write to express concerns with ongoing disruptions at our
nation's major ports, which are having ripple effects across the supply
chain. We were encouraged to see the Federal Maritime Commission's
recent announcement that the agency is issuing information demand
orders to ocean carriers and marine terminal operators to determine if
legal obligations related to detention and demurrage practices are
being met. We support this swift action, which is being led by
Commissioner Rebecca F. Dye.
As you are aware, our nation's ports are experiencing significant
increases in cargo volume. This volume is increasingly one-sided, with
imports far outweighing exports. This imbalance is causing bottlenecks
at key points in the supply chain and is affecting numerous sectors
that rely on a competitive market, such as agricultural exporters and
retailers. Truckers and other transportation operators are also facing
challenges in handling the spike in imports.
The Commission's information-gathering initiative will provide
valuable insights into these and other challenges. It should also
provide information on ocean carriers and terminal operators' practices
relating to container returns and container availability for exporters.
We ask that you keep us informed on your findings and any plans for
further action on these matters.
Throughout the pandemic, front line workers, port operators, truck
drivers, maritime employees, dockworkers, and others have kept our
economy moving by supporting the delivery of essential goods and
supplies. These critical infrastructure employees have ensured that
U.S. businesses and households receive the products they depend upon.
We greatly appreciate their contributions and the Commission's work to
support their efforts. Your information demand order will help support
their critical role in our supply chain.
Thank you for your consideration of this request and your ongoing
work to ensure our freight network remains fluid. We look forward to
working with you to address this important issue.
Sincerely,
Roger F. Wicker,
Ranking Member, U.S. Senate Committee on Commerce, Science, and
Transportation.
John Boozman,
Ranking Member, U.S. Senate Committee on Agriculture, Nutrition,
and Forestry.
Press Release, ``Rep. Schrier Sends Letter to Federal Maritime
Commission About Increasing Uncertainty for Washington State
Exporters,'' Submitted for the Record by Hon. Bob Gibbs
Rep. Schrier Sends Letter to Federal Maritime Commission About
Increasing Uncertainty for Washington State Exporters
For IMMEDIATE Release
March 2, 2021
WASHINGTON, DC--Congresswoman Kim Schrier, M.D. (WA-08) today sent
a letter to the Federal Maritime Commission (FMC) with concerns about
foreign-owned ocean carriers returning empty containers to China for
quick turnaround in order to get more Chinese exports to the U.S. This
practice is extremely harmful to U.S. farmers, who are left unable to
reliably ship their goods overseas, and to the 8th District's economy.
Too often, Washington state's farmers and growers don't know when a
ship will be in port, making it difficult to get their products to the
carrier in time. Farmers and growers are also forced to pay additional
fees when their products, often perishable, have to wait at the port to
be loaded onto a ship. And the buyers overseas become understandably
frustrated with late deliveries. Washington's farmers and growers risk
losing their foreign markets.
In the letter Rep. Schrier says, ``Washington's 8th Congressional
District stretches across the Cascade Mountains and is home to some of
the nation's largest agricultural producers and exporters, selling hay,
apples, pears, and cherries around the world. For months, these
exporters have shared with me how carriers favoring empty export
containers is impacting their industries, threatening export markets
and souring relationships they have developed and maintained over
decades. It is not an exaggeration to say that the economic health of
my district is being directly threatened by the actions of the nine
major ocean carriers.''
In her letter, Rep. Schrier says that she believes the carriers
could be in violation of the Shipping Act and requests the FMC to use
all available tools to end the unfair behavior of prioritizing certain
exports.
``Our products, primarily Apples and Pears, are highly perishable
products, which also happen to be produced by many, many other
countries around the world, including China, the EU nations, and many
Southern Hemisphere countries. When shipping companies abruptly
increase our cost, restrict our cargo, delay our cargo, or simply
refuse to carry our cargo, we lose sales opportunities which we cannot
get back. In my estimation, the current issues we are facing with
respect to loading and movement of our cargo to customers around the
world, will result in Export sales losses in the millions of dollars
for our current crop alone. Simply missing or skipping one week of
shipments to an important market can mean missed sales of $250,000-
500,000 in value . . . and we have faced a number of missed weeks,
skipped weeks, and downright refusals already. Those sales don't come
back. They are gone for good,'' said Dave Martin, Export Sales Manager,
Stemilt Growers LLC.
Earlier this month Rep. Schrier spoke with several commissioners on
the Federal Maritime Commission who shared her concerns about this
issue and how it affects America's exporters. In her letter Rep.
Schrier tells the Commission that she will pursue legislative action if
the Commission needs that assistance to rectify this situation.
A copy of the letter is below.
# # #
Dear Commissioners:
I am writing to express my concerns about reports that foreign-
owned ocean carriers are unfairly prioritizing importation of foreign
goods over U.S. exports. For faster turnaround, the carriers take empty
containers back to China, rather than waiting to load the ships with
U.S. agricultural exports. This is heavily impacting the viability of
U.S. farmers and exporters.
I understand that the Federal Maritime Commission is already
engaged on this issue, has launched a formal investigation into ocean
carrier practices, and is determining whether the carriers' actions may
be in violation of the Shipping Act.Today I want to offer the
Commission my full support and encourage you to use whatever means are
within your authority to end this unfair behavior.
COVID-19 has disrupted global supply chains, upended long-standing
trade patterns, and created bottlenecks at ports around the world. It
is understandable that ocean carriers--along with terminal operators,
exporters, truckers, and just about the entire international trade
economy--have struggled to overcome these logistical challenges. And
yet, from what I am hearing from Washington state exporters, the
current lack of container availability cannot be attributed to
pandemic-related disruptions alone. Ocean carriers seem to be making a
revenue-based decision to reject U.S. exports.
This rejection, as well as the carriers' failure to provide
accurate notice of arrival and departure times, frequent last-minute
booking cancelations, and questionable demurrage and detention
practices, is hurting American farmers and exporters. I have heard from
many of them in my district.
Washington's 8th Congressional District stretches across the
Cascade Mountains and is home to some of the nation's largest
agricultural producers and exporters, selling hay, apples, pears, and
cherries around the world. For months, these exporters have shared with
me how carriers favoring empty export containers is impacting their
industries, threatening export markets and souring relationships they
have developed and maintained over decades. It is not an exaggeration
to say that the economic health of my district is being directly
threatened by the actions of the nine major ocean carriers.
The widespread rejection of U.S. exports must end. American farmers
and agricultural exporters are depending on you to stand up against
these unfair practices. I support any FMC enforcement action that will
ensure ocean carrier compliance with the Shipping Act and bring
desperately needed relief to our exporters. If you find that current
regulations do not adequately equip the Commission with enforcement
capability, I am happy to work with my colleagues to pursue legislative
language to grant you that authority.
Thank you for your commitment to protecting American exporters and
consumers. If you have any questions or concerns, please do not
hesitate to contact me or my staff.
Sincerely,
Kim Schrier, M.D.,
Member of Congress.
Article entitled, ``Carriers Rejected at Least $1.3 Billion in
Potential U.S. Agricultural Exports From July to December,'' CNBC.com,
March 15, 2021, by Lori Ann LaRocco, Submitted for the Record by Hon.
Bob Gibbs
Carriers rejected at least $1.3 billion in potential U.S. agricultural
exports from July to December
CNBC.com, March 15, 2021 2:42 p.m. EDT, updated 2:45 p.m. EDT
by Lori Ann LaRocco
Key Points
The United States saw at least $1.3 billion in potential
agricultural exports rejected at major ports on the East and West
coasts, from July to December last year, according to a CNBC analysis.
The rejections were particularly heavy in December,
according to analysis of data compiled from the Census Bureau and the
Ports of Los Angeles and Long Beach in California, and the Port of New
York in New Jersey.
This investigation comes at a time where China's exports
hit records. The full year trade surplus reached $535 billion, the
highest since 2015.
The United States saw at least $1.3 billion in potential
agricultural exports rejected at major ports on the East and West
coasts, from July to December last year, according to a CNBC analysis.
The rejections were particularly heavy in December, according to
analysis of data compiled from the Census Bureau and the Ports of Los
Angeles and Long Beach in California, and the Port of New York in New
Jersey.
The estimated total value of lost export trade from the three ports
for December was a minimum of $257.5 million. The Port of New York and
New Jersey saw its largest volume of export rejections for 2020 during
December.
The maritime carriers' export decisions at these ports are under
investigation by the Federal Maritime Commission. Commissioners are
examining whether this denial of trade is in violation of the 1984
Shipping Act. This investigation comes at a time where China's exports
hit records. The full year trade surplus reached $535 billion, the
highest since 2015.
One of the key legal obligations in the Shipping Act is the
nondiscriminatory regulatory process by the carriers for the movement
of goods by water. Maritime carriers have been favoring sending back
empty containers to China in an effort to quickly fill the boxes so
they can be transported along the more lucrative China-U.S. route.
According to the Freightos Baltic Index, carriers are charging
$5,548 a container to the East Coast, and $4,571 to the West Coast.
U.S. agricultural export containers take longer to process because the
product needs to be unloaded and the container needs to be cleaned. The
route from the U.S. to China is also a fraction of the price ($715 a
container), so carriers can afford to return empties instead of
containers full of agriculture.
``Carrier practices are not only inflicting significant financial
damage to U.S. exporters and importers, but are extremely short-
sighted,'' said Peter Friedmann, executive director of the Agriculture
Transportation Coalition. ``Those practices are causing U.S. exporters
to lose foreign customers, and setting the stage for the ocean carriers
themselves to lose significant business in the future.''
In December, shippers rejected an estimated 72,508 containers known
as 20-foot equivalent units, or TEUs, according to CNBC's data
analysis. That tally was calculated by taking the difference between
the actual empty exports in 2020 versus the 2019 share of export
empties. The difference represents the amount of empty container
exports that should have been filled in 2020.
From July through December, a total of 370,505 TEUs were denied out
of the ports of Los Angeles, Long Beach, and New York and New Jersey,
with a container deficit value of $1.3 billion.
To calculate the minimal value in the potential lost trade as a
result of the rejection of agricultural exports, CNBC used the Port of
Los Angeles' containerized agricultural export price for soybeans/
oilseeds/grains, which can be found on the U.S. Census, USA Trade
Online [https://usatrade.census.gov/] site. The value of this export is
$3,552 a TEU. It is one of the lower valued exports.
China and Brazil
Starting in the new year, China traditionally starts buying from
the United States' top soybean competitor, Brazil. The Agriculture
Transportation Coalition's Friedmann says this rejection of trade can
only provide more opportunity for Brazil.
``Brazil expanded its soybean production during the trade war and
this denial of trade can only help them at the expense of the U.S.
farmer,'' said Friedmann. ``When foreign customers are denied
affordable/dependable U.S. ag exports by carrier practices, they find
alternative sourcing to U.S. agriculture, and simply do not return to
their U.S. sources.''
Friedmann said Asian buyers are frustrated. One of the largest
soybean buyers in Asia is looking to switch delivery of U.S. soybeans
from container to bulk freight, which can impact American jobs.
``Major China animal feed importers of U.S. soybeans are fed up
with ocean carrier practices, charges and the dependability of
container delivery,'' Friedmann explained. ``Once these Chinese
customers switch, they may never come back to the container model and
that impact jobs at the port. Container ships generate more man-hours.
This will mean many fewer containers to be loaded at our marine
terminals, less work for longshoremen and fewer containers to be
carried on container vessels, for years to come.''
The decrease in U.S. exports can also be tracked in the global
containerized trade data by local and global transport and logistics
research company MDS Transmodal, China's share of global exports
increased in the third and fourth quarters of 2020. North America's
global export share however, never recovered.
``The increase in global trade was mainly driven by China, which
has not only retained the title of `factory of the world' but improved
its position,'' explained Antonella Teodoro, Senior Consultant at MDST.
Other ports and next steps
The Northwest Seaport Alliance, the fourth-largest container
gateway in North America, comprised of the Port of Seattle and Port of
Tacoma, tells CNBC it also suffered a large loss in exports. In 2019,
the ports moved out 913,332 containers of full exports. In 2020, that
number dropped to 790,620 containers.
``Our exporters are suffering,'' said John Wolfe, chief executive
officer of The Northwest Seaport Alliance. ``We have spoken with our
terminal operators and carriers about this issue and there is more work
to be done by all in order to address the extreme challenges faced by
our export community.''
CNBC sent its findings to FMC Commissioner Louis Sola.
``I can say for a fact that some carriers have decreased their
exports in return for empties (mainly the European lines) while other
have made a conscious effort to pick up the slack and increases their
exports in 2020 (mostly the Asian lines),'' said Sola. ``I do find this
most interesting and warrant that it requires further discussion.''
Sola said he is also keeping an eye on the potential jobs impact.
``This assertion warrants review. We support our longshore workers.
Indeed, that is why I have attempted to draw attention to the loss of
work generated by the cessation of cruises to our cruise ports across
the nation and speak out for the safe resumption of cruising,'' he
said.
The imbalance of trade has created an outpouring of letters by
American exporters pleading for intervention by the Federal Maritime
Commission. Letters have also been sent by politicians on both sides of
the aisle. FMC Commissioner Rebecca Dye is currently leading an
investigation into the carrier's actions in a Fact Finding 29
investigation.
The investigation was authorized in March 2020, and was expanded in
November to include the container return and container availability for
U.S. export cargo, as well as the charges in storage and late fees
carriers are charging exporters.
``No public servant enjoys a trade deficit unless it is the other
fellow's deficit,'' said Sola. ``America is best served when we ship
more product out than we ship in.''
Article entitled, ``COVID-19 Even Affects Apples: Washington Farm
Exports Crimped by Cargo-Container Shortage,'' Seattle Times, March 9,
2021, by Paul Roberts, Seattle Times Business Reporter, Submitted for
the Record by Hon. Bob Gibbs
COVID-19 even affects apples: Washington farm exports crimped by cargo-
container shortage
The Seattle Times, March 9, 2021 6:01 a.m., updated March 12, 2021 9:03
a.m.
by Paul Roberts, Seattle Times business reporter
In Wenatchee, tens of thousands of boxes of apples that should be
on their way to the Middle East and Asia are piling up instead in
warehouses.
In Ellensburg, it's a similar story for mountains of hay bales that
would otherwise be on container ships bound for Japan and South Korea.
The problem isn't a lack of demand: Foreign buyers are eager for
farm goods from Washington and other states. But thanks to the strange
effects of COVID-19 on global shipping, U.S. farm exports are barely
moving.
In normal times, ``We ship 10 to 15 containers of fruit every week
into Taiwan,'' says Dave Martin, export sales manager for Stemilt
Growers in Wenatchee, one of Washington's biggest tree-fruit exporters.
``This week, we will not have a ship.''
The shortage of cargo space has backed up Stemilt's huge packing
operations and idled dozens of truckers who normally haul the 40-foot-
long containers to the ports of Seattle and Tacoma. It has also
prompted Stemilt's foreign buyers to look to competitors in countries
such as Chile, where the apple harvest is just starting. ``Those sales
are lost,'' Martin says of the numerous foreign shipments Stemilt has
forgone since November, when the shipping crisis became severe.
The cargo-space crunch is the latest symptom of a global trade
system that was unbalanced even before the pandemic, but is now so
lopsided that entire sectors are at a virtual standstill.
Since the start of the pandemic last spring, Americans have spent
far less on services, such as dining out, and far more with Amazon and
other online retailers. That in turn has sparked a surge in imports
from Asia.
The wave of mainly Chinese goods has overwhelmed some West Coast
ports, especially in Los Angeles, where ships often sit for days
waiting to unload. And because some of those ships, once they unload in
Los Angeles, go pick up cargo at other West Coast ports, bottlenecks in
Southern California have meant major delays for exporters waiting to
load their goods in Seattle and Tacoma.
``We are now experiencing unprecedented eastbound cargo volumes
coming out of Asia to the U.S., and it's creating huge disruptions
within the supply chain,'' says John Wolfe, chief executive officer of
the Northwest Seaport Alliance, which manages marine cargo operations
in the ports of Seattle and Tacoma.
But the surge in Asian imports has had another effect on Northwest
farmers. Because U.S. demand for Asian products is so high, shipping
companies can now make far more money sending empty containers back to
China as soon as possible, rather than take the time to refill them
with American farm products.
It's simple economics: Because a container of Chinese electronics,
apparel and other exports is generally worth more than one filled with
American farm products, shippers can charge more per eastbound
container load, says Peter Friedmann with the Agriculture
Transportation Coalition in Washington, D.C. For that reason, it's more
profitable for carriers to speed that container back to Asia for
another high-value load than it is to wait for several days while a
U.S. exporter fills the container with hay or apples or some other low-
value product. Pound for pound, the value of American apples or
potatoes or ``is a mere fraction of the value of a container load of,
say, Adidas running shoes,'' Friedmann says.
That imbalance has meant more empty cargo containers leaving the
ports of Seattle and Tacoma: In January 2020, just 37% of the
containers exported from Seattle and Tacoma were empty, according to NW
Seaport Alliance figures. This January, just over half went back empty.
(Due to the greater weight of American exports, outbound ships always
carry some empty containers.)
In fact, eastbound cargo is now so much more profitable--around
$6,000 per container on average, versus $3,500 or so for westbound
containers--that some cargo ships that unload their Asian goods in
Southern California now skip scheduled calls at Seattle or Tacoma and
head straight back to Asia.
That has meant fewer vessels calling in Seattle and Tacoma during
the pandemic: Vessel calls in January 2021 were down nearly 20%, to
125, from a year earlier, according to alliance figures. ``The shipping
lines are in a rush to get their vessels and [container] equipment back
to Asia to capitalize on those high-value cargo shipments out of Asia
to the U.S.,'' says Wolfe.
For exporters in Washington and elsewhere in the U.S., that east-
west imbalance has created massive ripples up and down the exporters'
supply chain.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ships are routinely delayed or canceled outright, often with little
time for exporters to make alternative arrangements.
Before the pandemic, truckers could pick up an newly emptied
container at the port in a few hours and drive it back to Eastern
Washington to fill with produce, says Bryan Gonzalez, with Washington
agricultural exporting firm FC Bloxom & Co. These days, Gonzalez says,
drivers can wait all day for a container--and in a few cases, they were
told to ``come back to tomorrow.''
Those delays create additional and expensive backlogs at processing
plants and packing sheds. And things are about to get worse as
exporters who haven't sold all of last year's crop now brace for this
year's harvest.
In a few months, for example, hay farmers in the Pacific Northwest
will start cutting the first crops of 2021, ``and we've still got a lot
of last year's crop that needs to be moving,'' says Ellensburg hay
exporter Mark Anderson. His company, Anderson Hay, normally sells 90%
of its product to foreign buyers, but now struggles to find cargo
space.
``It's become, really, a complete supply chain meltdown on the
Pacific Ocean,'' Anderson says, who worries that some customers may
switch to Australian hay.
Trade economists and policymakers expect the capacity shortages to
fade as the pandemic ends and normal consumer patterns return. But many
exporters fear that by then, they may have permanently lost some market
share.
``My biggest worry is that suddenly what seemed like a blip in
exports and a temporary problem becomes, well, now China is going
elsewhere for their apples and their cherries and their hay,'' says
Rep. Kim Schrier, D-Sammamish.
Schrier knows farmers and exporters have little leverage in a
shipping business that is now dominated by just a handful of massive,
foreign-owned firms, whom exporters can't afford to offend. ``Their
hands are tied,'' she says.
Instead, she wants the federal government to pressure shipping
companies to make more room for American exports on westbound ships by
minimizing the empties they take back to Asia.
Schrier says that the Federal Maritime Commission is already
exploring whether shipping companies' practices violate U.S. shipping
law--and thinks the threat of federal action or a congressional inquiry
could induce shippers to ``think twice'' and stay in U.S. ports long
enough to load more full cargo containers.
Two of the ports' biggest carriers--MSC and Maersk--did not respond
to requests for comment. (In a subsequent email, an MSC spokesperson
said the firm is working to ease the container shortage by adding
vessels and rerouting some cargo away from congested ports, among other
measures.)
``Sometimes, just pushing into investigating an issue is enough to
make things happen,'' Schrier says. ``But if not, we are prepared to
work . . . with the Federal Maritime Commission to make sure we have
fair agreements'' for shipping.
This story has been updated with a response from MSC.
Presentation, ``The Anatomy of the Container Terminal Logistics Supply
Chain Congestion Issues at the San Pedro Bay Ports During the COVID-19
Pandemic,'' prepared by Martin Associates, June 30, 2021, Submitted for
the Record by Hon. Alan S. Lowenthal
[The 21-page presentation is retained in committee files and is
available online at https://www.pmanet.org/wp-content/uploads/2021/07/
John_Martin_Research-July_2021.pdf (accessed September 8, 2021). A
summary of the research appears directly below.]
Research Summary, ``The Anatomy of the Container Terminal Logistics
Supply Chain Congestion Issues at the San Pedro Bay Ports During the
COVID-19 Pandemic,'' prepared by John Martin, Ph.D., July 2021,
Submitted for the Record by Hon. Alan S. Lowenthal
COVID-19 has led to dramatic swings in cargo volumes on the West
Coast--from a stark plummet early in the pandemic to an unprecedented
surge beginning in Q2 of 2020 and continuing today. This wave of Asian
imports has stretched the regional and national supply chains at every
point. Warehouses are filled, causing back-ups all the way to port
terminals, made worse by shortages of shipping containers, rail cars,
trucks, and chassis to meet the enormous demand.
With the historic supply chain congestion placing marine terminals
under enormous pressure, the Pacific Maritime Association commissioned
noted maritime economist John Martin, Ph.D., to evaluate the core
causes of the congestion. A summary of Dr. Martin's data-driven
findings follows:
The terminal and vessel backlogs that occurred in San
Pedro between July 2020 and March 2021 were the result of a cumulative
collapse of the entire logistics supply chain. These backups have kept
ships waiting at anchorage for days and even weeks, and led ships at
LA/Long Beach to decline or cancel labor more than 1,000 times between
October 2020 and March 2021.
There was an unprecedented increase in TEU volume at San
Pedro Bay Ports starting in April 2020 and peaking in October 2020 and
again in March 2021, and remaining at historical high levels from July
2020. For example, total TEUs handled at the Ports of LA/Long Beach in
March 2020 plummeted to under one million, and nearly doubled a year
later to 1.8 million.
ILWU labor hours increased in response to this volume
growth, also remaining at historical levels from July 2020, yet
production per ILWU hour began to decline, reflecting terminal
congestion. It is important to note that the TEU throughput per hour at
automated terminals continued an upper trend during the pandemic
compared to traditional terminals.
Terminal dwell times for containers also began increasing
in July 2020 and remained at historical high levels through February
2021. As PMA CEO Jim McKenna wrote in the Wall Street Journal, ``Dwell
times, which measure how long a container remains at a terminal, peaked
in January at over five days--more than twice the standard length.
That's because the supply chain reached full capacity, leaving
containers with nowhere to go.''
Street dwell times for chassis have also hit crisis
levels, exceeding the ``red zone critical dwell time'' of six days
continually since November 2020. In fact, early December 2020 and early
January 2021 showed peak street dwell times for chassis at 9 days--a
full week above the optimal two-day average ``green zone'' established
by the Pool of Pools and Harbor Trucking Association. This corresponded
to the peak terminal dwell times and transload/warehouse congestion.
Truck turn times (from pedestal to pedestal) reflecting
queue time outside the gate, retrieval time in the terminal and exit,
reached between 60 and 70 minutes beginning in September 2020 and grew
to record levels in October and November 2020, and remained high
through March 2021.
This on-terminal congestion reflects the growth in on-
street dwell times for trucks (measured in terms of chassis turns)
moving to and from transload facilities, indicating congestion at the
regional transload and distribution centers, as well as the limited and
declining vacancy rate of industrial warehouse property in Southern
California and the Inland Empire. Data show that the vacancy rate of
industrial warehouse space has been declining in the Inland Empire to
under 4%, and is under 2% in the Los Angeles South Bay area near the
ports. These extremely low vacancy rates suggest a critical warehouse
and transload facility shortage in the Southern California region.
Since about 60% of the intermodal containers are currently transloaded,
capacity constraints and congestion at regional warehouse and transload
facilities also effect discretionary cargo bound for markets east of
the Rockies, critical to the health of West Coast ports.
Further exacerbating the off-terminal congestion is the
fact that rail capacity was curtailed through 2020 and early 2021, as
reflected by the reduced number of intermodal trains moving daily
through the Alameda Corridor. The number of trains per month in 2020-21
has plummeted from the average number throughout the entire year of
2018, for example. During 2020 to the end of March 2021, the average
number of daily trains through the Alameda Corridor was at historically
low levels, reflecting potential rail car shortages, a shifting of
service levels by the railroads, or both.
The ILWU was able to respond to the terminal volume
demand, but the breakdown in off-terminal logistics systems, primarily
warehouse/transload capacity and intermodal rail service, led to the
terminal and vessel congestion. The percentage of container vessels at
berth either cancelling labor gangs and/or not requesting labor
increased to more than 40% per day in peak days in November 2020, and
averaged more than 13% per day through March 2021, reflecting the
outside the terminal congestion issues.
Appendix
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Question from Hon. Julia Brownley to Hon. Daniel B. Maffei, Chairman,
Federal Maritime Commission
Question 1. Have you engaged with U.S. Trade Representative
Katherine Tai and others in the administration to discuss how we can
resolve some of the shipping challenges through trade policy and bi-
lateral or multi-lateral agreements to prevent overcharging of
shippers?
Answer. We have engaged with the Office of the U.S. Trade
Representative to determine how we can cooperate on areas of mutual
interest. We will be happy to share our expertise with their office.
Though the Federal Maritime Commission is an independent agency, we
do seek to cooperate with other Executive Branch agencies where
appropriate and the public interest is served. In response to ongoing
issues related to ocean shipping, I have had meetings with counterparts
from the Surface Transportation Board, the Department of
Transportation, the Federal Motor Carrier Safety Administration, and
the Maritime Administration.
I would also like to make you aware that the Commission was named
in President Biden's recent Executive Order on Promoting Competition in
the American Economy. Although not mandatory that we participate
because of our status as an independent regulatory agency, I am
committed to doing what I can as Chairman to cooperate with the
provisions of the Executive Order and its spirit of establishing a
whole-of-government approach to promoting the interests of American
workers, businesses, and consumers.
Finally, we have recently entered into a Memorandum of
Understanding with the Department of Justice's Antitrust Division. This
agreement will allow our agencies to more closely and effectively
communicate and cooperate should the need arise to address actions that
may violate the laws enforced by either agency.
The underlying issues causing port congestion, higher prices to
ship cargo, and degradation of the supply chain are beyond the ability
of any one agency to resolve. We will continue to partner with other
government agencies to bring relief to ports, shippers, transportation
workers, and transportation service providers, including the ocean
carriers.
Questions from Hon. Dusty Johnson to Hon. Daniel B. Maffei, Chairman,
Federal Maritime Commission
Question 1. In April 2020, the FMC issued new guidance about how it
will assess the reasonableness of detention and demurrage practices of
ocean carriers and marine terminal operators. American importers and
exporters have reported numerous, and increasing, accounts of ocean
carriers disregarding the guidance and routinely imposing detention and
demurrage charges often in circumstances beyond the control of either
the importer or exporter. How many enforcement actions has FMC
initiated for these and other violations of the guidance? What
penalties have been levied?
Answer. Since last spring, when the Federal Maritime Commission
issued a non-exclusive list of factors it will consider in its
reasonableness analysis (the Interpretive Rule on Detention and
Demurrage Under the Shipping Act, found at 46 C.F.R. Sec. 545.5), the
Commission has received numerous complaints of varying specificity
related to carrier and terminal practices, some involving demurrage and
detention charges, others regarding operational issues exacerbated by
the pandemic (e.g., lack of empty container return location, vessel
delays).
The Commission received allegations from 32 entities that
potentially could be actionable--they reported occurrences involving
the issues in the Interpretive Rule and/or Fact Finding 29, contained
specific allegations about the conduct at issue and the carriers or
terminals involved, and included information that could be
substantiated. The Commission is prioritizing alleged violations
affecting exporters and is investigating (or has finished
investigating) allegations from 14 of these entities. These
investigations have not yet resulted in formal enforcement action or
the issuance of civil penalties and due process for such actions takes
time. However, in several instances, complaints received by the
Commission have already been resolved by the parties informally.
The Commission will continue to evaluate the other potentially
actionable allegations received, as well as new allegations as they
come in, and bring enforcement action where appropriate.
Question 2. By electing to send empty containers back to their
points of origin rather than carry U.S. exports, ocean carriers are
wielding enormous power in dictating which cargo is carried, to the
disadvantage of U.S. agriculture, and are inflating their own freight
rates in the process. To make matters worse, U.S. exporters must rely
on fewer than a dozen foreign-owned carriers to deliver U.S.
agricultural products to overseas customers. Stakeholders tell me that
because these carriers face few consequences for their actions, they
appear impervious to U.S. oversight.
a. Is that the case--are foreign-owned ocean carriers impervious
to U.S. oversight? If not, what specific actions has FMC taken in the
last year that has changed the practices of the ocean carriers?
Answer. No entity operating within the United States, irrespective
of where they are incorporated, is immune from the law or excused from
regulatory oversight. Ocean carriers are no exception.
The Federal Maritime Commission has authority to seek to enjoin the
operation of an agreement that violates the statutory competition
standard. The Commission closely monitors the marketplace for liner
services for any evidence of collusion and anticompetitive behavior.
The three ocean carrier alliance agreements receive the highest degree
of scrutiny by the agency's Bureau of Trade Analysis (BTA). BTA
monitors the alliances for behavior that could violate the standard
established in 46 U.S.C. Sec. 41307(b), which states that the
Commission may file an injunction against any agreement that, by a
reduction in competition, produces an unreasonable reduction in
transportation service or an unreasonable increase in transportation
cost or substantially lessens competition in the purchasing of certain
covered services.
The Commission also has the authority to amend the monitoring
requirements, and has done so during the past year, to get even more
timely information beneficial to its monitoring work.
Additionally, ocean carriers are subject to the prohibitions and
penalties established in Chapter 411 of Title 46.
A formal investigation by the Commission is one way to provide
oversight to ocean carriers, but it is not the only way. Shippers have
the opportunity to bring cases to the Commission as well: sworn formal
complaints can be filed to be adjudicated by the Commission's ALJ (in
accordance with 46 C.F.R. Sec. 502.62); small claims under $50,000 can
be brought through the Commission's informal adjudication process (46
C.F.R. Sec. Sec. 502.301-502.321); and if the party does not wish to
pursue either of these options, allegations can be sent to the
Commission's Bureau of Enforcement (BOE) for further consideration
which may lead to a Commission-initiated BOE investigation. In
addition, the Commission's Office of Consumer Affairs and Dispute
Resolution Services (CADRS) offers ombuds assistance, mediation,
facilitation, and arbitration to resolve challenges and disputes
involving violations of the Shipping Act (see 46 C.F.R. Sec. 502.401).
The relatively few formal private party complaints filed related to
current market conditions has led the Commission to pursue self-
initiated enforcement actions. The Commission will take action against
any entity for any behavior that violates the law.
The Commission is sometimes criticized for a perceived lack of
oversight of the rates charged by ocean carriers. High prices for ocean
cargo services are not in and of themselves proof of a collusive
marketplace or evidence of anticompetitive behavior. Similarly, the
comparatively high volume of empty containers returning overseas to
serve the East-West trades, is not proof of ocean carriers dictating
whose cargo is carried. The marketplace has determined there is more
demand for goods coming into the United States than leaving the Nation
and it is setting the price for the service and the priority for
deployment of the intermodal equipment.
b. Does FMC have the regulatory tools needed to adequately address
this crisis? If not, what authority does the FMC currently lack that
would enable it to take more immediate action?
Answer. The Federal Maritime Commission does have adequate
regulatory tools to achieve its current mission, to ensure a
marketplace for ocean liner services free of collusion and
anticompetitive behavior.
However, this question fundamentally goes to what sort of agency
the Commission should be, which in turn would dictate what authorities
it should possess.
The Commission is only authorized by Congress to regulate some
facets of the freight delivery system. We have stepped into the role of
promoting supply chain efficiency and reliability because of the unique
relationships we have with all parties involved in the movement of
ocean cargo. This has allowed us to act as a convener of sorts over the
years, with positive results.
The Commission does not regulate ocean carrier rates, reliability,
or what cargoes a common carrier prioritizes when space is limited.
Even in the case where the Commission does have authority--to deny
anti-trust immunity to an alliance were it to violate the statutory
competition standard--the Commission cannot take direct action but must
go to Federal court to seek an injunction.
Therefore, whether the FMC has the tools needed to address the
crisis depends on what sorts of government actions the questioner
believes are warranted to adequately address this crisis. This may
involve legislative changes to permit or order the FMC to take actions
on some of the issues the FMC is not currently authorized to address.
We will be happy to provide any technical assistance necessary to any
legislative proposals put forward.
Question 3. I have heard from some stakeholders that FMC does not
have legal authority to enforce its own guidance. Is that true? What,
specifically, are FMC's enforcement authorities and what additional
authority does FMC need?
Answer. The Federal Maritime Commission does have the authority to
enforce its statutory mandate and its corresponding regulations.
Chapter 411 of Title 46 contains prohibitions of the Shipping Act and
the penalties associated with violating them.
The Interpretive Rule on Detention and Demurrage Under the Shipping
Act, 46 C.F.R. Sec. 545.5, issued in May 2020, provides guidance to
the public about how the Commission will evaluate reasonableness of
detention and demurrage charges to determine whether they represent a
violation of 46 U.S.C. Sec. 41102(c). This section states that ``[a]
common carrier, marine terminal operator, or ocean transportation
intermediary may not fail to establish, observe, and enforce just and
reasonable regulations and practices relating to or connected with
receiving, handling, storing, or delivering property.''
The Commission does not need additional authority to pursue civil
penalties for violations of Sec. 41102(c) or any of the other
prohibited acts.
The recently announced VOCC Audit Program, established at my
direction on July 19, 2021, was initiated to bring ocean carriers'
detention and demurrage practices into compliance with the requirements
of the law. The Commission has the authority and ability to enforce
against violations that are discovered through this program.
Question from Hon. Alan S. Lowenthal to Hon. Rebecca F. Dye,
Commissioner, Federal Maritime Commission
Question 1. Commissioner Dye, you, and Chairman Maffei have spoken
about some of the violations, or the problems with detention and
demurrage charges. Can you elaborate for the Committee on these
findings?
Answer. There is no question that we have more work to do to
achieve complete compliance in ocean carrier and marine terminal
operator policies and practices related to detention and demurrage. It
is important to note that the United States is the first country in the
world to attack demurrage and detention charges of U.S. and foreign
ocean carriers engaged in international commerce. Ours is an approach
that is responsive to complaints from shippers heard by the Commission.
We are determined to enforce the law concerning demurrage and detention
charges and will continue to use all our available resources to support
that result. Like any other regulatory or law enforcement agency, we
need complete, factual allegations of Shipping Act violations to pursue
an investigation.
There has been progress on detention and demurrage. Some of our
international ocean carriers are committed to change and have taken
significant steps toward compliance. The Ocean Carrier Audit Team
established by the Chairman as part of the VOCC Audit Program will be
beneficial in helping those carriers refine their policies and
practices in line with the Commission's requirements. For those
carriers that have not yet matched the commitment of industry leaders,
we will have the opportunity to reiterate and reinforce the mandatory
requirement of their compliance.
The fundamental proposition of the Commission's rule is that
detention and demurrage should serve as an incentive for shippers and
truckers to keep equipment in motion. These charges should not be used
by carriers and marine terminal operators as a revenue stream. Toward
that end, the Commission's Demurrage and Detention rule requires
compliance in four areas:
Transparent, standardized language for demurrage and
detention practices.
Clear, simplified, and accessible demurrage and detention
billing practices and dispute resolution processes.
Explicit guidance regarding the types of evidence
relevant to resolving demurrage and detention disputes.
Consistent notice to cargo interests of container
availability.
The Commission is united in support of our Demurrage and Detention
requirements and will vigorously enforce the law in cooperation with
affected U.S. importers and exporters.
Questions from Hon. Dusty Johnson to Hon. Rebecca F. Dye, Commissioner,
Federal Maritime Commission
Question 1. On March 31, 2020, FMC initiated Fact Finding 29,
stating in its order: ``Given the Commission's mandate to ensure an
efficient and economic transportation system for ocean commerce, the
Commission has a clear and compelling responsibility to actively
respond to current challenges impacting the global supply chain and the
American economy.'' In November 2020, FMC issued a supplemental order,
because information collected in the fact finding raised concerns that
the foreign-flagged ocean carriers may be employing practices in
violation of the Shipping Act. I applaud you for initiating the
investigation, but the problem remains acute. When can we expect FMC to
conclude its investigation and report out findings?
Answer. Fact Finding Investigation 29 is conducted under two
Commission Orders. The first Commission Order, issued March 2020,
authorized me, as Fact Finding Officer, to engage supply chain
stakeholders in public or non-public discussions to identify commercial
solutions to unresolved COVID-related operational impacts to the U.S.
international ocean supply chain. The Order also directed me to form
one or more Supply Chain Innovation Teams from all commercial sectors
of the U.S. international supply chain. These Teams are organized to
develop commercial solutions to port congestion and related supply
chain challenges. In a complex system like our international ocean
freight delivery system, commercial solutions maximize the chance of
success and minimize the risk of negative consequences.
The Fact Finding 29 Supplemental Order was issued at my request in
November 2020 and authorized me to investigate several ocean carrier
practices under section 41102(c) of title 46, United States Code.
Neither of these Orders contains an end date. The Commission issued
these Orders without end dates to provide me, and by extension the
Commission, with the flexibility to respond to rapidly changing
circumstances and conditions in the U.S. international ocean supply
chain during the pandemic.
The emerging consensus is that the effects from the issues that
were the subject of this hearing will last throughout the remainder of
this year and into 2022. There are many benefits to not concluding Fact
Finding 29 prematurely. For example, I may request the Commission to
amend the Supplemental Order establishing the investigation into
certain ocean carrier practices. Continuing Fact Finding 29 permits me
to pursue an offer from the Port of Los Angeles to determine how the
data the port collects in their port information system can aid in
enforcing demurrage and detention and in addressing other supply chain
dislocations, including earliest return date and container return.
Additionally, now that I may be able to convene Supply Chain Innovation
Teams in person, we can more effectively lead a consensus on how to
address operational issues undermining efficiency and adding to supply
chain congestion. Soon I will convene Supply Chain Innovation Teams,
starting with a focus on exporters, to develop commercial solutions to
include ``earliest return date,'' ``container return,'' and certain
information visibility problems.
As you may recall, in the first half of 2020, ports were facing a
congestion problem but for reasons different than today. The closing of
factories in Asia, coupled with the closing of stores, warehouses, and
transportation services in the United States at the beginning of the
pandemic resulted in cargo and empty containers accumulating at
American ports. Ocean carriers cancelled sailings as traditional cargo
volumes collapsed. Ships that did call on ports discharged cargo that
could not be accepted by American importers. Some shippers abandoned
their cargo, leaving it to sit on terminals. The Southern California
ports were at risk of reaching capacity due to stranded and abandoned
cargo. I immediately worked with port directors around the country to
locate storage space for American businesses that were shut down and
unable to accept cargo.
By May 2020, I had convened nine regional FMC Supply Chain
Innovation Teams as part of Fact Finding 29. These Teams included port
directors, senior ocean carrier executives, marine terminal operators,
and longshore labor leaders to address the underlying systemic
operational issues that exacerbated supply chain disruptions. The task
of the Teams was to identify commercial solutions to the most pressing
supply chain problems that were compounded by the pandemic. Their first
meetings determined that there were three simple pieces of information
shippers could provide to marine terminal operators to prioritize
delivery of cargo that had accumulated in ports and related facilities.
Those recommendations were:
Identify shipments that contain Personal Protective
Equipment. These commodities must move first, and marine terminal
operators need to know which containers to prioritize.
Identify containers shippers want to accept and can be
prepared to be picked-up.
Identify containers that shippers are not able to accept
or pick-up.
In June 2020, I published the findings from additional Innovation
Team conversations, which were that the freight delivery system could
achieve increased efficiencies in four areas:
1. Truckers should be directed to return empty containers to the
terminal where they were picked up, allowing them to make dual moves
and reduce the number of chassis required.
2. Notice of terminal gate closures should be given no less than
three days, and preferably seven days, before gate closing. At no time
should a closure occur mid-shift.
3. Notice of cancelled sailings should be given not only to
beneficial cargo owners, but also posted prominently on a carrier's
website, at least seven days in advance. Notice of bypassed ports
should be posted at least 72 hours in advance.
4. Carriers and terminals should immediately seek to collaborate
regarding Export Cargo Receiving Timelines with the goal of better
coordinating their interaction.
The recommendations offered last year by the Supply Chain
Innovation Teams are sound, well founded, and will lead to progress
that will benefit all supply chain actors. We will continue those
meetings this month.
As you noted, the Supplemental Order adding a formal investigatory
aspect to the Fact Finding was not issued by the Commission until the
end of November 2020. Under that Order, I have issued a Commission law
enforcement demand (Section 15 Order) to 27 different entities
resulting in voluminous reporting from the responding parties.
Commission staff is reviewing the materials received not only to help
inform as to the next steps I should take in the Fact Finding 29
Investigation, but also to determine if there are any enforcement
actions the Commission can self-initiate against ocean carriers or
marine terminal operators.
Fact Finding 29 is an ongoing investigation and does not need to be
concluded for the Commission to bring enforcement actions based upon
factual allegations or evidence of Shipping Act violations. The
Commission has received few formal private-party complaints for the
Commission to adjudicate. Also, the Commission has received few factual
allegations concerning potential violations of the Shipping Act with
enough supporting evidence to open a Commission Order of Investigation.
As you may already be aware, on July 19, 2021, the Commission, at
the direction of Chairman Maffei, launched the ``Vessel-Operating
Common Carrier Audit Program,'' creating a dedicated Audit Team to
examine the detention and demurrage practices of the top nine ocean
carriers by market share. I strongly support this program. The efforts
of the Audit Team will initially be focused on carrier compliance with
the Commission rule interpreting 46 USC 41102(c) as it applies to
detention and demurrage practices in the United States.
Finally, on July 28, 2021, I presented to the Commission a list of
Interim Recommendations aimed at minimizing barriers to enforcement of
the Shipping Act, clarifying Commission and industry processes,
encouraging shippers, truckers, and other stakeholders to assist
Commission enforcement efforts, and bolstering the ability of our
Office of Consumer Affairs and Dispute Resolution to facilitate fair
and prompt dispute resolution. The specific recommendations are:
Amend 46 U.S.C. 41104(a)(3) to broaden the anti-
retaliation provisions so that it applies to all regulated entities and
protects anyone who complains about potentially unlawful conduct to the
Commission.
Amend 46 U.S.C. 41305(c) to authorize the Commission to
order double reparations for violations of 46 U.S.C. 41102(c)
concerning detention and demurrage.
Issue a Commission policy statement on retaliation,
attorney fees, and representational complaints.
Revise the Commission's website to: (a) more clearly
distinguish between the processes for providing information to the
Bureau of Enforcement, requesting assistance the Office of Consumer
Affairs and Dispute Resolution Services, and filing a complaint; and
(b) make communications more intuitive for website visitors.
Hold a webinar to explain Commission processes.
Issue an Advanced Notice of Proposed Rulemaking seeking
industry views on whether the Commission should require common carriers
and marine terminal operators to include certain minimum information on
or with demurrage and detention billings and adhere to certain
practices regarding the timing of demurrage and detention billings.
Amend 46 U.S.C. 41109 and 41309 to authorize the
Commission to order refund relief in addition to civil penalties in
enforcement proceedings, focused on demurrage and detention refunds.
Designate an Export Expert in the Office of Consumer
Affairs and Dispute Resolution Services.
Question 2. U.S. agriculture importers, exporters, truckers, and
producers have experienced what appears to be predatory and
unreasonable behavior of foreign-flagged ocean carriers, which has
exacerbated existing delays and congestion concerns, and has gone
largely unchecked, with no sign of abating. I hear from exporters that
perhaps the most egregious action perpetrated by ocean carriers is
their declining to carry U.S. agriculture commodity exports, including
meat and poultry exports, instead choosing to carry empty containers to
Asian markets to fill them with more lucrative consumer goods to export
back to the U.S. Has the FMC seen evidence of these actions by ocean
carriers? If so, what enforcement actions has the FMC taken in
response?
Answer. The Commission is aware of ocean carriers prioritizing the
repositioning of empty containers to countries where imported cargo is
sourced. This behavior by ocean carriers is in response to meeting the
demand of American consumers for goods and American manufacturers for
inputs. While demand globally is relatively flat when compared to 2019,
there has been a demand in the U.S. market for 500,000 new TEUs monthly
from 2019 levels. The first half of 2021 saw more than 9,500,000 TEUs
of cargo enter the United States, the highest volume on record for
containerized trade. In terms of equipment management, the ocean
carriers are responding to the dynamics of the marketplace and are
managing their equipment to deliver the cargo purchased by American
consumers, manufacturers, and suppliers.
Ocean carriers are moving containerized agricultural exports from
the United States in greater volumes. The most recent data available
published by PIERS, a database reporting import and export statistics,
shows that agricultural export volumes for January through April 2021
had increased by 6% compared to the same period last year (1,134,595
TEUs in 2021 vs. 1,067,218 TEUs in 2020). The U.S. Department of
Agriculture reported in its Outlook for U.S. Agricultural Trade,
published in May, that U.S. agricultural exports in fiscal year 2021
are projected to grow by $7 billion for a total of $164 billion. PIERS
data shows that containerized U.S. agricultural exports rose by 9.4% in
2020.
Preventing the repositioning of equipment may further exacerbate
problems with the supply chain and the movement of goods by ocean
carriers. We are engaging ocean carriers and intermodal equipment
providers to determine if there are initiatives that might provide more
containers and chassis to agricultural export shippers. One ocean
carrier has proposed that re-establishing inland container terminals
would respond to exporters' need for containers. Other parties have
suggested that a new model of collapsible containers be particularly
well suited to supporting agricultural exporters; when folded, one
chassis can move multiple units to inland locations for lower costs.
Question 3. If current ocean carrier practices persist, and are not
subject to oversight and enforcement, then the U.S. meat and poultry
industry, its workers, and the related industries it supports will
struggle to access vital markets that have been cultivated over
decades. This is particularly concerning since Asia accounts for a
significant portion of U.S. meat and poultry trade, with China, Japan,
and Korea among the top markets for both beef and pork annually. While
ocean carriers shirk, or outright ignore, FMC's guidance and authority,
the U.S.'s foreign competitors stand ready to fill the void left by
American meat exports unable to depart U.S. ports. How long will FMC
allow these practices to continue? What specifically will FMC do to
ensure the timely shipment of product in accordance with one of the
stated purposes of the Ocean Shipping Reform Act of 1984: ``to promote
the growth and development of U.S. exports through competitive and
efficient ocean transportation''?
Answer. The Federal Maritime Commission is aggressively pursuing
compliance with the 2020 rule addressing detention and demurrage
practices. Compliance with the rule is not optional and the Commission
is working to make certain ocean carriers and marine terminal operators
understand their responsibilities in terms of how and when these
charges should be levied against shippers and truckers.
There is no question that COVID-19 impeded the ability of the FMC
to do the field work and outreach necessary to achieve compliance. Now
that vaccination rates have reached levels where travel and meetings
are again permissible, the in-person efforts necessary to move forward
with achieving wider compliance with detention and demurrage
requirements are beginning.
The Vessel-Operating Common Carrier Audit Program established by
Chairman Daniel Maffei on July 19, 2021, is an important step in
getting to compliance. The Audit Team leader, who serves as the
Commission's Managing Director, has already contacted each of the nine
top ocean carriers by market share to initiate the process. The Audit
Team has set an aggressive schedule for the data it wants gathered for
review. Analysis of the responses will inform the Commission on what
next steps it needs to take to further its goal of compliance regarding
detention and demurrage practices.
It is important to note that the United States is the first country
in the world to attack demurrage and detention charges of U.S. and
foreign ocean carriers engaged in international commerce. The
Commission's approach is responsive to complaints from shippers heard
by the Commission. We are determined to enforce the law concerning
demurrage and detention charges and will continue to use all our
available resources to support that result. Like any other regulatory
or law enforcement agency, we need complete, factual allegations of
Shipping Act violations to pursue an investigation.
Question 4. How specifically will FMC support U.S. pork and other
exporters whose product, through no fault of their own, is left
stranded at U.S. ports? What specific enforcement actions can FMC take
to promote the efficient, timely transport of these products?
Answer. The Federal Maritime Commission is committed to enforcing
the law and its regulations.
The lack of actionable, factual allegations of violations of the
Shipping Act from shippers impedes the ability of the Commission to
take enforcement action.
If the Commission can identify through its own efforts ocean
carrier behavior that violates the law, the Agency will act.
The Commission is frustrated by the state of the freight delivery
system, but to date, there is no action to pursue that would provide
the outcomes all of us desire that you so well stated. There are other,
non-enforcement actions and priorities that we should not ignore as
being beneficial.
Achieving change in the detention and demurrage practices of ocean
carriers and marine terminal operators would unquestionably bring
relief to exporters who are faced with bills for cargo stranded at a
port. As I have outlined in other responses above, the Commission is
taking action toward that goal.
Questions from Hon. John Garamendi to Frank Ponce De Leon, Coast
Committeeman, Coast Longshore Division, International Longshore and
Warehouse Union
Question 1. Does ILWU agree that trade should be reciprocal,
providing both foreign imports access to the American market and U.S.
exporters access to foreign markets? In other words, does the ILWU have
a position on foreign-owned ocean carriers sending empty containers
back to the Asia-Pacific?
Answer. The ILWU has long supported fair trade between the United
States and its trading partners. This includes equal access to
international markets. We believe maintaining the capacity, efficiency
and reliability of America's ports is critical to growing our economy
through fair trade and to also maximizing market access for our
exports.
[all]