On August 10, 2021, Rep. John Garamendi (D-CA) introduced the Ocean Shipping Reform Act of 2021 to move containers clogged in ports off the Pacific Ocean onto dry land.
To gain traction in decongesting these ports, agricultural industry leaders are sharing experiences and offering suggestions for imports and exports.
Import Dilemma
AgriTalk’s Chip Flory and Davis Michaelson discussed supply chain issues with Ken Ericksen, senior vice president of client advisory and development for energy and transportation at IHS Markit, earlier this week.
When asked whether moving ships away from West Coast would resolve the clogged port issue, Ericksen says it would only solve one piece of the puzzle.
“Other ports have terminals, cranes and capabilities, but no chassis to put those containers on,” says Ericksen. “They don’t have chassis because there are regulations around importing some of those, which we’re hoping to see loosen up.”
Upticks in shipments due to COVID-19 has caused an unexpected “tidal wave” totaling 2 million loaded containers coming off ships over the past 15 months. Ericksen says, “from 2015 to 2019, only six times did we exceed two million loaded containers.”
Governor Gavin Newsom (D-CA) has asked California’s Department of Transportation planners to find ways to expedite opening container depos and landing areas.
According to Ericksen, “Newsom is recognizing if we can’t move anything through, our nation’s economy is in trouble.” He says heat from constituents is helping push Newsom along, as approaching holidays may “put Christmas on his back if he doesn’t do something” about the cargo.
Export Dilemma
Mike Durkin, President and CEO of Leprino Foods Company--the nation’s largest purchaser of milk--stepped up to the microphone at the House Agriculture Committee hearing on Wednesday to share how the current supply chain challenges have hindered his company’s exports.
Freight rates from the U.S. to Asia now sitting 15 times lower than rates from Asia to the U.S., creating an incentive for ships to leave U.S. ports with empty containers as the unload time at U.S. ports costs time and money. For this reason, “70% of containers return to Asia empty,” Durkin says.
According to the Ports of Los Angeles, Long Beach, Oakland, U.S. agricultural exports out of California are currently down 75% in September 2021 compared to their 2018-2020 averages.
Durkin says 99% of Leprino’s ocean shipments have been cancelled and re-booked. Of those, 1% of exports that made their way to water, unprecedented freight, storage, and demurrage fees have emerged. He says, on one account, a single freight bill cost over $25,000, resulting in costs of “$25 million in 2021” to Leprino alone.
The bi-partisan Ocean Shipping Reform Act of 2021 was enacted to help address these traffic issues. However, Durkin says more is needed from our government in operating 24/7 and labor and training, “in addition to prohibiting foreign carriers from leaving the U.S. empty.”
Solving the Dilemmas
In his opening statements, House Agriculture Committee’s Republican Leader Glenn Thompson said he believes the only way out of this “ruinous crisis” would be for the White House to work alongside agriculturalists, as “transportation and shipping delays have serious consequences on farmers ability to export product—a void being filled by foreign competitors.”
The International Dairy Foods Association also rang-in at the House Agriculture Committee, sharing their “brainstorming a better way” points they think will resolve the export issues:
1. Pass the Ocean Shipping Reform Act of 2021
a. Eliminates unruly detention and demurrage charges and export cargo bookings.
2. Pass the Infrastructure Investment and Jobs Act
a. Emphasizing the need for 18- to 20-year-old’s to be able to drive out-of-state with their qualified commercial driver’s license (CDL).
3. Increase Truck Weight Limits
a. Gross vehicle weight limit increase from 80,000 lbs. to 91,000 lbs. with a sixth axle.
