Ag exporters demand action from Buttigieg on container shortage

A group of more than 300 agricultural groups sent a letter April 27 to Secretary of Transportation Pete Buttigieg demanding immediate action on a shortage of containers for exporting ag products that is worsening, as a growing United States hunger for imports accelerates an imbalance between exports and imports.

The imbalance has resulted in containerized ag exports products not being able to find containers as surging imports of more lucrative consumer goods make ocean carriers more willing to send empties back to Asia so as to carry more profitable. containers full of consumer goods to the U.S. The letter claims the problem has already cost U.S. ag exporters $1.5 billion in “lost” exports.

The groups signing the letter included the Agriculture Transportation Coalition, ADM, AgriWest, and state farm bureaus, as well as ag organizations representing growers of virtually every ag product including grains, dairy products, seeds, produce and pulses.

Broader export-import imbalance

The fundamental source of the container shortage is the imbalance between U.S. import and export demand. That’s an issue that is expected to get much worse this summer, as the expected economic recovery from the COVID-19 lockdown accelerates. Demand for consumer goods that contracted or plateaued during the lockdown is soaring now.

The specific problems of ag exporters have been overlaid and exacerbated by a broader import-export imbalance affecting all products. A survey released April 1 by the National Retail Federation showed that 98% of retail respondents have been affected by delays at the ports or other shipping delays, with problems throughout the supply chain starting in supplier countries. Retailers said congestion at the ports has added at least six days to their supply chains; more than half said it is adding at least three weeks. More than two-thirds said shipping costs have gone up. Since the beginning of 2021, as imports ratcheted up, as many as 30 massive container ships could be seen at anchor in California’s San Pedro Bay, waiting to dock at the Port of Los Angeles or the Port of Long Beach, which together handle half of U.S. imports from Asia.

About a quarter (27%) are using other West Coast ports to avoid backed-up Los Angeles and Long Beach, and 35% are using East Coast ports. To add to the congestion, truck drivers are still in short supply and some container yards are overwhelmed. It can take much longer to retrieve a single container from a yard than it did just a few months ago. Some reports allege that container yards are charging illegal and off-the-books “surcharges” to guarantee movement of particular containers as drayage drivers spend hours in line waiting for container access.

Carrier consolidation

Part of the problem comes from the global consolidation among ocean carriers. “The last three decades in the ocean shipping industry have brought consolidation to a sector that once had dozens of carriers,” the letter points out. The consolidating became more acute after the 2007 recession, to the point that global container shipping is now effectively cartelized. “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,” the letter continues.

None of the major container carriers are headquartered in the U.S., and they all belong to shipping alliances to coordinate container and route allocation.

Detention and demurrage

Ag exporters may have little ability to influence global trade imbalances. But they hope to get immediate relief on detention and demurrage fees. The two terms are sometimes used interchangeably, but they are not quite the same thing. Briefly, demurrage fees are charged by a shipping line to the handlers of a full container beyond the dates specified for its loading. Detention fees are charged when customers use shippers’ equipment beyond a “free time” specified in the shipping contract. Both types of fees are negative incentives to merchants to ensure that containers move within a specified window of time and deter customers from using docks as free storage.

But when customers see their full containers left on the docks due to factors beyond their control, being charged demurrage on top of that can feel like insult added to injury. That’s why the letter to Buttigieg refers to ocean carriers not only declining to ship U.S. commodities but “imposing hundreds of millions of dollars of punitive charges already determined to be unreasonable by the Federal Maritime Commission.”

According to the letter, “The [container shortage] 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 window –a practice that the FMC has found to be unreasonable.” Carriers say they are cooperating with the FMC, which has been investigating since last year whether carriers refusing containers violates provisions of the 1984 U.S. Shipping Act.

The investigation is taking a long time because some of the language in the act is ambiguous. Some fed-up exporters are saying the act needs to be brought up to date by Congress.

But for now, the letter is asking that the Department of Transportation “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.”

David Murray can be reached at [email protected].