Ocean Carriers Rejecting U.S. Ag Exports

Mar. 23, 2021
By: Chaney A. Finn

The large import surge we discussed recently has caused ocean carriers to return empty containers to Asia to more quickly load them with goods in Asia. This has resulted in some carriers rejecting U.S. agricultural export shipments. This rejection avoids having the containers move inland for weeks at a time. In response, over 100 members of Congress signed a March 9, 2021 letter to the Federal Maritime Commission (FMC) asking it to investigate reported discriminatory practices and take appropriate enforcement actions if appropriate.

The letter outlined the effect this is having on the agricultural industry, pointing out that 20% of U.S. agricultural production is exported. Exporters incur additional costs as carriers are refusing to route the containers inland for pickup, leaving only higher cost modes of transportation available, or a several week delay in receiving a container. Exporters often resort to freezing the products to keep from spoiling in effort to mitigate longer storage time, ultimately decreasing the value of the product. Agriculture, food, and related industries contributed $1.109 trillion to the U.S. GDP in 2019, a 5.2-percent share, according to the USDA, providing almost 11% of U.S. employment. The Congressional letter also states that reaching foreign markets is essential to American agricultural producers and has urged the FMC to provide monthly updates until the matter is resolved.

CNBC, verified by economic and transportation consulting firm Martin Associates, estimates the value lost from this bottleneck is $632 million in October and November of 2020. This is calculated by the combined 177,398 container deficit between the ports of LA/Long beach and New York/New Jersey at the average cost of $3,552 per twenty-foot equivalent unit (TEU). $1.1 billion is the estimated deficit value from July to November 2020. “The reason for this is the Chinese are being so aggressive about trying to get empty containers back ... that it’s hard to get a container for U.S. exporters.” Mark Yeager Redwood Logistics CEO states. Analysts identified the increased ratio of empty export containers to total exports began as early as June 2020.

The FMC is the independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer. Information demand orders issued by the FMC under Commissioner Rebecca F. Dye targets marine terminal operators and ocean carriers operating in an alliance and calling the Port of Los Angeles, the Port of Long Beach, or the Port of New York & New Jersey. Unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing, or delivering property is prohibited under the US Shipping Act 46 USC 41102(c).

In March 2020, the FMC launched a ‘Fact Finding No. 29’ investigation to identify operational solutions to cargo delivery system challenges related to the COVID-19 pandemic. The order convened teams of industry leaders and members representative of the supply chain to develop process innovations that would enhance supply chain reliability and resilience. Commissioner Rebecca F. Dye has been designated as the Fact-Finding Officer, granting her full authority to perform such duties as may be necessary in accordance with U.S. law and Commission regulations. This investigation was expanded in November 2020 to include detention and demurrage, container return, and container availability for U.S. exports. Commissioner Dye stated “The time has come to resolve the most serious impediments to port performance.”