Ocean Shipping Carriers: It’s Time to Realign the Interests of Shippers and Ocean Carriers

Ocean Shipping Carriers:

It’s Time to Realign the Interests of Shippers and Ocean Carriers

by DUSTY JOHNSON

When the global pandemic hit our shores in 2020, like a cog in a machine, America’s supply chain quickly came to a halt. Outbreaks at processing plants stymied production, dairy farmers were forced to dump milk, cattle producers slowed growth rates, and pork producers had to cull production.

These were just the shortterm effects.

COVID-19 relief packages bolstered social safety net programs – expanding welfare program eligibility for millions of Americans. Stimulus checks coupled with lockdowns allowed Americans to save more money compared to historical norms, leading to what we’re seeing today: increased spending on goods instead of dining, entertainment, and other services.

Cue the long-term effects. Port backups. Empty shelves. Delayed orders. Workforce shortages. Covid outbreaks. Record-breaking ocean carrier profits. Inflation.

Supply chain delays and port backlogs impact all of us. It does not matter whether you’re a business owner, consumer, or agriculture producer – we’ve all felt the strain.

There’s been a lot of talk and concern about goods coming in, but this supply chain crisis is a two-front battle, with the second being the delays and financial losses American exporters are facing.

While COVID-19 has exacerbated issues with our supply chain, a lot of these issues existed beforehand and have been worsened by outdated policy that encourages bad behavior by ocean carriers.

This bad behavior was brought to the forefront at the peak of the pandemic when the backlog of ships at the port stretched miles long. For context, the 2014 port congestion record was 48 total vessels, while the 2021 backup record was 154 vessels. Import shipping rates from China to the U.S. for forty-foot containers have always been priced higher than containers being exported from the U.S. to China, but now it’s become financially advantageous for ocean shippers to directly cancel export obligations. Spot rates remain near historic highs for container shipping; the boom shows no sign of ending. This unprecedented backlog shifted the way foreign flagged ocean carriers do business. Instead of reloading at American ports to bring U.S. exports across the Pacific – ocean carriers began turning around with their empty containers, leaving U.S. exports stranded.

Supply chain delays and While the largest ocean port backlogs impact all of carriers saw profits more us. It does not matter whether than triple in 2021, in just six months, the U.S. dairy sector you’re a business owner, incurred nearly $1.3 billion consumer, or agriculture in losses due to container availability issues. Valley producer – we’ve all felt Queen Cheese, a South the strain. Dakota dairy exporter, had more than 2 million pounds of sold and ready-to-ship lactose stuck in its warehouse because they couldn’t get an empty container to take it overseas. Just this week, dry pea and lentil processors are having 3050% of their bookings canceled without reason. According to a survey by the Ag Transportation Coalition, agriculture exporters report that 22% of

their export sales are lost because it is not possible to want to do business with American ports, you need to deliver to foreign customers affordably and dependably play by our basic rules. due to supply chain delays. Ag shippers are considering OSRA protects American consumers and producers expensive air freight at massive losses just to maintain from price gouging by foreign carriers and establishes customer relationships built up over decades in markets minimum service standards to ensure best practices. It we fought hard to access. Delays threaten producers’ would also prohibit ocean carriers from unreasonably bottom-line, and even worse, their reputation as a declining shipments of U.S. exports and from slapping reliable trading partner. undeserved fees on our

American consumers exporters. having difficulty accessing More than 360 national, items like toilet paper and China and the foreign flagged state, and local groups, and dishwashers is a problem; American businesses and ocean carriers aren’t playing businesses support OSRA. We were proud to see OSRA agriculture producers not fair, and accountability is pass the House (364-60) in being able to ship millions long overdue. December and be included of dollars in produce, grain, as an amendment to the and meat overseas is a major COMPETES Act with an even financial crisis in the making. stronger vote. This emergency That’s why Congressman John Garamendi (D-CA) and isn’t going away anytime soon – that’s why it’s urgent I teamed up to introduce the Ocean Shipping Reform the Senate passes OSRA expediently. We cannot continue Act (OSRA) early last year. Our bipartisan bill is the to allow foreign entities to crush American profits and first major update of federal global shipping regulations enable lengthy delays any longer. RF since 1998.

China and the foreign flagged ocean carriers aren’t Dusty Johnson represents South Dakota’s at-large playing fair, and accountability is long overdue. If you District in the U.S. House of Representatives.

pepsico.com