World Shipping Council Criticizes Ocean Shipping Reform Act in Senate Hearing

John Butler, CEO of the World Shipping Council, said ocean carriers are getting mixed messages from the White House, which is encouraging carriers and ports to rev up their leverage on buyers and freight forwarders so that they pick up their cargo promptly, and from Congress. The House of Representatives is expected to vote on an Ocean Shipping Reform Act that would give the Federal Maritime Commission more authority to punish players for unreasonable demurrage charges -- the same fees used as leverage.

Butler said the administration also has been telling carriers "we must put empty containers on ships to clear the ports," but the bill under consideration would require that carriers load all export containers "before we can load empties."

Butler said that if carriers had to wait for export containers, it would slow the return trip to Asia, which would then add to the congestion that is caused by the surge in demand for imports from Asia. "When the system is overloaded it affects importers and exporters," he said, as there are no import ships and export ships, just an endless loop of trips crossing the oceans. "There is no legislative silver bullet on this but it is possible to make the situation worse," he said.

In Butler's written testimony for the Senate Commerce Subcommittee on Surface Transportation, Maritime, Freight, and Ports, he noted that only a small proportion of agricultural exports go on container ships, and that the total volume of containerized agricultural cargo is up compared with both last year and before the pandemic, with nearly 33 million metric tons exported from October 2020 through June 2021.

But senators at the hearing were quite sympathetic to the agricultural exporter on the panel, Preferred Popcorn CEO Norman Krug, who said that a shipment to Tokyo that took 37 days to travel from Nebraska before the pandemic, after a two-week wait for space on a ship, now takes 60 to 90 days for the transportation leg, and two to three months to get a spot on a ship.

Krug said he couldn't find spots at all for $10 million worth of product he wanted to export. He said his freight costs are up 30%, not counting additional costs for storing popcorn longer. He said he's also having debates with his customers about who's going to pick up demurrage costs.

Sen. Roger Wicker, R-Miss., asked Butler if the dwell time penalties that West Coast ports have threatened to levy are "being charged to companies who are unable to pick up through no fault of their own." Butler said they are helpful, "because it does provide an incentive to keep product moving. Everyone's trying to optimize their little piece of the supply chain." He said a buyer's warehouse is full, "if you can leave it at the port for free, you're going to leave it at the port for free, even if it gums up the system."

Several witnesses said a shortage of available chassis and truckers is causing part of the congestion. Some loaded semi-trucks are parked in lots as they're waiting for warehouse availability; there are also hefty antidumping and Section 301 duties on Chinese chassis, which can either discourage their import or raise costs.

Sen. Tammy Baldwin, D-Wis., whose state is home to one of the major domestic chassis manufacturers, said that a shortage of shipping containers, chassis and truck trailers have all contributed to the problem, and she said that the decline of our manufacturing capacity has contributed to that. She said she's working to get her Supply Chain Resiliency Act into the Senate version of Build Back Better. The House version (see 2111190045) would give the Commerce Department $5 billion to support supply chain resiliency, some of which could be payments to manufacturers.

She asked AFL-CIO President of Transportation Trades Department Greg Regan how much emphasis Congress should put on buying American products to help the supply chain problems. "The fact that we are so reliant on foreign products, including chassis, made us much more susceptible to failing," he said.

Sen. John Thune, R-S.D., told Butler that he and Sen. Amy Klobuchar, D-Minn., would be co-sponsoring a Senate companion bill to the Ocean Shipping Reform Act soon, which he said would provide the FMC with "clear authority to intervene" when unfair actions are discovered.

Butler replied that while better dispute mechanisms would benefit everybody, there are other provisions in the bill that he thinks need work, such as on certification. He said the FMC already has "a lot of authority."

But Klobuchar said that agricultural exports have been particularly hard hit by the increased costs and challenge of getting space on ships. "We have to take action here," she said.

Sen. Rick Scott, R-Fla., complained that the hearings should bring the commerce secretary and transportation secretary to account for what they've done to fix the problem. He argued that they do nothing but appear on TV, and he said he will refuse to allow any votes on nominees for posts at the two agencies until they testify.

But Butler told Scott that those departments cannot fix the bottlenecks. "There is a limited number of things the government can do to unwind this situation," he said. "In terms of the short-term situation that we’re facing today… it’s going to be commercial actors, the folks that run that supply chain that unwind that thing."