Ocean shipping issues are in the spotlight in letters to the White House

Myriad ocean shipping supply chain issues continue to remain front and center in supply chain circles on various fronts, which were highlighted this week by various federal government and industry bodies.

Going back to the outset of the COVID-19 pandemic in March 2020, one major resultant issue centered on the issue of a shortage of ocean containers, which have been in short supply, for a whole host of reasons. That was the impetus for a hearing hosted today by the United States House Committee on Transportation, entitled “Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain.”

While the reasons for the ongoing lack of containers are well-documented, they stem from containers being stuck at anchorage outside United States ports that are not being returned to Asia, coupled with Asian manufacturers lacking any containers to send back to the United States West Coast, where there have been delays, as shippers are paying top dollar to secure the needed container capacity, which is exacerbating the situation, in terms of getting goods out of Asia.

House Committee on Transportation and Infrastructure Chair Peter DeFazio (D-OR) said in his opening remarks at today’s hearing that the average cost of transporting a shipping container has increased nearly 195% over the past year.

“Concurrently, consumer demand for foreign made imports has grown exponentially, and ocean carriers are struggling to keep up,” he said. “This asymmetric demand for imports means that it is more profitable for shippers to carry high-value goods from overseas rather than lower value domestic exports.”

DeFazio added that last Congress, the House T&I Subcommittee on Coast Guard and Maritime Transportation held a hearing on the maritime supply chain and how to rebuild it following the COVID-19 pandemic.

“At the time, Chinese factories were shut down, and shipping was at an all-time low,” he said. “We heard from witnesses that not only foreshadowed the impending strains on the supply chain that we’re currently seeing, but also compelled action to help the industry emerge even stronger. As we know, that didn’t happen, and what we see today is the result of inaction. While nothing could prevent the surge in consumer demand for foreign made products, investments in the Maritime Transportation System Emergency Relief Authority could have helped ports and marine terminals respond to the impacts of COVID-19.”

The committee’s hearing is not alone in voicing concerns regarding the myriad supply chain issues.

Earlier this week, National Retail Federation (NRF) President & CEO Matthew Shay penned a letter to President Biden in which he requested a meeting with several of his organization’s retail leaders to discuss the current supply chain challenged that continue to impact prolonged economic recovery.

“The supply chain disruption issues, especially the congestion affecting our key maritime ports, are causing significant challenges for America’s retailers,” wrote Shay. “The congestion issues have not only added days and weeks to our supply chains but have led to inventory shortages impacting our ability to serve our customers. In addition, these delays have added significant transportation and warehousing costs for retailers. In many instances retailers will absorb these costs and not pass them along to consumers. However, many smaller retailers may have no choice but to pass along these costs, especially as they face other challenges with reopening their businesses.”

Shay also shared key results from a recent member survey NRF conducted about port congestion, including:

• Over 97% of retailers surveyed say they have been impacted by port and shipping delays;
• The most common challenges respondents mentioned were U.S. port congestion, lack of carrier capacity and lack of available containers overseas;
• More than two-thirds (70%) of respondents say they have had to add 2-3 weeks to their supply chains;
• All respondents said their costs have increased with a majority (75%) having had to pass along some of the costs to consumers; and
• Nearly all (85%) of those surveyed say they are experiencing inventory shortages because of the ongoing supply chain disruptions

The top NRF executive concluded his letter to President Biden by stating that as the White House undergoes supply chain reviews for critical sectors, including transportation, addressing the current state of U.S. ports and freight movement needs to be a critical component of the strategy.

“As trade continues to grow, we need to make sure we have truly 21st century ports and freight movement,” he wrote. “This certainly is central to the administration’s Build Back Better approach.”

The American Apparel & Footwear Association (AAFA) penned its own letter to President Biden, with the subject: U.S. Government Must Address Shipping Crisis ASAP.

AAFA President Steve Lamar did not mince words in calling on President Biden to immediately address the shipping crisis, explaining that without immediate action, this dire situation will derail the nation’s fragile economic recovery.

“The shipping crisis began in summer 2020, which led to shortages and delays during the critical holiday shopping season,” he wrote. “This year, instead of getting better, the shipping crisis has only gotten worse— leaving critical industries without key inputs, creating substantial delays that threaten to leave store shelves empty, and imposing significant new costs on companies at a time when they can least afford it. While many hoped the crisis would go away this spring, a confluence of complicated and compounding factors leaves many experts predicting that, without action, the crisis will not abate until 2022, or beyond. This threatens back-to-school, another holiday season, and certainly stalls our economic recovery. The crisis is drastically impacting the supply chain via: lack of access to empty containers; labor shortages at ports caused by surges in COVID cases; carriers charging shippers 4-5 times contract rates and then still “rolling” them off ships; lack of available chassis to move containers; restrictions on truckers on when they can access containers at ports; limits on truckers’ ability to bring in empty containers and take out full containers (so called “dual transactions”); lack of capacity at ports to handle ever larger ships; lack of air cargo capacity; unreasonable and arbitrary fees on shippers at all points in the shipping process; and more.”

Lamar added that while some issues impacting supply chain throughput can be addressed through infrastructure investment, the need for both short-term and long-term solutions remains intact, noting that the aggressive enforcement of existing rules and regulations is critical, as is ending the punitive tariffs on China and renewing the Generalized System of Preferences program and the Miscellaneous Tariff Bill.

AAPA’s take: Chris Connor, President and CEO of the American Association of Port Authorities (AAPA), told LM that even through there are some signs of port congestion abating, there are indications it will continue into the summer.

“I would argue that in the past these kinds of congestion issues have been single event driven,” he said. “For example, the insolvency of Hanjin a few years back, which created a massive, albeit short-term, backlog. When these single events are over, things tend to smooth out. I am not so sure that is going to be the case this time around. The buying habits of consumers have significantly changed, and it exposes some challenges that we have, and a lot of it comes back to [needed] investment in port infrastructure.”