Statement of Commissioners Maffei and Sola: Op-Ed, Supply Chain Dive
Commissioners Maffei and Sola released the below op-ed, published by Supply Chain Dive on March 2, 2021. In this piece, the Commissioners urged cooperation to find solutions to the current global congestion crisis.
Opinion: Global Cooperation Can Resolve Shipping Industry Woes
The word “unprecedented” has almost lost its meaning as a result of the COVID-19 pandemic, but yet, it is still the best way to describe conditions in the ocean container shipping industry. In the past year, we have seen a wild swing from a record-number of blank sailings (cancellations) in March 2020 to a post-peak season surge in volume that has reached almost unsustainable levels. As recent reporting from CNBC and others has illustrated, one of the most devastating consequences of the instability is the disruption of United States agricultural exports.
U.S. companies are facing limited access to containers and space on vessels to ship exports abroad. Faced with paying high premiums that eliminate profit and the risks of loads not getting to customers on time, agriculture exporters, most notably those in America’s heartland, are struggling.
However, U.S. exporters are not the only ones in this position. Container shortages and export difficulties are an issue across the globe. The European Shippers Council recently appealed to the European Commission for relief; Australian exporters are “taking extreme measures” to get products to market in a reasonable time; and seafood exporters in Southeast Asia are facing cost increases between 145 and 276 percent for exports to Europe.
Although container supply generally kept up with container port handling in 2020, containers are not where they need to be. Reporting shows containers are stuck in depots for more than 30 percent longer than usual, even in the places where they are needed most. As a result, carriers are willing to ship empty containers back to China, in order to avoid the time it takes for the containers to be refilled with exports and the downtime for exports to be unloaded and the containers refilled upon their arrival in China.
There is not a single cause for the difficulties being felt around the world, but one of the major drivers is the congestion at ports around the world. Factory closures and blank sailings in early 2020, followed by a rapid rebound as consumer spending patterns recalibrated, then logistics difficulties caused by warehouse space shortages and workforce disruptions have resulted in backups at ports everywhere.
In order to support better cargo fluidity around the world, but particularly for United States exporters, all industry participants must work together. Every participant in the supply chain must work together to get through this challenging time, and as regulators, we must also work with our counterparts across the globe to find solutions.
The most obvious answer to a container shortage is to manufacture more containers. Most containers are made in China, so we were pleased to see the Chinese government encourage an increase in container manufacturing in recent months and investment in containers increasing. We have, however, seen some reporting that indicates this encouragement may not have been heeded, and we hope that is not the case. Regardless, containers take time to build, and furthermore, simply injecting more boxes into the system will not solve the problem unless other bottlenecks are also addressed.
Unwinding the congestion at ports around the world is complicated. Every participant has a theory as to who is to blame, but the truth is that there is no one party at fault. Everyone is responsible, but no one is to blame. If we, as a Republican and a Democrat, can cooperate on this issue in such divisive times, certainly others with diverse interests should be able to do so as well. We therefore urge industry stakeholders to collaborate to find mutually beneficial solutions both for the current crisis, and to prevent something this disruptive from happening again. We must learn from this situation and find ways to prevent similar conditions in future times of disruption.
Parochially, as a regulatory authority, the FMC can contribute by increasing monitoring and enforcement with an eye toward protecting the public from those who attempt to exacerbate and profit from the current situation. Earlier this month, the FMC announced that Commissioner Rebecca Dye, in connection with her Fact-Finding 29 Investigation, will issue information demand orders to ocean carriers and marine terminal operators to determine if legal obligations related to detention and demurrage, container return, and container availability for exporters practices are being met. Information received from parties receiving demands may be used as a basis for hearings, Commission enforcement action or further rulemaking. In addition, the FMC can also attempt to guide, advise, and bring together the various parties with their diverse interests toward the common goal of a fluid and efficient supply chain.
But one of the best ways we can help fix the problem is by collaborating with our peers in China and the European Union. Global solutions are the only way to make a difference when addressing a worldwide phenomenon. As two individual Commissioners, we look forward to working together within the FMC and with our peers around the world to find immediate and long-term solutions that work for everyone.
Daniel B. Maffei and Louis E. Sola are Commissioners with the U.S. Federal Maritime Commission. The thoughts and comments expressed here are their own and do not necessarily represent the position of the Commission.