Congestion at US Ports: Missed Chances & Remedy

As people were confined indoors due to the spread of COVID-19, their spending on electronics and apparel increased. The unprecedented surge in imports overwhelmed the US supply chain ecosystem. As US imports rose substantially, exporters lost billions of dollars in sales. The US Congress has passed bipartisan legislation to resolve the supply chain chaos.

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The United States supply chain has a new normal – congestion at ports combined with historic levels of imports. When essential goods like baby formula, medical equipment, and tech hardware do not reach consumers in time, supply chain woes no longer remain a coffee table conversation topic. 

Round-the-clock operations at ports and targeted legislative action from the US Congress have not been able to decongest the supply chain yet. There has been marginal improvement since February, when the waiting time at US ports had peaked. 

A vessel at rest is not making money. Vessels are either drifting, slow steaming or waiting at ports for way too long. Trade is a reliable indicator of a country’s economic health. There have been many instances in the past couple of years, where shipping lines have transported empty containers back to Asia. Denial of containers to American farmers resulted in loss of billions of dollars in sales. 

From a geographic perspective, the United States’ two largest trading partners are based in North America (Canada and Mexico). Meanwhile, six of the top 10 are based in Asia. 

US Ports: A Choice Between Bad and Worse

As per data available from vessel tracking websites, the Port of Oakland (California) tops the list of congestion with vessels taking six days to unload and load. Import containers are remaining almost 11 days in the port before they are transported. The Port of Los Angeles (also in California) is the second highest in wait times, clocking in almost 12 days for containers to leave the port and five and a half days for vessels to be processed. 

As congestion created problems on the West Coast, flow of goods at East Coast and Gulf ports increased. The Port of New York and New Jersey has greatly benefited from this trend. The busy winter and holiday season is slated to witness unpredictable demand due to the Russia-Ukraine war, inflation, semiconductor shortages and labor issues. Supply and lead times also will remain unpredictable. 

Some of the other challenges for the US supply chain ecosystem in the coming months will be the difficulty to get hold of chassis and intermodal reliability. The last thing ports in the US need is a strike by dockworkers. Importers are mindful of the mess from last year and have begun procurement ahead of the normal schedule.  

The only silver lining in all this chaos is that business executives across the US are aware of the problem and are trying their best to resolve it. 

OSRA 2022: A Step in the Right Direction

Agricultural exports from the US have been hit hard by increased costs and transportation challenges. Over the last two years, agricultural exporters have lost 22 per cent of sales due to delays in ocean shipping. 

Meanwhile, ocean carriers have reported record profits of $150 billion in 2021 from the increased demand for imported goods and higher prices for container shipments. 

The Ocean Shipping Reform Act 2022 (OSRA) aims to level the playing field for American exporters and importers by providing the Federal Maritime Commission (FMC) the tools it needs to improve oversight over international ocean carriers and crack down on rising shipping fees facing consumers.  

OSRA aims to do the following:
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• Authorize the FMC to self-initiate investigations of ocean common carriers’ business practices and apply enforcement measures, as appropriate. 
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• Prohibit ocean carriers from declining opportunities for US exports unreasonably. 
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• Shift burden of proof regarding the reasonableness of “demurrage and detention” charges from the invoiced party to the ocean carrier that issues the charge. 
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• Require ocean carriers or marine terminal operators to include invoice information that any late fees—known in maritime parlance as “demurrage and detention” charges—comply with federal regulations or face penalties. 
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• Improve transparency on US agricultural and other exports by requiring ocean common carriers to report to the FMC how many empty containers they are transporting. 
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• Improve chassis management by authorizing the Bureau of Transportation Statistics to collect data on dwell times for chassis and including a National Academy of Sciences study on best practices of chassis management. 

During the COVID-19 pandemic, American consumers shifted to buying goods online. The resulting port and intermodal congestion left exporters, including American farmers, struggling to get their products to global markets because of unpredictable sailings, ocean carriers denying American cargo, and skyrocketing freight costs.