How We End the Shipping Crisis
Last month, White House staff claimed that the worst of our ocean shipping crisis was behind us and that the largest bottlenecks at America’s ports were no more. Citing the improved inventories of big box stores like Walmart, some prematurely claimed victory over a problem that is still driving many small businesses into the ground.
As the president of the National Association of Chemical Distributors (NACD), a trade association representing smaller companies that import vital chemical ingredients into the United States, I’ve seen a different picture. In fact, our current ocean shipping crisis has gone from bad to worse. Recent data we collected found that 87% of our members have experienced stock outages, 90% are experiencing an average shipping delay of 11 days or longer, and 83% reported lost revenue due to shipping delays or the inability to book transit.
And that is just NACD members. The most recent weekly numbers from Freightos show that transit times from China, one of the country’s most important import sources of chemical products, have continued to rise and hit a record 80 days in December. This is up from 58 days in January 2021, and just 45 days prior to the COVID-19 shutdowns. The reason transit times keep rising is almost solely due to congestion at California’s ports. While shipping rates have stabilized, the Asia-U.S. West Coast prices for a 40-foot container ($14,572) is 169% higher than the same time last year and the Asia-U.S. East Coast price ($17,476) is 190% higher than rates for this week last year.
For a small company, a late shipment or the resulting lost business can be all it takes to shut off the lights for good. NACD members, who on average employ between 20 and 30 people, cannot afford to charter entire ships or fly-in cargo, as many of these larger companies have resorted to over the pandemic. For smaller companies, success lies in their ability to book cargo on overcrowded vessels that might not even honor their contracts.
As ocean carriers price gouge American businesses and jeopardize the import of vital chemicals used in everything from PPE to vaccines and municipal water treatment, our communities become less secure and our economy becomes weaker. It’s on all of us to find a solution to the current ocean shipping crisis, addressing the needs of everyone in the supply chain.
Since the start of the pandemic, chemical distributors have been deeply involved in efforts to combat this crisis. We’ve worked closely with the Federal Maritime Commission (FMC), shared real-time data to give them insight into the challenges our industry is facing, and are actively participating in the Commission’s newly-formed National Shipper Advisory Committee. But at the end of the day, we need real legislative reform to alleviate the current crisis and help ensure it doesn’t happen again.
Unfair ocean shipping practices are the reason we’re even in this predicament. Over the past several months, ocean carriers have price-gouged shippers and failed to honor common carrier standards in transporting hazardous cargo. The Ocean Shipping Reform Act of 2021, which recently passed in the House, will go far in strengthening the FMC’s current enforcement abilities, expanding its authority to ensure industry-wide compliance with federal law, and establishing a streamlined process for addressing demurrage and detention complaints.
Coupled with robust infrastructure investments in our nation’s ports and a renewed commitment to supporting the U.S. manufacturing base for shipping containers and chassis, this legislation can play a vital role in alleviating intermodal freight bottlenecks. To secure the rest of the supply chain, however, we must also turn our attention to our nation’s trucking and rail systems.
Our nation has been facing a severe shortage of commercial truck drivers for some time now. The current crisis we find ourselves in has only exacerbated that shortage and further impacted our members’ ability to provide on-time product delivery. As many drivers retire, they are not being replaced in the workforce. A prime reason for this is that commercial drivers are not permitted to move goods across state lines until they turn 21. This interstate restriction is preventing the next generation of truck drivers from entering the workforce and hurting businesses that are bound by contract to deliver products on time. The Federal Motor Carrier Safety Administration recently announced the launch of a pilot program to allow persons ages 18, 19, and 20 to operate commercial motor vehicles in interstate commerce. This is a good start.
Beyond trucking, our nation’s railroads are also desperately in need of reform. Similar to ocean carriers, Class I railroads operate as near monopolies and can charge whatever rates they want to transport cargo. Greater freight rail competition and a strong and engaged Surface Transportation Board (STB) that can review and evaluate commercial fairness and reciprocity issues such as demurrage and accessorial charges can improve the efficiency and effectiveness of our nation’s freight rail system.
While the challenges our supply chain is facing may be daunting, they are not insurmountable. Working together, the private sector and government can find common ground on the right playbook to alleviate this crisis and better strengthen our transportation systems for the next one. Our economy depends on it.
Eric R. Byer is president and CEO of the National Association of Chemical Distributors, an association of more than 400 member and Affiliate companies which represent over 85 percent of the chemical distribution capacity in the nation and 90 percent of the industry’s gross revenue.
