Exporters and Industry Representatives Testify at Senate Commerce Hearing on Supply Chain Issues
On Tuesday, December 7, the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Surface Transportation, Maritime, Freight, and Ports held a hearing titled “Uncharted Waters: Challenges Posed by Ocean Shipping Supply Chains.”
This is one of several recent Congressional hearings on supply chain problems. Eno covered the November T&I hearing focused on multimodal nature of the supply chain as well as a June T&I Coast Guard subcommittee hearing with two panels, one with Federal Maritime Commission (FMC) commissioners and another with exporters and shippers.
This hearing was centered around American exporters and delved into the issues they face in dealing with ocean shippers, ports, and landside infrastructure.
- John Butler, CEO, World Shipping Council
- Greg Regan, President of Transportation Trades Department, AFL-CIO
- Paul Doyle, CEO, Coastal Automotive
- Norman Krug, CEO, Preferred Popcorn
In a normal year, said Krug, it would take 37 days to ship a container of popcorn from Nebraska to East Asia. Now, it takes four to five months. On top of this, shipping costs are 30 percent more than normal times. If these problems continue, buyers will start to look to other markets if they cannot get reliable deliveries from American exporters. This is just one of many stories on how the supply chain delays are impacting American exporters.
Exporters and industry professionals laid out a few reasons for the ongoing supply chain problems. According to the panel, the most significant problems lie in the landside infrastructure and operations, including terminals, railroads, trucks, and warehouses. There is simply no more room for containers. When every warehouse is full, there is nowhere to put containers except for them to be left on the port terminals themselves or on empty chassis, complicating the issue. Also, as ports are right next to ocean, they have some of the most expensive commercial real estate locations in the U.S., told Butler. In most cases, they have no room to grow, so they must use the space they have efficiently.
The witnesses offered a range of short-term and long-term solutions to the supply chain issues. In the short-term, finding temporary spaces for containers is essential. Sen. Cynthis Lummis (R-WY) asked about the suitability of using federal property for container storage, and Butler agreed that ports have been looking into every option. Sen. Raphael Warnock (D-GA) told of the successful initiatives he spearheaded between the Biden administration and the Port of Savannah. Through roundtables between ports and small businesses, he secured $8 million to create pop-up container yards, which he said alleviated congestion at the port.
For long-term solutions, all agreed on the need to expand landside capacity, through increased container storage facilities, better intermodal connections for railroads and trucks, and more efficient technology systems to coordinate shipments. However, Butler warned that the suitability of a property for container storage depends on its location, space, multimodal connections, and equipment availability, among other factors. While this removes some of the immediate bottlenecks, it is not a perfect solution. And in the long run, the logistics industry must look to more permanent locations for warehouses or open land.
Butler also shared his views on proposed regulations. He warned about a provision in H.R. 4996, the Ocean Shipping Reform Act of 2021, that would make shippers load all full containers before loading any empties (his concern was that regulations that are too restrictive may make the system worse for everyone). (Ed. Note: Separately, the House passed H.R. 4996 on December 8 by a bipartisan vote of 364 to 60. The bill was then referred to Senate Commerce instead of going straight to the Senate Calendar, which means that the committee will have to vote to report any related legislation before the Senate can act.)
Sen. Mike Lee (R-UT) also asked about the need for more truck chassis, and again Butler contradicted this claim, saying we do not need more chassis per se, but rather the existing chassis need to be used more efficiently.
Another solution pushed by Sen. Jon Tester (D-MT), Sen. Tammy Baldwin (D-WI), and Sen. Peters (D-MI), as well as Doyle and Regan, is to increase domestic manufacturing to lessen the need for foreign-made products that are essential to American exporters. This would decrease shipping costs and hasten the delivery time. Doyle spoke about this in relation to his car part manufacturing business, one that provides the foam for seats and headrests in vehicles. Currently, he imports raw products from Greece with a 12-week lead time (the period between ordering and receiving goods) and sometimes has delays of 29 weeks. By shortening the supply chain, he added, this would make supply networks run more efficiently.
The ideal role of the Federal Maritime Commission (FMC) was mentioned frequently. Amy Klobuchar (D-MN) and Regan agreed that as ocean carriers are making record profits, it is unacceptable that American exporters must pay the price. Hence, Klobuchar, Regan, and Sen. John Thune (R-SD) recommended the FMC investigate this problem and issue regulations based on their findings. Sen. Thune also emphasized the need for the FMC to have a better definition of “unreasonable” demurrage and demurrage charges (an interpretive rule to the Shipping Act gave the FMC power to fine shippers for “unreasonable detention and demurrage fees,” but in June FMC Commissioner Rebecca Dye admitted that no shipper had been fined yet). (Ed. Note: detention and demurrage rules are also a key focus of H.R. 4996.)
A few smaller ideas were also presented, such as investing in better technology so shippers, importers/exporters, port personnel, and railroads and truckers are all in contact and can plan more effectively and make the loading/unloading process most efficient. In addition, some proposed investing in and expanding the capacity of smaller seaports, with Sen. Klobuchar suggesting smaller ports such as in Duluth. For farmers and manufacturers who produce in rural regions far from large transit hubs, these smaller ports could assist them in exporting goods. While this could be possible with increased funding, smaller ports would need to invest in multimodal connections so there is an effective transfer from boat to railroad or truck.
Throughout the hearing, many echoed frustrations on not knowing the specific federal role to help this crisis. While some, such as Sen. Rick Scott (R-FL) criticized the Biden administration and USDOT for not taking action to resolve the supply chain problem, Butler, representing the global line shipping industry, told the Senators that there are a limited number of things that the government can do. While the infrastructure investments are essential, he said, most changes will be made by commercial actors. Even when pressed by Sen. Lummis on if the federal government should have any role in this, Butler said that from an industry standpoint, they “prefer to keep it in-house.” The frustration was palpable as both industry and exporter representatives had few ideas on policy initiatives to help fix the current supply chain bott