Chairs DeFazio, Carbajal Statements from Hearing on the Impacts of Shipping Container Shortages and Increased Demand on the North American Supply Chain

June 15, 2021

Chairs DeFazio, Carbajal Statements from Hearing on the Impacts of Shipping Container Shortages and Increased Demand on the North American Supply Chain

Washington, D.C. - The following are opening remarks, as prepared for delivery, from Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-OR) and Chair of the Subcommittee on Coast Guard and Maritime Transportation Salud Carbajal (D-CA) during today's hearing titled, 'Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain.' Videos of DeFazio and Carbajal's opening statements are here and here. More information on the hearing can be found here.

Chair DeFazio:

Thank you, Chair Carbajal, for holding this important hearing today to focus on delays and disruptions within the maritime supply chain due to the COVID-19 pandemic and its effects on U.S. shippers.

Like many of my colleagues, I've been hearing from constituents about concerns regarding supply chain disruptions and the ongoing shipping delays. These stakeholders range from farmers to retailers to recyclers, all of whom are experiencing delays or even cancelations of everyday deliveries to their consumers.

In fact, one of my constituents, Alexis Jacobson, International Accounts Manager for BOSSCO Trading LLC located in Tangent, Oregon, is testifying on the second panel. I want to thank Ms. Jacobson for joining us for this hearing and sharing her experiences as an agricultural exporter operating on the West Coast. This hearing could not come at a more appropriate time.

The maritime supply chain is critical to America's economy and national security, and that point could not be more evident than it is today. Sometimes it takes a major disruption to highlight vulnerabilities. For years, we've been warned of the fragility of this system, and I've continually pushed for investment in the maritime supply chain to increase productivity and enhance resilience.

The average cost of transporting a shipping container has increased nearly 195 percent over the past year. Concurrently, consumer demand for foreign made imports has grown exponentially, and ocean carriers are struggling to keep up. 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. These conditions are taking a toll on West Coast exporters, including producers of citrus, almonds, walnuts, tomatoes, timber, seed, and hay, just to name a few. And with many agricultural products requiring refrigeration, delays in shipment could spell significant losses.

In my home state of Oregon, the recycling industry exported 283,992 metric tons of product in 2020, worth $176.1 million. And in the U.S., more than 30 percent of the recycled material is exported. Container shortages and rate increases, however, have resulted in a 6.7 percent year-over-year decline in export volume as of February 2021.

Despite more than doubling their productivity over previous years, West Coast ports remain congested with vessels anchored offshore and containers stacking up in marine terminals. This has resulted in delays in the transportation of these goods across the country. In addition, COVID-19 outbreaks earlier this year resulted in labor shortages that we're still recovering from. These delays mean costly penalties that smaller exporters simply cannot pay.

Last Congress, this subcommittee 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. 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.

I've heard from ports, shippers, shipping companies, and labor on potential solutions. I hope this hearing today will provide a productive conversation on the ongoing issues in the supply chain and will also present helpful guidance on a path forward.

Chair Carbajal:

Good morning, and welcome to today's Coast Guard and Maritime Transportation Subcommittee hearing on 'Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain'. Today, we will hear from witnesses who can speak to the unprecedented conditions in the container shipping market. This is an important issue and requires our attention not only to determine the root causes of the problem, but also to hear potential solutions to alleviate the strain on our supply chain and prevent disruptions in the future.

In every sector of international commerce, the COVID-19 pandemic is having long-lasting consequences and is drastically disrupting global and domestic supply chains. The shift to work from home for many Americans resulted in a significant increase in online shopping. A heightened demand for imported consumer goods, manufacturing parts, and commodities produced in Asia coupled with periodic labor shortages due to COVID outbreaks has fueled massive backlogs and price increases in the shipping container market.

The increased flow of goods has primarily been from China to the United States and has resulted in significant port congestion, especially on the U.S. West Coast. South of my district at the Ports of Los Angeles and Long Beach, there are as many as 60 ships anchored off the coast, which doesn't include even more ships that were unable to anchor offshore due to a lack of overflow space. This is a major problem.

In addition, carriers have often chosen to ship empty containers back to Asia rather than carry U.S. exports since it is more profitable to do so. As of June 3rd, container rates from Los Angeles to Shanghai were only $779 compared to $5,952 from Shanghai to Los Angeles, highlighting just how massively imbalanced the market is.

Container shortages have placed a heavy strain on our agricultural exporters, leaving them without access to international markets and no guarantee that their product will be delivered on time. These shortages also cause backups in port terminals, where containers are stacking higher than ever, making it more difficult for truckers to move containers across the country. Longshore workers are burning both ends of the candle trying to keep pace with the deluge of imports. And all the while, American workers have been exposed to numerous COVID-19 outbreaks in ports, making their health and welfare all the more uncertain.

Delays are also costly, not only in time lost, but also in the application of detention and demurrage fees for lengthy container storage times both on ships and on docks. For example, container turnaround times have nearly doubled from 60 to 100 days. Add to that peak-season surcharges, and it becomes very difficult for our exporters to compete in the global marketplace.

On March 10th, I sent a bipartisan letter to the Federal Maritime Commission along with Chair DeFazio, Ranking Member Graves, and Ranking Member Gibbs to ensure that ocean carriers are abiding by the Shipping Act of 1984 and not engaging in unjust and unreasonable shipping practices. I look forward to hearing from the FMC, who is currently conducting Fact Finding 29, an investigation to identify operational solutions to cargo delivery system challenges related to COVID-19.

Today, I look forward to hearing from diverse interests, including international carriers, domestic exporters, labor, and ports; as well as from the FMC on how they are addressing this issue.

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