When the global pandemic hit our shores in 2020, like a cog in a machine, America’s supply chain quickly came to a halt. Outbreaks at processing plants stymied production, dairy farmers were forced to dump milk, cattle producers slowed growth rates, and pork producers had to cull production.
These were just the short-term effects.
COVID-19 relief packages bolstered social safety net programs – expanding welfare program eligibility for millions of Americans. Stimulus checks coupled with lockdowns allowed Americans to save more money compared to historical norms, leading to what we’re seeing today: increased spending on goods instead of dining, entertainment, and other services.
Supply chain delays and port backlogs impact all of us. It does not matter whether you’re a business owner, consumer, or agriculture producer – we’ve all felt the strain.
Cue the long-term effects. Port backups. Empty shelves. Delayed orders. Workforce shortages. Covid outbreaks. Record-breaking ocean carrier profits. Inflation.
Supply chain delays and port backlogs impact all of us. It does not matter whether you’re a business owner, consumer, or agriculture producer – we’ve all felt the strain.
There’s been a lot of talk and concern about goods coming in, but this supply chain crisis is a two-front battle, with the second being the delays and financial losses American exporters are facing.
While COVID-19 has exacerbated issues with our supply chain, a lot of these issues existed beforehand and have been worsened by outdated policy that encourages bad behavior by ocean carriers.
This bad behavior was brought to the forefront at the peak of the pandemic when the backlog of ships at the port stretched miles long. For context, the 2014 port congestion record was 48 total vessels, while the 2021 backup record was 154 vessels. Import shipping rates from China to the U.S. for forty-foot containers have always been priced higher than containers being exported from the U.S. to China, but now it’s become financially advantageous for ocean shippers to directly cancel export obligations. Spot rates remain near historic highs for container shipping; the boom shows no sign of ending.
This unprecedented backlog shifted the way foreign flagged ocean carriers do business. Instead of reloading at American ports to bring U.S. exports across the Pacific – ocean carriers began turning around with their empty containers, leaving U.S. exports stranded.
China and the foreign flagged ocean carriers aren’t playing fair, and accountability is long overdue.
While the largest ocean carriers saw profits more than triple in 2021, in just six months, the U.S. dairy sector incurred nearly $1.3 billion in losses due to container availability issues. Valley Queen Cheese, a South Dakota dairy exporter, had more than 2 million pounds of sold and ready-to-ship lactose stuck in its warehouse because they couldn’t get an empty container to take it overseas. Just this week, dry pea and lentil processors are having 30-50% of their bookings canceled without reason. According to a survey by the Ag Transportation Coalition, agriculture exporters report that 22% of their export sales are lost because it is not possible to deliver to foreign customers affordably and dependably due to supply chain delays. Ag shippers are considering expensive air freight at massive losses just to maintain customer relationships built up over decades in markets we fought hard to access. Delays threaten producers’ bottom-line, and even worse, their reputation as a reliable trading partner.
American consumers having difficulty accessing items like toilet paper and dishwashers is a problem; American businesses and agriculture producers not being able to ship millions of dollars in produce, grain, and meat overseas is a major financial crisis in the making. That’s why Congressman John Garamendi (D-CA) and I teamed up to introduce the Ocean Shipping Reform Act (OSRA) early last year. Our bipartisan bill is the first major update of federal global shipping regulations since 1998.
China and the foreign flagged ocean carriers aren’t playing fair, and accountability is long overdue. If you want to do business with American ports, you need to play by our basic rules.
OSRA protects American consumers and producers from price gouging by foreign carriers and establishes minimum service standards to ensure best practices. It would also prohibit ocean carriers from unreasonably declining shipments of U.S. exports and from slapping undeserved fees on our exporters.
More than 360 national, state, and local groups, and businesses support OSRA. We were proud to see OSRA pass the House (364-60) in December and be included as an amendment to the COMPETES Act with an even stronger vote. This emergency isn’t going away anytime soon – that’s why it’s urgent the Senate passes OSRA expediently. We cannot continue to allow foreign entities to crush American profits and enable lengthy delays any longer.
Dusty Johnson represents South Dakota’s at-large District in the U.S. House of Representatives.