US Ag Exporters Urge President Biden Take Action Against Ocean Freight Carriers’ Practices
71 U.S. agricultural industry groups teamed up to write a letter to President Biden, informing him of the injury ocean freight carriers are doing to US agriculture, food, and forestry product exporters and urging him to take action.
“This is a crisis: unless the Shipping Act and other tools available to our government are applied promptly, agriculture industries will continue to suffer great financial losses; these carrier practices will render US agriculture noncompetitive for years to come,” they write in their letter.
The associations, federations, and commissions that put their names to the letter aren’t wrong either. Despite a gamut of questionable actions by carriers during the course of the pandemic from using their alliances to drop capacity below market demand to charging no-roll premiums, which I argued were paramount to holding shippers’ cargo for ransom, what carriers are doing to U.S. agricultural exporters seems to be the most damaging.
Back in November, I opened a blog post questioning the legality of what carriers are doing to U.S. agricultural exporters with the frank statement, “U.S. agricultural exporters are getting screwed.” It was because of that post the letter agricultural exporters wrote to the president first came to my attention. After reading the post, reporter William Schulz sent the letter to me and requested I comment, specifically asking if the exporters raised a valid concern.
“I believe exporters are raising a very valid concern,” I replied before briefly laying out the situation of what’s happening to agricultural exporters and why I think their concerns are valid.
Overview of What Carriers Are Doing to Shippers Through Pandemic
Here’s how I laid out the situation for Mr. Shulz:
“For years, I’ve been warning that the carrier alliances, which regulators around the world like the FMC have allowed, shrink competition in the ocean freight industry and would eventually result in shippers paying higher rates. We really saw that come to fruition in 2020 when carriers manipulated capacity, dropping it below demand, and pushing freight rates way up. That may not be as completely nefarious as it sounds, as I don’t think anyone expected demand to soar as high as it did with lockdowns and government stimulus moving so much spending to goods. It’s still hard to believe carriers did not go beyond what was reasonable, especially when they started pushing no-roll premiums on shippers when carriers’ reliability reached terrible lows despite the record high rates they were charging.
“On top of that, the incredible amount of blanked sailings carriers did in the first half of 2020 began a shipping container shortage, particularly in Asia, by not properly reallocating containers. That was exacerbated by the very high demand for international shipping that was seen all through the second half of the year and beyond. That’s all bad for U.S. shippers, including agricultural exporters, but here’s where U.S. agricultural exporters really have a complaint: carriers withholding shipping containers and services from them. It seems pretty clear that carriers prioritized getting shipping containers back to Asia, where they were making more money on eastbound transpacific routes, delivering goods from China to the U.S. especially, over getting containers to U.S. exporters. Rather than shipping containers full of U.S. agricultural goods to Asia, they shipped empty containers back to Asia, seriously damaging U.S. agricultural exporters’ ability to ship their goods.”
Full Letter to the President
Here’s the full letter the agricultural exporters wrote to the president, including the list of all 71 groups behind it:
February 24, 2021
President Joseph R. Biden
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500
Dear President Biden,
As is being widely reported, one of the great commercial challenges of the on-going pandemic has been actions of ocean container carriers, including declining to carry our export cargo, severely injuring US agriculture, food and forestry product exporters, preventing us from delivering affordably and dependably to international markets. This is a crisis: unless the Shipping Act and other tools available to our government are applied promptly, agriculture industries will continue to suffer great financial losses; these carrier practices will render US agriculture noncompetitive for years to come.
According to their own public reports, the ocean carriers are enjoying their most profitable period in decades by controlling capacity and charging unprecedented freight rates, imposing draconian fees on our exporters and importers, and frequently refusing to carry U.S. agricultural exports.
These refusals and charges by the ocean carriers dramatically increase costs to our exporters, making foreign sales inefficient and uneconomical, rendering farmers and processors (for the first time), unreliable suppliers to the global supply chain. The international ocean container carriers which carry over 99% of our foreign commerce, are headquartered overseas – perhaps unaware of the injury their actions are causing to the US economy, as they profit from the pandemic.
The situation is so egregious that the Federal Maritime Commission (FMC) last year issued a Rule setting forth guidelines as to what would be reasonable carrier practices – however, none have been implemented by the carriers, deepening the crisis. While the FMC is undertaking further efforts to gain compliance, the damage being done to our agriculture and forest products industries is severe, increasing, and with lost foreign markets, may be irreversible.
The Shipping Act provides the FMC with the authority to prohibit unreasonable, unjust practices, and “to promote the growth and development of US exports through competitive and efficient ocean transportation…’. Given the urgency of this situation in commerce, we ask that these tools and any others available to our government be immediately applied to stem the current ocean carrier practices that are so damaging our agriculture exports.
- Agriculture Transportation Coalition
- African-American Farmers of California
- Agricultural & Food Transporters Conference of ATA (American Trucking Association)
- Almond Alliance of California
- American Farm Bureau Federation
- American Feed Industry Association
- American Forest & Paper Association
- American Potato Trade Alliance
- American Pulse Association
- California Seed Trade Association
- California Cotton Ginners and Growers Association
- California Farm Bureau Federation
- California Fresh Fruit Association
- California Prune Board
- California Rice Commission
- California Walnut Commission
- Cascade Shippers Association
- Colorado Corn Growers Association
- Consumer Brands Association
- Corn Refiners Association
- Dairy Farmers of America
- DairyAmerica Inc.
- Harbor Trucking Association
- Hardwood Federation
- Idaho Potato Commission
- Intermodal Motor Carriers Conference of ATA
- International Association of Refrigerated Warehouses
- International Dairy Foods Association
- Leather and Hide Council of America
- Meat Import Council of America
- National Association of Egg Farmers
- National Chicken Council
- National Cotton Council
- National Council of Farmer Cooperatives
- National Fisheries Institute
- National Hay Association
- National Milk Producers Federation
- National Onion Association
- National Pork Producers Council
- National Turkey Federation
- Nisei Farmers League
- North American Meat Institute
- North American Renderers Assiciation
- North Dakota Grain Growers Association
- Oregon Potato Commission
- Oregon Seed Association
- Pacific Coast Council of Customs Brokers & Freight Forwarders Association
- Pacific Northwest Asia Shippers Association
- Pet Food Institute
- Potato Growers of Michigan, Inc.
- Potato Growers of Washington, Inc.
- Produce Marketing Association
- Specialty Crop Trade Council
- Specialty Soya & Grains Alliance
- U.S. Apple Association
- U.S. Dairy Export Council
- U.S. Meat Export Federation
- U.S. Pea and Lentil Trade Association
- United Fresh Produce Association
- United States Cattlemen’s Association
- US Forage Export Council
- USA Dry Pea and Lentil Council
- USA Poultry & Egg Export Council
- USA Rice
- Washington Farm Beaureau
- Washington State Hay Growers Association
- Washington State Potato Commission
- Western Agricultural Processors Association
- Western Growers Association
- Wine and Spirits Shippers Association
- Wisconsin Potato & Vegetable Growers Association
CC: Secretary, U.S. Department of Agriculture, Tom Vilsack
Secretary, U.S. Department of Transportation, Peter Buttigieg
Chair, Council of Economic Advisors, Cecilia Rouse
Chair, Federal Maritime Commission Michael Khouri