The Biden administration, together with U.S. shippers and the ag sector, are pressuring ocean carriers to stop turning down farm commodity exports, but it may take Congress to force the issue.
There’s little that the Biden administration can do directly to make the handful of foreign-owned vessel-operating common carriers servicing U.S. ports to stop returning empty containers to China, but Agriculture Secretary Tom Vilsack says they would be wise to facilitate U.S. exports.
“I think you can make (carriers) aware of the fact that this is leading to members of Congress proposing legislation and (carriers) need to be fully appreciative of what that could mean to their business model and hopefully they’re paying attention,” Vilsack told Agri-Pulse. “They risk the United States Congress taking action and if I were in their shoes, I would be taking that risk very seriously.”
John Porcari, the port enjoy for the administration’s Supply Chain Disruptions Task Force, says the ocean carriers should know just how important it is to the White House that they no longer stand in the way of U.S. agricultural exports. The proof is in the efforts the Biden administration is taking to improve conditions at U.S. ports, such as the Monday announcement of an expansion to the Port of Oakland for ag exporters.
USDA is partially funding a new 25-acre container yard at the Port of Oakland and subsidizing costs for ag exporters to ship their commodities by making payments of $125 per container that is filled.
“The announcement that you heard today for the Port of Oakland is only one part of a multi-pronged strategy,” Porcari said at a trade event hosted Monday in Washington by Agri-Pulse. “Think of it as first firing a warning shot across the bow for ocean carriers that we are watching.”
And the pressure is starting to show signs of working, said Mike Durkin, president and CEO of Leprino Foods Co.
“We’ve been having conversations with the carriers and we’re starting to see the wheels turn to resolve some of these issues,” said Durkin, who joined other dairy company CEOs to meet privately with Vilsack last week on improving exports through U.S. ports. “I feel like we’re starting to get some traction.”
But more pressure on the carriers from the U.S. government, port authorities and the Federal Maritime Commission is needed, said Durkin.
Porcari stressed that the Biden administration – including State Department officials – are meeting with high level officials at the carrier companies.
One proposal put forward by Leprino is based on the “FastPass” system Disney World used to take that let visitors pay to jump to the head of lines for rides. The idea being pushed by Leprino would allow ships to dock first, if they agreed to load up on U.S. exports.
Other ideas being floated include new taxes on carriers or limitations on access to unload foreign goods, Durkin said.
“I do believe there’s pressure or other things that can be done by the White House,” said Durkin, who stressed that the carriers need incentives to change their ways.
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But changing their ways when it comes to U.S. ag exports would also be less lucrative for carriers, which have seen revenues grow during the pandemic as U.S. demand for Chinese goods increased.
Those revenue gains have come at the expense of many U.S. exporters, trying to ship their pork, beef, dairy, tree nuts, eggs, wine, hay, poultry fruits and vegetables to customers throughout Asia. The carriers are making so much money from Chinese exporters that they are rushing containers back to Chinese ports empty rather than load up with U.S. ag exports.
“Exporting an empty container is simply more valuable to ocean carriers than a container filled with (U.S.) agricultural products,” said Porcari. The cost of a container to ship Chinese goods to the U.S. rose from $4,300 last year to $13,600 this year, while the cost of a container to ship U.S. goods to Asia rose from a comparatively much lower rate of $650 to $1,000, he said.
Still, Vilsack stressed that while the Biden administration is continuing its efforts to improve the conditions at ports to make sure that exporters with successful bookings can get their goods on ships, it cannot force carriers to change their ways.
“The Federal Maritime Commission has limited regulatory authority, and we obviously have urged them to use whatever leverage they have. But they are an independent body, and we can’t tell them what to do,” he said. “We can only ask them to do whatever they can.”
Legislation is moving through Congress that could have a significant impact on carriers, but that’s not yet guaranteed. The House version of the Ocean Shipping Reform Act would force carriers to accept U.S. ag exports destined for buyers throughout Asia instead of returning empty containers to China, but the unfinished Senate version could be weaker.
The House bill, approved 364-60 vote in December, say carriers can't “unreasonably decline export cargo bookings if such cargo can be loaded safely and timely.”
Hill aides tell Agri-Pulse that as of Monday, the Senate draft would only instruct the Federal Maritime Commission to issue a rule defining what is “unreasonable refusal.” That legislation, authored by Sens. Amy Klobuchar, D-Minn., and John Thune, R-S.D., is expected to be introduced as early as Thursday.
GOP Rep. Dusty Johnson of South Dakota, one of the authors of the House bill, says he’s still hopeful that the Senate bill can be strengthened, even if it happens during conference after the Senate votes.
“We’ll try to bring the Senate around to our way of thinking,” he said Monday. “Congress should not kick too many things to the administration … I think we should be able to get to a point in conference … where we put a little more meat on that bone than perhaps the Senate intends to.”
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