Rumors on the Death of the Shipping Crisis are Premature

By Nate Herman

Everyone from President Biden to port directors and pundits have claimed that we are now seeing the other side of the shipping crisis, the very same shipping crisis that has led to exorbitant and unjust costs, empty shelves, and higher prices at the cash register for the travel goods industry this holiday season. But, in the immortal words of Monty Python, the shipping crisis is instead telling everyone “I’m not dead yet!”

The White House and pundits point to the lower number of ships waiting outside the Ports of Los Angeles and Long Beach, only 16 on December 15, the clearing of some cargo off docks, and slightly slower shipping rates as their evidence that the shipping crisis’ days are numbered.

Regrettably, the reality is anything but that.

First, the ship numbers. In November, the terminal operators, the ports, and the southern California air quality regulators agreed that dozens of ships sitting out in San Pedro Bay was not really good for the environment, or for optics either. So, they reached an agreement to stage ships waiting at anchor, waiting to enter the ports, as far as 150 or 300 miles out. The 16 ships at anchor only counts the ships within 25 miles of the ports. The reality is there are over 100 ships waiting at sea to enter the ports. Further, the average wait for those ships before they can berth at the ports has grown astronomically to record levels, with the Port of LA now reporting average wait times of 19.7 days and the Port of Long Beach reporting a whopping average 28.6 day wait time, a whole month.

Second, the clearing of cargo off docks. After the Ports of LA/Long Beach announced on October 25 that they would impose a so-called “super demurrage fee” on longstanding containers on docks, a fee that every ocean carrier said they would pass on to you, the shipper, there was an effort to move cargo off docks. Instead of that cargo going to you, a lot of that cargo was, in many cases, instead moved to off dock facilities. The ports, citing progress in reducing cargo on the docks, has repeatedly delayed the implementation of the fee. However, that progress has appeared to stall as the ports have cited the same 37% reduction in containers for three weeks, finally increasing to 47% on December 13.

Third, the decline in shipping rates has stalled and, on some routes, has started to increase again. The reality, however, is that even if rates continue to stay flat, or even decline slightly, those rates are still almost 4-8 times the rates you were paying last year.

And those pundits are ignoring the other “truths” you, the shippers, are now facing. On the U.S. side, terminal operators have started to charge shippers fees for missed appointments, and terminals around the country are now adopting the “temporary storage” fees for cargo stuck on the docks, all fees paid by us, the shippers, for situations that are completely out of our control.

Add to that China’s new data restrictions making it more difficult to track ships in China and new COVID lockdowns affecting Chinese product and ports – all leading to more delays and more confusion.

And, finally, the current labor contract for longshoremen at U.S. West Coast ports expires on July 1, 2022. The longshoremen have already rejected an extension of the current contract. And, if past is prologue, contract negotiations can lead to strikes, work slowdowns, or lockouts.

To paraphrase Monty Python, the shipping crisis looks to be very much alive and “feeling much better”.

But there are small signs of good news on the horizon. Thanks to the efforts of the Travel Goods Association (TGA), and many others, we now have the full attention of the White House and the press. We keep pushing the need to bring all of the stakeholders to the table and lock them in a room until they come up with real solutions to bring this crisis to an end. We keep calling for immediate relief for the travel goods industry by eliminating the China Section 301 tariffs and immediately renewing the Generalized System of Preferences (GSP) program.

And Congress is listening. In fact, on December 8, the House approved key TGA-supported legislation that will give the Federal Maritime Commission (FMC) real teeth over the ocean carrier industry to stop price gouging, contract violations, and unfair late (detention and demurrage) fees.

In the end, if we all work together, we can finally bring the shipping crisis to a quick and timely death.