Losses in Over 20% of Sales due to Continued Port Congestion

Almond Alliance of California — The transportation crisis continues for agriculture exporters and seems to be worsening as the holiday season nears. Increased costs, rescheduling, cancellations, detention and demurrage charges up 300% and lost markets are some of the realities the industry is facing. Based on numerous sources, over 20% of sales cannot be completed due to ocean carrier rates, declining to carry export cargo, unreasonable demurrage and detention charges, and other practices.  As an industry that is international holiday focused, this issue continues to be a top priority for almonds.

The Almond Alliance continues to focus on this issue and work closely with AgTC, several stakeholder organizations, logistic companies and of course the Port of Oakland.  Here is a summary of recent efforts related to port congestion and related Almond Alliance action items.

Federal Maritime Update (FMC):

The FMC launched an expedited inquiry into the timing and legal sufficiency of ocean carrier practices with respect to certain surcharges. There are eight ocean carriers being asked to provide the Commission’s Bureau of Enforcement (BOE) with details about congestion or related surcharges they have implemented or announced. This action was taken in response to communications received by the Commission from multiple parties reporting that ocean carriers are improperly implementing surcharges. The companies contacted are CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line; and Zim. Each ocean carrier was identified as having recently implemented or announced congestion or related surcharges. Ocean carriers are subject to specific requirements related to tariff changes or rate increases, including providing a 30-day notice to shippers and ensuring that published tariffs are clear and definite.

The FMC has indicated that they are committed to transparency and Chairman Maffei has said, “As Chairman, I want to know the carriers’ justifications for additional fees, and I strongly support close scrutiny by the FMC’s Bureau of Enforcement aimed at stopping any instance where these add-on fees may not fully comply with the law or regulation.”

In summary, the FMC is working on the below items:

• The Fact Finding 29, led by Commissioner Rebecca Dye, to identify operational solutions to cargo delivery system challenges.
• FMC Ocean Carriers Audit Program which will analyze the top nine carriers by market share for compliance with the Commission rule interpreting 46 USC 41102(c) as it applies to detention and demurrage practices in the United States. Other focus areas of the audit process may include practices of companies related to billing, appeals procedures, penalties assessed by the lines, and any other restrictive practices. Lucille Marvin, the Commission’s Managing Director, is leading the audit.  
• FMC is committed to transparency facilitating ongoing stakeholder discussions and roundtables.

The Commission can initiate enforcement actions for improperly established tariffs based on their findings. We will let you know when the inquiry on Shipping Act violation findings are released. If you want to file a formal complaint, please contact the Almond Alliance and we will walk you through the process.

The Federal Maritime Commission recently announced their National Shipper Advisory Committee. The Committee is comprised of 24 members, evenly divided between those who export cargo from and those who import cargo to the United States, that will advise the Commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system. Joshua Woods from Blue Diamond Growers will serve on the advisory committee.  The Almond Alliance will continue to communicate industry challenges to the Commission and newly formed advisory committee.

Action Item:  The Almond Alliance continues to engage with the FMC staff and will be transmitting a letter to the commission regarding the impacts to the California almond industry and our requests for action. In addition, we alerted the FMC that due to the delays at the Port of Los Angeles and Port of Long Beach the number of vessels that have bypassed the Port of Oakland, we believe due to time constraints, has soared. The number of vessels that have bypassed the Port of Oakland in comparison to last year is approximately 40 (from July 2020 to July 2021) which furthers the challenges that almond exporters are facing.

Recent Roundtables Facilitated by FMC:

Port of Oakland on August 30, 2021: Oakland Port executives, with Federal Maritime Commissioner Carl W. Bentzel, California State Transportation Agency Secretary David S. Kim, importers, exporters and stakeholders discussed the port congestion challenges and how to strengthen Oakland’s place in the global supply chain and strengthen the state and federal economies. Attendees asked for support from maritime leaders to streamline seaport operations and communications and collaborate on making the supply chain transparent for customers and operators. FMC and CalSTA asked for recommendations on how to alleviate the port congestion and improve communication between importers, exporters, the Port of Oakland, logistics and carriers.  The Almond Alliance requested longer night gate hours, requirements on the percentage of empty containers returning on a vessel, improved notifications from carriers on early calls and blank sailings, explanation of increased fee methodology and compensation for third party fees on storage and chassis. While our requests are ambitious, our goal is to push for transparency on the issues important to our exporters.

Port of Long Beach on September 1, 2021: The Long Beach roundtable focused on supply chain transparency and how equipment and operations move cargo in and out of the largest port complex in the United States. Commissioner Bentzel was joined by Congressman Alan Lowenthal, who has represented the LA/LB port complex at the local, tate and now federal level for decades. Long Beach and Los Angeles Port Directors Mario Cordero and Gene Seroka also joined as well as representatives of rail lines, trucking, chassis, container lines, and terminals.

Action Item:  The Almond Alliance was asked to summarize and update the impacts that the port congestions have had on almonds.  We are in the process of drafting and will submit soon.  We need to hear from our handlers if expanding night gate hours for truckers at the Port of Oakland will be helpful and utilized. Please email us and express your support. This will help our effort to expand gate hours at the Port of Oakland.

Port Update:

Port of Oakland: A year-long cargo surge slowed and volume dipped at the Port of Oakland in July. The Port recently reported it expected containerized cargo volume growth to resume as peak shipping season arrives. Though business dipped in July, the Port said year-to-date import volume has increased 16 percent. Total volume in the same period is up 9 percent.

According to the Port, cargo volume declined 3.5 percent in July compared to the same month a year ago. Here’s the breakdown:

• July containerized imports down 1.7 percent year-over-year;
• July containerized exports down 4.7 percent Y-O-Y; and
• July total volume, which includes imports, exports and empty container repositioning, down 3.5 percent Y-O-Y.
  

The Port attributed the declines to record cargo volume in the first half of the year. It explained that surging shipments stacked up on docks causing delivery delays. The Port said that as a result, shipping lines omitted several voyages to Oakland, leading to lower volumes.

The Port said that cargo volume should increase again from August through October. Those are peak shipping months for retailers building holiday inventories. Oakland has introduced two new vessel services to Asia in the last month which should also boost volume. The Port said new services demonstrate continued reliance on Oakland as a key global trade gateway.

Action Item:  The Almond Alliance is working with the Port of Oakland to encourage longer hours of service at the night gate, with an early opening time. If you have an opinion on this issue, please contact the Almond Alliance.

Union Negotiations:

All of our almond exporters are concerned with the upcoming labor negotiations which are set to begin in January 2022. Given the existing conditions at the Port of Oakland, an impasse would be devastating.  While labor negotiations impact the Port of Oakland, the two parties negotiating are the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The Almond Alliance is meeting with ILWU and PMA and will continue to monitor contract negotiations and update on the progress.

Legislation of Interest:

Congressmen John Garamendi and Dusty Johnson are authors of the Ocean Shipping Reform Act of 2021 “OSRA21”. The Act’s provisions address the unreasonable detention and demurrage charges, export cargo bookings, and other carrier practices that are essential to allow US agriculture to remain competitive in global markets. The Almond Alliance strongly support provisions in the bill to gain reasonable and fair ocean carrier practices consistent with the Federal Maritime Commission’s Interpretive Rule on Demurrage and. It imposes upon carriers the obligation to self-police compliance with that Rule. In addition, the bill obligates ocean carriers to carry export cargo, to the extent they can do so safely. It addresses carrier practices limiting efficient use of containers, chassis and other equipment. The Almond Alliance will continue to work on advancing and strengthening this bill as it proceeds through the legislative process.

To view the Ocean Shipping Reform Act of 2021, Click Here.