At the end of last year, MEMA began to hear reports of significant slowdowns at our nation’s ports impacting delivery time and logistics costs. Initially, members did not identify a single port as problematic but over time the slowdowns became most acute at the large ports (LA and Long Beach) in California.
MEMA immediately reached out to other industry groups impacted by the slow down as well as the Federal Maritime Commission (FMC) and Governor Newsom of California. However, the slowdowns are not abating. And the crisis includes ports on both coasts and even into the Canadian ports. This has led to airfreight and trucking shortages causing logistics problems throughout the supply chain.
So . . . what are the next steps?
The port slowdown is a complicated problem resulting from the increase in imports into the U.S., COVID-19, FMC regulations, and infrastructure.
Congress and the White House are struggling to find a policy path to address the slowdown.
What I am Watching For?
How will Congress and the White House react to the tremendous amounts of cash being spent by industries to address the port slow down?
Will Democrats insist that “Buy America” is the way through this crisis?
Will Congress force changes to the FMC regulations updating processes and procedures and will this help?
What Caused the Crisis?
The easy answer is the COVID-19 pandemic. The wholesale shift in spending by homebound consumers from travel and entertainment to home improvement has overwhelmed the capacity of the end-to-end system. Containers have been unable to be quickly offloaded and moved through terminals and then unloaded at jam-packed distribution centers, which has slowed down the repositioning of containers back to Asia, reducing the capacity of the entire system.
However, the pandemic is not the whole story. Most experts agree that the lack of 24/7 capabilities limits any growth at our ports. This automatically leads to terminal productivity. The ports have suffered from a lack of infrastructure investment and labor practices have not kept pace with 21st century needs. This tangle of issues has led to a crisis impacting manufacturers, retailers, farmers, and consumers.
Will an Infrastructure Bill Help?
Maybe. But that is the long-term strategy. The $2.3 trillion infrastructure bill includes $17 billion for inland waterways, coastal ports, land ports of entry, and ferries. Yet, Transportation Secretary Pete Buttigieg seemed to acknowledge the difficulties, stating last month that when it comes to port congestion issues, there are no “easy fixes.”
What About the FMC?
According to a recently published interview with Daniel Maffei, FMC’s Chairman, congestion at the nation’s major ports is likely to continue throughout the summer and possibly later into the year.
“I am extremely concerned by it, partly because it’s not going to go away, Maffei told Transport Topics. “Yes, it’s gotten a little bit better and I expect and hope it won’t get as bad as it was, when 60-plus ships at the worst, lined up.
“But the fact is, we’ve stressed our supply chain to the max and beyond. But we do have a situation where we’d have this unprecedented import boom, and every ship is going to be on the water, and we’d have a shortage of empty containers… But I do think this is better than empty ports and not enough jobs for truckers and longshoremen.”
So Why Discuss “Buy America”?
For many, the answer is to just make more things in the U.S. This week the Senate will begin consideration of the Endless Frontier legislation that addresses additional research and development spending for the U.S. These dollars will most likely have significant limitations that will require only U.S. spending. And the infrastructure package will have more limitations on it aimed to foster growth in U.S. jobs and manufacturing. But, as we know, our industry needs a global supply chain, and the desire to “Make it in America” will not allow our manufacturers to continue to be competitive.
What Should We Do?
On May 11th, the Senate Commerce Committee will hold a hearing on the infrastructure needs and challenges of the freight industry – including ports. MEMA has already reached out to the committee laying out our concerns on congestion at the ports and the impact on our industry.
But you must do more. I urge you to use this opportunity to educate the members of the House and the Senate on how the port slowdown is impacting your business. Be clear about your concerns and share any specifics you have available. And work with us, providing us with data and up-to-date information so we can stay current on the impact this crisis is having on your business.
Just like other supply chain issues, we need to be prepared to discuss both the long-term and short-term. I urge you to be part of the dialogue.