A Post COVID Surge, And A Variety Of Port Issues - Transport -

A Post COVID Surge, And A Variety Of Port Issues – Transport


There are reasons to be optimistic about the economies of the
world bouncing back from the pandemic in 2021, and at the same
time, the major push to restock the world’s supply of goods has
been met with a variety of problems at the world’s ports, from
Australia to Singapore, but primarily on the west coast from
Seattle to Long Beach. Product coming in from Asia has been met
with less than a smooth and timely transition to a berth, as the
ports are absolutely log jammed.

Reasons for the bottleneck at the west coast ports (like so many
others around the globe) are many. A surge in ecommerce during the
pandemic, and the rush to restock the world’s supply chains.
COVID of course has wreaked havoc with longshoreman, but now that
the vaccines are rolling out, they could be, and should be, put on
the priority list. Right? Well, not yet, and they are in fact
essential workers. What really hurts is that there is currently a
major shortage of shipping containers worldwide. Most of which are
manufactured in China, of course, but the fact remains, the
shortage creates a domino effect with warehousing shortages,
trucking snags, and delays for ships at the ports for sometimes up
to two weeks to get a berth. Yes..two weeks.

Imagine, approximately 25-30 ships within the Long Beach port
limits, waiting a week or more to get a berth to unload at the
dock. You could walk 2 miles, ship-to-ship out into the bay, and
never touch the water. Ouch. (Note: The Port of Long Beach moved
771,135 containers in February 2021, up 43.9% from 2020, the
port’s largest-ever annual increase).

Air freight as a result of the log jam at the ports has seen
quadruple growth as a result, and shipping costs overall reflect
the same increase. Globally, the average cost to ship a 40-foot
container increased from $1,040 last June to $4,570 on March 1,
according to S&P Global Platts. The ramifications of the supply
chain surge, and lack of movement is something that will probably
be with us through the summer of 2021 according to most supply
chain experts. Also, there aren’t many options to get product
into the U.S. from Asia via the west coast ports. To add to the
global mess, the world of trade witnessed the news of Egypt’s
Suez Canal being blocked by a 224,000-ton container ship. Hundreds
of ships have been waiting on both sides of the canal for passage,
and the blockage cost world trade roughly $10 billion a day. In the
meantime, as a result of not being able to predict when the ship
would be free, some had directed shipping from Europe to Asia
around Africa, adding substantial additional costs. The ship was
finally dislodged on Monday 3/29. Time now for the blame game on
billions lost, and ongoing litigation.

The Suez blockage is a stark reminder that “stuff
happens”, so one must think ahead knowing that if you are
shipping product for instance from China to Long Beach, your
electronic filing in advance and reaching the port limits, but not
being able to berth for a week or two, could have monetary
ramifications beyond simple product delays to market. What do I
mean specifically? For example, I am familiar with a case in the
not-so-distant past that involved a vessel showing up at the port
of Long Beach, having filed electronically for a 12/28/2020
arrival. The port is of course overcrowded to the point that they
were forced to wait, within port limits as defined by CBP, but had
to change their arrival filing date to 1/5/2021, per CBP, once they
secured a berth at shore to unload. This simple little change in
the documented date of arrival cost this particular company
approximately $60,000 in Section 301 tariffs that were
automatically applied. Why? Because the expiration date on the
Section 301 exemptions they were benefiting from was official on
12/31/2020. Ouch! I know what some are thinking, like me, how or
why could that happen? The shipper did everything correctly, filing
electronically in advance, and arriving at the port in advance of
the expiration date on the exemptions. The vessel was within port
limits, as defined by CBP, and yet, the port entry date change was
mandatory per CBP. I know, it was certainly no fault of theirs, as
they were unaware of what the absolute bottleneck at the port would
ultimately cost them. Obviously, it’s like checking the traffic
on the way to the airport now. Plan ahead, because in this case, a
lot worse can happen than simply missing a flight.

This is just one example of many where the domino effect is
creating headaches for many. The shipping times per vessel from
China were already stretched, and now, one must calculate a
possible additional one- or- two- week delay if going into a port
such as Los Angeles, Long Beach, San Francisco, or even a smaller
port like Oakland. Seasonal sales are also pushing the limits on
vessels, and warehouse space is filling up fast. (Long Beach
warehousing space is currently at around 85% capacity) As a result,
many are simply going straight to the truck for immediate transport
and skipping any additional down time to get the product to
market.

The bottlenecks have also affected exports, as many shipping
company’s vessels are simply not waiting an additional week or
two for the loading of U.S. agricultural exports and are sending
empty containers back to China for more profitable goods to be
returned. Obviously, this decision has also affected the Phase 1
agreement with China the previous USTR had put in place regarding
the purchase of agricultural goods, which has only been met to date
at around 40% of quota. Katherine Tai (newly appointed and blessed
USTR) is going to have her hands full as the prediction for the
disruption at the ports will continue through the summer possibly
adding to Section 301 tariff timeline frustrations. In the
meantime, freight rates from China to the U.S. have surged 300
percent. Some Asian countries are simply forgoing exports to the
U.S. based on the impossibility of getting product to market from
the port in time (food items especially).

Solutions obviously include staying out of the western U.S.
ports, but often, rerouting is simply not an option, as well as
defaulting to air freight, which has also gone up in cost
exponentially. Suffice it to say, it’s a great time to be in
the air freight business, and Amazon is testimony to that.
They’ve purchased a minority stake in one of their carriers and
have been buying jets recently in their own name. Yep, in about 5
years, Amazon could have as many as 200 of their own cargo jets in
the air. Look out FedEx and UPS, here comes the competition, again.
Overall, this will be a healthy addition to air freight, and should
help drive costs down somewhat.

I digress, now back to the problem in the ports. It begs the
question, where the heck is a stockpile of empty containers? Well,
it seems that containers that carried millions of PPE to countries
in Africa and South America very early on in the pandemic remain
there, empty and uncollected, collecting dust, because shipping
carriers have concentrated their vessels on their most popular
routes, such as those linking North America and Europe to Asia.
Empty containers are also piled up at ports in Australia and New
Zealand.

It’s time to put our heads together. There has got to be a
way logistically to get those empty containers back into the
system. Imagine that, the United States, once again finding a
shortcoming in an absolutely necessary supply chain item, like a
simple shipping container, manufactured in China. The U.S.
government needs to be talking with U.S. Steel at this juncture and
making a plan to allocate the necessary resources to keep supply
chains moving as we rebound economically. Something as basic as a
40 foot metal box is invaluable in the rebuilding of the economy. I
say go for it President Biden, any surplus on the containers can be
used to house the homeless. There is nothing to lose.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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