NACD supports measures to promote greater capacity and reliability in moving goods through the international and domestic supply chains. Chemical distributors are currently experiencing severe delays and increased costs in moving their products in and out of ports. NACD urges the Federal Maritime Commission and Congress to use their authorities to address these issues to ensure timely and efficient delivery of products critical to the U.S. economy.
NACD members need affordable, efficient, and predictable international and domestic transportation networks to receive and deliver chemicals to their hundreds of thousands of industrial customers who use these materials to produce the goods essential for the health and well-being of Americans and the entire U.S. economy.
Many chemical distributors import products from overseas, which is often necessary in the absence of U.S. production of the materials. For the past several months, NACD members have been experiencing extreme congestion at ports as well as skyrocketing freight costs. Dozens of container ships are anchored in the waters outside of ports, and there is a week-long delay for docking space. Some NACD members have experienced a doubling in the time it takes for shipments to leave their origination points and arrive at their destinations, with additional timeline uncertainties while shipments are en route. At the same time, shipping costs have severely risen, including increased detention and demurrage charges on importers, even when these firms cannot control the delays.
Several factors have led to this situation. In recent years, consolidation has occurred in the ocean carrier industry, leaving shippers with limited choice and a lack of bargaining power on many routes. COVID-19 has led to an immediate crisis. Increased U.S. consumer demand during the pandemic has resulted in a surge of imports, filling ships, containers, rail cars, and trucks. In addition, a substantial percentage of dockworkers have been out of work for periods of time because of COVID-19 illness or quarantine. This is happening as the nation is also facing a severe truck driver shortage.
In March 2020, the FMC initiated Fact Finding No. 29, International Ocean Transportation Supply Chain Engagement, to identify operational solutions to cargo delivery system challenges related to COVID-19. Under this initiative, led by Commissioner Rebecca Dye, Supply Chain Innovation Teams are working to identify measures to address the disruptions. In November, the FMC expanded the Fact-Finding to authorize Commissioner Dye to investigate ocean carriers operating in alliances and calling the Ports of Long Beach, Los Angeles, New York, and New Jersey to determine if the carriers’ detention and demurrage, container return, and export container availability policies and practices violate The Shipping Act of 1984. On February 17, 2021, the FMC authorized Commissioner Dye to issue information demand orders to require the same ocean carriers to provide documentation on their policies and practices. Marine terminal operators will also be subject to information demands. The FMC may use the findings as a basis for hearings, enforcement action, or rulemaking.
NACD supports the FMC’s investigations and urges the agency and Congress to take additional actions necessary to ensure vital goods can move through the nation’s ports without disruption.
The FMC has issued new guidance about how the commission will assess the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine terminal operators (MTOs) under 46 U.S.C. 41102(c).
The final rule, “Docket No. 19-05, Interpretive Rule on Demurrage and Detention under the Shipping Act,” will become effective upon its publication in the Federal Register.
Under the new interpretive rule, the FMC will consider the extent to which detention and demurrage charges and policies serve their primary purpose of incentivizing the movement of cargo and promoting freight fluidity. The rule also provides guidance on how the FMC may apply that principle in the context of cargo availability (and notice thereof) and empty container return.
For further questions about NACD’s Reliable Shipping Issue Page please contact Erin Getz, Manager of Legislative Affairs at firstname.lastname@example.org.