A cargo ship stands at Long Beach harbor, California.
Joe Cllar | AFP | Getty Images
Shipping carriers rejected US agricultural export containers to the value of hundreds of million dollars during October and November, instead of shipping empty containers, to be filled with more profitable Chinese exports to China, a CNBC investigation found.
The Federal Maritime Commission warns from petitions by US agricultural exporters that the delay in trade threatens not only profits but the reputation of the industry.
In return, the commission launched an investigation and is reviewing trade data from major ports in California, New York and New Jersey to see if the carrier’s refusal to load US export cargo was a violation of the Shipping Act .
The act denies the carrier “to refuse to deal with or negotiate improperly, to boycott” or to take any other concrete action that results in denial of improper action, “or” to engage in this conduct That inadvertently prohibits the use of intermodal services. “
America’s agricultural exports were entering their peak season, so export containers declined. While exports run continuously for 12 months, the months of November through March are important as they follow harvesting of crops.
Based on the orders completed during this window, agricultural producers have more clarity in planning for the upcoming crop. During the winter months, farmers and growers meet with banks to secure funds for the next cycle.
There is also a danger of the Brazilian crop coming in February. The biggest lesson learned by the agricultural sector during the American trade war with China is that no contracts are sacrosanct – they can always be postponed to the second season or canceled altogether.
Millions of dollars in rejected business
In October and November, the carrier rejected an estimated 177,938 containers, according to an analysis of data compiled from the Census Bureau and ports in Los Angeles, Long Beach, California and New York and New Jersey.
In mid-October, the carrier informed agricultural exporters that they would prefer empty export containers over agricultural exports. He also said that if goods were transported they would raise prices on US agricultural exports.
According to Port Trade data, the total export container loss for the ports of Long Beach and Los Angeles was 136,392 TEU. An estimated 41,546 TEUs were excluded from the ports of New York and New Jersey. The total value export trade from those ports is $ 632 million.
To calculate the value in potential lost trade as a result of the rejection of agricultural exports, CNBC used the Port of Los Angeles for agricultural soybean / oilseeds / cereals using the agricultural export price found on the US Census, USA online site Can. . The value of this export is $ 3,552 a TEU.
That tally was calculated taking the difference of the empty share of exports between 2020 and 2019 between actual empty exports.
John Martin, manager of the economic and transportation consulting firm, said, “These are vacant exports expected to be filled in TEU 2020.” Martin Associates, Which verified the findings of CNBC. “This formula shows you the increased proportion of empty export containers to total exports. This data specifically explains the logic of Los Angeles, Long Beach, that empty export containers were being moved as quickly as possible, causing American export cargo Was released at the dock. “
Reviewing import and export data from January 2020 to November 2020, CNBC found that this growing US export container deficit pattern began as early as June for Los Angeles, July for Long Beach, and New York and New Jersey. August for
From July to November, a total of 297,997 TEUS were deprived of a $ 1.1 billion container deficit value in the Ports of Los Angeles, Long Beach and New York and New Jersey.
“Compared to the same months in the previous time period, there has been a clear increase in the proportion of empty export containers to total exports,” Martin said. “This underscores our continued dependence on China.”
Three out of four containers from the US to Asia are “going back empty”, according to Redwood Logistics CEO Mark Yeager, who supported the findings of CNBC’s analysis. “The reason is that the Chinese are becoming so aggressive about trying to get empty containers back … that it is difficult for American exporters to find a container.”
Ports carry weight
CNBC shared its data with the Port of Los Angeles, Long Beach and New York and New Jersey.
Jean Seroca, executive director of the Port of Los Angeles, said, “American farmers and agricultural exporters should not be looking for containers to bring their goods to market.” “We need a united US export policy that addresses a range of issues, including container access to our agricultural markets across the country.”
Carl Bentzel of the Federal Maritime Commission, along with fellow commissioner Daniel Pardon, sent a letter to the World Shipping Council in December stating that the denial of US exports by major ocean carriers could be a violation of the US Shipping Act.
“This data and the impact on our economy is potentially very disturbing, but unfortunately not entirely surprising,” Bentzel told CNBC. “These numbers trace back to the complaints we have been receiving on FMC for the last four or five months. My fellow commissioners and I forward these complaints to our Enforcement Office, and to the ongoing commission Fact Finding-29 Are doing., And they are currently evaluating and evaluating potential enforcement claims. ”
Source: Knight Port Logistics
Fact Finding 29 is an investigation, commissioned in March 2020, aimed at identifying those actions in the international maritime transport supply chain and operations that would impede the flow of international trade. The investigation was expanded in November to include container returns and container availability for US export cargo, as well as fees in storage and late fee carriers are charging exporters.
But carriers such as Germany’s Hapag-Lloyd told CNBC that they are actually pushing agricultural exports forward.
Ufe Ostegaard, president of Hapag-Lloyd’s US operations, said the company has canceled or not shown the agricultural shipper with about 40% of bookings.
“This is in line with the historical average, but you’d expect these to be canceled. Lack If there were actual location or equipment restrictions, “he said.” On the subject of agricultural exports from the US, Hapag Lloyd has continued to serve shippers without interruption, as has the wider container carrier industry…. We work closely with shippers who generally understand the current challenges well and try to adjust their supply chains accordingly. ”
A representative for the Evergreen Line said it is working with Federal Maritime Commission officials on their investigation.
“As stated earlier, there are a number of factors that have contributed to congestion at the mentioned ports and we continue to work with FMC officials, as they say on behalf of the carrier, Michael Voos of Voss Haneman Associates.” However Global conditions during this past year may have challenged the movement of timelines within the supply chain, our priority being to serve customers in our trade lanes for both inbound and outbound cargo, thereby accelerating the flow of commerce. As much as possible. “
Maersk Corporate Communications said in an email to CNBC that the company had a quiet period for earnings. Requests for comments by CMA CGM SA, COSCO Shipping and ZIM Integrated Shipping Services were not returned.
While agricultural export volume for 2020 was larger than 2019 due to America’s phase one trade agreement with China, the purchase was lower than the target. According to the Peterson Institute for International Economics, China imported $ 100 billion worth of American goods, which was agreed to in the agreement – a targeted 58% of about $ 173.1 billion. An export is not official until it is transported and processed in the country of destination. The increase in agricultural exports, however, is higher than the increased ration of empty export containers.
“The number of hands touching egg exports or any US exports for that matter is in the millions,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition. “The jobs that lie in this production and supply chain, from farming, processing, storage, transportation, are tremendous.”
According to the US Department of Agriculture, US farms contributed $ 136.1 billion in 2019 to about 0.6% of GDP. Agriculture, food, and related industries contributed $ 1.109 trillion to the US gross domestic product (GDP) in 2019, accounting for 5.2 percent.
“Just when you think America’s ag industry can start full throttle, this export transportation differentiation starts,” Friedman said.
‘It’s beyond business’
American farmers say they are now embroiled in a new battle – struggling with a growing web of export rejection or delaying eating into their profits.
Bob Sinner, president of SB&B Foods, a major US soybean exporter, provided some details to CNBC, with some of the carriers telling them to reject or delay their exports.
In early January, Sinar, who is also the chairman of the specialty soy and cereal alliance, told CNBC that between 30% and 40% of his company’s total exports were either delayed or canceled.
“Not only does the customer service refuse the booking, but then they try to pass the ‘buck’ by telling their sales representative that they are honoring our account allocation scheme, which is not true.” ” “So, his sales representative says the customer service information is not accurate and he is looking into it, but we don’t have anything from our sales representative yet that is being straightened out. Then the same customer Comes back with an attempt by a service person. We are accused of having canceled our booking. These carriers are not taking any kind of blame and trying to pass the blame on to the shipper. “
He said: “It’s beyond business. It’s also about food safety. Our soybeans are food grade. We ship between 690-700 bags in a container. Each bag makes about 275 pieces of tofu. We are very All mouths feed. “
Source: Knight Port Logistics
The refusal of the trade recently forced Sinar to send its customer via air freight six metric tons of bags to North Asia to meet their requirements.
Refusal and delay of agricultural exports can also be tracked by truck.
Cotton, scrap paper, scrap plastic and scrap metal are transported to Knight Port Logistics’ yard, according to company director Keil Lane.
“Cotton exports have been rolling for weeks and you cannot find export bookings for scrap metal and scrap plastic exports,” said Layne. “These containers are on the chassis adding to the lack of chassis.”
Record Chinese import volumes in Los Angeles and Long Beach, combined with the slowdown outside Los Angeles in containers away from ships, have added to the empty export problem.
“We’ve had to sit on containers for months,” Layne said. “Right now, we have a total of over 600 containers and half of them are currently sitting in our yard just a few miles from the port.” He said that in a normal business environment there are 100 to 150 containers.
“Loaded containers are mostly American exports that we are still trying to convert to port,” he said.
Layne said the problem with the withdrawal of these US exports is the lack of appointments at the terminal, which coordinates with carriers in loading exports.
“The ratio of our import / export business is usually 70/30. Now it is 90/10,” he said. “Exports to us are down about 30% by the end of 2020. We have seen a 15% decrease in export volume. It is easier for us to get an empty container at the Los Angeles terminal than US exports.”