Idle Goods Drag Down Shipping, Trade During Pandemic
Article
Bloomberg Law
The coronavirus pandemic is drastically reducing the demand for goods, and containers are sitting idle at ports, having a snowball effect on the shipping industry. GKG Law attorneys take a look at what the Federal Maritime Commission is doing to mitigate the pandemic’s enormously disruptive effects on trade.
The efficient movement of cargo relies on the constant flow of containers through ports and inland facilities. Containers sitting idle can have a snowball effect on the shipping industry as a whole.
When containers sit idle, are not picked up, or returned bottlenecks are created that flow down and slow down the supply chain. Chassis that store containers on rail ramps or shipper facilities further exacerbate the problem as the number of chassis available for movement are significantly reduced, which then delays the movement of goods out of the ports. All these factors are amounting to a significant backup of loaded containers throughout U.S. ports, which could have long term adverse effects on the shipping industry.
Mitigating the Effects
As the country adjusts to a new normal, delays and disruptions in the supply chain are inevitable. However, at this critical time, it is necessary to develop steps to mitigate the effects of Covid-19.
As has been the case with numerous other agencies, the Federal Maritime Commission (FMC) has undertaken a role to attempt to ameliorate some of the enormously disruptive effects on trade that have been caused by the Covid-19 pandemic. On March 31, the agency first opened Fact Finding Investigation No. 29 (FF No. 29) in an attempt to identify solutions for some of the issues. Additionally, Commissioner Rebecca Dye was appointed as the Fact Finding Officer with authority to establish one or more supply chain innovation teams.
The FMC had previously opened a formal investigation in Fact Finding No. 28 (FF No. 28) for the purpose of providing guidance as to what constitutes “just and reasonable practices” with respect to the assessment of demurrage, detention, and per diem charges by vessel operating common carriers and marine terminal operators.
At that time, the focus of Dye’s investigation was largely guided by the input she received from her innovation teams as well as the comments she received from the shipping industry. Based on the information gathered, Dye developed proposals to address demurrage and detention practices, including a proposed interpretive rule on demurrage and detention, 84 Fed. Reg. 50369-70 (Sept. 13, 2019). A final decision on that is expected soon.
Identifying Actions for Relief
As was the case with the demurrage/detention investigation, the innovation teams will consist of leaders from all commercial sectors of the U.S. international supply chain. The FMC provided notice April 6 that Dye and her innovation teams planned to commence work that week to identify what actions could provide the shipping industry with immediate relief from the disruptions caused by Covid-19.
With that end goal in mind, Dye has posed the following questions to each team member:
1. What can the FMC do to provide relief or assistance to mitigate negative impacts on the supply chain related to Covid-19?
2. What can companies involved in ocean cargo delivery do to respond to existing supply chain challenges and bottlenecks?
3. What can supply chain actors do to strengthen the overall performance of the American freight delivery system?
The scope and focus of the innovation teams will then be based on the responses provided. Hopefully, with the teams working together, some solutions may be found to at least temper the most harmful effects of this crisis.
All Stakeholders Included
The FMC has opened this topic up to all industry stakeholders. NVOCCs, as well as vessel operators, marine terminal operators, shippers and truckers have the opportunity to provide both comments and suggestions that can and should be considered.
It is highly likely, of course, that topics including force majeure, demurrage, detention, customs holds, chassis shortages and delays will be addressed, but given the diverse nature of the problems, the FMC is welcoming the participation of as many members of the industry as possible.
While the Covid pandemic is, hopefully, a once in a lifetime event, lessons learned from this would likely be translatable to other, more frequent, disruptive occurrences. Hurricanes, floods, major snowstorms, unresolved labor issues and inadequate port infrastructure all have contributed to significant congestion at the nation’s ports in the past and are likely to continue to do so in the future.
Whatever processes are ultimately adopted to address the current situation will hopefully inform the trade and help reduce disruptions from similar occurrences in the future.
This is an excellent opportunity, accordingly, for stakeholders in the shipping industry to present information regarding the challenges they are experiencing or have experienced due to the Covid-19 pandemic. Anyone wishing to participate can do so by submitting information and/or comments to Dye at the following email address: ff29@fmc.gov.