“The Biden administration on Friday again urged global ocean carriers to accept more export freight and restore service at underutilized West Coast ports to ease supply chain constraints and give U.S. agriculture companies a fair chance to sell their goods in overseas markets,” begins a FreightWaves story. This move is a variation on the administration’s strategy of claiming conference calls as governance. Instead of a call, it’s a letter from the secretaries of agriculture and transportation.
The problem, according to the letter, is that American agricultural firms are having a hard time exporting their products because of port congestion. The proposed solution is that Pete Buttigieg and Tom Vilsack “strongly encourage you [ocean carriers] to help agricultural shippers of U.S. exports by restoring services to the Port of Oakland and more fully utilizing available terminal capacity on the West Coast.”
There are a few issues with this approach. First, it was already happening before the letter was sent. From the East Bay Times on December 16, the same day the letter was sent: “Container traffic at the Port of Oakland is starting to pick up again amid the supply-chain chaos.” The story says that “2021 could be Oakland’s busiest year on record.”
But the story also said that was because imports were up: “Export volumes declined 9.4% due to lack of ships heading to foreign markets.” Just sailing more to Oakland, as the secretaries’ letter pleads, will not guarantee exporters access to ocean shipping.
Second, while no port is as congested as Los Angeles/Long Beach, the other ports on the West Coast aren’t exactly “underutilized,” as the secretaries contend. In addition to Oakland’s possible record-setting year, according to DHL’s most recent port-situation update (from December 16), “all Seattle/Tacoma terminals are operating at full capacity.” The update also notes that in Seattle, “chassis counts remain low due to the surge in imports.” The administration has kept in place a 250 percent tariff on chassis, which is no help to the situation in Seattle.
Fundamentally, exporters need empty containers. They fill those empty containers with their goods to be shipped overseas. Lots of empty containers are stuck in Los Angeles/Long Beach right now. They take up yard space, and many are sitting on chassis. Every chassis that is used to store an empty container is a chassis that cannot be used to move a full container.
The empty-container situation is getting worse. “There are now 71,000 on Los Angeles terminals or near-dock depots, up from 65,000 a month ago, with 60% dwelling nine days or more,” according to FreightWaves. All those containers sitting at the port are not being loaded with American exports, and they are needed back in Asia to accommodate the unprecedented surge in imports. As Business Insider put it, “The US’ biggest export this year was air.” Through October, 59 percent of shipping containers left American ports empty this year.
Getting these empty containers circulating again would greatly help importers and exporters alike. In the FreightWaves story about the secretaries’ letter, Harbor Trucking Association president Matt Schrap is credited with suggesting that empty containers be relocated to Oakland. “That would help ease the space crunch at marine terminals in the San Pedro Bay ports and give farm exporters access to the containers they desperately need,” the story says.
That makes sense, but it’s very difficult to do. We’re talking about 71,000 containers (plus tens of thousands more elsewhere in the country, but let’s just focus on Los Angeles for right now). Trucks can carry one at a time, and they are very fuel inefficient compared with other modes of transportation. Trains are more fuel efficient, but they can only carry a few hundred containers at a time, and rail capacity is vital for full containers as well.
Ships, on the other hand, can move thousands of containers at a time in a very fuel-efficient way. A few ships shuttling empty containers up and down the West Coast would be very helpful to ease the burden in Los Angeles. That’s the only way to put a significant dent in the empty container backup in a relatively short amount of time.
And it’s essentially illegal because of the Jones Act. Without the ability to operate port-to-port empty-container shuttles within the U.S., the ocean carriers (which are all foreign-owned) feel as if they have to take every opportunity they can to get empty containers back to Asia. Their customers are mostly not Americans, and they don’t really care all that much that American exporters are having a hard time accessing containers.
Nothing about the letter from Pete Buttigieg and Tom Vilsack changes any of that. Words on paper do not move empty containers. To make that easier, the federal government should waive and ultimately repeal the Jones Act, and it should eliminate the truck-chassis tariff so ports like Seattle can order more from major manufacturers. We absolutely should be using our other ports more, but just asking carriers to use them doesn’t mean that they will.