Currently, the United States of America is ranked as the largest producer of energy products – like Liquid Natural Gas (LGN) – while also serving as the second-largest agricultural trader globally. These ranks have been achieved thanks to an incredible push from producers as well as the implementation of policies that open foreign markets. Fortunately, as output exceeds domestic demand, export in both industries has hit a high and is only expected to grow.
In a time that should be full of excitement, there is still one thing standing in the way -- an extreme lack of vessels to support the export shipping volume.
A Call For Help
On May 4th, 2022, a letter from two U.S. senators was sent to Marc Bourdon, the Senior Vice-President at CMA CGM, one of the largest cargo carriers in the world. The letter detailed a lack of infrastructure at California ports and within international shipping companies, claiming that such lack directly causes export loss to the United States agricultural industry.
For example, the letter states:
“Agricultural commodities have been significantly hampered in exporting their products because of container and equipment shortages, canceled bookings, and inadequate receiving windows. According to the attached letter from several of California’s major agricultural producers, three out of four containers at U.S. ports are returning to Asia empty, resulting in a significant backlog of sold products in need of transportation. As a result of these delays, the California agricultural industry has lost $2.1 billion in exports between May and September 2021.”
The situation is only going to worsen as this plight – without some type of support – does not only apply to agriculture, but energy products and all other U.S. exports.
A Possible Solution
On May 16th, 2022, presenters addressing the Maritime Day Symposium argued that the United States needs to build and staff ships to help American exporters.
In the presentation entitled “Do U.S. Exporters Need New U.S. Ships,” Jim Patti, president of the International Propeller Club, mentioned that United States built vessels carrying agricultural goods and energy products could help export shortfalls immensely. Ideally, with more ships, the infrastructure issues expressed by countless exporters would dissolve. However, despite many within the symposium seeing the idea as positive, one issue was spoken about at great length -- it is very hard for United States carriers to make a profit when competing against companies from countries like China.
“U.S shipping companies are not there anymore because they could not compete with non-U.S. shipping companies. The companies that stay alive are protected by the Jones Act. That’s the extent of it … If I compare the U.S. way of running companies compared to Europe there is an extreme focus on quarterly profitability. Running a shipping company while focusing on quarterly profitability is a very unhappy mix.”
Not only do shipping companies from other countries offer lower rates, but they are also supported by their governments — which helps them focus less on profitability and more on functionality.
What is the Jones Act of 1920?
Put in place after a recession, the Jones Act (the “Act”) was meant to ensure that the United States maintained a large number of cargo ships to avoid being dependent on other countries. In theory, a good idea, but unfortunately, because the United States sold a large number of ships after WW2, the Act has led to a huge cost burden and an increase in dependency on foreign carriers.
That said, if the Act is rewritten and an investment by the United States to support modern shipbuilding practices is put into place, the disadvantages it faces against other countries could be minimized.
Would Coastal Shipping Services Help?
While rewriting the Jones Act to better utilize American ships could take some time, another immediate solution is coastal feeders between major ports like Oakland, L.A., and Long Beach. Brought up in various recent meetings, from the Maritime Day Symposium to reactions of the above-mentioned letter, the basic idea is simple — with transport support, exporters could potentially avoid congestion at ports by moving products to another. In turn, this helps exports stay on schedule and reduce missed departures. But, like many solution suggestions, this can only be done with the support of the government.
A Better Export Future
In the end, it is clear that something needs to be done to support United States exporters. What the exact line of action will be is still unknown, but conversations have started, and small steps are being made daily. Contact ClearFreight today to hear how our decades of experience and specialized supply chain solutions can help make logistics, even exporting, easier for you.