Supply Chain Disruptions Impact Industry – Part 2 of 2

Supply chain disruptions continue to plague global trade and have a significant impact on movement of the 2021 crop. These issues have also affected your individual businesses as the cost for fertilizer, parts and equipment, energy and more has increased significantly and in some cases been difficult to get in a reasonable time frame. 

Today, three global alliances, made up entirely of foreign companies, control almost all of ocean freight shipping. These alliances—groups of ocean carrier companies that work together—control 80%+ of global container ship capacity and control 95% of the critical East-West trade lines1 that our industry, and California agriculture, relies on to transport goods to foreign markets.

The CWC has had continued engagement with the USDA and all levels of government to increase awareness of the challenges our industry is having as well as the projected losses, price declines and carry-out that our industry is facing just from supply chain disruptions alone. 

The CWC is also working collaboratively with other cooperators through the California Farm Bureau, the Agriculture Transportation Coalition and other related organizations to be part of the larger voice of California agriculture that’s facing these extraordinary challenges brought on by the pandemic.

At both the state and federal levels, task forces have been created to understand and address causes and potential solutions to the ongoing supply chain disruptions. Additionally, on February 28, 2022, the Biden administration announced that the Federal Maritime Commission (FMC) and the Department of Justice (DOJ) are forming a new joint initiative to promote competition in the ocean freight transportation system. Under the new initiative, the DOJ will provide the FMC with the support of attorneys and economists from the Antitrust Division for enforcement of violations of the Shipping Act and related laws2.

While the previous article in last month’s newsletter mentioned some of the actions already being taken at the federal level, below is a summary of those actions, as well as those of the State of California and other legislative bodies. This is not an exhaustive list but is designed to help provide insight into different ways the supply chain issues are being addressed. 

Many of these actions are long-term solutions that will not have an immediate effect on the challenges being faced for this year’s crop, and experts agree that these disruptions may continue through 2022 and possibly into 2023. However, the actions taken so far have started to have a positive effect on congestion at West Coast ports. 

State of California Efforts (Governor Newsom Administration):

• In the early days of the pandemic, then California Transportation Secretary David Kim authorized increased truck weight limits on the interstate system in California. Additionally, Caltrans has been permitting oversize agriculture truck operations on the non-Interstate State Highway System to mitigate worker retention issues in the Ag trucking industry. 

• October 2021: Governor Newsom signed an executive order directing state agencies to identify additional ways to alleviate congestion at the California ports (in coordination with the Biden administration’s Supply Chain Disruptions Task Force).

•  November 2021: California Department of Motor Vehicles began taking immediate action to tackle the commercial truck driving shortage and keep goods moving quickly between California’s largest ports and major distribution centers by doubling the capacity to conduct commercial driving tests.

• November 2021: Caltrans began to identify priority freight routes to be considered for temporary exemption of truck weight limits on the non-Interstate State Highway System. 

Federal Efforts (President Biden Administration):  

• October 2021: 
  • Announced beginning of 24/7 operations at the Ports of LA and Long Beach – points of entry for 40% of containers to the U.S. – to address bottlenecks.
  • A partnership was announced between California and the U.S. Dept. of Transportation (Emerging Partnership Agreement) which allows California to expedite work on a network of related projects that will help relieve congestion and allow for the movement of imports and exports.

• January 2022:
  • USDA Secretary Vilsack announced plans to increase capacity at the Port of Oakland through a new 25-acre “pop-up” site. Starting in March, this site should improve service for shippers of U.S.-grown agricultural commodities, including:
    • Quicker pickup of empty containers as the main terminal is bypassed 
    • Access to available equipment 
    • Fewer unpredictable congestion surcharges for trucks

• March 1, 2022:

• • At President Biden’s State of the Union Address, he discussed strengthening supply chains and promoting competition in the agricultural sector. 

Legislative Actions:

• Pilot program was initiated to allow drivers as young as 18 to obtain commercial driver’s licenses and move goods across state lines. The pilot program can accommodate up to 3,000 participants at a time and would be evaluated after 3 years. 
• H.R.3684 – Infrastructure Investment and Jobs Act, which became public law on November 15, 2021, provides $17 billion for ports and waterways. 
• H.R.4521 – America COMPETES Act of 2022 has passed the House but is still in process. It includes an amendment that requires the USDA Secretary to monitor U.S. food & agriculture supply chains and report to Congress with the findings. 
• H.R.4996 – Ocean Shipping Reform Act of 2021, introduced by California Congressional Representative John Garamendi, has passed the House but is still in process. The bill is designed to establish more regulation over private-sector shipping by:
  • Ensuring carriers do not unreasonably decline export cargo if it can be loaded safely, can arrive timely abroad, and is destined to a location to which the carrier is already scheduled. 
  • Requiring that fees imposed on exporters by the carriers for delays provide documented evidence. 

• H.R.5376 – Build Back Better Act has passed the House but is still in process. It would provide $600 million for the Maritime Administration to support supply chain resilience and increase port efficiency.