Uncharted Waters: Challenges Posed by Ocean Shipping Supply Chains (U.S. Senate Committee on Commerce, Science, and Transportation, Subcommittee on Surface Transportation, Maritime, Freight, and Ports)

Hearing	Uncharted Waters: Challenges Posed by Ocean Shipping Supply Chains
Committee	U.S. Senate Committee on Commerce, Science, and Transportation, Subcommittee on Surface Transportation, Maritime, Freight, and Ports
Date	December 7, 2021

 

Hearing Takeaways:

• The U.S.’s Current Shipping and Supply Chain Challenges: The hearing focused on how the U.S.’s ocean shipping system was currently experiencing significant delays and high prices largely as a result of the economic and travel disruptions stemming from the COVID-19 pandemic. Subcommittee Members and the hearing’s witnesses noted how these problems were creating broader supply chain issues. Subcommittee Ranking Member Deb Fischer (D-NE) noted how industry experts believed that these supply chain disruptions could persist into late 2022 or even into 2023.

  • Detention and Demurrage Fees: Detention and demurrage fees refer to the fees that ocean carriers impose on customers for either failing to pick up or failing to drop off their cargo in a timely manner. Several Subcommittee Members expressed concerns that these fees were being charged to companies and shippers that were unable to comply with pick up schedules through no fault of their own. Mr. Butler remarked however that detention and demurrage fees acted as a strong incentive to get parties to promptly pick up their cargo or to bring back their empty equipment. He further asserted that these fees did help to address supply chain delays.
  • Increased Shipping Costs and Limitations: Mr. Doyle testified that his company expected to face a 20 percent increase in costs when its long-term agreement with its largest supplier expires in April 2022. He attributed this expected increase to the fact that the supplier was facing higher logistics costs due to increased costs for shipping containers, storage and demurrage fees, and transportation. Mr. Krug mentioned how many of his company’s forwarder partners had indicated that containers that could be filled with American products were being returned across the ocean empty to be loaded again with goods coming into the U.S. He commented that this practice confined U.S. exports and limited new potential sales.
  • Supply Chain Management Challenges: Mr. Doyle testified that his company had been required to order and receive inventory in a manner other than just-in time over the previous 20 months. He noted how his largest supplier was significantly larger than his company, which meant that his company’s contract with its suppliers did not prevent the supplier from sending significantly more products than his company was able to receive. He stated that quoted lead times now were very inaccurate and mentioned that capital equipment purchases from both China and South Korea have been between 20 and 29 weeks beyond quoted expectations. 
  • Worker Shortages: Subcommittee Members and the hearing’s witnesses expressed concerns over current workforce shortages, which compounded existing shipping delays and supply chain issues. Subcommittee Democrats and Mr. Regan asserted that workers were not the cause of the current supply chain and shipping problems. They contended that current labor shortages were attributable to a failure of employers to provide sufficient incentives (including good wages, working conditions, and benefits) to attract and retain skilled workers. 
  • Impact on Customer Relations: Mr. Krug discussed how shipping problems had strained his company’s relationships with international partners and distributors that they had worked hard to build over the previous two decades. He expressed concerns that these strained relationships would lead these partners and distributors to seek out new suppliers.
  • Impact on Agricultural Products: Subcommittee Members and Mr. Krug highlighted how the U.S.’s current shipping challenges and increases in input costs were particularly impacting agricultural businesses. Sen. Jon Tester (D-MT) mentioned how the U.S. was losing about 22 percent of its agriculture exports due to current shipping challenges. Mr. Krug testified that the perishable nature of his company’s products had led his foreign customers to sometimes return shipments if they had been significantly delayed. 
  • Current Profitability of Ocean Carriers: Subcommittee Chairman Gary Peters (D-MI) discussed how ocean carriers had reported record profits throughout the COVID-19 pandemic as a result of increased prices for container shipments and increased demands for goods. He expressed concerns that these increased profits were coming at the expense of struggling businesses. Mr. Butler remarked that the current shipping price situation was unfamiliar to the ocean shipping industry and noted how the ocean shipping industry had operated at very thin margins prior to the pandemic. He asserted that the ocean shipping industry’s current profitability was purely the result of supply and demand.
• The Biden Administration’s Response to Shipping and Supply Chain Challenges: Subcommittee Members were divided on how the Biden administration was responding to the U.S.’s current shipping and supply chain challenges. Subcommittee Democrats and Mr. Regan applauded the Biden administration’s efforts to swiftly counter ocean shipping challenges through its issuance of Executive Orders (EOs), empowerment of the U.S. Federal Maritime Commission (FMC), and engagement with major ports. Subcommittee Republicans expressed concerns that the Biden administration was failing to fulfill its promises to expedite shipping and asserted that the administration should take additional actions to address the current shipping delays.
  • Criticism of Biden Administration’s Measurement of Vessel Backlogs: Full Committee Ranking Member Roger Wicker (R-MS) mentioned that while the Biden administration had claimed that the number of vessels waiting off of the Ports of Los Angeles and Long Beach was decreasing, he asserted that the Biden administration was simply employing a new counting methodology in order to support this claim. He stated that this new methodology obscured the true nature of the problem. Mr. Butler stated that the new methodology for assessing ship wait times was the result of a voluntary program that was set up by the shipping industry, the U.S. Coast Guard, and the Marine Exchange of Southern California. He asserted that this program was meant to bolster safety during the winter season through spacing out ships.
  • Impact of COVID-19 Vaccine Mandates: Full Committee Ranking Member Wicker also remarked that COVID-19 vaccine mandates could exacerbate the challenges facing the transportation sector. He noted how the trucking industry was estimating that the employer-based vaccination mandate currently under consideration could result in the loss of up to 37 percent of drivers for covered companies.
  • Holds on Biden Administration Nominees: Sen. Blumenthal noted how there had been several holds placed on President Biden’s nominees for several key U.S. Department of Transportation positions, which were hampering the Biden administration’s efforts to respond to current shipping and supply chain issues. He emphasized that Senate Republicans were responsible for these holds. Sen. Rick Scott (R-FL) indicated that he would maintain holds on all nominations to both the U.S. Department of Transportation and the U.S. Department of Commerce until the Committee held a hearing with the U.S. Secretary of Transportation and the U.S. Secretary of Commerce to examine the current shipping and supply chain problems.
  • Shipping Industry Policy Uncertainty: Mr. Butler remarked that conflicts between the Biden administration and Congress were providing ocean carriers with “mixed messages” on shipping policy. He noted that while the Biden administration was pressing ocean carriers to get their customers to pick up their cargo from ports, he stated that legislation under consideration would restrict the ability of ocean carriers to use detention and demurrage incentives to get cargo picked up. He also mentioned how the Biden administration was directing ocean carriers to put empty containers on outbound trips while legislation under consideration would require ships to load all export boxes before they could load empty containers. He noted how shipping companies did not run separate import and export ships and stated that an overloaded system would thus impact both importers and exporters.
• Proposed Solutions for Addressing these Challenges: Subcommittee Members and the hearing’s witnesses considered several policies meant to address the U.S.’s current shipping and supply chain problems. Mr. Butler remarked however that there were a limited number of actions that the U.S. government could take to address current supply chain problems. He stated that while government infrastructure investments were “absolutely critical” for improving supply chains over the long-term, he asserted that commercial actors would be primarily responsible for fixing the U.S.’s current supply chain issues in the near-term.
  • Building Inland Storage Capacity: Several Subcommittee Members expressed interest in leveraging inland storage facilities and inland ports to help reduce current port congestion. Mr. Regan mentioned how the Biden administration had provided port operators with more flexibility to use allocated funds to set up pop-up inland facilities. 
  • Using Federal Properties to Provide Inland Storage: Sen. Cynthia Lummis (R-WY) and Sen. Mike Lee (R-UT) expressed interest in converting existing federal properties into temporary storage facilities in order to reduce current congestion levels at U.S. ports. Mr. Butler remarked that a property’s value as a storage facility was dependent on the property’s location, ability to be secured, and ability to receive equipment. He stated that empty federal properties that possess the aforementioned qualities should be considered for use as temporary storage facilities.
  • Onshoring More Manufacturing Capacity: Several Subcommittee Democrats expressed interest in efforts to onshore more manufacturing within the U.S. and commented that such onshoring would help to address many of the U.S.’s current supply chain issues. Mr. Regan remarked that the U.S.’s over reliance on foreign manufacturers for critical supply chain items (including chassis and railcars) had made the U.S. supply chain significantly more susceptible to failure during the pandemic.
  • Increasing the Supply of Truck Chassis: Sen. Lee also discussed how the U.S. currently had a shortage of truck chassis and expressed interest in working to increase the amount of available truck chassis. Mr. Butler remarked that having more truck chassis would likely be beneficial. He stated however that terminal and port operators were more focused on improving the efficiency of existing equipment.
  • Improving the Truck Driver Certification Process: Full Committee Ranking Member Wicker (R-MS) and Sen. Lee expressed interest in expediting the processing of trucker credentials in order to address current port workforce challenges. Mr. Butler testified that he had not heard of slow credential processing as being an issue for obtaining port workers.
  • Providing Flexibilities under the Jones Act: Sen. Lee further expressed interest in providing temporary flexibilities under the Jones Act to help support the rerouting of cargo and/or the transferring of cargo. Mr. Regan contended that waiving the Jones Act would not create greater shipping opportunities between ports within the U.S.
  • Improving Access to International Markets for Rural Businesses: Sen. Amy Klobuchar (D-MN) mentioned how she had introduced the bipartisan Promoting Rural Exports Act of 2021, which would establish the Rural Export Center to assist rural businesses seeking to export their products.
  • Curbing Anticompetitive Behavior: Sen. John Thune (R-SD) and Sen. Klobuchar discussed their intention to introduce a U.S. Senate companion bill to the bipartisan Ocean Shipping Reform Act of 2021. They explained that this legislation would clarify the authority of the FMC in resolving disputes and curbing anticompetitive behavior. They expressed their hope that this legislation would increase the accessibility of the FMC to smaller shippers and provide the FMC with clearer authority to address unreasonable practices. They noted how the legislation would require the FMC to further define what constitutes unreasonable detention and demurrage practices while also establishing a separate streamlined compliant process to more efficiently resolve disputes.
• Long-Term Infrastructure and Supply Chain Investments: Subcommittee Members and the hearing’s witnesses expressed interest in making long-term investments to the U.S.’s infrastructure and supply chains. They stated that while these investments would better position the U.S. to respond to future economic disruptions, they acknowledged that these investments would have limited impacts on the U.S.’s current transportation and supply chain problems.
  • The Infrastructure Investments and Jobs Act: Subcommittee Members and the hearing’s witnesses highlighted how the recently enacted Infrastructure Investment and Jobs Act would strengthen the U.S.’s transportation system and supply chains through making investments in U.S. ports, airports, rails, and roads.
  • Build Back Better Act: Subcommittee Democrats also remarked that the Build Back Better Act currently under consideration would make additional investments to bolster the U.S.’s infrastructure and supply chain needs.

Hearing Witnesses:

1. Mr. John Butler, CEO, World Shipping Council 
2. Mr. Greg Regan, President of Transportation Trades Department, AFL-CIO 
3. Mr. Paul Doyle, CEO, Coastal Automotive 
4. Mr. Norman Krug, CEO, Preferred Popcorn

Member Opening Statements:

Subcommittee Chairman Gary Peters (D-MI):

• He mentioned how his state of Michigan’s small businesses were experiencing significant supply chain delays and problems, particularly related to ocean shipping.
  • He commented that these issues were subjecting small businesses and customers to higher prices and shipping delays.
• He stated that the ocean shipping network had gone from a system that was fast and cost effective to a system plagued by delays and “exorbitant” pricing practices.
  • He largely attributed these issues to the global economy’s uneven recovery from the COVID-19 pandemic and the resulting supply chain collapses.
• He expressed his interest in working to bolster the resilience of supply chains.
• He then recounted his 2019 report on the rising costs of prescription drugs and noted how the report had found that the U.S. would be ill-prepared to deal with significant supply chain disruptions.
  • He stated that the pandemic had shown this finding to be accurate and commented that the U.S. had been overly reliant on foreign suppliers for key health care supplies.
• He also discussed how the U.S. was currently experiencing a semiconductor chip shortage that was negatively impacting auto workers and manufacturers.
• He remarked that the aforementioned supply chain disruptions and shortages adversely impacted the U.S.’s national security, communities, workers, and families.
• He noted how ocean shippers were charging “skyrocketing” fees and penalties to U.S. businesses and stated that there were instances where ocean shippers had failed to fulfill their commitments to ship the products of small- and medium-sized businesses.
• He also mentioned how retailers had been subjected to significantly higher shipping costs in order to obtain products for their stores.
  • He added that many contract brokers had declined to honor their agreed upon prices.
• He discussed how U.S. agriculture businesses were routinely seeing their orders get rolled and noted that this rolling often occurred after these businesses were informed that they had already incurred substantial demurrage fees.
• He applauded the Biden administration’s efforts to swiftly counter these ocean shipping challenges through its issuance of EOs, empowerment of the FMC, and engagement with major ports.
  • He commented that these efforts were beginning to show signs of success and mentioned how retail business executives had recently told President Biden that supply chain conditions were showing some signs of improvement.
• He also stated that the recently enacted Infrastructure Investment and Jobs Act would help to ease inflationary pressures and strengthen supply chains through making “long overdue” investments in U.S. ports, airports, rails, and roads.
  • He added that the Build Back Better Act currently under consideration would further support U.S. families.
• He mentioned how the Committee had held multiple hearings on this topic and called for further Committee action.

Subcommittee Ranking Member Deb Fischer (R-NE):

• She remarked that the U.S.’s supply chain and transportation networks had experienced “immense” strains throughout the COVID-19 pandemic and stated that the U.S. would need to deal with these problems for the foreseeable future.
  • She noted how industry experts believed that these supply chain disruptions could persist into late 2022 or even into 2023.
• She lamented how Preferred Popcorn, a Nebraska-based business, had been unable to ship over one-third of its containers internationally in 2020 due to supply chain disruptions.
• She remarked that Preferred Popcorn’s shipping issues were not unique and mentioned how numerous Nebraska–based businesses had told her office about their own unique shipping issues.
  • She stated that these shipping issues had forced these businesses to send their workers home early and produce more of their products outside of the U.S.
• She also discussed how many U.S. consumers were concerned about their ability to purchase goods during the current holiday season and noted how grocery stores and retailers were experiencing inventory problems.
• She stated that while the recently enacted Infrastructure Investment and Jobs Act would provide “historic” investments into the U.S.’s freight system, she remarked that the legislation would not provide a short-term fix to the U.S.’s shipping and supply chain problems.
  • She expressed interest in exploring how shippers and carriers could help to alleviate bottlenecks across the U.S. supply chains.
• She lastly called on the Committee to hold additional hearings on the topic to explore how transportation operators and the Biden administration were working to address current supply chain challenges.

Full Committee Ranking Member Roger Wicker (R-MS):

• He remarked that freight and supply chain congestion posed significant challenges to U.S. manufacturers, retailers, consumers, and workers.
  • He commented that these challenges would become more pronounced during the holiday gift buying season.
• He stated that these transportation bottlenecks showed no indications of subsiding within the near-term and noted that high levels of freight congestion were expected “well” into next year.
• He discussed how the U.S. currently faced a shortage of port terminals and warehouse spaces, limitations on intermodal equipment, and workforce disruptions.
  • He commented that these issues made it more difficult for truckers and railroads to move containers.
• He remarked that COVID-19 vaccine mandates could exacerbate the aforementioned challenges facing the transportation sector.
  • He noted how the trucking industry was estimating that the employer-based vaccination mandate currently under consideration could result in the loss of up to 37 percent of drivers for covered companies.
• He expressed agreement with Subcommittee Ranking Member Deb Fischer’s (R-NE) call for the Committee to hold additional hearings on the supply chain with witnesses from the Biden administration and from land-based transportation operators.
• He then mentioned how he had led a recent letter that requested a briefing from the Biden administration on its plans to address the current supply chain issues.
• He noted that while the Biden administration had previously stated that it would keep the Ports of Long Beach and Los Angeles open 24/7 to address current supply chain issues, he indicated that a recent Washington Post report had found that this has yet to occur.
  • He commented that shortages of truckers and warehouse workers were making it difficult to staff ports on a 24/7 basis.
• He mentioned that while the Biden administration had claimed that the number of vessels waiting off of the Ports of Los Angeles and Long Beach was decreasing, he asserted that the Biden administration was simply employing a new counting methodology in order to support this claim.
• He also expressed his disappointment with the resistance to modernizing port and freight operations.
  • He suggested that automated terminals and trucks or new technologies could improve efficiency and transparency within the supply chain.
• He applauded the recent enactment of the Infrastructure Investment and Jobs Act and stated that the law would bolster the U.S.’s supply chains, which would in turn minimize future bottlenecks.
• He also discussed current legislative proposals under consideration to bolster the U.S.’s supply chains and transportation networks.
  • He mentioned his bill, the Facilitating Relief for Efficient Intermodal Gateways to Handle Transportation (FREIGHT) Act, which he commented would spur improvements to the U.S.’s freight transportation system, streamline the certification process for truck drivers, address unlawful shipping conduct, and provide oversight of transportation operations.
  • He also mentioned Sen. Marsha Blackburn’s (R-TN) Improving Memphis’ Supply Chain Act, which would incentivize a private sector-led chassis pool in Memphis, Tennessee.
• He further applauded Sen. Jerry Moran (R-KS) for leading a letter to the FMC that encouraged the Commission to engage with the ports and swiftly address any unjust or unreasonable aspects of the new dwell fees.

Witness Opening Statements:

Mr. John Butler (World Shipping Council):

• He remarked that the U.S. was currently experiencing unprecedented global port and supply chain congestion, which he attributed to the COVID-19 pandemic.
• He stated that ocean carriers had put every ship and every container that they could buy, charter, or repair into service and that the U.S.’s current shipping issues were not attributable to a lack of ships or containers.
• He asserted that the U.S. current shipping issuers were instead attributable to an inability for ships and containers to access ports.
• He discussed how the U.S. was experiencing an “import surge” and commented that landside infrastructure could not process all of these imports.
  • He added that the shift to e-commerce was exacerbating these import challenges.
• He remarked that the aforementioned issues were leading customers to use marine terminals, containers, and chassis as temporary storage facilities, which further reduced shipping and supply chain capacity.
• He stated that while the U.S. was currently experiencing significant supply chain issues, he asserted that the U.S. shipping system was moving a record amount of cargo.
• He then discussed how the U.S. government was providing ocean carriers with “mixed messages” on shipping policy.
  • He noted that while the Biden administration was pressing ocean carriers to get their customers to pick up their cargo from ports, he stated that legislation under consideration would restrict the ability of ocean carriers to use detention and demurrage incentives.
  • He also mentioned how the Biden administration was directing ocean carriers to put empty containers on outbound trips while legislation under consideration would require ships to load all export boxes before they could load empty containers.
  • He noted how shipping companies did not run separate import and export ships and commented that an overloaded system would impact both importers and exporters.
• He lastly stated that while there did not exist a “legislative silver bullet” to address the U.S.’s current shipping and supply chain issues, he asserted that federal policy could make the situation worse.
  • He cautioned Congress against considering legislative proposals that would empower the federal government to take a more robust role in running shipping and supply chain networks.

Mr. Greg Regan (AFL-CIO):

• He discussed how the current challenges facing the U.S.’s supply chain and freight networks were negatively impacting his labor union’s members.
  • He indicated that these union members included workers that directly engaged in freight transportation and those in industries being negatively impacted by supply chain chokepoints and delays.
• He remarked that the U.S. must acknowledge the longstanding structural issues that underlaid the U.S.’s current supply chain and shipping issues so that the U.S. would be better prepared to respond to future crises.
• He stated that the historic rise in cargo volume had stressed every component of the U.S.’s freight transportation network, including workers.
• He asserted that workers were not the cause of the current supply chain and shipping problems.
  • He contended that much of the current blame being directed towards workers for these problems was intended to undermine collective bargaining rights and further deteriorate safety and working conditions.
• He remarked that short-sighted industry practices and chronic underinvestment in supply chain infrastructure had rendered the U.S. supply chain incapable of meeting the “soaring” demand for goods.
• He stated that the lack of price elasticity among freight railroads had worsened the current supply chain challenges and discussed how the use of precision scheduled railroading (PSR) made it nearly impossible for railroads to respond to economic shocks or rapid changes in the flow of traffic.
  • He also mentioned how the freight railroad sector had slashed 20 percent of their workforce prior to the COVID-19 pandemic, which had limited the sector’s ability to respond to issues stemming from the pandemic.
• He contended that current labor shortages were attributable to a failure from employers to provide sufficient incentives (including good wages, working conditions, and benefits) to attract and retain skilled workers.
  • He stated that “blatant” worker misclassifications in the trucking industry had artificially suppressed wages and had made working conditions untenable.
  • He also stated that eroding workplace conditions were driving many workers out of the railroad sector.
• He then applauded the Biden administration’s response to the U.S.’s supply chain challenges and noted how the U.S. had experienced a 41 percent reduction in the number of containers sitting on U.S. docks for over nine days since the beginning of November.
  • He also stated that the on-shelf availability of goods at grocery and drug stores had effectively returned to pre-pandemic levels.
• He acknowledged that while ocean shipping costs remain high, he asserted that these costs were now showing signs of “meaningful” decrease.
• He remarked that federal policymakers must work to address the systemic supply chain problems.
  • He called on Congress and federal regulators to address the impacts that drastic reductions in the railway workforce and the degradation in service quality have had on U.S. supply chains.
  • He thanked Sen. Tammy Baldwin (D-WI) for introducing an amendment to the National Defense Authorization Act (NDAA) that would provide the U.S. Surface Transportation Board (STB) with more tools and authority to address bad behavior from the railroad industry.
• He also applauded the recent enactment of the Infrastructure Investment and Jobs Act for its investments in ports and railroads.
  • He recommended that the U.S. build upon this work and suggested that the U.S. consider investments to expand waterborne transportation alternatives though America’s Marine Highway.

Mr. Paul Doyle (Coastal Automotive):

• He asserted that the current challenges facing U.S. automotive manufacturers were unprecedented and testified that he had not seen similar challenges throughout his 33-year career in the industry.
• He stated that the U.S.’s automotive manufacturing problems did not have a single root cause.
  • He listed several causes for these problems, including the COVID-19 pandemic, semiconductor shortages, labor shortages, the Suez Canal blockage, increased trucking demand (which was driven by COVID-19 pandemic-related home shopping), enhanced and extended unemployment benefits, increasing material and wage costs, port shipping issues, and trucking infrastructure issues.
• He testified that his company, Coastal Automotive, had experienced a 90 percent drop in sales in April 2020 and stated that his company had been able to remain in business through clever management and Paycheck Protection Program (PPP) funds.
• He remarked that his company was now experiencing shipping delays and extended lead times on its imports from Greece.
• He also stated that his company expected to face a 20 percent increase in costs when its long-term agreement with its largest supplier expires in April 2022.
  • He attributed this expected increase to the fact that the supplier was facing higher logistics costs as a result of higher costs for shipping containers, storage and demurrage fees, and transportation.
• He discussed how his company had been required to order and receive inventory in a manner other than just-in time over the previous 20 months.
  • He noted how his largest supplier was significantly larger than his company, which meant that his company’s contract with its suppliers did not prevent the supplier from sending significantly more products than his company was able to receive.
• He stated that quoted lead times now were very inaccurate and mentioned that capital equipment purchases from both China and South Korea have been between 20 and 29 weeks beyond quoted expectations.
  • He noted that his company shipped to 30 different countries around the world and indicated that his company was regularly informed that trucks would not arrive on scheduled ship dates due to a lack of trucks and drivers.
• He testified that his company’s material costs as a percentage of sales will be 25 percent higher next year and his company’s labor costs will be 20 percent higher next year.
• He then stated that his company faced several challenges beyond global supply chain issues, including semiconductor shortages, raw material and labor cost increases, Section 301 tariffs on China, and Section 232 steel and aluminum tariffs.
• He specifically raised concerns over the prospects of a prolonged worker shortage and testified that his company was currently operating at between 10 percent and 15 percent below its required staffing levels.
  • He commented that this problem could become pronounced when demand rebounds.
• He stated that sickness, fear, continued state and federal pandemic relief, COVID-19 guidelines, and economic growth had caused “significant distress” to the labor market.
• He lastly discussed how the two major growth areas for the automotive industry were electric vehicles (EVs) and automated vehicles (AVs) and mentioned how the Infrastructure Investment and Jobs Act included a proposal to review the U.S. National Highway Traffic Safety Administration’s (NHTSA) safety standards.
  • He expressed support for this NHTSA review of safety standards.
• He asserted that his company’s current lack of profitability and cash undermined their ability to supply automotive companies with up-to-date innovations, provide better working conditions, provide worker training and development services, and maintain a sustainable business.

Mr. Norman Krug (Preferred Popcorn):

• He discussed how his company, Preferred Popcorn, had been able to grow largely as a result of the export market and noted how the export market had provided demand for his company’s product while the company had worked to grow the domestic market.
  • He commented that the Export–Import Bank of the United States (EXIM) had helped to enable his company to confidently export its products.
• He remarked that the COVID-19 pandemic had negatively impacted his company and noted how the closure of movie theaters had effectively eliminated his company’s largest customers.
• He stated that exports played a key role in keeping his company financially viable during the pandemic and indicated that shipping problems were now hampering his company’s ability to export their products.
  • He testified that these shipping problems had prevented his company from shipping 900 additional containers to their customers and had equated to a loss of sales worth more than $10 million.
• He also discussed how these shipping problems had strained his company’s relationships with international partners and distributors that his company had worked hard to build over the previous two decades.
  • He commented that these strained relationships would eventually lead to higher costs for consumers.
• He then noted how many of his company’s forwarder partners had indicated that many containers that could be filled with American products were being returned across the ocean empty to be loaded again with goods coming into the U.S.
  • He commented that this practice confined U.S. exports and limited new potential sales and remarked that small businesses needed these containers to be filled.

Congressional Question Period:

Subcommittee Chairman Gary Peters (D-MI):

• Chairman Peters asked Mr. Doyle to address whether onshoring more manufacturing within the U.S. would help the U.S. to address many of its current supply chain issues.
  • Mr. Doyle noted how his company was worth just $50 million while its main supplier was worth several billion dollars. He expressed serious doubts that his company could influence this supplier to move all of their operations to the U.S. given that his company was a relatively small customer of the supplier. He stated however that his company was working with its main supplier on ways that the supplier could move some of their operations to the U.S. He commented that the logistics costs associated with importing certain materials were not in the interest of either his company or its main supplier. He then discussed how 30,000 parts went into the manufacturing of a motor vehicle and noted how global supply chains had been developed to provide these parts. He stated that automotive manufacturers had optimized these supply chains to the minute, which meant that these manufacturers heavily depended on on-time deliveries. He expressed support for having the U.S. promote the onshoring of certain supplies and commented that having a single source of supplies often posed risks to supply chains.
• Chairman Peters expressed interest in working on policies that would enable U.S. companies to have domestic supply networks. He then discussed how ocean carriers had reported record profits throughout the COVID-19 pandemic as a result of increased prices for container shipments and increased demands for goods. He expressed concerns that these increased ocean shipping costs posed challenges for his state’s businesses. He also noted how many companies were having their shipments cancelled or rebooked for later dates, which forced them to incur significant amounts of detention and demurrage fees. He asked Mr. Butler to address how companies should deal with the aforementioned challenges and fees in light of recent record profits for ocean carriers.
  • Mr. Butler remarked that the current shipping price situation was unfamiliar to the ocean shipping industry and noted how the ocean shipping industry had operated at very thin margins prior to the pandemic. He asserted that the ocean shipping industry’s current profitability was purely the result of supply and demand. He then explained that there were two types of pricing in the ocean shipping industry: pricing under service contracts (which were long-term agreements between ocean carriers and their customers) and pricing under spot markets (which were ad hoc and short-term contracts between ocean carriers and their customers). He stated that the service contract rates were not going up as much as the spot market rates. He indicated that many shipping customers were now seeking to engage in service contracts in order to obtain more stable pricing and shipping capacity. He then discussed how ocean carriers that operated ships were not the only market participants. He noted how there were non-vessel operating common carriers (NVOCCs), which he explained operated as middlemen that bought space from ocean carriers and then resold the space. He commented that NVOCCs had driven some of the recent ocean shipping price increases.

Subcommittee Ranking Member Deb Fischer (R-NE):

• Ranking Member Fischer asked Mr. Krug to indicate how long it would take his company to ship one container from his farm to an international partner.
  • Mr. Krug indicated that it would normally take his company 37 days to ship their products from Nebraska to Tokyo, Japan. He testified that this same shipment now took between 60 days and 90 days, as well as an additional two or three months to get space on ships for the products. He commented that it therefore took an additional four or five months to ship his company’s products to Tokyo. He also stated that the perishable nature of his company’s products had led his foreign customers to sometimes return shipments if they had been significantly delayed.
• Ranking Member Fischer mentioned that agriculture producers had raised concerns to her that they were experiencing difficulties in accessing shipping containers and significant shipping delays for their perishable goods.
  • Mr. Krug affirmed Ranking Member Fischer’s description of the current agriculture shipping situation. He stated that these shipping issues and delays would permanently harm agriculture companies as they would cause end-consumers to look elsewhere for agriculture products.
• Ranking Member Fischer asked Mr. Krug and Mr. Doyle to indicate how much shipping costs for their companies had increased in 2021.
  • Mr. Krug testified that his company’s freight shipping costs were up 30 percent from a year ago. He stated that there were additional costs associated with prolonged storage and demurrage fees.
  • Mr. Doyle noted that his company was not freight responsible and that his company’s supplier was responsible for freight delivery. He stated however that his company was currently negotiating its next contract with its supplier and indicated that the supplier would incorporate these increased shipping costs into the contract. He testified that his company had been told that it should expect to experience a price increase of between 20 percent and 25 percent due to these increased shipping costs.
• Ranking Member Fischer then asked Mr. Krug to discuss the delays that his company was experiencing with regard to equipment and fertilizers and to address how these delays impacted the farm economy.
  • Mr. Krug noted how input costs were very high and mentioned how fertilizer costs were now three times greater. He stated that agricultural cooperatives were telling farmers to purchase products ahead of time, try to lock in prices, and obtain their products as soon as possible. He elaborated that expected supply shortages meant that farmers might not be able to obtain necessary items next year. He remarked that there were concerns that expected equipment and fertilizer shortages would lead to higher agriculture prices in 2022 and the following years.

Sen. Richard Blumenthal (D-CT):

• Sen. Blumenthal noted how there had been holds placed on President Biden’s nominees for several key U.S. Department of Transportation positions. He asked Mr. Regan to indicate whether these holds impacted the U.S.’s ability to address current supply chain delays.
  • Mr. Regan answered affirmatively. He specifically noted how the U.S. Federal Railroad Administration (FRA) Administrator position was currently unfilled.
• Sen. Blumenthal emphasized that Senate Republicans were responsible for these holds. He then asked Mr. Regan to discuss the sources of the U.S.’s current workforce shortage.
  • Mr. Regan remarked that the U.S. did not have a workforce shortage as much as it had a problem with job quality and pay. He mentioned how truckers were often misclassified. He further noted how owner-operated truckers were only paid for the period that they held cargo and were responsible for covering their own benefits and overhead. He commented that these trucking jobs were not very attractive, which accounted for the industry’s high staffing turnover rate. He also discussed how railroad jobs were becoming increasingly stressful and stated that this stress was driving many workers to prematurely leave the industry. He concluded that the U.S.’s current high number of job openings was largely attributable to job quality issues.
• Sen. Blumenthal then asked Mr. Regan to indicate whether employers could attract more workers through providing more skilled training.
  • Mr. Regan answered affirmatively. He also recommended that employers engage labor unions in order to ensure that the workers being brought in were skilled employees. He also stated that employers should emphasize that transportation jobs were safe jobs with good benefits.
• Sen. Blumenthal asked Mr. Regan to indicate whether improving the quality of jobs and providing skills training could enable the U.S. to effectively address its current high number of job vacancies.
  • Mr. Regan answered affirmatively. He then discussed how the current workforce issues in the trucking and railroad industries were different. He attributed the trucking industry’s workforce issues to worker misclassification and the attractiveness of the jobs. He attributed the railroad industry’s workforce issues to hedge funds and corporations that were imposing excessive pressures on railroad workers to meet certain targets. He stated that these pressures were driving many railroad workers out of the industry mid-career.
• Sen. Blumenthal then asked Mr. Krug to indicate whether his company’s popcorn was perishable.
  • Mr. Krug stated that his company’s popcorn could be stored for 18 months without perishing if proper measures were taken. He commented that improper storage conditions could reduce the shelf life of his company’s popcorn.
• Sen. Blumenthal asked Mr. Krug to indicate whether his company provided shippers with recommendations on how to properly transport the company’s popcorn.
  • Mr. Krug remarked that his company communicated to shippers popcorn transportation protocols as part of their required documents. He also stated that his company communicated popcorn storage protocols to their customers.
• Sen. Blumenthal asked Mr. Krug to discuss how the COVID-19 pandemic had impacted the popcorn industry.
  • Mr. Krug remarked that the pandemic had adversely impacted the popcorn industry. He noted how movie theaters and stadiums had been shut down in response to COVID-19, which had eliminated some of the popcorn industry’s greatest customers. He noted however increases in grocery store popcorn sales had helped to offset the significant sales reduction in the live events market. He also mentioned how increases in ready-to-eat and microwave popcorn markets had helped to offset losses in the bulk and export popcorn markets.

Full Committee Ranking Member Roger Wicker (R-MS):

• Ranking Member Wicker mentioned his bill, the FREIGHT Act, which he stated would spur improvements to the U.S. freight transportation system. He asked Mr. Butler to indicate whether the FREIGHT Act would be helpful.
  • Mr. Butler stated that the FREIGHT Act would likely be helpful. He expressed support for legislative proposals that would build up infrastructure and improve information flows. He indicated that his concerns related to certain proposed amendments to the Shipping Act of 1984.
• Ranking Member Wicker asked Mr. Butler to identify problematic legislative proposals currently under consideration.
  • Mr. Butler mentioned how a legislative proposal from the U.S. House of Representatives would require carriers to provide adequate equipment to all parties that seek to ship goods. He noted how the same proposal would require carriers to put exports on a ship before they could put on any empty containers for repositioning on the ship. He asserted that these two requirements would be very difficult to balance during the current period.
• Ranking Member Wicker then asked Mr. Butler to indicate whether it would be helpful to streamline the certification process for truck drivers.
  • Mr. Butler remarked that the trucking industry would be better suited to opine on the merits of such streamlining. He stated however that such streamlining would likely be beneficial if it were to maintain existing safety standards and make it easier for people to join the trucking workforce.
• Ranking Member Wicker then asked Mr. Butler to clarify whether dwell fees encompassed both detention and demurrage fees.
  • Mr. Butler noted how people had used the phrase “dwell fees” to describe fees under consideration on the West Coast. He commented that these fees were essentially demurrage fees because they would be imposed on parties that failed to pick up their cargo in a timely manner.
• Ranking Member Wicker asked Mr. Butler to indicate whether demurrage fees were adding to the cost of goods. He also asked Mr. Butler to indicate whether demurrage fees were being charged to companies and shippers that were unable to comply with pick up schedules through no fault of their own. He further asked Mr. Butler to indicate whether there existed a solution to this problem.
  • Mr. Butler mentioned how the FMC had recognized that detention and demurrage fees acted as a strong incentive to get parties to promptly pick up their cargo or to bring back their empty equipment.
• Ranking Member Wicker interjected to ask Mr. Butler to indicate whether detention and demurrage fees were helping to address existing supply chain delays.
  • Mr. Butler stated that these fees did help to address supply chain delays because the fees provided an incentive for parties to keep their equipment moving. He noted how all parties were seeking to optimize their pieces of the supply chain. He commented that the absence of detention and demurrage fees would lead parties to leave their products on ports at no charge, which would slow down supply chains.
• Ranking Member Wicker then asked Mr. Butler to comment on the veracity of media reports that the Biden administration was merely altering their counting methodology in order to understate current ship wait times.
  • Mr. Butler stated that the new methodology for measuring ship wait times was the result of a voluntary program that was set up by the shipping industry, the U.S. Coast Guard, and the Marine Exchange of Southern California. He asserted that this program was meant to bolster safety during the winter season through spacing out ships.
• Ranking Member Wicker interjected to comment that these ships were still causing supply chain delays. He then asked Mr. Krug to indicate whether his company had been able to reship its popcorn that had been returned due to excessive shipping delays.
  • Mr. Krug indicated that his company had been able to recondition and reuse their popcorn that had been returned.

Sen. Tammy Baldwin (D-WI):

• Sen. Baldwin discussed how shortages in shipping containers, chassis, and truck trailers had all contributed to the U.S.’s current supply chain problems and mentioned how her state of Wisconsin was a key manufacturer of these products. She asserted that the decline of the U.S.’s manufacturing capacity had been overlooked and commented that this decline had rendered the U.S. unprepared to respond to the problems created by the COVID-19 pandemic. She mentioned how she had introduced the Supply Chain Resiliency Act, which would provide assistance for addressing supply chain bottlenecks through increasing domestic production. She indicated that she was working to ensure that similar support for domestic supply chains would be included within the Build Back Better Act. She asked Mr. Regan to address how increasing the domestic production of containers, chassis, and truck trailers would reduce current supply chain bottlenecks. She further asked Mr. Regan to indicate the level of emphasis that Congress should put on Buy American provisions in upcoming legislation.
  • Mr. Regan remarked that the U.S.’s over reliance on foreign manufacturers for critical supply chain items (including chassis and railcars) had made the U.S. supply chain significantly more susceptible to failure during the pandemic. He asserted that the U.S. should make increasing its domestic manufacturing capacity a priority. He also stated that there were currently many emerging technologies coming to market (e.g., EVs) and contended that smart investments and policies could help to ensure that the U.S. would become a leader within these emerging areas.
• Sen. Baldwin then remarked that the current supply chain challenges underscored the need for structural changes to the U.S. freight rail system. She mentioned how STB Chairman Martin Oberman had raised concerns over how job cuts had negatively impacted the railroads and noted how the U.S. railroad industry had cut about 30 percent of its workforce since 2014. She mentioned her amendment to the NDAA that would direct the STB to develop standards and guidance related to their common carrier obligations. She indicated that this amendment would require the STB to consider workforce reductions and infrastructure maintenance by railroads. She asked Mr. Regan to address how these railroad job cuts were impacting the ability of railroads to provide reasonable service and satisfy their common carrier requirements.
  • Mr. Regan discussed how railroads were less flexible due to the decrease in workforces and the reduction in equipment. He commented that this dynamic provided shippers with limited railroad shipping options. He contended that the STB needed additional tools and authorities to ensure that railroads were satisfying their common carrier obligations.

Sen. Jon Tester (D-MT):

• Sen. Tester mentioned how his own family farm was currently experiencing increased input costs. He asked Mr. Krug to indicate how much of the current cost increases for fertilizers and chemicals were attributable to shipping costs.
  • Mr. Krug stated that he did not know the precise extent to which increases in shipping costs were responsible for increases in fertilizer and chemical costs. He noted how shipping costs involved a combination of input costs, including fuel. He also predicted that his company was more likely to feel the impacts of increased input costs in 2022.
• Sen. Tester then mentioned how the U.S. was losing about 22 percent of its agriculture exports due to current shipping challenges. He noted how the U.S. currently had more imports coming into the U.S. than exports leaving the U.S. He commented that this dynamic should mean that exports would have ample empty space on outbound ships. He asked Mr. Butler to explain why U.S. producers were unable to capitalize off of this empty space on outbound ships.
  • Mr. Butler first noted that the 22 percent figure was from an Agriculture Transportation Coalition poll. He stated that he could not speak to the poll’s veracity. He then remarked that both importers and exporters were experiencing difficulties in their efforts to move their goods efficiently. He noted how the U.S.’s import-to-export ratio was traditionally 2:1. He stated that the U.S.’s current import-to-export ratio was 3:1. He remarked that the U.S.’s greatest challenge was the imbalance between imports and exports and the difficulties associated with keeping all aspects of the shipping system in motion.
• Sen. Tester mentioned how the Infrastructure Investment and Jobs Act included funding to support shipping and expressed his interest in working to deploy this funding. He then expressed agreement with Mr. Regan that the U.S. had an opportunity to increase domestic manufacturing. He raised concerns over the U.S.’s overreliance on foreign countries for its critical manufacturing needs. He asked Mr. Doyle to identify his ideal policies for addressing the U.S.’s current supply chain problems.
  • Mr. Doyle remarked that the U.S. should urgently work to address the U.S.’s current supply chain problems. He commented that the FREIGHT Act would be beneficial in addressing these problems. He then stated that the U.S. should upgrade its infrastructure in order to support long-term manufacturing goals. He commented that the Infrastructure Investment and Jobs Act would support these efforts.

Sen. Rick Scott (R-FL):

• Sen. Scott discussed how the U.S.’s current supply chain problems were harming families and small businesses. He contended that the Biden administration was exacerbating these problems through its imposition of “burdensome” regulations. He criticized the U.S. Secretary of Transportation and the U.S. Secretary of Commerce for not doing more to address supply chain issues and called on the Committee to hold an oversight hearing on the issue with the two secretaries. He indicated that he would maintain holds on all nominations to both the U.S. Department of Transportation and the U.S. Department of Commerce until such a hearing were to occur. He asked Mr. Butler to indicate whether the U.S. Department of Transportation had a significant impact on shipping and the global supply chain.
  • Mr. Butler remarked that there were a limited number of actions that the U.S. government could take to address current supply chain problems. He stated that while government infrastructure investments were “absolutely critical” for improving supply chains over the long-term, he asserted that commercial actors would be primarily responsible for fixing the U.S.’s current supply chain issues.
• Sen. Scott then recounted how his state of Florida would prepare for gas demand surges prior to hurricanes during his time as the state’s governor. He noted how these preparation efforts included the relaxing of regulations and the use of highway patrols to support the distribution of gas tanker trucks. He remarked the Biden administration was failing to take similar actions with regard to the U.S.’s current supply situation. He then asked Mr. Krug to indicate how many employees each of their companies have.
  • Mr. Krug indicated that his company maintained about 80 employees within the U.S. and another 50 employees in Mexico. He stated that all of his company’s employees were essential. He thanked the PPP for enabling his company to retain these employees during the COVID-19 pandemic.
• Sen. Scott asked Mr. Krug and Mr. Doyle to indicate whether regulations requiring businesses to treat non-essential employees differently were sensible.
  • Mr. Krug commented that such regulations were not sensible. He noted how his state of Nebraska had a low unemployment rate and stated that the U.S. ought to support those in the workforce.
  • Mr. Doyle expressed agreement with Mr. Krug’s response. He testified that his company’s current problem was not having enough workers and stated that his company needed to focus on attracting prospective workers.

Sen. Raphael Warnock (D-GA):

• Sen. Warnock discussed how the U.S.’s current supply chain problems impacted both consumers and businesses. He noted how his state of Georgia had been able to secure $8 million from the federal government to help alleviate congestion at the Port of Savannah. He indicated that these funds would enable the Georgia Ports Authority to partner with railroads to convert existing inland facilities into pop-up container yards. He asked Mr. Regan to elaborate on how investing in pop-up facilities would help to relieve dockside congestion and help to move vessels in and out of ports more quickly.
  • Mr. Regan stated that pop-up facilities played an important role in terms of addressing the current dearth of container storage areas. He mentioned how the Biden administration had provided port operators with more flexibility to use allocated funds to set up pop-up facilities.
• Sen. Warnock stated that pop-up facilities had played a beneficial role in addressing port congestion issues. He then noted how Mr. Butler had remarked that the lack of landside capacity at U.S. ports was one of the causes for the current port congestion issues. He asked Mr. Butler to indicate whether increased federal investments in port and multimodal freight infrastructure would help to ease congestion and help to build up necessary capacity for handling increases in ocean shipping traffic over the long-term.
  • Mr. Butler remarked that increased investments in port and multimodal freight infrastructure would have a beneficial impact over the long-term. He contended that the U.S.’s short-term port congestion issues were operational in nature and commented that all parts of the supply chain must work to address these issues. He stated that bolstering each part of the supply chain through investments would make the supply chain better able to respond to congestion problems.
• Sen. Warnock mentioned how he had worked to support the Georgia Ports Authority’s successful Infrastructure for Rebuilding America (INFRA) grant for $47 million to build an inland port. He also mentioned how he had advocated for increased funding for port projects and multimodal grant projects within the Infrastructure Investment and Jobs Act. He expressed his interest in working with the witnesses and the Biden administration to deploy Infrastructure Investment and Jobs Act funding to his state of Georgia as soon as possible.

Sen. John Thune (R-SD):

• Sen. Thune remarked that the U.S. was currently experiencing a supply chain “crisis” and highlighted how these supply chain issues were negatively impacting agricultural producers. He mentioned how he planned to introduce a U.S. Senate companion bill to the bipartisan Ocean Shipping Reform Act of 2021. He explained that this legislation would clarify the authority of the FMC in resolving disputes and curbing anticompetitive behaviors. He expressed his hope that this legislation would increase the accessibility of the FMC to smaller shippers and provide the FMC with clearer authority to address unreasonable practices. He then asserted that U.S. ports were in need of modernization and transparency. He stated that the U.S.’s failure to invest in terminal automation and port efficiency initiatives (such as data sharing) would compound existing problems and result in long vessel wait times. He also expressed support for the FREIGHT Act. He then asked Mr. Krug to indicate whether the Ocean Shipping Reform Act of 2021’s provision of enforcement authority to the FMC to address unreasonable practices would help to support his company’s ability to deliver its products globally.
  •  Mr. Krug commented that the Ocean Shipping Reform Act of 2021’s provision of enforcement authority to the FMC appeared beneficial.
• Sen. Thune then asked Mr. Krug to provide suggestions for easing the movement of containers within the U.S. once they have left the ports.
  • Mr. Krug remarked that good communication between shippers and companies was very important and noted how such communication helped to reduce demurrage charges and warehouse overfills.
• Sen. Thune mentioned how the Ocean Shipping Reform Act of 2021 would require the FMC to further define what constitutes unreasonable detention and demurrage practices while also establishing a separate streamlined compliant process to more efficiently resolve disputes. He asked Mr. Doyle to indicate whether improvements to the complaint process and better guidance from the FMC on what constitutes an unreasonable detention or demurrage charge would help to address the challenges faced by his company.
  • Mr. Doyle stated that his company was not directly responsible for detention and demurrage fees because their contracts did not hold them freight responsible. He commented that while Sen. Thune’s proposed legislation appeared logical, he remarked that his company’s situation made him ill-prepared to opine on the legislation.
• Sen. Thune asked Mr. Butler to comment on the Ocean Shipping Reform Act of 2021’s proposed provisions.
  • Mr. Butler remarked that having better dispute resolution mechanisms would likely benefit all parties. He stated however that the Ocean Shipping Reform Act of 2021 contained certain provisions relating to certification that were problematic. He expressed his organization’s willingness to work with Sen. Thune on improving these provisions.

Sen. Amy Klobuchar (D-MN):

• Sen. Klobuchar discussed how increasing transportation costs had particularly impacted agricultural exports. She stated that numerous actions were needed to address the current supply chain issues, including infrastructure investments, shipping industry reforms, and workforce development. She noted that while her state of Minnesota’s agriculture producers had experienced significant declines in exports and sales during the COVID-19 pandemic, she indicated that ocean carriers had reported record profits during this same period. She mentioned how Mr. Krug had asserted that his company was losing its ability to compete in the global market due to shipping challenges. She asked Mr. Krug to indicate whether the FMC needed to take additional actions in order to protect competition.
  • Mr. Krug remarked that the inability of U.S. companies to ship their products would lead end-users to seek out other product sources.
• Sen. Klobuchar then noted how it currently costs seven times more to ship a product from California to China than to ship that same product from China to California. She asked Mr. Regan to discuss the challenges associated with moving freight on land (particularly with transporting empty containers).
  • Mr. Regan first stated that domestic manufacturing of containers would help the U.S. to better meet its container supply needs. He also contended that the FMC needed to have the authority to investigate and oversee the shipping industry.
• Sen. Klobuchar then mentioned how the Port of Duluth was the largest and busiest port of the Great Lakes. She noted however that her state of Minnesota had deferred building a portion of the port’s interchange because of high construction costs. She mentioned how the Port of Savannah was using inland ports to hold overflow containers. She asked Mr. Regan to discuss the importance of inland ports for relieving some of the congestion from the coastal areas.
  • Mr. Regan called the inland ports “extremely important.” He discussed how funding issues often hampered the development of inland ports and intermodal facilities. He expressed his optimism regarding the Infrastructure Investment and Jobs Act’s funding for port infrastructure and commented that this funding would help to support the U.S.’s long-term infrastructure needs.
• Sen. Klobuchar then noted how rural businesses were often located far from transportation hubs, which made it difficult for these businesses to access international markets. She mentioned how she had introduced the bipartisan Promoting Rural Exports Act of 2021, which would establish the Rural Export Center to assist rural businesses seeking to export their products. She asked Mr. Krug to discuss the importance of providing rural businesses with increased access to foreign markets.
  • Mr. Krug recounted how the paving of a road near his company had played a significant role in terms of providing his company access to global markets. He expressed support for efforts to improve transportation access for rural businesses.

Sen. Cynthia Lummis (R-WY):

• Sen. Lummis asked Mr. Butler to indicate whether there existed any regulatory barriers preventing ocean carriers from operating additional sweeper ships that would help to alleviate the excess container capacity at ports.
  • Mr. Butler stated that there did not currently exist regulatory barriers that prevented ocean carriers from operating additional sweeper ships. He testified that his organization’s members were working diligently to clear out empty containers. He noted however that there were provisions in legislative proposals under consideration that would require carriers to load all export containers before they could take any empty containers. He criticized these requirements and asserted that these requirements would slow down the shipping process.
• Sen. Lummis then asked Mr. Butler to address whether increased data transparency for port operations would be beneficial in terms of reducing port congestion.
  • Mr. Butler remarked that better communication at ports would help to improve the fluidity of the shipping system and stated that the private sector was actively working to improve such communication. He commented however that he was uncertain as to what the federal government’s exact role should be in facilitating this communication.
• Sen. Lummis asked Mr. Butler to explain how the private sector coordinated its communications at ports.
  • Mr. Butler noted how ocean carriers communicated with the terminals that they were planning to call while the carriers were at sea. He also indicated that the ocean carriers communicated with inland transportation providers. He remarked that there already existed significant communication between various shippers and ports. He stated however that increasing cargo volumes necessitated the improvement of communication and information sharing capabilities.
• Sen. Lummis asked Mr. Butler to clarify whether he was asserting that the federal government had no role to play in improving communications amongst shipping system participants.
  • Mr. Butler commented that the federal government might have a role to play in encouraging the exchange of information. He remarked however that there did not need to exist a federal system for supporting communications amongst shipping system participants.
• Sen. Lummis then mentioned how she had written a letter to President Biden that outlined actions that the Executive Branch could take to help alleviate the U.S.’s current supply chain issues. She noted that one of the recommendations was to explore using federal properties for temporary storage for excess containers. She asked Mr. Butler to opine on the viability of this recommendation.
  • Mr. Butler remarked that a property’s value as a storage facility was dependent on the property’s location, ability to be secured, and ability to receive equipment. He stated that empty federal properties that possess the aforementioned qualities should be considered for use as temporary storage facilities.
• Sen. Lummis asked Mr. Regan to discuss the Port of Savannah’s experience with establishing offsite overflow container storage areas. She also asked Mr. Regan to indicate whether other ports should consider establishing similar off-site overflow container storage areas.
  • Mr. Regan noted how the Port of Savannah’s establishment of offsite overflow container storage areas had addressed some of their bottleneck issues. He mentioned how the Port of Savannah had left over money from federal grants and was provided with flexibility to use this money to address their problems as they saw fit. He commented that other ports might not view establishing offsite overflow container storage areas as necessary and might prioritize other approaches for addressing their congestion issues. He commended the Biden administration for providing ports with flexibility to use federal funds as they saw fit for addressing their unique challenges.
• Sen. Lummis expressed interest in identifying actions that Congress can take to alleviate the U.S.’s current supply chain problems.

Full Committee Chairman Maria Cantwell (D-WA):

• Chairman Cantwell noted how the U.S.’s current infrastructure spending constituted a very low percentage of its gross domestic product (GDP) and stated that the Infrastructure Investment and Jobs Act would boost this percentage. She commented that this increased infrastructure spending would be needed to support supply chains and shipping capabilities. She then discussed how her state of Washington’s economy was heavily dependent on exports and noted how current port congestion was hampering the U.S.’s ability to export products. She expressed interest in how ports were currently working to move excess containers to other locations in order to partially relieve this congestion. She asked the witnesses to identify other actions that the U.S. should take to expedite these container relocations. She also asked the witnesses to identify actions that the U.S. should take to support rail transportation.
  • Mr. Butler noted how ports were naturally limited in terms of their ability to physically expand and asserted that it was therefore imperative to use the space at ports as efficiently as possible. He stated that moving activities off of the port terminals provided a buffer that enabled ports to better transport items. He mentioned how there were currently efforts underway to get importers to pick up their cargo and find other locations to store the cargo. He commented that the current saturation across all elements of the supply chain was unprecedented. He also discussed how the Biden administration and other actors were pressuring ocean carriers to move out empty containers in order to relieve port congestion. He expressed his interest in working with Congress on legislation that recognized the importance of both moving exports and repositioning empty containers.
• Sen. Cantwell expressed interest in working to support the movement of empty containers. She stated that she would take the responses to her questions on rail transportation for the hearing’s record and yielded back the remainder of her question period time.

Sen. Mike Lee (R-UT):

• Sen. Lee noted how e-commerce sales had spiked abruptly during the COVID-19 pandemic’s onset and stated that this spike had created problems for the U.S.’s supply chain infrastructure. He mentioned how these problems involved truck driver shortages, outdated scheduling technologies, port concentration, lack of container storage capacity, port-labor difficulties and shortages, and freight equipment scarcities. He remarked that these supply chain issues did not only impact coastal states and discussed how these issues were adversely impacting his state of Utah’s businesses and consumers. He stated that there existed temporary and immediate actions that the U.S. should take in order to address these supply chain issues. He mentioned how he had introduced the Surpassing Temporary Obstructions at Ports and Guaranteeing Resources to Increase the Nation’s Commercial Health (STOP the GRINCH) Act, which included several temporary and immediate actions for addressing the current supply chain crisis. He then mentioned how Mr. Butler’s testimony had discussed how the U.S. lacked container storage capabilities and how the U.S.’s landside container storage capacity could not keep pace with the volume of imported cargo. He noted that while his state of Utah was constructing an inland port to bolster the U.S.’s container storage capacity, he acknowledged that this construction would take time. He asked Mr. Butler to indicate whether the temporary use of U.S. Bureau of Land Management (BLM) managed lands to store overflow containers could help alleviate current landside capacity challenges.
  • Mr. Butler remarked that temporary inland storage was currently being considered as a tool for addressing landside capacity challenges. He stated however that the suitability of inland storage facilities was heavily dependent on a multitude of factors, including location and the ability to be secured. He commented that federal lands that could provide suitable inland storage would be helpful in addressing the current overflow of containers.
• Sen. Lee then discussed how the U.S. currently had a shortage of truck chassis. He asked Mr. Butler to indicate whether increasing the amount of available truck chassis would help to alleviate the U.S.’s current shipping backlogs.
  • Mr. Butler remarked that having more truck chassis would likely be beneficial. He stated however that terminal and port operators were more focused on improving the efficiency of existing equipment.
• Sen. Lee also asked Mr. Butler to indicate whether expediting the processing of credentials under the Transportation Worker Identification Credential (TWIC) program would help to address current port workforce challenges.
  • Mr. Butler testified that he had not heard of slow credential processing as being an issue for obtaining port workers.
• Sen. Lee stated that he had heard that slow credential processing was making it difficult to obtain port workers. He indicated that the STOP the GRINCH Act would temporarily enable the storage of overflow containers on federal lands, increase the amount of available truck chassis, and expedite the processing of credentials under the TWIC program. He then asked Mr. Butler to indicate whether cargo was currently being rerouted to less congested ports. He also asked Mr. Butler to identify any potential impediments that might prevent cargo from being rerouted.
  • Mr. Butler remarked that cargo rerouting was currently occurring. He stated however that the rerouting of cargo often created new problems. He noted that the ports that receive the rerouted cargo might have worse infrastructure and be further away from customers. He concluded that any rerouting of cargo must therefore be done in a thoughtful manner and on a limited basis.
• Sen. Lee asked Mr. Butler to indicate whether temporary flexibilities under the Jones Act could help support the rerouting of cargo and/or the transferring of cargo.
  • Mr. Butler indicated that his organization had members that were subject to the Jones Act and members that were not subject to the Jones Act. He stated that his organization therefore maintained a policy of not taking positions on the Jones Act.
• Sen. Lee also discussed how port depth issues often hampered the rerouting of ships.
  • Mr. Regan stated that waiving the Jones Act would permit short sea shipping. He mentioned how his labor union had developed a proposal to establish a national maritime highway that would facilitate such short sea shipping. He stated that the STOP the GRINCH Act’s proposal failed to address the main impediment to establishing a national maritime highway, which was the problem of double taxation. He contended that waiving the Jones Act would not create greater shipping opportunities between ports within the U.S.
• Sen. Lee expressed disagreement with Mr. Regan’s comments and asserted that Jones Act waivers would make it easier to reroute cargo.

Subcommittee Chairman Gary Peters (D-MI):

• Chairman Peters expressed interest in working to move cargo to less busy ports and contended that the U.S. could make greater use of the Great Lakes ports. He commented that the Great Lakes ports could play a key role in transporting cargo into the central U.S. He noted however that Great Lakes ports were held to different standards than other ports around the U.S. He asked Mr. Regan to address how smaller seaports could support the U.S.’s shipping system.
  • Mr. Regan remarked that smaller seaports could play an important role in improving the U.S.’s abilities to endure supply chain crises and move goods. He stated that increased investments in smaller ports would enable these ports to receive larger vessels and transport cargo to rail and truck facilities. He asserted that adequate intermodal facilities were key to bolstering the U.S.’s broader shipping capacity.
• Chairman Peters stated that the industrial Midwest possessed robust intermodal capacity.