Preventing Another Supply Chain Groundhog Day
The Alliance for
Chemical Distribution
[email protected]
703-527-6223
Rising prices, long delays, and mounting backlogs are factors reminiscent of the 2020 shipping crisis. But businesses still experience some of the same challenges, which are, unfortunately, tracking well ahead of where we were during the pandemic. It’s imperative that we prevent another supply chain Groundhog Day.
Ongoing tensions in the Red Sea and Gulf of Aden have severely disrupted the economic transport of essential chemicals. Container ships are rerouted around South Africa’s Port of Good Hope because of pirates. The historic drought in the Panama Canal compounds these disruptions, making shippers anxious of what’s to come.
I recently testified before the Federal Maritime Commission (FMC) to warn about the implications of rising shipping rates and delays should these challenges not be resolved. The Alliance for Chemical Distribution (ACD) relies heavily on chemical imports and our members are starting to experience the impacts of these shipping challenges.
We recognize some increases in costs and transit times are justified and we want ocean carriers to ensure the safety of their employees, vessels, and cargo. However, they must also ensure their response does not damage the global marketplace.
Our members have grown concerned by the lack of communication from carriers about the location of their containers and potential for delays. In a world of 24/7 global communications and GPS tracking, this is unacceptable.
More than Necessary?
ACD members have also seen an uptick in shipment surcharges. While we understand the interwoven nature of global shipping means these disruptions will impact ocean shipping, we fear that current pricing shifts go beyond what is necessary and place a disproportionate cost burden on shippers.
Shippers are experiencing a significant increase in the spot rate market. More frustrating, carriers have invented new surcharge names, such as Emergency Freight Surcharges or Peak Season Surcharges, and placed them on shipments regardless of their destination and without clarifying how they determined these charges.
Following the historic profits made by carriers during the pandemic, Congress overwhelming passed the Ocean Shipping Reform Act, giving the FMC expanded oversight and power to regulate the ocean carrier community. However, carriers continue to do as they wish with little regard to the impact on businesses across the supply chain.
If we want to avoid another supply chain crisis and get out of this endless time loop of shipping challenges, a number of actions must take place:
1. The FMC must remain vigilant in overseeing special permission requests and surcharges levied by ocean carriers.
2. The FMC has the authority to address unreasonable surcharges, and must hold these carriers accountable.
3. The FMC must proceed with the Maritime Transportation Data Initiative to improve data transparency and cargo movements.
4. Congress must conduct oversight to once again force carriers to be held accountable for their actions.
We must not let the ocean carrier community use tensions in the Red Sea as an opportunity to financially benefit at the expense of the American supply chain, businesses, consumers, and ultimately, the U.S. economy.