On the supply chain and freight fluidity: Enforcement, not reformation
It’s not hard to guess the catalyst that sparked the recent House-approved Ocean Shipping Reform Act (H.R. 4996), its expected companion bill currently under development in the Senate, and a smattering of other supply-chain-related bills working their way through Congress. Here’s a hint: legislators are drawn to this six-months-long-reported issue and are seeking to instill reforms to both prevent reoccurrences and protect U.S. consumers and businesses. The answer is obviously supply chain disruptions – so what do we do?
Notwithstanding a genuine appreciation for Congress’ concerns, seaports are not convinced that new regulations curtailing freight fluidity charges serve the public interest. First, seaports support strengthening the Federal Maritime Commission’s (FMC) mandate, coupled with stepped-up funding, which will enable the agency to execute its mission surgically and expeditiously, and address any presumed unfair or deceptive practices. This, in particular, is a foremost and legitimate concern for bipartisan congressional supporters of the Ocean Shipping Reform Act. However, seaports encourage Congress to avoid burdensome new regulation without a full understanding of the consequences to freight movement.
The FMC is the independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and consumers. FMC’s mission is to “ensure a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.”
To deliver on its mission, Congress provides funding to the FMC of nearly $29 million annually. This amount seems woefully inadequate to police and regulate the economic activity of seaports, equating to $5.5 trillion each year – or 26 percent of GDP (according to an independent analysis by economic consulting firm Martin & Associates). Supporting the FMC with a strengthened mandate and more robust funding will enable them to fulfill the mission of regulating U.S. ocean commerce.
Second, and longer term, the recently passed Infrastructure Investment and Jobs Act (IIJA) — now called the Bipartisan Infrastructure Law (BIL) — is a crucial step in repositioning America’s competitive posture in global trade. The supplemental appropriations contained in this legislation are welcome news for freight movement and will be used primarily to create a more fluid and resilient port system, including intermodal connectivity. The five-year funding duration is not long enough, but there is hope in convincing Congress to continue to invest in port infrastructure and intermodal connectivity on a sustained basis — as many of America’s global competitors, like China, already do.
Included in BIL is a mandate to create an Office of Multimodal Freight Infrastructure and Policy within the Department of Transportation. The nation direly needs this office to function as a strategic, non-partisan, and geographically agnostic body to develop smart and actionable direction and policy recommendations for the future — a hopeful paradigm shift for an interconnected system.
Finally, U.S. ports engaged early with the White House port envoy and moved to commit to extended hours of operations. Ports also deployed pop-up off-site container depots as a means for increasing velocity and capacity. Admittedly, these were short-term actions to alleviate pressure in the supply chain, but they set the stage for important longer-term changes to the traditional international freight movement operating model.
In a crisis-driven media, the optics for the U.S. port industry — just as for our private sector partners in terminal operations, rail, and truck — have not been good, with headline-grabbing photos of ships queuing in San Pedro Bay awaiting discharge of their import-laden cargo holds, but unable to do so because freight is stalled on terminals and not moving rapidly enough off port property.
The interdependence between key participants in the U.S.’ national freight mobility system has magnified, as has the antiquated state of data exchange among transport modes and users. The proverbial blame game has been rampant and, unsurprisingly, has taken a partisan turn politically, as lawmakers try and sort through the chorus of complaints from their constituents.
There’s surely abundant blame to distribute, but this crisis transcends both party affiliation and politics. The genesis of what’s playing out in real time presently has been a generation in the making and demonstrates what happens when there’s no cohesive national strategy in place to enhance freight mobility. The bottlenecks illustrate the result of decades of underinvestment in port infrastructure and intermodal connectivity.
Coming back to the issue of the supply chain and freight fluidity- let’s give the FMC the resources it needs to enforce, and not unwittingly compound our current challenges with freight movement.
Chris Connor is president and CEO of the American Association of Port Authorities (AAPA).