FMC Publishes Findings on Ocean Freight Challenges Due to Coronavirus

The results are in. Of what, you ask? Of the Federal Maritime Commission’s (FMC) “Fact Finding No. 29, International Ocean Transportation Supply Chain Engagement, in order to identify operational solutions to cargo delivery system challenges related to Coronavirus-19.” Well, that was a mouthful. Let’s simplify for a moment.

The FMC has a fact-finding initiative to address difficulties at the ports due to COVID-19. We are now learning things the initiative found.

We did a big round up of the effects of the coronavirus pandemic on ocean freight shipping a couple months ago that included the FMC calling upon industry stakeholders to join the commission’s initiative. Commissioner Rebecca Dye heads up the initiative, and back in April she said over 50 industry stakeholders responded, wanting to take part.

The fact-finding initiative created Innovation Teams tasked with identifying challenges specific to their area of expertise and to their specific regions, as well as making suggested actions the FMC could make. The Innovation Teams for the San Pedro region completed those tasks. Commissioner Dye then had meetings with directors from the Ports of Los Angeles and Long Beach, ocean carrier chief executive officers, Southern California marine terminal operators, longshore labor leaders, and the FMC Innovation Teams themselves. From there, Commissioner Dye and the FMC shared “approaches to address the four critical operational challenges at the San Pedro Bay ports identified by Innovation Teams.” Commissioner Dye and FMC also shared one action the FMC could take to facilitate discussion suggested by Innovation Teams.

Keep reading to see the FMC initiative’s findings.

4 Critical Operational Challenges at Ports of LA & Long Beach

Picture: Port of Los Angeles Sunrise by pete (wirralwater) – Flickr

I’m going to share here what the FMC published, but I’m changing its order a bit. Before we get to approaches that address the four critical operational challenges at the San Pedro Bay, I think we should see what those four critical operational challenges are.

The FMC’s publication included those four challenges in a Discussion Summary section. The section didn’t just include the problem, but the suggestions of approaches that should be taken. If you want to see the FMC’s quick list of suggested approaches, skip down to the next section. But since I like context before hearing statements, I’m sharing FMC’s discussion notes here first:

1. Empty Container Returns: BCOs and their drayage trucking agents have expressed frustration with untimely notice when carriers’ empty containers are not being accepted at one terminal and truckers are directed to an alternative terminal. The complexity of the process is increased because carrier alliance members may call at multiple terminals at Los Angeles and Long Beach. Most parties agreed that the ideal approach would be to direct truckers to return empties to the terminal where they had picked up the loaded container, allowing them to make a dual move and reduce the number of chassis required.

With limited exceptions, suggestions included: (1) terminals refraining from cutoffs of empty returns mid-shift, (2) terminals adopting a goal of 7 days advance notice, but no less than 24 hours, for empty cutoffs, and (3) terminals allowing appointment-free returns during low use periods (such as night gates). Commissioner Dye noted that some San Pedro Bay terminals have already instituted these, or similar, practices.

2. Terminal Gate Closure Notification: Under current conditions, terminals may decide that expected cargo volumes may not financially justify maintaining full gate hours. But BCOs and drayage companies need timely notice of any gate closures. Participants have suggested that MTOs adopt a goal of 7 days advance notice, but no less than 3 days.

Commissioner Dye pointed out that BCOs and drayage companies could improve the situation by letting terminals know when they no longer need appointments. “Rapid cancellation of unneeded appointments can help the whole system run more smoothly, and reduce the chassis availability situation, too.”

3. Blank Sailing and Bypassed Port Notification: Until cargo volumes begin to increase substantially, carriers will respond with blanked sailings to keep vessel supply matched to vessel demand. It is important to both American exporters and importers, especially smaller shippers and their freight brokers, that adequate notification is given. Participants in the Fact Finding discussions have suggested that, at a minimum, shippers and truckers get 7 days notice for blanked sailings, and 72 hours notice for port bypass decisions.

It is vital that ocean carriers communicate their plans in a timely way to all parties who, in turn, coordinate their businesses around cargo availability. Notification should be made available on carrier websites, as well as direct notification to shipper customers, to accommodate truckers and other parties.

4. Export Cargo Receiving Timeline (ERDs and Cut-offs): With respect to export cargo, changes to ship arrivals (schedule integrity, blanked sailings, port bypass) can affect the cargo’s earliest receiving date (ERD) and cutoff date for loading the container – especially for inland-based rail users. Missed sailings and rolled cargo can have a profound effect on the exporters’ financial arrangements. Participants in the fact finding have suggested a minimum of 7 days notice of changed ERDs– but more notice, especially for inland-based exporters, would be better. In addition, carriers’ and terminals’ information on the exporter’s cargo receiving timeline needs to be closely coordinated to prevent conflicts.

Identifying these approaches is meant to assist stakeholders in addressing the operational challenges in San Pedro Bay, and is not intended to suggest that these approaches are required by the Shipping Act of 1984 or the Commission’s regulations.

Innovation Teams’ 5 Suggestions

Okay, now let’s see the quick of the suggestions from within the discussion shared above plus the additional suggestion the Innovation Teams made for the FMC:

1. Truckers should be directed to return empty containers to the terminal where they were picked up, allowing them to make dual moves and reduce the number of chassis required.

2. Notice of terminal gate closures should be given no less than three days, and preferably seven days, before gate closing. At no time should a closure occur mid-shift.

3. Notice of blank sailings should be given not only to beneficial cargo owners (BCOs), but also posted prominently on a carrier’s website, at least seven days in advance. Notice of bypassed ports should be posted at least 72 hours in advance.

4. Carriers and terminals should immediately seek to collaborate regarding Export Cargo Receiving Timelines with the goal of better coordinating their interaction.

5. That the Commission consider an Advisory Board consisting of ports, carriers, and MTOs in the interest of fostering and promoting greater collaboration across those three industry sectors.

Commissioner Dye added “I appreciate the willingness of our senior ocean carrier and marine terminal executives to address the four San Pedro supply chain operational challenges identified by the Innovation Teams. As we move into the third and fourth quarter of 2020, greater collaboration between ocean carriers and marine terminals will be critical to avoid cargo disruption and support a thriving American economy.”

Innovation Teams’ Suggestions for Other Ports Coming Soon

While the above information published by the FMC is obviously specific to the Ports of Los Angeles and Long Beach, such suggestions should soon be published for popular ports, such as the Port of New York and New Jersey, in other parts of the U.S.

FMC’s publication ended with a short section called “FF29 Regional Approach to Continue” that specifically addresses other ports:

Commissioner Dye stated that FF29 will continue a regional approach recommended by the Innovation Teams because freight delivery challenges differ in different ports around the country.  She also noted that the Commission’s recently published guidance on demurrage and detention has been well-received and may already be contributing to better operational environment among affected parties.

Commissioner Dye will continue regional meetings to identify practical port operational goals that can improve the international supply chain.

Dye will soon engage with industry leaders operating through the Port of New York and New Jersey and the Port of New Orleans.

I expect fairly similar suggestions but will be interested to see additional ideas that come out of East Coast ports. With New York having been hit so hard by COVID-19, there may be additional issues and insights brought to light from industry professionals working there.