Transportation Roundup: Shipping challenges expected to continue

By Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

The global container-based supply chain serving U.S. exporters and importers is continuing to experience unprecedented challenges, congestion, delays and cost increases at virtually every step in the system – overseas and North American ports, railroads, shipping lines, inland rail terminals, trucking and warehousing. With the peak season for consumer product imports just now getting underway, the outlook appears bleak for container availability and meaningful service improvements for the rest of 2021, industry experts advise.

Here’s an overview of current developments, with links to key sources:

K+H insights

Historic growth in imports to North America are the underlying driving force causing the severe strains in the transportation infrastructure, according to Kuehne+Nagel, one of the world’s largest logistics and forwarding companies.

In a report to update its customers, K+H described the pinch points and congestion across the supply chain spectrum – inland rail service shutdowns, chassis shortages and increasing dwell times, clogged ports on the West Coast and in Asia looking to backslide with more congestion due to rail service cutbacks, a chronic shortage of truckers, and ocean carriers maxed out for capacity and driving up rates.

“At this time, there is no indication as to when cargo will again flow at pre-pandemic service and transit time levels,” K+H concluded.

Rail challenges

Chicago intermodal rail service suspended: Union Pacific and BNSF railroads shocked the industry last week with an announcement that they were temporarily suspending intermodal train service to and from UP’s Global IV and BNSF’s Logistics Park container rail yards in Chicago from the West Coast starting July 18. BNSF’s suspension was expected to last two weeks.

The two largest container rail terminals in the Chicago area are jammed up, with containers and chassis packed in with no room to add and serve more until they are moved out. Rail service to and from the West Coast has had volume limits on the number of container rail cars to Chicago for a number of weeks.

UP’s suspension, first reports said, was expected to last at least a week.  A later report indicated UP will restart shipments from Global IV on a gradual staggered basis. The suspension impacted container movement from the Ports of Los Angeles, Long Beach and Tacoma. Several SSGA member exporters ship through those ports from Chicago and are seeing further delays.

UP reportedly considered re-opening its Global III container rail yard in Rochelle, Ill., which it closed in 2019, to store overflowing containers. SSGA member shippers may want to watch that potential development to see if any enhanced container availability for exports could develop that can avoid the trucking logjam at the other two leading container yards.

Disruptions to continue through ’21: UP President and CEO Lance Fritz forecasted in a call with stock investment advisers that the international intermodal congestion and disruptions the system is now experiencing will likely persist through the end of 2021, according to a Freightwaves report.

CN offers incentive: Canadian National (CN) railroad announced it is offering to waive up to $1,050 in demurrage fees in Chicago and Memphis for importers if they pick up their containers at those rail yards during weekend off-hours. The program is an incentive to space out and get more containers moved during three off-hour periods between now and August 9.

Wildfires hamper rail service: Wildfires in inland British Columbia are hampering rail service between Kamloops and the Port of Vancouver. Canadian Pacific and CN are operating there under a government Ministerial Order that includes targeted slower speeds, increased equipment inspections and preventive measures. For awhile, CN needed to operate on CP lines until bridge and rail line repairs could be completed. Ships continue to be anchored off-shore, and there is a high level of on-dock cargo not moving out at normal flow. The order will last until at least Aug. 4 and could be extended, according to an operational update issued Monday from the port.

FMC to audit ocean lines

In response to pleas from cargo exporters and importers – including SSGA, Agriculture Transportation Coalition, members of Congress and senior Biden Administration officials – the Federal Maritime Commission (FMC) told the nine largest container shipping lines serving the U.S. market that it will immediately begin auditing how the lines issue detention and demurrage per diem penalties upon shippers. The move indicates the FMC is serious about cracking down on unreasonable penalty fees.

FMC’s new “Vessel-Operating Common Carrier Audit Program” will assess if the carriers are in compliance with its previously announced Interpretive Rule and handling of such penalties.

“The Federal Maritime Commission is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages,” FMC Chairman Dan Maffei said.

More coverage can be found in Freightwaves and the Journal of Commerce.

STB to examine rail congestion

President Biden’s Executive Order that called for the FMC to collaborate with the Justice Department on matters of preserving competition, also called on the U.S. Surface Transportation Board (STB) to collaborate with FMC on regulatory oversight on supply chain issues.

The STB, which for years has deemed intermodal container shipping to be one of the exemptions – essentially off-limits to federal regulatory oversight – is now taking a new interest in intermodal rail container operations given the congestion turmoil rocking the industry sector.

The STB is now asking Class 1 railroads to explain how they are dealing with the container supply chain problems. STB is also asking the railroads to provide information on how they are applying their own version of detention and demurrage penalty fees and considering if the railroads’ use of such penalties for intermodal should fall under STB’s own guidance on detention and demurrage fees on other rail car shipping.

STB Chairman Marty Oberman requested information on the number of free days allowed for container storage before penalties kick in, the daily fees for demurrage fees, any increase or decrease in such fees since January and any caps in such fees, breakdowns in volumes of stored containers, and if any efforts are being made by the railroads to reduce those storage fees when a delay in picking up the container is out of the control of the shipper or cargo receiver.

Actions by STB to formally address or oversee application of detention and demurrage fees by the railroads would represent a new departure from policy by the agency.

More coverage of this development can be found in Freightwaves and the Journal of Commerce.