East and Gulf coasts brace for impact

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By Gary Williams, SSGA Director of Transportation and Regulatory Affairs

Shippers and importers are bracing for a storm on the East and Gulf coasts as the International Longshoremen’s Association (ILA) Union issued stern warnings and strong rhetoric last week. Two main issues loom. The first is an offer by U.S. Maritime Alliance (USMX) management for a 32% pay increase that is being rebuffed by the labor union as far below their ask of a 78% pay increase that is based upon wanting a share of the record profits obtained during the pandemic by ocean container carriers.

Second is the union’s fight against port automation. The ILA submits that wage increases aren’t worth anything to workers that have been eliminated by automation.

The pessimism is growing regarding an agreement being reached before the strike date of Oct. 1, as evidenced by articles in major national publications close to the container industry.

While President Biden will have at hand the Taft-Hartley Act to invoke to bring union workers back to work, the union has pledged to work in extreme slowdown if ordered back. The outcomes for the Trudeau administration intervening were very negative, with a possible early election being called for, which would be expected to go in favor of the Conservatives should the NDP break away from their alliance with the Liberal party there as a reaction to the strike intervention.

Having recently watched the scenario in Canada with rail workers being locked out and immediately ordered back to negotiations and continuance of work, all involved are in a difficult position: Labor is firm on wanting their “piece of the pie” and a labor agreement that exceeds the most recent ILWU contract. USMX is poised to resist as importers and shippers warn of much higher costs charged back to them having a major effect on imports and exports.

With the election on the horizon, the Democratic Party (often considered pro-union) could face potential political backlash from unions if President Biden chooses to intercede, while standing aside could disrupt 60% of the U.S. container volume, valued at $588 billion annually.

The disruption is too great not to affect all other ports, and customers should be made well aware that West Coast execution will most likely experience significant challenges should the strike go into effect for even a short period of time.

Strategizing the St. Lawrence Seaway’s potential: SSGA hosts transportation mission to Netherlands, Belgium

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By amplifying the global visibility of the St. Lawrence Seaway, the Specialty Soya and Grains Alliance (SSGA) accomplished a key goal during a first-of-its-kind ag transportation mission to Europe’s largest seaports in Belgium and the Netherlands Sept. 2-6. But a checked box is just a first step in what SSGA has learned in a long, but attainable to-do list ahead.

“What has happened here, is that we’re on the cusp of change,” said Eric Wenberg, executive director of SSGA. “The right people are meeting and talking to each other. This trip is not a trade promotion trip. This is a transportation preference trip. We need to make it clear that the U.S. does have transportation access to these ports and onward to the rest of the world if we need it, but we’re asking the stakeholders to choose a preference from the U.S. and reconsider the Great Lakes.”

Exploring the interconnectivity of commerce

SSGA brought in stakeholders from all over the Midwest, including Wisconsin, Illinois and Minnesota soy checkoff leaders, the Department of Transportation, USDA and Great Lakes St. Lawrence Seaway Development Corporation, to participate in several networking opportunities and tours to discuss the potential benefits of the St. Lawrence Seaway being chosen as the gateway of choice.

“We need supply chain resiliency and redundancy in the Great Lakes St. Lawrence Seaway system,” said Peter Hirthe, international trade specialist with the Great Lakes St. Lawrence Seaway Development Corporation.

Attendees witnessed how industry leaders stay one step ahead at Hutchison Port ECT, recognized as one of Europe’s leading container terminal operators. The terminal utilizes semi-automatic cranes and automated guided vehicles to move containers, enhancing operational efficiency and safety. That followed with a trip to the World Port Center, Samga grain terminal in Belgium and more, giving SSGA and other leaders from the U.S. the opportunity to learn about the interconnectivity of commerce between Europe and the rest of the world.

“From a business development standpoint, success in business development has relied on finding a need. A lot of times the customer doesn’t know what it is they need and what it is that would make it better. Redundancy and resilience-that’s what a lot of our job is going to be, finding the defined needs and coming up with a creative solution,” Gary Williams, SSGA’s director of transportation and regulatory affairs, said.

Joining forces

Through conversations with colleagues and maritime industry leaders from Europe, feelings of optimism grew during the four-day visit.

“The planning of this and the way this was done was extremely unique, but it worked,” said SSGA Chair Bob Sinner. “It’s hard to know who we should have in the room for these types of discussions. To have a room full of logistics providers made sense because they have a lot of companies that export to the U.S. As a shipper, I’m extremely grateful for the understanding of our history and complexities and how difficult freight can be for companies like us.”

U.S. attendees also made it a priority to highlight the importance of the St. Lawrence Seaway at each of the week’s several networking meetings.

“We shared information about the St. Lawrence Seaway, like the fact that it had 99.4% on-time deliveries, that it is very environmentally sustainable and is a direct path to Rotterdam,” said Gail Donkers, who represents MSR&PC on SSGA’s board of directors. “Our trade mission delegation had time to meet with the transportation specialists to discuss our objectives and look at how each company could benefit from shipping goods along the St. Lawrence Seaway as a back haul.”

Finding a route for success

The visit wrapped up with an opportunity for U.S. attendees to gather to brainstorm, reflect and develop a vision for what the next steps entail.

“What we’ve learned on the trip is that there are billions of dollars being invested in infrastructure,” Wenberg said. “Being here to talk to the U.S. administration, and embassy in these ports along with the St. Lawrence Seaway administration means we can continue to target and support the infrastructure developments we need to support the Lakes system.”

For SSGA, this unique mission is only just beginning in further optimizing the St. Lawrence Seaway and will require collaboration from the region to find success.

“It really is a connection to Europe,” Wenberg said. “Sixty percent of the economy of the EU is within 500 miles of these ports in the U.S. If Europe wants to connect with our consumers in Toronto, Canada and Chicago and our eight Great Lakes seaway states, we have to build this trade force together.”

Transportation Roundup: Breaking down the Refusal to Deal rule

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By Gary Williams, SSGA Director of Transportation and Regulatory Affairs

In the news and on our minds today is the announcement by the Federal Maritime Commission (FMC) on their regulations and definitions revolving around “Refusal to Deal” within the Ocean Shipping Reform Act of 2022 (OSRA-22).

The purpose of this regulation is to better assure that carriers do not continually sweep away equipment quickly at the port of discharge (or even inland intermodal ramp) and collect empty containers by using blank sailings or other tactics to better assure the containers are not delayed.  When these containers are loaded with ag products, carriers wait for the export cargo to unload until that container can be used again for a much higher paying import cargo. In the current environment, not only has the Suez Canal disruption utilized more than the “over built capacity” of the past three years, it also has meant smaller vessels have been thrown into service because of need and a rate structure that allows for it to take place. Velocity of containers is a very strong desire for carriers today.

Journal of Commerce reported yesterday that ocean carriers will have to file a “documented export policy” annually outlining pricing strategies, services, routes and equipment available for U.S. exports.

This brings into question what rate guarantees export capacity being granted? Will the total sum of import revenue (rate) + export revenue (rate) holistically determine that a carrier is fairly pricing the export container/route? Today, spot market export rates are historically low for ag products, as the import rate is paying many times over for the total move (one carrier gave a real example of the overall revenue being 98% on the import move, and 2% on the export move for the same commonly used west coast U.S.-Asia origin/destination pairing). If, instead, the carrier calculates the cost of a move to be only the export leg today, its almost certain that export rates are below capital return + operation cost for the export move – meaning containers would be available only for a much higher rate than shippers see today.

With this regulation, which is a major step in a positive direction towards assisting ag shippers being provided an avenue to export their products, comes many questions on how data will be used, interpreted, and applied to achieve a fair balance of capacity and rate structure for export containers (for the shipper AND the carrier).

We know with new rules come “loopholes” or ways around them, and the risk of what implementation looks like.  From here, SSGA’s Competitive Shipping action team will need to watch and learn diligently how this is executed and provide overwatch that a rule that should benefit our members does not get twisted into a disadvantage.

Member Profile: Tina Lyons, Double River Forwarding LLC

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Sometimes, predicting the future of market prices, crop yield or weather would be helpful.

While “The Simpsons” might be able to see the future, Tina Lyons didn’t foresee a pandemic throwing a wrench in her best laid plans when she founded her company back in 2008.

“I wanted to do something in international (business), and I didn’t quite know how it would turn out,” Lyons said. “It certainly hasn’t been easy. I think if I had known the pandemic was going to happen, I never would have done (this). There’s no way anyone could have known that (a few) years ago.”

She persevered through the challenge as the owner of Double River Forwarding LLC in Portland, Ore., shipping items like soymeal, corn gluten meal, grass seed and more.

“At some point you have to decide where your strengths are, and I had a lot of contacts in the ag industry in the Midwest, so I decided that’s what I was going to focus on, since that made the most sense,” Lyons said of starting Double River Forwarding.

Prior to launching her own business, Lyons started a wastepaper company in freight forwarding.  After working for a few companies, including a small commodity trading company, and seeing how it’s done, Lyons figured she could do it herself.

Through Specialty and Soya Grains Alliance (SSGA), she’s made connections and continues to engage with industry leaders around the country.

“I think probably the first conference that I went to was in St. Louis, and SSGA wasn’t in existence yet,” Lyons said. “A lot of people who now are in SSGA were in Midwest Shippers and that’s how I met everybody. They were advocating for so many of my customers in the Midwest, so it made sense to be a part of that and stay connected. That morphed into SSGA. I feel like you can really get a lot done and learn a lot because there’s such a willingness for everybody to help each other.”

After joining SSGA, she was appointed to the Competitive Shipping Action Team and named chair. Lyons said she’s not afraid to jump in to help and build relationships.

“There’s a lot of good people on that committee,” Lyons said. “That’s been a real honor. And that particular group of people, everybody in that committee is really smart and engaged and they show up to the meetings. They contribute by asking questions, and the committee is really moving forward on trying to tackle some of the problems we have in shipping out of the Midwest.”

Since joining SSGA, Lyons said she has seen a benefit to joining every day since.

Lyons said it’s difficult in the tight-knit freight forwarder community to get new business. But when new partnerships are secured, it’s rewarding knowing everyone has challenges and the customer’s business was earned.

“(Being a member of SSGA) gives me some support to make it through some of these hard times that we still seem to be going through, and to know that other people are out there that can help,” Lyons said.

ILA suspends labor contract negotiations, continues stance against automation

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The International Longshoreman’s Association (ILA) has cancelled today’s (June 11) scheduled talks on a new six-year contract agreement. The Union provides labor for the U.S. Gulf and East Coast ports. The issue at hand is which labor claims are violations of its existing labor agreement on automation at the port.

ILA’s statement said that projects by Maersk and its APM Terminals subsidiary at the Port of Mobile are utilizing Auto Gate system, which processes trucks without ILA labor.

The Journal of Commerce quotes the ILA as stating, “This system, initially identified at the Port of Mobile, Alabama, is reportedly being used in other ports as well,” ILA said. “This is a clear violation of our agreement with the USMX [and we will not tolerate it any longer.”

The current master contract is set to expire Sept. 30. ILA is adamant they are not returning to talks until the automation agreement violation is rectified. Should the dispute continue through the Sept. 30 contract deadline, the Gulf and East Coast ports could face a strike – something that hasn’t happened in 50 years.

Maersk has countered that the tech projects do not violate the master contract with the ILA and restates they want to resume talks.

SSGA talks successes in D.C.

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SSGA staff and board members discussed their successes and future plans with USDA, several agricultural organizations and legislative leaders during their Washington, D.C., trip in April.

SSGA Chair Bob Sinner, board members Chuck Kunisch and Rob Prather, Executive Director Eric Wenberg and Manager of Strategic Programs Shane Frederick met with leaders at the Agriculture Transportation Coalition, U.S. Soybean Export Council, North America Export Grain Association, Food Export-Midwest, Michigan Agribusiness Association, and the offices of Sens. Debbie Stabenow (D-MI) and Tina Smith (D-MN) and Reps. Brad Finstad (R-MN) and Angie Craig (D-MN).

The meetings were an opportunity to educate about SSGA’s success with market promotions abroad and its work domestically to support U.S. growers and businesses. This year, with USDA forecasting poor returns on net revenue for America’s farmers, it’s more important than ever to keep educating about opportunities for the higher returns available from quality segments like U.S. identity preserved.

“It was really incredible to talk and get feedback on our concrete achievements. No other organization has returned investments to its members like SSGA has, with new innovative national programs,” Wenberg said. “The partners we met with really responded to it, as they are looking for new solutions.”

The group explained its unique role in trade such as through the High Quality Specialty Grains program operated with USDA’s Animal & Plant Health Inspection Service and how its work abroad resulted in U.S. Identity Preserved, the first national program bringing attention in international markets to a U.S. standard for identity preserved techniques and how they can be used to guarantee quality, origin and safety for soybeans or specialty grains. SSGA discussed challenges in transportation and a key role in the future of identity preserved crops in container, intermodal trade. SSGA received positive results from the visit and encouragement to continue its path for the future.

Transportation Roundup: Intermodal transport industry eyeing potential strike, SSGA watching changing sailing dates

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By Gary Williams, SSGA director of transportation and regulatory affairs

We are watching…Canada. The Teamsters Canada Rail Conference (TCRC) Union is voting during a period beginning April 8-May 1 on a potential strike date of May 22. The union members involved count 6,000 on the Canadian National (CN), and 2,500 on the Canadian Pacific Kansas City (CPKC). The collective agreement with CN and CPKC expired on Dec. 31, 2023.

Talks between the sides are continuing with a federal conciliator who can broker a deal up until May 1, when a 21-day cooling off period begins before any strike could occur. The union would then have to issue a 72-hour strike notice to the two Canadian railroads. According to CN’s website, on April 11 the railroad proposed an improved offering to the Union, focusing on wages, job security and guaranteed earnings.

Shippers in Canada are relating to SSGA that the CN has a very positive tone on being able to avoid a strike. Canadian Pacific has been more cautious. CPKC directly serves several grain elevators in North Dakota and Minnesota, which usually moves through Canada and is handed off at Kingsgate to reach U.S. export facilities. It also handles intermodal volumes to Vancouver, BC to/from inland ramps in Minneapolis, Chicago and Milwaukee.

We will continue to monitor the situation and assess potential impacts to intermodal and covered hopper grain movement.

SSGA also has its eye on changing sailing dates and the impact on members.

Our Competitive Shipping action team is spending some time collecting information and analyzing typical cases of steam ship lines (SSL) changing voyage dates abruptly even after containers have started pulling on a booking, moving the Earliest Return Date (ERD) out in the future and disallowing further containers to be pulled. While they will receive the loaded containers in, not being able to continue pulling and loading results is disrupting the trucking that has been secured, can create cash flow impacts on producers, slow or stop processing lines at the conditioning plant, result in split bookings which customers may not accept due to fixed costs and fees being spread out over fewer containers. Customers may not always be able to accept double bookings in the same week due to a lack of free time at the destination yard and limited warehouse space. Additionally, a number of other logistical issues, trade-offs and costs often occur.

Overall, not being able to smooth out these delays and disruptions create higher costs in our businesses, loss efficiencies and a number of costs not seen by the SSL.

We understand that delays in voyage arrival/sailing dates are often unavoidable, but our hope is to discuss and propose solutions that could help smooth out the disruption to mitigate the effects after we can delineate the impacts and costs that occur. Certainly, we continue to have reputable cost as the U.S. prides itself on having the highest reliability in the world – an important component that makes U.S. identity preserved field crops desired as the number one choice!

We encourage all members to let action team chair Tina Lyons or myself know your own cases, and help us quantify the outcomes when these late changing dates are experienced.

Transportation Roundup: Cargo insurance basics

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The Maersk Dali is a crisp reminder of the value of cargo insurance when you finally need it. In the news of late and conversations on some of the calls we have participated in concerning the Key Bridge disaster in Baltimore harbor is the mention of “General Average Claim.” General Average spans back to the York Antwerp Rules of 1890; American companies accepted it in 1949. However, the custom of contribution that General Average evolves from dates to the six-century A.D. Roman Law. It distributes extraordinary losses and expenditures to complete a voyage among ALL parties that have cargo aboard the vessel.

In the case of the Dali, the costs are expected to exceed 10% of the value of what was carried on board in lost goods due to containers overboard, refrigerated containers that lost product when the vessel lost power, damage/loss from damaged containers, the costs to clean-up the harbor if any, tug and tow assist and repair to vessel to make a safe harbor, salvage expense, temporary accommodation for passengers and crew on board during salvage operations, and other items as they become known and are required for the vessel to complete its voyage (reach a point of discharging freight).

The value of all the cargo and the value of the vessel are calculated into one sum. Then a weighted percentage by cargo value owned (or the value of the vessel in the owner’s case) are tabulated. The total costs and losses are portioned out to each party that has freight aboard on their weighted percentage of value they have on board. So, if $10 million of cargo is on board, and your cargo is valued at $2 million, you have 20% liability. If in turn total costs/losses to complete the voyage equal $4 million, you will owe $800,000. These claim demands for payment are for cash and can be very constraining when the payout has to be made while you are still working to get the cargo moving again toward its original or alternate destination.

For the uninsured, the cargo is seized and a deposit is required. Uninsured shippers may be required to post deposits greater than those with insurance. This deposit will also be held until the claim(s) are finally resolved. For the insured, claims of this type are reportedly swiftly responded to by the insurer to ensure little delay of regaining freedom to move the cargo. The final settlement conversely can take five years to conclude.

This would be a good time to review what coverage you have with the cargo insurance you are using, and strongly consider the costs and losses you could be subject to if you have not been utilizing insurance.

Transportation Roundup: CARB regulations could hinder ag shippers

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Of current concern for much of the agriculture industry is the request from the California Air Resources Board (CARB) for authorization of regulations that would target key aspects of the operation of freight locomotives in California. The proposed regulations would 1) levy annual fees on rail carriers for deposit in accounts that can only be used to comply with the regulations; 2) require the decommission of locomotives 23 years or older beginning in 2030 and require that new switch, industrial and passenger locomotives operate in zero-emission configuration (2035 for new line haul locomotives); 3) attempt to regulate locomotive emissions by requiring railroads to shut them down while in transit in certain circumstances; and 4) impose certain reporting and “administrative payments.”

National Grain and Feed Association (NGFA) describes the effects as:

“If the CARB regulations were authorized by EPA, we believe freight rail carriers would be significantly hindered financially and operationally and, in turn, shippers and their customers would be impaired. The inevitable increases in transportation costs and introduction of operational inefficiencies for agricultural shippers and receivers would result in food price inflation.

Moreover, the proposed rules would require railroads to meet regulatory goals that cannot be reached. Specifically, zero emissions locomotives would have to be purchased to replace the decommissioned locomotives, but such locomotives are not yet commercially viable and won’t be in the foreseeable future.

Presumably, battery technology would need to be utilized to meet the zero-emission requirement. While battery powered locomotives have been tested, they are not presently commercially viable primarily due to a limited operating range.”

SSGA will be engaged on the matter as it certainly would affect the pricing and timely movement on containers and covered hoppers moving through California, a vital point of discharge for our stakeholders shipping to markets in Asia. The rail network is interconnected, with about 65% of the locomotive fleet going in and out of California.

Transportation Roundup: Implications for container vessel capacity increases

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The Journal of Commerce put this graphic out last week that tells the story of just how much new capacity was gained in 2023. Already slow steaming, there are many excess containers operating on the East Coast to compensate for the slow chug around Africa (avoiding Suez), and post pandemic import slack – this doesn’t brighten the picture ahead for steamship liners (SSL).

Eventually, one expects the Suez situation to improve, creating a flip on “extra” containers back from East to West that are currently compensating for the longer run. SSLs remain determined to scale themselves to being “right-sized” based on the current economic condition they find themselves. They want full vessels and will seemingly sacrifice regular service to minimize losses in this environment. SSGA members are wary of dropped sailings/rolled bookings, inconsistent arrival for exported cans and a myriad of resultant fees for shippers and customers that are unannounced are likely to be the result.

We will be talking about how this and other dynamics will likely affect container movement of agricultural products in the next decade at Transportation Go! March 13-14 in Toledo, Ohio.