FMC approves container availability recommendations

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By Chris Gillis for Freight Waves

The U.S. Federal Maritime Commission on Sept. 6 unanimously approved a set of recommendations to bring about fairness in the way demurrage and detention fees are administered by ocean carriers and marine terminal operators against American shippers.

Commissioner Rebecca Dye delivered her recommendations to Chairman Michael Khouri and Commissioners Daniel Maffei and Louis Sola for their consideration and approval on Aug. 27.

“I would like to convey how deeply appreciative I am for all the support from my colleagues at the commission and the freight delivery system,” Dye said in an interview.

She particularly complimented the ocean carriers and marine terminal operators, as well as the numerous American importers and exporters, for their input throughout the year-and-a-half-long fact finding investigation. “I’m thrilled,” she said.

Demurrage pertains to the time an import container sits in a container terminal, with carriers responsible for collecting penalties on behalf of the marine terminals. Detention relates to shippers holding containers for too long outside the marine terminals.

In the past five years, shippers have become increasingly outspoken about the way these fees are assessed against them, often pointing out that they are financially penalized for industry events such as sudden marine terminal congestion, which are largely out of their control.

In December 2016, the Coalition for Fair Port Practices filed a petition with the FMC requesting regulatory action against unfair demurrage and detention fee assessments, which was followed by public hearings at the commission in early 2018. The FMC approved the initiation of the Fact Finding 28 investigation in the spring of 2018 and put Dye in charge.

Dye’s recommendations to bring clarity to the way these fees are assessed include:

  • Promoting standardized language for demurrage and detention.
  •  Simplifying the dispute resolution process and billing practices associated with the assessment of these fees.
  •  Providing guidance on what evidence is relevant to promptly resolving demurrage and detention disputes between shippers, ocean carriers and marine terminals.
  • Ensuring consistent industry notice for container availability and equipment returns.

To put these recommendations into practice, the FMC will soon publish a notice of proposed rulemaking to establish “interpretive” rules for addressing future demurrage and detention disputes brought before the commission by the industry. (An interpretive rule is an agency rule that clarifies or explains existing laws or regulations.)

Dye has remained transparent with the ocean shipping industry during the investigation. She has further emphasized in industry forums that more work lies ahead in remedying problems related to demurrage and detention assessments.

Among the recommendations approved by the commission will be the establishment of a shippers’ advisory board that will work with the commission on solutions to future container availability problems.

Dye recommended the formation of a shippers’ advisory board that will work with the commission on myriad issues.

In addition, Dye proposed continuing the FMC’s Memphis Supply Chain Innovation Team, which since 2016-17 has brought together shippers, ocean carriers and railroads to address the shortage of available chassis for containers arriving and departing the railhead in Memphis, TN.

“The Memphis team concluded that current chassis provisioning models are not keeping up with growing intermodal container demand and that change is necessary,” Dye said in testimony on May 22 before a Surface Transportation Board hearing focused on rail demurrage and detention.

She explained to the STB members how the Memphis team concluded that a gray chassis pool should be implemented for the Memphis rail hub.

“Major U.S. importers and exporters shared their stories of millions of dollars in inventory held up in congestion in Memphis, resulting from a lack of chassis,” Dye told the STB. “U.S. agricultural shippers believe that they cannot afford another season with current chassis issues.”

The FMC commissioners on Sept. 6 also approved Dye’s recommendation to continue the commission’s involvement with the Memphis team to implement a gray chassis pool.

SSGA taking steps with competitive shipping

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By Bruce Abbe, SSGA strategic advisor for trade and transportation

As noted in previous editions of Member News Update, Specialty Soya and Grains Alliance’s (SSGA) structure provides that we will have action teams of members whose role is to recommend strategies for our organization to push for expanded intermodal and more competitive shipping options for our members nationwide. Initial steps have gotten underway to form SSGA’s Competitive Shipping action team.

An initial steering committee met Aug. 13 in Bloomington, Minn. to brainstorm next steps to form and activate this vital function for SSGA. Despite “Shipping” no longer being in the title of SSGA (as it was in the Midwest Shippers Association), advocating for more competitive global shipping for ag exporters remains every bit a priority for SSGA now as in the past.

Shipping action team members include: veteran John Andrusko, founder of Professional Export Services, Inc.; Lynn Vorvick, general manager of Globe Runners, Inc., a national Non Vessel Owning Common Carrier (NVOCC); SSGA board members Bob Sinner, president of SB&B Foods; Darwin Rader, international marketing manager for Zeeland Farm Services; SSGA Executive Director Eric Wenberg and SSGA Strategic Advisor Bruce Abbe.

Next Steps – Member Survey Coming
A survey will soon be going out to all of SSGA’s member to gather a more detailed picture about SSGA member’s global-to-local shipping patterns, and most importantly, to hear about issues in transportation you are experiencing and recommendations and ideas you may have for SSGA. While intermodal container shipping will likely remain the key focus of SSGA’s efforts, intermodal by its very nature encompasses ocean, rail and trucking/drayage issues.

We will want to learn about the ports both in the U.S. and overseas destinations our members ship to, markets our members serve, railroads most commonly used, how trucking issues are affecting you, any new markets and trade lanes you see yourself serving in the future. We hope to hear about any new intermodal developments or prospects you are aware of. We want to hear your recommendations about what SSGA should tackle for our organization and members that we can realistically do and provide that will be valuable to you.

Larger Action Team
A larger Competitive Shipping action team will eventually be formed with regular conference call meetings, and likely special group initiatives as the group and board determine. SSGA wants highly-informed member representatives on this group – people who deal with shipping every day, and will provide experience and knowledge about the impact of new issues we face that seem to develop every week now.

What we’ve heard so far

Here’s a brief rundown of some issues we’ve heard from members on so far:

  • Trucking weight limits, particularly uneven limits among states for longer hauls, is a long term challenge. Some states have higher weight corridors or limits on state roads.
  • Rail heavy weight surcharges, primarily a Union Pacific issue that cropped up last year, is a newer issue that may need attention, especially if other railroads move to adopt. UP has done some refinements, but ocean carriers are including those surcharges on customer bills now.
  • The International Maritime Organization (IMO) 2020 fuel cost hikes are coming, mandating the steamship lines either move to low sulfur fuel or take ships out of rotation and install scrubbers. Jan. 1, 2020 is the mandate requirement globally now. Shippers want to see what the price increases are in actuality. That may differ by location, depending upon availability of the fuel. The cost hikes, many believe, should not be determined by pure market forces – i.e., the Walmarts able to bargain for lower fuel hikes compared to small shippers. Can the Federal Maritime Commission be pushed to mandate carriers provide advisements to shippers on costs or availability? It seems information on how IMO will be handled is just now starting to trickle out from the carriers, and the industry is running behind on getting cued up.
  • Rail service inconsistency in departure times is another issue SSGA has been tracking. In smaller intermodal hubs like Minneapolis, Omaha, St. Louis and Denver, the trains don’t leave until the railroad has a complete full unit train of container cars. In bigger hubs like Chicago and Kansas City, they’ll leave as soon as the train is full. But the discrepancy in departures can mean some shippers might miss a cut-off time for the ship at the ports. That could mean your freight sits at the port for another week until the next departure to your destination, with detention fees a possibility.
  • Drayage availability – there are more intermodal trucking firms leaving the business. Among those in the business, some are no longer willing to haul more than 38,500 pounds in a 20-foot container, some 3,000 pounds less than they could haul. Having enough drayage trucking service may become the number one issue for ag shippers in the coming years.
  • Steamship line customer service has been a complaint over the past four years or more. The growth of e-commerce and digitalization of business transactions has brought along an ever-widening hole in customer service. Carriers promote online interaction to resolve problems, but the reality is, very rarely are these online requests addressed in a timely manner or to the satisfaction of the shippers/forwarder. A call is typically needed to reach someone at the steamship line, and the person who answers the call often is not knowledgeable or in position to get the issue solved.
  • The deteriorating quality of containers for ag, food and feed shippers, remains a problem. One positive step on that issue – we learned at the Ocean Container Shipping Panel session at the Global Trade Exchange & Specialty Grains Conference in Chicago that Ocean Network Express (ONE), the new combined carrier made up of the three previous, large Japanese carriers, now has acquired or is acquiring all new containers. They’re the only one, and will set the mark most likely for better quality equipment for some time.

Those are examples of the issues this action team wants to learn about from members. We want to consider ways as a group we can advocate for changes to improve competitive shipping from the inland U.S. to global markets.

Your Input
Most importantly, please note SSGA wants to hear from all of our members about transportation issues and developments you are facing. As a member, you are encouraged to contact SSGA. On shipping matters, contact Bruce Abbe, who serves as the staff lead on transportation – bruce@abbecommunications.com or call him at (612) 716-5074.

Federal Motor Carrier Safety Administration publishes hours of service proposal to improve safety and increase flexibility for commercial drivers

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WASHINGTON – The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) published a notice of proposed rulemaking (NPRM) on changes to hours of service (HOS) rules to increase safety on America’s roadways by updating existing regulations for commercial motor vehicle (CMV) drivers.

“This proposed rule seeks to enhance safety by giving America’s commercial drivers more flexibility while maintaining the safety limits on driving time,” said U.S. Transportation Secretary Elaine L. Chao.

“FMCSA wants drivers and all CMV stakeholders to share their thoughts and opinions on the proposed changes to hours of service rules that we are putting forward today. We listened directly to the concerns of drivers for rules that are safer and have more flexibility—and we have acted.  We encourage everyone to review and comment on this proposal,” said FMCSA Administrator Raymond P. Martinez.

First adopted in 1937, FMCSA’s hours of service rules specify the permitted operating hours of commercial drivers. In 2018, FMCSA authored an Advanced Notice of Proposed Rulemaking (ANPRM) to receive public comment on portions of the HOS rules to alleviate unnecessary burdens placed on drivers while maintaining safety on our Nation’s highways and roads. In response, the Agency received more than 5,200 public comments.

Based on the detailed public comments, FMCSA’s proposed rule on hours of service offers five key revisions to the existing HOS rules:

  • The Agency proposes to increase safety and flexibility for the 30 minute break rule by tying the break requirement to eight hours of driving time without an interruption for at least 30 minutes, and allowing the break to be satisfied by a driver using on duty, not driving status, rather than off duty.
  • The Agency proposes to modify the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of not less than two consecutive hours, either off duty or in the sleeper berth. Neither period would count against the driver’s 14‑hour driving window.
  • The Agency proposes to allow one off-duty break of at least 30 minutes, but not more than three hours, that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.
  • The Agency proposes to modify the adverse driving conditions exception by extending by two hours the maximum window during which driving is permitted.
  • The Agency proposes a change to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on‑duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.

FMCSA’s proposal is crafted to improve safety on the Nation’s roadways. The proposed rule would not increase driving time and would continue to prevent CMV operators from driving for more than eight consecutive hours without at least a 30-minute change in duty status.

In Addition, FMCSA’s proposed rule on hours of service regulations is estimated to provide $274 million in savings for the U.S. economy and American consumers. The trucking industry is a key component to the national economy—employing more than seven million people and moves 70 percent of the nation’s domestic freight.

The public comment period will be open for 45 days.

The Federal Register Notice, including how to submit comments, is available here: https://www.federalregister.gov/documents/2019/08/22/2019-17810/hours-of-service-of-drivers

Shippers push for more say in railroad operations under PSR

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By Bruce Abbe

Precision scheduled railroading (PSR). Some feel it will be a boon for the railroads by improving efficiencies and lowering costs. Yet, it’s been a boondoggle for many rail shippers so far over the last three years that it’s been implemented in one form or another by more class one railroads.

Time will tell if PSR will live up to the promises railroads have been making. More observers, including some shippers, are coming around to the idea that maybe service will eventually improve, while others believe it will be the cause of uneven and deteriorating service for different rail shippers and it’s not the right route for rails to travel.

U.S. House transportation hearing

On July 25, a U.S. House Transportation and Infrastructure subcommittee held a roundtable in Washington, D.C., to hear from rail shipper customers and industry associations to highlight challenges faced by farmers, manufacturers and energy companies whose rail service have been impacted by precision scheduled railroading.

Perhaps the overriding complaint was the lack of collaboration between the railroads and their customers when they set out to redeploy their physical assets: rail cars, engines and related equipment, and reduce their labor needs and costs while pursuing leaner, streamlined service.

The shippers also voiced strong complaints about service delays and hiccups when PSR is initially implemented that led to them to get hit with skyrocketing overcharges for demurrage and storage of rail cars that they believe is solely the responsibility of the railroads.

PSR got its start and name under the late Hunter Harrison several years back when he took the helm of Canadian National (CN) railroad and embarked on a fierce cost cutting program, shedding assets and service frequency while pursuing increased fluidity. Some believe the changes were necessary. Operating profit improved, but service took a hit. After Harrison left CN, the new administration set about restoring service and trying to rebuild a reputation for doing so.

After hedge fund investors took control of CN’s main competitor, Canadian Pacific (CP) railroad, Harrison was brought on as CEO and set about leaning up CP’s operations while emphasizing the more lucrative long haul with unit trains. CP even sold off assets, including engines at a time when the Bakken Oil Field boom was taking place and its main U.S. competitor, BNSF railroad, was adding equipment to meet oil and frac sand shipping demand. After the hedge fund investors sold off their stock and Harrison departed, CP’s new management has been working to restore service levels and take back some of the intermodal business it had lost to CN.

Harrison next came out of retirement to take over leadership at CSX, one of the two main class one, eastern U.S. railroads. CSX moves to cut and reform its operations proved to be more difficult in the more fragmented geography the railroads in the East tend to operate on, and many shippers were irate and fearful of losing service. The U.S. Surface Transportation Board (STB) heard numerous complaints and engaged CSX on its PSR steps.

More recently, Union Pacific (UP) railroad, the largest U.S. railroad that serves the western half of the country embarked on its version of PSR, rolling out a range of operational changes, including eliminating some “hump yards” that switch rail cars between rail lines and trains where it was believed operations can be sped up without them.

Intermodal container service, generally less impacted by PSR operational reforms, did undergo changes by UP when it announced it would discontinue managing the interconnecting handoff of containers shipped west to east and back requiring a connection to an eastern railroad.   Shippers or their logistics firm providers will need to manage trucking containers from UP rail yards on the west side of Chicago to a CSX or Norfolk Southern rail terminal on the east side of the Chicago metro area.

MARS conference examines PSR

In truth, PSR is a very general term and is different from one railroad to the next in terms of how it is executed.

PSR and its impact on shippers was the focus of the Midwest Association of Rail Shippers (MARS) annual summer meeting two weeks ago attended by the Specialty Soya and Grains Alliance (SSGA) staff.

Keynote speaker James Squires, president and CEO of Norfolk Southern (NS) railroad, told the large crowd of rail shippers that NS chose to hold back and watch how PSR was executed by other railroads and is taking a different approach.

“The chainsaw method…” to PSR doesn’t work. NS, he said, has adopted a different approach by engaging and involving its shipper customers in planning its version of precision scheduled railroading. He believes it is paying off and will yield benefits for both the railroad’s operating bottom line and shippers in the resulting efficiencies.

A panel of four major, large volume rail shippers that work with more than one railroad had a bit different story about their experiences with PSR.

Rob Cook, senior manager of rail operations at Bunge, noted the supply of rail cars got so pinched down during PSR implementation they had to bring on their own supply of cars when the rails reduced the cars they would supply. Customer support was lacking.

Another manufacturer shipper was concerned about the break up of the large unit trains they had geared their operations to serve. Their customers were used to handling the larger trains.

Precision scheduled railroading “is not very precise” at destinations and origins – that last mile of service” – said another shipper. Customer service was bad. Local crews were reduced.

Few people understood the “accessorial” and demurrage charges that the railroads began to charge. When the group was asked what could be done to make PSR better, Cook said he’d like to see “reverse demurrage,” whereby the railroad had to pay when its equipment didn’t show up on time when ordered.

All of the shippers urged more collaboration in planning a major overhaul of rail operations.

The first three months of PSR implementation was described as “chaos” by more than one shipper, but improved after three months. The general prediction was after one year of adjustment operations will be better and the results better known.

BNSF takes a different track

Precision scheduled railroading also frequently came up at the MARS winter meeting in Chicago in January 2019. Matt Rose, BNSF’s long serving chairman and CEO, was honored at that event for his service leading the other main western U.S. class one railroad, which had led the way in terms of continuing to reinvest profits into the track, assets and operations. Rose was asked during a sit-down keynote interview what he thought of PSR. BNSF has rejected that approach, Rose said emphatically. Operations at BNSF are continually evolving but finding a way to expand and improve service should be the priority focus for the long term, rather than embarking on any whole-sale slashing of operations in the name of efficiency.

Let SSGA know your thoughts

SSGA would like to hear from any members who have felt the impact of any PSR rail operational reforms affecting your business, or if you have views or news about rail service that we should know about. Contact Bruce Abbe at bruce@abbecommunications.com or Eric Wenberg at ewenberg@soyagrainsalliance.org

Bruce Abbe is the Strategic Advisor for Trade and Transportation for SSGA. Reach Bruce at 952-253-6231 or drop him a line here.

Container trucking turn-around times expected to improve at CP Rail’s Chicago yard thanks to new chassis location

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Story from Ari Ashe for Journal of Commerce

A new location for chassis at Canadian Pacific Railway’s Bensenville, Ill., container rail yard near Chicago’s O’Hare Airport is expected to speed up trucker’s turn-around times, in hopes of alleviating a major headache in recent months.

CP Railway is a major provider of inland container service for many Specialty Soya & Grains Alliance (SSGA) members shipping ag products by containers to the West Coast or Montreal for export. CP provides intermodal service for the region from its Chicago and Minneapolis yards, and even east to Ohio.

The new chassis location at Bensenville will be located inside the DNJ Internodal Depot, which is inside CP’s property and close to the terminal’s ingates. It will hold chassis for three chassis pools.

The huge volume of containers moving to and through Chicago, coupled with different systems and recent changes at different railroads’ container operations, have led to recent chronic shortages of chassis needed to move the container between terminals and customers. Chassis availability has been an issue at Union Pacific, BNSF and Canadian National Chicago intermodal operations as well.

Click here for more detailed coverage of chassis issues and developments at Chicago.

CP Railway also has plans for expanding its undersized intermodal container facility at Shoreham Heights in Minneapolis, where trucking congestion and delays have plagued area roads and traffic leading to and from the facility.

Union Pacific’s intermodal service took hit during second quarter

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By Michael Angell for Freight Waves

Union Pacific’s (NYSE: UNP) intermodal rail service saw average speeds sink to a two-year low in the second quarter, with shippers and intermodal marketing companies reporting extensive delays in getting their freight from the railroad.

The service hit came during an overall lull for West Coast container imports. And many of the delays were due to the extreme rains and flooding that hit the U.S. Midwest.

But shippers also say the railroad’s efficiency drive may have also contributed to the service deterioration.

Union Pacific’s Chief Executive Lance Fritz said that overall volumes are tracking 4 percent lower in the second quarter. Fritz blamed the poor weather and trade uncertainty as the main reasons for the lower volume.

High winds and severe rains forced Union Pacific to run shorter trains at slower speeds, so cargo has not been as quickly throughout its system in the last few months.

In a June 24 customer update, the railroad said “flooding conditions continue to impact operations across the southern portion of our network… These outages have caused network delays due to terminal and main line congestion with trains holding in multiple locations. Customers with shipments around the affected areas can expect delays of 48 to 72 hours.”

The weather’s effect on the network can be seen in performance statistics. Union Pacific saw average train speeds for intermodal cars reach two-year lows during the second quarter, hovering just over 26 miles per hour in parts of April. In the two previous years, Union Pacific intermodal cars saw weekly average speeds north of 30 miles per hour.

Average speeds picked up to just under 29 miles per hour by mid-June.

Source: Surface Transportation Board

A Union Pacific spokesperson said up to eight subdivisions were impacted by flooding through the last week of May and that it worked with customers to prioritize trains and direct shipments away from flooded areas.

Extreme flooding also contributed to ingate suspensions at intermodal facilities in Chicago, St. Louis and Houston.

But other performance indicators showed declines in service ahead of the poor weather. The weekly average number of intermodal cars that have not moved in 48 hours or more spiked to as high 500 in 2018.

Source: Surface Transportation Board

In June, Mediterranean Shipping Company (MSC) said BNSF would replace Union Pacific for its intermodal rail service out of marine terminals in Los Angeles and Long Beach.

A shipping line executive who was not authorized to speak publicly said the change stems mostly from MSC’s alliance partner Maersk already using BNSF on those lanes. But he said that shippers, as well, have asked for changes.

Speaking on condition of anonymity, a logistics executive who ships with Union Pacific out of the Midwest said working with the railroad has been a “has been a challenge to deal with.”

The big challenge is keeping up with the changes wrought by Unified Plan 2020, the railroad’s version of performance scheduled railroading. The railroad is in the process of consolidating six intermodal ramps in Chicago by closing two and limiting shipments at two others.

“We are facing long lift times at the yards they do still have open for our truckers, and the equipment they have in their facilities is down to bare bones – hardly anything available when we go in for empties,” the logistics executive said.

Union Pacific also halted some services as a result  of changes in its intermodal interchange agreement with CSX for cars destined for east of the Mississippi. Those changes “limited the options they have to reroute when faced with the recent weather issues as well,” the executive added.

One intermodal carrier executive who spoke on condition of anonymity said Union Pacific’s Marion intermodal yard near Memphis presented severe problems for shippers. A lack of chassis in that particular location forced containers to be stacked, which created longer than expected turnaround times for drivers.

“The container stack became known as ‘the wall,’” the executive said. “Union Pacific told you it’s here and available. But it would take forever to dig out of the pile.”

But he added that BNSF also had its own share of troubles at Chicago intermodal ramps. He said chassis shortages at the yards forced containers to be grounded, resulting in higher dwell and detention time for drivers.

“The turn times went from 30 minutes to a couple of hours,” the executive said.

“The Union Pacific and BNSF both had substantial flooding, so everything was backed up three to four days,” he said.

In a statement, the railroad said the ongoing rollout of Unified Plan 2020 will “help our intermodal service become more consistent and reliable.”

Cost-share split sought for inland waterways work

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By Chris Gillis for American Shipper

Inland waterways users want Capitol Hill lawmakers to modify the cost-share structure to finance infrastructure projects on the commercial river system to reflect the approach that now is used for deepening the nation’s harbors from 45 to 50 feet.

Currently, the cost-share structure for inland waterways infrastructure projects is 50% nonfederal funds and 50% federal funds. The 2016 Water Resources Development Act (WRDA) established a cost-share split of 25% nonfederal funds and 75% federal funds to support harbor deepening.

In the case of the inland waterways industry, the 25% nonfederal funds would be derived from the Inland Waterways Trust Fund (IWTF) for inland navigation projects. The IWTF is funded through the collection of a 29 cents-per-gallon diesel gas tax already paid by the inland waterways users.

The inland waterways industry wants Congress to make this change as it prepares the language in the 2020 Energy and Water Development and Related Agencies Appropriations Act.

“The inland waterways system has a portfolio of more than 15 high-priority inland navigation projects either under construction or awaiting construction. At the current rate, many of these projects will not even begin construction in the next 20 years,” testified Rob Innis, plant manager for LafargeHolcim (OTC: HCMLF) at Sparrows Point, Md., as a representative of the Waterways Council Inc. (WCI) before the House Water Resources and Environment Subcommittee on Wednesday.

According to Innis, LafargeHolcim, a global supplier of concrete and aggregates, relies on the U.S. inland waterways system to support 30 facilities. In 2018, the company transported 9.2 million tons material over the nation’s rivers.

“By conforming the cost share with the Inland Waterways Trust Fund to the same formula that was approved for deep-draft ports in WRDA 2016, this committee’s action would allow for the inland navigation capital program to remain operating at or above a $400 million level achieved since the cost-share change at Olmsted and accelerate project delivery on that portfolio of critical inland waterways projects,” said Innis, who also serves as a member of the Inland Waterways Users Board. A special provision in the 2014 Water Resources Reform and Development Act (WRRDA) allowed for a one-off cost share of a 25% IWTF-75% federal funding split over the last six years to speed up the Olmsted Locks and Dam revitalization program. The Inland Waterways Users Board noted to Congress in May that this allowed for an estimated $600 million in economic benefit to be already achieved for the nation.

“With this cost-sharing change, there will be sufficient funds in the IWTF to continue full and efficient funding for the ongoing inland waterways projects already under construction and to allow consideration of additional important and time-sensitive projects,” the Inland Waterways User Board wrote in a letter to the leadership of both the House and Senate on May 10.

SSGA represented at Ag Transportation Coalition Annual Meeting

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By Bruce Abbe

Ag shippers currently face a myriad of issues and challenges in intermodal container transportation, from trucking costs, port congestion, coming cost increases from the pending low sulfur fuel mandate, demurrage and detention penalties, and more. Those attending last week’s national Agriculture Transportation Coalition (AgTC) Annual Meeting in Tacoma, Wash., heard a very sobering take on the “elephant in the room” for exporters – the unknowns and dim prospects surrounding the future of trade between the U.S. and its largest ag export customer: China.

AgTC’s annual meeting drew a record crowd of nearly 500 ag export shippers, forwarders and logistics officials. Among them were 18 member companies of the Specialty Soya and Grains Alliance, including SSGA board members Bob Sinner of SB&B Foods, Darwin Rader of Zeeland Farm Services, and Bruce Abbe, past president of Midwest Shippers Association (MSA). Among other current SSGA or past MSA members with multiple staff in attendance were: MacMillan-Piper, Inc., Northwest Seaport Alliance, Professional Export Services, GlobeRunners, Inc., Fr. Meyer’s Sohn NA, LLC – FMS Logistics, Scoular, Laufer Group international, Tacoma Transload, Inc., US Nisshin Shokai, Ltd., Norseman, Toyota Tsusho America, Inc., International Feed, Double River Forwarding LLC, Bluegrass Farms of Ohio, Inc., Ray-Mont Logistics America and Fornazor International.

Erin Ennis, senior vice president of the US-China Business Council (USCBC), told attendees she wished she could bring a more positive message about the prospects for improved trade with China, but international trade industry observers remain very much in the dark about where talks stand. Current posturing of the Trump Administration and its China counterparts does not bode well heading into the next scheduled meeting at the G20 summit in Tokyo at the end of this month.

USCBC works on trade policy on both ends, seeking improved trade flows and fair business operating environment by both the U.S. and China’s government.

Ennis, a ten-year veteran at USCBC and previous staff member at the U.S. International Trade Commission and on Capital Hill, made several observations.

“China has yet to feel the pain of the U.S. tariffs,” she said.

Currency valuation changes have helped minimize the cost impact of the tariffs in place since 2018 so far. But the threatened, pending increases will have an impact if they go through.

“China is preparing for a no deal scenario,” Ennis said.

President Trump has likewise indicated no rush to compromise on the remaining issues under negotiation – some, notably intellectual property and technology rights, that are serious, thorny matters to agree on.

Due for a reset?

Ennis believes that regardless of who won the last election, the U.S. and China would still be in a trade dispute. The relationship between China and the U.S. “was due for a reset,” and there is wide spread views among trade observers from both political perspectives that China is a bad actor. She believes “there has been uniform support for the Administration’s tactics.”

Currently, roughly $267 billion in Chinese goods exported to the U.S. are subject to 25 percent tariffs from the first three lists of products that have been posted since last fall. In addition, some $17 billion in steel and aluminum imports are subject to tariffs. Negotiations are to begin again and if there is no agreement, the Trump administration said it will go forward with tariffs on the remining $300 billion in imported products from China.

Retaliation

If that happens, China will unquestionably retaliate. Ennis estimated that China has retaliated from past Trump tariffs at about 85 percent of reciprocal tariffs at the 25 percent tariff level. Although some ag exports got hit twice so in reality it’s a 50 percent tariff, she indicated. China has also intimated it could take “qualitative,” in addition to “quantitative retaliatory moves.”  Qualitative generally means unspecified challenges on issues like delays and product inspection hold-ups at the ports.

It is unclear how far apart the negotiators are over the intellectual property rights issue, she said.

“Economists say this uncertainty and threats of higher tariffs on trade between the U.S. and China is accelerating the chance for a global recession,” Ennis said.

While some economic forecasters have projected 2020 for a recession, without an agreement and with big increased tariffs on the remaining trade between the two countries, a recession could start in the third or fourth quarter of this year.

In response to a question, Ennis said over the past 16 months China has reduced tariffs on products imported from other countries than the U.S. – consumer products mostly.

“Until there is an agreement, U.S. products will be at a disadvantage,” she said.

Ennis also said we’re not yet at a point of no return, no progress … but as long as the U.S. tariffs are in place, China will have to retaliate.

What does this mean for U.S. agriculture? The hard facts are that as long as the tariffs are in place, you will be priced out of the China market.

For more coverage of the AgTC meeting and the China trade presentation, visit here.

Shipping and trucking industries gearing up for new 2020 ocean vessel fuel mandate

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Six months before ocean vessels will be required to burn low-sulfur fuel, such as diesel used in trucks, a U.S. Department of Commerce advisory committee disclosed recommendations to mitigate potential fuel shortages and price spikes.

The International Maritime Organization will mandate that the cargo shipping and cruise line industries shift from marine diesel (so-called bunker fuel) to ultra-low-sulfur diesel starting Jan. 1.

Most ships are expected to use new blends of fuel oil, which will be produced to meet the 0.5 percent limit from 3.5 percent on sulfur oxide (SOx).

Heavy fuel has been used by the maritime industry for years despite criticism of pollutants, partly because of its lower cost.

Limiting SOx emissions from ships will improve air quality and protect the environment.

The main type of bunker oil is derived as a residue from crude oil distillation. Crude oil contains sulfur which, after combustion in the engine, ends up in ship emissions. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contribute to the acidification of the oceans, according to IMO.

The Advisory Committee on Supply Chain Competitiveness said the cost and operational impact of the rule remains uncertain while cargo owners, carriers and fuel users need as much transparency as possible regarding fuel availability and price increases. Further, it suggests that the affected industries and the public be kept aware of the low-sulfur regulation and that the U.S. Energy Information Administration immediately create a web page with regular updates on prices and availability.

Port and trucking officials told Transport Topics they are cautiously optimistic about getting through the transition.

“My concern is if there is a huge jump in demand for low-sulfur diesel for shipping vessels we have an adequate supply,” said Armand Patella, a vice chairman of the Maryland Motor Truck Association.

Patella said the petroleum industry, along with the shipping and trucking industries, have been working to develop a strategy.

An alternative to using low-sulfur diesel, approved by IMO, involves installing scrubber technology on ships to remove pollutants and get SOx emissions to required levels.

“There are at least four suppliers of low-sulfur fuel out there, so it seems like most have a plan around phasing ships into scrubbers and using this type of fuel,” said Bayard Hogans, vice president of Ports America Chesapeake, which operates Seagirt Marine Terminal at the Port of Baltimore via a public-private partnership with the Maryland Port Administration.

The panel also advised the Commerce and Energy departments:

Make available information about IMO-compliant fuels, including low-sulfur diesel, truck and rail diesel, liquefied natural gas and other alternatives.

Increase federal support for alternative fuel research, including engine and fuel production technology.
Determine whether the nation has sufficient low-sulfur crude reserves and refined products to avoid potential supply disruptions for the nation’s transportation system and heating supply.

Determine whether the nation’s heavy crude oil and fuel transportation network has sufficient flexibility and capacity.
In a letter to President Donald Trump, 10 Republican senators, some from energy-producing states, expressed support for the mandate. They said the nation’s growing energy dominance puts the country at “a distinct advantage” to global competitors.

“Any attempt by the United States to reverse course on IMO 2020 could create market uncertainty, cause harm to the U.S. energy industry and backfire on consumers,” according to the letter dated April 29.

Strike halts grain exports in Argentina

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BUENOS AIRES, ARGENTINA — A nationwide strike in Argentina protesting austerity measures under President Mauricio Macri brought the country’s airports to a standstill and halted work at key grains ports on May 29, according to a Reuters report.

The strike, called by the country’s main unions, comes as center-right leader Macri tumbles in the polls ahead of presidential elections in October, his popularity with voters hurt by high inflation, job losses and a weak peso.

According to Reuters, Argentina’s airports were shut down as a result of the strike, while grain exports stopped at the ports in Rosario, one of the most important agro-industrial regions in the world.

In February 2018, trucker owners went on strike briefly to attempt to force the adoption of minimum grain hauling rates, halting exports at the Port of Rosario.

That strike also affected the operation of grain mills in the Santa Fe province, where 80% of the country’s agricultural exports are processed, transported and loaded onto ships.

With 6.8 million tonnes of soybean exports in 2018-19, Argentina ranks third in that category behind Brazil and the United States, according to the U.S. Department of Agriculture.