Rising Freight Costs and Port Delays: Finding Solutions to a Supply Chain Crisis

Amidst a global pandemic, strains on the supply chain have reached emergency levels and the U.S. government is taking notice.

The Biden administration has appealed to stakeholders for recommendations in finding solutions to problems ranging from continued backlogs at ports, rising container rates, limited warehouse space and lack of transportation, price-gauging, to shortages of shipping pallets.

These problems have affected nearly every industry that relies on the shipment of goods over long distances and the Administration has reached out to the business community for ideas and assessment of the situation.

Recently, there have been several key developments in this area.:

• On July 9, President Biden issued an Executive Order on Promoting Competition in the American Economy. The order addresses shipping, along with other industries, and is intended to promote fair competition in the American economy. It encourages the Federal Maritime Commission “to ensure vigorous enforcement against shippers charging American exporters exorbitant charges” and to “consider further rulemaking to improve detention and demurrage practices and enforcement of related Shipping Act prohibitions.”
• On July 12, the FMC and the Department of Justice signed a Memorandum of Understanding to work together to promote competitive conditions in the shipping liner industry.
• The FMC has issued its own recommendations on how to address the problem of rising container costs. This includes amending the law to allow shippers to file complaints without fear of retaliation by carriers that have violated detention and demurrage rules. This change would also make it possible for the FMC to order refunds or restitution to parties injured by a shipping violation and encourage them to assist the FMC’s investigations.
• Shippers have already started to file complaints with the FMC alleging that surging freight transportation rates are due in part to statutory violations being committed by major vessel carriers.
• On Aug. 11, the Department of Commerce held a meeting of its Advisory Committee on Supply Chain Competitiveness and made several recommendations. The first focuses on the dire driver shortages across the country, calling for the DOC to lead a multi-agency federal effort to proactively address the crisis. The second seeks to eliminate a million-dollar drain on national trade by requesting that the DOC remove the requirement for companies to provide transaction-by-transaction data for shipments between the U.S. mainland and the Virgin Islands and Puerto Rico. The ACSCC also called on the DOC to take the lead on implementing more efficient digital systems (e.g., for shipping documentation) for the collection of customs information and the application of applicable regulations.

As the Administration continues to research and implement changes to encourage supply chain competitiveness for U.S. businesses, there will be repeated opportunities for companies to provide recommendations and for cooperation across industries and business groups.

If you have any questions about these developments, please contact Mark Ludwikowski (mludwikowski@clarkhill.com; 202-640-6680), Kevin Williams (kwilliams@clarkhill.com; 312-985-5907); William Sjoberg (wsjoberg@clarkhill.com; 202-772-0924), Courtney Gayle Taylor (cgtaylor@clarkhill.com; 202-552-2350); Dennis Devaney (ddevaney@clarkhill.com); or another member of Clark Hill’s International Trade Business Unit.

Please watch this space for news and date for an upcoming webinar.