FMC creates teams to address coronavirus-related cargo challenges

Dive Brief:

The Federal Maritime Commission (FMC) will create new "Supply Chain Innovation Teams" that will help to address the ocean shipping challenges related to the COVID-19 outbreak, the agency announced Tuesday.
"Small and medium-sized shippers are especially affected by a lack of cargo storage space and are running out of options of where to send shipments once offloaded and I applaud this contribution," FMC Commissioner Rebecca Dye said in a statement. The Pacific Northwest Seaport Alliance offered sites to stage cargo and containers.
The teams will be similar to those created by the agency in 2016 consisting of representatives from port authorities, terminal operators, longshore labor, rail and other stakeholders. The 2016 teams issued a final report containing six recommendations for improving understanding of the ocean shipping ecosystem.

Dive Insight:

The pandemic has caused considerable changes in the global shipping industry that have led to the upending of the equilibrium of equipment and resources — storage, empty containers and reefer transportation. The disruption began when ocean carriers issued blank sailings going out of China when factories in the country shut down.

It has continued as consumer demand slumps and importers cancel orders. The 2M Alliance has canceled about a fifth of its capacity along the Asia-Europe trade.

"There are reports of warehouse space getting tight and arriving containers piling up at U.S. ports with the potential to cause bottlenecks," Freightos said in a release. And THE Alliance announced multiple void sailings Wednesday along Asia-European and Transpacific routes.

The issues ports are now experiencing related to empty containers and tight storage capacity are a result of all these blank sailings, according to Cary Davis, the director of government relations and general counsel for the American Association of Port Authorities.

"When it comes to the empty containers, I know that a lot of ships that would otherwise take those empties off the docks to foreign ports have canceled their calls at U.S. ports," Davis said in an interview with Supply Chain Dive. Some ports have dealt with this by booking port calls with different shipping lines to get containers off of docks, he said.

This week, MSC announced a Suspension of Transit program to help beneficial cargo owners and non-vessel-owning common carriers find storage for goods leaving Asia in the case that "major ports of destination may still not be ready to discharge containers," the carrier said in a press release.

"The MSC SOT [program] provides potential cost savings for customers faced with high warehousing storage costs at destination, demurrage, per-diem and other charges," the carrier explained. "It will also free up space at origin factories and warehouses and avoid excess inventory at site, bringing cargo closer to destination markets and alleviating the risk of congestion or closure at ports of discharge."

The increased number in blank sailings means shippers have fewer options to move cargo, coinciding with a drop in schedule reliability. Global schedule reliability dropped to 65.1% in February, which is "the lowest recorded global score since Sea-Intelligence introduced the score in 2011," the maritime analytics company said in an announcement emailed to Supply Chain Dive.

FMC Commissioner Daniel B. Maffei laid out some issues facing the ocean shipping industry in a statement last week.

"We know shippers do not have sufficient access to refrigerated containers, ports are facing excess numbers of empties, and terminals and warehousing facilities are dealing with operational difficulties due to volume swings, potential cases of COVID-19, and shortages of appropriate equipment to properly protect vital workers from becoming sick," Maffei said.

The teams assembled by Dye will work to find solutions.

"I believe that FMC will be reaching out directly to port directors who have a better idea than anyone else of what's actually occurring on the ground and to probably advise the FMC on how supply chains are being disrupted and how each of them are dealing with it," Davis said.

But the order did not contain any timeline or details on final deliverables. The teams in 2016 took 22 months to issue the final report. The agency did not respond to a request for comment.