By Kenneth Rapoza, CPA Industry Analyst
Shipping companies are preferring to send empty containers to Asia, in order to offload them and fill them with China goods bound for the US at a much higher price. Twenty-four Senators from farm states are now getting involved.
Our new export to China: empty space inside a container shipped across the Pacific Ocean. Senators from agriculture exporting states are livid.
The problem serves as an example of transnational, corporate interests being at total odds from US economic policy – whether it is Trump’s reshoring push and Phase One trade deal that boosted agriculture, or Biden’s Build Back Better plans.
On March 1, 24 Senators sent a letter to Michael Khouri, Chairman of the Federal Maritime Commission (FMC) to express their concern from agriculture exporters that some vessel-operating common carriers (VOCCs) were denying carriage for agricultural commodities. If the complaints are true, it means containers that could be used for US exports are instead going empty to China so they can sit unused until the pandemic breaks and a flood of China imports heads here.
This has been an ongoing problem. In March 2020, the FMC initiated a Fact Finding No. 29 – led by Commissioner Rebecca Dye – which was expanded in November 2020 to investigate reports of potentially unjust and unreasonable practices by certain VOCCs.
There’s been no results from this fact finding mission yet and Senators are now pushing for it.
“The need is urgent, especially with record container volumes at the nation’s major ports,” the letter stated.
“These volumes, and the resulting congestion, will only grow as the global economy recovers from the coronavirus pandemic. Producers rely on competitive access to foreign markets, and the reported actions by certain VOCCs to undermine this access pose significant ramifications for agricultural exporters and the industry at large,” the letter continued.
Agricultural exports were a key part of the Phase One China trade deal commitment; a commitment which Senator Charles Grassley (R-IA) said China has not yet met. Grassley was one of the two dozen senators to sign the letter to Khouri.
Agricultural exporters rely on cargo containers and they have been raising concern since last year that ocean carriers are not giving exporters a chance to load products onto those containers and onto ships. Instead, shippers are finding it more profitable to return to China with empty cargo containers for exporters in that country to immediately use. The situation has led to hundreds of millions of dollars in lost exports for agricultural shippers, ag newswire DTN reported.
The complaints from agricultural exporters to the FMC began in October, during the harvest season.
Bob Sinner, president of North Dakota-based SB&B Foods, told DTN newswire in January that food exporters were unable to book containers.
That’s because exporters can charge “five to six times more” by bringing Chinese goods to the US than sending agricultural exports to Asia. Sinner said his company has been requesting bookings on vessels as much as eight weeks in advance, but carriers said they were booked solid. Carriers also have been canceling orders from American farmers.
“One of our biggest exports to China has long been empty shipping containers. The dream of domestic US businesses growing market share by exporting to China is obviously one that is not shared by Beijing,” said Michael Stumo, CEO of CPA. “Now we have shipping companies helping China by prohibiting containers from being filled with US agricultural goods, an important part of the US economy and to our post-pandemic recovery. Perhaps what we need is a new rule that no containers from China may enter without being filled on the backhaul with US goods bought by them.”
The China to US trade route is almost $5,000 per container, but US to China is just $700. Plus, agricultural exports can be dirty, so the people on the other side of the trade don’t want to clean out the containers, apparently. Or don’t want to waste time doing it when they can ship iPhones and Nikes in a box. Empty containers are faster to move and shippers can essentially make more money by shipping nothing. Some may be doing this to make up for massive losses in cargo at the height of the pandemic from February to May.
Proprietary US Census Bureau data shows carriers rejected as many as 177,938 containers known in October and November. The vast majority of the empty containers were leaving Long Beach and Los Angeles, and New Jersey and New York. Data showed that a high volume of empty containers were leaving US docks to be shipped to Asia, mainly China, to then be used for exports.
CNBC’s trade reporter Lori Ann LaRocco stated in January that by mid-October, carriers had notified agricultural exporters that “they would prioritize empty export containers over agricultural exports. They also said they would increase prices on agricultural exports if the commodities were transported.”