Experts Say No Silver Bullet for Shipping Quagmire

Date: Monday, April 26th, 2021
Source: Sourcing Journal

The import and export of goods to and from U.S. shores have become a major point of stress for the industry, as standard logistics have become mired in complications.

At Sourcing at Magic’s seminar on imports and exports Thursday, global freight forwarder and customs broker Robert Krieger, and Bobby Hines, international trade specialist with the U.S. Department of Commerce’s International Trade Administration (ITA), weighed in on the most pressing issues brands are facing today.

According to Hines, with online shopping on the rise, the ITA has developed an e-commerce innovation lab to help U.S. brands identify export opportunities and optimize their digital strategies. The group offers market intelligence, information about export compliance, and country commercial guides, which give exporters insights into their international target markets. ITA also provides up-to-date status updates on ever-shifting free trade agreements that might impact U.S. businesses.

These tools have proven crucial to American brands, he said, as they attempt to move beyond the Covid slowdown. Hines touted the agency’s Gold Key service, which provides U.S. companies with matchmaking appointments with interested parties in foreign markets, as one of the ITA’s most helpful options for U.S. brands looking to jump-start international commerce post-Covid.

The service, which is available only for export-ready stateside brands with goods or services of at least 51 percent U.S. origin, helps identify firms that could be a good match, creating profiles of potential partners and even attending the appointments with company stakeholders. “The Gold Key has been the premier service of the U.S. Department of Commerce for over 30 years,” Hines said.

When it comes to imports, though, U.S. companies continue to be plagued by shipment delays at domestic ports, which began in the fall amid an onslaught of holiday-related orders from overseas. The Port of Long Beach and Port of Los Angeles, for example, are attempting to work through a backlog of shipments while also contending with a dearth of shipping containers.

Krieger noted that throughout his career at Norman Krieger, Inc., he has witnessed a number of “strikes, slowdowns, work stoppages, politics and economic issues with the ports,” adding, “This is the worst I’ve ever seen.”

To move cargo from Southeast Asia or China to the United States, “normal rates have gone up fourfold, from about $2,000 last year to about $8,000,” he said. The same shippers are now also asking for an additional $1,000-$3,000 to guarantee freight on their ships.

“Just because it’s on that ship and you pay that guarantee doesn’t mean it gets here,” he said. Shipments from India, Bangladesh, Pakistan and Indonesia are often routed through Hong Kong, China, Taiwan, Japan and Korea, he said. The cargo is then unloaded onto feeder vessels and transported onto other steamships. This step in the process can lead to complications, he said, as increasingly desperate companies will throw money at freight forwarders to ensure that their goods make it out faster, bumping even guaranteed clients off ships.

Once the goods reach the West Coast, trouble starts again, Krieger said. Up to 40 ships have been observed waiting in the queue to get into L.A.’s ports, and currently, a lineup of more than 20 vessels at a time is standard, with just 11-12 ships berthing each week. “These ships hold on average about 12,000 containers, and they max out at 20,000,” he said. “As everyone observed in the Suez Canal, the ships are too big,” he added, referencing the six-day obstruction of the waterway by a container ship in March.

Shipping lines have been building larger ships to accommodate a greater volume of containers, and there have been “a number of incidents where these large ships have had issues in the Pacific,” Krieger said, some losing containers due to heavy waves. “If you’ve got your cargo on that ship, even the most idyllic situation, it can take three or four days to unload,” he added, due to their size and maneuverability. “That’s when everything is working well.”

But things haven’t been running smoothly for more than a year, he argued, when steamship lines began pulling ships out of service in reaction to shutdowns at Asia’s factories. “When business started picking up, they were very slow to put their issues back into service,” he said, and that caused an imbalance between the limited supply of space on ships and the now outsized demand from shippers. The issue has impacted most of the ports in the U.S., he said, with L.A.’s hub most hobbled by the unending backlog. These delays, along with the widely publicized Suez Canal incident, have contributed greatly to the shortage of shipping containers worldwide, he said.

Krieger expressed concern about a peak in imports around back-to-school. “If anybody is importing apparel, and really wants to get those deliveries on time and not face cancellations, they’re going to have to air freight,” he said, “and air freight has always been expensive.” Those prices have shot up even further, he added.

“There are some solutions here, but they’re very individualized,” he said, noting that there’s no silver bullet that will save brands’ upcoming seasons. First, Krieger said, brands should sit down with their freight forwarders and discuss special financing and longer lead times to account for delays. They also need to rethink the cost of their goods, he said, potentially offsetting the price increases in shipping by negotiating with suppliers.

 

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