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USDA announces container subsidy — lawmakers say it’s not enough

Garamendi, Johnson want more pressure on ocean carriers from Biden administration

Vilsack at the National Press Club on Monday. (Photo: John Gallagher/FreightWaves)

Lawmakers leading a push to overhaul U.S. ocean shipping laws in Congress shrugged off the latest effort by the Biden administration to offset punishing costs and service shortfalls being absorbed by American agricultural exporters.

The U.S. Department of Agriculture (USDA) announced on Monday it was partnering with the Port of Oakland on a new 25-acre container staging area reserved for agriculture exports. The goal is to get quicker pickup of empty containers for refilling with products destined for overseas markets while avoiding congestion on the docks as well as surcharges and additional fees charged by the ocean carriers.

In addition to paying 60% of the cost to start up the latest “pop-up” container yard — similar to facilities set up late last year by the Georgia Ports Authority — USDA will provide shippers using the yard a $125-per-container subsidy to offset the logistics costs of getting the containers to the yard.

“We believe the combination of the assistance subsidy and the new yard will help us see expanded exports of nuts, dairy, wine, meat, citrus and other agricultural products,” said Agriculture Secretary Tom Vilsack, speaking on a panel at the National Press Club in Washington.

“When there is supply chain disruption, it makes it more difficult for [exporters] to maintain their market reputation. Once you lose market share, it’s very difficult to get it back. The hope and goal is to expand this at other ports along the coast so that we see more free-flowing cargo on the export side.”

Garamendi, Johnson not impressed

U.S. Rep. John Garamendi, D-Calif., who along with Rep. Dusty Johnson, R-S.D., is leading the charge on overhauling shipping regulations with their Ocean Shipping Reform Act (OSRA) of 2021, emphasized that such moves would not fix the underlying problem of ocean carriers prioritizing vessel capacity for imports at the expense of less lucrative U.S. exports.

“The problem is, the ocean carriers do not understand the word ‘reciprocity,’” said Garamendi, speaking on the panel.

“They don’t understand this is a two-way street. Until they get that message, all of the good things you are doing are simply not going to solve the problem. There’s a reason those carriers are not in the Port of Oakland today — they can make more money sitting outside the ports of Los Angeles and Long Beach waiting for an empty container that they can put on their ship back to the western Pacific. The economics are going to drive those ocean carriers to do exactly what they’re doing until there is a law that says they can’t do it.”

Watch: U.S. food exporters’ transportation challenges

Johnson, also on the panel, said that with the passing of OSRA in the House of Representatives in December, the creation of pop-up staging areas for containers and new investments being made at the ports, “we’re only about 40% of the way there. We cannot take our foot off the pedal, we have to make sure we continue to push these things forward. [Exporters] are telling me that 30-40% of their shipments are still being canceled by the carriers.”

The next step for OSRA is a Senate version that Garamendi and Johnson are hopeful will include the export reciprocity and minimum service standards included in the House version. “I think the Senate text is going to be a little different than ours, but we’re going to try to bring them around,” Johnson said.

Shipper sees benefits

A major agricultural exporter speaking at the conference said both OSRA and short-term action taken by the administration will make a difference.

Mike Durkin, president and CEO of Denver-based Leprino Foods — the world’s biggest exporter of mozzarella cheese — said 95% of his cargo was either rolled to a later vessel sailing or missed its shipment altogether in 2021. “That number is usually 10%, and we or our customers had to pay the extra fees,” he said. “This problem is not going away, which is why we need legislative reform.”

Regarding USDA’s involvement at the Port of Oakland, “time will tell, but I think it’s a really good start, because it gives shippers a dedicated 25 acres and a separate gate; that is going to be important. We’re also having individual conversations with the top ocean carriers in the world, with more coming up, and all, for the most part, are sincerely interested in helping to figure this out.”

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John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.