Newsline By Kevin Sinnott, President, Fornazor International Inc.
Shipping Woes Plague Exporters
Editor’s note—Fornazor International Inc. offers a wide
variety of commodities and feed ingredients. Prior to joining
Fornazor in 1999, Kevin Sinnott was in sales and management
positions with three ocean carriers over a 12-year period.
In these unprecedented times, the issues facing United
States (US) exporters continue to leave American-made
products destined for overseas markets, including rendered
products, stranded on multiple levels in all areas of the
country. The effects of COVID-19 that led to the closure of
overseas manufacturing plants followed by the shuttering
of US facilities, including meat processing, and the resulting
imbalance of trade, has been more like a wild roller-coaster
ride than typical trade lanes.
Combining these plant closures and reopenings with the
current lack of equipment and space on ocean vessels, early
return dates changing on a weekly basis, increased chassis fees,
and increased detention and demurrage means US exporters
are stuck in a costly neutral position.
Over the past 15 years of mergers in the ocean carrier
industry, the remaining shippers and their operational partners
have done a good job at vessel-sharing and controlling
capacity, which is healthy in the long run. In the short run,
however, costs to the exporter are in many cases irreparable.
Vessel delays over the past year, some waiting weeks to berth
at US ports, have added costs to everyone’s bottom lines. Due
to these delays, exporters hold loaded containers at their
facilities leading to per diem/detention charges because
containers cannot be delivered to the ocean terminals where
space is at a premium. Carriers have also tightened their origin
and destination free times in order to get containers back to
Asia. Per diem/detention charges have also increased, some
as high as $200 per day, which could lead to major unforeseen
charges to any exporter, especially volume-driven agricultural
shippers, making US origin prices less competitive.
Driving this increased imbalance from COVID-19 and
government lockdowns was the shift in the United States
from services to consumer goods, which paved the way for
substantial increases in import freight rates due to overbooked
vessels and minimal capacity. Carriers are better served
sending empty ocean containers back to Asia than waiting
for lower-paying cargo to load in the United States, then be
transported to a destination port where the container must
clear customs, move to a location to be unloaded, and be
returned empty to the port.
For the US exporter, there were many weeks over the
past year when there was no equipment or space available
on vessels, which backed up inventory all around the country,
resulting in discounted prices just to move product. To add to
the exporter’s mountain of issues, the stranded vessel in the
Suez Canal in April could not have come at a worse time.
So, what can the US rendering industry do to protect
its export business on the logistics side? Short of being able
to get a booking on a vessel and being lucky that all goes as
planned, exporters must reach out to trade organizations and
government officials to intervene with the tools available.
Multiple letters from agriculture and transportation
trade groups have been sent to Transportation Secretary Pete
Buttigieg and as high up as President Joe Biden. Hundreds
of shippers and trade organizations, including the North
American Renderers Association, are signatories to these
letters, which are straightforward and demand action be taken.
There has already been severe damage to many corners of the
US shipping and rendering industries that must be reversed
with the help of US government authorities.
From what the ocean vessel carrier trade is suggesting,
this problem will last through the summer and possibly until
end of the year. While some level of mitigation is anticipated
from the US government, exporters need to take whatever
steps they can on their own behalf.
With the initial problem of obtaining bookings, shippers
should be contracting as far out as possible, with most carriers
usually accepting bookings six to seven weeks in advance.
Setting up weekly and monthly guaranteed allocations with
current ocean carriers is recommended—but be forewarned. In
the event a shipment misses its intended vessel, carriers have
started canceling bookings and have even charged exporters
for no-shows versus historically rolling to the next available
vessel. So, containers could sit for weeks if not managed
properly. It is recommended to spread volumes among at least
three to four ocean carriers and, if possible, try to partner
with carriers in separate vessel-sharing alliances in order to
help vessel departure and arrival dates on separate voyages.
Trucking capacity also continues to impact the entire
country. Some exporters have implemented into trade lanes
a match-back program in which they are street-turning import
containers to export loads. This type of program can take years
to implement since it is a complicated task, but it has helped
efficiencies in many origins.
These additional responsibilities need to be handled by
more staff that, during the current competitive environment,
may be a difficult decision for management to make, but
one that could pay for itself in the future. Perhaps most
importantly, daily communication within logistics, operations,
and sales staff is imperative to ensure everyone is setting
similar joint targets and goals to meet these incredibly high and
costly hurdles the shipping industry is dealing with today. R
8 June 2021 Render www.rendermagazine.com
/www.rendermagazine.com
