November 28, 2023

A container ship enters the port of Los Angeles on February 1, 2021 in San Pedro, California.

Mario Tama | Getty Images

Just a week after CNBC’s two-month investigation into shipping companies’ rejection of US agricultural exports, California is urging the Federal Maritime Commission (FMC) to take immediate action. A letter to the FMC was signed by several state officials requesting immediate action to review the airlines’ export policies.

Shipping companies turned down hundreds of millions of dollars in US agricultural export containers in October and November and instead sent empty containers to China to fill with more profitable Chinese exports, according to the CNBC investigation.

In the letter received from CNBC, state officials said, “We seek your assistance in addressing the current delays and ongoing shipping problems in California ports, which are having a significant impact on the business of companies across the state. In particular, the business of our The Agriculture Sector, who is heavily dependent on the export markets is badly affected. “

California, the letter reads, is the country’s largest agricultural exporter and producer, with more than $ 21 billion in annual agricultural exports requiring and supporting an estimated 157,800 full-time jobs. These exports benefit the economy directly by generating $ 25 billion in additional economic activity.

The call for proposals letter comes after FMC announced in November an investigation into trade with key ports in California, New York, and New Jersey to determine whether airlines’ refusal to ship US exports was a violation against the Shipping Act.

The law makes it unlawful for air carriers to “improperly refuse to do business or negotiate,” “boycott or take other concerted action that will result in an improper refusal” or “engage in behavior that involves the use of intermodal services inappropriately restrict “.

The FMC declined to comment.

The World Shipping Council (WSC), whose members control approximately 90 percent of the global container fleet, and the Pacific Merchant Shipping Association (PMSA) responded to California officials and urged better communication between them compared to the involvement of the FMC.

In a two-page letter to CNBC, the two groups accused the record surge in imports from China as a catalyst for the port’s efficiency and the associated fees that importers and exporters pay.

The WSC and PMSA listed the export sales of the various farms exported from the Port of Los Angeles, saying they were “up significantly” year over year. The group then called it a “false impression that California’s agricultural exports are being excluded from access to the international supply chain”.

CNBC previously reported that while agricultural export volumes for 2020 were larger than 2019 due to the U.S. Phase One trade agreement with China, purchases fell short of targets. According to the Peterson Institute for International Economics, China imported $ 100 billion of the U.S. goods agreed under the deal – roughly 58% of the targeted $ 173.1 billion. Exports are only official once they have been transported and processed in the country of destination. However, the increase in agricultural exports pales in comparison to the increased ration of empty export containers.

CNBC launched its own review of import and export data, and concluded that the airlines rejected an estimated 177,938 containers, called TEUs (20-foot equivalents), in October and November. This was the result of an analysis of the data compiled by the Census Bureau and the ports of Los Angeles, Long Beach, California and New York and New Jersey. The total value of lost export trade from these ports is $ 632 million.

Prioritize empty export containers

The data showing the increase in empty containers being shipped back to China corresponds to the timing of the carriers who informed agricultural exporters in mid-October that they would prioritize empty export containers over agricultural exports.

The air carriers also said they would raise prices on US agricultural exports if the goods were moved. The rise in agricultural export fees continues. Last week, ZIM Integrated Shipping Services announced agricultural exporters that they would be introducing surcharges for all cargo from the US to China and other Asian countries between $ 150 and $ 500 per container starting Feb.17.

CNBC asked ZIM for a comment.

According to the CNBC investigation, the total export container deficit for the ports of Long Beach and Los Angeles was 136,392 TEU. An estimated 41,546 TEU were denied from the ports of New York and New Jersey.

To calculate the value of the potential trade loss resulting from the rejection of agricultural exports, CNBC used the containerized agricultural export price for soybeans / oilseeds / grain in the Port of Los Angeles, which can be found on the US Census website, USA Trade Online.

The value of this export is USD 3,552 per TEU. The value of the lost trade is likely to be higher as the value of the Ag’s raw materials fluctuates widely. Soybeans are at the lower end of the commercial value spectrum.

This balance was calculated using the difference between the actual empty exports in 2020 and the share of export empty in 2019.

However, CNBC analysis shows that the pattern of the growing US export container deficit extends beyond October and November.

Based on the trade data, empty container exports began to rise as early as June for Los Angeles, July for Long Beach, and August for New York and New Jersey. From July to November a total of 297,997 TEU from the ports of Los Angeles, Long Beach as well as New York and New Jersey were denied a container deficit of USD 1.1 billion.

“The core problem is that a rapidly recovering China has revived its export economy and pays huge premiums for containers, which makes it more profitable to send them back empty than to refill them,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition. “In the Port of Los Angeles, three out of four boxes returning to Asia are empty, compared to the normal rate of 50%. Food is piling up in the wrong places.”

Read the full letter: