The Ocean Shipping Reform Act is now law, but much more is needed to ensure reliable exports of U.S. dairy products to the overseas markets that represent the industry’s future, said Tony Rice, trade policy manager for NMPF and the U.S. Dairy Export Council, in a Dairy Defined podcast released today.
“Our international customers demand U.S. dairy products,” said Rice. “Our competitors, mostly the EU and New Zealand, they've shown that they're not going to be able to keep pace in the coming years. So it makes all the more important that these supply chain issues get ironed out, and hopefully sooner rather than later.”
Rice explains the complexities of the challenges facing U.S. port traffic, why additional public policy changes are essential, and how NMPF is leading agriculture’s efforts for change.
The Ocean Shipping Reform Act is now law, but much more is needed to ensure reliable exports of U.S. dairy products to the overseas markets that represent the industry’s future, said Tony Rice, trade policy manager for NMPF and the U.S. Dairy Export Council, in a Dairy Defined podcast released today.
“Our international customers demand U.S. dairy products,” said Rice. “Our competitors, mostly the EU and New Zealand, they've shown that they're not going to be able to keep pace in the coming years. So it makes all the more important that these supply chain issues get ironed out, and hopefully sooner rather than later.”
Rice explains the complexities of the challenges facing U.S. port traffic, why additional public policy changes are essential, and how NMPF is leading agriculture’s efforts for change.
Alan Bjerga, NMPF: Hello, and welcome to the Dairy Defined Podcast. Dairy celebrated a much needed win last month through passage of the Ocean Shipping Reform Act, which will make it easier for U.S. dairy producers to get their products to the markets they're building. But the work is not complete. Joining us to explain what's happened and what's next is Tony Rice, NMPF's manager for trade policy. Good having you here Tony.
Tony Rice, NMPF: Well thank you.
Alan Bjerga, NMPF: So first Tony, walk us through this legislation. What exactly does it do and how does it affect dairy producers?
Tony Rice, NMPF: So the Ocean Shipping Reform Act, which we have to give a lot of credit to the members of Congress who we worked with, Representative Garamendi and Dusty Johnson in the House and Senators Thune and Klobuchar in the Senate for leading this initiative that would bring about some welcome changes to the way that the ocean carrier market works for agriculture and U.S. dairy exporters.
It would doing three major things. One, it would require the Federal Maritime Commission, which is the agency that oversees the ocean carriers carrying U.S. goods from airports to customers around the world, that agency would be required to set guidelines on what constitutes unreasonable refusal to load U.S. products. What we've seen is a lot of these carriers, a lot of them foreign flagged and foreign owned and operated, they've been refusing to provide space on the ships. They've been refusing to provide containers simply because it's more economic and more profitable for them to take those empties and return them quicker to the west coast, and they're not even extending contracts for American agricultural exporters. So what this would do, it would require the Federal Maritime Commission to set guidelines on what constitutes reasonable guidelines on when and where and how these ocean carriers can provide containers to exporters.
Second piece of that is increased transparency. As you can imagine shippers need to know when a boat's going to be at the port. They need to know where their containers going to be, and that unfortunately hasn't been the case. The schedules have not been clear. There's been a lot of confusion as to when a container's going to be available at the yard to be picked up or to be dropped off.
The third piece of that leading off of transparency is new regulations related to detention and demurrage fees. Now what these fees are intended to do is provide some certainty and efficiency ironically in the market, but they've been abused by the ocean carriers as a money making revenue stream for them. A lot of times these fees would be incurred outside of the power of a U.S. agricultural export. For example, if they go to drop off a container at a yard and there's no space there even though they were scheduled to drop it off, they have to hold it for a few more days, those fees would keep piling up, and this legislation would take steps to address that problem.
Alan Bjerga, NMPF: So that fixes everything right, all the boats should be moving smoothly and we don't need to do anything from here?
Tony Rice, NMPF: Well, I wish I could give you glowing reviews and great news but unfortunately the situation hasn't improved by any significant amount. There have been little changes that's related to some of the fees that have been charged to shippers. A lot of the ocean carriers have dropped those fees due to what we believe is this legislation coming down the pipe. So aside from that unfortunately there's still a lot of difficulties with a shortage of labor, shortage of truckers, a shortage of containers, all compiling to a backlog throughout the entire supply chain. And looking at the numbers of empty containers leaving the major west coast ports the number hasn't improved, it's still around 70% through the last three, four months here, that hasn't changed from the last part of last year. In 2021 alone these challenges have cost U.S. dairy exporters just over $1.5 billion as a result of direct higher cost, reduced sales and reduced value as some of this product has been sitting in container yards, sitting in ships, and the quality and the value of course goes down as a result of these challenges.
Alan Bjerga, NMPF: Tell us a little bit about the next steps that National Milk Producers Federation. U.S. Dairy Export Council, the dairy community and advocates in agriculture are taking to move this forward so we can get an even stronger solution than what we've already been achieving.
Tony Rice, NMPF: Yeah, so the Ocean Shipping Reform Act is now officially law. Our president and CEO Jim Mulhern had the opportunity to go in June to the White House, to the signing ceremony, with President Biden. And now that it's law and we're going to move onto the next steps.
There's a few things that happen immediately, one of them being the transparency requirements. Ocean shippers are now required to provide a little more insight into when their schedules and the container availability is.
The next piece is rule making. So the Federal Maritime Commission has to establish guidelines related to what constitutes unreasonable refusal to load product, as well as guidelines on detention and demurrage fees, and that begins with the rule making process, that kicks off now that the bill has gone into law. And our role is going to be making sure that the Federal Maritime Commission takes measures to ensure that those provisions are strong and they support U.S. agriculture and dairy exporters. And we're going to be working with our partners in Congress who oversee this commission to make sure those provisions are the ones that are going to support American interest and American exports.
Alan Bjerga, NMPF: And let's be clear about this, when we're talking about ports we're not just talking about the west coast here. Talk a little bit about some of the nationwide impact of some of the things that we're seeing and some of the efforts that we're making.
Tony Rice, NMPF: That's a good question. And while a lot of these exports go out of the west coast ports it does have an effect on dairy producers all throughout the United States. Nearly 18% of total U.S. production was exported in 2021 alone, and as you can imagine if there is any hiccups in getting that product out the door that has a downward pressure on farm gate milk prices.
Alan Bjerga, NMPF: And just to step back for a moment Tony, in the grander scheme of U.S. dairy trade and the importance of these global markets, how important is it that we get the supply chain struggle that we're seeing right now fixed?
Tony Rice, NMPF: It's really important, not only for the short term problems that we're seeing now but it's been pretty clear that this volume is going to continue. Our international customers demand U.S. dairy products, they demand dairy in general, and our competitors, mostly the EU and New Zealand, they've shown that they're not going to be able to keep pace in the coming years so it makes all the more important that these supply chain issues get ironed out, and hopefully sooner rather than later. And the Ocean Shipping Reform Act would take steps to doing that as well as some of the other efforts we're working with the administration and with Congress to make that happen. Now it might be some time before we get it ironed out given that there's a rule making process as I mentioned before with the Ocean Shipping Reform Act, but it has those long and short term implications getting the product out the door today, but also five, 10 years out as the U.S. becomes a more and more dominant player in the world market.
Alan Bjerga, NMPF: We're speaking with Tony Rice, NMPF's manager for trade policy. Tony, anything else you need to share before we let you go?
Tony Rice, NMPF: The only thing I would add is that this is not going to be a one stop solution to the problem. We've worked with Congress for the better part of a year now on this Ocean Shipping Reform Act fully recognizing that this is only one piece of the puzzle, and we're going to continue the efforts with the administration, with our members, our working group, and with Congress to make sure that all the tools that are available can be employed to make sure that U.S. dairy exporters can meet the international customers who demand our product now and for years to come.
Alan Bjerga, NMPF: Tony, thank you for your time.
Tony Rice, NMPF: Thank you for having me.
Alan Bjerga, NMPF: And that's it for today's podcast. For more on NMPF's policy priorities visit nmpf.org, we have a special section on trade. And for more of the Dairy Defined Podcast, this podcast can be found on Apple Podcast, Spotify, SoundCloud, and Google Play under the podcast name Dairy Defined. Thank you for joining us.