Happy New Year! We are kicking off 2022 with a focus on three important supply chain topics.
First, the U.S. goods movements supply chain ended a record-breaking year with a record-breaking holiday shopping season. Data from Mastercard indicate holiday sales rose 8.5 percent compared to 2020 and 10.7 percent compared to pre-pandemic 2019. Consumers also received nearly 99 percent of their packages on time or with minimal delays from USPS, UPS, and FedEx while delivery times for all three delivery services were 26 to 40 percent faster than before the pandemic.
Second, as we begin the new year, the Ports of Los Angeles and Long Beach announced a new fee on long-dwelling empty containers, building on the success of the fee announced on long-dwelling import containers in November. This will hopefully accelerate the removal of empty containers that are currently clogging the ports. In addition, efforts to ensure U.S. exporters are treated fairly continue: the Port of Oakland announced new actions to improve U.S. exports, particularly agricultural exporters.
Third, we have taken new steps to monitor potential Omicron-related disruptions at ports overseas and at home while working with the public and private sectors to prioritize the throughput of medical supplies at the nation’s ports.
A Record Setting Holiday Season
The latest edition of the transportation supply chain dashboard indicates a few of the reasons why this holiday shopping season was a success. First, ports have processed record amounts of containers in 2021. The Ports of Los Angeles and Long Beach—which handle 40 percent of containerized imports entering the U.S.–processed 14 percent more containers compared to their 2018 record over the same period.
Our preferred measure of goods on shelves—inflation-adjusted retail inventories without autos—rose 0.5 percent at the end of November compared to the end of October to not only exceed pre-pandemic levels, but also hit its highest monthly level recorded since 1992.
Ports Take New Steps to Increase Fluidity
This fall, one key strategy to get goods on shelves faster was changing the financial incentive for companies to remove goods sitting on docks for long periods of time. At the beginning of November, with support from the Administration, the Ports of Los Angeles and Long Beach proposed charging the ocean carriers for cargo that dwelled on the docks for nine days or more, which led to an almost 50 percent reduction in the number of long-dwelling import containers on the docks pre-Christmas. And despite the Christmas and New Year holidays, when many workers at the port took a much-deserved rest, the number of long-dwelling import containers remain about 40 percent below November 1 levels.
The threat of a fee on long-dwelling import containers has managed to reduce the number of import containers sitting on the docks. But docks are still clogged because the number of empty containers (which are not subject to the fee) remains too high. These empty containers sit on the docks awaiting pickup, either to be filled with exports or sent directly back to Asia. Tens of thousands of empty containers are one of the key impediments to restoring fluidity at the ports—they take up space used for unloading containers from ships, make it harder for trucks to maneuver on the docks, and many sit on chassis, which are in high demand and necessary to move containers. A lack of chassis is a key reason that truck drivers often have to wait so long to pick up containers and return empties at ports.
And so this week, the Ports of Los Angeles and Long Beach announced that in at the end of January they will seek to impose a fee on carriers for long-dwelling empty containers. The hope is this will further restore fluidity the docks, free up chassis, and increase the velocity of the goods movement chain.
The efforts of the Supply Chain Disruptions Task Force to improve agricultural exports at West Coast ports have also seen new progress. Last month, Transportation Secretary Buttigieg and Agriculture Secretary Vilsack sent a letter urging ocean carriers to expand their use of other West Coasts ports, particularly the Port of Oakland, to support agricultural exports. Yang Ming—one of the top ten largest carriers—responded to Secretaries Buttigieg and Vilsack announcing that they will be restoring service to Oakland, stating that “we are confident that these additional services and ships will increase our capacity to load agricultural exports through Oakland.” This follows announcements by fellow top-ten carriers ONE and CMA CGM that they are restoring service to Oakland.
In addition, the Port of Oakland announced this week that it will open up an off-terminal container yard after discussions with the State of California, Port Envoy John Porcari, and the U.S. Department of Agriculture. The yard will help move containers in and out of the port more quickly. The Port of Oakland was the fifth largest containerized agricultural exporter port in 2019, but exports have been falling this year as shipping lines began skipping Oakland. The restoration of service by these three carriers and opening of a container yard in Oakland will help West Coast containerized agricultural exports recover.
Tracking the Impact of COVID-19
Despite the highly contagious Delta variant, the Supply Chain Disruption’s Task Force’s actions helped increase throughput and stock goods on shelves. The Administration established an early alert system, run by the Departments of Commerce and State, to track COVID-related shutdowns in key semiconductor manufacturing facilities and ports across the globe. This allows us to detect potential disruptions earlier and support faster problem solving and coordination with our trading partners and the private sector, while also maintaining a focus on worker health and safety, supporting the public health response, and safely re-opening plants.
We are closely tracking potential supply chain impacts of the highly transmissible Omicron variant. The State Department has increased the frequency of its reporting on the situation at key manufacturing plants and ports worldwide. No significant threats to U.S. supply chains have been reported to date, but we will continue to monitor the pandemic closely.
The variant could impact labor supply, productivity and throughput at the ports. Through the pandemic, our supply chain workers, including those in the port, trucking, and warehousing sectors, have been frontline heroes, ensuring families and businesses receive the goods they need. Since coming into office, the Administration’s COVID Response Team has worked closely with the private sector to make free vaccines widely available to workers and put in place health and safety protections to mitigate the spread of the virus and these efforts will continue. For example, the longshore workers union is reinstating various social distancing protocols it had in place earlier in the pandemic to help limit the potential spread of COVID-19, and will continue to adjust its protocols to address changing health environments. In addition, the Department of Transportation is in close and regular communication with the nation’s largest ports to respond quickly if Omicron is having a severe impact on port operations.
The Administration is also continuing its work to ensure critical medical supplies are available throughout the country, including through close coordination between the Biden-Harris COVID Response Team and the Supply Chain Disruptions Task Force. First, thanks to collaboration between ports and the medical equipment industry, critical medical supplies have been prioritized at certain ports of entry and steps have been put in place to help expedite their delivery to their end destination. This work builds on prioritization procedures developed with public- and private-sector partners early in the pandemic to expedite critical medical goods.
The Administration has now expanded on this effort by going further upstream in the supply chain and asking ocean carriers, in situations deemed critical, to stow critical medical goods in parts of the ship where they can be more efficiently offloaded (“block stowing”), and to evaluate options for unloading critical containers at a prior port of call to decrease overall travel time. In one recent example, the Administration worked with a medical device company, an ocean carrier, port and terminal operators, and rail operators to expedite import of two dozen shipping containers with critical equipment used in intensive care units, moving up the scheduled arrival date by weeks.
We will continue to use these and other measures on a strictly as-needed basis to get the most critical medical supplies to hospitals around the country as efficiently as possible. Longer term, we will continue our efforts to build a more resilient and sustainable public health supply chain, as directed under Executive Orders 14001 and 14017.
While the impact of the emergent Omicron variant will unfold over the next days and weeks, we will continue to remain focused on supporting the public health response, closely monitoring impacts on domestic and global supply chains, and take action in partnership with the public and private sector and our international allies and partners to improve supply chains.