By Wayne R. Rohd1
The global COVID-19 pandemic that has affected all of our lives since March 2020 has had significant operational impacts on the international ocean supply chain, including inland components of this supply chain. These operational impacts have potential legal implications for supply chain actors, particularly those subject to regulation by the United States Federal Maritime Commission (“FMC” or “Commission”). This article briefly examines the operational impacts of the pandemic, then discusses some of the potential legal implications that flow from it.
I. OPERATIONAL IMPACT OF PANDEM
The initial operational impact of the pandemic was a decline in cargo volumes imported into the United States from other countries, particularly major trading partners in Asia. For example, in May 2020, cargo volumes at the Port of Los Angeles were down 29.8% from May 2019, and cargo volume handled by Los Angeles in the first five months of 2020 was down. 18.6% compared to the same period in 2019. .2 Other ports have seen similar declines in cargo volume, and in May 2020 some forecasters predicted an overall decline of 20-30% in cargo volumes handled by US ports in the first half of 2020.3 Shipping carriers reacted to the initial decline in cargo volumes by reducing vessel capacity.4
Freight volumes surged later in 2020 as U.S. consumers began to spend money that would have been on travel, dining and other entertainment away from home on goods. consumption designed to make the most of the “new normal” of socially distanced living and working from home. Carriers were able to quickly reactivate the capacity of idle vessels to meet the new demand.5
However, the increase in vessel capacity has not been sufficient to meet freight demand. The increase in freight volume that began in the middle of 2020 has continued unabated since then and has combined with a number of factors to create what I will call “supply chain congestion” . These other factors include:
- Ships delayed while waiting for a berth in crowded ports;
- Congestion at sea terminals due to high cargo volumes;6
- Decreased labor productivity at marine terminals and inland cargo handling and storage facilities due to a combination of COVID-19 disease among workers, altered working conditions to provide a safer working environment and the same labor shortages that affect many sectors of the economy;7
- Congestion in domestic rail facilities due to higher freight volumes;8
- A shortage of trucking capacity;
- An increase in the amount of time a chassis is used to deliver a loaded container to its destination and then return the empty container to the designated location (“dwell time”), resulting in chassis shortage and further loading delays ;9
- A shortage of containers resulting from some or all of the above factors.
The primary legal issues raised by supply chain congestion under the US Shipping Act of 1984, as amended, 46 USC §§ 40101, et seq. (the “Navigation Act”) are discussed below.
II. THE POTENTIAL LEGAL IMPLICATIONS OF SUPPLY CHAIN CONGESTION.
The supply chain congestion plaguing the international shipping industry since mid to late 2020 presents three main categories of legal issues under the Shipping Act: (a) reasonableness of charges demurrage and detention; (b) the adequacy of carrier service levels (particularly with respect to US exporters); and (c) Carrier’s compliance with contractual service commitments.
1 Mr. Rohde is a member of the law firm of Cozen O’Connor, whose offices are located at 1200 19th Street NW, Washington, DC 20036. He can be reached at 202-463-2507 or [email protected]
2 Press Briefing of June 10, 2020 by Executive Director Gene Seroka: https://www.portoflosangeles.org/references/news_061020_may_cargo_volumes_drop.
3 NY-NJ port seeks help amid declining COVID-19 volume,” Journal of Commerce, May 22, 2020.
4 NY-NJ Expects Freight Drop in First Quarter After Dozens of Empty Sailings”, Journal of Commerce, March 2, 2020
5 Container Volumes Shipped to U.S. Rise After Coronavirus Slowdown,” Wall Street Journal, September 4, 2020.
6 Rising Imports, Labor Shortages Worsen LA-LB Congestion,” Journal of Commerce, January 12, 2021.
8 BNSF, UP battling growing congestion pressures in Chicago,” Journal of Commerce, June 3, 2021.
9 Surge in Imports at Southeast Ports Tightens Chassis Availability”, Journal of Commerce, 10 December 2020. container or chassis is in possession of cargo interest or its agent/contractor
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Originally published by Journal of Transportation Law, Logistics and Policy
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.