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Container Ship Conundrum Claims (And Then Frees) Yet Another Retail Supply Chain Victim

The Titanic never saw the iceberg coming and they plowed right into it. Lately, retailers are colliding with new supply chain icebergs – ones that are truly hard to imagine.

Just yesterday, a “higher” tide, a full moon, and a lighter load freed the giant grounded container ship “Ever Forward” from the shallow bottom of the Chesapeake Bay, where it had been sitting for 36 days. The ship left Baltimore Harbor on March 13, 2022, carrying about 5,000 containers of cargo, and managed to run aground while apparently missing a critical turn in the Craighill Channel near Pasadena, Maryland. The “Ever Forward” is operated by Taiwan’s Evergreen Marine Corporation and is a sister ship of the infamous “Ever Given” – which blocked the Suez Canal for six days starting on March 23, 2021. Observers are asking: is this a pattern, are the ships too big, and are we destined to be reminded about how fragile the USA retail supply chain really is?

The response targeting the reality of America’s shipping problems is relatively easy to articulate.

America doesn’t actually own the ships that deliver inbound cargo from foreign ports (not one of the top 25 shipping lines is American owned). Imported goods are delivered to ports like Long Beach and Los Angeles in California that lease their terminals to private operators. In turn, the entire process is overseen by the Federal Maritime Commission (FMC) which is described as a Federal Agency with no teeth and limited power. On top of that, the West Coast Ports are protected by the International Longshoremen’s and Warehouse Union (ILWU) which is about to go head-to-head with the Pacific Maritime Association (PMA) in an effort to determine whether or not to strike by the end of June.

Transportation Secretary Pete Buttigieg likes to talk about the public/private partnership between government and the varied private operators. However, in spite of the fact that last year’s Christmas was not cancelled, interactions between the two groups remain somewhat tenuous. The government can’t really tell the private sector what to do, and the ILWU and the PMA beat to their own respective drums.

The government, for their part, has made some unfortunate decisions that have exacerbated supply chain problems. Industry prognosticators will tell you that last year’s supply chain debacle was well on their radar screen before the much-ballyhooed 2021 Christmas Holiday “90-day sprint to the finish.” Retailers generally feel that the government could be doing more to focus on the supply chain problem. As an example, most everyone understands that containers (or boxes) don’t come with wheels, but the Biden Administration was trying to protect American jobs, so that they tariffed imported chassis (wheels) from China at 221% to let domestic contractors supply the wheels. Great idea to do this, but in the middle of a supply chain emergency, the effort seemed to have lacked foresight. In addition, everyone was reasonably horrified at the picture of all the container ships anchored off of San Pedro Bay. That, of course, was easy to fix, they just moved the vessels further out to sea, so that they couldn’t be seen from the shore.

In addition to the ports currently handling more cargo and doing a much better job, there are other issues on the horizon. There is a shipping slowdown in China due the restrictive zero-COVID policies that now affect several ports as reported by American Shipper. It is also likely that there will be a calm before the storm on inbound container traffic with the potential of a July 1 West Coast port strike and a 2022 surge in traffic for the all-important Fall shipping season. Overall, there is just cause for retailers and economists to be alarmed.

In addition, America’s trade deficit is basically defined as imports minus exports, but it turns out that many shipping containers are heading back to Asia completely EMPTY (which affects exports) simply because it takes time to fill the containers – and they are more valuable when shipped full from Asia to America. Plus, during COVID, under the Biden Administration the direct-to-consumer (d-t-c) business has flourished and many companies (especially in China) are using services like the China Post and the US Postal System to ship around 2 million packages a day direct to consumers in the USA – that are free of duty and tariff (up to a limit of $800 per person per day). This process is called de minimis and is probably causing more than $128 billion in additional American trade deficit a year (per the Coalition for a Prosperous America).

The bottom line for all this is that no matter how much everyone tries to warn government, it is fairly clear that America could be headed for another shipping supply chain crisis. If the “Ever Given” wasn’t enough of a warning, then the “Ever Forward” should serve as a potent reminder that the unforeseen can easily spin out of control. It is true that 40% of the USA inbound container traffic arrives through the West Coast Ports and that is enormous. Given that the Suez Canal has recently raised their rates for passage (which affects USA East Coast Ports), and given that freight insurance has elevated, and given the Federal Government still has little control over the entire process– it is fairly clear that the chance for system failure exceeds the opportunity for success.

It has been estimated that when the “Ever Given” was blocking the Suez Canal for six days last year and the cost to the global economy was more that $400 million an hour. The “Ever Forward” was aground for 36 days but didn’t block passage for other ships. Being stuck in the muck – delayed delivery of cargo, created fears of damage to the environment, and reminded us how fragile the entire system really is.

In addition to the two (now infamous) Evergreen ships, the fleet also operates “Ever Genius, Ever Gifted, and Ever Gentle.”

America can’t really afford to wait for the next supply chain debacle. Someone in Government needs to take charge.

America was EVER warned by Given and Forward. Now, supply chain gurus can focus on the likes of Genius, Gifted, and Gentle – as retailers wait for the next supply chain shoe to drop.