Update on the supply chain situation in America: sea freights and customs clearance

This month, the average cost of shipping a 40' standard container from China to the U.S. West Coast has reached $20,056, a record high: it's almost double what it was in July, which was itself double the amount in January. Additionally, the wait time for container drayage from the port has increased from an average of 3.5 days to 17 days. The reason for this is that essential equipment for transporting goods is often not where it's needed, and when available, there aren't enough truck drivers or warehouse workers to operate it.

While Americans are furious, it seems that the supply chain issues initially considered temporary at the start of the pandemic will continue into 2022, fueling inflation, weakening economic growth, and questioning the global economic model that has prevailed for three decades.

The current convoluted supply chain is forcing companies to make precautionary orders to avoid stockouts, which is only increasing pressure on workers in the sector. Meanwhile, consumers face higher prices and experience firsthand the shortage of cars, children's shoes, and gym equipment, all while the holiday shopping season looms.

To Move Goods Efficiently from Factories in China/Asia to the U.S. Market, More Coordination is Needed Between Cargo Ships, Export Terminals, Truck Drivers, Tractor and Trailer Providers, and the Rail Network

The situation could worsen further before showing signs of recovery. The reason for this worsening is that global supply chains are not built to sustain these kinds of situations.

The negative consequences of the health crisis are the main reason for the rise in shipping rates and delays in deliveries. Americans trapped at home have drastically reduced spending on restaurants, cinemas, and sports events, and shifted consumption towards goods like laptops and bicycles, triggering an increase in imports that has overwhelmed the sea freight channel.

On the other hand, the pandemic has also highlighted weaknesses in the U.S. port infrastructure: lack of investment in key ports, controversial cuts to the workforce in the railway industry, and a chronic inability to collaborate among major U.S. actors. It's like having an orchestra with many first violins and no conductor, where no one is really in charge.

Congestion at Ports and Other Points in the U.S. Intermodal System Has Become a Risk Factor for the U.S. Market’s Competitive Position

When the U.S. supply chain is working, goods move smoothly as if they were carried by a river. Today, however, one bottleneck follows another.

In a normal situation, the following would happen:

1. When a cargo ship dock is available, dock workers use cranes to lift the containers and position them for transfer to inland America via truck or train;
2. Ideally, a truck driver notified of the goods' arrival reaches the terminal and finds a tractor or trailer to move the waiting container;
3. The container is loaded onto the truck and the driver takes it to the American customer's warehouse.

Too often, congestion elsewhere blocks port operations. As a result, distributors with full warehouses cannot send drivers to pick up additional containers, and many loads remain outside warehouses for days waiting to be unloaded, leaving ports short of essential equipment. Consequently, containers stay in port storage longer than expected, preventing ships from unloading new containers, thus feeding the vicious cycle of delays in customs clearance and unloading goods in the U.S.

With U.S. Infrastructure and Technology Improvements to Foster Cooperation Between All Parties on the U.S. Ground, the U.S. Supply Chain Can Be Decongested and America's Market Leadership Can Be Reaffirmed

Better sharing of commercial data for planning purposes (as is done in the port of Rotterdam using the PortXchange software) would allow better placement of equipment and personnel at key points in the American supply chain. Likewise, a massive investment in railway infrastructure would remove thousands of daily truck journeys from highways, alleviating congestion at U.S. ports. Indeed, many U.S. logistics (and non-logistics) companies do not want to expand their operational capacity too much: the danger is that when normalcy returns, their facilities will be filled with trucks, frames, or cargo ships, blocking the chain again, not to mention the exorbitant costs required to boost logistical capacity.

The Solution Lies Upstream: The U.S. Needs to Invest in Infrastructure and Personnel for Transportation and Customs Clearance

Everyone is aware of the atypical historical situation the market is facing. But since the outlook for the United States is optimistic, why not think right away about how to speed up the process? First of all, support policies are needed to ensure that businesses operating in America do not collapse due to the excessive costs of supplies outside the U.S. Equally essential is focusing federal government investment efforts on improving ports, railways, and sea supply routes, as congestion occurs when a single part of the logistical infrastructure gets clogged.

Regarding the United States, it is vital to avoid dependencies and vulnerabilities from abroad, which is precisely what President Biden aims to achieve through the infrastructure investment plan announced a few months ago. The keywords are, in short, investment, development, infrastructure modernization, and human capital.