Anchors Aweigh: Almond Alliance CEO Applauds Ocean Shipping Reform Bill
June 21, 2022 Seven months into her term as the President and CEO of the Almond Alliance of California, Aubrey Bettencourt can surely say she has found her sea legs. Bettencourt and a state-led delegation skippered by U.S. Rep. John Garamendi (D-CA) traveled to Washington on June 16 to attend the passage of the Ocean Shipping Reform Act of 2022. The bill, which President Biden signed, revises provisions related to ocean shipping policies and is designed to support the growth and development of U.S. exports and promote reciprocal trade in the common carriage of goods — such as almonds — by water in the foreign commerce of the U.S.
“We have not had any major updates to the Federal Maritime Commission (FMC) and a lot of these trade rules in about 24 or 25 years,” Bettencourt says. “In some cases — and I’ve had to learn a lot about maritime law in the last seven months — we are still playing by rules from the 1800s. It’s incredible the history and the legacy that so many of these rules have.”
Some of those rules — particularly after a year and a half of supply chain problems, massive trade imbalances, and challenges at ports — needed to be revisited, according to Bettencourt, who began her term with the Almond Alliance on Dec. 1.
Feeling likewise were Garamendi and U.S. Representative Dusty Johnson (R-SD). They introduced the Ocean Shipping Reform Act last August. “Foreign ocean carriers aren’t playing fair, and American producers are paying the price,” Johnson said at the time. “It’s time for updated rules of the road. That’s what our bill does.”
Similar attempts to rectify the situation had occurred in the previous 20 years, Bettencourt says, but they were never as pressing or “poignant,” she adds.
“I have to hand it to the agricultural community, not just myself but a lot of my other partners who predated me on helping to push this thing through and get it to a place where we could all work on it and work with it,” Bettencourt says. “I think ag really carried the day, but this is going to have implications for our importers as well, in a good way, helping them get product delivered appropriately.”
Newfound Clout
The legislation arms the FMC with a degree of authority that it had been lacking, Bettencourt says. The organization has typically been an oversight and conflict resolution body that performs research and analysis while having no regulatory authority over foreign-owned carriers.
“You can call the FMC; they’ve got reports printed for days that will tell you what’s wrong in our shipping world and in our supply chain,” she says. “But they have no authority to act on that.”
The Ocean Shipping Reform Act alters the landscape. Specifically, it:
- Expands safeguards to combat retaliation and deter unfair business practices
- Clarifies prohibited carrier practices on detention and demurrage charges and vessel space accommodation
- Establishes a shipping exchange registry through the FMC
- Expands penalty authority to include a refund of charges
- Increases efficiency of the detention and demurrage complaint process
“I keep telling people, this is now where the real work begins,” Bettencourt says. “The FMC now is charged with developing these standards and processes and procedures that they can now enforce. We have we have a long way to go still, but it touches on important things, like designing a process to ensure that if product can be delivered in a timely fashion and can be loaded, that it must be taken instead of just letting it sit on the dock and letting it pile up and cause increased congestion.”
Money Talks
Opinion varies as to when the supply chain crisis began. Some claim it predates the pandemic, Bettencourt says. Regardless, COVID-19 and its lockdowns have definitely exacerbated the situation, she says.
“Folks stopped going places, and they started buying things, and that resulted in about a 20% increase of demand for imported product from predominantly Asia, specifically China,” Bettencourt says. “As a result of that massive spike in demand, the shipping container carrier ships that we use to move that product back and forth across the Pacific, what used to take them 15 days to go from ports in Asia into the ports of Los Angeles and Long Beach, which are our biggest Pacific ports in the United States, now was taking them 50 days to come across and get unloaded because of the massive amount of volume that was coming at the rate that it was coming.”
In normal circumstances, the ships would travel from Los Angeles and Long Beach to Oakland, the largest agricultural export port in the U.S. There they would load export goods — typically ag products — and then travel across the world to drop something off and pick something up.
But because of the time it was now taking to reach Los Angeles and Long Beach, and because of the massive amount of demand, cargo containers skyrocketed from $30 per empty when taken back to Asia to $30,000 per empty when returned to Asia.
“Money is time, and time is money, and so the carriers were thinking, ‘You know what, fast nickels over slow dimes.’ They would get into L.A. — finally — grab whatever empties they could, turn around, and go back, and they could make two trips in the time it would take them to make one had they carried on their traditional route of picking up agricultural product,” Bettencourt says.
The result of that trickles down to farmers, whose predicted amount of volume keeps arriving, Bettencourt reminds, “because those trees don’t stop growing. Despite all the challenges, those trees keep growing and they keep making almonds. … This as drought hits, as the cost of inputs hit, with the crisis in Ukraine and Russia, and as water is now trading at $2,000 an acre foot.”
In turn, price degradation between September of 2021 and March of 2022 resulted in a $2 billion loss in revenue just to almonds, Bettencourt says.
“That’s $2 billion not getting back into our farmers’ hands; $2 billion not getting into the paychecks of our employees; $2 billion not going into bank payments and mortgages and land-based payments and fees and buying equipment — all of that,” Bettencourt says. “So, this big macro thing of supply chain disruption and these pictures of ships off of the Pacific has this absolute direct connection to towns like Mendota and Ballico and Manteca.”
Not if the Almond Alliance has a say.
“We’re starting to see success in various channels and really trying to get product moving again with the idea being that, if we can get volumes going, and we can get relationships going, and we can get product moving again, then we can start to work our way out of this,” Bettencourt says. “So, the upside is we have a little room to kind of work our way through this, but it’s very apparent that the way we’ve been doing business, where we were 85% dependent on Oakland for exports and predominantly on truck, it’s just not going to cut it anymore. We have to have more options and opportunities so that we have resilience for our own industry and our own supply.”
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