United States:
The Operational Impact Of Covid-19 On The International Ocean Supply Chain And The Legal Issues Presented By Supply Chain Congestion
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By Wayne R. Rohd1
The global COVID-19 pandemic that has affected all of our lives
since March of 2020 has had significant operational impacts on the
international ocean supply chain, including the inland components
of that supply chain. Those operational impacts have potential
legal implications for supply chain participants, particularly
those subject to regulation by the U.S. Federal Maritime Commission
(“FMC” or “Commission.”) This article briefly
examines the operational impacts of the pandemic, and then
discusses some of the potential legal implications arising from
same.
I. OPERATIONAL IMPACT OF THE PANDEM
The initial operational impact of the pandemic was a decline in
cargo volumes being imported into the United States from other
countries, particularly major trading partners in Asia. For
example, in May of 2020, cargo volumes at the Port of Los Angeles
were down 29.8% over May of 2019, and the cargo volume handled by
Los Angeles over the first five months of 2020 was down 18.6% over
the same period in 2019.2 Other ports experienced
similar declines in cargo volume, and as of May 2020, some
forecasters were predicting an overall decline of 20 to 30% in
cargo volumes handled by U.S. ports in the first half of
2020.3 Ocean carriers responded to the initial drop in
cargo volumes by reducing vessel capacity.4
Cargo volumes surged later in 2020, as U.S. consumers began
spending money that would have gone to travel, dining, and other
entertainment outside of the home on consumer goods designed to
make the most of the “new normal” of socially distant
living and working at home. Carriers were able to quickly
reactivate idled vessel capacity to meet the new
demand.5
However, increased vessel capacity alone was not enough to meet
cargo demand. The surge in cargo volume that began in mid-2020 has
continued unabated since that time and has combined with a number
of factors to create what I will call “supply chain
congestion.” These other factors include:
- Vessels delayed while waiting for a berth at crowded
ports; - Congestion on marine 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 illness among workers, working conditions modified to
provide a safer working environment, and the same labor shortages
that are affecting many sectors of the economy;7 - Congestion at inland rail facilities due to higher cargo
volumes;8 - A shortage of trucking capacity;
- An increase in the period 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 a shortage of chassis and further cargo
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 U.S. Shipping Act of 1984, as amended, 46 U.S.C. §§
40101, et seq. (the “Shipping Act”) are discussed
below.
II. THE POTENTIAL LEGAL IMPLICATIONS OF SUPPLY CHAIN
CONGESTION.
The supply chain congestion with which the international ocean
transportation industry has been plagued since mid- to late-2020
presents three primary categories of legal issues under the
Shipping Act: (a) the reasonableness of demurrage and detention
charges; (b) the sufficiency of carrier service levels (especially
with respect to U.S. exporters); and (c) carrier adherence to
contractual service commitments.
Footnotes
1 Mr. Rohde is a member of the law firm Cozen
O’Connor, with offices at 1200 19th Street NW, Washington, DC
20036. He can be reached at 202-463-2507 or
[email protected].
2 June 10, 2020 News Briefing by Executive Director Gene
Seroka:
https://www.portoflosangeles.org/references/news_061020_may_cargo_volumes_drop.
3 NY-NJ port seeks aid amid COVID-19 volume
decline,” Journal of Commerce, May 22, 2020.
4 NY-NJ expects Q1 cargo drop after dozen blank
sailings,” Journal of Commerce, Mar. 2,2020
5 Container Volumes Shipped to the U.S. Surge After
Coronavirus Downturn,” Wall Street Journal, Sept. 4,
2020.
6 Import surge, labor shortages worsen LA-LB
congestion,” Journal of Commerce, Jan. 12, 2021.
7 Id.
8 BNSF, UP battling growing congestion pressures in
Chicago,” Journal of Commerce, June 3, 2021.
9 Import surge at Southeast ports tightens chassis
availability,” Journal of Commerce, Dec. 10, 2020.container or
chassis is in the possession of the 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
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