[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
GLOBAL SUPPLY CHAINS AND SMALL BUSINESS
TRADE CHALLENGES
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HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND REGULATIONS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
OCTOBER 20, 2021
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-037
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-827 WASHINGTON : 2022
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Dean Phillips............................................... 1
Hon. Beth Van Duyne.............................................. 3
WITNESSES
Mr. Kevin Loe, Director of Customer Engagement, Redi-Rock
International, Petoskey, MI.................................... 6
Mr. Chris O'Brien, Chief Commercial Officer, C.H. Robinson, Eden
Prairie, MN.................................................... 8
Ms. Christine Lantinen, President and Owner, Maud Borup Inc.,
Plymouth, MN................................................... 9
Mr. John ``Chuck'' Fowke, President, Homes by John C. Fowke Inc.,
Valrico, FL, testifying on behalf of the National Association
of Home Builders............................................... 11
APPENDIX
Prepared Statements:
Mr. Kevin Loe, Director of Customer Engagement, Redi-Rock
International, Petoskey, MI................................ 39
Mr. Chris O'Brien, Chief Commercial Officer, C.H. Robinson,
Eden Prairie, MN........................................... 41
Ms. Christine Lantinen, President and Owner, Maud Borup Inc.,
Plymouth, MN............................................... 51
Mr. John ``Chuck'' Fowke, President, Homes by John C. Fowke
Inc., Valrico, FL, testifying on behalf of the National
Association of Home Builders............................... 53
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
ABC - Associated Builders and Contractors.................... 58
NLBMDA - National Lumber and Building Material Dealers
Association................................................ 62
GLOBAL SUPPLY CHAINS AND SMALL BUSINESS TRADE CHALLENGES
----------
WEDNESDAY, OCTOBER 20, 2021
House of Representatives,
Committee on Small Business,
Subcommittee on Investigations,
Oversight, Investigations, and Regulations,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:02 a.m., in
Room 2360, Rayburn House Office Building, Hon. Dean Phillips
[chairman of the Subcommittee] presiding.
Present: Representatives Phillips, Davids, Mfume,
Bourdeaux, Chu, Evans, Craig, Luetkemeyer, Hagedorn, Stauber,
Meuser, Van Duyne, Donalds, and Fitzgerald.
Chairman PHILLIPS. All right. Good morning, everybody. I
want to call this meeting to order. And without objection, the
Chair is authorized to declare a recess at any time.
I would like to begin by noting some important
requirements. First, House and committee rules in practice will
continue to apply during hybrid proceedings. All Members are
reminded that they are expected to adhere to these standing
rules, including decorum.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on, and remember to remain muted until you are
recognized to minimize background noise. If you have to
participate in another proceeding, we ask that you exit this
one and log back in later.
In the event a Member encounters technical issues that
prevent him or her from being recognized for their questioning,
I will move to the next available Member of the same party and
will recognize that Member at the next appropriate time slot,
provided that they have returned to the proceeding.
Lastly, in accordance with the Attending Physician's most
recent guidance, all Members and staff physically present in
the committee room today are required to wear masks in the
hearing room except when you are speaking, and that goes for
witnesses as well.
Furthermore, all Members and staff who have not been fully
vaccinated must also maintain 6-foot social distancing from
others. Members will, however, be allowed to briefly remove
their masks, as I said, if they have been recognized to speak.
With that, we shall begin with my opening statement. I want
to start by thanking our distinguished witnesses for joining us
today for this vital hearing on the state of the global supply
chain and its impact, grave impact on small businesses.
The ongoing COVID-19 pandemic is, what we hope, is a once-
in-a-generation crisis that has created massive economic
challenges for businesses and consumers alike.
An extraordinary increase in demand for goods has
exacerbated the many weaknesses in our supply chain, which
predated this pandemic and has inflicted chaos on supply chains
worldwide delaying the delivery of critical goods and products.
The complexities of the global supply chain are often
unseen and unappreciated, especially in an age where consumers
have come to reliably expect rapid delivery of goods and
products. That a port closure in Shanghai can impact a hardware
store in Chaska, Minnesota is not a reality that lends itself
easily to a sound bite on cable news or to political posturing
in Washington.
We are here today because we have a duty to investigate the
challenges facing our small businesses and using what we have
learned come together to address them. As I mentioned, the
COVID-19 pandemic has exposed cracks that have long been
present at nearly every connection point in our global supply
chain, and this is adding considerable economic stress to small
businesses which are already suffering from the economic
fallout of the pandemic.
COVID helped create the perfect storm for the disruptions
that we have seen over the past 19 months, adding to dwindling
natural resources, climate change, workforce development
problems, trade wars, and a lack of investment in our
infrastructure, which is undermining the entire foundation of
the international and domestic supply chain.
What is more, as our economic recovery has picked up, these
problems have worsened. Private businesses, whose operations
slowed during the height of the pandemic, are now struggling to
keep pace with the steep rise in demand as the economy roars
back to life putting even more stress on our supply chain.
All of these factors have combined to create difficult
circumstances. Disruptions have led to supply shortages,
backlogs in major ports, and terribly severe delays in
delivering goods, as we all know. These disruptions are not
only harmful to consumers; they also can be disastrous for
small businesses.
Small companies have limited inventories and cannot afford
to wait weeks or months for the products or supplies that they
need. At the same time, they often depend on lower prices from
overseas goods making the skyrocketing costs of imported
materials prohibitive.
These higher costs might be manageable for bigger
enterprises that can absorb the higher shipping costs and
negotiate favorable terms with shipping companies. Small firms
engaged in international trade have no choice but to accept the
prevailing market rate.
Throughout the last year, surveys have shown that over
half--half of small business owners feel supply chain
disruptions are hurting their businesses. I have heard from
many of them directly. In fact, Ranking Member Van Duyne and I
met with several personally, including one of our witnesses
here today, when she visited my district this past September.
So we must take a closer look at how weakened supply chains
are hurting small firms and our economy and what Congress can
do to strengthen them. By making our supply chains more
resilient, we can help ensure the uninterrupted flow of vital
goods and prepare ourselves for future potential disasters.
As part of that, I believe the federal government must work
closely with the private sector to find solutions--I stress,
find solutions. We understand the problems--to alleviate that
pressure on our supply chains. We also must look to existing
measures that we can utilize to help small businesses with
issues surrounding supply chain and foreign trade, which is one
reason I look forward to hearing more about SBA's State trade
expansion program that aids entrepreneurs as they market and
sell their products overseas.
I am on a mission to get to the bottom of this issue, and I
commit today to work with Chairwoman Velazquez, Ranking Member
Van Duyne, and the White House to make certain that this
administration is doing everything in its power to help small
businesses weather this terrible storm.
With that, I would like to yield to the Ranking Member, Ms.
Van Duyne, for her opening statement.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman. And I
very much appreciate you gathering this subcommittee to discuss
such an important and timely topic.
Just last month, I appreciated the opportunity to tour
businesses in Chairman Phillip's district, as he mentioned, and
discuss how supply chain problems are affecting businesses all
across the country. These issues are particularly harmful, as
the Chairman mentioned, to small businesses who lack the
purchasing power, diversified supply networks, robust
contingency plans, and pricing flexibility to be able to
compete with larger firms.
NFIB's recent small business economic trends report found
that 90 percent of small business owners saw supply chain
disruptions that are having an impact on their business.
Additional reporting has found that nearly 50 percent of all
small businesses have experienced product delivery delays from
their suppliers. Twenty-five percent of all small businesses
have succumbed to slower delivery times to their customers.
And the same study also found that supply chain disruptions
might cause approximately 20 percent of all small businesses to
rethink their current supply chain. As ``help wanted'' signs
are becoming a common site on the doors of small businesses in
local communities across the country and store shelves have
become increasingly bare, the American people are taking notice
to these Democrat-induced economic crises. For example, a
recent survey found that 85 percent of American adults are
concerned that supply chain problems may lead to shortages of
basic items.
And just let me give you a few examples that we have seen
in national news headlines recently: Wall Street Journal,
``Supply-Chain Bottlenecks, Elevated Inflation to Last Well
Into Next Year''; NPR, ``Dual Challenge: Combatting the
Shortages of Labor Workers and Supply Chain Breakdown''; USA
Today, ``Grocery Store Shelves Bare? These Products May Be Hard
to Find Due to Supply Chain Issues''; New York Post, ``Supply-
Chain Woes Forcing Toy Manufacturers to Scramble to Meet
Christmas Demand.''
In my home State of Texas, a local Dallas news headline
reads, ``Businesses Have Never Been This Stressful: Supply
Chain Issues Hurting Small Businesses in Dallas.''
Supply-chain disruptions have left small businesses paying
more of their hard-earned money for goods that they may not
receive for months on end. The Job Creators Network September
monthly monitor poll found that higher prices coupled with
inflation continue to be the leading concern for small
businesses, and make no mistake, Americans are paying more for
just about everything.
The Biden administration's labor crisis is also a key
contributing factor to the rising cost of goods and empty
shelves. The worker shortages have hindered the ability to get
cargo to shore, unpack these much-needed goods, and find truck
drivers to transport the products throughout the nation.
U.S. employers across all industries are struggling to fill
more than 10.4 million job openings to meet rising consumer
demands. And the NFIB reports that 51 percent of small business
owners have unfilled job openings. Again, 51 percent of small
businesses have unfilled job openings compared to a historic
average of 22 percent, which is a 48-year record high for the
third consecutive month.
America's economy is being held hostage by Joe Biden's
supply chain failures. Last week, the President's very own
chief of staff referred to inflation and supply chain
disruptions as, quote, high-class problems. Additionally,
Secretary of Transportation made jokes about supply chain
issues and how they could impact Christmas gift giving for all
Americans.
This smug small business negligence within the Biden
administration is unfortunately a reality that will crush
businesses all over this country, that depend on increased
sales and spending during the holiday season. Simply put, small
businesses are left to bear the brunt of President Biden's
supply chain crisis.
Inflation is skyrocketing. Cargo ships stocked with
thousands of containers are circling U.S. ports with no
available slips to unload, and small businesses cannot find
workers. And without the products or workers, store shelves
across the country are becoming increasingly empty.
And while we are holding this hearing, the Biden
administration continues to minimize this crisis and seems
confounded by the seriousness of our supply chain issues. The
challenges that we are facing and this administration's blatant
inability to address it go far beyond a slightly less Merry
Christmas for the rich.
Supply chain problems are keeping not just toys but medical
supplies, oxygen containers, and basic necessity out of the
hands of all Americans. And when you couple this with the
devastating inflation and escalating energy costs as colder
winter sets in, President Biden's policy will literally cost
American live this winter. This is the undeniable reality of
what we face in the months ahead.
I look forward to hearing from our witnesses today, and I
hope to work with my colleagues on real solutions to support
our small businesses and secure America's supply chain without
enacting legislation that authorizes large amounts of new money
and fails to combat overregulation, labor shortages, and
taxation.
Thank you very much, Mr. Chairman, and I yield back.
Chairman PHILLIPS. Thank you, Ms. Van Duyne. The gentlelady
yields back.
I would like to take a moment to explain how the hearing
will proceed. Each witness will have 5 minutes to provide a
statement and each committee Member will have 5 minutes for
questioning. Please ensure that your microphones are on when
you begin speaking and that you return to mute when you are
finished.
With that, I would like to start by introducing our
witnesses. I begin with Mr. Kevin Loe, the sales director for
Redi-Rock International. Redi-Rock is the industry leader of
large block retaining wall systems and has been expanding its
footprint across international markets, thanks in part to the
SBA's STEP program. Mr. Loe has been instrumental in taking
Redi-Rock from a business from zero export sales to a global
market leader. Prior to joining Redi-Rock, Mr. Loe served with
the United States Coast Guard. Appreciate you joining us, Mr.
Loe.
Our next witness is Mr. Chris O'Brien, the chief commercial
officer of C.H. Robinson, a third-party logistics provider
located in the heart of my congressional district. C.H.
Robinson is committed to solving logistics problems for
companies large and small across the globe. Mr. O'Brien has
been with the company since 1993 and has worked his way up from
a manager in Raleigh, North Carolina, to president of C.H.
Robinson's European division to now senior vice president and
then--I sorry, and now chief commercial officer. And we
appreciate you being us with today, Mr. O'Brien, remotely.
Our next witness is Ms. Christine Lantinen, the president
and owner of Maud Borup, Incorporated, a woman-owned and
veteran-owned company reinventing classic sweets profoundly
committed to sustainability. Maud Borup, founded in Minnesota
in 1907, has a long and delicious history, including chocolate
covered marshmallows in my great grandmother's drawer.
Ms. Lantinen purchased the company in 2005 and revitalized
and reinvigorated a great small business, which has brought
about 150 different products to market. Ms. Lantinen has
received numerous awards for her work, including SBA Small
Business Person of the Year. We welcome you, Ms. Lantinen.
And now Ms. Van Duyne will introduce her first.
Ms. VAN DUYNE. Mr. Fowke is a Tampa-based, Florida-based
small business owner with 40 years experience as a custom
homebuilder. Mr. Fowke is also the National Association of
Homebuilders' 2021 Chairman of the Board. He has been active in
the NAHB leadership structure at the local, State, and national
levels throughout his career. And as a senior life delegate, he
has served in the leadership of the association for more than
20 years.
He was named builder of the year by the Tampa Bay Builders
Association in 2006 and 2009 and is a past president and
lifetime director of the TBBA. He was also president of the
Florida Homebuilders Association and continues to serve the
association. In 2019, he was inducted into the FHBA's Florida's
Housing Hall of Fame, and he received the Florida Homebuilders
Eagle Award in 2012.
Mr. Fowke joins us today as unprecedented increases in
supply chain disruptions and lumber prices have crushed the
American workforce over the past year and a half. As we have
seen in more recent weeks, these issues continue to harm small
businesses, homebuyers, and the housing industry alike.
Homebuilders like Mr. Fowke are facing prolonged delivery
times, skyrocketing material costs, and escalating labor
shortages.
We appreciate you and the other witnesses for joining us
today as we explore this critically important and timely topic.
And I look forward to your testimony, and I yield back.
Chairman PHILLIPS. And I join Ms. Van Duyne in expressing
gratitude to all of you, and with that, we will begin with Mr.
Loe. You are recognized for 5 minutes.
STATEMENTS OF KEVIN LOE, DIRECTOR OF CUSTOMER ENGAGEMENT, REDI-
ROCK INTERNATIONAL, PETOSKEY, MI; CHRIS O'BRIEN, CHIEF
COMMERCIAL OFFICER, C.H. ROBINSON, EDEN PRAIRIE, MN; CHRISTINE
LANTINEN, PRESIDENT AND OWNER, MAUD BORUP INC., PLYMOUTH, MN;
AND JOHN ``CHUCK'' FOWKE, PRESIDENT, HOMES BY JOHN C. FOWKE
INC., VALRICO, FL, TESTIFYING ON BEHALF OF THE NATIONAL
ASSOCIATION OF HOME BUILDERS
STATEMENT OF KEVIN LOE
Mr. LOE. Good morning, Chairman Phillips, Ranking Member
Van Duyne, and Members of the subcommittee. I thank you for the
opportunity to testify before you here today. I am truly
honored to be here. My name is Kevin Loe, and I am the director
of the customer engagement team at Redi-Rock International.
At Redi-Rock we believe in changing the world in concrete
ways by unleashing the possibility of people, products, and
technology to create large block retaining wall systems that
you can trust for a lifetime. Today we are working with 120
independently owned and operated concrete manufacturers around
22 different countries around the world that license the Redi-
Rock precast product and provide great retaining wall systems
throughout.
We provide one integrated solution of wall solutions to
create engineered solutions behind the wall and natural stone
appearances on the face of the wall, creating like one-ton
legos to build fast retaining walls.
Currently, Redi-Rock employees over 55 hardworking team
Members with positions in welding, production, marketing,
engineering, and finance and sales. We manufacture our products
in beautiful Charlevoix, Michigan, in export containers to
different countries around the world. Our headquarters is just
down the road in Petoskey, Michigan, and Little Traverse Bay on
Lake Michigan.
I want to start by saying that because of the State Trade
Expansion Program, also known as STEP, and the U.S. Small
Business Administration and the Michigan Economic Development
Corporation, MEDC, that Redi-Rock went from almost zero export
sales to becoming a global market leader in our industry. STEP
was a catalyst for us to invest our time and resources into
international trade, and as a result Redi-Rock has grown our
export revenue to more than $3.5 million in all these 22
countries.
These exports have allowed us the freedoms to get good-
paying, hardworking jobs, diversify our sales, increase our
market share, and continue manufacturing in the State of
Michigan. This has allowed us to work through the global
pandemic without eliminating any positions. We could not have
achieved the success without the support of the STEP grant in
MEDC.
Just a quick story that goes with this is that our very
first employee, Larry Pop, has been with the company since we
started in 2000. As part of the international growth
initiatives, Larry's son, Owen, now works for the company
helping us in our manufacturing facility, becoming our first
and only multigenerational employee working with us.
We are seeing similar generational success and impacts in
the international as well as in France. Our customer, Lashow
Baton, had a gravel business that struggled through the
recession in 2008 and in the years following. When the next
generation took over the family business in 2013, they were
hungry to innovate. That is when they chose Redi-Rock. As a
result, this family business has seen year over year growth and
is invited to the French palace to receive an award for
invitation from our product.
Redi-Rock has allowed small family businesses to thrive in
the next generation, and the STEP funding has been pivotal in
helping us empower small business growth here and also abroad.
Small businesses like us, we don't have those resources to be
able to navigate the global market and export process. That is
where our partners come in handy with MEDC and the federal
trade agencies that are absolutely crucial and vital for a
company like us to succeed in this market.
During the pandemic even, we quickly had to shift our
operation strategy to continue to grow our exports. Through the
STEP program and MEDC, we participated in several virtual trade
tours and events and looking at potential buyers in Australia
and also in Peru. We were able to utilize Zoom, build our
relationships, and in the end we secured a new customer in
Australia because of the work that they were able to do to help
us. We are still working on securing our exports in Peru. It is
a work in process.
Typically, these sales would've required extensive travel
and these countries to take between 6 and 12 months to
finalize. But with the help of STEP and MEDC technology, we
were able to secure the export system.
I want to conclude by expressing my strong support for the
STEP program. It has been vital for our ability to grow as a
small business. We strongly support the reauthorization of the
program and continued funding of the STEP program. We would
also advocate to increase the funding to $50 million per year.
This is good money spent, and we so appreciate that as a small
business.
In addition, we strongly support the bipartisan
infrastructure bill and investing in our aging infrastructure.
This will help ensure we can remain competitive in the global
markets while also creating support jobs here in Michigan.
Thank you to this committee, thank you for the opportunity
to appear here, and I look forward to your questions.
Chairman PHILLIPS. Thanks, Mr. Loe. You make me want to buy
a retaining wall.
Now, Mr. O'Brien, you are recognized for 5 minutes for your
opening statement.
STATEMENT OF CHRIS O'BRIEN
Mr. O'BRIEN. Thank you. Chairman Phillips, Ranking Member
Van Duyne, and Members of the Small Business Committee, thank
you for the invitation to testify at today's hearing. As one of
the nation's largest third-party logistics providers, C.H.
Robinson has a unique view on how goods and commerce flow from
manufacturer to consumer.
My name is Chris O'Brien, and I am the chief commercial
officer for C.H. Robinson. I joined the company 29 years ago,
and I have been the chief commercial officer since 2015. I am
responsible for overseeing our customer strategy, and I lead
our marketing and external communications functions.
We were founded in 1905 and have grown to over 15,000
employees globally. We are Minnesota's eighth largest
publically held company headquartered in Eden Prairie. We serve
customers of all sizes, but we provide critical freight
transportation services to over 60,000 small businesses and
assign their freight to a network of carriers that includes
over 50,000 active small business trucking companies.
Freightquote by Robinson, based in Kansas City, includes a
self-service tool made specifically with and for small
shippers.
In the global trade area we operate similarly. We simplify
complex international landscape for our customers by connecting
them to the world's ocean and air freight capacity as well as
customs and trade support. We do not own any commercial trucks
or containerships ourselves but rather build technology
platforms and logistics services that allow our customers to
save time and money. This is especially beneficial to small
businesses who we empower with our prebuilt tech to give them
an advantage of larger companies.
The congestion in the supply chain has been well
documented, but I want to describe the factors that influence
these outcomes. Over the course of my 29-year career, the
fundamentals have not changed. Supply of capacity and demand
for goods ebbs and flows to create conditions either favorable
for the flow of goods and lower freight cost or conditions that
challenge the flow of goods and increase freight cost.
Economic growth, weather, labor availability, regulation,
and other factors push and pull on the demands of available
transportation. Capacity in the form of trucks, drivers, ships,
and sports adjust over time to these market signals. For
example, right now we are seeing the surge in formation of new
small trucking companies.
What makes 2021 unique are the orders of magnitude in speed
with which the system has gone from one extreme to the other.
The world's supply chain simply weren't built to handle the
nearly shut down of early COVID followed by the rapid restart
and the robust consumer demand that followed.
The current supply chain congestion is creating challenges
for our large customers, but the impacts cause magnified
personal stress for small business owners. Like large
businesses, small companies have experienced significant and
rapid freight cost increases across all modes of
transportation, shipment delays, port detention charges,
difficulty assessing available capacity, and supply chain
challenges have forced all business to make painful choices
regarding passing on increased cost to their customers.
As many have said, the current supply chain challenges are
complex and with few easy fixes. We would encourage the
committee to focus on four primary areas: First, stimulative
economic policy in COVID reopening has driven surging demand
across the economy. U.S. GDP growth has exceeded 6 percent for
two quarters in a row. Freight congestion and cost increases
have naturally followed. We feel that if economic growth
continues at higher than historic levels, trucking, ocean, air,
warehousing, and port capacity will be challenged to keep up.
Secondly, our industry has been dealing with a shortage of
truck drivers that predates COVID by decades. Policymakers can
help truck driver shortage by focusing on driver quality-of-
life investments like truck parking, driver recruitment, and
training. Many new truck drivers and warehouse workers are
recent immigrants and there are opportunities to increase
participation within that workforce. We support both the DRIVE
SAFE Act and the Women in Trucking Workforce Act which would
expand the driver pool.
The China trade war has increased costs in the form of
tariffs and high-price inputs on many small business. Small
businesses are asking themselves tough questions. Are tariffs
likely to continue or expire? Congress and the administration
can provide more concrete signals to small businesses regarding
the direction of the trade war so they can make long-term
decisions.
Immediate trade relief for small businesses was included in
the U.S. Innovation and Competition Act. The Trade Act of 2021
would be retroacted to December 2020 and could mean section 301
exclusion refunds of tens of thousands of dollars in duties for
some small businesses.
Next, COVID-related shutdowns in facilities here and
especially abroad continue to adversely impact supply chains.
Lockdowns, partial shutdowns of ports and manufacturers
continue to add to delays periodically and recently. Truck
parts sourced from overseas have also seen shortages from
foreign factory shutdowns, and this delays repair and takes
capacity off the road.
Finally, many small businesses who hire mortar carriers are
unaware of the risk they take in selecting them. Some shippers
shy away or exclude small trucking companies from business
opportunities to mitigate this risk. We would encourage Members
to support H.R. 3042 to establish a mortar carrier selection
standard to increase safety and protect small businesses and
shippers and small business truckers.
Thank you for the opportunity to share our views, and we
look forward to the questions.
Chairman PHILLIPS. Thank you, Mr. O'Brien.
And now I recognize Ms. Lantinen for 5 minutes. You have
got to unmute.
STATEMENT OF CHRISTINE LANTINEN
Ms. LANTINEN. Thank you. All right. Chairman Phillips,
Ranking Member Van Duyne, Congressman Hagedorn, and Members of
the subcommittee, thank you for the honor of testifying today.
Before I discuss my business supply chain challenges, I would
like to give you some background on myself and my company.
My name is Christine Lantinen, and I am the president and
owner of Maud Borup, a candy manufacturing and food gift
company. We are a privately held, Minnesota-based business
employing over 200 team Members. The company's growth has been
strong and steady since I took ownership of the business in
2005, and this year we are on track to grow sales by 75
percent.
Maud Borup is over 100 years old, and like me, it has deep
ties to Minnesota. I grew up a farmer's daughter in Le Center
working as a server at the American Legion at the age of 13. I
joined the Army and attended basic training at the age of 17
and went on to serve almost 10 years as a medic. I graduated
from Minnesota State University, Mankato, and after working my
way up the corporate ladder found myself in a unique position
to acquire and lead Maud Borup. Today, as a certified woman-
and veteran-owned business, we are deeply committed to our
community, with our corporate office located in Plymouth and
our factory in Le Center.
I was asked to join today's hearing to share my perspective
and experience navigating supply chain challenges. I would
begin by placing a spotlight on our workforce. My business
faces a dire shortage of workers. At 200 employees, we are down
roughly 100 from our optimal number of staff.
Since December of 2020, we have instituted a 36 percent
hourly salary increase, and we still have trouble recruiting
workers. Some factors driving this situation are economic; our
general community maintains a low unemployment rate, almost a
full percentage point below the State average of around 4
percent. Other factors are geographic; we are located in
proximity to peer businesses competing in the same worker pool.
Perhaps most relevant to this committee is the factor of
worker development. Trade programs producing certified truck
drivers, welders, and other specialists are not producing
workers fast enough for businesses like mine to hire them. I
urge this committee to take a hard look at policy solutions to
accelerate the pipeline of trade certification and education
programs.
To put it directly, the biggest and most immediate
challenge to my business' supply chain is a lack of workers.
The situation is so severe that despite a purchase of 6 acres
of land adjacent to our lot, our business has put expansion
plans on hold. Our desire is to continue operating in our
corner of Minnesota, but our current workforce shortages are
unsustainable.
Another supply chain challenge currently impacting our
business is the cost of transportation for goods and supplies.
In August of 2020, the cost to ship a standard 40-foot shipping
container was approximately $4,300. By August of 2021, that
figure had exploded to $30,000. Like our shortage of workers,
this situation is also unsustainable from a business management
standpoint. We need to see action to alleviate the bottlenecks
mostly caused by labor shortages.
According to the U.S. Bureau of Labor Statistics, there are
100 million Americans not in the U.S. labor force. Forty-two
percent, 42 million of that number, are retirees. The Fed
classifies the U.S. labor force as every U.S. citizen 16 or
over who is not incarcerated, in the U.S. military, or in a
nursing or residential care home. Retirees are considered part
of the labor force.
How can we incentivize retirees and others currently not
working but able to work to enter the workforce to help fill
the 10.4 million job openings America currently has? Bolstering
participation is critical for U.S. competitiveness and economic
strength.
Lastly, I would be remiss if I didn't mention a
longstanding challenge to businesses like mine, not just in the
chocolate and confectionary industry but the broader food and
beverage manufacturing sector as well. I am referring to the
U.S. sugar program, which consists of a combination of domestic
marketing allotments, tariff freight quotas, guaranteed price
support loans, and the Feedstock Flexibility Program.
This labyrinth of policy is so convoluted I do not have the
time nor the expertise to walk you through it all. The result
is that the federal government restricts the supply of sugar to
inflate prices. American businesses that rely on a steady
supply of sugar are thus often forced to pay twice what our
global competitors pay on the global market.
Thank you again for the opportunity to testify today. I am
grateful for the subcommittee's interest in my business, and I
appreciate you looking at the troubling set of urgent supply
chain challenges we are currently faced with. If you have any
questions, I would be happy to answer them. Thank you.
Chairman PHILLIPS. Thank you so much, Ms. Lantinen.
And with that, I recognize Mr. Fowke for 5 minutes.
STATEMENT OF JOHN ``CHUCK'' FOWKE
Mr. FOWKE. Thank you for the opportunity to be here today.
Supply chain disruptions have affected the homebuilding
industry profoundly. From record high lumber prices to severe
shortages of other building materials, the result has been
lengthy delays or postponed projects and dramatic price
increases. This is further harming housing affordability at a
time when we face an ongoing housing affordability crisis.
Coordinating the timely delivery of materials and products
to the build site is challenging under the best of
circumstances. The COVID-19 pandemic has roiled global supply
chains making this once challenging endeavor nearly impossible.
In May of this year, a widely regarded framing lumber index
hit a previously unthinkable all-time high of $1,500 per 1,000
board feet. NAHB estimated at the time the dramatic rise in
lumber prices was adding nearly $36,000 to the price of the
average new single-family home and nearly $13,000 to the price
of each new multifamily home.
And while lumber prices began a sharp decline soon after,
prices began rising again in September and have increased by
more than 40 percent over the past 6 weeks. Lumber pricing and
availability is just one of the many problems we face with the
supply chain.
Supply chain challenges are driving scarcity and elevated
prices on almost every product or good or material that goes
into the construction of the American homes. According to the
Bureau of Labor Statistics, the average price of goods used as
inputs to residential construction has risen 13.2 percent thus
far in 2021, more than triple the rate of the core inflation
over the same period.
While historically high prices and supply shortages remain
a challenge for all homebuilding firms, they pose unique
challenges for smaller firms. Among the unique challenges small
firms face in these times are volatility and uncertainty as
well as the ability, or more often the inability, to pass along
these ever-increasing prices.
Without large economies of scale, small businesses
generally cannot negotiate bulk discounts. Builders have been
forced to commit to purchasing material such as lumber without
knowing exactly what the cost will be when delivered. The
effects of the uncertainty trickle all the way to the buyer,
many of whom have balked at projects at the last minute due to
unexpected price increases.
At the core of today's building material supply chain
issues are two fundamental problems: Barriers to trade and
challenges associated with moving goods to their final
destination. I applaud the Biden administration for its action
to date on the homebuilding supply chain. Convening the
homebuilding supply chain summit in July was critical to
identifying some of the issues facing homebuilders.
Prioritizing building materials and supplies is part of the
Department of Transportation's hours of service waiver for
trucking has been helpful, but it is only a start. More can be
done and should be done. Congress and the administration need
to consider steps to reduce or move barriers to trade. This
includes at least temporarily suspending duties and quotas on a
wide array of imported building materials and goods, from
Canadian softwood lumber to steel and aluminum.
In addition, Congress and the administration must continue
to aggressively explore solutions to port congestion and the
persistent delays in truck and rail transportation. Building
materials, supply chain challenges exposed and exacerbated by
the COVID-19 pandemic are driving an unsustainable increase in
the cost to construct a new home.
Until we address all the underlying causes of the crisis,
millions of households are denied the American Dream of
homeownership and millions more are rent burden. Housing has
been a bright spot for the U.S. economy as the nation continues
to recover from the COVID-19 pandemic. But historically high
lumber and building material prices continue to serve as
headwinds for the U.S. housing sector.
And there is mounting evidence that housing is at risk, has
seen a dramatic increase in the cost of materials.
One sign that the market may be slowing down is the number
of housing units, permitted but not started, has risen over 40
percent in the past year. Any slowdown in housing production
would be troublesome as we remain well off the mark of making
up the shortages from under building over the past decade.
I commend Chairman Phillips and Ranking Member Van Duyne
for holding this important hearing today, and I look forward to
answering any questions you may have for me. Thank you.
Chairman PHILLIPS. Thank you, sir. And thank you to all of
our witnesses for being with us today. There are current and
former small business owners on both sides of the aisle on this
committee, and rest assured, we share your pain, we empathize,
and I hope I speak for all when I say our obligation and
intention is to identify solutions today.
With that I will begin by recognizing myself for 5 minutes.
We pointed out the problem. I don't think we need to keep
identifying what is wrong. Mr. O'Brien, I am going to start
with you.
You identified four areas that are causing the supply chain
issues, surging demand, a trucker shortage, the China tariffs
and a trade war, COVID-related shutdowns are the four that I
believe you referenced.
You know, my intuition tells me that today you might hear
from certain Members of this committee that Joe Biden is
responsible for this whole problem, the Biden administration's
policies have led to inflation and supply chain issues and
labor shortages and the like. You might even hear some say it
was the former administration. The fact of the matter is, I
don't care who is responsible; I want to find solutions.
So with that, Mr. O'Brien, you know, can you point to a
policy of either the past Trump administration or the current
Biden administration that you believe is, A, responsible for
the issue that we are now facing relative to supply chains, and
if so, how do we fix it?
Mr. O'BRIEN. I can't point to any specific policy--thank
you for the question, Representative Phillips--but I would say
that it is--this is a long-term sustained problem. The current
demand--the other thing I would talk--describe is that this has
been an unprecedented inversion of supply demand.
This is a very unnatural event when you talk about--the
world's supply chain, the world's economy simply wasn't built
to shut down and restart and then deal with increased demand, a
whole new product set that really occupied the global shipping
lanes for the first several months was PPE.
But I will say that this demand has exposed long-term
chokepoints in the supply chain. And today, you know, it
started with manufacturing and it had to restart, but it has
exposed other physical and infrastructure challenges throughout
the supply chain from our ports to available chassis to the
draymen that haul containers out of a port.
I mentioned in my testimony the one longest term--so every
4 or 5 years we have seen a port slow down when demand is high.
We have never seen anything like this. But really in every
period of increased demand we have dealt with truck driver
shortage.
So if there is one area that I would want the committee to
focus on the most, it is the part of the supply chain crunch
that has been the most enduring and problematic.
The additional benefit is that it will benefit both the
international supply chain and the domestic supply chain. Many
small businesses rely on North American trucks. Our job is to
consolidate that small carrier group and bring access to them
to small shippers.
So like I testified, I would say anything that we can do
like the DRIVE SAFE Act and the Women in Trucking Workforce Act
to increase supply. It is no secret that truck driving is a
business that is not attracting adequate labor, and anything we
can do to help the lifestyle and improve the attractiveness of
that role is important, and I think anything else to address
the other supply chains.
I would just say, it has been a long-term challenge, and
today's crunch has just magnified it and brought it to all of
our attention. But over the long haul, disruptions like this
are unusual. And the international, the global, and the
domestic supply chains have been resilient, but probably the
weakest link is North American trucking due to the driver
shortage that we have had for years.
Chairman PHILLIPS. And, Mr. O'Brien, is it also fair to say
that our infrastructure is not as sound and robust as some of
our international peers relative to ports? And also a lack of
an integrated communication system between ports and customs
and the like, is that an area in which we can improve?
Mr. O'BRIEN. That is an area that we can improve. Compared
to other world-class ports, ours are backed up more right now,
and we have less automation and less adequate communication
programs at our ports. So I would agree that there is an
opportunity to invest there as well.
Chairman PHILLIPS. And would you say that the--I think it
is $17 billion or $18 billion in the bipartisan infrastructure
bill dedicated to port improvement, would that help?
Mr. O'BRIEN. I think anything that we can do to improve
infrastructure, especially transportation infrastructure, is
helpful, not just at the ports but across our highways, our
intermodal systems, our rail terminals, anything that can
reduce those, you know, endpoint supply chain chokepoints that
we have today.
Chairman PHILLIPS. Okay. Well, hopefully we will be voting
on that soon in the affirmative.
With that, my time is expiring, so I will turn to my friend
and Ranking Member, Ms. Van Duyne, for 5 minutes.
Ms. VAN DUYNE. Excellent. Thank you. And it is good to see
so many of you that we visited with when I was up in Minnesota
last month.
I want to ask, Mr. Fowke, I understand that you referenced
the limitation of pricing flexibility for small businesses.
President Biden's recent announcement mentioned that
commitments from large companies like UPS and FedEx, Wal-Mart,
and Target to use expanded hours to move goods. But can you
walk us through, from the ports to the trucking company to the
supply house to the builder, how small businesses continue to
be harmed and left out in times of supply chain shortages?
Mr. FOWKE. Well, the biggest challenge we have with the
supply chain is the production of goods, and then once the
goods are produced having them tracked or delivered to the
sites has become a bigger challenge.
Inventories are low for materials. But having UPS and FedEx
ramp up their delivery process doesn't do a lot for the
challenges that we have with lumber, labor, and things of this
nature that are handicapping our industry and creating a
shortage of new houses which has put a stress on existing
housing stock, and therefore, the possibility of affordable
housing has left the scene.
Ms. VAN DUYNE. I was going to ask you, I know that you did
a great job in your testimony talking about the impacts
actually on homebuyers. Do you want to just kind of just run
down very quickly how the supply chain shortages within the
homebuilders industry is directly affecting consumers?
Mr. FOWKE. Well, it affects every price level in housing in
some fashion. Affordability is the biggest thing that we are
affected by. Housing affordability is always a challenge. You
know, in my business, if people come to me to have a home
built, they want to have an idea what the house is going to
cost.
And over the past--you know, I have been doing this a long
time. And, you know, every year in January we get a letter from
suppliers that there is increases. For the last 12 months, we
get letters about increases not every 30 days but every week.
So to be able to identify the cost of a house is almost
impossible, so therefore the entry level home buyer is being
pushed out of the market.
The $36,000 that lumber added to the price of a home, if
you do the math, for every $1,000 increase in price of a home,
150,000 people are pushed out of the market. They can no longer
afford the American Dream. So if you do the math, the $36,000,
the impact for lumber alone.
But the challenges we have as builders, to better answer
your question, trying to schedule material has become virtually
impossible. I ordered windows last year in November. The
windows were delivered to the job site in June. And in the
sequence of construction, you cannot produce the home and
construct the home without having the windows installed.
And so that is just one of the simple things. You know, the
ability to get appliances, the ability to just get cabinets,
and if you can't get the cabinets, you can't put the
countertops on, so therefore, you know, these things have been
slowed up. And anybody and everybody that works in this
industry is in dire need of added labor. We have got to do
something about the labor situation that will help us with the
supply chain.
If the supply chain disruption continues and prices
continue, inflation is going to hit us; therefore, Chairman
Powell is going to raise interest rates. And our entire economy
is going to come to a screeching halt if something isn't done
quickly to get people back to work.
Ms. VAN DUYNE. I appreciate that answer and you definitely
answered my question.
My first question had to do with how this is affecting
small businesses. We know some of the larger businesses, larger
companies, multinational companies are being able to work
around some of these issues directly because they have got the
capability. How are you seeing this affect small businesses the
most because they don't have those capabilities?
Mr. FOWKE. Well, the large companies buy in bulk and they
design and build in bulk. Small firms, small building firms--
and just, for instance, you know, the National Association of
Home Builders is built up of--we have 30,000 builder Members.
And these builder Members build about 80 percent of the houses
built in this country.
We alone, when the pandemic hit, we alone carried the
nation's economy on our back with our industry. But with small
firms build 80 percent of the houses are handicapped in
production, the ability to buy in bulk or even the ability to
forecast when materials can be delivered, makes it virtually
impossible to run a business much less tell a buyer what the
price of a home is going to be.
The large builders can buy in bulk and move materials
around where needed where we don't have those opportunities as
small businesses. So in Tampa, it is a little different because
the large-volume builders build about 70 percent of the houses
in Tampa Bay, and that is not, you know, the--similar to in
other parts of the country and other regions of the country.
But----
Ms. VAN DUYNE. My time is up.
Mr. FOWKE. Okay.
Ms. VAN DUYNE. I am sorry. I apologize, and thank you for
answering. I yield back.
Chairman PHILLIPS. The gentlelady yields back. And now I
recognize the gentlelady from California, Ms. Chu, for 5
minutes.
Ms. CHU. Thank you.
Mr. O'Brien, as a representative from the Los Angeles area,
which is home to the L.A. and Long Beach ports, which together
process 40 percent of all shipping imports into the U.S., I
have countless constituents whose businesses are impacted by
day-to-day conditions at the port. I understand that many of
the shipping delays are attributable to supply and demand
issues, but it is undeniable that some of these disruptions are
due to anticompetitive and unfair practices by shipping
companies.
For instance, at the port of Los Angeles and Long Beach, we
have seen many shipping containers refuse to load exports from
the U.S. because they will make more money sending empty
containers back to foreign ports with the highest demand. Some
will not even allow containers to be sent inland to collect
agricultural products because they would rather immediately
load those containers back onto ships.
The federal Maritime Commission is responsible for
protecting American exporters and importers from
anticompetitive activities, but they lack the authority to take
concrete action. That is why I have cosponsored H.R. 4966, the
Ocean Shipping Reform Act of 2021, which would give FMC the
authority to enforce import and export logistics and implement
minimum safety standards, as well as prohibit ocean carriers
from unreasonably declining opportunities for U.S. exports.
So can you talk about how anticompetitive behavior in the
shipping industry has contributed to the current supply chain
disruptions and discuss whether the federal government can step
up its enforcement? Do these types of anticompetitive behaviors
result in greater hardships for small businesses than larger
ones?
Mr. LOE. Thank you, Representative.
Mr. O'BRIEN. I will start with the basics on the export
economy, in that containers have always gone back to empty to
source of origin. And the greatest problem there and what drive
that is a lack of balance trade that the United States has. So
since containerization steamships have not made the choice to
turn back empty containers but they have brought them back, and
I think some of the demand for returning those containers empty
today is driven by our own demand for these urgent imports that
we have today.
I am not aware, from any of our customer situations, where
they have seen illegal activity or had containers refuse to get
loaded. I do think, if that is going on, we are curious and
looking forward to hearing more about the Ocean Shipping Reform
Act. And if there is the possibility in that, you know, to
empower, if things like that are happening, I do believe that
them having the power to investigate that is a good thing. But
from the beginning of international trade, it is our trade
balance that has, for rational reasons, sent containers back to
Asian manufacturing centers empty.
Ms. CHU. Well, I certainly do hope we have ocean reform
because we do have American exporters frustrated with higher
freight rates for shipping companies and increased tension
between shippers and ocean carriers over fees and the
availability of containers.
Nonetheless, let me talk about another issue, which is the
fact that there are changing consumer trends that are
increasing the demand. In fact, U.S. retail sales increased by
8 percent between 2019 and 2020 and another 14 percent between
2020 and 2021. So Americans have shifted much of their
consumption away from services and towards goods, the majority
of which are imported.
So the demand that we are seeing at ports like Los Angeles
and Long Beach might be a long-term trend that is here to stay,
so it is important that we focus beyond the ports at ways
improving capacity along the entire supply chain.
I first want to thank President Biden for taking action in
southern California to move our ports to 24/7 operation so that
we can clear the backlog, but he can't solve the problem by
himself. For example, 60 percent of the goods coming through
the ports transit through my district in the San Diego Valley
via train and truck.
We need containers to be emptied and restocked at the
ports, but we also need better, cleaner ways to quickly move
these goods to warehouses and businesses. And, in fact, there
was a survey from the National Retail Federation which said--
had 22 percent of the Members said that they were experiencing
intermodal rail delays and that 3 weeks had been added to their
supply chains.
Anyway, both the Senate infrastructure bill and the Build
Back Better Act will help transform our ports to meet these new
consumer patterns. But can you talk about other measures that
Congress should be thinking about to increase our capacity to
move and process these goods domestically?
Chairman PHILLIPS. Ms. Chu, unfortunately, your time is
expired.
With that, I yield to Mr. Hagedorn, the Ranking Member on
the Subcommittee on Underserved Agricultural and Rural Business
Development. Mr. Hagedorn, you are recognized for 5 minutes.
Mr. HAGEDORN. Thank you, Mr. Chairman. Appreciate that.
Ranking Member Van Duyne, good to be with you.
Thanks to the witnesses.
I mean, I appreciate this hearing. It is a good topic, very
important, timely. But I would just encourage my friends on the
other side of the aisle that if you want to stop the bleeding
of this whole supply chain issue and inflation, let's quit
micromanaging the economy, let's quit dumping cash into the
economy at a time when businesses aren't ready to respond and
spurring more inflation, shortages of products, services,
labor, you name it.
I don't think this bill that is coming along, $3.5
trillion, whatever it is, with all sorts of taxes, regulations,
higher cost energy, I mean, I don't know a small business out
there that says higher-cost energy is going to do the trick.
And then, you know, more government spending without any work
requirements or technical training requirements for people on
welfare, those things all have been stripped out. I tried to
put that back in the Ag Committee. Voted down. I don't think
that is the way to go.
And, by the way though, Mr. Fowke, I appreciate you being
here. The homebuilders have supported a piece of legislation
that I have introduced to help people get technical training
certificate programs and things like that. Our bill would allow
people that have saved for 529 education savings accounts to
not just use those moneys for their kids to go to a 4-year
college but to also go to vocational school and things like
that. I know, you know, you need a lot of those types of
skilled workers. Is that still something you support, and do
you think it would be a step in the right direction?
Chairman PHILLIPS. Sir, turn on your microphone, if you
would. Thank you.
Mr. FOWKE. We are working very hard to train our
individuals in our industry. We are an aging industry. For
every five people we lose, whether it is retirement or for
whatever reason, we are only able to replace them with two
right now. And any type of legislation that will help us with
training is very, very important.
Mr. HAGEDORN. Thank you.
Ms. Lantinen, and I note for the record that your
headquarters, I guess your manufacturing facility, is in Le
Center where you grew up. It is in our district, in southern
Minnesota, and I have toured it many times. Very impressive.
You have been expanding there. And your success is quite
something. I think you started your business when you bought it
with about $100,000 in sales, and now you are up to about $45
million. That is quite an increase, so congratulations on that.
What do you think about the workforce shortages? Do you
have any ideas that maybe we could address here at this
committee or across the nation as to how we can help?
Mr. LOE. Hi, Jim. First and foremost, hope your health is
is well, as always. I think the most important thing we can do
right now is dive into the 100 million Americans currently not
in the workforce. Forty-two percent of them are retirees. How
do we target that group which is a huge portion of potential
workforce we could tap into, provide them with incentives? Can
they work tax free up to a certain dollar amount? Are there
further Social Security benefits we could give them for coming
back to work?
I feel like we need a Rosie the Riveter character focused
at retirees that says ``We Need You'' as the tag line. And we
really need to focus on these potential groups that could be
contributing to our society because we will fall behind if we
don't have the employees to run our businesses.
Mr. HAGEDORN. Many of the businesses I speak with in
southern Minnesota tell me that they just sometimes can't
compete with the federal government. There is so much money out
there flowing from the federal government. It was enhanced
unemployment compensation. Now it is a number of different
areas, and I think that is still an issue.
I go back to work in technical training requirements for
welfare. It works every time that we implement it. We have
gotten away from that. Some people say that it is tough for
folks to get back in the workforce because they lose benefits,
and there is some short-term loss because there is so much out
there.
So I am a proponent of transition wages, whatever we have
to do in order to get people the incentive to get back to work.
It is much more compassionate than having people dependent on
government. The compassion is letting folks--giving them the
incentive in order to go out there and care for themselves and
to be in the workforce contributing. So that is something that
I will continue to do.
Mr. Fowke, any other comments that you have? I appreciate
what you said about supply chain issues and trade. And yet, I
understand we had a deal with China and other countries. We are
trying to sort that out. But maybe in this short period of time
we need to do some things to alleviate that, but--I have got 20
seconds left.
Mr. FOWKE. We just have to get people back to work. We have
an arm of our association, the Homebuilders Institute, we are
training military veterans that are acing the military back
into public life. We are trying to train incarcerated people.
We are trying to get training back into the schools, where it
should be, so younger people can learn trades that not only
would teach them how to work in the homebuilding industry but
it will help them with their lives long range.
Mr. HAGEDORN. Thank you. I am out of time. Again, I
appreciate your support for our bill.
Mr. FOWKE. Thank you, sir.
Chairman PHILLIPS. And now I recognize my colleague from
Minnesota, Representative Craig, for 5 minutes.
Ms. CRAIG. Well, good morning. The Small Business Committee
is well represented by Minnesota certainly each and every day.
Thank you so much, Chairman Phillips, for yielding, and thank
you to all of our witnesses today.
A special thank you and welcome to Mr. O'Brien and Ms.
Lantinen. It is always nice to hear from fellow Minnesotans
here on the committee.
I am really grateful that our subcommittee is holding this
important hearing today. Every single week I hear from
different businesses in Minnesota's Second Congressional
District whose bottom lines are being impacted by disruptions
to our global supply chains.
But supply chain shortages aren't only impacting
businesses. I have also heard from schools in my district who
struggle to offer balanced lunches because of shipping delays
and, of course, from customers who are facing higher costs on
household items.
A strong and resilient supply chain is absolutely vital to
keeping our economy moving, which is exactly why I cofounded
the bipartisan Supply Chain Caucus last Congress, and this was
before the pandemic. In the months to come, I do hope that this
bipartisan group can come together and identify commonsense
solutions to help resolve these ongoing challenges and deliver
relief to the American people.
Many of these supply chains, Mr. O'Brien, as you certainly
know, are really run by the private sector. There is certainly
a number of contributing factors involved. It is not simple,
although it is real easy, just to kind of throw a political
barb back and forth and blame one party or the other or one
administration or another. We know that these supply chain
issues are very, very complicated, and it is going to take more
than a slogan or a political barb in order to solve them.
So we have certainly, Mr. O'Brien, seen the cost of moving
products into rural America and, of course, the Midwest
especially on the rise. You mentioned in your testimony one
issue you are seeing is a shortage of truck drivers. I am
really proud to represent Dakota County Technical College,
which offers a Class-B CDL truck and bus driver training
program. How could programs like this help bolster our supply
chain?
So Mr. O'Brien, you first.
Mr. O'BRIEN. Thank you, Representative. I think anything
that we can do to get more drivers into the workforce is
beneficial. Training is an area of current demand. A lot of the
training programs and truck driver certifications, you need to
get a commercial driver's license. A lot of those programs shut
down during COVID and that led to a delay, and I think anything
that involves outreach.
Like I said, it is no secret that it is a challenging job.
You are away from home, you have other choices. Today you can't
become a commercial driver for--in trucking until age 21. That
keeps many potential drivers out of the workforce where they
find an alternative trade that doesn't keep you on the road for
most of the time and away from families. So not only do we
support both cooperation between the private sector and public
on solving these problems, we particularly see the need for
additional programs for driver recruitment and training.
Ms. CRAIG. Thank you so much. I would love to turn now to
Ms. Lantinen. First of all, thank you so much for your service
to our country in the U.S. Army and for taking time to appear
before us today, especially with Halloween so close and the
holidays quickly approaching. I am sure that Maud Borup is hard
at work preparing for a busy time this time of year.
How have you seen supply chain challenges in the food
supply industry? And, of course, what do you think Congress can
do to help either do or get out of the way and not do?
Ms. LANTINEN. Thank you, Congresswoman Craig. We are
starting to see everything go up. You know, the cost of plastic
containers, the cost of food. I truly believe a year from now
everything we buy will be 35 to 40 percent higher. It is going
to take longer for it to catch up at the register.
I would say as I have spoken with people in the industry, a
large part of it is driven by shortages of workers. So we are
all struggling to either quickly automate to keep up with
increased demand or do whatever we can do to find people.
The shortage of people isn't just in the U.S.; it is
actually a worldwide struggle right now happening. So I feel
like the U.S. has a really unique opportunity for advancement
right now as everyone is struggling on a global level.
What are we doing to tap into our workforce that is here
and trying to find those pockets of people and how we can get
them out and working and contributing to society is really key
right now.
Ms. CRAIG. Thank you so much, Ms. Lantinen. And,
unfortunately, I am out of time.
So, Mr. Chairman, I will yield back.
Chairman PHILLIPS. The gentlelady yields back. And now I
recognize Mr. Meuser from Pennsylvania, the Ranking Member on
the Subcommittee on Economic Growth, Tax and Capital Access.
Mr. Meuser, you are recognized for 5 minutes.
Mr. MEUSER. Thank you, Chairman Phillips, very much and
thank you to the Republican Leader Van Duyne for holding this
hearing, and thanks to all of you for being here with us. We
appreciate you taking the time away from your business and your
homes.
So small businesses are not happy throughout my district
and throughout Pennsylvania, and wherever else I speak to
businesses. I was in business for many years, friends that are
owning small businesses nationwide, workforce issues as are
being described here, costs are going up randomly, very
difficult situation. Container costs, as we are talking about,
have gone up from $3,000 less than a year ago to $27,000,
$28,000 with no reliability in delivery. Demand is up, supply
is low, particularly products made in the U.S.
So you--on top of all of that, the supply side of your
business, your industry you have got upset customers, you have
got cash flow problems because you are trying to buy things--if
you get a prepaid discount, you are sending those checks in to
making those payments to try to expedite your deliveries or
your scheduling has got to be random, all of your scheduled
services and installations and anything related to building is
all over the charts. You probably have people showing up to do
the job, but the parts and everything else aren't there.
So everybody is pulling their hair out. I mean, businesses
are breathless, as I put it, because every time I get them on
the phone, they sound breathless. And that is--we are on the
Small Business Committee, we got to do what we can here to
correct things.
Now, of course, we have the port and part of that was due
to COVID, a lot of it was due to mismanagement, a lot of it was
due to government disruption. So--and that is where, perhaps,
we can come in. And yet as a Christmas present, our--on the
Democratic side of our Congress wants to tax you more and have
some unclear vaccine requirements, which I am all for the
vaccine, but the guidelines, as you all well know, would--are
not clarified at this point.
So people don't know if they are going to be laying people
off come November 8th or not. No matter how many times I ask
the administration for those guidelines, we don't get them.
So let's get to some questions from the real world, which
is where you all work and live. So offer me, offer me, Mr.
Fowke, the workforce availability. What do you see? You brought
up a couple of ideas that were well thought out. Relate it to
workforce, what can federal/state government do to improve the
workforce climate?
Mr. FOWKE. Well, if you pay a man to not work, why would he
work? The headwinds that we see in the near future for the home
building industry is lack of labor. So it is simple. We need to
get people back using their hands, showing up to work, helping
us produce materials, helping us get jobs done in the field.
And if we have to incentivize people to get them to work,
whatever we got to do. The supply chain issue is not going to
resolve itself. It is going to take some effort to get people
back out to work.
Mr. MEUSER. You think there is more government necessary
for more stimulus dollars and more regulations and other
government involvement or perhaps should government back off
and allow the open free markets to work?
Mr. FOWKE. Well, there is certainly always needs for the
government to help people, but in this case, I think anything
that continues to happen in the manner it has been happening is
going to simply delay things and pull the hand brake on our
economy.
Mr. MEUSER. So what about the Safe Truck Act. That is a
specific bill. I will open that up to anyone, maybe Ms.
Christine Lantinen. You deal with quite a few imports and
trucking issues. The Safe Truck Act would add to our trucking
work shortages, workforce shortages allowing those between the
ages of 18 and 21 to drive on an Interstate basis. That is just
one legislation that really isn't moving here in the House that
has got a lot of cosponsors on both sides. That would be
something I would think would help make a difference.
Are you folks familiar with that?
Chairman PHILLIPS. Mr. Meuser, I am sorry. Your time is
expired.
Mr. MEUSER. Oh. My apologies.
Chairman PHILLIPS. We might have time to come back to a
second round, in which case, we will get back to you. I
promise.
Now I recognize the gentleman from Maryland, our Chairman--
our Vice Chair of the Committee and Chairman of the
Subcommittee on Contracting and Infrastructure, Mr. Mfume, for
5 minutes.
Mr. MFUME. Thank you very much, Mr. Chair. My thanks to you
and to the Ranking Member for holding this hearing. I want to
also add my appreciation and thanks to the witnesses for being
with us today.
Mr. Chairman, I heard something earlier that I want to
actually start with and hopefully end with because it is
exactly what I think the biggest issue is and the one that we
have got to figure out how to get our hands around and that is
the inversion of the supply demand model, which we all grew up
with which we learned about in our first economics class and
which is the way we run our households and run our lives.
I can't ever remember a time in history when that has been
inverted, where one side dictates to the other in a way that
has never happened before. So that inversion to me, I believe,
is the one thing that we have got to come to grips with and
figure out how we reverse it. Now there are a lot of people who
hadn't been paying attention to supply demand issues because
they have got other things, quite frankly, that they are
dealing with, but when many looked up and saw 100 ships and
containers off the coast of California because they couldn't
get unloaded, it started people asking why.
Here in Baltimore, our ports are backed up also, not to the
same extent, but it is the same issue. It affects all of us.
And I think in listening to some of the discussions today and
some of the questions, probably we do ourselves a service by
getting away from stereotypes and trying to find a way to get
to solutions.
I heard one of my colleagues on the other side talk about
the way to fix this is to put work requirements on people who
are receiving welfare. Well, people who are receiving welfare
were receiving welfare before the pandemic. Most of them don't
want to be on welfare. Most are White and female and they are
taking care of families as best they can. So this quick-fix
notion of let's put some work requirements on these people, I
think, gets us past where we ought to be. It doesn't give us a
solution; it gives us a slogan.
And if we talk about, as I have heard some of the witnesses
say, they are recognizing the fact that ultimately they will
continue to have to pass along prices to consumers, I
understand their pain in that regard because it doesn't help
them. It reduces the amount of business that they are able to
do; it doesn't increase it.
And right now we have heard this morning from some of the
leading economists in the nation that the average family has a
cost of $175 more to be able to take care of goods and services
in their household than they did last year. Those same
economists are saying that we will be in this inflationary
trend at least through the first quarter of next year. And if
that is the case, it cries out for immediate kind of actions.
I want to commend Representative Chu for her legislation in
this regard. I think it takes us a long, long way and I am
hoping that we can pass that soon. And this issue of a lack of
workers is important. I am listening to the discussion about
truck drivers, in particular, and I could not agree more that
we don't have enough and that we have got to find a way to make
that particular occupation more desirable for the people who
are in it and the people who are looking at trying to get in
it.
And some of the things that we have to do in that regard,
as someone said earlier, is to look at wages and to look at the
taxation that we put on those persons. Well, every one of those
things has an economic consequence, so unless we are prepared
to go headfirst into this, recognizing that we have to, in some
instances, spend money in the area of truckers and truck
driving in order to rehabilitate and to recreate an occupation
that people want to go into, we are going to be fighting this
one for a long, long time. We have got to be proactive and
sometimes proactive means, in fact, investing.
Now, the issue of incentivizing workers, I would like to go
to that. I think it was--well, I don't remember who--I think
Ms. Lantinen who brought it up, is something that has some
immediacy to it. And when you talk about incentivizing and
retirees, it has got to be to the extent where those retirees,
in my opinion, feel like it is in their best interests.
So that is something, I think, that is very valuable. I
think it is a great solution. It requires expediency. We have
got to move on it because this situation continues to languish,
but even beyond this situation, I have always been an advocate
of incentivizing retirees to help in whatever particular
industry or area of expertise they have come out of. And I hope
that we don't lose that as we talk about trying to find a way
to get to a solution.
I know the notion of suspending duties and taxes is
important, and I can support that. I think that helps us to
find a way, again, to lower the cost on the respective
industries, but at the end of the day, we are still grappling
with this inversion of a supply demand model that I don't think
we have ever seen before in this nation in a capitalistic
society. And unless we come to grips with that----
Chairman PHILLIPS. Mr. Mfume, your time is expired,
unfortunately. And we are going to try to do a second round, so
if you can stick with us.
Mr. MFUME. Well, I will try, Mr. Chair. But I just would
leave all of you with that thought about this model and how we
fix it.
Chairman PHILLIPS. Thank you, sir.
And with that, I recognize Mr. Donalds from Florida for 5
minutes.
Mr. DONALDS. Thank you, Mr. Chairman. To the witnesses,
thanks for coming, obviously. Supply chain issues is really the
core issue, one of the core issues affecting our economy in
such a disastrous way. Chuck, it is good seeing you. Chuck
Fowke and I know each other back from Florida. For those who
don't know, he actually did a lot of work with my mother-in-law
for many, many years. So I will make sure I tell Gaila that,
you know, that you said hello and were here testifying today.
I have heard a lot of different things in this hearing
already, so I am going to try to cut through some of the
things, I think, that are important and just ignore some of the
things that are not. I think it is crystal clear we have a
staffing problem, an employee problem in the United States. My
last read on labor participation rate was somewhere between 60
and 61 percent of Americans are actually working Americans are
at a labor force.
Our economy needs a labor participation rate of around 65
percent to be kind of humming along. We simply are not there.
Pretty much would assume every witness we have could attest to
that fact that we have a severe labor shortage issue.
I do remember back in February when President Biden pushed
the American Rescue Plan, one of the key provisions for
extending federal unemployment benefits through September that
he wanted to do, the minority party said do not do that because
our economy's ready to start humming along and if you,
essentially, pay people--extend their federal unemployment
benefits, you will see labor shortage. That is what has
happened in the United States.
But specifically to supply chain, there was actually a
really good article was on zerohedge.com and the title of the
article was essentially--I will pull it up right now--``Empty
Christmas Stockings? Don't Blame COVID; Blame California.''
And one of the things it talked about was that California
has actually put through two very interesting pieces of
legislation that have crippled the trucking industry in
California, specifically.
One is AB5, which was targeted at gig workers, to protect
gig workers by making them employees, but what has been--what
has actually happened is that in California, the ports were
actually accessed by owner/operator truckers, but the owner/
operator truckers are essentially in that gig classification.
So they can't access the ports in California anymore.
So now you have to go, essentially, with union truckers
also dealing with the union issues we have at the longshoremen
as exists right now. So no matter what business you are in, one
of the reasons you are having issues accessing a lot of product
is because there are less trucks, actually, accessing the ports
in California.
The second California issue was, they passed emission laws
that they struck a deal with the EPA on where if your truck has
an engine that is more than 10 years old, that truck is not
allowed to be licensed and to be registered in the State of
California, which means that truck cannot access and be driven
on the roads in California, which means now you have supply
companies who are taking the newer trucks to the ports, driving
the newer trucks just to the State lines of California and then
off-loading the freight from the new trucks to the old trucks
and is driving the old trucks through the United States.
I would ask the witnesses and anybody can jump in, Mr.
O'Brien, Mr. Fowke, anybody, does this make sense in terms of
how you would maintain the logistics of a supply chain as
sensitive and as robust as ours in the United States?
Mr. FOWKE. Congressman Donalds, thank you. And thank you
for acknowledging our long-time friendship. I think anything
that any legislation that disrupts the opportunity to transport
materials right now is bad legislation.
If they can divert those tankers over to Florida, maybe we
can help them there unload their cargo and move it, but
anything that disrupts the flow in the transportation materials
right now is very disrupted to this issue.
And the home building industry, we have had our eye on
supply chain issues for almost over a year now, just remind you
of that.
Mr. DONALDS. Mr. O'Brien, if you are still with us, I mean,
if you care to comment, I would like to hear your opinion
because you actually bring a lot of valued points to this
discussion. I would really be interested in your opinion.
Mr. O'BRIEN. Thank you, Representative Donalds. I would
just say that outside the current congestion really goes beyond
any port or any State. It is systemwide. It involves many
different chokepoints, not just from the ports, but from the
supply of real estate that is available to transload from rail
yards to trucking.
On the issue of AB5, we talked to our carriers. They are
concerned about it. We don't have--it is not a particular issue
for us. It doesn't apply to our model as a value-added
intermediary. But overall, I would just encourage the Committee
to think about the supply chain as systematic and that it goes
all the way from the domestic links to the international links
and from port all the way to delivery.
And there is a lot of different modes versus any one port
or State that we need to work on.
Mr. DONALDS. All right. I am over time. Thank you so much,
gentlemen.
I yield back.
Chairman PHILLIPS. The gentleman yields back.
And now I recognize the Chairwoman of the Subcommittee on
Economic Growth, Tax and Capital Access, the gentlelady from
Kansas, Ms. Davids, for 5 minutes.
Ms. DAVIDS. Thank you, Chairman. Well, first of all, I am
glad that we are holding this hearing today on such a critical
issue that is definitely impacting small businesses and their
customers in real-time.
Supply chain delays and shortages have been a concern since
the beginning of the COVID-19 pandemic when our stockpile of
critically needed medical supplies and PPE was depleted and
demand was growing to protect frontline healthcare workers.
Amid those early shortages, I heard from businesses in
Kansas about the impacts of the supply chain breakdown on
various industries. Their concerns led me to introduce the
SUPPLIES Act in April of last year to support small
manufacturers that really stepped up to produce some of those
desperately needed medical supplies and equipment.
And today, our small businesses are still faced with these
extremely high shipping costs and delays that are setting them
back. And, frankly, this--we heard this earlier too. This has
been an issue since even before the pandemic and it
demonstrates that we have been dependent on a pretty precarious
supply chain for far too long.
And in today's hearing, I do want to focus on the
challenges that shipping and freight industries are facing
right now. You know, the Kansas Third is an extremely busy
intermodal shipping hub. Our small businesses and the small
businesses across the country rely on the Kansas City Metro
area to facilitate the transportation of so many different
products to their destinations.
And as the Vice Chair of the Transportation and
Infrastructure Committee, I have been working to alleviate
congestion at ports of trade and the issue of shipping
container shortages, and I am glad that we have freight expert
here to help us understand the impact on small businesses and
how we can support them through these shipping challenges,
especially after they have suffered such devastating impacts
during the pandemic.
So Mr. O'Brien, I am really glad that you are able to join
us today and as a freight company that really focuses on small
business services, can you kind of speak to the unique
challenges that small businesses are facing with the current
state of shipping?
Mr. O'BRIEN. Yes. Thank you, Representative Davids. So we
work with companies of all sizes and consistent with my
testimony, I would say that companies of all sizes are
struggling. It is especially challenging for small businesses,
but we are getting calls every day from potentially the largest
companies in the world that are struggling and sometimes they
are thousands of containers behind.
So, like I said, it is not one port, it is not one State,
or one point of origin; it is just this very unique and
unprecedented in my 30-year career crunch from a supply chain
standpoint, from a demand and supply inversion. So we are in
the foot steps of the small shippers, sometimes quite literally
on site.
We represent them. We represent them with the steam ships.
We do everything that we can. As you know in Kansas City, we
have our freight quote by Robinson team they and they build
online tools that were built with and for small shippers to
give them access to LTL pricing at the rates and size and scale
of a larger shipper.
So we focus on anything that we can do and right now within
this period, our people are working harder than ever on behalf
of customers of all sizes. We are on their footsteps as one of
the largest purchasers of transportation services around the
world.
So it certainly has been extremely challenging, but we are
doing everything that we can for companies of all sizes today.
Ms. DAVIDS. Yeah. And so, you know, mentioning the working
with LTL and I think of us being able to move quickly and be
able to pivot, be able to really be agile, and I think we need
good infrastructure to be able to do that. As we work on this
bipartisan infrastructure package, I am curious if you can, you
know, from your perspective, what investments can we be making
in infrastructure that are going to result in that timely and
efficient and effective moving of all of those goods?
Mr. O'BRIEN. I think anything that helps move the flow of
goods. So expediting at our ports. The American Transportation
Research Institute is a good place to start. They published a
list of the largest supply chain chokepoints, and those are
highways, not ports. Those are most of our major Metro areas.
We have a challenge with available drivers and congestion is
not helping them at all. It is making the job more challenging.
It is delaying revenue for them.
So I would want the focus to be broad across the supply
chain because the challenge really is broad. Across every mode,
there are chokepoints today.
Ms. DAVIDS. Yeah. Well, thank you for that and thank you,
again, for everybody participating today.
And I yield back.
Chairman PHILLIPS. The gentlelady yields back.
And now I recognize the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes.
Mr. FITZGERALD. Thank you, Mr. Chairman. I just wanted to
take it a little bit different direction than just on the
supply side. Met with a number of developers and this is in
southeastern Wisconsin about a month ago and there seemed to be
a level of frustration, and I know this is regional, but
developers right now and the relationships that they are trying
to build with municipalities to further, for the most part,
subdivisions and the creation of subdivisions, there seems to
be another issue and that is kind of everything that needs to
happen to support that subdivision, whether it is the
underground or later on kind of revisiting that site and making
sure that it is up to snuff and up to code.
Mr. Fowke, maybe you can comment on this. I mean, you know,
it is hard to get a municipality to make this type of upfront
investment not knowing necessarily if they are going to be able
to recoup this at a later date. And certainly I think what we
are seeing is not only the disruptions, but also just the labor
issue and being able to have enough carpenters or masons on the
job site. I mean, this is becoming far more complicated than it
has ever been before and I was wondering if you could comment
on that upfront investment that municipalities have to make?
Mr. FOWKE. Well, unfortunately, a lot of municipalities
today are against growth and the challenges with these areas
being against growth, it puts stress on the old housing stock
for people to have a place to live. The other thing is the
regulations that are heaped on our industry continue to
increase. Right now the effect of regulations on the
construction of a home today add 30 percent to the cost of the
home. This is before the house ever starts. This is average
number throughout the country.
So unneeded regulations, delays in approvals, and then just
certain areas that are against growth and they have moratoriums
on growth. And we need to do a better job of planning for water
and sewer and the infrastructure that we need to provide
housing for people because, again, you know, our supply of new
houses, healthy supply of new houses typically is about 6
months. We have about a 2 month or less supply now. Own housing
stocks is the same way.
We resell houses. Typically, a 6-month inventory is a
healthy inventory. We are below 2 months now for that. So all
this does is increases the price and just prohibits the
opportunity for people to enjoy the American dream.
Mr. FITZGERALD. Yeah. Mr. Robinson, can you comment on kind
of this dance that goes on between municipalities and
developers and often times what results in zero new
development?
Mr. Robinson, could you comment on that?
Oh, Mr. O'Brien, I am sorry.
Mr. O'Brien.
Mr. O'BRIEN. Sorry. I wasn't clear on the question. Could
you repeat that?
Mr. FITZGERALD. Yeah. I was talking about when development
is happening and municipalities are making the upfront
investment and the underground and everything related to that
project, often times what they recoup on the back end is
difficult for them at this point. So they are leery or they are
unwilling to make that investment.
Mr. O'BRIEN. Yeah. That is not an area that our business is
very close to. I would say one trend from municipality
standpoint that we need to be careful on is the trend towards
banning urban parking. So I have mentioned the need for more
truck drivers. The long-term trend is, you know, more urban
residence.
That is one thing that impedes and it is not talked about
that much, but a lot of cities are removing urban trucking
parking spots and that makes it more difficult to attract
drivers that would have to drive a longer distance to be able
to get to their truck and does not help the already existing
capacity crunch.
Mr. FITZGERALD. Yeah. Thank you. I mean, my comment would
be in the developers in southeastern Wisconsin, I know it is
regional, but a lot of the issues, I think, have resulted in
zero growth in some of my counties. Literally, municipalities
that have not had one new home built over the last 3 years and
I think it is becoming not only alarming, but is a very complex
issue.
So with that, I would yield back.
Thank you, Mr. Chair.
Chairman PHILLIPS. The gentleman yields back.
And now I recognize the gentlelady from Georgia, Ms.
Bourdeaux, for 5 minutes.
Ms. BOURDEAUX. Thank you so much, Chairman Phillips, and
Ranking Member Van Duyne for holding today's hearing and for
allowing me to waive on to discuss this critical issue. Supply
chain issues have become increasingly apparent since the on set
of the COVID-19 pandemic, particularly in recent months as our
economy continues to recover and demand surges.
In my district, Metcam Metal Fabricators had to temporarily
shut down production of certain items due to a shortage of
titanium dioxide, a component almost exclusively available from
China. This disruption then led Carrier to having to restrict
its manufacturing processes in its southeastern United States
facility and this shows how these shocks and disruptions in one
portion of the supply chain can trickle down and affect many,
many other components. These issues are not new, however.
In recent years as our economy has depended on just-in-time
delivery models and increasingly global supply chains, we
really haven't matched that change with sufficient government
review and support for supply chains of critical goods and
services. This effort requires a whole-of-government approach,
one that really emphasizes collaboration between the government
and the private sector to achieve our shared goal of resilient
economy that can avoid and withstand disruptions and shocks to
the supply chain.
Of course, this is not just an economic issue; it is also a
national security issue and is about our national health as we
saw during the pandemic when we were very dependent on global
supply chains that were badly disrupted. This is why I
introduced the Supply Chain Health and Integrity For the Nation
Act, the Supply Chain Act with Representatives Kinzinger and
Kelly 2 weeks ago.
The Supply Chain Act would create an office of supply chain
resiliency and crisis response at the Department of Commerce
which would be responsible for coordinating this approach and
collaborating with the private sector and labor organizations.
This office would also be responsible for producing a
quadrennial national strategic plan for manufacturing and
industrial innovation, which will guide our nation's efforts to
secure critical supply chains.
This question is for Mr. O'Brien. And really ties back to
that idea of this just-in-time production strategies. We saw
those really developed over the past couple decades. They have
helped keep inventories and costs low for businesses and
customers, but clearly these economic and business strategies
are also really vulnerable to disruptions.
Can you talk a little about why this business model was
adopted and if you think this model is going to change after
the disruptions around COVID? What are going to be some of the
changes you are seeing out there or are we just trying to get
back to business as usual?
Mr. O'BRIEN. Thank you, Representative Bourdeaux. I would
like to start by addressing your comments about the public-
private cooperation and I think that is going to be key to a
solution.
I was a part of the Minnesota business partnership that
worked with the State and city and the major employers in
Minnesota at the initial outbreak of COVID and we volunteered
our time, as well as many corporate leaders to facilitate the
flow of PPE into the State of Minnesota and then we passed on
what we learned to other States.
So I think that is the way forward. In terms of investment
in the flow of goods, I would say, as you look about that whole
supply chain, keep in mind the customs process as that is
completely in government control. Anything we can do to
modernize U.S. Customs processing and automate it which has
been the direction that we have had some success is great.
Lastly, on your question of just-in-time inventory, just-
in-time inventory has been a long-term trend which is to reduce
costs and keep safety stocks as low as possible in order to
pass on those savings to consumers. So it has been a good
trend. It is obviously in an unprecedented time like this shown
the weakness side of it in ways that we haven't noticed in the
past and are probably unlikely to in the future.
Obviously, companies right now are rethinking that
strategy. I don't think right now there is enough available
supply transportation or goods to create anything like a
bullwhip effect through this, but I do talk to several
companies that are thinking about re-evaluating, but I don't
think it is, you know--I don't think we are going to go back to
a period of trying to build up safety stocks at the level that
would be necessary to prevent the challenges with something to
this scale, but I would see some adjustments.
But overall there is an expense to carrying costs to
businesses and ultimately to the consumer.
Ms. BOURDEAUX. Thank you. I think this is going to be an
ongoing challenge of how we both support those supply chains.
We want to make sure we are efficient, working in a very
efficient way, but also how are we going to deal with
disruptions.
And I don't know that it is just going to be--things are
going to be able to go back entirely to normal. I think there
will be other unforeseen things on the horizon and we need to
be agile and able to really figure out how we adapt quickly to
that.
This next question is for--oops. I think I am out of time.
So I will hold my next question and thank you so much for
letting me weigh in here.
And I yield back.
Chairman PHILLIPS. The gentlelady yields back.
And now I recognize my colleague from Minnesota, Mr.
Stauber, for 5 minutes.
Mr. STAUBER. Well, thank you, Mr. Chair, Ranking Member Van
Duyne for holding this very--very important that we look at
this issue and find ways to, you know, secure our supply
chains.
And I first want to say that, you know, at the start of
COVID, there was--the nation wasn't sure what was going to
happen, but I have to say the trucking industry and those
related helped carry the goods to the American people. Goods
that we needed and obviously right now with some of the
policies coming out of this administration, bear shelves,
energy policies causing us all to pay more for not only
gasoline and other fuels, but even groceries.
I want to thank the witnesses, in particular, from C.H.
Robinson, Mr. O'Brien, and I know they are not only a national,
but really a world leader and to have an expert such as Mr.
O'Brien here, I want to thank my colleague from Minnesota for
bringing this expertise to this Committee. It is really
important. And I am going to get right to the point. We know
that we have--we are paying more, you know.
Mr. O'Brien, you mentioned that small businesses are going
to be hurt more just in fuel costs alone, can you tell us the
devastation it is going to cause small businesses if they have
to pay additional moneys to find different ways or pay more to
bring that commodity to their small business?
Can you tell me what you have heard, how devastating it
will be to small businesses that don't have the capital to pay
those high prices right now.
Mr. O'BRIEN. Thank you, Representative. I would add that
fuel is one of the things that goes into any shipper's budget
of any size. Fuel obviously being very high certainly does not
help. It is one of the input costs. Transportation rates, both
domestically, we have talked about transportation rates
globally being up, you know, enormously.
Transportation rates are up domestically as well. In the
spot market, we have seen rates 40 to 50 percent increases over
last year. Contractual rates are up.
Mr. STAUBER. Mr. O'Brien, rather, what would be the input
rate right now for cost of fuel?
Mr. O'BRIEN. I am sorry. Could you clarify the question?
Mr. STAUBER. What is the input rate today for the cost of
fuel?
Mr. O'BRIEN. Do you mean as a percentage of transportation?
Mr. STAUBER. Yes, percentage.
Mr. O'BRIEN. Roughly 40 percent.
Mr. STAUBER. Okay. With the increase of fuel prices, would
it be more than 40 with the fuel going up? Would that input
increase?
Mr. O'BRIEN. I am sorry. Could you clarify the question? It
really depends on the length of haul of the goods. So----
Mr. STAUBER. If it is a 500-mile haul, for example, is the
cost--the input cost for fuel going to be more?
Mr. O'BRIEN. I don't know exactly what the break point is,
but if you think about it being 40 percent, you could just do
the math from there. I would say there is some break point, but
it is--it is pretty--it is pretty parallel to the cost of line
haul. The longer you go, the more you are paying for fuel. So I
would use 40 percent as the right metric and then just multiply
by the increasing rates of fuel.
The system and the transportation has a pretty good way of
dealing with fuel. It is a surge charge tied to an average
diesel price. So the processing is there and the industry for
years has dealt with it going up and down, but today it is an
added expense in an already constrained industry.
Mr. STAUBER. What I am hearing from the small businesses in
Minnesota's eighth district, northeastern Minnesota, they can't
get their supplies, they can't get what the consumer needs, and
in light of the PPP that was extended to them, many of them are
on the verge of not making it because they can't--they can't
get the products to market.
And I think that one of the things that we must look at and
we must understand is that, as the experts in the
transportation industry, we are looking for you for answers and
help as we go forward. And I think that what you have given out
today in your testimony is extremely helpful. So we could make
good decisions to help with this crisis.
And it is not going to happen overnight, but we have to
have good legislation that will move forward and allow us to
get back to where we were to get the goods to the consumers,
including the small businessmen and women across this nation.
I see I am over time, Mr. Chair. Thank you very much.
Chairman PHILLIPS. And with that, we are going to move to a
second round of questioning, anybody wants to participate in
another round. I ask you to join me.
With that, I will start with myself for 5 minutes. Mr. Loe,
I remember years ago using the STEP program for our business to
help with trade shows and market our brands overseas. We talked
about how we need to be a country that fills more of these
empty containers and sends them overseas, and I really want to
salute you and your enterprise for being amongst that 1 percent
of small businesses in the U.S. that actually export their
products internationally.
Would love for you to share with this body how the STEP
program has helped you and the elements that we should continue
to invest in and support and your overview of how we can be
more effective?
Mr. LOE. Thank you, Mr. Phillips, for the question. Really
appreciate that. Yeah. The STEP program has just been enormous
for us in being able to use the services. We use services in
our marketing strategy to access new customers. That is one of
the biggest things that this program has allowed us to do is to
do trade shows, be able to use trade offices located across the
world.
U.S. Embassies that we use as well too to hold meetings and
really locate with market research from the different
universities that we have been teamed up with and partnered
with, as well as using their offices for boots on the ground
type of approach to be able to look for new customers of ours.
When we find new customers of ours, that is when we send
large containers overseas and we continually build that
relationship with those customers to then send more containers
of equipment to them to service, you know, their local market
with our product. That is done through different programs in
the STEP program that includes, you know, different trade
shows.
We are able to use their--again, their trade offices to
understand who their end customer is. So not only the potential
manufacturers that we use, but also the end customers that
would then use our product that these trade offices help to
build that business. It is a great partnership that we are able
to do with those manufacturers to provide those services.
We don't understand sometimes all the different, you know,
factors involved with it and that is where the MEDC comes in to
play to help us with those trade offices to understand what we
need to do to go into market and to be very, very successful
with that market.
We use educational in training with the STEP program as
well too. I wish I knew everything when it came to
international trade. I don't and I rely on them to provide that
training for us to make that happen. The effectiveness of this
program is really big for small business like ourselves.
We appreciate all those services that they provide to us
because it helps us grow our business and in doing so helps
them out as well too.
The effectiveness I would say to continue with the STEP
program, to continue with the government services like Michigan
Economic Development Committee that continually helps us and
figures out different ways. We have used internship programs
with them. We have used lots of different services that they
continually offer us to make our success in international vital
to our business.
Chairman PHILLIPS. Love it. Hope you keep filling more
containers.
Mr. LOE. We will. We will.
Chairman PHILLIPS. With that, Ms. Lantinen, like to return
to you for a moment. You referenced job training incentives as
two potential solutions to rectify your 100 employee deficiency
at the moment. I hope you might speak about other potential
solutions.
Is immigration reform perhaps one? Is childcare provision,
especially in Minnesota where we are the third highest cost
State in the country? Are those areas in which we should spend
some time and look at improving policy?
Ms. LANTINEN. Thank you, Congressman Phillips. You know, of
that 100 million people that are not in the workforce, 10
percent is an estimate for illegal immigrants. And we have
turned away many people with fake IDs to the point that our HR
team has said, if we accepted fake IDs, we would had the 100
people that you need, Christine.
So I do think we need to look at that and look at people
that have been in our country and that have been contributing
to our society as another potential work pool to pull from that
is out there and wants to work.
As far as childcare goes, we are actually looking at
putting a childcare facility on site at our factory to help
working moms and to help with the cost of childcare and the
quality of childcare. So those are important things definitely.
Chairman PHILLIPS. Thank you very much. My time is expired.
Do any of my colleagues--Ms. Van Duyne? Anybody?
Mr. HAGEDORN. Chairman?
Chairman PHILLIPS. I recognize Mr. Hagedorn, my colleague
from Minnesota, for 5 minutes.
Mr. HAGEDORN. Thank you for doing this. I want to clean up
a few things. Talk about the trucking shortage and truckers. A
lot of the problems in the trucking industry are bad government
policies or government policies that were well-intended on
safety and other issues, environment, that have led to big
problems in the industry.
The hours of service over the years has limited truck
drivers, created a lot of inefficiencies driven up the cost of
transportation. The Tier 4 environmental standards that are
imposed upon big trucks are driving up the costs of those big
trucks $20,000 or more.
If somebody is trying to get in the industry, want to be an
independent truck driver, that means they got to spend another
$20,000 to go buy a truck. That is an impediment. That is not a
good thing. The environmental standards are also ripe for
failure on these trucks.
These sensors go off and at any time right now in our
country the trucking industry people in Minnesota tell me there
are between a thousand and 10,000 trucks on the side of the
road who are waiting for sensors to be fixed because these
things when they go wrong, the trucks have to stop. It is
$1,000 tow. That is also not very good for the truck driver or
the industry.
And before you know it, they can't get the parts and they
are waiting for technicians. So we have a lot of trucks that
are just out of service all the time. Again, well-intentioned,
but did we go too far with Tier 4 requirements that make you go
from here to here, but it is way more expensive. It is
something to look at, but that is government. That is bad
government in many instances.
Look at the supply chain issues. Nobody today has really
mentioned China. Let's bring our jobs back from China. We
should be doing what we can to have less manufacturing in China
and more manufacturing in the United States or countries that
are neutral actors with us that we can rely upon more freely.
One of the things that bothers me about the Democrats' big
reconciliation bill, massive transfer of dependency to China.
Just look at energy. They have something in there called
the Clean Electricity Plan. It is a remake of Obama's Clean
Power Plan. You are going to decommission natural gas and coal-
fired power plants in the United States and try to supplement
that with intermittent energy in wind and solar. It is not
feasible for one. It is going to drive up cost and it is going
to make it less reliable.
If you like what is going on in Germany and California
where they have rolling brownouts where the wind and solar
weren't cutting it and so they are begging for natural gas
power and they are spending 50 percent more in California,
other places. This is what the Democrats want to do to you all
across the country.
I think it is a bad idea, but even worse, when you rely on
wind and solar and electric vehicles, you are dependent upon
China because they have all the rare Earth materials and
minerals needed to produce the lithium, the cobalt, all those
things that go into that.
I don't know a patriotic American that thinks it is a good
idea for the United States to depend upon our electricity and
our vehicles to Communist China. I can't figure that one out,
but it is something that people have to start wrapping their
hands around.
Lastly, Mr. Mfume and others talked about work for welfare.
Well, you kind of skewed that. When we talk about work for
welfare or technical trading requirements for people that
collect welfare in this country, we are talking about able-
bodied people without dependents. We are not talking about
people taking care of families, we are not talking about people
that can't go to work.
And I will just say it for the record, again. I worked on
this issue back in the 1980s with Congressman Stangler from
Minnesota. We carried the bill that was a precursor to what
Gingrich and Clinton and everybody did. It works every time. It
is fair to the taxpayers. It is the right and compassionate
thing to do for people who are out of work and to try to
encourage them to get private sector work.
Helping people become self-sufficient and less dependent on
government is absolutely should be our goal. And, you know,
when the folks on the other side say, oh, you are going to take
them away from their families. That is not what we are talking
about. We are talking about able-bodied folks who don't have
any dependents and 71 percent of them have no income, according
to the latest statistics.
So they are certainly capable of getting out there,
particularly when we have 11 million jobs available and
everybody in southern Minnesota and across this country every
business is begging for work.
With that, I will yield back.
Chairman PHILLIPS. The gentleman yields back.
And now I recognize the gentleman from Florida, Mr.
Donalds, for 5 minutes.
Mr. DONALDS. Thank you, Mr. Chairman. I associate myself
with the comments of my colleague from the great state of
Minnesota.
Mr. Loe, I want to come to you. You said in your opening
statement that you are supportive of the bipartisan
infrastructure plan. Is that correct?
Mr. LOE. That is correct, Mr. Congressman.
Mr. DONALDS. Mr. Loe, do you know what percentage of that
actual bill actually goes towards infrastructure? Roads,
bridges, construction, construction materials, do you know what
percentage of that bill actually goes towards it?
Mr. LOE. In regards to the 3.5 trillion or the 1 trillion?
Mr. DONALDS. I am just dealing with the 1.2 trillion. That
other thing isn't even infrastructure I don't care what they
say. With respect to the $1.2 trillion bill, you know what
percentage actually goes towards construction, actual
construction costs?
Mr. LOE. I do not.
Mr. DONALDS. All right. So that is about anywhere between
depending on what you want to put into the bucket, anywhere
between 130 billion to $200 billion of the 1.2 trillion. Still
support it?
Next question--don't answer that one.
My next question is, with respect to your business and
shipping costs--this is really supply chain that we are talking
about--in that bill there is without a doubt, there are going
to be tax increases on energy production in the United States.
That is the life blood of every business. Your colleagues that
are on this witness panel today to keep the lights on in this
place all across the country. There are going to be tax
increases on energy production.
Since we already know because it was said by Mr. O'Brien
that 40 percent of the inputs into shipping is energy costs and
that bill is going to increase energy costs in the United
States into a framework that is already strained by extended
costs in the shipping area, is it something, in your opinion,
that small business owners should be supporting, which are tax
increases into the energy framework of our economy that will
also increase the costs on freight and shipping, which are
already heightened in the United States?
Is that something, in your opinion, small business owners
would support?
Mr. LOE. Thank you for your question, Mr. Donalds. That is
a great question and I would be happy to get back to you on the
implications of that. As related to infrastructure with our
business and our product itself, we build retaining walls and
in the infrastructure bill, we are looking at building roads,
building bridges, and retaining walls are huge part of that as
infrastructure. That is where the support comes from from any
infrastructure support from our business----
Mr. DONALDS. Mr. Loe, I got a follow-up question for you
because I only got 2 minutes and 25 seconds.
Mr. LOE. Sure.
Mr. DONALDS. Here is my follow-up question to that. I
totally understand you as a business owner wanting to make sure
you have all the necessary revenue and jobs lined up for the
continuation of your business model, the continuation for your
employees, the continuation for your owners, shareholders,
however, your company is formed.
Is it appropriate--I am going to use this phrase, is it
fair and is it equitable for your enterprise to be able to get
additional revenue into your business associated with this
bill, meanwhile other businesses in our country who would never
get a construction or infrastructure contract, the costs on
them associated with freight will precipitously increase
because the bill you support will increase energy costs in the
United States which will also increase freight and delivery
costs in the United States?
Do you believe it is fair and equitable for all small
business owners to basically be hamstrung by the bipartisan
infrastructure bill, even though, in your specific enterprise
you might seek to benefit from the infrastructure bill? Is it
fair and equitable?
Mr. LOE. Thank you for your question and I am not qualified
to answer that question.
Mr. DONALDS. Mr. Loe, hold on a second because I have
missed an introduction page over here. Stay with me, Mr. Loe.
Mr. Loe, for the record, because I don't have the sheet in
front of me, what is your title with your company? What is your
position?
Mr. LOE. Director of the customer engagement team.
Mr. DONALDS. So you are director of customer engagement?
Mr. LOE. That is correct.
Mr. DONALDS. So you have not had any conversations with the
owners of your company?
Mr. LOE. I have had lots of conversations with the owner of
my company, yeah.
Mr. DONALDS. They support the infrastructure bill?
Mr. LOE. We support infrastructure bill to go after roads
and bridges construction to continually gain the revenue need
for our 120 independently owned and operated businesses so that
they can continue to provide great retaining walls for bridges,
for roads, for municipalities, and for government DOTs----
Mr. DONALDS. Mr. Loe, I have a question for you--my final
question for you.
Mr. LOE. Yes, sir.
Mr. DONALDS. Do you want to see your electricity prices
increase for you, not your company, just for you, you and your
home?
Mr. LOE. I do not want to see my prices increase.
Mr. DONALDS. Mr. Loe, why would you support a bill that is
going to increase the cost of electricity just for your home?
Don't answer that question, Mr. Loe. Here is what I will
leave the American people with, Mr. Chairman. Americans like
the word ``infrastructure.'' I completely understand why, but
that bill is far more than infrastructure. It will unilaterally
remake our energy matrix; it will increase the cost on all
Americans whether you get a government contract or not.
Chairman PHILLIPS. The gentleman's time has expired.
Mr. DONALDS. Thank you, Mr. Chairman.
Chairman PHILLIPS. Not seeing any other interests in
questioning, I will make a closing statement.
My colleague from Florida asked about the infrastructure
bill. Let me just read the components of it since the question
was asked. $110 billion for roads and bridges, $55 billion for
water infrastructure, $66 billion for railroads, $65 billion
for broadband, $17 billion for ports, $17 billion for ports.
Our ports in the United States of America are significantly
underfunded and pale in comparison to ports around the world,
$25 billion for airports, $65 billion for the electric grid,
including another $50 billion to make it more resilient. It is
a bill that generated 19 Republican senators support including
the Minority Leader Mr. McConnell. I leave the data and the
facts as they are.
I want to thank all our witnesses for being with us today.
This is tough stuff. We are here to support small businesses.
Condemnation doesn't go too far, conversation does, and I want
to thank my colleagues on both sides of the aisle who share my
interest in identifying the problems, but, most importantly,
finding solutions. The pandemic has up ended a lot in our
lives. It has exposed weaknesses, including for small
businesses, including particularly our supply chain. It is a
complex system our supply chain. There is no magic solution. I
was hoping we might come here today and find that magic wand
that we could just solve this problem.
The truth is I didn't hear one actionable solution that we
could implement today to solve the problem. We have to make
investments. Long-term, strategic, thoughtful, and intentional
by both Democrats and Republicans. That is the spirit of this
Committee. That is what I hope we do. It is going to take
strong leadership.
We can do a few things. The Biden administration, of
course, this week announced that they would extend operating
hours for our major ports to 24 hours, something that
competitors around the world at their ports are already doing.
Those are small steps that we can take. I salute the
administration for doing so.
With that, we will close this meeting and I would ask for
unanimous consent that Members have 5 legislative days to
submit statements and supporting materials for the record.
Without objection, so ordered.
And if there is no further business to come before the
Committee, we are now adjourned.
Thank you, everybody.
[Whereupon, at 11:56 a.m., the Subcommittee was adjourned.]
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