[Senate Hearing 117-774]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-774

   UNCHARTED WATERS: CHALLENGES POSED BY OCEAN SHIPPING SUPPLY CHAINS

=======================================================================

                                HEARING

                               BEFORE THE

  SUBCOMMITTEE ON SURFACE TRANSPORTATION, MARITIME, FREIGHT, AND PORTS

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

                            DECEMBER 7, 2021
                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
                             
                   [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                            


                Available online: http://www.govinfo.gov
                
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
54-133 PDF                WASHINGTON : 2023                   
                
                
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                   MARIA CANTWELL, Washington, Chair
AMY KLOBUCHAR, Minnesota             ROGER WICKER, Mississippi, Ranking
RICHARD BLUMENTHAL, Connecticut      JOHN THUNE, South Dakota
BRIAN SCHATZ, Hawaii                 ROY BLUNT, Missouri
EDWARD MARKEY, Massachusetts         TED CRUZ, Texas
GARY PETERS, Michigan                DEB FISCHER, Nebraska
TAMMY BALDWIN, Wisconsin             JERRY MORAN, Kansas
TAMMY DUCKWORTH, Illinois            DAN SULLIVAN, Alaska
JON TESTER, Montana                  MARSHA BLACKBURN, Tennessee
KYRSTEN SINEMA, Arizona              TODD YOUNG, Indiana
JACKY ROSEN, Nevada                  MIKE LEE, Utah
BEN RAY LUJAN, New Mexico            RON JOHNSON, Wisconsin
JOHN HICKENLOOPER, Colorado          SHELLEY MOORE CAPITO, West 
RAPHAEL WARNOCK, Georgia                 Virginia
                                     RICK SCOTT, Florida
                                     CYNTHIA LUMMIS, Wyoming
                 Melissa Porter, Deputy Staff Director
       George Greenwell, Policy Coordinator and Security Manager
                 John Keast, Republican Staff Director
            Crystal Tully, Republican Deputy Staff Director
                      Steven Wall, General Counsel
                                 ------                                

  SUBCOMMITTEE ON SURFACE TRANSPORTATION, MARITIME, FREIGHT, AND PORTS

GARY PETERS, Michigan, Chair         DEB FISCHER, Nebraska, Ranking
AMY KLOBUCHAR, Minnesota             JOHN THUNE, South Dakota
RICHARD BLUMENTHAL, Connecticut      ROY BLUNT, Missouri
BRIAN SCHATZ, Hawaii                 DAN SULLIVAN, Alaska
EDWARD MARKEY, Massachusetts         TODD YOUNG, Indiana
TAMMY BALDWIN, Wisconsin             RON JOHNSON, Wisconsin
TAMMY DUCKWORTH, Illinois            SHELLEY MOORE CAPITO, West 
JON TESTER, Montana                      Virginia
RAPHAEL WARNOCK, Georgia             RICK SCOTT, Florida
                                     CYNTHIA LUMMIS, Wyoming

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 7, 2021.................................     1
Statement of Senator Peters......................................     1
Statement of Senator Fischer.....................................     3
Statement of Senator Wicker......................................     4
    Letter dated December 3, 2021 to Hon. Joseph R. Biden, 
      President of the United States from Senators Wicker, Blunt, 
      Fischer, Moran, Sullivan, Blackburn, Capito, Lee, Young and 
      Lummis.....................................................     5
    Article dated November 26, 2021 from the Washington Post 
      entitled, ``Biden sees gains in the supply chain battle, 
      but the fight isn't over'' by David J. Lynch...............     7
    Article dated December 4, 2021 from Bloomberg entitled, 
      ``U.S. Ship Logjam Stretching Into Pacific Is Longer Than 
      Before'' by Brendan Murray.................................    11
Statement of Senator Blumenthal..................................    41
Statement of Senator Baldwin.....................................    44
Statement of Senator Tester......................................    46
Statement of Senator Scott.......................................    48
Statement of Senator Warnock.....................................    50
Statement of Senator Thune.......................................    52
Statement of Senator Klobuchar...................................    54
Statement of Senator Lummis......................................    56
Statement of Senator Cantwell....................................    58
    Article dated November 18, 2021 entitled, Spending on 
      infrastructure might not be sexy. 
      But it's even more important than you think.'' by Fareed 
      Zakaria....................................................    58
Statement of Senator Lee.........................................    61

                               Witnesses

John W. Butler, President and CEO, World Shipping Council........    14
    Prepared statement...........................................    16
Greg Regan, President, Transportation Trades Department, AFL-CIO.    21
    Prepared statement...........................................    23
Paul Doyle, Chief Executive Officer, Coastal Automotive..........    27
    Prepared statement...........................................    29
Norman Krug, CEO, Preferred Popcorn..............................    33
    Prepared statement...........................................    34

                                Appendix

Letter dated December 7, 2021 to Hon. Gary Peters and Hon. Deb 
  Fischer from Jessica Durrum, Ports Project Director, LAANE.....    65
Response to written questions submitted by Hon. Shelley Moore 
  Capito to John W. Butler.......................................    71

 
   UNCHARTED WATERS: CHALLENGES POSED BY OCEAN SHIPPING SUPPLY CHAINS

                              ----------                              


                       TUESDAY, DECEMBER 7, 2021

                               U.S. Senate,
 Subcommittee on Surface Transportation, Maritime, 
                                Freight, and Ports,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m., in 
room SR-253, Russell Senate Office Building, Hon. Gary Peters, 
Chairman of the Subcommittee, presiding.
    Present: Senators Peters [presiding], Cantwell, Klobuchar, 
Blumenthal, Baldwin, Tester, Warnock, Fischer, Wicker, Thune, 
Sullivan, Lee, Scott, and Lummis.

            OPENING STATEMENT OF HON. GARY PETERS, 
                   U.S. SENATOR FROM MICHIGAN

    Senator Peters. The Committee will come to order. First 
off, I would just like to thank our witnesses for joining us 
today for what is indeed a very important conversation. 
Throughout the past year, I have heard many times from my small 
businesses across all multiple industries about significant 
delays and problems that they are having with supply chains, 
specifically as how that relates to ocean shipping. And the 
bottom line is this, small businesses and families throughout 
Michigan, as well as all across the country, are experiencing 
higher prices and major delays associated with importing and 
exporting their products and their supplies.
    The ocean shipping network, which is responsible for 90 
percent of the global trade, has gone from being a system that 
was both fast and cost effective, to one plagued by delays and 
exorbitant pricing practices. Certainly many factors have 
contributed to this shift, but one major cause has been the 
global economies uneven recovery from the COVID-19 pandemic and 
the resulting supply chain collapses that have resulted from 
that. In short, our supply chains can be very efficient, but 
they are not resilient. This is an issue that I am committed to 
improving and addressing.
    And back in 2019, through my role as Senate Homeland 
Security and Governmental Affairs Committee, as Ranking Member 
at that time, I released a report on the rising cost of 
prescription drugs and one of the takeaways from that report 
was that in a major event such as the pandemic, our supply 
chains were not going to be prepared to deal with it. And sure 
enough, when the pandemic hit, we had major shortages of 
personal protection equipment and other kinds of medical 
supplies because of our overreliance on foreign suppliers. And 
right now, we are having an ongoing semiconductor chip shortage 
that is hurting our auto workers and our auto manufacturers.
    These shortages and disruptions pose not only a threat to 
our National Security, but also have devastating impacts on 
Michiganders, their families, businesses, and workers all 
across the country. For instance, automakers and their 
suppliers have consistently encountered skyrocketing penalties 
and fees charged by ocean shippers.
    Combined with heightened volatility around ocean shipping 
logistics, these conditions have actually diminished auto 
production. There are examples of ocean carriers not fulfilling 
their commitment to move the product of small and medium sized 
businesses. Retailers have had to pay 6 to 10 times the 
standard amount of shipping costs in order to get products to 
their stores and on their shelves, and even then, they have 
seen contract brokers decline to honor those agreed upon 
amounts. Members of the agriculture industry have seen their 
orders routinely get rolled, oftentimes only after learning 
they have already incurred substantial demurrage fees.
    And these are just a few of the many, many examples that I 
could talk about. I certainly applaud the Biden 
Administration's swift efforts to counter some of these 
challenges, whether it has been multiple Executive Orders 
empowering the Federal Maritime Commission working with major 
ports. President Biden has taken important and necessary steps 
to better secure our ocean shipping supply chains against 
vulnerabilities.
    We have already begun to see some positive results of these 
efforts. Just last week, the CEOs of major retailers told 
President Biden that supply chain conditions have begun to show 
some signs of improvement. Additionally, the bipartisan 
Infrastructure Investment and Jobs Act will help ease 
inflationary pressures and strengthen supply chains by making 
long overdue investments in our Nation's ports, airports, 
rails, and roads.
    And the Build Back Better Act will take many steps to lower 
costs for families. The Senate Commerce committee has also 
addressed this issue from multiple angles in recent months, 
from a freight mobility supply chain hearing that I chaired 
through this subcommittee in May, to a full committee hearing 
held in July that focused on implementing supply chain 
resiliency. The multifaceted challenges facing our supply 
chains are going to require, however, a holistic response from 
all sectors, including from ports, where I believe the Great 
Lakes ports can play a significant part in reducing backlogs. 
Ports in Michigan and across the Great Lakes St. Lawrence 
Seaway system are ready-made relief valves that are currently 
underutilized.
    And as we explore solutions to strengthen our shipping and 
supply chains, we must be sure to look to the Great Lakes, our 
Nation's--I would say our Nation's best coast, to help fill in 
the gaps when possible. Additionally, there are roles for both 
the Federal Government and private industry to play in 
alleviating our supply chain pressures and challenges.
    I look forward to hearing from our witnesses here today 
about the practices they have found to be successful in 
addressing supply chains challenges associated with ocean 
shipping and where gaps continue to plague logistics. I would 
now like to invite Ranking Member Fischer to share her opening 
remarks.

                STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. Thank you, Chairman Peters, and thank you 
for holding this hearing on ocean shipping bottlenecks as we 
are in the midst of the holiday season. It would be an 
understatement to say that the past year and a half has been 
rough for many Americans. In addition to the public health 
crisis, our supply chain and transportation networks have 
experienced immense strains throughout this pandemic.
    Grocery stores are struggling to keep shelves stocked again 
with the current freight bottlenecks across the country. While 
we hoped these disruptions would be a temporary problem, it is 
clear that we will have to deal with this crisis for the 
foreseeable future. Industry experts believe the supply chain 
disruptions could persist into late 2022 or even into 2023.
    Today's hearing will highlight the impacts the port backlog 
is having on American businesses, including Preferred Popcorn 
of Chapman, Nebraska. I am pleased to introduce my friend 
Norman Krug, who founded Preferred Popcorn in 1997. 50 percent 
of Preferred Popcorn's business is overseas, exporting to 70 
countries around the world. While he was able to export 1,500 
containers of popcorn last year, it should have been much more.
    Mr. Krug informed my office that over 900 of his containers 
were unable to be picked up for delivery. In other words, over 
one-third of Norm's export business was not shipped due to 
disruptions, and that is unacceptable. Norm will be able to 
provide this committee with more insight on how the supply 
chain disruptions are affecting the agriculture export 
industry, and I look forward to hearing his testimony.
    Unfortunately, Norm is not the only Nebraska business 
leader who has reached out to my office about the supply chain 
disruptions. I have heard from individuals who have had to send 
employees home because their supply was stuck in a warehouse on 
the West Coast, and they didn't have work for them. Another 
business informed me that they were having to start producing 
more products outside the United States facilities because the 
cost of exporting their products is becoming too expensive.
    Additionally, many Americans are concerned about being able 
to purchase goods ahead of this holiday season. Grocery stores 
across the country are struggling to maintain consistent 
inventory, and retail sector and analysts are already warning 
that Christmas orders will likely be delayed.
    I was joined by many of my Senate colleagues, including 
Chairman Peters, in supporting the Infrastructure Investment 
and Jobs Act, which was recently signed into law. While this 
legislation will provide historic investments into our Nation's 
freight system, this will not be a short term fix. I hope this 
hearing will provide Congress with a better understanding of 
how these disruptions impact American businesses.
    Additionally, I hope we can have a productive conversation 
with the witnesses to discuss how shippers and carriers can 
work to alleviate bottlenecks across this supply chain.
    Finally, I believe this committee should have additional 
hearings on this topic to understand how transportation 
operators and the Administration are addressing the supply 
chain challenges that we are discussing today. Thank you, Mr. 
Chairman.
    Senator Peters. Well, thank you. Ranking Member Fischer. We 
will now introduce our witnesses. Our first witness today----
    Senator Wicker. Mr. Chairman.
    Senator Peters. Oh, yes. Ranking Member Wicker.
    Senator Wicker. I have a brief opening statement.
    Senator Peters. Oh, sorry. Absolutely.

                STATEMENT OF HON. ROGER WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. Thank you, sir. Thank you very much. U.S. 
manufacturers, retailers, consumers, and workers face enormous 
challenges stemming from freight and supply chain congestion. 
The effect will become even more pronounced as Christmas is 
upon us, and families are trying to purchase gifts for their 
loved ones amid soaring prices.
    These transportation bottlenecks show no signs of letting 
up. High levels of freight congestion are expected well into 
next year. I have heard from many supply chain stakeholders 
about the complexity of moving such a vast amount of goods. And 
indeed, the situation is complex. We have all seen the images 
of ships waiting for miles offshore to unload their cargo. The 
lack of port terminal and warehouse space continues, as well as 
limitations on intermodal equipment and workforce disruptions.
    All of this makes it harder for truckers and railroads as 
they move--as they work to move containers. On top of all this, 
vaccine mandates could have a major impact on the 
transportation sector. The trucking industry estimates that the 
employer based vaccination mandate could result in the loss of 
up to 37 percent of drivers for covered companies. Mr. 
Chairman, we simply cannot absorb that level of disruption. It 
would be impossible to cover every aspect of the supply chain 
challenges in one sitting. But I appreciate Senator Peters and 
Senator Fischer for holding today's hearing.
    I also want to join Senator Fischer in urging the Committee 
to hold additional hearings on the supply chain with witnesses 
from the Administration and from land based transportation 
operators. Recently, I led a letter with several of my 
colleagues requesting a briefing from the Administration on how 
they plan to address the supply chain issues. I would like at 
this point, Mr. Chairman, to ask unanimous consent to insert 
that letter into the record at this point.
    Senator Peters. Without objection.
    [The information referred to follows:]

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    Senator Wicker. Thank you, sir. The Administration has made 
few attempts at solving the problems--has made a few attempts 
solving the problems, such as announcing back in early October 
that the ports of Los Angeles and Long Beach would be open 24/
7. But as the Washington Post reported just a week ago, that 
has yet to happen. And at this point, I ask unanimous consent 
to enter into the record that Washington Post story confirming 
that this has yet to happen.
    Senator Peters. Without objection, so entered.
    [The information referred to follows:]

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    Senator Wicker. Supply chains are still jammed up. In fact, 
just one port of Los Angeles terminal has experimented, just 
one, with 24/7 operations. But according to the port director, 
``we have had very few takers'' to this one experiment in one 
Port of Los Angeles. Very few takers for those extended hours 
because of a shortage of truckers and warehouse workers. They 
seemed reluctant to show up at 3 a.m. in the morning to load 
goods onto their trucks.
    The Administration--and this does really concern me. The 
Administration has claimed that the number of vessels waiting 
off ports of Los Angeles in Long Beach is decreasing. The only 
way they can make that claim is that they are using a new 
counting method requiring ships to queue up over 150 miles off 
the California coast. As of December 4th, over 96 ships were 
waiting for berths, and at this point, Mr. Chair, I ask 
unanimous consent to insert into the record a Bloomberg article 
in this regard.
    Senator Peters. Without objection, it will be entered.
    [The information referred to follows:]

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    Senator Wicker. And in other words, there are just as many 
ships still out there. Cooking the numbers is not a solution. 
And I am disappointed at the Administration for attempting to 
suggest that that has been a solution. I have been disappointed 
by the resistance to modernizing port and freight operations. 
For example, automated terminals and trucks or new technologies 
could improve efficiency and transparency within the supply 
chain.
    There are steps that should be taken to support the 
movement of goods. I welcome the President's signature on the 
bipartisan infrastructure bill. This includes much needed 
investments in traditional infrastructure and will result in 
long term benefits to the supply chain to help minimize future 
bottlenecks. Furthermore, Senators are working on legislative 
solutions. I recently introduced the Freight Act with Senators 
Capito, Moran, Young, Blackburn, Thune, and Sullivan.
    This legislation would spur improvements to our freight 
transportation system, streamline the certification process for 
truck drivers, address unlawful shipping conduct, and provide 
oversight of transportation operations. Senator Blackburn has 
legislation to incentivize a private sector led chassis pool in 
Memphis. As a major inland port, Memphis needs to increase its 
ability to operate more efficiently in our interconnected 
freight system, which stretches from coast to coast.
    And I want to applaud Senator Moran for leading a letter to 
the Federal Maritime Commission, which I joined. That letter 
encouraged the Commission to engage with the ports and swiftly 
address any unjust or unreasonable aspects of the new dwell 
fees. There are limits to what the Government can do.
    The challenges facing our supply chains are enormous, as I 
said complex, and involve numerous stakeholders around the 
globe. If we are not careful, a heavy Government hand could 
result in additional congestion rather than solutions. But 
thank you to the witnesses and thank you, Mr. Chairman, for 
your indulgence. I look forward to the testimony.
    Senator Peters. Well, thank you. Thank you, Ranking Member 
Wicker. Our first witness today is Mr. John Butler, who is the 
CEO of the World Shipping Council, also known as WSC. Mr. 
Butler is here representing more than 20 members of the liner 
shipping industry, who operate approximately 90 percent of the 
global liner ship capacity.
    Mr. Butler has many years of experience working with the 
shipping industry, including as a partner at Chevron Blackwell, 
where he served as outside counsel to the WSC. Welcome, Mr. 
Butler. You may proceed with your opening remarks.

        STATEMENT OF JOHN W. BUTLER, PRESIDENT AND CEO, 
                     WORLD SHIPPING COUNCIL

    Mr. Butler. Thank you, Chairman Peters, Ranking Member 
Fischer, members of the Subcommittee. I appreciate to test up 
the invitation to testify today. This hearing is appropriately 
titled. We truly are in uncharted waters. We have experienced 
localized port congestion in the past, but what we are seeing 
today is completely unprecedented. In the 60 plus years of 
containerized shipping, this is the first time that we have 
seen global supply chain congestion. And of course, it took a 
global pandemic to put us in this spot. I would like to leave 
you with four points today.
    The first one I just mentioned, which is that the supply 
chain congestion that we are experiencing is global and it is 
triggered by COVID. The second point that I would like to make 
is that ocean carriers have put every ship and every container 
that they can buy, charter, or repair into service. The 
problems are not caused by a lack of ships or containers. We 
have plenty of those.
    The problem is that we get--when we get to port, we can't 
get in. And Senator Wicker made reference to the many, many 
ships, for example, waiting to come to berth off of Southern 
California. There is too much cargo coming in because of this 
import surge for the landside infrastructure to process. And 
that is the terminals, that is the railroads, that is the 
trucks, that is the warehouses all the way out to the end 
consumer. And a lot of that has been further complicated by the 
shift to e-commerce.
    That part of the supply chain is handling things in ways 
that are different than the models that we had before. And as a 
result of those problems and the fact that the entire supply 
chain is saturated, what we are seeing in too many instances is 
customers are using marine terminals and containers and chassis 
as temporary storage facilities. And that means that cargo is 
sitting on the terminals. It means that empty equipment is not 
coming back to be given to the next customer.
    And all of that feeds a lack of velocity that makes it 
difficult to serve everyone. And that is really just the very 
definition of congestion. The third point I would make like to 
make is that even though we are facing very real supply chain 
challenges, and the problems that you have both raised in your 
opening Statements are real, there is no question about it, and 
we are absolutely conscious of that, but the fact is, at the 
same time, we are moving a record amount of cargo and the 
system has been moving a record amount of cargo for the last 18 
months.
    And you have my commitment that we will continue to do 
that. And fourth and finally, the last thing I would like to 
speak to is the Government policy response. And frankly, as 
ocean carriers, we are getting mixed messages on this front. On 
the one hand, for example, the Administration is pressing us to 
get our customers to come to the ports and pick up their cargo 
so that we can get it out of the way and move additional cargo. 
At the same time, we have a House bill and an expected Senate 
bill that would restrict the ability to use detention and 
demurrage incentives to get that job done.
    As another example of the mixed messages, we are being told 
by the Administration that we must put empty containers on 
outbound ships in order to clear the ports. Again at the same 
time, the proposed legislation in both chambers would say that 
we have to load all export boxes before we can load empties. So 
we are getting mixed messages on that front as well. One of the 
things that I am not sure everyone fully appreciates is that we 
don't run separate import and export ships. It is a single 
continuous loop with the same ships and the same facilities 
serving everyone.
    And so when the system becomes overloaded, it affects both 
importers and exporters, even though the main surge is coming 
from the import side. When that is in balance, we can manage 
it. When it is not, it becomes harder to do. The last thing I 
would say, where I would like to close is to say, and Senator 
Wicker made reference to this, there is no legislative silver 
bullet on this, but it is possible to make the situation worse. 
And there are some proposals in legislation that is kicking 
around, frankly, that would take away some of the tools we need 
and put the Federal Government in the middle of running a very 
complex network.
    We would urge you to move very cautiously in taking those 
steps to make sure that we don't end up with a situation that 
is worse than what we have now. Thank you very much for the 
time.
    [The prepared statement of Mr. Butler follows:]

       Prepared Statement of John W. Butler, President and CEO, 
                         World Shipping Council
1. Introduction: The World Shipping Council and the Liner Shipping 
        Industry
    Chairman Peters, Ranking Member Fischer, and Members of the 
Subcommittee thank you for the invitation to testify today. My name is 
John Butler. I am President and CEO of the World Shipping Council\1\ 
(``WSC'' or the ``Council''). WSC is a non-profit global trade 
association whose goal is to provide a coordinated voice for the liner 
shipping industry in its work with policymakers, the public, and other 
industry groups with an interest in international transportation.
    WSC members comprise an industry that has invested hundreds of 
billions of dollars in the vessels, equipment, and marine terminals 
that are in worldwide operation today. Approximately 1,200 ocean-going 
liner vessels, mostly containerships, make more than 28,000 calls at 
ports in the United States during a given year--almost 80 vessel calls 
a day. This industry provides American importers and exporters with 
door-to-door delivery service for almost any commodity to and from 
roughly 190 countries. The ocean common carrier community is committed 
to serving the international trade of the United States, and the record 
volume of import and export cargo that we continue to move is the 
evidence of that commitment.
2. Record U.S. Consumer Demand and COVID-19 Disruptions Have Strained 
        Every Link in the Supply Chain
    The U.S. is experiencing unprecedented import cargo demand due to 
pandemic-altered consumer spending patterns and COVID disruption. U.S. 
consumers made a dramatic shift in spending from services to goods, 
with many of these goods purchased on e-commerce platforms. What was 
perceived as a temporary consumer shift during the beginning of the 
pandemic to e-commerce is increasingly appearing to be a permanent 
shift. This behavioral change has resulted in record import volumes, as 
the majority of goods U.S. consumers, businesses and importers are 
ordering are made overseas, or assembled in the U.S. with components 
from other countries. U.S. import demand is further complicated by 
COVID disruptions when factories, port terminals and other operations 
throughout the world are sporadically shut down in response to 
infection outbreaks, putting pressure not just on ocean carriers, but 
on every link in the complex global and North American supply chain 
from both a production perspective and a transportation perspective.
    Ocean carriers responded to the U.S. consumer import demand by 
deploying every container ship available. But when these ships and 
containers reach the entrance to U.S. ports, a shortage of landside 
capacity to process the cargo--in marine terminals, trucking, chassis, 
warehouses, distribution centers, and rail cars--has created 
bottlenecks. This video is illustrative of the challenge: https://
youtu.be/_56qEFojS1I The most visible bottleneck is the record number 
of ships backed up off the ports of Los Angeles and Long Beach. On 
November 16, a record 86 container ships were at anchor or loitering 
offshore waiting for a berth assignment. For reference, from 2018 to 
2019, the number of ships at anchor or loitering was typically zero--
arriving ships proceeded directly into port to offload cargo.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    What is the primary cause of this congestion? Simply put, U.S. 
landside capacity cannot keep up with the volume of import cargo that 
American businesses and consumers are ordering from overseas. Because 
cargo owners' warehouses are full, and there is strong competition for 
trucking and rail services to pick up and process the cargo, in some 
cases cargo owners are effectively using the marine terminals and 
containers as temporary warehouses. This practice is consuming precious 
space and limiting the terminals' ability to operate at full capacity. 
It is also taking up the space where returned empty containers would 
typically be stored, so in some cases marine terminals are unable to 
accept empty container returns from truckers unless a loaded import 
container is removed in the same transaction in order to create space.
    The inefficiencies that these conditions generate are made worse by 
the fact that both loaded and empty containers are too often stored 
outside of the marine terminals on the same truck chassis that are 
needed to move imports off of the terminals and to move export 
containers onto the terminals to be loaded on outbound ships. Each 
inefficient process affects every other connected process, and each 
individual problem compounds problems in the rest of the supply chain.
3. What are Ocean Carriers doing to help alleviate this congestion?
    Although in most cases ocean carriers' contractual obligation is 
completed once they deliver merchant haulage cargo to the marine 
terminal, ocean carriers are working with the Administration's Supply 
Chain Disruption Task Force, Port Authorities, and their customers 
(cargo owners) to encourage them to pick up their cargo as soon as 
possible. This collaborative effort has resulted in a decline in long-
dwelling containers in Los Angeles and Long Beach from 62,000 to 
39,000--a 37 percent reduction.\1\ One WSC member company has even 
taken the unique step of instituting an ``Early Container Pickup 
Incentive Program'' which offers importers up to $200 per container if 
they pick up their container from Los Angeles and Long Beach within 
eight days of delivery, in an effort to improve cargo fluidity.\2\
---------------------------------------------------------------------------
    \1\ See Ports of LA, Long Beach, delay container fee for 4th time--
Press Telegram
    \2\ See https://www.cmacgm-group.com/en/news-media/cma-cgm-
implements-incentive-pro
gram-to-ease-congestion-at-the-ports-of-Los-Angeles-and-Long-Beach
---------------------------------------------------------------------------
    Ocean carriers are also working where possible to operate dedicated 
empty container evacuation ships--so-called ``sweeper ships''--which 
have picked up some 20,000 empty containers, freeing up both terminal 
space and chassis, which provides more chassis availability for 
truckers to retrieve laden containers from the marine terminals and to 
deliver U.S. export containers to the ports for loading on outbound 
ships.\3\
---------------------------------------------------------------------------
    \3\ See Empty Containers Pile Up at Port of Los Angeles as Ocean 
Liners Add `Sweeper' Ships to Clear Backlog (gcaptain.com)
---------------------------------------------------------------------------
4. When Ocean Carriers Return Empty Containers to Alleviate Port 
        Congestion and free chassis, are these ``empties'' displacing 
        U.S. 
        Agricultural and other exports?
    Within the category of agricultural exports that move in 
containers, there has been an assertion that more containers should be 
set aside for agricultural exports. Although it is understandable that 
all shippers would prefer to have a favored position in the market, it 
is not possible to arbitrarily favor one group of customers without 
disrupting the functioning of the entire system, to the detriment of 
all. When overall U.S. import volume surges and overall U.S. export 
volume remains relatively flat--as has been the case since mid-2020--
this results in an increase of empty containers in the U.S. that need 
to be repositioned to overseas locations to be filled with U.S. import 
cargo.
    Without that repositioning of empty containers to the origin 
countries from which U.S. importers purchase goods, U.S. importers 
would not be able to meet the demands of U.S. businesses and consumers 
that purchase those imported products. Equally important, if these 
containers are allowed to pile up in ports, the resulting congestion 
slows down the system for everyone--importers and exporters. The 
containerized ocean transportation system is not two disconnected 
import and export systems. It is one system comprised of a single 
interconnected network employing the same ships and containers in 
continuous service loops, and that network must be managed to keep all 
types of cargo moving. Everybody's cargo moves, or nobody's cargo 
moves.
    U.S. agricultural exporters face the same land transportation and 
equipment challenges as importers as they work to move their export 
cargo in the opposite direction, as well as the additional challenge of 
synching their export loads up with the ships they are booked on. This 
combination of challenges has created frustration among exporters 
because it is difficult to match inland transportation arrangements 
with ship schedules that are themselves uncertain because of port 
congestion. This has resulted in problems with what is termed the 
``earliest return date'' (ERD) for outbound cargo--the window during 
which the marine terminal will accept cargo for a particular ship. If 
the cargo comes into the terminal too early and the ship does not 
arrive, then that cargo contributes to congestion. If the cargo comes 
in too late, it may miss the ship. The Federal Maritime Commission 
(FMC) recently announced it is addressing this issue using a ``Supply 
Chain Innovation Team'' composed of representatives from ocean carriers 
and marine terminal operators to address exporter concerns and bring 
certainty and predictability to the ERD process.\4\
---------------------------------------------------------------------------
    \4\ See New Supply Chain Initiatives Announced at FMC Meeting--
Federal Maritime Commission--Federal Maritime Commission
---------------------------------------------------------------------------
    While there have been allegations that exporters of agricultural 
products have been disproportionately affected, in fact all exporters, 
both agricultural and non-agricultural, have been affected by the 
bottlenecks caused by the pandemic induced supply chain congestion. 
Notwithstanding the congestion, however, U.S. agricultural exports are 
moving at high and in some cases record levels.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    By way of context, containerized cargo is a relatively small 
percentage of total agricultural exports. Exports to Canada and Mexico 
move almost entirely by land transportation. For agricultural exports 
moving by sea, the majority are exported on bulk freighters.
    However, U.S. containerized agricultural exports are also moving at 
pre-pandemic and in many cases record levels. According to the Foreign 
Trade Division of the U.S. Census Bureau, containerized export tonnage 
of soybeans increased almost twenty-five percent in the October 2020-
March 2021 period, reaching the highest levels ever. Additionally, 
containerized exports of Tree Nuts, Frozen Beef, and Dairy were at 
record levels and Pork, Cotton and Forage (Hay & Clover) were at near-
record levels.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    U.S. Department of Agriculture Forecasts project exports for Fiscal 
Year 2021 at $173.5 billion, an increase of $9.5 billion from the May 
2021 projection.\5\ The USDA forecast for 2022 continues this upward 
trend rising $4.0 billion to $177.5 billion, with soybeans increasing 
by $3.3 billion from 2021, to a record $32.3 billion, cotton forecast 
up $500 million to $6.8 billion, and livestock, poultry and dairy 
exports up $400 million to $36.8 billion, primarily due to growth in 
dairy and poultry products. Overall agricultural exports to China are 
forecast at $39 billion--an increase of $2 billion from FY 2021.
---------------------------------------------------------------------------
    \5\ See United States Department of Agriculture, Economic Research 
Service, Outlook for U.S. Agricultural Trade: August 2021, available at 
USDA ERS--Outlook for U.S. Agricultural Trade

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

5. The Ocean Carrier Industry is not highly concentrated; Vessel 
        Sharing Agreements (VSAs) enable carriers to offer a broader 
        suite of services and use vessels more efficiently
    Recently there have been assertions that the ocean carrier industry 
is highly concentrated and that price increases caused by the ongoing 
COVID-19 disruption might not be market driven. In fact, the opposite 
is true. Both the FMC and European Union competition authorities have 
recently reviewed pandemic-driven price increases, with both agencies 
concluding that they have not received any evidence or identified any 
anticompetitive behavior in relation to price increases.\6\ In fact, 
these competition authorities have concluded that the pandemic has 
presented operators across the supply chain with exceptional 
challenges, that the causes of the prices hikes and of the current 
level of service quality are multifaceted, not necessarily the same 
across the entire world, and are not attributable to one determining 
factor or one category of operators.
---------------------------------------------------------------------------
    \6\ See International Shipping Competition Agencies Meet--Federal 
Maritime Commission--Federal Maritime Commission (fmc.gov); Increase in 
maritime freight transport costs (europa.eu); Answer for question E-
004399/21 (europa.eu)
---------------------------------------------------------------------------
    The fact is that prices in the ocean shipping markets are driven by 
supply and demand. Demand for ocean transportation services into the 
United States is at a record, sustained level. Despite the fact that 
ocean carriers have deployed all available ships and equipment, the 
landside bottlenecks discussed above are preventing those ships from 
efficiently unloading import cargo and loading outbound U.S. exports. 
In this way, the operational and infrastructure challenges that begin 
at the ports and run inland all the way to the final destination of the 
imported goods are reducing the effective capacity of the ocean vessel 
fleet. Ships forced to wait to get into port are not moving cargo and 
satisfying demand.
    There has also been some misunderstanding about vessel sharing 
agreements, or VSAs. These longstanding arrangements are one of the 
most important structural features of the liner shipping industry. VSAs 
allow carriers to share vessel capacity on each others' ships, causing 
ships to be used more efficiently and resulting in more service 
offerings to more ports by more carriers than would otherwise be the 
case. These are purely operational arrangements, however, and each 
carrier continues to individually price its services.
    VSAs are recognized worldwide by regulators as increasing service 
levels and operational efficiency, to the benefit of all supply chain 
users. In the United States, VSAs are filed with the FMC and are 
subject to strict monitoring to ensure that they remain pro-
competitive. In the conditions that we are currently experiencing, VSAs 
provide a mechanism to ensure that every slot on every vessel is used 
to move loaded containers or to reposition equipment for the next use--
efficiencies that are critical to getting the best performance from an 
ocean transportation system that is constrained by inland congestion.
6. The Federal Maritime Commission (FMC) has the Necessary Authority 
        and is Actively Regulating the U.S. International 
        Transportation 
        System
    In challenging trade conditions, it is not uncommon for there to be 
complaints about marketplace behavior in all transportation modes. For 
liner shipping, if there are problems that run afoul of the Shipping 
Act, the FMC punishes unreasonable behavior. The FMC is actively 
investigating allegations of Shipping Act violations through its ``Fact 
Finding 29, International Ocean Transport Supply Chain Engagement'' in 
order to address any abuses and to identify operational and regulatory 
solutions to cargo delivery system challenges related to COVID-19.\7\
---------------------------------------------------------------------------
    \7\ See www.fmc.gov/fact-finding-29
---------------------------------------------------------------------------
    The FMC also recently completed an audit of the top nine ocean 
carriers by market share for compliance with the Commission's recently 
promulgated ``Interpretive Rule on Demurrage and Detention Under the 
Shipping Act'' \8\ and subsequently urged ocean carriers to adopt best 
practices for detention and demurrage.\9\ Detention and demurrage 
charges are used to ensure that shippers expeditiously pick up their 
cargo and promptly return empty containers so the equipment can be used 
by the next customer. This keeps the supply chain moving and enhances 
service efficiency, reliability and predictability. The Commission has 
been especially focused on detention and demurrage charges recently, 
both because these mechanisms are necessary to maintaining the free 
flow of cargo, and also because cargo volumes and related congestion 
have raised questions about how charges are applied in some cases.
---------------------------------------------------------------------------
    \8\ Federal Maritime Commission, Interpretative Rule on Demurrage 
and Detention Under the Shipping Act, 85 Fed. Reg. 29638, at 29647 (May 
18, 2020).
    \9\ FMC VOCC Audit Team Urges Carriers to Adopt Detention & 
Demurrage Best Practices--Federal Maritime Commission--Federal Maritime 
Commission
---------------------------------------------------------------------------
    The FMC's active engagement and oversight demonstrate that the FMC 
is uniquely positioned and has ample authority to address these issues. 
The Commission has repeatedly confirmed that questions about detention 
and demurrage are inherently fact-specific, and adjudication of any 
complaints is the sort of task to which administrative agencies, with 
their adjudicative and investigatory resources, are well suited to 
handle. To date, there have been very few formal complaints filed with 
the FMC, and the Commission has the authority to undertake enforcement 
actions on its own initiative if it finds cause to do so.
7. Conclusion
    Every sector of the global supply chain remains under tremendous 
stress, and that stress is more acute in the United States than 
anywhere else on the globe. That is the case because of the surge in 
U.S. import cargo. The record-level import surge has clogged overseas 
ports as well as some of this Nation's ports, the inland transportation 
system, and warehouses and distribution centers. Those landside back-
ups mean that we have ports where ships are waiting for long periods of 
time to unload and load cargo, thus reducing the effective capacity of 
the world's containership fleet. The import surge has also exacerbated 
an existing imbalance between import and export volumes, which 
increases the need to reposition empty containers in order to meet the 
continuing demand from U.S. importers. If those empty containers pile 
up in marine terminals or are left sitting on chassis outside the 
terminals, that slows down the flow of cargo for both importers and 
exporters. All of these factors build upon one another to cause the 
situation that we find ourselves in today.
    Everyone experiencing these unprecedented conditions has been 
impacted by the business challenges, costs, and delays resulting from 
the pandemic and its cargo demand surge. As testimony from all 
witnesses today will show, this is not a situation caused by the 
failure of any one part of the supply chain, and no part of the system 
has been untouched. To the contrary, all parts of the chain are 
affected, and all parties are working overtime to keep cargo moving. 
And while there are obviously disruptions, costs, and delays, the fact 
is that the international ocean and U.S. intermodal transportation 
system is moving more cargo right now than at any time in history. The 
system is bent, but it is not broken.
    The supply chain challenges that we face require logistical and 
management solutions, as well as a return to a more normal volume and 
balance of import and export cargo, which will happen over time. 
Necessary solutions are being provided through the common purpose and 
efforts of many supply chain actors. These are operational and 
commercial challenges that must be addressed first and foremost by the 
commercial service providers and customers involved, with a steady 
regulatory backstop provided by the FMC. The ocean common carrier 
community is committed to serving the international trade of the United 
States, and the record volume of cargo that we continue to move is the 
evidence of that commitment.

    Senator Peters. Well, thank you, Mr. Butler. Our second 
witness today is Mr. Greg Regan, President of the 
Transportation Trades Department at the AFL-CIO, also known as 
TTD. In that role, Mr. Regan leads and oversees the daily 
operation of a labor organization consisting of 33 unions that 
together represent workers in all areas of transportation.
    Mr. Regan also serves as TTD's spokesperson and chief 
strategist, working with elected leaders on both sides of the 
aisle to fight for long term investments in our transportation 
system and to ensure that jobs in the sector are both safe and 
secure. Welcome to the hearing. You may proceed with your 
opening Statements.

   STATEMENT OF GREG REGAN, PRESIDENT, TRANSPORTATION TRADES 
                      DEPARTMENT, AFL-CIO

    Mr. Regan. Thanks, I am a little un-used to an unmute 
button. It is nice to see a physical one in here. Well, thank 
you, Chairman Peters and Ranking Member Fischer for inviting me 
to discuss the challenges facing America's supply chain and 
freight network.
    The employees represented by TTD's 33 affiliated unions are 
on the front lines of these challenges, including workers 
directly engaged in the freight transportation of railroads, 
ports, and in trucking, as well as those who work in industries 
like manufacturing that are grappling with the rippling effects 
of supply chain choke points and delays.
    Ultimately, there is no lone actor, decision, or policy, 
that is responsible for this situation. However, we must 
acknowledge the long term structural issues going back 40 years 
that must be addressed so that we do not find ourselves in the 
same place when the next crisis occurs. The historic rise in 
cargo volume has stressed every component of the freight 
transportation network frequently to the breaking point.
    And this includes workers, many of whom have been pushed 
past the brink of exhaustion. I must be perfectly clear on one 
point. Workers are not the cause of this crisis, but they are 
working around the clock to fix it. Putting any amount of blame 
for this crisis on the shoulders of hardworking Americans who 
drive our economy through thick and thin is unacceptable.
    This is particularly true when such scapegoating is done as 
an excuse to undermine collective bargaining rights or further 
deteriorate their safety or working conditions. Instead, let's 
acknowledge that shortsighted industry practices and decades 
long underinvestment supply chain infrastructure have rendered 
our supply chain incapable of meeting the current soaring 
demand for goods. Unfortunately, while the drastic spike in 
demand was unpredictable, the results were in many ways 
inevitable.
    For example, the lack of elasticity among freight railroads 
has worsened the supply chain challenges. For years, Class I 
railroads have pursued an operating model known as precision 
scheduled railroading, or PSR. Through the PSR model, the 
railroads all but ensured that their operations would not be 
able to rapidly respond to economic shocks or rapid changes in 
the flow of traffic like those we are now seeing.
    The real world impact of the freight railroads business 
model is that they slash a staggering 20 percent of their 
workforce in the 5-years prior to the pandemic. When greater 
and more reliable freight service was obviously needed, the 
railroads only dug in further to their skeleton crew operations 
and continually prioritize profits over people. Some claim a 
shortage of employees in the supply chain as a major factor in 
this crisis. Such claims imply that the workers needed to 
perform a job do not exist in our current market.
    This is simply not true. The truth is that many employers 
fail to provide the incentives, including good wages, working 
conditions, and benefits that will attract and retain skilled 
workers. In the trucking industry for example, blatant worker 
misclassification is artificially suppressed wages and made 
working conditions untenable. This is also true in rail, where 
our union's report mid-career employees walking away from 
formerly good jobs and secure retirements due to eroding 
workplace conditions.
    We are unequivocal, PSR and other industry practices have 
resulted in a network that was less prepared for this crisis. 
There are no overnight fixes to our supply chain challenges. 
When the scope of disruption became clear, the Administration 
established a whole of Government response that paved the way 
for nimble and integrated collaboration and planning. The Biden 
Administration's decisive actions are already yielding positive 
results.
    Just since the beginning of November, we have seen a 41 
percent reduction in containers sitting on our docks for over 9 
days. While there have been misleading, if not outright 
falsified claims of empty store shelves, the on-shelf 
availability of goods in grocery and drugstores has in fact 
effectively returned to pre-pandemic levels.
    Ocean shipping costs remain high, but we are now--but they 
are now showing signs of meaningful decrease. Decisive and 
focused actions have made a difference here. Policymakers, 
including those in Congress, must, however, address the 
systemic problems that put us in the situation in the first 
place.
    In doing so, we call on you to work closely with supply 
chain employees and their union representatives across the 
Nation to develop real, long term solutions. Congress and 
economic regulators must consider and address the impacts of 
drastic reduction in the rail workforce and degradation and 
service quality have had on supply chain disruptions, let alone 
whether current railroad operations are consistent with our 
common--statutory common carrier obligations.
    I would like to thank Senator Baldwin for introducing an 
amendment to the NDAA, which would give the Surface 
Transportation Board more tools and authority to address bad 
behavior by the railroads. Solutions must also include robust 
and well directed investments in our Nation's freight 
infrastructure. To that end, we strongly applaud the enactment 
of the IIJA, the Infrastructure Act, which provides $2.2 
billion for the Port Infrastructure Development Program, 
offering a lifeline to the almost half of all U.S. ports who 
state the better rail access could increase their throughput 
capacity by over 25 percent.
    Historic investments in the rail network and in multi-modal 
development will similarly act to prevent or blunt future 
supply chain challenges. Congress should also consider novel 
approaches to supply chain challenges that would create jobs 
and economic activity. For example, the expansion of waterborne 
transportation alternatives to our marine highways may ease 
supply chain bottlenecks, particularly at major ports.
    And finally, we once again call on you to reject ill-
conceived efforts to manipulate the crisis to attack workers 
themselves. The pursuit of a more efficient supply chain cannot 
be an excuse to eliminate regulatory safeguards or attack 
collective bargaining rights. Thank you again for the 
opportunity, and I look forward to your questions.
    [The prepared statement of Mr. Regan follows:]

  Prepared Statement of Greg Regan, President, Transportation Trades 
                          Department, AFL-CIO
    On behalf of the Transportation Trades Department, AFL-CIO (TTD) 
and our 33 affiliated unions, I first want to thank Chairman Peters and 
Ranking Member Fischer for inviting me to testify before the 
Subcommittee today on the challenges facing our supply chain and 
freight network. The employees represented by TTD-affiliated unions are 
on the front lines of these challenges--including the workers directly 
engaged in freight transportation at railroads and ports, and who work 
in industries that are struggling with the down-economy effects of 
chokepoints and delays.
The State of the Supply Chain
    The fact that these disruptions have resulted in enormous economic, 
financial, and environmental costs is clear. Despite no shortage of 
finger-pointing and over-simplifying, we must acknowledge that the root 
cause of our supply chain bottlenecks is multivariate. Principally, we 
know that year to date, overall cargo volume through the Port of LA 
Long Beach, for example, has increased by a massive 26 percent compared 
to 2020, driven in part by a sharp uptick in consumer demand for 
durable goods.\1\ This remarkable rise in cargo volumes has stressed 
every component of the freight transportation network, frequently to 
the breaking point. By way of example, earlier this year, Union Pacific 
found itself unable to clear backlogs, and stopped running desperately 
needed trains between the West Coast and its Global IV gateway in 
Chicago. Burlington Northern Santa Fe similarly began rationing service 
over its LA-LB to Chicago routes. Still, today, dozens of cargo ships 
remain anchored off the port, currently unable to dock due to lack of 
capacity at port terminals. Terminal operators at both LA-LB and the 
Port of Savannah are repurposing additional facilities to store 
overflow containers, as storage at the port has been exhausted.
---------------------------------------------------------------------------
    \1\ https://www.portoflosangeles.org/business/statistics/container-
statistics
    https://www.clevelandfed.org/en/newsroom-and-events/publications/
economic-commentary/2021-economic-commentaries/ec-202116-durable-goods-
spending-during-covid19-pandemic.aspx
---------------------------------------------------------------------------
    It is not surprising that this historic increase in cargo volumes 
and demand would result in supply chain challenges. There are few if 
any industries that would be positioned to handle this level of new 
demand without difficulties. Ultimately, there is no actor, decision, 
or policy that is individually responsible for the scenario the Nation 
finds itself in. However, as we seek to move past these supply chain 
bottlenecks, Congress and the administration must acknowledge and 
examine conditions that increased the severity of the crisis, alongside 
efforts to alleviate the backlogs of today and tomorrow.
    I must also take this opportunity to be perfectly clear on one 
point. There are many in Congress and in the industries our members 
serve who are cynically using this opportunity to scapegoat hard-
working Americans, undermine their collective bargaining rights, and 
further deteriorate safety and working conditions for supply chain 
employees. Putting any amount of blame for this crisis on the shoulders 
of your constituents--the American workers who drive this economy 
through thick and thin--is unacceptable. We reject this misguided 
placement of blame out of hand and urge all policy makers to do the 
same.
A Decisive Response
    As discussed below, many of the potential remedies to the supply 
chain challenges of today and tomorrow will require long-term 
structural changes to how we operate the supply chain network, prepare 
for shocks to the system, and invest in freight infrastructure. 
However, since the crisis began the Biden Administration, through 
thoughtful and sustained engagement with stakeholders, has taken 
decisive actions that are having demonstrable positive results.
    When the scope of disruptions became clear, the administration 
established a whole-of-government Supply Chain Disruptions Task Force 
that has paved the way for nimble and integrated collaboration and 
planning. At the Port of Los Angeles/Long Beach, this included working 
with the private sector to begin 24-hour port operations, and the 
waiving of fees assessed to truck drivers when they arrive at night or 
on weekends, incentivizing greater throughput at traditionally slower 
times. Through its Action Plan for America's Ports and Waterways, the 
administration leveraged existing Federal investments, including 
allowing the Port of Savannah to flex Port Infrastructure Development 
Program funding to convert existing inland facilities into five pop-up 
container yards to hold overflow containers and reduce congestion at 
the port. And the Department of Transportation has renewed targeted 
hours of service flexibility for drivers with critical cargoes.
    There is no overnight fix that will make these issues disappear. 
However, since just the beginning of November, we've seen a 41 percent 
reduction in containers sitting on docks for over 9 days. While 
misleading if not outright falsified claims of empty store shelves and 
unprecedented product scarcity that would leave Americans without 
turkey on Thanksgiving have abounded, the on-shelf availability of 
goods sold at grocery and drug stores has effectively returned to pre-
pandemic levels.\2\ Ocean shipping costs remain high, but are now 
showing signs of meaningful decrease. These disruptions and their 
impact are not over, and the continued effects of the COVID-19 pandemic 
and other variables will remain a challenge. However, we applaud the 
administration for its approach to the crisis which has played a major 
role in our path to recovery.
---------------------------------------------------------------------------
    \2\ https://indices.iriworldwide.com/covid19/?i=5
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Unexpected Conditions, Inevitable Results
    The supply chain crisis has put a spotlight on components of the 
freight network that were particularly ill-prepared for the demand 
shock of the last year. For years the Class I railroads have pursued an 
operating model known as precision scheduled railroading, or PSR. PSR 
operations seek to lower operating ratios--a railroad's expenses as a 
percentage of revenue--to appease shareholders and increase returns. 
Fundamentally, a PSR railroad abandons the traditional operating model 
of a service industry that responds to the variable demand of its 
customers. Instead, it operates on a regimented schedule more akin to 
passenger rail. After eliminating on-demand response, flexibility in 
the construction of train consists, and the availability of service, 
railroads then jettison capital assets like locomotives and cars and 
slash jobs across the network.
    In doing so, Class I railroads all but ensured their operations 
would not be able to rapidly respond to economic shocks or rapid 
changes in the flow of traffic, like those the Nation is currently 
experiencing. This is evident in the hollowing out of the industry that 
has taken place in recent years. During the five-year period between 
2014 and 2019, Class I railroads eliminated a staggering 20 percent of 
their overall workforce. I might add that many of these freight rail 
employees have specialized skills and training--many require 
certification--that are not easily replicated in the broad U.S. 
workforce.
    Throughout the pandemic, employment dropped further as freight 
volumes collapsed. However, freight rail has enjoyed a ``v-shaped'' 
recovery--carloads have nearly returned to 2019 levels. Yet, Class I 
carriers today employ fewer employees than they did pre-pandemic, and 
amid the supply chain crisis, employment continued to decrease in 
August and September of this year. Further, in the first three quarters 
of FYI '21, an analysis of four Class I railroads shows a shocking -
19.5 percent decrease in employee service hours compared to FY '19, 
while handling only 3.2 percent fewer carloads. Now, after years of 
capricious job cuts, yo-yo-ing employees back and forth between active 
and furloughed status, and a degradation of the work environment, 
railroads find themselves experiencing service issues due to inadequate 
staffing. In a recent letter to Norfolk Southern, Surface 
Transportation Board Chairman Marty Oberman remarked that ``Coinciding 
with the marked deterioration in NSR's performance metrics, the board 
has received an increasing number of complaints from NSR's customers 
about poor performance'' and requested ``a review of the current state 
of NSR's network, and your assessment of what factors are affecting 
NSR's ability to achieve past levels of fluidity and consistent 
service, and in particular the impact on customer service of previous 
headcount reductions for train, yard and maintenance employees.'' 
Unsurprisingly, NS and other carriers take no responsibility for their 
role in today's skeleton crew workforce. We are unequivocal--these 
reductions have resulted in a rail network that is less prepared, less 
capable, and less safe.
    Not only do railroads lack the personnel to respond nimbly to the 
supply chain crisis, but they frequently also lack equipment. In its 
2020 financial disclosures, Union Pacific stated that it had reduced 
its active locomotive fleet by 24 percent and only managed to keep 58 
percent of its remaining locomotives in service. Other carriers have 
similarly eliminated equipment, and TTD unions report that equipment 
not in use is often not kept in a state of good repair, meaning that it 
cannot quickly be put into service when needed. As a result, when a 
surge of force was required to resolve congestion issues, railroads 
were left without the institutional flexibility required to do so 
quickly.
    While drastic spikes in demand were always likely to result in 
significant operational challenges, the lack of elasticity among 
freight railroads has worsened and extended supply chain challenges. 
Today, while rail carriers will cite that some metrics have improved, 
many of these improvements are recent--for example, rail dwell times at 
West Coast ports didn't begin a sustained decrease until August.\3\ 
Further, despite these efforts intermodal rail volumes have actually 
decreased year over year, with U.S. intermodal volumes for September 
6.7 percent lower than September 2020, and 2.8 percent lower than 
October 2020. as shippers look elsewhere to move cargo.\4\ It is clear 
that challenges persist, and have persisted longer than they needed to.
---------------------------------------------------------------------------
    \3\ https://www.pmsaship.com/wp-content/uploads/2021/10/West-Coast-
Trade-Report-October-2021.pdf
    \4\ https://www.freightwaves.com/news/us-intermodal-rail-traffic-
softens-in-september-on-supply-chain-woes
---------------------------------------------------------------------------
Good Jobs Attract Strong Workforces
    Today, Class I's are acknowledging the need to hire additional 
employees to meet demand, and we strongly encourage them to do so. 
However, in a tight labor market,\5\ rail employers are pointing to so-
called ``labor shortages'' as an explanation for ongoing difficulties 
in staffing. TTD rejects any characterization that the rail industry is 
suddenly experiencing a shortage beyond its control, given the 
calculated elimination of tens of thousands of jobs over the past 
decade. If the existing rail workforce is inadequate to handle current 
freight demand, and we believe that it is, this is the result of 
intentional decision-making by Class I carriers as they've embraced the 
PSR model. They must be held accountable during this supply chain 
crisis for decisions that have contracted our freight rail capacity and 
left our economy in a worse state as a result.
---------------------------------------------------------------------------
    \5\ https://fred.stlouisfed.org/graph/?g=E9Bs
---------------------------------------------------------------------------
    Not only have carriers drastically cut headcount, but they have 
also fostered workplace conditions that have degraded the quality of 
railroad employment. TTD unions have increasingly reported on the 
phenomenon of mid-career rail employees resigning from well-paying jobs 
and giving up stable retirements due to an unwillingness to continue to 
work in unsafe conditions where the perpetual threat of furlough looms 
large. According to data provided by the Railroad Retirement Board, 
even when adjusting for retirements, approximately 7,200 employees left 
the rail industry during the pandemic. The bulk of these individuals 
were employed by Class I railroads. While targeted hiring campaigns and 
incentive programs to boost ranks are certainly welcomed, an ongoing 
exodus of highly-skilled and experienced employees is liable to 
undermine any forward progress.
    More generally, we do not believe that a shortage of employees in 
the supply chain is a factor in current conditions. A workforce 
shortage implies that the workers needed to perform a job do not exist 
in the market. What we have today in our economy is the failure of 
employers to respond to market conditions and provide the incentives--
wages, benefits, working conditions, that will attract the workforce 
they need. In addition to rail, proponents of the shortage explanation 
frequently cite trucking as an example of an industry where total 
employment is lacking despite best efforts. Yet, the 90 percent 
turnover rate for long-haul truckers speaks to a similar market 
response from drivers who are disinterested in long hours, low wages, 
and a difficult working environment.\6\ As an example, port truck 
drivers working for XPO Logistics recently won a settlement of nearly 
$30M after successfully arguing that they had been willfully 
misclassified under Federal labor law, to deny them fair wages, 
benefits, and bargaining rights.\7\ The mistreatment faced by XPO 
drivers, operating in a key node of the supply chain, was hardly 
unique. The failure of an employer to incentivize its future workforce 
is not synonymous with a labor shortage, and the solutions are not 
interchangeable.
---------------------------------------------------------------------------
    \6\ https://www.ccjdigital.com/economic-trends/article/15064753/
driver-turnover-rate-holding-steady
    \7\ https://teamster.org/2021/10/xpo-drivers-achieve-nearly-30-
million-in-settlements-after-company-misclassified-its-workers/
---------------------------------------------------------------------------
A Path Forward
    As Congress and the administration continue to work to solve the 
ongoing challenges, and prevent future interruptions of this magnitude, 
we call on you to work closely with supply chain employees and their 
union representatives across the Nation to develop long and short-term 
solutions to the supply chain crisis.
    This must include considerations of the impacts of the drastic 
reduction in the rail workforce and degradation in service quality, how 
these factors have contributed to supply chain disruptions, and even if 
the manner in which railroads have chosen to operate is consistent with 
statutory common carrier obligations. We encourage the pursuit of long-
term structural changes that will reverse the current path of the 
industry and return to the prioritization of long-term viability, high-
quality service, and the creation and support of thousands of good 
jobs.
    Solutions must also include robust and well-directed investments in 
our Nation's freight infrastructure. To this end, TTD strongly applauds 
the enactment of the generational Infrastructure Investment and Jobs 
Act (IIJA), and we thank Chairman Peters and Ranking Member Fischer, as 
well as Chair Cantwell and Ranking Member Wicker, for their hard work 
and support of this legislation which will transform our Nation's 
transportation and freight systems.
    As policymakers and the private sector consider strategies to 
expedite the flow of goods at major ports, the $2.2 billion the bill 
contains for the Port Infrastructure Development Program offers a 
lifeline to the nearly half of U.S. ports that state that better rail 
access could increase throughput capacity by over 25 percent.\8\ 
Historic investments in the rail network, and in multimodal development 
will similarly act to prevent or blunt future supply chain challenges. 
Critically, to achieve the greatest economic impact for IIJA, it is 
essential that the legislation is implemented in a way that sustains 
good-paying jobs while acting as an economic force multiplier 
throughout the supply chain.
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    Congress should also consider novel approaches to supply chain 
challenges that would create jobs and economic activity. For example, 
the expansion of waterborne transportation alternatives through our 
Marine Highways may alleviate symptoms of a supply chain bottleneck, 
particularly at major ports. Short sea shipping is the practice of 
commercial waterborne transportation utilizing America's Marine 
Highways and is a practical alternative to moving freight from major 
ports to its destination. A fully developed short sea shipping sector, 
utilizing smaller cargo vessels, would supplement and complement 
services provided by rail and truck transportation and would provide 
shippers with an additional alternative to direct goods to their final 
destination. In addition, being able to use our waterways more 
consistently would create benefits for the U.S. maritime industry by 
creating good jobs aboard vessels and at ports and shipyards, while 
reducing port congestion.
    We also call on you to reject ill-conceived efforts to hijack the 
crisis to attack supply chain workers and their industries. The pursuit 
of a more efficient supply chain cannot be an excuse to eliminate or 
deconstruct critical regulatory safeguards, such as fatigue 
protections, or to water down carefully crafted training and 
qualification requirements. In particular, we strenuously oppose 
legislation that seeks to amend long-standing labor law to deny 
collective bargaining rights. Transportation labor views any such 
efforts as an unwarranted and deeply misguided assault on employees in 
the supply chain who continue to work tirelessly to keep the economy 
and the flow of commerce moving.
    TTD thanks the Subcommittee for the opportunity to testify today on 
the significant challenges facing our supply chain. We look forward to 
continuing to work together to alleviate current congestion and to 
foster more resilient freight transportation industries well into the 
future.

    Senator Peters. Well, thank you, Mr. Regan, for your 
comments. Next, our third witness today is Mr. Paul Doyle, the 
CEO of Coastal Automotive, a small, forward looking automotive 
safety component manufacturer headquartered in Holland, 
Michigan, with manufacturing facilities there and with sales 
and technical team in Rochester Hills, Michigan. Mr. Doyle has 
a wealth of experience, having spent over 20 years in the 
manufacturing industry before leading Coastal Automotive. Mr. 
Doyle, welcome. You may proceed with your opening comment.

   STATEMENT OF PAUL DOYLE, CHIEF EXECUTIVE OFFICER, COASTAL 
                           AUTOMOTIVE

    Mr. Doyle. Chairman Peters, Ranking Member Fischer and 
committee members, on behalf of all the employees of Coastal 
Automotive, as well as my colleagues at the Motor and Equipment 
Manufacturers Association and its division, the Original 
Equipment Suppliers Association, I am really thrilled to be 
here today to share our experiences as a Michigan manufacturer, 
as you wrestle with the solutions to the tangled web that is 
our supply chain reality. Both MEMA and OESA represent over 
900,000 team members in the United States, and Coastal makes up 
a small but proud 200 of those.
    I have worked in the automotive market for thirty 3 years 
and I have never seen such a combination of issues facing our 
manufacturers, including those of the Great Recession of 2007 
to 2009. Coastal Automotive is a small company, but we have a 
global footprint.
    We do all of our manufacturing and our R&D in Michigan. The 
main product we make is a specialized foam responsible for head 
impact safety. Our products are in well over 60 percent of all 
vehicles on the road in the United States. As many have said, 
there is no singular root cause to this challenge that we are 
facing.
    In the last 20 months, automotive manufacturing has been 
challenged by COVID, multiple challenges of semiconductor 
supply and demand, labor shortages, Suez Canal blockages, 
increased trucking demands driven by COVID related home 
shopping, enhanced and extended unemployment, increasing 
material and wage costs, port shipping and truck trucking 
infrastructure issues, and I am not blaming nor complaining, it 
is just the landscape that we are dealing with. In April 2020, 
Coastal sales dropped from about $5 million per month to about 
$500,000.
    What we did in response defies everything I know about 
managing a lean operation. But between clever management and 
the PPP dollars, and thank you for that by the way, we remained 
a viable business today. But here is our current situation. We 
received through East Coast ports roughly 250 sea containers 
each year from Greece. And like most, we have seen delays and 
extended lead times.
    We have a long term agreement with our largest supplier, 
which expires in April 2022, and we expect about a 20 percent 
increase in cost. The increase is based largely on the cost of 
their logistics, shipping containers have gone up to $27,000 
compared to pre-pandemic levels of around $3,000, storage and 
demurrage charges at the docks, subsequent transportation cost 
on rail to Chicago and truck to Michigan. In the last 20 
months, we have been required to order and receive inventory in 
a manner other than just in time.
    Our main supplier is much bigger than we are, so when the 
ships, docks, and trucks do get a load rolling, our contract is 
not going to prevent our suppliers from sending to our docks 
five times the number of trucks than we have agreed to or are 
prepared to receive. Quoted lead times mean little anymore. 
Capital equipment purchases from both China and Korea have been 
20 to 29 weeks beyond quarter expectations.
    We ship to 30 different countries around the world, and we 
are regularly informed that trucks will not arrive on scheduled 
ship dates for lack of trucks and drivers. Our material cost to 
the percentage of sales next year will be 25 percent higher and 
our labor costs will be 20 percent higher as well. As you 
noted, Mr. Peters, global logistics is not the only issue 
facing Coastal and the automotive manufacturers. As the ports 
and supply chains eventually get untangled, we will be left 
with other parts of the web that will also require attention.
    The well-known semiconductor shortage issue, raw material 
and labor cost increases that are unlikely to move back down to 
pre-pandemic levels, Section 301 tariffs on China, as well as 
Section 232 steel and aluminum tariffs. While I expect 2022 
will remain tough for the automotive suppliers, I am confident 
we will solve the supply chain issues in time. And when we do, 
my fear is that we are going to find waiting for us the very 
serious matter of an acute worker shortage.
    Currently, we are running 10 to 15 percent below our 
required staffing levels, and when demand returns, that is 
going to worsen proportionally. Sickness, fear, continued State 
and Federal pandemic relief, and COVID guidelines, combined 
with a massive economic growth, has caused significant distress 
to the labor market.
    The final point I would like to make is regarding cash-
flow, profitability, and investment. Occupant safety is the 
purpose of Coastal Automotive, but profit is the gas in our 
tank to fund our future, to fund innovation. The automotive 
industry is once again in the middle of a technological 
transformation.
    The two major growth areas are the electrification of the 
vehicle and automated technologies, which is in large measure, 
all about safety. The new infrastructure bill has included a 
proposal to review units of safety standards, which is 
something we fully support. We have been a three time supplier 
of the year to General Motors, but by virtue of our reduced 
cash and profit, I suspect that we are 2 years behind in our 
product innovation.
    The reduction of profitability also reduces our ability to 
provide better working conditions for our team members, reduces 
our ability to provide training and team member development, 
reduces our ability to support our communities, and as noted, 
significantly reduces our ability to invest in growing, and in 
doing so, create and maintain a sustainable business. The ports 
and shipping issues are indeed a tangled web, and we need your 
help with fast solutions for breaking down silos and bringing 
Government and private sectors together to solve this problem.
    We hope that our comments bring clarity, compassion, and 
urgency to your deliberations because there are 900,000 MEMA 
team members affected, and every day I get to look 200 of them 
in the eye and all they want is the opportunity to do 
meaningful work and provide for the dreams of their family. 
Thank you very much.
    [The prepared statement of Mr. Doyle follows:]

      Prepared Statement of Paul Doyle, Chief Executive Officer, 
                           Costal Automotive
    Chairman Peters, Ranking Member Fischer, and Committee members, on 
behalf of all the team members of Coastal Automotive and my colleagues 
at the Motor & Equipment Manufacturers Association (MEMA) and its 
division the Original Equipment Suppliers Association (OESA), I am 
happy to be here today to share our experiences as a Michigan 
manufacturer as you wrestle with solutions to the snarl that is our 
supply chain reality.
    I have worked in the automotive market for 33 years and have been a 
member of the OESA Board of Directors for 14 years. I have never seen 
such a combination of challenges and issues facing our manufacturers, 
including those in the great recession from 2007-2009. One of these is 
the ports and shipping crises facing our industry and our country.
    Ship transportation of goods to and from ports is at or above 
capacity and increasingly gridlocked on both the east and west coasts. 
Manufacturers, farmers, retailers, and consumers have all witnessed the 
adverse impacts of this gridlock. Since July 2020, shipping costs from 
Asia have increased four to tenfold. As recently as the last few weeks, 
more than 70 container ships have been waiting at the ports of Los 
Angeles and Long Beach with delays reported in other key ports such as 
Savannah and Seattle. There are now reports that backlogs are starting 
to clear at America's ports. For example, the ports say that wait times 
and the number of ships in the queue are decreasing at L.A./Long Beach. 
However, carriers have been told to slow their Pacific Ocean travel 
time and to anchor further out. MEMA and the experts they consult 
believe that delays and price increases from the carriers will persist 
into 2022.
    In our industry, these challenges and cost increases come at a time 
of other significant supply chain tensions and an increased need for 
new investment in technology, sapping much needed resources and human 
capital away from other issues.
    Coastal Automotive is a small company, with a global footprint, 
headquartered in Holland, Mich., with manufacturing facilities there, 
and a Sales and Technical team in Rochester Hills, Mich.. We have 
annual sales in the neighborhood of $50 million and we employ over 200 
people. In our way of thinking that makes us directly responsible for 
the livelihoods of 200 families. The technical term for our products is 
``passive safety countermeasures.'' The main product we make is a 
specialized foam responsible for automotive head impact safety. Our 
products are in well over 60 percent of all vehicles on the road in the 
United States. We are a supplier to most of the established automakers 
such as GM, Ford, Stellantis, Toyota, Volkswagen, Honda, Nissan, and 
BMW. We are also supplying many of the emerging automakers, such as 
Tesla, Rivian, Zoox, and Lucid Motors. We are also a key supplier to 
the automotive racing industry, as our products ensure driver safety in 
both NASCAR and the IndyCar Series. We have earned the coveted ``GM 
Supplier of the Year'' award three times and have been awarded five 
consecutive GM Supplier Quality Awards, a feat that a fraction of GM's 
entire supply base has achieved.
    In April 2020, our sales dropped from about $5.0 million per month 
to $33,000. What we did in response defied much of what I know about 
lean operations, but between clever management and the SBA Paycheck 
Protection Program (PPP) dollars we remain a viable business today. 
Thank you for passing funding for this program; I assure you it helped 
keep Coastal Automotive--as well as many other small businesses--viable 
during the pandemic in 2020-2021. Since that day in 2020, we have 
continued to refine our strategy for growth and sustainability almost 
weekly.
    Coastal Automotive is a proud member of MEMA. MEMA represents more 
than 900 member companies that manufacture motor vehicle components and 
systems for the original equipment and aftermarket segments of the 
light vehicle and heavy-duty industries. Nationwide there are more than 
900,000 employees in the motor vehicle parts manufacturing industry 
with 143,000 of them in Michigan and 200 of them under our care. Parts 
manufacturers are the largest employer of manufacturing jobs in the 
country and approximately 1 in 20 U.S. workers support the global 
mobility market.
    Automotive suppliers provide over two-thirds of the value of a new 
vehicle, and two-thirds of the innovation. I talk and strategize with 
MEMA member companies every day who are at the center of the 
transportation supply chain crisis, and who will be here, standing 
strong, when this problem ultimately recedes. Our customers and supply 
chains are necessary in every corner of the earth, so governments here 
and abroad are making decisions that affect an inextricably 
interconnected system of customer fulfillment.
    I would be remiss if I did not point out that Coastal Automotive 
supports legislation that would strengthen passive safety measures in 
new vehicles. Even though the goal of automated driving is zero 
crashes, we all know that there will be some. When that happens, 
passive safety devices, like our energy absorbing countermeasures, will 
be cheap insurance against catastrophic injury. We believe that the New 
Car Assessment Program, or NCAP, should be revisited and strengthened, 
and that the five-star safety ratings should be more robust. 
Additionally, we believe that the harmonization of global safety 
standards will serve emerging markets where safety technology should be 
accelerated and consumer awareness increased. For years, our industry 
has been advocating for NHTSA to address and revise NCAP for years, and 
we are excited to see that the most recent infrastructure bill includes 
elements that address this issue.
    Our focus here today is on shipping and the supply chain crisis at 
the ports. We are truly in ``Uncharted Waters'' right now as we face 
shipping supply chain challenges. This is at the top of the logistics 
and public policy challenges for Coastal Automotive as well as many 
MEMA member companies. Others on this panel undoubtedly know more about 
the root causes of this bottleneck. Every participant in this industry, 
and ultimately our overall economy, will benefit from policies and 
practices that get products and materials flowing again. I am simply 
here to recount our experiences as an American manufacturer in the 
middle of this crisis over the past year or so.
    However, this is not the only issue facing automotive suppliers. 
Our industry is facing serious supply chain woes due to the well-known 
semiconductor shortage issues. There are numerous raw material price 
increases, and many companies are struggling with Section 301 tariffs 
on imports from China as well as Section 232 tariffs on imported steel 
and aluminum, which will soon face tariff rate quotas (TRQs). While 
2020 will remain tough for motor vehicle parts manufacturers, I am 
confident that, in time, we will solve these supply chain challenges. 
And when we do, my fear is that we will find, looming in the darkness, 
the very serious matter of acute worker shortage.
    Currently, we are running at 10-15 percent below our full staffing 
levels and when demand returns that will worsen proportionally. We have 
the reputation of being a good company to work for, we have a great 
culture, and we have great leaders. We have raised wages 20 percent in 
the last year and in terms of attracting talent, all we have done is 
borrow talent from our neighbors and they will ultimately borrow it 
back. Toby Curry, our Director of Operations, continually reminds me of 
the COVID impact that Coastal's workforce faces. Before 2020, he 
measured employee tenure in years, now he measures it in the number of 
breaks the team members stick around for. Sickness, fear, the need for 
parents to support and educate children at home as well as continued 
State and Federal pandemic relief combined with massive economic growth 
has caused significant distress to the labor market.
    The crisis at our Nation's ports has added to these other looming 
challenges. At Coastal Automotive, approximately 40 percent of our cost 
structure is from our supplied input materials and 95 percent of those 
raw materials come from overseas. During the past year, Coastal has 
seen unparalleled increases in costs for both raw materials and 
transportation. Our second largest supplier increased prices 70 
percent. Due to the rising price of lumber, the prices of pallets have 
increased 90 percent. Many other suppliers have increased their prices 
upwards of 25 percent. While our largest supplier has not increased 
prices over the past year, this is due to a long-term agreement that 
expires in April 2022. We have already been informed that there will be 
a significant increase from them in the next few months, likely more 
than 20 percent.
    In most industries, raw material costs are the subject of price 
negotiations with one's customers--this is not necessarily the case in 
automotive. Our customers, the original equipment manufacturers (OEMs) 
have historically not allowed price increases on contractual awards. 
This practice is likely to receive significant pressure in 2022, as 
suppliers will either have to increase prices to the OEMs, or face 
going out of business. This ultimately means that the cost of new 
vehicles is going to continue to rise for at least the short term, as 
the OEMs pass along these supply chain price increases to the American 
buying public. And, as history has shown, when supply and demand 
returns to pre-pandemic levels, it is not likely that prices will fall 
accordingly.
    The port situation on the West Coast certainly attracts the most 
attention, and it seems that is rightfully so. While Coastal Automotive 
does not import nor export goods through the ports in California, we 
were negatively impacted last year when we ordered critical machine 
components from China. A quoted 12-week lead time turned into a 29-week 
delay before we were able to receive the needed parts.
    We experience our primary shipping delays in the importation of our 
primary raw material which comes from Greece, and therefore through the 
ports in New York. Because of the delays and inefficiencies at the 
port, our supplier is incurring significant storage and demurrage 
charges, costs which have never occurred to the extent that they are 
occurring in 2021. These costs are a major driver in the upcoming price 
increase that we expect to see in 2022.
    We receive roughly 250 ocean containers each year from Greece, and 
we have seen delays and extended lead times--during which time we 
maintained a 99.9 percent on-time delivery performance--this is our 
brand and commitment to our customers. However, to pull this off 
required a huge cost on people and cash reserves.
    When you are a smaller company, you have little leverage against 
multi-billion-dollar companies who dictate their terms and conditions. 
While we have contractual agreements that qualify order size and 
shipment in the last few years we have been required to order and 
receive inventory in a manner other than ``Just-in-Time.'' This creates 
a plethora of problems for a lean operation; specifically, we do not 
have the space, we do not have the cash, level scheduling is disrupted, 
and nothing good ever happens to inventory. However, when the ships, 
docks, and trucks get a load rolling, our contract is not going to 
prevent our suppliers from sending to our docks two to three times the 
number of trucks other than what we have agreed to.
    Outside of our direct operations, our customer OEM needs have been 
unpredictable, at best, and 40 percent down, at worst. We all know the 
reasons for this, and we do not look to blame anyone. COVID is a 
serious matter and doing the right thing in terms of bringing people in 
to work and having them there safely is the right thing to do. That 
does not negate the reality that production schedules are not 
predictable and supply chains are not predictable; at the end of the 
day our people must deal with the whiplash. As I said earlier, we have 
made what I consider to be clever and responsible management decisions 
to keep people working and financially healthy with the help of PPP 
funds. We built huge quantities of inventory when people needed to work 
and granted lots of leave time when families needed it for sickness, or 
to be home to provide schooling.
    Raw materials are up 25 percent, direct labor is up 20 percent and 
these price increases are compounded by supply chain woes, customer 
price reductions, and labor challenges, it will be no surprise to 
anyone that profits are down 30 percent, but I would ask that you hear 
this in a distinct way. The 30 percent is not money going into an 
owner's pocket. The reduction in profitability reduces our ability to 
support community charities, reduces our ability to provide better 
working conditions to our team members, reduces our ability to provide 
training and team member development, and significantly reduces our 
ability to invest in growing our business.
    Automotive is, once again, in the middle of a technological 
transformation. The two major growth areas are electrification and 
automated technologies, which is in large measure all about safety. 
While we believe that this economic down cycle is temporary and not 
reflective of any fundamental problem in the industry, it has, by 
virtue of reduced cash, restricted our ability to invest in innovation 
that is so clearly demanded by both regulations and markets. We are 18 
months behind in product innovation and I fear this puts our 
sustainability as a company at risk.
    The overall motor vehicle parts sector remains at risk, due to the 
ports and shipping concerns being discussed today. While I will not 
delve into solutions too deeply, I offer the following thoughts that 
reflect a separate communication that the Committee has received from 
MEMA.
    First, MEMA strongly supported the passage of the bipartisan 
infrastructure legislation. That bill provides $17 billion for ports 
and inland waterway improvements as well as additional funds for 
intermodal transportation centers, rail, and trucking. My understanding 
is that the Biden Administration is prioritizing availability of some 
of these funds for ocean going ports, which will be helpful. If this 
money can get out the door quickly, it will help alleviate some of the 
tension in this situation.
    We appreciate that the ports of L.A./Long Beach are moving toward 
24-7 operations. Competitors to the U.S., such as China and the EU, 
already have these robust hours. Other U.S. ports need to implement a 
similar program if we really want to eliminate bottlenecks.
    In 2022, the Congress needs to pass a version of H.R. 4996, the 
Ocean Shipping Reform Act, which has been introduced in the House with 
80 cosponsors. That measure will increase the enforcement ability of 
the Federal Maritime Commission on detention and demurrage issues. It 
prohibits discrimination by ocean carriers or marine terminals against 
shippers who have filed complaints or used alternative carriers. The 
bill also applies anti-retaliation safeguards and sets minimum service 
standards for ocean going carriers. I hope that each Senator on this 
Committee can support a Senate bill on ocean shipping reform.
    Finally, American exporters and importers need you to remain 
focused on shipping reform. This crisis must lead to improvements in 
ocean shipping and at the ports to prevent future crises. Passing 
legislation is important, but we urge this Committee to use the bully 
pulpit of future Senate and House hearings to keep the focus on the 
Biden Administration, state and local governments, and the private 
sector to continue to make progress. Historically, there has been an 
episodic and siloed approach to ports and shipping reform in the United 
States. As CBS News reporter Bill Whittaker said in a November 14 story 
on a recent 60 Minutes broadcast on this issue, ``The truckers blame 
the terminals, the terminals blame the shippers, the retailers blame 
the truckers and the shippers. How do you get that contentious group to 
sit at the table, stop pointing fingers, and actually clear out this 
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    The ports and shipping issue is indeed a complex and tangled web, 
and we need your help in breaking down silos and bringing the 
government and all private sector stakeholders together to solve this 
problem. Everyone at Coastal Automotive and MEMA thanks you for taking 
the time to hear our concerns. We hope that our comments bring clarity 
and compassion to your deliberations.

    Senator Peters. Thank you. Thank you, Mr. Doyle, for your 
comments. Our last witness today is Mr. Norman Krug, who serves 
as the CEO of Preferred Popcorn, which is based out of Chapman, 
Nebraska. Mr. Krug founded Preferred Popcorn nearly 25 years 
ago with a vision and a goal of providing high quality, 
wholesome popcorn with both honesty and integrity. Preferred 
Popcorn currently ships to over 70 countries around the world 
and supplies some of the biggest movie theater chains in 
America. Welcome Mr. Krug. You may proceed with your opening 
remarks.

        STATEMENT OF NORMAN KRUG, CEO, PREFERRED POPCORN

    Mr. Krug. Thank you, Chairman Peters and Ranking Member 
Fischer, Chairman Cantwell and Ranking Member Wicker. I truly 
mean that. Thank you for the opportunity to testify today. My 
name is Norm Krug, and I am the CEO of Preferred Popcorn. I am 
a farmer from Chapman, Nebraska. We grow corn, soybeans, and of 
course, we especially love growing popcorn.
    23 years ago and a mile and a half away from my house, 
there was a cleaning facility that was vacant, and it was my 
vision to reopen that facility and to provide opportunities for 
local farmers. I had hoped that we can start by showing our 
popcorn to Nebraska concessionaires and cinemas and stadiums, 
and then expand from there. But we were so good at producing 
popcorn that our very first year we grew to 200 truckloads.
    So one of my first calls was to the University of 
Nebraska's Athletic Department to see what their annual 
consumption was. Well, it turns out the whole university, and 
those of, you know, who have been to Nebraska, we all go there. 
It turns out that Nebraska uses one load per year.
    And even that load at that time was being donated. So my 
plan of opening a popcorn company to supply the needs of the 
State of Nebraska was not going to be big enough. While we 
struggled to gain name recognition and credibility with large 
domestic theater brands, we were growing rapidly in the global 
marketplace. Countries including Mexico, Thailand, Indonesia, 
China, India, Taiwan were all loving our American popcorn. And 
with the support of the EXIM Bank, we were able to ship to 
these countries without concerns about receivables. Soon we 
were shipping to over 50 countries, and now as has been 
mentioned, 70.
    We are feeling confident and are--we were feeling quite 
confident in our future until COVID-19 came along, and like 
many small businesses, that dealt us a devastating blow. In the 
case of 2020, for the first time in history, nearly all the 
cinema industry was closed, not only in the United States, but 
in every country.
    We had then sold the popcorn and our largest category of 
customers were shut down in an instant. But we are farmers and 
farmers find a way to make it. Once again, exports were the key 
to our success. We were able to move dramatically into new 
markets into the Middle East. But it was then, however, we 
started to see a shift in our logistics--as our logistics team 
began informing me that the steamship line bookings were not 
coming back from our forwarders as quickly as they had in the 
past. For the next few months, we heard about the problems on 
the West Coast and the buildup of ships waiting to be unloaded. 
At the beginning of 2021, we started to see large increases in 
wait times for the steamship line booking of the East Coast as 
well.
    So explaining the global freight crisis to our customers 
has now become part of our daily routine. Had these logistics 
not been obstacles in October--by October of this year, we 
would have shipped more than 900 additional containers to our 
customers who need our popcorn.
    And overall, this is equated to a loss of sales for 
Preferred Popcorn totaling more than $10 million. Of course, 
that means strained relationships with our national partners 
and distributors that we had fought hard to maintain over these 
23 years. And eventually it is going to result in a higher cost 
to the consumer.
    We have heard from our foreign partners that many 
containers that could be filled with American products are 
being returned across the ocean empty to be loaded again with 
goods coming into the United States. This practice confines our 
exports and limits new potential sales. Small businesses need 
these containers in the Midwest. I believe that given an equal 
opportunity, American farmers can compete with anyone in the 
world, and given an efficient container delivery system.
    I appreciate the opportunity to share our story 
respectfully--and I respectfully encourage the Committee to 
provide the relief and assistance to the agricultural community 
at large who work tirelessly every day to feed the world. Thank 
you for this opportunity and look forward to your questions.
    [The prepared statement of Mr. Krug follows:]

      Prepared Statement of Norman Krug, CEO, Preferred Popcorn, 
                     and Farmer, Chapman, Nebraska
    Chair Peters, Ranking Member Fischer, Chair Cantwell, and Ranking 
Member Wicker,

    Thank you for the opportunity to testify today. I am Norm Krug, CEO 
of Preferred Popcorn, and a farmer in Chapman, Nebraska. We grow yellow 
dent corn, white corn, soybeans and especially love growing popcorn. My 
father grew popcorn for forty-five years, and I have now been producing 
popcorn for over forty-four years.
    Twenty-three years ago, a mile and a half from my house, there was 
a popcorn cleaning facility that been vacant for two years. It became 
my vision to reopen that facility allowing for us to market our own 
popcorn as well as provide more opportunities for local farmers. I 
called some close friends who were also farmers and the Aurora 
Cooperative. Together we decided to see if we could make this new 
venture successful and market the products of our toils.
    I hoped that we could begin by selling our popcorn to Nebraska 
concessionaires, cinemas, and stadiums, and then expand beyond that to 
ship into other surrounding states. In our first year, we grew enough 
popcorn to fill 200 semi truckloads. I called the University of 
Nebraska to see what their consumption would be. It turns out that the 
University of Nebraska only used one truckload per year for all their 
sporting events, and even that popcorn was donated. Thus, my plan of 
opening a popcorn company to supply the needs in the state of Nebraska 
was not going to be enough. We quickly learned that we needed to look 
outside of the state and maybe even outside of the country to sell all 
the popcorn we had produced.
    A few days after forming the new company, my wife and I, as well as 
some of the owners, attended our first trade show. At that trade show 
we saw the evidence that the U.S. market for popcorn was nearly 
saturated. There were few U.S. companies that seemed to need a new 
popcorn supplier. Thankfully at that show we met a man named Doddy from 
Indonesia, and he was willing to hear about our new company, Preferred 
Popcorn. We started shipping our popcorn to him two months after our 
initial meeting, and I am thankful to say that twenty three years 
later, we still ship to my good friend Doddy. In the first few years, 
we had numerous stories like this. While we struggled to gain name 
recognition and credibility with the large domestic theater brands, we 
were growing quickly in the global marketplace. Countries including 
Mexico, Indonesia, China, India, Thailand, and Taiwan were loving our 
high-quality American popcorn. We started investing in exporting to 
support our international customer base. We staffed international 
documents specialists at our facility to learn the customs requirements 
in the countries we were shipping to, and we started traveling to trade 
shows overseas to find more distributors for our popcorn. With the 
support of the EXIM bank, we were able to ship to these countries 
without concerns about receivables. These investments paid off and soon 
we were shipping to over fifty countries. We purchased a second 
facility in Palmyra, Indiana to help with our domestic and 
international sales and we continued to innovate to meet the diverse 
needs of our customers. We've been blessed with substantial growth over 
the last twenty-three years, and we thank God often for leading us and 
giving us a vision for the future. Our mission statement reads, 
``Preferred Popcorn strives to honor God by providing high quality 
products and serving our customers with integrity.'' With His help, we 
have been able to do just that.
    2020 hit our business hard. Today much of our popcorn goes to the 
cinema business. COVID's effect on the movie industry cannot be 
overstated. I always believed that our diverse allocation of 
international customers meant we would be cushioned from the ever-
changing global trade landscape. On many occasions, we observed one 
country's popcorn needs decrease, while at the same time, another 
country's needs would increase. In the case of 2020, the difference was 
that in every country there were no operating theaters. We had bins 
full of popcorn, and our largest category of customers were shut down 
in an instant. But we are farmers, and farmers will always find a way.
    For the next six months we ``left no stone unturned.'' We reached 
out to contacts in new markets and to old friends, trying to keep our 
employees working and our facility up and running. Thankfully it 
worked, and we were able to move dramatically into new markets in the 
Middle East and Asia. These countries tend to consume popcorn in their 
daily diet and not just in cinemas. Countries like Egypt and Dubai were 
taking dozens of containers towards the end of 2020. It was then that 
we started to see a shift. Our logistics team began informing me that 
the steamship line bookings were not coming back from our forwarders as 
quickly as they had in the past. Within a few weeks I started getting 
calls from customers asking why our popcorn was taking so long to get 
to their ports. For the next few months, we heard about the problems on 
the west coast and the buildup of ships waiting to be unloaded. At 
first there were not enough containers to load at our local depot in 
Omaha. Then, we could not get space on steamship lines going from the 
west coast to our customers in Asia.
    At the beginning of 2021, we started to see a large increase in 
wait times for steamship line bookings off the east coast as well. This 
drastically slowed our ability to ship from our Indiana facility. In 
April of this year, we had a customer fly urgently from Cairo, Egypt to 
Nebraska. We had contracted to sell over 300 containers of popcorn to 
companies in Egypt. Sadly, because of the logistics breakdown, we had 
not been able to ship many of them. Our Egyptian customer visited 
Nebraska to find out if it was our fault that these containers had not 
shipped. At that time, much of the world did not know what was 
happening in the freight industry and what American businesses were 
facing as they shipped their goods overseas. Some of these containers 
were arriving three months later than normal transit times.
    Explaining the global freight crisis to our customers has now 
become part our daily routine. Had there not been these logistics 
obstacles, Preferred Popcorn would have shipped over 600 more 
containers in 2020 from our docks. Through October of this year, we 
would have shipped more than 900 additional containers to our customers 
who desperately need our popcorn.
    For cinemas, popcorn provides the highest margin and nets the most 
profit of anything being sold at the concession stand. Popcorn is a 
pillar in the financial stability of any cinema chain. Theater owners 
often tell us that popcorn is the one thing that they simply can never 
run out of. The container freight issues have obviously affected our 
bottom line as well. Many of the contracts that we write with our 
customers have a hard stop date. Meaning that after a certain date, the 
contract is void and we lose those sales. Because we were not able to 
ship the necessary containers, we have lost many sales entirely; many 
times, to our competitors who produce popcorn in other countries. In 
the last two years we have seen many of our customers turn to popcorn 
producers in Argentina and Brazil because we are not able to get the 
necessary containers or steamship line space to ship our products. 
Unfortunately, once we lose these customers, it is a struggle to regain 
them. Our international distributors sell our brand, Preferred Popcorn, 
to their customers. Once they change their product line from American 
products to alternatives, it can be difficult to switch back. Our brand 
has hard-earned name recognition in many countries, and losing market 
share due to logistical issues has become a stark reality. Preferred 
Popcorn employs over eighty people in small Midwest towns. We contract 
with over 125 farmers to grow our popcorn in seven states. The millions 
of pounds we sell to our customers overseas represent dozens of hard-
working families that rely on good paying jobs.
    Along with the container shortages and steamship line delays we 
have experienced a large increase in freight cost. We are continually 
being told from our freight carriers that the current shortage of 
drivers and dock workers are raising prices for businesses all over the 
Midwest. Preferred Popcorn has seen a 30 percent increase in freight 
costs since 2020. In many cases we have had to absorb that additional 
cost, but most impactful has been the opportunity cost of the freight 
increases. Over the last twelve months we have lost some ability to 
compete in the global market because we can no longer move our product 
affordably to many international ports. Overall, this has equated to a 
loss of sales for Preferred Popcorn totally more than $10,000,000. It 
has meant strained relationships with international partners and 
distributors that we have fought hard to maintain over these twenty-
three years, and it will mean a higher cost to the consumer.
    Over the last year our team and I have met with our forwarders and 
trucking companies to try and find solutions to our shipping problems. 
We have been given many reasons for the current situation including the 
lack of containers in the Midwest, the lack of space on the steamship 
lines, trucker shortages, and port congestion. Solving any one of these 
problems is difficult but finding ways to ship consistently in this 
freight climate has become insurmountable.
    Our popcorn is a good-for-you, affordable snack food that is cost 
effective enough to be consumed in some of the most impoverished 
nations. The current freight situation has been passed on to the end 
consumer in many countries including our own. Trucking, and rail costs 
have both risen in conjunction with container costs. This has meant a 
higher popcorn cost to U.S. businesses and theaters.
    Our industry is not unique in how the container freight crisis has 
affected us. Many Nebraska small businesses are feeling the burden of 
lost revenue and high cost of goods. We have heard from our forwarder 
partners that many containers that could be filled with American 
products are being returned across the ocean empty to be loaded again 
with goods coming into the United States. This practice confines our 
exports and limits our potential new sales. Small businesses need these 
containers in the Midwest. We are hoping for more accountability 
between the steamship lines and the Federal Maritime Commission to 
accomplish our mutual goals of fast and affordable trade. Hopefully 
this would allow U.S. exporters a fighting chance at loading and 
shipping containers and providing American goods to a global audience.
    I believe that, if given equal trade opportunity, American farmers 
can compete in any market, but we need free trade to do so. The trade 
limitations facing American farmers are putting all of us at a 
disadvantage with our competitors. The rising cost of inputs for our 
growers and high import duties into many countries mean American 
farmers are getting besieged on multiple fronts. Import duties on U.S. 
goods, including popcorn, can be as high as 55 percent into many 
countries. These import duties, on top of the freight crisis, have 
meant losses for our company and many other small exporters in the 
Midwest.
    Exports are essential to Preferred Popcorn and to the state of 
Nebraska. Our state has a population of 1.9 million and operates 45 
million acres of farmland. Nebraska farms exported nine billion dollars 
in goods in 2019 alone. We grow and raise more food products than our 
state could ever need. We want to be able to better serve our global 
customer base and provide them with the high-quality products that our 
state offers.
    I appreciate the opportunity to share our story and to respectfully 
encourage the committee to provide the relief and assistance to 
Nebraska processors and the agricultural community at large who work 
tirelessly, every day, to feed the world.

    Senator Peters. Well, thank you. Thank you for those 
comments. Questions, Mr. Doyle, in your opening comments, you 
certainly painted a very challenging picture for you and your 
company and all of your employees to get through what you are 
still working to get through because we are not through this.
    But in your testimony, you talk about the critical machine 
parts that were, ``with a 12 week lead time turned into 29 week 
delays'' before you finally received those parts. That is an 
incredible management challenge, and I understand you are still 
been able to maintain your deliveries, which certainly speaks 
well to what you are able to do.
    But my question to you is that I know you are committed to 
doing most of your manufacturing in the United States, your 
research and development, which was done in Rochester Hills and 
as we look long term on this challenge because it will continue 
to be a challenge going forward, could you speak to whether or 
not a good way to think about dealing with supply chain 
distributions from overseas is that we need to onshore more 
manufacturing here in the United States with American workers?
    Talk to me a little bit about that and how you would see 
that as something we should be thinking about as a policy 
direction.
    Mr. Doyle. Thank you for the question. I think that there 
are probably two thoughts that come to mind when that happens. 
One is the very personal one of our case about bringing a 
supply base on shore. We are a $50 million company, and our 
supplier of our principal materials is a multibillion dollar 
company.
    So our chances of asking them to think about the 
optimization of their manufacturing on our behalf is a little 
silly. That having been said, we are exactly involved in that 
conversation with them. We have been working with them on their 
costs. We both know that the logistics costs are non-value 
added to either of our operations. They are looking to add 
manufacturing locations in the United States that would shorten 
our supply chain from instead of Greece.
    It would be actually a place in the Midwest, which would be 
great. So while I think our ability to affect that is limited, 
that I do believe that it is something we are pushing for and 
we are trying to do that to optimize our operation, shorten our 
supply chains, which makes it easier to manage our operations, 
reduce inventories, those sorts of things all go with shorter 
supply chains. So absolutely, we are asking those questions. 
From the motor vehicles kind of point of view, there are 30,000 
parts that go into the manufacturer of a vehicle.
    And the nature in which the way the supply chains have been 
developed over the course of the 30 years that I have been 
involved in this, particularly when you look at the incredible 
expansion of manufacturing of vehicles in China and in Europe 
in some cases, a global supply chain developed, and the 
manufacturers optimized that down to the minute.
    You know, when we are late a minute to our customers, the 
consequences of that are fairly severe. Therefore, I think when 
you look at that, there is a much bigger kind of question. On a 
personal side, I think that we have discovered over the course 
of the last couple of years that there are certain supplies, 
commodities, services that we need to protect and be careful 
about, and I would absolutely support giving serious 
consideration to some of those things being balanced in a 
supply base.
    I think a lot of us have learned about single source of 
supply and the risk that goes with that. Secondary sources in 
the United States and other friendly places, I would absolutely 
endorse.
    Senator Peters. Right. Well, thank you, Mr. Doyle. And I 
realize that as one company, you can't affect all of those 
changes, but it is about policy and how we make sure that we 
are providing companies like yours and others the ability to 
have supply networks that are based in the United States with 
American workers and make logistics a whole lot easier than 
what we are seeing right now, but more importantly, create jobs 
and opportunities for Americans. And I applaud what you already 
are doing. You are doing that every day. So thank you for what 
you are doing, and we want to be able to try to support those 
activities. Mr. Butler, throughout the COVID 19 pandemic, ocean 
carriers have reported record profits due to increasing the 
price of container shipments and increased demands for goods.
    Earlier this month, the Danish shipping company Maersk 
reported a net income of $17 billion. I understand it is their 
best quarter and more than 100 years, and we have seen an 
increase in container shipping pricing of 121 percent from just 
a year ago.
    Clearly, these record profits are good for the shipping 
industry, but have placed real challenges on businesses in 
Michigan, both large and small, as they try to deal with these 
increased shipping costs. We heard from Mr. Doyle what is going 
to happen later with his contract as a result of these large 
shipping costs. We have heard some testimony, and I have 
certainly heard from small suppliers in the automotive 
industry, that these price increases are putting significant 
strain on those businesses.
    And large businesses like Leprino Foods, which operates two 
manufacturing facilities in Michigan, are being heavily 
impacted by current ocean shipping practices. Over 99 percent 
of Leprino's 2021 ocean shipments have been canceled, have been 
rebooked for a later date at least once, if not twice, and in 
some cases up to 10 times or more, and they have incurred 
millions of dollars in detention and demurrage fees on top of 
that.
    So my question for you, Mr. Butler, is what would you say 
to a company faced with the prospect of going out of business 
as a result of these exorbitant fees and practices at the same 
time ocean shippers are making record profits?
    Mr. Butler. Well, thank you, Senator. As I said during my 
opening Statement, we realize the conditions are difficult for 
folks all over the world, and I have got nothing but sympathy 
for people that are like Mr. Doyle's business who were dealing 
with those situations. The price situation right now is 
entirely unfamiliar to us.
    I mean, for the last 20 years, the ocean shipping business 
has been lucky to make its cost of capital. And what we are 
facing today is, you are absolutely correct, it is completely 
unprecedented, and it is purely the result of supply and demand 
in the market. Couple of things I would like to say about 
pricing.
    There are really two kinds of pricing in the industry. One 
is pricing under service contracts, which are long term 
agreements between ocean carriers and their customers. Those 
rates have not gone up nearly as much as you hear with respect 
to these headline rates that don't often make it to the 
newspaper. The headline rates are in what is called the spot 
market, which is what it sounds like. It is you go out on, you 
know, tomorrow and ask what the rate is to move a box next 
week. And those are the rates where you are seeing the really 
eye popping numbers.
    So one of the things we are seeing in the industry right 
now is a lot of our customers, shippers, are really looking 
forward wanting to make sure that they lock in capacity at a 
fixed rate under a service contract going forward. So that is 
just a little more background on that situation.
    The other piece with respect to pricing is that the ocean 
carriers that actually operate the ships are not the only 
actors in the market that price. There are far more middlemen, 
if you will. What they call non-vessel operating common 
carriers, or NVOCCs, those folks buy space from our members and 
then resell it. And so that part of the market has also driven 
some of these pricing increases.
    Senator Peters. Thank you. Ranking Member Fischer.
    Senator Fischer. Thank you, Mr. Chairman. Welcome to all of 
our panelists today and a special hello to Norm. I am so happy 
that you could join us and thanks for taking the time to zoom 
in for this hearing. In a normal year Norm, how long would it 
take you to ship one container from your farm to an 
international partner?
    Mr. Krug. Well, thank you. As has been commented 
previously, it has been that efficiency that has made it 
possible for us. Normally, from example, Chapman, Nebraska to 
Tokyo, Japan was 37 days. And that is pretty good when you 
think about the distance, and we are able to do that quite 
efficiently and land products around the world and be 
competitive. Currently, there are two issues. One is the axle 
transit time now would be 60 to 90 days to get that product 
shipped. But the bigger problem is that it takes two to 3 
months to get space on the ship.
    So the booking time isn't where we need to put it in and 
request 10 containers Japan, Tokyo and then we get a response, 
in 2 weeks, the containers would be here. So its those two 
months, combined with the two months of shipping time that is 
often putting us four, 5 months late from when the customer 
would--longer than what we enjoyed in the past. The most 
extreme case, which is an interesting and appreciate this 
opportunity to share that with you, where you have to remind 
everyone that the popcorn, along with many other foods, are 
perishable.
    And so when you ship a container and you think on the way 
it is going to take 37 days, and at 90 days, and Japan 
recently, they just said, take that back, we don't want that 
popcorn. That popcorn had made it all the way to the coast, and 
they were concerned enough about quality that we had to return 
as painful as that was, as you can imagine, those containers 
all the way back to Chapman to be unloaded and reclaimed and 
checked and all those things.
    So the problem gets amplified even more when you talk to 
them about perishable goods. So, yes, long answer to your 
question, but has went from a pretty dependable 37 days to 4 to 
5 months.
    Senator Fischer. And your business isn't unique in this, 
right? I mean, I am hearing from Ag producers all across 
Nebraska, all across this country who, first of all, are 
concerned that they can't get containers in order to even 
export their products. But then you add in the time involved, 
and as you said, these are perishable goods, it is affecting 
all parts of agriculture. Would you agree with that?
    Mr. Krug. Yes, I definitely agree. Preferred Popcorn is 
just one of many, many companies that are impacted. And of 
course, a lot of the cases, there are even larger amounts of 
grain and other Ag products that are not being shipped. And 
then those sales, those sales are often lost forever because 
like all of us, the consumer is going to look elsewhere to get 
their product if they are not able to get it from us.
    Senator Fischer. And Norm, I would like to ask you and 
also, Mr. Doyle, when you were looking at the shipping problems 
you are having now, a big part of that is cost. You know, you 
have alluded to that. So how much of your shipping costs have 
gone up this year? We will start with you first, Norm.
    Mr. Krug. Yes. Well, our actual freight costs are up about 
30 percent from a year ago, which is hard enough. And then, of 
course, there is additional costs in storing the product 
longer. And then ultimately, we have got a lot of the demurrage 
cost. And but you have to work that out with the customer, who 
is going to pay that and who follows that when really it is 
neither. But to answer your question directly, our export costs 
are up about 30 percent.
    Senator Fischer. And Mr. Doyle.
    Mr. Doyle. Ours is a rather unique situation or unique to 
some of the others. We are actually not freight responsible. 
Therefore, our supplier provides it to our dock. The way it 
impacts us is that we have already begun negotiations with them 
for when our contract expires in April 2022 and they have 
informed us that we should be expecting a price increase of 
about 20 to 25 percent. They have told us that that--and we 
know that the raw material underlying that cost has not 
substantially increased. It is a raw material. It is going to 
be the logistics question that is going to drive the increase 
in costs. So we are expecting 20 to 25 percent.
    Senator Fischer. OK. And one last question for Norm, when 
you were--you have talked about being a farmer, and 
agriculture, of course, is very important for the State of 
Nebraska. You are talking about delays that you have in your 
business, but what about the delays in equipment, fertilizer, 
when you add in everything on these delays, how is that 
impacting not just you, but obviously the entire economy there, 
the farm economy?
    Mr. Krug. Yes, good question. Well, as you probably heard, 
the input costs for 2022 are very high. Fertilizer prices are 
up not just percentage points, but about three times, as long 
as--as well as costs of our pesticides that we, all farmers 
use.
    The most interesting thing in this year's negotiations, as 
we are talking about next year's input costs, where the co-ops 
are actually telling us that yes, you should buy ahead, yes, 
you should lock the price in, and additionally, you should 
probably come and get it, and then have it stored on your farm 
because it is going to be such a tight supply.
    So in 2021, farmers did have adequate pesticides and 
fertilizers to produce the crop. The fear is that it is going 
to be 2022 that will be very impactful in the cost of 
production for farmers in the Midwest.
    So I think we have only seen the beginning of the 
inflationary impact of these transportation issues. They are 
not going to go away, as been stated already. Personally, I 
think it is going to increase more and more as we go into next 
year and the years following.
    Senator Fischer. Thank you. Thank you, Mr. Chairman.
    Senator Peters. Thank you, Ranking Member Fischer. Senator 
Blumenthal, you are recognized for your questions.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thanks, Mr. Chairman. Mr. Regan, as you 
know, there have been a number of polls on Department of 
Transportation nominees. Do those have an impact on the ability 
to deal with supply chain delays?
    Mr. Regan. Absolutely. You know, most of this would be 
dealt with under DOT jurisdiction not being fully staffed up, 
not having full authority for those who are Senate confirmed 
positions that need to be in their jobs, including the FRA 
Administrator, for example. That is going to impact our ability 
to respond in an effective way.
    Senator Blumenthal. And those holds are Republican holds on 
nominees to the DOT?
    Mr. Regan. That is my understanding, yes.
    Senator Blumenthal. What do you think are the sources of 
the workforce shortage?
    Mr. Regan. To me, it is not a workforce shortage so much as 
it is a quality of jobs problem and a pay shortage, certainly 
in the trucking industry where you see misclassification. Owner 
operated truckers that oftentimes are leasing their vessels, 
they are only paid for when they hold the cargo, they are 
waiting in hours long lines, and they have to pay their own 
benefits and their own overhead on top of that, and that is not 
a very attractive job.
    That is the reason we see 90 percent turnover in that 
industry. And similarly, on the rail side, you know, these have 
been historically the types of jobs that people work for their 
entire career and retire under, and we are seeing mid-career 
employees walking away, walking away from a secure retirement 
because oftentimes the pressure that is put on based again on 
stock returns and other sort of profitability are making them 
less attractive, including the threat of furloughs, the 
pressure to get inspections done earlier, the safety concerns 
that many people have.
    And that is, again, these aren't people that have been--
that are walking away. So they have been doing those jobs and 
now they are no longer doing them.
    Senator Blumenthal. So it is really a quality of work 
rather than a workforce shortage?
    Mr. Regan. Yes.
    Senator Blumenthal. Is the issue?
    Mr. Regan. Yes, indeed.
    Senator Blumenthal. What about skilled training? Could 
employers attract more workers by providing more skilled 
training?
    Mr. Regan. Yes, I think certainly from a rail perspective, 
the type of training, and also engaging their unions because 
this is a highly unionized industry, to make sure that we bring 
in skilled employees and making sure that we are stressing 
these are safe jobs that are going to provide good benefits. 
That is an important part of retaining and attracting skilled 
workers.
    Senator Blumenthal. Do you think that with these changes in 
the quality of work and more skilled training, we can meet what 
people commonly call the workforce shortage, but really is not 
a shortage of people willing to work, it is the other factors 
that go along with the workplace?
    Mr. Regan. Yes, I think that this is something that we can 
address. Certainly again, there is sort of separate issues 
between some of the railroad and the trucking side of this. On 
the trucking side, you know, it is our contention that 
misclassification of these workers, disconnecting people from 
their employer, making these less attractive jobs is a key part 
for why there is such high turnover rate and why we are having 
so much difficulty attracting people to do that work.
    On the rail side, you know, this was once again the type of 
career that people would do for their entire careers and making 
sure that we are addressing some of the movement of the 
industry toward the sort of hedge fund managed style and away 
from the consistent, sustainable operations that we require of 
our freight network, would transform, bring us back to the type 
of jobs that frankly, most of the people that I know in the 
railroad industry think of very fondly and are very proud of.
    Senator Blumenthal. Thank you, Mr. Krug, talking about the 
popcorn business, is popcorn as you manufacture and ship it, a 
perishable item?
    Mr. Krug. It is. Thank you, Senator, for the question. It 
has a long, perishable time and if stored properly, is--our 
normal expiration dates are 18 months. But it is perishable, 
and it is of course, very dependent on the conditions. If it is 
stored in high humidity, then it would last, of course, only a 
short time. It could mold in a month if the conditions aren't 
correct. So it is perishable. But we are fortunate it has a 
long perishable time, if the conditions are good.
    Senator Blumenthal. Do you tell shippers about conditions 
that you recommend for it to be transported?
    Mr. Krug. Yes. Yes, of course, we communicate that in all 
of our documents that are required for shipping and with our 
customers as well. And so we do the best we can to communicate 
that information.
    Senator Blumenthal. How has the pandemic affected the 
popcorn business, if I may ask?
    Mr. Krug. Yes, well, it has been very difficult, as I 
stated earlier. You couldn't really imagine anything that could 
come around and shut down every theater, every cinema, every 
stadium, not only in America but in the world. There has been--
some counter to that is there has been increased grocery sales 
of the product line, and that has been helpful. To offset some 
of the loss that we have had in exports and in bulk 
consumption, there has been increases in the retail market and 
in the microwave business, and that part has been helpful to 
offset the total picture.
    Senator Blumenthal. I am a big popcorn fan, so I wish you 
well. I am especially a fan of Nebraskan popcorn.
    Mr. Krug. Great.
    Senator Blumenthal. Thank you, Madam Chair.
    Senator Peters. Thank you. Thank you, Senator Blumenthal. I 
will now recognize the Full Committee's Ranking Member, Senator 
Wicker.
    Senator Wicker. Thank you very much, Senator. Mr. Butler, 
let me ask you about a Statement you made, certain legislation 
could actually have the opposite effect and I think you and I 
agree on that. Let's try to be specific, though. On the Freight 
Act, the legislation would spur improvements to our freight 
transportation system. That would not be unhelpful, correct? 
That is not one of the things you are talking about, right?
    Mr. Butler. That is correct, Senator. I think the things 
that are systemic in terms of building up infrastructure and 
improving information flow and that sort of thing is all to the 
good. I was referring to amendments to the Shipping Act, some 
of which I think would be detrimental.
    Senator Wicker. OK, well, specifically, tell us what not to 
do.
    Mr. Butler. OK, well, there are--for example, in the House 
bill that is being considered probably this week, just as an 
example of the conflicting signals that I was talking about in 
my opening Statement, there is one provision in that bill that 
says, you have to--as a carrier, you have to provide adequate 
equipment to everybody who wants to ship.
    The next provision says you have to put exports on the ship 
before you can put any empty containers for repositioning on 
the ship. Now, as I said earlier, in normal times, we can 
balance that even though we have a 2 to 1 imbalance of imports 
to exports. We can work around that. But in times of scarcity, 
it becomes very difficult. And those are some of the things we 
have talked about here today.
    Senator Wicker. OK. Well, perhaps our colleagues in the 
House will help us by making good decisions over there. What 
about streamlining the certification process for truck drivers?
    Mr. Butler. That is not in the legislation that I am 
speaking of----
    Senator Wicker. OK, so it is in the Freight Act, but would 
that be helpful streamlining the certification process for 
truck drivers?
    Mr. Butler. I would defer to my colleagues in the trucking 
industry, but if it maintains safety and brings people on more 
quickly that want to work, I can't see how it could hurt.
    Senator Wicker. OK, I see. Well, let's talk about demurrage 
and detention. Now that detention is when the product doesn't 
get there soon enough. And demurrage fines, demurrage fees are 
when the shipper doesn't come and pick it up from the port 
quick enough. Detention and demurrage. And it--are we sort of--
when somebody talks about dwell fees, does that term describe 
both detention and demurrage?
    Mr. Butler. So the term dwell fee has come into use with 
these fees that have been proposed but not yet charged on the 
West Coast, and I would say those are essentially demurrage 
fees. Those are fees that would be imposed if you don't pick up 
the cargoes soon enough.
    Senator Wicker. OK. Right. Well, are demurrage fees adding 
to the cost of goods? And are they being charged to companies 
and shippers who through no fault of their own, are unable to 
comply? And is that a problem? And if so, is there a solution?
    Mr. Butler. Well, there is no one answer to that question, 
but I will say a couple of things. With both detention and 
demurrage, there has to be a balance. The Federal Maritime 
Commission has recognized that these fees are a critical 
incentive to get people to either pick up their cargo from the 
port and get it out of there, or to bring back the empty 
equipment.
    Senator Wicker. Is it helping right now, Mr. Butler, with 
everything else that is causing the supply chain delay?
    Mr. Butler. In many cases, it is helping. It does help 
because it does provide an incentive for people to keep that 
equipment moving. Part of the problem is, and again, I am 
trying to point fingers and somebody else mentioned this 
earlier, everyone is trying to optimize their little piece of 
the supply chain, right.
    And if you have got a full warehouse and you have got more 
product coming in that you have ordered from overseas, you have 
got no place to put it, if you could leave it on the port for 
free, you are going to leave it on the port for free, even if 
it is going to gum up that same supply chain.
    Senator Wicker. Let me ask you quickly, Mr. Butler. Were 
you surprised at the information I gave to the Committee about 
a different queuing system, a different counting system? Is 
that information that I alluded to from the Bloomberg article 
correct? You have actually got more ships there, longer waiting 
times, they are just counting them different.
    Mr. Butler. I don't know if they are counting them 
differently. That was a voluntary program that was set up 
between the industry, the Coast Guard, and the Marine exchange 
office out in Southern California. We had too many ships too 
close together and too close to shore with winter weather 
coming on. There was concern about safety and so------
    Senator Wicker. OK, but if they are loitering out for 
whatever reason, slowing their speed, to say that those ships 
are not part of the supply chain delay is a little inaccurate. 
So thank you for that. Let me just ask briefly, Mr. Krug. Mr. 
Krug, that 90 day old popcorn that was still probably OK, I 
hope you are able to send that somewhere.
    Mr. Krug. Yes, we are able to check that over and 
recondition it, and we were able to reuse that product. So it 
is just an ongoing complication that probably you don't think 
of when you say there are delays in shipment. Like--testified 
here today, the problem just grows and grows.
    And we have all the more reason to do all we can, and I 
again appreciate you meeting to work on that today to keep the 
amazing system that we have had in the past moving. It is best 
for agriculture and best for small businesses, and best for 
consumers.
    Senator Wicker. Well, thank you. I wish you well, and I was 
just going to offer to take some of that popcorn because I am 
with Senator Blumenthal in support of popcorn, and with some 
relatives in Nebraska, I am sure it is among the finest. I 
yield back and thank the Chair for his indulgence.
    Senator Peters. Thank you, Ranking Member Wicker. Senator 
Baldwin, you are recognized for your questions.

               STATEMENT OF HON. TAMMY BALDWIN, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Baldwin. Thank you, Mr. Chairman. So shortages in 
shipping containers, chassis, and truck trailers have all 
contributed to the supply chain problems that are the subject 
of this particular hearing. And I have seen media reports that 
describe these newly in demand items as simple or an 
afterthought. In Wisconsin, however, we know that these 
products are actually highly engineered by companies like 
Stoughton Trailers, and the work of Wisconsin manufacturers is 
never an afterthought for me.
    What is overlooked is the decline of our manufacturing 
capacity, which has left us unprepared to respond to many of 
the problems that are created by the pandemic. So in order to 
rebuild our manufacturing base and make products that we need 
for our supply chains right here in the United States, I have 
introduced the Supply Chain Resiliency Act.
    That legislation, which was referred to this committee, 
provides assistance to address supply chain bottlenecks by 
increasing production, domestic production. And I am working to 
ensure that similar support is included in our Build Back 
Better legislation.
    So, Mr. Regan, in your view, how would increasing the 
domestic production of things like containers and chassis and 
trailers improve our supply chain bottlenecks--I guess reduce 
our supply chain bottlenecks would be a better way to put that. 
And what sort of emphasis should we be putting on buy America 
and make it in America?
    Mr. Regan. Well, thank you, Senator, and thank you for your 
unwavering support for U.S. manufacturing and the good union 
jobs that it supports. I think you have really hit the nail on 
the head here. And we--the fact that we are so reliant on 
foreign manufacturers, foreign products, including chassis and 
other parts of the supply chain in railcars, for that matter, 
really made us much more susceptible to failing when something 
like this happens, when we have a crisis. Increasing our 
domestic manufacturing capacity should be a priority for this 
Congress and for this Administration.
    I know that it is for many of you. And also, as we start to 
see more emerging opportunities with new technology, things 
like electric vehicles and things like that, those are emerging 
markets, and we have an opportunity with the right type of 
investment and the right type of policies to make sure that the 
U.S. is getting an important part of that supply chain in that 
market share for manufacturing.
    Senator Baldwin. Thank you. I am going to stick with you 
with this next question. I have been long concerned about rail 
service and competition, and these supply chain challenges 
underscore the need for structural changes for freight rail. At 
the Surface Transportation Board, Chair Marty Oberman has 
raised concerns about the significant impact the job cuts have 
had on the railroads.
    I know we have already been discussing that, about their 
ability to serve their customers and move goods across the 
country. Since 2014, the industry has cut about 30 percent of 
its work force, and I introduced an amendment, as you gave it a 
shout out, to the NDAA that would direct the STB to develop 
standards and guidance related to their common carrier 
obligations, and in so doing, require the STB to consider 
workforce reductions and infrastructure maintenance by 
railroads.
    So now more than ever, the railroads really should be 
focused on their workers and shippers, not just shareholders. 
What do you see as the impact of these job cuts, specifically 
on the ability of railroads to be able to provide reasonable 
service and again meet their common carrier requirements?
    Mr. Regan. Thank you. And we talk a lot about this, and in 
our written as well, about precision scheduled railroading, is 
what we like to call it. It has put a lot more of the onus on 
the shippers themselves. There is a lot of reduced flexibility 
because of the sharp decrease in work forces and also in 
equipment. There has been a lot of mothballing of railcars and 
closing of rail yards. So what shippers end up with is a take 
it or leave it approach.
    So it is essentially, can I reach this car and ship my 
goods? Or am I going to have to try to, you know, catch the 
next train or use another mode of transportation? And 
oftentimes, that alternative is far more expensive. We have 
spoken, I have spoken with Mr. Oberman quite a bit about this, 
and he does need the tools and the authority to be able to 
really look into it and investigate it and oversee to ensure 
that these railroads are fulfilling their common carrier 
obligations.
    Senator Baldwin. Thank you.
    Senator Peters. Thank you, Senator Baldwin. Senator Tester, 
you are recognized for your questions.

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman. This is a great 
committee. We have got folks from the World Shipping Council 
and the American Federation of Labor. Mr. Doyle, do you deal in 
cars or car parts? Parts? That is a good thing because we like 
to redo cars on the farm, and we also like to eat popcorn. So 
here we go. I am just a couple of months away from starting our 
45th year on our family farm.
    And so we have seen a lot of increases of inputs, and I 
hate to say every time, but I am going to say every time we see 
a bump in prices, we see a bump in the cost of inputs. And this 
is for you, Mr. Krug, how much of the increased price in 
fertilizer and chemical that we talked about, and I have heard 
the same statistics you have, and I believe them to be true, 
but how much of that increase cost actually has to do with 
shipping? Do you know?
    Mr. Krug. I don't have any exact numbers on that, but I am 
sure it is a combination of input cost of fuel is one of those, 
and as has been mentioned earlier is also market seeing as 
demand is high, there often seems to be increases in prices.
    As far as the products that we produce, the popcorn, we 
are--there isn't any supply shortage. We are able to tell our 
customers we have the product. But it will be a big deal next 
year, you are correct. Sounds like we are both in farming, and 
it will be challenging to see how we are going to afford those 
increase in inputs.
    And I don't have a good answer on why it is such a big 
increase, but I know that it is.
    Senator Tester. I have my own thoughts on it, and it has a 
lot to do with the lack of competition in the industry, I 
believe, but time will tell that out. This is for you, Mr. 
Butler. The statistics I have seen is that we are losing 
potentially about 22 percent of our exports, our Ag exports, 
because of the lacking--lack of shipping ability.
    I didn't get here at the very beginning, but one of you, 
and I think it might have been you said, we got more coming in, 
imports, than we got going out. It would seem to me that that 
would mean that exports have an advantage in this system 
because there is more boats and containers to take care of 
those exports. Can you tell me why it isn't happening? And if 
you want to add in why taking empty containers back when we are 
losing 22 percent of our exports is something that we should 
accept?
    Mr. Butler. Thank you, Senator. On the 22 percent, my 
understanding is that number comes from a poll that the 
Agricultural Transportation Coalition did. We have never seen 
that poll, so I don't really--I can't really speak to the 
legitimacy of that number. But we do know this. We know that 
both importers and exporters are having trouble moving their 
goods efficiently. So there is no question about the nature of 
the problem. In terms of the space in and out, and I did refer 
to this a little bit earlier, in normal times--pardon me.
    In normal times, we are about two to one imports to 
exports, right. So you always have to reposition some empties. 
During this import surge, particularly in Southern California, 
we have gone up three to one or more. So the big problem is 
really the imbalance, and it is keeping everything moving so 
you can get it to the next person, and in the case of your 
question, a U.S. exporter. And then once they get that 
container, a lot of their fight is getting it to the port so we 
can put it on a ship.
    Senator Tester. Yes, and there is money in the bipartisan 
infrastructure package to do some things with shipping and do 
some things with rails that I look forward to get out the door. 
I do agree with Mr. Regan that we have an opportunity here to 
start manufacturing more stuff in this country, and my good 
friend Senator Baldwin, because quite frankly, this is kind of 
silly.
    I mean, truthfully, that we are depending upon other 
countries for stuff we can do right here. And we might say, 
well, you know, it costs too much to build it here, but it is 
costing us a lot with this supply chain stuff. And so it is 
really important.
    So I have got a question for you, Mr. Doyle, simply because 
you are in the automotive business, and I like my son, actually 
like to fix up old cars. If you were king for a day, what would 
you do to solve this problem?
    Mr. Doyle. I suppose retire is not an acceptable answer.
    [Laughter.]
    Senator Tester. You would retire immediately, is that what 
you said?
    Mr. Doyle. I think that we have got long term and short 
term issues. I have joked with my peers, having read through a 
lot of the bills and acts that are out there, that one of the 
things that I have seen is that you are pretty clever at naming 
these bills. I like The Grinch Act and things like that. In the 
short term, I have joked about the idea, I would like to see 
the Dunker Act. Everybody on the boat go out and pick up 
something and bring it to shore and let's get things rolling. 
And I know that is in jest, but it gets at the question of 
urgency, and it gets at the question of creativity to solve 
this problem.
    What I have to do every day is look at my employees and 
talk to them about wages and unemployment issues and lower 
bonuses and less opportunity for training. And why is that? 
Well, part of it is because there is this backup in the system, 
and I will defer to the two gentlemen to my right as experts on 
why and how that is occurring. But if I were king for a day, 
first thing I would do would be I would create a sense of 
urgency by getting these things done. I don't know what the 
answers are. I think there is a lot of good stuff in the 
Freight Act that gets at this.
    I have seen a lot of the bills and I think a lot of really 
good thinking is being done. I would ask for urgency. The 
second thing if I were king for today is I think that there is 
an awful lot of being that is also being talked, that is 
fundamentally addressing the needs for us to upgrade our 
infrastructure to support manufacturing for the long term.
    I think that the infrastructure bill gets at a lot of those 
things. There is money out there for roads and bridges, and it 
looks like you are electrifying everything from vehicles down 
to tricycles. All very cool stuff. And so I think that that is 
on the right path as well. King for a day, I would get after 
those things with a sense of urgency.
    Senator Tester. OK, thank you. Thank you, Mr. Chairman.
    Senator Peters. Thank you. Senator Tester. Senator Scott, 
you are recognized for your questions.

                 STATEMENT OF HON. RICK SCOTT, 
                   U.S. SENATOR FROM FLORIDA

    Senator Scott. First, I want to thank Chair Peters and 
Ranking Member Fischer for hosting this hearing today. As 
President Biden continues to push failed policies and 
unconstitutional vaccine mandates, the United States is facing 
a major supply chain crisis.
    Higher prices and product shortages caused by this crisis 
are hurting families, like poor families that are struggling 
every day to make ends meet and our small businesses in my 
state, and I know all across the Nation. Around my state what 
they are seeing is they are seeing the shelves not stocked with 
everyday items, and it is an everyday challenge to get the 
goods on the shelves.
    So what we have seen is instead of creating a friendly 
business environment to help rebound from the pandemic, 
President Biden has made a priority of his Administration to 
add burdensome regulations that have stifled economic growth.
    When I was Governor of Florida, what I saw is not just 
cutting taxes, it is reducing regulations and streamlining the 
permitting process that help you get more jobs. I have got--we 
have 15 seaports in my state, and what we are seeing around the 
country as American ports are experiencing severe cargo delays 
as we head into the holiday season. We are also seeing 
inflation now is the worst it has been in 30 years. And as I 
talk to many manufacturers, are seeing double digit cost 
increases and that is going to get passed on over the next year 
or two to customers.
    I find it--you know, the way I have watched is, instead of 
the Secretary of Transportation, the Secretary of Commerce 
going on and figuring out how to solve a problem, what they are 
seeing is--what I have seen is they go on TV, and they have 
commentaries about what the problem is, but they don't solve 
it.
    I have requested oversight hearing in this committee to 
address the current supply chain crisis. I have called for 
Secretary of Transportation Buttigieg and Secretary of Commerce 
Raimondo to testify about what their plans are. When I was 
Governor of Florida, when we had a problem, we got on a plane, 
we went down to the city, and we sat there and solved the 
problem.
    And what we are seeing right now with those two Secretaries 
is, I mean, I see them on TV, but I have not seen one of them 
go to the port in Long Beach and done squat. I mean, that is 
not what you do if you get elected in your--or you get 
appointed to these positions.
    So I want to thank Chair Peters and Ranking Member Fischer 
for hosting this meeting, and I am encouraging Chair Cantwell 
to urge Secretary Buttigieg and Secretary Raimondo to share 
their solutions. I don't know why they wouldn't want to come 
and share their solutions and show what they are going to do to 
solve these problems.
    But in the meantime, I am going to hold all the nominations 
to the Department of Transportation and Commerce until that 
happens. I think the American public deserves it. And I think 
it is wrong that they won't come here and tell us what they are 
doing to fix it. So my first question is for Mr. Butler.
    So as the CEO of World Shipping Council, what would you 
say--would you say the Department of Transportation has a 
pretty significant impact on shipping and the overall supply 
chain?
    Mr. Butler. Senator, the fact of the matter is that whether 
it is the Department of Transportation or any other part of the 
Government, there is a limited number of things that Government 
can do to unwind the situation. There has been a lot of talk 
today about some of the infrastructure investments, and in the 
long term, those are absolutely critical. But in terms of the 
short term situation that we are facing today with this 
important surge, it has really just saturated the supply chain 
from end to end. It is going to be commercial actors, the folks 
that run that supply chain that unwind that thing. We 
appreciate all the help we can get, but in the end, it is our 
job.
    Senator Scott. So my--we had, when I had a hurricane, some 
days we were selling nine times as much gas in 1 day. And for a 
week before a hurricane, we sell multiples. And what we did is 
we sat down, we organized, and we sat down with every level, 
every player all along, and we streamlined the process. We 
waived regulations.
    We had--highway patrol helped move the trucks to get the 
gas out. And I have not seen one thing like that out of this 
Administration. So I don't believe that it is going to be run 
by Government. But clearly Government could have an impact by 
just helping move the process along and getting everybody 
together and talk about it because you have to be able to 
streamline this.
    And I haven't seen them do it one time. So Mr. King and Mr. 
Doyle, what--do you guys employ--how many jobs do each of you 
have?
    Mr. Krug. We have about 80 positions in the United States, 
and we have a small company in Mexico where we have about 50 
employees.
    Senator Scott. How many non-essential--how many non-
essential workers do you guys have?
    Mr. Krug. Probably zero. They are all pretty essential, and 
we have been fortunate to keep all of them throughout all this. 
In a lot of ways, the system has worked quite good. The PPP was 
very helpful, and we stayed open through all of the pandemic, 
and we have not let anyone go. We need all of them. They are 
all essential.
    Senator Scott. How about you, any non-essential? So, when 
you hear these regulations that come out that you have got to 
treat these nonessential workers somehow, you know, 
differently. What that means--I mean, does that make any sense 
to you?
    Mr. Krug. If you are talking to me, no. And as far as 
Nebraska, the unemployment rate is quite low, and I think we 
want to continue to encourage hardworking Americans and reward 
them. And that--so that, yes, there is a great need for work, 
and we are grateful for the great workforce that we have, but 
certainly need to continue to encourage them and reward those 
that are working.
    Mr. Doyle. I would completely concur with all that was just 
said. Our issue isn't non-essential workers, our issue is not 
having enough workers at the moment. We have what I would 
consider an outstanding company culture. I think we address a 
lot of the questions of wages, training and development, 
excellent leadership throughout the facility, and my biggest 
concern is that we need to focus on growing employment and 
focusing on the things that will continue to attract people to 
us as their best option as a place to work, because through our 
work, they can provide for their families, and they can provide 
for their personal and professional development. That is our 
focus on employment.
    Senator Scott. Thanks for being here. Thank you, Chair 
Peters. Thank you, Ranking Member Fischer.
    Senator Peters. Thank you, Senator Scott. Senator Warnock, 
you are recognized for your questions.

              STATEMENT OF HON. RAPHAEL WARNOCK, 
                   U.S. SENATOR FROM GEORGIA

    Senator Warnock. Thank you so very much, Chair Peters. 
Whether it is parents shopping for groceries and holiday 
presents or businesses trying to deliver for their customers, 
we have all felt the effects of the current supply chain 
disruptions.
    And that is why I convened a roundtable last month with 
Georgians representing the Port Authority's workers, freight 
transportation, local small businesses, and big international 
companies to learn more about the challenges they are facing, 
and to discuss the solutions that they are already 
implementing.
    And after that roundtable and many conversations with the 
White House supply chain disruptions task force and the Georgia 
Ports Authority, we were able to secure $8 million to help 
alleviate congestion at the Port of Savannah.
    With these funds, the Georgia Ports Authority is able to 
partner with railroads to convert existing inland facilities 
into pop-up container yards.
    Mr. Regan, I know from your testimony that you are quite 
familiar with what the Georgia Ports Authority is doing. Could 
you elaborate on how investing in these pop-up facilities will 
help relieve dockside congestion and move vessels in and out of 
ports more quickly, especially when we see these big spikes in 
container traffic?
    Mr. Regan. Certainly, Senator. While we know that, you 
know, all the challenges of LA, Long Beach have gotten a lot of 
the headlines, we know that there are a lot of problems in 
Savannah as well. But you know, these pop-up shops again, as 
Mr. Doyle or Mr. Butler mentioned, one of the problems is there 
is no place to put these containers. So the pop-up areas will 
have more areas for containers so we can start moving them out 
more quickly.
    And this is actually an example of an area where the Biden 
Administration has actually provided more flexibility for port 
operators to be able to use allocated money for more flexible 
purposes to alleviate the problems existing in the supply chain 
right now. So this is an example where the Biden Administration 
has acted to alleviate to provide more flexibility and more of 
an ability for operators to address the problem that they are 
seeing right now.
    Senator Warnock. Thank you so much. I think these pop-up 
facilities are a part of the solution, and we are already 
seeing declines in vessel backlog, load time, truck turn times. 
As a native of Savannah, Georgia, I am very proud of the port 
in Savannah, and we want to make sure that we provide capacity 
so that the port can address the current supply chain issues.
    Mr. Butler, in your testimony, you mentioned the lack of 
land side capacity at U.S. ports as one of the causes for the 
congestion that we are seeing. Do you think increased Federal 
investments in port and multimodal freight infrastructure will 
help ease congestion and buildup that necessary capacity to 
handle increased ocean shipping traffic long term?
    Mr. Butler. Senator, long term, it is absolutely--it has to 
be beneficial to have that increased investment. There is no 
question about it.
    Senator Warnock. Can you say more about that?
    Mr. Butler. Well, you know, you asked your question in 
terms of long term, and I think that is appropriate and this 
goes a little bit to something I said to Senator Scott. The 
short term is really an operational situation that we all have 
to work together throughout the supply chain to try to solve.
    And it is every hand-off from the ship to the port, from 
the port to the railroad, from the railroad to the warehouse, 
all of that right is saturated. So we have to work through all 
of that. But having said that, for the long term, if each of 
those points in the supply chain is more robust from better 
investment, then it all works better, right, when you get 
pushed with a situation of congestion like we have today.
    Senator Warnock. These investments, as you point out, are 
critical. And that is why I was proud to support Georgia Port 
Authority's successful INFRA grant application for nearly $47 
million to build the Northeast Georgia inland port in Hall 
County.
    And that is one reason I pushed for increased funding for 
port projects and multimodal grant projects in the bipartisan 
infrastructure package. I look forward to working with you, 
with the Administration to get these investments out to Georgia 
as soon as possible. Thank you so much.
    Senator Peters. Thank you, Senator Warnock. Senator Thune, 
you are recognized for your questions.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Chairman Peters and Ranking 
Member Fischer, and thanks to all the witnesses for being here 
today. It has already been pointed out and we all know that the 
country is facing an unprecedented supply chain crisis, with 
Americans encountering empty store shelves, long wait times, 
and rising costs as the holiday season approaches.
    Agricultural producers are also feeling the crunch, with 
capacity for their goods being hampered by a combination of 
surging demand for containerized shipping and a massive backlog 
at our Nation's ports, particularly L.A. Long Beach. This 
inefficiency has downstream effects on commodity prices, which 
is hurting farmers and ranchers across the country and 
including in my state of South Dakota.
    And that is why Senator Klobuchar and I, along together 
with Senators Sullivan and Baldwin, plan to introduce the 
Senate companion to the Ocean Shipping Reform Act of 2021, 
which takes significant steps to clarify the authority of the 
Federal Maritime Commission in resolving disputes and curbing 
anti-competitive behavior.
    I believe these changes will increase the accessibility of 
the FMC to smaller shippers and provide the agency with clearer 
authority to intervene when unreasonable practices relate to 
the movement of cargo are discovered. More generally, our 
Nation's ports are desperately in need of two things, 
modernization and transparency.
    And a failure to invest in terminal automation and port 
efficiency initiatives such as data sharing compounds the 
problems we are already facing today and puts the United States 
below the global average in vessel wait times. Which is why I 
am also proud to be a co-sponsor of Ranking Member Wicker's 
Freight Act, which takes strong actions to improve the movement 
of freight, I should say, across the supply chain. A resolution 
of this crisis is imperative, and I look forward to discussing 
this matter with our witnesses today.
    Mr. Krug, thank you for being here to testify today 
virtually about the supply chain challenges that your business 
has faced throughout the pandemic. I have heard from several 
businesses like yours and can certainly understand the 
frustration of losing hard won business across the world due to 
circumstances that were entirely out of your hands.
    As I previously mentioned, the bill that I plan to 
introduce with Senator Klobuchar would provide the FMC with 
authority to pursue enforcement action if truly unjust or 
unreasonable practices related to vessel space accommodations 
were discovered.
    Do you believe that such a change would help address the 
challenges that you are facing in getting your products to 
markets across the world?
    Mr. Krug. Yes, that certainly sounds positive and helpful, 
and we appreciate all of your efforts in that regard. And so 
yes, the answer would be yes, I think that would be very 
beneficial. I did have one more idea in regard to that 
opportunity, if I were king for a day. I was just thinking 
about that. I think I would order everyone to go to the movies 
and buy two boxes of popcorn.
    [Laughter.]
    Senator Thune. OK. Well, I don't think you would have any 
opposition to that idea on this committee, at least not from 
this group. You mentioned in your testimony the difficulty you 
face in getting containers inland, and I am just wondering if 
you have any suggestions for what Congress can do to ease the 
movement of containers once they leave the ports?
    Mr. Krug. Once they leave the ports?
    Senator Thune. Yes.
    Mr. Krug. Yes, I think the biggest thing there is good 
communication from the shippers to us. One of the big costs 
would be if we plan on 10 containers coming and then are good 
forwarding companies are only able to ship out 2. So the better 
the communication is in regard to, no, this ship really is 
going to not come in, it is not going to be available, it will 
be 3 weeks--while that doesn't really solve the problem and the 
big picture, it does help reduce demurrage charges and 
warehouse that are overfilled because you are expecting to ship 
10 and you get 2 containers. So that would be one point.
    Senator Thune. Yes, thank you. Mr. Doyle, you mentioned in 
your testimony the effects of demurrage charges on the price of 
your products and called for an increase in the enforcement 
capabilities of the FMC in respect to detention and demurrage 
charges.
    In the bill, as I mentioned, that I plan to do introduce 
with Senator Klobuchar would require the FMC to further define 
what constitutes unreasonable detention and demurrage 
practices, while also establishing a separate, streamlined 
complaint process to more efficiently resolve disputes.
    Do you believe that improvements to the complaint process 
and better guidance from the regulator on what constitutes an 
unreasonable detention or demurrage charge will help to address 
the challenges that you are facing?
    Mr. Doyle. As I mentioned at the beginning, since our 
contracts do not have us as freight responsible, we see the end 
of this, but not the causes of it. Everything you have said 
sounds logical, but I would certainly defer to the people who 
are wrestling with the issues. I don't understand the current 
condition well enough to, I think, give a reasonable answer to 
your question.
    Senator Thune. Mr. Butler, can you react to that?
    Mr. Butler. Senator, I think having better dispute 
resolution mechanisms probably would benefit everybody. There 
are some other provisions, if I understand the bill correctly, 
that I would like to work with you and your staff on, having to 
do with certification, for example. There is some real problems 
with how that would work. But in general, the FMC has a lot of 
authority today. If we can make it quicker and easier to get 
disputes resolved, I think that is all to the good.
    Senator Thune. OK. Thank you, and thank you, Mr. Chairman.
    Senator Peters. Thank you, Senator Thune. Votes have been 
called, so I am going to be stepping out to vote. Ranking 
Member Fischer will take the gavel, but before I step out, 
Senator Klobuchar, you are recognized for your questions.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Very good. Thank you very much, Chairman 
Peters, Senator Fischer, for your work. As Senator Thune noted, 
we have to take action here. Agricultural exports, and we both 
are in major, all three of us here, major Ag producing States, 
very important export for our country in so many ways. And Ag 
exports have been particularly hard hit by increased costs and 
transportation challenge. I think one of our problems here is, 
yes, we have supply chain problems. We all know that.
    We all know there are multiple answers and proving the 
infrastructure, what is going on in the shipping industry, work 
force, everything from training people to go into the jobs that 
we have available now to wages, to making sure that we do 
immigration reform and get some more workers into certain 
industries.
    So but the problem is it is not the same size fits all. At 
the start of the pandemic, Minnesota Ag producers saw a 47 
percent decline in exports, and in the last 2 years, Ag exports 
have lost--exporters have lost 22 percent of sales. Meanwhile, 
ocean carriers have reported record profits from the increased 
demand for imported goods and higher price for container 
shipment.
    And so that is what we are dealing with here, and that is 
when you step in, because we want the economy to work for 
everyone and especially, obviously for our constituents and 
those that are feeding the world.
    Mr. Krug, in your testimony, you note how your company is 
losing its ability to compete in the global market due to 
challenges moving freight. Do you agree that FMC needs to do 
more to protect competition?
    Mr. Krug. Yes, so we certainly--you know, it is normal 
market, it is a competition that takes place if you are unable 
to deliver or a ship. That end customer is going to get that 
product from some other part of the world.
    So in this case with Argentina and Brazil and so if we are 
not able to deliver, they are not going to say, well, we 
understand we will wait, they are kind of trying to find that 
product as competition normally works, they are going to find 
somewhere else to buy it. So that is where this becomes the 
really important. And I appreciate that. You are doing a good 
job.
    Senator Klobuchar. Well, thank you. Unsolicited, remote, 
but unsolicited. Mr. Regan, it currently costs seven times more 
to ship an export from California to China than to ship that 
same product from China to California. Can you speak to some of 
the challenges with moving freight on land, particularly with 
transporting empty containers?
    Mr. Regan. Sure. And we discussed a little bit this earlier 
in term, yes, we are having our ability to manufacture them 
here and have develop our own capacity to be able to meet some 
of the challenges we are seeing here in terms of container 
supply.
    And I also want to comment that we also agree with the 
comments the Federal Maritime Commission needs to have the 
authority to investigate and oversee the statutory requirements 
that are put in place by that agency.
    Senator Klobuchar. Thank you very much. Maybe you can take 
this one as well. The Port of Duluth is the largest and busiest 
port of the Great Lakes, with 800 vessels and an average of 35 
million tons of cargo per year.
    Minnesota, however, has deferred building a portion of the 
Twin Ports Interchange, a project to replace aging 
infrastructure and better accommodate freight access because of 
construction costs. Mr. Reagan, in your testimony, you note how 
the Port of Savannah is using inland ports to hold overflow 
containers. How important are our inland ports in relieving 
some of the congestion from the coastal areas?
    Mr. Regan. They are extremely important. And I think--the 
other thing that we often find right now in terms of the lack 
of development in some of these major port issues is frankly 
funding. Funding is a big problem, in terms of pursuing whether 
it be more inland port, but also more intermodal facilities.
    And we have discussed the lack of rail connectivity as one 
of the major problems. But 60 percent of ports say that funding 
is their number one hurdle toward addressing some of these 
problems. So we are very positive about the $2 billion in the 
bipartisan bill toward the Supporting Infrastructure 
Development Act, and that is really going to go a long way 
toward the long term solutions.
    Senator Klobuchar. Great. From a Duluth, Minnesota 
perspective, agree. Mr. Krug, this will be my last question. 
While small and medium sized enterprises account for 98 percent 
of U.S. exporters, rural businesses are often located far from 
transportation hubs, making it difficult for them to access 
international markets. Senator Hoeven and I have introduced a 
Promoting Rural Exports Act.
    It actually makes permanent what has been a very successful 
effort to have a set group of people working on rural exports 
and giving rural businesses the expertise they need. And this 
is based on our experience both in North Dakota and Minnesota.
    Could you talk about the importance of rural businesses 
having increased access to foreign markets and how it is not 
the same as a multinational corporation, many of them are also 
located in my state, who can employ full time trade experts in 
different regions of the world.
    Mr. Krug. Sure. Yes, transportation, obviously is key. We 
started out a few years ago and we had to pave a road that is 
only 1.2 miles long to get to the highway. But that 1 mile 
opened up the world. And that ability to be able to reliably 
ship containers each day was a big step, and the state of 
Nebraska was supportive of that. So anything that can be done 
to improve transportation and ability to get these Ag products 
to the marketplaces is huge. And there is the rail, of course, 
is important to that. That was some of the issues that have 
happened too--great communication.
    Senator Klobuchar. Yes, OK----
    Mr. Krug. The rail----
    Senator Klobuchar. Yes, I see some of my colleagues are 
here, so I am over--overdone my questions here. So I want to 
thank you very much, all of you. Thanks.
    Senator Fischer. Thank you, Senator Klobuchar. Senator 
Lummis.

               STATEMENT OF HON. CYNTHIA LUMMIS, 
                   U.S. SENATOR FROM WYOMING

    Senator Lummis. Thank you, Madam Chairman. My first 
question is for Mr. Butler. Are there any regulatory barriers 
facing the carriers from operating additional sweeper ships 
that would help alleviate the excess container capacity at the 
ports?
    Mr. Butler. Senator, today, the answer is no. And that is 
one of the things that our members are doing to try to clear 
out some of the empties that have piled up that are getting in 
the way of everybody being able to move their cargo.
    It is a good question though, in the context of some of the 
legislation that is out there because there are provisions both 
in the new Senate bill and in the House bill that would 
essentially say you have to load all export containers before 
you can take any empties. And it doesn't work that way. We have 
to keep both moving, and if we get too restrictive about how we 
operate our networks, then it is going to make it worse for 
everybody.
    Senator Lummis. Followup on that with regard to 
transparency of data. I know Congress has passed several laws 
relating to data transparency for how ports are operating, but 
would additional transparency mechanisms needed for port 
operations, and would they help with that? Could they help the 
communication between empties and offloading and in all of what 
seems to be jamming up some of the ports right now?
    Mr. Butler. There is no question that better communication, 
pardon me, can only improve the fluidity in the system. And 
that is something that really every private sector actor within 
the supply chain is working on today.
    At a place like L.A., Long Beach, where you have got, you 
know, so many terminal operators, so many carriers, so many 
trucking companies, it is a tremendously complex thing. So I am 
not sure how big the role is, for example, for the Federal 
Government in that, but it is absolutely something that is part 
of the solution.
    Senator Lummis. So how do the private sector providers of--
coordinate the communications?
    Mr. Butler. Well, so it is probably a different answer for 
every port, every terminal operator, every carrier, but in 
broad scope, I mean, the ocean carriers communicate with the 
terminals that they are going to call while the ship is still 
at sea. Say, this is when we want to come in, this is what we 
have on board, you know, and they begin communicating with the 
inland transportation providers, the railroads, et cetera.
    So there is a tremendous amount that goes on today. I mean, 
sometimes when you hear this debate, you would get the 
impression that nobody is talking to anybody. And that is not 
true because if that were the case, we wouldn't be able to move 
the tremendous amounts of cargo that we move. But having said 
that, the cargo volumes keep going up, the challenges get more 
and more complex, and so we have to improve our communications 
and information sharing to match that.
    Senator Lummis. So that--there is no role for the Federal 
Government in that, correct?
    Mr. Butler. Well, I would never say never. You don't want 
to say there is no role. There may be some roles in terms of 
encouraging the exchange of information, but if you are asking 
me, should there be some Federal system to handle all that? I 
think from our industry standpoint, we would prefer if you 
would keep that in-house.
    Senator Lummis. Yes, OK, thank you. With regard to the lack 
of available storage space for containers coming off the ocean 
carriers, earlier this fall I wrote a letter to President Biden 
outlining several actions his Administration could take to help 
alleviate some of the supply chain issues we are currently 
seeking. And one of the recommendations was to explore using 
Federal properties for temporary storage for excess containers. 
Do you believe that is a viable option?
    Mr. Butler. Senator, storage off the ports is something 
that I think everybody is looking into today. Whether a 
particular piece of property will work depends on its location, 
whether it can be secured, whether you can get equipment there. 
But if we have empty Federal properties that meet those 
criteria, then that is something we should be looking at.
    Senator Lummis. Well, I noted, and I turn this to Mr. 
Regan, when the gentleman from Georgia was here, he alluded to 
some of these pop-up storage sites. And Mr. Regan, in your 
written testimony, you mentioned how the Port of Savannah use 
Federal funds to create offsite overflow container storage 
areas. What has been the impact for that specific port? And is 
it an idea that should be expanded to other ports?
    Mr. Regan. Sure. The impact has been to remove some of the 
bottleneck that is existing at that port. So you are moving 
some of the containers away from where the offloading is 
happening away from the intermodal facilities, and you are 
creating more of a fluidity at the port. And the reason why 
that was appropriate in that case was the operator of the Port 
of Savannah had leftover money from previous Federal grants, 
and they were given the flexibility to be able to use it to 
address the problem as they saw fit.
    That may be the best solution to other ports. They may want 
to use excess money or use Federal grants for other purposes 
because I think the problems are different at each place. But 
the flexibility is a key part there, and I think that is a 
really important part of the way that the Administration has 
addressed this problem.
    Senator Lummis. Well, you sense the frustration of the 
Committee and trying to understand what the role of Congress 
might be in these issues. I have heard you compliment some of 
the provisions of the bipartisan infrastructure bill. So I am 
hopeful that that can begin to address some of the issues we 
are discussing today. And I encourage you when you have other 
thoughts about how we can help alleviate this problem, we would 
be grateful for your thoughts. And thank you, Mr. Chairman. I 
yield back.
    Senator Peters. Thank you, Senator Lummis. So we are joined 
by the Chair of the Full Commerce Committee, Senator Cantwell, 
you are recognized for your questions.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    The Chair. Thank you, Mr. Chairman, and I want to thank you 
and Senator Fischer for both being stalwarts in getting this 
hearing done. I think this is the third hearing we have had on 
supply chains, so we very much appreciated and appreciate all 
the witnesses being here today to talk about this important 
issue.
    I don't know if any of you caught Fareed Zakaria's 
discussion a couple of weeks ago about supply chain and the 
Infrastructure Investment Act. I thought it was great and I 
will submit this to the record if I can.
    Senator Peters. Without objection.
    [The information referred to follows:]

             Spending on infrastructure might not be sexy. 
              But it's even more important than you think.

         By Fareed Zakaria, November 18, 2021 at 6:35 p.m. EST

    Every two minutes, a water main breaks in America. The total amount 
of treated water wasted every day is about 6 billion gallons, or 9,000 
swimming pools. Every day! And it highlights why the infrastructure 
bill that President Biden just signed into law is so important. The 
need to fix America's crumbling infrastructure has become a weary 
cliche--but that doesn't change the fact that it is indeed falling 
apart. And just as is the case with any kind of deferred maintenance, 
the longer we wait, the worse the problem becomes--and the more 
expensive it will be to fix.
    One way to make clear what a shift the Biden administration's 
infrastructure legislation represents is to look at the amount that the 
Federal government has spent on infrastructure over the decades. In the 
1950s and '60s, infrastructure spending as a percent of gross domestic 
product was over 1 percent. In 2019, decades later and with an 
exponentially bigger economy, spending was at about 0.7 percent of GDP. 
The new surge of spending from the bill will raise it to about 1.3 
percent over the next five years. And the bill has many good ideas to 
encourage private investments that would increase these numbers.
    Economists disagree on exactly how much growth is produced by 
infrastructure spending. But if we take a longer and broader view, the 
payoff seems obvious. Felix Rohatyn, the banker who rescued New York 
City from bankruptcy, wrote ``Bold Endeavors,'' a book that shows how, 
over 150 years, Federal investments created the American economic 
system--from the Erie Canal to the first transcontinental railroad to 
rural electrification to the interstate highways.
    We tend to think of the United States' competitive advantages 
largely in terms of either the capitalist system or the hard-working 
and inventive people who have come to the country over the centuries. 
While those things are certainly a part of the equation, other 
countries can boast similar advantages. An almost unique feature of 
America is that it has the world's largest and most easily accessible 
consumer market in the world, a point made in Peter Zeihan's excellent 
book ``The Accidental Superpower.'' As he notes, the United States has 
17,600 miles of navigable waterways, the world's largest network by 
far. (China and Germany have 2,000 miles each.) Those waterways feed 
into a series of massive deep-water ports. Some of the largest natural 
harbors are Puget Sound, San Francisco Bay and the Chesapeake Bay. The 
latter has ``longer stretches of prime port property than the entire 
continental coast of Asia from Vladivostok to Lahore.''
    But this massive advantage has been eroding for decades as 
waterways, railroads and ports have all faced increased traffic and 
insufficient investment. Almost 80 percent of the inland locks and dams 
that made America's waterways work should have been replaced by now, 
many of them being 60 or 70 years old. New locks would mean barges 
would move through the system much faster. Similarly, investments in 
port infrastructure will ease up these crucial choke points. Better 
roads and faster railways will all make a difference.
    This is a once-in-a-generation opportunity for Democrats to show 
the country that public investment can work. That makes it crucial that 
this money should be spent well and fast. Common Good, an organization 
that advocates good and cost-effective government, put out an excellent 
report in 2015 on infrastructure approvals that should be read by 
everyone involved in administering these funds at the federal, state 
and local levels. A six-year delay in starting construction projects, 
it notes, could cost America $3.7 trillion, which is more than double 
the amount of money needed to modernize key sectors of the country's 
infrastructure by the end of the decade. Common Good's Philip K. Howard 
writes in the report that, ``As practiced today, environmental review 
often harms the environment. America's antiquated power grid, for 
example, wastes the equivalent of 200 coal-burning power plants.''
    Infrastructure sounds like a bore, but it's important not simply 
because of the obvious fact that it makes the economy run. Spending on 
infrastructure is a sign of a healthy society that is willing to invest 
in its future. Yale economist Ray Fair wrote a paper in September in 
which he analyzed the United States' infrastructure spending from 1929 
to 2019. He found that it was around the 1970s that spending as a 
percentage of GDP started to plunge, never to fully recover. It was 
also about that time that America began routine deficit spending. To 
him, both are signs of a society that is more interested in spending on 
consuming in the present than investing for the future. In 2019, the 
Federal government spent four times as much on programs for elderly 
people compared with programs for children.''
    Fair sees the infrastructure bill as a very small shift in that 
long-term trend. But let's celebrate the change and hope that we can 
begin, once again, to embark on some bold endeavors for the country's 
future.

    The Chair. Basically, he was talking about the percentage 
of infrastructure investment as it relates to GDP and how we 
had fallen off getting to less than 1 percent down to 0.7 
percent. But obviously with the infrastructure bill by 2026 we 
would get up to 1.3 percent.
    So while we are dealing with these phenomenon that Mr. 
Butler adequately describes in his opening Statement about the 
impacts of being able to order more and import more and the 
challenges of COVID, we also have to keep in mind that we have 
to make significant infrastructure investments.
    So I think you would all agree that that was a good thing 
that we made these infrastructure investments, and now that we 
have to get them actually implemented. Is that correct that you 
think that this helps immensely in changing the picture here?
    Mr. Regan. Yes, absolutely.
    Mr. Doyle. No argument.
    The Chair. OK, so now we are talking about new patterns in 
addition to this very historic pattern of under-investing in 
infrastructure. And I say this coming from a big trading state, 
so obviously we are exporters and importers, but we, you know, 
a lot of our products, practically every sector is, you know, 
an international more than half of the businesses.
    If you are talking about Washington wheat, 90 percent of it 
is exports. If you are talking about our agriculture or other 
agricultural products, it is exports. If you talk about 
airplanes, the markets are exports.
    So, we care about both, but I am interested in following on 
the discussion about the congestion that is occurring at the 
ports. And Mr. Butler, you mentioned some of the innovation 
that is occurring to try to temporarily move these containers 
to other locations.
    What else should we be doing to try to expedite that? And 
what should we be doing--I am not so sure how much discussion 
has happened on the rail side this morning because obviously 
the price of rail affects this issue as well.
    And a few years ago, we had really exacerbated problems of 
Ag product not even being able to get on to the rail because 
oil was pushing it off. So what do we need to do to help get 
more innovation and moving congestion out of the ports on these 
containers? And what do we need to do to think about rail? And 
maybe Mr. Reagan or Mr. Doyle, you can answer that.
    Mr. Butler. Chair Cantwell, you have hit the nail on the 
head, which is that we, you know, our ports are the interface 
with the sea, and that is the most valuable commercial real 
estate in our country, and it is limited in terms of space. We 
know many of these ports, there is not much room to grow 
physically, so we have to use that space as efficiently as 
possible.
    And to the extent that we can move some of that activity 
off of the terminals that provides a buffer that keeps things 
moving. And that is essentially what we are trying to do right 
now in Southern California. There is a big push in both 
directions.
    One is to get importers to pick up their cargo and find 
someplace else to put it, which is a real challenge for them in 
many cases. So I am not pointing fingers, but that has to 
happen.
    The Chair. Because the warehouses are stacked too?
    Mr. Butler. Correct.
    The Chair. OK, so this is--the problem is, you know, we are 
importing a lot in general, and your testimony specifies why 
that is, because we are making it easier for people to do that 
too.
    Mr. Butler. Right. And so but the port, if you will, is the 
commons for everybody that imports and exports. So if somebody 
has a warehouse space problem, if that impacts every other user 
of that port that is not the best solution. Really, we have to, 
and this is what I mentioned in my opening Statement, is that 
this is new, we have saturation throughout the entire land side 
of the supply chain. We really haven't seen that before. So we 
are working through this in a way for the first time.
    So all those pieces have to fall altogether at the same 
time. And at the same time, we are getting lots of pressure, 
and rightly so from the Administration and others to move out 
empty containers, right, because they get in the way as well. 
If you have too many empties piled up on the port, then that 
stops imports and exports.
    I mentioned earlier one of the things I am concerned about, 
and we would like to work with, with the Committee and the 
staff on the new legislation is to make sure that we end up 
with legislation that recognizes that we have to both move 
exports and reposition empties. It is two sides of the same 
thing.
    The Chair. Listen, we were very involved in getting new 
Federal freight legislation. We said freight can't wait. So 
maybe the new motto is empties have to be moved. So we got to 
get them somewhere else. Thank you, Mr. Chairman. I will take 
for the record, if I could, Mr. Regan, because I see our 
colleagues waiting. We have to get to a vote on that about the 
rail.
    I am very serious about the rail part of this equation 
because I do think that also affects people when the rail 
prices are so high, people don't move the product, they rather 
sit there and wait for another route. Thank you.
    Senator Peters. Thank you, Chair Cantwell. Senator Lee, you 
are recognized for your questions.

                  STATEMENT OF HON. MIKE LEE, 
                     U.S. SENATOR FROM UTAH

    Senator Lee. Thanks so much, Mr. Chairman, and thanks for 
holding this hearing. At the outset of the COVID-19 pandemic, 
e-commerce sales spiked abruptly, and this is something that 
had a tendency to frustrate and did frustrate our already 
troubled supply chain infrastructure and work force.
    Some of the challenges included truck driver shortages, 
others involved outdated scheduling technology or poor 
concentration, lack of storage capacity for containers, port 
labor difficulties and shortages, and scarce freight equipment, 
including things like truck chassis. I want to make very clear 
these are not just coastal state issues. Utah, not a coastal 
state. It is entirely landlocked.
    And yet Utahns and Utah businesses are very directly 
feeling the effects of our supply chain backlog, and they are 
experiencing everything from empty store shelves, online orders 
taking weeks for delivery for things that used to take days, 
and price hikes basically across the board, sometimes more 
excessive with some goods than others, but they are being felt 
everywhere. Utans and Americans generally are, of course, 
looking for solutions right now.
    And while we certainly will have to address some of the 
long term root causes of these problems, it is not something 
that should distract us from the fact that there were also 
temporary but immediate actions that I think we can and must 
take in order to ease the backlogs, especially in time for the 
holidays.
    I have packaged some of these shorter term actions into a 
single bill, a bill that I refer to as the Stop the Grinch Act. 
Mr. Butler, I would like to start with you on this because in 
your testimony, you mentioned the lack of container storage as 
an issue and that U.S. landside capacity simply can't keep up 
with the volume of import cargo.
    Now, it seems to me like we need both short and long term 
capacity. And in the long term, I think there are a lot of 
options that are attractive, including things like the Utah 
Inland Port, which can store containers and ease the burden.
    But that takes a while, of course. So in the shorter term, 
would temporarily using some land managed by the Bureau of Land 
Management for multiple uses to store overflow containers, is 
that something that could help alleviate the challenges with 
land side capacity?
    Mr. Butler. Senator, there is no question that among the 
tools everyone is looking at is, is temporary inland storage. 
With respect to any particular piece of property, now there is 
a whole laundry list of things you have to go through to know 
if it is going to work. Is it in the right place, can you 
secure it, et cetera?
    Senator Lee. Sure. I am just referring to extra space 
generally. I assume that would be helpful if----
    Mr. Butler. That would be helpful, yes.
    Senator Lee. Now you also mentioned the availability of 
truck chassis. You know, so not only are containers sitting on 
chassis, rendering them useless for additional transportation 
needs until the container can be delivered, but the emergence 
of more e-commerce has also highlighted the need for more truck 
chassis as well.
    Do you think increasing the amount of available chassis 
would help alleviate the backlog? If we could do that, overall 
increase the number of chassis, would that be beneficial?
    Mr. Butler. Overall, it would probably help, but when I 
talk to people in the terminals and at the ports, frankly, what 
I hear most often is we need to use what we have better. We 
need to keep things moving.
    Senator Lee. Right. And to that end, to the end of using 
what we have better, what about expediting the processing of 
truck credentials? Would that help some of the workforce 
challenges at the port?
    Mr. Butler. I have not heard of that being a limitation.
    Senator Lee. From what I understand, it is, from the 
information I have gathered suggests that it is. And all three 
of these issues that I have just mentioned are addressed in the 
Stop the Grinch Act, which includes temporary solutions to a 
lot of those same problems. And Mr. Butler, there has been a 
lot of conversation about rerouting cargo to less congested 
ports. Is that happening? And to the extent it is not, what are 
some of the challenges that is causing that to not happen?
    Mr. Butler. It has happened, and it has happened over the 
really the 18 months we have seen this surge. Often, though, 
what happens if you move too much cargo, you just create a 
problem in another place. I mean, there is a reason the cargo 
goes where it goes today.
    That is where the infrastructure is, that is where the 
customers are. So that is something that has been done on the 
margins by a lot of our members to try to maintain schedule 
reliability and keep things moving, but it is not something you 
can do on a wholesale basis.
    Senator Lee. Could temporary Jones Act flexibility help 
with the rerouting of cargo or at least with the transfer of 
cargo off of a ship, anchored off the coast of another vessel?
    Mr. Butler. Senator, we have both Jones Act and non-Jones 
Act members, and we have a policy with our organization of not 
taking positions on the Jones----
    Senator Lee. No, I understand. And you and I may disagree 
on the Jones Act itself. I am just saying that in a time of 
diminished capacity and diminished supply, sometimes it can be 
helpful to utilize provisions already built into the law that 
allow for that.
    Mr. Regan. Senator, if I may----
    Senator Lee. And port depth is also an issue. Port depth 
also sometimes frustrates our ability to reroute because we 
don't have access to dredging. I am out of time, but if you 
wanted to weigh in, I would be happy to hear from you as well.
    Mr. Regan. Sure. And when you talk about waiving the Jones 
Act, and I know you are what you are essentially talking about 
is short sea shipping, which we have done a very thoughtful 
proposal to create a national maritime highway. What your 
proposal does in this bill does not address the underlying 
problem, the underlying hurdle that we have toward creating a 
national maritime highway, which is the double taxation issue.
    Waiving the Jones Act would do nothing to promote greater 
shipping opportunities or actually to make it better to be able 
to move ship across up and down coast and between U.S. ports. 
There are reasonable and strong ways to do this. Unfortunately, 
just waiving the Jones Act is not the way to accomplish this 
goal.
    Senator Lee. Well, I strongly beg to differ, especially 
given that rerouting can be more possible--you can reroute and 
not have to deal with the Jones Act as much if you have access 
to more ports capable of receiving vessels that have made the 
transoceanic voyage. But we have access to so few dredging 
ships and our ports are less deep than they need to be, we have 
fewer international ports capable of receiving these vessels. 
And so that is a problem as well that needs to be addressed. I 
see my time has expired now. Thank you, Mr. Chairman.
    Senator Peters. Thank you, Senator Lee. Well, as we are 
closing this hearing, I just want to kind of have one more 
question to think through. These are some of the points that 
came up and Mr. Butler, you mentioned how the most valuable 
spaces are in our oceans there, and that it is limited and 
there is not much capacity to be able to actually expand those 
parts out there because of all the development that has already 
occurred around them. It is difficult, and if you did, it is 
incredibly expensive. Then there has been issues related to 
moving cargo to other ports.
    And that is really what I want to explore because I think 
there is a great opportunity for us to use the Great Lakes and 
the St. Lawrence Seaway to a greater extent than is currently 
being used. Throughout history, it has been used very heavily 
and you were able to bring cargo right into the heartland, 
right Mr. Doyle, the heartland of America and Michigan, and in 
our ports that we have in the Great Lakes. And if you are going 
to expand ports that have the capacity, you mentioned sometimes 
that capacity isn't there.
    If you are going to invest in capacity, it is a whole lot 
cheaper to do that with ports throughout the whole Great Lake 
system that can handle additional freight that is coming in, 
but you have to have equitable access to Federal resources and 
you have to be held to the same standards.
    We find that the standards for Great Lakes ports are 
different than they are at other ports around the country, and 
that includes standards related to CBP and security issues. My 
question for you, Mr. Regan, is how would smaller seaports 
factor in and thinking about the Great Lakes and other areas as 
long as there is equitable distribution of resources to make 
sure those ports can make the kinds of investments necessary? 
And we know how powerful those investments can be. What are 
your thoughts?
    Mr. Regan. I think they can play a really important role in 
expanding our durability when it comes to these types of crises 
and expand our capacity for moving goods. I think the more the 
investment that we make into making these ports capable of 
receiving larger vessels and capable of transporting them more 
quickly to rail and truck facilities, that is going to be the 
key to making sure they are successful.
    It is one thing to be able to bring a ship in and dock it. 
It is another thing to have the access to the rest of the 
country that makes it a viable financial option. So making sure 
that we have those intermodal facilities and having the 
facilities built to move it is the key to making that a success 
and improving our broader capacity.
    Senator Peters. Right. And certainly, there is no shortage 
of intermodal capacity in the industrial Midwest with 
significant rail assets and highways and material that comes 
through there. And Mr. Doyle, I am sure if material came 
through the port of Monroe that is a whole lot closer to you 
than someplace else and an opportunity for us to grow economies 
in those areas while also dealing with what is a significant 
problem.
    So certainly, look forward to chatting with each of our 
witnesses in the future about how we can think that through 
because I think it is certainly an option that needs to be 
fully considered. I would like to reiterate my appreciation for 
each of our witnesses. Thank you so much for being here today. 
This is a big issue, it is an important issue, and it is a 
complex issue. And we need to all get together and put our 
heads together to think through how we deal, not just with the 
short term issues, as you mentioned, Mr. Doyle, king for a few 
moments, which it is always good to be king, but it is not just 
the short-term issues, but the long-term issues.
    This is not something that is going to go away anytime 
soon, and it will continue to be complex, and we will continue, 
this committee will continue to explore those issues, from 
ocean shipping to the intermodal issues, when you get here to 
the United States as well.
    The hearing record will remain open for two weeks. Any 
Senators that would like to submit questions for the record 
should do so within two weeks. And with that, this hearing is 
now concluded and adjourned.
    [Whereupon, at 12:10 p.m., the hearing was adjourned.]

                            A P P E N D I X


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Response to Written Questions Submitted by Hon. Shelley Moore Capito to 

                             John W. Butler
    Question 1. Congress was able to pass a historic, bipartisan 
legislation that reflected our commitment to nation's infrastructure 
and just this last month it was signed into law. The Infrastructure 
Investment and Jobs Act (IIJA) made significant investments across our 
Nation's transportation system, investing $16.6 billion in port and 
waterway infrastructure. Will the multimodal and port infrastructure 
investments in IIJA help build the landside capacity needed in the 
industry?
    Answer. Yes. The IIJA represents a significant down payment on 
modernizing U.S. ports and intermodal infrastructure, with over $5 
billion for port-specific programs and significant additional grant 
monies for port-eligible programs. Given that the current supply chain 
congestion is the result of an interrelated set of landside 
infrastructure bottlenecks, money wisely spent on transportation 
infrastructure across ports, rail, inland waterways, and highways--and 
the interfaces between the different modes- will increase capacity and 
resilience.

    Question 2. On November 19, I joined my colleague Senator Moran in 
sending a letter to FMC Commissioner Maffei expressing our concern with 
the new ``Container Excess Dwell Fees.'' We are concerned that these 
fees will ultimately be passed on to the American consumer. If these 
fees end up taking effect, what would the impact be on your members?
    Answer. WSC members have worked closed with the Administration's 
Supply Chain Task Force and Port Envoy, the Ports of Los Angeles and 
Long Beach, and their customers to encourage cargo owners to retrieve 
their long-dwelling cargo that ocean carriers have delivered.
    Because of these collaborative efforts, the number of long-dwell 
laden import containers has been significantly reduced, and the long-
dwell fees have, to date, never been charged.
    If the long-dwell fees ever are imposed, WSC cannot speculate on 
how individual members would be impacted and what their response would 
be.

   Follow-up: Since your members contract ends once the cargo 
        reaches the marine terminal, is it likely that these fees will 
        be passed on?
    Answer. Under the FMC's guidance on these sorts of fees, such fees 
are to be charged to the party that has the responsibility to move the 
cargo. As your question suggests, for cargo (the substantial majority) 
that the importer is responsible for moving off of the port, it would 
be that importer that should properly be charged any such fee.

    Question 3. On November 23, I joined Ranking Member Wicker in 
introducing the Facilitating Relief for Efficient Intermodal Gateways 
to Handle Transportation (FREIGHT) Act. This legislation will build on 
the work of the IIJA by minimizing barriers and harmonizing port 
operations in order to alleviate the current shipping crisis. Will the 
provisions of the FREIGHT Act help alleviate the logistical challenges 
you mention in your testimony?
    Answer. Yes. As I responded to Senator Wicker's question during the 
hearing, provisions in the FREIGHT Act would result in improvements to 
landside transportation and logistics--and it is the landside inability 
to process all the cargo that U.S. consumers are ordering and ocean 
carriers are delivering that is the cause of the current port 
congestion.

   Follow-up: What are some of the initiatives your members 
        have implemented that have worked to improve the operational 
        and logistical challenges?
    Answer. Ocean carriers have deployed every available ship and 
container to carry and deliver record levels of cargo. They have 
shifted unprecedented vessel capacity into the U.S. trades in response 
to demand.
    Ocean carriers have also sent numerous empty container vessels--or 
``sweeper ships''--to retrieve thousands of empty containers which has 
freed up needed port space to expand cargo handling operations, as well 
as chassis (upon which the empty containers were fixed for transport), 
which are needed by drayage truckers to haul out the loaded import 
containers and bring export cargo to the ports.
    WSC members are also working with farmers to find solutions in 
getting their goods to global markets. For example, several WSC member 
companies recently joined the International Dairy Foods Association and 
the Port of Los Angeles in the creation of the Dairy Exports Working 
Group, which focuses on identifying and addressing supply chain 
challenges affecting U.S. dairy product exports. Many of the solutions 
are the result of direct commercial and operational collaboration 
between individual carriers and their customers.

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