Chapter 14

Ocean 

Transportati on
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Chapter 14: Ocean Transportation 

The agricultural community uses the ocean transportation network extensively to serve its 

global customers. An estimated 70 percent of all agricultural exports in 2007 were moved via 

ocean transportation to their foreign destinations. U.S. agriculture is known for its high 

standards, quality, and the efficient movements of its goods to customers all over the world, 

and the marine transportation system is critical to its continued growth. 

For the purposes of this study, the ocean transportation system is defined as the combination 

of ocean ports, rail and highway infrastructure adjacent to the port area, and the waterborne 

trade routes used to transport cargo to and from foreign markets. Intermodal transportation—

defined as the movement of marine shipping containers between two or more transportation 

modes—is also described in this chapter. 

A recent study by the U.S. Department of Transportation’s (DOT) Maritime Administration 

(MARAD) reports one of its findings: 

America’s ports and Marine Transportation System are critical to the national 

economy. The importance of our port system will only grow as globalization 

continues and the American economy becomes more integrated into the world 

economy. Increasing world trade has resulted in record levels of cargo entering and 

leaving our ports. This cargo flow has become a large part of the U.S. economy. In 

2006, foreign trade accounted for nearly 22 percent of the nation’s gross domestic 

product.343

This chapter focuses on the ocean transportation industry for both bulk and containerized 

movements, the importance of ocean transportation to agriculture, rate structures and 

influences, capacity availability and constraints, and service challenges. 

Today’s Ocean Transportation Industry 

Three themes in today’s ocean transportation industry affect agricultural shippers: 

• Capacity limits and congestion 

• Environmental stewardship and expansion conflicts 

• Container availability 

This section broadly sketches out these themes and sets the stage for later discussion of why 

they are important to agricultural shippers. 

Port Capacity Limits and Congestion 

Most major ocean ports in the United States are approaching their capacity limits. Congestion 

at the ports and the availability of landside infrastructure is a major concern of U.S. exporters 

and importers. The challenge to the marine transportation system lies in the projected growth 

of the nation’s international trade, and the ability of the marine, highway, and rail systems to 

accommodate the increased volumes of freight shipments so vital to our nation’s continued 
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economic growth. DOT projects total freight volumes will increase by more than 50 percent in 

the next 20 years. U.S. international container traffic is projected to at least double from 2001 

to 2020. Nowhere will this pressure be felt more than at U.S. ports. As trade volumes increase, 

the capacity of America’s intermodal transportation system must increase in order to maintain 

and expand the nation’s economy.344 

Environmental Stewardship & Expansion Conflicts 

Promoting, developing, and implementing environmental stewardship while expanding to 

accommodate increased volume is a challenge for the maritime industry, particularly for the 

ports. The property available for marine development in and around existing port facilities is 

limited. Port expansion plans face competing development issues and environmental concerns 

that limit expansion activities. Property that may be suitable for port development is subject to 

pressures for non-port uses, such as office, residential, or recreational development.345 

Vessel Capacity and Container Availability 

Shippers of containerized cargo are faced with these challenges to container availability: 

• Growing economies in developing countries demand U.S. agricultural exports, but fewer 

containers being available in locations suitable for export can result in lost sales and 

unreliable service to overseas buyers. 

• Importers have increased the use of distribution centers near ocean ports. This practice 

has constrained the number of containers that are moved to inland locations and 

therefore limits container availability for agricultural exporters in the heartland. 

• The increased demand for vessel capacity and container supplies can push up freight 

rates. 

• Increasing demand in other trade lanes (Asia-Europe and Intra-Asia) more profitable to 

ocean carriers could further reduce vessel calls and, as a result, vessel capacity and 

container availability for U.S. exports. 

• The use of the largest container ships in the U.S. trade lanes reduces the number of 

vessel calls at U.S. ports, but decreases costs for carriers when vessels are full due to 

economies of scale. Larger ships carry more containers per trip; therefore, the vessel 

makes fewer trips. 

• The continued ocean container carrier consolidation and vessel sharing agreements do 

their part in reducing vessel calls at some U.S. ports and the number of carriers serving 

the U.S. market, ultimately affecting competition in the market. 

• The potential for a rise in bulk ocean freight rates relative to container rates to increase 

the demand for ocean container service. 
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Characteristics of the Ocean Shipping Industry 

The demand for ocean transportation is a function of global supply and demand for basic 

commodities and finished goods. Therefore, the condition of the world economy, which 

determines the level of international trade, is a primary factor in ocean shipping demand. 

Other economic factors that influence the demand for shipping include currency exchange 

rates, shifts in interregional trade patterns, and seasonal variations in production or 

consumption. 

Ocean transportation is composed of two major commercial markets: “tramp” and “liner.”346 

Tramp vessels are contracted to shippers on an as-needed basis; they do not have regularly 

scheduled routes. These vessels are usually deployed 

by their owners when and where they can find the 

greatest profit. Many tramp vessels are designed to 

carry dry bulk cargo such as grain, ore, coal, or 

fertilizer. Some are designed to carry either dry bulk 

cargo or liquid bulk cargo. Four basic types of tramp 

vessel charter (lease) agreements govern bulk ocean 

grain transportation: voyage charter, time charter, 

bareboat charter, and contract of affreightment. In 

the dry bulk industry, the voyage and time charters are 

the most common. 

The liner shipping market is composed of carriers that 

provide service over fixed time and route schedules. 

Vessels in this market are designed to carry 

containerized cargo, including such agricultural 

commodities as meat, hay, horticultural cargo, highvalue specialty grains, etc. 

The operation and management of liner and bulk 

vessels are significantly different. Liner vessels carry 

containers uniform in size, shape, and function with a 

variety of cargos. Also, the ocean container carrier is 

legally bound to the container after it is discharged in a 

country; part of the ocean container carrier’s 

operational costs requires the carrier to follow the 

container through the inland transportation system to 

its final destination. Bulk ocean carriers do not have 

the extra responsibility and costs associated with 

inland transportation. 

Shipping Charters 

Voyage (or trip) Charter: An agreement 

to lease a vessel to complete one trip 

between a specified origin and 

destination. 

Time Charter: An agreement to lease a 

vessel for a period of time (months or 

years). 

Bareboat Charter: An agreement similar 

to a time charter agreement, except the 

charterer operates and controls the use 

of the vessel during the term of the 

agreement. 

Contract of Affreightment: An 

agreement with a ship owner to carry 

cargo at a set rate, within a set time 

period, without the ship owner 

obligating a specific vessel. 
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Bulk Shipping 

The ocean shipping industry—especially the bulk transportation market—is governed by a 

complex set of economic relationships. The bulk transportation market is marked by high 

competition, frequent changes in charter rate levels, and the relative absence of economic 

regulations. Some characteristics of the bulk market are:347 

• Many firms and vessels compete; no single operator or cartel dominates or influences 

the market. 

• Rates are determined in a competitive environment. 

• Current information about freight rates, trade patterns, and vessel availability is 

publicized. 

• Vessels can be rapidly shifted into different markets and can generally be used to 

transport a wide array of bulk products. 

• Vessel operators have minimal shore-side fixed costs. 

• Barriers to entry for ship owners are relatively low. 

Figure 14-1: Bulk shipping vessel 

Source: Wikimedia Commons 
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Global Dry Bulk Vessel Fleet Capacity 

The total capacity of the dry bulk fleet depends on vessel size and number. Bulk vessels are 

categorized by size: 

• Handysize vessel 

• Handymax vessel 

• Panamax vessel 

• Post-Panamax vessel 

• Capesize vessel 

• Very large ore carrier (Vloc) 

Due to the high volume of trade and shipping economies of scale, Panamax vessels are 

commonly used to transport grain from the United States to markets in Asia since they are the 

largest ships that can transit the Panama Canal at its current size. Handysize vessels are 

frequently used to transport grain from the Great Lakes to ports situated in shallow waters or 

on other lower-volume trade routes. 

The capacity of the world fleet is determined by fleet performance, ship building, and ship 

scrapping activities. The addition of new vessels to the fleet increases the supply, and the 

retirement or scrapping of older vessels diminishes it. Fleet performance is influenced by vessel 

traffic congestion at major ports, vessel operating speed, occurrence of vessel breakdowns, and 

other factors. As of February 2010, the total bulk vessel operating fleet (both dry and liquid 

bulk vessels) was 10,258 vessels, resulting in 833.6 million deadweight tons (mdwt).348 About 

7,121 vessels, accounting for 55 percent (462.3 mdwt) of the total deadweight, were dry bulk 

carriers (Table 14-1). During the same period, the Panamax bulk vessel fleet was estimated at 

1,841 vessels, accounting for a total of 131.2 mdwt. The dry bulk Panamax vessel fleet was 

1,483 vessels, representing 100.1 mdwt. Approximately 76 percent of the Panamax vessels are 

allocated to dry bulk shipments. 

Table 14-1: Global dry bulk fleet, February 2010 

Type of Vessel Size (dwt) No. of Vessels Capacity in mdwt 

Handysize 10,000-40,000 2,636 72.0 

Handymax 40,000-60,000 1,801 89.2 

Panamax 60,000-80,000 1,408 101.1

Post-Panamax 80,000-110,000 311 27.7

Capesize 110,000-200,000 793 131.0

Vloc 200,000+ 172 41.4

Total 7,121 462.4 

Source: Drewry Shipping Consultants

 
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Indicators of expansion in the fleet size are the industry orderbook for new vessels and new 

building activity; demolition activity is a good measure of the vessels’ retirement rate. 

Orderbook statistics represent the scheduled delivery date for newly built vessels (Table14-2). 

Owners were encouraged by the relatively high ocean freight rates during the 2004–2008 

period to order additional vessels. 

During February 2010, 1,779 bulk vessels were on order and scheduled for delivery, totaling 

about 168.5 mdwt. Just over 73 percent of these vessels were dry bulk carriers, about 124.3 

mdwt total. However, demolition activity was almost non-existent. Only 23 bulk vessels were 

scrapped during February, representing about 1.9 mdwt. About 0.411 mdwt of the scrapped 

vessels were dry bulk vessels. Dry bulk vessels on order until 2015 totaled 287.9 mdwt and 

represent about 63 percent of the existing fleet (Table14-2). The implication of a lower 

scrapping rate and a robust orderbook is that vessel supply will keep increasing and may keep 

the cost of shipping and return on vessel assets low if the demand for vessel loading activity 

does not catch up. 

Table 14-2: Global dry bulk orderbook, 2010-2015 

Type of vessel Size (dwt) No. of vessels Capacity (mdwt) % of fleet

Handsize 10,000-40,000 793 25.878 35.4%

Handymax 40,000-60,000 884 50.418 55.9%

Panamax 60,000-80,000 273 20.316 20.2%

Post-Panamax 80,000-110,000 461 40.459 153.0%

Capesize 110,000-200,000 625 106.997 83.0%

Vloc 200,000+ 151 43.785 109.8%

Total 3,187 287.852 62.7% 

Source: Drewry Shipping Consultants. 

Global Network Impact of Vessel Allocation 

Although bulk ocean vessels are owned and operated by many companies in many nations, the 

majority are registered in just ten countries: Panama, Hong Kong, Malta, China, Cyprus, Liberia, 

Bahamas, Greece, Marshall Island, and Singapore (Table14-3). 

Vessel owners often consider financial, regulatory, and other inducements offered by the 

respective countries when registering their vessels under a national flag. Analysts have found 

that U.S.-flag merchant vessels have higher operating costs than foreign-flag ships, partly due 

to federal regulations relating to ship construction, repair, and on-board labor. In addition, 

some governments operate or subsidize their national-flag ships to create or grow market 

share. Because of higher U.S. flag operational costs, commercial grain exporters usually prefer 

foreign-flag vessels.349 In 2006, over 74 percent of the vessels in the world bulk fleet were 

registered in the 10 countries listed above, totaling about 296 mdwt. Panama registered the 

largest bulk fleet, with 1,865 vessels and a total deadweight capacity of over 124 million tons. 
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Table 14-3: World oceangoing merchant fleet 

Source: Clarkson Research Studies, Vessel Registers, London: Clarkson Shipbrokers, 

<www.clarksonresearch.com>
446

Similarly, about 75 percent of the vessels (totaling about 308 mdwt) in the world bulk vessels 

were owned by just 10 countries: Greece, Japan, China, Germany, United States, Singapore, 

Norway, United Kingdom, South Korea, and Taiwan (Table 14-4). Greece and Japan owned the 

two largest bulk fleets, totaling 1,362 (83 mdwt) and 1,150 (85 mdwt) vessels, respectively. 

Table 14-4: World merchant fleet by country of owner and type 

Source: Clarkson Research Studies, Vessel Registers, London: Clarkson Shipbrokers, 

<www.clarksonresearch.com>
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Container Shipping 

The container phenomenon began in the 1950’s, allowing shippers to save time and money 

using marine shipping containers to transport their goods. Containers reduce the need for 

products to be handled several times between modes of transportation. Less handling also 

results in a higher-quality product upon arrival at the destination. Containers provide product 

segregation, which allows buyers to be specific about the type and quantity of product they are 

buying. Containers provide added safety and reliability during the transportation process, thus 

reducing product deterioration, pilferage, and exposure to the elements during transport. 

Containers also facilitate just-in-time delivery, which reduces inventory costs and increases 

efficiencies of production. 

Most marine containers are a standard length of either 20 or 40 feet long. Container 

movements are often described in terms of equivalent units. A Twenty-foot equivalent unit 

(TEU) is equal to a 20-foot container and a 40-foot container is equal to 2 TEUs. Other sizes of 

containers exist, including 45, 48, and 53-foot containers, but slot availability on ocean vessels 

is limited for them. A 20-foot container holds maximum of 22–25 metric tons of cargo and a 

40-foot container holds 32–36 tons. 

The industry refers to ocean container carriers in several categories, including liner carriers, 

shipping lines, and common carriers. An ocean container carrier is a company that provides 

ocean transportation service for containerized cargo on vessels operating on fixed itineraries or 

regular schedules and provides established rates available to all shippers.350 

Freight rates were historically based on the ocean carrier's tariff. A tariff is a document 

published by the carrier setting forth applicable rules, rates, and charges for the movement of 

goods. The document sets up a contract of carriage between the shipper, consignee, and 

carrier. The term “tariff” is sometimes confused by those outside the industry with a tariff 

assessed in the form of a customs duty that is payable on imported merchandise. In the 

context of ocean shipping rates, they have distinctly different meanings and should not be 

confused. Additionally, ocean ports sometimes use the term “tariff” to refer to a document or 

set of rules that sets forth terms of port services and charges. Since the passage of OSRA in 

1998 the general rate in a shipping company’s tariff has become less indicative of actual rates 

charged, as the vast majority of ocean freight rates are now individually negotiated in 

confidential annual “service contracts” between shippers and carriers. Tariff rates and 

conditions are made available by the carrier to all comers; service contracts, on the other hand, 

are confidential, individually negotiated agreements between shipper and carrier. Tariffs are 

required by U.S. law to be published by the carrier; service contracts are filed confidentially 

with the Federal Maritime Commission (FMC). Freight charges are discussed in more detail 

later in the chapter. 

 
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Figure 14-2: Container Shipping Vessel 

Source: Port of Los Angeles

Container vessels come in various sizes and configurations. In 1956, the first container ship 

carried 58 reinforced highway trailers on the deck of an old World War II tanker vessel. The 

voyage took 6 days to go from Newark, NJ, to Houston, TX. Today a standard container vessel 

can cross the Pacific Ocean from Los Angeles to Tokyo in 9 days carrying as many as 10,000 

TEUs. Because of the nature of containerization, one vessel could be carrying car parts, 

motorcycles, personal electronics, apparel, oranges, grain, wastepaper, scrap metal, or any 

number of varied and unrelated products, all on the same ship. These cargo combinations 

would be impossible to move on a bulk vessel. The newest generation of container vessels can 

carry as many as 12,000 TEUs. These large ships allow shipping lines to create greater 

economies of scale with large amounts of cargo on one voyage. 

Global Container Ship Fleet Capacity 

At the end of February 2010, the global container ship fleet consisted of more than 4,680 

vessels with more than 12.9 million TEU in capacity. Much like the bulk fleet, the container ship 

fleet is organized in categories ranging from a feeder vessel, which has capacity of less than 

1,000 TEU to the very large Post-Panamax*

 vessels that can carry more than 15,000 TEU. 

Orderbook statistics also show that the number of vessels on order and scheduled to be 

delivered between February 2010 and 2014 is estimated to be 873 total vessels, with an 

 

*

 A Panamax vessel is the largest vessel that can currently fit through the Panama Canal. A Post-Panamax vessel 

is too large to fit through the Panama Canal at its current size. 
449

additional capacity of 4.87 million TEU. The Very Large category is slated to experience the 

largest increase in capacity—163 vessels with capacity of 2.1 million TEU, more than 444.5 

percent of the current fleet of ships of this size. Demolition or scrapping activity statistics are 

not available for container ships. However, as larger vessels join the fleet, smaller vessels are 

often reallocated to the intra-Asia trade lanes where feeder vessels are needed to access 

smaller ports. 

Table 14-5: Global container ship fleet, February 2010 

Type of Vessel Size (TEUs) No. of Vessels Capacity 

(thousand TEUs)

Feeder <1,000 1,167 677

Handsize 1,000-1,999 1,186 1,705

Intermediate 2,000-2,999 718 1,820

Panamax 3,000-4,999 869 3,516

Post-Panamax 5,000-7,999 513 3,079

Large 8,000-9,999 192 1,650

Very Large 10,000+ 41 463

Total 4,686 12,910

Source: Drewry Shipping Consultants 

Table 14-6: Global container ship orderbook, 2010-2014 

Type of Vessel Size (TEUs)

No. of 

Vessels

Capacity 

(thousand TEUs)

% increase in 

fleet size

Feeder <1,000 82 62 9.2%

Handsize 1,000-1,999 142 207 12.1%

Intermediate 2,000-2,999 73 182 10.0%

Panamax 3,000-4,999 211 881 25.1%

Post-Panamax 5,000-7,999 114 729 23.7%

Large 8,000-9,999 88 756 45.8%

Very Large 10,000+ 163 2,056 444.5%

Total 873 4,872 37.7%

Source: Drewry Shipping Consultants

As with bulk vessel capacity, the U.S. agricultural community can benefit from this additional 

container vessel capacity. If demand is slow to recover from the recent economic downturn, 

the additional capacity will help to keep rates low. However, carriers must earn an adequate 

return on vessel assets to continue to offer service; otherwise, they will lay up or scrap their 

vessels. 

 
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In 2009, some carriers cancelled newbuilding orders as the economic slowdown diminished the 

carriers’ confidence in the global trade arena. According to a report by Drewry Consulting,351

the revised orderbook figures in February 2010 showed the orderbook numbers have dropped 

26 percent from March 2009 reflecting vessel deliveries, some newbuilding cancelations, and 

less overall demand for vessel capacity. 

In addition to canceling newbuilding orders, ocean container carriers are implementing several 

strategies to decrease costs during these challenging economic times: 

• Employee layoffs—fewer customer service employees could reduce the quality of 

service to customers. 

• Slow steaming—by reducing vessel speeds, carriers can greatly reduce bunker fuel costs 

(and associated emissions). Recently, numerous carriers have announced slow steaming 

initiatives. While slow steaming increases the amount of time for an individual voyage, 

carriers have generally added vessels to routes with slow steaming so that they can 

maintain the previous frequency of vessel calls at each port. 

• Routing vessels around the Panama and Suez Canals to access East Coast ports to avoid 

canal transit fees. Intermodal transit by rail from the West Coast is more expensive than 

the Panama Canal option. All-water routes around the tips of Africa and South America 

are being used as cheaper alternatives. 

• Using their ability to form alliances among the carriers to share vessel and container 

capacity. If the carrier doesn’t have to operate its own vessel, but instead shares the 

cost of another company’s vessel, both companies save money. However, this reduces 

vessel capacity for exporters. 

• Pulling vessels from scheduled routes for dry docking, which reduces the total fleet 

capacity available to shippers. 

In 2009, ocean carriers began idling vessels in response to the collapse in shipping rates and 

demand. According to the Paris-based AXS Alphaliner, the number of idled vessels reached a 

peak of 581 in January 2010352, but carriers have recently been reactivating vessels, and the idle 

number dropped to 474 as of March 15, 2010.353 

Global Impact on Container and Container Ship Allocation 

The ocean container industry works within a global network of vessels, ports, routes, and 

container allocation. The strength of demand for service in a certain trade lane can impact the 

availability of service, vessels, and containers in another. For example, if ocean container 

carriers are able to receive high rates for cargo moving in the Asia-to-Europe trade lane, they 

will probably allocate service and equipment to that trade lane, reducing service and container 

supplies in other trade lanes. In essence, the U.S. shipper is competing for reliable ocean 

container service with other countries and the freight rates they are willing to pay. 

 
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However, over the long term, even as carriers acquire new vessels to support sustained 

demand around the world, unexpected shifts in demand to one country can strain the vessel 

and container pool for another country’s service needs. For example, increased demand in the 

Asia-Europe trade lanes can pull vessel and container equipment away from U.S. trade lanes 

and increased rates, particularly in the Trans-Pacific trade lanes. During times of slow demand 

for ocean container service, the carriers are faced with overcapacity in the current fleet, and 

any new vessels being commissioned into the market only add to the surplus in capacity. Such 

times of overcapacity can provide shippers opportunities to negotiate lower rates, as they do 

through the service contract process or by “spot” rates. 

Government Oversight 

FMC has the authority under the Shipping Act of 1984 (Shipping Act) and its predecessor 

statutes to regulate the ocean common carriers, ocean transportation intermediaries, and 

marine terminal operators. The Shipping Act of 1984 was passed in order to reduce 

government intervention and regulatory costs in ocean transportation and to achieve a 

competitive and efficient liner fleet through greater reliance on the marketplace consistent 

with international shipping practices. FMC can influence the level of competition in maritime 

trade by policing and moving to block carrier agreements that are exempted from antitrust 

laws. 

Most liner carriers that operate in the U.S. trade lanes participate in “discussion agreements” 

and other cooperative agreements regulated by FMC under the Shipping Act, as amended by 

the Ocean Shipping Reform Act of 1998 (OSRA). Discussion agreements are the forum through 

which carriers exercise their anti-trust exemption to discuss market conditions and establish 

voluntary rate guidelines. Several other types of agreements are filed with the Federal 

Maritime Commission and immunized by the Shipping Act from the antitrust laws, such as 

agreements among carriers to share vessels and equipment (e.g., the Ocean Carrier Equipment 

Management Agreement) and agreements among marine terminal operators to discuss rates 

and to coordinate practices and policies (e.g., the California Association of Port Authorities and 

the Los Angeles and Long Beach Port Infrastructure and Environmental Programs Cooperative 

Working Agreement). 

The Shipping Act was crafted in an attempt to make the ocean liner industry more responsive 

to shipper needs. The legislation was designed to: 

• Establish a nondiscriminatory regulatory process for the transportation of trade by sea. 

• Provide an efficient and economic system to carry ocean commerce. 

• Encourage the development of the U.S. flag liner fleet. 

• Promote the growth and development of U.S. exports through competitive and efficient 

ocean transportation. 

 
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As a result of the Shipping Act, members of the discussion agreements (which have come to 

replace the liner conferences, which had mandatory rates set through a common tariff, that 

were common before the Ocean Shipping Reform Act amendments) can collectively agree on 

voluntary guidelines for rates and services.354 

OSRA modified portions of the Shipping Act associated with collective rate setting and the use 

and confidentiality of service contracts negotiated between the shipper and carrier. Previously, 

tariff and contract rates were provided to the public; OSRA required that service contract rates 

be filed confidentially with the FMC. This allows shippers to enter into contracts with carriers 

individually without the carrier being influenced by other members of the discussion 

agreement. Member carriers may still discuss rates and develop rate guidelines, but it is up to 

individual carriers to decide on a customer-by-customer basis whether to implement a 

guideline wholly, in part, or not at all in their confidential service contract negotiations. These 

new regulations helped to increase the competitive nature of the industry. 

OSRA went into effect on May 1, 1999. The biggest effects of OSRA were the increased 

competition among the ocean carriers and stabilization of rates particularly in the U.S. 

westbound Transpacific trade lanes. As shown in Figure 14-3, average westbound rates 

remained fairly flat for nearly 7 years after OSRA went into effect. However, as a result of 

record export demand in 2008, rates rose dramatically to levels not seen since the mid 1990’s. 

In the first half of 2009, the economic downturn caused rates to drop significantly, but by early 

2010, rates have begun to rebound to approach their pre-2008 levels. 

Figure 14-3: Container rates for trans-pacific trade lanes 

Source: Containerization International 
453

Some U.S. shippers would like to do away with the liner carriers’ antitrust exemption for rate 

discussion agreements, hoping to realize increased competition in the industry through the 

workings of the market. However, the carriers question whether adequate ocean services 

could be maintained without discussion agreements. Carriers feel that open competition might 

prove destructive, and ultimately lead to additional industry consolidation.355 Carrier 

consolidations in 2005 and 2006 already reduced capacity available to agricultural shippers on 

some trade routes, particularly on the all-water routes from the U.S. West Coast to Europe. In 

October 2008, Europe eliminated its antitrust exemption for container carrier conferences, but 

retained some exemptions for “consortia agreements,” which all carriers to agree to share 

vessel space. The FMC is in the process of studying the effects of Europe’s repeal. 

Negotiating Service Contracts

As a result of OSRA, exporters and importers typically negotiate confidential service contracts 

with ocean container carriers. These contracts stipulate the volume and type of cargo to be 

moved over a determined period of time between agreed-upon origin and destination port 

regions. Service contracts allow shippers and carriers to enter into agreements wherein 

shippers obtain rate and service concessions in return for cargo volume commitments. The 

negotiations are said to start with the carrier’s tariff, but are refined to meet the service and 

operational needs of the carrier and shipper. Rates are partially determined by the value of the 

cargo being moved. 

The confidential element of the service contract allows the shipper and carrier to develop rates 

in a more competitive environment; however, the carriers’ antitrust exemption allows the 

carriers to discuss the market conditions and establish voluntary rate guidelines. 

FMC Complaint Resolution Process 

FMC is charged with administering the Shipping Act, as revised by OSRA. Under Sections 10 and 

11 of this law, FMC provides both formal and informal complaint resolution processes for 

importers and exporters that believe ocean common carriers have violated the Shipping Act. 

FMC provides mediation services for disputes between individual importers and exporters and 

the ocean carrier. Additionally, FMC conducts investigations if it feels a carrier is in violation of 

the Shipping Act. Finally, any person can file a formal complaint or lawsuit with FMC alleging a 

violation of the Shipping Act. For more information about the FMC complaint resolution 

process see Appendix 14-1: FMC Complaint Resolution Process. 
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Intermodal Facilities 

The use of landside intermodal facilities is essential when moving containerized cargo into 

international commerce. Intermodal facilities are locations where containers are moved from 

one conveyance to another to reach the ultimate destination. These facilities are located just 

outside the ports and throughout the country, mostly in major cities. Some of the intermodal 

hub locations are in Chicago, Memphis, Kansas City, Dallas, and Columbus (Figure 14-4). 

Figure 14-4: Intermodal Facilities, 2002 

Agricultural exporters in the heartland use these facilities to access container pools. Over the 

past few years, major importers such as Wal-Mart, Home Depot, and Target have developed 

distribution centers near ports. These distribution centers allow companies easy access to the 

ports of import where the cargo arrives. The cargo is moved by truck a relatively short distance 

to the distribution center, where the containers are emptied. They are then taken back to the 

ocean port. As a result, shippers located near the ports or within a few hours by truck are 

provided with a consistent pool of containers. 

Over the years, ocean carriers in the U.S. transpacific trade lanes have fed the U.S. import cargo 

business (mostly high-valued electronics, apparel, and footwear), also known as the headhaul

cargo, with sufficient container supplies since these cargoes bring higher rates for the carriers 
455

than the lower-valued export cargo (the backhaul cargo, typically agricultural products, 

wastepaper, and scrap metal). The headhaul is the leg of a round trip that generates the 

greatest revenue to the carrier and greater volume. The backhaul is considered secondary 

because it generates less revenue. In recent years, the higher value of imported cargo has 

brought higher revenues for the carriers, making it the headhaul cargo and relegating the 

exported cargo to backhaul status. The import cargo can be so profitable for the carrier, that 

they return containers to Asia empty in order to more quickly and efficiently supply the 

eastbound cargo with sufficient equipment. Rates for westbound cargo in the Transpacific 

trades have not been sufficient to attract abundant container supplies to inland locations. 

As a result, exporters located further inland struggle to get enough containers; there aren’t as 

many import containers moving inland, as containers are unloaded at distribution centers 

closer to ports. For example, containerized grain shippers in the Midwest rely on import 

containers to supply the container pool for export movements. Even at large container hubs, 

such as Minneapolis and Chicago, containers are becoming increasingly scarce for the export 

community. 

Railroads have increased the rates for picking up loaded containers or dropping off empty 

containers at some rural intermodal hubs. As a result, shippers have to collect containers from 

a major transportation hub, move them to the production site, load them, then move them 

back to the city to get rail service to the port of export. These additional transits increase 

transportation costs for agricultural shippers compared to what they would have been if 

containers had been available at their local rail terminal. An example of this is a rural hub near 

Dilworth, MN/Fargo, ND, where the railroads now quote rates more than three times higher 

than they did just a few years ago. Because of this higher rate, it is now cheaper for exporters 

to use the Minneapolis transportation hub with the additional truck costs than to use the rail 

hub in their local community. When the value of the cargo cannot sustain the extra 

transportation costs, the shipper either loses the sale or loses profit from the sale. 

Transportation options for agricultural exporters are also constrained by the fact that ocean 

carriers in U.S. trade lanes have a practice of only transporting “carrier-owned” containers, 

which are containers that they own or lease themselves. Ocean carriers sailing from U.S. ports 

often impose prohibitive charges for containers that are owned or leased by shippers or thirdparties (“shipper owned” containers), or they refuse them altogether. By contrast, the same 

carriers routinely transport shipper-owned containers from exporters in Europe.356

Transload Facilities 

With increased frequency in recent years, some shippers use transload facilities located at 

major inland intermodal hubs or at facilities by ocean ports. Agricultural commodities are 

transported in bulk by railcar from the production area to the transloading facility. The 

commodity is then transloaded into a marine shipping container. This eliminates the added 

transportation costs to reposition containers and can provide the shipper the opportunity to 

take advantage of the benefits of container transportation even when containers are not 

available in the local production area. Transload facilities near ports also offer the advantage of 
456

loading containers slightly heavier than they could be loaded at an inland location due to 

highway and railway weight restrictions. 

Containerized Transportation of Agricultural Products 

More than half of U.S. agricultural exports by value move in marine shipping containers each 

year. Containers are used to haul all types of products, including both low and high-valued 

agricultural products and grains. Whether it is U.S. grains to Asia, poultry to Russia, or wine to 

Europe, the container facilitates the movement of U.S. agricultural products all over the world. 

Figure 14-5 shows the overall upward trend in using containers for waterborne agricultural 

imports and exports. 

Figure 14-5: Waterborne agricultural container trade 

Source: Port Import Export Reporting Service (PIERS) 

Agricultural shippers regularly take advantage of container benefits in the market place. 

Containers have opened many doors previously not available to U.S. agricultural exporters, 

allowing all types of products, both perishable and non-perishable, to move around the world. 

In 2007, 19 percent of U.S. waterborne agricultural exports on a tonnage basis were moved in 

containers—up from 8 percent in the early 1990s357. Technological advances in the design and 

construction of refrigerated containers minimize loss in commodity quality by slowing 

deterioration of fresh, perishable commodities and, in some instances, assist in the ripening 

process during transit. These specialized refrigerated containers also can maintain a constant 

temperature to ensure frozen products do not thaw. 
457

Table 14-7: Waterborne agricultural exports 

Source: Port Import Export Reporting Service (PIERS) 

In terms of volume, nearly 20 percent of waterborne agricultural exports in 2007 were moved 

in containers358. Grains and grain products made up 35 percent of waterborne containerized 

agricultural exports359 (see later discussion of containerized grain). Other agricultural products, 

such as food preparations, cotton, and frozen poultry, also use containers extensively to reach 

export markets. Containers provide the protection, temperature controls, traceability, and 

convenience needed to serve the foreign demand for U.S. agricultural products. 

U.S. agricultural exporters moved nearly 2.5 million TEUs in 2007. Table 14-8 lists the top 20 

shipping lines used to move these containers. It is not surprising that the largest container 

ocean carrier in the world, Maersk, ranks first on the list of carriers for agricultural products as 

well. 
458

Table 14-8: Container shipping lines for agricultural exports 

Source: Port Import Export Reporting Service (PIERS) 

Agricultural Shippers Use of Containers 

U.S. agricultural exporters use marine shipping containers for several reasons: 

• To reduce handling, which provides a higher quality product at destination 

• To preserve the identity of the product based on buyer specifications 

• To service small niche markets 

• To supply relatively small amounts of the product, compared to bulk shipping, to buyers 

hoping to reduce inventory costs 

• To take advantage of cost benefits when container freight rates are competitive with bulk 

freight rates. Grain exporters, in particular, monitor ocean rate fluctuations of container 

and bulk movements, hoping to realize the most competitive rates 
459

Ocean Ports 

U.S. ports and the maritime industry offer agricultural shippers and exporters access to a vast 

global marketplace. Ports are the fixed infrastructure by which exports, imports, and domestic 

movements of waterborne commerce are loaded onto or discharged from maritime vessels. 

The maritime industry is the dominant mode for the transport of commerce to all international 

markets except Canada and Mexico. Approximately 90 percent of America’s overseas foreign 

trade tonnage is moved by ship. 

The goods our country consumes and the economic growth it enjoys are connected to the 

ability of the ocean ports to deliver goods. As our economy has become interdependent with 

the global economy, the U.S. Gross Domestic Product (GDP) has grown exponentially. This 

global interdependence among trade nations has brought prosperity, but also has placed 

additional demands on our ports and the end-to-end delivery system of imports and exports.360 

Although foreign trade accounted for only 13 percent of U.S. GDP in 1990, it had grown to 

nearly 22 percent by 2006. Recent projections indicate that foreign trade will be 35 percent of 

GDP by 2020 and may grow to 60 percent in 2030.361 As foreign trade continues to grow, 

marine transportation will become even more important to our economy. 

According to the MARAD, 6,867 ocean-going vessels made 63,804 calls at U.S. ports during 

2007, up 13 percent for 5 years earlier. Of these calls, 34 percent were tankers, 31 percent 

container ships, 17 percents were dry bulk vessels, and 10 percent were Roll on-Roll offs (a type 

of ship designed to permit cargo to be driven on at origin and off at destination362). About onethird (20,203) of the vessel calls were made at the U.S. Gulf ports. 363 About one-quarter 

(4,988) of the U.S. Gulf vessel calls were made by dry bulk vessels. Usually, close to 54 percent 

of the U.S. grain exports are shipped through the U.S Gulf. 

At ocean ports today, practically every mode of transportation, equipment, handling service 

and inspection service is used to meet shippers’ needs. However, most agricultural products 

are not produced near these centers of transportation and trade. Unfortunately, all the 

benefits of business done close to the ports are not available to most of the agricultural 

community without extra transportation costs. For example, grain, cotton, and meat products 

are produced primarily in the nation’s heartland, and require substantial transportation to 

reach export ports on the West, East, and Gulf Coasts. Even those shippers within States that 

contain major transportation and trade hubs need to reposition equipment to get 

transportation service and must bear the additional costs associated with that repositioning. 

Importance of Ocean Ports to Agricultural Movements 

U.S. ocean ports provide the gateway for an estimated 70 percent of U.S. agricultural exports 

and 60 percent of agricultural imports. Approximately 49 percent of U.S. waterborne 

agricultural exports move through the U.S. Gulf Region, which moves substantial amounts of 

grain and frozen poultry. More than 45 percent of U.S. agricultural imports move through the 

East Coast ports. Imports of fruit, vegetables, and canned products move through New 
460

York/New Jersey, Philadelphia, and Wilmington, DE. The top 10 import and export ports for 

U.S. waterborne agricultural trade are shown in Figures 14-6 and 14-7. 

Figure 14-6: Ports moving agricultural imports, 2007 

Note: Chart depicts all waterborne agricultural imports, bulk and container combined, based on tonnage moved. 

Source: Port Import Export Reporting Service (PIERS) 

Figure 14-7: Ports moving agricultural exports, 2007 

Note: Chart depicts all waterborne agricultural exports, bulk and container combined, based on tonnage moved. 

Source: Port Import Export Reporting Service (PIERS)
461

Containerized Agricultural Movements 

The top ocean ports used to move U.S. containerized agricultural commodities (both imports 

and exports) were the Los Angeles/Long Beach port complex, New York, Oakland, Seattle and 

Tacoma, and Norfolk. Approximately 38 percent of waterborne containerized agricultural trade 

moves through the two busiest port complexes in the country, Los Angeles/Long Beach and 

New York/New Jersey. 

Figure 14-8 displays the top 20 U.S. ports used to move container agricultural imports and 

exports. It’s clear that waterborne agricultural import traffic is concentrated on the East Coast 

and export movements are concentrated on the West Coast. 

Figure 14-8: Top 20 container ports for exports and imports 

Port specialization differs with commodities. For example, waterborne containerized poultry 

exports are moved mostly through East Coast ports due to the dense production of poultry in 

the southeastern portion of the country. Nearly 75 percent were moved through East Coast 

ports in 2007. More than 80 percent of the waterborne containerized grain exports moved 

through the West Coast ports of Los Angeles/Long Beach and Seattle/Tacoma. 
462

Bulk Agricultural Movements 

Grain and soybean exports make up about 86 percent by volume of waterborne bulk 

agricultural exports. Other agricultural commodities, such as poultry, oils, and some fruit and 

vegetables, are moved in bulk as well. The United States exports approximately one-quarter of 

the grain it produces. This includes nearly 45 percent of its wheat, 35 percent of its soybeans, 

and 20 percent of its corn. 

Table 14-9: Bulk waterborne agricultural exports 

Top 10 U.S. Bulk Waterborne Agricultural Exports, 2007 

Commodities Metric Tons Share 

Bulk grains 74,823,151 63% 

Soybeans 27,227,285 23% 

Grain products, flour 5,946,118 5% 

Animal feed 2,966,875 3% 

Rice 2,144,429 2% 

Vegetables 1,207,970 1% 

Poultry 1,177,329 1% 

Tallow, grease 751,112 1% 

Soybean oil 542,265 0% 

Corn oil 286,363 0% 

Grocery items, canned foodstuffs 282,565 0% 

Fish 182,326 0% 

Fungus, moss 176,334 0% 

Molasses, treacle 170,022 0% 

Vegetable oil & shortening 127,553 0% 

Beverages 74,054 0% 

Frozen fish 69,871 0% 

Oranges 46,594 0% 

Citrus fruit juices 45,781 0% 

Millet seed 37,119 0% 

Other 280,235 0% 

Total 118,565,352 100% 

Source: Port Import Export Reporting Service (PIERS) 

 
463

Figure 14-9 displays the top 20 ports for imports and exports of U.S. bulk agricultural 

commodities. 

Figure 14-9: Top 20 bulk ports for imports and exports 

The importance of exports to the U.S. global grain trade underscores the significance of grain 

export elevators with the ship-loading and storage capacities to keep up with export 

requirements (Table 14-10). The majority of export elevators are located in the Louisiana port 

region. According to USDA’s Grain Inspection, Packers and Stockyard Administration data, 57 

percent of the U.S. export grain shipments departed through the U.S. Gulf region in 2008. 

Figures 14-10 and 14-11 show major grain export elevators in the Mississippi and Texas Gulf 

ports. 
464

Table 14-10: Major U.S. grain export ports 

Source: USDA/FGIS 
465

Figure 14-10: Mississippi Gulf ports and export grain elevators

Source: AMS 

Table 14-11: Mississippi gulf ports and export grain elevators 

Source: USDA/GIPSA

Map Reference Location Storage Capacity 

(million bushels) 

Load capacity 

(bushels/hour) 

1 Myrtle Grove 6.5 90,000

2 Westwego 4.3 100,000

3 Ama 5.0 80,000 

4 Destrehan 6.2 80,000 

5 Destrehan 6.3 80,000 

6 Destrehan Floating Rig 30,000 

7 Reserve 3.6 80,000 

8 Reserve 7.7 100,000 

9 Saint Elmo 2.0 60,000

10 Convent Floating Rig 60,000 

11 Convent 4.0 120,000 

12 Darrow Floating Rig 30,000 

13 Baton Rouge 7.0 60,000 

Total 52.6 970,000 
466

Figure 14-11: Texas gulf ports and export grain elevators 

Source: AMS 

Table 14-12: Texas gulf ports and export grain elevators 

Source: USDA/GIPSA

Map Ref. # Location Storage Capacity 

(mil bu) 

Load capacity 

(bu/hour) 

1 Lake Charles, LA .75 25,000 

2 Beaumont, TX 3.5 50,000 

3 Channelview, TX 6.0 190,000 

4 Galena Park, TX 6.0 75,000 

5 Galveston, TX 2.8 80,000 

6 Corpus Christi, TX 6.3 60,000 

7 Corpus Christi, TX 5.0 150,000 

8 Brownsville, TX 3.0 50,000 

Total 33.35 680,000 
467

Port Capacity Constraints 

Until recently, port capacity demands could be met by building another terminal or adding 

another highway lane. That is no longer the case because the land necessary to build them is 

no longer available. Today, our Nation’s ports and international systems face a growing 

capacity crunch.364 

Competing land-use issues adversely impact port expansion efforts. Limited acreage is 

available for marine development around existing port facilities and port expansion plans face 

competing development issues and environmental concerns that further limit expansion. 

Property that may be suitable for port development is subject to constant pressures for nonport uses, such as office, residential, or recreational.365

Ports could experience pockets of congestion as space available for increasing amounts of 

import and export cargo is limited by environmental and community concerns. Congestion also 

occurs when vessels arrive at the same time rather than spread through the week. Most ports 

must look to operational improvements to increase capacity and reduce congestion, such as 

reducing the period of demurrage allowed for containers at terminals; instituting chassis pools, 

which make chassis available for truckers at the port; and using stacked container 

operations.366 

Port Infrastructure Expansion and Environmental Implications 

Ports must supply capacity to handle the increasing amounts of cargo coming in and going out 

of the country while ensuring expansion does not have detrimental effects on their local 

community. Ports are, more than ever, under pressure to clean up the pollution created by 

vessels, trucks, cranes, and rail service, and expand only when measures are taken to reduce 

emissions and protect the air quality in their local community. 

Although the Federal Government has paid for much of the transportation infrastructure of the 

U.S. highways and airports, ocean ports and marine terminals have historically been financed 

by local taxes or private sector investment. Many container ports in the U.S. continue to 

develop new terminals and implement projects to reduce port congestion and accommodate 

bigger ships. However, not all ports and terminal operators are able to do so. A recent report 

by the American Society of Civil Engineers states: 

Although U.S. ports are currently comparable to foreign ports in terms of overall 

port infrastructure, more effort needs to take place in terms of dockside 

infrastructure, i.e., larger and more substantial berths, newer and larger cranes, and 

improved intermodal access to inland transfer areas.367 

Port development, capital expenditures, and maintenance are financed through port revenues, 

general obligation bonds, revenue bonds, and public funding at the local, State, and Federal 

levels. Port revenues are generated through fees charged to vessel owners, stevedore 

companies, and shipping customers for use of facilities and services. As public support for port 
468

development has diminished, some ports are financing 

environmental cleanup and congestion programs through 

per-container fees. 

MARAD’s recent publication America’s Ports and 

Intermodal Transportation System says: 

America’s Marine Transportation System faces 

growing congestion challenges. The U.S. Marine 

Transportation System has managed to accommodate 

our rising levels of international trade. Trade growth, 

however, has begun to strain our waterways, ports 

and key road and rail freight corridors. Our Nation’s 

gateway ports, typically located in some of our most 

populous urban areas, face serious capacity 

expansion challenges—such as congestion, 

community, environmental, and competing land use 

issues.368

Port Infrastructure Funding 

Port authorities and marine terminal operators are 

spending substantial sums to build, improve, and expand 

terminals to handle the current and anticipated increases 

in cargo. Billions of dollars have been and are being 

expended to improve terminals to accept and process 

cargo. During fiscal years 2006–2010 alone, $8.6 billion is 

projected to be invested: over $3 billion in the U.S. 

southern Pacific Coast ports, $2 billion in the South 

Atlantic, and over $1 billion each in the North Atlantic and 

the Gulf regions.369 Specific investment plans by port are 

provided in Appendix 14-2: Port Expansion Plans. 

Recently opened terminals, such as the Maersk Terminal 

in Portsmouth, VA, and planned terminals such as the 

Yusen Terminal in Tacoma, WA; the Coos Bay Terminal in 

Coos Bay, OR; the Dames Point Terminal in Jacksonville, 

FL; the Maersk/CMA CGM Terminal in Mobile, AL; the 

North Carolina International Terminal in Wilmington, NC; 

and the Craney Island Expansion Project in Norfolk, VA, 

are responding to the need for expanded berths, newer 

and larger cranes, and improved intermodal capabilities. 

These terminals will add approximately 12 million TEUs of 

capacity to the national port system within the next few 

years.370 

Congestion at Southern California 

Ports in 2004 

The Southern California port 

complex of is the busiest port 

complex in the United States 

because of its huge volume of 

containerized trade. In 2004, the 

port complex experienced a period 

of severe congestion when an 

unexpected rush of import cargo 

pushed port and rail capacity to its 

limit. The congestion began in late 

June and became progressively 

worse as the peak season 

approached in the fall. The 

complex experienced extremely 

slow cargo handling and a backlog 

of waiting vessels. This period of 

severe congestion was blamed on a 

lack of available longshoremen, an 

earlier-than-usual peak season, and 

a significant growth in container 

volume, particularly import traffic. 

Since 2004, these ports have 

expanded, hired additional labor, 

and avoided further severe 

congestion. Nevertheless, some 

wonder if it is only a matter of time 

before the future increases in U.S. 

trade will once again overflow the 

bounds of the port complex.*

 Since 

the extreme episode in 2004, 

shippers have diversified the ports 

they use instead of relying on just a 

few ports or one port region. They 

learned that relying on one major 

port was potentially costly during 

times of strong demand and 

pressed capacity. 

*

 America’s Ports and Intermodal 

Transportation System, MARAD, January 

2009.
469

Part of the strategic plans at several ports is to deepen ship channels to make safer navigation 

conditions and to accommodate the newest and largest container ships in the market. 

Ports—particularly on the East Coast—are making plans to receive such vessels as the Panama 

Canal is widened to accommodate them. The maintenance and improvement of Federal 

coastal harbors and channels is the responsibility of the Army Corps of Engineers 

The Corps deepens, widens, or lengthens coastal harbors and channels based on an 

economic evaluation. It has several significant coastal harbor construction projects 

underway: Mobile Harbor, AL; Los Angeles Harbor Main Channel Deepening, CA; Port of 

Long Beach, CA; Oakland Harbor (50 Foot Project), CA; Delaware River Mainstem and 

Channel Deepening, DE, NJ & PA; Jacksonville Harbor, FL; New York and New Jersey 

Harbor, NJ & NY; Gulfport Harbor, MS; Columbia River Channel Improvements, OR & 

WA; Houston-Galveston Navigation Channels, TX; and Texas City Channel, TX. 

The American Association of Port Authorities asserts: 

As a result of federal underinvestment, the 59 most-utilized federal channels only 

have authorized depths available for the center half of the channel 30-40% of the 

time. This limits efficient use of our waterways and increases transportation costs. 

The annual need for maintenance dredging, which is in the range of $1.3 to $1.6 

billion according to the Army Corps of Engineers, is comparable to the funds 

collected. However, over the past five years, annual expenditures for channel 

maintenance have averaged less than $800 million, creating a surplus of funds and 

leaving users with inadequately maintained channels. The net result is increased 

costs for waterborne transportation users, higher prices to consumers, and reduced 

competitiveness of U.S. exports in the global marketplace. Jobs and income 

produced are adversely impacted as well.371

The Corps evaluates the competing demands for funding among its programs and strives to 

make the best use of the available funds from a national perspective. Under its performancebased allocation process, the Corps allocates a significant portion of total operation and 

maintenance (O&M) funding to coastal harbor maintenance. The 2011 Budget requested $764 

million from the Harbor Maintenance Trust Fund for such work.372 This represents about onethird of the total O&M program for the Corps, which includes the inland waterways, flood and 

storm damage reduction projects, multi-purpose dams and other programs nationwide. 

Within program areas, the Budget allocates funding using objective performance criteria. For 

example, the Corps is developing an improved methodology to rank dredging needs based on 

an assessment of its economic return. The Corps gives priority to the maintenance of the 59 

coastal harbor projects with 10 million tons or more of commercial cargo per year. It typically 

dredges a portion of a project in a given year, with emphasis on places where shoals that could 

affect navigation have formed. 
470

 

Improvements to gate systems, technology, cranes, equipment, ship channels, management 

processes and information technology are costly. They do not alleviate all issues associated 

with cargo movement, but they can improve port viability, distribution of benefits and costs, 

environmental quality, and the overall effectiveness and efficiency of the national 

transportation system. 

Expansion of the Panama Canal 

Recently developed expansion plans at ports along the U.S. Gulf and East Coast are partly in 

response to the expected increase in vessel traffic from the Panama Canal expansion currently 

underway.373 

The Panama Canal is reaching the limits of the number of vessels it can handle. It handles more 

traffic than its builders forecast and does not have the infrastructure to handle Post-Panamax 

vessels, which carry 27 percent of the world’s containerized maritime shipments.374 On 

December 9, 2009, the Panama Canal Authority received financing to begin a Canal expansion 

program that will increase its cargo capacity and allow for the transit of larger vessels. The 

project is expected to be finished by 2014.375 

The U.S. intermodal system* is the main competitor of the Panama Canal, particularly for cargo 

moving in the Northeast Asia†

–East Coast route.376 The Canal route is less costly and highly 

reliable but takes longer than the U.S. Intermodal System route. 

The major advantage of the U.S. Intermodal System is the opportunity to develop economies of 

scale in the transpacific maritime route. This route frequently uses Post-Panamax container 

ships, so only five ships are needed for a weekly service rotation instead of the eight ships 

required by the Panama Canal route.377 However, the port and railroad reliabilities have been 

affected by labor problems (strikes and shortage of labor to handle new cargo) and capacity 

expansion challenges such as congestion, as well as community and environmental land uses.378 

As trade increases, many of the top ten U.S. container ports‡ are reaching the limits of existing 

capacity.379 

The Panama Canal’s expansion will allow for the use of Post-Panamax vessels in the trade lanes 

between Asian and U.S. Gulf and East Coasts, likely increasing container capacity in those trade 

lanes. A deeper and wider Panama Canal will offer shippers an alternative to West Coast ports 

for their import and export needs. U.S. Gulf and East Coast ports are preparing to take 

advantage of the increased demand for port services. 

 

 

*

 Cargo moved by rail from the port to the inland portions of the country or from one coast to the other. 

†

 Northeast Asia includes: China, Hong Kong, Mongolia, Macau, Taiwan, Japan, South Korea, and North Korea. 

‡

 Top 10 U.S. container ports: LA/LB, New York/New Jersey (NY/NJ), Seattle/Tacoma, Savannah, Houston, Norfolk, 

Oakland, Charleston, Port Everglades and Miami (DOT 2008). 
471

Southern California Environmental and Infrastructure Initiatives 

In addition to port funding sources from port revenues, general obligation bonds, revenue 

bonds and public funding (local, State and Federal), the ports of Los Angeles and Long Beach 

have instituted per-container fee programs to mitigate congestion, pollution, and improve 

infrastructure. For example, these ports, along with the California Air Resources Board, 

adopted the San Pedro Bay Ports Clean Air Action Plan (CAAP) in November 2006. The plan 

eliminates older, less-clean diesel trucks by helping to finance a new generation of clean or 

retrofitted vehicles and equipping all major container cargo and cruise ship terminals with 

shore-side electricity so that vessels at berth can shut down their diesel-powered auxiliary 

engines. The plan also calls for reducing ship speeds when entering or leaving the harbor, using 

low-sulfur fuels, and other emissions-reduction measures and technologies. Some estimates 

project that implementation of this plan would cut particulate matter pollution by 47 percent, 

nitrogen oxides (NOx) emissions by more than 45 percent, and sulfur oxides by 52 percent. The 

port complex currently is responsible for 10 percent of the region’s emissions levels.380 

Several other communities and ports around the country, such as Seattle and Oakland, are 

considering variations of this plan. In addition, some states, municipalities, and ports are 

contemplating various fees to finance the cost of this environmental remediation.381 

The ports of Los Angeles and Long Beach consistently rank among the top three U.S. ports for 

containerized waterborne movements of agricultural imports and exports. In 2007, the 2 ports 

combined moved nearly 30 percent of waterborne agricultural exports and 17 percent of 

waterborne agricultural imports in terms of a TEU calculation. They have established percontainer fees on cargo owners to help fund their environmental programs. In the past 5 years, 

importers and exporters using these ports have been faced with an increasing array of potential 

container fees to reduce congestion and improve environmental conditions and infrastructure. 

Some of these fees can be avoided by changing practices, such as moving cargo in off-peak 

times or using clean trucks. 

These fees include: 

• Alameda Corridor Fee 

• PierPass Mitigation Fee (assessed during peak traffic periods) 

• Clean Truck Fee (only on older, higher emission trucks) 

• Port Infrastructure Cargo Fee (to be determined) 
472

The Alameda Corridor 

The Alameda Corridor is a 20-mile-long rail cargo expressway linking the ports of Long Beach 

and Los Angeles to the transcontinental rail network near downtown Los Angeles 

(Figure 14-12). It is a series of bridges, underpasses, overpasses, and street improvements that 

separate freight trains from street traffic and passenger trains, facilitating a more efficient 

transportation network. The project’s centerpiece is the Mid-Corridor Trench, which carries 

freight trains in an open trench 10 miles long, 33 feet deep, and 50 feet wide between State 

Route 91 in Carson and 25th Street in Los Angeles. Construction began in April 1997 and it 

opened in April 2002.382 

Figure 14-12: Map of Alameda Corridor 

Source: <www.acta.org>
473

The Corridor is used extensively by the shipping industry. More than 10,000 TEUs move 

through it daily. A per-container fee of $18 per TEU is assessed to the cargo owner for use of 

the Corridor.383 

PierPASS Off-Peak Program

In an effort to reduce congestion at the ports of Los Angeles and Long Beach and improve air 

quality in the community, the marine terminal operators created an extended gate hours 

program designed to encourage truck cargo to use non-peak terminal gate hours at night and 

on weekends. It imposes a Traffic Mitigation fee on the cargo owner for each loaded container 

moved in or out of the terminals during peak daytime hours (3:00 AM to 6:00 PM). No fee is 

charged for use during off hours. PierPASS is a non-profit organization created by the marine 

terminal operators to administer the “off peak” program and collect the fees. 

When the PierPASS program began in July 2005, the fees were set at $40 per TEU and $80 per 

40-foot container (FEU). Since then, the fee has increased to $50 per TEU, or $100 a FEU. 

PierPASS does not assess a fee for empty containers and chassis, domestic containers, or 

transshipment to other ports. Nor does it assess a fee for containers that depart or arrive via 

on-dock rail or the Alameda Corridor. 

The program has diverted nearly 40 percent of the port complex’s truck traffic to off-peak gate 

hours, resulting in a noticeable reduction in congestion on the freeways leading to and from the 

ports during peak traffic times. Turn times for trucks once inside the gates are now 35–40 

minutes for both peak and off-peak, down from more than 45 minutes, creating further 

flexibility, agility, and efficiency.384

Clean Trucks Program

The ports of Los Angeles and Long Beach began the Clean Trucks Program in October 2008. The 

Clean Trucks Program is part of a larger Clean Air Action Plan, which includes several strategies 

to reduce emissions and improve the environment. The Clean Trucks Program is designed to 

ban the use of trucks at the ports that do not meet the more stringent 2007 Environment 

Protection Agency’s (EPA) emissions standards by January 1, 2012. As of February 18, 2009, a 

per-container fee called the Clean Trucks Fee is being assessed on each container moved in or 

out of the port complex by a “dirty” truck. The program has come under scrutiny by the 

American Trucking Associations, shipper organizations, and the Federal Maritime Commission. 

Even the Department of Justice has weighed in on the competitive implications of the program. 

The goal of the program is to have all trucks using the ports meet the EPA’s 2007 clean air 

standards by January 1, 2012, and reduce truck emissions by 80 percent. The initial phase, 

which began on October 1, 2008, bans trucks built prior to 1989—about 2,000 trucks that 

previously serviced the ports. More than 16,000 trucks in total will need to be replaced or 

retrofitted by the deadline. 

 
474

As part of the Clean Trucks Program, shippers are charged a Clean Trucks Fee on each loaded 

inbound and outbound container moved by truck that does not meet the 2007 emission 

standards. The fee will help pay for a port-sponsored grant subsidy to help drivers purchase 

new “clean” trucks or retrofit older trucks. The cargo owner is responsible for a fee of $35 per 

TEU and $70 per FEU. These fees are expected to generate revenue of about $1.6 billion, or 72 

percent of the total needed for the grant subsidy. The fees are not charged for cargo moved 

through the ports by rail. 

As part of the program, each harbor trucker must sign an agreement with each port. The 

agreements establish the environmental, operational, and security provisions of the Clean 

Trucks Program. Cargo moved by trucks that meet the “clean” standards do not have to pay 

the Clean Trucks Fee, but are still required to enter into an agreement with the ports. The ports 

have different requirements and it is important that shippers understand these differences 

when doing business at the respective ports. 

The agreements are being challenged. Some requirements are seen as reducing competition by 

restricting the trucks or drivers that can call at the port, and others as increasing the cost for 

trucks to do business at the ports. The American Trucking Associations have taken court action 

to at least temporarily enjoin the program or portions of the agreements deemed unreasonable 

or illegal by the litigants. 

Port Infrastructure Cargo Fee

The Ports of Los Angeles and Long Beach have proposed an Infrastructure Cargo Fee, which was 

originally scheduled to begin in January 2009. Implementation of the fee has been postponed 

several times due to the economic slowdown, challenges facing the shipping community, and 

delays in State funding. The latest deadline was July 2010; however, the ports are currently 

reassessing this deadline to either postpone implementation again or revisit the idea in a few 

years after cargo movements have fully recovered from the recession. When implemented the 

Infrastructure Cargo Fee is proposed to initially be $15 per TEU and will fluctuate over time as 

port infrastructure projects are approved. This fee will be tied directly to funds needed for 

projects the ports have identified to improve infrastructure and, as a result, reduce congestions 

and emissions. 

 
475

Table 14-13 summarizes the fees mentioned above, which are either currently in place or are 

expected to be initiated at the Ports of Los Angeles and Long Beach. 

Table 14-13: Comparison of port fees at Ports of Los Angeles and Long Beach 

Existing Fees Time frame Mode Per 20ft 

Container 

Per 40ft 

Container 

PierPass Mitigation Fee Currently in 

force Truck $50 $100

Alameda Corridor Fee Currently in 

force Rail $18 $36

Clean Trucks Fee Currently in 

force Truck $35 $70 

Upcoming Fees 

Port Infrastructure Cargo 

Fee 

To be 

determined 

Truck & 

Rail $10-18 $20-36 

Source: <www.pierpass.org, www.acta.org>, 

<http://www.cleanairactionplan.org/strategies/cleantrucks/default.asp> and <www.portoflosangeles.org>

Impact on Agricultural Movements 

In 2007, more than 723,000 agricultural export containers and more than 407,000 agricultural 

import containers moved through the Ports. Based on these numbers, the Clean Trucks Fee 

alone could cost the agricultural export community more than $20 million per year and the 

agricultural import community nearly $12 million per year. Per-container fees either reduce 

profits for agricultural shippers or reduce their ability to remain competitive in the global 

marketplace. 

However, flexibility in the transportation network could, over time, allow shippers to adjust to 

the new system and find ways to avoid the Clean Trucks Fee. Trucks currently classified as 

“clean” by the Ports are not required to pay the fee. However, agricultural shippers will have to 

find these clean trucks or increase their use of rail transportation to avoid paying the new fee. 

As the program progresses, truckers and trucking companies that take advantage of the Ports’ 

grant subsidy by providing clean trucks will become more plentiful. 

The agricultural shipper could use any of the scenarios listed in Table 14-14 based on the 

urgency of the cargo delivery demands. However, making arrangements or changes to 

established business practices to strive for the Best Case Scenario (Scenario 1) is timely and 

costly to the agricultural shipper, and in some cases may cost more than the Worst Case 

Scenario (Scenario 3). 
476

Table 14-14: Fee scenarios for moving containers through Southern California ports 

Scenarios PierPass Alameda 

Corridor 

Clean 

Trucks 

Fee 

Port 

Infrastructure 

Cargo Fee 

Total Fees 

Per 

Container 

% of the Value of 

an Average 

Export Container 

Scenario 1: 

“Clean” truck 

used. 

Delivered to 

the port 

during offpeak hours. 

 X $30 0.2% 

Scenario 2: 

Shipper uses 

rail to deliver 

cargo to the 

Ports. 

 X X $66 0.4% 

Scenario 3: 

“Unclean” 

truck used. 

Delivered to 

the port 

during peak 

hours of 

operation. 

X X X $200 1.1% 

Source: Table developed by USDA, data sources are: PierPASS, <www.pierpass.org>; Alameda Corridor 

Transportation Authority, <www.acta.org>; Clean Trucks Program, 

<http://www.cleanairactionplan.org/strategies/cleantrucks/default.asp>; Port of Los Angeles 

<www.portoflosangeles.org>, and Port Import Export Reporting Service (PIERS) <www.piers.com> 

Rates, Competition, and Service 

Ocean freight rates are a determining factor in deciding whether to ship commodities as bulk or 

in containers. Containerized shipments of agricultural products, particularly grain products, 

have gained popularity because of the relatively high bulk ocean freight rates over the past 5 

years. However, the fundamental market conditions for bulk ocean and container shipping are 

different. Because of these differences, their respective freight rates are normally determined 

independently. 

Bulk Freight Rates 

Bulk ocean freight rates are volatile, at least in the short run, since the total supply of vessel 

space is relatively inelastic in that time frame. While it may take a long time for a newly built 

vessel to be delivered, the demand for vessel space can vary greatly. Ocean freight rates for 

shipping bulk grain and other agricultural products are determined in competition with the 

shipments of other bulk commodities such as coal, iron ore, steel, cement, fertilizer, sugar, salt, 
477

and forest products. In recent years, ocean freight rates for shipping bulk grain from the 

United States to export destinations have increased because the global demand for bulk 

commodities has increased. For instance, world seaborne trade of iron ore increased by almost 

50 percent from 2002 to 2006, from 481 million metric tons (mmt) to 721 mmt.385 Waterborne 

coal shipment increased by 34 percent to 544 mmt during the same period. Waterborne 

shipment of grain increased about 8 percent to 292 mmt. 

Before the dramatic drop in rates during the later part of 2008, ocean freight rates for shipping 

grain from the U.S. Gulf and the Pacific Northwest to Japan had been relatively high since 2004. 

The high ocean freight rates were consistent with increases in global shipments of bulk 

commodities, especially coal and iron ore during these periods. Prior to 2004, rates were 

considerably lower than the 5-year average during the period 1999-2003 (Table 14-15 and 

graph in Figure 14-13). However, the freight market was not immune to the global economic 

crisis; rates returned to pre-2004 levels and lower. 

Table 14-15: Bulk grains ocean freight rates 

Source: Baltic Exchange, Inc/Drewry Shipping Consultants Ltd/O'Neil Commodity Consulting 

1999 - 1999 -

2003 Avg 2004 2005 2006 2007 2008 2009 2003 Avg 2004 2005 2006 2007 2008 2009

Jan. 20.42 58.56 60.01 36.41 53.70 99.00 26.30 14.50 43.58 36.44 24.64 38.40 58.00 14.60

Feb. 20.51 70.56 59.90 34.91 54.40 102.40 39.25 14.29 44.31 36.99 25.69 38.00 59.40 19.75

Mar. 21.99 72.75 63.04 35.82 57.00 111.25 42.25 14.97 44.05 39.18 27.71 40.15 66.50 22.00

Apr. 22.82 69.83 60.55 34.70 59.15 113.25 14.81 39.88 33.12 25.31 42.05 64.75

May 24.00 56.88 54.90 34.70 63.60 133.10 15.16 32.94 27.53 25.38 43.80 72.00

Jun. 22.28 43.05 49.40 37.16 63.90 127.25 15.01 26.25 25.08 28.85 42.75 80.25

Jul. 22.39 47.05 38.25 39.67 82.00 127.50 15.00 32.66 20.79 30.42 58.25 72.50

Aug. 22.71 51.52 36.26 44.82 90.75 115.80 13.94 32.07 21.84 32.72 64.60 60.00

Sep. 24.22 52.92 40.62 50.15 97.00 88.00 14.41 33.85 24.53 37.16 66.45 51.50

Oct. 26.78 56.78 46.36 48.74 112.60 40.40 18.15 37.72 25.22 38.23 86.70 23.60

Nov. 26.88 63.06 44.44 49.44 118.00 27.63 19.07 42.44 23.60 40.87 86.50 17.38

Dec. 26.88 64.82 40.27 52.54 124.20 23.33 20.11 44.17 25.66 40.07 79.35 13.33

Avg 23.49 58.98 49.50 41.59 81.36 92.41 15.79 37.83 28.33 31.42 57.25 53.27

U.S. Gulf to Japan Pacific Northwest to Japan
478

Figure 14-13: Bulk grain ocean freight rates from U.S. to Japan 

Source: Baltic Exchange, Inc/Drewry Shipping Consultants Ltd <www.drewry.co.uk>/O'Neil Commodity 

Consulting 

Containerized Freight Rates 

The long-term nature of service contracts provide a relatively stable rate structure that protects 

rates from sharp market flucucations. However, at any point during the term of the contract, 

the two parties can agree to amend the contract based on current market conditions. In 

addition, the ocean carriers over the years have added stipulations to the contracts that allow 

for rates to flucuate within a reasonable and agreed-upon range. Some contracts allow for 

surcharges, such as a fuel surcharge, to flucuate throughout the life of the contract based on 

current fuel market conditions. Sharp increases in fuel prices, such as those experienced in 

2007 and the first part of 2008, would significantly increase an exporter’s or importer’s rates if 

the contract allows. 

Since containerized freight rates are kept confidential under the OSRA, it is difficult to analyze 

rates for specific commodities and trade routes. However, some private consulting firms collect 

avereage ocean container rates for all commodities and all trade routes. These rates provide an 

overall trend of container rates, but do not show the specific flucutations or impacts on 

individual commodities or commodity groups. 

 
479

Figure 14-14 shows overall average container rates per TEU in the trans-Pacific trade lanes. 

Overall, rates were stable in the U.S. to Asia trade lane from 2000 until 2008, when rates rose 

quickly in response to increased demand for U.S. exports. 

Figure 14-14: Container rates for trans-pacific trade lanes 

Source: Containerization International 

The westbound or export movements to Asia from the U.S. are usually lower-valued goods such 

as agricultural products, waste paper, and scrap metal. Carriers move fewer export containers 

than import containers. Over the years, the ocean container carriers have viewed export 

container movements as backhaul cargo which brought lower revenue, but was preferrable 

over the absence of revenue associated with moving the container back to Asia empty. 

However, as the U.S. demand for consumer goods from Asia has increased, carriers have 

chosen to move containers back to Asia empty to facilitiate a quicker turnaround time for the 

container’s reuse in the eastbound market. This constricts the available container pool for U.S. 

exporters. 

The following section describes the problems exporters face with container availability as well 

as the rate and capacity impacts of the 2007 export boom. 
480

Container Service Challenges: Container Availability and the 2007 Export Boom 

Since 2005, economic growth in developing countries has increased the demand for 

containerized agricultural products such as meats, fruit, vegetables, and nuts. These increases 

in demand accelerated sharply in 2007 and to a record level in 2008 (Figure 14-15). The 

unprecedented demand for export ocean container service caught the ocean carriers by 

surprise and left the export community with insufficient container equipment to deliver the 

amount of product demanded. Demand for export container service subsided in early 2009, 

but returned in late 2009 and early 2010, again straining container supplies for the export 

community. 

Figure 14-15: Containerized agricultural exports 

Source: Port Import Export Reporting Service (PIERS) 

 
481

Impact on Agricultural Exporters 

Agricultural exporters took advantage of the 

weak dollar in 2007, which made U.S. products 

more competitive in foreign markets. However, 

the opposite happened to import traffic; the 

weak dollar made imports more expensive in the 

United States. This effectively reduced demand 

for import cargo while demand for export cargo 

was increasing. Fewer imports resulted in fewer 

containers supplying the agricultural export 

container pool. 

Increased export sales resulted in an export 

boom and further strained the available 

container pool. Exporters who could not find 

enough containers lost sales in foreign markets 

and scrambled to locate containers. Shippers 

reserved vessel slots with multiple ocean carriers, 

sent trucks to distant rail hubs to obtain empty 

containers, transloaded cargo from rail to 

containers at the ports where containers were 

more plentiful, and used third party logistics 

providers to improve their chances of finding 

available equipment. Shippers reported they 

were provided a fraction of the containers 

requested from the carriers. 

In addition, 2007 brought weak global supplies of 

grain due to bad weather in other grainproducing countries, increasing the demand for 

U.S. grain. U.S. bulk grain shipments competed 

globally with strong demands for other bulk 

commodities, such as steel and coal, for bulk 

carrier capacity. This competition for bulk service 

pushed rates to record levels. In response, many 

bulk grain exporters started using containers to 

move their products. Containerized movements 

offered a cost advantage compared to the rising 

cost of the bulk ocean transportation. 

 

Containers and Agricultural Shipping 

• U.S. import containers make up a 

significant portion of the available 

container pool for U.S. containerized 

exports. 

• Imports are considered headhaul*

cargo in the Trans-Pacific trade lanes. 

Ocean carriers have traditionally 

subsidized the export movements, 

which is used to gain partial cost 

recovery for the return of container 

equipment to Asia. 

• Marine shipping containers are usually 

more plentiful at ocean ports, 

particularly in Southern California. 

• The use of near-port distribution 

centers by major container importing 

companies has increased. 

• The pool of available containers at 

inland locations is limited. 

• Rail transportation is cheaper than 

trucks for long-distance movements, 

so containers pass through major rail 

hubs to access ocean export ports. 

• Exporters incur additional 

transportation costs obtaining 

containers because they are only 

available at major rail hubs and ocean 

ports. 

*

 Headhaul cargo was recently defined by an ocean 

container carrier as cargo that provides enough 

revenue to pay for the initial transportation to the 

buyer and the return transportation of the empty 

container. In contrast, backhaul cargo is unable to pay 

for both legs of the transportation. 
482

After several months of using containers to export grain, some traditional bulk shippers decided 

they liked the product protection and higher quality at the destination that containers 

delivered. Figure 14-16 shows that containerized grain exports to Asia grew dramatically in 

2007; an average of more than 31,000 containers of waterborne grain exports moved each 

month, 87 percent more than the previous year. The trend continued into 2008; containerized 

grain exports to Asia reached record levels in February, at nearly 53,000 TEUs. The introduction 

of bulk grain shipments into the container market combined with the export boom made the 

export container supply even further strained. 

Figure 14-16: Containerized grain exports to Asia 

Source: Port Import Export Reporting Service (PIERS) 

Figure 14-17 shows that from June 2007 to July 2008, average ocean freight rates for bulk 

movements increased 73 percent. In late 2007, the peak average rate reached more than $86 

per metric ton—more than double the rate just 6 months earlier. Container rates remained low 

until the first quarter of 2008 then peaked in July at more than $55 per metric ton—88 percent 

higher than at the beginning of the year but still 23 percent lower than bulk ocean freight rates. 

Rates for containerized transportation increased in response to the unprecedented demand for 

U.S. exports in containers that began in late 2007. However, by September 2008, rates for both 

bulk and container movements responded to the economic slowdown, as container rates fell 13 

percent and bulk rates fell 29 percent—and have since continued to fall. 
483

Figure 14-17: Average ocean freight rates from U.S. West Coast to Japan 

Source: Baltic Exchange, Drewry, and O'Neil Commodity Consulting (bulk rates), Drewery Supply Chain Advisors 

(container rates) 

Rate Competition Between Bulk and Containers 

During the 3rd and 4th quarters of 2007, many grain exporters wondered why the container 

carriers were not reducing rates as quickly as the bulk carriers. Until then, container carriers 

did not see bulk service as competition. The increased use of containers by traditional bulk 

shippers such as grain exporters was a reaction to record-high bulk rates and the perceived 

abundance of containers due to the large amount of containers used for importing consumer 

goods into the United States. This increased the use of containers and further strained the 

container pool. This strain on the container pool eventually pushed container rates higher. 

Rates began to fall in the 3rd and 4th quarters, but tight container supplies kept them high 

longer than bulk rates. 

Exporters faced strong demand and a limited supply of containers through the first 6 months of 

2008. By summer, the dollar began to strengthen, the first signs of the global economic 

slowdown kicked in, and bulk ocean rates began to fall; containerized grain export volumes 

slowed as well. The question in the containerized shipping industry shifted from: “Where are 

all the containers?” to “Who wants containers?” By the 4th quarter of 2008, the global 

economic slowdown had brought U.S. container trade to a slow crawl. U.S. agricultural exports 

fell 38 percent from the record high in March and even fell below the 3-year average by the end 

of the year (Figure 14-18). 
484

Figure 14-18: Monthly movements of containerized agricultural exports 

Source: Port Import Export Reporting Service (PIERS) 

The downward path experienced during the second half of 2008 continued for container trades 

through the first half of 2009. 

Container Shortages 

With the emerging economic recovery, the container “shortage” situation, that accompanied 

the export boom in 2007 and early 2008 has begun to return. As the economy recovers and 

growing economies overseas continue to demand high-quality food, wastepaper, coal, iron ore, 

and scrap metals, demand for U.S. containerized exports could return to their former levels and 

once again strain container availability and affect rates. In fact, even during the recession in 

2009 some agricultural exporters (particularly shippers moving non-refrigerated cargo) 

experienced some container availability challenges because import cargo was lower than it had 

been for 5 years and ocean carriers continued to reduce vessel capacity. 

Foreign Trade Regulations 

The new Foreign Trade Regulations (FTR) were put into effect on July 2, 2008; enforcement 

began October 1, 2008. The new regulations require exporters to file their export 

documentation with the Census Bureau electronically through the Automated Export System 

(AES). According to the Census Bureau, more than 95 percent of exporters were using the AES 

system before the new regulations came into effect (previously, exporters could submit a paper 

Shippers Export Declaration to the Bureau). The new rules are briefly explained below and the 

implications for agricultural shippers discussed. 
485

The new regulations brought the Customs and Border Protection (CBP) to the forefront of 

export filing enforcement. Shippers will be more closely monitored by CBP for accuracy and 

timely filing of export information to the Census Bureau. Steep fines have been established for 

noncompliance. Penalties, both civil and criminal, from $1,100 to $10,000 may be imposed per 

violation of the FTR for delayed filing, failure to file, false filing of export information, or using 

the AES to further any illegal activity. Also, all AES filers face new filing deadlines by mode of 

transportation for reporting export information.386 The table below shows the filing 

requirements for each mode of transportation. 

Table 14-16: Comparisons of filing requirements by mode 

Vessel cargo 24 hours prior to loading cargo on the vessel at the U.S. port 

where the cargo is laden. 

Air cargo 2 hours prior to the scheduled departure time of the aircraft. 

Truck cargo 1 hour prior to the arrival of the truck at the United States border 

to go international 

Rail cargo 2 hours prior to the time the train arrives at the U.S. border to go 

international 

Mail 2 hours prior departure of exporting carrier 

Pipeline Within 4 calendar days following the end of the month. 

In addition, transportation providers are required to report proof that the shipper has 

submitted an AES filing before they can load cargo onto the vessel (see Appendix 14-3 for 

regulation language). As a result, many carriers instituted a “No docs, no load” policy that 

requires shippers to have a completed bill of lading and proof of AES filing or exemption status 

within a timeframe decided by the ocean carrier. The timeframes are different for each ocean 

carrier; the regulation requires that carriers submit the shipping documentation, including the 

proof of AES filing, 24 hours before the vessel sails. 

Impact of New Trade Rules on Agricultural Shippers 

Some agricultural commodities are still in the field 48 hours before they are scheduled to be on 

the ship, so it is impossible to meet the carriers’ requirements with complete and accurate 

information such as value or weight required on the documentation. When specific pieces of 

required information are unavailable at the time of filing, an estimate is used instead; when 

accurate information is available, the shipper is allowed to file an amendment to the filing. 

Each amendment requires the shipper to submit the paperwork twice, knowing that any 

mistakes or delay could result in significant penalty from CBP. Late filing is only permitted for 

those shippers that have been granted post-departure filing provision. 
486

Post-departure filing—previously called Option 4—is part of the FTR that allows exporters to 

file documentation up to 10 days after the vessel sails. This provision was put on hold in 2003 

when the new regulations were being developed. The Census Bureau and CBP have agreed 

that the hold placed on post-departure filing in August 2003 will remain in effect pending 

further review of this option for shippers. However, current Option 4 filers were grandfathered 

in with the new regulation. 

Conclusions 

The U.S. marine transportation system is a critical component in the movement of agricultural 

goods. Each component of the marine transportation system—ocean carriers, ports, 

intermodal facilities, transload facilities, export elevators, and landside transportation—work 

together to move agricultural trade effectively and efficiently. The current system is keeping 

pace with the continual increases in cargo volumes, but as trade continues to increase, the 

marine transportation system must continue improving to provide globally competitive service. 

Recent boom cycles of trade have shown that the system, although currently adequate, is 

fragile. In 2004, an unexpected increase in import traffic caused severe and prolonged 

congestion and delays at the ports of Los Angeles and Long Beach. In 2007 and 2008, demand 

for U.S. exports and competition for ocean service sent freight rates to record highs, caused 

significant container availability challenges, and resulted in lost sales for many agricultural 

exporters. 

Physical, environmental, and financial considerations constrain ports from growing larger, 

raising the possibility of congestion, delay, and increases in shipping expenses. Port expansion 

plans are required to improve air quality and practice environmental stewardship. These 

requirements, though important, increase costs and delay infrastructure improvements, putting 

additional pressure on the current system to sustain increasing traffic flows. Some of the 

busiest ports in the country have instituted per-container fees to pay for environmental and 

other port improvements. However, per-container fees add cost to the transportation of 

agricultural products and impact shippers’ narrow profit margins. 

The expansion and growth of developing countries continues to swell the demand for U.S. 

agricultural commodities. Shippers believe ocean container carriers need to reassess the 

strength of the westbound trans-pacific trade lane and allocate enough equipment to serve the 

demand. Agricultural exports are often seen by the ocean carriers as backhaul cargo, 

dampening their incentive to provide sufficient equipment. The higher-valued import cargos of 

retail goods can support a higher freight rate, so carriers in the Transpacific trades cater to the 

equipment needs for eastbound movements instead of westbound movements. As demand for 

U.S. agricultural products grows, the issue of carrier equipment adequate to meet the export 

shipping needs of U.S. agriculture will continue to grow as well. 

 
487

The recent economic downturn put the ocean transportation industry under heavy stress. 

Cargo volumes fell sharply worldwide, rates were at all-time lows, and carriers reduced staff, 

vessel capacity, and service. The U.S. agricultural export community was affected by the 

economic slowdown, but cargo continued to move. Overall, shippers have to adjust to the 

conditions of the infrastructure, recent loss of capacity, and volatile rates, all of which increase 

unpredictability in the transportation system for agricultural shippers and make U.S. 

agricultural products less competitive in the global market. 

 
488

Appendix 14-1: FMC Complaint Resolution Process 

The Federal Maritime Commission (FMC) is charged with administering the Shipping Act, as 

revised by OSRA. Under Sections 10 and 11 of this law, FMC provides both formal and informal 

complaint resolution processes for importers and exporters that believe an ocean common 

carrier or carriers have violated the Shipping Act. 

Local Area Representation 

FMC maintains a presence in Houston, Los Angeles, New Orleans, New York, Seattle, and South 

Florida through Area Representatives, who are based in each of those areas. Besides the ports 

in the cities where the Area Representatives are located, they serve other major port cities and 

transportation centers within their respective areas. Area Representatives serve a number of 

functions: 

• Representing FMC within their jurisdictions 

• Providing liaison between FMC and the local maritime industry and the shipping public 

• Collecting and analyzing information of regulatory significance 

• Monitoring and investigating functions 

• Assessing industry conditions 

Liaison activities involve: 

• Cooperating and coordinating with other Federal, State, and local government agencies 

and departments. 

• Providing regulatory information, including educational seminars. 

• Relaying FMC policy to the shipping industry and the public. 

• Handling informal complaints. 

FMC’s Bureau of Enforcement attorneys work closely with Area Representatives to be sure the 

industry is in compliance with the Shipping Act.387
489

The Informal Process 

Individual importers or exporters can make an informal request to FMC to act as a mediator 

between the ocean carrier, ocean transportation intermediary (OTI), or other industry entities, 

and themselves to resolve a dispute. FMC’s Office of Consumer Affairs and Dispute Resolution 

Services (CADRS) is responsible for administering this process. CADRS can: 

• Act as an "honest broker" between parties to disputes. 

• Provide information relevant to the resolution of particular problems. 

• Advise firms and individuals of options that the relevant statutes make available. 

• Intercede with carriers and other parties to obtain new examinations of rejected claims. 

• Advise passengers how to file claims against cruise operators. 

• Assist individuals who have encountered difficulties in moving their personal effects or 

automobiles.388

Some examples of disputes brought before the CADRS include: 

• Shipper's inability to learn the location of a particular cargo. 

• Shipper's problem with defaulting ocean transportation intermediaries, such as freight 

forwarders and non-vessel operating common carriers. 

• Shipper's difficulty in processing damage and loss claims. 

• Freight forwarder’s inability to collect rightful compensation from carriers. 

• Trucker's dispute with terminal operator's interpretation of equipment detention rule. 

• Terminal operator's complaint concerning the interpretation of a lease agreement. 

• Carrier's objection to a shipper's or forwarder's document preparation.389

FMC Investigations and Private Actions 

FMC, upon complaint or upon its own initiative, may investigate any conduct that it believes 

may be in violation of the Shipping Act.390 Section 10 of the Shipping Act prohibits ocean 

common carriers, OTIs and marine terminal operators from engaging in a variety of 

unreasonable and discriminatory practices.*

 These prohibited acts can be enforced either by 

FMC investigation or by the filing of a private complaint to FMC. 

 

 

*

 For example, section 10 (d) (1) of the Shipping Act states that common carriers, ocean transportation 

intermediaries and marine terminal operators may not fail to establish, observe and enforce just and reasonable 

rules and regulations relating to or connected with receiving, handling, storing , or delivering property; section 

10 (d)(2) prohibits marine terminal operators from unreasonably discriminating in the provision of terminal 

services to common carriers; section 10(d) (4) prohibits marine terminal operators from giving undue or 

unreasonable preferences or advantages or unreasonable prejudice or disadvantage with respect to any person; 

and Section 10 (b)(10) prohibits common carriers from unreasonably refusing to deal or negotiate. 
490

Pursuant to Section 11, any person, including shippers, OTIs, or trade associations may petition 

FMC to initiate an investigation of an alleged violation. The result of such an investigation could 

be the assessment of civil penalties if a violation is found. However, under this authority the 

petitioner would not be eligible to receive reparations as a result of a FMC investigation. 

The Bureau of Enforcement represents FMC during formal and informal investigations. 

Attorneys in the Bureau serve as trial attorneys in formal administrative proceedings instituted 

before FMC under Section 11 of the Shipping Act. Bureau attorneys work closely with the Area 

Representatives in investigations of potential violations of the Shipping Act and FMC 

regulations. 

Any person may also file a private complaint (a private lawsuit) with FMC alleging a violation of 

the Shipping Act. This process can be the lengthiest and most costly of all the available 

grievance processes. However, if the private complainant is successful in establishing a 

violation of the Shipping Act, pursuant to Section 11 (g), the complainant could receive 

reparations amounting to up to two times their actual injuries plus reasonable attorney fees. 

Enforcement actions and investigations into alleged violations of the Shipping Act include the 

prohibited acts in section 10 and the Commission’s regulations. Examples of the types of 

activities that have been investigated in the past include: 

• Rebating 

• Misdescriptions or misdeclarations of cargo 

• Unfilled agreements 

• Abuses of antitrust exemptions 

• Unlicensed OTI activity 

• Untariffed cargo carriage 

• Unbonded passenger vessel operations 

• Various types of consumer abuses, including failure of carriers or intermediaries to carry 

out transportation obligations, resulting in cargo delays and financial losses for shippers 

• Unfair or unjustly discriminatory practices of ocean carriers and OTIs 

• Unreasonable refusals to deal or negotiate391
491

Appendix 14-2: Port Expansion Plans 

This information was compiled and published in January 2009 by MARAD in a report called 

“America’s Ports and Intermodal Transportation System.” The Gateway (including near-port) 

and Corridor projects have a national significance because they play a key role in the U.S. 

Marine Transportation System. Projects are divided into key east/west rail exchanges and 

corridors that support the seven groups of Gateway Ports as described in the Strategy. 

New York/New Jersey 

Gateway and Near-Port Projects:* 

1. Increase NY/NJ water depth to 50 feet (Completion due 2009) 

2. Add new container terminal capacity in NJ area, including Brownfield 

development and access 

3. Construct on-dock/near-dock rail infrastructure at Port of New York/New Jersey 

4. Complete North Avenue Corridor Improvement Project (connector ramp and 

grade separations) 

5. Build/improve truck-only highway connectors between NJ turnpike (including 

exits 12, 14, 14A, and 15) and marine terminals, and on I-78 and north of port 

area in NJ 

6. Construct new Passaic River road crossing 

7. Increase vertical clearance of the 75-year-old Bayonne Bridge to accommodate 

modern ships 

Corridor Projects:*

 

1. Fund and complete four long-term rail route improvements—the River and 

Chemical Coast Lines to the north (double and triple-track and grade crossings), 

the Lehigh Line to the west (triple-track) and West Trenton Line to the south. 

Hampton Roads 

Gateway and Near-Port Projects: 

1. Develop the Craney Island Marine Terminal and Rail Corridor 

2. Construct Hampton Roads Third Crossing Tunnel 

3. Complete State Road 164 Rail Corridor Relocation Project (in progress) 

4. Conduct Elizabeth River Southern Branch Navigation Channel Deepening 

 

 

*

 Port projects marked with an asterisk were identified by the Department of Defense as rail capacity 

improvements in individual port master plans that will prove beneficial to military operations. Department of 

Defense Report to Congress on Projected Requirements for Military Throughput at Strategic Seaports, Under 

Secretary of Defense (Acquisition, Technology & Logistics), April 2007. 
492

Corridor Projects:

1. Expedite completion of the Heartland rail corridor connecting the Port of Virginia 

to the Midwest. This will allow high speed, high capacity freight movements and 

shorten the distance traveled between the rapidly growing port and western 

destinations. 

2. Fund and develop the I-81 Crescent rail corridor, which includes plans for new 

terminals in Pennsylvania, Western Maryland, and Alabama, and upgrades to 

Roanoke, VA, and Memphis, TN, intermodal yards. 

III. Charleston/Savannah 

Gateway and Near-Port Projects: 

1. Expand the port in the former Charleston Navy Base (including road connectors 

and 280-acre container terminal, scheduled for completion in 2013) 

2. Deepen Savannah Harbor and approach channel from 42 to 48 feet 

3. Complete turning basin component of Charleston Harbor Deepening Project (to 

45 feet) 

Corridor Projects: 

1. Widen State Road 17 (Savannah Highway) southward to link with I-95. 

 Houston 

Gateway and Near-Port Projects: 

1. Develop Port of Houston Bayport Terminal 

2. Improve connections between the port, State Highway 146, and I-69 

3. Improve State Highway 146 

4. Improve rail connections between terminals and Class I rail lines at Pasadena, 

Strang, and Deer Park Yards and double-track main line across Buffalo Bayou 

5. Develop Grand Parkway loop around central business district (State Highway 99 

to I-45) 

6. Develop Pelican Island Terminal (long term project) to increase future container 

capacity 

Corridor Projects: 

1. Develop I-69 (Designated as a DOT Corridor of the Future) to improve 

north/south freight movements to Canada and Detroit 

2. Improve I-10 between Houston and San Antonio to facilitate freight movements 

westward. This includes widening a key section from 4 to 10 lanes each direction 

 
493

IV. Seattle/Tacoma 

Gateway and Near-Port Projects: 

1. Develop additional container terminals along the Blair waterway in Tacoma. 

2. Develop Pacific Northwest regional intermodal yard support capacity. 

3. Complete Lower Columbia River Navigation Channel and improve Tacoma 

Harbor Channels 

4. Resume maintenance of Snake River Navigation Channel 

5. Build Stevedore Services of America (SSA) Terminal in Tacoma 

6. Build Tacoma-Olympia South Sound Logistics Center 

7. Improve Columbia/Snake River Locks. 

8. Extend SR 167 in Tacoma and State Road 509/99 in Seattle 

9. Reconfigure/improve Seattle Terminal 30 

Corridor Projects:* 

1. Add grade separations and track additions for rail service between Seattle and 

Tacoma, creating unobstructed urban corridor access while improving safety 

2. Upgrade Stampede Pass tunnel to accommodate double stack trains 

3. Reopen rail line between Ellensburg and Lind, WA 

4. Eliminate single-track line between Portland and Troutdale 

5. Construct additional track between Seattle and Tacoma 

6. Double-track between Seattle and Everett, WA 

V. Oakland 

Gateway and Near-Port Projects:*

 

1. Increase Oakland navigation channel to 50-foot depth 

2. Develop Outer Harbor Terminal in Oakland 

3. Improve access to the Port of Oakland and Union Pacific rail facility 

4. Rehabilitate the Oakland–Martinez line to provide a third mainline into Oakland 

5. Re-align Maritime Street in Oakland 

6. Improve 7th Street grade separation and roadway to relieve road and rail 

congestion at the port 

Corridor Projects:* 

1. Upgrade Donner Pass rail tunnels to accommodate double stack containers and 

double track the line from Reno to Salt Lake City 

2. Double track San Joaquin Valley to eliminate freight/passenger competition for 

the single track 

3. Improve the Tehachapi Trade Corridor Rail line; augment rail connections 

between northern and southern California 
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VII. Los Angeles/Long Beach 

Gateway and Near-Port Projects:*

 

1. Replace Gerald Desmond Bridge in Long Beach (to allow larger ships and increase 

lane capacity for truck traffic). 

2. Expand TraPac Marine Terminal 

3. Construct Port of Los Angeles/BNSF Southern California International Gateway 

Intermodal Rail Yard 

4. Build SR-47 Expressway project 

5. Expand capacity of I-710 between Long Beach and I-10 

6. Expand UP ICTF rail yard in Wilmington 

7. Improve/construct on-dock rail at LA/LB 

8. Increase Los Angeles Harbor navigation channel to 55 feet 

9. Develop Pier B Rail Yard in Long Beach 

10. Develop West Basin Rail Yard in LA 

Corridor Projects:*

 

1. Increase mainline rail capacity (triple track) through Cajon Pass 

2. Complete grade separations along “Alameda Corridor East” to establish the Los 

Angeles–Colton corridor 

3. Build Colton Crossing grade separation project 

4. Double track between Colton, CA, and El Paso, TX 

5. Upgrade Rail connector between Port Hueneme and main line 

Major projects approved by the California Transportation Commission include: 

• Gerald Desmond Bridge replacement at the Port of Long Beach – $250 million 

• SR 47 Expressway and Schuler Heim Bridge Replacement in LA/LB ports – $158 

million 

• LA/LB ports rail improvements – $175.1 million 

• San Gabriel Valley Grade Separations, Alameda Corridor East – $336.6 million 

• U.S. 101-Rice Avenue Interchange near Port of Hueneme – $30.4 million 

• I-15 widening and Devore Interchange reconstruction – $118.0 million 

• Port of Oakland 7th Street Grade Separation – $175 million 

• Port of Oakland Outer Harbor Intermodal Terminals – $110.0 million 

• Union Pacific track and tunnel improvements at Donner Summit – $43 million 

• I-880 freeway reconstruction in Oakland – $73.0 million 

• Highway 4 Cross-Town Freeway extension in Stockton – $96.8 million 

• I-580 freeway eastbound truck climbing lane – $64.3 million 

• Tehachapi trade corridor rail improvements – $54.0 million 

• Stockton Ship Channel dredging – $17.5 million 

• Sacramento River channel dredging – $10.0 million 
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• National City Marine Terminal Wharf Extension, Port of San Diego – $15.0 million 

• Port of San Diego grade separations – $81.6 million 

VIII. Key East/West Rail Exchanges 

1. Expedite the Chicago CREATE rail project that facilitates major east/west freight 

movement and local congestion relief. This project includes 25 new roadway 

overpasses or underpasses at locations where auto and pedestrian traffic currently 

cross railroad tracks at grade level, six new rail overpasses or underpasses to 

separate passenger and freight train tracks, viaduct improvements, grade crossing 

safety enhancements, and extensive track, switch, and signal system upgrades. 

2. Support the New Orleans gateway infrastructure improvement projects that create 

grade-separated multiple track corridors through this vital chokepoint. This publicprivate partnership between the Nation’s six Class I railroads and State and local 

government will include replacing track, eliminating one underpass, and several 

grade crossings and upgrading junction switches. 

Appendix 14-3: Foreign Trade Regulations: Carrier 

Responsibility 

The regulation for carriers reads, Section 30.7 (b) “. . . the U.S. Principal Party of Interest (USPPI) 

or the authorized agent is responsible for annotating the proper proof of filing citation or 

exemption legend on the first page of the bill of lading, air waybill, export shipping instructions, 

or other commercial loading documents. The USPPI or the authorized agent must provide the 

proof-of-filing citation or exemption legend to the exporting carrier. The carrier must annotate 

the proof-of-filing citation, exemption or exclusion legends on the carrier’s outbound manifest 

when required. The carrier is responsible for presenting the appropriate proof-of-filing citation 

or exemption legend to CBP Port Director at the port of export as stated in Subpart E of this 

part.”392 

 
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