September at-a-glance … supply chain

Updated survey findings confirm that NAFEM members face unprecedented, concurrent supply chain pressures

Supply chain issues caused by component shortages, shipping challenges and tariffs continue to plague NAFEM members. These ongoing disruptions impact the ability of businesses to compete, grow, control costs, fulfill orders and, ultimately, maintain employees. More than 96% of respondents to NAFEM’s recent member survey report escalating supply chain issues.

Supply shortages and the rising costs of shipping are members’ most-pressing concerns in the current August and earlier, April, surveys. While the order of issues impacting members changed slightly in the past four months, tariffs on imported metals and goods from China and shipping delays round out the industry’s concerns.

Limited access to essential steel and aluminum, the industry’s most cumbersome supply challenge, increased from 52% in April to 75% in August. Shortages of plastics, polyurethane/foam insulation and semi-conductors increased as well. These supply shortages are impacting respondents’ abilities to control costs (100%), fulfill orders (92%), grow (83%), compete (63%) and maintain their workforce (31%).

The Section 301 tariffs on imports from China also are hurting members’ businesses. More than 76% of those surveyed report supply issues on Chinese imports, up from 60% in April. Tariffs are impacting NAFEM members’ abilities to fulfill orders (97%), control costs (95%), grow (87%), compete (69%) and maintain their workforce (22%).

Shipping issues further exacerbate members’ challenges. From April to August, members were burdened by worsening delays in domestic transportation – including intermodal, rail or truck. Delays also have increased in air and ocean freight.

NAFEM and its members are working closely with elected and appointed officials to address these challenges, reinforcing members provide good-paying manufacturing jobs across the country.

New resources to inform conversations with elected/appointed officials

In addition to the above supply chain survey results, NAFEM has a number of new assets in its toolkit as it ramps up for another round of virtual visits with elected and appointed officials. These include:

• An infographic that quickly summarizes steel supply chain issues.
• A white paper that further articulates the pressures supply chain issues are having on the U.S. manufacturing sector, including jobs. This document was prepared by the collation of NAFEM, the Association of Home Appliance Manufacturers (AHAM), Air-Conditioning, Heating and Refrigeration Institute (AHRI) and National Electrical Manufacturers Association (NEMA).

NAFEM is currently scheduling additional virtual meetings with those who shape policy to advocate for relief to supply chain issues caused by tariffs, shipping challenges, semi-conductor shortages and other supply chain-related issues. Members interested in participating in these meetings should contact Charlie Souhrada, CFSP, vice president of technical and regulatory affairs. “It’s imperative that those impacting our industry in Washington, D.C. hear directly from the companies involved. We had an excellent series of meetings in July and look forward to many more this fall,” Souhrada said.”

“Made in USA” claims clarified; penalties standardized

To prevent deceptive “Made in USA” claims, the U.S. Federal Trade Commission (FTC) issued a final rule regarding claims Aug. 13. To qualify to use the claim, all three of the following must be true:

• All or virtually all of the products, ingredients or components are made and sourced in the U.S.
• All or significant processing for the product occurs in the U.S.
• Final assembly or processing of the product occurs in the U.S.

The final rule allows the agency to seek monetary penalties of up to $43,280 for each violation of the “Made in USA” standard. The FTC provides a useful guide to Complying with the Made in the USA Standard.

Shipping challenges intensify, expected to continue into 2022

First, it was the closure of ports worldwide due to the COVID-19 pandemic. Then, it was the Ever Given blocking the Suez Canal for almost a week. In August, global shipping delays continued with the COVID-19 driven almost two-week closure of a terminal at China’s Ningbo-Zhoushan Port, the world’s third largest, south of Shanghai. While the terminal has since reopened, relief is not expected any time soon.

A new report by The Economist Intelligence Unit, sponsored by Citi, based on a survey of 175 supply-chain managers finds that, “Shifts in supply chains were already underway, owing to geopolitical and economic factors, and COVID-19 has accelerated some of them. Recent outbreaks of the virus – driven by the delta variant – mean that we have not seen the last of supply-chain disruptions yet, as economic activity across Asia-Pacific continues to be hampered.”

In the U.S., container ships continue to wait to be unloaded outside of California ports. Inland logistics locations also are experiencing delays due to a shortage of truck drivers to move intermodal containers. And costs continue to climb. According to Xeneta, a firm that tracks shipping rates, the average cost of shipping a container from China to the U.S. West coast increased from $3,350 to $7,574 in the past year.

John Drake, vice president for supply chain policy at the U.S. Chamber of Commerce, said “Unfortunately, we expect these delays to continue well into 2022. A lot of delays are COVID-related – a shortage of truck drivers and warehousing space, a big shift in U.S. consumers spending money on goods instead of travel and entertainment, and ongoing COVID-related shutdowns at ports and factories worldwide.”

To help address the longer-term systemic challenges exacerbated by the pandemic, NAFEM joined 152 groups, including 59 companies and 93 trade associations, advocating for passage of the Ocean Shipping Reform Act of 2021. The first update to federal legislation impacting the global ocean shipping industry since 1998, the Act is intended to help reduce the United States’ longstanding trade imbalance with China and other countries.

DOT requests information to address transportation bottlenecks and supply constraints

In response to an Executive Order on America’s Supply Chains signed by President Biden Feb. 24, the Department of Transportation (DOT) issued a request for information. DOT seeks practical solutions to address current and future challenges to supply chain resilience in the freight and logistics sector. Comments are due Oct. 18. Members interested in contributing to NAFEM’s comments on these issues should provide input to Charlie Souhrada by Friday, Oct. 8.