Port Congestion Update

Posted October 22, 2014
Category Company News

Frustration with west coast port congestion and resulting delays continues to grow as importers and exporters watch helplessly and express concern as the status quo lingers. With cargo taking over 2 weeks to get off west coast docks, the trade community finds itself in the midst of the worst gridlock to hit west coast ports in over a decade.

Labor negotiations between the ILWU and PMA while still unresolved are not the greatest contributing factor to the congestion. The logjam is attributed to a mix of factors including a lack of chassis, a lack of truck drivers who are pursuing more lucrative opportunities, long wait times at port terminals, mega-ships transferring to/ from dock greater amounts of containers on a single voyage, a lack of port terminal automation, and inefficiencies among railroads who struggle to find the right balance of lower versus higher profit cargo.

Recognizing the gravity of the situation at hand, Los Angeles and Long Beach port authorities recently directed port staff to develop plans to procure and make available thousands of chassis to help alleviate congestion during peak time periods. Last week the port commission cited a commitment by DCLI and TRAC Intermodal, two large chassis lessors, to inject 3,000 additional chassis into their Southern California fleet as a sign that help is on the way.

A teamwork effort will be needed to minimize the current backlog. Many are calling for terminal operators to decrease truck turn times and keep their gates open longer, the latter of which will not even be a consideration until a new labor agreement is reached. Long turn times, often referred to as ‘devastating to profitability’ by drivers, is the main cause many are leaving the industry for other employment.

Although unconfirmed, west coast truckers also assert the terminals are using demurrage and per-diem fees to inflate profits even though drivers are restricted from entering terminals due to port congestion. Additionally, some ocean carriers levy demurrage fees on top of port terminal demurrage fees. Industry pundits note rising demurrage and per-diem charges are directly related to congestion at terminals.

Gene Seroka, Executive Director of the Port of Los Angeles, recently put a spotlight on the congestion noting, “Four of seven Los Angeles container terminals are operating above a 90% utilization level.” To put that statement into perspective, Seroka added, “When a terminal is at 80% capacity, it is going full bore.”

“Reduced free time and increased demurrage penalize shippers for the terminals’ own lack of efficiency”, Don Pisano, president of American Coffee Corp. in Jersey City, New Jersey, said at a recent FMC hearing in Baltimore. “What is extraordinary is the sense that the carriers and the terminal operators only seem to serve each other — all others be damned.”

In recognition of the severe congestion, new Port of Long Beach Chief Executive Jon Slangerup took a positive step to address the bottleneck by ordering a two-week extension of the normal free time cargo owners are allotted to pick up imported loads. Long Beach importers typically receive four business days from the date of discharge; however, this action offers cargo owners a full seven business days to procure cargo through the end of October. “The terminal congestion is very unfortunate and a truly exceptional occurrence, so I am using my authority to waive demurrage fees through the end of the month,” Slangerup said.

Port Congestion Isn’t Just a West Coast Issue

Unfortunately, congestion issues are affecting ports nationwide as the industry struggles to keep up with the surge of imported goods. In addition to west coast ports, east coast and gulf coast ports are also feeling the pinch as long turn times are being reported.

While east coast ports are finding themselves to be the beneficiaries of west coast struggles via an increase in diverted and east coast routed cargo, chassis shortages are leading some terminals to insist truckers bring their own chassis, and to have an empty or loaded container on it. That’s long been the de facto situation at New York-New Jersey terminals where chassis are chronically in short supply and terminals are jammed with empty boxes.

In recent months terminals in New York, New Jersey and Virginia have temporarily halted the return of empty boxes because of congestion forcing truckers to return empty containers to off-dock sites without adequate compensation which may lead to chassis split charges.

At a point in which good news is needed, a positive development took place on Tuesday October 21st with the Port of Houston Authority announcing a one hour extension of gate terminal hours at the Bayport and Barbour’s Cut Terminals effective November 17, 2014. The additional hour per day seeks to increase overall productivity and owner operator pay while helping to off-set driver shortages. All trucks moving standard equipment will be allowed to enter the terminals until 6:00 pm but must exit the terminal no later than 7:00 pm (M-F). All late gate limitations apply to out-of-gauge cargo.

While the congestion continues inland carriers are struggling to maintain service and retain drivers under current federal hours-of-service (HOS) restrictions. While a temporary waiver of HOS rules has been requested such a move by the FMCSA is unlikely.

While cargo owners cite higher costs shipping via east coast ports, most say it’s worth it to keep cargo moving.

Ocean Carrier Reactions

Adding insult to injury Transpacific Stabilization Agreement (TSA) carriers are levying a fee on intermodal cargo in the transpacific trade citing port terminal congestion, driver shortages, slower rail service and rail terminal congestion leading to longer dwell times and increased costs.

TSA lines are planning to levy fees of approximately $90 per 20’ and $100 per 40’ container around mid November / early December. TSA members include: APL, China Shipping, CMA CGM, COSCO, Evergreen, Hanjin, Hapag Lloyd, Hyundai Merchant Marine, K Line, Maersk, MSC, NYK, OOCL, Yang Ming and Zim Line.

ILWU Response to Port Congestion

ILWU Leadership is calling for more permanent longshoremen jobs and extended port operations, even citing 24 hour operations to keep the Ports of Los Angeles-Long Beach competitive. The ILWU cites no new permanent personnel hires have taken place which hinders productivity as ‘casual’ hires do not have the expertise needed to operate machinery to levels needed to increase productivity and efficiency. Whether or not more permanent jobs or extended port hours of operation are part of present ILWU / PMA contract negotiations is unknown.

While the ILWU advises ‘automation is not the wave of the future’ citing safety concerns, terminal operators tout automation as the driver needed to achieve efficiency levels unattainable under the present work model. Union leadership fears unmanned cargo handling equipment is unsafe; however, some European terminal operators have been using automated equipment for the past 2 decades and today recognize fewer safety issues as there are fewer workers in and around the terminal facility.

Only time will tell what the proper balance between automation, manpower, efficiency and profitability truly is. In the meantime, the trade community anxiously awaits relief from the present gridlock and a return to the normal flow of trade.

Unfortunately, there is no ‘quick fix’ for the industry’s current ills. Vessels are beginning to back up on the west coast, port terminals are congested, outbound shipments via the west coast are being split or rolled in some cases, trans pacific import shipments are experiencing 2 – 3 week delays and the trade can only watch and remain hopeful that the situation improves.

A PMA / ILWU labor agreement and a commitment by all involved to induce positive change will go a long way to expediting the flow of trade but as history has proven, change takes time.

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