Port Congestion Worsens With Mounting Fees for Importers

Apparel importer Ashok Kumar is patiently waiting in Los Angeles for six to eight containers of sweaters and jackets to arrive by boat from Asia to stock his various clothing stores in downtown Los Angeles.

But the ships that were to deliver those containers have been diverted to other ports because there is no space for them to dock at the Long Beach/Los Angeles port complex. It will be several days before they return to the Los Angeles area and then several days or weeks to unload the cargo. In addition, Kumar has another container still sitting in Hong Kong that won’t arrive until after Christmas.

To make matters worse, starting on Nov. 17, a new congestion fee of $1,000 per 40-foot container is being imposed by shipping lines on all incoming cargo passing through all West Coast ports, including the Port of Los Angeles and the Port of Long Beach. That is on top of a $125-a-day demurrage fee for cargo sitting on the docks waiting to be picked up.

“We are getting screwed left and right,” said Kumar, whose VIP Fashion Inc. company has several shops in the Santee Alley area of the Los Angeles Fashion District. He also sells clothing to other small boutiques.

The clothing executive estimates that the port congestion will cost his company at least $1 million in lost orders and sales during this critical Holiday season. “This is so stressful,” he said.

Cargo congestion at the Port of Los Angeles and the Port of Long Beach has been an ongoing problem for six to eight weeks now. But instead of getting better, it is getting worse.

Several issues have exacerbated the problem. There is still a shortage of chassis, the wheeled rigs used to transport containers. Negotiators are still sitting down and trying to hammer out a new six-year contract between the International Longshore and Warehouse Union and its employers represented by the Pacific Maritime Association. The contract for nearly 20,000 workers at 29 West Coast ports expired July 1.

While both sides still meet in San Francisco, there have been accusations that dock workers aren’t moving as fast as they could to get cargo containers off the waterfront. To make matters worse, several independent truckers who believe they should be classified as full-time employees at two Los Angeles–area trucking companies picketed around four terminals at the Port of Los Angeles and three terminals at the Port of Long Beach on Nov. 13. And they said they will be back.

This is the fifth time this year truckers have picketed the ports. In July, longshore workers briefly honored the picket lines but were told by a federal arbitrator that they had to return to their jobs. Many were fearful the longshore workers would try to honor the truckers’ picket lines again, but operations were running normally on Nov. 13 at the two ports, port representatives said.

Bring in the feds

Everyone thought the congestion problem would have diminished as less cargo is brought in this time of year because it is almost too late to stock store shelves. But it is still taking about two weeks to get a container off the docks once a ship has been unloaded. It started with a chassis shortage and evolved with worker slowdowns.

With so much congestion, cargo-container ships are anchoring off the port breakwater to wait for a berth. One vessel has been anchored there for a week, hoping a space will clear up, said Capt. Kip Louttit, executive director of the Marine Exchange of Southern California, which monitors ship traffic in and out of the ports.

As of Nov. 13, there were nine cargo-container vessels stationed beyond the breakwater, which is unchanged from one week ago. Normally during this time of year, there should be no cargo-container ships anchored beyond the breakwater.

To cope with the congestion, several shipping lines have been diverting their cargo to other ports, such as Oakland or Seattle, which have been having their own labor problems and slowdowns.

For those thinking they could air freight their cargo into the United States, they have been in for a shocking surprise. With so much demand for air cargo space, rates are rapidly rising by as much as 20 percent to 30 percent and could go higher.

“Air freight prices are increasing because it costs more as the demand rises,” said Mark Hirzel, president of the Los Angeles Customs Brokers and Freight Forwarders Association, noting it is difficult to get space. “In this industry, they are going to take the highest-paying ticket as cargo and bump the ones paying the lowest rate.”

Suzuki reportedly was seeing a two-week delay to air freight motorcycle parts from South Korea to Los Angeles.

The ports have not been this congested in over a decade. In September 2002, in the midst of negotiations between longshore workers and their employers over another six-year contract, the terminal operators locked out the longshore workers, leading to an 11-day shutdown of the West Coast ports. Work resumed only after former President George W. Bush invoked the Taft-Hartley Act and obtained a court order opening the ports.

Several U.S. senators, congressional representatives and industry leaders have stepped into the current crisis, urging the two sides in the labor contract negotiations to resolve their issues and sign a new contract.

On Nov. 12, six U.S. senators from California, Washington and Oregon sent a letter to the heads of the ILWU and the PMA, asking them to resolve their differences and come up with a new contract.

The same day, several industry representatives, including Jonathan Gold of the National Retail Federation and Peter Friedmann of the Pacific Coast Council of Customs Brokers and Freight Forwarders Association, met with White House leadership from the Domestic Policy Council, the National Economic Council and the Department of Commerce, urging them to take federal action to resolve the port-congestion problem.

“Apparently, the White House was unaware of how severe this whole thing was,” said Hirzel of the Los Angeles Customs Brokers and Freight Forwarders Association. “The meeting went to the point that the federal government had to do more and not just monitor the situation but bring out a federal mediator to understand the issues.”