IMPORT & EXPORT

Port Congestion Fees Suspended for Shippers But More Problems at the Docks

The silver lining in the West Coast port-congestion problem is this: There will be tons of discounted winter merchandise for sale after the holiday shopping season.

That’s great for consumers and off-price outlets, but for apparel importers and department stores, it will take a big chunk out of profits at a time many retailers and apparel manufacturers are still struggling with more competition from e-commerce sites and price-conscious shoppers.

Ram Kundani, of B. Boston & Associates in Los Angeles, said the port-congestion problem will cost him at least $500,000. He is still waiting for seven to eight cargo containers filled with sweaters to show up on the local docks. His retail clients already have canceled their orders on that merchandise.

He will probably be selling his excess merchandise to discounters for 50 cents on the dollar. “At this point, what can you do?” Kundani said. “We will have to dump the merchandise. We will be losing a lot of money.”

Kundani’s loss is a gain for stores such as TJ Maxx. In a conference call with analysts on Nov. 18, Carol Meyrowitz, chief executive officer of TJ Maxx’s parent company, TJX, said that a little disruption at the ports will benefit her company. TJ Maxx brought in a lot of its holiday goods early, which might have cost more in warehouse expenses but will be made up by lower prices for a ton of merchandise made available later this year.

“I think later we’re going to yield a great opportunity from the goods that haven’t gotten through for most vendors and retailers as of yet,” Meyrowitz said.

TJ Maxx’s windfall is because the congestion problems at the Port of Los Angeles and the Port of Long Beach haven’t improved. The same holds true at the Tacoma/Seattle port complex. Getting goods to any West Coast port is proving challenging.

Some companies have gotten so desperate they are offering an extra $200 to $300 to truckers if they pick up their cargo containers before other clients, said Debra Taylor, a customs broker and freight forwarder with Alba Wheels Up, located near the ports.

Taking desperate measures to dig cargo containers out of the ports has been prompted by several problems that converged all at once on the waterfront.

A new labor contract between nearly 20,000 longshore workers and their employers at 29 West Coast ports has been in the negotiation process since last May but still hasn’t been resolved.

On Nov. 17, the National Association of Manufacturers and other trade groups wrote the White House to urge President Obama to intervene by sending a federal mediator to help negotiate the six-year contract, which expired July 1. The International Longshore and Warehouse Union and the Pacific Maritime Association have been meeting regularly in San Francisco.

“We’d like the administration to consider the use of federal mediation to help them reach a deal,” said Jonathan Gold of the National Retail Federation. “We want to avoid at all costs the shutdown of West Coast ports.”

However, the White House said it would not send in a federal mediator but continue to monitor the situation, confident the two sides will resolve it on their own.

That stance was reiterated by Mario Cordero, chairman of the Federal Maritime Commission, a federal agency responsible for the regulation of maritime international transportation of the United States. “In my mind, something will develop very soon,” Cordero said in a telephone interview. “That complements the White House statement where they expect some closure soon.”

Accusations linger that longshore laborers are not working as quickly as they could, with crane operators scarce at the ports of Los Angeles and Long Beach, the Pacific Maritime Association said.

To add to the slowdown, the ILWU announced on Nov. 20 it was taking a 12-day break from “big table” negotiations and would only have subcommittee meetings during that time to discuss limited issues. The ILWU maintained it is concentrating on some of the smaller issues that need to be tackled. “We believe that smaller subcommittees are the best way to make progress on some important issues that need special attention,” said ILWU spokesman Craig Merrilees in an email.

The PMA was not happy with the fact that “big table” negotiations would be shelved for a while. “We have made it abundantly clear that we believe these negotiations are of the utmost importance and should continue at full strength until the Thanksgiving holiday,” PMA spokesman Wade Gates said. The PMA maintains that ILWU work slowdowns mean some ports’ productivity remains 30 percent or more below normal.

As a result, a watery parking lot with cargo-container ships is forming off the breakwater of the Port of Long Beach and Port of Los Angeles. On Nov. 20, there were nine cargo containers still waiting for berths at the two ports, compared with nine last week. Off the Tacoma/Seattle port complex, there were seven cargo containers floating on the ocean, waiting for space.

On Nov. 20, the Port of Oakland and other San Francisco Bay Area ports were closed for the entire day when ILWU laborers decided not to work in response to the death on Nov. 19 of a longshoreman who was stricken at the nearby Port of Benicia and later died at a hospital. His death is believed to be related to natural causes.

Containers that finally made it to the docks were stacked so high that it is still taking as much as two weeks or more to dig out. “It is looking increasingly challenging,” said Mark Hirzel, president of the Los Angeles Customs Brokers and Freight Forwarders Association. “As you pack it higher and taller, there is more on the bottom, and then you have more congestion, not less congestion.”

He complained that ocean carriers continue to send cargo to the West Coast instead of holding it in Asia until the congestion problem eases.

The ports have become so backed up that the shipping lines said they would start imposing a $1,000 per 40-foot container port congestion fee starting Nov. 17. But when importers complained vociferously, the carriers decided to indefinitely suspend the new fee.


Keep on trucking, maybe

If matters weren’t bad already, independent truck drivers decided this was the time to urge trucking companies to employ them full time. About 80 percent of the truck drivers working in the port area are independent operators who own their own rigs.

At mid-week, truckers were picketing five trucking companies whose rigs were delivering to terminals at the ports in Los Angeles and Long Beach, causing more delays.

“What we are seeing is at least all the marine terminals, at least at the Port of Los Angeles, are turning away trucks from those companies that are being struck,” said Barb Maynard, a spokeswoman for the Teamsters Union, which is organizing the strike. “So those containers are not getting moved at the docks.”

At the Port of Long Beach, the ITS terminal was accepting trucks from targeted trucking companies. Consequently, there was a rash of picketers around that terminal’s gates. Picketers were marching alongside trucks and sporadically walking in front of them to stop their movement, said Art Wong, a Port of Long Beach spokesman.

“It is only a temporary slowdown, and then they go back to work,” Wong said. “We agreed with them that they get only so many minutes to walk across the street [in front of trucks]. Our security people and the Teamster leadership know how this works.”

By Nov. 20, truckers had stopped picketing three truck companies: LACA Express, QTS and Win Win Logistics.


Cargo on wheels

The months’ old port-congestion problem started out with a shortage of chassis, the wheeled frames used to transport the cargo containers. That situation hasn’t changed even though the Port of Los Angeles and the Port of Long Beach have devised plans to alleviate the problem.

The Port of Long Beach recently announced it was setting aside 30 acres at Pier S on Terminal Island to temporarily store empty cargo containers affixed atop chassis. That means the empties could be taken off the chassis and the chassis returned to pick up a loaded cargo container. But the Pier S site won’t be open until early December because a temporary road to the location has to be upgraded to accommodate larger 18-wheelers, Wong said.

Earlier this year, the Port of Los Angeles allocated space to store empty and loaded containers on Terminal Island. But that still is not being used.

One of the problems is that a labor contract has to be in effect to determine the rules of how the ILWU, which services the chassis, will work in these two locations.

A gray chassis pool that would make chassis more readily available at the two ports won’t be in effect until at least February.