West Coast Port Congestion Update: Conditions Deteriorate

Crane Operator

Crane operator in the Port of Long Beach, CA (Source: Journal of Commerce)

As the new year dawned a few weeks ago, we had hoped that it would bring good news in the form of a resolution to the nation’s West Coast port congestion woes. Sadly, such was not the case. The standstill at the nation’s West Coast ports drags on, with no end in sight.  By all accounts, the near gridlock situation is beginning to take a toll on the nation’s quickly rebounding economy.  Meanwhile, business owners fume, logistics companies scramble to find alternatives and government mediators accomplish little.

So what is the cause of this on-going transportation Armageddon? Let’s take a quick look. Some would place the blame on a truck chassis shortage. Others point to new, super-sized ships from Asia and the inability of the aging infrastructure at the nation’s ports to handle them. Some say too many truckers have exited the business due to low pay and increasingly expensive vehicle regulations. All of the above contribute to the problem, but it’s much simpler than that.

It’s a prolonged and bitter labor dispute.

The Longshoreman’s Union (ILWU) has been without a contract since last summer. The port operators, known as the Pacific Maritime Association (PMA), have refused to capitulate to the union’s demands of increased wages, increased health benefits, reduced automation and expanded authority over work rules. In short, it has devolved into a protracted war of attrition. Both sides have dug their trenches and hardened their intractable positions, with little regard for the harm they are doing to businesses or the nation’s economic recovery.

So why has it gotten so much worse the last 60 days?

Since November, the ILWU has begun “hard-timing” the ports and under-manning them. That’s union-speak for a work slow down. Unions are refusing to send enough skilled labor to operate the port’s cranes, leaving many of them idle as ships sit anchored off-shore waiting to be unloaded.  The workers that are reporting for duty are operating as slowly as possible, while still technically complying with their expired contract.  The PMA reports that worker productivity has dropped from an average of 28 containers moved by each crane per hour to 20. That’s a decrease of nearly 30%. What’s worse, the PMA reported that in early November the ILWU locals informed them that the number of yard crane operators the union would dispatch each day would decrease from 110 to 35. Horrendous delays and gridlock resulted immediately.

In response, the PMA, which is incurring huge expenses because of plunging productivity, has been attempting to cut back on labor costs wherever possible. For example, terminal operators stopped night gate (second shift) operations in Seattle and Tacoma several weeks ago, and in Oakland during the past two weeks. The unions howled.

Cargo Ships off Long BEach

Cargo ships off the coast waiting to unload their goods in the Port of Long Beach. (Source: Los Angeles Daily News)

Steamship lines are taking huge losses as a result of the strife, as well.  With the unloading of arriving vessels having slowed to a crawl, many ships are forced to anchor idly offshore for 7-10 days until a berth opens up. While they sit, their losses mount. Consequently, outbound shipping schedules are a shambles, as nothing is arriving on time. In an attempt to defray some of their losses, carriers have begun to assess importers with a Port Congestion Fee of up to $1,000 per container.

Meanwhile, the rest of the world looks on and shakes it’s head as the reliability and reputation of the West Coast’s ports erodes daily. It’s a black eye for the country.

Where will it all end? It’s anyone’s guess at this point.

Who are the big losers in this playground spat gone global?  Certainly the two combatants and the vessel owners are. Businesses, even more so. However, in the end, the answer is that we all lose.

(The Journal Of Commerce contributed to this post.)

 

Port Congestion Surcharge In Effect

Ships Off Long Beach

Ships anchored off of Long Beach, CA waiting to unload (Source: L.A. Times)

Due to ongoing port congestion issues on the West Coast, particularly the Ports of Los Angeles-Long Beach, ocean carriers are now implementing a Port Congestion Surcharge on all imports.  This surcharge is effective immediately. Please see a recent L.A. Times article relating to this matter, if you are unfamiliar with the situation.

Per tariff filings with the Federal Maritime Commission (FMC), the Port Congestion Surcharge will be $1,000 per FEU, “effective for all import cargo discharging at U.S. West Coast ports on or after November 17.”

An “FEU” is ocean-speak for a full, 40′ container.

Surcharges are as follows:

  • $800 per 20′
  • $1,000 per 40′
  • $1,125 per 40’HC
  • $1,266 per 45’HC

All carriers including, but not limited to, Hanjin, CMA CGM, Hyundai, Yang Ming, Evergreen and NYK are putting this surcharge in effect. Some of these surcharges were filed with the Federal Maritime Commission (FMC) as far back as two years ago in case of any severe service disruptions along the East, West Coast or Gulf Coast ports.

Here are links to a few official carrier announcements:

This unprecedented decision by carriers stems from carrier argument that they are incurring huge operating losses while their ships sit idly, anchored offshore waiting to be unloaded. In some cases, the delay to be unloaded has recently been 7-10 days in some cases.

In response, some carriers have even been cancelling sailings and/or re-routing vessels to alternate ports.

As if things weren’t tough enough on importers, there is now also a strong possibility of some type of a work stoppage in the near future by the ILWU (longshoreman’s union), as their contract negotiations from this past summer appear to have stalled and reached a critical juncture.

We understand how this major event affects your cost of doing business. It affects us adversely as well..

We will continue to monitor this situation very closely. Any mitigation of this surcharge will immediately be passed on to you.

Note that there is a similar, though much small surcharge in place on exports as well.

Have questions or need to know more? Please contact a Customer Service Representative for more information. We’re here to help.

Peak Season Update: Port Congestion Grows on Both Coasts

Harbor Delays

 

‘Tis the Season… To Ship Early

With the peak of the holiday shipping here, port congestion at the nation’s two largest container gateways continues to grow, leaving truckers and importers fuming. Severe congestion at  the Port of Los Angeles and Port of New York-New Jersey has been widely reported, with the situation in Los Angeles becoming increasingly dire.

“The vessels keep arriving and the trucks keep arriving,” said John Cushing, president of PierPass Inc., which manages the extended gates program for the 13 container terminals in the port complex. Yet the backlog continues to grow.  “There are times when the imports are not moving. The numbers are outrageous —6,000 to 7,000 containers just sitting at the terminals,” he said.

One terminal operator in Long Beach said he is working only two cranes each week per vessel, rather than five cranes he should be, because the yard cannot absorb any more boxes. Unloading of vessels has slowed to the point that some terminals are in danger of having to tell vessel operators to slow down their arrivals because the ships can not be handled on schedule.

So what is the cause of this rapidly snowballing problem?

Chassis Shortages Severe
Chassis ShortageIn Southern California, truckers and terminal operators point to chassis being in short supply, in the wrong place at the wrong time or chassis being out-of-service as being the main culprit.

“Chassis are the Achilles’ Heel here,” said Fred Johring, president of Golden State Express and chairman of the Harbor Trucking Association of Southern California.

Ocean carriers during the last five years have exited the chassis business in Los Angeles-Long Beach and New York-New Jersey, selling the assets to chassis leasing companies. Terminals on both coasts immediately began to report that they did not have enough chassis, not because the overall supplies in the harbors were reduced, but because the business relationships involving cargo interests, shipping lines, terminal operators and chassis providers had changed. It can now take truckers twice as long to get an empty chassis, often from an off-site location, at increased rates. Those increased costs have been passed along to shippers, where they were previously built into ocean carriers’ pricing.

Truck & Driver Shortage Continues
As if the chassis shortages aren’t enough, truck drivers in the US are voting with their feet and leaving the industry at an “unsustainable pace”.  These are the words of Federal Maritime Commission (FMC) commissioner William Doyle, who is at the forefront of an investigation by the Washington agency into port congestion. It is a combination of depressed wages, rising equipment cost and increased regulation.

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Customs Exam – The Two Worst Words In Shipping

CBP Inspection

CBP Inspectors examining a produce shipment.

  • Why Me? – What causes an exam
  • Types of Exams – VACIS, Tailgate, USDA and Intensive
  • How to minimize the likelihood of an exam

Overview

They have been called the two worst words in shipping: “Custom Exam”.  That phrase can strike fear in the heart of even the most seasoned shipper or logistics professional. In this article, we’ll take a look at exactly what a Customs Exam is all about, what it means to you as an importer and what can be done to mitigate the risk of having it happen to you.

Why Me? – What Causes an Exam

Customs-Inspection #3You, your overseas supplier and your freight forwarder have done everything perfectly. The schedule has run like clockwork and your freight is due for delivery any day now. Then, you get that most unwelcome of emails or phone calls. Your freight has been flagged by the U.S. Customs and Border Patrol (CBP) for an exam.  Your heart sinks and you mutter a few choice expletives that we’ll omit here. Everyone’s first question: Why Me?
In the post 9/11 world, it is no secret that security measures are on the rise and that CBP is increasing frequency with which they flag shipments for exams. Under 19 USC 1467, CBP has the right to examine any shipment imported into the United States, and you, the importer, are required to bear the cost of those cargo exams. Not only can an exam delay delivery of your freight by days, or weeks, the fees you are responsible for can run into the hundreds of dollars for which you have not budgeted.

What could you have done wrong? You’re not a bad guy, right? Unfortunately, CBP will not disclose the reason for a hold on a specific shipment, citing security concerns. They don’t want the bad guys to know what they are looking for. What we do know is that the CBP “selectivity process” uses complex algorithms to evaluate the degree of risk associated with each shipment.  Factors include:

  • Number of previous shipments:  Are you a first time importer who lacks a track record with CBP?
  • Identity of manufacturer, shipper, importer, and consignee:  Are any of these entities associated with previous “problem” shipments, or violations of U.S. regulations?
  • Origin, routing, and destination of shipment:  Did the shipment come from, or pass through, any locations where unauthorized persons might have had access to the cargo?
  • Who arranged and loaded the shipment: Was everyone involved in handling the shipment a “known entity” to U.S. Customs, with an adequate cargo security program?
  • Commodity: Does this type of product often have inaccurate declarations of classification or value, high potential for commercial fraud, high risk factors for consumer product safety issues, or intellectual property rights issues?

One very important item note is that your shipment may not be the source of the hold.  If your shipment is part of a consolidation (i.e., partial container), if any one shipment in the container gets flagged for an exam, the entire container may be held for an exam. More about this in a minute.

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