This article was deemed too hot to publish by the Journal of Commerce and so ended our relationship.
As we move into the new year and things start to settle into more of a routine, one issue that simply will not go away is port congestion. There are lots of reasons for the current mess. Just as it took a long time for things to get this bad, there are no quick fixes.
When the topic of port congestion comes up, everyone has an opinion. Here are the most popular causes cited – truckers, steamship lines, terminals, labor and, of course, port management. Each bears some of the blame, but let’s first provide some perspective, and then talk about actions which can be taken now.
Let’s start with the steamship lines, terminals and port management, as a group. Los Angeles, Long Beach and Oakland are unique in that they are owned by local governments. However, the problem is obviously not limited to those ports. When one looks at the situation more broadly, here are some of the more critical factors this group controls:
- Until maybe 5 to 10 years ago, each vessel was operated by a single steamship line, holds were stowed so that shipments being discharged at a given arrival port were stowed together in a designated set of holds, and most of the organization of the cargo was overseen at the loading ports. In other words, there was an effort made to make unloading as smooth as possible for one simple reason – time always costs money!
- Now, vessels are operated by consortia and the process has become members are designated which holds to stuff rather than stuffing by location. As a result, there appears to be very little real attempt to organize the cargo based on unloading ports. Carrier 1 in the consortia gets holds 1 through 5, Carrier 2 gets 6 through 10, and so on. As such, you can quickly see the mess that lack of discharge port organization can cause. And part of that mess is containers having to be taken off at one port to unload cargo destined for that port, only to have the same containers be put back on the vessel so they get to their actual port of discharge.
- Then, the U.S. is one of the few countries where there is no widespread use of grey boxes, meaning containers which are used by multiple carriers. As such, there is no uniform pool of empties from which to pull for exports and a very erratic pooling for the return of empties after the imported cargo is unloaded.
- Add to that the mass of containers that were in the U.S. when the pandemic hit and were not rerouted in the most efficient manner once it was possible to again move them. The rush to get them back to Asia has led to empty containers being shipped because that is more economically beneficial than allowing them to be stuffed with U.S. export cargo!
- Add to that the consortia themselves. These are groups of steamship lines which enjoy anti-trust immunity and so operate as cartels. They are all headquartered outside the U.S. So, decisions are made in Copenhagen, Hong Kong, Singapore and other company headquarters for global reasons, not based on what is good for U.S. companies.
- On the export side, it is now quite common for a company located a state or two away from a coast, to not be able to bring an empty container to their location to stuff and export. Assuming an empty can be found, the cargo must be trucked to where the container is instead of where the cargo can be found! On the import side, it is equally common for containers to come off vessels, be positioned within a large mass of other containers which are situated in such a way that individual containers cannot be accessed until many other containers around them are delivered. As a result, goods end up stuck until long past when they are permitted to stay on the dock free of charge. The carriers or terminals are assessing the storage charges anyway! Why? Because they make money at it! One carrier was recently heard to say these demurrage and detention charges made up about 20% of their gross revenue in 2020. The government jurisdictions which own the ports are in a similar position. Because many other forms of revenue are way down, they need/want these storage charges as income to spend to support other programs. The situation is so bad right now that recent news out of Asia indicates space for a container on a vessel was auctioned and the winning bid was $16,000!
- Making matters more complicated is the divide between the haves and the have-nots is widening. There are any number of large shippers who are negotiating with individual carriers to get more free time on imports and get containers to inland locations, which they can do because of their buying clout. Similarly, these same larger shippers have service contracts with these carriers and can be expected to negotiate more concessions when the next contract negotiations take place. The smaller shippers have no recourse!
While not an exhaustive list, these factors by themselves are causing significant disruption, but there is more. What about labor and trucking? Turning first to labor, let’s just say there is plenty of evidence that labor could move containers more efficiently but does not. It is also worth talking about the average age of longshore workers. In 1995, the New York Times published an article about the greying of this workforce, and found the average age to be 55. It is most often thought of now as at least 60 years old. The point is this workforce is aging, has fought automation tooth and nail, and now may lose the fight due to mere maturity!
When it comes to the truckers, they are stuck between the proverbial rock and a hard place! Whereas long awaited appointment systems were finally implemented. Most of them are dysfunctional, to be polite. The stories are no longer myth, they have simply been heard too consistently – the trucker gets their appointment and shows up on time, only to take their place in a very long line (typically well over 1 or 2 miles) and sit for many hours waiting for access to the terminal. Once finally in, all too often, the driver gets turned away because the terminal cannot dig out the container and release it for delivery to the driver. Of course, that assumes there is a chassis available for that container. No wonder we are seeing drivers leave the trucking industry in droves. They are really more a victim than a cause, but this lack of drivers is a huge contributing cause to the ongoing chaos.
So, now that some of the major causes have been outlined, what are possible solutions? Some would say, the anti-trust immunity enjoyed by steamship lines/carriers should be repealed. Importers and exporters cannot wait for that relief, assuming it was even possible given the current fractured times. So, what can be accomplished?
Well, last November, the Federal Maritime Commission expanded its Fact Finding Investigation 29, having to do with the “International Ocean Transportation Supply Chain Engagement.” As the FMC said in its press release: “[t]he expanded Commission investigation will seek to determine if the policies and practices of those shipping companies related to detention and demurrage, container return, and container availability for U.S. export cargoes violate 46 U.S.C. 41102(c).” The investigation is focused on Los Angeles, Long Beach, and New York/New Jersey. More details can be found here: https://www.fmc.gov/fact-finding-29/. You may also want to engage the local FMC representative in your area. You can find their contact details here: https://www.fmc.gov/about-the-fmc/bureaus-offices/area-representatives/.
If you are shipping through the listed ports, here are some suggestions. First, the trade community banded together and made recommendations to Los Angeles and Long Beach, which have so far been ignored:
- At least 48-hours of advanced notification of empty receiving locations by the ocean carriers published and displayed in a centralized location that will be easy for the truckers and shippers/importers to find.
- Establish a minimum threshold for dual-transactions of at least 50% at each marine terminal and facilitate a strategy to incentivize this benchmark.
- Work towards strategies and best practices that reduce costs to shippers, increase gate productivity, and reduce the carbon footprint of the maritime community through operational efficiencies and not onerous and expensive mandates.
Then, when (not if) you run into challenges with a given shipment, remember the standard the FMC will need to follow is the party is being “unreasonable.” Frame your complaint so you address the specifics. Are there no containers? No chassis? Are you getting charged storage when the container is not available? Which carrier or terminal is engaging in this practice? What happened and when? What did it cost you? The more clear details you can provide, the better. Send your complaint to the highest person you can identify at the carrier or terminal and then also copy the FMC. The more of these situations they see, the more clear it is to the FMC this is a significant problem. The FMC email addresses are Director, FMC Bureau of Enforcement BTrogdon@fmc.gov, with a copy to firstname.lastname@example.org. Commissioner Dye is the designated Fact Finding Officer.
To this point, the trade community is discussing a means whereby parties who do not want to be identified will be able to submit information anonymously, but that option does not exist right now.
The other step that can be taken is to educate your Member of Congress and Senator. There is a PORTS Caucus in the House (Ports, Opportunity, Renewal, Trade, and Security (PORTS) Caucus). Whether or not your Member or Senator sits on the committee with jurisdiction over ports and transportation, if cargo cannot move due to port congestion, goods do not get to market, and everyone suffers!
There are on-going discussions within the trade community about creating a short list of talking points for Congressional visits, but that is still early in the process. So, call up your Member and Senator’s office, arrange a visit and tell them your story. What is this port congestion costing you? How does it impact your business? Economic development? Jobs? There are a number of trade associations involved with this effort. More would be welcome. Regardless of your political persuasion, this is one time when no one can afford to sit on their hands!