(Updated 3:40 P.M ET)
Punitive charges that went into effect Monday at the Port of Los Angeles for containers left on the docks too long are a last resort to help shippers retrieve urgent cargo trapped under a massive backlog, said Executive Director Gene Seroka at Friday’s emergency Harbor Commission meeting. He implored large companies that don’t need products right away, and have overflowing warehouses, to find alternative storage in the region so small businesses can get orders they need to survive.
“There is no finger-pointing. If you don’t need your cargo, let’s set it aside for now. Let’s put it somewhere else so we can get after the cargo that has to get to market for the holiday season, the ventilators that are on containers that have to get to our medical and hospital networks and the parts and components that head to American manufacturers and factories,” the port director said.
Port officials made clear they can’t wait any longer for industry stakeholders to figure out solutions because letting containers languish well beyond normal free time is no longer acceptable.
“We tried diplomacy. We’ve tried collaborative meetings. [White House port envoy] John Porcari is meeting with folks all the way around each day and nothing has worked.
We haven’t moved the needle,” Seroka said, explaining why the 90-day order, made in consultation with the Biden administration, is necessary.
Commissioners voted 4-0 to fine ocean carriers $100 per container for boxes sitting nine or more days that move by truck and six days for those scheduled for transport via on-dock rail. The fee increases $100 each day so that by the time the first bills are sent out on Nov. 15 a carrier could be on the hook for $12,000.
The Port of Long Beach also approved the same change to its tariff schedule for terminals.
The Port of LA handled 903,865 twenty-foot equivalent units in September, a 2.3% increase over last year’s record. Through the end of September volume at the Port of LA totaled 8.2 million TEUs, a 26% increase from the same period last year. The two port are expected to handle a combined 20 million TEUs this year.
Several logistics sector representatives complained the steep fees are misguided because carriers mostly aren’t responsible for the inland portion of the freight journey and that vessel operators plan to pass the penalties onto their customers. And, they said, the root cause of the logjam is the abundance of empty containers sitting on wheeled frames, known as chassis, all over Southern California because marine terminals are severely limiting the number of empties that can be returned.
Seroka said the port authority regrets any short-term pain but action is required because the twin ports represent 40% of containerized imports in the U.S. and gridlock is hurting the economy, which grew at a surprisingly lower rate of 2% in the third quarter.
“My stomach has been in knots since we came up with this thing” on Oct. 23 because of relationships developed since he started as a sales representative for American President Lines in 1988, Seroka told the commission.
Small businesses, Seroka said, are feeling the brunt of the pain. The port director described how MGA Entertainment, a toy manufacturer with seven buried containers, can’t get its orders to market for Christmas.
“There are hundreds of stories like this and that’s why we need to free up this space. It’s going to help the little guy who imports, maybe, 10 containers a year and the next four weeks is going to make or break his payroll in a third-generation family-owned business. That’s the type of person I’m trying to get after with a policy like this.”
Cargo sitting on marine terminals over nine days amounts to 47% of all containers in the Los Angeles port, or 38,000 shipping boxes. About 36% of all cargo has been in terminals one to four days, but it represents 52% of the cargo exiting through the gate, demonstrating that the longer cargo sits the less likely it is to be retrieved. Before the pandemic-led import surge that began last year, containers for local delivery remained on container terminals under four days, on average, while containers designated for trains dwelled less than two days.
“Let’s get the cargo out of the way that’s not needed. Nobody is going to be publicly shamed about it. It’s just the way the marketplace is following COVID-19. This will allow us to focus on those important empties, those exports which have been hurt terribly by trade tariffs and the folks that have seasonal cargo,” Seroka said.
Local officials have previously indicated some shippers, eager to avoid extended delays, as transit times double and upward of 70 vessels park off the coast waiting for a berth to unload, ordered goods early for next year and are using the ports as makeshift warehouses.
In addition, hundreds of facilities are being rented out in, and around, the port district simply to store containers. Seroka said a few large overflow yards, similar to one operated by the Port of Long Beach, are preferable, warning that with so many empties and chassis scattered across pop-up parcels, it will be difficult to systematically return them to the ports in a few weeks.
Port officials have explored the idea of large strategic sites in Ontario, California, and other parts of the Inland Empire, that could serve as near-port terminals where trucks could pick up containers to deliver to warehouses and bring back empty containers, freeing up space on the docks. They are also looking at desert locations, farther east, as chassis depots.
Seroka said the port is repurposing empty parcels within port property to be container overflow yards and urged cargo owners to send their empties there, pick up a chassis that has undergone a six-point road worthiness check by accredited longshoremen and leave with a loaded container. Empties will then be shuttled to the terminals for vessel loading during the 3-7 a.m. “hoot” shift rather than having individual truck drivers try to deal with restrictive rules on container exchanges.
“So we’re going to try to do everything we can to supplement the space that we have here with more parcels right inside, adjacent to terminals and flying those empties in overnight,” he said.
Chicken or egg?
Meanwhile, the supply of empty containers around the port continues to multiply.
Many motor carriers and importers say the reason they can’t pick up cargo at the ports is because terminals aren’t allowing drivers to return empties and make a swap, while port officials say they first need to make room for the unfilled units. Most of the empties are out on the street, not clogging the terminals, they emphasized.
Still, those empties are exacerbating the chassis shortage and taking up space in storage lots.
Seroka said return of empty containers to Asia is at an all-time high but has done little to alleviate terminal crowding that is preventing stacking cranes and trucks from efficiently maneuvering, and ships from unloading, he added.
A quarter of the containers on departing vessels are loaded exports, while the remainder are empties — an increase of 35% to 40% from last year.
Adding to the storage challenge, Seroka reported, is a nontraditional influx of empties from East and Gulf coast ports such as Charleston, South Carolina, and Houston. Container lines are moving equipment by rail cross-country to get them back to Asia faster than they can by boat or because they are diverting equipment from less busy trade lanes to South America. The empty loads also allow railroads to reposition crews, engines and rail cars to the West Coast.
Ocean carriers are responding, but need to do more, the port director said. Cosco will bring a ship from a rotation that normally calls Canadian ports in British Columbia just to pick up empty containers and return them to origin. German carrier Hapag-Lloyd recently brought in four sweeper vessels to move out empties and another liner company plans to reroute a vessel from the Mexico market to clear out equipment.
Seroka also said he is asking major European carriers to bring back ultra-large container vessels that normally operate in the Asia-Europe trade that can take more empties back after unloading import cargo. Last year, Mediterranean Shipping Co. called the Port of Los Angeles with three vessels capable of carrying 23,000 TEUs.
Carriers need to publish their empty return numbers every day so the trucking community can be informed how many units can be accepted by each terminal. And marine terminals need to develop a uniform policy on empty and chassis returns to simplify life for truckers that serve multiple facilities, the port director said.