Seroka: National Guard is ‘backup plan’ for LA port congestion

“We talked about that [the National Guard] with state and federal officials. I told them what kind of numbers we needed and nothing has materialized to this point,” Seroka said. “It was also our backup plan If our penalty fee didn’t work to get these aging containers out of the port that we were simply just going to use National Guard  or military drivers to pull those containers out, put them on property far away from the port and allow those importers to collect them when they wanted to, at a cost of course.

“But still, if that opportunity would present itself we would take it right away,” Seroka said.

One reason that container overstays at the ports have recently declined is that large importers, such as Walmart (NYSE: WMT) responded to the gridlock by renting land and setting up temporary storage yards where containers are shuttled before getting stacked with the rest of cargo waiting on docks for delivery. The port authorities are also setting aside vacant land to use as overflow sites for loaded and empty shipping boxes. Long Beach, for example, this year has activated more than 130 acres in several parcels, including 70 acres at Pier S, to provide relief to the private terminal operators.

John Drake, vice president for supply chain policy at the U.S. Chamber of Commerce, pushed against the National Guard idea, saying it would create unintended supply chain disruptions elsewhere.

Many members of the National Guard are truck drivers and would get pulled from their day jobs and “their normal routes to serve the Port of L.A. or Port of Long Beach. So I’m not sure  if that would result in a long-term solution or even a short-term solution,” he said during the program. “You might see a drop in congestion at the Ports of L.A. and Long Beach, or wherever those drivers are shifted towards. But I think on the back end, you would see a decrease in service and delivery for those routes those drivers were pulled from to serve.”

The threat of the storage fee, even if not implemented, appears to have prompted enough movement of containers that had been sitting for long periods, improving the fluidity of cargo and equipment. But the effect appears to be wearing off, as the exodus of overdue boxes has slowed in recent weeks. 

Officials and private sector operators are trying so many tactics to restore some levels of efficiency that “it’s hard to separate out which intervention is resulting in which outcome,” Christopher Koontz, deputy director for development services at the city of Long Beach, told FreightWaves.

Last month, the city relaxed zoning rules for 90 days to allow properties already approved for container stacking to place four in a stack instead of the normal two to free up more storage space where possible.

The Port of Long Beach said it has processed more than 8.6 million twenty-foot equivalent units year-to-date, 18.3% greater than the current annual record of 8.1 million TEUs, set last year. The November volume of 745,488 TEUs represented a 4.9% decline from last year, but ocean shipping analysts say that is because cargo owners anticipated major delays throughout the transportation system and shipped many goods far earlier than normal for the holiday season. Imports dropped 5.3% to 362,394 TEUs and exports fell 6.4% to 109,821. 

Empty containers moved back to Asia decreased 3.6% to 273,274 TEUs, according to the port authority. Cargo owners and drayage companies complain that the backlog of empties at the ports, and in yards throughout the city, is the main culprit behind the gridlock and want ocean carriers to send more vessels to evacuate them.

The twin ports set a combined record of 17.3 million TEUs in 2020 and are expected to top 20.1 million units this year — more than double the next largest gateway, the Port of New York/New Jersey.

Besides the storage surcharge, Seroka said the reduction of vessels hovering off the coast waiting for a berth because of the landside congestion is a sign that supply chains are untangling. The improvement, however, has more to do with a new queueing system that requires vessels to stay at least 150 miles offshore to minimize air pollution in the Los Angeles basin and unsafe bunching. Vessel owners reserve a spot in line upon departure from Asia, eliminating the need to race across the Pacific only to wait at anchor for weeks for an available slot. Seroka said there are 60 vessels over the horizon following the system for precision arrival. 

A CNBC interviewer on Tuesday pointed out that  the backlog isn’t any less just because ships are pushed farther away and that an ocean timeliness indicator by freight forwarder Flexport shows transit times from the cargo ready date at the exporter’s gate to the destination port has skyrocketed to more than 100 days, a 250% increase since May.

Seroka took a swipe at Flexport, saying the company only controls 1% of the cargo moving to the U.S. and that the Port of Los Angeles’ system captures much more data and provides a holistic view of the ocean traffic and the bottlenecks. 

“There are a lot of observations in our industry. Not a day goes by that someone doesn’t have an opinion. We know the vessel schedule integrity is way off kilter,” but rail dwell times are down to two days from 13.5 days in the summer and the dwell time for truck moves is averaging six days from a high of 10 several weeks ago, Seroka said. “No one is claiming victory but it is good to see these KPIs and subsets starting to go in the right direction.”

2022 outlook 

The LA port director predicted import volumes would not let up for most of next year, but suggested there was a small window next summer when the ports could possibly catch up to more normal productivity.

Demand will remain strong through February as shipments rushed out of China to beat the Lunar New Year holiday reach the U.S., then retailers will focus on inventory replenishment and building up safety stock during what is normally considered the slack season, Seroka said during the virtual The Washington Post event. 

“Then we will probably pivot to a little bit earlier holiday season much like we saw this year and run it strong through the end of 2022,” he added.

During a special harbor commission meeting on Monday, Long Beach Deputy Director Noel Hacegaba was more definitive about the ports getting a breather in a couple of quarters.

“Our best guess is that next year we will see retrenchment to what we consider normal. We don’t expect a record year in 2022. … So what we will begin to see next year, possibly in the summer months, is a deceleration. We think there’s going to be an uptick in January …  but then after that it’s probably going to be a regression,” he said.

Infrastructure investment

Seroka said the $1 trillion infrastructure bill enacted by Congress offers the opportunity to make fundamental improvements and modernize the ports, adding the port authority has presented a list of “shovel-ready” projects with an investment need of $500 million to the Department of Transportation. 

The impact of those projects, however, could take years to be felt.

“We must now step forward and get our fair share. Forty percent of the nation’s imports come through this gateway. It’s my belief 40% of the infrastructure dollars would give the American consumer the greatest return on their investment,” he said.

Projects at the top of the list include grade separations and connectors for freight rail so cargo can be discharged faster, and a workforce training and development center to “upskill and reskill” supply chain workers. 

The Chamber’s Drake said the LA and Long Beach ports need to also focus on better using the existing infrastructure because they are near the bottom of world rankings in productivity. That means adopting more automation, especially for ship-to-shore and stacking cranes and other tools to get cargo moving faster. 

One of the sticking points in the move toward more automation has been the longshoreman’s union. Drake said forecasts for a robust 2022 in Southern California could be undermined if the International Longshore and Warehouse Union can’t agree on a new labor deal before the new one expires midyear.

“We think it’s really important to have those negotiations resolved as quickly as possible so that there is no interruption in service and so that the business community, and U.S. consumers, can take confidence in knowing that goods are moving as quickly as possible through their ports,” he said.

Seroka this week received the Containerization & Intermodal Institute’s top honor – the Connie Award – for outstanding leadership and achievements as well as advancing the industry and its priorities.

Click here for more FreightWaves/American Shipper articles by Eric Kulisch.

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