Feb 19

USA Won’t Delay SOLAS

Source:  JOC.com

WASHINGTON — The U.S. Coast Guard Thursday said it will not consider delaying the International Maritime Organization’s controversial new container weight rule and the agency cannot, and will not, hold shippers responsible for not providing container weight documentation to carriers.

Carriers, however, will be required by their flag state to hold shippers responsible, and no container without Verified Gross Mass documentation will be allowed to board a vessel. How carriers enforce this is a “business practice solution” not under the jurisdiction of the Coast Guard, agency officials said.

“Delayed implementation is not an option,” the Coast Guard’s Rear Adm. Paul Thomas said at a public listening session Thursday on the Safety of Life at Sea, or SOLAS, amendment, which goes into effect July 1.

Moreover, Thomas said, despite shippers’ concerns over how the Coast Guard will go about enforcing the new regulation, the U.S. agency will not be holding shippers accountable. Only carriers and vessels are party to the SOLAS amendment, not shippers, he said.

“There is not authority under SOLAS that requires shippers to do anything,” said Thomas. “I cannot require shippers to do anything.”

Thomas listed two mechanisms of enforcement at Thursday’s hearing. If a container arrives at a terminal without a VGM after July 1, the Coast Guard will declare the box “manifestly unsafe” and the agency would put a hold on the container until a gross mass is known and documented. If, for whatever reason, a container is weighed at a terminal and the VGM does not match the container weight, Thomas said the container would need to be reweighed and a new VGM registered.

“There would be no action taken against the shipper because, again, we have no authority,” Thomas said.

According to the SOLAS amendment, the gross mass of the container “shall be verified by the shipper,” either using one of two methods. Acccording to the Coast Guard, because it’s the carrier that will be the target of enforcement, then it’s up to the carrier to “enforce” the rule on its customers by somehow ensuring that the VGM submitted by the shipper is accurate.

As far as the Coast Guard is concerned, Thomas said, the agency will not be enacting fees or fines on shippers. Any fiscal punishment for failing to provide a VGM or providing an inaccurate VGM will be in the carriers’ hands, he said. That’s different than Canada’s take, which will level fines on shippers without VGMs.

The Coast Guard’s confirmation that it won’t seek to delay SOLAS is a blow to U.S. exporters that have been pressing the agency to defer the SOLAS mandate’s July 1 deadline until it can be amended and determined that they won’t face a competitive disadvantage against foreign exporters. The regulation may not mean fees or fines, they say, but it will mean added costs in the form of longer wait times at terminals, expensive weighing equipment and still-unknown carrier enforcement policies.

U.S. exporters want to see the issue handled in much the same way the Secretary of Homeland Security delayed implementation of the 100 percent scanning requirement for all inbound containers as mandated under the 2006 Safe Ports Act. Congress repeatedly has given the department the go-ahead to delay the scanning mandate.

“There is absolutely no industry standard that is available for this information flow for VGM,” Donna Lemm, director of business development at Mallory Alexander International Logistics, said at Thursday’s session. “The U.S. is simply just not ready.”

The Agriculture Transportation Coalition, which represents agriculture exporters, has called for a congressional inquiry into the matter.

The AgTc and other shippers contend that the verification requirement is a dramatic change from current practice and there is a lack of details on implementation, from the sending of verification to shippers to the acceptable weight variance, despite the rule taking force in less than five months. Ultimately, the transportation costs of U.S. exports will rise, the AgTc argues.

Perry Bourne, director international transportation and rail operations at Tyson Fresh Meats, said his company “guesstimates” it could add $250 per box in extra non-value added services that Tyson won’t be able to recover from its customers.

The new regulation is a major commercial risk for the agriculture trade, Lemm said. “Our margins are thin. We’ve just added hundreds of dollars of cost to the U.S. export supply chain.”

It’s more than a financial cost, she added. It’s time.

“It is complicated enough with VSAs, vessel-sharing agreements, to get those trains to arrive on time for loading,” Lemm said. “The addition of one more variable could cause us to miss a vessel.”

Truck drivers are already waiting in hours-long lines at terminal gates due to other documentation requirements and general congestion, added Cathy Nagin, general manager of New Orleans Cold Storage Transport. It sometimes takes up to three hours for some drivers to wait on terminal operators to resolve discrepancies.

“It would be the same if VGMs were not updated in the terminal systems,” she said. “This could discourage drivers from remaining in the transportation industry, adding to the driver shortage.”

But, delaying implementation is not an option, Thomas repeated multiple times Thursday.

“The thing about SOLAS is it applies to ships,” he said. “Those ships, for the most part, are foreign-flag ships. Those flag states are going to implement this requirement.”

Even if the U.S. were to delay implementation, other states would still be enforcing the mandate on U.S. goods. Rather than deferring enforcement, delaying implementation stateside would ultimately send a message — the wrong message — to the world, Thomas said. “Delayed implementation sends the word around the world that you cannot load U.S. cargo safely.”

Contact Reynolds Hutchins at reynolds.hutchins@ihs.com and follow him on Twitter: @Hutchins_JOC.

Feb 05

SOLAS Delay Requested By US Exporters

Source:  JOC.com

Saying it will be impossible to implement the SOLAS container weight rule by July 1 without severely disrupting trade, U.S. exporters are calling on the Coast Guard to delay the rule until it can be amended and determined that they won’t face a competitive disadvantage against foreign exporters.

Following a Wednesday meeting in Atlanta attended by 60 exporters and the U.S. head of a large container line, the head of an agriculture shippers group said it was clear it would be impossible not to disrupt trade while meeting the rule’s requirement that a shipper-signed weight, the verified gross mass, is given to the carrier and marine terminal sufficiently in advance of vessel stowage to allow stowage plans to be created.

“We cannot put U.S. exporters at a greater competitive disadvantage than they already are due to the high price of the U.S.  dollar,” Peter Friedmann, executive director of the group, the Washington-based Agriculture Transportation Coalition, told JOC.com.

Friedmann said the group was calling on the Coast Guard to delay implementation much the same way the Secretary of Homeland Security delayed implementation of the 100 percent scanning requirement for all inbound containers as mandated under the 2006 Safe Ports Act. He said the rule should not be implemented in the U.S. until it is determined that implementation would put U.S. exporters on a level playing field with other exporters. At the very least the rule should be put off until July 1, 2017, he said.

Under the amendment to the Safety of Life at Sea, or SOLAS, convention originally approved in 2014, individual nations that are party to SOLAS will implement the rule according to their own guidelines, ensuring that the core requirements that shippers provide a VGM based on actual weighing of the cargo, and that carriers and terminals do not load a container for which no weight has been provided — are met. (An extensive and up to date Q&A about the rule is available on JOC.com here. A link to the JOC’s complete coverage of this issue is here.)

“We believe the U.S. Coast Guard should decree that it will not implement this and instruct the terminals not to implement it until such time that all the stakeholders are satisfied that this will not to disrupt export commerce,” Friedmann said.

The issue has been raised by Friedmann’s group on Capitol Hill and members of Congress are starting to look into the issue. “There’s growing interest in global container weight and it’s something that both Representative Hunter and the subcommittee will continue evaluating. With the competing interests involved, it’s important to fully understand all the arguments to determine the best way ahead. And that’s something we’re in the process of doing,” said Joe Kasper, chief of staff to Duncan Hunter, R-Calif, chairman of the Coast Guard and Maritime Transportation Subcommittee.

“The Commerce Committee is making inquiries about the impact of the mandate,” said Frederick Hill, communications director for Sen. John Thune, R-S.D., chairman of the Commerce, Science and Transportation Committee. Thune has been a strong supporter of agricultural exporters, having pushed for faster responses to shippers’ rail complaints via a Surface Transportation Board reform bill and highlighting late last year how U.S. West Coast port congestion was crippling outbound shipments. He was also instrumental in pushing the Department of Transportation to create metrics on port productivity.

The U.S. Coast Guard is expected this month to issue guidelines on how the rule will be implemented, but it’s unclear how far they will go in addressing the range of outstanding logistics issues. But the World Shipping Council, the Washington-based trade group representing container lines globally, said unlike in the Safe Ports Act, which authorizes the Homeland Security secretary to postpone the scanning rule, nothing in the law behind the container weight mandate allows for a delay in implementation.

“The Secretary of (the Department of Homeland Security) is authorized to postpone implementation of the 100 percent scanning provision if he/she determines that it cannot be successfully implemented. There is no similar provision in the SOLAS amendments,” John Butler, CEO of the World Shipping Council, told JOC.com in an email on Thursday. “More to the point, nobody can seriously make the case that in 2016 it is unreasonable to require a shipper to accurately describe the weight of a loaded container that it introduces into international commerce. We don’t know of any other shippers that are making such a claim.”

To the point that the rule shouldn’t be implemented in the U.S. until other countries have implemented it, Butler said: “SOLAS is a safety convention; it does not allow member countries to ignore safety on the grounds of economic considerations.”

Having recently called the SOLAS rule a “fiasco,” Friedmann stepped up criticism of the rule and the process that led to its adoption by the Maritime Safety Committee of the International Maritime Organization, the London-based United Nations agency. He said U.S. shippers and terminals had no role in the development of the rule, which will impact container supply chains back to the origin hundreds or thousands of miles from the seaport from which the container left.

The rule requires the shipper named on the bill of lading to physically weigh the cargo — or have a designated representative do it — using one of two methods (either weighing the contents of the container and adding it to the unladen weight of the container, or weighing the sealed container and its contents as one), and to submit a signed VGM to the carrier. The rule makes it illegal for the carrier and terminal to load a container onto a ship for which no VGM has been received and requires they use the VGM in building the vessel stowage plan.

Among the key emerging issues is the time it will take to obtain the VGM and get it to the carrier with enough advanced notice for it to be used in the stowage plan. Other issues include how the VGM will get into the hands of the carrier given that manual documentation is used for an estimated half of the roughly 300,000 containers shipped daily on a global basis, according to the online container portal Inttra. Still further issues surround the question of whether terminals will allow containers unaccompanied by a VGM into their facilities.

“There were many parties who were never engaged in the development of this rule, including the marine terminals — they were never part of this discussion — and the shippers were never part of the discussions,” Friedmann said.

Prior press releases indicated that a few different non-governmental groups other than the World Shipping Council were involved in discussions at the IMO over five years leading to the adoption of the container weight rule. One group, the Global Shippers Forum, has the head of the U.S.-based National Industrial Transportation League on its board. Another group that was involved, International Cargo Handlers Association, has some terminals as members.

But that said, based on the large and growing number of questions from shippers, carriers, terminals and other parties about how the rule will get implemented with less than a half a year before it takes effect, it seems clear that the preparation was inadequate. As time has gone on, the confusion and the list of questions only seems to grow, with only bits and pieces of clarity coming from carriers or other parties.

In an interview with JOC.com on Wednesday, Friedmann went further, suggesting that given the hurdles to get it implemented, there was no compelling rationale for the rule to begin with. He said scant evidence of problems associated with overweight containers has been presented and he said there was just one vessel casualty, that of the MSC Napoli, which was scuttled in the English Channel in 2007, that has been cited as rationale for the rule. Though the U.K. coast guard found many containers to be overweight and noted in its report that “…The stresses acting upon a container ship’s hull cannot be accurately controlled unless containers are weighed before embarkation,” Friedmann said it was “inconclusive” that overweight containers were the actual cause of the accident.

“The creation of this rule was done without any problem identified. Why do we have this rule?” Friedmann said.

“Representatives of over 160 governments who carefully considered the issue for the last five years disagree,” Butler said. “The decision by the SOLAS parties to adopt the rule was based on multiple sources of information indicating that misdeclared containers are prevalent and dangerous. That decision was made two years ago after extensive discussion.”

“It is not open for reconsideration,” Butler said. “This is now the law, and the job at hand is to make sure it is implemented.”

Some say the issue of overweight containers has long been an issue for carriers. Even the founder of containerization, Malcom McLean, understood the danger. According to William Gotimer, McLean’s personal and business attorney and general counsel for all his transportation companies from 1991 until McLean’s passing in 2001, overweight containers were a big issue for the Sea-Land Service Inc. founder.

“Malcom McLean had a visceral sentiment on the issue of overweight containers. He strongly believed they were dangerous on the road and in the port,” Gotimer said. “I believe it stemmed from an accident he either once had or knew of where the driver was unable to control the load due to its weight. He had me speak with each of the various transportation departments of the states up and down the eastern seaboard to seek their support to limit overweight containers citing the constant damage overweight loads were doing on the roads.”

Gotimer said McLean refused to accept even legally overweight containers on his Trailer Bridge barge service to Puerto Rico. He was concerned not just about a container being overstuffed, but those handling it, including the truckers and dockworkers, not knowing it was overweight and being put in harm’s way as a result. He said the issue stemmed from the switch from commodity pricing for containers to container pricing, i.e. the rate became based on the container irrespective of what was inside it. That created “a great incentive to overstuff it, and an incentive to lie about what was in it.”

Contact Peter Tirschwell at peter.tirschwell@ihs.com and follow him on Twitter: @petertirschwell.


Aug 21

Tianjin Blast Disrupts Logistics in China

Chinese Logistics Problems Continue After Tianjin Blast

By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE

Not only have last week’s portside warehouse explosions in Tianjin, China, created persistent logistics challenges, but news reports now are suggesting that at least two other hazardous chemical facilities were operating in the area in violation of government regulations, posing more potential risks for residents and business operations in the area, The Guardian reports.

This issue started last Wednesday when a fire broke out at a warehouse operated by Ruihai International Logistics. This was followed by devastating explosions, which have killed at least 114 people, according to The Guardian.

“Large quantities of toxic chemicals including sodium cyanide were being stored in the warehouse, despite government regulations which state that such facilities must be located at least 1 [kilometer] from public places, transport networks, and residential communities,” writes Tom Phillips for The Guardian.

The explosions created logistical difficulties that continue, even though the port, one of the world’s busiest, is running again. According to an article in The Wall Street Journal, some executives reported enduring bottlenecks for industries such as steel production and oil refining.

“Authorities blocked one company’s access to 16,000 tons of iron ore stored near the explosion, while it diverted another 170,000 tons set to arrive in Tianjin on Saturday to the port of Rizhao just south of the city, said one Singapore-based trader,” Brian Spegele and Biman Mukherji write for The Wall Street Journal. A Chevron spokesman reports that one of its facilities sustained minor roof damage. Technology firms with manufacturing operations in Tianjin, including Lenovo Group, report their business has been unaffected.

Imported cars sold in China, of which 40 percent come through the Tianjin port, might have delivery times pushed back, according to the news source, but inventories are high because China’s auto market is softening.

Lastly, logistics companies located in the blast area are still assessing the damage. Although material can come into the port, it’s more difficult to get shipments distributed past that point in the channel. “There is no transportation,” said Rahul Goel, head of projects planning at General Nice Group in The Wall Street Journal article.

Moving forward

Tianjin, the fifth largest city in China, is a key manufacturing and distribution hub. Therefore, many local and international companies have the potential to be affected by the blasts. Consider the following definition from the APICS Operations Management Body of Knowledge Framework: “Channels of distribution are any series of groups or individuals that participate in the flow of goods and services, from the raw material suppliers and producers to the final users or consumers. The terminology is used to reflect the intermediate companies and steps in the distribution process.”

The Tianjin story illustrates the essential role distribution and logistics play in overall supply chain management—and the chaos that can ensue when they are interrupted. Last month, APICS finalized its merger with the American Society of Transportation & Logistics, which reinforces and adds value to our supply chain education and certification offerings with deeper content in the areas of transportation and logistics. We’re excited to welcome these professionals into our APICS community. The merger reinforces the end-to-end supply chain body of knowledge that fuels APICS’s global supply chain research, education, and certification programs. In the coming weeks and months, we will be announcing new distribution and logistics education for members. Please visit www.apics.org/about/astl-and-apics-merger/ for more information.

May 26

West Coast Contract Update 2015-5-26

From JOC.com

The West Coast contract agreement that was ratified Friday by the membership of the International Longshore and Warehouse Union, while applauded by cargo interests, carriers, ports and truckers, and rightfully so, will have a limited impact on West Coast port productivity and labor relations.

However, if the tortuous events of the past year result in a change in how future negotiations between the ILWU and Pacific Maritime Association are conducted, this could be a milestone in the history of labor relations on the West Coast.

On the other hand, if one or both entrenched cultures refuse to change, a repeat of the ILWU work slowdowns and retaliation by employers is likely when a new contract is negotiated in the summer of 2019. The PMA and ILWU have indicated that change is possible, even necessary, but they said the same things following the equally disastrous 2002 negotiations and nothing changed then.

What is so disconcerting about the 2014-15 negotiations, compared to those of 2002 and 2008, is that those contracts brought significant change to West Coast ports. The 2002 contract opened the door for unlimited use of computerization and information technology at marine terminals. ILWU marine clerks fought those changes because they knew that loss of jobs would result. Employers were equally adamant that productivity could not advance without the use of computers and a free flow of information.

The 2008 contract was potentially the most revolutionary of the last three contracts. It gave individual terminals the unrestricted right to introduce automation —computer-controlled ship-to-shore cranes, unmanned horizontal ground transportation and automated stacking cranes in the yard — that could eliminate 40 to 50 percent of the ILWU general longshore jobs. The 2008 contract negotiations were relatively peaceful.

The contract that was ratified Friday is unremarkable in most every aspect. Going into the negotiations, the main point of controversy was supposed to revolve around who would pick up the tab for the estimated $150 million a year in additional medical costs associated with the so-called Cadillac tax in the Affordable Health-Care Act. In retrospect, the PMA had always paid 100 percent of the dockworkers’ healthcare costs, so why should the ObamaCare provision be any different? The PMA agreed to pay it.

Wage increases in the new contract will total $6.50 an hour by the fifth year of the contract, bringing the base wage up to $42.18. That’s generous by blue-collar standards, but not exorbitant. Furthermore, veteran longshoremen make most of their money through overtime and skill differential pay that can elevate the approximately $80,000 annual base salary well into six figures. According to the PMA, the average annual wage of full-time longshoremen who work 2,000 hours a year is $147,000. Wages were not a sticking point in these negotiations.

Jurisdiction was a major issue, and is likely to be so for years to come as terminals modernize and automate their facilities, and as the evolution of the maritime industry affects asset ownership. Therefore, in the 2014-15 negotiations, jurisdiction over chassis maintenance and repair was front and center.

Carriers in the U.S. had, since the beginning of containerization more than 50 years ago, owned the chassis that were provided to cargo interests and truckers with the delivery of the containers. The ILWU (and the International Longshoremen’s Association on the East Coast) maintained jurisdiction over M&R work, which was perfectly legal, because their employers owned the assets.

After incurring literally tens of millions of dollars in annual costs, per carrier, to purchase, maintain, repair and reposition chassis for more than 50 years, carriers sold their assets to chassis-leasing companies and are for all intents and purposes out of the chassis business. Employers look at this as a wise business decision. The ILWU is convinced carriers wanted to cut them out of M&R work. The ILWU pressed for, and was granted, continued jurisdiction over chassis inspections, maintenance and repair.

Truckers and cargo interests say that since PMA members no longer own the assets, it is illegal for the employers to grant jurisdiction to the ILWU that is not theirs to give. The PMA and ILWU know they are treading on dangerous ground here because the contract specifically excludes trucker-owned chassis from ILWU inspection and M&R.

However, the contract is silent on trucker-leased chassis. Trucking companies in recent months have acquired a number of chassis to supplement those that are provided under the “pool of pools” that was established in Southern California on March 1. Many of the chassis were acquired under lease, and it appears that the ILWU will attempt to maintain its jurisdiction over leased chassis. Truckers have indicated that the roadworthiness of the chassis they are leasing has been certified by the intermodal equipment provider. Truckers have indicated lawsuits could result if the ILWU seeks to exert jurisdiction over their equipment .

The PMA and ILWU, in a letter of understanding in the contract, stated the Federal Maritime Commission will be asked to offer its views on the legality of the chassis inspection and M&R provisions, and if the FMC indicates a portion of it is illegal, the PMA and ILWU will work to correct the illegality.

One of the surprising developments in the negotiations was the adamant position the ILWU took on the local arbitrators in Oakland and Southern California who rule on day-to-day disputes on the waterfront. According to the PMA, the ILWU wanted those arbitrators removed because their rulings at times went against the union.

The way this dispute was resolved could have a lasting effect on how local arbitrations are handled on the docks. The area arbitrators in Southern California and Seattle-Tacoma are nominated by the ILWU and approved by the PMA. The local arbitrators in Oakland and Portland are nominated by the PMA and approved by the ILWU. It is assumed that the arbitrators nominated by the ILWU will rule mostly in favor of the union and the arbitrators nominated by the PMA will favor employers. However, that was not always the case as David Miller, the ILWU-nominated arbitrator in Southern California, at times ruled against the union, and the ILWU wanted him fired.

In a way, the ILWU got its way because under the new contract the arbitrators in Oakland and Southern California must vacate their positions within 14 days of the ratification of the agreement. The Northern California arbitrator has already resigned.

But in an important development, the new contract established a new area arbitration panel with one member nominated by the ILWU, one by the PMA and a third person, who is to be a professional arbitrator, with no previous ties to the industry. This is expected to provide balance to the arbitration process.

Since there is nothing in the new contract that threatens the earnings, benefits or job security of West Coast longshoremen, and no provision that is anywhere nearly as explosive as unfettered introduction of computerization and automation, it is disconcerting that the negotiation process dragged on for so long, and that the work slowdowns and employer retaliation efforts resulted in virtual gridlock at the ports for four months beginning in early November.

Measuring cargo diversion is an imprecise endeavor. Industry analysts speculate that 10 percent of the cargo diversion from the West Coast that took place after the 2002 contract negotiations never came back. Current speculation is that the reputation of the ports was damaged so severely, and that completion of the Panama Canal expansion project in April 2016 will make all-water services to the East Coast more competitive, so that 20 percent of the cargo diversions that have taken place the past year could be permanently lost.

Regardless of the number, both the PMA and the ILWU have at least acknowledged the fact that the negotiation process must change. PMA President Jim McKenna told JOC.com at an event in New York last week the current process of negotiating contracts “is not sustainable.”

In an address to a Toy Industry Association meeting in Long Beach on Thursday, Bobby Olvera, president of ILWU Local 13 in Southern California, said he is a firm believer in action. When disputes arise on the waterfront, both parties should address them immediately rather than letting them fester until the next round of negotiations five years later.

Chad Lindsay, PMA’s vice president of labor relations in Southern California, took heart from the announcement earlier this year by the International Longshoremen’s Association and USMX, which represents East Coast employers, that they intend to begin contract discussions this year even though their contract does not expire until 2018.

“This contract is mature. It has been around for 85 years,” Lindsay said in reference to the ILWU contract that dates back to the legendary ILWU founder Harry Bridges. There is no reason why issues that pop up from time to time can’t be addressed immediately, he said. “Absolutely, we should address issues as they arise,” Lindsay said.

If the PMA and ILWU are serious about restoring confidence in West Coast ports, they may have no choice but to follow the lead of the ILA and USMX on the East Coast and open up early negotiations. Furthermore, maverick work slowdowns and stoppages by individual locals up and down the coast must cease or at least diminish significantly.

Cynics say this will never happen. They point to the Port of Portland, where hard-timing by the ILWU local against terminal operator ICTSI since June 2012 resulted in Hanjin Shipping Co. and Hapag-Lloyd discontinuing their services last month. The departure of those carriers wiped out 99 percent of Portland’s container business, and has many industry experts saying the ILWU will never change its militant culture.

Two possible solutions to the West Coast labor issues could occur. Congress is considering the possibility of placing the ILWU and ILA under the Railway Labor Act, which could prevent the ILWU from using work slowdowns as leverage during contract negotiations. Some West Coast employers say that scenario is politically explosive and would be difficult to pull off in Washington under any circumstances. Others say the unions could always find a way around legal prohibitions.

Another possibility is that the pain of the past year was so severe, and costly, that terminal operators that are on the fence about automation may now decide to move forward with the costly introduction of automated machines that require little if any human intervention. The TraPac terminal in Los Angeles has completed the first phase of its automation project and the Middle Harbor Terminal in Long Beach is scheduled to open the first phase of its automated terminal next spring.

A report last year by the Port of Los Angeles stated that a fully-automated TraPac terminal will eliminate 40 to 50 percent of the ILWU jobs, while creating new jobs that require highly-trained individuals to program, maintain and repair the sophisticated automated cargo-handling equipment. One residual of automation is that it eliminates some of the jobs that give the ILWU so much leverage over employers, such as the yard cranes that deliver containers to truckers. That function is handled by automated stacking cranes that can operate 24 hours a day.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo


May 14

West Coast Port Progress Update

From www.joc.com

Vessel, yard and gate operations at West Coast ports are not yet back to normal after almost seven months of crippling congestion, but the ports and port users are confident that “normal’ will happen by the end of May.

Nevertheless, a return to the conditions that were considered normal before contract negotiations between the International Longshore and Warehouse Union and Pacific Maritime Association began on May 12, 2014 will not be good enough if West Coast ports are going to efficiently handle today’s big ships.

“The terminals are not designed for big ships,” said Dan Smith, principal at the Tioga Group. The consulting firm recently studied the ship-to-shore crane shortfalls at West Coast terminals. Now that the busiest terminals are expected to handle more than one big ship at a time, Tioga concluded that the ports will need 100 additional cranes in order to  work at least five cranes against every big ship that will be calling on the West Coast in the coming years.

Furthermore, the physical layout and operational methods at the terminals simply won’t stand up to the stress of efficiently turning vessels with capacities of 8,000 to 14,000 20-foot container units, he said.

When the ILWU and PMA on Feb. 20 reached tentative agreement on a new five-year contract, port directors said the entire coast would be back to normal in three months. Seattle, Tacoma and Oakland appear to almost there. Los Angeles and Long Beach are still grappling with cargo surges and sporadic but minot backlogs of ships at anchor.

Recent reports from the Marine Exchange of Southern California showed no ships at anchor and awaiting berths on some days , but on other days there were one or two. That is certainly much better than the peak of 28 ships at anchor two months ago. Terminal operators say the Pacific Southwest services are not completely back to their normal rotations, but they should be by the end of the month.

Gate turn times for truckers have also improved up and down the coast. Dick Coyle, president of Devine Intermodal, said he has lowered the congestion surcharge of $150 that Devine had been charging at most of the terminals in Oakland to $100, and will take further reductions if conditions continue to improve. Devine is still charging a $250 surcharge at the SSA Marine terminal in Oakland because of continued gate times of several hours or longer, Coyle said.

Vessels calling in Tacoma are back on schedule, said port spokeswoman Tara Mattina, but the port is dealing with occasional container surges as terminals continue to operate with shortened receiving windows, primarily for exports. Intermodal rail operations are about 90 percent of normal, she said.

There is still not an optimal flow of cargo in Los Angeles-Long Beach, although the terminals are “heading in the right direction,” said Weston La Bar, executive director of the Harbor Trucking Association. The gray chassis “pool of pools” unveiled on March 1 by the ports and the chassis-leasing companies has resulted in improved equipment availability, and terminals that experience occasional shortages are working through the issues, La Bar said.

Since the ports are about three months away from the beginning of the peak-shipping season, the terminals should have enough time to clean up their operations before the late summer-fall rush of holiday cargo descends upon the ports. Furthermore, the ILWU membership is voting on the tentative contract, and hopes are high that on May 22 the ILWU and PMA will announce that the contract was ratified.

Even with those positive developments, though, the shipping community is dreading the peak season. In a normal year, peak season container volumes are about 20 percent higher than during the slower months. If that pattern repeats itself this year, the ports could be in trouble once again.

It’s not simply the increased container volumes, but more so the surge of containers from the big ships that are causing most of the problems. In Los Angeles-Long Beach, the discharge and reloading of 5,000 containers in a single vessel call is considered normal now with the big ships, and 10,000 or more container moves per vessel call are occurring regularly.

The ports are scrambling to implement measures to deal with the surges this peak season and beyond. Oakland is considering four measures, said port spokesman Mike Zampa. The port is looking at running Saturday gates as a permanent condition, and it’s now a matter of determining how to operate a Saturday gate program and how to pay for it. Zampa said Oakland is also testing new technology to measure gate queue times so long truck lines can be quickly addressed.

Oakland is also looking for off-dock locations where containers can be dropped off and picked up after hours so truckers don’t even have to enter the marine terminals. The port is also looking at establishing a common chassis pool.

Recent innovations in Los Angeles-Long Beach such as container dray-offs to off-dock sites and segregating containers for high-volume importers so truckers can peel off the containers from a single pile without having to go deep into the terminals are producing positive results. The ports intend to expand those programs. Chassis-leasing companies are continuing to collect metrics on terminal requirements and they expect the gray chassis concept to be working as designed by the end of June.

Nevertheless, even if there are no further labor disruptions for the five-year duration of the new contract, the port and shipping communities at each of the West Coast ports said the old way of running vessel, yard and gate operations will not stand up as ships continue to increase in size. According to Alphaliner, carriers during the three-year period that ends on Dec. 31, 2016, will have entered into their global fleets 285 ships ranging in size from 7,500 to 20,000 TEUs.

Smith said terminals must immediately address operational deficiencies and extend gate hours in order to make it through the peak season, but in the longer term they will have to modernize their physical plants in terms of layout and automation in order to handle the big ships. That will take at least 10 years, if they start now, he said.

La Bar said truckers in Southern California are pushing for more continuous hours of operation. Every time a terminal closes for the lunch hour or between the end of the first shift and the beginning of the second shift, the traffic and cargo-handling rhythm are disrupted. Even if the terminals can’t go immediately to 24/7 operations, they can eliminate downtimes in the crucial periods cargo-handling hours, he said.

Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him on Twitter: @billmongelluzzo

Apr 27

Truck Strike In Port of Los Angeles

AP – Monday April 27, 2015

LOS ANGELES (AP) — Truck drivers who haul goods from the nation’s busiest port complex in Southern California walked off the job Monday in a dispute over their wages and employee status, months after another West Coast labor conflict cost major delays in billions of dollars of trade.

The move comes after a weekend vote from the Teamsters. Drivers from four companies are striking, but it wasn’t immediately clear how many of the 16,000 truckers at the ports of Los Angeles and Long Beach would walk off the job. The strike is not expected to shut down all port business.

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Teamsters spokeswoman Barb Maynard said the drivers have been victims of “persistent wage theft” from employers because they are treated as independent contractors instead of employees.

Most of the drivers are independent contractors for trucking companies. The truckers had said they face shrinking wages and becoming actual full-time employees of the companies would mean better wages and workplace protections.

The trucking companies said the unhappy truckers were a vocal minority and a labor stoppage would have been disastrous while the industry still recovers from a recent dockworkers strike.


Mar 31

West Coast Port Update – March 31, 2015

As information, the following is  a brief update on the west coast ports: 

Port Conditions:

1)  Terminals operations continue to be impacted by the shortage of trucks and chassis.  

2)  There is still an imbalance of ILWU labor but increasing.

3)  Appointments for pick ups are implemented again by several terminal operators.

4)  Dual transactions for picking up loads and returning of empties remain in affect.

5)  The use of “grey chassis” was implemented to improve the velocity of chassis avoiding split pick ups and additional expense

6)  As of today, March 31, the number of container ships at anchor for LA/LB has dropped to 9, showing that the ports are catching up on the back log of cargo. See attached

Vessels at a Glance and Port Update.

ILWU Contract 

1) No updates regarding the ratification of the contract.  Union members are meeting this week to discuss the contract.

Mar 27

West Coast Backlog Update for March 27th, 2015

West Coast ports continue to reduce vessel and container backlogs that built up during the nine months of labor negotiations, with the ports of Oakland, Seattle and Tacoma progressing at a faster pace than Los Angeles-Long Beach.

The Southern California port complex accounts for more than 70 percent of the West Coast’s cargo volume. At least 20 container ships arrive on a typical weekend at Los Angeles and Long Beach, but even those ports are recording progress.

The Marine Exchange of Southern California reported on Friday there were 15 container ships at anchor and awaiting berthing space. That was down from 18 Thursday. During the peak of the congestion from early November through February, it was common for 25 or more container ships to be anchored. The Marine Exchange said five container ships are scheduled to arrive on Friday, seven on Saturday, five on Sunday and three on Monday.

Container backlogs on the docks are also dissipating, although no numbers are available to measure the progress. Terminal operators are filling hundreds of work orders each day with International Longshore and Warehouse Union members. During the peak congestion period, the Pacific Maritime Association said the ILWU refused to dispatch sufficient skilled workers, causing near-gridlock conditions at the terminals.

The PMA website lists the weekly man-hours paid for work on the docks at all West Coast ports. For the four-week period ending March 20, employers in Los Angeles-Long Beach paid an average of 489,308 hours each week. That was up 40 percent from the comparable period in 2014.

The ports of Seattle and Tacoma reported no container ships at anchor outside the ports Friday. In mid-February, when congestion was worst, the Puget Sound ports had 16 vessels at anchor. The ports said Friday that crane productivity had returned to the historical levels of crane moves per hour. Productivity had declined to below 20 container moves per crane, per hour, but now is back up into the high 20s.

The Puget Sound ports report at least a 20 percent increase in railcars moving in and out since the ILWU and PMA reached a tentative contract agreement on Feb. 20. “That’s significantly helped clear out the terminals by providing the inbound empties needed for exports as well as the rail cars necessary for imports headed to the Midwest and Ohio Valley,” the ports said in a statement.

Export surges are expected to cause sporadic truck backups at the terminal gates, but generally the terminal and gate operations are moving back to normal, the ports said. During the four-week period ending March 20, man-hours paid in Seattle-Tacoma averaged 101,547 per week, 13 percent higher than a year earlier, according to the PMA.

Oakland reported one vessel at anchor and no ships in the holding area outside of the Golden Gate Bridge. Vessels at anchor have declined steadily since the Feb. 20 tentative contract agreement, and Friday’s report is the best since the congestion began late last year, spokesman Mike Zampa said.

Although gate operations at Oakland have improved, truck turn times are not back to normal throughout the port complex. Motor carrier Devine Intermodal said Friday that four of the port’s marine terminals have shown “marked improvement” in recent days. Richard Coyle, the company’s president, said Devine it will adjust its congestion surcharge effective April 1. SSA Marine’s terminal continues to suffer congestion, with truck turn times taking as long as four to six hours, Coyle said. The ILWU began “hard-timing” or reducing productivity at SSA after Feb. 20 because the tentative contract does not include an increase in manning for certain positions that ILWU Local 10 had demanded, according to the PMA.

Coyle said truckers continue to grapple with occasional chassis shortages at all Oakland terminals, but that chassis supply generally has improved. Terminals in the port paid an average of 68,709 man-hours each week during the four-week period ending March 20, which was 7 percent higher than during the comparable period last year, according to the PMA.

Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him on Twitter: @billmongelluzzo.

Feb 23

Post Agreement: How Long Will the West Coast Disruptions Last?

By Hugh Finerty

The good new is that the rumors I reported on Friday morning of an agreement being struck late Thursday night, were true. The agreement was officially reported late Friday.  Although a five year agreement has been struck between the ILWU and the PMA, the bad new is it still could take weeks for the rank and file to “ratify” the agreement and many of the structural problems causing delays will remain for many more months. Here is an issue-by-issue assessment of the challenges facing the West Coast ports

Clearing the cargo backlog:  Local officials in the west coast ports expect a 4-6 week phase to clear out the backlogs. Industry experts believe this prediction far too conservative and that a 3+ month time horizon is more likely. Rescheduling labor, digging out chassis, a shortage of trucks and the arrival of mega-ships are the challenges to be overcome. At least there might be a short “breather” of new cargo arriving due to factories being closed during Chinese New Year.

Labor and Port Operations Normalization – Many industry experts expect it to take up to 6 months from the labor contract ratification for port operations to normalize. Port operation “normalization” refers to the re-establishment of sufficient crews and operational working hours. This does not refer to disruptions that will remain due to chassis shortages and the arrival of the mega-ships carrying 14,000 TEU’s per ship. The ports will need to devise a plan for the “new normal” of these large ships.

Shortage of Chassis – the chassis shortage remains a significant component of the delays in the West Coast ports. Many chassis have been damaged and sit idle while waiting for repair. Other functioning chassis are “buried” amongst the damaged chassis, or sitting under containers that are not being accepted back into the ports due to congestion.  By March, the new “gray” or neutral chassis pool of 4 operators should be up and running. There are skeptics as to whether this new chassis operation will be able to meet the demand of the mega-ships carrying 14,000 TEU’s, especially during peak season.

Shortage of Trucks – There will be an immediate high demand for trucks to remove the logjam of containers from the ports. This will include local drayage trucks, as well as the long-haul trucks who will be delivering containers inland to customers who can not wait for the containers to move by train. Many are expecting sharp increases in trucking rates during this phase. Another factor contributing to a truck shortage is the “turn-down” rate of loads. Many truck companies refuse to send their drivers to the ports due to long wait times. As port operations normalize, trucks will return to the market. This phase will provide opportunities for the truck brokerage sector to provided much needed load matching services.

Mega-Ships – the arrival of the mega-ships is causing havoc with labor, chassis and trucks needed to meet the new demand. These mega-ships carry up to 14,000 TEU’s; a significant increase over the average ships that carry only 8,500 TEU’s. The question that is still to be answered is how long it will take the stakeholders at the ports to model the systems and resources needed  to efficiently and effectively handle this never before seen level of demand.

Calculating these risks into your supply chain plan for 2015 and into 2016 is a key to keeping your customers satisfied. The disruptions of the recent 6 months should have identified problems in your supply chain that need to be addressed and improved. Please feel free to contact me to arrange a review of these areas and a discussion of possible solutions.

Visit www.hughfinerty.com for more information on global supply chain issues written by Hugh Finerty