Industry Alert: An Update on Ongoing Shipping Challenges at California Ports

Dec. 6, 2021 – -The supply chain issues continue and, in some cases, have worsened for agricultural exporters of all sizes. Our industry continues to face delays, equipment shortages and rising costs linked to disruptions in the global supply chain. The Almond Alliance continues to express the challenges of getting our products to international buyers which are resulting in extreme costs and negatively impacting well established relationships with international customers. As you all know, this problem is complex and once one piece is addressed, you find out there are multiple layers of new challenges that need to be solved.

Below are updates and a summary of activities to resolve this continued supply chain crisis.

The Almond Alliance continues to focus on this issue and work closely with AgTC, several stakeholder organizations, logistic companies and of course the Port of Oakland.

This list of the Almond Alliance priorities:

* Clear the “empty” containers off the Ports of Long Beach and Los Angeles floor and relocate them to inland sites near ports. The Almond Alliance has provided sites near the Port of Los Angeles and Long Beach to GO BIZ and the Office of the Governor.

* Redirect and restore carrier services into the Port of Oakland. (Immediate priority.)

* Advocate for carriers to offer solutions in terms of carrying “empties” to the Port of Oakland.

* Work with terminal operators to improve efficiencies of getting trucks into the terminals.

* Identify additional land and warehousing near ports and inland.

* Support for Federal Maritime Commission resources for enforcement of ocean carrier practices.

* Support federal financial assistance for agriculture lost sales, transport costs, product damage.

* Support the ports of Los Angeles efforts to get a port wide portal to work out inefficiencies within the supply chain to uncover, fix and hold all stakeholders more accountable.

* For the long term, work with the State to address the truck driver shortage.

Industry News: 

APMT Los Angeles to levy missed appointment fees from January

* Drayage companies say missed appointments are largely a result of dynamics outside of their control, not an intention to book slots they don’t plan to use.

* APM Terminals is set to implement a new set of appointment-related fees on harbor truckers in Southern California from Jan. 1 at its Pier 400 facility in Los Angeles.

* According to a Wednesday LinkedIn post from Matt Schrap, CEO of the Harbor Trucking Association (HTA), the fees will be $65 for failing to show for an appointment, $25 for canceling an appointment two to eight hours prior, $25 for setting up a same-day appointment, and $100 for performing a gate move without an appointment. Schrap told JOC.com earlier Wednesday that drayage drivers are “drowning in empties.” With roughly 120,000 empties crowding Los Angeles and Long Beach terminals, drayage operators are unable to return additional empties, which in turn keeps them from using those chassis to pick up imports, exacerbating congestion at the ports. Schrap said a mid-November HTA survey of 43 drayage providers found they were sitting on 9,400 empties unable to be returned, with an updated survey ongoing. For context, he said there are 800 trucking companies that regularly do business in the ports.

* Historic levels of congestion in the ports, driven by a 16-month flood of imports, dislocated chassis, and empties piled up in terminal yards, create situations that make it hard for drayage drivers to honor appointments made via the terminals’ various systems.

Fee reduction, financial incentives aim to decongest LA-LB

* Terminal operators in Los Angeles and Long Beach on Wednesday rolled out two programs designed to incentivize retailers and truckers to make greater use of extended gate hours as the largest US port complex edges toward a 24/7 operation to reduce record levels of congestion.

* All 12 container terminals, operating under the West Coast Marine Terminal Operators Association (WCMTOA), will temporarily adjust the traffic mitigation fee (TMF) that had been charged on all laden containers. WCMTOA members will waive the usual TMF of $34.21 per TEU and $68.42 per FEU for nighttime moves performed after 6 pm and will double it to $78.23 per TEU and $156.46 per FEU for daytime moves to encourage more pickups during night hours.

* Separately, CMA CGM, whose vessels call at the Fenix Marine Services (FMS) terminal in Los Angeles, on Wednesday launched a three-month incentive program that will pay importers $100 per box for picking up containers within eight days of their arrival during daytime hours, and $200 per container to take delivery of those containers during the night shift that begins at 6 p.m. CMA CGM in a customer advisory said the carrier will financially support FMS for the extra costs it incurs in expanding its hours of operation, “so containers can be picked up day and night, seven days a week.”

* On an AgTC zoom, Port of Los Angeles Executive Director Gene Seroka said that 48% of the backlogged import containers have been evacuated since they threatened to pose a fee on import cargo dwelling for more than 8 days.

Status of Vessels in Southern California Ports (December 2, 2021):

* Port of Los Angeles and Long Beach

o 31 at berth

o 70-85 anchored, drifting close to shore/drifting/anchored well offshore

* Port of Oakland

o 6 at berth

o 3 anchored, 2 drifting and 2 en route

California Association of Port Authorities: Speaking as President of the California Association of Port Authorities (CAPA), Port of Oakland Executive Director Danny Wan requested state help last month to ease a U.S. supply chain crisis. He called for increased collaboration and solutions from all levels of government as containerized cargo continues to back up at California ports. Inaction could result in freight migration – and job loss – to other states, CAPA President, Wan warned. “The current congestion that we see today is a result of decades of underinvestment in our ports and supply chain,” Wan said at the California Legislature’s Select Committee on Ports and Good Movement. “Notably there is an 11-to-1 imbalance in federal transportation and waterside spending on other port complexes around the country compared to those in our state,” he said. Wan recommended everything from a state-funded supply chain investment fund to land dedicated to cargo container storage.

Port of Oakland gets supply chain visit from Port Envoy; John D. Porcari examines export logjam for White House: President Biden’s Port Envoy visited the Port of Oakland on November 16th in hopes of easing nationwide supply chain gridlock. John D. Porcari toured the Port seeking to break a logjam that’s hampering shipments of U.S. agricultural exports overseas. At stake: billions of dollars of trade in farm goods with Asia. Port officials gave the White House Supply Chain Disruptions Task Force envoy a first-hand look at the problems. Topping the list:

* Not enough ships or vessel space to transport agricultural exports that arrive in Oakland from California and the Midwest;

* Outbound vessels that leave behind exports in favor of empty containers needed in Asia to load U.S. imports; and

* The soaring cost of containerized cargo transport.

A combination of factors is conspiring to cripple the export supply chain,” said Port of Oakland Executive Director Danny Wan. “That’s why we urged the Port Envoy to seek a comprehensive approach to the problem – there’s no one silver bullet.” Supply chain congestion has hindered the U.S economy for much of 2021. Inability to move goods rapidly is blamed for everything from inflation to empty store shelves. It’s also getting in the way of shipments to overseas markets. Elaine Trevino from the Almond Alliance briefed Port Envoy John Porcari on the impacts the supply chain crisis has on the California almond industry, emphasizing the need for more vessel service to return to the Port of Oakland, the need for inland port “depots” to take “empties” off the Long Beach and Los Angeles port floors and develop a short term system that allows truckers to drop off an “empty” and pick one up in the same transaction.  She also emphasized the need for better management of the overall system given the ongoing congestion challenge and the news of another COVID variant in California.

Port of Oakland cargo volume off; blame vessel bypass:

Forty-three percent fewer ships called in October at the Port of Oakland due to delays elsewhere. The Port of Oakland total cargo volume declined 20 percent in the month of October. Containerized imports dropped 14 percent compared to October 2020 totals. Exports were down 27 percent. However, through the first 10 months of 2021, Oakland total cargo volume is up nearly 2 percent and import volume has increased 8 percent. The Port attributed the monthly cargo dip to declining vessel traffic; 43 percent fewer ships stopped in Oakland last month than in October 2020. Some carriers bypassed Oakland and returned to Asia, following delays at Southern California ports. In October 61 ships called in Oakland, compared to 54 in September. A larger number of vessel arrivals is expected and shipping lines have begun restoring Oakland vessel services suspended earlier in the year.

Federal Maritime Update – Commissioner Bentzel’s Data Initiative:

The first meeting of the maritime data initiative being led by Commissioner Carl W. Bentzel will take place on December 7, 2021, from 1:00-3:00 PM (Eastern). Topics scheduled to be discussed include the need for data standards and transparency to improve supply chain efficiency. Chairman Daniel B. Maffei and other Commissioners will make comments at this event. Presenters for this event include:

* John Porcari – Port Envoy, Biden-Harris Administration Supply Chain Disruptions Task Force

* Lars Jensen – CEO, Vespucci Maritime

* Brian Bumpass – Chair, National Shipper Advisory Committee

* Kristen Monaco – Chief Economist, FMC

On November 10, 2021, the Federal Maritime Commission instituted an Order of Investigation and Hearing entitled Hapag-Lloyd, A.G. and Hapag-Lloyd (America) LLC Possible Violations of 46 U.S.C. 41102(c). Acting pursuant to Section 41302 of Title 46 of the United States Code, that investigation is instituted to determine:

* (1) Whether Hapag-Lloyd, A.G. and Hapag-Lloyd (America) LLC. are violating or have violated section 41102(c) of the Shipping Act by failing to establish, observe, and enforce just and reasonable regulations and practices relating to its assessment of charges on containers when return locations with corresponding appointments were unavailable.

To View the Order: Click Here.

Union Negotiations: 

The union representing about 15,000 dockworkers at the U.S.’s largest ports declined an offer by employers to extend existing labor contracts for a year, setting the stage for heated negotiations.

The Pacific Maritime Association — which represents 70 ocean carriers and terminals operating at 29 West Coast ports — proposed extending its current agreement with the International Longshore and Warehouse Union for another year through July 1, 2023, it said in a November 16th letter.

“There is already a perception among the trade community that negotiations are likely to result in some kind of disruption,” PMA President James McKenna said in the letter. The extension would be a “necessary step to protect commerce and our economy during this recovery period,” he said.

When companies and workers last discussed contracts in 2014, West Coast ports faced nine months of slowdowns that only came to an end when the White House got involved.

Originally set to end in 2019, the contracts were extended for three more years after roughly two-thirds of union members voted to lengthen them to avoid cargo disruptions in exchange for higher wages and pensions. This time around, the negotiations come amid record backlogs at the ports of Los Angeles and Long Beach, with persistent supply-chain constraints contributing to delays, shortages of some goods and quickening inflation.

Dockworkers are also focused on the economy, union International President William Adams said in a letter of response to the employers. It’s “especially ironic to ask labor to pass on collective bargaining” when shortages of workers outside of the ports — such as truckers and warehouse employees — don’t have “wages and working conditions attained through collective bargaining that persuade people to stay and commit their lives to tough physical labor,” he said in the letter.

“The employer is now asking for an extension to that extension,” Adams said in a separate emailed statement to Bloomberg News. “We’ve been waiting for seven years to address issues that are important to dockworkers.” A one-year contract extension with the ILWU “would be in the best interests of the national economy,” in light of the supply-chain disruptions, the PMA said in an emailed statement. “Given the union’s response, we will be prepared to meet at the bargaining table next year.” Automation and safety issues are likely to be at the center of the discussions. The union has lost at least 20 members to COVID-19, according to Adams, and automation has been a point of contention between the two organizations for years, as it’s gained more space in contracts over time.

In an interview with Bloomberg earlier this month, McKenna said the PMA has “already done our proposals” and is “prepared to get into negotiations” once the union is ready, which is likely to happen in the spring.

The Almond Alliance will continue to keep you updated on the ILWU negotiations.

Source: Bloomberg.com

Legislation of Interest:

Congressmen John Garamendi and Dusty Johnson are authors of the Ocean Shipping Reform Act of 2021 “OSRA21”. The Act’s provisions address the unreasonable detention and demurrage charges, export cargo bookings, and other carrier practices that are essential to allow US agriculture to remain competitive in global markets. The Almond Alliance strongly support provisions in the bill to gain reasonable and fair ocean carrier practices consistent with the Federal Maritime Commission’s Interpretive Rule on Demurrage and. It imposes upon carriers the obligation to self-police compliance with that Rule. In addition, the bill obligates ocean carriers to carry export cargo, to the extent they can do so safely. It addresses carrier practices limiting efficient use of containers, chassis and other equipment. The Almond Alliance will continue to work on advancing and strengthening this bill as it proceeds through the legislative process.

To view the Ocean Shipping Reform Act of 2021, Click Here.

A current list of Co-sponsors of OSRA21, Click Here.