Bracing for a Tighter Fit

A cargo tsunami is heading for Southern California’s ports, which just emerged from their worst pre-holiday logjam ever.

The fresh crush of cargo will sail mainly from China and India, which on Jan. 1 will be freed of tight restrictions on textile and apparel exports to the U.S.

This global lifting of quotas by the World Trade Organization is expected to launch a worldwide shift in trading patterns for cloth and clothing, roiling an overseas shipping infrastructure ill-equipped to deal with additional pressures. The change won’t occur overnight, experts say, but eventually will send a new surge of goods through the ports of Los Angeles and Long Beach as retailers take advantage of lower manufacturing costs around the world.

“What happened at the ports this year may just be a preview of coming attractions,” said Steven Erie, director of the urban studies and planning program at UC San Diego and author of the book “Globalizing L.A.: Trade, Infrastructure and Regional Development.”

“More outsourcing to China and India worsens the risk of gridlock at the ports, and these so-called peak seasons may become permanent,” Erie said.

China has long been a major textile exporter to the U.S., holding an 11% share, behind the European Union at 16% and Mexico at 13%, according to the WTO’s latest figures. The situation with clothing exports is similar with China at 16%. Mexico and the rest of Latin America would account for a combined 27%.

But with restrictions lifted, the WTO predicts that China will grab a 50% share of the U.S. clothing market, and India is expected to move into second with a 15% share, up from just 5% in 2002. China’s gains in the U.S. textile market are predicted to be less dramatic, but China is still expected to dominate at 18%, followed by the European Union at 14% and Mexico at 11%.

It’s unclear just how much of that additional ocean traffic would come to the local twin ports, which are headed for a third straight record year of cargo flow.

Still, shipping experts aren’t taking lightly the prospect of another increase at the nation’s largest port complex.

In fiscal 2003 alone, more than 6 million metric tons of textiles and apparel products moved through the local ports, according to statistics from port officials and from the U.S. Maritime Administration.

“The ramifications are huge,” said Gene Ochi, senior vice president for marketing and sales at UTi Worldwide, a Rancho Dominguez company that coordinates the movement of goods from manufacturers to retailers around the world. “The ports need to figure out how they are going to handle this.”

The ports’ last cargo crunch, which began in July and ended this month, stranded as many as 94 vessels at a time, up from the usual range of 30 to 50 ships. The wait to unload stretched as long as nine days. Holiday merchandise was delayed, and shippers moved their goods through other ports to avoid the gridlock.

Some of those changes will be permanent.

Hanjin Shipping Co., for example, recently announced that it would expand its use of Portland, Ore., for shipments from Japan. The company said the move was prompted by congestion at other West Coast ports.

Southern California port officials said they should be able to accommodate more trade, especially as recently hired dockworkers are trained and as terminals begin opening their gates at night and on weekends in 2005.

“It shouldn’t be a major thing,” said Julie Nagano, a spokeswoman for the Port of Los Angeles. “We move a lot more electronics than apparel and textiles.”

Said Art Wong, spokesman for the Port of Long Beach: “It won’t overwhelm us.”

A representative of West Coast shipping lines gave a cautious endorsement of the ports’ ability to handle any significant increase in apparel and textile imports.

Jim McKenna, president of the Pacific Maritime Assn., said the port gridlock was an anomaly caused by a failure to predict this year’s increase in business. The problem shouldn’t recur because the port labor pool is being increased by 50% and more hiring automatically will occur any time the nonunion labor force drops below 6,000, he said.

“We know now that the traffic is not as seasonal as it once was,” McKenna said. “Once we have enough people, we can manage the volume.”

The Southern California ports aren’t the only ones with difficulties.

Ron Widdows, chief executive of APL Ltd., a shipping line, said at the recent Textiles and Apparel Trade Conference in New York that “the problems of inadequate terminal capabilities are global and will be with us for years. Intermodal capability is stretched at nearly all major load centers worldwide.”

Spokesmen for two prominent labor groups, the International Longshore and Warehouse Union and the International Transport Workers Federation, have called for more hiring at ports worldwide to help manage the expected demand.

The possibility of more port congestion has pushed some retailers -- still reeling from delays and higher costs in getting their holiday goods -- to hire consultants to steer them through the troubled waters.

Toronto toy company Spin Master Ltd., maker of the Bella Dancerella home ballet studio, said it would look into alternatives to the Los Angeles-Long Beach port complex.

“It’s getting worse, not better. It’s serious enough so that when we are through this season, this is a top priority,” said Harold Chizick, Spin Master’s director of marketing communications.

Other retailers are also keeping their options open for next year.

Retailers are “conducting studies on how to bypass these ports,” said Nancy Mangold, director of the China America Business Education Center at Cal State Hayward, who is predicting substantial cargo increases at the two ports. “They don’t really want to avoid them, but they are very concerned. They are hiring consultants to do logistical studies.”

Not everyone sees a shipping disaster on the horizon.

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., predicted that some retailers, particularly sellers of expensive clothing, would continue to depend on established sources for manufacturing. Others will be loath to shift all of their business to China, no matter what the level of cost savings, he said.

“I’m hearing,” Kyser said, “most will not put all of their eggs in one basket.”