Shifts in oceangoing commerce upend cargo trade at U.S. ports
With 30 ships still stranded off the California coast, the Los Angeles and Long Beach ports have only begun to clear a cargo backlog in the wake of the recent labor dispute.
But the fight between shipping companies and the dockworkers union, resolved last month, was only one of the causes of chronic congestion at the nation’s busiest seaport complex.
Sweeping changes in the global shipping industry have upended cargo trade at major U.S. ports. To cut costs, shippers have formed alliances to combine goods from multiple carriers on so-called megaships, some with nearly twice the capacity of traditional commercial vessels. That means each ship takes that much longer to unload.
At the same time, the shipping companies outsourced the management of truck trailers that carry shipping containers around the country. That transition did not go smoothly, by all accounts, creating a logistical nightmare that snarled traffic at Southern California ports long before labor talks broke down.
“In essence, the maritime supply chain has become unhinged,” said Jock O'Connell, an international trade economist with Beacon Economics. “You’ve got some fundamental problems that will take a long time to resolve.”
The shifts in oceangoing commerce have led to significant challenges for those handling the goods on shore.
Traditionally, each shipping line had its own terminal at the port and provided its own trailers, allowing containers to be trucked away to warehouses and distribution centers. That gave shipping companies control over much of the supply chain, from the loading of goods in China to distribution via the U.S. highway system.
The arrival of much larger ships, carrying goods from several ocean carriers, means that cargo once confined to a specific terminal can end up anywhere at the port. In addition, shipping companies in recent years decided to sell off the truck trailers they had traditionally provided at U.S. ports.
The trailers, called chassis at the ports, are a crucial link in global transport. By outsourcing to third-party equipment companies, shipping lines inserted a new set of players into the mix.
The changes meant truckers had to ensure they were using the correct trailers to haul away the goods. With cargo increasingly spread out across terminals — a side-effect of the megaships — the trailers often weren’t where they needed to be.
That sent truckers on hours-long expeditions searching for the right chassis.
“It went helter-skelter,” said Joe Palazzolo, a maritime consultant hired by the Port of Long Beach in 2012 to study the equipment backlogs. “The steamship lines, over decades, had developed staffs and systems to support the management of those chassis. Then it was gone overnight.”
Chassis operators deny that outsourcing was the primary cause of delays at the port.
“Chassis were a part of it, no question about it,” said Keith Lovetro, chief executive of TRAC Intermodal, the nation’s largest supplier of the equipment.
But the complexity brought on by larger ships — combined with longshoremen shifts being cut during the last month of the dispute — created “the perfect storm of congestion,” Lovetro said.
The Pacific Maritime Assn., which represents shipping companies at the West Coast ports, declined to comment.
Trucking companies started to see long delays last year, said Fred Johring, chairman of the Harbor Trucking Assn., which represents carriers working out of Southern California ports. Nearly a third of truckers spent more than two hours picking up a container — double the industry norm, he said.
Shortages at one terminal meant truckers had to rush to another one, waiting in long lines with no certainty that the equipment would be there. Tempers flared, and truckers frequently squabbled over scarce equipment.
Many port truck drivers are paid by the number of loads they deliver, not the hours they work, so delays cost them money. And some delays exceeded four hours, said Julio Garcia, who has driven at the ports for more than five years.
“There’s so much pressure you have to get the load out,” he said. “Nobody wants to waste a second.”
Shipping companies also made it clear the equipment was not their responsibility, Johring said.
“They washed their hands of it,” Johring said. “We got hundreds of emails saying, ‘It’s up to you to get a chassis.’”
Complicating the issue, the International Longshore and Warehouse Union, which represents West Coast dockworkers, has historically repaired and maintained the chassis as part of their contract with the shipping companies. The outsourcing of chassis threatened jobs for union mechanics.
The issue became a major point of conflict in the contract negotiations. An ILWU spokesman, Craig Merrilees, said the agreement will allow the union to continue repairing the equipment. But he said the transfer was ill-advised, as evidenced by the backups over the last year.
“This was an industry-induced problem that had everybody scrambling for solutions,” Merrilees said.
The chassis delays weren’t confined to Los Angeles and Long Beach. The port of New York and New Jersey — the nation’s third-largest complex — has also struggled with the equipment changeover.
This month, three of the nation’s largest chassis owners launched a plan to reduce backlogs. Rather than force trucking companies to use one company’s trailer tied to a specific contract, the new plan treats all equipment the same.
The three largest operators will now share the equipment in a pool that spans almost all terminals at the two ports. The firms will use an accounting system to tally which trailers are used, and will then settle up at the end of the month, Lovetro said.
“The key is that the units can be used by anybody,” he said.
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