Shippers planning for a possible East and Gulf Coast port shutdown next month must choose from a menu of unpalatable choices.
They can shift cargo to other coasts, at a price. They can move cargo early, as some have done, also at a price. Or they can watch and wait and hope a work stoppage is avoided or is short-lived.
Which choice a shipper makes depends on the cargo commodity, its origin and destination, and its value and degree of time sensitivity.
In some cases, the window of opportunity for contingency plans already has closed. If cargo from Asia on all-water services from Asia isn’t in transit by now, it won’t arrive on the East or Gulf coasts until after the International Longshoremen’s Association contract expires on Sept. 30.
Space on trans-Pacific services to the West Coast is in high demand. With the peak season for holiday imports in full swing, eastbound space was tight even before shippers started seeking strike alternatives. Shippers lacking relationships with carriers could be out of luck. Some shipments are being rolled to subsequent voyages.
Several carriers have announced trans-Pacific “congestion surcharges” that will take effect if East and Gulf Coast ports are hit by a strike or lockout. Carriers must file the surcharges 30 days before they take effect.
Dave Akers, managing director of the Toy Shippers Association, began encouraging his members months ago to reroute critical shipments to avoid possible disruptions. “We’ve told them, this is a very real situation,” he said.
Pat Moffett, vice president of Voxx International, said some of his company’s electronics shipments that normally would move through the East Coast are being sent through Seattle and Tacoma. He said intermodal capacity from those ports is usually ample.
BNSF Railway said it has seen no significant diversions from the ILA negotiations, but that it and its West Coast ports “have ample capacity to handle additional business during the upcoming peak season.”
Most Los Angeles-Long Beach marine terminals have “plenty of not only physical but also operational capacity,” said Bruce Wargo, president and CEO of PierPass, which uses fees from daytime terminal gate moves to subsidize the cost of off-peak hours at gates.
He said most of the ports’ terminals are still on their summer schedule of keeping gates open only four nights a week and could quickly add a fifth one if necessary. “We can basically do it overnight,” Wargo said.
Fred Johrning, president of Golden State Express, said truckers would welcome an increase in extended-hour gates. He said turnaround times at many port terminals are unacceptably long because operators try to minimize labor costs. “There is no terminal infrastructure issue if they properly staff the terminals,” he said.
Although capacity is ample now, that could change if there’s an extended work stoppage. After West Coast ports were closed by an 11-day dockworker lockout in 2002, it took weeks to clear the backlog of out-of-position equipment.
Bob Weiss, independent administrator of the Food Shippers Association of North America, said he’s concerned widespread diversions from the East and Gulf coasts could cause a shortage of refrigerated containers in North America. He said carriers could be tempted to bump empty reefer boxes from eastbound vessels so they can carry more high-revenue consumer merchandise in dry containers.
Geoffrey Giovanetti, managing director of the Wine and Spirits Shippers Association, said switching wine shipments from the East Coast to the West Coast for shipments from Australia, New Zealand or Chile is relatively easy. It will cost more to ship by mini-landbridge to the big New York market, but shippers will pay the price if necessary to get their goods on retail shelves in time for the holidays, he said.
The big problem could be for shipments of wine, beer and spirits from Europe, which account for about half of his members’ volumes. Montreal and Halifax are good options, but those ports are “chock-a-block,” Giovanetti said.
Shipping early was an option, but it’s too late for that, and holding inventory longer adds to carrying costs. Giovanetti said some of his members are gambling that a work stoppage will be avoided or will end quickly.
Some shippers, particularly those with commodities that can’t absorb higher costs, have little choice but to watch and wait. Tony DeSantis, executive director or U.S. Shippers Association, whose members include chemical shippers, said most of his members have opted not to divert cargo to other coasts. “We’re keeping our fingers crossed,” he said. “Changing coasts is very difficult when you already have your logistics partners set up. You’re looking at some major costs.”