The long-awaited surge in diverted cargo from East Coast ports to the West Coast finally arrived in September, but the harbor trucking industry in Southern California can’t decide if it’s a blessing or a curse.
Fred Johring, president of East Rancho Dominguez, Calif.-based Golden State Express, said business picked up as some shippers concerned about the outcome of the International Longshoremen’s Association negotiations on the East Coast diverted cargo to Los Angeles-Long Beach.
Johring is busy moving containers for his own customers, while fielding calls from other motor carriers that desperately need more trucks to handle their business. Some retailers authorized the motor carriers they contract with to pay a $50 premium per load to secure additional trucking capacity, Johring said.
Although this is good for an industry that operates on a thin margin, harbor trucking companies are losing some of the extra revenue as quickly as they get it because of unusually long delays at marine terminal gates in Los Angeles-Long Beach. “The turn times are worse than ever,” Johring said.
His drivers recently experienced average delays of 130 minutes at one container terminal contending with higher-than-usual cargo volumes as well as programming glitches in its terminal operating system, he said.
The shipping industry since March has been bracing for a diversion of cargo from East and Gulf Coast ports to the West Coast and Canada. That’s when ILA President Harold Daggett told The Journal of Commerce’s TPM ocean shipping conference that a strike was possible if employers didn’t satisfy several key union demands.
Because that threat came at the beginning of the service contracting season in the eastbound Pacific, some national retailers and other large importers who ship through West as well as East Coast ports immediately planned to route more shipments through the West Coast this year.
Smaller importers generally stayed with their all-water routing from Asia to the East Coast, but shipped earlier than usual to beat the Sept. 30 expiration of the ILA contract. The early shipping resulted in a bump in cargo volumes at East Coast ports in July and August, resulting in longer gate times at some ports.
The initial stages of negotiations between the ILA and the United States Maritime Alliance, which represents employers in the contract negotiations, were positive. Many importers were optimistic a strike or employer lockout could be avoided, and they continued to ship through the East Coast well into August.
For many small and midsize importers, diversion to the West Coast wasn’t an option, said Jeff Bader, president of Golden Carriers in Hillside, N.J. “A lot of them never changed their plans,” he said.
Negotiations, however, broke down suddenly on Aug. 22 when employers told the ILA they wanted to address certain work rules and practices they said contributed to higher costs and unnecessarily high staffing. Daggett refused to negotiate on those issues. The talks were suspended and Daggett said a work stoppage was likely after Sept. 30. That news sent many importers scurrying to secure space on services to ports on the West Coast and in Canada.
Even the Sept. 20 announcement by a federal mediator that the ILA and USMX agreed to a 90-day contract extension came too late to prevent a diversion of cargo to the West Coast. (For more on the ILA-USMX truce, see page 40.)
West Coast terminal operators and harbor trucking companies noticed an increase in volume in mid-September. Some of the increase resulted from the normal peak-season spike in volume, but the addition of cargo diverted from the East Coast created a larger-than-normal spike in mid-September.
Even then, however, motor carriers did not describe the cargo increase as a tsunami, and they believe marine terminal operators should have been able to handle the increase because they knew it was coming. Greg Stefflre, owner of Rail Delivery Services in Fontana, Calif., said the cargo surge wasn’t enough to overwhelm the ports and inland infrastructure.
Harbor trucking executives, however, said truck turnaround times slowed measurably because terminal operators didn’t respond quickly enough with increased staffing and additional gates.
The biggest problem harbor truckers face is the inconsistency of gate operations in the harbor, said Vic LaRosa, president of Total Transportation Service in Rancho Dominguez, Calif. Some of the terminals offer the traditional Monday-through-Friday day gates plus five additional night and weekend gates each week, while other terminals offer only four night and weekend gates.
Truckers’ inability to move freely throughout the harbor, with the option of dropping off and picking up containers at all terminals, results in too many non-revenue moves, LaRosa said. “It creates an additional cost we can’t recover,” he said.
PierPass, which was established by the 13 terminals in Los Angeles-Long Beach to manage the extra-gates program, doesn’t see the situation like that. Thomas Stephenson, chief financial officer, said the terminals regularly report their truck turnaround times, and almost all of the terminals were operating within generally accepted standards as far as PierPass is concerned. If volumes spike, the terminals would consider adding the necessary gates, he said.
Ed DeNike, chief operating officer at Seattle-based global terminal operator SSA Marine, agrees with PierPass. The increased volumes SSA has experienced did not result in excessive trucker delays at its terminals, he said. The company also operates a trucking subsidiary, Shippers’ Transport, that shuttles containers at night from the terminals to an off-dock yard. The trucks are available for hire should other motor carriers need the capacity, but SSA hasn’t had any requests, DeNike said.
Motor carriers, through the Harbor Trucking Association of Southern California, say they don’t trust PierPass’s assessment of what constitutes acceptable turn times. The association has contracted with an independent analyst to track turn times at the terminals. That exercise should last into next year. The study will be used to rank the marine terminals “from first to worst,” LaRosa said.
The Sept. 20 announcement of the 90-day ILA contract extension eventually will bring normalcy back to harbor trucking operations on both coasts. The spike in West Coast cargo caused by cargo diversion should last through October, and then taper off.
By then, East Coast ports could get a bump in business as importers that had been considering rerouting their cargo return to all-water services from Asia. Golden Carriers’ Bader said he’s ready. “Anything they can throw at us,” he said, “the harbor trucking industry can handle.”