Is LA-Long Beach More Business Friendly?

Is LA-Long Beach More Business Friendly?

 Just when importers and exporters were beginning to feel it was safe to ship through Los Angeles-Long Beach, office clerical workers at the nation’s largest container complex went on strike.

“It’s a horrible thing from a PR perspective — from a timing perspective,” said Paul Bingham, managing director of the global trade and transportation practice at economic analysis and forecasting firm IHS Global Insight.

 It was business as usual for cargo-handling in the first week after the Office Clerical Unit of International Longshore and Warehouse Union Local 63 set up picket lines at several terminals when the union’s contract expired at midnight June 30. The waterfront arbitrator, ruling the OCU was not bargaining in good faith, instructed dockworkers not to honor the pickets. They complied.

The OCU is affiliated with the ILWU, but office workers have a separate contract. Even though the ports are moving cargo, some shippers saw “ILWU” in the headlines and their knee-jerk reaction was that Los Angeles-Long Beach has an unstable labor force, Bingham said.

The two ports, along with shipping lines and the ILWU locals in Southern California, had worked as a team this past year to convince cargo interests they should feel comfortable about making Los Angeles-Long Beach their gateway of choice in the trans-Pacific trade.

In fact, shortly after the pickets were erected, ILWU President Bob McEllrath encouraged the OCU negotiators to work for a settlement. Spokesman Craig Merrilees said the international leadership has always attempted to be a facilitator when there is a conflict on the local level, and McEllrath was simply doing what he could to help the OCU achieve a fair contract.

The industry, however, interpreted his efforts as a message to the OCU that Southern California cannot afford to lose any more cargo and man-hours for dockworkers.

The ports’ marketing effort in recent months has had a positive story to tell. After environmental challenges held up major infrastructure work for more than seven years, the ports have secured approval for several key terminal expansion projects.

Cargo volume is recovering strongly. According to the Pacific Maritime Association, Los Angeles-Long Beach led the West Coast in container growth during the first five months of 2010 with a 15 percent increase in total volume.

Carriers have responded by reintroducing all of the services they had discontinued during the winter months. Many of the vessel strings are comprised of 8,000- to 10,000-TEU ships, the largest vessels calling at U.S. ports.

The ports’ ambitious clean-trucks program has replaced some 6,500 old, polluting trucks with new vehicles since the program was launched on Oct. 1, 2008. Similar pollution-reduction efforts with vessels, harbor craft and trains have cut diesel emissions by 25 percent since 2005.

And, responding to complaints about cargo fees to support various projects, the ports delayed for two years a proposed infrastructure fee. The only inescapable fee today is the Alameda Corridor charge for cargo moving by train. Shippers can avoid the traffic mitigation fee under the PierPass extended-gates program by moving containers at night. A small number of shippers still pay the dirty-truck fee, but most importers and exporters are exempt because new, compliant trucks handle their containers.

But the ports’ cause has suffered a setback, as harbor truckers complain vociferously about congestion at marine terminals. When cargo volume declined last year, terminal operators reduced staffing, discontinued early morning and later afternoon flex gates and reduced their evening PierPass gates to four times a week from five.

The return of double-digit growth caught the terminals unprepared, and they have only recently begun to extend their gate hours and ramp up staffing in an effort to relieve congestion. Of all the problems plaguing Los Angeles-Long Beach over the years, congestion is by far the biggest deterrent to cargo growth.

The ports also must contend with meddling by their city administrations, a development that gives the ports a reputation of being anti-business. Los Angeles continues to fund a lobbying effort, using port money, to amend federal pre-emption law and open the door for unionization of harbor truck drivers.

Los Angeles on July 1 approved another installment of $75,000 to support The Gephardt Group’s lobbying efforts in Washington, making it a total of $340,500 that the port has paid to promote local regulatory control of harbor trucking. Long Beach, meanwhile, is attempting to increase the amount of port funds transferred each year to the city government.

Cargo interests abhor political interference in port operations. They have written letters to the ports and spoken out at public forums, but on certain issues, the cities do not budge.

The Los Angeles-Long Beach port complex has lost about 6 percent market share the past four years. Cargo interests warn that an unstable labor force, congestion at marine terminals and political meddling will lead to additional diversion of cargo.

“It’s not like they’re saying we’ll avoid Los Angeles-Long Beach at any cost,” Bingham said. “But when it comes to growth, other options make more sense.”

Contact Bill Mongelluzzo at bmongelluzzo@joc.com.