Shippers engage

Shippers engage

Something we know about importing from Asia via ocean container is that given the opportunity, shippers will seek alternatives to Southern California. That is when congestion in North America is chronically at its worst. Last year, and so far this year, imports through the ports of Oakland, Seattle and Tacoma grew faster than they did at Los Angeles-Long Beach. Wal-Mart says it imports more than half its containers through ports accessed through the Panama Canal, and East Coast ports have put up impressive numbers in recent years because of Asian cargo arriving via the Panama route.

Consider new terminals being planned in Mexico and Canada, and the question must be asked: Could port congestion be solved through diversification? The answer: maybe for the moment, but not long-term. "The canal is just about at the limit of what it is capable of handling until it is expanded," Ron Widdows, chief executive of APL Ltd. said in a recent interview. "Delays in crossing the canal are just beginning to build, and that will begin to have a fairly significant negative impact on the operation of all-water U.S. East Coast services," he said, noting that Seattle and Tacoma are also rapidly headed toward capacity.

The point is clear. As smooth as 2005 has been - by this time last year the West Coast was a mess - the nation is inevitably heading toward a major capacity crunch at its ports. The problems in Southern California - or elsewhere around the country - can't be shrugged off. Problems must be dealt with head on, whether through nighttime gates, off-dock truck depots or other solutions. One look at the swollen order book for 8,000-TEU-plus vessels likely to enter the trans-Pacific makes that abundantly clear. Thankfully, the problems are beginning to be acknowledged, and for one reason above all others: Shippers are getting directly involved. Widdows himself can take some of the credit for that.

Since early 2003, Widdows has been on a persistent crusade to bring seaport problems to the attention of people who matter in Washington - officials in the Transportation, Treasury and Commerce departments and on Capitol Hill. His efforts have been aided greatly by the enthusiastic participation of major importers, who have welcomed the opportunity to tell their tales of woe.

A series of meetings in Washington in April included representatives from Nike, Dell, Newell Rubbermaid, Target Stores and Toys "R" Us. A separate gathering in Hong Kong with Transpor-tation Secretary Norman Mineta included Sears, J.C. Penney, Icon, Macy's, Helen of Troy and The Limited. To-gether, the companies represent more than $250 billion in annual sales. The point that came through loud and clear was one of economic hardship because of rising costs related to congestion.

"Some customers are not able to pass the costs along because they compete with some of the largest retailers in the U.S. and they have to remain competitive," Widdows said. "What they shared with the DOT and Commerce is they have no choice but to retain their profitability by reducing costs, which means reducing the number of people they employ."

Where could all of this lead? Widdows acknowledges as many do that traditional funding from Washington isn't the answer. "The funding to achieve a more significant result is not something that exists within the capabilities of Washington," he said. But that doesn't mean Washington is a helpless bystander, the way it often appears to be when it comes to issues of port congestion. The emerging solution is user-funded initiatives in which there is no possibility whatsoever that the funds could get diverted for non-transportation purposes. Such closed-loop funding systems were behind the Alameda Corridor as well as the PierPass system being implemented in Southern California to divert cargo movements to nighttime hours. Other opportunities would be to create a federally legislated system of investment tax credits for railroads, encouraging them to invest at greater levels than they do currently. "If you look at what is the single most significant challenge, it is railroad-related," Widdows said.

The effort in Washington will continue, Widdows said, but the leadership will transition from APL to the World Shipping Council, the container lines' trade group. But the results are already being felt. Officials at high levels in Washington are now very much aware of the problems, and that can only be positive in the long run.

Peter Tirschwell is vice president and editorial director of Commonwealth Business Media's Magazine Division. He can be contacted at (973) 848-7158, or at ptirschwell@joc.com.