Disruptions cost agricultural shippers billions in lost sales – what’s next?
Some issues are clearing for shippers of Ag products, but others remain Memories hold tight when it comes to delayed shipments. Many recall all too well stories about imported Christmas trees that were not offloaded until January due to delays on the West Coast due to the Port of Los Angeles and Long Beach longshoreman slowdown. The Agriculture Transportation Coalition (AgTC) states that the US agriculture and forest products industries suffered billions of dollars of lost sales and revenue during that prolonged disruption. Growers and shippers lost money right and left on exports they could not ship. Meanwhile, they watched their crops sit on the docks and rot. Some worried that they would permanently lose overseas customers if all they could deliver was spotty shipments of spoiled goods. In Japan, feedlots and dairies began reformulating rations to use Australian oat hay instead of Washington timothy hay. (Japan is the State of Washington’s largest customer for timothy hay.) McDonalds began reconfiguring its supply chain for French fries to increase the use of European grown potatoes instead of relying totally on US grown potatoes. Simultaneously, shippers of products like meat and dairy being exported to the US from Australia and New Zealand could not allow these commodities to sit at sea for days. These products were already seeing unprecedented demand due to the strengthening US dollar. Consequently, some shippers rerouted their shipments to Gulf and East Coast that could take up the slack and handle the cold chain products. Ports Respond The Ports of Long Beach and Los Angeles, in a joint press release, emphasize that the deployment of larger ships, coupled with a new level of vessel-sharing dynamics created by carrier alliances, an imbalance of truck chassis and contract issues, contributed to the congestion issues faced this past fall and winter at many ports. “Generally, when congestion hit the West Coast, perishables were hit harder than dry goods,” Phillip Sanfield, Port of Los Angeles spokesman, tells AJOT. With a tentative labor agreement in place and possible ratification in a few weeks—combined with other improvements in the supply chain, Los Angeles port officials are optimistic that the Port will not repeat the “perfect storm” that occurred in 2014 and at the start of this year. Art Wong, Long Beach port spokesman, remarks: “The congestion is behind us. At the worst, in mid-March, the two ports had nearly 30 ships waiting for open berths. Since April 19, the port has been back to normal with no more than two ships waiting.” Sanfield points out that the Ports of Los Angeles and Long Beach, under an agreement with the Federal Maritime Commission (FMC), are working together to help optimize the supply chain. “An interoperable chassis pool went into effect on March 1, and has proven to be very effective,” he says. The ILWU is expected to ratify their new contract with a vote on May 22. “Diverted cargo should begin to return after the vote,” Wong adds. Meanwhile, Los Angeles introduced on February 25 an off-dock container yard, or “peel-off program,” where exporters and importer can drop-off or pick-up their containers, without going into the container terminals. According to a press release on the program, import containers loaded with goods belonging to high-volume shippers are stacked together in a block upon arrival at the port. The terminals expedite Total Transportation Services Inc (TTSI) trucks through their gates to retrieve the containers and deliver them to the near-dock yard less than a mile away where they are sorted. The same trucks loop back to the terminals for the next inbound container. The trucks keep boxes moving by delivering outbound containers on the return leg. “These off-dock container yards work faster than container yards,” Sanfield says. Sanfield particularly emphasizes that the two ports are working on other programs to increase efficiency through the port—like block stowing on the container ships. “Containers are coming off a ship pre-sorted for intermodal transport and local transport,” he explains. “We are working with a software provider, where the trucking community can pick up containers through an app that works almost the same as Uber. Through technology we also need to have better visibility of the containers that are coming our way, either by ship, rail or truck and need a port wide inventory of the containers that are in our terminals.” Wong emphasizes that the Port of Long Beach is addressing the issues that caused the initial congestion. “A chassis pool is easing the shortages and confusion over chassis availability,” he says. “We’ve set aside overflow yards for containers and chassis. And the two ports have begun meeting to find even more ways to improve efficiency.” Shippers Issue While the Ports of Long Beach and Los Angeles appear to be addressing critical issues, another one still remains: the assessment exporters and importers are facing of per diem container detention charges by the ocean carriers. Peter Friedmann, AgTC executive director, points out that exporters and importers of US agriculture and forest products “are faced with millions of dollars of charges being imposed by ocean carriers, for delays which were most certainly not caused by the exporters.” “These are costs that are being imposed following nine months of lost sales, cargo damage, lost customers and diverting cargo to air and to alternative gateway ports,” AgTC writes in a press release issued on May 5. AgTC is urging the US Congress to encourage FMC Chairman Mario Cordero and the Commission to “compel the ocean carriers to waive all per diem charges imposed during the period of West Coast port congestion, roughly November 1, 2014 through April 15, 2015.” The Coalition points out how it was impossible for exporters and importers to return the ocean carriers’ containers before the ‘free time’ expired - typically 4 to 10 days. “Terminals closed abruptly for hours or days at a time, and trucks could not get into the terminals to drop off their containers, creating gridlock that lasted for weeks and months. At times, railroads were forced to embargo shipments to the West Coast ports, as there was no place to unload,” it says. Nevertheless, ocean carriers churned out “per diem” charges for failure of their customer to return the container on time. As one observer noted, this is akin to renting a car at the airport, but when you try to return it, the car company has so congested the terminal that you can’t get in - and then the car company charges you penalties for not returning the car on time! Some carriers are waiving these charges, but others are not. Laura Daniels of Anderson Hay and Grain Company Inc. blames ocean carriers for creating the problem, stating that they did not provide accurate information on when their vessels would arrive or depart. “This created detention liability on our part when the marine terminals delayed receiving the containers we were trying to return,” she says. “The carriers allowed the terminals to decide when and for how long they would accept containers for a sailing. Cut off dates for receiving cargo (and containers) were frequently delayed two or three weeks after we had taken the containers for loading, even though the carriers knew they were only giving us 14 days free time.” Frequently, terminals only accepted containers back for a two or three day period, leaving trucks stranded in lines at the terminals all day long. “Our trucking capacity was reduced by half just due to lines at the terminals, further inhibiting our ability to return containers,” Daniels continues. “Carriers blamed labor and the terminals, while labor and the terminals blamed carriers.” As the exporter at the end of the chain, Daniels believes shippers like Anderson Hay and Grain have been left holding the bag, “trying to figure out what schedule our bookings would be on, what we might possibly be able to truck in order to keep our business running and our employees working. For all this, the carriers are imposing hundreds of thousands of dollars of per diem fees on the hay exporters here in the Pacific Northwest,” she states. Friedmann contends that carriers should not be allowed to profit by the congestion. While some carriers are responding to exporters’ and importers’ requests to waive the per diem fees, Friedmann wants the FMC and Congress to insist that all carriers waive the fees. FMC has established a process through its Consumer Affairs and Dispute Resolution Service (CADRS) by which an individual exporter or importer can file a request for assistance. The shipper can then request the FMC to encourage the carrier to waive the per diem fee. Friedmann points out, however, that the services is on an individual case-by-case basis and requires the shipper to research and provide detailed documentation for each time the terminals were closed. “It is almost impossible for the shipper to retrieve this information,” he says. “Sometimes the terminals themselves may not have it.”