By Michael D. White, author and freelance writer
Back around the middle of the last century, every Sunday evening at 7:00, families across the country would congregate in front of their television sets to watch as a self-conscious Ed Sullivan introduced the evening’s entertainment.
Occasionally appearing on his show was Erich Brenn, a debonair, tuxedo-clad Austrian whose claim to fame was being ranked the undisputed world champion of the arcane talent of plate spinning.
For some unknown reason, Brenn had developed the ability to keep nine dinner plates, balanced and spinning on tall sticks, from crashing to the floor, all while quickly dancing from one to another and back again to the dizzying cacophony of Aram Khachaturian’s Sabre Dance.
The term multi-tasking was decades away from vogue when Sullivan introduced Brenn to America, but, as it surely applied to him, it applies today to the movement of goods and those tasked with moving goods effectively and efficiently along multiple supply chains.
In a perfect, ‘normal,’ world, ships loaded with containers come into port, where the ‘cans’ are off-loaded and either stored for a brief period or immediately checked-through the gate and taken to railheads or directly to regional distribution centers. Empty containers or those loaded with goods for export are loaded aboard and carried to their ultimate destinations, thus freeing up terminal space.
Today, though, it’s an entirely different picture as chronic congestion at the nation’s container ports; a shortage of truck drivers, rail cars and terminal equipment; aging infrastructure; ongoing, often acrimonious West Coast labor negotiations; and more headache-inducing issues have caused a perfect storm being weathered by manufacturers, importers, exporters, and, ultimately, consumers across the country.
The situation particularly impacts retailers “coping with inventories that are mismatched to shifting consumer buying patterns, and raises shipping expenses at a time when transportation costs are contributing to decades-high U.S. inflation,” according to one of many studies inked during the current state of affairs.
On the Waterfront
The strain on the nation’s supply chain is enormous as the movement of goods by sea is the leading transportation mode for U.S.-international freight trade with ships moving more than 41 percent of the value—more than $1.8 trillion—and 68.5 percent of the volume—1.6 billion tons—in 2021.
According to Container Trades Statistics, about 25 percent more cargo was shipped from Asia to the U.S. in the first eight months of 2021 compared with the same period in 2019 pre-pandemic, while cargo volumes have largely remained the same between Asia and Europe.
For the past year, ships carrying goods into many major U.S. ports have been relegated to anchoring off-shore, sitting like so many ducks while waiting for a berth at terminals jammed with full and empty containers.
While the actual number of containerships anchored off the neighboring ports of Los Angeles and Long Beach—which, combined, handle some 40 percent of U.S. transpacific trade—has decreased significantly over the past several months, the pendulum has swung to seriously impact transatlantic trade with ports along the U.S. Gulf and East Coasts experiencing a growing backlog of vessels waiting for terminal berths as ocean carriers have diverted vessel calls away from congested West Coast ports.
In July, 64 percent of waiting ships sat off East and Gulf Coast ports with the remaining 36 percent anchored off those on the West Coast, a development that has Gulf and East Coast ports working feverishly to mitigate the problem with one—the Port of Savannah—already seeing positive results.
According to the Georgia Ports Authority (GPA), Savannah’s parent, the port has handled 3.4 million TEUs, some seven percent higher than the same period in 2021 by implementing a number of initiatives to handle the increased traffic, including shifting operations to start two hours earlier to 4 a.m. to better suit drivers’ needs.
The Georgia Port Authority, with support from the Department of Transportation, has also earmarked more than $8 million to establish five pop-up container yards in Georgia and North Carolina. These five yards, accessible by rail and truck, can accommodate more than 500,000 containers over the course of a year or the equivalent of 27 “mega” container ships.
In addition, the GPA has set the goal of growing its annual berth capacity from six million to 7.5 million TEUs by 2023 and to nine million TEUs by 2025 with several infrastructure projects currently underway including adding eight new ship-to-shore container cranes, with four arriving in February and the remaining four in operation by the end of 2023.
The Port says the expansion of the berth capacity by 1.4 million TEUs at the port’s Garden City Terminal is 60 percent complete, while the Garden City Terminal West project will add one million TEUs of container yard capacity in 2023 and 2024.
Port bottlenecks that have tied up U.S. supply chains are spreading from the docks to the country’s freight rail networks, raising costs and adding new shipping complications for importers trying to manage the flow of goods.
Some retailers are waiting weeks to move cargo by train out of Southern California’s ports of Los Angeles and Long Beach, while others are giving up on the railroads and shifting shipments of furniture, apparel and other consumer goods to trucks for long inland journeys on highways.
The backups stretch to major freight hubs including the key transit point at Chicago, freight executives say, where containers have been piling up at rail yards.
The congestion led BNSF Railway Co., one of the main rail operators connecting the U.S. West Coast to inland points, to limit the number of boxes the railroad will carry out of the Southern California port complex.
Foreign Trade Zones
Despite the chronic congestion at the nation’s deep water ports, Foreign-Trade Zones have continued to serve as an effective trade tool for U.S. companies, and remain a key player in the U.S. manufacturing and logistics operations that rely on countless, multi-faceted global supply chains to remain competitive.
Benefits of participation include import duty and tariff savings, as the customs duties on imported goods entering the FTZ can be waived until the cargo is exported. No duty is paid if the merchandise is shipped overseas directly from the zone.
Permissible activities in an FTZ include the assembly, inspection, sampling, testing, marking, labeling, and repackaging of various commodities, and, for example the processing of products such as the bottling of alcoholic beverages or the drying and bleaching of tallow.
Currently, more than 3,300 companies currently maintain operations at the nation’s 195 active FTZs and sub-zones. Foreign-status merchandise received into FTZs in 2019—the latest year for which data is available— remained at 11.2 percent of all U.S. imports of foreign goods, while the value of goods exported directly from U.S. zones totaled $111 billion—6.7 percent of total U.S. merchandise exports.
One example of a Foreign Trade Zone weathering the current storm is FTZ 84, one of the largest Foreign Trade Zones in the country.
Operated by the Port of Houston—which handles about 69 percent of the U.S. Gulf’s annual container cargo volume—FTZ 84 encompasses 70 separate sites on 1,191 acres in Harris County, as well as neighboring Fort Bend and Brazos counties, all of which encompass most of the Greater Houston metropolitan area.
An eclectic blend of companies currently maintain operations at FTZ 84 including Kuehne & Nagel, Toshiba International, Bauer Equipment America, Mitsubishi Caterpillar Forklift America, Geodis USA, ExxonMobil, and Crane Worldwide Logistics.
“The effects of the pandemic are somewhat behind us, however, we’re continuing to see the zone vastly utilized for duty deferral due to an increased need for storage,” says Rina Lawrence, economic development manager for the Port of Houston and administrator of its FTZ 84.
In light of the ongoing issue of port congestion, she says, “Companies need to secure additional storage and warehousing to alleviate the bottleneck issues and we’ve heard from a lot of companies that want to utilize the FTZ to do that. We’ve recently seen how FTZs have played a crucial role in alleviating the issue of making duty payments when merchandise is being stored and unable to move,” adds Lawrence.
“FTZ 84’s service area has provided relief for companies looking to store excess merchandise due to unforeseen challenges. The use of available activated FTZ space has alleviated companies’ cash-flow challenges by deferring the payment of duties and other fees.”
Alternatives and Solutions
While the situation at the nation’s deep-water container ports is easing somewhat, shippers are looking for alternatives to move cargo that needs to reach consignees sooner than later.
Some are seeing the ports that dot the shoreline of the Great Lakes—the five connected bodies of freshwater that connect the U.S. Midwest with the Atlantic Ocean and the world—as offering an alternative to relieve the congestion at the nation’s deep-water coastal port complexes.
The Port of Cleveland, Ohio, for example, currently moves only about 10,000 TEUs (20-foot equivalent units) annually, but, port officials say, its facilities could potentially handle as many as 100,000 ‘cans’ a year.
Located on Lake Erie and long-established as an agricultural and bulk commodities port—the port has expanded its vision to attract ‘box’ cargoes and, it says, provide “strategic advantages for partners through ease of access, ample capacity and lack of congestion allowing them to save up to 10 days on door-to-door transit via the St. Lawrence Seaway compared to coastal port routings.”
The gambit appears to be paying off. Last year, the port experienced a revival with its total tonnage volume increasing by 69 percent from 2020. Tonnage figures for April, 2022, were almost double that of the same month in 2021.
According to one report, last November, one ship calling at Cleveland last November had sailed from Shanghai to Cleveland to avoid terminal congestion and expensive days at anchor at ports on the country’s three deep-water coasts, while, in August, a Dutch shipping company added an additional vessel to its regular Antwerp-Cleveland route to meet growing demand.
Cleveland is also working with a Texas-based motor carrier to truck cargo the 1,000 miles from the Gulf of Mexico up to Lake Erie and then on to consignees in Europe.
The Port of Duluth-Superior, the largest on the Great Lakes, has also become a player as the port, six hundred and thirty miles northwest of Cleveland, saw its first overseas shipment of containers—200 containers of bagged kidney beans destined for Italy, France, Germany and Hungary—sail in late May.
The downside to the Great Lakes alternative, though, is inescapable, and well may make the bloom on the Great Lake’s rose a temporary one.
The fact is that the five lakes are not open year-round because they, and the 15 locks along the St. Lawrence Seaway, are essentially frozen over during the winter months. In addition, the locks can only handle vessels that are no wider than 78 feet, a reality that severely limits the size of the ships capable of transiting the waterway.
However, an ‘alternative’ alternative is being considered that could mitigate that downside—namely a feeder service with smaller vessels based on a successful container shuttle service that started in mid-2021 linking the Canadian Port of Montreal with Hamilton, Ontario.
The U.S. Department of Transportation’s Supply Chain Assessment Report, published in February, 2022, outlined several proposed solutions detailing ways to alleviate the ongoing congestion at U.S. container ports, as well as ways to prevent a recurrence of the current situation.
Highlights of the report include “achieving commitments from the Ports of Los Angeles and Long Beach—which handle 40 percent of our country’s containerized imports—labor, and our largest retailers to move toward a 24/7 supply chain system to unlock bottlenecks.”
The response, so far, has been positive as toolmaker Stanley Black & Decker has committed to moving 33 percent of its Los Angeles and Long Beach cargo during the off-peak hours while clothing retailer Gap Inc. has committed to a 15 percent increase. Retail giant Walmart, as well as FedEx and UPS will reportedly follow suit in late 2022.
Also proposed is a reduction in the number of “long-dwelling containers” at the Ports of Los Angeles and Long Beach by 65 percent through a new fee on ocean carriers leaving import containers at the ports for too long.
The U.S. Department of Agriculture and the Port of Oakland are developing a 25-acre ‘pop-up’ container yard to help reduce congestion caused by empty containers and make it easier for agricultural exporters to move their products to market.
In addition to paying 60 percent of the cost to start up the new container yard, the DOA is providing shippers that use the yard a $125-per-container subsidy to offset the logistical costs of getting the containers there.
In 2021, the Port of Savannah, Georgia, worked with the Federal Government to fund several “pop-up” inland port facilities to relieve congestion and more quickly unload vessels, and a similar partnership with USDA was created in March at the Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, with subsidies to shippers of $200-$400 per container.
The U.S. Department of Transportation is currently evaluating how to further engage short line railroads in development of those sites.