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Port Bottlenecks Snarl Imports Flowing in for Holiday

Call it coronavirus clutter.

Among all the “not normal” aspects of society and business that have resulted from the pandemic, a glut of imported merchandise headed to traditional and online merchants ahead of the holiday season has created a bottleneck at major U.S. ports.

“A challenging spring was followed by a rapid increase in global demand,” John Gilmore, director of Eastern region sales at Ocean Network Express (ONE), said on a webinar for the Apparel Importers Trade & Transportation Conference. “Depleted inventory from the initial halt to production and increased consumer demand has rebounded major dominant trade legs. Increased ad-hoc sailings, rates at unprecedented levels and charter rates are at their highest since 2011.”

Gilmore said there are potential hurdles to come, including port labor and ocean crew issues, especially during the holiday period. Equipment shortages to meet the surging demand have the potential to be problematic, as does intermodal rail and truck congestion and availability. In addition, warehouses are said to be at capacity, he noted.

A coalition of trade organizations, including the American Apparel & Footwear Association, National Retail Federation (NRF) and Footwear Distributor & Retailers of American, wrote a letter this week to the Federal Maritime Commission (FMC) urging it to “explore all available powers and authority to immediately suspend detention and demurrage charges, which are being unfairly and unreasonably assessed in the Ports of Los Angeles and Long Beach, as well as the Port of New York & New Jersey by ocean carriers and marine terminals.”

The group said its members have collectively paid more than $150 million in charges this year in the twin Southern California ports and the port of New York & New Jersey due to the “massive congestion created by record setting volumes, coupled with a shortage of both skilled labor and available chassis.”

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In Southern California, the “Pool of Pools” chassis agreement has been massively oversubscribed, the coalition said. leading to the biggest chassis shortage in the history of the San Pedro Bay port complex. Despite efforts by the shipping and trucking industry to promote more dual-transactions to allow chassis to be recycled during the pick-up and drop-off of containers, the ocean carriers have refused to provide advanced notification of empty receiving locations to allow truckers and marine terminals to partner on increasing dual-transactions throughout the port complex.

Chassis shortages have also reached critical mass at the Port of NY & NJ, where dwell times have nearly tripled in recent weeks, the letter said.

“The trucking community servicing the San Pedro Bay ports are working diligently to maintain cargo fluidity, however through no fault of the truckers or their customers, the hurdles to do so have become insurmountable and there looks to be no consideration or reprieve from the detention and demurrage charges that shippers and truckers cannot avoid,” the coalition wrote.

“In the short term, we again ask for a suspension of these unreasonable detention and demurrage charges in the Ports of Los Angeles, Long Beach, and New York & New Jersey due to current conditions and the lack of adoption of the FMC interpretive rule guidelines, which would have helped mitigate these issues,” the group added. “We would further ask that the commission review and disallow carriers from filing or collecting any surcharges for congestion, trucking or equipment for moving in and through these ports until they have made a constructive action to remedy the problems.”

The most recent Global Port Tracker report, produced by the NRF and Hackett Associates, revealed that cargo imports experienced their busiest “peak season” on record this summer and fall, as retailers replenished inventories and stocked up for the holiday season.

“Peak season is the Super Bowl of the supply chain world each year, as retailers make sure they have enough merchandise on hand to satisfy demand during the holidays and this is the busiest we’ve ever seen,” Jonathan Gold, vice president for supply chain and customs policy at NRF, said. “Part of this surge was fueled by restocking after retail sales rebounded this summer and part could be making sure there aren’t shortages if we see panic buying again.”

Some retailer and brands have reported port delays and congestion that are making them rethink shipping schedules.

“In terms of…disruptions at the port, you would think disruption for us equals supply,” Ross Stores CEO Barbara Rentler said on a conference call with analysts. “So, what goes on in the first quarter, depending on how long the ports are jammed up, we might wind up even getting some spring supply earlier.”

Tim Boyle, chairman, president and CEO of Columbia Sportswear, which gets most of its goods from Asia, said amid good early season wholesale sell-through and continued momentum in e-commerce, issues such as port congestion, logistics and partial shipping capacity constraints are straining fulfillment service levels industrywide.

“We’re working closely with our third-party logistics providers and our customers in an effort to mitigate these risks,” Boyle said.

Ernie Hermann, president and CEO of TJX Cos, added, “We continued to experience merchandise delivery delays due to continued bottlenecks in the supply chain.”

U.S. ports covered by Global Port Tracker handled an estimated 8.1 million 20-Foot Equivalent Units (TEUs) from July through October, the peak shipping season when retailers rush to bring in merchandise for the winter holidays each year. That represents an increase of 6.1 percent over last year and beats the previous record of 7.7 million TEU set in 2018.

The peak season record includes a record 2.11 million TEU imported in September, a 12.5 percent year-over-year increase. October imports were estimated at 2 million TEU, up 6.5 percent year-over-year and the fourth-highest month on record. With most holiday merchandise already in the country, November was forecast to be down 0.2 percent to 1.7 million TEU.

The Port of Los Angeles processed 980,729 TEUs in October, an increase of 27.3 percent compared to October 2019 and eclipsing the previous record of 961,833 set in August. Propelled by replenishment of inventories and retailers preparing for upcoming holidays, October marked the busiest month in the port’s 114-year history.

“With COVID-19 cases on the rise nationwide, the U.S. economic outlook remains uncertain,” Port of Los Angeles executive director Gene Seroka said. “Volume swings like the one we are seeing are an outgrowth of this uncertainty.”

The Port of Oakland reported October imports grew 10.4 percent compared to a year earlier. The port said total TEUs for October were 216,686, up 5.8 percent compared to October 2019.

The port attributed the jump in imports to the pandemic changing consumer spending habits. In turn, this is causing retailers to continue stocking up fearing a second wave of factory shutdowns.

“We’re cautiously optimistic because our industry partners are pointing to continued strong import demand heading into 2021,” Port of Oakland maritime director Bryan Brandes said.