With dozens of ships waiting to dock and marine terminals running out of space, the Ports of Los Angeles and Long Beach announced Monday they will soon fine ocean carriers for lingering import containers. Yeezy, meanwhile, is the subject of a new lawsuit over its own shipping shortcomings.
Set to go into effect Monday, the new carrier fees will kick in after nine days if the container is scheduled to move by truck and after three if it is arranged to depart by rail. According to Gene Seroka, executive director of the Port of Los Angeles, approximately 40 percent of the containers on the ports’ terminals today fall into these two categories.
Prior to the pandemic-induced import surge that began in mid-2020, containers for local delivery sat on container terminals for less than four days on average, the Ports of Los Angeles and Long Beach said. Those destined for trains, meanwhile, dwelled less than two days.
“We must expedite the movement of cargo through the ports to work down the number of ships at anchor,” Seroka said in a statement. “If we can clear this idling cargo, we’ll have much more space on our terminals to accept empties, handle exports and improve fluidity for the wide range of cargo owners who utilize our ports.”
The new rule will begin with a $100 charge per container and increase in $100 increments per container per day. The ports—accused earlier this month of employing “lazy” crane operators— said they will re-invest the funds these fees raise into programs designed to “enhance efficiency, accelerate cargo velocity and address congestion impacts throughout the San Pedro Bay.”
“With the escalating backlog of ships off the coast, we must take immediate action to prompt the rapid removal of containers from our marine terminals,” Port of Long Beach executive director Mario Cordero said in a statement. “The terminals are running out of space, and this will make room for the containers sitting on those ships at anchor.”
Like the ports’ shift to 24/7 operations, the new policy was developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force. The U.S. Department of Transportation and “multiple supply chain stakeholders” were also involved in creating the surcharge. John D. Porcari, the task force’s port envoy since August, voiced his support for the new fees.
“As our economy continues to grow, increased demand and disruptions caused by the pandemic are putting our supply chains to the test,” Porcari said in a statement. “While we’ve seen new records set in terms of throughput this year at West Coast ports, we need more players throughout the supply chain to keep stepping up. The federal government will continue to bring together private companies and stakeholders from across the supply chain and serve as an honest broker helping to surface solutions like this to address supply chain disruptions.”
Those not involved in crafting the policy, meanwhile, have expressed less enthusiasm. Jon Gold, the National Retail Federation’s vice president of supply chain and customs policy, said he appreciated the ports’ efforts to address ongoing congestion troubles, but noted that other problems remain.
“Key issues such as chassis availability and empty container returns still need to be addressed,” Gold said. “We encourage ocean carriers to continue to work with importers and truckers to move cargo as quickly as possible and not just pass along the cost of the fee, which will further exacerbate the problems.”
Gold is not alone in his concern over who might ultimately end up paying for the added costs. Steve Lamar, president and CEO of the American Apparel & Footwear Association, said he doesn’t believe the new surcharges “make any significant progress to resolve the urgent supply chain crisis.”
“Carriers may simply see this as another opportunity to pass this along to shippers on top of already massive freight costs,” Lamar said. “AAFA continues to call for leadership by the Biden administration to urgently bring all stakeholders together to end this destructive cycle that is fueling inflation and causing epic goods shortages.”
Nimesh Modi, CEO of BookYourCargo, a digital drayage optimization provider, was also skeptical the fines would solve the congestion plaguing the ports and, like Gold, pointed to other issues that the solution leaves unaddressed.
“The fines won’t help the systemic problems at the ports, which is the shortage of chassis and lack of drivers to move the containers out of dwell,” Modi said. “More than likely, the cost of paying these fines will be passed from the ocean shippers to the importers, which will then be likely passed on to consumers.”
Johannes Schlingmeier, co-founder and CEO of the logistics company Container xChange, echoed Modi’s concerns, noting that the ports’ charges are unlikely to increase trucking supply.
“What we foresee resulting from this decision is an added burden passed on to the shippers from the ocean carriers who are the customers of the carriers,” Schlingmeier said. “Hence, there will be limited impact of this measure on the improvement of cargo movement and congestion at the LA and LB ports if we look at it in isolation.”
According to Container xChange’s data, the average demurrage and detention charge doubled across the world’s 20 biggest ports from 2020 to 2021. In Los Angeles, the charge has climbed 42 percent, with carriers like CMA CGM and Maersk seeing the greatest increases—167 percent and 161 percent, respectively.
Though the pandemic is certainly the impetus for much of what is producing the West Coast’s ongoing congestion problems, it appears long-standing productivity issues are exacerbating the issue. According to IHS Markit, Asian ports can load or unload a container more than twice as fast as their North American counterparts, taking an average of 27 seconds compared to 76 seconds on large call sizes. Everstream data showed that vessels waiting at the Ports of Los Angeles and Long Beach idled for 12-13 days on average last month. China’s Yantian and Ningbo ports, meanwhile, had an average waiting time of only three days.
The same day the Port of Los Angeles announced it was shifting to a 24/7 schedule, the Biden administration hosted talks between government, business and labor leaders to discuss additional solutions to alleviate congestion and improve efficiency. According to a White House readout, these potential solutions included a temporary expansion of warehousing and rail service, improving data tools and data sharing at the ports, and increasing both recruitment of truck drivers while improving the quality of trucking jobs.
Faced with delays on the West Coast, companies like Crocs have begun looking to the East Coast as a potential alternative. In May, Maersk Inc. North America announced it would start a new service linking Vietnam and China to ports in Savannah, Ga., Charleston, S.C., and Newark, N.J. In recent days, Florida Gov. Ron DeSantis has repeatedly pitched his state as a potential alternative to those facing delays out West. However, Florida ports might be limited in their ability to assist.
Glenn Koepke, SVP of customer success at Chicago-based supply-chain visibility company FourKites, previously told Sourcing Journal that “no port system can take on the volume of L.A.-Long Beach.” Few if any U.S. ports can handle vessels the size of those that call in the nation’s busiest marine gateway, he said.
Yeezy sued for delays
Though businesses everywhere are wrestling with the consequences of global supply chain disruptions, one company in particular is facing legal trouble for its response.
On Friday, the state of California filed a lawsuit in Los Angeles County Superior Court alleging Yeezy—the popular apparel and sneaker brand from Ye, the artist formerly known as Kanye West—violated a statute requiring items shipped over the internet be delivered within 30 days. Should shipment exceed 30 days, state law requires vendors either provide a refund, send equivalent or superior replacement goods or issue a delay notice—actions the suit claims Yeezy did not take.
The complaint also alleged Yeezy Apparel and Yeezy made untrue or misleading statements regarding their ability to “ship products within a certain timeframe, particularly where customers paid an additional charge for expedited shipping.” The district attorneys that have brought the suit are seeking fines of as much as $2,500 per violation, along with restitution for customers.
The California lawsuit comes as Yeezy faces a legal fight from Walmart. The ongoing spat began in April, when the mega retailer formally objected to a Yeezy trademark application. Two months later, the 22-time Grammy winner and former presidential candidate hit back with an “unfair competition” lawsuit. Walmart, the suit alleged, was selling a “cheap knock-off” of the popular Yeezy Foam Runner clog. Late last month, the nation’s biggest brick-and-mortar retailer filed a notice of demurrer—a legal move that alerts the “Donda” hitmaker that it will challenge the basic legitimacy of his complaint “on the grounds that it is fatally uncertain.”