August 22, 2021 at 04:20PMEben Shapiro
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“All I see are ships,” said Gene Seroka, executive director of the Port of Los Angeles, the busiest port in America, gazing out of his office window recently toward the Pacific Ocean.
The pandemic has wreaked havoc across the global supply chain, and the evidence is stacking up high in the world’s overcrowded ports. Normally, pre-COVID-19, ships could steam directly into ports in L.A. and Long Beach with no waiting. But, as of Aug. 18, there were 32 vessels waiting at sea for a spot to unload at one of the two ports.
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The congestion is largely due to the tremendous volume of traffic coming from ocean carriers to satisfy the intense demand for imports. The Port of Los Angeles just completed its busiest June ever, reporting a 27% increase in unit shipments. For the first six months of 2021, cargo volume at the port increased by 44% compared to 2020. Prices are soaring, and the Federal Maritime Commission recently launched an investigation into price gouging. Industry experts estimate that 99.5% of all available ships in the world are deployed right now.
The delays have been exacerbated this summer by COVID-related shutdowns at shipping facilities and a host of climate-change impacts (including wildfires that have slowed rail traffic in Canada and floods that hampered barge movement in Europe). In the U.S., the world’s largest economy, overflowing warehouses are also understaffed during a labor shortage. There aren’t enough long-haul truck drivers either, and earlier this summer, several major railroads announced they were hitting pause for a week on new pickups because they had railroad cars backed up for miles in the Midwest. (For a vivid and delightful example of the impact of supply-chain delays on one product, read my colleague Alana Semuels’ piece on ordering a stuffed giraffe for her son.)
Seroka joined TIME on Aug. 11 for a video conversation on what it will take to ease the supply-line congestion, the state of cybersecurity and the cargo that unexpectedly set off an alarm. The interview has been condensed and edited for clarity.
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In a speech last week, President Biden said the Administration was “tracking congestion” at the Port of Los Angeles. Did you watch the President’s comments on the port, and what was your reaction?
I watched it three times. It’s positive. To get that kind of attention from the nation’s Chief Executive and the people he has put on the case is just awesome.
What can the federal government do to help alleviate the congestion?
If you get a call from the Secretary of Transportation, you’re probably going to pick up the phone, and then you’re going to attend the meeting. They have strong convening powers to bring all of these massive stakeholders together.
I understand that your view is that some of these supply-chain issues predated the pandemic and were brought on by the Trump trade wars and tariffs. What was the impact on supply-chain dynamics?
Those policies hurt the American exporter and primarily the American farmer, because China then instituted retaliatory tariffs on our exports.
We got beat to the punch by every other trading nation. Brazil knocked us out of the game on soybeans, as an example. So here at the Port of Los Angeles, our export market is down now 28 of the last 32 months.
How has this trade imbalance affected the business?
In our industry, a lot of the focus is on round-trip economics, meaning I want to bring in as much as I push out on the export side. Now what we’ve seen with the surge in imports is that it is a 5:1 ratio: five imports that come in for every one export. So that means that our biggest export is air.
We’re exporting empty containers back to Asia so they can be pre-positioned at the factories to bring the next round of imports here to the U.S. That’s not efficient, because you don’t get revenue from air, right? The railroad companies, the trucking companies, the forwarder and broker community are spending a lot of time repositioning those empty boxes with very little return.
What kind of issues are the delays causing for your customers?
The key word for this surge has been uncertainty. I’m not sure if my products are going to be on the shelf. I’m not sure how long they’re going to take to get to me if I buy online. I’m not sure that I know when the cargo is going to get off the ship.
What is fundamentally driving this?
It all starts with the American consumer. I’ve never had more stuff in my closet. I’ve never had more sneakers. The output of the manufacturing sector is at its highest recordable levels. They can’t keep up with the orders that are coming in. They’re making as much product as they can. We’re putting it on every available ship, but we need more ships to carry this volume.
Then when it got here, we started to see the railroads get very full, and the warehouses overflowing with inventory because we’re buying so much overseas. We’ve got 2 billion sq. ft. of warehouses, from the shores of the Pacific, out to the Mojave Desert and by car.
Now with COVID-19, the workforce looked a little different too because we can no longer work in teams very close to each other. Some people got sick. Other people were scared to go to work for fear of getting sick. So we didn’t have the necessary labor force on the ground, day in and day out.
On top of that, some of the railroads hit pause.
It amounted to about 15% of our cargo that would pause there for about a seven-to-10 day period. I understood their rationale because they’re facing the same thing. Chicago’s got 50 miles of trains waiting to be unloaded right now. There’s so much cargo coming in, and the importers are not picking up the cargo as quickly as they used to, pre-COVID.
So if the cargo sits longer, the next train comes in, the next ship comes in, and it all starts backing up.
That’s a huge productivity increase regarding how fast you unload a ship. How have you been able to accomplish that? How did the longshoremen accomplish that?
They’re averaging six to seven days of work per week for 18 straight months. They’ve really rallied to the challenge. The workforce, men and women of the International Longshore and Warehouse Union, are the best in the business, and they have the capacity to improve through training time on the job to get higher certifications of skill. And that’s what we’re seeing today, all those hours that the men and women have put in to reach those new markers is paying off for us right now.
What’s the highest skill level?
You start off as an apprentice, or what we call a casual longshore member, and you’re doing just about anything and everything to get on the docks. And then it goes all the way up to the people who run those very tall ship-to-shore cranes that are now over 170 ft. in the air.
That is the highest skill, to be able to put that crane mechanism 170 ft. down to a ship, connect to a container, pick it up and move it onto a truck bed for carriage out of the terminal.
Are you experiencing the same kind of cyberattacks that many businesses have been hit with during the pandemic?
We created the nation’s first cybersecurity operation center at a port, and today it’s stopping 40 million cyber-intrusion attempts per month. It’s double what it was pre-COVID, because the bad guys are out there.
What climate-change impacts are you seeing today, and how are you responding?
It’s huge. Climate change is real. I’ve lived in port cities most of my life. There’s nothing more I would love to see than a zero-emissions port complex, and that’s the goal that L.A. Mayor [Eric] Garcetti and I have today. You still have a lot of work to do.
We’ve reduced diesel particulate matter, the tailpipe exhaust from trucks, by 87% [between 2006 and 2020], and other source categories have come down by large numbers, but we still have to get after greenhouse gases, and we still have to find a way to get to a zero-emissions platform, whether it be battery, electric, hydrogen-fuel cell or other possibilities. We’re testing them now on the ground in Los Angeles.
In December, there was a raid by U.S. Customs officials, working in conjunction with port security, that uncovered a million fake Viagra pills and counterfeit sneakers. How big of a concern is smuggling?
It’s a big issue. We worry about human trafficking, not just goods. We want to make sure that the world is safe from those types of folks who want to do that type of illicit work.
What is the strangest thing that you’re aware of that was found in a shipping container, either licit or illicit?
We did contact and noncontact radiation exams, and we had a series of containers that were pulled aside because they tripped the buttons. Come to find out it was the potassium in the bananas that was setting it off.
Do you get calls from anxious customers trying to track down their shipments?
Every minute. Every day. Every waking hour.
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