Chairman Cordero’s Remarks American Apparel & Footwear Association’s 13th Annual International Sourcing, Customs, & Logistics Integration Conference
Good afternoon. I am very pleased to be here at the AAFA’s Annual Conference. I realize that you have experienced the burdens of congestion at U.S. ports all too closely, as your industry imports approximately 97 percent of all clothing and 98 percent of all footwear sold in U.S. markets. And 50 percent of those totals entered the U.S. via the Ports of Los Angeles and Long Beach. Nonetheless, because of the continuing importance of the topic, I will focus my remarks on congestion at ports in the United States.
I think most of us would agree that the tentative agreement with respect to the labor negotiations at West Coast ports is a welcome development. The agreement does not eliminate the impact of congestion on AAFA members and other importers, exporters, carriers, terminals and international supply chains, but it has helped accelerate cargo movements.
The world’s container port volume is twice as large today as it was 10 years ago. Container throughput at U.S. ports reached 31 million TEUs in 2014, with contents valued at almost a trillion dollars. That volume will only increase over time.
Correspondingly the world’s containership fleet also keeps growing, with the size of each vessel in the major trade lanes increasing steadily. Vessels capable of carrying approximately 14,500 TEUs call at the Ports of Los Angeles and Long Beach and discharge thousands of containers with each call. Sometimes the number of TEUs discharged exceed more than half of their capacity.
Larger vessels offer less costly and more efficient transportation, however, the discharge of thousands of containers at one time presents serious challenges to terminal operators and drayage truckers to try to keep pace. The effects of container surges produced by the use of ultra-large vessels, unfortunately, have been exacerbated by chassis unavailability, trucker shortages, and lack of adequate investment in port-related infrastructure. In short, even with a new labor contract in place on the West Coast, America still needs to address mid-term and longer-term congestion issues or face substantial reductions in our ability to compete effectively in the global economy.
For these reasons, one of the top priorities for the Commission in 2015 is addressing port congestion and to that end, my fellow Commissioners and I hosted four regional forums around the country last fall to begin a dialog with our stakeholders, including public port authorities, terminal operators, trucking companies, railroads and maritime labor. As a result we learned more about the varied causes of congestion. The forums pointed up the need for port stakeholders to work together to develop efficient and sustainable ways to address congestion concerns.
The Commission is internally studying the causes and effects of congestion based in part on the comments provided by stakeholders at the congestion forums held last fall, and feedback we have received since that time. As some of the AAFA members may know too well, there are many beneficial cargo oweners and their trucking companies that have had to pay demurrage and detention charges even when they are prevented from picking up their containers or returning empty containers.
In response to the volume of these complaints, the staff was instructed a few weeks ago to prepare a report on demurrage and detention rules, rates and practices. And, just yesterday, at the Commission’s April meeting, the Commissioners received a briefing from staff on the report they prepared. I am happy to say that the Commission decided yesterday to release the report to the public. The report is informative and I invite all of you to take a look. I did not bring copies of the 64 page report with me but it is easily downloaded from the Commission’s homepage. The Commission will have the opportunity to consider what further steps, if any, it will take on those and other congestion issues.
The Commission has heard complaints from all sectors of the container transportation supply chain. In fact, I met with your President & CEO Juanita Duggan a couple of weeks ago at which time she informed me of the types of problems experienced by many of AAFA’s members. It is clear that terminal congestion at U.S. ports severely affects businesses, their employees, and their customers in cities and towns all across America.
It is self-evident that even the country’s biggest ports capable of handling the world’s largest vessels are only as efficient as the least productive link in the landside infrastructure on which they depend. Without the transportation infrastructure necessary to move cargo swiftly off dock and to its destination, whether by truck, rail, or barge, more cargo on larger ships will lead to more congestion. In the near term, however, it appears that solutions to some of the causes of congestion will have to come through the joint efforts of stakeholders to produce efficiencies with resources they have pending infrastructure funding.
So what can the Commission, as a regulatory agency, do to help resolve congestion issues? The Commission has encouraged broad-based stakeholder collaboration locally and regionally. In recent weeks, the Commission permitted an amendment to the cooperative working agreement between the Ports of Long Beach and Los Angeles to become effective much earlier than it would have otherwise. The amended Agreement will help the Ports and stakeholders address some of the many causes of port congestion, including coordinating the arrival of large vessels, addressing issues of chassis availability, coordinating programs to reduce truck congestion, and working with railroads to increase efficiency in getting containerized cargo to and from America’s heartland.
Beyond today’s terminal congestion problems, the long-term competitiveness of America’s ports depends on adequate and, unfortunately, long overdue investment in port-related infrastructure. Funding sources need to be identified and activated. To this end the Administration has included a six-year $478 billion surface transportation reauthorization proposal, which is known as the Grow America Act, in its 2016 budget. Out of that $478 billion, a total of $7 billion will be made available over six years for transportation projects across the country under the highly successful Transportation Investment Generating Economic Recovery (TIGER) competitive grant program.
For each of the six years through 2021, $1.25 billion is allocated. This amount is $750 million greater than the $500 million enacted for 2015. While the TIGER grant program is better funded, it does not meet the funding needs that our port infrastructure requires. However, the TIGER grant program can serve as a model for a program dedicated to port infrastructure projects. Projects that will help accelerate cargo movement and allow our ports to put congestion problems behind them.
Ocean commerce represents a vital pathway to America’s economic growth, a path that runs through America’s ports to the landside transportation systems on which American businesses, exporters and consumers depend. Ports are key international commerce centers that need our full policy and funding attention. Trade begins at the ports! Today’s national decisions regarding infrastructure investments – or the absence of such decisions — will directly impact America’s ability to compete in a global economy for years to come. The Commission is committed to facilitating and encouraging broad-based cooperative efforts to keep America’s public port system strong and efficient. This strength and efficiency should translate to greater service and reduced costs to both our import and export communities.