Freight Forward: Be Prepared

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through JOC.com articles and additional sources and also what to expect for the week ahead.

Just in case you’re wondering, I’m Cathy Roberson, a supply chain writer, and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

Last Friday the contract between ILWU workers and the Pacific Maritime Association (PMA) expired including the contract’s “no strike” clause. As a result, 22,400 dockworkers will be able to walk off the job at any time until a new contract is ratified.

However, the two sides issued a statement just hours before the contract expired:

“While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached between the Pacific Maritime Association and the International Longshore & Warehouse Union,” the statement read. “Both sides understand the strategic importance of the ports to the local, regional, and US economies, and are mindful of the need to finalize a new coastwide contract as soon as possible to ensure continuing confidence in the West Coast.”

Still, the National Retail Federation sent a letter to President Joe Biden, co-signed by 150 other trade associations, calling for the expiring contract to be extended, thereby keeping in place a no-strike/no-lockout clause as well as the grievance procedure that allows arbitrators to issue spot rulings on disputes.

“We appreciate that the administration, including the President, has been in constant communication with the parties,” wrote Jon Gold, vice president, supply chain and customs policy at the National Retail Federation. “However, without a contract in place, there remains concerned about potential disruptions.”

In a WSJ opinion article, Peter Tirschwell wrote that an actual strike isn’t probable but instead, local labor disruptions are a possibility. Tirschwell notes that while there was no strike at West Coast ports in 2014 and 2015 when the contract was last up for negotiation, there were nearly six months of labor disruption, leading to billions of dollars in losses for agricultural exporters. Local units of the ILWU disrupted individual ports over local grievances they felt weren’t being addressed in the negotiations.

According to Tirschwell, port employees’ main tactic, which they’ve employed since the 1990s, was to work “to the letter of the contract,” loading and moving containers very slowly. It’s not possible to stop a dockworker from driving equipment at a snail’s pace, and it can severely disrupt cargo flow. Because such disruptions originate at a local level, it’s hard for the union’s leadership to maintain control.

Another concern facing the US West Coast is the AB5 worker classification law. Last week's US Supreme Court decision allowing California’s Assembly Bill 5 (AB5) worker classification law to take effect after three years of appeals could force 70,000 independent contractor drivers to change their operating model according to the California Trucking Association.

But the law is not expected to disrupt port and trucking operations during the upcoming peak-shipping season, truckers in the state say.

Despite uncertainties as to how the implementation of AB5 will play out, the key message for shippers is that truck capacity in three of the top seven US container ports will not suddenly dry up with the peak-shipping season at hand, trucking executives said.

“It’s hard to say what will happen next. We’re in the process of trying to find out how many drivers will be affected,” said Matt Schrap, CEO of the Harbor Trucking Association, which has member companies in Southern and Northern California.

Trucking companies have just seven days to begin to comply with the regulation that ends the independent contractor (owner-operator) model that dominates harbor trucking at the ports of Los Angeles, Long Beach, and Oakland. However, actual enforcement of AB5 will take some time to unfold, truckers and legal observers said.

Further inland, more than 2,000 ocean containers are clogging BNSF Railway’s terminal outside Dallas–Fort Worth amid a chassis shortage that is likely to continue for at least another few weeks. Stakeholders say the shortage stems from equipment that was shifted from Dallas to Houston in recent months amid an import uptick in the latter, and cargo owners taking too long to unload containers sitting on chassis.

Chassis providers DCLI and TRAC Intermodal say the average chassis dwell in Dallas–Fort Worth exceeds seven days, up more than 30% compared with three months ago and nearly double pre-pandemic levels.

Meanwhile, the Port of Jacksonville looks to recapture Asian imports by aiming to handle two post-Panamax ships simultaneously after dredging the port’s main ship channel, rehabilitating berth space, and adding new cranes at one of its two main terminals, the port’s chief said.

PIERS data shows that since 2018, Jaxport’s Asia volume went from 199,825 TEU to 135,958 TEU in the calendar year 2021, an average annual decline of 12%. Over the same period, Asian imports to all of the US have grown at an average annual rate of 4.6% to reach 18.8 million TEU in 2021, PIERS data shows. The decline in Jaxport’s Asia business accelerated after Ocean Alliance stopped calls on its trans-Pacific service into the port in 2019.

An additional 6 million square feet of warehouse space is expected to be built in the Jacksonville region over the next two years, on top of 144 million square feet of existing distribution space according to Jaxport Chief Executive Eric Green.

“We have the ability to reach 100 million consumers within a 24-hour truck drive and have significant rail service,” Green said.

Among those with an existing presence near the Jacksonville port are Wayfair, Margo Home Products, Article Furniture, Carparts.com, and 1A Auto. Green said the ability to handle larger vessels at Jaxport will allow those and other shippers to grow their Asia volumes over time.

Also last week was FedEx's investors' conference. The carrier outlined its new long-term strategy which includes consolidating portions of its network and promoting more collaboration between its shipping segments.

Max Garland writes in a good Supply Chain Dive article that by the fiscal year 2027, FedEx expects to operate 100 fewer stations, eliminate more than 10% of pickup and delivery routes overall and reduce millions of linehaul miles driven. FedEx expects the more efficient use of its separate networks will provide it with a $2 billion financial benefit each year.

In addition, I wrote in an Air Cargo World article that FedEx will also introduce dynamic pricing beginning with its peak surcharge in August “to manage customers in an automated way if [customers] are not hitting the requirements that they are giving us,” said FedEx Executive Vice President and Chief Customer Officer Brie Carere, who also serves as co-president and co-CEO of FedEx Services.  

While much of the focus has been on US imports, US exports have suffered. US farmers have lost an estimated $25 billion in agricultural exports in the past six months because of exporting issues, according to Zippy Duvall, president of the American Farm Bureau. The American Port Access Privileges Act is meant to jump-start US exports, particularly agricultural goods, according to Representatives John Garamendi and Jim Costa, two California Democrats who co-sponsored the bill.

According to the bill, ocean carriers would receive “preferential berthing” at US ports in exchange for calling multiple ports in the country or agreeing to carry “significant” volumes of exports under legislation introduced in the House of Representatives.

“This new preferential berthing will reward ocean carriers that serve both importers and American exporters by moving those vessels to the front of the queue for unloading and loading,” the statement said. “It will similarly incentivize ocean carriers to make second-leg voyages to ports like the Port of Oakland, which is critical for California’s agricultural exporters.”

Further north, a lack of drayage capacity in Toronto and Montreal for receiving cargo from Prince Rupert and Vancouver is increasingly putting upstream pressure on the West Coast ports, keeping rail dwells elevated at marine terminals and slowing the inland movement of Asian imports.

“Rail dwell is challenging across the port due to capacity constraints in the network and inland terminals, and this is not isolated to terminals within the Port of Vancouver,” GCT Canada, which operates the Deltaport and Vanterm terminals in Vancouver, told JOC.com in a statement.

Meanwhile, the congestion at rail hubs in eastern Canada is a direct result of drayage capacity shortages at those facilities. “It’s an ongoing situation with both railroads (Canadian Pacific and Canadian National),” said Julia Kuzeljevich, public affairs manager at the Canadian International Freight Forwarders Association (CIFFA).

“There are fewer drivers in Toronto to handle the volume, creating a backlog/congestion issue. On a YTD basis, total truck visits declined by 18.5%,” CIFFA said in a bulletin to its membership. CIFFA noted that the drayage problem, which first surfaced in Toronto in May, has extended to Montreal.

As a result of the congestion at their inland facilities, the railroads are metering, or managing how many trains they are deploying to Vancouver and Prince Rupert. This is causing rail containers to back up at the marine terminals because of reduced train capacity. However, the situation at marine terminals is fluid, with rail dwells changing from day to day.

And in Europe, transportation networks face strike actions due to workers' demand for wage increases. Over the past couple of weeks, several 24-hour “warning strikes” by ver.di were held at ports across northern Germany, while a one-day national strike in Belgium closed Brussels airport and created some disruption at the port of Antwerp. A national rail strike in the UK shut down most of the network all last week, and strike action has been announced in Italy, Spain, Portugal, France, and Malta.

“We are expecting a very hot summer for transport all over Europe,” Livia Spera, general secretary of the European Transport Workers’ Federation (ETF), wrote in a letter to European Union transport ministers last week.

The ETF, which represents more than 5 million transport workers from 200 transport unions and 38 European countries, said workers were losing faith in the transport industry amid job and pay cuts coupled with rising inflation.

“Working conditions in transport have deteriorated so much that the sector is simply not attractive enough to workers,” Spera told EU ministers. “The COVID-19 crisis has meant severe job losses and pay cuts for some groups of transport workers, but the recovery is not bringing anything good for them.

“Transport workers’ income and purchasing power have significantly dropped through a combination of rising inflation and a lowering of pay and working conditions, pushing workers away from our sectors,” she added.

Economic Outlook

• Wednesday, July 6 - S&P Global US Services PMI. Little, if any change is expected.
• Thursday, July 7 - US Foreign Trade Balance. The goods and services deficit was $87.1 billion in April, down $20.6 billion from $107.7 billion in March. MarketWatch expects the May deficit to be down $84.9 billion.
• Friday, July 8 - US Unemployment Rate. The June unemployment rate is expected to remain the same at 3.6%.

That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.

What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

In the meantime, here’s hoping everyone has a good freight week ahead!

-Cathy