Port of L.A. Cargo Slump

Reported as "Los Angeles terminal operators 'in trouble':

Port of Los Angeles executive director Dr Geraldine Knatz has told the Los Angeles Harbor Commission that the port’s terminal operators are now facing a 20-30% drop in volume in the first quarter of 2009 and some terminals may have trouble meeting their minimum rent obligations Some operators have told Dr Knatz that volumes had “cratered” with one terminal down 50% on last year. LA’s biggest customer is Maersk and it has recently moved to pulls ships off the transpacific trade and consolidate some volume in Seattle at LA’s and Tacoma’s expense. Dr Knatz has written to port staff advising them of the need to understand that customers are in “survival mode.” To play its part the port is recommending that the Commission shelve the per TEU infrastructure fee slated to be levied from next January and “modify the clean truck program to lessen the [financial] impact.” Dr Knatz added that this is not the time to borrow for capital investment and projects that generate revenue for tenants must now have top priority. She has issued a hiring and overtime freeze and the port’s audit committee has made an additional US$20M in budget cuts (9% of expenditure) on top of cuts previously made. Some projects under the ports clean air action plan are certain to be delayed or cancelled. Dr Knatz warned: “Times have changed. We embarked on the clean air action plan when times were good and now we are trying to implement it when times are bad.”

Shipping company concerns over cargo security measures

Shipping company concerns over excessive cargo security measures expressed here:

The fear that terrorists might smuggle a nuclear weapon into the United States hidden inside a shipping container has led to "ill-conceived" security measures that fail to grasp the way transportation systems worldwide are interconnected, a senior shipping industry executive said earlier this week.

"This highly efficient supply chain network-of-networks is critically dependent on a transport system that is in perpetual motion," said Stephen Carmel, senior vice president of maritime services at Maersk Line Ltd., a Norfolk, Va.-based transportation services firm. "A stoppage anywhere will propagate effects through the system and quickly become a stoppage everywhere."
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He highlighted the "100 percent scanning requirement" of a recently enacted bill to implement unfilled recommendations of the 9/11 Commission. The White House initially opposed the scanning provision, but President Bush still signed the bill last month. The law requires all U.S.-bound shipping containers to be scanned by radiation detection equipment at foreign ports by 2012.

Critics contend that technology to scan the more than 11 million shipping containers that arrive at U.S. seaports every year is not available. They also say the requirement would result in costly bottlenecks and would unduly burden some nations with ports too small to install the scanners.

"It's a concern because we haven't seen the details," Carmel said. "Done wrong, it would be catastrophic." Any maritime or homeland security strategy that puts a "chink in the supply chain" will do more harm than good, he said.

Today's global economy and business practices such as just-in-time delivery demand a hyper-efficient system to transport both final products and intermediate parts, the shipping executive said. He characterized the supply chain as a web of interlocking conveyor belts that has no tolerance for stoppages, and warned that industry and jobs would flee the United States for less regulated locations if burdensome security measures hobble the transportation system.

Carmel said the current system is so efficient that it costs less to ship a container from Hong Kong to Los Angeles than it does to truck the container the last 100 miles to its final destination in the United States. Tolerance in the delivery time of that container from Hong Kong to Los Angeles is measured in hours, he said.

He said that nearly every maritime strategy he has seen describes shipping lanes as under threat and in need of protection to ensure the unimpeded flow of goods. "I do not see a threat," he said. He dismissed the menace of piracy as a coastal waterways affliction that does not affect ocean-going supertankers and container ships.

Maritime Security: Cargo carriers and their view

Interesting report from the American Association of Port Authorities (AAPA) Port Security Seminar held recently:

Even though there are many initiatives and forms of political legislation designed to protect ports, carriers, and shippers in the event of an act of terrorism or natural disaster, the underlying theme is that much more work, planning, resources, and education is needed to make ports truly safe, according to panelists at the American Association of Port Authorities (AAPA) Port Security Seminar held in Boston last week.

The panel, entitled “Ocean Carrier Perspective on Port Security Challenges,” touched upon what is—and what is not—happening to make ports as safe as possible.
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Regarding the issue of 100 percent container examination at the port of origin, which is a major component of the SAFE Ports Act, Hyde said that may be a good thing to strive for some day, but added that “the reality is we are a long way from that.”
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From the perspective of ocean carriers, CBP and the Department of Homeland Security, a risk-based, layered approach to security processes is the most efficient way to go about making ports safe, said Hyde.

“You cannot have any one component be the silver bullet [for security], because that does not exist,” he said. “We have to raise the security level a lot on vessels internationally and at the origins we call. There are [more than 700] foreign ports that ship cargo to the United States all the time. So how are you going to establish a regime you are comfortable with at this many ports? Security in an ocean environment needs to be ingrained into everything we do.”

More than anything, Hyde stressed it is important for all involved regulatory bodies and the private sector to “keep the dialog going” with politicians to ensure port security and safety initiatives continue to head in the right direction.
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Burke noted that as various facets of the ocean carrier industry continue to be regulated by politicians in Washington that are coming out with legislation he described as ill-advised.

“We don’t do a good job of educating our political people in Washington of what this industry is really all about,” said Burke. “Look at the Dubai fiasco. It is important for our industry to focus in on how do we [best] educate Congress and the Senate to..make them understand that what we do has a tremendous impact on their constituents, our country, and the world?”
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“So many times on Capitol Hill staffers are advising politicians on what action to take,” said Burke. “And these staffers often have no port experience or have ever been in a port themselves. We have [to realize] we are not doing a good job of educating politicians. This is the time for us to do it in an election cycle. It is very important for the future of our country. We cannot afford to let politicians to continue to make policy that affects the maritime industry, our international trade, and our standing in the world.”

Educating Congress and its staffs... good idea.

And for proof, here's a related article about a Congressional "5-year Plan" for port security:

In a decision which could potentially have a major impact on how ocean cargo moves through the global supply chain, the conference committee on the 9/11 Commission legislation last week signed off on an amendment that would establish a five-year deadline for 100 percent scanning of all containers before they are loaded up on ships bound for U.S. ports.
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At the center of this bill was an amendment introduced by Senators Charles Schumer (D-NY) and Robert Menendez (D-NJ) that proposed requiring DHS officials to develop a plan with yearly benchmarks leading to 100 percent container scanning at U.S. ports. This amendment was required by the Senate by a 58-38 vote in March. The amendment was also included in the SAFE Ports Act, which passed last October, but it was removed before it was signed into law. It was also included in H.R.1, Implementing the 9/11 Commission Recommendations Act of 2007, but awaits Senate approval.

While the drumbeat for 100 percent container inspection continues, these measures have been largely been rejected on the basis that they would be impossible to implement without harming domestic and global economy operations. ***
While the concept of a five-year deadline is a “great concept,” the transfer from paper to reality could be far more difficult, said Captain Joseph Ahlstrom, professor of maritime transportation at SUNY Maritime College.

“Everyone is on the same page when it comes to security; they all want 100 percent scanning,” said Ahlstrom. “But are we able to do that? The other thing people are waiting to learn is exactly what exactly we will be screening for. Is it chemical agents? Nuclear agents? Some sort of explosives? 100 percent screening of containers where containers can be inspected is one thing, but I would much rather see some sort of system where an alarm will be triggered if there is something suspicious in the containers as they go through.”