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Nov.10, 2014

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COMMENTARY 18 THE JOURNAL OF COMMERCE Mario Cordero NOVEMBER 10.2014 WHY FIXING PORT CONGESTION MATTERS AS A FORMER commissioner at the Port of Long Beach, I had the oppor- tunity to view the challenges of ensuring efficient operations. Los Angeles-Long Beach is the nation's largest port complex, handling 40 per- cent of containerized U.S. imports. My eight years as commissioner at a port authority and now as chairman of the Federal Maritime Commission affirm my view that international trade begins at our nation's ports. As FMC chairman, my role includes ensuring the commission furthers its stated mission: to foster a fair, efficient and reliable interna - tional ocean transportation system. The competiveness of U.S. ports clearly depends on an efficient trans- portation system, including entities the FMC regulates: ocean transporta- tion intermediaries, common carriers and maritime personnel operators. Earlier this year, I testified before Congress that the two most important ways the FMC promotes economic growth are facilitating the competitiveness of our ports and maritime transportation systems to support growth in exports; and pro- viding maritime regulatory relief so businesses and their customers can hire more American workers. Port congestion causes delays and increases transportation costs that hurt our economy. Resolving the consequences of congestion is espe- cially important to keep pace with the growth in international maritime trade. In 2013, U.S. container imports and exports reached 30.5 million TEUs. That number is expected to increase this year, so addressing congestion and potential congestion- related maritime issues isn't vital only for our individual port gateways, but also a paramount national objective. Larger ships require ports to han- dle larger volumes of cargo within a given time frame. This complicates the loading and unloading cargo and strains terminal operators' ability to provide sufficient personnel to main- tain operations across all facilities. For instance, large ships carry- ing more cargo than a typical call may require diversion of personnel and equipment from the shipyard to the dock to unload cargo. Despite the scramble to handle rising volumes, terminal operators feel pressure to reduce costs arising from labor and equipment. A reduction in labor and cargo-handling equipment is unsustainable given the increasing cargo volumes passing through our ports. Poor weather conditions and the unreliability of carriers' arrival times also can cause unanticipated surges in volume, further straining the ports' limited resources. In the past, West Coast ports have borne the brunt of congestion-related complications because of their prox- imity to Asian trade lanes and ability to handle larger ships. With the Pan- ama Canal's expansion, East and Gulf Coast ports must prepare to receive larger ships. Thanks to the Water Resources Reform and Development Act, ports will receive the financial resources to update infrastructure needed to support rising trade. Congest ion's consequences aren't limited to ports. The scarcity of resources to meet cargo-handling needs slows the transfer of cargo to intermodal carriers. Trucking is par- ticularly susceptible to the effects of port congestion. Delays create long lines for trucks arriving to pick up cargo. Trucking companies require high productivity levels to meet costs of expensive trucks. Because truck productivity is measured by the number of pickups per day, lengthy waiting times have an immediate impact for these drivers. Port con- gestion also affects railroad efficiency and, ultimately, beneficial cargo own- ers, who expect on-time delivery. The change in ownership of chassis from ocean carriers to third parties also complicates the process of ensuring cargo is available for timely pickup at port facilities. Congestion not only disrupts inbound cargo, but also decreases the efficient transport of U.S. exports and reduces the competitive advan- tage of U.S. ports. Growth in U.S. exports is essential to strengthen the national economy. The vast major- ity of our exports and 80 percent of international trade travel through U.S. ports and by ocean. Efficient port operations, then, are the lynch- pin to maintaining the status of U.S. businesses as reliable exporters and trading partners. Furthermore, the vitality of our ports themselves may be at risk because of the adverse effects of congestion. If ports can't handle high volumes in a timely manner, carriers may divert cargo to ports in Mexico or Canada, or a U.S. exporter may lose a sale. As FMC chairman, I'm com- mitted to addressing the congestion problem, which is a barrier to the U.S. goal of increasing exports. Along with other FMC members, I met with interested members of the public to discuss congestion-related concerns at a Sept. 15 FMC forum at the Port of Los Angeles. Subsequent to that meeting, commissioners William Doyle and Richard Lidinsky hosted a mid-Atlantic forum. Commission- ers Michael Khouri and Rebecca Dye also will host forums in Charleston, South Carolina, and New Orleans. Because an efficient maritime transportation system benefits all involved in the international trans- portation of goods, I encourage maritime stakeholders to join the FMC in examining how we can reduce the causes of congestion. JOC Mario Cordero is chairman of the Federal Maritime Commission in Washington and will address the FMC's findings from regional port forums at the JOC Port Performance North America Conference in Newark, New Jersey, on Dec. 9.

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