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Mar.7, 2016

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BENEATH THE SURFACE 86 THE JOURNAL OF COMMERCE www.joc.com MARCH 7.2016 Gary Ferrulli LABORING FOR PRODUCTIVITY AFTER MAKING ARRANGEMENTS for my f light to the 2016 TPM Con- ference in Long Beach, I began to think about what I would see and hear at the event, looking forward to the market and economic fore- casts about container shipping volumes. Obtaining information on changes to underlying services is crucial, because planning for my own company is tied to where the markets are headed and how ser- vices may change. Much of what I expect on other subjects are what I'll call "concerns," considering the uncertainty I hear from the shipper and carrier repre- sentatives I travel with and meet. Personally, I have one huge concern, and that's longshore labor, especially on the West Coast. Although a long- term agreement is in place, it doesn't address the major issue of produc- tivity. And as I listen to shippers and landside service providers, much of their concern around congestion ties directly to longshore labor produc- tivity, or lack thereof. Congestion is still a big concern for shippers, and the new SOLAS rules on weight certification have many worried. The agriculture com- munity, a huge U.S. export group represented by the Agriculture Transportation Coalition, issued a white paper outlining its views on the subject. Agriculture interests essentially believe that providing weight information on contain - ers isn't something they should be accountable to provide. It entails an extra step in the process and likely some computer programming. But they're also concerned that congestion will grow at port ter- minals if some containers arrive without the necessary paperwork, causing their loads to be turned away. As they look at their internal processes and systems, they see a big blank space on the tare weight of the container. Yes, the tare weight is available on the inside and outside of the container and in the carrier's or leasing company's database, but how do agriculture interests access it and make it available to the terminal before the container arrives? They're also concerned about the rules being implemented without full consulta- tion with all stakeholders. I believe much of this can and will be resolved, but the fear of additional congestion at ports is real. Although communications have improved between stakeholders dealing with ports and terminals, and congestion has eased, much still needs to be done, and port produc- tivity remains a concern. Progress that could be made hasn't been because much of the design, infrastructure and equip - ment in por ts don't meet t he requirements of today's environ- ment and markets. Those making decisions also aren't convinced that spending the time, energ y and money required will improve pro- ductivit y. Why go through the effort and cost if productivity doesn't increase, and increase significantly? The International Longshore and Warehouse Union, with its monopoly on working vessels at U.S. West Coast ports, has made it an almost exact science at keeping average production under 30 moves an hour per crane, while the rest of the world averages 35 to 50-plus moves per hour per crane. The ILWU's long-running work rules and terminal gate hours have held productivity under 30 moves per hour for decades. The most telling part of what is happening in and around Long Beach may be at the new Middle Harbor terminal, which will be completed in about four years. The cost of the facility is a significant $1.3 billion and the rev- enue over a 40-year term is expected to be $4.6 billion. The port and car- rier, OOCL, are betting the farm on being able to get productivity well above 30 moves an hour to make the investment pay off. Smartly, OOCL engaged the ILWU from the early planning stages, highlighting the need for increased productivity. Labor will be trained to handle the new equipment and systems, a quid pro quo that on the face of it is the right solution. If Middle Harbor gets to an average of 40 moves an hour per crane — not a bad deal at all for all sides — it will become the model for the rest of the West Coast, if not the entire U.S. But what if Middle Harbor's pro- ductivity numbers hover in the 30 to 35 range? A ton of money will have been spent on a lengthy build-out, for nothing? With trade growth of 5 percent a year, what is now a dif- ficult place to work in because of congestion will simply get worse. I hope my skepticism is unfounded. I hope the ILWU recognizes that it's already lost an entire port's work in Portland, Oregon, and that the market share of cargo volume on the West Coast has shrunk because of its actions. We'll hear from the ILWU at TPM, but I've heard the union before. A few years ago, it bragged about getting "over 40 cans an hour" at an Oakland facility, making it clear it can do it if and when it wants to. For the sake of all of us dealing with international trade through the West Coast, let's hope we see that progress at Middle Harbor and spread up and down the coast, keep- ing those ILWU members working and adding to their ranks. And let's hope for Portland to regain its con- tainer business. JOC Gary Ferrulli is president-North America for Unicon Logistics. Contact him at mrgtf4811@mindspring.com.

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