The LA Port and others are handling a phenomenal rise in cargo due to the main global pandemic output shifts coupled with many years of supply chain challenges. We will cover what's happening at the LA and similar ports, why seaport rates are going up, the labor negotiation talks to avoid further crisis, how the port's labor contract renewal will affect the congestion issue, and how retailers can get ahead of this year's holiday season.
Why Are Sea Ports Rates Increasing?
International supply chains confronted unanticipated demand starting from June 2021, which resulted in customers spending more on commodities as opposed to services when the COVID-19 containment regulations were at their high in the various countries.
However, the growth in demand was met by various limitations, including container shortages, container ship-carrying capacity, labor shortages, port congestion, and the COVID-19 regulations. The growth in demand and the resultant restraints caused a great rise in the seaport rates.
Related Video: Shipping Rates Continue to Steadily Increase in 2022
The Current Labor Negotiation Talks
Freight terminal operators from over 28 West Coast ports are in negotiations this year on several years' agreements with the twenty-two thousand four hundred dockworkers union.
American shippers battling with a supply-chain logjam on the West Coast are encountering fresh difficulties this year. Given calls for talks by the maritime terminals gird and dockworkers for a fresh labor contract.
How Will the Labor Contract Renewal Affect Holiday Shipments for eCommerce Retailers and Their Imports?
The ports' backlog that has growled supply chains for over a year could become terrible soon. In the talks for a fresh contract between dockworkers and the West Coast, port operators did not materialize. Misunderstandings between the dockworkers union and management have resulted in stock shortages, untimely shipments, and increasing port rates.
The talks are geared towards replacing the existing contract expiring at the end of June. To prevent the degrading congestion state of the now common customer needs against the facility, equipment deficits, and COVID-19 pertinent issues.
The association of trade advised that any hesitation in negotiating the contract could damage businesses and customers, who depend on the ports on the West Coast and compel shippers to contemplate other avenues. Given that the contract deadline expires some days to the high shipping season for the holiday commodities.
The dockworkers union is anticipated to push the container lines and their terminal colleagues to take advantage of the backlog. Whereas emphasizing its greatly reimbursed members are worth a portion of the transporter's profits.
"The two parties should try to come up with a contract before the expiration of the current one, to help the national economy and offer the desired assurance to the parties to the supply chain industry, which depends on the ports on the West Coast. We additionally beg that you publish a statement committing to the beginning of significant talks, and to devote yourself to proceeding with the negotiations and functioning without recess, even if the talks go beyond the set date of expiry." said Matthew Shay, the president of NRF, in a message to the ILWU and PMA officials.
To ease the misunderstanding and congestion, a task force from the White House was put in place. However, experts in the industry warn that it will take some time to clear the backlog.
So What's Causing the Congestion?
The International transport system connecting manufacturers to customers wasn't developed to operate for a long duration at high capacity as the lanes of transpacific trade have been operating. So, in November 2021, the system got to its point of breaking.
Almost 25 percent of extra cargo was ferried to America from Asia during less than nine months of 2021. In comparison to a similar period in 2019 before COVID-19, as revealed by the statistics from Container Traders. And in between Europe and Asia, they have stayed constant.
This together with the calls for a new labor contract by the dockers are causing congestion. And although the officials are confident that this might come to an end shortly, it may take some time to solve it.
How Can Retailers Get Ahead of the 2022 Holiday Season
A Third-Party Logistic company such as Rakuten Super Logistics can come in handy with over 20 years of operational excellence and a dedicated team of logistics experts. 3PLs deal in volumes as compared to specific businesses and can, as a result, attract softer shipping rates as well as pressure for pickups compared to minor shippers. The above savings assist in counter-balancing the fuel fees, among others, that escalate the rising expenses that normally affects the profit margin.
Learn how partnering with Rakuten Super Logistics can help eCommerce retailers have a smooth 2022 Holiday Season without any hiccups. Request a quote here.