The Port of Los Angeles and Port of Long Beach are holding discussions about entering into a memorandum of understanding (MOU) to address joint challenges and strengthen the relationship between the two ports.
Gene Seroka, the executive director of the Port of Los Angeles, gave a brief presentation to the Los Angeles Harbor Commission about the MOU on Aug. 22 and said the goal was to ensure the two ports “are the gateway of choice in North America.”
He offered limited details about the plan, but said the ports would discuss and undertake activities related to: service enhancements at landside transfer points, cargo transfer predictability, supply chain connectivity, workforce development, training, cyber security and metrics.
He said a final recommendation on the MOU from the Port of Los Angeles staff would be presented to its commission on Sept. 5 and that its members would have an opportunity to edit it and make recommendations back to the staff.
“We feel it is pretty comprehensive when it comes to a nonbinding memorandum of understanding. It is now historic … for the first time in a generation we are taking this relationship to the next level. The fight is not L.A. versus Long Beach for that last container. It’s about keeping cargo here in southern California,” he said. “That is the battle that we face — price competitiveness, labor cost, environmental cost, regulations, etc.”
The Port of Los Angeles is the nation’s largest container port and the Port of Long Beach is the second largest. Seroka said they must perform at a “competitive level for the folks who have a choice as to what port complex than can utilize in the United States.”
The battle for this so-called “discretionary cargo” that can move through a variety of ports has intensified in recent years.
The cost of doing business in California, strict environmental regulations, the widening of the Panama Canal, the shift of more manufacturing to Southeast Asia, the increased size of containerships — these are all trends that have made all-water routings of containerized cargo to East Coast and Gulf Coast ports more attractive.
Contentious labor negotiations between the International Longshore and Warehouse Union ILWU) and management that have resulted in periodic shutdowns at West Coast ports that have encouraged some shippers to move more cargo through other ports. British Columbia ports such as Vancouver and Prince Rupert have seen strong growth in U.S.-bound cargo from Asia as well as U.S. exports, and more companies are adopting strategies to move cargo through multiple ports in order to make their supply chains more resilient.
In an article published just this week in the Pacific Merchant Shipping Association’s monthly West Coast Trade Report, economist Jock O’Connell cited U.S. Department of Commerce figures showing the share of East Asia cargo moving through the combined ports of Los Angeles and Long Beach, declined to 45.4% as measured by weight last year from 57.4% in 2003. By value, that cargo fell during the same period to 53.5% from 63.2%.
However, despite that decline in market share, Seroka noted during the meeting that the port continues to set new cargo volume records. Last month it handled 912,000 TEUs, its busiest July ever. Total container volumes at the port are up 6% in the first seven months of the year, despite the trade war between the U.S. and China.
Though Seroka had thought the MOU would be presented to the Long Beach Board of Harbor Commissioners as soon as Aug. 26, Long Beach officials said the presentation would be delayed until a later meeting.
Seroka noted that the two adjacent ports have worked together since 2013 under a Federal Maritime Commission agreement aimed at establishing and implementing programs and strategies to: improve port-related transportation infrastructure; increase cargo movement efficiencies and port capacities; improve safety and security; and decrease port-related air pollution.
Los Angeles Harbor Commissioner Diane Middleton said while what was presented at the meeting was positive — “like apple pie and motherhood” — she was looking forward to getting more details.
Seroka noted the two ports have worked together closely on security along with the Coast Guard and the MOU will help them continue to find ways to optimize work of first responders, security personnel and those who work in the cybersecurity area.
“It’s about finding efficiencies in the work effort” and eliminating duplicate work, he said.
And while metrics drive the port’s decision-making, he vowed “they will never, under my watch, be used in a punitive fashion against labor.”
A number of ports have announced cooperative agreements in recent years. In 2017, the Georgia Ports Authority and Virginia Port Authority formed the “East Coast Gateway Terminal Agreement” and in 2014 the Port of Seattle and Port of Tacoma merged marine cargo operations by forming the Northwest Seaport Alliance.
Sources say the cooperation Los Angeles and Long Beach are proposing will be far less extensive than what Seattle and Tacoma undertook.
In a March 2018 article in Research in Transportation Business and Management, Geraldine Knatz, Seroka’s predecessor as executive director of the Port of Los Angeles, wrote, “There have been significant attempts to merge the San Pedro Bay ports of Los Angeles and Long Beach since their creation as separate municipal authorities in 1911. These efforts continue to the present day with the most recent proposal made in 2014.”
She said, “All merger proposals have failed to gain widespread support for two primary reasons. First, all proposals came from outside the port administration, often generated without any port knowledge or participation and limited stakeholder involvement. Second, none of the merger proposals were accompanied by an objective analysis identifying the benefits to accrue to both port cities from a merger.”
But she noted cooperation between the neighboring ports “increased in the 1980s, spurred by problems confronting both port administrations — that is the impacts of containerization on the surrounding communities. The ports used a variety of governance tools to affect cooperative arrangements including creation of quasi-independent single-purpose authorities.”
These include the creation of the Alameda Corridor Transportation Authority to finance construction of a $2.4 billion rail freight corridor between the ports and Class 1 railroad yards; cost sharing for rail and road projects; creation of the Pacific Harbor Line, a shortline railroad that operates in the two ports; the Clean Air Action Plan to reduce air pollution; and new hiring hall for longshore workers.
Knatz said, “The willingness and initiatives of the ports to cooperate, when necessary, has negated serious consideration of merger proposals. Instead, the two ports have increasingly expanded cooperative efforts to address common issues while retaining their independent jurisdictions.”