LOS ANGELES — Epic port congestion, a headache that has plagued the industry for the past few months, was top of mind for footwear stakeholders attending lastweek’s Footwear Distributors and Retailers of America event in Long Beach, Calif.
As the situation gets more complicated, Gene Seroka, executive director of the Port of Los Angeles, offered up proposals to assuage the bottlenecks that have containers backing up in terminals and truckers coming to a standstill.
But his timeline to ease the crowding met with collective groans from the 200 or so footwear importers in the audience at the Footwear Traffic, Distribution and Customs conference. The meeting, held Oct. 19-22, drew representatives from manufacturing, such as Converse and K-Swiss, retailers like Zumiez, trucking firms and supply chain providers. “I do not see immediate relief,” Seroka said. “These ideas will go into effect next year. We’re trying to start doing something to provide a release valve.”
Seroka and others attribute the issue to a perfect storm of events, with a dose of market dynamics exacerbating the problem. The improving economy is boosting trade, with port volume through September up 9 percent compared with last year, he said.
Meanwhile, ships are supersizing — almost quadrupling in the past 15 years — to accommodate more than 14,000 containers. At the same time, shipping lines have pulled back on providing chassis, leaving truck owners to rely on leasing companies. Those firms in turn often come up short on supplying the trailers when or where needed, often outside of terminals; this can lead to more delays.
Suggestions for improvement include creating a more centralized system to manage and maintain chassis, implementing a more robust technology infrastructure that ties the supply chain together and taking better advantage of the intermodal transportation system. Much of the ideas are in limbo, however, until the International Longshore and Warehouse Union and Pacific Maritime Association wind up their contract negotiations.
A treaty ratification is in order, especially given no one is predicting a slowdown in trade. Seroka said he expects cargo rates to continue to rise until at least November, with a slight dip occurring before Valentine’s Day and Easter. On the plus side, Seroka said the marketplace has changed, with retailers better managing inventory, which has minimized highs and lows of traffic.
Another issue front and center at the conference was the burden of tariffs. Matt Priest, president of the FDRA, discussed the double-digit duty that the footwear industry pays — a little more than 10 percent — compared to the much lower rates of taxation on other products. Free-trade agreements are “avenues to cut into the duty rate,” he said.
One trade agreement involving the U.S. is the Trans-Pacific Partnership (TPP), spanning 12 countries. Footwear could see up to a 50 percent drop in taxes with the agreement’s finalization, Priest said.