THE US port of Long Beach will commence on October 1 an incentive programme for shipping lines, in an effort to stabilise cargo throughput that has fallen each month this year amid the continuing US-China trade row. The move comes one year after the neighbouring port of Los Angeles launched its own incentive programme.
Both of these incentive programmes come in a response to seismic tumult in the industry, according to the ports' officials, reported the Los Angeles Daily News.
The ongoing US-China trade row has forced some manufacturers to relocate to Southeast Asia, which - along with the rise in carrier alliances and other factors - has pushed higher traffic volumes to US east coast ports, exacerbating a year-long trend that's eaten away at the twin ports' dominance.
The incentive programmes, in short, are an attempt to persuade current port customers to increase how much cargo they bring in and lure more business away from competing ports.
"It's a tool we can utilise to stabilise our cargo volume," said Long Beach port's deputy executive director Noel Hacegaba. "We felt this was the right time."
Under the Long Beach programme, which will last one year, the port will offer carriers US$10 rebates for each 20-foot standard container (TEU) they bring in above market growth.
The rebates are capped at $2 million per carrier per fiscal year, according to a staff report.
The port of Los Angeles launched its incentive programme in September 2018. It's virtually the same as Long Beach's, with two exceptions. First, Los Angeles' programme allows both loaded and unloaded containers to count towards the rebate, while Long Beach requires them to be filled. Second, Los Angeles requires carriers to provide data - manifests, the routes ships take - to its Port Optimizer, a digital tracker that helps keep the supply chain running smoothly.
From the programme's onset to the end of the fiscal year on June 30, Los Angeles paid out $6.5 million in rebates, according to port of Los Angeles' executive director Gene Seroka, who said the return to the port has been "three-to-four times that."
During that time, the ports of Los Angeles and Long Beach have gone in different directions. Long Beach's total cargo traffic for the calendar year is down 6.6 per cent through August compared to the first eight months of 2018. The port of Los Angeles has seen its total traffic rise 5.74 per cent year on year.
Port of Long Beach officials have for months said there are multiple reasons for the slide. At the heart, is the trade war. In 2018, Long Beach continually set traffic records, largely driven by manufacturers and retailers trying to beat each round of tariffs, which the US first implemented in July. The port's record setting, Mr Hacebaga said, was the reason Long Beach "did not see the need to employ an incentive programme."
However, a slowdown, it seems, was inevitable. "For 2019, it seems that the cargo is all here and warehouses are filled," Long Beach port executive director Mario Cordero said in July. "That's disrupting container movement and the growth we would normally see this time of year."
Long Beach port officials have also said the decline, compared to Los Angeles' increase, can partially be explained by the normal ebb-and-flow of customers between the nation's top two ports.
Long Beach's programme could cost between $4 million and $6.5 million, according to a staff report, though officials said they believe the additional revenue from increased traffic would offset that and help bridge the gap with Los Angeles.
Despite Los Angeles's increase in total traffic, a closer look shows the trade war has impacted the port as well, which saw decreases in exports throughout the year and rise in empty containers coming in and out - meaning fewer products are actually heading overseas.
One of the worries of a prolonged trade war was that manufacturers would start moving out of China and to Southeast Asian countries, such as Vietnam, Thailand and Cambodia. Doing so, Mr Seroka and Mr Hacegaba both said, would give a competitive advantage to US east coast ports.
"For every container we gain from Southeast Asia," Mr Seroka said, "we lose 2.5 from China."
Both ports have already seen some manufacturers shift away from China because of the trade row, and carriers following suit by taking goods to the ports in New York and New Jersey, Mr Hacegaba said. That shift has continued a trend that's gone on for years as costs in China have grown.