Cargo handling in US West Coast ports has hit “a North American record”

Cargo handling in US West Coast ports has hit “a North American record”

The US clothing industry is benefiting from a sharp rebound in logistics following the end of last year’s West Coast port dispute, along with optimism about the likely positive impact of the new Trans-Pacific Partnership (TPP) trade deal – a key meeting of the United States Fashion Industry Association (USFIA) heard this week.

While record port volumes were welcomed at the USFIA’s 27th annual Textile & Apparel Importer Trade and Transportation Conference, optimism over the TPP trade deal was mixed in with concerns about if and when it might be implemented. 

The general tone of this year's meeting, which wrapped up on Wednesday (4 November) in New York City, proved a marked contrast from one year ago, when labour-dispute-induced port bottlenecks hit the industry hard, delaying imports through the US West Coast.

With the labour situation in the key California ports of Los Angeles (LA) and Long Beach finally settled in May, movement of apparel of all kinds into the US is once again proceeding at a fast clip, with cargo handling in the two ports hitting “a North American record” as of the third quarter of 2015, Gene Seroka, executive director of the port of Los Angeles, told the conference.

“Productivity from ships, trucking and rail is at an all-time high,” he said. “How we connect new products and the supply chain is the main task we face.”

According to Dr Noel Hacegaba, chief commercial officer and managing director of commercial operations for the port of Long Beach, some 46% of all apparel that enters the US comes through LA and Long Beach.

“These two ports are benefiting from an extraordinary rebound,” he said, noting that while the first quarter of this year had seen “double-digit declines” in cargo handling, an uptick began in the second quarter and by August 2015, this volume had reached a record, with the third quarter scoring a 50% year-on-year increase.

Faced with the prospect of continued volume increases, driven by ever-larger cargo ships and increased trade, particularly if the TPP comes into effect, Hacegaba said his industry is faced with two options: either spend more than US$1bn to build bigger terminals for the two California ports or “figure out ways to move cargo more efficiently.”

He explained that with waterfront real estate becoming increasingly expensive, the cost of expansion is on the rise: “We can't rely on the old model of building the infrastructure and they will come,” he argued. “Our ports need to be strategic when it comes to land use. We need to make cargo sequencing as efficient as possible.”

Comparing the current setup in US ports to “owning the most expensive computer available but running it on Windows 95,” Hacegaba called for the implementation of a system enabling “any segment along the supply chain to access any information at any time. Even at Disney World there are apps that tell you how long the wait is going to be.”

TPP timing

Meanwhile, although conference attendees welcomed last month's conclusion of the TPP, they were unable to discuss the details – because the text was only released a day after delegates went home (on 5 November).

TPP text details textiles and apparel specific rules

“I can't tell you exactly when, but I can tell you that it's going to be soon,” Bill Jackson, acting assistant US trade representative for textiles at the Office of the US Trade Representative (USTR) said. The TPP, which had, until recently, only garnered the attention of policy wonks, “is now a part of popular culture, having recently been a question on [popular US television quiz show] Jeopardy.”

And this attention is warranted, as he points out. Stressing about 40% of the world’s gross domestic product (GDP) is already generated by the 12 TPP countries – the US, Canada, Japan, Mexico, Peru, Chile, Australia, New Zealand, Brunei, Malaysia, Vietnam and Singapore – he claimed this figure ought to rise to “nearly 50% over the next few decades if the TPP goes into effect.

“Everybody in this Rim is going to benefit from TPP,” he explained. “This opens up markets throughout the region to all manner of US goods and services exports.”

For the fashion industry, Jackson said, this means “all textile and apparel tariff lines will see significant cuts on day one.” Eventually, he said, “all of these tariffs will go to zero, some immediately (including dresses and skirts and travel accessories like backpacks), some after a phase out.”

In addition to touting the reduction of tariffs, Jackson also sought to ease industry concerns over the so-called ‘yarn-forward rule’ – which restricts content of products getting TPP trade breaks to that which originated in TPP countries – by pointing out the supply flexibility to be gained by the deal's extensive short-supply list.

“We have a yarn-forward rule which prioritises TPP region supply chains and keeps the benefit of TPP in the US and the TPP region,” he said. On the other hand, the import-export trade will be compensated for this by “one of the most extensive short-supply lists that we've ever had in a free-trade agreement.”

Presidential election politics

But whatever the fine print may contain, the conference was warned that prospects are far from assured regarding its implementation in the 12 member countries, particularly in the US, where the increased spotlight given to the trade pact has put it into possible collision with 2016 US presidential election politics. Earlier this year, the US Congress gave President Barack Obama trade promotion authority, which allows him to submit the measure for a yes or no vote.

While groups like USFIA have been generally supportive of TPP, significant interest from groups such as the domestic automotive industry, labour groups and the pharmaceutical industry, have emerged in opposition, and the political controversy surrounding the deal has heated up, said Jonathan Fee, partner at the US-based Alston & Bird LLP.

“Republic support for free-trade has softened, and recent statements by Hillary Clinton disavowing the deal, which she once supported, don't give much cover to Democrats wanting to vote for TPP,” he warned.

“There is precious little support for TPP among the presidential candidates,” he added. “It makes me even more certain that we won't see a TPP before the next president is inaugurated.”