The ports of Long Beach and Los Angeles are exploring a joint memorandum of understanding (MOU) aimed at ensuring their competitiveness as a trade gateway. While a finalized MOU has not been voted on by either ports’ harbor commissions, each has reviewed a draft agreement, and staff at both ports continue to refine the document.

San Pedro Bay Ports Aerial
Combined, the ports of Long Beach and Los Angeles handle about 37% of the United States’ maritime trade. In an effort to protect this marketshare, the ports are considering entering into an agreement to work together on solutions to boost the efficiency of cargo movement and tracking. (Photograph provided by Port of Long Beach)


At a September 23 meeting of the Long Beach Board of Harbor Commissioners, Port of Long Beach Deputy Executive Director Noel Hacegaba laid out the basic tenets of the proposed agreement and the reasoning behind it. If ultimately agreed to, the MOU would enable the ports to work together to address cargo transfer predictability, supply chain connectivity, cybersecurity and metrics, according to Hacegaba. Workforce development had initially also been included, but at direction from commissioners it will be addressed separately, he noted.


At an August 22 meeting of the Los Angeles Board of Harbor Commissioners, Port of Los Angeles Executive Director Gene Seroka explained that the ports must work together to ensure they remain competitive and “the gateway of choice in North America,” he said.


Since  International Longshore & Warehouse Union workers were locked out of the docks in 2002, resulting in massive congestion at the San Pedro Bay ports that rippled throughout the U.S. supply chain, the ports have lost 20% of their marketshare, Seroka explained. Other issues are at play, he noted, such as increased competition due to the widening of the Panama Canal and upgrades by East Coast ports that have occurred since.


While the ports of Long Beach and Los Angeles compete for cargo, Seroka emphasized that to address their marketshare, they have to work together. “Simply a race to the bottom of cargo trading between the ports of L.A. and Long Beach based on transactional pricing is something we must avoid in the future for success of this complex,” he said.


Seroka and Hacegaba both cited statistics to illustrate the importance of the ports to the regional economy. For example, Hacegaba said, “Today, 37% of all waterborne goods entering the United States enter through this gateway. And they touch each of the 435 congressional districts in the nation. That amounts to about $312 billion in trade on an annual basis.” He added, “So when we talk about competitiveness, it’s not just TEUs that we’re talking about. We’re talking about jobs. . . . The San Pedro Bay complex encompasses 3,400 acres across 13 container terminals, employs 15,000 longshore personnel serving 15 shipping lines, and handles 60,000 truck moves on a daily basis.” Seroka cited the same data.


The ports are able to work together on matters surrounding supply chain efficiency thanks to an agreement sanctioned by the Federal Maritime Commission in 2014, when another period of congestion occurred that was in part caused by labor strife but also by changes within the supply chain.


“The Shipping Act of 1984, among other things, grants immunity from anti-trust laws to maritime terminal operators [so] that they may confer with each other and agree upon services, practices and other operational decisions related to the common carriage of goods by water,” Hacegaba explained. “In order to receive this immunity, the parties must file notice with the Federal Maritime Commission in the form of a written agreement outlining the topics and actions of the parties that would be undertaken together.”


In June 2006, the ports entered into an agreement sanctioned by the FMC to work together on environmental issues – namely, on the creation of their Clean Air Action Plan. “Since that time, the operating environment at the ports changed considerably,” Hacegaba said. “The massive realignment of the shipping line industry combined with the emergence of e-commerce, for example, has created disruption across the supply chain and has put us as port authorities in a position where we must become more operationally oriented and evolve from the traditional landlord model to supply chain convener and facilitator.”


According to Hacegaba, the decentralized nature of the supply chain limits communication and the transfer of information related to cargo movement, which results in complications. “The fragmented nature of the supply chain results in choke points at critical intermodal transfer points between supply chain partners,” he said. “The greatest challenges reside in the landside transfer points between the marine terminal operators, the motor carriers and the railroads. As a port, we are in a unique position to engage all of our supply chain partners to facilitate communication and collaboration between them, and to work with them to align their business interests for the benefit of the complex and the broader supply chain.”


If the ports’ two harbor commissions ultimately agree to an MOU, they will be able to work together to address issues related to trucking efficiency, availability and distribution of chassis (truck trailers used to haul containers), and other supply chain matters. Hacegaba noted that the ports’ staff envision digital solutions “intended to provide stakeholders with common access to cargo status information,” as well as a universal appointment system for truckers at the ports’ terminals.


The Port of Los Angeles already has a digital tool in place to track cargo through the supply chain: General Electric (GE) Transportation’s Port Optimizer. The Port of Long Beach tested the same tool in a pilot program, but has yet to adopt it permanently.


Long Beach Harbor Commission President Bonnie Lowenthal said at the September 23 meeting that the MOU was an important step, but she did have one caveat. “I don’t want to see us tie this MOU to a particular digital solution but rather a broad range of solutions,” she stated.


In an interview with the Business Journal later in the week, Lowenthal said that the harbor commission has a subcommittee focused on port efficiency. Asked whether she would support a port-wide adoption of the GE Port Optimizer so long as other solutions were considered, she said, “That is going to be a function of what the subcommittee recommends to the other commissioners, so that all five of us are looking at the options for efficiency.”


Lowenthal said that working together on the issues outlined in the proposed MOU is a topline priority for the ports. “We have always prided ourselves as being the greenest port in the nation. We pride ourselves on customer service. We also pride ourselves on efficient operational efficiency. We will continue to work with that goal of being the most efficient port in the nation,” she said of the Port of Long Beach.


An MOU would be a continuation of a history of working together, as Lowenthal explained it. “We have a history of this cooperation. We continue to cooperate on the environmental front. We are also doing work together on sea level rise. We’re also working together on earthquake challenges as they come along,” she explained. “This is an extension of that cooperation, because competition among regions of North America for international trade is at an all-time high.”


Lowenthal expects a finalized MOU to come to both commissions for a vote in a few months. “It takes a little bit of time to dot the i’s and cross the t’s and make sure that everyone is completely in agreement,” she said.


Editor’s note: An earlier version of this piece stated that the ILWU went on strike in 2002. It has been altered to reflect that dockworkers slowed down work and were subsequently locked out by their employers.