Background and Development

As early as the 1940s, mechanized cargo handling began in North America. However, its growth during the 1960s and the containerization movement during the 1970s resulted in great changes in worker activities, costs, and productivity levels.

The three kinds of cargo handled by stevedores included break-bulk, bulk, and containerized. Break-bulk general cargo vessels totaled 21 percent of the world's shipping by gross registered tonnage (GRT). Break-bulk general cargo ships were self-sustaining in cargo handling, meaning that they did not need on-shore handling equipment. Many ships even carried their own containers in order to operate at ports lacking adequate handling facilities. These kinds of ships included coasters, tramps (cargo vessels lacking a regular schedule), and cargo liners.

Handling break-bulk cargo was normally labor intensive and time consuming, requiring the movement of sheds close to the berth and the availability of equipment for lifting and moving cargo. On the ship, moving cargo usually involved making slings or trays and carrying or hauling heavy cargo into the center of the hatch to remove it from the ship. Movement of break-bulk cargo required extra caution when pipes, plates, and other awkward loads or dangerous materials had to be transported. Work on the wharf included making up slings and landing loads onto vehicles. Use of forklift trucks and mobile cranes, both introduced to most ports during the 1960s, was fundamental in removing much of the hard labor from onshore cargo handling.

Bulk cargo vessels ranged from 50,000 to 150,000 deadweight tons (DWT), and most of the larger modern vessels were without cargo-lifting equipment. These kinds of vessels included bulk carriers, ore carriers, timber carriers, and combination carriers for ore and oil, and for ore, dry bulk, or oil. Bulk cargoes such as ore, coal, coke, bauxite, sand, and salt once were handled using buckets, scoops, and baskets. However, the loading and unloading of bulk cargo was mechanized long ago. Bulk terminals handled a combination of commodities such as grain, wood chips, and scrap metal, while others housed a single commodity such as iron ore, copper ore, or minerals. Liquid bulk cargo such as crude oil and petroleum products accounted for more than 40 percent of the cargo engaged in seaborne trade. Handling of liquid bulk was almost entirely automated, thus requiring limited manpower.

The development of standardized modular containers for transporting bulk goods became known as containerized cargo. Standardization included the maximum weight of individual containers, specific lifting points, and uniform shapes. Due to containerization, much of the handling equipment in ports around the world also became highly standardized. Most manufactured goods and primary products were carried by containers. Only very large items were excluded, but even logs and timber could be carried in specially designed containers. Although standard in size, containers were built using a variety of materials and could be refrigerated, heated, ventilated, or specially equipped to handle virtually any kind of cargo. The use of standardized containers reduced the time it took to load or unload a vessel, thereby increasing productivity and reducing port labor needs. The speed and volume of cargo handling continued to increase during the 1990s, as container systems become more widely accepted.

Due to these technological advancements in cargo movement, the job of stevedoring has changed over the past 70 years. What used to be laborious, physically demanding manual labor was replaced with handling diverse materials and operating highly technological equipment. The expansion of containerization also modified cargo-handling operations, as ports had to be equipped with special cranes capable of lifting these containers.

Having the most profound impact on containerization and cargo-handling operations were the number of huge containerships that came on line in the mid-1990s. To replace inefficient ships, meet shippers' demands, and maximize loads, larger, faster, and more efficient containerships began to be introduced on certain trade lanes. The largest, dubbed supercontainers or post-Panamax vessels, were engineered to carry 4,000 to 5,000 TEUs, rather than the most prevalent generation capacity of 3,000 to 3,400 TEUs. Such huge vessels affect land operations such as on-dock rail facilities and intermodal connections. In addition, cranes must have a broad enough reach to stretch across six containers.

Ports, such as the major U.S. West Coast gateways of Los Angeles and Long Beach, California, positioned their operations to accommodate these huge supercontainer ships. In 1995, the Port of Los Angeles embarked on a $600 million expansion plan. In 1996, the Port of Long Beach and Chinese steamship line China Ocean Shipping Co. (COSCO) finalized plans for a $200 million marine terminal to accommodate post-Panamax ships.

Other port volumes reflected not the importance of containerized cargo but the difficulty they had in sustaining its business. On the West Coast, the Port of Long Beach accounted for 31.4 percent of all West Coast containerized volumes. On the East Coast, the Port of New York and New Jersey remained the busiest container port with some 40 percent of the North Atlantic business.

A more recent problem facing all U.S. ports is the ongoing controversy about how to dispose of the muddy silt dredged to keep the harbors navigable. Much of the silt contains environmentally hazardous pollutants, which creates dredging permitting delays. Through the lobbying efforts of the American Association of Port Authorities, amendments to the Water Resources Development Act (WRDA) were proposed to Congress. They called for a national dredging policy that would enable the U.S. Army Corps of Engineers to dredge more efficiently. Provisions in the act called for authorizing equitable federal cost sharing and dredged material disposal facilities, the prompt removal of obstruction to navigation, and capping of local cost sharing during the feasibility stage of project development.

Facing their own financial constraints, terminal operators explored the idea of forming partnerships among themselves, a process dubbed by the shipping industry as "rationalization." By forming regional port authorities, terminal operators working with a shipping line in one port could form a partnership with operators in other ports that served the same shipper. The operators would divide the revenue generated for the work done in all the ports under an agreed-upon formula. Using this arrangement, the shipping line would benefit by receiving a volume discount, while the terminal operators would gain additional business without investing in equipment, office space, and labor. Several examples of regional port authority alliances included the Virginia Port Authority, the Port Authority of New York and New Jersey, and the Delaware River Port Authority. Prior to forming the Virginia Port Authority, competition among Norfolk, Portsmouth, and Newport News was so intense that steamship lines decided to call on other East Coast ports.

Many of the major container shipping lines began taking their stevedoring and terminal work in-house, virtually squeezing independent stevedoring operations out of the market. Edward DeNike, senior vice president of Stevedoring Services of America in Seattle, Washington, suggested in the Journal of Commerce and Commercial that independent operators should expand their services and embrace intermodal operations--the combination of different modes of transport. Working with 25 steamship operators, Stevedoring Services has become an intermodal operator with its 22 rail ramps, nine chassis pools, and a computer services division. Direct Container Line, Inc. also launched an intermodal container service between Japan and Mexico. The company offered Japanese shippers and Mexican importers door-to-door service that took 14 to 16 days, nearly 20 days faster than all-water cargo transportation.

Often companies that offered intermodal services were classified as non-vessel operators (NVOs). These companies did not own any vessels; instead, they either coordinated the transportation of several shipments in one container and were called "consolidators," or they handled the complete transportation of full box loads and were called "multimodal operators." Combined transport, such as the marriage of rail and trucking, generally was most developed within the North American market, followed by the European community. Intermodalism had yet to pick up in Asia.

On May 1, 1999, the ocean and inland container transportation industry was deregulated under provisions of the Ocean Shipping Reform Act of 1998 (OSRA). The act's provisions intended to open competition in the industry. One of the key changes under the new law was the elimination of filing requirements with the Federal Maritime Commission of all contracts between container ship operators, importers, and exporters. Under OSRA, such contracts may remain confidential and unavailable to competitors' inquiries. Although intended to challenge price-fixing and favoritism, smaller shippers feared that it would promote unequal bargaining power among shippers. Small to medium-sized companies began to form alliances in order to leverage their negotiating power and keep them competitive in the market. In September of 1998, three California consolidators--Direct Container Line, Brennan International, and Conterm Consolidation Services--formed the New American Consolidators Association (NACA) to combine their buying and negotiating power. In early 1999, the National Customs Brokers & Forwarders Association of American Shippers Association (NCBFAASA) was formed.

Contract negotiations between the Pacific Maritime Association and the International Longshoremen and Warehousemen's Union during the summer of 1999 caused slowdowns and backups at the Ports of Long Beach and Los Angeles, creating a ripple effect along the entire coast. Crane drivers shut down the Port of Oakland, California, on July 7, further exacerbating the tense bargaining. A three-year contract was finally agreed upon in November 1999, with voting approval by more than 80 percent of the union's members (only 60 percent was required). In 1998, average earnings for West Coast union workers were between $99,000 and $125,000 annually, including overtime and shift differential. Average hours worked per week were 54 hours.

Labor issues have always affected the marine cargo handling industry. However, during the early 2000s their effects were felt across America and throughout the world. When the International Longshore and Warehouse Union (ILWU) failed to come to terms with the Pacific Maritime Association (PMA) in the fall of 2002, more than 10,000 dockworkers at 29 coastal ports staged a lockout that lasted 11 days. The lockout created a number of significant problems. Hundreds of ships were stranded, leading to congestion at area seaports. In addition, some industry observers estimated that losses would cost shipping companies anywhere from $400 million to $600 million.

Because of the havoc the lockout was wreaking on the nation's economy, President Bush ended it on October 9, 2002, by invoking the Taft-Hartley Act of 1947. After a federal judge ordered a brief "cooling off period" so that a federal mediator could help to resolve the matter, the two parties finally came to terms on a new contract in late November. The agreement was subsequently ratified by both organizations and finally approved on February 1, 2003. According to the PMA, "The agreement provides ILWU members with substantial wage and benefits increases. This includes fully employer-paid health care, a 58 percent hike in pension benefits, and job protection guarantees to ensure that no currently registered worker will lose a job as a result of technology." Disagreements over the use of technology were at the forefront of discussions. While workers feared technological improvements could lead to workforce reductions, employers wanted to modernize their operations via the introduction of technologies like bar code scanners, global positioning satellite (GPS), and electronic messaging.

In 2004 port operations on the West Coast, particularly at the Los Angeles/Long Beach complex, were reduced to chaos as a number of factors led to a severe labor shortage and port facilities were stretched to their limits. The amount of imports from Asia surged--the number of TEUs arriving on the West Coast totaled a record 13 million in 2004, up from about 12 million in 2003. Of that total, Los Angeles/Long Beach handled more than 9 million, making it the third-busiest container port in the world. Portland, Seattle, and Tacoma also reached record high TEU numbers as many ships were diverted from the congestion of Los Angeles up the coast.

In the fall of 2004 as many as 100 ships were in the harbor at Los Angeles, the highest number since the labor strike in 2002. Of those, more than 40 were anchored offshore awaiting berth space to unload. Total turnaround time for a ship to move in and out of the port grew to seven days--about twice the normal time required. Once the ships moved through the bottleneck to unload, labor shortages at the port provided further complications.

Port officials were unprepared for the upswing in activity and an insufficient number of trained employees were available to handle the cargo efficiently. This led to long delays in offloading, which in turn led to long delays for truck drivers waiting in port for cargo containers. Because drivers normally are paid by the load rather than by the hour, as wait times inched toward seven hours idling in line, truck drivers quit in droves, leading to even further delays in getting the containers out of the port once they were off the ships. The railroads were also caught shorthanded, with not enough locomotives, cars, or employees to handle the TEUs.

Offloaded goods had to be stacked and then unstacked to be loaded on trucks. Some containers were moved offsite to be stored until they could be transported by truck or rail. As another solution, some ships were diverted to other West Coast ports. All measures required extra handling and time, and thus added to the overall cost of the products. The backlog caused problems for merchants awaiting the arrival of inventory for the Christmas season. Barney Gimbel noted in Fortune in December 2004, "It's hard to overstate the ripple effects of the chaos. Just ask... Sharp Electronics, which had to fly in television parts from China, or toymaker MGA Entertainment, which lost some $40 million in revenues when it couldn't deliver its bestselling Bratz dolls on time to big retailers. Sharper Image even blamed a third-quarter loss in part on reduced inventory from the port backlog."

Between the summer of 2004 and February 2005, the Southern California shipping industry hired more than 5,000 casual workers and promoted about 1,750 to registered status. In the constant struggle to balance labor needs with demand, the PMA was hesitant to hire any more union workers than necessary. However, the need for equipment operators and marine clerks rose during 2005 when terminal operators institute PierPass, a program that was designed to increase the number of hours truck gates are open by extending hours to include at least five night and weekend shifts a week. Import volumes were also expected to increase, further straining the ports' capabilities.

Cargo volume also increased on the East Coast during 2004. In February 2005 the New York Shipping Association announced plans to hire an additional 1,000 longshoremen and clerks during the year along with replacing 400 early retirees. The Port of New York and New Jersey employed 3,511 registered longshoremen, checkers, and maintenance workers in 2004, who earned $308 million in wages and $173 million in benefits.

The increased cargo-handling activity and congestion of the mid-2000s led to a surge in acquisitions of U.S. port facilities that began to die down by late 2007. To accommodate the growing cargo volume, however, companies that purchased marine terminals were facing the possibility of investing millions more to expand infrastructure and improve productivity to handle the larger vessels that carriers are deploying to U.S. ports. Estimates are that terminal operators would have to increase crane productivity to about 35 moves per hour from less than 30 lifts per hour. As a result, the terminal operators may have to raise cargo-handling fees.

To alleviate future problems, Maritime Administrator Sean Connaughton said the federal government may develop a new national port strategy. The Maritime Administration is developing a program to encourage private investment in port infrastructure at the ten U.S. ports that handle 85 percent of seaborne cargoes. In addition to increased traffic from Asia, trade between the United States and NAFTA partners Canada and Mexico reached a record $866 billion in 2006, a 9.7 percent increase in value over 2005. The total volume between the U.S. and its NAFTA partners in 2006 was approximately 475 million tons.

With the ports in Los Angeles and Long Beach, California, near capacity volume and essentially flat in 2007, many East Coast ports were posting growth rates of 5 to 6 percent, similar to what had been seen in California earlier in the decade. Savannah, Georgia, managed to attract new all-water container services from Asia through the Panama and Suez canals and reported a 22 percent increase through September 2007. Terminal operators have found it easier to get terminals developed at East Coast ports.

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