Supply Chain ‘Impacts’ Abounded From West Coast Port Disruption, GAO Finds
Almost all the 21 “selected industry groups” interviewed by the Government Accountability Office “said that shippers in their respective industries using major West Coast ports were affected by recent port disruptions,” such as the labor impasse that virtually shut down 29 West Coast ports in 2014 and 2015 (see 1502230002), an Oct. 31 GAO report said (here). Higher costs, lower revenue and shipment delays were the “main types of short- and long-term financial and business impacts” the industry groups said their members experienced from the 2014 and 2015 port disruption, GAO said. Almost all cited “some form of increased costs, and several industry groups experienced multiple types of increased costs,” the report said. “Some of the impacts were short-term -- such as increased costs or shipment delays -- while other impacts were of longer-term duration, such as the loss of sales, customers, or market share.”
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Representatives from 18 of the 21 groups canvassed told GAO “that at least some shippers experienced some impacts to their supply chains” from the 2014 and 2015 port disruption, and about half (11 or 21) said that “all or a majority of shippers who ship out of West Coast ports were affected by that disruption,” it said. “Interviewees said the disruption in 2014 and 2015 mainly affected containerized shipments.” The GAO also interviewed nine regional associations affiliated with the National Customs Brokers & Forwarders Association of America "to understand the logistical impacts of disruptions," it said.
Some shippers responded to the 2014 and 2015 port disruption by “temporarily modifying their supply chains,” GAO said. These modifications all meant higher costs or lower revenue and included diverting shipments to other ports or to air freight, or “diverting shipments intended for the export market to the domestic market,” it said. After the end of the 2014 and 2015 port disruption, “industry groups said shippers in their industry maintained and permanently implemented some of the supply chain modifications they made, such as shipping some commodities through East or Gulf Coast ports instead of West Coast ports, in order to diversify their shipping routes and minimize their risk exposure to West Coast ports in the case of future disruptions there,” the report said.
It studied U.S. Census international trade data from January 2005 to March 2016 to discern whether there were “significant changes in the dollar value of trade flows at certain ports coinciding with the 2014 and 2015 West Coast port disruption,” the report said. Its statistical analysis showed “total exports at major West Coast ports were significantly lower in this time frame than during other quarters included in the analysis, given other established trends in the economy and other factors we were able to control for,” GAO said.
GAO said it “did not find that West Coast port vessel imports were statistically different during any of the three quarters that correspond with the 2014 and 2015 port disruption when compared to imports during other quarters included in our analysis.” GAO also found “there were no differences in total imports at East Coast ports during this time frame compared to other quarters included in the analysis,” it said.
The analysis found that the “dollar value of imports at Gulf Coast ports was substantially higher during the three quarters of the port disruption than other quarters included in the model.” Those imports “continued to be higher than past levels in every subsequent quarter at Gulf Coast ports, up to and including the first quarter of 2016,” it said. It’s possible the diversion of shipments from West Coast ports “may have played some role in these increases during the port disruption but because we found no statistical evidence that imports were lower at West Coast ports, it would appear that diversion likely played a small role, if at all,” GAO said.
The study found no “statistical indication” imports “were different at West Coast ports than expected during the port disruption, despite hearing during our interviews about specific impacts that some West Coast port importers experienced during this time frame,” the agency said in a footnote. “Notably, we were told that some imports bound for West Coast ports were delayed and that importers engaged in some diversion of goods to other U.S. ports as well as to ports in Canada and Mexico, and that some importers suffered additional costs for transportation and/or suffered revenue losses.”
The “empirical analysis” examined only “overall trade levels, but could not detect certain other possible impacts of the port disruption,” GAO said. “For example, if a shipment of imports was delayed but still arrived in the originally scheduled quarter -- which is the time frame of our data -- such delays would not show up in our analysis. Additionally, our analysis cannot determine whether additional costs were incurred to expedite transportation due to a possible delay at ports.” Imports that were “somewhat late might miss critical time frames, which can lead to increased costs such as late fees or revenue losses for importers,” the agency said. “These financial impacts would not be identifiable in the data we examined.”
To assess if “there may have been some shifts to air freight during the disruption period,” GAO also examined whether “trade flows at large U.S. airports exhibited any unusual changes during the same quarters of the 2014 and 2015 disruption,” the report said. “Imports were statistically higher during the last two quarters of 2014 but not during the first quarter of 2015, compared to past levels at the West Coast airports. However, we found no changes in air imports at East or Gulf Coast airports during any of the time frame examined in our analysis.” The findings suggest some imports destined for West Coast ports were diverted to East Coast airports, but “it is possible that other factors influenced the trends we found at West Coast airports,” the agency said.
While still reviewing the report, Jonathan Gold, National Retail Federation vice president-supply chain and customs policy, hailed the document because it "addresses a lot of the bigger supply chain and port congestion issues that stakeholders are facing today, beyond what happened during the 2014-2015 disruptions," he said in an email. For example, NRF agrees with the need "for a freight data strategy to help DOT better address an overall multimodal freight strategy, that includes the ports," he said of the Department of Transportation. "We are extremely supportive of the requirement under the FAST Act for the creation of the Port Performance Freight Statistics Program," Gold said of the Fixing America’s Surface Transportation Act enacted in December. "This is critical to help identify and address key congestion issues at our nation’s ports."