Port of LA’s Gene Seroka Unpacks COVID-19 Impacts on Goods Movement

The Ports of Los Angeles and Long Beach serve as harbingers of how the global slowdown of trade due to COVID-19 is progressing. Share with our readers what you believe the pandemic’s impact will be on global trade going forward.

Gene Seroka: From our perspective, there have been two huge shocks to the international supply chain and the port systems in the past couple of years. One is the ill-advised trade policy in Washington with respect to China that ended with a 16.5 percent decline in volume for the Port of Los Angeles in the fourth quarter of 2019.

The second shock is obviously this global health pandemic, COVID-19, which in this first quarter of 2020 will show that our volume will be down 18 percent year on year—one-eighth. Those numbers will probably get a bit worse, and the knock-out effects of the coronavirus will go through the end of this year. 

The latest reporting on trade flow includes signs of recovery for China's exports, but also that demand is faltering in the US and Europe. Does this square with what’s occurring at the Port of Los Angeles?

Yes. Right now, it looks like China’s manufacturing is at about 50 percent of normal capacity. That's basically cross-referenced—not just by our decades-long contacts on the ground after having worked in China, but also we compared those numbers to energy consumption, traffic patterns, and even smog—and all of those are right around that 40 to 50 percent mark.

While some were hopeful, we start to see a modest uptick in manufacturing capacity capabilities. It's being met right now with a retail market that is shuttering doors and trying to cut back on inventory through delaying or eliminating purchase orders.

There's a new Brookings report that asserts that in the midst of market uncertainty, two points are clear: some places are more exposed than others when it comes to managing the movement of goods;  and, that millions of workers in those places will directly feel COVID-19’s effects. Could you elaborate on Brookings’ findings?

I totally concur with that. We're seeing cargo movement that is about 80 percent—or maybe less—than normal. Mainly on the heels of the fact that our book of business with China amounts to about 50 to 55 percent of all cargo that moves through the Port of LA. Our level of exposure is higher than some based really on geographic proximity and decades of relationship development.

On the worker side—with Safer at Home—everyone except the essential workers stay at home, while that definition of ‘essential workers’ continues to be honed at federal, state and local levels. Many Americans and many workers worldwide are being impacted as we all know. We've all read the mass media reports of what's tragically taking place in Spain, France, Italy, and many other countries. Slowly, even Britain jumped on board yesterday, finally.

Workers worldwide will be impacted, and I'll give you a couple of stats from around here. One is that our Longshore groups have been working at about two-thirds of normal levels for the better part of this year, meaning about a third of their jobs have been cut, simply because there's not enough cargo moving. In some cases—with the regular folks—they're receiving a pay guarantee to be at home, as part of their coastwide NLRB sanction contract.

Truck drivers are not pulling as many loads, and some warehouses appear to be conflicted right now because of the unclear definition of ‘essential work’. Folks aren’t not willing to take a chance on having their warehouse open, deliveries made, etc., trying to understand what the letter of an essential goods really means as issued by these governmental orders.

We're doing our level best to try to make sure people have an understanding, clear interpretation, and government level contracts to make sure there is no confusion about who should be on the job today. Obviously—being an economy who rests 70 percent of its success on you and me, the consumer, it's going to take a hit.

By definition, two consecutive quarters of declines mean you're in a recession. The manufacturing sector has been in recession for some time simply because of those trade policies. Here at the Port of Los Angeles, we witnessed 14 consecutive months of export decline. The pandemic itself would have meant economic disaster at any time, but coupled with those trade policies out of Washington, we've been hit in the face twice.

Share the priorities being advanced by your senior staff, to address the Port of Los Angeles’ current and future challenges.

The agenda is broken down into three categories. We hold a morning meeting at 0900 with my leadership team, and talk first about cargo—what’s the disposition of ships, to work, the workers on the docks, their health and safety, and any type of projections that we have. Most of which I just covered in the opening of this discussion.

Second is our cruise business. As we know well from reports from all around the world, that industry has been decimated. So many illnesses and unfortunately, fatalities that have taken place after folks had been on cruise vessels. We're doing our best to house those vessels in a very safe and secure environment, allowing crew to work closely with the US Coast Guard and Customs and Border Protection, and make sure all health and safety protocols are followed.

Thirdly, we work specifically around our employee base. Here at the Los Angeles Harbor Department have a little over 900 employees, and the work on health and safety has been front of mind. But to do that, continued work on messaging with respect to social distancing, rotation of work, telecommuting opportunities, as well as the Disaster Worker Program—that the mayor declared the day before yesterday—to make sure that the City's services can be executed by the 45,000 Los Angeles city employees that we have, and how best they can fit into all 42 departments.

This work happens every morning at nine o'clock. We have our instruction for the day from the responsible parties, and the execution that's expected. We've been trying to wrap up at the end of the day, to see what coverage we've had, what Intel we gained, and how we're going to approach the work at night. Then that culminates into what we do nine o’clock the next morning.

Prior to the current pandemic, the Port was engaged in policy discussions related to the promise and challenges of incorporating artificial intelligence (AI) and other digital technologies into workplace operations. Now, with shelter-in-place and social distancing, how operationally relevant are these evolving technologies, in terms of what you must address to keep the supply chain fluid and vibrant?

Keeping our employees, our workforce, our crews, and those people who come in to do business at the Port of Los Angeles healthy and safe is job number one. And through all of the guidance medical experts have given us from the CDC, LA County Health Services, and the many others who have volunteered their knowledge and time to help us through this pandemic.

Secondly, it's our job to keep this port open and running, because we will be supplying essential goods and services and products to the American citizens who need them. While I'm so heartened by how the public and private sector have rallied, there are going to be hurdles, choke points, and contradictory information, but we have got to keep it at the center of this.

You may have noticed that more than any other port nationally, we have—through the use of social, mainstream, and digital media—been putting out direct-to-market videos and direct-to-employee videos to make sure that we're keeping that good healthy environment on what the latest information is and how, when, and where we need help. Over-communicating at a time like this is important, and the ability for social media to exponentially grow our viewership is going to be a benefit.

The artificial intelligence (AI) piece is also something that we can proliferate, and yet, unfortunately we're the only one. We've created the only Port Community System in the United States, one that will provide visibility and decision-making capability for folks who shipped cargo to and from this port. These Port Community Systems have been in action for decades, in Europe, Asia, the Middle East, and we’ve tried to replicate best practices. For whatever reason, ports in the United States have not adopted this concept, and it's very unfortunate.

At a time like this, we need to know where the medical products are, how quickly we can get them, and how we will expedite them to the users’ location. Playing politics or worrying about individual commercial interest right now is not the task at hand, and I would call out anyone who is trying to preserve their own individual market share that impedes the greater good of the American people at a time like this.

We will utilize the technology that we have in concert with our many supply chain partners to deliver what we can. As the mayor's direction, today's effort is about saving lives and that is not underscored strongly enough.

In closing, could you assess the policies being advanced at the federal, state, and international level to facilitate a cargo flow going forward? 

The work we're doing can and should be replicated across the country. It’s about bringing the public and private sector together and making sure there is visibility of cargo flow, and that's done through information sharing. It's not done to try to make one company better than the other or stomp out the weaker brother or sister.

That starts with people like the secretaries of commerce, transportation, and labor pulling together all these folks. That's probably for another day, but I have got to believe that those folks taking the direction from the president should be looking at this segment of the economy very closely, because again, it's not about economic growth or an individual company's profits at this time. It's about saving lives by making sure the goods, materials and services are where the people need them.

To that end, in closing, the United States Navy has announced that they will be bringing the United States Navy Ship Mercy, the 1000-bed floating hospital to the Port of Los Angeles very soon. This hospital will take on non-COVID-19 patients to relieve a little bit of the landside hospitals’ work, so they can focus on curbing and ultimately eradicating this virus; this is just another way the Port of Los Angeles is stepping up at this critical time.