Direct route to the East by importers worries area ports.

Shippers who have used the ports of Los Angeles and Long Beach as the gateway for nearly all imports from Asia are increasingly turning to East Coast ports as an alternative -- a development that potentially has serious economic consequences.

The change, often requiring the use of the Panama Canal, adds to delivery time, but it is cost-efficient and alleviates some of the uncertainty that comes with shipping goods through a single entry port.

To date, the shift -- which typically comprises a small portion of an importer's total volume -- hasn't hurt West Coast ports as much as it has helped their smaller East Coast competitors. With import volumes from Asia rising in general, most ports are still recording increases.

However, the Panama Canal Authority is gearing up a marketing alliance, and local port officials were caught by surprise when May volume numbers released in mid-June underscored the trend. They are analyzing the data so they can respond before it becomes a larger problem.

"For companies that have facilities east of the Mississippi (River), the East Coast is increasingly attractive because the rates are comparable, the railroads are quite congested and the West Coast ports have become quite congested," said Robin Lanier, executive director of the Waterfront Coalition, an importers' trade organization.

Asian imports to the ports of New York New Jersey jumped 52 percent in the first four months of 2003, and 45 percent in Charleston, S.C. In Savannah, Asian imports rose 31 percent in 2002 versus 2001.

Fueling the trend is an expansion of operations by the canal authority, which has reached preliminary agreements to jointly market several East Coast ports, including New York-New Jersey, Norfolk, Va. and Savannah. This week, Charleston, Houston, Miami and New Orleans are expected to join the program as well.

East Coast advantages

There are a number of reasons why bypassing the West Coast makes sense for shippers.

Money is one. Shippers save $200 to $300 per container to move goods destined for East Coast retailers and manufacturers through the Panama Canal instead of using the so-called "land bridge" -- Asia to the West Coast by steamship, and onto the East Coast by train.

"It's primarily logistics," said Freya Maneki, spokeswoman for Westlake Village-based Dole Food Co., which imports pre-processed packaged foods from Asia. "It's most efficient to distribute to East Coast customers from the East Coast ports."

Bypassing local ports also avoids the congestion on the Long Beach (710) Freeway, which is said to be the worst among port access roads in the nation.

A long history of labor unrest, which resulted in a 10-day shutdown of the West Coast last fall, is also partially to blame. By the time the International Longshore and Warehouse Union. ratified a six-year agreement with the steamship lines in January, many importers were already searching for permanent alternatives.

Shippers are less vulnerable to labor unrest on the East Coast because the International Longshoremen's Association consists of separate bargaining units. So if dockworkers at one location strike, importers can divert their cargo to a nearby port -- and at Charleston, many port workers are employees of the port authority itself, virtually eliminating any possibility of a job walkout. By contrast, a strike by the ILWU would shut down all 29 West Coast ports.

Even so, the West Coast's advantage of speedier delivery trumps the alternatives in many cases, especially during the peak season from August to mid-October, when retailers order their Halloween, Thanksgiving and Christmas goods.

For Torrance-based Toyota Motor Sales USA Inc., getting Asian-made automobile parts into its 750,000-square-foot distribution facility in Ontario is critical to ensuring just-in-time delivery to its customers.

"Otherwise customer satisfaction will be impacted and you'll be increasing your costs through expedited deliveries," said Tony Minyon, national logistics manager for the Toyota Motor Corp. unit.

Local ports respond

While East Coast ports have siphoned off some business, they haven't yet put a serious dent in traffic at the ports of L.A. and Long Beach, since the amount of imports is rising nationwide.

The L.A.-Long Beach port complex handled a combined 4.7 million TEUs (20-foot equivalent units) during the first five months of this year, up 11 percent over the year-earlier period. Most of the cargo comes from Asia.

But the diversion of some traffic has caught them off guard.

After May figures showed sharp increases on the East Coast, L.A. port officials instructed their research and planning staff to conduct an analysis on the reasons for the shift and whether it can be curtailed.

Some port officials already believe that last fall's West Coast port shutdown was the trigger for the changes.

"There has been a consistent increase in the number of all-water services since the labor situation last autumn," said Jim MacLellan, the L.A. port's director of marketing. "It's an effort by the importers to try to increase their diversity of routes so they are not 100 percent reliant on the Pacific Southwest."

Final details of the agreements between the Panama Canal Authority and the seven eastern ports should be ironed out within a couple of months, opening the door for shared business intelligence, such as marketing studies, details of infrastructure improvements, trade flow patterns and port channel dredging.

In this way, the canal will become a quasi-partner of the participating ports, not simply a gateway leading to them.

The authority is considering a 5- to 7-year expansion that would enable ships carrying 7,400 TEUs to ran through the canal, which currently can't handle ships larger than 5,000 TEUs. That's an advantage the L.A.-Long Beach complex now has.

"We feel this is the beginning of a new relationship," said Rodolfo Sabonge, director of corporate planning and marketing for the Panama Canal Authority.

RELATED ARTICLE: How Ports Create Work

THE Port of Long Beach is responsible for 30,000 jobs in that city, according to a new study by Rutgers University, up from 18,000 when the study was last completed in 1996.

The increase is considered more a reflection of refined surveying than job growth. Previously, job estimates only included workers directly involved with handling or transporting cargo. Currently there are 18,400 workers in that category, easily the largest segment.

Among those counted for the first time are construction firms, tourism companies, retailers selling imported goods and wholesale distributors of imported goods.

Job growth for direct handlers of cargo has stayed about the same over the seven-year period despite increases in cargo volume.

"The port industry has experienced huge productivity improvements. You can handle the same amount of cargo with fewer people," said Larry Cottrill, manager of master planning at the Port of Long Beach.

Rutgers was originally contracted by the U.S. Department of Transportation's Maritime Administration agency to develop an economic impact model for ports. The model has also been used by the Jacksonville (Fla.) Port Authority and the New York Shipping Association.

The Rutgers' model does not account for manufacturers that use the Long Beach port for exporting because many of those local companies are actually shipping companies hired to export goods.

Jobs from these companies are counted in a broader Southern California number that assumes the goods are made somewhere within the region, said Cottrill. There are 49,000 export-related jobs in the region.

In L.A., a survey done three years ago by the Board of Harbor Commissions of the Port of Los Angeles found that one of three residents in the cities of Wilmington and San Pedro derived their income from the port.

John Wentworth, who was president of the Board of Harbor Commissions at the time, said that the Rutgers' model would show greater impact in Long Beach if jobs related to the Port of L.A. were included.

Michael Thuresson