How American Shoppers Broke the Supply Chain

Gina Martinez, 54, has watched the vociferous U.S. appetite for stuff drive by her door every day. She lives in the house where she grew up in Wilmington, a working-class neighborhood of Los Angeles. When she was young, neighbors would chase trucks out of the neighborhood, she says, yelling at them for rumbling through on their way to and from the nearby twin ports of Los Angeles and Long Beach.

Today, her neighborhood is, essentially, a truck stop. Huffing diesel engines rattle down quiet residential streets, despite the signs prohibiting vehicles weighing more than 6,000 pounds. Trucks idle on streets where the pink of bougainvilleas is muted, covered in dust. They roll over sidewalks and chip the mirrors of parked cars and spew pollution into the already-smoggy air.

As Americans went on a spending spree this year and the ports filled with imports, clogging the supply chain, trucks started dumping shipping containers in Wilmington so they could go back to the ports and pick up more to relieve the backlog. The 40-foot containers, which can weigh four tons, are hulking feet from residents’ kitchen windows and blocking the driveways where their children ride bicycles. They’re piled six or seven high in storage yards where they dwarf small churches and homes.

“This wasn’t here six months ago,” Martinez tells me as we pull past a lot where white containers are stacked six tall, towering to the sky; a sign outside identifies it as an auto shop. “It was just a yard.”

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America has long been gobbling up more goods from overseas than we send back, but in the past year, spending has gone bonkers. Stuck at home and unable to buy services like haircuts and massages, and unable to travel and eat out as much as they’d like, Americans bought even more stuff, filling their ever-larger houses. The U.S. imported $238 billion worth of goods in September, up 15% from September 2019. Meanwhile, the country exported about $96 billion less than it imported, leading to a record trade deficit, according to the most recent advance estimate released by the Commerce Department. Spending will likely only continue to grow for the rest of the year as shoppers stock up for the holiday season.

The pandemic is partially to blame. People stopped shopping in March of 2020 as they hunkered down and waited to see what would happen next; when spending started booming in the summer, shipping containers were stranded in ports across the world. As backlogs grew, factories across the world could no longer rely on the global supply chain to get them the parts they needed quickly, which meant delays in getting their products to consumers.

But the supply chain is also broken because of the sheer volume of stuff that Americans are buying, especially online. To keep up with demand for two-day shipping, companies like Amazon and Walmart have built warehouses around the country, and are importing even more containers of goods to fill them. These warehouses are getting a lot more action now that even the most reluctant online shopper was pushed to embrace e-commerce during the pandemic to comply with shelter in place orders.

“Americans have become singularly impatient consumers, unlike their peers in much of the rest of the world,” says Jock O’Connell, international trade advisor at Beacon Economics. “We have much more inventory in this country than we would need if Jeff Bezos hadn’t convinced us we could have our stuff delivered tomorrow.”

Because there are so many more goods coming into the ports, the ports are clogged up. A few miles from where Gina Martinez lives, dozens of container ships wait on the blue waters off Los Angeles and Long Beach, looking like a fleet ready to attack. There’s no room to unload them because there are so many containers already there. There were about 81,000 containers sitting at the Port of Los Angeles on October 29, and nearly half have been there for nine days or more.

Because there’s no more room to unload, longshoremen shifts are getting cut, and because there’s nowhere to put the containers, cranes sit idle. And retailers can’t get all the products they ordered months ago, which could lead to empty shelves ahead of the holiday season. A truck might show up to the port to pick up a certain container for a retailer, but that specific container might be buried under five others and unavailable for pickup. But instead of worrying about reducing consumption, many Americans are panicking about getting their holiday gifts on time.

There are so many empty containers piling up at the ports whose goods have been unloaded and sent to warehouses and onto American consumers that global shipping companies like Maersk and Hapag-Lloyd are sending in “sweeper” ships just to move the empties to make room for more stuff.

What’s causing holiday shipping delays

“We’re in the midst of unprecedented cargo congestion,” said Gene Seroka, the executive director of the Port of Los Angeles, at a Harbor Commission board meeting Friday, where the ports approved assessing a $100 fee per day on every container that has sat at a marine terminal for nine days or more. “The system is all gummed up.”

Trying to get containers out of the ports to make more room, trucking companies hauled them to lots in Martinez’s neighborhood, many of which are unpermitted. Sometimes they just leave the containers in the streets. Los Angeles Port Police have issued 500 citations for unlawful storage of containers in residential areas of Wilmington in the last 40 days, says Tom Gazsi, Chief of Police for the Port of Los Angeles. In 2019, they issued just a handful. But trucks don’t have the equipment to take the containers off their chassis—the wheels and frame that attaches to the truck tractor—so they just separate the chassis from their trucks and head back to haul more loads. That means many of the containers sitting in Martinez’s neighborhood are tying up chassis that could be used to haul more loads.

“Right now, it’s super bad,” says Josue Alvarez, a 28-year-old trucker who waited from 7 a.m. to 5 p.m. a few weeks ago just to get a chassis. Last week, he waited from noon to 6 p.m. A few years ago, shipping companies decided to get out of the chassis business (they had previously owned chassis and provided them to cargo owners). That set off a scramble for chassis, and now, truckers like Alvarez have to get them from a pool of chassis at the ports. But when those chassis are being used to store containers, no one can do any unloading. A tariff levied on Chinese-made chassis starting May 6 has also made them more expensive to import.

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The competition for chassis is so fierce that truckers like Alvarez know they can’t get out of line to make a bathroom stop or to eat. He’s been ordering Uber Eats to be delivered to his truck while he’s waiting in line to make sure not to lose his spot.

Alvarez, who drives a truck between the ports and warehouses for XPO Logistics, says he only gets paid about $300 a day for waiting around to pick up a load. If he delivers 2-3 loads in one day, he can make $800. These delays mean that some days, he loses money, because he is an independent contractor and has to pay for his own expenses like maintenance and gas. It costs $600 to fill his tank because the price of diesel is so high. (XPO Logistics recently agreed to pay $30 million to settle a class action lawsuit from drivers including Alvarez who say they earned less than the minimum wage while working at the ports.)

The number of idling ships waiting offshore and increased volume of trucks is causing more pollution at the ports, where a low line of brown smog can be seen hovering on the horizon. The 17 million people living in the region already breathe air with the highest ozone levels in the country, according to the South Coast Air Quality Management District. There’s been a 40% increase in smog-forming emissions since the port congestion began, according to the California Air Resource Board, creating another headache for locals like Martinez. She says that she and most of her neighbors can name someone in their family who has had cancer.

Our buying habits are hurting the U.S. economy

Usually consumer spending is good for the economy, but the bottlenecks created by America’s huge appetite are becoming a problem for economic growth. The U.S. economy grew at a rate of just 2% from July to September, the Commerce Department said last week, down significantly from the 6.7% it grew the quarter before, largely because of supply chain bottlenecks that have made it harder for consumers to buy all the things they want.

Global demand for shipping containers was up only 3% in the second quarter, compared to 2019, according to the shipping giant Maersk. But what Maersk could charge to ship a container was up 63% in the same time period, driven by U.S. demand. “The current situation is a growth story in the U.S. – and the supply chain disruption you are seeing is a byproduct of this growth,” said Narin Phol, Maersk North America’s Regional Managing Director, at a trade conference in South Carolina in October.

Meanwhile, the ports of Los Angeles and Long Beach are scrambling to move cargo, both off the docks and out of the neighborhoods. On Oct. 20, California Gov. Gavin Newsom issued an executive order directing the government to identify privately owned and government owned land where containers could be stored.

There’s a lot of finger-pointing as frustrated ocean carriers, trucking companies, and cargo owners try to get things moving more quickly. Congestion at the ports of Los Angeles and Long Beach got so bad that the marine terminals launched an appointment system in 2018 to try and mitigate truck traffic. But that appointment system is now causing even more headaches.

The ocean carriers blame the cargo owners and trucking companies for not picking up containers at the ports, and say that truckers don’t show up for appointments to pick up the containers. They point out that cargo sat at a marine terminal for nearly six days on average in September before being picked up, the longest since they began tracking in 2016.

Trucking companies say that the ports are so full that they can’t get appointments to drop off empty containers and pick up new ones. Kent Prokop runs a trucking company, California Cartage, that brings containers for major retailers from the ports to their inland warehouses. (It’s owned by the logistics company NFI Industries.) Last year at this time, the company was hauling about 300 containers a day. Now it’s doing 200. Cartage has so many empty containers that it’s started storing them on company lots that usually hold full containers heading for warehouses. A few months ago, Prokop paid thousands of dollars to repair a broken forklift so he could use it to stack containers on his yard to make more room.

His customers are getting charged for not returning the containers, he says, even though truckers can’t get appointments to drop them off. He’s had to hire more staff to take screenshots of the marine terminal websites that say there aren’t appointments available so the cargo owners can prove that they were prohibited from dropping off containers.

“Our staff is higher than it’s been and we’re hauling less containers,” he says.

He walked me up and down long rows of empty containers sitting at his company’s yard in Long Beach, eight acres that used to be a dairy farm but is now just a parking lot for the containers that transported goods from Asia to fill America’s huge appetite. Some of the containers were stacked beneath the remnants of hay barns, where dairy cows roamed until 1993.

The supply chain bottlenecks are, ironically, pushing the U.S. further in the direction of an economy that consumes things but doesn’t make them. Many U.S. farmers can’t currently get their hay and other goods onto containers for export. Shipping companies can make more money sending empty containers back to Asia and filling them back up with stuff than they can loading them with agriculture exports. Importers used to pay $6,000 or $7,000 to bring a container from Asia, and exporters would pay $1,000 to send one back, says Peter Friedmann, executive director of the Agriculture Transportation Coalition. Container shipping rates from China to the U.S., by contrast, surpassed $20,000 in August, so it’s not worth diverting a container to go pick up agricultural exports.

Merchants in the U.S. are doing what they can to get goods across the ocean and to shoppers ahead of the holidays. They’re holding their breath and seeing if U.S. consumers will put up with the higher prices they need to make up what it costs to get things here. Charlene Anderson, who sells craft supplies on Amazon, says she’s going to have to raise prices 15% because it’s gotten so much more expensive to import goods. Even then, she’s worried about inventory arriving in time. “It’s not going to be a fun thing to answer all those ‘You ruined my Christmas’ emails’” she says. She recommends people do their holiday shopping now, because once products are sold out, replacements won’t be available until after the holidays.

She’s a member of an Amazon sellers group where lots of people are panicking and trying to figure out how to get goods into the warehouses. Only one seller had an option that seemed fool-proof: rather than shipping goods in from Germany, they’re going to air freight everything, and pass on the costs to the American consumer, who seems perfectly willing to spend, provided there’s something to buy.