Biden ordering 24/7 operations at port of LA is 'too late to do much now': AAFA CEO

Stephen Lamar, American Apparel and Footwear Association CEO & President, discusses the implications of President Biden's order for round-the-clock operations at the port of LA amid the supply chain crisis.

Video Transcript

AKIKO FUJITA: Well, the Port of Los Angeles is joining the Port of Long Beach and shifting to a 24-hour operation after the White House stepped in this week to try and ease the backlog we've seen in shipments. Retailers say, though, that doesn't go far enough in averting a crisis come this holiday season. Let's bring in Stephen Lamar, American Apparel and Footwear Association CEO and president. Stephen, good to talk to you today. What are you hearing from your members as they look to some of the busiest months?

STEPHEN LAMAR: Well, we're pleased to see the president get personally involved. We've been urging him to get involved. We've been making that appeal for a number of months. Unfortunately, like the cargo that's been snarled up at a lot of ports, this is really coming too late to do much good now, but it's a great first step. It's important that we get the ports operating 24/7. You know, boats operate 24/7. Ports around the world operate 24/7. There's no reason that we shouldn't be doing that in the United States.

But we need to really get whole of government approaches. And we need to get approaches that really bring all the stakeholders together, so not only just the ports, but the folks moving goods out of the ports as well. And then we also need to keep focus on the terrible freight costs that are going on, the carrier collusion that's creating real contract mischief, that's making freight costs go through the roof. You know, I think it's too early to helicopter out to one of the 70 container ships that's anchored in San Pedro Bay and hang a mission accomplished sign. We have a lot more work to do to get out of this problem.

ZACK GUZMAN: Yeah, you say it's mostly been largely symbolic in terms of the efforts now coming from the White House this early on, but it does seem like there's not a lot that more money thrown at the problem or more time thrown at the problem is going to do to alleviate the bottlenecks, right? Just the issue, kind of, in the moment of unloading here to alleviate it, I suppose, spreading out to 24 hours a day might. But I mean, what more is there to do in the long-term to make sure something like it doesn't happen again?

STEPHEN LAMAR: Well, I mean, in the long-term, you know, long, long term, we're talking about passing the infrastructure bill, which the president talked about. But we can't really look at that as something that's going to get us out of the problem right now. We need to step up enforcement activities with the Federal Maritime Commission. I mean, they need to use all of their enforcement tools. There's legislation pending that will give them even more tools to investigate and put a stop to the extra costs that are being levied at the ports or extra costs that are being charged by the shipper, by the carriers.

One of the things the administration could do right away is we charge an extra 65% tariff on chassis, right? So there's a huge chassis shortage. One of the reasons why there's a chassis shortage is we're making it really expensive to import chassis into the United States. So we can relieve that shortage. That makes no sense at all.

AKIKO FUJITA: You mentioned the freight costs going up, another challenge for some of your members. At what point does that get passed down to consumers, if it hasn't already?

STEPHEN LAMAR: Well, cost getting passed down to consumers are decisions that are made by individual companies. But, you know, if you're putting extra freight costs in-- and these are freight costs that are 10 times more expensive than normal. I mean, if you can kind of give an analogy to a gallon of gas, I mean, if you are used to a gallon of gas being $3.20 and then you show up and it's now costing you $32, that gives you an idea of the kind of freight costs that our members are having to absorb.

And ultimately, those costs end up getting passed down. They get passed down in the form of higher prices. And as goods are not arriving, as goods are not making their way to store shelves, that scarcity also results in higher prices. And I think this is one of the things that the administration is beginning to focus on, is that this is becoming a problem for everyday Americans.

Everybody is feeling this, whether it's pressure of jobs, pressure on prices, pressuring the stores. We're all beginning to feel this, and it's something the administration should really focus, deploy every tool they can, and really treat it like the crisis that it is. As I said, we're pleased to see the president is engaged personally. And we hope that engagement stays on a daily basis.

ZACK GUZMAN: Yeah, and Steve, I mean, when we talk about the companies you represent and the decisions that they make, I suppose, you know, a lot of those tariffs were put in place originally under President Trump in a trade battle with China. But also at the forefront of it was this idea of apparel manufacturers, shoe companies moving their supply chains back here to the US, or looking to make some of the stuff here.

I suppose if you couple the tariffs as well as shipping issues around COVID-19, it seems like now would be kind of the all-time high in terms of pressure for some of these companies to move things back. And if they aren't, it would kind of, I suppose, undo the idea of tariffs. I mean, how do you look at that? How do the companies you represent look at that in terms of maybe now thinking about moving some of this stuff back to the US?

STEPHEN LAMAR: Well, there's been a long time long-term, and this goes back even before the Trump administration efforts to diversify sourcing supply chains. You know, there's a big concentration coming out of China, and that has dropped, although China still continues to be the number one supplier of apparel of footwear of travel goods. So when you then impose these extraordinarily high tariffs on China, that means you're imposing extraordinarily high and crushing tariff burden on the US importers that are bringing in much of that product. So, and again, that's another cost that gets passed on to consumers, or it comes at the expense of payroll. It comes at the expense of innovation.

And to your point, you know, when you look at what's going on right now, we have these very, very high, these disabling high freight costs. On top of that, we also have these very high tariff costs. One of the things we've asked the administration to do is if you look at that tariff tool and suspend it, maybe even refine some of those $110 billion worth of tariffs that you've been charging us.

And then that gives the companies that are the most directly affected by the container crisis, by this freight crisis, more relief, more reserves that they can use to just even stay in business. I mean, it is a very, very existential threat we're dealing with right now. And as I said, we need to get the administration to really put all the tools back at work for the US economy.

AKIKO FUJITA: Can you elaborate on that threat? What do you mean, when you say there's an existential threat? I mean, how dire is the situation for some of your members who are not just dealing with higher freight costs, a backlog that's added-- likely to add to costs, additional tariffs on Chinese imports? What's the reality look like for them?

STEPHEN LAMAR: Well, if you're a small business and your freight's now 10 times more expensive than it was, and you've contracted the freight, but the carrier, because they have these take it or leave it contracts, there's no other options. You're forced to eat these very, very high freight costs. Like I said, you also have very high tariff costs. A number of trade programs, Congress has let them expire this year.

When you add all of that up, plus you can't get your goods and you can't sell your goods, so you can't sell your goods, you're paying all these extra expenses, you can't make the revenue. And I think small businesses are really going to feel the brunt of this shipping crisis.

So unless we can do something to provide them relief, help them make that transition to some of these other medium and even longer term efforts to untangle the port congestion, begin to take effect, it's going to be really difficult for some of those smaller companies that are very, very dependent on these supply chains to stay above water. We're doing everything we can to encourage them, to help them get their products in right now. But it's tough. It's very, very difficult right now.

AKIKO FUJITA: Yeah, it does feel like it's been one hit after another, especially for small businesses over the last several years. Stephen Lamar, it's good to have you on today to give us this context. American Apparel and Footwear Association CEO and president.

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