Port of Los Angeles Executive Director Gene Seroka joins Yahoo Finance Live to discuss America's supply chain crisis and what needs to be done to improve this port issue.

Video Transcript

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ALEXIS CHRISTOPHOROUS: The supply chain issues that crippled our nation's ports at the end of last year are starting to look a little bit better. Here to fill us in is Gene Seroka, executive director at the Port of Los Angeles, which we know is one of the busiest in the country. Gene, good to have you on the show.

So let's just start with an update here. How many ships are out there waiting to get in? How many containers are waiting to get taken out of the port? And how does that compare with just a few months ago?

GENE SEROKA: Good morning. The number of ships coming across the ocean, those that have just left, are traversing the Pacific or just about to get here to the ports of Long Beach and Los Angeles, counts at 83 today. That's the lowest it's been since the fall of last year just before the industry started to measure the ships through their new queuing process.

The flow of cargo continues with an early Lunar New Year in Asia, landings here for container cargo toward the end of this month. And what we've seen is a large number of these ships by count are the smaller vessels by capacity, which take just as long, if not longer, to work. The total container count on the water coming across represents about weeks worth of work for us.

- Gene, how long are these ships staying in port on average? And then are you still considering imposing fees for if they stay on the dock for too long, those dwell fees?

GENE SEROKA: The work of the vessels in port, Alexis, are really staggered throughout the course of the workweek. If there's enough room on the terminal tarmac, we're able to unload those ships in good frequency. They're staying a little bit longer than normal depending upon the shipping lines requirements and the private sector terminal operators' plan to move those containers in and out by truck and rail.

What we have right now is 55% of our truck gates go unused every day. That means we've got about half of our capacity in latent stage. We can move more cargo in and out. There's also 30% of our rail capacity that's not being used today as markets have shifted since late last summer. In both cases, both modes of transportation, we can handle more cargo than ever before.

On your question of those long, aging containers which we tried to isolate last fall, since we announced a penalty back on October 25, we've reduced those containers that we're sitting nine days and longer by an amazing 74%. We now have less than 10,000 container units on the ground, well off the peak of 37,000-plus units back in October. So our plan looks like it was correct. Let's segment that cargo away that's not needed right now and speed the other product that needed to get to market.

Think of factory parts and components, those products that needed to go into our medical system and hospital communities, as well as those at the retail level that needed to get to market for the all-important holiday season. And as we've seen, while no one is taking a victory lap, retail sales grew by 8.5% during the holidays, and it was the best retail sales year in our nation's history.

- Gene, Alexis here. Give us a feel for what the biggest challenges are at the moment. Because we know with the omicron surge and even prior to that, there were real labor issues up and down the supply chain. Is it infrastructure? Is it not having room to stash the goods once they're offloaded from inbound vessels? As you see it right now, what are the most outstanding challenges?

GENE SEROKA: There are so many elements to this, Alexis, that you really can't just pull one lever and say I've got it isolated, and it's going to be fixed. This all began with the trade policies back in the fall of 2017 leading up to the implementation of trade tariffs in March of 2018. Many American importers rushed and advanced inventories to market as quickly as they could to avoid those taxes or tariffs. China then met us with retaliatory tariffs that really hurt the American farmer and manufacturer.

Go a little bit farther forward to the fourth quarter of 2019. Our business fell off a cliff, dropping by some 16%. Then COVID-19 hit China, and the manufacturing community shut down for the better part of the first half of 2020. Our business then dropped another 19% through the month of May. Then suddenly, the strength of the American consumer shined through, and we began shipping more cargo than ever before.

In fact, the trade gap widened even after those policies were implemented simply because we weren't traveling going to movies or ballgames. We were buying products, and more online than ever before. That cargo keeps flowing. And it was never overly terrible for the supply chain, but it was like taking 10 lanes of freeway traffic and squeezing them into five. If the driver next to you didn't let you in and you had to get to work at a certain time, you were left behind. And that's what we saw with a lot of American importers, small and medium, who were getting stuck behind the larger importing companies who didn't need their product right away.

We had on our docks lounge chairs, patio furniture, and even flat screens for the Super Bowl back last fall. Those products weren't needed right away. We needed to get the other goods to market. And that's how we started to segment the cargo prioritizing based on need in the supply chain domestically. We also have an infrastructure law now in place which will allow us to hopefully erase and leapfrog a decade worth of underinvestment.

$11 billion in the past 10 years was assigned by the federal government and Congress to ports on the US East and Gulf Coast compared to only $1 billion here out West. That's got to change. 40% of the nation's imports come through Los Angeles and Long Beach ports. And we should get a representative amount of those federal infrastructure dollars.

- Gene, let me jump in here, because I'm wondering if you can give us an educated prediction, I guess, as to when we might see the supply chain go back to pre-pandemic levels. Or is there just going to be a new normal for us, and what might that look like?

GENE SEROKA: I don't think we're going to hearken back to a better look at yesteryear. This is what we have to work with. American consumers are driving this economic recovery through COVID-19. We're seeing more purchasing online, as you all have reported so often. And in addition to that, we're going to be ramping up American exports. We've got to help better balance this trade not only for the industry where we start getting round-trip and triangulated economics for our service providers, but we've got to get the American farmer and manufacturer back in the game.

The use of digital solutions will become omnipresent. Right now with the Port Optimizer, the Port of Los Angeles introduced the nation's first and still only port community system. We have a line of sight as much as 40 days upstream in Asia as to what's coming our way. That way, we can better plan staffing and machinery to move all this cargo.

But we need others to adopt this. It's not good that just in our patch, we can see the cargo. We need a wider array of service provider participants to be able to see that data, share theirs-- in generic format only, nothing proprietary, but one that will help us really drive the decision making of the importers and exporters so they then have choice which rail truck provider, liner shipping company, and port they may use.

ALEXIS CHRISTOPHOROUS: Yeah, I agree. Transparency is key, right? You all have to be able to be looking at the same thing to make the best choices. Gene Seroka, Port of Los Angeles executive director, thanks so much for your time.