The Expert Podcast

…There's an interesting phenomenon going on in the supply chain market was shipping…and has to do with some new laws and regulations that were enacted in the state of California. California has some of the largest ports in the country long beach Los Angeles. Oakland. And a lot of the. cargo that comes from Asia mostly China and Taiwan. That's the closest place to come right across the Pacific ocean You're right in. The west coast of the U S. Shippers now are abandoning the west coast ports and heading east And we're going to take a look at some visualization of this cause it's worse than you can imagine. Why is this happening? Businesses are reorganizing their supply chains to avoid the west coast entirely shipping goods from the east meaning Asia to Gulf ports instead. Well let's take a look at a map. Here's China. Here's a U S and you know you have Taiwan and Korea and a lot of the other countries that manufacture goods that come to the U S typically what would happen is There would be cargo that would come from China to the west coast mostly California. There are ports in Seattle. And in Portland but those aren't as big. So it's a direct route…Well because of the fact that there are some changes in rules in California it's very difficult to get the cargo out of the port. What are those changes Well, number one is. Certain types of trucks are no longer eligible to operate in California If the truck is older than 2011, 2012, it doesn't have certain emissions equipment It doesn't have Def diesel exhaust fluid. It doesn't have certain double catalytic converters. So it's not allowed to operate in California…Second of all they passed a rule called AB five California Which prohibits truck drivers to be independent contractors you have to be an employee of a company. Meaning that there's a lot of other regulations and bureaucracy that goes along with being an employee. Even if you own your own truck. You have your own trucking company, you can't be an independent contractor that makes it difficult. For these owner operators to run out of these ports and get the cargo Cause you gotta remember. Once the cargo…Gets to California. It's got to get out of California to the rest of the country. So that is what the trucks do. So what is happening? Instead of fighting with the port congestion and all the bureaucracy and the laws in increased costs. Shippers are taking their cargo from China and Taiwan across the Pacific ocean through the Panama canal. And either to a Gulf port sometimes to Savannah sometimes to. Norfolk Virginia. Even farther up into New York they're using east coast ports. And also Jacksonville Florida. Right. So you have this cargo instead of taking the straight route right to the west coast or going all the way across through the Panama canal which costs tens of thousands sometimes hundreds of thousands of dollars. To go through the canal. And now they get to the east coast. Well now…It's all on the east coast You have to get it to the west coast Well now what you need to do is you get need to get that cargo shipped. Will you put it on rail and trucks to get it shipped off? across the country to different places. In the U S…So think about the route that this takes very circuitous route. As opposed to a direct route would have been right Like this…Extra fuel, extra. bunkering for the cargo ships, extra cost through the canal, more truck transportation. But because of there's an invisible. Blockade that people don't realize coming out of the ports…That…you can't really see. Right because there is. An obstacle. To get out of the ports in California. A financial obstacle, a logistics obstacle and employment obstacle, and a trucking obstacle. Now maybe these things resolve itself at some point. But for the time being. Shipping companies and consigners are using this longer route. To get their cargo From Asia. Too. Inland U S. It also affects insurance because the longer the cargo is en route. You have to have cargo insurance you have to have inland Marine for the rail and the trucking. So this is something that's an unintended consequence of some of these new laws Certainly There's other factors besides just AB five and the, the truck restrictions. But think about it. How hard does it have to be How expensive how annoying does it have to be…To go through California for the shippers to go all the way around through the Panama canal, to then negotiate to the other states that are benefiting the states that are benefiting our Texas Florida Virginia Georgia. They're benefiting from this. Even Newark New Jersey. Port Elizabeth is benefiting from it. Tell us what you think in the comments about this unintended consequence of the restrictions on the ports in Los Angeles…