By Carlos Barria and Lisa Baertlein

OAKLAND, July 18 (Reuters) - Truck drivers choked traffic at the Oakland, California, seaport on Monday protesting a state law that makes it harder for independent contractors to transport goods and could limit labor at the state's already clogged seaports, threatening to worsen the nation's pandemic-fueled supply chain jams.

California's ports handle about 40% of container goods that enter the United States. Trucking disruptions come at a time when unions and West Coast port employers are also negotiating a high-stakes labor contract.

The law, known as AB5, or the "gig worker" law, sets tougher standards for classifying workers as independent contractors. Independent truckers who now operate under the authority and insurance of companies that hire them for jobs would be shouldered with the hefty costs and red tape of taking that on when the law is enacted.

"They want to eliminate us," said independent driver Douglas Urtado, who joined dozens of protesters on Monday at the Oakland seaport in the San Francisco Bay Area.

Wayne Feng, wearing a "No on AB5" T-shirt, told Reuters the law would be so financially draining that drivers "aren't making anything."

Legal challenges kept the law from going into effect in 2020, but the U.S. Supreme Court last month denied a California Trucking Association petition claiming the law is blocked by federal regulations. Experts say an injunction that put the law on hold could soon be lifted.

More than 100 drivers and small trucking company operators opposed to the law swarmed two terminal gates in the Port of Oakland, slowing truck entry to a trickle. The action came after port truckers in Los Angeles picketed gates and snarled roadways at the nation's busiest seaport complex last week.

Business owner Josue Mendez, 29, said AB5 would devastate his port trucking firm, which relies on 10 independent drivers to move everything from medical equipment to almonds.

"I can no longer hire them" and be in compliance with AB5, said Mendez.

Backers of AB5, which include the Teamsters union that once dominated trucking, say it will crack down on trucking company labor abuses by pushing owners to hire drivers as employees and provide workers' compensation insurance and other benefits.

Industry groups representing roughly 20,000 Los Angeles and Oakland port truckers, including the Owner-Operator Independent Drivers Association, have asked California Governor Gavin Newsom not to enforce the law until owner-operators have information about how to legally operate as independent contractors.