Commissioners express sympathy for shipper frustration over terminal congestion, fees.
A proposal by a group of agricultural and forest product shippers that the Federal Maritime Commission use its injunctive powers to dismantle the PierPass program at the ports of Los Angeles and Long Beach will get a receptive audience.
On Monday, Peter Friedmann, executive director of the Agricultural Transportation Coalition, wrote to members of the press to say that his organization was proposing that the “FMC should seek to terminate the agreement which has allowed the terminals to create and run PierPass by using the injunction process under the Shipping Act.”
Friedmann told American Shipper on Tuesday, however, that he has not yet sent a letter to the FMC.
FMC Chairman Mario Cordero said he has “spoken to a number of stakeholders who have shared their concern as to PierPass, both as to the long-term sustainable aspects to this program and the short term request by many stakeholders for them to mitigate/suspend the fee.”
He said, “There is a very strong feeling with regard to not only ‘do we have congestion,’ but the cost incurred.”
Commissioner Richard A Lidinsky, Jr., said, “I am very concerned over the LA-LB vessel situation and support Chairman Cordero as he reviews options for FMC action at his home ports. I have always championed ag exports and will carefully review this new proposal.”
Commissioner William P. Doyle added, “I do not want to see U.S. ports lose market share. I do not want our exports, agriculture in particular, hamstrung by over-burdensome fees. I am deeply concerned about port congestion.”
Commissioner Michael A. Khouri said he would need the benefit of analysis of both the FMC’s economists in the Bureau of Trade Affairs and general counsel before forming an opinion. He noted that the FMC has been intensively studying the congestion issue and said the question was whether the congestion problems are transitory and will work themselves out or not.
Khouri last week chaired an FMC “listening session” on port congestion in Charleston where a diverse group of companies involved in transportation and trade expressed their concerns. Commissioner Rebecca Dye was chairing a similar forum in New Orleans on Monday.
Khouri said there needs to be a “big table with a lot of collaboration to work on this issue. But it is going to be commercial answers that are going to address this issue. I don’t think a regulatory agency coming in and trying to tell these commercial actors how to run their business is going to be a good road to start off with.”
Cordero made a request last week in a telephone call to John Cushing, the president of PierPass, that the group consider temporarily suspending the fee; Cushing said he will bring the request to his members — the terminal operators in the port. But he said he told Cordero that terminal operators may question why they are being asked to waive the fee that was “set up and successfully reduced congestion” by encouraging shippers and their drayage drivers to pick up and deliver containers at night.
The National Industrial Transportation League and the National Retail Federation have also made requests for a moratorium on the fee.
PierPass is a program set up by the terminal operators in the Port of Los Angeles and Port of Long Beach to relieve daytime congestion at marine terminals. Companies moving containers at “peak hours” between 3 a.m. and 6 p.m. are charged a traffic mitigation fee ($66.50 for a 20-foot container, $133 per 40-foot container; empty containers and rail intermodal containers are exempt.) At other hours, no fee is charged. The money collected by the fee is used to offset the cost of extended hours in the evening or weekend.
Begun in 2005, PierPass has been so successful that about 55 percent of cargo at the two ports moves at night.
Friedmann wrote that his group has suggested to the executive directors of the ports of Los Angeles and Long Beach they should take over the PierPass program.
“If there needs to be a fee, understand that it benefits those who use the day and night gates, so spread the cost around so that all gate moves pay it, including the carriers bringing in their empties,” he wrote. Loaded, empty, day or night — the fee would thus be a fraction of what it is now.”
He said AgTC also agrees with a call by Bobby Olvera, Jr., president of ILWU Local 13, for 24-hour operations at the ports.
Bruce Wargo, the chief executive officer of PierPass, wrote in a post on the PierPass website that while the idea of round-the-clock operations “may seem appealing when considered in a vacuum, it can’t survive a basic cost/benefit analysis. Such a mandate would undermine the competitiveness of the San Pedro Bay ports, as it would raise costs for shippers and drive away cargo.
“When the terminals nearly doubled the number of gate hours per week under the PierPass off-peak program in 2005,” he continued, “container volume was expected to grow rapidly to fill the new second shift. However, by 2013 volume was only slightly higher than it was in 2005 (14.6 million TEUs in 2013 vs. 14.2 million TEUs in 2005).”
He concluded, “As a result, marine terminal operators have never recovered the full costs of the night gate operations.”
Cushing said the amount of money each terminal receives from the traffic mitigation fee is based on the container volume of each facility. The terminal operators use the fee to offset the cost of operating the night time gates at each terminal.
“We have seen various calls for waiving of the traffic mitigation fee, but we have not received anything to explain how that will help the current situation of the chassis shortages,” he said.
Cushing said the off peak gates collectively cost about $180 million, but the traffic mitigation fee did not cover that entire amount. Just more than $115 million was distributed to the terminal operators, leaving a shortfall of $64.9 million which was then covered by the marine terminal operators.
“The terminals need to pay labor to work at the terminals. So what they do is collect fees in different ways — some are with the ocean carriers, some are with the PierPass mitigation fee,” he explained.
On top of the above shortfall, he noted that since Sept. 1, when congestion started getting much worse, terminal operators have seen additional costs of $3 million per week. He said these are unbudgeted, extra costs.
He said since Sept. 1, there has been an increase of 46 percent of open gates. PierPass said more terminals are opening earlier, keeping the gates at terminals during lunch and dinner breaks.
On its website, PierPass said, “The majority of the 13 international container terminals at the Los Angeles and Long Beach ports are keeping truck gates open during lunch hours and shift changes. As the accompanying schedule of relief and flex gates shows, 77 percent of the terminals are hiring additional labor to keep terminal gates open during the day shift’s contractually mandated lunch hour from noon to 1 p.m., while 85 percent are keeping gates open during the OffPeak shift’s 10 p.m. to 11 p.m. dinner hour. Terminals are also opening gates early in the morning (flex gates) and keeping them open between shifts. Ten of the 13 terminals (77 percent) are running truck gates between the end of the day shift at 5 p.m. and the start of the OffPeak shift at 6 p.m., while eight (61 percent) are opening an hour before the 8 a.m. start of the day shift.
Wargo said the West Coast Marine Terminal Operators Agreement members (whose members set up Pier Pass) “recently contracted an accounting firm to calculate the cost of operating seven days a week, at either two shifts or three shifts per day. The firm took into account an expected decrease in the cost of existing shifts as a portion of cargo volume flows into the new shifts.”
He said the accounting firm provided the following estimate:
Working two shifts per day, seven days per week, would add $121.5 million to current annual operating costs, a 22-percent increase. Working three work shifts per day throughout the week would add $167 million to current annual costs, a 30-percent increase increase.
Cordero told American Shipper that the FMC “will continue to look at PierPass to see whether it is achieving its objectives, both as it relates to the congestion question and the question of cost. What we are seeing in Southern California is a lot of people stepping up to the plate as a result of what has been achieved in this particular peak season, and I’m hoping that PierPass steps up to the plate.”
Could the terminals operate without PierPass?
Cushing said, “I think the best that you can do is look at, ‘What was it like without PierPass?’ Before there was PierPass, the terminals were not collectively working the off-peak hours, and there was no incentive for importers and exporters to send their trucks down in the off-peak. … Before PierPass, 88 percent of the cargo mov[ed] during the day. That also resulted in lengthy queues for trucks to get in and out of the terminals.” Forty five percent of cargo moves during the day today.
“If we don’t have the traffic mitigation fee, then the question is who would pay labor to work in the off-peak,” said Cushing.
“The bottom line is that we have congestion now that is caused by the shortage of available chassis. The terminals do not provide the chassis — the terminals operators are unloading the ships and making the containers available, but there is a shortage of chassis. We have heard from a number of stakeholders that the street dwell time on chassis has gone as high as nine days,” said Cushing.
“There are chassis out there but people are hanging on to them, which is reducing the velocity of the chassis in the marketplace. To keep a chassis out for nine days is greatly impacting the turnaround of available chassis,” he said, adding that when PierPass officials meet with stakeholders, the conversations are always about trying to get their hands on chassis.
FMC receptive to shipper concerns about PierPass
