Frustration builds among shippers as SoCal ports struggle to get cargo off docks by truck, rail.
Two large organizations that represent shippers have asked terminal operators in the ports of Los Angeles and Long Beach to help reduce congestion by waiving the PierPass traffic mitigation fee that is used to encourage truckers to pick up and deliver containers to marine terminals after 6 p.m.
Meanwhile, a third group wants to go further and dismantle the program as it currently exists.
Some members of the U.S. Federal Maritime Commission in Washington, which ostensibly has oversight over the marine terminal market, appear receptive to some sort of change in the off-peak program.
In fact, FMC Chairman Mario Cordero in a late-October phone call asked PierPass executives to consider temporarily suspending the fee after hearing complaints from many stakeholders.
In comments provided by the FMC to American Shipper, 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.”
Other commissioners also expressed concern, but are taking a wait-and-see approach, saying the market might best be able to solve the situation.
The FMC has held four “listening sessions” across the country to gather industry feedback about the root causes of truck and vessel backlogs in three major port complexes, and to a lesser degree elsewhere. Most exports point to a confluence of rising trade volume, the utilization of larger vessels bringing concentrated amounts of cargo at once, new ocean carrier alliances that result in services berthing at multiple terminals rather than sticking to one, and a shortage of truck chassis and drivers.
The National Retail Federation and National Industrial Transportation League made written requests to PierPass seeking a moratorium on its fees.
“Whereas the PierPass fee was meant to alleviate highway congestion, under today’s circumstances, it is having the unintended reverse effect of adding to the congestion problems currently plaguing shippers. Lifting the fee now could provide an economic incentive to get truckers out of long lines in the late afternoon and shifted to the less congested earlier hours of the day,” NIT League President Bruce Carlton wrote in his letter.
On Nov. 3, the Agriculture Transportation Coalition indicated it would ask the FMC to use its injunction power to terminate the agreement which has allowed the terminals to create and run PierPass.
AgTC Executive Director Peter Friedmann explained in a note to reporters that the port authorities should take over PierPass.
“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 said. “Loaded, empty, day or night — the fee would thus be a fraction of what it is now.
“We agree and believe that if the ports take over PierPass that it will finally be transparent, so those who pay the fee can see how every penny is spent. We believe this will result in a lot more night gates,” Friedmann added.
The AgTC’s Washington lobbyist has complained for years about what he argues is a lack of transparency in how PierPass fees are used and also questioned why there is no fee on empties.
“Currently, the fee is only paid by the cargo, not by the carriers. But isn’t a gate move, a gate move? Doesn’t a truck with an empty box take as much room on the freeways as a truck with a loaded container?” he said.
Friedmann also said “for agriculture, the PierPass fee is not only an unwelcome expense, but can make the difference between an export sale or not. For agriculture, it is often difficult to move at night. U.S. agriculture and forest products exports are low-margin and face relentless competition from other sourcing countries.”
PierPass responded that it can’t entertain a moratorium because terminals depend on the money to operate night gates, Jon Gold, NRF’s vice president of supply chain and customs policy, confirmed.
John Cushing, PierPass president, said in an interview that his members question why they are being asked to waive a fee that was “set up and successfully reduced congestion” by encouraging shippers and their drayage drivers to pick up and deliver containers at night.
PierPass is a not-for-profit company created by marine terminal operators at the two Southern California ports in 2005 to address multi-terminal issues, such as congestion, air quality and security.
Under the PierPass program, a fee of $66.50 per 20-foot container or $133.00 per 40-foot container is charged on daytime moves of containers moving locally (intermodal cargo moving by train inland is exempt from the fee) between 3 a.m. and 6 p.m. The fee is imposed Monday through Friday to offset the cost of operations in the evening and on weekends. Fifty-five percent of cargo at the ports now moves at night.
Terminal operators “have incurred since Sept. 1 more than $22 million in unbudgeted and additional costs to address the congestion that has been brought to their terminals,” Cushing said. The cost increases averages $3 million per week.
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. Terminals are also opening an hour early in the morning. Eight terminals are open on Saturday, a dozen terminals are open on Monday, Wednesday and Thursday nights, and all the terminals are open on Tuesday nights.
Cushing noted terminals are making those expenditures to pay for additional labor to “rework” and move cargo around the terminal.
The higher volumes and shortage of chassis on which to load containers means ocean boxes are staying on terminals longer and being placed in stacks that are wider and higher than normal. For example, containers may be stacked four or five high instead of three high, or placed in locations around terminals where they are not below transtainers. As a result, longshoremen are spending more time digging for a particular container in the stacks for which a driver has arrived to pick up, or looking for a place to put empty containers.
He said because of the chassis shortage, containers that would normally be drayed to an off-dock railyard are not moving, and importers are asking them to be loaded on dock trains, leading to additional handling.
“It’s taking nearly as long to return an empty now as it has taken to pull a load. So when customers are screaming for their loads, you can imagine what gets left behind and that’s the empty,” Fred Johring, chairman of the Harbor Trucking Association, said.
Cushing said, in some cases, terminals do not have space to receive empty containers. He noted the terminals are speaking to the port authorities to see if open land at the port complex could be used for truck queuing or storage of empty containers.
A few days later, Port of Long Beach Chief Executive Jon Slangerup proposed that the port explore the establishment of a lot on, or near, port property where truckers could drop empty boxes on their way to retrieve loaded boxes at a terminal.
The arrangement is designed to eliminate a trip to a congested terminal to drop an empty and then travel to another facility for a loaded box, or to wait in line for a crane lift at the empty area within a terminal.
Terminals are also moving containers from one terminal to another to build on-dock rail trains, because there are not enough railcars being delivered for common destinations.
“They are taking containers over to locations within the port where they can get them loaded out, and this is all at great expense to the terminal operators,” he said.
“To waive the traffic mitigation fee… that money is used to pay labor. And also there is concern that due to the great amount of congestion currently at the terminals, we would have an increase in daytime truck queueing,” Cushing said.
The amount of money each terminal receives from the traffic mitigation fee is based on the container volume of each facility.
“When the terminals nearly doubled the number of gate hours per week under the PierPass off-peak program in 2005,” PierPass Chief Executive Officer Bruce Wargo said, “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).
“As a result, marine terminal operators have never recovered the full costs of the night gate operations.”
Cushing said, “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.”
The off-peak gates collectively cost about $180 million, but the traffic mitigation fee did not cover that entire amount, according to PierPass. Just more than $115 million was distributed to the terminal operators, leaving a shortfall of $64.9 million.
“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,” Cushing explained.
Port of Long Beach Vice Chairman Rich Dines, local union leaders and others have suggested the ports should operate around the clock.
Wargo said the West Coast Marine Terminal Operators Agreement members (whose members set up PierPass) recently contracted with 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.
Cordero told American Shipper 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.”
Other Problems. A new plan to segregate large blocks of containers and peel them from the top for each assigned truck is being challenged by the chassis shortage, Cushing added. The “free-flow” concept is designed to address the random-access model whereby any truck can show up at any time to retrieve a box.
“To keep cargo flowing quickly as ships grow ever larger, we need to change how we move containers,” Wargo said. “Doing the same things incrementally faster won’t solve congestion pressures.
“How congested would LAX or JFK [airports] be if every taxi came for one specific person rather than picking up the first in line? That’s how the current system works,” he said of the container terminals.
Cushing said terminals are also discussing how to better communicate with trucking companies about whether areas of the terminal are accessible or closed for safety at certain times.
The Harbor Trucking Association sent letters to the heads of the ports of Los Angeles, Long Beach and Oakland, stating the group is considering taking legal action to enforce various provisions of the UIIA California laws regarding equipment return, notification and gate hours.
The UIIA, or Uniform Intermodal Interchange and Facilities Access Agreement, is a standard industry contract between intermodal truckers/drayage companies and equipment providers, such as ocean and rail carriers, and equipment leasing companies.
Johring said HTA has discussed with the FMC its desire to see the hours of service for Customs and Border Protection personnel at the ports extended to enable the nightshift to deliver containers until 2:30 a.m., instead of 1 a.m. HTA is also considering a formal petition and administrative action with the Federal Motor Carrier Safety Administration for permission to extend the hours of service that truckers can work from 14 to 16 hours because of the congestion.
Sara Mayes, president of Gemini Shippers Association, said the congestion has been a “nightmare” for shippers. She noted that one of her members had a container misplaced that took 45 days to locate because of congestion at the terminal.
“They call it UTL — unable to locate,” she said. “That’s what I call container hell.”
Another member was unable to get parts for a production line, and one was fined $10,000 a day in chargebacks from a customer because it was not delivering goods on time.
“Honestly, I don’t know if anybody has had no problems,” Mayes said. “Everybody is paying demurrage.”
She said some terminals are waiving demurrage, but added it may not be for long enough periods.
“It is waived for four days, and the trucker is supposed to pick it up on the fourth day, and he goes in, and no chassis are available,” she said. “I would say the delays are probably at least a week. In the past you were usually able to pick up your container within a day of freight payment and customs clearance. Now you are probably talking a week, maybe more.”
— Eric Kulisch contributed to this report.
This article was published in the December 2014 issue of American Shipper.
