Harbor commissioners for the ports of Los Angeles and Long Beach on Friday unanimously approved a plan to penalize ocean carriers with a $100 surcharge, compounding daily, for containers that sit too long on marine terminals in an effort to clear backlogs that are preventing vessels from unloading cargo.
Port of Los Angeles Executive Director Gene Seroka said the California Association of Port Authorities on Thursday voted to support the joint effort, providing legal cover to add the fee to the tariff schedule.
Under the 90-day policy, ocean carriers will be charged $100 per day, increasing in $100 increments per container per day, for containers scheduled to move locally by truck that dwell for nine days or more, and for containers scheduled to move by intermodal rail that dwell for six days or more. The total cost for the first five days, for example, would be $1,500.
The ports will start counting storage time this coming Monday, with assessments beginning Nov. 15.
The goal is to reduce the length of time containers dwell in terminals to improve reliability for importers, and so there is more room to handle export and empty containers.
Many shippers and freight management companies are concerned that ocean carriers will simply pass on the charges to their customers. Seroka said that if the freight community makes sufficient progress unwinding the backlog, the port could hold off assessing the surcharge.
“Starting Monday, we will be taking daily data snapshots of how long import containers sit on our container terminals,” the port chief said. “If progress is being made clearing our docks, I have the discretion to delay the start of fees beyond Nov. 15. Our goal is to see significant improvement on our docks so that we don’t need to administer any fees.”
Cargo sitting on marine terminals over nine days amounts to 47% of all containers in the port, Seroka said. In real terms that represents 38,000 shipping boxes out of 81,000 stacked on the docks. Before the pandemic-led import surge that began last year, containers for local delivery remained on container terminals under four days, on average, while containers designated for trains dwelled less than two days.
Officials at both ports say that some companies are ordering products from Asia earlier than normal to mitigate against shipping delays and using marine terminals as makeshift warehouses because their facilities are too full to receive more cargo.
Seroka said older shipments are turning over at a much slower rate than newer arrivals, which suggests companies have urgent need for newer products as the holidays approach. Cargo that has just landed and moves out in one to four days represents 36% of the overall cargo but 52% of the overall cargo exiting through truck gates or by on-dock rail.
The threat of severe fines has motivated carriers and other industry stakeholders to engage the ports in more serious conversations about how to fix immediate and long-term inefficiencies, the port directors said.
“This action was not intended as a pass-on cost. This action was intended as a message to the carriers, that you need to be at the table and you need address this situation that we’re in. Having said that I’ve had very constructive conversations with the carriers,” said Long Beach Executive Director Mario Cordero during a virtual meeting. “Needless to say that when you make decisions like the one that we’ve brought forward to the commission, no one’s going to be happy. It’s going to be pain for everybody. The truck driver, the port authority, the consumer. But what we need to get to is to resolve and mitigate the situation. We need to get the containers out of the terminals. What this is addressing is the import containers so that we can diminish the anchorages out there that we see in the harbor. At this time next year, it is my hope that we don’t have any vessels at anchor.”
Seroka echoed those remarks, saying the surcharge is intended to ignite self-reform within the shipping community.
“They know that there is a proverbial clock ticking,” Seroka said. “By no means am I intending this amendment to generate revenue for the port of Los Angeles. The purpose here is to drive behavioral change, get the cargo off the terminals and move empties and exports through.
“And I hope the program is resoundingly unsuccessful because if we don’t collect the money, that means the cargo is moving. And the less money that this tariff item makes, the more cargo that will keep flowing through the chain as we need to get products to market for the holidays, to our hospitals and to our factories throughout the country,” he said.
Several speakers at the meeting opposed the new demurrage fees, saying the situation won’t improve until terminals start accepting more empties.
Any fees collected from lingering cargo will be reinvested for programs designed to enhance efficiency, accelerate cargo velocity, and address congestion impacts, according to the port authority.
(Greg Miller contributed to this story.)
Click here for more American Shipper/FreightWaves stories by Eric Kulisch.
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