The nation’s top international ocean shipping regulator wants to investigate whether West Coast terminal operators are taking advantage of supply chain disruptions by gouging shippers on rates charged for off-peak terminal gates.
Federal Maritime Commission Chairman Daniel Maffei on Friday said he will ask for a meeting of the full commission “as soon as practicable” to consider whether the agency should launch the probe of PierPass, a nonprofit company set up in 2005 by Los Angeles and Long Beach container terminal operators to ease port congestion.
Maffei’s request stems from recent temporary changes in rates charged by PierPass – which PierPass is looking to make permanent – go beyond merely covering the cost of operating off-peak gates but instead have become a profit center for the company.
The rate change, according to PierPass, was done at the request of the Biden-Harris Administration Supply Chain Disruptions Task Force, led by White House Port Envoy John Porcari, with the goal of incentivizing importers to move more containers through off-peak night gates by charging its traffic mitigation fee (TMF) only during peak daytime hours – but at a rate 129% higher.
“I fully support the president’s port envoy and his efforts to work with the industry to find ways to reduce congestion, including an incentive for greater off-peak gate use,” Maffei said in a statement.
“However, neither he nor others advocating off-peak gate incentives could have known that PierPass’ proposed fee structure generates revenue well above what is currently required to implement the program in a revenue-neutral manner. PierPass claims to be cooperating with President Biden’s port envoy but apparently only if it can rake in millions more in profits paid for by American importers.”
The initial temporary change in the TMF rate, which increased from $34.21 per twenty-foot equivalent unit to $78.23 per TEU, began on Nov. 10 and ended on Jan. 31. Because the rate is agreed to among the 12 terminal operators at the two ports (as a way to mitigate the cost of operating extended gate hours), it is given an antitrust exemption through a West Coast Marine Terminal Operating Agreement (WCMTOA) filed at the FMC.
On Jan. 24, the counsel for the WCMTOA filed an amendment to the agreement – which the FMC has yet to approve – that would make the off-peak gate incentive program permanent.
But based on two months of revenue data generated by the change in rates and supplied to the FMC, Maffei is not convinced that it is actually incentivizing 24/7 operations – a priority of the Biden administration – or that the rates are not actually merely making more money for the terminal operators.
Watch: Strategies to counter port congestion
“The current congestion at the ports of Los Angeles and Long Beach remains a threat to the nation’s economic vitality and a serious problem for thousands of importers and exporters,” Maffei asserted. “It can only be solved through positive collective action, and many stakeholders at the nation’s biggest port complex have made contributions, sometimes being willing to sacrifice for the greater good. PierPass seems to be an exception.
“I know of no change or idea that PierPass has ever offered to help ease COVID-related congestion and, to be fair, it’s possible PierPass simply is not in a position to help much. However, far from contemplating a sacrifice, this amendment seems to be an attempt to profit from a national crisis. I urge the WCMTOA parties to consider more public-spirited actions.”
