Mister Rogers sang songs and staged puppet shows to teach us how to be good neighbors.
Well, Mister Rogers is dead and the world has gone to hell in a handbasket. Perhaps we have set aside being neighborly during the COVID-caused economic firestorm that is proving fatal for businesses large and small.
For our story, we turn to California’s San Pedro Bay neighbors, a “disappointing” press release and the lack of agreement on implementation of a $10-per-twenty-foot-equivalent-unit (TEU) clean truck fee at the ports of Long Beach and Los Angeles.
Chapter 1: ‘We are taking this relationship to the next level’
The LA and Long Beach harbor commissions signed a memorandum of understanding in February and the ports issued a joint press release in which they promised greater collaboration to find operational efficiencies, reduce costs for shippers and improve sustainability.
“For the first time in a generation we are taking this relationship to the next level,” said Gene Seroka, the Port of LA’s executive director. “The fight is not LA versus Long Beach for that last container. It’s about keeping cargo here in Southern California.”
The MOU outlined five areas of focused cooperation to enhance the ports’ competitiveness: cargo transfer predictability, digital connectivity, establishment of metrics and workforce development.
Phillip Sanfield, director of media relations for the Port of LA, noted in February that cooperation between the San Pedro Bay neighbors was not new.
“The two ports have collaborated on the Clean Air Action Plan since the early 2000s. After some congestion issues in 2015, the two ports came together to work on supply chain efficiency issues. We also work closely together on security issues. So we’re looking forward to tackling the issues outlined in the recently approved MOU,” Sanfield said.
Chapter 2: ‘Uncertain months ahead’
The Clean Air Action Plan (CAAP) was established in 2006 and updated in 2017 with the goal of a zero-emissions drayage truck fleet at the ports of LA and Long Beach by 2035. To incentivize companies to adopt cleaner technologies and help pay for zero-emissions equipment, the harbor commissions for both ports agreed in March of this year to the implementation of a clean truck rate.
The rate would be a $10-per-TEU fee paid by cargo owners on loaded containers moved by truck at the San Pedro Bay port complex. Monies collected would go into a pool of incentive funds to help the trucking industry purchase near-zero and zero-emissions drayage trucks.
Zero-emissions trucks would be exempt from paying into the fund, and the harbor commissioners agreed to look at other possible exemptions before the fee would go into effect this fall.
And then volumes plummeted at the ports of LA and Long Beach — and all ports around the United States — because of the coronavirus’ blow to imports from China. There were more immediate challenges than a 2035 zero-emissions goal.
LA, North America’s busiest container port, reported a year-over-year March volume drop of 30.9%.
“We’ve had two serious shocks to our supply chain system — first the trade war between the U.S. and China and now the COVID-19 pandemic,” Seroka said when reporting the port volumes in April. “With U.S. retailers and cargo owners scaling back orders, volumes are soft even though factories in China are beginning to produce more. Amid this public health crisis, there will be uncertain months ahead in the global supply chain.”
Even port calls were uncertain at that time. The two San Pedro Bay ports had 61 canceled sailings during the first quarter, nearly double the 31 in the same period in 2019.
When reporting its April volumes were down 17.3% year-over-year, the Port of Long Beach said it expected 16 more blanked sailings in the second quarter.
Chapter 3: ‘I’m absolutely disappointed’
Earlier this month, the Port of LA reported it had suffered 11 straight months of volume declines. But summertime had brought brighter days across the bay, where Long Beach recorded its best July ever.
Perhaps after that breath of relief, the Port of Long Beach returned its focus to the clean truck fund.
On Aug. 6, the Port of Long Beach announced that the $10 surcharge would be postponed until 2021 in a press release titled “New Clean Truck Rate Delayed.”
“Originally due to start this fall, the $10-per-TEU surcharge is being postponed until sometime next year due to the ongoing economic impacts of the U.S.-China trade war and the global pandemic,” the press release said. “Meanwhile the ports are continuing to work with their industry and regulatory partners to develop the new Clean Truck Program, including the clean truck rate approved by both ports in early March.”
On Aug. 13, Seroka said the Port of LA was not involved in the announcement that the fee implementation would be delayed.
“I’m absolutely disappointed that they did not confer with me on this particular notification,” Seroka said during a press conference. “This has been an ongoing discussion with the air regulators, our trucking partners, the cargo owners and it’s a polarizing conversation — very difficult.
“We do want to push the envelope on moving to cleaner technology, but this has traditionally been done in partnership between the twin ports here in San Pedro Bay. And a unilateral decision on this is disappointing. We’ll recover and we’ll put out some guidance, but it’s unfortunate that we stand here answering a question like this today,” Seroka said.
Chapter 4: ‘Unilateral statements unfortunately have gone out’
The Long Beach Board of Harbor Commissioners was provided an update on the Clean Truck Program in late July, and according to the port press release, was looking at “how to structure exemptions to the pending $10-per-TEU rate and craft financial incentives for trucking companies to invest in the cleanest available models going forward.”
The press release also said the July 27 presentation “was the Long Beach board’s first update since adoption of the clean truck rate in early March. Heather Tomley, managing director of the port’s planning and environmental affairs bureau, confirmed that staff from both ports are working with industry partners, regulatory agencies, truck dealers and original equipment manufacturers on how to structure the incentive program. The ports are also evaluating the time frame for an exemption for near-zero-emissions trucks, if included.”
Tomley told Long Beach harbor commissioners that “collecting the rate, managing the pool of money and allocating it in the form of incentives are other key elements the ports are working on.”
And the ports are working together, Port of Long Beach Executive Director Mario Cordero told American Shipper.
“The Port of Long Beach and Port of Los Angeles have been working together closely on development of the Clean Truck Program,” Cordero said. “In March of this year, the proposed clean truck fund rate, a key element of the Clean Truck Program, was approved at a jointly held meeting of the boards of both ports. The implementation date for when the rate would go into effect has not yet been determined by either board and will require future action by both boards before it can go into effect.”
Cordero said the boards of both ports received late-July reports that “indicated that COVID-19 is having a significant impact on the maritime industry and that the timeline for implementation of the rate will depend upon market conditions. Both ports continue to monitor these conditions and discuss the timeline for the rate, including potential initiation in 2021.
“Once the boards of both ports determine that market conditions have stabilized and the rate can proceed, they will take action on the tariffs and the rate will be implemented on the same timeline at both ports,” Cordero said.
During a meeting of LA’s harbor commissioners last Thursday, Seroka reiterated his disappointment in a lack of collaboration.
“We are not leaning one way or any way in any recommendation just yet to this Board of Harbor Commissioners. I had said [Aug. 13] in my press conference I was disappointed the Port of Long Beach unilaterally put out a press release,” Seroka said.
“The [Clean Air Action Plan], predating me, has always been a collaboration between the twin ports here in the San Pedro Bay. There’s so much uncertainty economically, trade headwinds and so much other work that we’re trying to do on the ground with regulators here in the state of California. It’s far too early to make any type of determinations. We will be working closely with the beneficial cargo owner community, the original equipment manufacturers, we have workshops and an OEM summit outlined for the month of September,” he said.
“But unilateral statements unfortunately have gone out,” Seroka said. “We have not made any predeterminations without first consulting with this Board of Harbor Commissioners on this topic.”
Chapter 5: ‘Enough is enough’
The dustup over presenting a unified front on the timing of the fee is hardly the only controversy surrounding the issue. Not all stakeholders believe a fee of any kind implemented at any time is a good idea.
“We have heard from many [beneficial cargo owners] that enough is enough,” Harbor Trucking Association (HTA) CEO Weston LaBar said in March. “Costs keep rising and they are starting to make plans to move volume elsewhere. This is just the most recent example of fees that are not going to [produce] operational efficiencies or [provide] a value add to the customers who use our twin ports.”
LaBar reiterated the HTA’s position in an email to American Shipper last week.
“Right now is not a good time to add any additional fees to shippers using our gateway,” LaBar said. “The biggest issue with the clean truck fee is that there are still too many uncertainties in how the market will proceed. There are a lot of debates on the viability of zero-emissions technology, given that the electric infrastructure in Southern California cannot support residential uses during the current heat wave.
“The ports need to do their due diligence to ensure that whatever measures implemented won’t further hinder the ports’ efforts to compete for freight that has been leaving our gateway,” he said. “The Clean Air Action Plan was constructed with these built in ‘off-ramps’ because of the unknowns in the market. Delaying this process and continuing to work with stakeholders was the only realistic decision, given the economic issues we are all dealing with and the lack of clarity on a feasible strategy towards continued emissions reductions in California.”
The HTA also has been critical of other costs to do business at the ports of LA and Long Beach, including a PierPass traffic mitigation fee that was increased by 4.2% as of Aug. 1.
The Clean Truck Program fees — and controversy associated with them — are not new either. The ports of LA and Long Beach in February 2009 began collecting $35 per TEU moved on trucks with engines built between 1989 and 2006. Trucks with engines built in 2007 or later were exempt, and trucks older than 1989 were banned.
The court cases began before the fee collections took effect.
In September 2008, the U.S. Court of Appeals for the 9th Circuit denied an American Trucking Associations request for an injunction to prevent the ports of Long Beach and LA from proceeding with the Clean Truck Program.
In April 2009, a judge denied a Federal Maritime Committee request for an injunction against enforcement of some portions of the Clean Truck Program. The FMC had argued the ports’ program would likely reduce competition and produce an unreasonable increase in transportation cost or unreasonable reduction in service, thereby violating the Shipping Act of 1984.
In January 2011, penalties for “dray-offs” — the practice of switching cargo from a “clean” truck to a “dirty” one within the harbor district — were approved.
Chapter 6: ‘A steady reduction in market share’
In March, when the two ports agreed on a $10-per-TEU fee, they indicated they would heed a report that warned against setting the levy too high.
“Both ports have already experienced a steady reduction in market share for more than a decade,” the February report said. “A high added cost may have the potential to accelerate that trend.”
The loss of market share has been a top agenda item for Seroka. California’s “very, very heavy” environmental mandates have driven some business away from the state’s ports, he said in July.
“I am not — and I will underscore this — not advocating that we roll back on the great environmental strides that we have made thus far since 2006, but what I am sharing is this is a high-wire act to balance jobs creation, commercial interests and what’s in our DNA to be a leading proponent of environmental change worldwide,” Seroka said.
The HTA was among the 52 trade associations, industry organizations and businesses that sent a letter to California Gov. Gavin Newsom in July asking him to do something about what they identified as a 19.4% drop in West Coast ports’ market share.
An analysis prepared for the Pacific Merchant Shipping Association by economist Jock O’Connell said U.S. West Coast ports “are expected to transition to zero-emissions standards right now. That obviously puts them at a competitive disadvantage against ports in political jurisdictions that are less fastidious about environmental issues.”
Chapter 7: A return to beautiful days?
Despite being miffed by the Long Beach announcement, Seroka has no intention of pulling the Port of LA out of the Clean Truck Program.
“No, we are not rolling back on any of our environmental commitments,” he said in mid-August. “Since we implemented the first-ever Clean Air Action Plan and Clean Truck Program — predating me back in 2005 and 2006 — we’ve reduced truck diesel particulate matter by 96%, nitrogen oxide by 60% and sulfur oxide by 98%.”
And cargo volumes grew as emissions came down, Seroka pointed out.
“We have shown that great effort in reducing emissions and attempting to remain competitive in the marketplace so, no, we are not going to roll back anything,” Seroka said.
And perhaps friendly relations will move forward and there will be beautiful days throughout the San Pedro Bay neighborhood.
John Kingston contributed to this story.
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Click for more American Shipper/FreightWaves stories by Senior Editor Kim Link-Wills.