Date: Tuesday, November 30, 2021
The ports of Los Angeles and Long Beach announced Monday they will again hold off charging shipping companies for long-stored containers because of progress in reducing cargo heaps. Meanwhile, a major terminal operator took a different approach to the freight gridlock, saying it will introduce an incentive program that pays importers cash to clear out shipments faster.
It is the third time the twin ports have postponed the controversial fee since it was scheduled to kick in Nov. 15 as a way to pressure cargo owners not to use the docks as makeshift warehouses. The surcharge begins at $100 and escalates by $100 per day on shipping units scheduled to move by truck that dwell nine days or more, with rail moves penalized after six days or more. It ostensibly targets ocean carriers because the port authorities have contractual relationships with ocean carriers and their terminal divisions, but is universally expected to be passed on to importers.
The port authorities said the fee was delayed after a virtual meeting in the morning among White House port envoy John Porcari, ocean liner companies and terminal operators. Since announcing the container overstay fee on Oct. 25, the amount of old cargo on the docks has declined 37%, they said.
However, according to the Port of Los Angeles’ daily operations report, the number of containers lingering beyond nine days has actually increased in the past three weeks to 23,000 and total containers on the docks have also ticked back up.
The port directors said they will reassess fee implementation after another week of monitoring data. Currently, no date has been set to start the clock for counting excess dwell times. Before the pandemic instigated a massive surge in import demand, containers for local delivery remained on terminals for an average of four days, while containers destined for trains dwelled less than two days.
The amount of cargo on the docks piled up to the point that it restricted room for unloading vessels and for cargo handling equipment and trucks to maneuver, slowing the evacuation of containers to a crawl in recent months.
There are 55 container vessels at anchor or further offshore Monday waiting for a port parking spot. Half of those can carry up to 10,000 twenty-foot equivalent units of cargo, according to the Los Angeles operational dashboard. An additional 19 vessels are three days from arrival.
The ports have made some progress improving efficiency at the terminals even if the number of long-dwelling boxes hasn’t continued to come down. Average container dwell times for local drayage have decreased to 5.7 days from a peak of 11 days, with rail fluidity at two days compared to wait times of 13.4 days at the worst point last summer, according to the report.
CMA CGM incentives
Meanwhile, ocean carrier CMA CGM said it will credit importers $100 per container picked up during daytime hours within the first eight days of being available and $200 for containers moved at night or during weekends.
The incentive program, scheduled to begin Wednesday and run for 90 days, is designed to improve cargo flow through the terminal.
CMA CGM, which took total ownership of the Fenix terminal in Los Angeles earlier this month, said its payout to importers could exceed $22 million over three months. The carrier pushes a substantial amount of cargo through Fenix because it controls the facility, but the incentive will apply to any terminal that handles CMA CGM cargo in Los Angeles and Long Beach.
Shippers are paying $10,000 to $20,000 for ocean transport after rates skyrocketed this year, so it remains to be seen if $100 will encourage them to retrieve containers sooner. Many cargo owners say their hands are tied because they can’t secure chassis or appointments to make pick ups.
Additionally, the container line said it will financially support Fenix in expanding hours of operation so containers can be picked up day and night seven days a week while the incentive program is in place. In a statement provided to American Shipper, the carrier indicated the new extended hours will cover Saturday night and all day Sunday in addition to night hours already offered for truckers. The program will be analyzed at the completion of the 90-day period to determine whether it should be continued or expanded.
Fenix will become the second terminal in the port complex to experiment with 24/7 operations after Total Terminals International in September began keeping truck gates open during pre-dawn hours. Few motor carriers and truckers have warmed to the extended gate hours at TTI so far, according to multiple reports and logistics professionals.
Port and federal officials are working to convince more warehouses to stay open late to receive containers so truckers feel the effort is worth their time.
“We applaud our longtime partners at CMA CGM Group for its first-of-a-kind incentive program designed to increase fluidity on San Pedro Bay terminals. Combined with an additional commitment to expand gate hours at Fenix Marine Terminals, CMA CGM exemplifies the strategic leadership and collaboration needed during this historic cargo surge,” said Gene Seroka, Port of Los Angeles executive director.
The carrier said its efforts are based on its participation in the White House Supply Chain Disruptions Task Force.
CMA CGM said it has sent 14 extra loaders with expedited cargo to Southern California in the past year to alleviate shipment backlogs and increased the number of available truck chassis in the region. The company said it plans to increase vessel capacity up to 16% for services calling the U.S. in the coming months.
“CMA CGM Group is committed to doing everything we can to assist in improving overall supply chain velocity in southern California. By incentivizing the movement of containers off the terminals and ensuring pickups can be made on nights and weekend at FMS, we will decrease truck turn times and expedite the flow of goods into the United States,” said Ed Aldridge, president of CMA CGM and APL North America, in a statement.
On Tuesday, Labor Secretary Marty Walsh will tour the San Pedro Bay ports with Los Angeles Mayor Eric Garcetti and local union officials representing longshoremen to further highlight the administration’s efforts to help reduce port bottlenecks around the country.
It is the third stop for Walsh at a major port in the past month, following meetings at the ports of Philadelphia and Charleston, South Carolina. Earlier in November, the Biden administration released a Port Action Plan and the president signed major infrastructure legislation that includes $17 billion for port projects.