So. Calif. Ports Reduce Rail Container Fees in Attempt to Help Firms Weather Downturn
This story appears in the March 2 print edition of Transport Topics.
Concerned about losing market share to other West Coast ports, harbor commissioners with the ports of Los Angeles and Long Beach have voted to cut their rail container fees by 10%.
Port officials said the cuts are for intermodal containers imported or exported by rail to or from locations outside of California. They said they intend to send a message to shippers, ocean carriers and terminal operators that the ports are trying to help them weather the economic downturn.
The intermodal fees currently are about $40 to $60 a “box,” or 20-foot-equivalent container, said Art Wong, a Port of Long Beach spokesman.
“We’re going to essentially share 10% of that with our terminal operators,” Wong said. “They’re having a hard time, and hopefully this is an incentive that will bring more cargo through here.”
“The incentive program was created in response to our dialogue with customers about what we could do to help sustain container volumes during these tough economic times,” said Arley Baker, a spokesman for the Port of Los Angeles. “The intermodal cargo is the most vulnerable cargo because it can go through other ports.”
Rail-hauled cargo makes up about half of the containers that pass through the Port of Long Beach and more than 40% of the Port of Los Angeles container traffic.
The containers targeted for the fee reductions involve so-called “discretionary cargo,” containers that shippers could send through other ports. Most of the major destinations are east of the Rocky Mountains, Donald Snyder, director of trade relations for the Port of Long Beach, told Transport Topics.
Officials at Long Beach estimate the fee cuts will cost the port about $11 million in lost revenue. Long Beach officials hope to begin the reductions on April 1 and keep them in place for a year. The Port of Los Angeles fee cut is retroactive to Jan. 1, also running for a year.
Long Beach harbor commissioners voted to cut the intermodal container fees on Feb. 23, less than a week after the ports began collecting a $35 per 20-foot-equivalent container fee (click here for previous Premium Content story). The Port of Los Angeles approved its fee cut on Feb. 19, only a day after officials began collecting the clean trucks fee.
“Our growth in recent years has been because we have some of the only facilities that can handle the largest ships,” Wong said. “In the current climate, they don’t need to use as many of the larger ships, and some of them are not even using larger ships.”
“That cargo can go to other ports, and some of it has,” Wong added. “We’re just trying to give them another reason to either continue bringing it through Long Beach or bring more of it through Long Beach.”
Snyder said that, while most ports on the West Coast are seeing decreases in container numbers, the drop is more pronounced at Long Beach.
“We’re seeing a greater cargo loss than some of the other ports,” he said. “We’re just trying to make sure we stay as competitive as possible with our supply-chain partners.”
Paul Bingham, a managing director of IHS Global Insight, said there is no statistical evidence yet that the two ports have lost business to other West Coast ports.
“I think some of this move to reduce the tariffs is somewhat proactive by the ports, but it’s also reactive in the context of all the container fees that have been applied for the clean trucks program and for mitigation on air quality issues,” Bingham said.
Meanwhile, officials at both ports said technical glitches on Feb. 18, the first day of collecting the new ports’ clean trucks fees, have been mostly worked out.
“It’s like any program with a learning curve,” Wong said.
On Feb. 18, the ports experienced long backups, and about 20% of the vehicles trying to pass through terminal gates were denied entry. Last week, only about 10% were turned away, and the lines have shrunk, Wong said.
