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Ramping Up Congestion Relief

December 17, 2014

 

The San Pedro Bay ports are moving forward with a joint plan to collaborate with their industry partners on long-term solutions to the congestion that has slowed the movement of cargo shipped through Long Beach and Los Angeles in recent months.

In the coming days, the ports are expected to jointly file a formal notice with the Federal Maritime Commission (FMC) to hold substantive talks and develop industry-wide solutions to equipment and operational problems to unplug bottlenecks.

“This is a crucial next step in advancing lasting solutions that ensure cargo flows efficiently through our complex year-round,” said Port of Long Beach Chief Executive Jon Slangerup. “We’re dealing with systemic industry problems that can only be solved by all the parties working together, and the ports are in a unique position to facilitate those solutions.”

While major ports around the globe are grappling with the same problems, the difficulties have been magnified at the United States’ busiest harbor complex, which handles nearly 40 percent of the nation’s cargo. Congestion has eased since it peaked in mid-November, but delays in getting loaded containers off the terminals and to their destinations continue.

The FMC filing is subject to approval by the Long Beach Board of Harbor Commissioners, which is scheduled to consider the item Dec. 22. The Los Angeles Board of Harbor Commissioners unanimously approved the document Dec. 11. Subject to FMC review, the talks could begin as early as February.

By providing immunity from anti-trust laws that would otherwise prohibit their collaboration, the agreement allows the ports and their partners to tackle congestion together. The root causes include rising cargo volumes that have extended the peak season; cargo surges from megaships that deliver more containers in a single call; and a shortage of chassis to handle increased demand while the chassis business itself shifts from being managed by ocean carriers to third-party providers.

“The industry is changing and the economy is rebounding at the same time,” Slangerup said. “The walls need to come down so we can zero in on the most effective strategies to eliminate congestion across the supply chain.”

Pursuing San Pedro Bay Solutions

The FMC filing, which amends an existing agreement, specifies the two ports can exchange information on “projects” and “programs” in addition to rates, charges, operating costs, practices and regulations related to marine terminal, trucking, rail and vessel operations. The new language also specifies topics the ports are likely to address:

  • Vessel calls and operations
  • Marine terminal operations, including gate hours and pick-up/drop-off  appointment systems
  • Drayage truck operations at the ports, including queuing and turn times
  • Chassis issues including availability, operations and storage
  • Railroad operations in and surrounding the two ports

Under the existing FMC agreement, Long Beach and Los Angeles have collaborated on programs and strategies related to transportation infrastructure, cargo efficiencies and port capacities, safety and security, and environmental programs for more than eight years, including the San Pedro Bay Ports Clean Air Action Plan (CAAP). The CAAP led to unprecedented success in slashing harmful air emissions from ships, trains, trucks and other port-related sources. Today, the two ports are considered global leaders in sustainable industry practices.

Port of Long Beach Initiatives

While FMC review of the amended agreement is pending, the Port of Long Beach continues to aggressively pursue congestion relief initiatives. To date, the measures have focused on increasing the chassis supply to restore normal throughput as swiftly as possible. Immediate and long-term measures include:

  • Pier S Temporary Empty Container Depot: To put more bare chassis in circulation and eliminate time lost by truckers hauling empty containers to terminals with no place to store them, the Port is opening a 30-acre storage facility at Pier S where trucks can unload the empties. Trucks can then proceed to the terminals to pick up their next load. The facility is being operated by Pasha Stevedoring and Terminals LLC and worked by longshore labor. The temporary facility, which is planned to open on Dec. 29, will remain open through March 31, 2015. The owner of the empty container will be charged $5 a day for the service.
  • Peak Chassis Pool: The Port is exploring options for increasing the chassis supply during future peak seasons by investing in its own chassis fleet. At its Dec. 22 meeting, the Board of Harbor Commissioners is scheduled to consider a Request For Proposals (RFP) for a supplemental chassis pool owned by the Port. The proposed RFP indicates the Port’s intent to have the supplemental pool in place by summer 2015. As the process progresses, the Port will evaluate whether to engage a contractor to manage the supplemental pool.
  • Gray Chassis Pool: The Port continues to work with private chassis providers to develop a “gray” fleet model that allows chassis serving the San Pedro Bay complex to be used interchangeably for all transactions within the harbor complex. At the Port’s urging in early October, two vendors, DCLI and TRAC, have augmented the supply by adding 3,000 chassis to the fleet serving the ports.

The Port’s high-level Congestion Relief Team continues to track trends and confer with customers daily to stay current on cargo flow issues. Early initiatives included opening a two-week “free-time” window in late October during which containers could remain on the docks up to seven days without incurring demurrage. Future measures may involve increased use of technology to optimize drayage operations and shorten turn times.

The Port itself has been preparing for the growing number of big ship calls and rebounding cargo volumes for several years. Already equipped to handle the largest vessels in the trans-Pacific fleet, the Port is midway through a 10-year, $4 billion capital program to ensure its infrastructure – terminals, streets, rail and bridges – is ready for future growth in cargo volume.

Also in place is the Board of Harbor Commissioners’ Special Advisory Committee on Port Productivity and Efficiency, created a year ago to ensure that Port policies and practices anticipate global trends. Vice President Rich Dines chairs the subcommittee and is working with Commissioner Lori Ann Farrell. As part of their larger focus on Port infrastructure and terminal efficiencies, the commissioners are working closely with staff’s Congestion Relief Team.

The Port’s On-Dock Intermodal Incentive Program is also helping to reduce congestion by promoting the use of on-dock rail to move loaded containers to their inland destinations or deliver U.S. goods to the Port for export. Adopted in June to attract more cargo and reduce air pollution, the program offers a $5-per-container-unit incentive to ocean carriers for each additional 20-foot equivalent unit transported by on-dock rail above the vessel operator’s 2013 total. The incentive is available for the 2014 and 2015 calendar years.

Other Factors

Other factors in the congestion equation include new vessel-sharing alliances that have changed ship call patterns, increased competition for rail slots, and declining ranks of truck drivers.

Also complicating the situation is ongoing contract negotiations between the Pacific Maritime Association (PMA), which represents terminals and shipping lines at 29 West Coast ports, and the International Longshore and Warehouse Union (ILWU), which represents nearly 20,000 workers who move the cargo. The parties have been at the table for more than seven months, which has heightened concerns about shipping through West Coast ports and led to calls for President Obama to appoint a federal mediator to help the parties reach a new labor agreement.

“The Port of Long Beach is not a party to the negotiations,” Slangerup said. “But we are strongly advocating that both sides resolve their remaining differences and approve a contract before further damage is done to our customer relationships.”

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