Major retailer to Southern Cal ports:
Requirements are many, costs are high

By Stephanie Nall

Long Beach harbor commissioners prove they were listening

For home improvement chain Lowe’s, Southern California ports are a convenient way to get imported goods distributed throughout the country; but a company official said that could change if the ports don’t make it easier and less expensive to do business.

Lowe’s is the seventh largest importer in the country and in 2008 sent about 60,000 TEUs of cargo 30 percent of its total import volume through the San Pedro Bay ports of Los Angeles and Long Beach.

Dean Tracy, director of international transportation for Lowe’s, said shippers can’t and won’t accommodate the extra costs of using Los Angeles and Long Beach when so many retail chains are going out of business. Speaking at the Port of Long Beach’s annual Pulse of the Ports forecast conference, Tracy said myriad fees for infrastructure, extra gate hours, environmental programs and using the Alameda Corridor tack a huge premium onto intermodal shipments, and are fees that aren’t assessed at other ports.

“In L.A. and Long Beach the requirements are many, the costs are high and there are additional indirect costs of time and effort,” Tracy said. Shippers have to not only pay the fees but have employees manage and audit the fee programs, he said.

“The economic slowdown is an opportunity for the ports to reassess how they do business. They need to streamline and cut costs. If L.A. and Long Beach remain uncompetitive, cargo will move - in fact it already is.”

Less than a month after Tracy issued the very public warning, the port responded and put off for at least another year an infrastructure fee. Port officials also reworked its clean-trucks program, making it easier for shippers to avoid paying a $35 per TEU fee.

The board of harbor commissioners said it was acting to stay competitive in the current economic downturn and minimize costs for its customers by deferring until July 1, 2010 a $6 per TEU infrastructure fee that had been scheduled to go into effect on January 1 at a level of $15 per TEU.

The board further heeded Tracy’s warning by lowering port charges as a way to keep and attract discretionary intermodal traffic.
Wharfage charges, the amount paid to the port to move cargo across the docks, were dropped 10 percent as incentive for terminal operators to maintain or increase their “discretionary” cross-country cargo that could be shipped through any of several ports to reach inland destinations. The reduced rate, which could cost the port as much as $11 million, will apply beginning May 1, 2009, and continue for one year.

New or additional levels of intermodal cargo will also bring a 10 percent discount in wharfage rates.

Changes to the clean-trucks program means that the dirty-truck fee of $35 per TEU will only apply to containers moved by 2006 and older trucks and clean diesel trucks funded after April 20. This drastically increases the pool of trucks exempt from the fee, a fact that could save shippers millions of dollars each year.

Industry experts say cargo pulse to remain weak for some time
The Port of Long Beach’s annual gathering of transportation industry panelists was launched in 2005 and billed as a peak season forecast, with speakers opining on how much congestion to expect and how to maneuver cargo through the overburdened port structure. In an acknowledgment that peak congestion is no longer an issue, the session has been renamed “The Pulse of the Port.”
Richard Steinke, the port’s executive director, joked that despite a steep falloff in cargo “the port does still have a pulse.”
But Steinke and other speakers didn’t sugarcoat the situation facing Long Beach and other ports.

Economist Joseph Magaddino of Cal State Long Beach said that contractions in the economies of developed nations in Europe, North America and Japan are much greater than the growth that continues among developing nations. Magaddino forecast a 5 percent increase in imports in 2020, but only after the imports decline 13 percent this year.

John Doherty, head of the Alameda Corridor Transportation Authority, said it will take six years to regain economic ground lost recently. Peter Keller, president of NYK (North America) said he doesn’t know where the bottom is, but that we haven’t reached it yet. Asked about cargo volume trends in March, he answered simply “Not great.”

One bit of good economic news was added by an exporter. George Adams, chairman of the Institute of Scrap Recycling Industries, said on the bulk side, China was buying in February and March.

“We will see steel move first before the rest of the economy. When we see more scrap moving, it will be a good sign for the economy,” Adams said.

In This Issue

News, Trends & Analysis
New Items

Don’t Get Carried Away

Supply Chain
So, how much is this worth, anyway?

Compliance Corner:
Service Providers and Trade Compliance Freight Forwarders need apply!

Five things you should know about auto and logistics software

Distorted Web Sites

Supply Chain product review
Security Software Solutions

Features
Gateway at a Glance Gulf Coast

Supply Security Investments: A Balancing Act

Ports & infrastructure
Major retailer to Southern Cal ports: Requirements are many, costs are high

Port Product Review
Security Equipment

Commentary
Security Issues Impacting the Supply Chain

Who, What, Where, When

Final Say