Survey: Shippers plan to avoid PierPass fees by diverting cargo

Readers cite availability of 24-hour drayage, warehousing as key concerns.

By James A. Cooke, Executive Editor -- Logistics Management, 7/1/2005

LONG BEACH, CALIF.—Plenty of shippers may elect to bypass the "OffPeak" program operated by PierPass, a non-profit group formed by marine terminal operators at the ports of Los Angeles and Long Beach. The controversial program imposes penalties for picking up and delivering ocean containers during standard business hours.

A survey of 90 Logistics Management readers who ship through L.A. and Long Beach found that 56 percent believe the OffPeak program will cost the ports business. "I understand the reason for it and agree that something must be done to reduce congestion, but charging higher fees for picking up containers during peak hours is only going to discourage business and drive traffic away," wrote one respondent.

Slated to take effect on July 23, OffPeak is designed to reduce traffic congestion around the ports by encouraging shippers to shift cargo movements to nights and weekends. PierPass will charge cargo owners a "Traffic Mitigation Fee" for picking up and delivering containers during peak hours, defined as 3 a.m. to 6 p.m. Monday through Friday. Shippers that move containers during those hours will be assessed $40 per 20-foot container and $80 for 40-foot equipment. No penalties will be assessed during off-peak hours, defined as 6 p.m. to 3 a.m. Monday through Thursday and 8 a.m. to 6 p.m. on Saturdays. Empty containers and those arriving and departing via the Alameda Corridor will be exempt. (Details of the program can be found at www.pierpass.org.)

Some 63 percent of respondents indicated that they would shift some or all of their pickup and delivery times to avoid the fees. Of that number, nearly half (48 percent) said they would change less than 25 percent of their container movements to off-peak hours. Another 19 percent will switch between 25 and 50 percent of their shipments, and one-fourth plan to reschedule between 50 and 100 percent. Only 9 percent said they would change all of their container activity to off-peak hours.

Many respondents expressed concern about finding drivers who would be willing to move containers nights and weekends. Some surmised that drayage companies would have to pay drivers more to work at night, and that cost would inevitably be passed on to shippers. Others worried that container terminals would not be fully staffed at all times, and therefore would be unable to resolve problems that might arise during the night. Still others questioned whether enough warehouses and distribution centers would be open around the clock to make the program worthwhile.

Some respondents praised port management for its proactive approach to solving the traffic problem. "It's an outstanding program," says James Bottoms, director of global operations for Eagle Creek, a, manufacturer of travel gear. "It will relieve traffic congestion and reduce pollution," he says. "From an economic standpoint, there are times when it becomes necessary to forcefully encourage the beneficial owners of cargo to adjust working patterns for the greater service of the community."

While Eagle Creek and some other shippers are willing to alter their distribution practices, others are looking for ways to avoid the new fees. The survey found that 47 percent of respondents who move products through L.A. and Long Beach are considering rerouting their cargo to other ports to avoid the peak-hour charges. Of those respondents, 41 percent said they might reroute 50 percent or more of their shipments. Only 5 percent plan to divert all of their cargo to other ports. (See chart, above right.)

Although Pacific Northwest ports are likely to be the greatest beneficiaries of such diversions, Mexico also stands to gain business. "I know some firms have started to run through Mexican ports," wrote one reader. "Our firm is already running ocean test runs through the port of Manzanillo."

It will take several months to determine the extent of shippers' acceptance—or rejection—of the OffPeak program. Meanwhile, many shippers remain skeptical of port management's motives. "My personal opinion is that they're looking for another way to make more money off of us," says Jim Ewert, a traffic and logistics supervisor for the Bechtel Corp. in Houston. "I don't honestly think it will change the congestion problem in L.A."