PierPass raises fee at ports of LA/Long Beach
“While the economy has moved out of the abyss of 2008, we are still in a recovery mode,” said Bruce Wargo, president of PierPass, the non-profit formed by WCMTOA in 2005 that runs the OffPeak program
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In a move to contain costs and sustain service, the West Coast MTO Agreement (WCMTOA) today announced it will raise the current Traffic Mitigation Fee (TMF) at the Ports of Los Angeles and Long Beach.
“While the economy has moved out of the abyss of 2008, we are still in a recovery mode,” said Bruce Wargo, president of PierPass, the non-profit formed by WCMTOA in 2005 that runs the OffPeak program.
In an interview with LM, he noted that the price point will be raised to $60 per twenty-foot equivalent unit (TEU) in order to sustain continued operation of PierPass OffPeak gates. The TMF adjustment is effective July 4, 2011.
“Things are really getting better at LA/Long Beach,” he said, “and we feel that Southern California will be the premier destination for ocean cargo from Asia for years to come.”
Wargo noted that is the first increase in the TMF since 2006. Since then, hourly labor costs have increased 31 percent. The terminals have operated the OffPeak gates at a loss since the program’s start in 2005. The shortfall between TMF revenues and OffPeak gate costs was $52.3 million in 2010.
Adding the night shifts in 2005 substantially increased costs for terminal operators. The immediate effect of opening the night shifts was to spread the same amount of volume over twice the number of hours. In addition, nighttime labor rates are significantly higher than daytime rates.
“It is clear that absent some action, TMF revenue will continue to fall short of OffPeak gate costs and endanger the program,” said Bruce Wargo, president of PierPass, the non-profit formed by WCMTOA in 2005 that runs the OffPeak program. “With 55 percent of non-exempt cargo movements taking place during OffPeak hours, the program has become an important element of port operations.”
A number of options were evaluated by marine terminal operators to cut the losses, including adjusting the rate, decreasing the services offered, or instituting a fee on OffPeak cargo. Adjusting the rate was determined by the marine terminal operators to be the most effective and least disruptive way to reduce the losses.
“While OffPeak was never intended to be a profit-making venture, the terminal operators can’t continue sustaining operational deficits at the current levels,” Wargo added.
Beginning in mid-2012, the TMF will be adjusted annually based on changes in Pacific Maritime Association maritime labor costs.
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About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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