Fed up with cargo owners using their docks as free storage space, officials of the ports of Los Angeles and Long Beach are pushing to cut the time goods sit on the docks before fees can be levied.
Terminal operators at both ports now start charging what are known as demurrage fees after five days for imported cargo and seven days for cargo waiting for export. But Bruce Seaton and Richard Steinke, the respective heads of the L.A. and Long Beach ports, are each working to have those charges begin a day earlier in each direction.
Seaton and Steinke will present the plan to the March meeting of the California Association of Port Authorities, which represents 11 ports in the state that would be affected. If the association endorses the plan, as is expected, the regional ports cannot be tagged with allegations of collusion to raise fees.
The effort comes at a time when the ports have suffered from ongoing backlogs, fueled by labor strife, labor shortages on the docks and rail lines, and truck traffic gridlock.
Some retailers have taken advantage of the backlogs to store freight on the docks for two weeks or more before charges are incurred.
While many cargo owners oppose the measure, the other links in the supply chain are coming to realize that free time is an outdated concept. "By reducing free time on the dock, we're seeking to improve the velocity on the terminals," said Theresa Adams Lopez, a spokeswoman for the L.A. port.
The threat of quicker imposition of storage charges "will get the containers moving more quickly through the terminals," she said.
The L.A. port, the larger of the two, wants to reduce the free time by one day within the next six months and an additional day by the end of the year.
That means imports now allowed to idle on the docks for five business days would only be allowed three penalty-free days. Export times would drop from seven days to five.
L.A.'s demurrage fees on an imported and exported 40-foot container are $54.29 per day for the first five days and $108 per day afterward.
At Long Beach, demurrage fees on a 40-foot import container are $42 per day for the first five days after the free time has expired and $83 per day afterward. Export cargo owners are charged $27 per day for the first five days and $56 each day from then on.
California ports first reduced their free time allowance in 2000, cutting it to the current five-day limit for import containers from seven days and to seven from 10 days for exported goods.
To date, the penalties have done little to alleviate congestion.
"We grew by 24 percent last year," said Art Wong, spokesman for the Long Beach port. "One of things we're concerned about is having enough room to deal with all this cargo."
The added revenues from earlier demurrage fees go to terminal operators, many of which have clauses in their contracts allowing them to pay or waive the fees if they desire. But the backlog of cargo has been so great that terminal operators are being pressured to stop waiving the demurrage fees.
Salespeople working for the vessel lines often promise importers and exporters extended free time as a sweetener to grow or maintain their customer base. But the free time can add to the congestion moving the cargo through the ports.
Robin Lanier, executive director of the Waterfront Coalition, acknowledged that her clients must realize that leaving cargo for extended periods on the docks costs more in the long run.
"Some shippers gain by free time and some lose by free time and in some cases, it's the same shipper, but they haven't figured it out," said Lanier. "The whole industry really needs to discipline itself on free time."
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