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Issue 9 Do you have a friend or colleague who would like to receive this eFlash, click here. |
The Port of Los Angeles, in line with other California Association of Port Authorities (CAPA) ports, has officially amended their tariff by increasing tariff rates for shipping containerized cargo by five percent and reducing amount of free time for import and export containers.
The amount of "dwell time" - the number days cargo may remain on a container terminal without applying any surcharge - will decrease from five days to four days for import containers, and from seven days to six days for export containers.
The reduction in dwell time is aimed at increased efficiencies on the terminal and increasing the velocity of container movements on the terminal. Additional dwell time reductions scheduled for July 2006 will be three days for import containers and five days for export containers.
The five percent increase was approved by the Los Angeles Board of Harbor Commissioners on May 25, 2005, and will temporarily take effect July 1, 2005, pending permanent approval by the Los Angeles City Council by October 1, 2005. Dwell time changes take effect permanently on July 1, 2005.
Terminal operators at the Los Angeles and Long Beach ports have loosened eligibility requirements for importers and exporters interested in establishing credit to pay PierPass the imminent Traffic Mitigation Fee (TMF). This surcharge will take effect later this month.
Many shippers registering for the PierPass program were upset at being informed they did not qualify for billing because they shipped fewer than 2,000 containers per year through the port complex. The new criteria set a volume floor of 500 containers per year in order for cargo owners, logistics companies or motor carriers to establish credit with PierPass.
The TMF will be applied on the movement of daytime cargo as part of an incentive program to encourage shippers and truckers to take advantage of extended night and weekend gate hours. The hope is that this program will reduce truck traffic on nearby highways during peak commuter hours and pollution from idling trucks waiting to enter port facilities.
PierPass is scheduled to begin off-peak operations July 23, but won't collect the fee until July 25. Terminals will operate full-service gates from 6 p.m. to 3 a.m. Monday through Thursday and 8 a.m. to 6 p.m. on Saturday. Peak hours are set as 3 a.m. to 6 p.m.
The terminals will assess a $40-per-TEU fee ($80 for a 40-foot container) on every container that moves out of the yard during peak hours. Containers that move during off-peak hours or by train via the Alameda Corridor and empties are exempt from the fee, which will be refunded if it has already been paid.
Companies will be billed through their accounts for peak moves or receive automatic credit for designated off-peak or rail moves. Shippers can also find their bill of lading, claim their shipment and pay for peak period moves using a credit card or electronic check through the Internet.
PierPass officials have repeatedly said that setting up an account and credit agreement is a better method for high-volume shippers because the system automatically debits and credits their account, thus reducing potential cargo delays associated with manually tracking and paying each shipment.
Under PierPass, imports and exports will be treated differently. Imports will be held and truckers turned away at the gate if customers don't register and pay the fee, while exports that are not claimed will be loaded on the ship and charged a higher fee.
Customs House Brokers can register themselves, obtain credit with PierPass and pay the traffic mitigation fee on behalf of the cargo owner. Some shippers are opting to pay the fee themselves and others plan to let their customs broker handle payment, much the same way a broker advances the freight charges, storage penalties or customs duties for a shipper. PierPass doesn't know the identity of the beneficial cargo owner, only the bill of lading and container numbers, so whether a broker pays the fee depends on the arrangement between broker and shipper. Brokers are likely to be able to clear the volume hurdle because they are responsible for containers for multiple customers. Small shippers who don't want to deal with credit card payments may benefit from using a broker who can obtain credit.
PierPass officials insist they will be ready to launch the extended gate program in three weeks, but much work remains to be completed.
The terminal group issued a statement last Thursday that "strongly urged" cargo owners and their logistics service providers to register for the off-peak program and set up their payment method. The appeal appeared to be a reaction to the fact that out of tens of thousands of regular port users only 2,300 had registered since May 23.
Although shippers that move cargo during off-peak periods do not have to pay the road fees, PierPass said all companies must be registered so their cargo movements can be traced and charged accordingly.
Even companies that are not responsible for payment should register, the statement said. Registration will allow a trucking company, for example, to check whether the fee has been paid for a particular container before sending a driver to pick it up.
FMI International will register for PierPass for query purposes only.
In addition, we have asked our customers to designate their preference for container retrieval during the Peak or Off-Peak hours. This will help us to plan labor and power accordingly to our shifts.
If you have not registered for PierPass and are an FMI customer, we encourage you to do so in order to avoid potential delays after July 25, 2005. If you have any questions, please contact us or visit the PierPass website at www.pierpass.org.
Freight transportation and logistics costs rose 7.5 percent in 2004 to more than $1 trillion, an all-time high, as companies stockpiled more inventory to deal with supply chain disruptions and transportation delays, and higher interest rates made it more expensive to hold inventory, according to Rosalyn Wilson, author of an annual report on the state of logistics in the United States.
Logistics costs as a percentage of economic output -- the benchmark measure for evaluating the efficiency of the logistics system -- remained flat at 8.6 percent of Gross Domestic Product, offset in large part by 4.4 percent growth in the economy. Logistics costs have remained under 10 percent of GDP since 2000.
"The economic recovery has kind of masked that we've had a record increase in logistics costs," Wilson said at press conference in Washington.
The $71 billion jump in logistics costs recorded by the report comes as no surprise to retailers, manufacturers and farmers, who have been pinched by higher transportation and inventory costs during the past 18 months as double-digit growth in import volumes continues to strain vessel, truck, rail and air cargo capacity and transportation providers take rate increases in a booming seller's market.
Transportation costs, particularly trucking, accounted for the largest share of the cost increase, Wilson said. Trucking alone represented more than 50 percent of total logistics costs. Trucking costs rose $27 billion compared to 2003, as truckers increased profits and passed on higher costs for fuel, equipment and driver wages. The cost of transportation by rail rose more than 10 percent. Maritime shipping costs increased by $1 billion and airfreight by $2 billion.
Transportation as a percentage of GDP has remained flat at 5.5 percent for three consecutive years.
Inventory carrying costs rose 10.6 percent in 2004 and average inventory investment rose to a record high $1.63 trillion, up $133 billion from 2003, according to U.S. Department of Commerce statistics.
Wilson explained that the inventory-to-sales ratio declined from 1.33 to 1.30 months of supply despite the increase in total inventory because retail sales are way up and inventory is turning faster.
Logistics costs continue to grow so far in 2005, but at a slower rate as inventory cost increases and interest rates have leveled off a bit, Wilson said.
The warehousing industry bounced back strong, with vacancy rates down to 9.6 percent at year end from a high of 11.1 percent in the first quarter of 2003 as demand increased to house inventory, Wilson said, noting data from warehouse developer ProLogis.
The report also referred to work done by consultant Richard Armstrong that showed shippers spent $115 billion in 2004 on third-party logistics services in North America.
Wilson said she revised some figures, especially for freight forwarding costs during the past years, after finding some Commerce Department data that was more reliable than assumptions used by previous author Robert Delaney. The adjustments did not noticeably change the overall logistics figures, she said.
The full report can be found on the Council of Supply Chain Management Professionals' Web site at http://www.cscmp.org.
-American Shipper Newswire
©2005 FMI International