The Ports of Los Angeles and Long Beach on Monday, Nov. 15, are set to begin levying fees against ocean carriers whose containers linger too long at terminals, among the most significant initiatives they’ve undertaken to alleviate the unprecedented supply chain bottleneck that threatens the nation’s economic recovery from the coronavirus pandemic.
The backup stems from a more than yearlong surge in imports, largely related to a change in consumer habits because of the coronavirus pandemic.
But the current crisis has also made real what experts have long-feared: that the supply chain was vulnerable to breaking down.
The result has been cargo gridlock. Ships spend days at anchor off the California coast — as far as South Orange County. There’s a shortage of truck drivers and chassis needed to move out containers. Inland Empire warehouses have overflowed. Retailers can’t get goods quickly enough.
The potentially hefty fees, initially set to go into effect on Nov. 1 but delayed so ocean carriers had time to prepare, are but one potential solution the ports, federal and state officials and even ocean carriers themselves have announced in recent weeks to alleviate the bottleneck in the short-term and improve the supply chain in the years to come.
“We must expedite the movement of cargo through the ports to work down the number of ships at anchor,” Port of LA Executive Director Gene Seroka said in a statement when the carrier fee was first announced.
Here’s what you need to know:
What are these fees?
The ports, under this new program, will charge ocean carriers at least $100 a day per container that stays too long at a terminal.
There are two categories for containers: those that leave the ports via train and those that head out on trucks.
A container will be fined $100 a day if it is set to go out on a train and stays at a terminal for six days or if it will leave by truck and remains nine days. The fee will increase by $100 each day; a container set to leave by truck, for example, would cost its carrier $200 on day 10 and $300 on day 11.
Despite the port delaying the fees, the clock has been running — meaning at least some carriers are set to be charged on Monday.
The Port of Long Beach, in fact, had 17,314 containers meant to leave on trucks that had been there at least nine days as of Friday, Nov. 12. There were 575 containers leaving by rail that had been there at least six days, according to port data.
That means had the fees been in effect on Friday, ocean carriers would have been charged at least $1.8 million.
The Port of LA did not have similar data available.
Why does this matter to me?
That question has two related-but-distinct answers.
Broadly, the current supply chain crisis has the potential to limit what you can buy.
Multiple businesses, including Starbucks, already have signs up warning customers that their favorite items may not be available because of shortages and one toy executive said earlier this year that folks should buy holiday presents as soon as possible.
There’s no guarantee you won’t see empty shelves in a couple of weeks.
You can put that into the pro column for why the fee matters.
Now for the con column: The fee could hurt your wallet.
The ocean carriers could pass those costs onto importers, who would then, in turn, pass them onto consumers — raising prices.
How substantial that could be is unknown. But the fear is real.
The Mediterranean Shipping Company, in fact, sent a notice to customers on Nov. 3 saying, “MSC expects that all costs will be passed through to shippers.”
MSC is one of the largest carriers in the world.
Is there any good news?
Yes, actually.
While the Port of Long Beach had nearly 18,000 containers on Friday that would have qualified for the fee, that number represents a stark improvement.
The port had seen a 32% decline in the number of containers qualifying for the fee compared to Oct. 28, according to the port’s data.
The number of containers lingering for 13 or more days has also decreased steadily, the data shows.
And officials, during a Friday press conference at the Port of Long Beach featuring U.S. Sen. Alex Padilla, said containers lingering too long at both ports had decreased 20%.
“I’m encouraged by what we’ve seen over the last 10 days but there’s still work to do,” LA harbor commissioner Anthony Pirozzi said in early November. “While recently unloaded cargo is moving out faster, older cargo still isn’t moving as fast as it needs to.”
What about bad news?
In short, the crisis still remains.
The average time ships have had to wait at anchor — because there’s no berth at which they can dock and unload cargo — has continued creeping upward, hitting an average of 16.9 days on Friday, according to Port of LA data.
The number of ships waiting at anchor off the coast repeatedly sets records, including multiple times this week.
And underscoring the urgency of the crisis, it seems like each week sees a different major political figure visit the ports. President Joe Biden has visited, Gov. Gavin Newsom has stopped by. Padilla and a coterie of federal, state and local officials gathered there this week.
But the carrier fee isn’t the only solution in the works, right?
Not even close.
Both ports, at the urging of the Biden Administration, are working toward 24/7 operations. The DMV has begun offering commercial driving tests at more locations to help with the trucker shortage. And U.S. Transportation Secretary Pete Buttigieg tweeted this week that ocean carriers would send sweeper ships to pick up empty containers cluttering the ports.
The Pacific Maritime Association, the Pacific Merchant Shipping Association and the Marine Exchange of Southern California will implement a new queuing system requiring cargo vessels that arrive early to the Ports of Los Angeles and Long Beach to anchor and wait 150 miles off the California coast in an effort to reduce ship congestion and the pollution idling ships produce. That will begin Tuesday.
And Friday’s press conference was meant to tout the $1.2 trillion bipartisan infrastructure, which Biden is set to sign Monday and should help make both ports more resilient over the long-term. The new infrastructure bill includes $17 billion for ports and waterways.
So there’s a lot going on. But the immediate goal remains reducing the current bottleneck as soon as possible.
Long Beach Mayor Robert Garcia, in fact, was clear about the priority during Friday’s press conference.
“Our priority is making sure folks have what they need for Christmas presents and getting all these goods off ships, out of containers and onto the shelves across the country,” Garcia said. “We’re waking up, it’s an all-hands-on-deck moment.”
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