Oakland plans PierPass-like program to fund Saturday gates

Federal Maritime Commissioner Doyle and shipper groups say they want more details on the Port of Oakland’s plan to help relieve congestion by opening facilities on Saturdays and charging peak usage fees.    You’ve heard of PierPass. Now meet OakPass.
   Marine terminal operators (MTOs) in Oakland are planning to open their facilities on Saturday in order to help relieve congestion at the port and charge a fee to shippers moving their cargo during peak hours to support the extended hours.
   The so-called OakPass program will be similar to the PierPass program in the Ports of Los Angeles and Long Beach.
   While details of the program have yet to be finalized, the terminal operators are tentatively planning to help pay for the extended hours with a fee — $17 for 20-foot containers and $34 for other size containers — which would be paid by users of the port during peak hours. The fee would not be paid by offpeak users, or on empty containers or transshipped cargo.
   (In comparison, the PierPass fee is $69.17 per TEU, but terminals in the Southern California ports are open four to five additional shifts per week to offset the peak charge.)
   In a filing with the Federal Maritime Commission on July 24, the members the Oakland Marine Terminal Operators Agreement — SSA, Ports America, TraPac, and Seaside Transportation Service — said they had agreed they would open their terminals for one or more additional shifts per week “in view of the urgent need to ease congestion at the Port of Oakland.”
   Initially, they will add one shift, and the amount of the fee and terms and condition of its application and collection will be set forth in a schedule that will be published on the website of the Oakland Marine Terminal Operators Agreement (OAKMTOA).
   John Cushing, the president of OakPass as well as president of PierPass, says terminal operators are still working on a cost analysis, but there is not a schedule to post or implementation date yet. He added the program would not be for profit.
   Cushing said the hope is to start the program this year, and that the Port of Oakland has also wanted to have Saturday terminal hours. He also noted the Pacific Maritime Association and International Longshore and Warehouse Union (ILWU) are adding workers and the terminal operators want to make sure there are a sufficient number of trained longshoremen.
   The ILWU said to date 100 “casual” longshorement have been made Class B, permanent employees and that in response to a request to add another 100, permission to add 50 has been granted. Another 200 casuals have been added as well.
   “Before we do anything in terms of a launch, we would want to do an outreach program where we can work with all of those in the supply chain so that we can explain…in greater detail the need for the additional gate, when it would be and how payments would work,” said Cushing. “Nothing is final, it is a work in progress.
   “Right now there is too much volume going through the Port of Oakland for it to continue to handle it Monday through Friday,” he said. According to Cushing, this was evident even prior to the congestion that developed at the port earlier this year, which has been attributed to chassis shortages and contentious contract negotiations between employers represented by the PMA and the ILWU.
   He said OAKMTOA members recognize solving that problem requires an additional shift and that optimally that would be on Saturday because it would work best with labor issues surrounding trucker hours of service and availability of labor.
   “In the past when there have been ad hoc gates, they have been for the most part on Saturdays because it works better with distribution centers,” said Cushing.
   Cushing and terminal operators met with members of the Federal Maritime Commission to discuss their plans on Tuesday.
   FMC Commissioner William P. Doyle said he posed many questions about the agreement himself and has received queries about the proposal from several shipper groups.
   Doyle said he was concerned that the schedule with prices and conditions has not yet been made public, and he believes OakPass should meet with stakeholders to discuss their plans.
   “It hasn’t been vetted through the public,” said Doyle. He would like the schedule “to be posted on the FMC website immediately so that everyone can see it and understand exactly what is going on so we can have back and forth and discussion and comments on it.”
   Doyle emphasized he has not made up his mind about whether the FMC should approve the plan, which was filed on July 24 as an amendment to OAKMTOA.
   Agreements filed with the FMC go into effect in 45 days unless some action is taken. The FMC can stop the clock by asking for additional information, and then another 45 day comment period would ensue. Or it could seek an injunction if it is not able to get questions answered or have the agreement modified to meet FMC concerns.
   In a letter to the FMC, the National Industrial Transportation League, the nation’s largest shipper group, raised similar concerns about the proposal.
   “We acknowledge that congestion remains a significant problem in Oakland as well as the Southern California ports, and we support implementation of corrective measures that have been identified through rigorous analysis of both the cause of the problem and the efficacy of the proposed solution,” wrote Bruce Carlton, the NIT League president and chief executive officer. “However, we are not convinced that the OakPass initiative is the result of such a process.
   “Our concern stems in part from the language of the amendment.” Carlton said there has been no evidence of an “urgent need to ease congestion” in Oakland presented to the public.
  On the other hand, Peter Friedmann, a Washington, D.C.-based attorney who represents several shipper groups including the Coalition of New England Companies for Trade and the Agriculture Transportation Coalition (AgTC), told American Shipper earlier this month that in Oakland “the situation is in crisis” and said at least two carriers are skipping some port calls at Oakland as a result.
   Mike Zampa, a spokesman for the port said yesterday that the number of ships at anchor waiting for berths at the port had dropped from a high of about 13 about a month ago to between one and four in recent days.
   Friedmann said in comments to the FMC on OakPass filed on behalf of the AgTC, “We believe that this is a watershed moment in FMC existence. In recent years, the Commission has begun to demonstrate a refreshing understanding that it is the cargo which is the primary United States interest here. It is the cargo that pays for the marine terminals, pays for the ocean carriage, and is now being asked to pay for a new terminal revenue program at the Port of Oakland.
   “It is not immediately apparent why there is a need to create a separate fee under a new name. There is no particular reason that gates cannot be operated without a new and distinct fee. At some ports, terminals do operate at different times and on different days, without imposing a new fee. The cost of those gates is simply rolled into the general terminal fees, which can be increased or not, by the terminals under their current authority.”
   “Even if we accept that there is an ‘urgent need’, we can find no basis in the amendment for concluding that inaugurating use of so-called off peak terminal gate hours will cure the congestion problem,” added Carlton.
   “The lack of information and transparency regarding the OakPass program is also a concern,” said Carlton. “While we do know that beneficial cargo owners — shippers — will be assessed a new fee for picking up containers in daytime hours to support additional off peak work shifts, we do not know the level of fee to be charged, the number of work shifts that will be added, the number of participating terminals, or whether there will be clear standards to measure congestion levels which would clarify when the OakPass program will be operational and when it may be discontinued.
   “While the MTOs may indeed have the right to establish this off-peak program in the context of their Agreement, the specific terms and conditions of the program should be revealed to the Commission and made public. As the matter stands, the Commissionis left to pass judgment on a blank check, and shippers, NVOs and other affected parties are left in the dark,” the NIT League president added.
   Carlton said shippers and the groups that represent them “including the League, have voiced a number of concerns about the operation and efficacy of PierPass for quite some time. Widely saluted and supported at its inaugural as a sure-fire way to move a substantial portion of marine terminal operations from daytime to nighttime, and thereby make a significant contribution to daytime traffic mitigation, PierPass’s actual performance over time has raised numerous questions and concerns from the shipping public, which have yet to be addressed.
   “Shippers understood that the fee they were charged would be used to support the operations of a significant number of off-peak, higher cost night gates. Yet when traffic levels dropped considerably in the Great Recession, those off-peak gate hours were suspended but the fee was still collected. The shipping public has not been given any rational explanation for this, nor have they seen any financial reports on the operation of PierPASS. Nighttime gate hours are still less than optimal, yet PierPASS just announced yet another increase in their fee for daytime cargo operations,” he wrote.
   Concerns were also raised by the National Retail Federation.
   Jonathan Gold, vice president, supply chain and customs policy at NRF said, “The Port of Oakland has certainly struggled in recent months with port congestion.
   “While the additional off-peak gates might be part of the solution, we are concerned about the creation of a program similar to PierPass in Southern California which was initially developed as a way to incent beneficial cargo owners to move cargo during nighttime hours instead of congested peak daytime hours.”
   “We are concerned that the problems that have arisen with PierPass will plague OakPass. PierPass was supposed to support port-wide gates that would be available at least four nights a week.
    “There was supposed to be transparency in the cost structure of PierPass. PierPass has increased its fees continuously without providing the detailed financials of why such increases are warranted. The BCO’s, those subject to the fee, have no way of understanding if the current fees collected are actually covering the cost of the off-peak gates or not. This needs to be clear in any kind of OakPass program.
   “PierPass continuously claims that the revenues collected by the fee on peak hour, day-time operations, do not fully offset the cost of off-hour gates,” said Gold. “In 2008 during the economic downturn when trade declined, PierPass all but shut down port-wide night gates. Terminal operators said there wasn’t enough trade to justify off-hour gates. Unfortunately the fee remained in place even though there were only a handful of irregular off-hour gates being supported. When PierPass reduced the number of off-hour gates, but continued to increase the fee, shippers began to see the program as less of an incentive for BCOs to use off-hour gates, but as a revenue generating program for terminal operators.
   “This message seemed to be reinforced when PierPass refused to suspend the fee in order to help relieve the recent congestion resulting from the labor negotiations, even though industry, the Port Authority and the FMC had asked PierPass to act.
   “While there has been talk about a new ‘PierPass 2.0,’ there has yet to be any movement from PierPass to address the continuing issues. This kind of terminal behavior is simply unfair. It’s no different from the unfair practices that ocean carriers engaged in during the recent slowdowns at West Coast ports, when carriers charged detention and demurrage fees even though shippers were unable to pick up cargo or return intermodal equipment,” he said.
   In response to a query earlier this month by American Shipper, the NIT League, NRF, and Agriculture Transportation Coalition said shippers were still facing challenges at West Coast ports.
   “While the situation is certainly different this year without a contract being negotiated, there are still congestion issues on the West Coast because of a variety of issues. The delays aren’t as bad as what we saw last year, but there are still congestion issues impacting the ports and terminals,” Gold said at the time.
   Don Pisano, chairman of the NIT League’s Ocean Transportation Committee and president of American Coffee Corp. in Jersey City, N.J. said, “While the terminals have been recovering from their own self-inflicted implosion earlier in the year, they are still far behind any reasonable expectation of throughput. Our truckers are experiencing delays in each of the main ports of Los Angeles, Long Beach, Oakland and Seattle.
   “The recent chassis pool in LA/LB is a welcomed improvement, but getting in and out of the terminals remains a daily challenge,” said Pisano. “The congestion at Oakland has caused some vessels to omit their port, empties refused, and averaging 1.5 containers per day versus 3 or 4 in years past. Labor shortage seems to be a continued problem and can only hope that recent hires will make an impact when they get trained and can produce. Seattle terminals continue dismal turn times with truckers charging a terminal delay surcharge of about $150 over their normal dray rates.”
   “In the midst of all this, the port of Portland seems to have been all but abandoned. While they have had their own issues in the recent past, there appears to be a lot of capacity being wasted in favor of the higher productivity the ultra large vessels are supposed to be delivering at the other main ports.”
   “Delays cost money and as always, it is the shipper that bears the costs. These costs are factored into supply chain planning and cost efficient alternatives considered,” said Pisano.
   He said at American Coffee, “While we continue to service our west coast customers with shipments to their nearest ports, we have diverted much of our traditional buffer stocks to Gulf and East Coast ports.”
   Friedmann said, “Imorters and exporters from New England, to Iowa, to California, and the West Coast truckers who have to deal with congested gates everyday , are telling us that the situation of the West Coast ports is worse now than it was at this time (August) last year.
   “The recovery from the collapse of the West Coast ports during the second part of 2014 and the first three months of 2015, has been tepid, at best.
   “Our concern is now exacerbated with the news that five new vessel strings have been initiated to bring consumer goods manufactured in Vietnam, to the United States. We understand that all 5 of these new vessel strings will serve the United States, but none will call on the US West Coast ports. Instead they will access the US consumer via all water routes to US Gulf and East Coast ports. This suggests that the trend of importers placing major distribution centers in the southeast, and the growth of import cargo to the east coast and Gulf Coast ports, is not a temporary phenomena, but perhaps a permanent trend.
   “It is unclear whether the carriers are avoiding the West Coast ports due to ongoing delays, disruptions and uncertainties. At this point, it doesn’t really matter. All we know is that import containers are going to the East Coast, which means that agriculture and forest products exporters who depend on West Coast gateway ports to access the Asian market, are being left with fewer and fewer empty containers into which to load those exports. For the US agriculture exporter, this is a devastating trend.
   “Agriculture exporters need the fastest and most direct route to the major Asian markets of China, Japan, Korea and Vietnam, and empty containers into which to load our exports. If the trend is to bring more imports to the East Coast and fewer imports through the West Coast gateway ports, those empty containers will be on the East Coast and it will be extremely difficult to obtain sufficient empty containers to serve the large volumes of agriculture cargo that should move by the West Coast ports.”
   Friedmann, who had traveled to the Port of Los Angeles and Long Beach to meet with port businesses said, “It is imperative that the ports, terminal operators and labor at the West Coast ports recognize that this trend must be stymied, if our exporters (and importers) will remain competitive in the global marketplace, or not. The AgTC is taking steps, out of the public eye, to engage privately and individually with each component — terminal operators, labor, port authorities — towards changing the status quo, because the status quo is unacceptable.”