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American Shipper

PierPass sets eligibility for accounts at 500 containers

PierPass sets eligibility for accounts at 500 containers

   Responding to customer complaints, marine terminal operators at the Los Angeles and Long Beach ports have loosened eligibility requirements for importers and exporters interested in establishing credit to pay for a new anticongestion surcharge on cargo picked up or delivered during peak weekday periods.

   Many shippers registering for the PierPass program that tracks containers moving during day and evening shifts 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 updated criteria set a volume floor of 500 containers per year in order for cargo owners, logistics companies or motor carriers to establish credit, Scott Smith, vice president of APL's Eagle Marine Services terminal, said in a phone interview.

   The fee will be applied on daytime cargo moves as part of an incentive program to encourage shippers and truckers to take advantage of extended night and weekend gate hours being offered to reduce truck traffic on nearby highways during peak commuter hours and pollution from idling trucks waiting to enter port facilities. The terminal operators created the off-peak program last year to forestall a legislative proposal to tax daytime cargo moves to fund highway projects.

   PierPass, the organization set up by the 12 area container terminals to manage the program, 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.

   The credit restrictions came as a surprise to shippers who had been encouraged by the terminals to set up accounts to pay for the daytime fee. 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. But PierPass officials never indicated in public appearances, press statements or on their Web site that credit would only be extended to shippers that conduct a certain amount of business with the port.

   The closest that PierPass came to defining a high-volume shipper was a June 10 speech by board member Doug Tilden, president of Marine Terminals Corp., to agricultural shippers in which he said companies that ship more than 2,000 containers through the port each year should set up electronic data interchange connections to transmit data to PierPass.

   PierPass originally set the threshold for obtaining a credit account at 2,000 containers in an effort to keep down credit bureau payments and accounting costs, Smith said. Affiliated Computer Services (ACS), the company hired by the terminals to develop the information technology and operate the system, will check the creditworthiness of applicants through a Dun & Bradstreet database search and follow up with the Experion credit agency if the applicant is initially denied, Smith said.

   Some shippers are worried they will not be approved in time to pay the fee and move their cargo under the current 30-day turnaround time for processing a credit application, but Smith said processing time will only be 24 to 28 hours once ACS completes testing the online connections with Dun & Bradstreet.

   PierPass officials first clarified their policy during a conference call this week with members of the Waterfront Coalition, an advocacy group for port interests that includes major retailers and other large shippers. Waterfront Director Robin Lanier said the 500 container threshold appeared to satisfy her members, but a trade association official who represents many smaller shippers said the minimum container requirement needs to come down more.

   'This still is a threshold that is much too high considering that many exporters use multiple ports. A 500-TEU requirement through L.A.-Long Beach discriminates against small U.S. exporters, many of whom are agricultural or small manufacturers,' said Peter Friedmann, executive director of the Agriculture Ocean Transportation Coalition.

   Mid-size shippers prefer an account-based payment system too because they don't want to max out their credit cards, Friedmann said. An agriculture exporter who moves 200 containers per month during harvest season, for example, would put $16,000 (200 X $80) on the credit card during the period if all the shipments entered the port during peak hours. Five hundred shipments would amount to $40,000 in credit card charges.

   Paying by credit card also puts the onus on the shipper to take the initiative to claim the shipment and make payment so that the cargo can be released without delay. Smaller shippers worry that they could miss making a payment if they are out of town or away from their office for any amount of time. PierPass officials now say payments can be made in advance while the vessel is on the water and fees will be rebated as necessary.

   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.

   Shippers claim it is not fair to pay a higher fee if they have been denied the opportunity to establish credit, said Kathy Beubien, AgOTC's government relations director.

   Some companies that started out on a billing basis reversed course and decided to conduct transactions with the credit card system because of the information technology resources required to link up to the PierPass system, Lanier said.

   She agreed the number of containers shouldn't be criteria for determining creditworthiness.

   Smith clarified that brokers, and even truckers, 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, Smith said.

   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 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.

   ACS is in the process of testing the software for auditing container moves, the Web site used for conducting transactions and other information technology. The company will be conducting lots of system testing during the next couple of weeks and will be available in advance to companies interested in participating in the tests to make sure their EDI connections work, Smith said.

   During the Waterfront Coalition conference Smith and other PierPass officials addressed the concerns of large shippers who wanted assurances that the non-profit company would not make further changes regarding how to share unformatted batch data files. ACS published what the structure of its files would be so shippers could line up their systems for data exchange and then changed the requirements to accommodate payments by brokers and logistics providers after some shippers had already written the needed software code, Lanier said.

   Meanwhile, smaller shippers were told it might be another week before the credit card interface going to be available so users can get comfortable with it, which might not be enough time for companies to adjust, Lanier said.

   'We're still anticipating, unless there is something that we've seriously missed, starting on the 23rd,' Smith said.

   After all the policy changes and technical preparations, the wild card in the whole PierPass program is still the truckers. PierPass officials are banking that truckers will feel the extra productivity from making three round trips instead of two during the day is worth working at night.

   But many trucking, logistics and shipping executives are skeptical that truckers will show up in the numbers necessary to sustain night-time operations unless they are paid extra for working the night shift, as many are demanding.

   Truckers who shuttle containers on and off the ports to area distribution centers, receiving docks and rail yards are independent contractors who own their trucks and sub contract to trucking companies that solicit business and act as their dispatcher. As non-employees, the drivers can set their own hours.

   Smith acknowledged that 'it's not out of bounds for truckers to expect to get some more money for working the night time,' adding that rate negotiations are going on between trucking companies and individual drivers.

   The port trucking industry is already suffering from a severe manpower shortage as it becomes harder to find replacements for drivers — frustrated by long hours, low pay and too much unpaid wait time at shipper docks and terminals — leaving the business.

   'It's a fair demand, however that comes about. But even without the increases if a driver can make three vs. two turns at night, that's 50 percent increase,' Smith said.

   The money for more driver pay could come from increased productivity. A big shipper that required 15 drivers to move 40 containers may now only need 10 drivers to move the same number of boxes, which would allow trucking companies to shift some of the savings to pay a night shift differential, he suggested.

   'It will bring new life back to the trucking industry because they'll be able to make money again,' Smith said.

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