Shipper warns cargo could flee L.A.-Long Beach
A major importer has warned the ports of Long Beach and Los Angeles that intermodal cargo destined for inland U.S. points will shift to other ports if the Southern California ports don’t reassess the growing number of fees charged to importers.
Dean Tracy, director of international transportation for Lowe’s, said shippers won’t accommodate the extra costs of using Los Angeles and Long Beach when their own bottom lines are under siege.
Speaking at the Port of Long Beach’s annual Pulse of the Ports forecast conference last week, Dean unveiled a list of fees that shippers using the Southern California ports must account for, including:
' Port security fees.
' Fees to fund off-peak gate hours.
' Clean truck fees.
' Infrastructure fees.
' Charges to use the Alameda Corridor.
“If L.A. and Long Beach remain uncompetitive in terms of the cost and ease of doing business, I'm afraid service will migrate to other ports,” Tracy said. “We, as importers, given these economic times that we're in today, we have to scrape for every dollar like everybody else does. We vote with our feet and our wallets. And business just moves. We move to where it's conducive. (Other ports) don't have the intermodal costs we have here.”
Roughly half of the container volume arriving at Long Beach and Los Angeles is discretionary cargo headed for destinations beyond Southern California. Lowe’s, the seventh-largest U.S. importer, moved 60,000 of its 206,000 TEUs through the Southern California ports in 2008. Mirroring the 50-50 discretionary split in Los Angeles and Long Beach, about 28,000 of those TEUs were destined for California stores or distribution centers.
Lowe's, which ships to nearly every major U.S. port, has already begun routing discretionary cargo destined for the U.S. Midwest away from the Southern California ports.
'Not all of it,' he said. 'Not the bulk of it. The majority's still here, but we've had to move some business.'
Aside from the pure cost added per box, Tracy said there’s also the issue of administrative manpower needed to monitor all the fees.
“There are administrative costs to manage fees, to audit them, to make sure we are being billed correctly,” he said. “The time we spend on this could be spent on other initiatives. Either we take people off existing work or hire additional labor. We've had to take people off existing work.”
Tracy said slackening demand in the current year represents a chance for the ports to reexamine its fee structure in order to maintain business through the down cycle.
“Given the current conditions, I'm not sure we're really going to have a peak to manage through in 2009,' he said. “If we don't act now, I fear the opportunities for cargo to move may increase.”