California Apparel News

When the Port of Los Angeles saw its cargo-container volumes plummet 17 percent in the first three months of this year, it decided to start whittling away at a basket of fees it imposes on cargo movements.

In April, the port’s Board of Commissioners voted to postpone a $6-per-container infrastructure charge scheduled to go into effect July 1. The port is taking the fee, intended to help pay for highway and rail improvements around the port, off the books until March 31, 2010, when it will reassess the feasibility of adding yet another tax on cargo coming in and out of the port.

“We felt delaying the tariff was in the best interest of our importers and exporters in these tough economic times,” said Mike Christenshy;sen, deputy executive director for development at the Port of Los Angeles. “We wanted to give them a break.”

The Port of Long Beach matched its sister port’s move. “We are doing everything we can to help our partners, terminal and shipping operators, to give them more of an advantage,” said Port of Long Beach spokesperson Art Wong.

As towering steel cranes sit idle and truck traffic is congestion-free for the first time in years, Los Angeles and Long Beach port executives now worry that their seaside thoroughfares are becoming too costly. Shippers have a host of options for transporting their cargo from Asia to the United States.

For the past few years, so much cargo was coming into the Los Angeles/Long Beach port complex, which moves four out of every 10 cargo containers coming into the country, that thousands of temporary longshore workers were being trained to handle the flood of containers holding T-shirts, blue jeans, shoes, appliances, computers and television sets.

At the Port of Long Beach, cargo volumes spiked a whopping 16 percent in 2005 and nearly 9 percent in 2006. Cargo movement rose very slightly in 2007 and then started to nosedive, with an 11 percent decline in 2008. During the first three months of this year, cargo was off 29.5 percent.

“During the last four or five years, our biggest gains have been because we have been stealing market share with the big ships that come here, the ships that carry 8,000 TEUs [20-foot containers],” Wong said. “Long Beach, for the longest time, was the only big port complex [on the West Coast] that could handle these big ships. Now some of these big ships have left us because they are being idled as shipping lines use smaller ships to accommodate reduced cargo volumes.”

Preparing for the mega-ships

Indeed, for the longest time, the Port of Long Beach, with its naturally 50-foot-deep harbor, served as the only place that could accommodate the mega-ships that started plowing the waters between Asia and California in 2004.

But other harbors started deepening their channels to at least 50 feet in hopes of gaining more seaway traffic. The Port of Oakland will finish up its deep-berth dredging project this summer with a boost of $32 million in federal funds. “This is going to put us in a really good position to bring in these huge container ships that need a deeper draft,” said Port of Oakland spokesperson Marilyn Sandifur.

The Port of Los Angeles now has eight berths that can accommodate large container ships, said Lori Kelman, a Los Angeles port spokesperson. The Port of Long Beach has five of its seven container terminals that can handle mega-ships. Each terminal handles one to four big vessels.

Meanwhile, the West Coast ports are fashioning various programs that will act as a sort of discount fire sale on several services.

Almost all of the West Coast ports have adopted some kind of program that reduces fees on intermodal cargo, which is cargo transferred from cargo ships to railroad cars for transport to warehouses and retailers.

At Los Angeles and Long Beach, shippers get a one-year, 10 percent discount on each container shipped via rail versus truck. The ports in Oakland; Tacoma, Wash.; and Seattle adopted similar measures.

In addition, Los Angeles and Long Beach devised an incentive program that tacks on another 10 percent discount to every extra container moved by rail that exceeds the terminals’ 2008 levels. Again, ports in Oakland, Tacoma and Seattle matched those incentives with similar programs.

Taking it one step further, the Port of Seattle, which saw its cargo-container traffic plunge nearly 24 percent during the first three months of this year, has devised a program that gives temporary rebates on crane-rental fees, makes reductions in the acreage that terminal operators have to lease from the port and defers the minimum-volume payments that terminals are required to make if their volume falls below a certain level.

“This whole package will cost the port $6.2 million in revenues,” said Peter McGraw, a spokesperson for the Port of Seattle. “But we are going to get this money back.”

The program seems to be working already. A new joint service operation between Maersk Line, the Danish company that is the largest container-shipping line in the world, and French shipping line CMA CGM will begin calling at Seattle in June. Ships from the two lines will be making weekly stops, sailing from Hong Kong; Yantian and Shanghai in China; and Pusan, South Korea.

This is just one example of how the West Coast ports are jockeying for business. “With the economic downturn, it is a challenging time for ports around the country,” admitted Oakland’s Sandifur. “It’s a competitive situation.”