Background

Federal and state authorities and private-sector entities are continuing to roll out efforts to address problems that have roiled global supply chains. However, these measures could result in higher costs for importers.

The White House announced Oct. 13 that the ports of Long Beach and Los Angeles would move to 24/7 operations. To support that move, rail carrier Union Pacific announced Oct. 25 that it will run a pilot program through Dec. 31 offering a $60 per container refund to its ocean carrier customers for each container delivered to its near-port Intermodal Container Transfer Facility in Long Beach on the weekends. Rail carrier BNSF is offering a similar $50 incentive.

However, amid reports that the expanded hours are not being utilized, the two ports announced that beginning Nov. 1 they will begin assessing a surcharge on ocean carriers for import containers that stay on marine terminals for (1) three days or more for containers moving by rail or (2) nine days or more for containers scheduled to move by truck. The surcharge will be $100 per container, increasing in $100 increments per container per day. According to an American Shipper article, “within minutes of the announcement by the twin ports, container lines began sending letters to importers alerting them to be prepared for the new charges.”

While federal port envoy John Porcari said he supports the new charges, they were immediately denounced by importers and shippers. The Retail Industry Leaders Association said shippers “are already moving cargo out of the ports as fast as possible” and that if fees are passed on to shippers “there is no incentive for carriers and terminal operators to address the issues which can prevent shippers from accessing their cargo, including the equipment dislocation caused by the challenges of returning empty containers and the availability of chassis.” The National Retail Federation offered similar comments and called on carriers to work with importers and truckers to solve the problem.

The port charges could also violate federal rules issued in May 2020 designed to resolve longstanding complaints about just these types of fees, known as detention (charges for cargo containers exceeding allotted free time at a terminal) and demurrage (fees for use of carrier-provided containers beyond the allotted free time). The Federal Maritime Commission is currently auditing nine top ocean carriers for compliance with this rule and has warned it “will take appropriate action” if prohibited activities are uncovered.

In the meantime, California Gov. Gavin Newsome has issued an executive order directing state agencies to identify additional ways to alleviate congestion at the state’s ports. These could include making state-owned properties and other locations available to address short-term storage needs once goods are unloaded from ships and temporarily exempting priority freight routes from current gross vehicle limits to allow trucks to carry additional goods. The order also calls for the development of longer-term solutions such as port and transportation infrastructure improvements, electrification of the goods movement system from port to delivery, and workforce development.

Sandler, Travis & Rosenberg is continuing a campaign to advocate with federal regulators and lawmakers on solutions to the supply chain crisis. For more information on this campaign and how to participate, please contact Ned Steiner at (202) 730-4970 or via email.

Copyright © 2022 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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