LA Port Considers “Incentives” to Lure Shippers

By Pat Maio, November 7, 2013, The OC Register

As part of a competitive gambit to take back business from the Port of Long Beach, the rival Port of Los Angeles is expected to consider a novel approach of paying shippers an incentive fee to lure more containers to its seaport.

Meanwhile, the Port of Long Beach is struggling to figure out whether it will impose fees, or delay the charges over the next few years, while the federal government considers a national carrier fee to pay for infrastructure projects in the nation’s ports.

At the core of the Los Angeles proposal, to be considered today by the port’s five-member board of harbor commissioners, is a tiered incentive payment that would award shippers $5 for every 20-foot container, up to 99,999 containers, that a shipping line moves through the port in 2014, above and beyond the volume seen this year. They would be paid $15 per 20-foot container for 100,000 or more containers.

The benefit for the port is increased container volumes and revenue from carriers. This incentive program would be valid for one year.

“We lost a good chunk of cargo to Long Beach in the past year,” said Phillip Sanfield, a spokesman for the Port of Los Angeles. “We’re hoping to get a little chunk of that back.”

Cargo volumes have trended upward at Long Beach this year, compared to 2012. Sanfield and shipping sources attribute the uptick to shipments moving from Los Angeles to Long Beach after Mediterranean Shipping Co. switched to Long Beach in 2012.

At first blush, shippers are supportive of the Los Angeles proposal.

“The Port of Los Angeles understands the competition is fierce and they want the customers to bring the cargo to their port. They are making it more attractive to choose their port with this incentive program,” said Michele Grubbs, vice president of the Pacific Merchant Shipping Association, a trade group that represents shippers and container terminals.

On Monday, a controversial infrastructure cargo fee designed to fund construction projects in the Port of Long Beach was allowed to go into effect Jan. 1, despite efforts by the board of harbor commissioners to delay or repeal it.

The fee issue is important to big cargo importers like Wal-Mart, Nike, Target and others because the fee adds to the cost of doing business, and what consumers ultimately pay. While the fee hasn’t yet been established, a planning document from the port says it has hundreds of millions of dollars in eligible projects.

The motion to reject implementation of the fee, or delay it for two years, could come up again before the end of the year, when Board President Thomas Fields returns from an overseas business trip and provides a possible deciding vote.

The fee was proposed five years ago to fund construction on joint infrastructure projects in the Ports of Long Beach and Los Angeles – including rail facilities and the $1.2 billion Gerald Desmond Bridge replacement project. For various reasons, but mostly because of the economic downturn, the cargo fee was scrapped several times.

With the economy beginning to show signs of healing, talk of charging the fee is on the minds of port commissioners, who are staring at $4.4 billion in capital improvements over the next decade.

In September, the harbor commissioners in the Port of L.A. rescinded the fee from taking effect Jan. 1 because of concerns over competitiveness with the expansion of the Panama Canal nearing completion, and the fact the additional fee isn’t needed to complete its own earmarked projects.

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