West Coast Port Congestion Addressed with OffPeak Program

The problems with significant port congestion at the ports of Los Angeles and Long Beach has resulted in the introduction of the Offpeak program. The program, launched by PierPASS, a not-for-profit company backed by marine terminal operators, has as its goals, moving more of the activity at the two ports from conventional business hours to off hours. The decision to introduce this program was partly in response to a close to 40 percent jump in cargo volume between 2000 and 2004.

The program officially began July 23, 2005. The crux of the new program is that any shipper who moves cargo through the port between the hours of 3 AM-6 PM, Monday through Friday, would be assessed an $80 per 40-foot container Traffic Mitigation Fee; a $40 per 20-foot containers TMF There would be no fee for shipments outside these hours.

Along with easing congestion at the two ports, PierPASS also implemented the program as a way to reduce smog during the key business hours.

According to a Paul Sherer, a spokesman for OffPeak, since starting the program roughly on-third of the shippers have moved to the off hours. He notes that truck drivers are upbeat about the program because they are able to make more runs during the day.

In fact, when PierPASS was first introduced, a number of shippers came out in support of the program. According to a release given when the program began, Tony Cheng, vice president of Exports for America Chung Nam, a large recovered fiber exporter, said, “America Chung Nam supports the extended hours offered by the OffPeak program as it will help ensure that goods will flow more smoothly through the ports of Los Angeles and Long Beach.”

However, other paper stock exporter are less upbeat about the arrangements. Several paper stock dealers have noted a host of problems with the PierPASS program.

When asked about the program, one paper stock exporter said: “It doesn’t mean anything good.”

Recovered fiber is the largest containerized shipment from the United States. At the same time, while it makes up a significant amount of the business, it is one of the lowest value commodities shipped via containers.

This leads to one of the most widely noted problems that many paper stock dealers have with the program.

Several paper stock dealers note that while an $80 per container charge may be minimal for in-bound freight that may have a value that runs upwards of $30,000 or more, recovered fiber has a far lower per container value. And, the charge could end up equaling any profit on the shipment. In fact, one scrap paper exporter noted that, by percentage, the $80 a container charge, by percentage, is often greater than the profit margin for a paper in total.

Another problem many recyclers see with the OffPeak program is the shifting of shipments to off hours to avoid the fee. if a company is seeking to use the off hours there are additional costs to their business. A recycling center may have to stay open later in the evening or keep more employees on for a longer period of time, costing a company more money.

Another problem is finding truck drivers, who have typically shipped during the day, to switch to shipping at night. This could add to the overall expense for recyclers, who continue to struggle with thin margins for their commodity.

Also, while the OffPeak program said it would hire more employees to work during the night hours, several paper stock exporters have noted that when they do attempt to ship during the evening hours there are a number of problems. And, if no one is at the recycling plant, then the shipment will be delayed even more.

While the program is only limited to the two ports, there is some concern that the program could gain adherents at other ports, both on the West Coast as well as ports throughout the country.

For shippers further away, the cost of the new program may be avoided by shifting shipments to other ports on the West Coast. However, for recyclers who use the two ports affected by the PierPASS program, logistics, trucking costs, and distances make it impossible to shift material to other ports.

In pointing out the success the program has had, PierPass notes that since implementing the program more than one million trucks trips have been diverted from peak daytime shipment hours.

The company estimates that between 30-35 percent of the shipments to the two ports have moved to the off hours.

While many of the recyclers are having to make major adjustments to their business to compensate for the significant change, several key associations, notably the Institute of Scrap Recycling Industries and the Association of California Recycling Industries are looking at steps that could be taken to remedy the problem.

A sentiment expressed by one recycler is that the PierPASS program is an “abuse of their (terminal operators) anti-trust immunity granted under the Shipping Act of 1984 overseen by the Federal Maritime Commission.”

In the meantime, one exporter says, “It is just making it more difficult for our business.”