The Port of Portland Commission on Feb. 12 will be asked to approve an agenda item that would result in a payment of up to $4 million to keep Hanjin Shipping Co., Hapag-Lloyd and other carriers calling at the port in 2014.
If the commission approves this latest carrier incentive program, it would mark the third year in a row that the Oregon port has offered incentives to carriers to maintain their services in Portland despite some of the lowest crane productivity of any U.S. port.
Port executives are especially concerned about Hanjin, whose trans-Pacific service accounts for 78 percent of the port’s container volume and which late last year announced plans to discontinue its weekly service due to low productivity. Job actions taken by members of the International Longshore and Warehouse Union in a jurisdiction dispute with another union are the alleged reason productivity levels have plunged to under 20 crane moves per hour.
If Hanjin in fact leaves Portland, it would be a devastating blow to the port. Still, Portland has already paid dearly for the drop in labor productivity that dates back to the summer of 2012. Hanjin, its partner carriers in the CKYH alliance, and Hapag-Lloyd, which has its own service to Portland, got caught up in a jurisdictional dispute between the ILWU and the International Brotherhood of Electrical Workers over work involving refrigerated containers. The port and ICTSI, which operates Terminal 6, were enmeshed in the dispute.
The ILWU claimed jurisdiction over the equivalent of two jobs plugging, unplugging and monitoring reefer containers. The IBEW had jurisdiction over that work for more than 30 years when Portland was an operating port. When Philippines-based ICTSI took over Terminal 6 and joined the Pacific Maritime Association, the West Coast waterfront employers’ group, the ILWU claimed jurisdiction over the work, instigating a protracted legal saga.
Due to work slowdowns and other actions by the ILWU, carriers in 2012 began bypassing the port for some vessel calls. Hanjin avoided Portland for a five- to six-week period, and Hapag-Lloyd skipped the port several times.
In order to convince the carriers to maintain their services, which many exporters in the region depend on, the port commission approved a short-term carrier support program that paid the carriers $175,000 in 2012.
Additionally, to support ICTSI, which experienced lost revenue, the port in 2012 initiated a cost-sharing program in which it paid the terminal operator $2.7 million. Funds for the carrier- incentive and cost-sharing programs came from the annual rent ICTSI pays to the port.
“Although port management was hopeful that productivity at Terminal 6 would improve over the course of 2012, the result did not prove to be the case,” the commission agenda item states. As a result, ICTSI in 2013 issued a proposed rate schedule, to be paid by carriers, that ICTSI said reflected the continued low productivity. The carriers balked, and it was feared the lines might leave Portland.
In order to induce the carriers to remain, Portland in January 2013 offered an incentive program in which it paid the carriers $10 per container moved through the port, up to $1 million for the year. The port also made ICTSI a cost-sharing proposal that eventually resulted in Portland paying the terminal operator $3.4 million. That program expired at the end of 2013.
“While the 2013 programs have been successful in maintaining the level of carrier calls, the productivity levels at the terminal have not returned to historic levels,” the commission item stated. Hanjin late last year announced it would discontinue its service to Portland in early 2014 because of productivity issues.
The commission on Feb. 12 will be asked to approve an incentive program for 2014 with a base incentive of $20 per container to all calling carriers. An added volume incentive of $25 per container is included in the latest proposal to encourage carriers to bring even more cargo through Portland. Also, the incentive is meant to encourage other lines to begin service to Portland. The 2014 carrier program will be capped at $4 million.