The costs of free time

The costs of free time

A provision inserted into a current Senate maritime security bill caught my attention, but not apparently for the same reason it caught a lot of other people's attention.

The idea is to assess a fine of $5,000 per bill of lading for cargo left on a pier for more than five days. The provision currently written into S. 2279, the Maritime Security Act, would effectively lower from 15 to five days the amount of time a container can sit on the docks without having cleared Customs before it must go into general order - that is, be sent to a bonded warehouse off the pier for storage, according to Peter Powell, chairman of the National Customs Brokers and Forwarders Association of America.

Groups such as the NCBFAA and the World Shipping Council, which represents container lines, pounced on the provision as unworkable, and as we report elsewhere in this issue (see Radar Screen, page 8), few believe it will be included in any maritime security bill that emerges from Congress. But that isn't what interested me.

I asked around, and though I didn't get a definitive answer, some believed the provision may have at least partially been intended as an anti-congestion measure with an attractive revenue-raising stipulation, rather than as a security policy. And that's what caught my interest because of a simple but important fact: cargo left for too long on docks, and especially at intermodal railyards, remains one of the principal causes of freight transportation gridlock in North America. It seemed to me that even if this provision never sees the light of day, it could serve a useful purpose to shine a federal-level spotlight on what is clearly a problem of national scope - or international, when Canada is taken into account.

All indications are that shippers continue to ask for and receive extra free time for their containers at marine terminals. In other words, the practice that dates to the earliest days of container shipping - shippers using terminals as free warehouse space - continues. Another reason it continues, according to Los Angeles trade attorney Susan Ross, is that shippers may increasingly be holding off on taking possession of cargo to avoid putting inventory on their books and thereby face adverse tax consequences.

In one respect, the Senate provision would merely be an extension of the 15-day policy, which Powell says was created years ago, partly to speed the movement of containers from crowded terminals. Yet the problem is hardly limited to marine terminals, and in fact has had its most severe consequences at intermodal rail terminals, which are much smaller and therefore more vulnerable to delays when unclaimed containers start stacking up.

After last year's backups at Canadian National's Brampton facility outside Toronto, the railroads seem to be moving aggressively to deal with the problem. For them, the consequences can be catastrophic because intermodal delays at one location can easily spread around the system. Railroads are known, therefore, to be much stricter than steamship lines in collecting fines for intermodal equipment that overstays its welcome on terminal grounds. But the railroads are taking additional measures.

CN has initiated an Intermodal Excellence, or IMX, program that seeks to achieve a smooth and even flow of intermodal cargo through its system. It hopes to achieve that partly by doubling the fines on shippers to $150 per day for each container that overstays its free time. "Our terminals are transfer facilities, they are not storage facilities, and there are economic consequences if you don't move your container within a certain period of time," said Mark Hallman, a CN spokesman.

Other railroads experiencing similar problems are also acting, in part by reducing the number of free days allotted to each shipment before charges are assessed. Steve Rand, assistant vice president, domestic, at CSX Intermodal, says that many international containers move in-bond directly to the destination railhead, and therefore don't require the free time that other units do. "Many of the loads pre-clear through AMS (the automated manifest system), so in actuality, the railroads give away free days at destination, when in fact many of the containers are already cleared," Rand said. This is important for basic operational reason: "It's hard to process big stacktrains when freight sits around and isn't picked up." Is someone in Washington taking notice?

Peter Tirschwell is editor of The Journal of Commerce. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.