LONG BEACH DEFENDS PLAN TO HIKE TARIFF

LONG BEACH DEFENDS PLAN TO HIKE TARIFF

The Los Angeles Steamship Association warned the Port of Long Beach that it may experience a loss of cargo, especially intermodal traffic, if it enacts a general tariff increase as planned.

Port officials responded that the proposed increases will not significantly increase the cost of moving a container through Long Beach. The port proposes an increase of 4.5 percent in wharfage, 5 percent in dockage and 10 percent in demurrage.Of significance in this debate - one experienced by most port authorities - is the impact of port charges in the overall cost of moving a container when total transportation charges are often $2,000 or more for a 40-foot box.

Speaking at a meeting of port commissioners Monday, Travis Montgomery, director of trade development in Long Beach, said the general rate increase, the first since 1985, is necessary to generate more money for port expansion. Long Beach is virtually out of land and must construct landfills in San Pedro Bay to accommodate new container facilities.

The Port of Los Angeles is not planning to increase its wharfage and dockage rates at this time, but Long Beach officials say the increase in their charges won't affect their port's competitive position. Tariff rates at the neighboring ports are about the same now.

The cost of moving a container through Long Beach will increase by less than $10 compared to Los Angeles, by our calculations. That's a very small increase in the overall cost of shipping a container, Mr. Montgomery said.

Steven Paul Resnick, director of marketing in Los Angeles, said that port is reviewing its rate structure in light of what Long Beach is doing, but is considering only some minor adjustments in areas such as storage and demurrage.

We have ruled out a general tariff increase and so informed Long Beach, Mr. Resnick said.

Richard A. Powell, president of the Los Angeles Steamship Association, the group that represents ocean carriers and terminal operators in tariff and other matters involving the Southern California ports, told the harbor

commission the proposed July 1 tariff increase comes at a bad time for shipping companies.

You should be aware that the ocean transportation industry is just beginning to emerge from the industry's most severe economic crisis in recent history, he said.

The harbor commissioners plan to take action on the proposed increase at a later date.

Mr. Powell, who is also director of American President Lines' operations at the Port of Los Angeles, said the Southern California ports must consider their competitive position vis-a-vis other ports.

You must be aware that the San Pedro ports now have the distinction of being the second-highest-cost ports in the United States. Only New York is higher.

San Francisco held this dubious distinction for many years and did nothing to correct this distinction because they believed that the center of shipping was San Francisco and that the ocean carriers had to come there if they wanted the business, Mr. Powell said.

Mr. Montgomery responded that the port would not propose a tariff increase if it felt carriers would divert their cargo to other ports. He noted that even with the 4.5 percent increase, Long Beach's wharfage rate will be $4.60 per revenue ton, compared with $4.65 at Oakland. Wharfage is often the costliest item in a port tariff.

Overall port charges in the Pacific Northwest are less than those in California, a fact no one expects will change soon because land in Seattle and Tacoma costs much less. Land is a major cost when factored into the overall compensation paid to a port, Mr. Montgomery noted.

However, the Southern California ports offer their own advantages, such as the region's large population and production base, which generates economy of scale savings for shipping companies, he added.

For this reason, Mr. Montgomery feels a 4.5 percent increase in wharfage will not cause a diversion of intermodal minibridge cargo to competing ports.

In fact, although the Southern California ports charge less per revenue ton for Overland Common Point, or minibridge cargo, than they do for cargo remaining in the region, Los Angeles intends to slowly reduce the differential. Mr. Montgomery said Long Beach plans no change in its OCP rates at this time.

Mr. Powell of the steamship association said the ports should be more sensitive to the competitive costs of minibridge cargo.

In the past five years, the fastest growing segment of freight on the West Coast has been the intermodal cargo destined for Midwest and eastern consignees. This freight tends to seek the most economic route because of the overall cost controls inherent in those movements, he said.

Mr. Powell added that in recent months some discretionary cargo has migrated from Southern California to the San Francisco Bay area ports. We want to stop this migration of business, and to do so we need your support, he told the harbor commission.

Mr. Montgomery noted that although Maersk Line recently announced a change in its vessel rotation, making Oakland its first West Coast port of call rather than Long Beach, he feels that move is a logistical decision made in conjunction with Maersk's entry into the North Atlantic trades.

The Los Angeles Steamship Association also took issue with the port's decision to increase its wharfage rates while at the same time renegotiating terminal leases with its tenants. Mr. Powell charged that Long Beach is double dipping in seeking additional revenues from terminal operators.

Steven R. Dillenbeck, managing director of the port's commerce and trade bureau, said that as leases come up for renegotiation in Long Beach, the port is changing them from flat lease rates to a revenue sharing arrangement.