FMC allows PierPass 2.0 but pledges close watch

FMC allows PierPass 2.0 but pledges close watch

PierPass said the proposed flat-fee pricing strategy was judged to be better than other options,
such as dynamic, variable-rate pricing and a portwide container peel-off proposal.
Photo credit: Port of Long Beach.

The two sitting commissioners on the US Federal Maritime Commission (FMC) on Thursday voted to allow the PierPass 2.0 extended gates program featuring a flat-fee pricing model to take effect. However, both commissioners raised concerns about the Los Angeles-Long Beach system and pledged to monitor it.

The FMC’s decision, however, did not satisfy the National Retail Federation (NRF), which represents beneficial cargo owners (BCOs) and has expressed concerns that the flat fee would be anti-competitive. The organization in the past has asked the FMC to ensure there is more clarity on how the appointment system will work and greater transparency in the pricing mechanism and use of the funds to reimburse terminal operators for the added costs associated with extended gates.

“We continue to remain concerned that PierPass 2.0 will go into effect without addressing the concerns that [the] NRF and other stakeholders have raised about the updated program,” said Jonathan Gold, the NRF’s vice president of supply chain and customs policy. “We welcome the announcement from the FMC that the agency will be looking at options to enhance oversight of the program.”

Dramatic shift

The FMC’s vote ushers in a dramatic shift in the nation’s most prominent extended-gates program as ports increasingly look at how to structure and fund longer gate hours to handle pressure from growing volumes of cargo brought by ever larger ships. Montreal’s four terminals introduced an extended-gates program during the summer, and the Port of Oakland’s second-largest terminal extended its gates in September.

Large retailers who have been moving much of their freight at night to avoid paying the traffic mitigation fee will likely end up paying more under the revised fee structure. Smaller BCOs who have been paying the traffic mitigation fee because they move most of their freight during the day will pay significantly less because the flat fee will represent a 55 percent reduction from the current congestion-based fee structure.

The two commissioners on the five member commission — three seats are vacant — said they backed the revision, which also will establish appointment systems for drayage operators serving marine terminal facilities at the two ports, with some reservations.

The commission, led by Acting Chairman Michael A. Khouri, released a statement saying it will “consider and vote on staff recommendations on how to increase monitoring of the agreement during a yet-to-be scheduled closed meeting to be held in the coming weeks.” Commissioner Rebecca Dye said she shared Khouri’s concerns. "All parties concerned with the supply chain — carriers, terminal operators, truckers, and shippers — should focus on port efficiency and cargo fluidity,” she said, adding that “achieving actual visibility into the supply chain will ultimately alleviate the need for programs like PierPass.”

The FMC’s decision means that the West Coast Marine Terminal Operators Agreement (WCMTOA) can levy the revised charge of $31.52 per TEU or $63.04 per FEU or larger during all open hours at the two largest West Coast ports, rather than the $72.09 per TEU or $144.18 per FEU currently charged between 8 a.m. and 5 p.m. There is currently no fee for off-peak hours, a system introduced 13 years ago to encourage shippers to use off-peak and weekend hours to pick up and deliver cargo to the ports.

PierPass, supporting the change, said the new fee structure was agreed upon by a majority of BCOs, truckers, intermediaries, and other port stakeholders with whom terminal operators in Southern California met. Although some BCOs will pay more under the new model and others will pay less, the proposed flat-fee pricing strategy was judged to be better than other options, such as dynamic, variable-rate pricing and a portwide container peel-off proposal, PierPass says.

The 12 container terminal operators in Los Angeles-Long Beach, which form the WCMTOA, started PierPass Inc. in 2005 to develop and manage a program to keep terminal gates open to BCOs and truckers as much as 80 hours each week. The primary purpose of the initial off-peak program was to divert some truck moves to the evening hours, thereby mitigating truck traffic on Southern California roads and freeways during the busy daytime hours.

The congestion-based pricing model, however, has had an unintended consequence of causing truck bunching at certain times of the day, especially when terminals end their daytime shift at 5 p.m. and before they reopen for the night shift at 6 p.m. Some BCOs instruct their truckers not to complete the container delivery until 6 p.m. when the congestion charge ends, so they wait inside or outside the port, causing backups.

Contact Hugh R. Morley at hugh.morley@ihsmarkit.com and follow him on Twitter: @HughRMorley1.