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Clock Just Hours From Midnight For Overwhelmed California Ports

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Clock Just Hours From Midnight For Overwhelmed California Ports

By Greg Miller of FreightWaves,

The flood of import containers into Southern California continues unabated — an all-time high 81 container ships were stuck offshore of Los Angeles and Long Beach on Tuesday. Waiting time at anchorage for Los Angeles is surging and is now more than double wait times in early September.

The ports are scheduled to start charging a highly controversial excess dwell-time fee on Monday, a plan that some members of the National Shippers Advisory Council called “catastrophic,” “crazy” and “out of left field.”

With just hours left until the fee is set to begin, there are still over 51,000 containers on the terminals that are past the plan’s dwell-time limits.

If the fee plan is not delayed or modified, the aggregate cost to carriers — which would largely be passed on to importers — would start next Monday in the millions per day and escalate to tens of millions per day later in the week.

There is ongoing speculation that the ports will back off and announce a reprieve, given declines in the number of excess-dwell containers in recent weeks and the enormous costs that would be passed along to U.S. importers.

Asked about the level of fees that are set to start next week, a spokesperson for the Port of Los Angeles told American Shipper: “The Harbor Commission granted the executive director discretion regarding the program. More details and information will be coming on or before the 15th.”

New anchorage record … again

According to the Marine Exchange of Southern California, 111 container ships were in the port on Tuesday, a new high. Of those, 30 were at the Los Angeles/Long Beach berths, 32 at anchor and a record 49 “loitering” (in holding patterns).

Chart: American Shipper based on data from Marine Exchange of Southern California

The offshore tally of 81 does not include an additional six noncontainer ships in the queue carrying boxes. The total capacity of all 87 ships offshore carrying containers was 576,720 twenty-foot equivalent units. Assuming ships are at capacity and an average customs value of $43,899 per import TEU (the average recorded by the Port of Los Angeles in 2020), the value of cargo floating offshore is around $25 billion.

Meanwhile, the waiting time at anchorage continues to escalate. The Port of Los Angeles said that the average wait for anchorage to berth was an all-time-high 16.6 days as of Thursday. The wait time has trended sharply upward over the past week.

Chart by American Shipper based on data from Port of Los Angeles Signal
Deadline nears for controversial fee plan

On Oct. 25, the ports of Los Angeles and Long Beach announced a Biden administration-backed plan for emergency fees on containers dwelling too long at the terminals. Fees were initially set to start Nov. 1. That was delayed to Nov. 15. Fees were initially set to cover containers moving by truck that had dwelled for nine days or more and those moving by rail after three or more days. The ports then pushed the rail timeline back to six or more days.

Port officials have repeatedly stated that they do not want to charge the fees and would reconsider if sufficient progress were made before Nov. 15. The hope was that the threat alone of the fees would preclude the need to assess them.

There has indeed been considerable progress.

At the Port of Long Beach, local (trucking) containers dwelling nine days or more fell from 28,558 on Nov. 1 to 20,534 on Tuesday, a decline of 28%. Intermodal (rail) containers dwelling six days or more fell from 1,643 to 573, a decline of 65%.

The Port of Los Angeles told American Shipper that its intermodal dwell times were not available. For an estimate of local container dwell times, boxes in Los Angeles terminals for nine days or more fell from 42,277 on Nov. 1 to 30,210 on Nov. 10, a drop of 28%.

Chart: Port of Los Angeles
If it happens, what might it cost?

The fee would start at $100 per day and escalate $100 each day. So, for example, on the seventh day after the assessments began, if a container was still at the ports, the fee would be $2,800. Importantly, containers would not be charged for their excess dwell time accruing before Nov. 15. In other words, the charge for a local container that had been dwelling for 15 days as of Nov. 15 would be $100 (the same as one day past the eight-day limit), not $2,800 (seven days past the limit).

Assuming on a back-of-the-envelope basis that the daily rate of decline for excess dwell-time containers remains the same as the Nov. 1-10 trend, the number of “late” containers in Los Angeles and Long Beach combined would fall to around 42,000 on Monday (not including Los Angeles’ late intermodal rail containers, so the actual number would be higher). The aggregate charge to all carriers combined would be $4.2 million on Monday in this scenario, plus charges for Los Angeles’ late intermodal boxes.

After that, the fee scenario gets more speculative, because, for example, on day three of the program, there’s no way to predict how many late containers would be charged the one-day-late rate, the two-day-late rate or the three-day-late rate. For simplicity’s sake, assume they’re evenly spread (i.e., on day two, half are two days past deadline, half are one day past deadline).

In such a scenario, the daily aggregate fee charged to carriers would escalate to $40 million on day seven. The cumulative fees for all ocean carriers at the end of the first week alone would be $144 million. Carriers have explicitly stated they will pass these costs along to shippers to the extent possible, raising the question of how politically sustainable the Biden-backed port fee plan would be even after a matter of days.

Chart: American Shipper. Scenario assumes Nov. 1-10 rate of excess-dwell-container decline continues and average late container durations. Does not include Los Angeles intermodal late fees.

Tyler Durden Sun, 11/14/2021 – 17:00

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