October 28, 2021
A shortage in shipping containers has driven up the cost of global shipments. A recent policy implemented by the the two San Pedro Bay Ports (Ports of Long Beach and Los Angeles) is intended to drastically reduce congestion. Theoretically this will propel containers to reach final destination sooner, where they can be unloaded quicker, thereby freeing up containers for new shipments.
At the beginning of November, POLB and POLA (which handle around 40% of all US-bound container imports) will begin charging ocean carriers for containers that remain idle in terminals. Carriers will be charged $100/container that remain idle beyond set limits based on how the containers are scheduled to ship. For every day that the containers remain idle beyond the set limit, the fees will grow by increments of $100.
Containers that are scheduled to move by rail must be moved within two days. Containers scheduled to move by truck must be moved within eight days. Prior to the pandemic-fueled disruptions, containers intended for rail remained in terminals, on average, for under two days. Containers intended for truck shipments remained for less than four days.
While the new policy should eventually reduce congestion in the terminals, the question remains whether it will free up containers quicker. Also, will the policy drive costs even higher in the short run if carriers pass on these surcharges to their clients and these fees eventually get charged to end customers?
If the policy is successful in getting ocean carriers to move product out of the port terminals, other legs in the supply chain must be ready to receive the shipments. One rail company is trying to encourage ocean carriers to bring in containers during low volume days. Union Pacific Railroad, which has an intermodal container transfer site near the Port of Long Beach, will be providing incentives (in the form of refunds) to carriers that check in containers at the facility on weekends. How will other companies step up to make sure containers leaving these ports have a place to go? Considering there is still a shortage of rail chassis and labor shortages in warehousing, trucking, and rail, questions remain.
HOW CAN 3PL's help?
A 3PL skilled in supply chain management can tap into its extensive network and offer potential assistance to ocean carriers. Regional carriers in the network might be available to move product shorter distances and hand off to one another to get product to final destination. These smaller carriers may have a greater degree of flexibility and will certainly have more familiarity with routes in and around the terminals. Additionally, other warehouse partners can be contacted to see if they can temporarily store product in regions where the 3PL does not have a footprint. While no single 3PL can resolve the existing issues, the right partner can come up with solutions to help lessen the impact to your business.
Sources:
The Port of Los Angeles, "San Pedro Bay Ports Announce New Measure to Clear Cargo: Ocean Carriers to Be Charged Daily Fee for Containers that Linger on Terminals," October 25, 2021 updated October 27, 2021, https://www.portoflosangeles.org/references/2021-news-releases/news_102521_jointclearcargo.
Jeff Berman, "Port of Los Angeles and Port of Long Beach to assess surcharges for dwelling import containers," Logistics Management, October 27, 2021, https://www.logisticsmgmt.com/article/port_of_los_angeles_and_port_of_long_beach_to_assess_surcharges_for_dwellin.
The Maritime Executive, "Union Pacific offers ocean carriers weekend incentives at Long Beach", Maritime-Executive.com, October 27, 2021, https://www.maritime-executive.com/article/union-pacific-offers-ocean-carriers-weekend-incentives-at-long-beach.