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California container fees targeting BCOs could give Gulf Ports competitive advantage

May 30, 2017
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Proposed fees could generate as much as $1.1 billion annually at BCOs expense, Port Houston shines as an alternative shipping route

By Kellie Lynch

On March 3, the South Coast Air Quality Management District (AQMD) proposed a $100 per 20-foot container fee at the ports of Los Angeles, Long Beach, and Oakland to mitigate diesel emissions at terminals, a major hit to BCOs.  The AQMD has been given aggressive deadlines to meet Clean Air Act emissions standards, and the proposed fee could take effect July 1, 2018. 

While the goal of the fee is to lessen the impact of diesel emissions produced by trucks and equipment at the ports, the Pacific Merchant Shipping Association (PMSA), an advocate for shipping lines and terminal operators, believes that the revenue generated by the fees may not be commensurate with the benefits that would be received by the fee payers.  PMSA Vice President and General Counsel, Mike Jacob, told the Journal of Commerce (JOC), “Under the AQMD proposal, 90 percent of the revenue generated by the maritime sector would be used to fund non-maritime sources.”  This could present significant legal issues for the AQMD.

In addition to legal challenges and funding “ill-defined” programs, these fees could render California’s ports less competitive.  The volumes handled by California’s three container ports, more than 17 million TEUs last year, could generate hundreds of millions of dollars for AQMD programs -- and BCOs would foot the bill.  In a drafted letter to the AQMD, PMSA stated that the agency “has failed to analyze the economic impact of the fees on the ports and the businesses they serve.” Increasing fees on international and domestic shipments coming through California’s ports could make these ports less desirable for shippers. 

In an effort to avoid paying additional fees, BCOs may turn to rerouting their shipments through the Gulf Ports, like Port Houston.  With the expansion of the Panama Canal completed last year, the canal can now accommodate vessels that are longer, wider and heavier than before.  The doubled capacity of the canal provides BCOs an alternative, cost-saving route to move their cargo into and out of the United States. Port Houston has also been widening its channels, with the US Army Corps of Engineers currently at work widening the “Bayport flare” curve, which is expected to be completed by September of this year.

The world-class Port Houston is fully prepared to handle the increasing cargo volume.  In a press release, Executive Director Roger Guenther announced, “Cargo moving through Port Houston facilities is off to a solid start,” noting a cumulative total of 5.7 million tons of cargo has been handled by the terminals already this year, a three percent increase from the year prior.  So far in 2017, loaded container volume has increased by 21 percent and, Guenther shared, “remains very balanced” between import and export trades, “at nearly ‘fifty-fifty’…a very good position.” For more than 100 years, the port has owned and operated the public wharves and terminals of the Port of Houston – the nation’s largest port for foreign waterborne tonnage and an essential economic engine for the Houston region, the state of Texas, and the nation. 

Building upon these new developments, ContainerPort Group (CPG) has also recently expanded its drayage network into the Gulf Region, opening a new terminal in Houston, Texas.  Slader Atkinson, CPG Regional Director – Gulf, will be overseeing the terminal and working to develop this demanding intermodal market.  In an interview, Atkinson discussed his plans for the new facility, “Many [of our customers] are already doing business with us in our current network, and they are excited to extend their use of our services into the Gulf.”  Atkinson believes this new location will provide an advantage to customers who typically use ports on the West Coast.  “By rerouting their shipments through the Panama Canal and into the Gulf, we can provide customers with exceptional service and substantially reduce their costs by avoiding these [regulatory] fees,” he explained.  Atkinson’s goal is to have a large base of Independent Contractors operating in Houston by the end of the year to support the expansion.

While regulatory fees could increase costs for BCOs, terminal operators, and businesses who currently utilize California’s ports, Port Houston is rapidly becoming a more desirable alternative for moving cargo into and out of the United States.  ContainerPort Group remains poised to handle this increase in volume and is proud to extend its services to support businesses operating in the Gulf Region.