Port of LA will pay container terminals for efficiency gains
The Port of Los Angeles is willing to pay out $7.5 million to San Pedro Bay container terminals over the next year if they turn trucks faster.
“We see this as an investment in our efficiency,” a port spokesman told American Shipper Wednesday.
The port announced this week that beginning Feb. 1, it will reward container terminals for both improving truck turn times and completing dual transactions.
The port said the incentive program is designed to help move trucks faster and more efficiently through the container terminals. Terminal operators can earn what the port called “financial rewards” by shortening the time it takes to process trucks dropping off and/or picking up cargo. Rewards also would be given for trucks handling both a drop-off and pickup in the same trip.
“These best practices are needed now more than ever to relieve pressure on the supply chain due to the ongoing surge,” Port of LA Executive Director Gene Seroka said in the port’s announcement. “Ports are more fluid when trucks move quickly in and out of the gates and more productive when a truck delivers one container and leaves with another in a single trip.
“We’re going to reward terminals for better performance,” Seroka said.
Drayage trucks reportedly handle about three-fourths of the import and export containers moving through the port. Imports far outweigh exports at the Port of LA. The port said that imbalance has “reduced the number of chassis in circulation, caused inbound containers to stack up on terminals and slowed the movement of trucks in and out of terminals.”
A spokesman for APM Terminals, which operates the largest privately operated container terminal in North America at Pier 400 at the Port of LA, told American Shipper Wednesday that “import cargo on-dock dwell time has dramatically increased during the cargo surge the port has experienced over the last five months. As dwell increased, the terminals densified cargo storage as stacks of loaded import containers grew from three high to five high.
“Increased cargo density — the container cargo being stored on the waterfront — directly impacts the service levels provided to the truckers picking up import cargo,” he said.
The Los Angeles Harbor Commission last week approved the port’s plan to pay terminals that improve truck turn times by 5% to 20% between 50 cents and $2.75 per loaded or empty twenty-foot equivalent unit (TEU). According to the port, the “rate of the reward” will increase on a sliding scale as terminals improve turn times.
“If a terminal averages turn times of 35 minutes or less in a given month, it will earn the top rate of $3 per loaded or empty container,” the port’s announcement said.
On top of that, terminals can earn between 40 cents and $1.40 per loaded TEU when at least half of all trucks calling their facilities drop off one container and depart with another on the same trip. The port said the percentage is based on the number of dual transactions out of all gate moves for the month and, like the turn-time incentive, the rate of the reward goes up as the percentage of dual transactions increases.
Seroka broached the subject of rewarding terminal efficiency during his State of the Port address last week when he said, “Long turn times and a lack of dual transactions are especially frustrating for those thousands of hard-working truckers who serve our port. Terminal operators can effect positive change in this area.”
Container and chassis congestion at the San Pedro Bay ports has been a front-page issue since imports from Asia began flooding back in late summer. The import surge continued beyond the usual holiday peak. “The week before Christmas, we handled 94% more traffic than the same week in 2019,” Seroka said in his speech last week.
In mid-January, the port is “still moving extraordinary levels of cargo,” he said.
According to port data, it expects to handle 138,691 TEUs of imports this week; 148,277 TEUs between next Monday and Jan. 30; and 138,172 TEUs between Jan. 31 and Feb. 6.
The port did not say if the reward program would continue after cargo congestion subsides, only noting that “incentives will be paid monthly as long as the program remains in effect.” However, the port added that its estimated cost for the first year of the program was $7.5 million.
The terminals do have to provide information in order to be eligible for rewards. Details on truck moves provided by the terminals will be collected and processed by the Port Optimizer, the tool the port uses to update supply chain stakeholders on cargo status.
The port said the incentive program is just the latest initiative designed to boost cargo efficiency and fluidity.
In September, the Port of LA launched The Signal, a dashboard for sharing data on inbound containers three weeks before their arrival.
In November, the port added the Return Signal to the Port Optimizer so truckers know when and where to return empty containers.
The APM Terminals spokesman said the Pier 400 terminal operator looks forward to the opportunity to “further enhance the delivery of import loads.”
“APM Terminals will enthusiastically embrace this creative opportunity,” he said.