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Why August’s Busiest Port OK’d Controversial Fee

Ocean carriers moved quickly to rid the Port of New York and New Jersey of their empty containers following threat of a new fee aimed at tamping down on congestion

The port said in August it would implement a fee the following month on long-dwelling empty containers. The fee schedule was then postponed as the port weighed carrier concerns over what was being proposed. 

It appears the thought alone of fees was incentive enough to move empties, with carriers scheduling vessels to handle removal, retooling ship schedules or sending damaged boxes to scrap yards. 

The efforts since the fee was first raised yielded a 10.5 percent decline in empty containers, according to the port. 

“We’re happy wherever the empty containers go, as long as they’re out of the port and no longer taking up space that should be used for incoming imports that are coming in record numbers each month,” said Bethann Rooney, director of the Port Authority of New York and New Jersey’s port department, in a statement Tuesday. “The tariff was never about penalizing the carriers to make us money—I’d be very happy if we did not issue a single bill because everyone removed their empties in time.” 

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The empty containers allowed for 24.1 percent more cargo to be moved in August, compared to the year-ago period, according to the port.

August was a big month for New York-New Jersey, which saw the facility surpass the ports of Los Angeles and Long Beach to become the country’s busiest container port with 843,191 twenty-foot equivalent units (TEUs). That also marked the port’s busiest August ever. 

Although carriers scrambled to move their empties, a restructured fee program still went into effect Oct. 1.

The changes take into account carrier concerns voiced during a public comment period in August. The port said some carriers had criticized what they perceived as a “blanket formula” for the fee. 

The original proposal required carriers’ outgoing containers to meet or exceed 110 percent of their inbound container volume. The fee would have been assessed on a quarterly basis. The driver behind the fee was the glut of long-dwelling empties at the port. 

The revised version gives carriers four quarters to draw down their container imbalance before the $100 per container fee is assessed. 

“We’re extremely grateful that the ocean carriers recognized the need for their cooperation and stepped up to remove empties while they worked with us on the revised tariff structure,” Rooney said. “We continue to call on them to do more because we are still moving new monthly record volumes of cargo even after 25 straight months of record highs.”   

Rooney told CNBC this week some 200 acres are being used to hold empty containers and, with the expected import cargo uptick brought on by shifts to the East Coast, clearing congestion is key. 

She pointed to the work slowdown during the 2014 West Coast dockworker contract talks that prompted the re-routing of cargo to the East Coast, telling CNBC New York and New Jersey ultimately kept between 65 percent and 70 percent of that business.

Now, as another West Coast dockworker contract hangs in the balance, some wonder what the continued longer-term implications of cargo away from the West Coast will be on East and Gulf coast ports. 

Mediterranean Shipping Company (MSC) told customers last week it was temporarily suspending its route connecting south China with Long Beach, called the Sequoia service, merging it instead with an existing route.

The ocean liner cited “significantly reduced demand for shipments into the U.S. West Coast during the past weeks” as reason for the temporary suspension. MSC said the decision would allow it to boost transit times and also help with port congestion issues. 

West Coast dockworkers have been working without a contract since the previous one expired in July, with both sides on the negotiating table committing to continuing the flow of goods as a new deal is hammered out. 

However, a tiff emerged last week over which union is awarded work in Seattle and stands to potentially disrupt negotiations.  

The issue pits the International Longshore and Warehouse Union (ILWU) against the International Association of Machinists (IAM) and terminal operator SSA Marine.   

ILWU, the union representing the 22,000 dockworkers whose contracts are currently being negotiated with the Pacific Maritime Association, alleges SSA is working with IAM to trigger a National Labor Relations Board (NLRB) case it said would allow the work of cold ironing to go to IAM. 

ILWU contends its workers were assigned that work in previous collective bargaining agreements. 

ILWU said last week the NLRB proceeding now requires the union to shift its attention away from the collective bargaining table to focus on the Seattle work dispute.