LA Defers Decision on Annual GRI Strategy
Bensenville, Illinois - May 7, 2013
The Los Angeles Harbor Commission Thursday delayed for at least two weeks a vote
on a controversial proposal to adopt an annual general rate increase based on
the consumer price index.
The board’s action gives shipping lines and terminal operators a little more
time to formulate an action plan in opposition to an automatic GRI. The ports of
Long Beach and Oakland are considering adopting the same plan.
The three container ports operate with antitrust immunity under an umbrella
organization known as the California Association of Port Authorities. They
normally prefer to address rate actions in unison under CAPA so no port will use
its wharfage, dockage and similar charges as mechanisms for diverting cargo from
the other California ports.
Los Angeles is the first of the ports to take up the new policy proposed by CAPA.
The Oakland commission will address it next week, and Long Beach will follow.
Under the proposal, California’s container ports each year would automatically
implement a GRI using the CPI as the index for determining what the increase
For example, if the plan is adopted, the 2013-14 increase would be 1.7 percent,
said Kathryn McDermott, the port’s deputy executive director. That would
increase rates about 68 cents per container. For a port customer that pays fees
of several million dollars, the increase would be $25,000 to $35,000. For larger
terminals that pay $45 million a year, the increase would be about $750,000, she
Each year thereafter, port staff would formally request from the harbor
commission an increase based on the CPI. Port staff would also engage in
outreach to port tenants and their customers to discuss the rate action and
solicit input on the impact it would have on commerce at the port.
Although the GRI is described as automatic, the harbor commission would decide
whether to accept the staff’s recommendation, modify the proposed increase or
turn it down for that year, McDermott said.
California’s container ports currently take rate actions on an as-needed basis.
The last CAPA increases were in 2004 and 2005. When times are difficult, as they
were during the economic downturn of 2008-11, the ports actually gave $60
million back to tenants in the form of rebates and incentives, McDermott noted.
The Pacific Merchant Shipping Association, which represents shipping lines and
terminal operators on the West Coast, the Los Angeles Customs Brokers and
Forwarders Association and the International Longshore and Warehouse Union spoke
in opposition to the automatic annual GRI.
PMSA Vice President Michelle Grubbs said port charges should be determined by
port needs, with due consideration given to the competitive position of
California’s ports in relation to ports in Canada, Mexico and on the East Coast.
Basing an annual increase on an index such as the CPI just to keep up with the
national rate of inflation does not take these commercial factors into
consideration, she said.
The best way for a port to increase its revenue is to increase its cargo volume,
and the fact is that California’s ports have been losing market share in recent
years, Grubbs said. The competition is increasing, with larger ships now calling
at East Coast ports via the Suez Canal route from Asia, and with the Panama
Canal expansion project scheduled for completion in 2015, she said.
Dan Meylor, chairman of the brokers association, said that when brokers and
forwarders in California talk to beneficial cargo owners across the country,
they are invariably told that the ports’ charges are the highest in the country.
“You have to consider that automatic rate increases will be heard by our
customers,” he said.
Harbor Commissioner David Arian said that what is needed in this matter is
balance. The port needs revenue in order to continue building world-class
facilities, which give the port its true competitive edge in the industry.
However, if port fees are increased without paying close attention to the
commercial marketplace, it is likely that cargo will move elsewhere.
Arian suggested delaying the vote until the next meeting, and using the next two
weeks to engage in further discussions with port stakeholders. The motion was
Source: Pactrans Air & Sea, Inc.
About Pactrans Air & Sea, Inc.
Headquarted in Bensenville, IL, and doing business for
nearly 30 years, Pactrans Air & Sea has established itself as one
of the world's leading international logistics companies. Providing a
wide range of services, including: import / export air and ocean
freight, warehousing and distribution, local trucking, trade shows and
product trading / sourcing. Read more about us for more information. We are: CNS (an IATA Co), FMC, NVOCC, MBE and most recently WBE certified organization.