Policy%20Issues%20in%20Urban%20Goods%20Movement

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Policy Issues in Urban Goods Movement

• Caltrans Research Connection
• June 23, 2005

Genevieve Giuliano University of Southern
California
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Introduction

• What is the problem?
• Primer on waterborne commerce
• Southern California examples
• AB 2650
• PierPass
• 2002 Port shutdown
• Policy discussion

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What is the problem?

• Growing freight volume in metropolitan areas
• Limited supply of highway, rail, air, port
  capacity
• Congestion, air pollution, neighborhood impacts,
  safety

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Auto, truck and air transport
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LA/OC Urbanized Area
1982 2002
Total daily VMT 165M 293M
Total road miles 22.8K 26.3K
Total person-hrs delay 186M 625M
TT index 1.3 1.8
Congestion cost 1.951B 11.231B
Delay/person 19 hrs 49 hrs
Source Texas Transportation Institute
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LAX 3rd largest air cargo volume in US
SCAG 2005 State of the Region
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LA/LB largest container port in US, 5th in world
SCAG 2005 State of the Region
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Other problems PM10 and PM2.5
SCAG 2005 State of the Region
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Primer on waterborne commerce
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Example LA/LB Ports

• Background
• Explosive growth in international trade
• 1979 30B
• 1998 180B
• 2005 300B (est)
• Economic benefits, environmental costs
• 500,000 jobs
• Ports single largest PM10 source
• Complexity of the global supply chain

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Major actors in supply chain

• Manufacturers
• Steamship lines
• Ports and terminal operators
• Dock labor
• Customs brokers, freight forwarders, 3PLs,
  shippers
• Truck, rail industries
• Warehouse/distribution
• Wholesalers, retailers
• Governments

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Supply chain, simplified
Warehouse distribution
Air
Import consumers
Freight forwarders
Steamship lines
Secondary manufacturing
Ports
Major retailers
Terminal operators
US Coast Guard
Trucking
ILWU
Rail
Export producers
US Customs
3PLs
State, local governments
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The supply chain imperative Faster, cheaper

• Time is money
• Reduce transit time, dwell time
• Cargo processing
• Virtual warehouse
• Trucking advantage
• Scale economies
• Bigger ships, hub systems
• Warehouse/distribution centers
• Rail long haul high volume advantage
• Wal-Mart

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Institutions and relationships - 1

• Natural allies steamship lines, ports, terminal
  operators, major retailers
• Steamship lines, major retailers as customers
• Terminal operations to serve customers
• 24/7 ship service special gate hours for high
  volume importers flexible dock storage rules
• Added advantage ports and terminals exempt from
  antitrust collaboration provisions
• The powerbrokers ILWU
• Bargaining power of the west coast longshore
  union enhanced by Pacific trade growth
• Labor power reflected in work rules, pay scales,
  control of workforce supply
• Adversarial relationship of ILWU, PMA

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Institutions and relationships - 2

• Sometimes at the table rail, long distance
  trucking
• Importance of rail for interstate transport
• Size/scale of rail firms ? bilateral negotiations
• Alameda Corridor construction and fee structure
• Economic weak link independent drayage truckers
• Mostly small firms and independent
  owner/operators
• Low wages/income, old/dirty trucks
• Subject to antitrust collaboration laws
• Price takers
• Paid by trip responsible for chassis safety, but
  dont own them limited terminal truck gate
  service hours delivery fees set by shippers,
  cargo owners

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Institutions and relationships - 3

• Increasingly discontent general public
• Road congestion, trucks in neighborhoods,
  port-related diesel emissions
• I-710 as poster child
• Increasingly frustrated state and local
  governments
• Limited jurisdiction
• Steamship lines are foreign owned
• Rail exempt from local regulation under ICC
• Ports are independent authorities
• Limited scope for forcing change
• AB 2650 terminal gate appointment system
• Defeat of AB 2042 (port emissions), SB 348
  (equipment fees)

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Competitive position of LA/LB

• Despite the congestion problems, LA/LB remain
  competitive
• LA/LB container volume much larger than others
• 2004 LA/LB 13M TEU Oakland 2M, Seattle
  1.8M
• Other west coast ports also have landside
  constraints
• Southern California/Southwest consumer market
• Scale and network economies in ocean shipping
• larger vessels, hub systems
• Consequences
• Port congestion, landside congestion will
  increase
• Short run problem cant be solved with new
  capacity
• As long as key players are not losing significant
  business, little incentive to make operations
  more productive

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Some examples
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AB 2650 terminal gate operations

• Terminal gate problem
• Truck gates open generally M-F 8AM 5PM
• More container volume more truck moves in same
  time interval
• Truck queues at terminals
• Truck traffic concentrated in daytime peak hours
  ? more peak highway congestion
• Stated purpose reduce vehicle emissions
• Intended purpose extend terminal gate hours

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AB 2650 provisions

• Took effect 7/1/02 in force 7/1/03
• Fines terminal operator 250 for each truck
  idling more than 30 minutes while in queue
• Terminals with extended gate hours ( 70 hrs/wk)
  exempt
• Details
• Applies only to queuing to designated gate entry
  (not to pedestal entry)
• Applies only to idling, not standing with engine
  off
• Applies only if truck has appointment
• Does not apply to standing/idling within terminal
• Terminals establish own rules re appointments
• Availability, restrictions, priority access
• Enforced by local air district

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AB 2650 results - 1

• Enforcement
• To date, no citations at LA/LB, 2 at Oakland
• Extended gate hours
• 3 of 14 terminals, none changed in response to
  the law
• Extended hours viewed as too costly chose appt
  system instead
• Queues
• Queues shorter, likely due to OCR implementation,
  computerization of cargo data

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AB 2650 results - 2

• Appointments
• Use varies by terminal, 1 to 30
• Mixed review
• Did queue shift to inside terminal?
• Appointment to pick up vs cargo ready for pick up
• Appointment windows and road congestion
• Generally no priority at gate
• Allows allocation of cargo moves
• Allows truckers to schedule on contingency basis
  (no penalties for cancellations)

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PierPass - 1

• Current effort to extend terminal gate hours
• An industry response to legislative pressure (AB
  2041, withdrawn)
• Scheduled to start July 2005
• Provisions
• Fee of 40/TEU for all road cargo
  entering/exiting during peak hours
• Peak hours M-F 3AM 6 PM
• Exemptions
• Empty returns, chassis returns, domestic freight,
  transshipments to other ports, cargo subject to
  ACTA fee
• System operated by PierPass registration
  required
• Net revenues allocated to terminals to offset
  costs

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PierPass - 2

• Why extended gate hours are costly
• Dock labor works in shifts, gangs
• Shift differential pay
• Costs of operating dock equipment
• Potential landside barriers
• Restrictions on cargo delivery
• Lack of safe cargo storage options
• Possible shortage of truck drivers
• Some interesting questions
• Why didnt terminals set own rates?
• Why is 3 AM peak?

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The 2002 Port shutdown
5/1/02 Start contract negotiations
7/1/02 Contract expires, day-to-day extensions
9/1/02 ILWU refuses further extensions
September Various alleged work slowdowns
9/27/02 PMA shuts port down
9/29/02 PMA re-opens ports, shuts ports same day
10/9/02 Taft-Hartley Act invoked, ports re-open
11/23/02 Agreement on new contract
2/1/03 Start of new contract

• Result of labor conflict, ILWU and PMA
• Main issues
• Use of information technology in cargo operations
• Preservation of union jobs

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What happened port cargo
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What happened air cargo
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After the shutdown

• No plan for recovery
• No change in terminal operating procedures
• gate hours, container storage rules
• Like road congestion, dock recovery period
  depends on arrivals, departures, capacity
• Containers had accumulated on dock prior to
  shutdown
• Container unload rate gt container exit rate, so
  number of containers stored increased
• As containers on dock increased, exit rate
  declined
• Result recovery over several months
• Congestion costs imposed primarily on truckers,
  secondarily on wholesalers, retailers, consumers
• Railroads had problems due to freight stuck on
  trains

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Policy Discussion

• What do these examples tell us?
• Recall institutions and relationships
• Unequal distribution of economic power within
  supply chain
• Recall supply chain imperative
• Faster, cheaper

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Challenges to change

• Dynamics and imperatives of international trade,
  global economy outside local or state (or
  national) control
• Some key actors not subject to local or state
  government authority
• Trade continues to increase, so limited incentive
  for changes that would increase costs for
  industry
• Ports compete, so no incentive to incur unique
  local costs
• To date, no obvious leadership for fundamental
  change within the supply chain
• Trade carries powerful local economic argument
• Good jobs, big multiplier

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Opportunities for change

• Growing effectiveness of environmental advocates,
  community activists
• Documentation of health impacts on local
  communities
• Brokered agreements
• China shipping terminal
• I-710, second round
• State legislative pressure
• 2005 SB 761 (truck turn times), 764 (port
  emissions), 848 (collective bargaining for
  truckers), and many others
• Most wont pass, but the message is clear
• Collaborative decision-making
• PierPass, security issues have motivated
  cooperative action establishes institutional
  relationships
• Interest group advocacy
• Freight user fee (container fee) proposal for
  infrastructure

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Implications for Caltrans?

• Sources of demand for freight transport not
  subject to state, local control
• More demand in future a reasonable assumption
• Prices, time, reliability matter, but relative to
  many other considerations
• Efficient transportation system ? transport small
  share of production costs ? transport costs
  relatively less important
• Developing, implementing solutions requires
  collaboration, cooperation
• Partnerships with local agencies, industry,
  community
• Increasing the efficiency, capacity of existing
  system of key importance

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Thank you

• Contact information
• giuliano_at_usc.edu
• www.metrans.org