Shipping Firms See Their Costs Shoot Up at California’s Ports

While record cargo volume streams through the region’s twin ports at Long Beach and Los Angeles, the cost of shipping has gotten more expensive as new fees and higher labor costs inflate overhead for steamship lines.

The increases come at a time when steamship lines already are trying to digest a new labor agreement reached this summer that boosts the pay of dockworkers by up to 8% over the next three years.

On top of that, the state Legislature recently approved a law that requires cargo ships to pay up to $1,000 each time they enter California waters. That fee will pay for research into preserving state marine life that has come under attack from foreign species introduced by transpacific vessels.

Consumers, however, needn’t fear that the additional costs will automatically translate into higher retail prices, analysts say, because the fierce competition in ocean shipping means that steamship lines will most likely absorb the increases rather than pass them on to importers.

As it is, importers are already complaining they pay steamship lines too much to ship their goods, said Robin Lanier of the International Mass Retail Assn. in Washington. “It wouldn’t make sense [to pass it on],” she said. “You take it out of your margin if you think it’s going to make your customers unhappy.”

Last week, the state’s three biggest ports--Long Beach, Los Angeles and Oakland--slapped a facility fee increase of 10% on every cargo container that crosses their docks.

At Long Beach, which handles more containerized cargo than any other U.S. port, the cost to import one 40-foot container jumped from $270 to $297 and the cost for export containers rose from $196 to $216.

While harbor officials estimate that the increase translates into just one extra penny per item packed into a cargo container, the hike will mean a modest windfall for the port.

If, for example, the increase had taken effect in September when Long Beach took in about 200,000 40-foot containers, the port would have reaped roughly $4 million more in fees. As it is, the port took in about $39 million.

Needless to say, shipping lines are not pleased with the added costs.

“When you start increasing the cost of doing business on an industry that sees very little if any profit margin, it’s a very serious issue,” said Jay Winter, executive secretary of the Steamship Assn. of Southern California.

Although shipping lines set rates $900 higher per container in May and are carrying record import volumes from Asia, the U.S. trade imbalance has hurt their bottom line, Winter said.

With scant demand for U.S. goods in the Far East, shipping companies have recently been carrying more empty containers than loaded ones back across the Pacific, Winter said, operating those legs at a loss.

But Port of Long Beach spokesman Art Wong called the facility fee increase necessary to enable the port to fund capital improvement projects needed to handle a steadily growing cargo volume.

“We just want to make sure we have the revenue stream to pay for all improvements we’re implementing,” Wong said.

The port has been shouldering a capital expenditure budget of $300 million a year for the last three years to finance such projects as new rail lines, new roads and new terminal construction, including the redevelopment of 280 acres of former Navy land. The port had not raised the fee since 1994.

Next door, the Port of Los Angeles hadn’t raised its facility tariff since 1992, but during the same time authorized more than $1 billion in capital spending. Port officials estimate that figure will grow by $813 million over the next five years.

The timing was right for Los Angeles and other ports to increase fees, said Don Wylie, managing director of maritime services at Long Beach, because the shipping lines have indicated that they plan to raise their rates again next May 1 by $400 per 40-foot container and tack on an additional $300 peak-season surcharge from July 1 through Oct. 31.

Shipping lines were especially critical of the fee increase in Long Beach because of the port’s practice of turning over 10% of all net income to the city of Long Beach in each of the last four years.

In a letter to the Long Beach Harbor Commission last month, the Steamship Assn. questioned the logic of that transfer, reasoning that if the port needs money for improvements, it shouldn’t be giving its revenue to the city.