Policy Issues in Policy Issues in Urban Goods MovementUrban Goods Movement

Caltrans Research ConnectionCaltrans Research Connection

June 23, 2005June 23, 2005

Genevieve GiulianoUniversity of Southern California

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IntroductionIntroduction

What is the problem?What is the problem? Primer on waterborne commercePrimer on waterborne commerce Southern California examplesSouthern California examples

• AB 2650AB 2650• PierPassPierPass• 2002 Port shutdown2002 Port shutdown

Policy discussionPolicy discussion

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What is the problem?What is the problem?

Growing freight volume in Growing freight volume in metropolitan areasmetropolitan areas

Limited supply of highway, rail, air, Limited supply of highway, rail, air, port capacityport capacity

Congestion, air pollution, Congestion, air pollution, neighborhood impacts, safetyneighborhood impacts, safety

Auto, truck and air transport Auto, truck and air transport

Economic and Transportation Trends: LA CMSA

0

0.5

1

1.5

2

2.5

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

inde

x (1

982

= 10

0)

Employment

Population

Total VMT

5+ Axle Trucks

Total Airport Passengers

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LA/OC Urbanized AreaLA/OC Urbanized Area19821982 20022002

Total daily VMTTotal daily VMT 165M165M 293M293M

Total road milesTotal road miles 22.8K22.8K 26.3K26.3K

Total person-Total person-hrs delayhrs delay

186M186M 625M625M

TT indexTT index 1.31.3 1.81.8

Congestion costCongestion cost $1.951B$1.951B $11.231B$11.231B

Delay/personDelay/person 19 hrs19 hrs 49 hrs49 hrs

Source: Texas Transportation Institute

USCSCAG 2005 State of the Region

LAX 3rd largest air cargo volume in US

USCSCAG 2005 State of the Region

LA/LB largest container port in US, 5th in world

USCSCAG 2005 State of the Region

Other problems: PM10 and PM2.5

Primer on waterborne Primer on waterborne commercecommerce

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Example: LA/LB PortsExample: LA/LB Ports

BackgroundBackground• Explosive growth in international tradeExplosive growth in international trade

1979 = $30B1979 = $30B 1998 = $180B1998 = $180B 2005 = $300B (est)2005 = $300B (est)

• Economic benefits, environmental costsEconomic benefits, environmental costs 500,000 jobs500,000 jobs Ports single largest PM10 sourcePorts single largest PM10 source

• Complexity of the global supply chainComplexity of the global supply chain

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Major actors in supply chainMajor actors in supply chain ManufacturersManufacturers Steamship linesSteamship lines Ports and terminal operatorsPorts and terminal operators Dock laborDock labor Customs brokers, freight forwarders, Customs brokers, freight forwarders,

3PLs, shippers3PLs, shippers Truck, rail industriesTruck, rail industries Warehouse/distributionWarehouse/distribution Wholesalers, retailersWholesalers, retailers GovernmentsGovernments

Supply chain, simplifiedSupply chain, simplified

Steamship lines

Export producers

Ports

Terminal operators

ILWU

Warehouse & distribution

Import consumers

Secondary manufacturing

Freight forwarders

Trucking

Rail

US Customs

US Coast Guard

3PLs

Air

Major retailers

State, local governments

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The supply chain imperative: The supply chain imperative: Faster, cheaperFaster, cheaper

Time is moneyTime is money• Reduce transit time, dwell timeReduce transit time, dwell time• Cargo processingCargo processing• Virtual warehouseVirtual warehouse• Trucking advantageTrucking advantage

Scale economiesScale economies• Bigger ships, hub systemsBigger ships, hub systems• Warehouse/distribution centersWarehouse/distribution centers• Rail long haul high volume advantageRail long haul high volume advantage• Wal-MartWal-Mart

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Institutions and relationships - 1Institutions and relationships - 1 Natural alliesNatural allies: steamship lines, ports, : steamship lines, ports,

terminal operators, major retailersterminal operators, major retailers• Steamship lines, major retailers as customersSteamship lines, major retailers as customers• Terminal operations to serve customersTerminal operations to serve customers

24/7 ship service; special gate hours for high volume 24/7 ship service; special gate hours for high volume importers; flexible dock storage rulesimporters; flexible dock storage rules

• Added advantage: ports and terminals exempt Added advantage: ports and terminals exempt from antitrust collaboration provisionsfrom antitrust collaboration provisions

The powerbrokersThe powerbrokers: ILWU: ILWU• Bargaining power of the west coast longshore Bargaining power of the west coast longshore

union enhanced by Pacific trade growthunion enhanced by Pacific trade growth• Labor power reflected in work rules, pay scales, Labor power reflected in work rules, pay scales,

control of workforce supplycontrol of workforce supply• Adversarial relationship of ILWU, PMAAdversarial relationship of ILWU, PMA

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Institutions and relationships - 2Institutions and relationships - 2 Sometimes at the tableSometimes at the table: rail, long distance : rail, long distance

truckingtrucking• Importance of rail for interstate transportImportance of rail for interstate transport• Size/scale of rail firms Size/scale of rail firms bilateral negotiations bilateral negotiations

Alameda Corridor construction and fee structureAlameda Corridor construction and fee structure Economic weak linkEconomic weak link: independent drayage : independent drayage

truckerstruckers• Mostly small firms and independent owner/operatorsMostly small firms and independent owner/operators• Low wages/income, old/dirty trucksLow wages/income, old/dirty trucks• Subject to antitrust collaboration lawsSubject to antitrust collaboration laws• ““Price takers”Price takers”

Paid by trip; responsible for chassis safety, but don’t own Paid by trip; responsible for chassis safety, but don’t own them; limited terminal truck gate service hours; delivery them; limited terminal truck gate service hours; delivery fees set by shippers, cargo ownersfees set by shippers, cargo owners

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Institutions and relationships - 3Institutions and relationships - 3 Increasingly discontentIncreasingly discontent: general public: general public

• Road congestion, trucks in neighborhoods, port-related Road congestion, trucks in neighborhoods, port-related diesel emissionsdiesel emissions

I-710 as “poster child”I-710 as “poster child” Increasingly frustratedIncreasingly frustrated: state and local : state and local

governmentsgovernments• Limited jurisdictionLimited jurisdiction

Steamship lines are foreign ownedSteamship lines are foreign owned Rail exempt from local regulation under ICCRail exempt from local regulation under ICC Ports are independent authoritiesPorts are independent authorities

• Limited scope for forcing changeLimited scope for forcing change AB 2650 – terminal gate appointment systemAB 2650 – terminal gate appointment system Defeat of AB 2042 (port emissions), SB 348 (equipment Defeat of AB 2042 (port emissions), SB 348 (equipment

fees)fees)

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Competitive position of LA/LBCompetitive position of LA/LB Despite the congestion problems, LA/LB remain Despite the congestion problems, LA/LB remain

competitivecompetitive• LA/LB container volume much larger than others:LA/LB container volume much larger than others:

2004 LA/LB = 13M TEU; Oakland = 2M, Seattle = 1.8M2004 LA/LB = 13M TEU; Oakland = 2M, Seattle = 1.8M• Other west coast ports also have landside constraintsOther west coast ports also have landside constraints• Southern California/Southwest consumer marketSouthern California/Southwest consumer market• Scale and network economies in ocean shippingScale and network economies in ocean shipping

larger vessels, hub systemslarger vessels, hub systems ConsequencesConsequences

• Port congestion, landside congestion will increasePort congestion, landside congestion will increase• Short run problem can’t be solved with new capacityShort run problem can’t be solved with new capacity• As long as key players are not losing significant As long as key players are not losing significant

business, little incentive to make operations more business, little incentive to make operations more productiveproductive

Some examplesSome examples

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AB 2650: terminal gate operationsAB 2650: terminal gate operations

Terminal gate problem:Terminal gate problem:• Truck gates open generally M-F 8AM – 5PMTruck gates open generally M-F 8AM – 5PM• More container volume = more truck moves in More container volume = more truck moves in

same time intervalsame time interval• Truck queues at terminalsTruck queues at terminals• Truck traffic concentrated in daytime peak Truck traffic concentrated in daytime peak

hours hours more peak highway congestion more peak highway congestion Stated purpose: reduce vehicle emissionsStated purpose: reduce vehicle emissions Intended purpose: extend terminal gate Intended purpose: extend terminal gate

hourshours

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AB 2650 provisionsAB 2650 provisions Took effect 7/1/02; in force 7/1/03Took effect 7/1/02; in force 7/1/03 Fines terminal operator $250 for each truck idling Fines terminal operator $250 for each truck idling

more than 30 minutes while in queuemore than 30 minutes while in queue Terminals with extended gate hours (≥ 70 Terminals with extended gate hours (≥ 70

hrs/wk) exempthrs/wk) exempt DetailsDetails

• Applies only to queuing to designated gate entry (not to Applies only to queuing to designated gate entry (not to pedestal entry)pedestal entry)

• Applies only to idling, not standing with engine offApplies only to idling, not standing with engine off• Applies only if truck has appointmentApplies only if truck has appointment• Does not apply to standing/idling within terminalDoes not apply to standing/idling within terminal• Terminals establish own rules re appointmentsTerminals establish own rules re appointments

Availability, restrictions, priority accessAvailability, restrictions, priority access Enforced by local air districtEnforced by local air district

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AB 2650 results - 1AB 2650 results - 1

EnforcementEnforcement• To date, no citations at LA/LB, 2 at OaklandTo date, no citations at LA/LB, 2 at Oakland

Extended gate hoursExtended gate hours• 3 of 14 terminals, none changed in response to 3 of 14 terminals, none changed in response to

the lawthe law• Extended hours viewed as too costly; chose Extended hours viewed as too costly; chose

appt system insteadappt system instead QueuesQueues

• Queues shorter, likely due to OCR Queues shorter, likely due to OCR implementation, computerization of cargo dataimplementation, computerization of cargo data

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AB 2650 results - 2AB 2650 results - 2

AppointmentsAppointments• Use varies by terminal, 1% to 30+%Use varies by terminal, 1% to 30+%• Mixed reviewMixed review

Did queue shift to inside terminal?Did queue shift to inside terminal? Appointment to pick up vs cargo ready for pick upAppointment to pick up vs cargo ready for pick up Appointment windows and road congestionAppointment windows and road congestion Generally no priority at gateGenerally no priority at gate Allows allocation of cargo movesAllows allocation of cargo moves Allows truckers to schedule on contingency basis (no Allows truckers to schedule on contingency basis (no

penalties for cancellations)penalties for cancellations)

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PierPass - 1PierPass - 1 Current effort to extend terminal gate hoursCurrent effort to extend terminal gate hours An industry response to legislative pressure (AB An industry response to legislative pressure (AB

2041, withdrawn)2041, withdrawn) Scheduled to start July 2005Scheduled to start July 2005 ProvisionsProvisions

• Fee of $40/TEU for all road cargo entering/exiting during Fee of $40/TEU for all road cargo entering/exiting during peak hourspeak hours

• Peak hours = M-F 3AM – 6 PMPeak hours = M-F 3AM – 6 PM• ExemptionsExemptions

Empty returns, chassis returns, domestic freight, Empty returns, chassis returns, domestic freight, transshipments to other ports, cargo subject to ACTA feetransshipments to other ports, cargo subject to ACTA fee

• System operated by PierPass; registration requiredSystem operated by PierPass; registration required• Net revenues allocated to terminals to offset costsNet revenues allocated to terminals to offset costs

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PierPass - 2PierPass - 2 Why extended gate hours are costlyWhy extended gate hours are costly

• Dock labor works in shifts, gangsDock labor works in shifts, gangs• Shift differential payShift differential pay• Costs of operating dock equipmentCosts of operating dock equipment

Potential landside barriersPotential landside barriers• Restrictions on cargo deliveryRestrictions on cargo delivery• Lack of safe cargo storage optionsLack of safe cargo storage options• Possible shortage of truck driversPossible shortage of truck drivers

Some interesting questionsSome interesting questions• Why didn’t terminals set own rates?Why didn’t terminals set own rates?• Why is 3 AM “peak”?Why is 3 AM “peak”?

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The 2002 Port shutdownThe 2002 Port shutdown

Result of labor Result of labor conflict, ILWU and conflict, ILWU and PMAPMA

Main issuesMain issues• Use of information Use of information

technology in cargo technology in cargo operationsoperations

• Preservation of Preservation of union jobsunion jobs

5/1/025/1/02 Start contract negotiationsStart contract negotiations

7/1/027/1/02 Contract expires, day-to-day Contract expires, day-to-day extensionsextensions

9/1/029/1/02 ILWU refuses further ILWU refuses further extensionsextensions

SeptemberSeptember Various alleged “work Various alleged “work slowdowns”slowdowns”

9/27/029/27/02 PMA shuts port downPMA shuts port down

9/29/029/29/02 PMA re-opens ports, shuts PMA re-opens ports, shuts ports same dayports same day

10/9/0210/9/02 Taft-Hartley Act invoked, Taft-Hartley Act invoked, ports re-openports re-open

11/23/0211/23/02 Agreement on new contractAgreement on new contract

2/1/032/1/03 Start of new contractStart of new contract

What happened – port cargoWhat happened – port cargo

San Pedro Bay Ports Cargo Volumes (Thousand TEU)Data Source: Ports of Los Angeles and Long Beach official websites

500

600

700

800

900

1,000

1,100

1,200

1,300

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2000

2001

2002

2003

2004

What happened – air cargoWhat happened – air cargo

Air Cargo Volume (Thousand Tons), LAXData Source: Official Los Angeles World Airport Website

110

130

150

170

190

210

Jan Feb March April May June July August Sept Oct Nov Dec

2001

2002

2003

2004

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After the shutdownAfter the shutdown No plan for recoveryNo plan for recovery No change in terminal operating proceduresNo change in terminal operating procedures

• gate hours, container storage rulesgate hours, container storage rules Like road congestion, dock recovery period Like road congestion, dock recovery period

depends on arrivals, departures, capacitydepends on arrivals, departures, capacity• Containers had accumulated on dock prior to shutdownContainers had accumulated on dock prior to shutdown• Container unload rate > container exit rate, so number Container unload rate > container exit rate, so number

of containers stored increasedof containers stored increased• As containers on dock increased, exit rate declinedAs containers on dock increased, exit rate declined• Result: recovery over several monthsResult: recovery over several months

Congestion costs imposed primarily on truckers, Congestion costs imposed primarily on truckers, secondarily on wholesalers, retailers, consumerssecondarily on wholesalers, retailers, consumers

Railroads had problems due to freight stuck on Railroads had problems due to freight stuck on trainstrains

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Policy DiscussionPolicy Discussion

What do these examples tell us?What do these examples tell us? Recall institutions and relationshipsRecall institutions and relationships

• Unequal distribution of economic power Unequal distribution of economic power within supply chainwithin supply chain

Recall supply chain imperativeRecall supply chain imperative• Faster, cheaperFaster, cheaper

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Challenges to changeChallenges to change Dynamics and imperatives of international trade, Dynamics and imperatives of international trade,

global economy outside local or state (or global economy outside local or state (or national) controlnational) control

Some key actors not subject to local or state Some key actors not subject to local or state government authoritygovernment authority

Trade continues to increase, so limited incentive Trade continues to increase, so limited incentive for changes that would increase costs for industryfor changes that would increase costs for industry• Ports compete, so no incentive to incur unique local Ports compete, so no incentive to incur unique local

costscosts To date, no obvious leadership for fundamental To date, no obvious leadership for fundamental

change within the supply chainchange within the supply chain Trade carries powerful local economic argumentTrade carries powerful local economic argument

• Good jobs, big multiplierGood jobs, big multiplier

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Opportunities for changeOpportunities for change Growing effectiveness of environmental Growing effectiveness of environmental

advocates, community activistsadvocates, community activists• Documentation of health impacts on local communitiesDocumentation of health impacts on local communities• Brokered agreementsBrokered agreements

China shipping terminalChina shipping terminal• I-710, second roundI-710, second round

State legislative pressureState legislative pressure• 2005 – SB 761 (truck turn times), 764 (port emissions), 2005 – SB 761 (truck turn times), 764 (port emissions),

848 (collective bargaining for truckers), and many 848 (collective bargaining for truckers), and many othersothers

• Most won’t pass, but the message is clearMost won’t pass, but the message is clear Collaborative decision-makingCollaborative decision-making

• PierPass, security issues have motivated cooperative PierPass, security issues have motivated cooperative action – establishes institutional relationshipsaction – establishes institutional relationships

Interest group advocacyInterest group advocacy• Freight user fee (container fee) proposal for Freight user fee (container fee) proposal for

infrastructureinfrastructure

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Implications for Caltrans?Implications for Caltrans? Sources of demand for freight transport not Sources of demand for freight transport not

subject to state, local controlsubject to state, local control• More demand in future a reasonable assumptionMore demand in future a reasonable assumption

Prices, time, reliability matter, but relative to Prices, time, reliability matter, but relative to many other considerationsmany other considerations• Efficient transportation system Efficient transportation system transport small share transport small share

of production costs of production costs transport costs relatively less transport costs relatively less importantimportant

Developing, implementing solutions requires Developing, implementing solutions requires collaboration, cooperationcollaboration, cooperation• Partnerships with local agencies, industry, communityPartnerships with local agencies, industry, community

Increasing the efficiency, capacity of existing Increasing the efficiency, capacity of existing system of key importancesystem of key importance

Thank youThank you

Contact informationContact information

giuliano@usc.edugiuliano@usc.edu

www.metrans.orgwww.metrans.org