Taxes vs. Incentives at The Port of Long Beach

Last month, I wrote about how the Port of Long Beach decided to move ahead with its “Clean Trucks Fee,” which went into effect February 18.  According to the press release, the fee is expected to raise “about $1 million a day or about $1 billion over the next few years at both San Pedro Bay ports to help finance the replacement of many of the 17,000 trucks that are a leading source of air pollution in Southern California.”  Call this the “tax” approach to enabling a green economy.

I questioned at the time, however, whether these financial projections were realistic considering the sharp decline in cargo volume flowing through the ports.  In the first two months of 2009, for example, cargo traffic at the Port of Long Beach is down about 25 percent compared to the same period last year.  In response, the Long Beach Board of Harbor Commissioners gave preliminary approval this past Monday (less than a week after the clean trucks fee went into effect) to a package of incentives to increase rail-borne cargo through the Port of Long Beach.  Call this the “incentives” approach to job creation/retention.

According to the press release, the Port is proposing two shipper incentives to send rail-hauled cargo through Long Beach:

“In the first incentive, Long Beach would offer a 10 percent rate reduction to terminal operators on wharfage fees for all rail-hauled cargo coming through the Port. This would be about $4 to $6 per container, and would cost the Port about $11 million for the one-year life of the program.” 

“In the second incentive, the Port of Long Beach would offer $20 to ocean carriers for each additional rail-hauled 20-foot-long cargo container that they send through the Port. The financial incentive would be $40 for every container longer than 20 feet. Because this would be new cargo, the measure would not add costs for the Port.  About 30,000 people in Long Beach and 316,000 in Southern California work in international trade-related jobs, and Commissioners feel the incentives will help to retain those jobs in the region.”

Of course, it’s a bit unfair to directly compare the clean truck fee with these new incentives because they target different types of freight movements (truck vs. rail).  But at a high level, what’s happening at the Port of Long Beach is similar to the debate taking place on a national level with the recently-passed “American Recovery and Reinvestment Act”: what is the right mix of taxes, incentives, and spending to “stimulate” the economy?  I don’t think anybody really knows.

The bottom line for shippers: your supply chain costs will likely fluctuate more than usual in the weeks and months ahead.  Today, more than ever, you need to stay informed of all the factors influencing your supply chain costs (see “Is It Possible to Accurately Calculate Total Landed Costs?“).  And if you lack timely, accurate, and complete visibility to these costs, you won’t be able to manage them effectively.