If you have plans to ship from China to the West Coast, it is important to know about Traffic Mitigation Fee.
This fee is an integral element in enhancing the overall efficiency of cargo movement from terminals.
In this guide, I will take you through various aspects of the Traffic Mitigation Fee.
This will make it easy for you to know its essence and other related aspects.
- What is a Traffic Mitigation Fee?
- Why is Traffic Mitigation Paid?
- What are the Charges for Traffic Mitigation Fee?
- How does Traffic Mitigation Fee Work?
- Do Marine Terminal Operators make Money from Traffic Mitigation Fee?
- What is Pier Pass?
- How Often does Traffic Mitigation Fee Increase?
- How are Net Profits from Traffic Mitigation Fee Distributed among Terminal Operators?
What is a Traffic Mitigation Fee?
A traffic mitigation fee (TMF) refers to a levy paid at the terminal when congested.
When there is congestion at the terminals, operations have to take place beyond the stipulated regular working hours.
The work involves using human labor, mostly tasked with handling various types of operations within the terminal.
To compensate the workers, there is a need to pay some fee to cater for their overtime wages and other benefits.
Therefore, Traffic Mitigation Fee simply covers the additional cost of workers forced to operate outside normal hours.
In essence, this reduces any projected congestion, thus ideal for avoiding delays and business losses.
Why is Traffic Mitigation Paid?
Often, terminals across the U.S, especially on the West Coast, tend to Congest due to the high traffic of container shipments.
This congestion usually affects the berthing of ships, thus leading to unprecedented massive delays for customers.
Also, the delays lead to the loss of businesses and production, among others.
Therefore, to alleviate such congestions, the terminal gates tend to operate at night or during weekends to prevent daytime traffic.
Of course, adding night shifts and weekends to any operation implies increased costs.
This is particular for terminal operators since the labor rates for night time and weekends are higher than regular times.
And the increased operators’ cost is passed directly to the trade hence inflating the price of each commodity.
In general, TMF is paid to cater for the extra costs for night shift and weekend operations in a bid of congesting the terminal.
In the long run, the traffic mitigation fee helps enhance overall efficiency by facilitating congestion prevention in terminals.
What are the Charges for Traffic Mitigation Fee?
Traffic mitigation fees vary depending on a wide range of prevailing factors.
One of the factors is the specific container terminal.
Various terminals have different rates for their respective TMF.
The other defining element of TMF is the specific type of container.
Typically, there are two types of standard containers often used in shipping; 20ft and 40ft container.
Of course, the TMF for a 20ft container will undoubtedly be lower than that of a 40ft container.
Also, the government, through the responsible agency, always revise the charge for traffic mitigation fee.
And the trend has been in effect ever since the introduction of this particular fee.
In recent time, TMF at the West Coast were revised and increased by 4.2%
Therefore, since August 1, 2020, the traffic mitigation fee for a twenty-foot equivalent unit (TEU) was revised to $33.47.
The TMF for any other shipping container apart from TEU is $66.94.
However, the traffic mitigation fee for non-exempt containers.
Some of the containers exempted from TMF include;
- Empty containers
- Transshipment cargo
- Empty chassis and
- Bobtail trucks
How does Traffic Mitigation Fee Work?
Ideally, the terminal operators levy the TMF charge directly to the customers or cargo owners.
This traffic mitigation fee is designed to cater to the night and Saturday shifts.
In essence, it aims at compensating mainly for daytime congestion in and around these terminals.
Primarily, TMF is charged for different types of containers moving during peak hours.
And these peak hours are usually between 0300hrs and 1800hrs.
Do Marine Terminal Operators make Money from Traffic Mitigation Fee?
Not at all.
Since the inception of this program is 2005, the terminals have always operated the off-peak gates at a loss.
As of 2014, the MTOs at the ports had made up the shortfall in TMR revenue.
This was to ensure that traffic mitigation and as well as air quality benefits of the program continue to become a realization.
Technically, the revenue generated from TMF does not cover any added costs for operating the night and weekend shifts.
Moreover, in the recent past, TMF never fully paid for the OffPeak program.
In the recent past, the TMF charges have been increasing but still does not generate any meaningful revenue for MTOs.
Therefore, it is easy to say the terminals hardly generate enough revenue for the traffic mitigation fee.
What is Pier Pass?
Pier Pass refers to a system for collecting fees on a relatively large scale from cargo owners for paying terminal operators directly.
It is a non-profit organization formed by Maritime Terminal Operators (MTOs) at Ports of Los Angeles and Long Beach.
It was formed in 2005 to address a wide range of multi-terminal issues.
Some of these issues include congestion, security, as well as air quality, among others.
To fulfill the mission, the organization initiated the OffPeak program hence imposing TMF on cargo moved out of ports during the day.
In principle, this discouraged the truckers from moving out their cargo in peak weekday time.
However, the initial shift-based program failed to evolve with the growth of the industry and technological advancement.
Thus Pier Pass chose to launch OffPeak 2.0 in late 2018.
This organization charges a traffic mitigation fee on daytime traffic.
The revenues it collects from the cargo owners are used for paying terminal operators directly.
How Often does Traffic Mitigation Fee Increase?
Since the inception of Pier Pass in 2005, the TMF rates remained the same until August 2011.
This is after the realization that the revenue generated is not enough to cater for all the required compensation needs.
Moreover, it was also affected because hourly labor costs had increased by 31% for the same period.
Since 2012 West Coast MTO Agreement (WCMTOA) has been revising the TMF rates every year.
The announcement for new revises rates is usually effected from the 1st day of August every year.
In essence, this is to help address the increasing labor cost.
For instance, on August 1, 2019, the TMF rates were increased by 1.9%.
This means cargo owner paid TMF of $32.12 per TEU and $64.24 for all other containers for the entire year.
From August 1, 2020, the rates were reviewed upwards by 4.2%.
It thus shows that cargo owners are currently paying $33.47 per TEU and $66.94 for other containers.
How are Net Profits from Traffic Mitigation Fee Distributed among Terminal Operators?
In most instances, the net profit is usually distributed based on the container volume at each terminal.
Pier Pass has invested in a practical system, which determines the container volume for every terminal.
This makes it easy to distribute the net profits equitably to each terminal.
As you can see from this guide, traffic mitigation fee is a fundamental element in the overall management of marine terminals.
It is essential in enhancing the efficiency of cargo movement hence mitigating unnecessary delays.
TMF is also vital in shipping since it helps in fair compensation of the workers working beyond the stipulated regular hours.
Moreover, it helps to carry out maintenance programs within the terminals, enhancing flexibility and mitigating impacts on local communities.
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