Every year trucking companies in Southern California routinely pay thousands even tens of thousands of dollars in “per diem” charges to equipment providers in the Ports of Long Beach and Los Angeles. These charges accrue on a daily basis for late returns of empty containers. Since the Fall of 2014, however, the frequency and amount of the charges has soared as port congestion has made it difficult and sometimes impossible to return the containers on time. Motor carriers are now often facing hundreds of thousands of dollars in per diem charges accrued over the course of a few short weeks this Fall.
There are multiple causes for this port congestion including chassis shortages, closed terminals, early gate closures, closed areas, equipment redirections, and non-acceptance of equipment on certain days or shifts. The most significant issue affecting port congestion may be labor disputes The Pacific Maritime Association (PMA) is the primary negotiator and administrator of maritime labor agreements with the International Longshore and Warehouse Union (ILWU). This includes a coast-wide contract covering roughly 13,600 longshore, clerk and foreman workers at 29 ports along the West Coast, including the Ports of Los Angeles, Long Beach and Oakland. The ILWU workers have been without a contract since July and as negotiations have dragged on, both sides have taken actions to enhance their negotiating position but which have hampered the ability of trucking companies to move containers into and out of the Ports.
This port congestion problem has interfered with every aspect of motor carrier operations making it impossible to consistently return empty containers on time. The result has been that trucking companies are caught in the middle, unable to return empty containers on time and then getting charged “per diems.” Using an analogy to an old technology, it is like renting a movie from Blockbuster and being charged late fees because Blockbuster won’t let you return the movie.
Motor Carriers faced with these charges generally have 30 days to dispute them under the terms of the Uniform Intermodal Interchange Agreement (UIIA). Equipment providers must respond, generally within 30-60 days depending on the particular provider’s “addendum” to the UIIA. In the event the dispute is not resolved, the motor carrier has 15 days to invoke binding arbitration under the UIIA. Specific rules about invoking the dispute resolution process can be found in the UIIA document itself and the equipment providers’ addenda. The actual dispute resolution process involving UIIA arbitration is also explained at the UIIA website. Port congestion and labor disputes are conditions of “Force Majeure” under the terms of the UIIA which should exempt motor carrier from paying the per diems.
Because of the crisis level congestion at the ports, we expect per diem charges to soar dramatically over the next few months even assuming the labor dispute is resolved. While not every per diem charge may be attributable to port congestion, the vast majority of those faced by motor carriers over the last few months were likely caused by factors beyond their control. Motor carriers should carefully follow the UIIA procedures to make sure that no deadlines are missed for disputing these charges. It is also important to properly explain the Force Majeure condition and show how it has affected motor carrier operations.