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47 To provide an alternative to this tax, an industry group Unexpected Impacts composed primarily of importers and exporters created the Off Peak Program.58 Containers shipped through the ports The Off Peak Program was a response to imminent action during peak hours (3 AM to 6 PM) are charged a traffic mit- that was being proposed in the state legislature. Some inter- igation fee. The proceeds of the fee were used to reimburse view respondents noted that the legislature had not done terminal operators for the cost of keeping their facilities open analysis of the potential collateral impacts, including such is- during off-peak hours. The coalition created a non-profit or- sues as driver shortages at night or local area noise and con- ganization called PierPASS to administer the program. Cur- gestion impacts from nighttime dropoffs. Additional costs of rently, shippers moving cargo from port terminals during the the program may fall on shippers and receivers, who may need day are subject to a $50 fee for 20-foot containers and a $100 to adjust facility schedules to accommodate longer hours. fee for 40-foot containers. Cargo owners can avoid this fee by Exporters of lower value products have been hurt more by moving containers during off-peak periods. container fees than have other businesses. The fees represent a larger percentage of the value of their product. For instance, some agricultural shippers use containers to ship grain. In gen- Policy Impacts eral, U.S. exports have a lower value per ton than imports. Overall, this program has been successful in shifting truck Because of this, container fees have a larger impact on the traffic into off-peak periods. An independent study of PierPASS price of U.S. exports than foreign imports. The long-term found that prior to the program, 17 to 21 percent of port truck cumulative economic impact of container fees has not been traffic moved during off-peak hours. The share of non-exempt extensively considered. cargo that moves in off-peak hours increased from around 30 percent shortly after the program inception to nearly 40 per- Peak Pricing for Airports cent at present.59 The standardization of off-peak terminal hours was an important element of the program's success. Policy Description Negative impacts of the PierPASS program have fallen pri- In July 2008, as part of a broader attempt to use market- marily on drayage truck drivers, because they often must work based pricing to address congestion across the U.S. trans- longer hours and generally receive no change in compensation. portation system, FAA amended its policy statement regard- Some warehouse operators have been forced to adjust their op- ing airport rates and charges.63 According to FAA, the intent erating hours without the ability to pass on higher costs.60 is to provide incentives to air carriers to use congested airports Fees on port trucks or containers may cause diversion of ma- during off-peak hours or to use alternate airports to meet re- rine traffic to other ports. There is no evidence that such a di- gional air service needs. According to FAA, the change does version has occurred as a result of the Off Peak Program. One not allow congestion pricing, per se. Rather, it allows airport recent study estimated traffic diversion from the port's Clean operators to allocate new categories of cost to peak-hour land- Truck Program (which involves a fee of $35 on each loaded ing fees, thus achieving some of the effects of congestion pric- 20-foot container and $70 on each loaded 40-foot container) ing. Specifically, the policy amendment would be merely 0.5 percent.61 Another study looked at the di- version effects of different levels of container fees.62 That study Expands the ability of airport operators to include in the found that, without port access road congestion improve- peak-period user charges of a congested airport a portion ments, a fee of $60 on a 40-foot import container would reduce of the airfield costs of other, underutilized airports owned import volume at the Ports of Long Beach and Los Angeles by and operated by the same entity; and 6 percent. If the container fee were used for roadway conges- Permits the operator of a congested airport to add to peak- tion relief, the fee could go as high as $200 per 40-foot con- period user charges a portion of the cost of airfield projects tainer before significant diversion to other ports would occur. under construction. (Previously these costs could be re- couped only after project completion.) 58The History of PierPASS. https://www.pierpass-tmf.org/Documents/Pier PASSHistory.pdf 59PierPASS Review: Final Report. BST Associates. July 9, 2008. 60Genevieve Giuliano and Thomas O'Brien, "Impacts of Impacts of the Long Policy Impacts Beach and Los Angeles Ports PierPASS Program," Presentation at the National This policy increases costs for carriers who keep some of Urban Freight Conference, December 5, 2007. 61Container Diversion and Economic Impact Study: Effects of Higher Drayage Costs their flights in peak periods. There is also a cost to carriers of at San Pedro Bay Ports, prepared for the Ports of Los Angeles and Long Beach, September 27, 2007. 62Leachman & Associates, Final Report Port and Modal Elasticity Study, Prepared 63 FAA, "Policy Regarding Airport Rates and Charges," Notice of amendment to for Southern California Association of Governments, September 2005. policy statement, July 14, 2008, 73 FR 4043040445.

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48 shifting flights from the peak, given that they would not have Unexpected Impacts been choosing to operate in a time of congestion unless they In its Federal Register notices, FAA indicated some con- found some benefit in doing so. Because air cargo traffic can sideration of the potential impact on the air-cargo industry. more easily operate during off-peak times than passenger traf- For example, in its notice of proposed amendment to its fic, freight system impacts of this policy are likely minimal. policy statement, FAA considered permitting the operator CAA and FedEx Express asserted that higher landing fees of a congested airport to add the cost of airfield projects alone would not cause all-cargo air carriers to relocate to sec- under construction to landing fees throughout the day, not ondary airports. They noted that the cargo carriers must con- just the fees for peak periods.64 However, the agency con- sider issues of greater importance than landing fees (e.g., the cluded that doing so would penalize cargo operators and airport's proximity to customers and the need for ground in- others already avoiding peak periods without providing an frastructure such as warehouse space). incentive to change flight schedules. However, there is no CAA and carrier executives also noted that, although most indication that FAA conducted a quantitative analysis of all-cargo operations are during off-peak hours, some daytime how the policy amendment would affect carriers (either pas- flights are necessary. For at least some of those daytime flights, senger or cargo). they argue, the cost of adjusting operations and schedules to avoid peak periods will far outweigh the increase in the land- ing fee. In this light, the policy amendment will result in 64 FAA, "Policy Regarding Airport Rates and Charges," Notice of proposed increased costs to air-cargo operators. amendment to policy statement, January 17, 2008, 73 FR 33103316.