Tuesday, July 31, 2012

FMC Releases Seaport Competition Investigation Study Results

A new study by the US Federal Maritime Commission has found that despite previous suggestions to the contrary, carriers shipping cargo through Canadian and Mexican ports do not violate any US law, treaty, agreement, or FMC regulation.

“We identified a situation in the Pacific Northwest, even reaching southward into California, whereby cargo movements through certain other parts of our border are putting these ports at a strong competitive disadvantage,” FMC chair Richard Lidinsky wrote in a foreword to the report. “However, in the supply chain of American international waterborne commerce we oversee, US shippers violate no FMC law or regulation by using Canadian or Mexican ports.”

The report, which is entitled “Study of US Inland Containerized Cargo Moving Through Canadian and Mexican Seaports” and was issued July 27, comes eight months after the FMC launched an inquiry into whether  American policies are causing an erosion of container traffic at ports on the US West Coast.
Numerous factors account for why shippers elect to use ports in Canada and Mexico, according to the report, including overall shipment savings, risk mitigation through port diversification, perceived transit time benefits, avoidance of the US Harbor Maintenance Tax.

The maintenance tax is a US-only per-container federal fee, collected by American ports on behalf of the federal government, based on a percentage of the cargo’s value. The money collected – an average of $109 per forty-foot equivalent unit, according to the FMC is distributed to ports for dredging work and other improvements.

Since the fee’s not charged in Canada or Mexico, it has given rise to the belief by some officials that the tax could be causing diversion of cargo to non-US ports. In recent years, there’s been a steady increase in the amount of US-destined cargo moving through Canadian port Prince Rupert and the Port of Lázaro Cárdenas in Mexico.

The study confirms previous estimates that a significant amount of containerized cargo imports moving through the Ports of Oakland, Seattle, Tacoma and Portland on the US West Coast may be vulnerable to Canada routing.

The study says there are many options available to Congress should it decide to revise or replace the current maintenance tax structure.

“It is clear that HMT is one of many factors affecting the increased use of foreign ports for cargo bound for US inland destinations,” the report states in part. “While a user fee is necessary for US ports to grow, the number of proposals in both the House and Senate as well as from other sources, suggest that amendment to the current HMT structure should be given consideration.”

Among the ideas on the table are a joint proposal by the ports of Long Beach, Los Angeles and Tacoma to reform the HMT to allow for more efficient use, and other proposals have been introduced as legislation in Congress.

All would restructure the maintenance tax in various ways, and in particular reform the collection process.