US government report challenges Prince Rupert port claims, calls for government investment

On Friday the US Federal Maritime Commission released its report into the movement of containers into the US through Canadian ports.

On Friday the US Federal Maritime Commission released its report into the movement of containers into the US through Canadian ports, and the report is a comprehensive look at the issue.

The largest issue being discussed was the Harbour Maintenance Tax (HMT), which is charged at US ports to help with dredging and other maintenance. The report says this may be a reason shippers are going to through Canada instead of the US, but not a significant one.

We believe that $109 is a reasonable approximation of the average weighted HMT charged per FEU at U.S. ports. If U.S. importers were relieved from paying this tax or, equivalently, if a fee of this magnitude was imposed at the border on U.S. bound containers having used Canada’s west coast ports, a portion of the U.S. cargo that comes through the ports of Vancouver and Prince Rupert likely would revert to using U.S. west coast ports,” reads the report, while noting that only 2.6 per cent of west coast US bound imports were coming through Canada.

The FMC has an interest in ensuring that U.S. ports remain competitive in the waterborne commerce arena. This task is not simple, as there are many factors involved. U.S. ports are competitive internationally; however, it would appear that the HMT makes the challenge more difficult…It is clear that HMT is one of many factors affecting the increased use of foreign ports for cargo bound for U.S. inland destinations. While a user fee is necessary for U.S. 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.”

The report states some shippers choose to use Prince Rupert to diversify access to the US markets to avoid issues with natural disasters and work stoppages along one corridor.

In terms of the cost of shipping the committee found that Prince Rupert is less costly than all other west coast ports, in part due to the harbour maintenance tax , but that may be cancelled out by other factors.

While [the figures] would seem to suggest that Prince Rupert is simply a less expensive corridor for cargo heading to the Midwest, even prior to the inclusion of the HMT, discussions with importers suggest that this may not be the case. In fact, it has been suggested that rates through Prince Rupert are lower to offset higher transportation costs at other places in the supply chain. For example, many shippers have made infrastructure investments closer to rail facilities operated by U.S. Railroads. In order to utilize Prince Rupert, the cargo must travel by rail on CN; the lower ocean rates are offered to account for the increased trucking cost to move containers from the CN railhead to the ultimate destination,” reads the report.

As such, it is difficult to conclude that transportation costs are significantly lower when importers opt to use Prince Rupert as their seaport of choice.”

Another area the report questions Prince Rupert is in the time it takes to get to US destinations.

COSCO and Hanjin Lines both have ten day transits out of Shanghai to the Port of Prince Rupert. This beats the best transit times offered by APL, Maersk, and Hanjin Lines into the ports of LA/LB by two days (10 vs.12 days), but COSCO and Hanjin’s faster transit times into Prince Rupert do not always translate into faster delivery to U.S. inland points. Both COSCO and Hanjin Lines provide a service out of Shanghai to Chicago, with an eighteen day transit time, via the port of Prince Rupert. This same transit time is offered by APL via the port of Los Angeles. Orient Overseas Container Line (OOCL) actually bests COSCO and Hanjin transit time by one day (17 vs. 18 days) via the port of Tacoma…The same can be said for cargo moving to Memphis. COSCO and Hanjin Lines calling Prince Rupert direct offer a transit time out of Shanghai to Chicago of 20 days (COSCO), and 18 days (Hanjin). Hanjin beats its own transit time into Memphis by one day (17 vs. 18 days), via the port of Long Beach, and American President Line (APL) matches Hanjin’s Prince Rupert transit time of 18 days, via the port of Los Angeles,” it reads.

Prince Rupert is not a viable port for cargo originating from, and destined for, large swaths of the United States. While Chicago and Memphis are important industrial areas, and do represent the destination for a considerable portion of U.S. imports, we spoke with importers who indicated that they have distribution centers located all over the country, and cargo destined for these locations in places like Pennsylvania, California, or Texas would likely never be routed through Prince Rupert. Likewise, Prince Rupert’s claims of rapid transit times only currently apply for cargo being sourced from northern and central China, Japan, and Korea.”

The report concludes that the solution may rest with the US government making further investments in port infrastructure, citing Prince Rupert as a specific example.

Maintaining the competitiveness of the U.S. ports requires in part, improving port infrastructure. Prince Rupert, for example, is geared toward handling intermodal rail traffic and has on dock rail facilities that allow the gang to make fewer moves with the cargo. The design of the Port of Prince Rupert allows a single gang to move the cargo from ship to train and then move the train to the switching yard. In other ports, there are separate gangs that discharge the cargo, move the cargo to rail sidings, and then to switching yards to be consolidated with other flatcars,” it states.

Currently, many U.S. ports, highways, and bridges are slowly decaying due to lack of investment and strategic long-term planning. Our closest competitors, Mexico and Canada, have national transportation policies that ensure that their ports, highways, and bridges, all of which play important roles in the intermodal transportation of commerce, are sustained. Our country’s decisions regarding infrastructure investments today will directly impact our ability to compete in a global economy for years to come.”

The full report can be found here