US FMC chairman seeks inquiry into American cargo diversion into Canada

Time:2011-09-27 Browse:51 Author:RISINGSUN

PRESSURE from US west coast ports, particularly from Washington State where Seattle and Tacoma are struggling, has led the Federal Maritime Commission (FMC) to consider conducting an inquiry into Canadian cargo diversion.

FMC chairman Richard Lidinsky said he will propose an inquiry, following a request by two US senators from Washington State, whose principal ports of Seattle and Tacoma have been suffering.


The main concern is the steady growth of the northern British Columbia Port of Prince Rupert (343,366 TEU in 2010), which claims to shave off nearly three days to Chicago against landing cargo at LA-Long Beach. Vancouver (1.8 million TEU in 2010) is less of a worry as more than 90 per cent of its cargo is Canada bound.


But from Prince Rupert, the Canadian National Railway (CN) takes the cargo through thousands of miles of uncongested wilderness and can transfer it to the Chicago-area Elgin & Joliet Railway lines it purchased in 2009 to beat the Windy City`s congestion on its way to join CN lines to the west into Nebraska and south down the Mississippi to the Gulf.


Speaking at the Journal of Commerce Maritime Conference in Montreal, FMC chairman Richard Lidinsky said American ports are subject to a harbour maintenance tax, "and the more valuable the cargo, the higher the tax. Here is an issue where we need to ask in the US. Are we handicapping ourselves with our tax policy? How do Canadian ports raise revenues and pay for dredging and maintenance? Is there something we can learn from that?"


Mr Lidinsky said the Canadian government invested "in a state-of-the art new port with new infrastructure - aimed expressly at handling US cargo, reported American Shipper. In contrast, in the United States we see the federal government requiring west coast ports to pay a harbour maintenance tax, and not providing needed investments in return.


Mr Lidinsky said there are "claims of low rates for rail services between Prince Rupert and points in the United States - rates that can`t be matched by cargo moving by rail from US ports. We need to see if such disparities exist and why. Are there issues with US rail services and competition? Is there some rate structure or cross-subsidisation for Prince Rupert movements into the US? Or is any disparity based solely on natural competitive differences?" he said.


"So the question is not just whether anything unfair is being done north of the border - perhaps the more fundamental problem is that too many US ports, railways, highways and bridges are decaying due to lack of investment and strategic long-term planning," he said.


Mr Lidinsky said there were also legal questions such as where US waterborne commerce begins and ends, noting that the Supreme Court has held the FMC has authority over rail movement from port to destination.


"What law governs when there is a train accident involving intermodal cargo bound for Memphis but that moves through Prince Rupert? If it happens in Alberta, is that marine or rail cargo under Canadian law? What is it considered on the US side of the border?" he said.


"Adoption of the Rotterdam Rules by both of our countries would go a long way to resolve many of these questions," he said.


Mr Lidinsky said US and Canadian customs officers work closely on security issues, and "we understand that the security regime in Prince Rupert involves container inspections that are comparable to those in the US., but perhaps not identical. I don`t believe that Prince Rupert is part of the Container Security Initiative".