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Great Lakes shippers face higher costs under new pilot fee hike

Time:2016-12-25 Publisher:admin Num:7257

Great Lakes shipping interests are urging the US Coast Guard to reconsider a proposed new round of ship pilotage rate increases that vessel operators and ports say will force shippers to seek alternatives via Gulf and East coast ports, and even surface transportation.

“Ratepayers cannot be ATMs to fund ever-increasing pilotage fees and charges,” the American Great Lakes Ports Association, the Shipping Federation of Canada, and the U.S. Great Lakes Shipping Association said in a joint letter to the Coast Guard.

Pilotage fees have been a contentious issue on the Great Lakes-St. Lawrence Seaway. The current battle is over a proposed increase that the Coast Guard says would boost rates by a 14 percent rate increase in 2017 after increases of 24 percent in 2016 and 20 percent in 2015.

Carriers say those numbers are understated, and that actual pilotage costs have jumped 99 percent in three years. They say pilotage now accounts for as much as one-fifth of voyage costs for international vessels using the Lakes-Seaway system, and that rising costs threaten shipments of project, bulk, and other cargoes.

Shippers have advised that the proposed rate increase for 2017 would represent “a ‘tipping point,’ such that the competitiveness of the Seaway System will be threatened,” Terence F. Bowles, president and CEO of the St. Lawrence Seaway Management Corp., said in a letter to the Coast Guard.

“Given the threat to the Seaway System’s competitiveness, we submit that the further increase in pilotage rates proposed for 2017 is not sustainable and will promote a shift of cargo from the Seaway System to other gateways and to other modes of transport,” Bowles wrote.

Earlier this year, carriers and shipping associations filed a lawsuit challenging the Coast Guard’s fee-setting methodology and alleging errors in calculation of rate increases. Oral arguments are pending in the US District Court for the District of Columbia.

In recent comments opposing rate increases for 2017, industry groups, ports, and companies urged the Coast Guard to revisit its rate-setting methodology and to defer its increases until the court case is adjudicated. Pilots’ associations defended the increases as necessary to retain enough pilots to keep commerce flowing, and said additional pilots are needed.

US law requires all oceangoing vessels operating on the Great Lakes-St. Lawrence Seaway system to hire pilots. On the Lakes-Seaway system, the Coast Guard sets three pilots’ organizations rates annually through a rulemaking. Canadian pilots operate under a separate fee system.

In setting its 2016 fee levels, the Coast Guard decided to expand the number of US pilots, increase their average compensation to $326,000 per year from $235,000, and ensure that pilots have 10 days off each month during the nine-month shipping season.

The Coast Guard and pilots’ associations said the fee increases, added personnel, and increased time off are needed to retain qualified pilots. John G. Swartout, president of the Western Great Lakes Pilots Association, said that in most places, it is “exceptionally rare” for a pilot to voluntarily leave for another job, and pilot associations commonly receive more than 100 applications for a multiyear apprenticeship.

“That is the world outside the Great Lakes,” Swartout told the Coast Guard. “Here, pilots routinely leave their permanent, life-time appointments to take jobs on lakers, oil service vessels in the Gulf of Mexico, [and] other pilot associations.” He appended letters from several Lakes pilots who had resigned their positions.

Industry groups don’t dispute the need for safe pilotage but contend the increases are not supported by adequate data and seek to require users to pay for a Cadillac when a Chevrolet would suffice.

The American Great Lakes Ports Association, the Shipping Federation of Canada, and the U.S. Great Lakes Shipping Association said the current system “is the worst of all regulatory worlds for the ratepayers — no choice of provider, government-imposed fees that are arbitrarily out of proportion to the costs of providing the service, and apparent lack of concern by the rate-setting authority for the impact of the costs on ratepayers.”