Ports around the United States are anxious to encourage greater use of intermodal rail for inbound shipments, but when does that encouragement amount to an illegal subsidy for rail transport?
Nine container ship lines that rely mainly on trucks to move their cargo between the Port of New York and New Jersey and inland points say the port authority is crossing that line.
The carriers are asking the Federal Maritime Commission to order the Port Authority of New York and New Jersey to stop collecting a new port fee gives a cost break to intermodal rail shipments, arguing the fee violates the Shipping Act by forcing them to subsidize on-dock rail services.
The new fee charges carriers $4.95 per 20-foot equivalent unit on all loaded and empty containers lifted on or off ships. Fees also are assessed on shipments of automobiles ($1.11 per vehicle) and non-containerized cargo (13 cents a ton).
The fee replaced a $57.50-per-lift assessment on containers handled at the port’s ExpressRail ramps. It also eliminated a minor assessment levied on interchanges of containers between truckers and container terminals.
The port authority, looking for ways to increase the use of its ExpressRail operation at terminals decidedly oriented toward truck movements, approved the fee last December and put it into effect March 14. The agency began enforcing the fee on Aug. 15 with letters warning carriers they’d be denied service if they didn’t pay.
Carriers filing the FMC complaint — China Shipping Container Lines, Cosco Container Lines, Evergreen Marine, Hanjin Shipping, Horizon Lines, “K” Line, NYK Line, United Arab Shipping and Yang Ming Line — asked the FMC to order the port authority to end the fee and refund their payments.
The carriers said the new fee forces them to subsidize the cost of the port’s ExpressRail rail ramps even if they don’t use the ramps or use them only occasionally.
The fee “reduces the per-container costs for rail users from a rail fee of $57.50 for each container lift to ... $9.90 per 40-foot container, with the difference being picked up by the non-rail users,” the carriers’ complaint said. Carriers not using ExpressRail “will pay millions … for nothing. Conversely, rail users will benefit in the millions from (the carriers’) subsidies.”
The port authority reduced the rail fees to help compete with rivals led by Virginia, which is aggressively marketing Norfolk Southern Railway’s Heartland Corridor double-stack connection between Hampton Roads and the Midwest.
The port authority has been trying to boost rail shipments for environmental, operational and competitive reasons. It said the fee would reduce idling by trucks, reducing pollution, and provide more money for road improvements that would smooth cargo flow.
Rail accounts for only about 10 percent of the total container movements at New York-Jersey terminals: With such an enormous population within 200 miles of the port, trucks hauls generally are faster and the economics that make intermodal a strong proposition on the West Coast and at ports such as Norfolk don’t really kick in for short distances. But rail lifts also are growing more rapidly than overall container traffic. The port authority said rail lifts grew 22.3 percent last year over 2009 against 12.6 percent overall movements and were up 15.2 percent in the first half of this year against 8.2 growth in container volume.
Port authority officials wouldn’t comment on the FMC case. When the fee was announced last December, they said it was designed to encourage rail movements and support infrastructure and security improvements that benefit all port users.
Port Director Rick Larrabee said the agency expected the equalization of rail and truck fees to boost the percentage of port containers using intermodal rail by 2 to 3 percentage points from the previous 12 to 13 percent.
He said the fee was expected to generate $26 million a year, 27 percent more than the $20.5 million generated by the ExpressRail fee. The discontinued truck fee had generated minimal revenue.
The fee is collected by terminal operators that lease port-owned terminals, and by private owners of auto and general cargo terminals, and it is forwarded to the port authority.
Some terminal operators were uneasy about serving as the port authority’s collection agency, but one terminal executive defended the new fee as a reasonable way to assess port users for necessary infrastructure.
Carriers fighting the fee are being “shortsighted,” said James Devine, CEO at New York Container Terminal. “I support it 100 percent. The port authority needs the funds, and I think they correctly assessed that it’s more logical to spread the costs among all port traffic and not just the rail traffic.”