The name of the game for ports in the Pacific Northwest is competition. They compete with California ports for West Coast market share. They compete with East Coast ports for trade with Asia. The U.S. ports in the Northwest compete with the Canadian ports of Vancouver and Prince Rupert in British Columbia for regional supremacy.
The competition between Seattle and Tacoma and Canada’s Pacific Coast ports is also being played out in Washington, D.C., as the Federal Maritime Commission looks into claims the U.S. harbor maintenance tax gives Canada’s ports a competitive advantage in attracting cargo.
Lacking a large local population base such as that found in Southern California or the Northeast, the Pacific Northwest ports’ prosperity depends upon their ability to attract discretionary cargo. Officials at the region’s ports say the competition is a big reason why they are among the most efficient gateways for ocean as well as intermodal rail shipments.
The ports of Seattle and Tacoma have led the charge to change the harbor maintenance tax, which is levied on imports that enter the country through U.S. ports. There is no tax on United States-bound cargo that moves through a Canadian port and then crosses the border by rail or truck.
The tax is intended to fund the dredging of U.S. ports. Although it amounts to only 0.125 percent of the value of the shipment, the fee paid by the importer can be high depending upon the cost of the merchandise. The Port of Seattle, in a filing this month with the FMC, said the fee averages $84 per container, but is about $125 for a containerload of electronics and $312.50 for a shipment of auto parts.
Tay Yoshitani, the port’s executive director, told the FMC cost plays an important role in determining an importer’s decision on how to route cargo. If the FMC determines the harbor maintenance tax is putting U.S. ports at a competitive disadvantage, the commission should urge the government to change the fee arrangement to create a level playing field, Yoshitani said.
Sidebar: Direct to the Last Frontier
Although the evidence is only empirical — there aren’t many metrics to show what specific factors pushed shipments one way or another in a short time span — there are some signs of Seattle’s contention in container volumes at West Coast ports in the first 11 months of 2011 as reported by the Pacific Maritime Association.
During that period, the normally stable market share of the ports shifted, with the volume of loaded containers moving through Los Angeles-Long Beach gaining 3 percent, and the volume in Seattle-Tacoma declining 2 percent.
Paul Bingham, economics practice leader at Wilbur Smith Associates, said no single factor caused this development. But the shift in market share could be caused by a combination of how carriers in the trans-Pacific deploy capacity, putting their largest vessels into the Pacific Southwest services, and the generally lower ocean rates to Los Angeles-Long Beach and more favorable intermodal rates from Southern California to the nation’s interior.
However, the start-up last May of two services to Prince Rupert could have played a role, Bingham said. Hanjin Shipping added Prince Rupert to its Pacific Northwest service, making it the first call inbound, and China Ocean Shipping Co. added the Canadian port to its South China Express service, making Prince Rupert the last call outbound.
Prince Rupert, 500 miles north of Vancouver, British Columbia, opened its container terminal in October 2007 and now has four weekly services from Asia. The impact of the new services in 2011 was immediate. While other ports on the Pacific Coast of North America experienced a low single-digit increase or decrease in cargo volumes in 2011, Prince Rupert’s container volume increased 20 percent compared to 2010.
Container volume in Seattle declined about 5 percent last year, while neighboring Tacoma had an increase of 4 percent. Hanjin and Cosco both have calls at Seattle. That suggests Prince Rupert’s increased cargo volume last year may have come from Seattle rather than any other West Coast port.
The Canadian ports also filed comments with the FMC on the diversion issue, and they said there is no factual proof some U.S. importers ship through Prince Rupert or Vancouver to avoid paying the harbor maintenance tax. Furthermore, when all U.S. and Canadian ports are taken into consideration, the U.S. ports do better in attracting Canada-destined cargo than the Canadian ports do in attracting U.S. cargo.
U.S. ports in 2010 handled 137,372 20-foot equivalent container units of Canadian cargo, while Canada’s ports handled 425,264 TEUs of U.S. cargo. Canadian ports’ share of U.S. cargo dropped to 2.5 percent in 2010 from 3.2 percent in 2009, the Canadian report said.
While the harbor maintenance tax debate goes on in Washington, the Pacific Northwest ports continue to protect their home turf and work on improving efficiency. “We look to retain the business we have and expand where possible,” said Larry Kvidera, marketing and international trade specialist at the Port of Tacoma.
Tacoma and Seattle anticipate another year of slow recovery in the trans-Pacific. U.S. imports should increase modestly, said Bari Bookout, director of commercial strategy at the Port of Seattle, although exports should continue to increase at a faster pace than imports.
The Pacific Northwest ports are working with exporters of forest products and agricultural and seafood products in the region to ensure they have the containers they need to carry their export products. The ports also encourage further development of transload facilities in the Pacific Northwest. Shippers of specialty and identity-preserved grain products in the upper Midwest ship heavily through Seattle and Tacoma, with some of the shipments moving in rail hopper cars to the coast where they are transloaded into marine containers.
Seattle and Tacoma have unused marine terminal capacity and a well-developed intermodal infrastructure, so they can easily absorb larger cargo volumes when they develop. Seattle, with an annual volume of about 2 million TEUs, could handle 3 million to 3.5 million TEUs with the current infrastructure, Bookout said.
The ports also work closely with regional development agencies and the BNSF and Union Pacific railroads to continue building the FAST corridor, a series of overpasses and grade separations to improve rail access to the ports.
These projects fit in with the ports’ strategy for growth, which is “to be as efficient as we can be operationally,” Kvidera said.
Correction: An earlier version mistated the amount of Canadian cargo moving through U.S. ports in 2010.