Copyright 2008, Traffic World, Inc.
When the Crescent City River Pilots Association proposed a $174 surcharge for every ship turn they conduct along the Mississippi River, shippers throughout Louisiana braced for a brawl.
To them, the surcharge, which the pilots association said was needed to help pay the costs of recovery from Hurricane Katrina, was an example of the group taking advantage of its monopoly.
The latest round of surcharge requests was "like having your electricity bill increased because your neighbor has more televisions than you," said Sean Duffy, president and chief executive of the Gulf States Maritime Association.
Fortunately, a knock-down fight was avoided with the help of the Pilotage Fee Commission, a group set up in 2005 to mediate between the pilots and the shipping industry they serve.
In a deal that took effect March 1, the Crescent pilots won the right to charge $245 per inbound and outbound vessel they service, a lesser fee compared to the "per-turn" surcharge they first proposed.
In exchange, shipper groups that objected to the surcharge - the New Orleans Steamship Association, Louisiana Chemical Association, Louisiana Mid-Continent Oil and Gas Association and the Mississippi River Maritime Association - won a number of long-sought initiatives, including the right to view the pilots association''s expenses, to prevent the pilots association from adding to its capital budget without prior approval and to make reductions in the amount shippers will reimburse the pilots for several Hurricane Katrina-related costs.
In the end, the shippers said, they saved $1 million by shaving the expenses claimed by the pilots, including how much shippers would contribute toward insurance costs.
For most involved in the negotiations, the deal ushered in a new era in the relationship between pilots and shippers and marked the beginning of the drive to bring Louisiana pilots'' income more in line with those from around the country.
The numerous surcharges and tariffs imposed by the various pilots associations have raised pilot fees in the state to about $7,000 per vessel, some reports state. That compares with a little more than $2,000 for pilot fees in the Port of Houston area.
"Everyone went away from this thinking it was the most productive we have been," said John Hyatt, a member of the Pilotage Fee Commission and vice president at Irwin Brown Co., a customs broker and international freight forwarder.
The debate over a hurricane-related surcharge began last year when the Crescent City River Pilots asked the commission to institute a surcharge to help it recover from hurricane damage.
Among the funds the pilots sought to recover were lease payments they made for use of a quarters barge and other facilities at Pilottown and, among other items, payments for the reconstruction of an uninsured dock.
Pilottown is the remote island about 85 miles south of New Orleans on the Mississippi River where the Associated Branch pilots and the Crescent pilots transfer control of vessels.
Shippers protested, claiming the pilots sought to inflate their wages. They said some of the pilots'' lease deals and the purchase of two vessels were questionable. "There were some serious questions about some of the charges," Hyatt said. "Certain charges just didn''t seem in line."
Both sides eventually agreed that the shippers would not be fully responsible for the dock repairs or purchase of two vessels by the pilots after the storm.
Duffy said it was essential that the shippers won the right to make the surcharge based on vessel visits rather than per turn and that the shippers will have direct access to the pilots association''s financial records.
More important, many said, the settlement agreement shows for the first time that the two sides can work together.
"Hopefully, this will give us an opportunity to shine a little light on the entire process. We can learn how much they really work and how much they really make," Browser said.
Many argued that the state must reign in its pilots if it wants to remain competitive in the maritime industry.
"The whole cost of pilotage fees on our rivers is still too high," Browser said. "We have to make sure that, cost-wise, we don''t price ourselves out of the market."
Louisiana pilots in the state can earn, on average, as much as $340,000 a year and have benefits packages unmatched by any other pilots'' groups in the country.
Although the agreement with the pilots over surcharge fees passed the commission, many shipping industry representatives on the panel voted to reject the deal. In addition, some said the pilots'' request for a 5 percent hike in its tariff charge will be another issue long debated.
Browser voiced concern about the deal and said he still believes the pilots are getting too much money from shippers. But, "it''s the best deal that we can get," he said.
"The word we get through the grapevine is that there will be requests for additional fees," Hyatt said. "This is going to be an ongoing battle, but at least we did accomplish something."