Great Lakes ship pilots, industry groups bicker over rates

Great Lakes ship pilots, industry groups bicker over rates

A container ship.

The dispute, which has arisen annually during the past several years, comes as shippers, carriers,
and ports prepare for the 2018 Great Lakes/St. Lawrence Seaway shipping season,
which runs from late March through year's end.
Photo credit: Shutterstock.

A proposed 5 percent increase in US pilotage rates for oceangoing vessels plying the Great Lakes during the shipping season that begins March 29 has rekindled arguments over how the US Coast Guard determines pilots’ compensation.

The dispute, which has arisen annually during the last several years, comes as shippers, carriers, and ports prepare for the 2018 Great Lakes/St. Lawrence Seaway shipping season, which runs from late March through the end of the year.

Shipping interests complain that rising pilotage rates threaten to drive breakbulk and bulk shipments to competing US Gulf and Atlantic ports. Pilots dispute those claims, and say they are paid far less than pilots regulated by state or local authorities on other coasts.

Great Lakes domestic and international volume last year rose 9 percent to 38 million metric tons, largely due to iron ore shipments. Several ports reported increased breakbulk cargo. The Port of Cleveland handled 464,000 tons of general cargo, including an increase of nearly 20 percent in international shipments of steel, project cargo, and other shipments.

The Coast Guard said it raised rates and surcharges by a total of 40 percent from 2015 to 2017 after what it said was “many years” of low increases that it claimed provided inadequate revenue for pilots and made it difficult for them to recruit and retain new pilots.

The proposed 2018 increase would add an estimated $1.162 million to costs for the approximately 215 oceangoing ships that transit the Great Lakes during an average year, the Coast Guard said when it announced its proposed rate levels.

Controversy over pilotage rates landed in court last year after industry groups challenged the Coast Guard's 2016 rate schedule. A US federal judge upheld the rates but said the Coast Guard appeared to have been “arbitrary and capricious” in its methodology for setting them.

The court ruling on the 2016 rate levels came after the Coast Guard already had implemented a 2017 rate schedule that increased rates by 17 percent from the previous year.

2017 pay schedule has new weighting factor

The 2017 schedule included a new “weighting” factor that reflected different sizes of ships but like the 2016 schedule set pilots’ target pay 10 percent above that of Canadian pilots who perform similar work but receive government-paid benefits that private-sector US pilots do not enjoy.

The Coast Guard sets rates annually for the three pilots’ associations whose members work on different sections of the Great Lakes. Canadian pilots, who also guide international ships, are regulated by their country’s federal government.

In its proposed 2018 schedule, the Coast Guard said it responded to last November’s court ruling by reverting to a previously used benchmark — compensation of US-flag Great Lakes ship captains represented by the American Maritime Officers (AMO) union.

It said the AMO pay scales are outdated and do not reflect overtime pay that AMO captains receive, and that a fairer benchmark would be that of pilots’ organizations on other coasts, where annual target compensation often exceeds $450,000.

A benchmark based on other pilots’ pay scales “would result in target compensation of about $350,000 rather than the $319,000 in the proposed rule,” the three US Great Lakes pilotage associations said in comments to the Coast Guard. “The pilots cannot be sure why the (Coast Guard) refuses to consider a US pilotage benchmark, but suspect it might be because it would prefer to set a lower number to minimize criticism from litigious industry groups.”

The American Great Lakes Ports Association, the Shipping Federation of Canada, and the US Great Lakes Shipping Association told the Coast Guard they support use of the AMO benchmark and the weighting factor, but that “chronic shortcomings” in Coast Guard rate-making has provided pilot associations with excess revenue.

They said the Coast Guard “tends to accept uncritically complaints from pilot sources that pilots working approximately 200 days per year need average annual compensation in excess of US$320,000 to entice them into the profession or to prevent them from prematurely retiring or seeking alternative employment.”

The industry associations also said the Coast Guard’s rate proposal gave short shrift to a US Coast Guard-commissioned study by Martin & Associates that said hefty pilotage increases could drive cargo to other coasts. Pilots’ groups have criticized the study as “biased and flawed.”

Contact Joseph Bonney at joseph.bonney@ihsmarkit.com and follow him on Twitter: @josephbonney.