Paying for port security

Paying for port security

Post-9/11 discussion of seaport security has centered on three recurring questions: What must be done? Who's in charge? And who pays?

The first two questions have been at least partially addressed. The short answer to the third, of course, is that everyone will pay for tighter security of ports and other parts of the supply chain.

That's little comfort to a port director struggling to finance millions of dollars in security costs while also paying for cranes, dredging, computers and more - and doing it all without driving customers away.

The American Association of Port Authorities has repeatedly cited Coast Guard estimates that it will cost $5.4 billion over the next decade to secure ports against terrorism, while federal grants so far total only $565 million.

And if a recent report by the Department of Homeland Security's inspector general office is any guide, even these grants haven't always been allocated to best advantage. The report faulted the DHS for distributing its initial grants as widely as possible instead of concentrating them where they are needed most.

Chris Koch, president of the World Shipping Council, did not comment on the inspector general's report when he spoke at the AAPA's spring conference. But his wide-ranging speech touched on port security, and he said a couple of things that needed to be said. Koch reminded AAPA members that the Coast Guard's cost estimates "were estimates of what the industry was going to have to spend to comply with the new security rules, not the amount of money the government needed to provide the industry." And he said that in competition for budget funds, ports will be more successful with proposals "that identify specific, unique needs or problems that justify additional targeted federal assistance."

Ports have a right to worry about how they'll pay increased security costs. Few port authorities are profitable, and many ports' anticipated revenue streams are tied to long-term leases that may not allow increased costs to be passed to users. Competition also discourages the imposition of user costs.

But like it or not, ports will have to find ways to finance most of the burden of security, and shippers and carriers can expect to share in the cost. A few ports have independently established fees, and the Gulf Seaport Terminals Conference, one of several port groups that enjoy antitrust immunity under the shipping act, agreed last fall to set minimum port-security fees.

Look for efforts such as this to become more common. Ports would like for the federal government to cover the lion's share of their security costs, but it's not going to happen. They're going to have to do most of it themselves.

Joseph Bonney is editor of The Journal of Commerce. He can be reached at (973) 848-7139, or via e-mail at jbonney@joc.com.