A recent proposal by the U.S. Coast Guard to raise rates by 58% for Great Lakes pilotage services on April 1, coinciding with the kick-off of the 2016 St. Lawrence Seaway season, has provoked an unprecedented outcry from a wide range of stakeholders. Those on the warpath include Canadian and U.S. marine industry associations, ports, terminal operators, shipping lines, grain shippers and such steel giants as Tata Steel.
The biggest potential impact will be on foreign-flag operators who cannot obtain exemptions from compulsory pilotage as can some sufficiently qualified masters of domestic shipping companies. Critics have expressed strong concern that any drastic rate increase will generally erode the competitiveness of the North American waterway already hurt by a nearly 10% decline in traffic to 36 million tonnes in 2015.
Dozens of comments from interested parties on the September USCG Notice of Proposed Rulemaking (NPRM) were sent to the U.S. Department of Transportation by late December. In the coming weeks, the USCG will review the comments, and it remains to be seen if adjustments could be on the horizon.
In this regard, Todd Haviland, Director of Great Lakes Pilotage, offered this comment: “USCG reviews each comment we receive in order to determine if we need to make adjustments to the NPRM. We have made changes to proposals in the past.”
In the meantime, Canada’s Great Lakes Pilotage Authority has indicated it will increase its tariffs by 2.5% this year following a 0.5% increase in 2015.
“The NPRM, as drafted, is arbitrary, capricious, unsupported by substantial evidence, and otherwise not in accordance with law,” bluntly states a joint commentary submitted by the American Great Lakes Ports Association (AGLPA), the Canadian Shipowners Association, Canfornav Ltd., Fednav International Ltd., Polish Steamship Company, Shipping Federation of Canada, Spliethoff Transport, the United States Great Lakes Shipping Association and Wagenborg Shipping.
The above stakeholders “respectively suggest that USGC withdraw this NPRM, even if to do so requires a minimum one-year extension of the existing methodology.”
“We urgently seek the status quo,” stated Steve Fisher, executive director of the AGLPA, in an interview. “The regulation of pilotage rates is a business the USCG should not be in.”
Under federal law, a pilot is required for all ocean-going vessels operating on the Great Lakes. In the United States, pilotage services are provided by three independent organizations regulated by the USCG. Under this scheme, the agency annually sets rates and charges for pilotage services.
The NPRM proposes a benchmark of US$312,000 for individual target compensation and seeks to render the Great Lakes pilotage compensation levels more comparable notably with Canadian counterparts as well as with pilots in other regions of the United States.
In their joint commentary, the stakeholders challenge the option of using Canadian pilot compensation as a benchmark. “Canada has its own unique social programs, tax regime, and currency. Further, U.S. pilots are self-employed while Canadian pilots are employed by a government corporation.”
They urge the USCG to retain the current benchmark – the compensation of first mates on U.S.-flag Great Lakes vessels.
Between 2006 and 2015, the USCG increased pilotage rates a total of 114% on the Great Lakes while at the same time shrinking the total workforce.
“The record clearly illustrates that Great Lakes pilotage has become a runaway cost of users of the Great Lakes-St. Lawrence Seaway navigation system,” said Madeleine Paquin, president and CEO of Logistec Corporation. “Today, the cost of pilotage exceeds the operating costs of the vessel itself during a Great Lakes transit.”
In another submission, former Great Lakes pilot Ian Hurt of Chicago said he was “excited” to learn of new pilot compensation plans – but quickly withdrew his support when learning it would result in an $18,500 increase in pilotage costs per vessel call into the Great Lakes.
Under present rate levels, the larger ships completing a 2,200 km transit from Montreal to Duluth or Thunder Bay and using up to 12 pilots in short stints during the journey pay estimated total pilotage charges exceeding C$41,000.