By Brian Dunn
This year marks the 115th anniversary of the Shipping Federation of Canada and as the years pass, so do its priorities. While the Federation is keeping an eye on Canada’s free trade agreement (CETA) with the European Union which is starting to pay dividends, another key focus is on the environmental front, according to Federation President Michael Broad. There are also the IMO ballast water regulations with requirements to install BWT systems coming into effect between 2019-2024, the global sulphur cap as of 2020, the GHG emission reduction strategy and talk about total decarbonization. “On a global level, it’s an ambitious agenda which will have a huge impact on us and here in Canada, we also have the whale protection agenda on both the east coast and west coast.”
Another important file is the Port Modernization Review, a discussion paper published by Transport Canada, the first comprehensive review of the Canadian port system since the Canada Maritime Act was passed in 1998. The review will look at how operations have changed since 1998 in five key areas, namely trends and technologies affecting ports and supply chains; environmental sustainability of port operations and port development; safety and security challenges facing ports; incorporating Indigenous and community concerns into port planning and adequacy of current port governance models.
The Federation has submitted a brief about its concerns such as infrastructure spending and ensuring port funding comes from proper parties. “Ships shouldn’t have to pay for bicycle paths or pedestrian overpasses,” said Mr. Broad. “Some ports have not focused strictly on the cargo interests but have looked for ships to pay for other things. We’re also looking at the importance of fluidity to keep cargo moving.”
Port fees are another area of concern. “There is no formal mechanism for appealing fees so that’s something we’re looking at, because we think it could be useful for our members. In the past, some ports have increased rates with impunity.”
Since ports are an important part of the supply chain, the Federation continues to monitor their costs along with pilotage costs and other costs in the supply chain, because they tend to go up if unchecked, noted Mr. Broad, who added that port and pilotage fees have risen “well over” five per cent a year for the last ten years, a relatively expensive proposition compared to U.S. ports. The Federation is keenly monitoring the Pilotage Act Review which contains 39 recommendations in a report on the themes of governance, labour and safety. Nineteen of the federation’s 22 recommendations were included in the report released on May 22. It is expected a bill will be introduced in the House of Commons to amend the Pilotage Act based on their submitted recommendations.
“We hope the Transport minister will include all the recommendations in the report. We consider it an excellent report, but to be really effective, we need all the recommendations to be included.”
The current structure has led to a pilotage system that is unable to control costs or consistently provide users with the level of service they require in a highly competitive marine transportation economy, according to Mr. Broad. “We are in this situation because the Pilotage Act does not provide adequate checks and balances to counteract the effects of the monopoly structure under which the pilotage system operates.” Over the last decade, pilotage tariffs have increased between 23 and 83 per cent across all four pilotage authorities in Canada, he noted. During the same period, pilot compensation has risen between 26-55 per cent.
Still on the subject of pilots, the Federation was successful in convincing the U.S. Coast Guard (USCG) to reduce its 2018 rates by about 30 per cent by going to court to demonstrate that USCG had made a mathematical error in calculating a new increased rate. “Over the last few years, pilotage rates in the U.S. have increased by over 100 per cent. Lately, however, we’ve been able to bring this problem to the attention of senior coast guard personnel who are now starting to look into it.
“In terms of Bill C-49, the Transportation Modernization Act, one of the key elements for the shipping industry is that it allows all foreign flag carriers regardless of ownership, to reposition their empty containers between Canadian ports on a non-revenue basis. This has been an issue the Shipping Federation has been working on for over a decade,” noted Mr. Broad, “and we think it will make the logistics chain more efficient.”
On the environment front, there is a lot of concern about the implementation of the 0.5 per cent global cap for sulphur content in fuel set by IMO, due to the upfront cost of scrubbers to comply and whether alternative fuels will be available. So far, there has been limited investment in scrubbers, but more and more shipping companies have made announcements about investing in scrubbers, said Mr. Broad. As for alternative fuels, there’s LNG, but it would only cover a small amount of the alternative fuel sources, suggested Mr. Broad.
The current federal government environment is all about mitigating the impact of shipping through initiatives like the $1.5 billion Oceans Protection Plan which puts the maritime industry in the unusual position of being in the spotlight and which it capitalizes on where possible, suggested Mr. Broad. “But at the same time, we need shipping to move our world trade, so you want to make sure that system is as efficient and fluid as possible. So, you have those two tensions of increasing trade and environmental protection.”
Because of protectionism in the U.S. and Ottawa’s desire to expand trade beyond NAFTA, it has renamed the Ministry of International Trade the Ministry of International Trade Diversification. And one of the first items on the agenda when parliament resumed in September, was a bill to revise the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a signed trade agreement pending ratification by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. There are also negotiations on a free trade agreement with Argentina, Brazil, Paraguay and Uruguay known as Mercosur. And there’s still talk of a Canada-China free trade agreement, although Chapter 32 of the new USMCA, if ratified, will make it considerably more difficult to enter into a bilateral trade agreement with a “non-market” country such as China.
“If you look at tariffs between China and the U.S, and Europe and the U.S., it is bound to eventually slow down trade and possibly change trade routes. And if trade slows down with the U.S., maybe other countries will look to Canada, but our population is only so big. So hopefully all this will make Canadian exporters look elsewhere and not just to the United States.”