BY ANNE LEGARS
The marine provisions included in the Comprehensive Economic Trade Agreement (CETA) between Canada and the European Union have generated a great deal of noise in Canada. Of particular interest are those provisions that will introduce more flexibility and competitive options into the all-important logistics chain by liberalizing the repositioning of empty containers between Canadian ports by foreign flag ships on a non-revenue basis. This is a legislative change that has been ripe for years, and which should be implemented as soon as possible. However, the upcoming federal election makes it highly unlikely that any such legislation will be introduced until the next government has been elected and is up and running.
Competitiveness of exports and repositioning of empties
There is abundant literature on the costs of repositioning ocean containers and the need for containerized export cargoes to have access to empty ocean containers so they can be used for exporting cargo overseas. The availability of the right type of containers, as well as the need to provide such containers to the exporter at a reasonable cost, are instrumental to the feasibility of any given containerized export project and to the competitiveness of the cargo being exported.
Current prohibition for foreign flag vessel to reposition their empty containers between Canadian ports
In most cases, a shipping company’s least expensive option for repositioning its empty containers between Canadian ports for export purposes would be to use its own ship. However, the existing Coasting Trade Act has been construed as prohibiting the repositioning of empty containers between Canadian ports by foreign flag ships, even when such containers are carried on a non-revenue basis and/or when they belong to the marine carrier. As a result, the international ocean carrier would need to be granted a coasting trade licence to reposition its empties. Unfortunately, such a licence has never been granted, despite the fact that no domestic marine carrier has been able to deliver the service at a price that would be more competitive than the other available options (which include repositioning by land modes, both truck and rail, and the import of empties from either the U.S. or overseas). It is worth noting that across the border, the Jones Act allows for the repositioning of empty containers between U.S. ports by foreign flagged ships, and that this is a factor that contributes to the competitiveness of U.S. gateways.
A legislative change that has been ripe for years
Discussions about the benefits of liberalizing the repositioning of empty containers have been ongoing for quite some time. Several years ago, Canadian shipowners even agreed with a Shipping Federation proposal to carve out the repositioning of empty containers between Canadian ports by foreign flag ships on a non-revenue basis from the definition of ‘’coasting trade’’ provided in the Coasting Trade Act. However, rather than amending the Coasting Trade Act accordingly, Canada decided to bring the issue to the CETA negotiating table, where it became part of the negotiation package (i.e. it allowed Canada to gain other trade benefits in exchange).
The issue of the repositioning of empty containers between Canadian ports has been alive for years, especially in the Port of Halifax where there is a continuous need to supply refrigerated containers for frozen and fresh seafood exports. Let’s hope that once the fall federal election has passed, the government recognizes the importance of this issue to Canada’s trade competitiveness and moves quickly to amend the Coasting Trade Act by explicitly excluding the repositioning of empty containers between Canadian ports from the definition of coasting trade.