By Brian Dunn

Last year was a busy and productive one for the Shipping Federation of Canada on a variety of fronts and Federation President Michael Broad expects more of the same in 2017. “From pilotage to marine infrastructure to trade to the environment, there are many issues which the international shipping industry was consulted on this past year and our involvement in these subjects will continue to form a key part of our agenda in 2017 and beyond.”

According to Mr. Broad, one of the Federation’s major initiatives during the year was the development of a brief on the government’s long-term vision for the transportation sector, entitled “Transportation 2030 – A Strategic Plan for the Future of Transportation in Canada.”

Among the brief’s key recommendations is its call for a government-led review of the pilotage system in Canada and the Federation is pleased to see that such a review will indeed be part of the recently-announced Oceans Protection Plan. “Pilotage continues to be a major expense for our members,” said Mr. Broad, “and we believe there is room for innovation and technology to provide for a more efficient system. Last year, our members objected to increases in pilotage services through the Canadian Transportation Agency, however withdrew the objection after the authority agreed to reduce some of their cost increases.”

Federation members also objected to increases imposed by the United States Coast Guard (USCG) for pilotage services in the U.S. Great Lakes. “In 2016, the U.S. tariff increased by over 50 per cent and since the Coast Guard dismissed our objections, we, along with our members and other U.S. based trade associations turned to the Courts to mitigate the damages caused by such a large increase in costs. Furthermore, USCG has proposed additional increases of 14 per cent for 2017, ensuring that employing an American pilot in the Great Lakes will cost substantially more than a Canadian pilot for the same work. All of these increases mean higher costs for North American exporters.”

The Federation also used the brief as an opportunity to reiterate its longstanding call for the government to adopt a concrete plan for renewing the Canadian Coast Guard’s fleet of medium and heavy icebreakers and that it renew the multi-year agreement between Transport Canada and The St. Lawrence Seaway Management Corporation, which sets out the guidelines for capital expenditures and maintenance costs.

Another key recommendation urges Canadian Transportation Agency to reduce the impact of marine user fees by strengthening the mechanism for reviewing user fees established by Canada Port Authorities under the Canada Marine Act “by establishing new grounds for appealing such fees.”

A further issue that remains high on the Federation’s agenda is the push for targeted changes to Canada’s coasting trade regime that would allow ocean carriers to reposition their empty containers between Canadian ports on board their own (or a consortium partner’s) vessels on a non-revenue basis. Although the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union provides some liberalization of this activity, its framework is restricted to ships owned by EU enterprises. Therefore, the Federation is also encouraging the government to consider the repositioning issue in a broader context, like through the introduction of an amendment to the Coasting Trade Act that would allow all international marine carriers to reposition their empty containers, regardless of their nationality. “This is allowed in the U.S. and other countries and we feel it is important for our members to be able to do the same. Right now, ocean carriers reposition their empties via truck or rail, or more commonly, by exporting them from one Canadian port to another. Liberalizing this activity would render Canadian trade routes more logistically efficient and competitive, while also providing Canadian importers and exporters with additional opportunities by lowering the costs of using the trade route and offering additional export capacity at the Canadian ports where empty containers are being repositioned at a lower cost than under the current regime.”

On the environmental front, the industry will be monitoring the implementation of the Ballast Water Management Convention, which will enter into force on September 8, 2017. “We’re seeing some movement with USCG starting to approve ballast water treatment systems (BWTS). Since December, USCG has issued type approvals for three BWTS and this will hopefully create momentum for getting more treatment systems that will be recognized for operation in the U.S.,” explained Sonia Simard, the Federation’s Director of Legislative and Environmental Affairs. She came on board about a year ago, one of three new hires, along with Chad Allen, Director of Operations and Scott Galloway, Director of Strategic Initiatives in the Federation’s Vancouver office.

“On the international side, we’re monitoring a proposal that was made by some delegations at the last meeting of IMO’s Marine Environmental Protection Committee (MEPC) to modify the compliance dates for installation of BWTS,” said Ms. Simard. “This proposal will be discussed again at the next MEPC meeting in July. In the meantime, we’re still faced with challenges regarding the availability of treatment systems in the U.S. and the type of systems that will be approved under revised IMO G8 guidelines. What it means for shipowners is that hopefully at one point soon, there will be a greater prospect of having a sufficient number of BWTS that will satisfy both IMO-approved revised G8 guidelines and U.S. requirements to be able to operate ships in North America and abroad. MEPC is also discussing a phase-in period during the first few years of implementation of the Convention in order to gather data on how requirements under the Convention are being met, and evidence to support amendments, if needed. As part of this ‘experience building phase,’ there has been some discussions on adopting a limited non-penalization approach in the event of occasional exceedance of the discharge standards, so long as there is a system onboard that has been operated and maintained diligently.”

“The details of this experience-building phase are still being worked out and will be further discussed at MEPC’s next meeting in July. On the Canadian side, it’s possible that Transport Canada will not have completed its revision of Canada’s BW regulations before the Convention comes into force this fall. However, whatever approach IMO comes up with when it comes to an experience building phase approach and limited non-penalization, we expect that it will be adopted in Canada, “said Ms. Simard.

In terms of sulphur emissions, IMO has finalized the date of 2020 for the implementation of the 0.5 per cent global sulphur cap for sulphur content in fuel, down from the current 3.5 per cent. However, vessels coming to designated coastal areas of Canada and the United States under the North American Emission Control Area (North American ECA) are already required to burn fuel with a lower sulphur content and this regime will continue to apply. “What that means is that when you’re coming to Canada, you have to burn fuel that has no more than 0.1 per cent sulphur content. There also have been representations by some interests to extend the North American ECA requirements to the Arctic, because right now, it doesn’t apply to the Canadian Arctic,” Ms. Simard explained.

With respect to the Federation’s agenda for 2017, many of the year’s initiatives will be a continuation of projects from 2017. However, a new file this year concerns the government’s Oceans Protection Plan introduced in November.

`We’re looking for the government to come up with concrete steps to fulfill some of the commitments with respect to marine safety. We think it should be a process of continuous improvement,” said Mr. Broad.

One of Prime Minister Trudeau’s mandates to Transport Minister Marc Garneau is to apply a moratorium on tanker traffic on the North Coast of B.C. which goes against international law, according to Mr. Broad. As a result, Ottawa will attempt to enact legislation that allows it to establish a moratorium acceptable to the international shipping community.

“One of the good things coming from government is that it would like to come out with more data on marine transportation, which we support. Having a centralized set of accurate and comprehensive data on marine transportation is crucial to working towards a common understanding between the marine industry, the government and the public of the levels of risk associated with commercial navigation in Canadian waters.”

“The Federation continues to try and control shipping costs, because everybody seems to think ships are ATM’s. Government mandated fees continue to rise (by an average of more than five per cent per year over the last fifteen years), yet the shipping business has been very difficult since the credit crisis in 2008.”

There are some positive signs the industry may have bottomed out, suggested Mr. Broad. In some areas, the situation is better than it has been in some time and freight rates have “firmed.” However, excess capacity continues to be problematic everywhere and until demand meets capacity, the industry will continue to struggle.

The industry underwent a similar difficult period in the late 1980s and early 1990s, but this time around there are differences. “For instance, in the container industry back then, you had several smaller shipping companies that had financial difficulties and went out of business. Today, you have fewer but larger companies (like Hanjin) that went out of business, so I guess scale would be the major difference. And back then, interest rates were higher and you didn’t have the same credit facilities that you have today.

“It’s a bit like the airline business and in fact we have seen similar developments in both industries with a move towards consolidation to address excess capacity. You don’t get paid for an empty container slot or cargohold in shipping, just like an empty airline seat.”