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Aug.21, 2017

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GOVERNMENT WATCH INTERNATIONAL | WASHINGTON | CUSTOMS | SECURITY | REGULATION 36 THE JOURNAL OF COMMERCE www.joc.com AUGUST 21.2017 THE US FEDERAL Maritime Commission has decided not to continue the updates made to a report on US cargo diversions through Canadian and Mexican ports, drawing rebuke from the study's cham - pion, former FMC Commissioner Richard Lidinsky, who warns the issue will be part of NAFTA negotiations. The FMC said that although the agency created and released the report — "Study of US Inland Containerized Cargo Moving Through Canadian and Mexican Seaports" — in July 2012, it has "never initiated, spon- sored, or approved annual updates to the original study." The study found that the Harbor Main- tenance Tax — a 12.5 cent tax per $100 of valued imports — was a disincentive to move container through US ports, as the tax added roughly $109 per FEU. The loss of HMT revenue through diversions results in less money for US ports to spend on the main- tenance of jetties and dredging. Following the release of the study in 2012, Lidinsky issued annual updates, with his most recent in 2016, concluding that US port congestion helped drive more diver- sions through the ports such as Vancouver and Prince Rupert, British Columbia. "All sectors of the US foreign waterborne trade have come to rely on the annual update, and to discontinue it now is a disservice to con- gressional interests, impacted port authorities, shippers, and carriers using or contemplat- ing use of these gateways — but above all the White House, which will shortly begin the renegotiation of (the North American Free Trade Agreement), with this practice ranking high on their review list," Lidinsky said. Citing information from a now-retired, long-time FMC staffer, Lidinsky said the FMC, when led by an acting chairman, now Michael Khouri, would normally vote on whether or not to update the study. How- ever, there is no need for the commission to vote on continuing the update because there isn't an established reporting process for the study, FMC spokesman John DeCrosta said. Washington state's two senators, Patty Murray and Maria Cantwell, both Demo- crats, asked Lidinsky in August 2011 to study potential diversions after hearing their state's ports might be losing business to Prince Rupert. FMC commissioners Rebecca Dye and Michael Khouri voted against releasing the report, saying the report's methodology was flawed and its conclusions were half-baked. The "study of US inland containerized cargo moving through Canadian and Mex- ican seaports was one of kind," said FMC Commissioner William Doyle, who helped with the research of the updates. "It served as an in-depth resource on cargo diversion and a reference point for ports, carriers, and shippers trying to understand the movement of cargo to and from North America." Intermodal rail analysts and shippers say the competitive rates offered by the Canadian railroads, particularly Canadian National Railway's services connecting to Prince Rupert, and, in some cases, better reliability, was the real driver of US cargo diversions. CN and Canadian Pacific Rail - way can undercut the US railroads by as much as $600 per container to Chicago, according to a study for Vancouver that was performed by Ocean Shipping consultants. Thanks at least in part to the pricing strat- egies of the Canadian railroads, Vancouver has increased its share of US-Canadian Pacific Northwest cargo volume to 48.7 percent through the first five months of 2017, up from 45 percent in 2012, while Prince Rupert has increased its market share to 10.9 percent from 8.3 percent, according to a Journal of Com- merce analysis of port statistics. The combined market shares of Seattle and Tacoma fell from 43.8 percent to 40.3 percent in the same period. "A s por ts in Ca nada a nd Mexico continue to expand and improve, it is critical that we follow through on FMC's recommendations and invest in our port infrastructure to keep ports competitive," Cantwell said in a statement. Murray wasn't available for comment. JOC JOC Staff WINDING DOWN FMC passes on making an annual update to US cargo diversion report Songquan Deng / Shutterstock.com

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