As largely anticipated, a legal challenge has been mounted by a broad coalition of U.S. Great Lakes ports, foreign-flag carriers and maritime trade associations in Canada and the United States against the U.S. Coast Guard’s recent decision to dramatically increase Great Lakes. pilotage rates.
Amidst strong concern over the negative impact on the competitiveness of the Great Lakes/St. Lawrence Seaway system, the USGC has spiked pilotage rates on the Great Lakes by 58% over two years – prompting the coalition to file a suit on May 31 in Washington at the U.S. District Court for the District of Columbia. It’s an unprecedented action by maritime stakeholders in the North American waterway.
Much maritime trade flows to Great Lakes ports via the St. Lawrence Seaway which last year saw its cargo volume plunge by 10% to 36 million metric tons due mainly to a global decline in commodity shipments.
The plaintiffs urged the Court to remand the rulemaking (first proposed last September) back to the Coast Guard for revision, to declare the new rates “unlawful” and to reduce the 2016 Great Lakes pilotage rates “by at least 20.6 percent for the duration of the current navigation season.”
A 24% increase took effect in early April, shortly after the opening of a new commercial shipping season on the waterway following the annual winter closing. The remaining 34% is to be implemented in 2017.
By comparison. Canada’s Great Lakes Pilotage Authority earlier this year increased its tariffs by just 2.5% for 2016.
In filing the complaint, the American Great Lakes Ports Association, the Shipping Federation of Canada, and the U.S. Great Lakes Shipping Association were joined by Montreal-based Fednav International Ltd, Canfornav Inc., Polish Steamship Company, Spliethoff Transport, Brochart Shipping, and Wagenborg Shipping.
The coalition affirmed that the U.S. Coast Guard violated the Administrative Procedures Act “by making arbitrary and unsubstantiated decisions” during the conception of the new pilotage rates.
“Pilotage is currently one of the single largest costs to vessel operators engaged in international trade on the Great Lakes. On average, the daily cost of a pilot now exceeds the cost of chartering the entire cargo ship and its crew,” said Steve Fisher, Executive Director of the American Great Lakes Ports Association.
Will Friedman, President of the Cleveland-Cuyahoga County Port Authority explained, “Great Lakes pilotage costs have gone up 114 percent over the last ten years. The Coast Guard wants to increase them another 58 percent by 2017. These increases are unsustainable and will ultimately erode the viability of international trade through Great Lakes ports.”
Marine pilots are navigators familiar with local conditions. Under federal law, all ocean-going vessels operating on the Great Lakes Seaway System must hire local pilots to assist with navigation. The U.S. Coast Guard regulates all aspects of Great Lakes pilotage and has granted three private companies a monopoly to provide these services. Rates are set annually by the Coast Guard through a federal rulemaking.
In its 2016 rate-setting, the Coast Guard decided to expand the number of pilots from 34 to 54 (to arguably avert ship delays in peak periods), increase pilot compensation to US$326,000/year, and ensure that pilots have 10 days off each month during the nine-month shipping season.
The U.S. Coast Guard has argued that significant additional revenues are required to offset problems in recruiting and retaining pilots in the Great Lakes.