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FMC Official Updates Threat of Containerized Cargo Diversion from West Coast

Tuesday, August 13, 2013
Sandler, Travis & Rosenberg Trade Report

Federal Maritime Commissioner Richard Lidinsky Jr. issued Aug. 9 a statement suggesting that reasons for concern about the diversion of inbound containerized cargo from the U.S. West Coast to ports in Mexico and Canada are waning, at least for now. The FMC reported on these concerns in a controversial July 2012 study that responded to requests from members of Congress to evaluate the extent to which various factors, including the Harbor Maintenance Tax, may incentivize such diversion.

Policymakers have worried in particular about the emergence of the port of Prince Rupert, which lies 450 miles north of the U.S. border in the Canadian province of British Columbia. An increasing number of U.S.-bound imports from Asia are transiting through this location rather than U.S. ports such as Los Angeles, San Francisco and Seattle, prompting concerns about fewer jobs and lower revenues.

Lidinsky acknowledges that Prince Rupert has been successful, using its favorable geographic location and “naturally deep, ice-free harbor” to attract numerous ocean carrier service strings originating in northeast Asia. As a result, he adds, this port “now constitutes the largest single source of American cargo diversion,” with the number of twenty-foot equivalent units entering the U.S. via Prince Rupert increasing from 116,107 in 2010 to an estimated 190,000 in 2012.

On the other hand, that number is projected to rise to only 197,400 for 2013, perhaps signaling that Prince Rupert’s annual capacity growth is beginning to flatten. This lower growth could be attributed to several factors, Lidinsky speculates, including a slow-down of the global economy, the port nearing its maximum design capacity, and operational decisions by ocean carriers to utilize U.S. West Coast ports.

Concerns have been raised about other diversion threats as well, including the existing port of Lázaro Cárdenas in southwestern Mexico, which has been expanding in hopes of attracting container cargo that could travel by rail to distribution points in the U.S. Midwest; Punta Colonet, a container port planned for Mexico’s Baja Peninsula that could become one of the largest in the world; and the port of Melford, which is close to the current port of Halifax in Nova Scotia. However, Lidinsky suggests that those threats have lessened somewhat due to the “general economic downturn and cargo volume flattening experienced as a general trend over the last several years.”

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