short sea shipping the need for regional co operation august 12 2007 l.
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Short Sea Shipping : The Need for Regional Co-operation August 12, 2007 Agenda Is short sea needed? I-95 congestion is one driver… Some relevant findings from two Dalhousie studies. Focus in on the policy findings of the first of these.

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Presentation Transcript
  • Is short sea needed? I-95 congestion is one driver…
  • Some relevant findings from two Dalhousie studies.
  • Focus in on the policy findings of the first of these.
  • Draw conclusions about the key public policy issues to be resolved to make short sea traffic share grow. (Short sea is a key mode in the region but it could grow more.)
  • Open for questions about what regional co-operation could do and what is possible.
why short sea perceived to alleviate traffic congestion canada to us truck tons 2001
Why Short Sea? Perceived to Alleviate Traffic Congestion (Canada to US Truck Tons, 2001)

Source: FWHA Freight Analysis Framework

North-South Short Sea traffic would bypass USEC traffic going inland from Boston (or New York for example) and remove trucks from the congested I-95!

two dalhousie studies
Two Dalhousie Studies

Objectives for first study:

  • Advance the Canadian Government’s appreciation of the potential for SSS activities on the East Coast of Canada and the US (examine current and projected freight flows).
  • Identify the challenges that a modally integrated EC SSS operation would need to address to compete effectively with all-truck routes.
  • Examine the policies and regulations that facilitate or frustrate the potential for development of EC SSS services.


  • Used secondary data to evaluate the existing demand from Atlantic Canada to along the US East coast.
  • Surveyed/interviewed cargo interests to examine potential for SSS development in light of modal choice criteria and benefits of options (24 key informants)
  • Undertook a preliminary business case analysis for a new service
study 2 six research questions about customer choice
Study 2: Six Research Questions (about customer choice)

1. How do companies allocate their transportation choices between options based on the relative tradeoff between the price of the service and transit time?

2. All else being equal, how does the perceived reliability of the service influence this allocation?

3. All else being equal, how does the frequency of departures of the service influence this allocation?

4. How does a firm’s perception of Integrated Short Sea Shipping as an alternative to Trucking influence its allocation of transportation choices between options?

5. What situational variables would encourage a switch from Trucking to Integrated Short Sea Shipping?

6. What existing buyer requirements influence the allocation between mode options?

some relevant user findings from study 1
Some Relevant User Findingsfrom Study 1
  • More than twice as many companies preferred a single carriage document than multiple contracts. Conclusion: a single contract arrangement has a greater chance of succeeding, all else equal.
  • This encourages us to identify the interest of trucking companies and potential short sea operators in a retailing of an integrated transport package over one that is not integrated.
  • Service every two weeks unacceptable. More frequent departures critical.
  • Scheduling requirements indicate that 25% of the shippers are unlikely to switch to short sea shipping unless trucking service deteriorates drastically. (New York was mentioned as a particularly annoying chokepoint.)
  • Incentive pricing for an equivalent (to trucking) short sea service could induce trial and premium pricing or a better transit time service could also be effective in attracting customers.
relevant study 2 findings situational variables fuel costs and congestion
Relevant Study 2 Findings: Situational Variables (Fuel Costs and Congestion)
  • Confirmed an “ecotax” on fuel costs would encourage switching to Integrated Short Sea Shipping.
  • Trucking costs would have to increase 29.4% before cargo owners would consider ISSS compared to an increase of 44.9% in transit time required.
  • Respondents place a much greater emphasis on price when choosing a mode of transportation as their tolerance for price increases is much lower than that for transit time increases.
study 1 public policy issues
Study 1: Public Policy Issues
  • Arise from…
  • Differences related to risk, insurance and liability between modes
  • Image and promotion challenges
  • Technological challenges
  • Port and infrastructure efficiency challenges
  • Regulatory and administrative differences
  • Customs and security approaches
  • Challenges related to the availability of information, data, statistics, etc.
  • Differences in modal treatment by governments

I’ll address six of these issuesand then talk solutions…

issue modal differences example us advanced electronic notification
Issue: Modal Differences(example: US Advanced Electronic Notification)
  • LTL truckers returning from Canada would need to contact every shipper for permission to use the ISSS marine option
  • Truck will always be preferred. Southbound needs northbound rules.
issue us harbor maintenance tax
Issue: US Harbor Maintenance Tax
  • US HMT applies to marine cargo arriving from NAFTA partners as well as those overseas.
  • Doesn’t apply to passenger vessels so operator can’t really mix passenger and freight (if this were desirable)
  • The tax is not related to the type of vessel (applies to shallow draft vessels as well as deep-draft)
  • Penalizes cargo owners who choose SSS over truck As the tax is paid by the cargo owner on the value of the cargo ($125 per $100k of cargo), it discourages seafood producers with high-end fresh product (AC-USEC); autoparts too.
  • Result: SSS-eligible cargoes more likely to use truck instead of SSS option; US transhipment to feeder not likely to happen
current hmt initiatives question which one to support
Current HMT Initiatives(Question: which one to support?)
  • Great Lakes Short Sea Shipping Enhancement Act of 2007[H.R.981.IH] (12 Feb 2007)Regional effort: Great Lakes only; not size-based (depth ignored); excludes bulk.
  • Short Sea Shipping Promotion Act of 2007[H.R.1499.IH] (13 March 2007) Regional effort: Great Lakes only; not size-based (depth ignored); lo-lo or ro-ro only so does not include all cargo.
  • Blue Water Highway Act of 2007[H.R.1701.IH] (26 March 2007)Mainland-to-mainland (domestic only) by coastal or river (no blue water); not size-based (depth ignored); lo-lo or ro-ro only so does not include all cargo.
issue environmental damage road congestion
Issue: Environmental Damage & Road Congestion
  • Issue: Shippers are not well-informed about the environmental issues associated with each mode of transport. Shippers were unable to evaluate environmental factors.
  • Issue: Congestion findings (Study 1)
    • Incidence of road congestion: Majority of companies reported problems.
    • Severity of road congestion: Almost one-third of companies thought it is serious enough to encourage them to consider switching to short sea shipping.
    • Shippers will not switch unless the service is commercially competitive.
issue customs clearance
Issue: Customs Clearance
  • Issue: Advance Notification Rules discourage short sea development (a problem southbound more so than northbound)
  • Issue: Shippers perceive customs clearance to be more difficult for marine shipping than for trucking.
  • Issue: New Canadian customs facilities are cost recovered while existing ones are grandfathered. This discourages new route development, especially new short sea services.
  • Issue: Extended hours at existing facilities are cost recovered. This discourages efforts to improve asset utilization at borders; no incentive to off-peak capacity development.
issue modal switching
Issue: Modal Switching
  • Fact: Cargo owners won’t trust a new service until proven.
  • Fact: Carriers face severe traffic imbalances in the Northeast.
  • Fact: Shuttle services have failed. Triangulation is available to trucking but difficult in the marine mode (Jones Act, the Coasting Trade Act). Therefore, Eimskip’s new service will have asset utilization issues.
  • Fact: You cannot persuade buyers to switch from a familiar and proven choice of mode to an unfamiliar and more complex (therefore inherently more risky) alternative without some form of substantive encouragement.
  • Conclusion: Both congestion and road fuel taxes need to be a lot higher before switching will occur, particularly given HMT.
issue timing

Commercial Needs of Users and Providers


Promotion assistance (to stimulate a modal shift to short sea). Is a Northeast solution possible? (Many elements are federally controlled.)

Issue: Timing

Growth of Short Sea

(future desire of government)

six simple solutions for sss
Six Simple Solutions for SSS
  • HMT: Removed from all shipping within NAFTA (not just US domestic) for vessels under a certain size (to encourage growth of short sea)
  • Advance Notification and Border Uncertainty: Improvements to the rules for shipments originating in NAFTA ports. This requires political will to promote change.
  • Customs Clearance: Changes to Canadian Cost Recovery principles as part of a short sea promotion program (political).
  • Modal Switching: Planned incentive program for short sea; an equivalent to Europe’s “Marco Polo” program? (political)
  • Environmental Damage and Congestion: Short Sea is the solution (The impact of state road taxes is not known.)
  • Timing: Make plans now. There is significant clout in the Northeast in both countries. A Northeast pilot project could be the means…
thank you questions m brooks@dal ca
Thank You! Questions?

Acknowledgement: Co-funding from Transport Canada’s Strategic Highway Infrastructure Program, the Halifax Port Authority and Centre for International Business Studies, Dalhousie University made Study 1 possible.