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Great Lakes shipping threatened by proposed navigational aids fees.

Great Lakes shipping threatened by proposed navigational aids fees

Warning are being sounded in Thunderd Bay over a proposed Transport Canada cost-recovery scheme for Coast Guard navigational aids.

Opponents say it will be another blow to the declining fortunes of the port.

Cy Cook, general manager and chief executive officer of the Thunder Bay Harbour Commission, believes the scheme would have a serious effect on the Lakehead and the Great Lakes maritime industry overall.

"We already hav enough inequities in the system that favors the West Coast, without adding another ingredient," adds Thunder Bay Mayor Jack Masters.

If they proceed, the new fees would take effect in early 1991 and would only apply to commercial shipping (vessels exceeding 15 net registered metric tons).

The charges are expected to yield $21 million from vessels carrying international cargo, $3.5 million from ships with domestic cargo and $500,000 from vessels carrying international passengers.


Cook warned that the fees would be self-defeating, considering that the Canadian Great Lakes fleet is already downsizing. "The industry cannot afford to absorb this cost."

Cook fears that the industry will have a "knee-jerk" reaction and just pass the extra costs along to customers.

That may drive some shipping to U.S. ports and may cause a disruption by shifting cargo among Canadian ports, he said.

Cook also fears that the fees could result in a transfer of cargo from marine to surface modes of transportation.


In mid-October Thunder Bay city council passed a resolution strongly opposing the fee proposals.

The council resolution called for an exemption for grain shipments through the Great Lakes/St. Lawrence Seaway system.

The proposed system would create an imbalance between ocean ports and fresh water ports, Masters said. "Right off the top, you have a major inequity."

For example, he noted that shippers using Halifax would pay less in fees than those using Thunder Bay.

The major is also concerned that similar user fees will eventually be placed on such things as ice-breaking.

Masters believes the fees also have to be kept in line with those charged in the United States, particularly on the Mississippi River system which, he noted, is heavily subsidized.

"This throws another element of confusion and cost on the Canadian shipping industry," he said.

The major noted that the city's position on such fees remains unchanged since 1986, when similar proposals were made by the federal government. The previous legislation was not passed after it received opposition from several communities, including Thunder Bay.

The Thunder Bay Economic Development Corporation has produced a very negative report on the latest proposals.

"Many of the proposed new fee increases and cost recoveries would impose substantial burdens on all Seaway users and would, therefore, place the Port of Thunder Bay at a greater economic disadvantage vis-a-vis our competitors on the West Coast and elsewhere," states the report.

"Already, the inequities included in the Western Grain Transportation Act have contributed to substantial declines in grain tonnages handled by our port and have resulted in substantial economic losses to our community."

The report also rejects Transport Canada's suggestion that the policy is "in parallel" with its internal cost-reduction measures, noting that the ministry has had insignificant staff reductions of only 1.3 per cent and a spending increase of about $48 million in its total forecast 1989/90 budget of about $2 billion.

As for the argument that the fees would help federal deficit-reduction efforts, the report concludes: "In our view, the new federal revenues which would be generated, while significant in terms of Seaway user costs, are virtually too small to be relevant in terms of reducing the present federal deficit."

The report states that, at a time when grain shipments are down over 60 per cent from 1987/88 due to the regulation of Thunder Bay to "residual export status" and export sales uncertain, any additional imposed costs will only exacerbate the port's employment problems.


Dan Cogliati, the chief of cost-recovery policy with Transport Canada, says the proposed fees are a balancing act.

In a Telephone interview from Ottawa, Cogliati noted that the fees take into account the cost of the navigational service for ships travelling various distances and the value of the service, depending on cargo.

For international cargo, the distance component would be calculated per nautical maile (NM) travelled in Canadian waters to a maximum of 300 NM in-bound and 300 NM out-bound.

The cargo charges would be .04 cents per ton/NM for bulk, .08 cents per ton/NM for general cargo and .16 cents per ton/NM for containerized cargo.

Cogliati said the distance cap on fees takes into account Thunder Bay and similar inland ports. If the principles of the fees structure had been strictly kept, he noted that the great distance to Thunder Bay would have caused real problems on the Great Lakes.

To ensure that the 300-NM maximum is not exceeded in the case of grain transshipped at ports in Eastern Canada, the charge would not be applied to vessels loading grain at a Canadian port east of Lake Ontario.

Cogliati noted there has been some confusion about charges other than for navigational aids since a July document also outlined possible fees for dredging and icebreaking.

However, only Coast Guard navigational aids are currently targetted for fees, he said. "That's the only policy we've got out on the street."

Cogliati recognized that people are speculating on other fees. "I understand there are anxieties."

If fees are eventually proposed for ice breaking and dredging, there will be full consultation, he said.

Cogliati said Transport Canada wants to hear from the industry on the navigational aids fees, and has been receiving useful comments.

In response to industry requests, Transport Minister Doug Lewis has extended the deadline for consultation to Feb. 1. It had originally been No. 2.

With Transport Canada and the industry looking closely at navigational aids, Cogliati believes "market discipline" will be encouraged, as both sides look for ideas to reduced costs, particularly because the industry will now have to help pay for the service.

"We expect a lot of efficiencies will result."

The fees will assist federal deficit reduction, he said, noting that the department did not want to charge more than what it felt the industry could absorb. "It's a start."


The fees will not apply to commercial fishermen and pleasure boaters because of administrative complexities involving collection and enforcement, which have not yet been resolved.

While others are concerned about the possibility, Cook is hopeful that the charges will eventually be extended to include commercial fishing and pleasure crafts.

"The commercial industry is already paying a significant part of the cost," he argued.

Fishing and pleasure craft often cost Transport Canada more fore such services as search and rescue, Cook noted, adding that their inclusion would be "absolutely" fair.

The fees would also not apply to ferries, tugs, or state or military vessels.


For administrative simplicity and because ton/NM data is not available for domestic shipping, a monthly charge based on vessel net registered tonnage is proposed for domestic shipping.

The charge for cargo and passenger vessels registered in Canada would be 40 cents per net registered ton per month.

Cruise vessels would be subject to a separate charge of $1.25 for each passenger on board a vessel when it enters and leaves Canadian waters.

The charge would not include a distance element because of the administrative complexities which could result from the multiple stops of many cruise vessels.
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Author:Bickford, Paul
Publication:Northern Ontario Business
Date:Dec 1, 1990
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