Koch: Container industry not big enough to fund highways

The U.S. government should not look to the containershipping industry as a major source of income to improve highway infrastructure, said Christopher Koch, president and chief executive officer of the World Shipping Council. Koch "In the debate over how to fund a new federal highway program, the idea of taxing international containerized cargo shipments as a way to help pay for America's highways continues to be raised by some," said Koch, in remarks prepared for delivery today at the annual trade and transportation conference of the Coalition of New England Companies for Trade in Providence, R.I.

But he said, "import and export containerized freight is too small percentage of the freight using the nation's highway system to be a logical revenue source for funding highway construction especially when considering the highway system is generally built for and used mostly by automobiles, and that domestic freight far exceeds cargo in international containers."

Koch noted that only 10 percent of the roughly 20 billion tons of goods that move across the U.S. transportation system each year is international freight. Subtract air cargo, crossborder trade with Canada and Mexico, bulk, breakbulk, and rollonrolloff cargo, and containers make up only a small percentage of all cargo.

According to the Web site www.usatradeonline.gov, last year about 256 million tons of containerized imports and exports moved through U.S. ports last year. In addition, a "substantial share moves to inland points by rail rather than by highways," he said.

Trying to tax this small portion of America's freight commerce as a way to pay for highway construction would also face a number of legal impediments, including such a charge being challenged as unfairly discriminatory, the Constitution's prohibition on taxing exports, the World Trade Organization's restrictions on discriminating against imports, and international container conventions that guarantee tax free admission of containers," he added. "To the extent a tax on containerized shipments would be logical or legally sound, it would be as a nondiscriminatory user fee assessment applied against any cargo shipment using a highway project built on a user fee model."

Turning to other issues, Koch predicted environmental issues such air emissions from ships and ballast water discharges are likely to become as prominent as security issues have been in recent years.

In one sense that is somewhat ironic, because shipping is the most energy efficient way to transport goods, and produces significantly less pollution per ton mile than rail, truck or air transportation," he said.

The World Shipping Council and its carrier members recognize the need to address air pollutants such as nitrogen oxides, sulfur oxides and particulate matter, particularly in urban port areas. They have supported the U.S. government's comprehensive proposal to the International Maritime Organization to set new engine system standards and to establish a new regime for the use of lowsulfur fuel in designated coastal regions, Koch said.

While the cost of complying with such new standards will be significant, this should significantly improve air quality, should provide an effective and predicable international regulatory regime, and will hopefully eliminate a reason for holding up the permit approval process for maritime infrastructure expansion," he said.

Efforts to reduce carbon dioxide emissions are more difficult, he said "There is a lack of clear or specific proposals from governments for actions that should be taken, and the industry is similarly unsure what is to be expected."

On the issue of ballast water discharges, the industry "can support a solution that provides for the installation of treatment technology, even though this may cost billions of dollars," Koch said. "But for this to work, the industry needs a predictable, stable technology standard and regulatory system, so that compliant treatment technology can be installed on a vessel allowing it to call at any port."

He spoke against efforts to have the issue addressed through the permitting process of the Clean Water Act.

The act is "a poor regulatory regime for application to mobile vessel sources that are engaged in interstate and foreign commerce, and which call at different ports that have different water qualities" and because it would allow individual states to set their own standards and permitting processes, "which would only further complicate compliance and enforcement."

Turning to the issue of maritime supply chain security, he said there was "solid logic" to the federal government's strategy of using risk assessment to screen cargo, "more particularly on risk assessment of the cargo before it is loaded onto a vessel destined for the United States.

When Congress went further and passed a law last year requiring 100 percent of all import containers to undergo overseas radiation and NII (nonintrusive inspection) scanning before vessel loading by 2012, the trade community and many foreign governments justifiably cried `foul' over the policy and terms of this legislation, its drafting, and the process used to enact it," he said.

The law "had political motivations and was drafted in such a way as to avoid addressing fundamental questions central to an implementation of such an objective, it seems clear that the law's meaning will not be determined until some time during the next administration."

But he added that "one of the ironies that is currently playing itself out in Washington is that those who oppose the 100 percent container scanning legislation generally argue that the government's strategy should be based on credible cargo risk assessment instead. Yet, when CBP actually moves forward to improve its cargo risk assessment capability through the proposed `10+2' rulemaking, there is considerable resistance from the trade community."

The comment period on the "10+2" rulemaking which would require 10 sets of data from importers or their agents 24 hours prior to vessel departure and two sets of data from ocean carriers recently closed. Koch said there have been "thoughtful observations and suggestions, identifying legitimate issues that warrant a clear government response."

But, he asked, "for those who go beyond seeking specific answers or adjustments to the proposal to address specific concerns and make it work better, and seek instead to stop it from proceeding, what is the alternative cargo security strategy? Status quo reliance on carriers' bill of lading data for cargo risk assessment?"

He said the council supports "10+2," and "a decision not to proceed with the `10+2' initiative could easily raise even more difficult strategy questions than what the trade faces today." Chris Dupin

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