Pilot rate increase could risk Great Lakes carrier competitiveness

Dive Brief:

  • Carriers are protesting the U.S. Coast Guard's most recent pilotage rate increases for the Great Lakes region, arguing the 14% rise in 2017 would make many shippers reconsider maritime freight altogether, The Journal of Commerce reported Wednesday.
  • The Coast Guard has raised rates for the past three years, bringing the average ship pilot compensation to $326,000 in order to retain talent in the region.
  • However, carriers argue the increases are unsustainable for the seaway system, as piloting fees now account for one-fifth of the cost of international freight transport, some of which is inevitably transferred to shippers.

Dive Insight:

The Great Lakes - St. Lawrence Seaway System is nearing a potential tipping point in its increase of pilotage rates, which could signal a shift from the Seaway system to other modes of transport, including the Gulf of Mexico, eastern coastal ports, and surface transportation. Last year, this system carried 36 million tons of cargo, which included ore, grain, steel, and other bulk materials. 

At the heart of this threat is the pilotage fees, which are currently the basis of a lawsuit filed by the Great Lakes ports, vessel operators and maritime trade groups against the U.S. Coast Guard. At issue is the justification of these rate increases and whether they are truly necessary for the retention of qualified pilots or, as the complaint claims, the fee increases are "arbitrary and capricious."

The Coast Guard and the Western Great Lakes Pilot Association argue that the increase in rates, which includes both an increase in average salary (to $326,000 from $235,000) as well as an increase in the overall number of pilots, are necessary, as increased competition for pilots' services have reduced their numbers in the region. However, industry groups counter that while sufficiently safe pilotage is necessary for the industry, the recommendation and choice to increase these pilotage fees is not supported sufficiently by available data, and the net effect could be the potential erosion of the Seaway industry all together. 

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Filed Under: Logistics Freight
Top image credit: Vmenkov