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June 10 2019

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Spotlight 6 The Journal of Commerce | June 10 2019 www.joc.com cap Automation concerns bubble up north Longshore labor concerns with Canadian port automation have become publicly apparent, as reflected in the stalling of negotiations between the International Longshore and Warehouse Union Canada and employers. Tensions hit a boiling point on May 29 when the British Columbia Maritime Employers Association threatened a lockout, endangering container traffic through the ports of Vancouver and Prince Rupert, due to an impasse in talks to replace the eight- year contract that expired in March 2018. The ports of Vancouver and Prince Rupert have ambitious expansion plans that may involve automation. ILWU Canada wants all issues on the table for discussion but "they don't want to talk about it," ILWU Canada president Robert Ashton said. Opposition to automation and the impact the loss of jobs could have on dockers specifically and surrounding port communities in general is a front-and-center issue, even more so than wages and benefits, for longshore unions on the US West and East coasts and in Canada. Ashton referenced the port of Prince Rupert, 500 miles north of Vancouver. Losing longshore jobs in a community of 12,000 would filter down from the union to the mom-and-pop stores in the area. "It would be devastating," Ashton said. It's difficult to automate a facility while in full operation because the construction activities interfere with cargo handling and can result in congestion and excessive container dwell times. Deltaport experienced such issues during the past two years when it automated its rail facility. Terminal operators therefore prefer to introduce automation on greenfield sites, or at least a portion of a working facility that isn't in use. Long Beach Container Terminal's Middle Harbor facility followed the latter model and has been phasing in additional sections of the terminal without interfering with cargo handling. APM Terminals in Los Angeles announced its intention to automate a vacant 100-acre parcel at its 440- acre facility. The ILWU in Southern California is attempting to block that project by seeking to have a construction permit denied because it can't block automation through the coastwide contract. Railroads grilled on demurrage US rail regulators are questioning railroad demurrage and accessorial policies, a hot- button issue with shippers that believe the fees are used as a revenue generator while railroads consider them critical to network fluidity. Although most of the testimony before the US Surface Transportation Board (STB) on May 22 was about non-containerized cargo, known as "merchandise," the criticisms and tough questions in many ways also apply to intermodal services. The STB doesn't have the purview to regulate intermodal rail operations, nor does the top maritime regulator, the Federal Maritime Commission, leaving containerized rail shippers in a virtual regulatory limbo. Among the seven North American Class I railroads, demurrage and accessorial revenue surged more than 29 percent in 2018 on a year-over-year basis, according to data provided to the STB and analyzed by RSI Logistics. CSX Transportation, for example, increased its revenue related to the penalties by 75 percent, to more than $327 million. BNSF Railway assessed $279 million, and Union Pacific Railroad levied nearly $233 million in penalties. In the same period, the major railroads have increased their overall revenue, with five of the seven Class I railroads reporting double-digit revenue growth in 2018. Demurrage penalties refer to charges for not turning assets — containers or railcars — in a timely manner. Although shippers argue otherwise, railroads told the STB that demurrage fees are designed to encourage timely pickup of cargo and allow for better service to all customers. "Let me be clear: Norfolk Southern's accessorial program is not intended to increase revenues. That is not our intent. It is there to improve efficiency and reliability of our service product," said Alan Shaw, the company's executive vice president and chief marketing officer. UP said accessorial and demurrage account for only 1 percent of the company's total operating revenue, and it hoped the surges in charges in the first quarter were temporary. STB Commissioner Patrick Fuchs said how Alan Stoddard / Shutterstock.com Shutterstock.com

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