2019 Annual Review & 2020 Outlook

Comments from the Executive Director

The Comments which follow were intended to be presented at a USGLSA Annual Meeting of Members gathering on March 25, 2020, in Chicago. However, as with most every other event which was planned for that time period, COVID-19 had its way and the Chicago Meeting was cancelled.

Instead, the Meeting was held still on March 25, but by telephone conference call. This Report, provided to the Members prior to the call, was mercifully not read word for word by me during the call, but points were discussed in general. The full text (with a few small post-meeting edits) is respectfully presented below.

UNITED STATES GREAT LAKES
SHIPPING ASSOCIATION
EXECUTIVE DIRECTOR’S REMARKS
TO ANNUAL MEETING OF MEMBERS

MARCH 25, 2020

First of all, thanks to everyone for your patience as we were forced to cancel what was hopefully going to be a productive and informative Annual Meeting gathering in Chicago. No thanks to COVID-19, but instead, we now can use the time as a warm up for our Membership Monthly Conference Calls during the Navigation Season which may turn out to be a most challenging time.

REPORT FOR THE YEAR 2019

The 2019 Navigation Season was highlighted by some significant Association and industry achievements and some serious challenges, particularly at the end of the campaign due to water levels at unprecedented high readings and uncertainties about the timetable for conduct of operations in the Seaway System. Despite the challenges, it was a strong year for the Industry and for our Association, ironically due in part to some higher water levels, but also many robust regional commercial sectors. In 2019, USGLSA agents reported a total of 452 Ship Calls which barely exceeded 2018 (actually by one !), but long term, still better than any Season since 2006. An emerging focus of attention for agents has been the growth of passenger cruise service which has been building toward more activity in each of the last few years. We shall now see, however, what 2020 holds with the uncertainties created by the COVID-19 developments. Some other 2019 notable industry developments have been:

• Strong U.S. Congressional funding and support has been budgeted which now permits the commencement of construction of a second 1000 foot lock at Sault Ste. Marie. A truly notable event.
• Also, Congressional funding for Lakes dredging (including dredge material disposal) and harbor/channel maintenance continued in the current budget cycle driven by a higher level of political recognition of the Lakes commercial importance , allowing the U.S. Corps of Army Engineers to address some long standing neglected needs due to prior USACE Budget stress in the Great Lakes System.
• At the very local level, we are proud to have unveiled a new and updated version of the USGLSA web site. Headed up by Jackie Csiszar of World Shipping/Cleveland, we hope the new format and content will be informative and focused on important Lakes/Seaway issues as never before. Site details – Go to – www.usglsa.org
• Referenced earlier, the Cruise business in the Lakes increased and at year end was topped off with an exciting announcement by Viking Cruises of its intention to introduce service on the Lakes in 2020, eventually offering cruises with two vessels designed to fit Lakes tourism and travel opportunities.
• Ballast water developments in the Lakes have received a favorable boost during 2019 with the growing implementation of the Vessel Incidental Discharge Act (VIDA). Through the efforts of the EPA and USCG, the agencies which the Act tasks to implement its provisions, this important element of progress is a major step in the critical area of environmental quality of vessel operations. VIDA also was crucial in providing clarification of Federal and State jurisdiction over the responsibilities of ballast water management on the Lakes.
• High water levels and water flow intensity in the Lakes and Seaway System causing property damage and affecting navigation attracted great attention as the International Joint Conference (IJC) and its corresponding working partner on the matter, the International Lake Ontario-St. Lawrence River Board (River Board) struggled over proposals to close the Seaway early at the end of the Navigation Season in 2019 and when to open again in 2020. As to the opening, it was agreed that full operation in the Seaway which would normally commence in mid/late March, would not commence until April 1. Water and flow speed levels remain high and this issue is scheduled for more debate during this coming year.
• Pilotage remains a critical cost and operational challenge for industry on the Lakes. Rate increases continued on a pattern set over the last few years. In our view, rate making methodology remains unnecessarily complex and reflects little or no recognition of the need for reform to safely and more reasonably seek to harmonize the economic interests of pilots, vessels they serve and the public interest as referenced by Statute. Costly litigation for both sides over rates has continued. Also, with the prospect of future increased Lakes cruise operations, USCG is quite appropriately looking at what manning levels and what associated recruitment and training requirements and cost may be. In particular, facilitating highly reliable on-time arrivals and departures which cruise operators will demand will surely place more pressure on costs which could in turn impact USCG pilotage rates.
• As every year, USGLSA continues to participate jointly with other maritime organizations supporting common issues which impact its agent members and their respective principals located primarily in Canada and Europe. This policy provides strong informational exchange sources as well as a joint cooperative base to promote positions and ideas which benefits all. During 2019, strong contacts were maintained with American Great Lakes Ports Association, Shipping Federation of Canada, and many individual Ports around the Lakes served regularly by USGLSA agents. Good relations with the St. Lawrence Seaway Development Corp. (US) and the St. Lawrence Seaway Management Corp. (Canada) have always been maintained. Last Fall, USGLSA was a proud participant in ceremonies with the two Seaway authorities and a large crowd of U.S. and Canadian officials at the Eisenhower Locks in Massena, New York, marking the 60th Anniversary of the opening of the Seaway. In addition, regular attendance in Washington, DC at Meetings of NAMO (The National Association of Maritime Organizations) which represents ports and stakeholders on the East, West and Gulf Coasts, plus our Great Lakes (aka the “North Coast”). Meetings are conducted with many DC-based organizations but primarily U.S government where high level representatives are available; a personal access which is often found highly valuable for the NAMO members as well as the officials who are attending.

PROSPECTS FOR 2020

Only two months ago, the 2020 discussion section of this Report would have been quite different in outlook. However, COVID-19 has indeed made an impact which has created tremendous uncertainties as the Navigation Season on the Lakes and Seaway resumes. However, a few observations below which can only point to matters as of March 25, 2020, and while not looking good, lack any way of predicting yet what the short or long term impact may be on how much traffic will be affected and what the economic, social and political conditions will look like as the Navigation Season unfolds:

• Indications (from USACE and others) are that wet conditions will persist in the greater Lakes/Seaway Region and that high water levels will greet vessels entering the System again, meaning more potential damage to shore side properties and navigational challenges for vessels seeking to operate depending on how much water is allowed to flow through the System at any one time. These matters were the source of intense discussion between the IJC and River Board last year and these discussions are expected to continue in 2020. Early reports are that the River Board will seek to keep flows at high levels at the April 1 opening of the Season.
• Cruise prospects on the Lakes in 2020 would appear to certainly be damaged by events arising out of COVID-19. It is hard to imagine that even 2019 levels of cruise traffic may be repeated. However, assuming no complete paralysis which seems to be occurring presently, it would not be surprising that USCG and CBP may continue at some level to examine strategies with the involved stakeholders for needs for additional pilots and timely inspections, arrivals and departures in the case of USCG and for port infrastructure improvements for passenger management from cruise traffic.
• A very recent and what presently appears still to be a tangled situation involves positions for 2020 presented by CBP regarding inspection of containers arriving at Lakes Ports. CBP had announced that in 2020, containers will only be inspected in Cleveland. Currently for these purposes, most believed “containers” were meant to mean only the Trailer Equivalent Unit (TEU) sized type. The rationale for the position appeared to be that Cleveland has been identified as the only port which possesses access to adequate electronic methods of efficiently and effectively inspecting such containers. Some speculate that the policy also may be directed to encouraging other ports to obtain similar and very expensive inspection capabilities. Also, it is perhaps reflecting manpower shortages of CBP officers available to do these large container inspections without the technology. The matter became further confused when a TEU definition of a container by some was expanded to other packaging techniques to include crates of various sizes and packing characteristics. Would the Cleveland limitation capture different crates in other Great Lakes Ports? Are CBP Field Offices able to make separate and differing definitional decisions on this matter? We understand parties are trying to meet, but at the moment (thanks COVID-19), this appears to be unresolved. We still hope and expect the matter comes to clarity and reasonable settlement soon.
• At USCG, we await the publication of a Final Rule as to 2020 Pilotage Rates by the Lakes Pilotage Office. The Great Lakes Pilotage Advisory Committee (GLPAC) Meeting scheduled to be held in Covington, Louisiana was cancelled due to COVID 19. Many were perplexed why Louisiana in the first place for a Great Lakes Meeting, but apparently it is near a training facility the Lakes pilots use which was persuasive to the planners.
• USGLA in 2020 intends to continue to participate in NAMO Meeting activities (where I serve as VP – Great Lakes) and Green Marine (where I serve on the Great Lakes Advisory Committee – GLAC) as well as those events and activities sponsored by Highway H20, and selected other trade entities and their initiatives as the budget will permit. In these capacities, I am especially honored to represent USGLSA and its agent members who are the representatives of their Principals; those ship owners and operators who rely on the agent’s effort and skill to professionally manage affairs and protect their valuable assets and employees while far away from home port.

CONCLUSION

With 2019 “in the books,” I would like to take this opportunity to thank all of our USGLSA Members and especially our Executive Committee and wise counsellor Warren Marwedel; all of whom have provided their guidance, friendship and support during 2019.

As to 2020, we can only do our best for USGLSA in what may be some uncharted waters and stay loyal to each other, to our customers and to our high standards of performance and conduct.

Regards to all,

–Stuart H. Theis

Mr. Theis, who has served as Executive Director since April 2007, is an attorney and businessman with prior associations at Cleveland, Ohio based M. A. Hanna Company and Oglebay Norton Company. At Hanna, he held a variety of legal/operational positions including Corporate Vice President with responsibilities for Hanna’s Great Lakes/St Lawrence Seaway and Ocean Marine vessel and dock operations in the U. S. and Canada. While at Oglebay Norton, Mr. Theis served as President of the Company’s Great Lakes fleet and dock operations. Mr. Theis is a member of the American Bureau of Shipping and has served as a member on two U. S. Coast Guard Advisory Committees, the Great Lakes Pilotage Advisory Committee and the National Maritime Security Advisory Committee.