October 2018

Comments from the Executive Director

October brings us to the final months of a Navigation Season which has proven to be solid and healthy for the international flag vessel owners and operators which are served by USGLSA agents. Although early winter weather conditions can always be the wild card, current performance for this Season appears on track to match or exceed last year’s number of ship calls provided by Agents.

Another Season of growth in the passenger ship calls is appearing. Contributing to that growth has been U.S. Customs and Border Protection in cooperation with U.S. Coast Guard, Agents and the Destination Ports. All are trying to work to constantly improve the handling of growing numbers of passengers and in order to accommodate on time arrivals and departures which are so important to the nature and success of this business.

In this Report, I thought I would devote this space solely to an important subject which continues to occupy considerable time for USGLSA. That, of course, is pilotage cost and service. USGLSA remains focused on supporting industry efforts regarding pilotage issues, participating in the funding and through direct participation.

The dramatically growing burden of the cost of pilotage for international flag vessels trading in U.S. Great Lakes waters as an element of operating expense (in raw dollar amounts as well as a percentage of total voyage cost) without doubt, presents an increased threat to the competitiveness of the Lakes/Seaway trades served by USGLSA members and continues as a source of deep concern. Currently, litigation remains pending involving pilots’ and industry interests, in one stage or another, over pilotage rates which were established by USCG for the 2016 and 2017 Navigation Seasons. There have also been detailed comments and expressions of concern shared with USCG by industry over certain methodologies employed in the 2018 Rate Rule Making. Publication of the 2019 Season Rate NPRM is said to be due very soon, possibly triggering more of the same kind of unhappiness. In particular, in the 2016 Rate litigation, disagreements remain unresolved concerning a recovery remedy following the findings of a U.S. Federal Court which identified significant amounts of erroneously authorized payments of rates. Also in dispute are ongoing financial demands covering pilot compensation, manning, training, work rules and practices including questionable orders by pilots for costly tug assistance to vessels in ports. These tugs are being ordered despite benign weather and traffic conditions as well as bow thruster capability on the vessels where such assistance had never been required before. All of these elements take place in what has been to date what many characterize as a highly contentious and toxic atmosphere; an observation with which I would agree.

There has to be a better way than what appears to have the parties running on a treadmill of applied rate making methodologies which appear to hold potential for results which will be more destructive to the future of the service and trades than constructive. The Great Lakes Pilotage Act of 1960 addresses rate making stating that ‘The rates, charges and any other conditions or terms for pilotage services … shall be fair and equitable, giving due consideration to the public interest...” (underlining added). That underlined portion often seems to be ignored by the USCG Lakes Pilotage Office in establishing rates and related pilot management decisions in designing the service. Is there balance with the public interest here?

In seeking to create a rate making process and a level of service consistent with the statutory language above, for some time, USGLSA and members of the affected vessel industry community have suggested that the problem lies not necessarily those who are trying to deal with the assignment, but rather, the answer lies in the process itself. It is suggested that the NPRM and methodology carried out represents a defective and broken structure where it seems all challenges can only be solved by asking the customer to pay more and more. It may be a tall order, but the current model needs to be examined, changed or even completely discarded and replaced to be consistent with the referenced mandate in the Pilotage Act of 1960 covering the need for balance with “the public interest” as well as “fair and equitable.”

To date, in assessing alternates to the current model, industry interests have considered public and legislative/regulatory venues to try to raise awareness. As a possible tool in the endeavor, in my last message in this space, I referred to what I believe to be a very powerful and potentially useful Report released by the Conference of Great Lakes and St. Lawrence Governors and Premiers with the title of “Governance Options for the Safe, Reliable and Competitive Pilotage Service in the U.S. Waters of the Great Lakes.” The Report identifies the problems and defines some detailed alternatives. Perhaps it is not the “silver bullet,” but it represents a pro­ active approach with concrete examples of alternatives which may lead to a more harmonious and balanced process. Thus, I again recommend reading this document and continue to leave it posted on this site at the tab entitled “Items of Interest.” This area of inquiry might be broadened to explore some of the stated options and other alternatives.

Finally, on perhaps a more positive note regarding pilotage, last month, the USCG Great Lakes Pilotage Advisory Committee (GLPAC) met and while the Committee only “advises” USCG as the Committee title expresses, and the advice was limited, the tone of the discussions appeared considerably more constructive and less confrontational. The presence and participation of USCG Great Lakes District 9 leadership as well as from Headquarters was welcomed and helpful. Of course, we still do not have a full complement of 7 members on the Committee as the election requirement is that the vote of all 6 existing appointed members (3 pilots and 3 industry) must be unanimous to elect Member No. 7 and consensus on even that remains elusive. Thus, I guess we still have a way to go, but USGLSA will persevere and continue supporting the interests of our valued customers.

Comments, as always, are most welcome!

–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.