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Fall 2016

ADVOCATEThe Shipper

Official Publication of the Freight Management Association of Canada

www.fma-agf.ca

Infrastructure Update

Canadian Government Announces Transportation 2030

WHY GO WEST TO SHIP EAST?Did you know that in 2015, one in five containers handled at the Port either originated in or was destined for Asia? Thanks to our direct connections with transshipment ports in the Mediterranean and Northern Europe, we offer competitive and alternative routings to Southeast Asia and the Far East.

Find out what we can do for you at port-montreal.com/why-montreal

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C M Y K

Fall 2016

4 President’s Message

5 The Infrastructure that Matters Most to Canada

7 Transportation 2030: Encouraging for Shippers

8 Future Issues

9 Shippers Beware: Transportation Reliability Comes With a Price

10 Mega-Ships, Alliances and Competition: What Shippers Need to Consider

14 The Role of the Airship in the New Low-Carbon Era

18 Environment Update: Developments Related to Marine and Air Cargo

20 Experiencing Delays in Your Air Cargo Shipments? Find Out What You Can Do to Speed Up the Process!

21 Index to Advertisers

22 Global Shippers’ Forum Meets in Sri Lanka

COVER: The Port of Vancouver, iStockphoto.com

Chair: Neil McKenna

President: Robert H. Ballantyne

Vice President: Cindy Hick

Special Advisor: Forrest Hume, LLB

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4 | The Shipper ADVOCATE

AFTER MAKING the final report of the Canada Transportation Act (CTA) Review public on February 25, the Honourable Marc Garneau, Minister of Transport,

announced the government’s initiative to develop a “long-term agenda” for the future of transportation in Canada. It is an ambitious and necessary project. In addition to the recommendations of the CTA review, the Minister has been holding broad consultations to obtain input from stakeholders, and has been making use of several social media platforms to reach out to all interested Canadians.

In a speech to the Economic Club of Canada on April 27, the Minister outlined his approach to consultation. It includes five themes:1. Safer transportation;2. Trade corridors and global markets;3. Green and innovative transportation;4. The traveler; and5. Waterways, coasts and the North.

The Minister held eight roundtable meetings with invited stakeholders on these five themes during the spring and summer. While all themes impact freight transportation, either directly or indirectly, theme 2 is the one that focuses specifically on freight transportation and its importance to the Canadian economy. The first of the roundtables was held in Toronto on May 24 on theme 2, “Trade corridors and global markets.” FMA was one of 15 groups invited to this session, and was represented by the FMA chairman, Neil McKenna, Vice-President, Transportation at Canadian Tire. Transport Canada has published summaries of the roundtable discussions at www.tc.gc.ca/eng/future-transportation-canada-678.html.

The roundtables were not intended to reach conclusions or make recommendations, but to give stakeholders an opportunity to put their issues and perspectives on the table.

In addition, the Minister solicited written submissions to be sent to Transport Canada by September 16. After consultation with the membership, FMA submitted a comprehensive paper to the government covering all modes

PRESIDENT’S MESSAGE

of transportation. This paper can be found on the FMA website, at www.fma-agf.ca/CMFiles/FMASubmissionFutureofCdnTransport.pdf.

News reports earlier this year quote Transport Canada officials as saying that the Department would not be making public statements on the CTA Review final report until at least the fall of 2016 and until they had had an opportunity to review and consider stakeholder input. On October 21, FMA received a note from the Minister’s office saying that he would be setting out his plans for “The Future of Transportation in Canada” in a speech to the Chamber of Commerce of Metropolitan Montreal on November 3. FMA attended the Minister’s speech in Montreal; the Transportation 2030 article on page 7 provides a summary and preliminary comments on the Minister’s announcements.

FMA has met with officials in Transport Canada and with political staff in the Minister’s office on several occasions since the CTA Review final report was published and will continue to meet with officials as the government’s plans evolve.

In late September, the Minister also met with his provincial counterparts to discuss a number of issues, including the long-term agenda. No information on that agenda from the meeting has been made public. Given the breadth of this review, in addition to the provinces, federal departments including Agriculture, Industry, Environment, and Infrastructure will be asked to review and make recommendations to the Minister and the Cabinet on legislative changes that may be required in the Canada Transportation Act and other laws. It is unlikely that broad legislative amendments will be introduced before late 2017 or some time in 2018.

In his April 27th speech, the Minister stated: “For me, the Transport portfolio is critical for economic growth. To put it bluntly, I regard the Transport portfolio as an economic portfolio. I see transportation in Canada as a single, interconnected system that drives the Canadian economy.”

Bob Ballantyne President, FMA

Continued on page 11

The Future of Transportation in Canada: Developing a Long‑Term Agenda

“For me, the Transport

portfolio is critical for economic

growth. To put it bluntly, I regard

the Transport portfolio as

an economic portfolio. I see transportation

in Canada as a single,

interconnected system that drives

the Canadian economy.” —

The Honourable Marc Garneau

FALL 2016 | 5

PRIME MINISTER TRUDEAU and his new government in Ottawa have made increased investment in infrastructure a defining feature of their long-term economic plan

for Canada. Infrastructure investment was staked out as a priority in the Liberal Party election platform and was followed by high billing in the government’s first budget. So far, most of the government’s focus on infrastructure has been devoted to its newly established priorities of social, transit and green infrastructure. Budget 2016 provided each of these three categories with initial federal funding of $20 billion over the next 10 years for a total of $60 billion. Combined with the existing $60-billion Building Canada Plan (BCP), the government has committed to a record level of federal seed capital for national infrastructure investment.

The Canadian Chamber of Commerce and our network of 200,000 members are supportive of this new effort to upgrade the quality of infrastructure across Canada. However, notably absent in Budget 2016, with its focus on new social, transit and green infrastructure funding, was any clear commitment to the category of infrastructure that is of greatest long-term value to the Canadian economy: trade infrastructure.

That’s why, in June 2016, the Chamber released the report, The Infrastructure that Matters Most: The Need for Investment in Canada’s Trade Infrastructure.

For a country that trades as much as Canada does, the competitiveness of its trade infrastructure is one of the most significant determinants of the quality of life that Canadians have come to expect. This is because Canada’s export-based economy relies upon its roads, ports, waterways, railways, airports and pipelines to move Canadian products and services to the markets of its trading partners around the world. Together, these transportation and logistics assets that we call trade infrastructure combine with information systems and Canadian ingenuity to form the backbone of a trade network

The Infrastructure that Matters Most to Canada

TRANSPORTATION INFRASTRUCTURE

BY JOHN LAW AND RYAN GREER

that, today, accounts for more than 60 percent of the country’s collective income.

Maintaining the competitiveness of Canada’s trade infrastructure also pays real dividends because it directly generates more new revenue than other forms of infrastructure and in so doing, helps pay for the country’s social and economic priorities.

While the connection between trade and transportation infrastructure and Canadians’ quality of life is not new, what is, it can be argued, is the urgency for meaningful action. More than anything else, this urgency arises from accelerating competition from other nations seeking a larger share of the international trade pie. It is all about competitiveness. At a time when the quality of Canada’s own trade infrastructure is showing signs of increased strain, competitors are raising the bar by aggressively investing financial resources and political capital to improve their own trade infrastructure.

In the face of these new realities, the impacts of recent shortcomings in Canada’s infrastructure network, such as that evidenced by the 2013 grain crisis, extend beyond the multibillion-dollar impact that this event had on the Canadian economy. We are learning the hard way that Canada’s reputation for producing high-quality products and services is quickly eroded when we are unable to get them to destination markets in a timely manner.

Consequently, a significant measure in this coming test for Canada will be the ability to demonstrate improved reliability and efficiency in our trade-infrastructure network. And the standard by which our progress will be judged will not be a domestic one. Canada’s will be graded by international customers who, to a much greater extent than ever before, will gauge Canada’s reliability against that of competitor nations that offer similar products and services. Our collective response will carry consequences for the country’s trade performance and the individual wealth of our citizens.

While the connection

between trade and

transportation infrastructure

and Canadians’ quality of life

is not new, what is, it can be argued, is the urgency

for meaningful action.


In The Infrastructure that Matters Most, we outline some of the key reasons that governments should make trade infrastructure a priority.

One is the return on investment. Trade-infrastructure investments yield longer-term benefits by facilitating the transportation of goods and services more quickly, reliably and at lower cost. In other words, enhanced trade-infrastructure investment can increase the economy’s competitiveness and productive capacity after the infrastructure is built.

Another important reason is to improve Canada’s international competitiveness. The World Economic Forum’s Competitiveness Index suggests that the quality of Canada’s trade and transportation infrastructure is falling behind that of our competitors. Prior to 2010, Canada ranked ninth on quality of overall infrastructure, but by 2012, though still ahead of the U.S., had dropped to 15th in the world. By the 2014 rankings, Canada had dropped further, to 19th, and was behind the U.S. In the most current 2015-16 index, Canada sits in 23rd place. The trajectory of Canada’s international ranking should be cause for concern, specifically for those assets that support its export economy, such as road, rail and port infrastructure, all of which have declined since 2010.

In addition to return on investment and improving our international competitiveness, Canada needs to ensure our transportation network has the capacity to efficiently handle future demand. The 2014 Transportation Network Needs Assessment, conducted by Colledge Transportation Consulting Inc., is one of the more recent studies of future domestic freight demand on the country’s system of roads, rail, ports and airports, and it provides a proxy by which to measure the overall need for upgrades to key corridors.

The study projected that overall demand for domestic freight transportation will increase on a strong trajectory through 2024, based on global demand for Canadian resources in areas such as food, energy, fertilizers, mineral resources, petrochemicals and forest products. Total volumes travelling across the Asia Pacific network were forecast

to increase in the coming decade by 116 percent, from 91.6 to 197.6 million tons. Although the economic slowdown in the two years since the study’s completion have affected growth projections for some commodities such as coal, the positive trajectory anticipated by the study for freight movements remains. The rate of growth has moderated, but over the forecast period, growth is expected to continue.

Lastly, trade infrastructure should be central to the federal infrastructure plan because of the opportunity for Canada to prosper from the growth of the global middle class. As important as forecast growth in domestic freight traffic will be, the ability of Canada’s trade-infrastructure network to support Canada’s fight for its share of new, growing international market opportunities with an emerging global middle class is crucial. Canadian exports have been identified as ones that will be in high demand with this new group of consumers, but only if Canada’s trade-infrastructure network can deliver them in a timely fashion.

These emerging markets with more rapidly growing economies offer significant potential for products that Canada has been producing for years. The demand primarily comes from the growth of Asia, where at the end of 2015, China’s middle class overtook that of the U.S. to become the largest in the world. The number of these consumers is projected to grow from 1.8 billion today to 5 billion by 2030, representing unprecedented long-term growth in demand and changes in consumption patterns. If Canadian exporters are going to meet the demands of this expanding global middle class, it will require continued improvements to the capacity, speed and resiliency of our trade-infrastructure network.

In the report, we outline how the federal government can increase the importance of trade infrastructure in its

plan. Our recommendations include:• Making trade infrastructure an equal

funding priority alongside social, transit and green infrastructure;

• Renewing the federal commitment to trade corridors as was done previously though the Asia-Pacific Gateway and Corridor Initiative (APGCI) and the Gateways and Border Crossings Fund (GBCF);

• Partnering with industry to better determine long-term national trade-infrastructure priorities; and,

• Considering if the proposed Canada Infrastructure Bank can be used to enhance public-private investment in trade infrastructure.To their credit, since the missed

opportunity of Budget 2016, there is evidence that the Trudeau government has been listening to the Chamber and others urging greater support for trade-enabling infrastructure. In November 2016’s Economic and Fiscal Update, Finance Minister Morneau announced $10 billion of incremental funding over the next decade to target upgrades to trade and transportation infrastructure. It’s not yet at the level of the commitments for social, transit and green infrastructure, but it is a step in the right direction.

And perhaps of even greater significance, with this commitment, the federal government is signaling to Canadians and our trading partners alike that they will contribute to improving the reliability of the delivery system that is Canada’s network of trade and transportation assets. It is a recognition of the link between the quality of Canada’s trade and transportation infrastructure and the wealth and well being of Canadians. As decision makers from all levels of government consider the difficult choices of how to optimize new public infrastructure dollars, they will be well served, as will all Canadians, if they can stay focused on the infrastructure that matters most.

You can read The Infrastructure that Matters Most at www.chamber.ca/publications/reports.

John Law is the President of Lawmark International. Ryan Greer is the Director, Transportation and Infrastructure Policy at the Canadian Chamber of Commerce.

Trade infrastructure should be central to the federal

infrastructure plan because of the opportunity for Canada

to prosper from the growth of the global middle class.

FALL 2016 | 7

ON NOVEMBER 3, the Honourable Marc Garneau, Minister of Transport, announced the government’s long-term transportation plans

and policies under the title of Transportation 2030.The plan covers five main themes:

• The Traveller,• Safer Transportation,• Green and Innovative Transportation,• Waterways, Coasts and the North, and• Trade Corridors to Global Markets.

While most of the themes have implications for freight transportation, theme 5, “Trade Corridors to Global Markets,” focuses most directly on freight transportation.

The major policy announcements in the Minister’s speech are as follows:

For air travelers:• To improve and speed up security screening,

Transport Canada will look at innovations, at new equipment and technology.

• The government is promising to look at compensation standards for passengers denied boarding due to factors within the carrier’s control, or in the case of lost or damaged baggage.

• International companies will be able to own 49 percent of an airline in Canada – up from the current 25 percent. FMA will attempt to determine what impact, if any, this policy will have on air freight.

For improving safety:• The government plans to advance the statutory

review of the Railway Safety Act.• Transport Canada intends to put in place

new regulations that will require railways to include video and voice-recording devices in locomotives.

• The government is working to ensure that drones – or unmanned air vehicles – are subject to simple, clear and enforceable regulations.

• Transport Canada will be setting new, more aggressive tail-pipe emissions and tire standards

Transportation 2030: Encouraging for Shippers

THE FUTURE OF TRANSPORTATION IN CANADA

BY BOB BALLANTYNE

in cooperation with our North American partners. This will impact trucking as well as private automobiles.

• The government will formalize a moratorium on oil-tanker traffic along the north coast of BC.

For shippers:• The government plans to invest $10.1 billion in

transportation-infrastructure initiatives to support projects that will help keep people and goods moving as efficiently as possible at gateways, along corridors and across the wide expanse of our country, in the east, west and north.

• The government plans to place a renewed focus on information-sharing and collaboration – for example, by putting in place a new data regime to support evidence-based decision making by government and all stakeholders.

For rail shippers:The government will:

• establish the ability to apply reciprocal penalties between railway companies and their customers in their service-level agreements;

• better define “adequate and suitable service” in the Canada Transportation Act as it relates to how well railways are meeting their service obligations to shippers;

• improve access and timelines for Canadian Transportation Agency decisions;

• address the future of the Maximum Revenue Entitlement for export grain transportation; and

• review the temporary change extending “regulated” interswitching from 30 km to 160 km in the Prairie provinces, and consider whether or not this should be made permanent.Following from the recommendations of

the Canada Transportation Act Review, and the extensive consultation over the summer, the Minister’s statement indicates that he has heard, and responded to, the concerns of Canadians with regard to both freight and commercial passenger transportation.

For rail freight transportation, FMA is gratified to see the Minister’s announcements on improved information sharing, reciprocal penalties between

The Honourable Marc Garneau

Safety and environmental

policy announcements

will have an impact on

shippers using all modes of

transport, and will require continuing

dialogue with stakeholders

as the government’s plans evolve.


railways and shippers in service-level agreements, and considering the future of extended interswitching, along with a better definition of “adequate

and suitable” service. All of these announcements are in line with FMA recommendations made to the Canada Transportation Act Review and directly

to the Minister of Transport.The safety and environmental policy

announcements will have an impact on shippers using all modes of transport, and will require continuing dialogue with stakeholders as the government’s plans evolve. The $10.1-billion investment for transportation infrastructure will help keep Canadian industry competitive globally, and will be positive for consumers by maintaining effective transportation service for Canadian retailers that are large importers.

There will be considerable work in the coming months for the government to consult with stakeholders on the details following from the Minister’s announcements before legislative changes or regulations are drafted to give effect to the new policies. In addition, there were other recommendations broadly supported by the shipper community that were not included in the Minister’s speech; these will also be discussed with government officials going forward.

The proposed changes impacting rail freight may be controversial. It will be

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The Shipper ADVOCATE — Future IssuesThe Shipper ADVOCATE provides Canadian and international news and information for Canadian shippers and other industry stakeholders. Many articles that go into the magazine are related to regulations, issues and conditions that are current at the time of publication. We set our lead stories for upcoming issues well in advance of publication and we welcome articles on all transportation-related topics for each issue.

The lead stories (and editorial deadlines) for upcoming issues are:

• Spring 2017 – Canada’s Transportation Policy (April 14, 2017)

• Fall 2017 – Marine Transportation Update (November 1, 2017)

Proposals for articles can be submitted to Bob Ballantyne at [email protected].

Fall 2014

ADVOCATEThe Shipper


www.fma-agf.ca

Asia-Pacific Gateway and Corridor Initiative

Supply Chain in China

Right-Sizing the Grain-Handling System

Spring 2016

ADVOCATEThe Shipper


www.fma-agf.ca

FMA celebrates 100 years of service to Canadian

shippers

Spring 2015

ADVOCATEThe Shipper


www.fma-agf.ca

• Canadian Transportation Infrastructure

• 2014 Supply Chain Executive of the Year

Fall 2015

ADVOCATEThe Shipper


www.fma-agf.ca

• Canada–EU Trade Agreement

• Canada’s Ports: Improving Logistical Efficiency


FALL 2016 | 9

THE HANJIN SHIPPING situation again illustrates the fragility of today’s supply chains. Shippers would be mistaken if they think they need to be on guard for such

issues only on the seas. Supply chain disruption is becoming increasingly common across all modes.

Watching the chaotic aftermath of Hanjin’s bankruptcy filing unfold is like watching a Formula One race pileup in ultra-slow motion. Often started by a relatively benign-looking event, the cars end up ricocheting and interacting in unexpected ways, sometimes becoming airborne, causing collateral damage and destruction until all the awful energy is spent.

To paraphrase renowned economist Herbert Stein, “Trends that can’t continue, won’t.” Logic said steamship lines couldn’t continue to bleed red ink indefinitely. This isn’t to say it was clear that Hanjin, in particular, would be the first casualty. But it was clear that the chances of a major bankruptcy or financial distress were rising.

When the inevitable occurred, however, the industry and many shippers proved woefully unprepared. An every-man-for-himself mentality has prevailed that has magnified the downside. Although a casual observer might have expected fellow CYHKE Alliance partners to step in to help cushion the blow, for instance, the opposite came to pass. Alliance partners bailed on Hanjin in a heartbeat and pulled their freight.

The industry lacks the ground rules to deal with the situation, and it appears that the many participants in the international supply chain are making it up as they go along.

Although it’s early in the game, we can draw a few conclusions. It’s clear that container shipping isn’t a true commodity, not yet, at least. The carrier you use and its financial stability can make a big difference. Still to be determined is whether financially sound carriers will be able to extract a rate premium for the security they offer to beneficial cargo owners. How quickly other carriers rush in with additional capacity to fill

Shippers Beware: Transportation Reliability Comes With a Price

SUPPLY CHAIN FRAGILITY

BY LAWRENCE J. GROSS

the void will determine that answer.Second is the need for some industrywide

ground rules among carriers, terminals, and other supply chain participants on how to deal with such a problem the next time, so as to minimize the collateral damage.

A broader issue for beneficial cargo owners (BCOs) is the increasing fragility of the supply chain and its transportation suppliers in general. The steamship lines have been the poster children of disruption lately, whether it be the 2014 to 2015 International Longshore and Warehouse Union slowdown on the U.S. West Coast or the Hanjin meltdown, and the International Longshoremen’s Association’s September 2018 contract expiration is on deck. But shippers also need to keep a wary eye on their land carriers, their local and long-haul truckers, and railroads.

With freight demand soft, there is plenty of capacity to go around. Shippers should enjoy it while it lasts, because these days, if a carrier isn’t being compensated for providing surge or insurance capacity, they simply won’t provide it.

Compared with the steamship lines and their unique calculus of adding capacity in the face of static demand, truckers and railroads can be relied on to right-size their operations to meet current demand levels and make full use of their active capacity. Capacity, be it tractors and drivers or locomotives and engineers, will be adjusted down-ward to ensure high utilization and maximize prof-itability in the face of difficult market conditions.

What this means for BCOs is that their transportation suppliers are much less resilient than they used to be. Supply chain disruption can take many forms, including financial distress, operational mistakes, natural disasters (an ever-growing threat thanks to climate change), or an unexpected uptick in demand.

The Hanjin problem underscores the dangers of treating all carriers as equal, and perhaps a flight to quality will occur. But another way shippers can compensate for reduced transportation reliability

Still to be determined is whether financially

sound carriers will be able to

extract a rate premium for the security

they offer to beneficial

cargo owners. How quickly

other carriers rush in with

additional capacity to fill

the void will determine that

answer.



THE GLOBAL SHIPPERS’ FORUM has been monitoring the impact of mega-container ships since their arrival in the Asia–Europe trade lanes in 2011–12. Mega-ships have

been defined as ships of 18,000-plus TEUs (20-foot equivalent units). While largely confined to Asia–Europe trade, their effects have been felt more broadly internationally due to the knock-on effect of “cascading” larger vessels into other liner trades and the associated development of strategic alliances. This, in turn, has precipitated a major worldwide realignment of consortia and vessel-sharing agreements, which continue to be in a constant state of flux.

The deployment of mega-ships coincided with the slowdown in global trade stemming from the world financial crisis. The present difficult financial and trading position for the liner industry has been affected by two key factors: the deceleration of the Chinese economy resulting from a slow recovery in the key OECD economies; and unparalleled investment in new container ships, particularly in mega-ships, which has created a significant imbalance in supply and demand, thus exacerbating poor financial returns. This has been starkly illustrated by the recent bankruptcy of Hanjin Shipping and the recent announcement that the three main Japanese carriers, K Line, NYK and MOL, are to merge their operations.

The growth of mega-ships has been a major driver for the development of the four main strategic alliances1 (soon to be three, subject to regulatory approval2) and concentration of the container shipping market. As a result, the GSF has undertaken a detailed analysis of the potential impacts on shippers. In a major report issued in November 2016 (The Implications of Mega-Ships and Alliances for Competition and Total Supply Chain Efficiency: An Economic Perspective), the GSF has identified that the growth of mega-ships

Mega‑Ships, Alliances and Competition: What Shippers Need to Consider

ECONOMIC IMPACTS OF SHIPPING DEVELOPMENTS

BY CHRIS WELSH, MBE

across many liner shipping routes has wide-ranging implications for competition for shippers and between shipping lines, and for total supply chain efficiency.

The report illustrates that mega-ships and alliances may be harmful to shippers and ultimately to end consumers by reducing supply chain efficiency. It points out that the reduced frequency of sailings (as multiple ships are replaced with one mega-ship) and the promotion of practices such as slow steaming have undermined just-in-time logistics deliveries for many shippers. Shippers are, on occasion, experiencing additional overall supply chain costs because of increased stock holdings and inventory, as well as costs associated with unexpected supply chain disturbances, such as changes to shipping schedules at short notice, changes to ports of call and other disruptions that cause delays in deliveries to customers.

With the increasing probability of service on the world’s main trade routes being reduced to 6 to 10 lines due to consolidation of the container shipping market, the GSF report notes that, while there may be some limited price competition between alliance and consortia members, participation in such agreements can lead to anticompetitive effects. It restricts individual alliance members’ flexibility on some important parameters of competition, such as deployment of capacity (which can have a significant effect on price) and on other aspects of service, including frequency of service, transit times, and ports of call, which are also important drivers of competition among shipping companies.

GSF’s economic analysis highlights that, with the higher economies of scale associated with mega-ships, fewer ships will operate in a market of a given size. Given the cost advantages associated with larger ships relative to smaller ships, it is reasonable to expect that entry into a particular

The present difficult

financial position for

the liner industry has

been affected by…the

deceleration of the Chinese

economy …and

unparalleled investment in

new container ships.

FALL 2016 | 11

route will occur only with larger, rather than smaller, ships, provided the volume of trade is sufficient to warrant larger vessels. This, in turn, has implications for potential entrants on any high-volume route. Moreover, the entrant must be able to operate a large ship and, in order to be viable, the entrant must expect to fill the large ship. These considerations raise the costs and risks of entry for ship owners.

Given that higher economies of scale mean that fewer firms can operate viably in a market of a given size, the growth of mega-ships, by increasing economies of scale, and increasing the fixed costs associated with operating on a particular route, reinforce the trend in liner shipping towards fewer independent operators, with smaller operators being driven out of the major routes and into niche markets. It is, therefore, clear that the issues faced by shippers, as a result of the trend towards consolidation and cooperation due to mega-ships, are unlikely to be resolved by new entrants into liner shipping. This is particularly the case given the Organization for Economic Cooperation and Development (OECD) findings that today almost all major liner carriers are part of a global alliance, which creates a network of economic links between carriers and will tend to be a disincentive to independent carriers entering liner shipping markets.

In light of this economic assessment, the GSF has undertaken a detailed competition policy analysis, drawing substantially on the competition policy and regulatory approaches adopted by the European Commission Competition Directorate, the US Federal Maritime Commission (FMC) and other international regulatory regimes. The

EU’s competition policy approach is, arguably, the most pertinent, as the EU has abolished liner shipping competition exemptions, has regulated consortia and vessel-sharing agreements through the EU consortia block exemption and has carried out detailed competition policy assessments of various shipping mergers, including the Hapag Lloyd/CSAV merger. We believe the approach taken by the EU Commission in this case, ensuring that there is sufficient independent competition on key trade lanes affected by the merger, may have important repercussions for the strategic alliances that dominate the global market today.

GSF’s report identifies a number of key recommendations in response to the economic issues and competition analyses raised by mega-ships, strategic alliances and growing consolidation in the container shipping market.

First and foremost, the report raises serious questions regarding the mega-ships and alliances business model. In particular, it questions whether competition authorities and regulators need to review their existing regulatory powers to deal with the new competition issues raised by consolidation and strategic alliances.

GSF believes that, due to the complexity of the issues confronting the industry and the desirability of aligning the interests of shippers and carriers, there should be an active debate in an ongoing industry forum to discuss a sustainable future business model for the container shipping industry.

Other issues and recommendations identified in the GSF report include:

• The need for competition authorities and regulators to ensure there is sufficient

independent competition to strategic alliances on key trade routes.

• The repeal of all exemptions from competition and antitrust laws, including greater regulatory oversight of alliances and consortia, including more direct intervention to safeguard competition for shippers.

• Wider use of merger rules criteria to be used by competition authorities and regulators in their competition policy assessments of strategic alliances.

• A wider debate on the perceived wisdom that shipping alliances and con-sortia are preferable to consolidation between carriers, because shipping lines

While it is “a single, interconnected system,” many decisions are made on a silo basis, by many private- and public-sector participants, who must meet the needs of their shareholders or political masters. Getting supply chain stakeholders to consider transportation as a single, interconnected system will be a tall order for the government.

FMA will continue to be engaged and looks forward to working with government officials on this important work. As the CTA Review final report notes: “The quality of transportation and logistics systems may be the single greatest contributor to a country’s economic performance.” The government and all stakeholders need to make sure that we get this right.

Robert H. Ballantyne, P.Eng.

PRESIDENT continued from page 4


2016_068_ad_shipper_advocate_03_28.indd All Pages 3/29/16 2:27 PM


THE GOLDEN AGE of Air Transport ended in 1939 with the outbreak of World War II (WWII). During this period, international air travel was the domain of the Boeing flying boats

and the giant Zeppelins. After the war, flying boats and Zeppelins were swept from the skies. Concrete runways had been built in all major cities, which made wheeled airplanes faster than Zeppelins and more convenient than flying boats. Shortly, airplanes with reciprocating engines were also made obsolete. Jet-powered airliners, born as a child of WWII, ultimately devoured all competition in the skies, on the seas (ocean liners) and over land (passenger rail).

Seldom has a break with the past been more sharply defined by a single technology change. The modern world became known as the Jet Age. Speed was everything, but a silver lining was contained within a cloud of smoky jet contrails. In the Postmodern Age, burning fossil fuels with abandon has come to an end. This has significant implications for the cost of air travel and the growth of air cargo. It may also be the trigger that creates a new technological advance in the form of cargo airships.

Jet turbine engines created a sea change in air travel because they were lighter and more powerful, and required less maintenance than reciprocating engines. Jet aircraft could fly twice as fast as propeller aircraft, and soar well above the weather, which made travel more comfortable, too. Figure 1 presents an illustration of the product growth curve for jet airplanes versus its competitors and their exit date. Airships never made it past the tipping point before the war, but flying boats continued to be produced until the late 1940s. Piston-engine airplanes, like the DC-6, had clearly reached the point of accelerating sales, until the introduction of the Comet (1949) and the Boeing 707 (1956) passenger jetliners.

Passenger jetliners may now be approaching market maturity, but jet-powered aviation is still one of the fastest-growing industries in the world

The Role of the Airship in the New Low‑Carbon Era

AIR TRANSPORT

BY DR. BARRY PRENTICE

and supports eight percent of global economic activity in terms of GDP. Globally, air passenger traffic more than doubled from 1985 to 2000 and air cargo traffic grew even more quickly. Starting from 2009, world air cargo traffic is expected to triple over the next 20 years. This implies an average annual growth rate of 5.9 percent. The number of airplanes in the freighter fleet is expected to increase by more than two thirds

over the same period, from 1,755 planes in 2009 to 2,967 by 2029. Cargo revenues represent, on average, 15 percent of the airlines’ income. This increase in planes, coupled with increases in passenger traffic, will place heavy demands on the atmosphere. Currently, global aviation contributes about two percent of total greenhouse gas (GHG) emissions.

The aviation industry has reduced emissions by using more-fuel-efficient technologies. Aircraft now are far more fuel-efficient than they were 40 years ago, but, as shown in Figure 2, the rate of improvement has slowed considerably. Moreover, the growth demand is swamping technical advances. The International Civil Aviation Organization (ICAO) forecasts that global aviation emissions will grow by 70 percent over existing levels by 2020.

The major technical changes that are expected to contribute to aircraft fuel-burn reduction in the

In 2010, the International Air Transport

Association …[called]

for the air-freight industry

to change to airships

rather than conventional

aircraft as a way to meet

targets on greenhouse gas

emissions.

FALL 2016 | 15

future are:• Higher engine and aerodynamic efficiencies,

which are expected to improve by 20 percent each and account for more than 70 percent of the fuel-burn reduction over the next 50 years.

• Gradual reduction in aircraft structural weight of about 10 percent through use of composite materials. Aircraft structural weight has a reduction potential of up to 30 percent through full implementation of composite materials on the wings and fuselage.

It would take many decades for the entire global fleet to reach the level of these efficiency improvements.

The international nature of aviation complicates GHG reductions. ICAO is the United Nations agency responsible for addressing international aircraft pollution. In October 2016, the ICAO Assembly reached an agreement to establish a global market-based measure (GMBM). Airlines will have to offset the growth of their CO2 emissions post-2020 with the purchase of “emission units” generated by projects reducing CO2 emissions in other sectors of the economy. This will raise the cost of air transport, but for the cargo segment, another option may exist. Older jetliners that have been converted to cargo carriage could be replaced by an alternative greener technology: cargo airships.

Transport AirshipsIn 2010, the International Air Transport

Association (IATA), the trade association of the airlines, caused an uproar by Airbus and Boeing by calling for the air-freight industry to change to airships rather than conventional aircraft as a way to meet targets on GHG emissions.

“Lighter-than-air airships have much higher fuel efficiency than heavier-than-air aircraft,” said an IATA spokesman, Jean Baptiste Meusnier. “This makes them ideal for the use of cargo, as seen with some of the super-heavy lifters already in operation.”

“An airship produces 80 to 90 percent fewer emissions than conventional aircraft,” explained Meusnier. “They also fly at the lower altitude of 4,000 feet instead of 35,000 feet, which means their water vapour trails contribute almost nothing to global warming.”

Professor Sir David King of University of Oxford, the former U.K. government’s chief scientific adviser, also supports the use of airships for air freight. Few cargos need to travel at 800 kph, with the possible exception of organ transplants. He does not believe that airships would replace conventional air freighters completely due to their far slower speed of 125 kph (78 mph), but would instead become a viable option between air and ocean freighters.

Figure 3 presents a conceptual model to

Figure 1: Air Technology Race, 1936-2016

Figure 2: Aviation Fuel-Consumption Trends

Source: Prentice and Knotts, CTRF, 2016

Source: Peters et. al., National Space Laboratory, 2005

Source: ICAO, “Environmental Report”, 2010


examine the potential share of airships in the transoceanic markets from Hong Kong. The sheer weight of cargo is the only limitation of transport airships because their large cargo bays can accommodate only low-density freight. The Prentice-Yip value-density pyramid is reproduced below. Figure 3A presents the current speed and conceptual divisions of the Hong Kong trade lanes. Sea-air transport is freight that travels first in ocean

containers then in cargo jetliners for final delivery. An example is SAL Albatros that operates a sea-air service out of Dubai. They claim that they can deliver freight to Europe in 14 days from China, with 45 percent of the GHG emissions of pure jet shipment.

Figure 3B illustrates the transoceanic shipping market with transport airships. Some air-freight shippers would be happy to wait three or four days longer if the price were significantly lower. The airships would take over all the sea-air market. Transport airships would not compete with air cargo moving in the belly holds of passenger airplanes. This is a by-product that is priced to fill the available space.

Transport airships could attract the higher-value goods moving by ocean containers. Ocean shipping times from Asia to Europe or North America are at least 30 to 40 days from dispatch to receipt. This is long time for inventory to be in transit, but products that do not have the value-to-density ratio required to be shipped economically by jet aircraft have only the sea-air choice. A significant market should exist for transport that could offer 5-to-10-day service, even if the cost is double or triple that of container shipping.

A third component of the transoceanic freight market for transport airships is cargo that is attracted by the opportunity of a faster, low-cost shipping method. It is reasonable to expect that transport airships would induce larger volumes of some trade goods, and open entirely new markets for others. For example, the types and volumes of perishable food products that move between Southeast Asia, Europe and North America are very limited. Similarly, fully assembled upholstered furniture and large pieces of molded plastic are seldom moved long distances. These and other goods could become as widely traded intercontinentally, as they are continently.

Transport Airship DevelopmentUnlike the 1980s, when the investment in airship research

dried up with the collapse of oil prices, demand in the 21st century continues despite the decline in energy prices. Airships

Figure 3: Value-Density Cargo Shipping Pyramid

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Figure 4: Illustrations of Transport Airships Under Development

are not only fuel-efficient; they can also easily burn alternative fuels, such as methane and hydrogen. A hydrocarbon-hydrogen gas mixture, called blaugas, was used to power the Graf Zeppelin and could be used again.

A survey of global airship activity that looked at development projects and operations shows that limited but viable worldwide activity is taking place. A number of companies are designing heavy-lift transport airships and a few demonstration models have been flown. The only full-scale transport airship is the HAV Airlander that flew in August 2016. Most designs are at a conceptual stage; if investment were available, a prototype could be flown within two years, and certified within three to four years.

Figure 4 shows pictures of the cargo airships currently under consideration. The competition for the dominant design of a transport airship is producing many different variants. The structural issues revolve around whether the airship has a rigid or semi-rigid structure, or an inflatable, non-rigid envelope. Each design has its merits, as well as drawbacks. For example, the rigid structure is heavier, such that the airship

must be bigger to carry the same weight, but it is also more robust and less sensitive to temperature changes. The other advantage of the rigid airship is that the lifting gas is contained at atmospheric pressure, whereas the non-rigid airships (blimps) are pressurized. Consequently, the non-rigid airships leak more lifting gas than the rigid designs.

Airships can also be categorized by shape. Traditional airships are cigar shapes, while new catamaran shapes have emerged as “hybrids.” The catamaran designs are heavier than air when empty, so in theory, they can drop a cargo and return without the need to take on new cargo or ballast. Some other designs use a combination of lifting gas compression and ballast to offset the change in buoyancy. Again, each design presents trade-offs. The “hybrids” consume more fuel, while the need for ballast means that the traditional airship must have water or other material available at its destination to offset the delivery of its cargo load. Systems using gas compression require more on-board equipment and energy.

Ground-handling methods for exchanging cargo loads are another area in which multiple solutions are being put

forward. Although a dominant design has yet to emerge, the many ideas stimulated by the opportunity to transport freight by airship suggests that one soon will provide the direction. Subsequently, the rest of the airship industry will follow.

ConclusionsThe massive public

investment in airplane technology during WWII led to significant advances in speed, safety and cost reduction. The Jet Age allowed the masses to afford holidays in exotic locations, multinational business organizations to operate globally and high-value goods to be shipped across oceans in a matter of hours.

At the time that jet-powered aircraft were being adopted, no one was

concerned about the by-products of burning such vast quantities of carbon fuels, like Jet-A (kerosene). For over 60 years, the Jet Age shaped the nature of passenger transport and international trade. Now that the real costs of GHG emissions from jet airplanes are being recognized, air transport is scrambling to devise plans to reduce fuel consumption and find alternative fuels, or effective GHG offsets.

Jet airplanes used for dedicated freight transportation are the most polluting segment of the aviation industry. These are typically the oldest and least-fuel-efficient jetliners, but they are also the segment of air transport that might be replaced most easily. Cargo airships are being designed and tested that could reduce GHG emissions greatly. A worldwide competition is emerging to develop transport airships, and with the added incentives of carbon taxes, it is only a matter of time before this new technology begins to be employed commercially.

Dr. Barry E. Prentice is a professor at the I.H. Asper School of Business and the Transport Institute, University of Manitoba.

Source: Prentice and Knotts, CTRF, 2016


THE LAST FEW MONTHS have seen some highly significant developments in global environmental regulations relating to both air and marine cargo. For both sectors, there have

been changes in the way greenhouse gas (GHG) emissions are monitored and managed. In addition, the marine sector will see a global approach to reducing harmful sulphur emissions. This article describes the key points and likely implications for shippers, and sums up a presentation made at the Global Shippers’ Forum annual meeting in July 2016.

AIR CARGO GHG EMISSIONS. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) of the International Civil Aviation Organization (ICAO), agreed to at the ICAO General Assembly in October 2016, is designed to complement the basket of mitigation measures the air transport community is already pursuing to reduce CO2 emissions from international aviation. These include a goal of carbon-neutral growth for international aviation from 2020, delivered through technical and operational improvements and advances in the production and use of sustainable alternative fuels for aviation (this includes, for example, an aspirational goal of improving fuel efficiency by two percent by 2016), with CORSIA addressing remaining emissions.

Implementation of the CORSIA will begin with a pilot phase from 2021 through 2023, followed by a first phase, from 2024 through 2026. Participation in both of these early stages will be voluntary. The next phase, from 2027 to 2035, would see all states on board. Some exemptions were accepted for Least Developed Countries (LDCs), Small Island Developing States (SIDS), Landlocked Developing Countries (LLDCs) and states with very low levels of international aviation activity.

Cost impacts for shippers of the ICAO approach

Environment Update: Developments Related to Marine and Air Cargo

GLOBAL GHG INITIATIVES

BY ALEX VEITCH

to CO2 emissions on the air freight sector are unclear, but briefings by the UK national government delegation indicate that they are likely to be low, as they will be shared between passenger and cargo customers.

GSF has produced a briefing paper on aviation CO2 emissions, available at www.globalshippersforum.com.

MARINE GHG EMISSIONS. Following the Paris Climate Change Agreement, the International Maritime Organization (IMO), the regulatory authority for international shipping, has been under increased pressure to take further action on GHG emissions. The IMO has already made some important steps forward in this regard; in particular, new ships must meet energy-efficiency design standards. However, with marine emissions continuing to rise, many member states were keen to take accelerated action.

At the 70th Marine Environment Protection Committee (MEPC) meeting held in London in October 2016, there was agreement to launch a new data-collection mechanism, and a six-year process (from 2017 to 2023) to find agreement on what future policy measures, if any, to take on GHG emissions. These are explained below.

GSF attended the MEPC meeting, and was invited to address the plenary session during the debate on GHG emissions.

Fuel-Consumption DatabaseThe IMO approved the establishment of a

fuel-consumption database and a requirement that ships of 5,000 gross tonnage or more collect consumption data for each type of fuel oil they use, as well as other specified data, including proxies for transport work. These ships account for approximately 85 percent of the CO2 emissions from international shipping. The data collected will provide a firm basis on which future decisions on additional measures, over and above those already adopted by the IMO, can be made.

The IMO member states

did not fully endorse the

GSF position [on fuel-

consumption monitoring],

instead agreeing to a simplified

system that will provide only

limited energy-efficiency

information.

FALL 2016 | 19

GSF was involved in the debates around how the fuel-consumption monitoring should work, and made strong representations at the previous MEPC that there should be accurate data, or more realistic proxy values, used to estimate transport work, as this enables an assessment of the energy efficiency of ships. The IMO member states did not fully endorse the GSF position, instead agreeing to a simplified system that will provide only limited energy-efficiency information. Access to the database will also be tightly controlled, open only to member states. Business associations such as the GSF will not have access.

Nevertheless, the new mandatory data-collection system is a useful development, and is the necessary first step in what IMO refers to as a “three-step approach” to policy making, which involved first gathering data, then analyzing it, and then making policy recommendations based on evidence. GSF supports this approach to policy making, notwithstanding our concerns over the details of the data-collection system.

GHG “Roadmap”The other important development

related to GHG emissions was the approv-al, after a long and difficult debate, of a six-year (2017 to 2023) “roadmap,” a plan for how IMO member states will negotiate whether or not to introduce measures to reduce GHG emissions from ships.

The roadmap contains a list of activities, including further studies to forecast the future trends for maritime GHG emissions, which will be aligned with the data collected by the fuel-consumption database. At the end of the six-year period, in 2023, the IMO member states will adopt a strategy to address GHG emissions.

During the debate, GSF was invited to address the plenary session, having submitted a paper to the Committee via our partner the International Cargo Handling Association, which has observer status at the IMO.

Our intervention stressed the need to look at the agreement reached in the equivalent body for aviation, the International Civil Aviation Organization, which managed to chart a course through the political and environmental issues and find a compromise solution. We were

supported during the plenary debate by the Argentinian delegation, which is an important step forward for GSF, since having a member state endorsement provides additional credibility behind the GSF position.

The roadmap is simply a plan for negotiations and studies; at this stage, it is impossible to know what any policies will be, whether there will be some kind of cap or emissions limit, and how GHG allocations will be distributed across member states. There will be a sub-group set up to continue debates before the next MEPC in 2017, and GSF will join this group to follow and influence the discussions.

It is important to stress that there will be no new GHG measures in shipping announced until 2023, which are likely to enter into force no earlier than 2024 or 2025.

Marine Sulphur EmissionsIn addition to the developments on

GHG emissions, the October 2016 MEPC meeting made a vitally important decision on the reduction of harmful sulphur emissions.

Ships generate only in the range of 5 percent to 10 percent of all global man-made sulphur oxide emissions, which have significant health impacts. However, because the vast majority (around 70 percent) of these emissions occur within 400 km of coastal communities, about 60,000 early mortalities each year are attributed to shipping emissions, mainly in the seaside areas of East Asia, South Asia and Europe.

Recognizing these health impacts, the IMO has set January 1, 2020 as the implementation date for a significant reduction in the sulphur content of the fuel oil used by ships. The decision, which will be to implement a global sulphur cap of 0.50 percent m/m (mass/mass) in 2020. Exemptions are provided for situations involving the safety of the ship or saving life at sea, or if a ship or its equipment is damaged. This represents a significant cut from the 3.5 percent m/m global limit currently in place.

This decision followed the completion of an independent review that concluded that sufficient compliant fuel oil would be available to meet the fuel-oil

requirements. IMO member states had the option to defer the implementation date to 2025, but decided that, given the positive outcome of the fuel-availability study, and the health improvements that will result, the earlier date was preferred.

Ships can meet the requirement by using low-sulphur compliant fuel oil, alternative fuel gases that emit low sulphur oxides (SOx), or exhaust gas-cleaning systems or “scrubbers,” which “clean” the emissions before they are released into the atmosphere. In the latter case, the equivalent arrangement must be approved by the ship’s administration (the flag state).

The new global cap will not change the limit in SOx emission control areas (ECAs) established by IMO, which since January 1, 2015 has been 0.10 percent m/m. The ECAs established under MARPOL Annex VI for SOx are the Baltic Sea area, the North Sea area, the North American area (covering designated coastal areas off the United States and Canada), and the United States Caribbean Sea area (around Puerto Rico and the United States Virgin Islands).

For shippers, the key issues are around implementation. The fuel-supply and shipping industries have been aware that this regulation was highly likely to enter into force globally in 2020, and further, have already several years’ experience in ensuring that they meet regional low-sulphur requirements in ECAs. There is no justification for additional surcharges on shippers to meet these air-pollution requirements, particularly for trades into existing ECAs, where the rules are already in force.

That said, some industry analysts anticipate price increases and volatility as the market adjusts. Shippers should be particularly aware of additional surcharges blamed on increased costs of low-sulphur fuel, which is likely to be the main route to compliance for container ships. The Global Shippers’ Forum will be following the implementation phase at the IMO, and will provide more detail on this issue in future communications. Further information is available on the IMO website, at www.imo.org.

Alex Veitch is Head of Policy for the Global Shippers’ Forum.


TRANSPORT CANADA amended the Canadian Aviation Security Regulations, 2012 in May 2015, after extensive consultation with industry. New requirements under Canada’s

Air Cargo Security Program took effect on October 17, 2016.

These changes address security concerns and align Canada with key international trading partners. We are working closely with air carriers and the supply chain sector to ensure as smooth a transition as possible.

Regulated Program participants can now screen and make cargo secure at different points within the supply chain, using Transport Canada’s prescribed methods. The cargo remains secure through verifiable chain-of-custody procedures between regulated members of the secure supply chain. This ensures that secure cargo can be loaded onto passenger flights without additional screening. Transport Canada will conduct scheduled and random inspections of participants to ensure they meet program requirements and standards.

The benefits to Program participants are clear:Cargo from Known Consignors can be loaded

onto domestic, transborder and international passenger flights without rescreening because participants maintain its security status throughout the secure supply chain.

Obstacles to non-members may include:• Delays and security fees: Cargo from outside

the secure supply chain would have to pass through screening to make it secure for loading onto domestic and international flights carrying both passengers and cargo. This could result in security delays and additional security fees.

• Restrictions: Cargo from non-regulated shippers could be restricted from air transport to the United States altogether, even after screening,

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unless the shipper is registered with Transport Canada.

How to ApplyJoining the Air Cargo Security Program is

voluntary and free. Based on the goods it ships by air, as well as its overall business needs, a business can choose the best location to screen and make cargo secure.

Transport Canada accepts applications at any time. The process takes about six months, depending on a business’s existing security controls and its responsiveness during the application process.

Since November 2015, existing Air Cargo Security Program participants and those who use the Canadian aviation system to ship their goods have been able to apply to the Air Cargo Security Program under five new participant categories (Table 1).

Participant RequirementsTransport Canada has grouped Program

requirements for participants around five security themes or “pillars.” In addition to some administrative information, applicants must provide information related to:

1. Personnel Security: information about personnel with access to secure cargo, and the types of background checks performed.

2. Facility Security/Transportation Security: details about the security of facilities in which cargo is screened and/or stored. Where applicable, Program applicants can also expect questions related to security of the vehicles in which secure cargo is transported.

3. Chain of Custody: details about how they will maintain the secure status of cargo when accepting secure cargo from another Program participant, as well as details about the type of

Cargo from Known

Consignors can be loaded

onto domestic, transborder

and international

passenger flights without

rescreening because

participants maintain its

security status throughout the secure

supply chain.

FALL 2016 | 21

If your business plans to… Apply to become a(n)

1. originate air cargo made secure through a screening process at the time of packing

Known Consignor

2. store, transport and/or accept cargo that a regulated Air Cargo Security Program participant has screened and made secure

Certified Agent

3. screen cargo on behalf of others to make it secure, then store and/or transport it

Regulated Agent

4. originate cargo and have a regulated participant in the Air Cargo Security Program screen it to make it secure

Account Consignor

5. direct the movement of secure cargo without coming into contact with it (i.e., provide logistics services without screening, storing, transporting or tendering secure cargo)

Authorized Cargo Administrator

cargo-related information it will require at the time of tendering.

4. Training, Exercises and Audits: details about training personnel with access to secure cargo receive, to perform their security duties. We will also ask Program applicants if they perform security exercises and/or audits to assess the effectiveness of their cargo security controls.

5. Screening: details about the procedures used to screen and make cargo secure, in accordance with Transport Canada-prescribed methods. This includes screening via physical security controls or the use of certain types of approved screening technology.

Learn MoreTransport Canada encourages

businesses wishing to participate in the Air Cargo Security Program to contact its Air Cargo Security Support Centre, or begin the application process directly

Table 1

important for industry associations like FMA and for individual rail shippers to make their views known to Transport Canada officials and to the Minister as the work moves forward.

FMA will communicate progress to its members at regular intervals and arrange for dialogue and feedback through our modal committees.

The text of the Minister’s speech can be found on the Government of Canada website, at www.canada.ca/en; search for “Transportation 2030” and select the speaking notes from the search results.

2030 continued from page 8is by lubricating the system with more inventory. Perhaps this is one reason inventory levels remain stubbornly high.

If so, there’s another collision on the horizon, because it will never be cheaper to maintain excess inventory than it is today, with interest rates hovering around zero. We all know that interest rates will rise at some point. The question is when. Then the pressure will really be on to slash inventory levels, and reliability in the supply chain will become even more valuable.

Reliability won’t be free, however, and

RELIABILITY continued from page 9

operating common capacity cannot com-pete amongst themselves with regards to the consortium/alliance’s agreed capacity, sailing frequency, transit times, ports of call and associated service quality.

• Whether vertical integration between shippers and shipping companies may be an alternative means of better aligning incentives between both parties.

• A deeper analysis of the costs and benefits of alliances versus mergers between alliance partners would be helpful.

• Should the container shipping market become consolidated to 6 to 10

COMPETITION continued from page 11

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major operators controlling the main trade routes, it would seem inevitable that market share thresholds for alliances and consortia would have to be so low that they would be ruled out on competition grounds, with carriers having to compete head to head.

A copy of the full report can be found on www.globalshippersforum.com.

Chris Welsh is Secretary General of the Global Shippers’ Forum.

End Notes1. 2M Alliance, Ocean Three Alliance, CKYHE

Alliance, G6 Alliance.

2. 2M Alliance, Ocean Alliance, The Alliance.

shippers should be prepared to pay a price for quality.

Lawrence J. Gross is President of Gross Transportation Consulting in Mahwah, N.J.

Reprinted with permission from The Journal of Commerce. For more, please visit www.joc.com.


FOLLOWING the successful GSF meeting hosted by FMA in Toronto in 2015, this year’s event was held in Colombo, Sri Lanka in late July. Representatives of shippers’

organizations from Africa, Asia, Europe and North America convened in Colombo’s Cinnamon Grand Hotel on July 28 and 29 to discuss a variety of issues related to international shipping and air cargo, which are of concern and of interest to shippers throughout the world.

The GSF Annual Conference was scheduled to coincide with the 50th-anniversary celebrations of the Sri Lanka Shippers’ Council. With the support of the Ceylon Chamber of Commerce, Sri Lankan importers and exporters showed great foresight and initiative in responding to a United Nations recommendation in 1966 that shippers should organize to effectively negotiate with the shipping conferences.

Many of the issues identified in 1966 continue to require the time and effort of shipper organizations to promote cost-effective and efficient international supply chains, and these issues were addressed during this year’s conference.

On the marine side, emphasis was on “terminal handling” and other surcharges that are, in some cases, arbitrarily imposed on exporters or importers over and above the ocean freight charges. This is a particularly severe problem for shippers in Asia and Africa. As a result of the discussions, it was agreed that the GSF would undertake a major public campaign with a goal of ending the arbitrary surcharges.

In addition, the marine topics also covered:• the International Chamber of Commerce’s

Incoterms, due for revision by 2020;• mega container ships, mergers and alliances,

slow steaming and competition policy;• container weight verification and the new IMO

verified gross mass (VGM) rules; and• reduction of greenhouse gas emissions from

both ocean freight and air cargo.

In addition, the agenda included an air cargo roundtable discussion with members of the UN International Civil Aviation Organization (ICAO). This session covered enhanced international air cargo security initiatives, cargo delays, e-commerce initiatives, and attempts to further liberalize global air cargo services.

As part of the GSF meeting, the Sri Lanka Shippers’ Council arranged a tour of the Colombo container port, which has become a major transshipment hub for Southeast Asian container traffic destined to other parts of the world.

At the annual general meeting of the GSF, held in conjunction with the conference, FMA retained its seat on the board of directors and I was again elected Chairman of the GSF.

As the international ocean carriers and airlines have long-established global associations to further and protect their respective interests, the global shipper community has come together by formally establishing the Global Shippers’ Forum in 2011 to give a global voice to shipper concerns at UN agencies such as IMO and ICAO and with other international organizations.

Global Shippers’ Forum Meets in Sri Lanka

GSF: VOICE FOR SHIPPERS AROUND THE WORLD

BY BOB BALLANTYNE

Many of the issues

identified in 1966 continue to require the

time and effort of shipper

organizations to promote

cost-effective and efficient international

supply chains.

Cindy Hick and Bob Ballantyne (FMA’s vice president and president) at the Colombo Container Terminal in Sri Lanka.

• What’s keeping you up at night?• Fuel surcharges? • Transportation strikes? • New laws and regulations?

GOVERNMENT HAS A BIG IMPACT ON FREIGHT TRANSPORTATION FMA maintains a relationship with government, carriers and other stakeholders and facilitates communication and information exchange with members across Canada.

FMA HAS 3 MAIN ELEMENTS TO ITS MANDATE:1. Government Relations – advocacy on policy, legislation and regulation2. Providing networking opportunities3. Information dissemination

Membership is a sound investment for e�cient logistics. Contact us to �nd out how you can help shape

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FOR MORE INFORMATION CONTACT FMA: (613) 599-3283 | [email protected] | www.fma-agf.ca

REPRESENTING CANADIAN SHIPPERS FOR 100 YEARS

• What’s keeping you up at night?• Fuel surcharges? • Transportation strikes? • New laws and regulations?

GOVERNMENT HAS A BIG IMPACT ON FREIGHT TRANSPORTATION FMA maintains a relationship with government, carriers and other stakeholders and facilitates communication and information exchange with members across Canada.

FMA HAS 3 MAIN ELEMENTS TO ITS MANDATE:1. Government Relations – advocacy on policy, legislation and regulation2. Providing networking opportunities3. Information dissemination

Membership is a sound investment for e�cient logistics. Contact us to �nd out how you can help shape

the future of the freight transportation industry.

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Project Manager: MHazlettDesigner: Ryan Semeniuk

Client: Port of Vancouver NOVEMBER 17, 2016 Operator: DLiddle

Colours: 4C Publication: Shipper Advocate

220039-03 CargoFPgAd_Shipper Advocate_8.375x10.875.indd 1 11/17/16 10:33 AM

fall 2016 the shipper advocate - fma-agf.ca and publications/publications-shipp… · fall 2016...

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