Northwest Seaport Alliance Doubles-Down on Intermodal Rail Incentives
By Jordan Royer, VP External Affairs, Pacific Merchant Shipping Association
It is no secret that the Ports of Tacoma and Seattle have been seeing contraction in the container market, and have been losing market share to other ports for most of the past two decades. Whether it’s the impacts of the federal Harbor Maintenance Tax, expansion of capacity in Canada at the Port of Prince Rupert and Vancouver’s Delta Port, Panama Canal expansion, aggressive Atlantic and Gulf coast port competition, consolidation of West Coast market share by Los Angeles and Long Beach, it is clear that discretionary containerized cargo that used to call at Washington’s ports is choosing to go elsewhere.
Addressing this challenge was the key reason the Ports formed the Northwest Seaport Alliance (NWSA) – to coordinate as one gateway to compete for cargo and better align port assets to fit the needs of the ports’ customers. It hasn’t been enough.
This month, the ten commissioners of both ports that make up the NWSA Managing Members upped the ante: they approved a two-pronged strategy to try and incentivize discretionary cargo to come back.
So, what’s in the plan?
First, the NWSA has approved $9 million for an “International Container Rail Cargo Incentive” targeted at ocean carriers that help protect NWSA rail market share by growing their intermodal rail volumes. This incentive would be paid to an ocean carrier for incremental increases in container cargo year over year – at a rate of $100 per extra container. The program starts on May 1 of this year and runs through April 30, 2025, with the NWSA reserving the potential to renew the incentive into future years in Q1 2025.
Second, they have developed an awards program to encourage international container service consistency and vessel arrival on-time performance. The incentive would be paid to vessel lines that do not void sailings that are consistently on-time on port calls. The top three performers will receive awards of $500,000 for first place, $300.000 for second, and $200,000 for third.
These are in addition to another NWSA incentive to Marine Terminal Operators who consistently operate truck gates at a full 5-days per week. Currently, cargo volumes don’t always justify gate operations for all shifts across all 5 weekdays. The NWSA approved $2 million for this program.
While only time will tell if this strategy will have an impact and finally help bring discretionary cargo back, the NWSA ports need to be commended for trying. While the headwinds against the Gateway are huge and unpredictable, the port’s current volumes don’t leave them much choice but to lean in.
While there are plenty of costs in the harbor that are beyond the ports’ control for ocean carriers and their customers, like the Harbor Maintenance Tax, pilotage rates, and tug rates, these variables might be partially blunted by the application of these incentives for ocean carriers in the short term.
There is ample incentive for the ports to try and grow their volumes now and rebuild their market presence before being faced with several new and unique costs looming off in the future. With a huge turnover in the State Legislature, a new Governor in January, and clean air measures on the ballot this fall, it remains to be seen if Olympia will be pushing hard for ever more expensive water and air quality regulations, or if these new leaders will tap the breaks and work with the ports to create balanced environmental benefits and job growth.
The most advanced ports technologically and environmentally are also usually the busiest – and the NWSA ports right now are neither. The key to improving both is regaining the discretionary cargo volumes that have slipped away over the years, and these new rail incentives might be the first step towards a brighter future. We hope they work, and that new leadership in the State will not pull the rug out from under these efforts.
