Alabama State Port Authority: Security / Port Access: Impact of Federal Safety Mandates

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FEDERAL SECURITY MANDATES AND THEIR IMPACT UPON THE ALABAMA STATE PORT AUTHORITY

The Alabama State Port Authority (ASPA) was created to promote, maintain and operate the harbors and seaports within the State, including the inland waterways system. The Authority is self-supporting and it functions generally in the manner of an enterprise operation. ASPA revenues are not paid into the State treasury, and the port receives no appropriations from the State to pay for maintenance or operating costs.

The Authority’s facilities at the Port of Mobile are located on a land area of approximately 2,600 acres, a few blocks from the Mobile central business district. The principal facilities are:

Thirty general cargo berths
A coal import/export terminal
An export grain elevator
A dry bulk materials handling plant
A container handling facility
A terminal railroad system
A liquid bulk terminal
A cold storage facility
Approximately 3,800,000 feet of warehouse space

ASPA has very diverse operations and must deal with many different aspects of security. Even before the events of September 11, 2001, we had begun to tighten security at our port by:

Restricting vehicle access to piers and warehouses;
Tightening requirements for obtaining vehicle decals;
Developing designated parking areas; and
Beginning the process of converting from a security guard force to a sworn officer police force.

Since September 11, the challenge for ports has been to balance facilitation of trade with the need to increase security. In Mobile, for example, we have:

Restricted access to persons with verifiable business at the port;
Developed a credentialing process for persons desiring access to the port;
Hired additional police officers and increased surveillance;
Created new designated off-pier parking areas for vehicles;
Contracted for improvements to the perimeter fencing of the main-docks complex;
Commissioned installation of a CCTV system and supporting lighting improvements, and
Developed training programs to meet the requirements of Coast Guard regulations.

America’s port industry is vast, versatile and highly competitive, consisting of deep draft commercial seaports dispersed along the Atlantic, Pacific, Gulf, and Great Lakes coasts. These ports range from huge load centers handling millions of tons of containerized, break-bulk, and bulk cargos to relatively small “niche” ports serving the unique needs of particular cargos and regions. U.S. ports serve vital national interests by facilitating the flow of trade, the movement of cruise passengers, and supporting the mobilization and deployment of U.S. Armed Forces. In the next twenty years, U.S. overseas trade, 95% of which enters or exits through the nation’s ports, is expected to double. As the link between the land and the water, ports must continue to update and modernize their facilities, not only to accommodate this growth, but also to ensure congressionally mandated homeland security measures are in place and fully functioning.

Faced with growing costs to maintain U.S. border security, Congress has debated and rejected several proposals to assess security fees, none of which would have flowed back to the port community. Meanwhile, several ports have independently announced their intention to recover security costs through various means, including:

Assessments against vessels which call at their facilities,
Wharfage surcharges, and
Harbor fees.

Additionally, grain terminals located on the lower Mississippi River and in the Pacific Northwest have imposed security fees generally based on vessel capacity formulas. Also, within the last several weeks, Maersk, the world’s largest container carrier, has weighed in with a six-dollar per box, security surcharge to “cover the security costs incurred by the carrier, vessel security risk assessment; vessel certification; related security implementation; and administrative and operational expenses.”

We do not believe it is in anyone’s best interest to have security fees become a competitive issue among ports, terminals and carriers, but it certainly could develop that way. In the absence of federal funding, ports, marine terminal operators and vessel owners have begun to examine ways to generate funds to offset the growing cost of complying with U.S. Coast Guard regulations.

In addition to the various independent actions previously mentioned, other avenues being explored are:

Establishment of the Maritime Security Discussion Agreement, an FMC sanctioned coalition of ocean carriers, terminal operating companies and operating ports, which has been formed to develop a nation-wide method to recover port, terminal and vessel costs associated with security.
Actions by FMC sanctioned Marine Terminal Conferences which are permitted to discuss the issue and, if consensus can be reached, can develop equitable, non-competitive security cost recovery mechanisms for their members.

One such Conference, the Gulf Seaports Marine Terminal Conference (which ASPA is a member of), recently announced that it will file notice with the Federal Maritime Commission of its intention to impose a security fee for vessels and cargo utilizing Gulf of Mexico ports.

We believe that port security is not just the responsibility of individual ports; many federal agencies are involved in protecting our international borders. For example:

The FBI takes the lead on terrorism;
The INS on border integrity;
The U.S. Customs Service takes the lead in inspecting cargo, and
The U.S. Coast Guard is charged with protecting our domestic waters and most waterfront facilities.

In our opinion, security must be a shared responsibility between federal, state and local governments, seaports and private industry for it to work effectively. The American Association of Port Authorities (AAPA) has proposed that seaport security expenses should be funded from the $16 billion dollars generated each year from customs duties collected at the nation’s ports. However, Congress and the Administration have apparently determined that, unlike the nation’s airlines, the nation’s seaports do not need large infusions of federal dollars to meet the mandates imposed by the MTSA and resulting U.S. Coast Guard regulations.

Because ports must continue to make improvements, and fund the staffing added to implement and maintain surveillance and access controls, they will either have to drain current cash flows or develop methods to recover security expenses. When ports decide to impose fees, we believe certain basic assumptions must be made:

A fee must be transparent and based upon provable security expenses.
Only costs associated with post-9/11 security-related expenses should be recoverable in any proposed fee.
Proceeds from state and federal grants should be excluded from cost recovery mechanisms.
Fees assessed only against cargo will not be equitably distributed, because of all-inclusive rates and container rates ports negotiate with carriers, which typically include port handling charges.
The initial fee must be introduced and explained as a minimum fee which will be adjusted as required to meet rising security expenses.
A security fee should be a surcharge assessed in addition to tariff charges.
Consideration must be given to the commercial implications of any proposed fee.

Unrecoverable security-related costs have been a tremendous burden for ports, terminals and vessel operators in the post-09/11 world. Ports on the east coast and in the gulf have begun to add security surcharges ranging as high as ten percent on dockage and wharfage, and others are preparing to assess a variety of fees. Additionally, some vessel agents are adding security surcharges to the invoices they present to their principals.

In Mobile, we have seen our security costs sky rocket in the past two years. We have committed capital costs approaching five million dollars, our security-related operating costs have increased by more than $1.5 million dollars a year and our insurance premiums have increased by almost forty percent. Although we have received $2.78 million in federal grants, this money can only be used for capital improvements, and represents less than half of our known infrastructure expenses. On-going post-9/11 operating, maintenance and insurance costs, currently estimated to exceed $2.3 million per year, will continue to climb.

Though the port industry has been working hard to secure its facilities and is ready to comply with these new security regulations, little funding has been provided to assist ports in making security enhancements. According to estimates by the Coast Guard, it will cost port facilities more than $7 billion to comply with the new regulations, and in the current fiscal year, the Administration only requested $49 million dollars for TSA port security grants. We are grateful to Congressional appropriators who have provided a total of $643 million in grant funding for ports and facilities over the past three years. While we are pleased that ports have received this federal support, much more is needed, as the Coast Guard has pointed out. Even before the regulations were published, ports applied for more than $1.6 billion in security grants, and requests for the four rounds total more than $2.5 billion.

Federal help is essential to ensure maritime security regulations can be implemented to protect Americans from acts of terrorism. Without Federal help, costs to implement mandated security enhancements will severely impact public ports’ ability to invest in required infrastructure improvements such as facility expansion, efficiency improvements, channel deepening projects, and navigational aids to meet the growth in trade. The long-term impact will be significant and will be detrimental to the ability of ports to handle the projected growth in maritime trade.

Ports have already invested millions of dollars in port security since September 11, 2001, and providing Federal funds to help accelerate these improvements is vital. Without such help, new Federal requirements are likely to become unfunded Federal mandates and subject to competing budgetary pressures at ports. Ports are the first line of defense at our sea borders, and it is vital that Congress and the Federal government partner with our industry to secure the country’s international borders quickly.

ASPA pledges to work with the port community to maintain fair and transparent cost recovery mechanisms, and to keep such costs at the lowest possible level. However, we cannot continue to fund federally-mandated security expenses without additional federal assistance, or in the absence of such assistance, assessing reasonable fees on users of our facilities.