Last month, all five commissioners and Port of Seattle staff took a road trip to eastern Washington to hear from local business, civic and government leaders how the Port can better serve their needs as a trade and tourism gateway. Over the course of three days we visited Ellensburg, Wenatchee, Moses Lake, Spokane, Walla Walla, the Tri-Cities, Prosser and Yakima.
The trip drove home two truisms. First, to remain competitive in the global marketplace, Washington State trade officials need to keep their eyes on many different moving parts. Second, we are all in this together – the economic health of the region on the east side of the Cascade Mountains impacts the region west of the divide, and vice versa.
Central and eastern Washington agricultural products represent the largest category of containerized freight exported through the Port of Seattle. The state’s agricultural businesses exported $8.6 billion in farm products in 2011.
We kicked off our trip with a tour of Anderson Hay & Grain’s operations in Ellensburg, followed by a roundtable with local hay and alfalfa exporters. We received an earful from the participants, who told us that they are losing business to hay and alfalfa farmers in the US Southwest because the shipping rates out of Southern California are much cheaper than out of the Northwest. Hay going from Seattle to a northeast China port costs $1,000 per container but only $500 out of Los Angeles and Long Beach (See this article in the Ellensburg Daily Record).
After our meetings in Ellensburg, we traveled to Wenatchee to meet with apple and cherry exporters in the offices of the Washington Apple Commission. The major concern of both the apple and cherry exporters is the need for more capacity to get their products to overseas markets.
Washington is producing larger and larger fruit crops. A record 39 million boxes of Washington apples will likely be exported this season, and that number could increase by as much as 20 million boxes next season. Washington State cherry crops are also increasing, and up to 20% of the annual crop goes by air to Asia.
Because Washington is a high-export state, empty containers are quickly filled and sent back to Asia. If empty containers are not available, shippers have to rail those commodities to ports where containers sit idle (or in the case of many cherry exporters, truck the cherries to airports other than Sea-Tac Airport).
Containers off-loaded in ports like Los Angeles and Long Beach don’t have to go far because 80 percent of the contents are consumed in Southern California or adjacent areas. Both those ports have many more imports coming in than exports going out, so shipping lines have incentive to discount their rates to fill up empty containers returning to Asia.
To address this issue, Puget Sound ports need to work on getting more imports through our seaport terminals. As a discretionary port in a price sensitive industry, to do that we need to make sure that the Port of Seattle is as competitive as possible.
We talked with Eastern Washington farmers and business leaders about getting their support for our efforts to reform the federal Harbor Maintenance Tax, which places a competitive disadvantage on Puget Sound ports.
The Harbor Maintenance Tax is an ad valorem tax on imports being shipped through US seaports. All US ports pay the HMT on the value of what’s contained in incoming containers.
The revenues are used to dredge shipping lanes leading up to harbors, which makes sense in many places, including Columbia River ports in southern Washington. But the Puget Sound is a naturally deep water harbor and shipping lanes to the ports of Tacoma and Seattle do not need dredging. The tax puts us at a significant disadvantage – as much as $200 per container – when competing with the British Columbia ports, which don’t pay the tax (For more information on how the HMT hurts Puget Sound ports, see this editorial in Tacoma’s News Tribune).
We are working with Eastern Washington agricultural interests, other port stakeholders and our Congressional delegation to address the negative impact of the HMT on Washington deep water ports. It is only one issue, however, that we are keeping our eyes on in making sure the Port of Seattle remains competitive for Washington exporters.
To ensure Washington ports remain vibrant gateways for trade, Puget Sound port officials need to keep watch over many different moving parts, some of which we control, many of which we don’t.
I will address other aspects of the supply chain in future blog posts.