News & Reviews News Wire Federal Maritime Commission members urge STB to reject CP-KCS merger

Federal Maritime Commission members urge STB to reject CP-KCS merger

By Bill Stephens | June 23, 2022

Ocean regulators say merger would accelerate shift of U.S. port traffic to Canadian ports

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Red locomotive with freight in Illinois
Red locomotive with freight in Illinois
Bound for Chicago, a Canadian Pacific intermodal train that originated in Vancouver, British Columbia, heads south through Deerfield, Ill., on June 12, 2016. (Trains: David Lassen)

WASHINGTON – Three of the Federal Maritime Commission’s five members have urged the Surface Transportation Board to reject the proposed Canadian Pacific-Kansas City Southern merger, saying the deal would hurt U.S. ports.

Canadian ports — particularly Vancouver and Prince Rupert in British Columbia — have been gaining market share for containerized traffic that’s ultimately bound for points in the U.S. Now Canadian National and Canadian Pacific are aiming to divert some U.S. East Coast port traffic to Halifax, Nova Scotia, and Saint John, New Brunswick.

“The proposed merger will adversely impact U.S. ports and the primarily U.S.-based intermodal railway systems that serve our ports, and would disproportionately benefit Canadian ports and the primarily Canadian-based intermodal railway systems that service Canadian ports for transportation of U.S.-bound cargo,” Commissioners Carl Bentzel, Louis Sola, and Max Vekich wrote to the STB this week. “Canadian policies supporting Canadian port use per capita is financially much more significant than similar policies in the United States, contributing to erosion of U.S. port and railroad market share for U.S.-bound cargo.”

They noted that their comments reflected their individual views and were not an official position of the Federal Maritime Commission, an independent agency which regulates maritime transportation.

The CP-KCS merger, they argued, will do more harm than good by diverting business away from U.S. ports, hurting port and port-related jobs. “Such economic losses will be far greater than any economic gain that might ensue as a result of a consolidation of the railroad systems of CP and KCS,” they wrote.

Canadian ports are heavily subsidized by the federal government, which makes them cheaper for importers and exporters, particularly for cargo bound for the U.S. Midwest. As a result, the Canadian ports have gained share from U.S. ports.

In 2008, the commissioners noted, Pacific Northwest ports held a 62% to 38% edge in U.S.-bound traffic compared to British Columbia ports. By 2021, the tide had reversed, with the Canadian ports moving 69% of the Midwest-bound containers. California ports also have lost share to British Columbia, although the drop has not been as severe.

“The Canadian Pacific-Kansas City Southern proposed merger expansion is explicitly aimed at continuing to build on policies to use Canadian ports and Canadian railroads to carry U.S.-destined cargo,” the commissioners wrote.

Intermodal analyst Larry Gross was skeptical that the CP-KCS merger would contribute to the shift of traffic to Canadian ports. “I don’t buy it,” he says, pointing out that Canadian Pacific already serves Kansas City and could compete with West Coast and East Coast ports for Missouri-bound traffic.

KCS territory south of Kansas City, Gross notes, is too far from Canadian ports for them to compete effectively against U.S. ports. “If Los Angeles and Long Beach can’t dominate a route to Texas, then we deserve to lose,” Gross says.

17 thoughts on “Federal Maritime Commission members urge STB to reject CP-KCS merger

  1. Access to the expanding intermodal capacity ad Port Saint John is the crown jewel of the CSX acquisition of Pan AM Railways. Ultimately you will see doublestacks rolling across Maine and Massachusetts and continuing west to Buffalo, Norfh Baltimore, Chicago and even St. Louis.

  2. I’d say Canadian Ports gaining market share has more to do with the inability of US ports AND railroads to move the traffic. Sort of like the US Postal Service has now lost my important documentation mail to FedEx. I sent needed documentation to the RRB on May 21, arrived Philadelphia May 24 and has been out for delivery since May 28. SO what dumpster or mail carriers garage is it in? Not the first instance of needed documents not being delivered to me or seriously delayed.

  3. Is the Federal Maritime Commission a government body?
    If these three members are NOT speaking for the Commission, then they should keep their mouths SHUT! Furthermore, they ought to be removed form the Commission for speaking out unauthorized.

    1. EVERYONE is entitled to their personal opinion, even members of government commissions…unless you happen to think we don’t have freedom of speech in this company. The article headline is misleading, none of the 3 spoke on behalf of the FMC, therefore their opinions may not be those of the FMC.

  4. Shouldn’t the climate folks love the idea of reducing green house gases via less freight in LA/LB?

    1. I think you are confusing community air pollution and climate change. While the first certainly affects the second, the reverse is not as direct with some air pollutants not discipate. Moving the to another port would help with local pollution which is a huge problem in the LA/LB area, but not so much with climate change. (Granted it would a little bit assuuming that moving to other ports would burn less and cleaner fossil fuels.)

  5. The maritime commission is a front for the dock workers union. This is simply the union saying they see a threat to their jobs if work is shifted to other ports outside their jurisdiction.

    I seriously doubt it. Why would a shipper that wants something in the lower midwest choose Vancouver or St John?

    As far as I know CN is the only one that has an active container service with Asia via Prince Rupert to Indianapolis using the Indiana Railroad. And that was only because Indiana was supplying the right kind of soy.

    US destined Asian electronics, auto parts and autos all come in via Long Beach. European cars come in at Brunswick GA or Jacksonville FL and the US made ones exit on the same boats. Most other US destined, Euro sourced merchandise comes in at the Port of NYNJ.

    This is a mild over reaction.

    1. John Rice asks, “Why would a shipper that wants something in the lower midwest choose Vancouver or St John?”

      Perhaps that routing is faster, especially given the U.S. port delays.

      – Ed Kyle

  6. What is needed is accurate data on how the US ports stack up with the Canadian ports in both terms of efficiency and labor costs. Are their longshoremen unions more cooperative than their US counterparts? Do their unions have a history of mob infiltration like those in the US?

    1. Here is a link to the World Bank’s ranking of container port efficiency.

      You will notice that Vancouver, Long Beach, and Los Angeles rank at the very bottom. Halifax and a number of US East Coast ports rank in the top 100. The West Coast US ports are notorious for extremely high wages, refusal to automate, and less than 24 hour 7 day a week operations.

  7. Yes Charles maybe if places like long beach weren’t over flowing with containers and ships waiting weeks to unload they wouldn’t be going to ports in Canada. If you can’t get the job done O well you lose.

  8. If traffic is diverted to more efficient and reliable ports (i.e. in Canada), that’s a good thing. Let the market decide.

    Canada isn’t an enemy of the United States.

    1. You ignore that the ports in Canada are heavily subsidized by the Canadian government…subsidize our ports just like they do and see who handles the volume.

    2. Don’t kid yourself about US ports. They are getting a lot of Fed and State funds to support their infrastructure buildouts & expansion not too mention a slug of money that has been going into channel deepening projects over the last 5 to 10 years..

      A couple of examples, my company was low bidder on the most recent Mobile Harbor channel deepening phase which is fully funded by Feds at a tune of +$200 million of tax dollars followed by the fact that state of Alabama is also putting in a big chunk of state revenues to build up rail service on another +$200 million in rail corridor investment. Another good one, Port of LA/Long Beach have had dock to rail programs that have totaled well north of a couple hundred million of tax payer dollars. These examples are tip of the iceberg if you want to count how much tax dollars have been plowed into Ports in Boston, Norfolk, Charleston, Savannah, Jacksonville, Miami and a huge expansion going on in Houston.

      Simply put, all these ports are having record volumes and all are getting bigger. It is already happening in the States ever since Panama added a new bigger wider canal locks.

    3. And don’t forget one important factor Gerald, the Port of Prince Rupert is the closest port in North America to Asia, at least 500 miles closer than Tacoma and much much closer than Cali.
      The shipping companies also play an important factor in where they want their ships to dock, big bucks savings to them.

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