The Importance of Eastern Washington to the Port of Seattle

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.

Sustainability in the Shipping Industry: Reports of Its Death Have Been Greatly Exaggerated

Last week, I had coffee with a local maritime industry lobbyist who told me: “You know that goal that you set for the Port of Seattle to be ‘the greenest, cleanest, most energy efficient port in North America’?”

I responded, “Yes, the one my fellow commissioners and I unanimously adopted back in 2008? What about it?”

“It won’t help you grow your business, it’s meaningless.”

I can understand my lobbyist friend’s pessimism. Considering that the global shipping industry suffered an estimated $5 billion in losses in 2011, their minds have lately been directed elsewhere, namely on stemming the bloodshed.

There has been an obsessive focus by global shipping lines and their customers – the shippers of goods, or in industry lingo the “beneficial cargo owners” (BCOs) – on reducing costs throughout the supply chain. But the beauty of bringing sustainability into the supply chain is exactly that – it is not only the right thing to do for our planet, it also helps the bottom line.

So despite my lobbyist friend’s skepticism regarding the business case for sustainability, there has in fact been an increasing focus on sustainability by major retailers (such as Target and Ikea) and consumer products companies (such as Nike and Hewlett Packard) that account for a significant percentage of inbound cargo from Asia.

The Port of Seattle is well-positioned to benefit from this industry emphasis on sustainability and greening the supply chain. We believe that the Port’s green initiatives will help attract business and grow jobs for our region.

In 2009, the Port of Seattle commissioned Herbert Engineering Corp. to analyze the carbon emissions of intermodal shipments from Asia to North American markets. The study, which was updated in 2011, found that routing through the Port of Seattle offers the lowest carbon footprint for cargo coming by sea from Asia to major markets in the U.S. Midwest and East Coast.

The Port has marketed our comparatively low carbon footprint both to BCOs and global shipping lines as the “Green Gateway,” and we continue to collaborate with industry to come up with business friendly solutions for mitigating environmental impact.

It is true that the preliminary efforts by these businesses with regard to sustainability were focused on physical improvements such as lighting in warehouses, recycling and other downstream improvements. In the past couple of years, however, we are seeing an increasing shift of awareness to areas of the supply chain such as transportation.

Wal-Mart last fall announced a commitment to drive sustainability deep into its supply chain. It and other large retailers have been leaders in this area.

With the largest retailers taking the lead, we believe that it is only a matter of time before small retailers follow. The Port of Seattle’s position as a leader in sustainability, and the low carbon footprint of shipping from Asia into the Midwest through Pacific Northwest ports, position us well in the minds of these customers when selecting a gateway to ship their goods.

Nike already requires that ocean carriers list the carbon impact of their services as part of its contracting process. Retailers and other shippers have responded positively to the Port of Seattle’s Carbon Calculator tool, finding it useful in their own internal calculations of the carbon footprint of their supply chains.

In fact, we have gotten very positive comments from importers about the way we have implemented our environmental programs. The Port’s eschewing of confrontation in favor of a collaborative approach – working with industry to address environmental impacts – is well-regarded among the international trade community.

Shipping lines are also taking note. We have had excellent participation in our voluntary At-Berth Clean Fuels program, which incentivizes shipping lines to burn low sulfur diesel while at the Port. In each of 2011 and 2012, we saw participation of over 70% by frequent calling ships. Our business friendly approach has been attractive to shipping lines that are considering adding to or expanding services in the Pacific Northwest.

Our goal to be the greenest, cleanest, most energy efficient port in North America encompasses more than just our seaport and more than just air emissions. We are focused on improving air and water quality at both at both our seaport and airport, reducing energy usage at all of our facilities, recycling all sorts of items used by us and by our tenants, and cleaning up contaminated Port-owned properties and restoring those properties to productive use.

The Port of Seattle’s environmental goals and green initiatives are not only the right thing to do, they will help grow jobs for our region.

Commissioner John Creighton on New Delta Service to Japan

Moving between Seattle and Asia will be easier than ever before, according to Seattle Port Commissioner John Creighton, now that Delta Air Lines is providing expanded service. New nonstop flights offered by the airline will begin soon, and they will connect Seattle-Tacoma International Airport with Tokyo-Haneda and with Shanghai.

Seattle was among four cities vying for a route to Haneda Airport, which keeps tight control over air traffic. This region is attractive for travelers who want quick access to central Tokyo, rather than flying out to distant Narita and then having a long drive into the city. A nonstop flight to Haneda could be a boon to Sea-Tac Airport, Commissioner Creighton says.  The new service also compliments Delta's existing flights into Osaka and Beijing, as well as its new service to Shanghai, making Seattle one of the best places to begin a journey to Asia.

It's also possible that visitors from Japan will use Seattle as their vacation destination, as the flights are quick and easy and the service is so efficient. They may have relatives within the region that they want to visit, or they may simply feel that Seattle has some attractions they'd be hard-pressed to find in any other major city. These visitors will bring a needed economic boost to Seattle, as they spend money on food, lodging, transportation and entertainment during their visit.

John Creighton Port of Seattle is, not surprisingly, thrilled at the news of this new service. He's long been looking for ways to boost tourism within Seattle, and as co-chair  of the Port Commission's Century Agenda Committee, he's shaped the Port’s vision to help create 100,000 new port-related jobs for the region over the next 25 years. This new service may help him to achieve both goals.

Warehousing is Key to Port's Success, Says Commissioner John Creighton

When discussing the Port of Seattle, it's common for writers to focus on issues pertaining to the seaport terminals themselves and issues that surround them, such as increasing traffic and gentrification. It's natural, according to Port Commissioner John Creighton, as traffic flow is often the most visible issue that impacts the port, and it's also the thing that has the deepest impact on the average commuter. After all, when port traffic is backed up, commute times can often suffer due to traffic congestion moving into and out of the port. But, there are other aspects of the business model that also bear mention, and warehousing is just one of those important topics the port needs to consider.

In a perfect world, a shipper would send an item and a buyer would take that item right away. It would be a bit like a trade, with one company taking an item from the waiting arms of another. However, most companies simply don't function like this. They ship items early, ensuring that they'll be available when the other party wants to make a pickup, or the buying party experiences delays and needs to push back the date of product transfer. It's an imprecise science, and as a result, most companies need to use warehouses.

That said, in the Information Age warehousing has become a science, particularly with management concepts such as just-in-time delivery being in vogue.  The Green River Valley is home to the second largest warehousing district on the west coast, and ensuring that local governments pursue policies that keep warehousing businesses competitive means that more companies can use the port, says John Creighton Port of Seattle. They'll know they have the storage capacity, should they need it, and they know they can make pickups easily. Warehousing also means good jobs for local residents, as someone will need to be available to log those items as they move both in and out. It could be an excellent driver for the economy, and a vital part of the jobs the port plans to add as part of its Century Agenda.

Commissioner Creighton says more research should be done regarding how policymakers can ensure warehousing and logistics companies thrive locally, and he stresses that this will be a vital part of a successful roadmap for the port.

Seattle Port Commissioner John Creighton: 2013 a Great Year for Taste Washington

Each year, Seattle plays host to Taste Washington, a premier event focused exclusively on the food and wine that originate within this great state. Over 225 wineries are expected to participate in the 2013 event, scheduled for March 23 and 24, and Seattle Port Commissioner John Creighton hopes that visitors will be encouraged to come back for a repeat visit to Washington wineries and wine tasting rooms at a later date.

Taste Washington brings needed tourism dollars to the region, as those who participate often choose to stay the night in local hotels. The amount of wine poured makes driving a bit unsafe, and there are so many different delicacies to try that people often need both days that the event takes place in order to sample everything that's available to them with their ticket packages. But, according to Commissioner Creighton, Taste Washington could bring the Seattle area even bigger benefits down the line.

Wine and food enthusiasts might be drawn to the event due to the participation of heavy hitters from around the state, but participants may particularly enjoy the samples of food that come from the local region. This is an area that's often overlooked by food and wine critics, and it's a shame, as Seattle has some wonderful options available. As participants sip, nibble and swirl, they'll also have the opportunity to look out on the lights of the city, and when the event is over, they may choose to visit local restaurants for a more substantial meal, or they might choose to take in a show at the Fifth Avenue Theater, or visit a museum such as the Seattle Art Museum or Experience Music Project, or a local attraction such as the Space Needle or Chihuly Glass Garden. In short, the event could provide a doorway into the wonders that Seattle has to offer, and people might find that they'd like to come back and take a closer look at the city.