Cuba offers a wellspring of opportunities

In the wake of President Obama’s historic visit, there has been a tangible upsurge in goodwill for Cuba across the region. For us in the Caribbean shipping and logistics industry, it has been another signal that, even though the Cuban economy presents challenges and competition for tourism, trade and investment for the rest of the region, it also represents a wellspring of opportunities.

The United States authorities have removed Cuba from a list of countries deemed to have insufficient security in their ports, eliminating a major impediment to the free flow of shipping in the Florida Straits. The US Coast Guard, in an advisory on global port security just before the recent historic visit by the US President, said Cuba now has effective security measures in its ports. That certification also removes the requirement that US vessels maintain a higher level of security for access to ships while in Cuban ports. The shift clears the way for US cruise ships, cargo vessels and even ferries to travel back and forth with much less hassle. No longer will all ships have to wait to be boarded by the US Coast Guard for inspections, though the Coast Guard still can conduct random inspections.

“Cuba does have the potential to act as a transshipment hub for US cargo in a similar way to how Freeport, Bahamas, does now,” said shipping analyst Drewry last year.

This was reinforced by the US logistics executives who toured Cuba’s shipping facilities. Concurrent with President Obama’s visit, officials from 18 shipping companies toured a number of locations across the country including the Port of Mariel. The consortium also met with ProCuba, a Cuban group looking to promote foreign investment in the country. We already know that Mariel is due to receive further development from the Singapore-based terminal operator PSA International.

It was noted that, despite hurdles of heavy bureaucracy and poor infrastructure, Cuba may be an ideal location for cross-docking, or re-sorting and distributing, cargo from post panamax ships to smaller vessels headed for US ports. That could include ships from Asia with cargo bound for East Coast ports that aren’t equipped to handle the bigger ships, which can carry 14,000 teu or more.

Mariel will have to compete with several well established transshipment hubs in the Caribbean region such as those in Panama, Jamaica and the Dominican Republic and they also have the advantage of being on, or closer to, the main east-west and north-south shipping lanes. The decisive element could be the depth of Cuba’s ability to leverage partnerships and collaborations. Not only is Cuba forging a new relationship with the US, but it also is moving rapidly to normalize relations with the European Union, expanding its economic relationship with China and reintegrating its economy with the larger world. Port Mariel represents a new wave of partnerships that will certainly impact the rapidly evolving Caribbean shipping paradigm.

Meanwhile, US cruise lines including Carnival are gearing up to start sailing to Cuba as Americans, long prevented from traveling to Cuba under the US trade embargo, take advantage of the relaxed travel restrictions that Obama has put in place.

Regulatory changes

Maritime stakeholders must navigate a constantly evolving regulatory framework, driven by technological advancement and geopolitical events, and they require news and analysis on safety and regulation. As a key component of the global supply chain, our industry is expected to safeguard life and ensure safe operations at sea while protecting the marine environment.

The clock is ticking down to 1 July 2016 and the implementation of the International Maritime Organization’s amendments to the International Convention for the Safety of Life at Sea (SOLAS). This will require that shippers verify gross container weight prior to shipping as a means of tackling the issue of container collapses, accidents and losses due to overweight containers.

Despite calls from various quarters for a postponement of the implementation of these new standards, our industry must comply. Notwithstanding, this raises numerous practical considerations including technological concerns – shippers may not have the easy access to technology that terminal operators and trucking companies may already have in place. There are also cost transfer considerations – shippers may need to invest in new technology and retrofits, which may come at a high cost.

Ultimately, shippers will need to bear these costs, or shift them to consumers, in order to successfully implement these new measures. How should a terminal or transportation company deal with a non-compliant container? If the shipper is far away geographically, who should be responsible for the repackaging of the container to ensure compliance? If so, who pays for the storage costs in preparation for repackaging? Where should it be stored? What of enforcement – what sort of fines should be imposed to ensure compliance with these new rules? What enforcement mechanism should be adopted if a container is found to be misdeclared? These are some of the questions we seek to answer as we navigate the pending regulatory changes which will impact our industry in these areas.

Insights about the operational and financial impact of achieving regulatory compliance and the issues affecting enforcement must be tackled directly and in a timely fashion by our ports and regulatory authorities. From codes and conventions determined at the IMO to political moves from Asia, the EU and the US, it falls to us as an umbrella organisation to encourage our membership to prevent dislocation of our international clientele by taking decisive and speedy action to prepare for these changes.

Canal opening at last

The Panama Canal Authority has set the completion date for its US$ 5.3 billion expansion project for 26 June, almost two years behind schedule. The expansion may shift international trade routes, allowing ships to reach Asia from the US Gulf Coast more than two weeks faster than they would going east through the Suez Canal. It will make room for vessels with a capacity of 12,600 teu, almost three times what the existing locks permit, and will be able to handle liquefied natural gas tankers. Shipments through the canal may rise to 360 million tons in 2017 following the project’s completion. The expansion has spurred a series of port and infrastructure upgrades throughout the Caribbean and the US East Coast as docks make room for bigger vessels.

Now that this event is upon us, it remains to be seen what are the precise benefits, or consequences, of the canal expansion. What is clear is that it is leading to increased competition between regional ports and shipping lines; and opportunities lie dormant waiting to be tapped into by regional governments. The possibility of holding inventory in the Caribbean for redistribution or for other value-added manufacturing or contract logistics activity presents an opportunity waiting to be exploited. This dynamic will affect companies sourcing strategy and network alignment. As a result, Caribbean countries should expect to see an increase in third-party logistics providers, carriers, brokers, financiers and technology providers as the trend toward transportation and logistics outsourcing will only grow, predicated by a need for demand responsiveness, redundancies in supply chains and market agility. Governments seeking to improve their competitiveness must increase the quality of internal logistics performance to take advantage of this.

Preparing next-gen experts

We maintain our commitment to continued expansion of training opportunities in the face of increased debate about the merits of automated ports and the implications for native labor.

Through partnerships with regional institutions such as the Port Management Association of the Caribbean, the OAS, the Association of Caribbean States and others in Central America as well as regional educational organisations in Puerto Rico, the University of Trinidad and Tobago, the University of the West Indies and the Caribbean Maritime Institute, we forge ahead with our plans to create next-generation maritime experts who will adapt and direct the growth of our sector within a constantly evolving global environment.

Through the monetary support of our members, the CSA was able to present the Monica Silvera Scholarship to eight CMI students at the Pegasus Jamaica Hotel earlier this year. The eight students were chosen on the basis of their high academic record, leadership traits and community involvement. With all the advances in port infrastructure and global shipping, we at the CSA must continue to act as a training conduit.

By the time you receive this issue of ‘Caribbean Maritime’ we will be enjoying the hospitality of the Port Canaveral members of our Association at the 15th Caribbean Shipping Executives’ Conference of the CSA in Cocoa Beach, Florida. I am certain that all the participants will enjoy the discourse and planned events and I look forward to robust and productive dialogue during the conference.

David Jean-Marie
President 
Caribbean Shipping Association