Decision No. 415-W-2013

APPLICATION

[1] Eastern Bulk Shipping Ltd. (Eastern) applied for a licence to use the “WILSON SPLIT”, a Barbadian cargo ship, to transport aggregated stone and sand cargoes in bulk to and from a variety of East Coast ports, commencing August 18, 2013, and ending August 17, 2014.

NOTICE AND OFFER

[2] The Canadian Transportation Agency (Agency) staff gave notice of the application to the Canadian marine industry. CAI Group of Companies (CAI), Atlantic Towing Limited (ATL), Canada Steamship Lines, a Division of The CSL Group Inc. (CSL), Ocean Group Inc. (Ocean), McKeil Marine Limited (McKeil), CTMA , and Mariner Towing Ltd. (Mariner) submitted offers of Canadian registered ships by the Agency’s deadline.

ISSUE

[3] Is there a suitable Canadian ship available to perform the activity?

POSITIONS OF THE PARTIES

[4] According to Eastern, it acquired the “WILSON SPLIT” as it has commitments to transport material and it intends to register the ship in Canada but requires a coasting trade licence to operate in the meantime. Eastern submits that with the current Canadian fleet, it is difficult to get guaranties of safe delivery due to difficult weather and the lack of self-loading and unloading ships, which results in loss of cargo. Eastern also indicates that its ship is more efficient at transporting cargo and has self-loading and unloading capabilities. Eastern states that it intends to transport aggregates between the following ports:

• Aulds Cove, Nova Scotia to Grindstone, Magdalen Islands, Quebec;
• Mulgrave, Nova Scotia to Georgetown and Souris, Prince Edward Island;
• Pictou, Nova Scotia to Charlottetown, Georgetown and Souris, Prince Edward Island;
• St. George’s, Newfoundland and Labrador to Charlottetown and Summerside, Prince Edward Island;
• St. George’s, Newfoundland and Labrador to Grindstone, Magdalen Islands, Quebec; and
• Gaspé, Quebec to Grindstone, Magdalen Islands, Quebec.

[5] In its offer, CAI indicates that the “CHAULK TENACITY” is suitable and available to perform the proposed activity.

[6] ATL submits in its offer that it has various suitable tugs and barges available in the area and proposes the tug “ATLANTIC FIR” and the barge “ATLANTIC SHARK”.

[7] CSL indicates that the bulk self unloader type vessels “ATLANTIC HURON” and “ATLANTIC ERIE” are available immediately to commence carrying the proposed cargoes. CSL also indicates that its ships are suitable to operate in every named port except Souris.

[8] Ocean indicates that the barges “MOTTI” and “BETSIAMITES” are available and adapted to transport the aggregates mentioned in the application. Ocean states that it has carried out this type of transportation for several years with the barge “BETSIAMITES”.

[9] McKeil indicates that it has the capacity within its fleet to serve the requirements of Eastern. It offers the barges “LABRADOR SPIRIT” and “LAMBERT SPIRIT” which are available now. In addition, McKeil indicates that the barges “NIAGARA SPIRIT” and “ALOUETTE SPIRIT” are also available if required.

[10] CTMA indicates in its offer that the tug “SPANISH MIST” is available and would be adapted to transport stone and sand with a barge.

[11] Mariner submits that between itself and its partners, the capacity to transport the volumes proposed by Eastern is available. It indicates that it currently operates the tug “GULF DIANNE” and the barge “G. of G. 270” and that due to the smaller size of its ships, it can operate in ports where larger ships cannot.

[12] In its response to the offers, Eastern indicates that the company was created to provide a cost and time efficient option to satisfy the shipping needs of Chapman Bros. Construction Ltd (Chapman), Delaney Cement Co. and Western Logging Ltd. The small loading capacity of the “WILSON SPLIT” allows it to access markets that were not accessible due to draft requirements, demurrage charged by existing marine companies and cost efficiency. As a self-loading and unloading ship with sealable hatch covers and a capacity of 5,900 metric tonnes, the “WILSON SPLIT” is unique to the market sector it intends to serve. Tug and barge operations have not successfully served this sector of the market due to the nature of those operations, the weather restrictions and the costs.

[13] Eastern states that the ship offered by CAI has been at the Swansea shipyard in England since 2010 and is, therefore, unavailable. CAI did not refute this argument. With respect to the ships offered by ATL, Eastern submits that the proposed barge is too wide to load in Mulgrave and Aulds Cove and haul material directly to Prince Edward Island or the Magdalen Islands via the Canso Canal. Eastern adds that ATL would have to go around Cape Breton to unload in Prince Edward Island and the Magdalen Islands. Consequently, the voyage would not be cost efficient due to increased operating costs. ATL did not refute these arguments.

[14] Eastern also submits that the ships offered by CSL have capacities of 35,420 and 37,753 metric tonnes and are, therefore, subject to load restrictions at Georgetown and cannot enter Grindstone. Eastern argues that CSL’s ships would have to operate significantly smaller cargo, and therefore, would not be cost efficient due to increased operating costs. CSL did not refute these arguments. With respect to the ships offered by Ocean, Eastern acknowledges that Ocean did transport aggregate for Chapman over the past ten years, however, Ocean has been transporting other material, which has created scheduling and availability problems. Ocean did not refute this argument.

[15] Eastern states that the pricing previously provided to its client by McKeil to transport concrete sand from Turf Point, Newfoundland and Labrador was too high. Eastern further states that this pricing would not allow its client to be competitive in the selling of concrete sand in Prince Edward Island. McKeil did not refute these arguments.

[16] Eastern argues that the ship offered by CTMA is not suitable for towing barges over long distances and this type of voyage would not be permitted by the Canadian Coast Guard. Eastern also indicates that the accommodations on CTMA’s ship are below the deck and, therefore, the ship can only be used as a day tug.

[17] In its response to Eastern’s comments, CTMA confirms the applicant’s submission that the tug’s accommodations are below the waterline. However, CTMA plans to modify the ship to make it compliant. CTMA indicates that the marine engineering firm’s conclusions to this effect could be produced rapidly. CTMA also indicates that it does not understand Eastern’s arguments that using a tug and a barge is not adapted to transporting aggregate, because using these types of vessels does not change the quality of the load.

[18] Eastern states that Mariner does not have enough capacity to transport its own material and partnered with McKeil to assist in satisfying its needs. Eastern also states that Mariner has not been able to provide competitive pricing to Chapman. In its response, Mariner acknowledges Eastern’s submission that it used the services of other operators such as McKeil, CSL, ATL, Ocean and Miller Shipping Ltd., which in its view demonstrates that the shipping options are varied in the area. Mariner states that Chapman did not recently request pricing quotes from Mariner.

ANALYSIS AND FINDINGS

Legislative context

[19] The intent of the Coasting Trade Act is to allow foreign ships to be used in Canadian waters when there is no suitable Canadian ship available for a proposed activity. The Agency must determine whether, on a balance of probabilities, a Canadian ship is suitable and available to perform the activity.

[20] In carrying out its responsibilities, the Agency relies upon an applicant to provide detailed information about all relevant facts and circumstances that are pertinent to a proposed activity and to the foreign ship to be used. The Agency also relies upon Canadian operators to provide detailed information about the offered ship and how a Canadian ship that has been offered would be able to meet the requirements as described by an applicant. These requirements are clearly set out in the Canadian Transportation Agency Guidelines Respecting Coasting Trade Licence Applications (Guidelines).

[21] The onus lies with the applicant to file an application which contains all relevant details. Similarly, a Canadian operator filing an offer in answer to an application is required to describe in detail how a ship is going to perform the activity, including all relevant information to justify the offer.

[22] The Guidelines provide that the onus is on the applicant to demonstrate that a ship that has been offered is not suitable and/or is not available for the proposed activity. Further, the Guidelines recognize that the Coasting Trade Act does not state that an offered Canadian-registered ship must be “identical” to the foreign ship proposed in the application. The suitability of a Canadian‑registered ship is not assessed in relation to the foreign ship, but rather in relation to the requirements of the activity and to whether the Canadian-registered ship is capable of performing the activity.

Availability

[23] The Agency notes that Eastern specifically challenges the availability of the ship offered by CAI and that CAI did not refute Eastern’s arguments. As CAI failed to discharge itself of its evidentiary burden to demonstrate that its ship is available, the Agency finds that the ship offered by CAI is not available for the proposed activity.

[24] With respect to the Canadian ships offered by ATL, CSL and CTMA, Eastern did not challenge their availability. Although Eastern questions the ability of the ships offered by Ocean and Mariner to satisfy their own demand, both Ocean and Mariner confirmed that their ships are available for the proposed activity. Therefore, the Agency finds that the ships offered by ATL, CSL, Ocean, McKeil, CTMA and Mariner are available for the proposed activity.

Suitability

[25] As the Agency found that CAI’s ship is not available, there is no need to address the issue of suitability for that ship.

Technical suitability

[26] Eastern questions the technical suitability of tugs and barges in general to perform this activity. Five of the six operators (ATL, Ocean, McKeil, CTMA and Mariner) propose to use combinations of tugs and barges to perform the proposed activity. Eastern states that barges have not successfully served the proposed market due to the nature of the operations, the weather restrictions and the costs, however, Eastern failed to provide evidence or arguments to demonstrate that tugs and barges would not be technically suitable for the proposed activity. On the contrary, the submissions of the operators suggest that this type of activity has been performed by tugs and barges in the past.

[27] With respect to CSL’s ships, the Agency notes that CSL acknowledged in its offer that its ships are unable to operate at the port of Souris. In addition, as CSL did not refute Eastern’s argument that CSL’s ships cannot operate at the port of Grindstone, the Agency accepts that CSL’s ships would not be able to operate at the port of Grindstone. Similarly, CSL did not refute Eastern’s argument that CSL’s ships would have to operate under load restrictions at the port of Georgetown and, therefore, the Agency accepts that with respect to the port of Georgetown, CSL could only operate in that port under load restrictions. However, the Agency notes that Eastern failed to explain how the load restrictions would result in CSL’s ships being technically unsuitable to operate from that port. The fact that the ships proposed by CSL would have to operate with smaller cargoes when unloading at the port of Georgetown does not make them technically unsuitable for the proposed activity. Accordingly, the Agency finds that the ships offered by CSL would be suitable to operate at all ports, except for the ports of Souris and Grindstone.

[28] With respect to CTMA’s ship, the Agency notes that CTMA accepts Eastern’s argument that its ship is not suitable for towing barges over long distances because the accommodations are below the waterline. Although CTMA indicates that it is planning to modify its ship to make it adequate, it did not disclose a date when its ship could be made suitable to perform the activity. Based on the above, the Agency is of the opinion that CTMA did not meet its evidentiary burden to demonstrate that the ship would be suitable for the proposed activity.

[29] Eastern argues that ATL’s ship is too wide to load in Mulgrave and Aulds Cove and haul material directly to Prince Edward Island or the Magdalen Islands via the Canso canal, thus requiring the ship to go around Cape Breton and unload in Prince Edward Island and in the Magdalen Islands, making the voyage inefficient from a cost perspective. However, Eastern fails to provide any evidence or argument to demonstrate that ATL’s ship would not be technically suitable to perform the activity. The Agency also notes that Eastern did not present any specific arguments with respect to the technical suitability of the ships offered by Ocean, McKeil and Mariner. Therefore, the Agency concludes that Eastern failed to establish that the ships offered by ATL, Ocean, McKeil and Marine would not be suitable for the proposed activity.

[30] Based on the above, the Agency finds that the ships offered by ATL, Ocean, McKeil and Mariner would be technically suitable to perform the proposed activity.

Commercial and economic suitability

[31] The Guidelines indicate that the onus is on the applicant to produce evidence that clearly demonstrates that the use of a Canadian ship would render the activity economically and commercially unviable. Decision No. 450-W-2009 states:

With respect to the issue of additional costs, the Agency has previously ruled that “to claim that the cost of using a Canadian ship would be higher is not sufficient to show that a Canadian ship is not suitable; rather, the onus is on the applicant to demonstrate that the project would be uneconomic or commercially unviable using the Canadian ship” (Decision No. 352-W-2005). In the same Decision, the Agency referred to Decision No. 427-W-2003, in which the Agency ruled that “[...] where the applicant is arguing that the use of the Canadian vessel offered would impose an unacceptable financial burden on it, it is up to the applicant to provide the financial information that would prove these allegations.

[32] In its submission, Eastern questions the economic suitability of CSL’s ships and states that CSL has to haul significantly smaller cargoes when unloading at the port of Georgetown, making it an inefficient option from a cost perspective. Eastern also argues that using ATL’s ship would not be cost efficient as its ship must use a longer route around Cape Breton because it is too wide to operate in the Canso Canal. With respect to the ships offered by Ocean, Mariner and McKeil, Eastern states that their pricing is not competitive because of its size, thus making them inefficient options from a cost perspective.

[33] The Agency finds that Eastern failed to provide any financial information or evidence to demonstrate that using the ships proposed by ATL, CSL, CTMA, Ocean, Mariner or McKeil would render the proposed activity economically and commercially unviable.

OTHER MATTER

[34] The Agency notes that Eastern stressed the fact that it is a Canadian company that will be using a Canadian crew, which will provide employment to local seafarers as well as local shore residents.

[35] As set out above, the mandate of the Agency under the Coasting Trade Act is to determine whether suitable Canadian ships are available to perform an activity in Canadian waters that has been described in an application for the use of a foreign-flagged ship. When offers of Canadian flagged ships are made, the Agency considers their technical, economic and commercial suitability to perform the proposed activity. Accordingly, the fact that the applicant is a Canadian company and will employ Canadians does not form part of the criteria used by the Agency to assess suitability and availability of Canadian ships.

DETERMINATION

[36] In light of the foregoing, the Agency determines, pursuant to subsection 8(1) of the Coasting Trade Act, that there are suitable Canadian ships available to perform the activity.

[37] The Agency is providing this determination to the Minister of Public Safety and Emergency Preparedness.