Small Biz Braces for Life on the High (Priced) Seas
Importers and exporters face a new era in port security -- and that could bring choppy waters for small companies. As Inc. first reported in January, the nation's 361 ports, and the thousands of companies that do business there, were required at the end of 2003 to submit detailed plans to the Coast Guard explaining what they were doing to guard against maritime terrorism. The ports had until July 1 to implement any measures that the government suggested after reviewing those plans.
Exactly who will pay the estimated $7 billion tab for these new measures remains unresolved. At most ports, which act as landlords to private sector operators, the cost will trickle down to private companies. In those places where a municipal port authority manages everything, new fees may be assessed directly.
In either case, "I think it will raise costs for everyone, but the cost for a small firm will be proportionately larger," says Clemson professor John Mittelstaedt, a small-business trade expert. Fully 97% of U.S. exporters -- more than 230,000 firms -- are small or midsize.
A report cited by the American Association of Port Authorities sounded an even more dour note, raising fears that shipping rates could increase 1% to 3%, with 2% being enough to cause a "sharp drop" in commerce.
Business groups in Washington are now busy lobbying to bring federal security funding more in line with that of the airline industry. "There's a share that industry is willing to pay," says Jonathan Gold, vice president for international trade policy at the Retail Industry Leaders Association, "but not the lion's share."
The Coast Guard will spend $1.3 billion of its operating budget on security in 2004 (up from just $33.8 million before 9/11), but Homeland Security Secretary Tom Ridge has repeatedly said that industry should expect to absorb much of the cost for securing ports. And in February, Charleston, the nation's largest operating port and the fourth-busiest overall, became the first in the nation to introduce a terminal security surcharge -- $1 per foot, based on the length of ships docking at the port. The measure will raise $1 million per year. Among other measures, that revenue will pay for increased vehicle screening and closed-circuit surveillance.