The second example of how Detroit CBP policies affect Michigan ports involved a huge construction project in Grayling.
In 2015, Ft. Mill, S.C.-based Arauco North America Inc. reached a deal with the state to build the largest particleboard mill in North America, a $400 million project supported by property-tax incentives of $11.8 million. The Department of Natural Resources sold Arauco 600 acres for the plant at $1,400 an acre.
Arauco broke ground on the project in April 2017, and the plan was to have 14 ships from Europe loaded with construction material travel through the St. Lawrence Seaway to the Port of Monroe, then have the cargo loaded onto trucks to be transported up I-75.
Houston-based Spliethoff USA used the CBP’s web-based tool, Automated Commercial Environment (ACE) in mid-May, to get approval for the cargo, and a ship left Antwerp in early June. The plan was to unload steel containers in Cleveland and then proceed to the Port of Monroe, where crated cargo would be unloaded for the project and trucked to Grayling.
The expected arrival in Monroe was June 24, but as the ship was crossing Lake Ontario on June 18, the Detroit office of CBP sent a letter to Spliethoff, notifying it that the cargo could not be unloaded in Monroe after all. When Spliethoff asked for an explanation, it was told that the Detroit office was now considering any crated cargo as containerized. Previously, cargo in wooden crates had less stringent examination rules than those for steel shipping containers.
The Detroit office, according to the UM report, said that “a container is not limited to traditional shipping containers, but rather is any cargo enclosed in wood, steel or otherwise.”
The UM report called that a “new definition” of the previous rule.
That ship’s cargo and future shipments were offloaded in Cleveland and Toronto, causing Arauco to incur increased trucking costs.
“The cargo from these ships was allowed to enter at Cleveland because the Port of Cleveland is not in the CBP Detroit Field Office jurisdiction, but rather that of CBP’s Chicago Office,” according to the UM report. “The cargo was not opened, devanned, or scanned by CBP in Cleveland before being cleared and released by CBP. Offloading fees, wages and taxes were lost to port workers, the city of Monroe and the state of Michigan.”
The UM report said that the changes required by the Detroit office of CBP cost various partners in the project between $1.9 million and $3.1 million in added costs. In addition, the Port of Monroe and its dock operator lost out on about $15.4 million in revenue that was shifted to Ohio and Toronto.
Spliethoff told the UM students it had to cancel plans for two to four other sailings per month, with between 100 and 150 containers each, for the 2018 shipping season, and a contract between General Motors and Spliethoff to use the Port of Monroe was cancelled.
Spliethoff estimated it lost out on $12.5 million in revenue in the 2018 shipping season solely based on the inability to use the port.
A spokesperson for the BNSF Railway Co., the largest freight railroad network in North America, told UM researchers that, in the report’s words, “that he had never seen anything like this throughout his 35-year logistics career. Given the issues the company and their client Arauco experienced when trying to use the Port of Monroe, he said that he urges industry associates he encounters at trade shows and his clients, many of which are multinational corporations like Arauco, not to use the Port of Monroe, warning of potential costs brought on by their customs issues. The Arauco-CBP debacle, he said, sends the signal that Michigan is not open for business.”
The Detroit office of CBP declined three requests for an interview.
LaMarre said further studies are in the works.
“”We are in the midst of doing a second study with the same team which will be a comparative analysis of the State of Michigan’s investment in commercial port infrastructure projects as compared to the other Great Lakes states and coastal ports,” he told Crain’s.