Cuba shipping gains unlikely in the short term

Cuba shipping gains unlikely in the short term
Greg Miller, Special Correspondent | Aug 24, 2016 12:23PM EDT

Despite all the hype on Cuba, commercial shipping's opportunities to do
business with the island are unlikely to significantly improve until at
least February 2018.

U.S. President Barack Obama has since December 2014 used his regulatory
powers to ease restrictions on U.S. business ties with Cuba. In the
maritime industry, the highest-profile example was permission for
Carnival Corporation to offer cruises to Cuba.

However, volume gains for commercial shipping still hinge on the U.S.
Congress lifting the embargo on trade with Cuba and repealing the
"180-day rule," which prevents ships without a waiver calling at a U.S.
port within 180 days of visiting Cuba.

"Since December 2014, the legislative efforts have been almost a waste
of time," said U.S.-Cuba Trade & Economic Council President John
Kavulich in an interview. "You have a lot of inspiration and a lot of
aspiration chasing very little reality."

"When it comes to Cuba, there has been more public relations than actual
growth," said Carlos Urriola, senior vice-president of Carrix, the
parent of port group SSA International. "Even if things are starting to
move forward, it's not going to change tomorrow."

Commentators have focused on the potential for lifting the trade embargo
after a new U.S. president is inaugurated and a new Congress convened in
January 2017.

However, Kavulich sees that timetable as overly optimistic.

"There will be no legislative changes before President Obama leaves
office and after his presidency Cuba is not going to be a priority on
the list of issues facing the new president," he said.

"Nor should it be. It shouldn't be high on anyone's agenda, because no
one (in the U.S.) needs Cuba. Cuba is not China, where if a company
doesn't have China it can put the company in jeopardy. Cuba doesn't have
that role."

Any political momentum for ending the U.S. embargo will be focused on a
later date: Feb. 24, 2018, according to Kavulich.

"That is the date when (Cuban president) Raul Castro has said he's going
to retire, so members of Congress on both sides of the aisle will look
at the process and say, 'We should hold back on making changes because
we want to have something to either use as bait for Raul's successor or
to reward Raul's successor. Let's not give everything now to the old
guy. Let's try to enhance the new people,'" he said.

In other words, the closeness of Castro's retirement date — just 13
months after the U.S. government's transition — will effectively push
back the timetable for transformative change until 2018.

Hopes have been raised within maritime circles that the 180-day rule
could be repealed before the trade embargo is lifted. While the U.S.
president can exempt shipping companies on a case-by-case basis,
abolishing the rule would require an act of Congress.

If the 180-rule were revoked, container lines could use neo-Panamax
ships to drop off Asia-sourced transshipment cargo at the PSA-operated
terminal in Mariel, Cuba, and then continue on their front-haul voyages
to final destinations in the United States.

The challenge facing this lobbying effort is that U.S. business
interests would not necessarily benefit. In fact, some could be harmed.

Repealing the 180-day rule would allow no additional U.S. export volumes
to Cuba beyond the currently permitted cargo categories. However, Mariel
would be enabled to develop a transshipment business to serve Caribbean
islands in direct competition with U.S. exporters and U.S.-based liners
sailing out of ports in Florida and along the U.S. Gulf Coast.

"For U.S. ports, having Mariel as a receptacle for U.S. exports is
great, but having Mariel as a potential competitor is not. That's where
the challenge is," said Kavulich.

"By opening the 180-day rule, you're hitting Miami, you're hitting Port
Everglades, you're hitting Jacksonville — and what would you (the U.S.)
get in return?" Carrix's Urriola said.

Ending the 180-day rule and providing an economic boost to Cuba prior to
Castro's retirement would also go against the grain of America's
long-standing strategy, said Kavulich.

"There is a feeling that we (referring to U.S. government leaders) don't
want to be giving the current Cuban government any more money it can use
to perpetuate itself, because the more money it has, the less incentive
it has to change," he said. "We want to make it difficult for them, so
they have to make the changes."

Contact Greg Miller at greg.miller@ihsmarkit.com and follow him on
Twitter: @GMJournalist.

A version of this story originally appeared on IHS Fairplay, a sister
product of JOC.com within IHS Markit.

Source: Cuba shipping gains unlikely in the short term -
http://www.joc.com/maritime-news/container-lines/cuba-shipping-gains-unlikely-short-term_20160824.html