This document summarizes challenges facing the maritime transportation industry due to mega-ships, alliances, and port infrastructure deficiencies. Mega-ships carrying 18,000+ TEUs are straining port capacity and supply chains. Experts predict ships up to 24,000 TEUs and expect significant port congestion issues. Port infrastructure in the US is not equipped to efficiently handle the unloading of larger ships, exacerbating problems and costs passed to consumers. The document proposes inland ports as a solution to address these challenges.

1. James C. Breckinridge
1
Financial Common Sense for Development of Inland Ports
Introduction:
Shipping consultancy Drewry recently published its 2015 Global Container Operators Annual Report, in
which it says “The typical EBITDA …margins for international terminal operators remain in the
range from 20-45% and the 2014 financial results were much in line with previous years, illustrating the
consistency and reliability of container terminal operators’ profitability.”1
Therefore container terminal
operations are a great investment.
In 2015, cargo owners in the United States endured the latest episode of labor problems on the West
Coast and with an estimated cost to U.S. retailers of $7 billion.2
While the labor unrest was very
costly, it served as a warning that the maritime transportation industry is facing more prevalent and
serious port congestion challenges in the coming years from deficient infrastructure. Before offering a
solution, I want to briefly summarize the challenges that, if not prepared for, will have serious economic
consequences to all parties – shipping lines, port operators, cargo owners, the retail industry and the
consumer.
The momentous changes in the maritime transportation industry over the last decade3
have left the
logistics industry searching for answers to the introduction of mega-vessels,4
mega-alliances5
and their
much-lauded economies of scale.”6
“As the supply chain is being re-shaped to accommodate 18,000teu vessels and the world’s largest
shipping lines stretch, the paradigm of what is considered “normal” on every trade lane, port operators
and shippers are set to feel the pressure and pick up the cheque for a new set of “disadvantages of
scale” being faced throughout the supply chain….”7
And, while these vessels are the current capacity
benchmark, a study from 2014 indicated “that industry watchers expect ships as large as 22,000 TEU to
come into service by 2018, and that 24,000-TEU vessels are on the drawing board.”8
1
Container terminals are a better bet for investors than their box line customers, Mike Wackett, TheLoadstar, August 24, 2015,
found at: http://theloadstar.co.uk/container-terminals-are-a-better-bet-for-investors-than-
their-box-line-customers/.
2
Retailers felt US West Coast congestion pain through second quarter, Reynold Hutchins, Journal of Commerce, August 21,
2015, found at: http://www.joc.com/economy-watch/us-economy-news/retailers-felt-us-west-coast-congestion-pain-through-
second-quarter_20150821.html.
3
Between 2000 and 2005 container trade in North America increased by 6.85% CAGR (compound annual growth rate) reaching
48 million TEUs in 2005. In 2014, North American container trade had recovered from the 2009 worldwide recession to post
volumes of 57 million TEUs. Found at: http://aapa.files.cms-
plus.com/Statistics/NAFTA%20REGION%20PORT%20CONTAINER%20TRAFFIC%20PROFI
LE%202014.pdf.
4
Found at: http://ciw.drewry.co.uk/release-week/2015-06/.
5
Found at: http://www.universalcargo.com/blog/bid/104716/Carrier-Alliances-Impact-on-
2015-International-Shipping.
6
Who pays for the ‘disadvantages of scale’ from mega-vessels and mega-alliances?, Rainbow Nelson,
http://theloadstar.co.uk/panama-canal-transhipment-container-shipping-latin-america/,
October 29, 2014.
7
Ibid.
8
Bigger Container Ships Pose Bigger Risks, Gregory J. Millman, The Wall Street Journal, Feb. 8, 2015, found at:
http://www.wsj.com/articles/bigger-container-ships-pose-bigger-risks-1423443013.

2. James C. Breckinridge
2
The Western Hemisphere, with the recent widening of the Suez Canal and the scheduled opening of the
expanded Panama Canal in June 2016, will soon see the introduction of vessels up to 14,000teu and the
exacerbation of the problems already faced “in the region’s under-equipped ports.”9
A Beyond Traffic report from the U.S. Department of Transportation (DOT) predicted, the volume of
goods transported on U.S. roads, rail, air and water will increase 45 percent or more by 2045,
suggesting that while maintenance and management are very important, new projects will be necessary to
keep up with demand.10
In a February 26, 2015 article for Forbes Business entitled The Troubling Issues with Land-Locked Ports
and Chassis Management, Lora Cecere, reflecting on the effects of the West Coast labor dispute this past
year, said “I think the larger issue is the design of the ports to carry the volume. As a country, I think that
we need to rethink supply chain flows for chassis, drayage and the unloading of larger ships.”11
Acknowledging that labor issues are a recurrent problem, she went further to say “I think that we are
dealing with a much more insidious issue. The port infrastructure is not equal to the challenge of
moving the high levels of freight of larger ships without rethinking unloading space, equipment and
flows.”12
Port congestion at levels not experienced before is the future.
National Retail Federation (NRF) chief executive Matthew Shay said: “Twenty-first century business
needs twenty-first century infrastructure – modern ports and faster trains – and US ports are not as
modern as they should be and are acting as an impediment to an efficient supply chain.”13
Diana Furchtgott-Roth, Senior Fellow and Director for Economics21, Economic Policies for the 21st
Century at The Manhattan Institute, wrote a treatise in volume No. 4 April 2015 entitled Held Hostage –
U.S. Ports, Labor Unrest, and the Threat to National Commerce.14
Her paper discusses the importance of
international trade to the U.S. economy and specifically the role of U.S. ports.
The mega-ships and the mega-alliances have increased cargo unloading time which has led to congestion
at ports for truckers, more than doubling the time it takes to ship containerized cargo. When port
activities suffer from slowdowns caused by congestion, and that congestion prevents cargo owners and
truckers from operating efficiently, costs for U.S. importers and exporters increase. Higher costs are
passed on to U.S. consumers and make American exporters less competitive. Further, shipping lines
often impose congestion surcharges on cargo owners to cover increased costs, such as storage, trucking
charges, and wasted fuel from idling ships.15
Following are excerpts from her treatise.
9
Ibid.
10 Beyond Traffic: US DOT's 30 Year Framework for the Future - See more at:
https://www.transportation.gov/beyondtraffic#sthash.Vtia3lL4.dpuf. Updated: Tuesday, September 22, 2015.
11
http://www.forbes.com/sites/loracecere/2015/02/26/the-story-continues-lets-dont-
sugar-coat-the-real-issue/.
12
Ibid.
13
Call for reforms as US will feel aftershocks of the west coast port congestion all year, Gavin van Marle, March 9, 2015,
http://theloadstar.co.uk/west-coast-port-congestion-us-container-import-exports/.
14
Found at: http://www.economics21.org/files/pdf/e21_04.pdf.
15
Ibid.

3. James C. Breckinridge
3
U.S. international trade in goods accounted for more than $3.6 trillion in 2013, nearly 22 percent of U.S.
GDP.16
In the past decade, maritime trade increased dramatically, from $958 billion in 2004 to $1.75
trillion in 2013.17
Imports of 20-foot equivalent units (TEU)18
of containerized cargo are projected to
triple, from 17 million in 2011 to 60 million in 2037; exports are set to rise from 13 million to 52 million
containers by 2037.19
East and Gulf Coast ports hope to capture 70 percent of imports currently shipped to West Coast
ports.20
Import and export tonnage at East Coast ports is projected to rise from 65.1 million tons in 2012
to 146.3 million tons in 2029. Over the same period, Gulf Coast trade in containerized tonnage is forecast
to expand from 29.6 million tons to 64.6 million, according to the U.S. Army Corps of Engineers.21
As the global economy becomes more integrated, America will depend even more on its ports.
International trade through seaports is expected to grow to 60 percent of U.S. GDP by 2030.22
The Trans-
Pacific Partnership and the Transatlantic Trade and Investment Partnership have the potential to further
boost trade by some $400 billion by 2025.23
Finally, in a publication from the Port of Los Angeles, the following statement of admission was made:
Together, the Port of Los Angeles and Long Beach handle more than 15 million TEUs on
an annual basis….Terminal space is at a premium as the operators have to move ever
expanding volumes of cargo within the same footprint….Some of their industry trends
include: larger ships carrying a greater number of TEUs, vessel sharing alliances placing
TEUs from multiple shipping lines on the same ship, and the divestment by the shipping
lines of their chassis fleet to independent leasing companies. In the past, container
terminal space was sufficient to effectively handle many additional services such as
the maintenance and storage of chassis and containers. This is not the case
anymore….To boost efficiency, these activities are moving off the dock, but the need for
these services remains.24
I believe a game-changing solution to the coming “Perfect Storm” of challenges is found, not
at the deepwater port, but in the heartland of America along its inland waterways.
16
“U.S. International Trade in Goods and Services, November 2014,” U.S. Census Bureau, U.S. Bureau of Economic Analysis,
and U.S. Department of Commerce; and see World Bank, “World Development Indicators, GDP (Current US$),” accessed
February 4, 2015, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?order=wbapi_data_value_2013+wbapi_
data_value+wbapi_data_value-last&sort=asc.
17
“Foreign Waterborne Trade by Trading Partner by Value and Metric Tons, 2003–2013,” U.S. Census Bureau Foreign Trade
Division and World Trade Online data compiled by the U.S. Maritime Association, accessed February 4, 2015.
18
With dimensions 20ft x 8ft x 8ft, TEU is the standard size for single-cargo containers.
19
American Association of Port Authorities, “U.S. Port Industry: America’s Ports, Gateways to Global Trade,” accessed
February 4, 2015, http://www.aapa-ports.org/Industry/content.cfm?ItemNumber=1022.
20
Andrea Hricko, “Progress and Pollution: Port Cities Prepare for the Panama Canal Expansion,” Environmental Health
Perspectives, December 2012, http://ehp.niehs.nih.gov/120-a470.
21
U.S. Army Corps of Engineers, “U.S. Port and Inland Waterways Modernization.”
22
American Association of Port Authorities, “U.S. Public Port Facts,” accessed March 2, 2015, http://www.aapa-ports.org/
Industry/content.cfm?ItemNumber=1032.
23
U.S. Chamber of Commerce, “10 Overlooked Facts About Transatlantic Trade,” accessed December 10, 2014, https://
www.uschamber.com/sites/default/files/legacy/international/files/Top%2010%20Overlooked%20Facts%20About%20
Transatlantic%20Trade.pdf; and see “The Trans-Pacific Partnership: Economic Benefits,” Executive Office of the President,
Office of the U.S. Trade Representative, accessed March 2, 2015, https://ustr.gov/about-us/policy-offices/pressoffice/
fact-sheets/2013/December/TPP-Economic-Benefits.
24
Found at: http://www.portoflosangeles.org/business/rfp_proposals.asp.

4. James C. Breckinridge
4
West Coast v. East Coast and Gulf Coast
On April 30, 2014, Martin Associates published a white paper for the Pacific Maritime Association
(PMA)25
entitled Economic Impact and Competitiveness of the West Coast Ports and Factors that Could
Threaten Growth.26
One of their findings emphasized the importance the cargo owners will play in
deciding where cargo growth will occur.
Martin Associates pointed out that retailers have located major distribution centers in clusters around the
major Atlantic and Gulf Coast ports, as well as inland in such areas as Chicago, Memphis, St. Louis,
Columbus and Indianapolis. These areas correspond to the key consumption and population markets in
the U.S. The PMA study noted that the competitive battleground for market share will occur in the
Chicago, Columbus, Indianapolis, St. Louis, Nashville, Atlanta and Dallas markets.27
Martin Associates developed a logistics costing model to estimate the competitive advantage, by trade
route, of the port ranges to serve the specific inland markets. These logistics costs include the terminal
charges, …stevedoring, infrastructure fees, …and port fees; intermodal rail rates and linehaul truck rates;
and voyage costs between the West Coast ports of Los Angeles, Long Beach, Seattle and Tacoma, and the
Atlantic Coast ports of New York, Baltimore and Savannah and the three Asian ports of Hong Kong,
Singapore and Nhava Sheva (India).28
West Coast ports enjoy a small cost savings to inland points such as Chicago and St. Louis for the Hong
Kong trade route, while all‐water services are more competitive to serve Columbus, Atlanta and Dallas.
As additional all‐water services are deployed, the Atlantic and Gulf ports will become increasingly
competitive with the West Coast ports to serve the inland markets, as additional vessel capacity will add
to the ability to serve these inland points more frequently and with a reduced transit time. These Atlantic
Coast ports reflect ports with growing all‐water Asian services, through the Suez and Panama canals.29
The Atlantic and Gulf Coast ports are very competitive on the Singapore and Nhava Sheva trade lanes,
and as more services are deployed through the Suez Canal, it is likely that trade will move towards
all‐water routings. Trade moving via the Suez Canal from sources such as India, Vietnam and Cambodia
are all areas identified as growing supply sources for the U.S.30
Within the logistics cost chain, the port sector can only control one element of the cost chain – the port
and terminal charges. Terminal charges at the West Coast ports are much higher than those on the East
and Gulf Coasts. For example, an average West Coast terminal charge per container …averages between
$320 and $420 per move compared to an average box rate of $240 for the Atlantic Coast port range.31
25
The principal business of the PMA is to negotiate and administer maritime labor agreements with the International Longshore
and Warehouse Union (ILWU). This includes a coast-wide contract covering 29 ports along the West Coast, from Southern
California to the Pacific Northwest. These ports drive nearly half of all maritime trade in the United States, including more than
70 percent of all imports from Asia. http://www.pmanet.org/overview.
26
Found at: http://www.pmanet.org/wp-content/uploads/2014/06/West-Coast-Ports-
Economic-Impact-and-Competitiveness.pdf.
27
Ibid., p. 23
28
Ibid.
29
Ibid. p. 23-24
30
Ibid. p. 25, 27
31
Ibid. p. 26

5. James C. Breckinridge
5
Concept:
The effects of the “Perfect Storm” described above can be dramatically mitigated with this plan.
The Wall Street Journal recently reported that “Warren Buffett is taking Berkshire Hathaway Inc.
deeper into the industrial manufacturing and transportation world with his $32 billion purchase of
Precision Castparts Corp….With Precision Castparts joining BNSF Railway, the XTRA Lease
trailer business and Union Tank Car Co. under the Berkshire Hathaway umbrella, Buffett will
have industrial shipping all but covered, except for the maritime world.”32
Our plan provides three
modes of transportation to serve our inland ports – maritime (container-on-barge), rail and trucking.
We referred above to the recently publication by Drewry of its 2015 Global Container Operators Annual
Report. The report “predicts that global port demand will grow at an average of 4.5% a year through to
2019, equating to an additional 168 million teu, bringing the annual global total to almost 850m teu.”33
The Drewry senior analyst for ports and terminals said owning and operating international container
terminals remained a profitable business despite the “significant challenges ahead.”34
Most important to the investor, “The typical EBITDA (earnings before interest, taxes, depreciation and
amortisation) margins for international terminal operators remain in the range from 20-45% and the
2014 financial results were much in line with previous years, illustrating the consistency and reliability of
container terminal operators’ profitability.”35
A Journal of Commerce article states that "the appeal of inland ports is clear. By setting up shop near
inland ports, shippers can cut down their drayage costs and tap the benefits of logistics clusters such as
third-party logistics services and a skilled workforce. In the U.S. Southeast that appeal is illustrated in
the booming success of three individual inland ports in Georgia, South Carolina and Virginia, where
those ports are not only successful, they're now spurring interest in new inland port development in the
region."36
The Ohio River facility will be built upon three separate pillars that create a synergistic whole, yet each
pillar can stand alone: (1) traditional maritime related businesses including barge operations, rail
operations, trucking, warehousing, cross-docking; (2) Federal Government business, e.g. FEMA,
MARAD and DOD; (3) Energy and oil from the Marcellus, Utica and Rogersville shale drilling
operations, e.g. cracker related logistics.
32
The Wall Street Journal Logistics Report, Paul Page, August 11, 2015, found at:
http://www.wsj.com/articles/todays-top-supply-chain-and-logistics-news-from-wsj-
1439289760.
33
Container terminals are a better bet for investors than their box line customers, Mike Wackett, TheLoadstar, August 24, 2015,
found at: http://theloadstar.co.uk/container-terminals-are-a-better-bet-for-investors-than-
their-box-line-customers/.
34
Ibid.
35
Ibid.
36
Found at: http://www.truckinginfo.com/news/story/2015/08/intermodal-freight-slows-
shift-to-east-coast.aspx.

6. James C. Breckinridge
6
Our purpose is to identify, acquire and develop the appropriate real estate and facilities to deliver
state-of-the-art Tri-Modal Service Centers (TMSC) serving the American populace and connecting
them to the world and creating the first U.S. based Planned Integrated Industrial Center (PIIC).
Each TMSC will partner with local, state and federal agencies to leverage public funding sources and
programs37
that significantly increase the likelihood of success for the projects and ensure public goals
like job creation are achieved. The TMSCs will be integrated to create the first U.S. Inland Waterway
Liner Service providing container and general cargo transportation service on the Ohio and Mississippi
Rivers and the Tennessee Tombigbee Waterway. Cargo owners will have easy access to an effective
transportation system that serves more than two-thirds of the population of the United States and can
efficiently connect with the major East Coast and Gulf Coast ports.
Planned Integrated Industrial Center (PIIC) – purpose is to bring together industries that lend
themselves to each other to improve profitability for all members of the PIIC. For example, we will
locate exporters (e.g. wastepaper and agriculture) on the facility that will use emptied import containers
from clients on the same facility. The importer saves the cost of the return of the empty container to the
deepwater port and the exporter saves the trucking cost to pick up an empty container. The shipping line
gets a better utilization of its equipment and the rail company, trucking company or barge company is
generating better revenue for a full container.
Flexibility – cargo owners will have the flexibility to direct their cargo via ports on the West Coast, East
Coast or Gulf Coast. Cargo owners will have access to three modes of transportation to deliver their
cargo: container-on-barge, rail or truck. This flexibility will help cargo owners mitigate the effects of the
congestion problems at deepwater ports that the experts are forecasting due to the mega-ships and mega-
alliances.
Where there is a challenge, there is an opportunity, and I see significant opportunity generated by
the mega-ships, the mega-alliances and in the shifting trade routes in North America. This plan
will dramatically transform logistics for cargo owners giving them greater flexibility with their
cargo; reduce costs; increase profitability and access to new streams of revenue.
37
The Federal Government has realized the importance of the inland waterway system and is investing federal funds through the
U.S. Department of Transportation’s (DOT) Transportation Investment Generating Economic Recovery (TIGER) competitive
grant program. In 2011, then Secretary of Transportation LaHood announced the first round of grants worth $58 million for
projects to support the start-up or expansion of Marine Highways services, awarded through the Department’s TIGER grants
program. “On April 3, 2015, U.S. Transportation Secretary Anthony Foxx announced $500 million will be made available for
transportation projects across the country under a seventh round of the highly successful…grant program.” Found at:
http://www.transportation.gov/tiger.