WP C-2: The Dry Port integration in MoS concept

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1 WP C-2: The Dry Port integration in MoS concept Summary Presently, there is much attention given over to developing intermodal transport in the EU. Intermodal transport involves combining different transport modes for single transportation of freight, with the aim of providing better use of available infrastructure while providing lower costs and increased sustainability. The implementation of a Dry Port plays an important role in promoting inter-modality and creating effectiveness and efficiency in transport chains, such as those based on the Motorways of the Sea concept. There are several kinds of intermodal terminals that can appear to be similar to the Dry Port based on their functions and facilities, such as, inland clearance depots or conventional intermodal terminals. However, Dry Ports are more advanced than these, mainly because of a variety of value added service. The definition that we suggest in order to fully reflect the Dry Port concept is: Dry Port is an intermodal terminal situated in the hinterland servicing an industrial/commercial region connected with one or several ports by rail and/or road transport and is offering specialized services between the Dry Port and the transmarine destinations. Normally the Dry Port is container and multimodal oriented and has all logistics facilities, which are needed for shipping and forwarding agents in a port. The above definition of a Dry Port should contain the following minimal functional requirements: container transshipment from one transportation mode to another, temporary storage of goods, consolidation and distribution activities, customs control and value-added services for importers/exporters, transport mean operators, and businesses. Applying such functions to an inland terminal, can be advantageous for supply chains and related actors. The main benefits are: sustainability, reduced transport expenses, increased hinterland of a seaport and prevention of traffic bottlenecks. Environmental friendliness is reached with increased rail transportation versus road transport. Moreover, the likelihood of reducing road transportation is also determined by the fact that Dry Ports are helping to solve sea ports problems and therefore stimulating short sea shipping based transportation. Expansion of the port infrastructure can cause increased water pollution and changes in hydrological processes. Dry Ports can help avoid the expansion of the seaport infrastructure by the water, due to the possibility to expand its activities further inland. By doing so, water pollution can be reduced while at the same time, the port s capacity can expand with little impact 1

2 on the ecosystem. Additionally, the use of the rail instead of road transportation reduces transportation costs and traffic bottlenecks. Concentrating on the implementation of the high quality Dry Port, the following characteristics are important to analyse in details: value-added services, management of Dry Ports, transport modes integration and information and communication technologies. Value-added services suggested in the Dry Port allow the users of Dry Ports to get such extra values as saved time, convenience, reduced operational costs, etc., which provides the owner of the transported goods and involved actors with larger profit margins. Moreover, the greater variety of value-added services the Dry Port can offer, the more attractive it is for the businesses and therefore it increases the potential for new customers. The examples of the services adding value to the Dry Port customers can be: handling different types of cargo, handling dangerous, heavy good, support of the 3 rd and 4 th part logistics and customs clearance. A necessary service in the Dry Port customs clearance has to be analysed as an important issue in Dry Port implementation due to the complexity of the customs procedures in the inland terminal. The main document incorporating customs legislation in EU is the Community Customs Code, which is stating that the permission for customs clearance can be authorized by the customs authorities. Customs clearance procedures are dependent on whether the goods are Community or non-community, if the term customs procedure with economic impact is applicable. Moreover, different customs clearance procedures are done under the following types of arrangements: external transit; customs warehousing; inward processing; processing under customs control; temporary importation; and outward processing. An important issue for Dry Port implementation is the form of governance which shape modes of financing, operations, functioning and external relationships. The governance consists of two important aspects: ownership of a terminal and operations management and execution. Both of these can be executed by public or private sectors. Therefore, considering the combinations of ownership and operations subordination upon certain sector, three different options of Dry Port funding may occur: public funding, private funding or public-private partnership (PPP). Each funding possibility has its benefit. Usually in a public ownership case, the private sector can obtain leasing opportunities. The Dry Port under the public ownership could suggest users the greater equality and fairness in treatment regarding the tariffs, profiteering, etc. Moreover, greater prospect for cargo movement on different transport modes would appear due to the 2

3 centrally planned intermodal networks which would also include the publicly owned Dry Ports. Conversely, the public body may face the lack of experience in management of the Dry Port in comparison to private sector. The case of private ownership often appears in cases of privatization, in order to attract private investment for infrastructure. The biggest benefit of totally private funding is the utilization of private resources into the national transport infrastructure. Additionally, the possible advantage is a greater flexibility in the adoption to the trade, changing patterns of operations and the supply of tailored services. The public private partnership is featured by greater flexibility and the reach of synergies from cooperation between those two sections. The development of balanced economic and legal framework of a Dry Port can be ensured by a public body and the risks, related to building, operations and maintenance can be carried out by the private sector. Furthermore, the security of the project is increased regarding technical, legal and financial aspects due to custom-made contractual framework. Additionally, the private sector is adding the value to the PPP project with the greater know-how in comparison with the knowledge of public entity. Governments within Europe can play an important role in the development of Dry Ports, especially when Dry Ports are strongly complementing to national transport systems and could have international significance. The main possible contribution of government is attracting private capital for the Dry Ports infrastructure development. In that respect the important criteria includes the reliability and transparency of feasibility analyses, bidding procedures, financial and legal arrangements. Operations managing process in the Dry Port is another significant issue to discuss. The Dry Ports are bi-directional logistics systems, where the goods coming from ports are received and distributed to land, together the goods arriving by rail/road is received and delivered to ports for the sea leg journey of their trip. A high level of coordination and interconnectivity capabilities are necessary for such bi-directional logistics system. Information technologies (IT) is the proper mean for an accomplishment of latter capabilities. It helps to execute easier and advanced coordination and management, together contributing to the effective freight flow and time reduction. Highly efficient coordination together with communication, enabled by information and communication technologies (ICT), must be implemented in the Dry Port terminal thereto it 3

4 would be an integral node of logistics system. Information system is supporting interaction among people, equipment and procedures that gives the possibility to implement structured planning, implementation and control of the logistics processes. ICT support information flow in the logistics network and supply chain and enable a smooth functioning of operations, outbound logistics and services activities together. That significantly contributes to an efficient and effective movement and on-time delivery of cargo. Two case studies The two examples of Dry Ports are analysed in the report in order to get practical insight in the initiative processes, management and operations of Dry Ports. The investigation is mainly based on the information that was received from the managers of the Dry Ports and related persons. The Dry Port of Madrid (Puerto Seco de Madrid PSM) was initiated for the purposes of supporting the interests of the State-owned Spanish ports as individuals and as a system; moreover, the aim was also at implementing the balance between the rail and road transport use. The choice of location was made after the considerations of most concentrated production and consumption areas, national and international intermodal connections, and concentration of logistic services companies. PSM is managed by a public company, whereas the company of public and private bodies was formed to operate the Dry Port. PSM s customs clearance office is working with an external transit customs clearance under the cover of T1 form and is mainly handling non-community goods containers. Moreover, regarding the guaranties for the goods being transported between the ports and the Dry Port, no guarantees are needed in the case of PSM as operations are carried out by two spanish railway companies (basing this on the Community Customs Code). The same railway companies are responsible for the security of the containers. PSM is orientated at basic services in the Dry Port terminal and between the Dry Port and the ports. Only several extra services are provided, e.g. container washing and empty container depot supplies. Another case of Dry Port implementation the logistics center in Latvia, Jekabpils, with the name Central Euro-Asia Gateway (CEAG), which reflects the core idea of this Dry Port. Its goal is to create the corridor between the Far East and Europe and to become a gateway in this corridor. The choice of terminal location was made in relation to the networks of railways and main roads. CEAG has rail connections to the six nearest Baltic ports, moreover, Trans-Siberian and St. Petersburg-Warsaw railway lines are stretching through the CEAG. 4

5 The CEAG project was initiated, developed and owned by a private company, which has brought a strong know-how into the project. Additionally, the company brought the direct access to the owners of cargo flows, terminals and hubs, which are serving Far East European cargo flows provided by activities in Kazakhstan and China. CEAG provides the usual logistic services for railway operators, logistics companies, importers and exporters and a variety of tailored services for importers and distributors, for example, handling of heavy goods, overcoming trade barriers, rent of offices and so on. The customs clearance in CEAG will be performed by a 100 % daughter company CEAG Customs, providing two levels of customs clearance services: mandatory services and customs clearance services for single containers or wagons. CEAG has only recently been implemented and is thus not fully developed yet. However, due to the strong market knowledge, actively promoted and their clear business plan with a high future potential, there are many promising prospects predicted for this Dry Port. The cases of PSM and CEAG have shown two different examples of Dry Port implementation and functions in the logistics systems. On one hand, PSM was started by the public authorities and is governed by the public-private partnership, which is mainly supported by the interests of State ports. The Dry Port is oriented to basic services to support the ports and customs clearance. On the other hand, CEAG is based on total private management and is more innovative and customer oriented, providing many tailor-made services as the main goals are directed not to Latvia s interests, but to the development of the CEAG as a business and the connection between Europe and Far East. At present, focus on Dry Port implementation has been minimal. The promotion of MoS and reducing port congestion is starting to bring more opportunities to explore the use of Dry Ports in improving logistics networks. The Dry Port is seen as a mean for improving the efficiency of MoS, therefore it should be functioning as a reliable, added value service, bringing a non congested link into a transport chain. Additionally, it is recommended that European Union funds are invested in further developing Dry Ports as part of Motorways of the Sea corridor, because investing into all corridor, is the only way to effectively improve transport efficiency while reducing its environmental impacts. 5

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