Business and Legal Insights

Florida is home to a number of seaports which enlace the Florida peninsula: Port Canaveral, Port Everglades, Port of Fernandina, Port of Fort Pierce, Port of Jacksonville (JAXPORT), Port of Key West, Port Manatee, Port of Miami (PortMiami), Port of Palm Beach, Port of Panama City, Port of Pensacola, Port of Port St. Joe, Port St. Pete, and Port Tampa Bay. (Florida is also home to Port Citrus, which is currently a port in name only.)

Florida’s ports are critical to the state’s economy and development. These ports serve as the focal point for the movement of goods and people into and out of the U.S., generate well-paying jobs, support business and recreation, and contribute to state and local tax coffers. Notwithstanding the importance of Florida’s ports, many people are unaware of how ports function and how to do business with them.

Florida’s ports are operated independently of one another. In terms of governance, those Florida ports which were established by the Florida legislature as independent special districts are self-governing ports. Other Florida ports are subject to municipal or county oversight.

What Activities Do Ports Oversee?

To facilitate the movements of goods and people, the typical port in Florida provides facilities for ocean liners and cruise ships. In order to accommodate the ever-increasing sizes of these vessels, ports deepen and widen their channels and expand turning basins. To offset the cost of their facilities as well as their channel and basin work, ports generate revenues from “dockage,” which is the “charge assessed against a vessel for berthing at a wharf, pier, bulkhead structure, or bank or for mooring to a vessel so berthed.” 46 CFR § 525.1(c)(5). Ports also generate revenues from “wharfage,” which is the “charge assessed against the cargo or vessel on all cargo passing or conveyed over, onto, or under wharves or between vessels (to or from barge, lighter, or water), when berthed at wharf or when moored in slip adjacent to a wharf.” 46 CFR § 525.1(c)(23). Florida’s ports may also derive income through the imposition of business permit fees for service-oriented businesses (e.g., car rental courtesy shuttle services, etc.).

Some ports are significant landholders. Among Florida’s ports, Port Tampa Bay is the largest landowner with approximately 5,000 acres. Port of Jacksonville owns 1,500 acres, and Port Canaveral has around 1,000 acres of uplands. Through their considerable real estate holdings, these “landlord ports” generate significant rental income from leases and parking fees. For example, approximately 55% of Port Tampa Bay’s operating revenues are derived from long-term leases, and approximately 19% of Port Canaveral’s operating revenues are derived from parking fees.

What Are Foreign Trade Zones and How Do They Relate To Ports?

Many of Florida’s ports are located in or adjacent to a Foreign Trade Zone (FTZ). FTZ’s are authorized pursuant to the Foreign-Trade Zones Act, 19 U.S.C. § 81a-81u. The U.S. Department of Commerce describes an FTZ as “a designated location in the United States where companies can use special procedures that help encourage U.S. activity and value added – in competition with foreign alternatives – by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings.” Examples of how duties are reduced or eliminated in an FTZ include the following: (1) merchandise is not subject to duties while in an FTZ, (2) merchandise may be imported to an FTZ and re-exported duty free, (3) defective merchandise imported to an FTZ may be rejected or returned free from any duties, and (4) reduced duties are applicable to merchandise assembled or manufactured into finished products in an FTZ. Businesses engaged in international trade use FTZ activated sites located at or in the vicinity of Florida ports to minimize exposure to duties and for their proximity to shipping and other transportation modes. Ports understand the importance of FTZs to international trade, encourage the construction of facilities such as warehouses in FTZs, and promote the use of FTZ facilities located on port property.

What to Consider When Doing Business with Florida Ports

Doing business with a Florida port is tantamount to dealing with a governmental entity. Ports have formal processes, require various internal and external approvals, and conduct public hearings. Businesses should incorporate sufficient lead time when planning to do business with ports. To a certain extent, Florida’s ports compete for business, so the cost to do business may differ from port to port.

Depending on the nature of the business contemplated at a Florida port, the following additional considerations may apply:

1. Leases. Commercial tenants lease real property from landlord ports for a variety of purposes, such as storage and distribution of bulk products, storage of recreational boats at marinas, and operation of entertainment venues such as bars and restaurants. Ports frequently utilize the services of outside legal counsel to prepare long-term leases due to their financial significance. Long-term leases may be in effect for decades, and such leases may have renewal options. Tenants under such leases can suffer adverse consequences such as monetary damages or penalties in the event of their breach or early termination. Port approval may be required before a tenant can mortgage or sublease its leasehold interest. Shutts can negotiate long-term leases with Florida’s ports to ensure that tenants’ interests are protected.
2. Construction contracts. In the event a tenant enters into a ground lease with a Florida port, the tenant may desire to construct improvements to the property. The terms of the ground lease should detail the contemplated improvements and establish the port’s approval procedures for certain aspects of the construction. Depending on the nature and extent of improvements by the tenant, the tenant may be able to credit certain construction costs against the payment of rent under the lease. Shutts can represent tenants on construction contracts for property leased by ports, negotiating with both ports and contractors.
3. Operating contracts. Cruise ship operators may desire to enter into long-term operating contracts with Florida’s ports to ensure the availability of space. Ports may make certain landside and waterside improvements for their cruise ship operators in exchange for revenues from the passenger wharfage, vessel dockage, and other fees. Shutts can serve as legal counsel to cruise ship operators with respect to operating contracts with ports.
4. Procurement contracts. Florida’s ports also enter into procurement contracts for a wide variety of goods or services. Procurement contracts range from the support of current port operations to construction projects for future port expansion. Shutts can advise vendors and suppliers on procurement contracts as well as bids for the provision of goods and services to ports.
5. Sale of real property. From time to time, Florida’s ports expand their real estate holdings. In some instances, ports may desire to acquire property which is contiguous to existing port holdings in order to expand their immediate port operations. At other times, ports may be interested in acquiring real property which is remote from their existing holdings. Shutts can advise property owners in connection with the sale of real estate to ports (or in eminent domain proceedings in the event of a taking of their property).
6. Admiralty and maritime law. A variety of vessel-related incidents can occur at Florida’s ports. From property damage claims involving vessels or cargo to personal injury claims involving workers or cruise line passengers, Shutts has the experience to handle legal matters for maritime companies. Shutts has advised major cruise lines, ship owners, builders, operators and many others, including the financial and insurance institutions that serve them.

Conclusion

From its offices located near all of Florida’s major seaports, the law firm of Shutts & Bowen LLP has the expertise to advise clients on doing business with ports and resolving disputes arising at ports. Florida’s ports serve as a focal point for the movement of cargo and cruise passengers. To that end, ports offer businesses the opportunity to operate at their facilities, lease land, construct improvements, reduce or eliminate duties by way of FTZ facilities, and bid on port procurement contracts. From time to time, ports expand their real estate holdings. Given the number of vessels and people who pass through ports, incidents involving property damage or personal injury also occur.