View the July 15, 2020 seminar recording
Jennifer Symoun
Good afternoon or good morning to those of you to the West. Welcome to the Talking Freight Seminar Series. My name is Jennifer Symoun and I will moderate today's seminar. Today's topic is Examining the Growth of Inland Ports.
Before I go any further, I do want to remind you to call into the teleconference for the best audio quality. If you are listening to the audio over the computer and experience any issues, I am unable to fix them as audio quality will vary based on your network connection, computer, speakers, and other factors. Please also keep in mind if you are calling into the teleconference for the audio, you will need to mute your computer speakers or else you will be hearing your audio over the computer as well.
Today's seminar will last 90 minutes, with 60 minutes allocated for the speakers, and the final 30 minutes for audience Question and Answer. If during the presentations you think of a question, you can type it into the chat area. Please make sure you send your question to "Everyone" and indicate which presenter your question is for. Presenters will be unable to answer your questions during their presentations, but I will start off the question and answer session with the questions typed into the chat box. We will also take questions over the phone if time allows and I will provide instructions on how to do so once we get to that point.
The PowerPoint presentations used during the seminar are available for download from the file download box in the lower right corner of your screen. The presentations will also be available online within the next few weeks, along with a recording and a transcript. I will send a link to the recording in the next day or so and will also notify all attendees once all materials are posted online.
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Today we'll have four presenters:
Our first presentation will be given by Frank Harder, a Principal with the Tioga Group. Tioga is a specialized freight transportation and logistics consulting firm serving shippers, carriers, and government agencies. Frank has been in the freight transportation business since 1979, and a consultant since 1992. He specializes in surface freight transportation markets, operations, contracts, economics, and technologies with an emphasis on logistics applications.
Frank Harder
Thank you very much. My presentation is on inland ports and lessons learned. Thank you for that introduction. I think one of the things you will find today is that everybody that you will listen to this afternoon has a slightly different definition of what an inland port is, so I would like to begin with that. And for the inland ports I am talking about, we're talking about a rail intermodal terminal that is connected by rail service to a Marine terminal and at a distance of less than 400 miles. So, it becomes a short-haul rail service to an inland port primarily dealing with marine cargo. And in that context then, there is also a rail carrier involved, typically one of the class one railroads, but not necessarily so; one of the major ports; and usually there are Marine carriers involved in this process, that is the company that is moving the cargo from overseas; and then there is oftentimes a terminal operator, that may be the port itself or might it be an independent operation.
I want to begin with a conversation about railroads. This is a very stylized graph you're seeing that illustrates the trade-off between trucks and rail intermodal. And it is stylized, but it generally illustrates the rule of thumb that there is a break-even distance somewhere around 500 miles. And the institutional factors that are working at this point are the railroads owning and operating the terminal, the railway operating the trains and providing the railcars, and usually a private drayman completing the line haul. And this is highway distance with something of a recognition that there is typically some greater circuity in the railroads, so 500 miles. The point being here is that there are a number of railroads that are operating terminals within 500 miles of marine terminals, and the question is why did they do that? What you're looking at here on page 4 is a list of those short-haul services that are being offered by the class one railroads. And you will see that they're mainly an east coast phenomenon. That has to do with the particular east coast geography, actually. And so, why do they do that?
First of all, railroads find that there may be a network advantage in operating those services. Sometimes it's called "no new train, no new terminal", so they already have a train start that is bringing cargo from Savannah to Chicago and to add Atlanta into the middle without a problem. Obviously, volume is important, and the railroads will walk away from those lanes if they get more profitable traffic. So, you will see that those short-haul lanes come and go. And the reason for that is pretty simple. If I'm a railroad and I can have a choice between a 500-mile move or a 1,000-mile move as opposed to a 200-mile move, I generally make more money on the longer haul. So, the capacity of the railroad gets committed to the more profitable traffic. You also see, oftentimes, balance is an important factor in the need to address empty equipment and balances will have some impact on this. So, the 500 miles is not a hard-and-fast situation, but it is an indication that the short-haul intermodal is less profitable, let's just say that for the moment.
So, the other stakeholder that has created inland terminals, inland ports, are the two terminal operators; two private companies that operate terminals. In fact, their first inland port was created by Northwest Container Services in 1986; that operation runs from Seattle to Portland. And the second one is in Georgia from Cordele to Savannah. Here's a photo of the Northwest Container Services; you can see it's a large operation. Basically, it provided the opportunity for marine carriers to offer a bill of waiting to Portland without making a Portland call. So, there was some advantage in that, and it caused the main carriers to absorb that or take lesser of a profit in order to do that. I should also point out, and this is the feature of both of these terminals, that they provide a multiple of services. So, it's a container yard, trucking service, you know, basically any kind of full service container depot kind of facility. In addition, Northwest Container Services operates in conjunction with a municipal solid waste train, so the costs of the train are spread over multiple lines of business. This is akin to the full service gas station that you go to that you will sell the gas and a cup of coffee and lunch if you wanted and just about anything. And by putting all of the businesses together, they make a good profit, more than individually. Cordele is an interesting example of a very small bare-bones operation; side loaders over gravel and again multiple lines of business. One of the things both of these facilities do is they move products and export and they're balanced against major cities with inbound cargo; Portland in Oregon and Atlanta in Georgia.
So, why publicly sponsored ports? We'll look at the ones now that are sponsored by marine terminals. The first and most important reason is economic development and jobs creation. So, you want to get exports to market; they maybe ag, they may be manufacturing. And they also will understand typically there is port competition, particularly on the east coast, and by using an inland port you can extend the catchment area for the port facility. And so that is a common facility. You will also see some secondary rational associated with the reduction of congestion near the course. Everyone understands that urban congestion is a public problem for ports and these facilities tend to give the ports something to say about getting rid of the trucks nearby. There are a number of inland ports that are port-sponsored. There is a list that you have there, and we'll talk about them individually.
This is why it's happening; this is a lessons-learned page. Probably the most important one in this presentation. This is really a story of three balance sheets. We talked about the railroad perspective already and that the shorter hauls don't really make much money for the railroads. So, in order to get the railroad involved in this, you have to do something that reduces their risk; both the operational costs risk and the investment risk are important. We talked about the marine carrier perspective. They're willing to take a shrink sometimes on their profit in order to gain business. And that is particularly one that is true for larger shippers. The port perspective is interesting as well. If you note that this is primarily a southeastern United States phenomenon at this point, and, again, those ports are uniquely state agencies so that they are commissioned to develop business and industrial infrastructure within their states and economic development statewide is part of their commission. So, they can take the profits they are making on the port operation and invest them inland. That is not the case, generally speaking, or it's much more difficult say, in Southern California where the two major ports are essentially city agencies. So, the institutional aspect of this is very important.
So, I am going to talk a little bit about South Carolina and then I'll let the other presenters talk about Virginia and Georgia. South Carolina's got two ports, and the most important is Greer. That is the largest inland port in the country at this point. It's operating somewhere between 120 and 150,000 annual lifts. It illustrates the point about having an anchor customer. You can't talk about Greer without talking about Michelin and BMW, which are the locations or the companies that are the key customers providing the base load volume for that business. And South Carolina's promotional material counts $53 billion in economic activity each fiscal year from that operation, so you can see why they are doing it. So, in Georgia, there is the operation port; we'll give some more about that. And, again, you can clearly see clearly from the illustration that we're expanding the catchment area of the port. Virginia is coming up next. Virginia is interesting. It was one of the first ports and it was initially designed as a catchment area extension in competition with Baltimore. And that has happened, but what has also happened is interesting in that there has been an incredible amount of industrial development in and around the inland port. You can, again, see over a $1.2 billion invested. You will hear more about that later on in this presentation.
So, a couple of other comments. Economic development is the key driver. And having said that, all the ports measure through their share of rail cargo and tout it. For example, Charleston would say that before the increase in the railroad operation, they had a 13% rail share and now they have 25%. And most terminals now are developing additional on-dock rail facilities on the port end so that they can support a greater rail share. That said, we have not seen yet a terminal developed at less than 100 miles, which is primarily motivated by highway congestion or environmental considerations. It's the people who have been seeking to do that, particularly in California, but we have not yet seen that happen. Again, I talked a little bit about the railroad interests in keeping and maintaining their capacity for high-value cargo. I think you can probably walk around that if you're willing to subsidize the operation as much as you would subsidize commuters in the same geography. The other piece of the equation has been difficult to overcome was the urban and suburban development sites of sufficient scope are quite difficult to find and there is often resistance among the communities.
So, in summary, we talked about four kinds of stakeholders that are working to develop these kinds of terminals. And I think in terms of key takeaways or what you need to get done to make this happen, you need a champion or a sponsor agency that wants to make it happen; you need a viable marketing plan and anchor customers like Michelin and BMW, for example; you need a real financial plan, these facilities are not cheap; you need money, both investments and also shared risks on the operational costs, and that requires corroboration among the public and private stakeholders. And that concludes my remarks.
Jennifer Symoun
Thank you, Frank. Our next presentation will be given by Walter Kemmsies, a Global Strategist for Trade and Logistics for JLL, a global real estate services company. At JLL he serves as an advisor to the participants in port gateways, which includes ports, railroads and industrial real estate developers. His current work is focused on developing rail-served properties, both near and inland from ports. Prior to joining JLL he worked at Moffatt and Nichol Engineers for 10 years and before that at JP Morgan and UBS.
Walter Kemmsies
Good afternoon and good morning, everybody. And thank you Jennifer and Chip for having me here to speak. I have been fortunate enough to work on nine projects over the last 12 years. To be honest, two of them, I wasn't working for the project, I was working against the project because the idea made a lot of sense, but it was way before its time. And so, I will try to give you a pretty fair and unbiased view of things here. Some segments of the transportation industry don't appreciate some of the ways I look at things, but we're trying to be factual here. These kinds of investments, as we'll discuss in a minute, can be quite onerous and difficult.
Let me start here, I've moved to the next slide. We will talk about the key theme here, which is 12 years ago very few locations made sense as an inland port. And in the last two to three years, we have seen a significant acceleration in these developments and interest in them. So, I want to talk about this and really focus on the forward-looking thing. So, the first point here is that ports, railroads, industrial real estate developers, they have come to realize that they all serve roughly a very large common list of customers. We take a look at a retailer, a lot of what a retailer puts in their stores is imported, so the port is involved. Oftentimes it goes from the port to very distant locations inland, so the railroad gets involved; usually, not always. And the industrial real estate developers, who are all over the country, are the ones who put the building up. Sometimes they build to suit and sometimes it's a speculative building. So, I am currently involved in a couple of projects where the three have come together and a couple where two out of three are involved. But, on some of these, the local economic development agencies can be partners. Now, I don't mean in a sense they're involved and trying incentives and the benefits you need to make real estate work; I mean they actually own land that they contributed to the project, or else they add money to help finish acquiring the real estate and, thus, become financial partners, participating in the project. So, when I look at inland ports, I have a slightly different definition from Frank, but it's mostly because of how I am looking at it from more of an end-user point of view rather than a supplier or a producer point of view.
The second thing here is that these partners realize that inland ports are the ultimate solution to long-haul trucking capacity issues. And I should really say just the long-haul trucking issues, because it's well-known in the trucking industry the driver age profile is pretty advanced, the median driver age is significantly higher than the median age of the American population. There is a lot of competition for labor. And prior to Covid, the unemployment rate was the lowest it had been since 1967, 3.5%. And even now, although unemployment jumped up because of all of the discretionary industries where you can't have safe social distancing, that all shut down with some of it reopening and some of it may not, we have about 11 million people unemployed. But factories and distribution center operators are complaining they can't get people to come in. And so, oddly enough, there is a labor shortage for a lot of people involved with the transportation industry. So, are we going to continue? I think it will be hard for the trucking industry to keep up with demand. We saw that in 2003, I think Bob Costello showed us this once. In 2003, the average length of haul was something like about 800 miles, and a couple of years ago, it had fallen to 500 miles. So, there is the substitution away from trucks for long-haul for the OTR, and towards intermodal. The railroads have also become more efficient, and they are investing in infrastructure. Some places expanding current facilities and in others building new ones. And I'll show some of the recent things in a moment.
And probably not the least important, but, if you look at the S&P 500 companies, I think almost all of them have some kind of an ESG mandate (Environmental Social Governance mandate) because that is what the younger customers are demanding. And the things are bought by younger people, not older people. Older people have garage sales and the younger people go to the store sales. So, they do want to see labor and how much carbon was produced in getting this good to the store for them to pick up as well as other things. So, taking trucks off the road has meaning not just to the public sector policy part, but it also has meaning to the ultimate end-users of these ports being these beneficial cargo owners. So, I think those are really good thing in support of the recent acceleration and development of inland ports.
However, not all locations are ideal. So, some of them might become ideal down the road. And at this current time, I have seen efforts to develop inland ports that I don't think this is the right time. And, you know, 12 years ago, I would have said the same thing for a lot of locations, now, it's fewer locations. The big deal here really is it's the ramp-up time to get to the break-even volumes. The very first one that was ever done in the United States, everybody said theirs is first, they were not. The very first was Front Royal from the Virginia Port Authority. And since the VPA is here to speak today, it's better to just let her talk about it. But the second one that I know about was the Alliance Texas one done by Ross Perot. My understanding is it took 20 years to get the break-even. And I've had the pleasure of becoming friends with Mike Mullen, the former CEO of Center Point. When I asked him about Center Point, and I got a helicopter tour and I said, "This is brilliant. You did really well." He goes, "You want to know the truth?" I go yeah. "Well, this was a 9-year overnight success. It took nine years to get to break even." And now we're seeing the break-even levels being hit with much less time, but it takes a while to get things going. Wrapping up a new area is never that easy. And that is one of the reasons you will see more partnerships between industrial developers and the railroads, because this accelerates the break-even time period. But it is very risky and not everything works.
So, I am going to move on to the next slide and just spend a little bit of time looking at this from an end-user's point of view. So, I am looking here at a retail importer, and what they do is they have stores all over the country. So, I took a real example and then changed it a little bit so that you couldn't trace it back to the company's actual infrastructure. What you see here is all of the stores are marked off in these little red dots. And there are 5 distribution centers around the country, which are used to collect the imported goods that come in through ports and then redistribute the goods to the very stores. And what they try to do is locate distribution centers to minimize the cost of the network. So, we did a couple of examples here. If you look to the upper right-hand panel, what we did was we added a distribution center in up in the Pacific Northwest. It should be visible and easy for you to spot. And if you compare the upper left and upper right panels, you will see some of the stores that were being served by Southern California and even by a location in Texas are now being served by the distribution center. And this is a typical kind of distribution network optimization exercise that many companies with software do this and provide this, and sometimes the companies do it themselves, sometimes consultants do it. But what matters here is if you look in the upper left under the existing model, their total cost is $4.63 million to get the goods out to our stores with the five distribution centers, but once you put a sixth one in the cost drops to $4.52 million. You can do other exercises as shown in the lower panels, but I think you get the idea that when you want to build an inland port what matters is to look at very likely companies and industries to use the place and then try to see how that would fit in within their network. Because if you don't, you can build something, and they won't come. So, we have a good idea of who the big guys are they can fill these locations.
So, let's move on to the next slide. This is Logistics Park Kansas City. This is a property that is being brokered by a company, Jones Lang LaSalle. And the guy who is doing this, I think has been there for 12 years. So, BNSF, you can see their main line track running from Edgerton, the town on the lower left of the map. And the train runs towards the northeast part of the map. You can see the additional railyard area where the BNSF train stops. I forgot how many feet of track it is, but I believe it's north of 50,000 feet. Then you have roughly sitting there a 10 million square feet of industrial real estate. It's a mixture of distribution centers for big retailers and some manufacturing. The key thing here is when I visited the site a few years ago, what was see interesting to me is that I saw three 53-foot refrigerated vans bringing animal protein, beef and pork, over to one of these buildings where the contents of the three 53-foot containers were condensed into two 40-foot long refrigerated international containers. They were from CNA and were being loaded on BNSF where they went straight into one of the terminals in Long Beach and were literally lifted and loaded into the ship there. We have a problem with finding containers; the container balances are huge. Sometimes you send your goods in a box car in the rail to the port and then in the port there are a bunch of empty boxes you can use and put your stuff in it. And in other places like Logistics Park Kansas City, there are boxes coming in for some of the big retailers located there. And the boxes can be turned around to export various products like grains, and, in some cases, can be refrigerated goods. So, a balanced flow matters for an inland port to work. Of course, a balanced large volume makes these things work.
So, what I think is going to happen (and I'm going to the next slide) is that with all of the improvements and rail efficiency that we have seen, the investments that railroads have been making not only in expanding current yards but in new yards. What I did is I looked at the intermodal freight flow maps and I tried to figure out where I think the flows could be balanced. I didn't factor in when would make sense to build these things, I just laid that out. And what I came up with is an Inland Port Network. It's pretty short distances that are being served even by the class one railroads, such as the Seattle to Portland one, which I believe is 121 miles. And so, this is what I think the network is going to look like. Basically, I identified four kinds of hubs. The yellow ones are the public sector ones; there is the one from upstate New York, supported by the port of New York/New Jersey; we have the Port Royal in Virginia; two in South Carolina, Greer and Dillon; and we have the one for the Georgia Ports Authority in Northwest Georgia. Beyond that, Salt Lake City and Phoenix both have city and state governments involved in trying to start inland ports there. And you can also see on the map that we have the private sector ones; Dallas, the Alliance Texas one, as well as Center Pointe near Joliet, and you can see where Logistics Park Kansas City is. What I am seeing and discussing with a lot of people is that we are seeing a likely expansion of these places and in south Texas it looks to me like the conditions are ripe. I am not involved in anything there, but to me the conditions look ripe for an inland port, maybe even two additional ones, in the state of Texas. A lot of people and a lot of money and a lot of freight makes a lot of sense. So, I think we're going to see more of this happening going forward. Thank you for your time. I will stop here, Jennifer.
Jennifer Symoun
Thank you, Walter. Our next presentation will be given by John Petrino, the Director of Business Development and International Marketing for the Georgia Ports Authority. John started his career in international logistics with United States Lines in 1984. In 1988, he went to work for Maersk Line, the largest container shipping company in the world, where he held numerous management positions throughout the US in sales, line management, and operations. He joined the Georgia Ports Authority in 2006. John is a graduate of Leadership Southeast Georgia, a member of the Propeller Club of Savannah, and currently serves as the Chairman of the Board of Directors of World Trade Center Savannah.
John Petrino
Thank you very much, Jennifer. I would like to start out by thanking and you Chip for the opportunity to have Georgia Ports participate in this call today. Also thanks for sharing the registration list. Before I get started, I want to give a quick shout out to Mary Laney and Evan Grants with St. Louis Regional Freightway and also our friends Richard Grenville and Mark Halter with the Port of Kansas City. I hope you're on the line, I did see you registered, I just couldn't miss the opportunity to say hello thank you for all you have done for us. So, I will move on to my first slide.
I wanted to give a little background about the Georgia Ports Authority, specifically talking about our Garden City Terminal, which is where we handle our container business. Not too many people outside of the shipping industry know too much about the Garden City Terminal, but our terminal is actually the largest single container marine terminal in all of North America. I will explain that a little better in the next couple of slides. But at over 1200 acres, all the shipping lines bring their vessels into the one single terminal, which is very different from Los Angeles or Long Beach or New York/New Jersey. The Georgia Ports Authority, is an owner-operator port authority. What that means is we hire our own people. We have 1309 union employees who work side-by-side with the International Longshoremen's Association Unions. And different job categories have different responsibilities and jurisdictions. We do not lease the terminal operation out to a third party, a company or a shipping line. That is very different from other ports, so I just wanted to make that comment there. We have a very good relationship with our organized labor where our folks work side-by-side with them. So, I'm going to flip to the next slide here. I mentioned we're 1200 acres. We recently purchased an additional 145 acres of adjoining property and we'll use that primarily for container storage.
Moving along, a couple of quick highlights. You will see the terminology here, an acronym TEU standing for 20-foot Equivalent Units; most of you probably already know that. But just to give you an idea, the port of Savannah in calendar year 2019, handled over 4,500,000 TEUs, which is quite a sum. The next slide is going to put that in perspective with our top 10 container ports in the U.S. As most know, the Ports of Los Angeles and Long Beach are the largest container port systems in the U.S. Los Angeles and Long Beach are made up of 13 different marine terminals. New York/New Jersey is six different marine terminals. In Savannah, we have the one Garden City Terminal handling over 4.5 million TEUs. I just wanted to put things in perspective with a little bit of background there.
Moving into the inland port discussion. Several years ago, the port authority in our strategic planning said what can we do to maximize our assets? We have both the Norfolk Southern and CSX, which are the two class one railroads on the eastern half of the U.S. We have both of them on our terminal, and we operate them, and we built both of those the trains on our terminal with GPA employees. But how can we take better advantage of that asset? One of the things we looked at was inland ports. What locations throughout Georgia in addition to Atlanta might make good locations for inland ports? One of the first areas we identified was up in northwest Georgia; you see the Appalachian regional port. It's tucked up there just south of the Tennessee border, just east of the Alabama border. There is a tremendous amount of cargo, both import and export, that comes and goes from that area. The flooring industry is very heavy in northwest Georgia. So, that was a great opportunity for us up there. And we looked at some other strategic locations we'll talk a little more about. But right now, the Appalachian Regional Port is in full operation and has been for over a year. Unlike the port in Greer, that was talked about earlier, we don't have an anchor tenant up there. It's made up of several smaller tenants, but it is an economic engine for that area. There are jobs being created up there in the trucking industry. Warehouse and industrial development are taking place up there. Some very large appliance companies have recently opened up there. So, it's doing what we thought it would do. The one thing I want to mention, Atlanta is a little over 4 hour drive from the Port of Savannah; a little over 200 miles. Something that impacted the trucking industry within the last year or so is something called Electronic Logging Devices. When the trucking industry was required to implement Electronic Logging Devices, it really cut down on the length of hauls that truck drivers could make within their legal hours of service. And that is something that really helped springboard, I think, the development and the success of the inland ports on these, let's call them shorter haul distances. For example, a truck driver, if they were going to take a container from Garden City Terminal in Savannah all the way up into Murray County in Northwest Georgia, they would probably run out of legal hours of service before they could complete a round trip back to Savannah. That is something else that has really helped the railroads and the inland port strategy.
I'm going to move now to the next slide and talk a little bit about intermodal in general. So, I mentioned we did about 4.5 million, 20-foot equivalent units last year. About 20% of our cargo enters and leaves our terminal in Savannah by rail. And so, when you think about the numbers we heard earlier, 20% is a fairly low number, so we know we have some great upside potential there. If we look at our top 6 rail intermodal markets, Atlanta is number one, then we see Memphis is big, Nashville is big, Charlotte, Huntsville, and Birmingham. Well, the Atlanta market and the Charlotte markets, in particular, the rail is really competing with the over the road truck drivers when you've got about a 4 hour drive. If the diesel prices are low and transit time is really essential, then oftentimes some of the retailers will forego using rail for the option of truck. But we do know we have a lot of upside potential there and expanding into areas like our volumes into Memphis that have been growing, we're handling some business into Chicago, some in St. Louis and other location. We're looking at the Ohio valley, too, for a growth area as well.
I'm going to move to the next slide. So, a little over a half a million containers moved by rail last year. Again, the CSX and the Norfolk Southern, the two Class One railroads on the eastern half of the country are both operated on our facility. The railroads will contract with the different steamship companies or ocean carriers and that will dictate which rail really moves the container on behalf of the importer or the exporter.
Next slide, I just have a diagram of one of our largest Cap Ex programs and projects we have done in our history. In that top right, you see a number five; that is our Chatham yard where we build trains for CSX. And then in that number one in the lower-left column, that is currently where we build our Norfolk Southern trains. We're in the process of connecting those two segments on our terminal. It's going to require 100,000 feet of new rail. You can see the different expansions, grade separations, rail and truck crossings and things like that.
I'm going to switch to the next slide and talk a little more about it. We're going to go from having two separate facilities to having one major facility. I mentioned this was a large Cap Ex project for us. Over $225 million for this project alone. Our first phase of this opened up this past spring. We have two brand new rail-mounted gantry cranes I'm going to show you. Jennifer, I don't know if the video is going to work. You want to give that a try?
[Video plays, ]
There we go, nice job. We refer to this as our Mega Rail Project; $225million is a lot more than what we thought it was going to cost when we started to build it, but we know that over time it's an investment. To have both Class Ones on your terminal is rare in the container terminal business. We have a lot of room for expanding. Take that 20% we're handling by rail today and can increase it tremendously. That was a pretty quick video. All right, I will advance it to the next slide. I think we have folks on the line from MARAD. And if we do, I want to say thank you and please pass along our regards to Admiral Buzby. If you look at that rail-mounted gantry crane on the center right of the picture, that is one of the two we have in operation today. A couple of the largest rail-mounted gantry cranes built in the U.S. MARAD helped us with the grant to have those built in the U.S., so we're very excited and appreciate that. That is going to give us tremendous opportunity to speed our service, and to increase our efficiencies on-terminal rail.
Then moving to the next slide, I am going to talk about our Appalachian Regional Port more specifically here. That is, again, the terminal up in northwest Georgia, up near that Tennessee-Alabama-Georgia border. It's owned and operated by the Georgia Ports Authority. We do have our own staff working there. It's operated with 3 rubber-tired gantry cranes, 3 working tracks, and you can read the information there. We have about 20 people working up there. One of the main goals of the Appalachian Regional Port was to take trucks off of the highway. We estimate that it will take about 50,000 trucks a year off of the highway; that is trucks that we will not have to roll through Atlanta. So, if you're in the Atlanta area where some of our GDOT friends are on the phone, they know how important it is if we can get tractor-trailers not passing through the City of Atlanta. Our volumes are growing considerably. As I mentioned, it's about economic development and job creation. A very large appliance company has recently built and opened up a large distribution center up there. We're also looking at doing a lot of exports out of that area of things like logs and lumber, which gives us a good balance of trade, both imports and exports for our shipping line; that is also important. Again, with the Electronic Logging Devices, you won't be able to make it from Savannah, up to the Appalachian Regional Port, and back to Savannah with the legal hours of service with the Electronic Logging Devices these days. The next place we're looking at for an inland port in the state of Georgia, operated by the Georgia Ports Authority, would be in northeast Georgia. We have property that we purchased in Hall County in Gainesville. It's a suburb northeast of Atlanta. There is a tremendous amount of business already going up there for importers. Our friends at JLL helped us with a study. We know it's over 150,000 containers a year and we think that we can switch through rail from Atlanta directly up to a northeast regional port. We have a lot of customers up there, both importers and exporters, who are anxious for us to build something up there. This will be a fairly expensive endeavor to build. We're still doing our due diligence on that and, again, we do have the property. Our northwest Georgia inland port is served by the CSX. In northeast Georgia, we would operate that as you can see, will be served by the Norfolk Southern. A lot of companies are already up in that area and this should be a tremendous help for them. Really, that is it. I am going to say thank you there and pass the baton.
Jennifer Symoun
Thank you, John. Our final presentation will be given by Barbara Nelson. Barbara joined The Port of Virginia as Vice President of Government Affairs and Transportation Policy in 2019. In her role with the port, Barbara works to align federal, state, regional and local funding and priorities and leverage relationships to position The Port of Virginia to successfully compete for funding for capital investments, economic investments and job growth across Virginia. Prior to joining The Port of Virginia, Barbara's career has involved work with the MPO's in Virginia and with the USDOT Maritime Administration.
Barbara Nelson
Thank you. Good afternoon and good morning. I am glad to be with you today. My remarks will focus on our two inland ports. However, like John, I would like to begin by providing some context to the Port of Virginia that really pushes the cargos to these inland ports. At the port of Virginia, we work to deliver opportunity by driving cargo to and through Virginia to create economic opportunity across our Commonwealth with the right-sized transportation solution with the goal of maximizing the efficient use of our transportation system. Like most large ports, we have a significant market reach. Ours is deep into the Ohio valley and the Midwest and is supported by our strong rail relationships with Norfolk Southern and CSX. At the Port of Virginia, we worked to push cargo inland to improve the speed to market to our intermodal connections. We have four deep-water ports. If you look at the lower right-hand corner you will see in the Hampton Roads Region, we have 4 ocean terminals with on-dock rail to NS and CSX. And then as you move into central Virginia, we have our inland barge terminal at the Richmond Marine Terminal. And then in the northwest portion of Virginia, we have our Virginia Inland Port. And as Frank, and I believe, Walter mentioned, it was the 1989, one of the first ports that entered into this type of effort.
I would like to, on the next two slides, I am going to quickly roll through them to highlight some investments that we have made in two of our ocean terminals in Hampton Roads. Over the past few years, nearly a billion dollars has been expended or is committed to improving on-terminal and channel access to the terminals. This slide on slide 3 is our Virginia International Gateway Terminal. It has three phases. The final phase was completed in 2019, and it involved $320 million of investment with new ship-to-shore claims, doubled our refer capacity, doubled our on-dock rail capacity, added 13 new container stacks, added gate lanes, and implemented our truck reservation system, which is producing some significant results. A significant second effort that has been underway, again, both of the investments on these terminals is what is driving our ability to receive and then push to those inland marks, is the work that is going on with the optimization at the Norfolk International Terminals, the south terminal. This is a three-phase effort that started in 2018. The final phase will be completed later this year. But the important story we think here, is that we have gone through a densification and optimization process to add 46% capacity to our existing terminals footprint all while the terminal was handling record container volumes. So, that is the effort that is underway in Hampton Roads to create economic impact across our Commonwealth. I think all three speakers have really focused on that as an opportunity that is associated with our inland terminals. But the numbers that you are seeing on this slide, slide 5, is the total impact across the Commonwealth of Virginia from the Port of Virginia. There were 38 port-related announcements, more than $1.4 billion in investments, over 5400 jobs create, and over 9 million square feet of industrial space developed.
At the Port of Virginia, we are delivering the opportunity to drive this cargo to create the economic opportunity, and we believe that stage market is an important part of this conversation. By moving the cargo from our deported terminals to our interior locations, we lower the truck turn times, we reduce emissions, we expand our catchment area, we increase our customer service levels, and we create economic opportunity. The table on the right shows the market and the trip destination times with comparisons from Hampton Roads to the Virginia Inland Port and from Hampton Roads to the Richmond Marine Terminal. And I would like to call your attention to two examples, one being the Hampton Roads verses RMT on a trip to Chantilly, Virginia. If a box or truck were leaving Hampton Roads and you could successfully travel on I-64 and I-95 and make it to Chantilly in a little over 3 hours or 3.25 hours, that same trip from Richmond would take approximately 2 hours, and you avoid significant bottlenecks in the I-64 corridor. Similarly, if we compared a trip from Hampton Roads to the Virginia Inland Port and using Hagerstown, Maryland destination as an example, a box leaving Hampton Roads, best case is that it would take 4.5 hours to travel to Hagerstown. This versus a one-hour trip from our Inland Port. Again, the opportunity to provide more turns for the truckers is a direct advantage of the inland ports. Two other points I would like to share with you regarding our inland ports are that both of them are U.S. Customs ports of entry. They have full customs function that are available to customers. And that in working with the Virginia general assembly, we did create a number of tax incentives and grant programs to support the utilization of the Port of Virginia. One that we think is really pretty interesting is a barge and rail-use tax credit that provides a pro-box tax credit for increasing volumes on the barge or by rail.
My next few slides I will move in to are our two inland ports, first beginning with the Virginia Inland Port. That is in Front Royal, Virginia. This is our rail inland port; it was established in 1989. We have a little over 160 acres, great interstate access to interstate 66. We're about a mile from interstate 66, and within five miles of interstate 81. We have five-day-a-week rail service with Norfolk Southern, and 24/7 container availability. We have a secure drop lot, 24/7 availability with reefer plugs. In the Shenandoah Valley we deal with a lot of poultry, so the reefer connections are an important component with that project. We are also working with our USDOT partners and with the Virginia Department of Rail and Public Transportation partners to advance a $26 million project that will expand rail capacity at the Virginia Inland Port and provide great separation between a road and close proximity to the port and the NS main line. That should be underway letter this year.
This slide, we think, tells an important story of the economic impact of our inland port in Front Royal. We have customers in Virginia, West Virginia, Maryland, and Pennsylvania as you can see them listed on the map. And as Frank mentioned in his slide, as a result of the inland port's presence in the Front Royal area since 1989, 54 major companies have become business partners of ours in the area. We have had more than $1 billion invested, more than 10,000 jobs created, and more than 11,000 square feet of warehouse distribution and industrial space created as a result of the inland port.
Moving to our second inland port, which is a barge port, the Richmond Marine Terminal. We do manage both breakbulk and containers at that terminal. Unlike Front Royal, which we own and developed, this is a lease agreement that we have with the City of Richmond. Five years ago, we entered into a long-term lease through 2045 to lease this facility. We have direct access off of the terminal to I-95 and are in close proximity to I-64 And I-85. We have five times a week barge service, and rail service is available to the port by CSX and through switch with Norfolk Southern. The Richmond Barge story is similar as we have been in that market for fewer years than we have been in the Front Royal, but it really has made a significant impact in the short time that the Port of Virginia has had this long-term lease in place. Since 2016, over 700 jobs have been created in the region that are directly related to the port. And those 700 jobs come from 7 new business interests. In 2018, we had approximately 2 million square feet of industrial spec development that was occurring which is now leased or moving under contract. And one of the things that really was a differentiator in the success for the Richmond Marine Terminal was working to achieve 13 shipping lines offering direct bills of leading to RMT which helped to drive the cargo to Richmond. You can see when you look at this map, if you compare it to the one of the Virginia Inland Port, there is a heavy concentration of business interests in the central Virginia area. However, we do move out to western Virginia where business interests are trucking to the Richmond Marine Terminal and then going by barge down to Hampton Roads. And along the bottom of the map, we highlighted some of the recent business interests that have joined our services there.
In closing, I would like to highlight two of my colleagues; Laura Smith, who is our economic development manager for both of these inland terminal areas, as well as Aaron Ouellette, who is the economic development specialist, but also manages the tax credits and the grant programs that we have. So, if anyone participating on the seminar today would like more information, you're welcome to reach out directly to me, but my team of experts include Laura and Aaron, and I would encourage you to feel free to reach out directly to them. Thank you very much for the chance to participate today.
Jennifer Symoun
Alright, thank you very much. We are now going to move into the Q&A session. I'm going to start with questions that have been typed for Barb since we just finished up her presentation, then we will go to other presenters. So, Barb, it sounds like most container moves from the Hampton Roads Port to inland ports/Richmond Marine terminal or other destinations is by truck. Is there any significant rail component for these inland moves?
Barbara Nelson
The move to Richmond is barge or truck, but Front Royal is where we still see some moves to Front Royal region by truck. The larger percentage is moving by rail.
Jennifer Symoun
All right, thank you. Another question for you. Actually, two questions. I should mention if any other presenters want to jump in on any of these questions, some I think apply to all presenters. Barb, I will start with you. Is the key success of inland ports due to dedicated schedules for rail services for which a shipper knows when his goods will arrive (a guaranteed schedule)? If so, are the dedicated schedules a result of rail shuttle services that run only between the deepwater facility and inland port?
Barbara Nelson
For the Port of Virginia, we do have daily service that runs. We have a train that heads north and a train that heads south every day on a daily basis. And I do believe that both with rail and with our barge service frequency and reliability of the service, that regular call, is critical. We found that our customers expect us to do what we said we would do when we said we would do it for the price we said we would do it for. So, that reliability, they can build time into the supply chain if they know that that box is going to arrive on the appointed day by the appointed time so that they can schedule their drivers efficiently.
Jennifer Symoun
Alright, thank you. And any other thoughts from any other presenters on that question?
Alright. Barb, I will move on to another question for you. I think a few people had the same question. How does passenger rail impact cargo rail since they both operating on the same tracks?
Barbara Nelson
Yes. That is a great opportunity that we in Virginia share with many other states. And it can be a challenge, I would say, but we work very closely in partnership with the Virginia Department of Rail and Public Transportation and they have excellent working relationships with our two Class Ones and we work together in partnership to address conflicts if they arise and to plan for them before they become conflicts. An example of an effort we're working on that has a passenger rail focus, but a freight benefit is the long bridge over the Potomac River. It will make a significant impact to our ability to increase passenger rail capacity into the northeast corridor. But what it also does is frees up the existing CSX bridge that now also has to carry all of the passenger trips along with the mix of industrial cargo over the same bridge. So, it will give us the resiliency and redundancy that the system needs. So, we the port have a cargo interest, but we're supporting the long bridge passenger rail because of the positive impact that it has to the CSX system.
Jennifer Symoun
All right, thank you. Another question for you, is the tax credit based upon sales tax for the goods being shipped or another tax? And are you aware of other states offering a similar incentive?
Barbara Nelson
I am not sure if other states offer the incentive. And what I will do is when I finish this question, I will go into the chat box and I will type in that Virginia code section so that folks can read in detail or have the specific reference. But it's $25 per TEU or 16 tons of non-containerized cargo that go by rail or barge that originate at a public or private port facility in Virginia. So, it's off of your Virginia tax that a business would pay. It's not a sales tax, it's off of your business taxes.
Jennifer Symoun
All right, thank you. Another question for you. As new inland ports are acquired, will they be designed with green technology?
Barbara Nelson
Yes. At the Port of Virginia, the two terminals I showed earlier on, the International Gateway as well as the Norfolk International Terminals, we have been working aggressively to deploy green technologies and to redevelop them in a sustainable manner. And we're working with the Virginia Department of Environmental Quality to deploy some investments that they have funded and supported at the Richmond Marine Terminal for green technologies. So, it is something that is part of our core mission, and we're working as we acquire new equipment to ensure that it is green and to apply sustainable development principles on our terminals.
Symoun
All right. Another question for you. Is the Port of Virginia getting scheduled information assistance from rail providers regarding precision schedule railroad scheduling?
Barbara Nelson
That is a question that I don't know that I know the answer to, but I would be glad to look into it.
Jennifer Symoun
Alright, thank you. I have a question typed in for you, but it was also typed in earlier for both you and John. Barb, we will start with you. Can you elaborate on how the inland ports were initially funded and whether they are operated at profit today?
Barbara Nelson
So, the land at the Virginia Inland Port in Front Royal was acquired by the Virginia Port Authority and the project was funded through port revenues. And the Richmond example I shared, it's a different model. We leased that facility; it was an existing marine terminal that is owned by the City of Richmond. We had a short-term lease that was converted into a longer-term lease. And so, the business models for each are different. One of the ways we measure profitability is by the increases in the cargo volumes and even during this more challenging economic time, the Richmond service in fiscal year 20 grew by over 20%. Our front Royal rail service didn't grow at the same rate; its rates did not perform at the same level. And so, we consider all of our inland terminals to be part of the total six-terminal system. We don't really look at one as a profit or loss center separate from the others.
Jennifer Symoun
Alright, thank you. And John, I will pose the same question for you about funding and whether or not you're operated at a profit today.
John Petrino
Sure. Typically, we fund everything ourselves. All of our improvements on the container terminal down in Garden City, they're all funded through our revenue streams with the ocean carriers. However, as we started and opened the Appalachian Regional Port, the local development authority, the local community up there donated the property and there was an investment by CSX railroad. There was a similar investment from the State of Georgia and the Georgia Ports Authority picked up the lion share of the cost to build and we pay the entire cost to operate that facility. I am going to probably give the same answer as Barbara regarding the profitability. We don't break them out one way or another. A lot of it is about job creation. But I can tell you that it's really picked up momentum as we have gotten more steam ship lines or ocean carriers to offer competitive rates going up into that area. We see tremendous potential. Right now, we're only running three trains a week. and as we increase our volume of cargo, the CSX has committed that they will increase the frequencies. So, we also know we have some customers who are using it on a limited bases, and they have, they have assured us that when the frequency is increased to five-day-a-week or more, they will be able to give us a greater share of their business. So, hopefully, that helps.
Jennifer Symoun
Alright, thank you. John, we'll move to some additional questions for you. Given Savannah [ Inaudible ] Has there been labor challenging all positions.
John Petrino
Say that once more, if you don't mind.
Jennifer Symoun
Given Savannah's relatively smaller population, I guess the question is has it been challenging to fill all positions?
John Petrino
So, if we look at positions on the port, not a problem filling those. If we look at truck drivers, no shortage of truck drivers. As we continue to be successful and attracting warehousing and distribution centers, any of the manufacturing, it's not a big city, it's about a quarter of a million people or a little more than that in the metropolitan area. So, there can be challenges and have been in the past. I am not going to hide from there that. But we're working with school systems and there is a lot of military presence down here along the coast. We're working with the military, for folks who are retiring or separating from the military to work in some of these distribution centers, warehouses, and things like that. We work with the local economic development authorities, the school systems, technical college systems, and right now, we're doing okay. And I think part of this, too, is there is increased technology in the warehouses that is being implemented. So, some of the work being done there is more efficient. And so, again, we're not a million population, we're not a New York City, we're not an L.A./Long Beach. There are challenges. I mentioned military because that's a huge source of folks entering the workforce in this area. Even if someone has only been in the military three or four years, they end up enjoying their time in the coastal Georgia and low country over on the South Carolina side. So, we continue to work on that. It has not deterred the development. I didn't put some of the numbers out there, but we're one of the fastest area, as far as net absorption, of industrial real estate in the country. So, if you follow the JLLs and the Colliers and the CBREs, you will see that about 90 million square feet in our immediate port area of industrial warehouses.
Jennifer Symoun
Alright, thank you. You may have answered this in your previous response, but what were the funding sources for the Mega Rail project?
John Petrino
That is 100%. Well, let me say that $220 million is a Georgia Ports Authority investment. We received some grants from Maritime Administration on those rail mounts of the gantry cranes. But the rest, we source, and we fund from our operating capital. We're very proud of that. We're a very financially conservative organization. Any profits we make we reinvest in our infrastructure and future investments. So, that was money that came out of our operating budget.
Jennifer Symoun
Alright, thank you. Let's see here. So, there is a question about when you reduce the amount of trucking, you're reducing jobs, but create new jobs at an inland port. Are you really creating jobs or just shifting them into another market and removing jobs permanently from the trucking market?
John Petrino
That is a good question. We have about four trucking companies now operating in northwest Georgia who did not exist there prior to having that Appalachian Regional Port go there. If you recall that earlier slide about our growth and our growth potential, on that local side, 80% is still moving by truck. Our truck drivers have extremely efficient gates. The truck drivers coming in, many are hauling on the local distribution center of the market 5-8 containers a day in the time that we're open. So, truck drivers down here can make a good living. They're making a good living. We have new truck drivers coming in. We have new trucking companies coming to Savannah to serve new customers. New importers and exporters are locating here all of the time; E-Commerce is a huge driver of that. So, these are additional jobs, I would say; they're not displacing. All those jobs in northwest Georgia are all new. We continue to get trucking companies coming to us on a regular basis asking us how do we operate in the port of Savannah, can you put us in touch with real estate companies for property, we would like to open the terminal down there. I think it is growth all around.
Jennifer Symoun
Alright, thank you. I am going to move up now to some questions for Walter. Let's see here. Walter, do you know of any inland ports connected to multiple water ports?
Walter Kemmsies
Yeah, I would say probably the closest thing you will find is Logistics Park Kansas City. There is a direct connection coming from Los Angeles-Long Beach, and other railroads do go to the area as well; CSX and Norfolk Southern do. I think Norfolk Southern still has the service out to Kansas City, so that would be an example of one. And for sure AllianceTexas; it's actually connected to both west and east coast ports.
Jennifer Symoun
Alright. And do you know of any inland ports that are multistate efforts?
Walter Kemmsies
Not off hand, not yet. It's possible that the Salt Lake City one, which has got the governor's support and the city's support, they are definitely in communication with California. So, that would be a reasonable example of a multistate.
Jennifer Symoun
Alright. Have any inland ports made provisions for truck parking for over-the-road truckers to park for their mandate and rest break?
Walter Kemmsies
I was at the Agricultural Transportation Coalition, and I believe that some of the ag guys were talking about doing that in the inland ports where they were, or the ramps that they were using, which you could loosely define as an inland port. I don't know of any specific example. I just heard that they were having to do things like that simply because the truckers wouldn't come otherwise. And there are a lot of importers and exporters who actually set things up when they have large footprints in relatively rural areas. They have been building these truck stops with a little bit of retail and a little bit of hygiene stuff and places to sleep, and all things put together. But mostly because the truckers wouldn't otherwise give them a very good schedule or frequency of service.
Jennifer Symoun
Alright, let's see here. He's a question for both you and Frank. Walter, we'll start with you first. Is rail a prerequisite or could an inland port be established just outside of a major city and serve via truck only, essentially a shuttle service after hours to avoid traffic congestion and alleviate pressure at the marine terminal?
Walter Kemmsiess
Yes as a matter of fact, I will give you a couple of examples. One is over in Savannah, in John's neck of the woods. Basically, there was a dual rail served property, Georgia International Rail Park. CSX and Norfolk Southern run parallel to each other coming out of Savannah. And basically, there is a connection between them in this rail park, which goes further over to one side where Georgia Pacific and Georgia Paper are. The owners of the property are trying to develop about 1500 acres for the distribution centers and manufacturing. They would receive export-oriented goods coming in on either railroad on the domestic trains, and then they would have importers located there. And as the importers get the boxes drayed over from the Georgia trade authority, the boxes would be flipped over the fence from the importer. They would empty the box and hand it to the exporter. The exporter would fill it and it would get driven to the port. I think that basically qualifies it as an inland port. So, slightly disconnected, another good example is the Tradepoint Atlantic. This is no one known as Sparrows Point in Baltimore, a steel mill with about 3500 acres where they produced hundreds of millions of tons of steel a year. But what happened was they were literally railing ironwork from the receiving dock to places where they would smelter it, clean it, et cetera. But over time the efficient scale for steel plants shrank dramatically, so they went out of business in 2010. In 2015, I worked with Hillco and Redwood Capital and advised them on getting started on this. And the way they looked at it was, along the waterfront, which needed a lot of work, that can be a port. But the interior of the 3500-acre site, this is just massive, you could get lost out there. And they actually had 100-mile of functioning rail track on the property. So, we treated the inside of it as inland port. Now, no container terminal is built yet on Sparrow's Point, but you're only 7 miles away from the Seagirt Marine Terminal in Baltimore. So, what's happened is Tradepoint Atlantic they renamed Sparrows Point, basically gets boxes coming in by truck from Seagirt. The boxes go to the 7 to 8 million square feet of distribution centers owned and operated by Amazon, Nike, and other retailers and importers. And effectively, Sparrows Point functions as the inside, it functions as the inland port and it's a good overflow of location.
Jennifer Symoun
Alright, thank you. I know we're out of time, but if our presenters are able to stay on a few minutes longer, we'll try to get through a few more questions. John, I want to ask you for your response to the same question. I actually meant to say, Frank, but John, if you want to respond, too.
John Petrino
I think [indiscernible] Walter did a great job summing things up for Savannah while he was giving a comments. So, thank you.
Jennifer Symoun
Frank, your thoughts?
Frank Harder
The only thing I would add is that's pretty much the way the system works in Southern California. While the inland empire you can look at as the import and going back and forth and the cargo being incentivized.
Jennifer Symoun
Alright. Frank, we have two questions for you that I want to try to get through. The first is, is the willingness to reduce margin to gain volume still in place with the push to PSR streamlining increasing of cost efficiencies?
Frank Harder
Yes and no. Yes, in a sense that, if you look at the list of inland terminals, both CSX and NS are serving the facilities. So, whatever has been done in terms of contracts or in terms of arrangements, even in the PSR environment, the railroads are finding ways to be positive economic relationships for them. The second though is that if you look at the first list that I produced of inland terminals that were rail served, the short-haul ones, the terminals come and go off that list pretty regularly. And that, obviously, that has to do with customers, but it also has something to do with PSR as well where the railroads are looking to simplify their operations and eliminate marginal operations.
Jennifer Symoun
Alright, thank you. And one other question for you. Didn't West Virginia open an inland port they then closed due to lack of business?
Frank Harder
I believe that is true.
Jennifer Symoun
Alright. So, we have two questions left that came in for all presenters. If any of the presenters have to leave, I completely understand. But if you're able to stay on, I will try to get through these two. The first question for all presenters is, what are your thoughts about nearshoring? There is a lot of talk, especially after Covid-19 about production returning to the U.S. and Mexico, away from China and other countries. Are you considering this possibility in your strategic planning? I will let any of you who wants to start off go ahead.
John Petrino
Jennifer, this is John. Certainly, we're keeping a close eye on it and I think Mexico is certainly a possibility. We have seen nearshoring in the automobile sector with Mexico for years. So, that is something we definitely have our eye on that ball. China is the 800-pound gorilla with the tariffs even prior to COVID, we saw a lot of manufacturing shift from China to Vietnam and certain other places. But, we think maybe eventually India will be a big sourcing area for the U.S. I think companies will have to diversify. They can't have all of their eggs in the China basket. So, we're definitely engaged with our importers and exporters on that and we are also engaged with the shipping lines on that. I would think pretty much everyone on this call is thinking the same thing along those lines, but those are my thoughts on it.
Jennifer Symoun
Alright, thank you. Anyone else.?
Walter Kemmsies
Yeah, I'll just add to what John is saying little bit. I sit on an advisory committee to the Secretary of Commerce on supply chain competitiveness. Our last meeting was a big discussion of what the DOD is looking at in terms of national security. And the Department of Commerce, you can read about this, these are pretty open discussions. Basically, the focus is on getting all healthcare products and services that are sold in the United States manufactured in the United States all of the way to the highest level tier. In other words, really upstream, in particular the active pharmaceutical ingredients. The other one is technology and telecoms. Taiwan Semiconductor announced it intends for the U.S. government is going to build a $12 billion chip fab in Phoenix, Arizona. And our government's position seems to be that telephones and computers sold in America have to be made in America with all of the components coming from America. How viable that is is up for debate. Because, everybody is part of the supply chain. You get inputs from someone and you sell them to someone else. And making sure that your entire supply chain is located in the U.S. can be very, very tricky. But we do know that health and technology industries, it's the government's desire to have them completely domestic. So, I would expect that, the rest of it, unless you're really forced to, from the surveys we have been doing in my company, we see most people going towards India, Indonesia, Vietnam. And I'm in contact with our analysts there, so we share the information a lot. There are a lot of incentives being offered to companies to do so. So, we basically see a long, long shift away from China towards western Asia. Just like in 1987, when Reagan imposed 100% tariffs on Japanese electronics and told American companies to source elsewhere, we eventually saw the Asian tigers (Korea, Taiwan, et cetera) emerge and eventually China. Now, it seems the same message from 1987, and the logical places to go would be in Asia, because that is where the global middle class is growing the fastest and that's the consumer. So, we think that is the way things shift. The economics and policy statements, et cetera, seem to line up in this direction.
Jennifer Symoun
Alright, thank you. Anyone else?
Frank Harder
Sure, this is Frank. The way I define inland ports is a much narrower focus. For those kinds of inland ports, if you look at the markets they're serving, a lot of it is export-oriented. So, that would seem to me, at least, to give some insulation or even to the change toward nearshoring or even encouragement in growth as we move more product, as we produce more product in the United States for export. And, of course, export and import are two-way street. So, there is a lot of conversation we can have about that. But, at least as far as the inland port facilities that are being driven by manufacturing or agricultural markets, those seem to be more favored by that kind of change.
Jennifer Symoun
Alright, thank you. Barb, anything you want to add?
Barbara Nelson
I think Frank, John, and Walter have covered any of the points I would have made.
Jennifer Symoun
Alright. One last question for everybody. Is precision scheduled railroading on the Class One railroads having impacts on inland ports, their development, and ongoing viability? What are positive and negative affects?
Walter Kemmsies
I will say something here, because I am involved in some budding partnerships here. Basically, it's the scheduled railroading; the railroad talk they don't call it PSR anymore, it's really scheduled railroading. They're trying to put more volume in fewer routes, so that you have enough to be able to not only run an international intermodal rail service, but also a domestic intermodal on the back of that. And a very good example is what CSX has done between its north Baltimore property near Toledo and in Winter Haven. There is a lot of high traffic going between the two on a domestic basis. But, most of that really came about with extreme emphasis on efficiency. And, as that has happened, it has drawn the interest of other players. And basically, potential for being able to do domestic and international on some location is very, very attractive. But it really does require that emphasis on high efficiency. And, as Barbara said earlier, delivering when you said you would and the price you would. And so, I think the answer is yes, absolutely.
Jennifer Symoun
Alright, any other presenters?
John Petrino
Just quickly, this is John. The railroads are in it to make money, right? And if you look at what is happening to some of the other portions of their business, their coal and automobile businesses are declining markets for them. So, I think really the last couple years, they're looking at the intermodal, the domestic and international intermodal, as a revenue generator for them. You may also know that they have to have reliable predictable schedules, or the customers are not going to support them. And so, that is all I would add to Walter's comments on that.
Jennifer Symoun
Thank you. Anyone else?
Frank Harder
Yeah sure, I will throw in on that. You want the railroads to be making money. And as we just heard, there are a number of declining markets, so they have to adjust their operations accordingly. And for what remains, they have to be financially viable.
Jennifer Symoun
And Barb, anything?
Barbara Nelson
Nothing to add. Thanks.
Jennifer Symoun
Alright. Well, I know we have gone way over, so I think we're going to go ahead and end for today. I appreciate all presenters and their willingness to stay on a few extra minutes. Thank you, everybody, in attendance and for dealing with some of the connectivity issues that we had today. The webinar was recorded. I will send out a link to the recording of today's webinar within the next day. The August Talking Freight seminar is not yet available for registration but once it is I will send notice through the Freight Planning LISTSERV. The Freight Planning LISTSERV is the primary means of sharing information about upcoming seminars. I also encourage you to join the LISTSERV if you have not already done so.
