U.S. carriers operating in domestic cabotage trades under the protection of the Jones Act are undergoing an “extraordinary renaissance,” while that’s not so in the international trades.
It’s the best of times and worst of times for the U.S. Merchant Marine.
Carriers operating in domestic cabotage trades under the protection of the Jones Act are undergoing an “extraordinary renaissance,” while those who compete in international trade against foreign-flag operators are in a “precarious” state.
That was the stark contrast drawn by industry representatives during testimony given before the U.S. House Transportation and Infrastructure Committee’s Coast Guard and maritime transportation subcommittee in September.
Mark Tabbutt, chairman of Saltchuk—parent company of several shipping firms involved in domestic cabotage trades, including Totem Ocean Trailer Express and Sea Star Line, said “it is a very good time to be part of the American domestic maritime industry. Our industry’s contributions to America’s economic, national, and homeland security have never been more important and are expanding every day.”
Key to the renaissance, he said, is the Jones Act, which requires ships operating in trades between two points in the United States to be carried on U.S.-built ships, U.S.-flagged, and crewed by Americans.
“Certainty in government policy is the principal and critical ingredient that allows for success of the domestic maritime industry,” said Tabbutt, who testified on behalf of the American Maritime Partnership, a group that represents the domestic maritime industry protected by the Jones Act.
He said the domestic industry is “an industry that annually creates nearly $100 billion in economic impact and supports nearly 500,000 jobs.”
Tabbutt highlighted the growth in domestic vessel construction, including containerships to move cargo between the U.S. mainland, Hawaii and Puerto Rico; vessels capable of using liquefied natural gas as fuel; the growth of new cargo because of the “shale oil revolution;” and the industry’s efforts to reach out to military veterans to fill jobs.
Matthew Paxton, president of the Shipbuilding Council of America, said American shipyards deliver about 1,300 vessels per year.
While many of those vessels are small, he noted the increase in oil and gas production has “been a boom for shipyards, who are currently building out 19 (options included) large petroleum product carriers representing billions of barrels of new capacity for coastwise transportation. These vessels are both self-propelled and articulated tug/barge units; however the inland and coastal barge market is also strong, with 341 tank barges delivered in 2013, up over 250 in 2012. If this testimony were delivered just three short years ago, the picture would not be as rosy.”
On the other hand, the state of U.S.-flag carriers that operate in international trade is “precarious,” according to Niels M. Johnsen, chairman of Central Gulf Lines and Waterman Steamship Corp.
“Our industry is in the midst of a ‘perfect storm’—dwindling United States military cargoes, a precipitous drop in food aid cargoes, escalating costs and regulations from the U.S. Coast Guard and other federal agencies, and intense low-cost foreign competition,” he testified.
Much of his testimony was echoed by Don Marcus, president of the International Organization of Masters, Mates & Pilots (MM&P), who spoke on behalf of his own union and five others that represent U.S. seafarers.
Johnsen cited testimony from Maritime Administrator Paul Jaenichen before the House Armed Services Committee that the size of the U.S.-flag fleet that trades internationally has declined 18 percent from an average of 101 vessels in the five years between 2008 and 2013 to just 84 ships as of July 2014.
Noting an increase in military conflicts worldwide, Johnsen testified “we cannot predict when or if the American military will be called upon.
“But, we must all ensure that our merchant marine is ready to answer the call when it inevitably comes and that our U.S.-flag merchant marine is able to provide the essential sealift support that is critical to any successful military campaign,” he said.
“Our country should not increase the risk American troops already face by forcing them to rely on the whim of foreign shipping interests which do not share America’s defense objectives to provide them with what they need when they need it,” Marcus said.
USA Maritime believes there’s an urgent need for a national maritime strategy.
President Obama has requested $186 million for the Maritime Security Program (MSP) in his budget, which provides a subsidy for 60 U.S.-flag ships, but he said the House has recommended reducing that to $166 million.
Johnsen said it is essential the amount be adjusted “to achieve commercial viability, and a more level playing field for MSP vessels when competing against foreign-flag vessels.”
He called for restoring cargo preference provisions so that U.S.-flag ships would once again carry 75 percent of U.S. food aid cargo. The share was dropped to 50 percent in 2012, “with very negative impacts on the U.S.-flag commercial fleet,” he said.
USA Maritime also called for:
- MarAd to “redouble its efforts to rigorously enforce the existing cargo preference laws.”
- Coast Guard to cooperate with MSP carriers, adding a recently issued Navigation and Vessel Inspection Circular would, if fully implemented, “dramatically alter its long-standing cooperative approach to the documentation of MSP vessels.”
- Removal of international trade barriers, with Johnsen testifying that “numerous countries around the world continue to erect trade barriers in foreign commerce that exclude or limit the ability of U.S.-flag shipping companies to have access to those markets.”
Marcus said labor unions support proposals by Congressmen John Garamendi and Duncan Hunter to encourage the use of U.S.-flag ships for LNG exports and suggested if the ban on U.S. crude oil exports is lifted that they also “have an opportunity to participate in this trade.”
Unions also support the right of U.S. seafarers and their estates to sue in federal court if they are injured or die onboard a ship, but Marcus suggested Congress work with maritime labor and management “to determine the extent to which, if at all, the availability of the right of seafarers and their families to sue in court if they are injured affects the cost of operating a U.S.-flag vessel.”
This column was published in the October 2014 issue of American Shipper.
