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fortunately, the legis- U.S.-flag ships carry 75% of the U.S. Department of Agriculture’s Food for Peace Preference lon was unable to pass Cargo exports, but that program involves less than 7% of USDA shipments. That leaves more than 93% of Department of Agriculture shipments free to move under foreign flags.
America’s maritime industry today generally is divided into three major ut shrinking groups: commercial ship °Perating companies (both U.S. and international), shipyards and related marine Construction companies, and the maritime a"or pool, both unionized and nonunion- l?ed. A fourth element—the federal and state governments—influences these three y placing disincentives via policy on the tedustry that hinder its ability to operate competitively in the United States, and by imposing costs on the industry through legislatures and various taxation and regulatory agencies.
The maritime industry has suffered r°m a major, self-inflicted handicap for the last quarter-century. It has never been ab'e to rise above individual secular interests and stand with unity behind a comprehensive maritime policy re- 0rm package. People concerned over the welfare of me maritime industry have emoaned this dilemma or years, but nobody has een able to do anything about it.
However in 1992, fansportation Secretary Andrew Card launched a teajor attempt to craft a Series of reforms aimed at 'mplementing a modern Rational maritime policy.
new legislation that was submitted by the Bush administration in 1992—the lfst new legislation to enefit the industry since ue Merchant Marine Act 1936. The proposal w°uld have legislated tax reatment on a par with competitive foreign na- lQns and safety standards more in harmony with n°se of advanced international trading partners.
°ngress because of inability to fund the $1.1 billion cost of the reform program.
Status of the Fleet
In 1992, the U.S. fleet totaled 18,228,000 gross tons, registering still another year of sharp decline—2,062,000 gross tons from 1991 levels, the biggest fleet reduction of any maritime nation, according to statistics published by Lloyd’s register. This continued shrinkage should be a matter of great concern to military and civilian policy makers, as well as maritime interests. Today, the U.S. international liner fleet consists of just eight operating companies and 110 ships. By contrast, the combined world merchant fleets totaled 444,300,000 gross tons, an increase of 8,300,000 tons over 1991 levels.
The 1992 “top ten” ranking of international merchant marine countries and their percentage of total world tonnage demonstrate that the picture for U.S.-flag shipping companies is not particularly positive.
1. Liberia - 12.5%
2. Panama - 11.2%
3. Japan - 5.7%
4. Greece - 5.5%
5. Norway - 5.1%
6. Cyprus - 5%
7. Bahamas - 4.5%
8. United States - 4.1%
9. Russia - 3.5%
10. People’s Republic of China - 3.1%
Of these leading countries, Panama, Liberia, and the Bahamas each registered fleet growth in excess of 2 million gross tons in 1992.
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| Table 1 |
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Company | 12 Month Return on Equity | 12 Month Return on Capital | 12 Month Sales | % Profit |
CSX | deficit | deficit | $8,765,000,000 | deficit |
Alexander & Baldwin | 11.9% | 8.2% | $722,000,000 | 12.2% . |
Overseas Shipholding | 5.0% | 5.1% | $399,000,000 | 9.5% |
American President | 15.9% | 9.9% | $2,504,000,000 | 3.2% |
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The U.S. Fleet
This is an unacceptable level of maritime shipping operations for one of the world’s largest international trading nations.
A summary of current operational results of the leading U.S. maritime shipping companies, according to information published in the 4 January 1993 edition of Forbes magazine, appears in Table 1.
U.S.-flag ships carry 75% of the U.S. Department of Agriculture’s Food for Peace Preference Cargo exports. However, this special program volume only amounts to 6.7% of the department’s total shipments. This implies that 93% of overall USDA cargoes are free to move on foreign-flag vessels.
The United States has four coasts (counting the Great Lakes) and some of the world’s most advanced networks of port facilities serving our domestic and international waterborne and intermodal trade. These port facilities provide an employment base for 90,000 workers, as well as countless others who are engaged throughout the nation in the work of international commerce.
The largest problem affecting port development relates to the difficulty in obtaining dredging and spoils disposal permits from the U. S. Army Corps of Engineers and the U.S. Environmental Protection Agency, because of concerns over dioxin levels in certain port areas.
U.S. Shipping Trade Patterns
Liners: Most liner trade routes serving the United States have suffered from an overage of ships and capacity for more than a decade. This has caused a severe deterioration in freight rates. On some trade routes, freight tariff rates for certain commodities are at or below cost. This market condition is somewhat analogous to the recent chaotic rate-making system in the airline industry. Lines have been driven to price for a share of the market regardless of cost (or profit).
On one trade lane serving the United States and Europe, where the lines have lost around $400 million per year, 11 liner companies formed a rationalization agreement known as the Trans Atlantic Agreement. This pact, which won Federal Mar-
The tanker and bulk carrier markets were plagued by depressed rates and a number of ship losses. After grounding in the Shetland Islands and being battered by heavy seas, the Braer broke up and leaked her cargo of light crude oil into the Bay of Quendale.
itime Commission approval, is intended to restore profitability to the lines by:
► Raising rates to compensatory levels
► Managing ship and container capacity
► Restructuring inland transportation rates Assuming the Trans Atlantic Agreement is successful, it should help stop the cutthroat competition that has plagued these (and other) trade routes and brought some lines to the point of ruin.
Just as rationalization on certain trade lanes has begun, similar moves among individual lines serving the United States have continued in an effort to create the most efficient use of ships and equipment, and to obtain increased market share. Fof example, Hapag-Lloyd, N.Y.K. Line, and Neptune Orient Lines agreed to operate a joint service between North Americai Europe, and the Far East, in what is one j of the largest joint-venture liner service* ever planned. It is scheduled to begi° operation soon.
In other moves, Compagnie Generate J Maritime (the French line) announced 4 j would suspend its money-losing Europe' North America liner service. Also, At' lantic Container Line was put up for sale because its owners felt they could no longer tolerate the losses sustained on the
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NAVAL INSTITUTE GOES TO SEA
21-28 August 1993
Bn
DRUMBEAT
3«0WMAnCTFUE SgRYOF GERMANY'S
iU^ntAMERICAN COAST W WORLD WAR (1 HWUMIMIM#
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SEMINAR TOPIC: Battle of the Atlantic
The panel of World War II experts aboard MS Crown Monarch includes Ned Beach, Michael Cannon, and Marc Milner.
NED BEACH
A World War II submarine commander, Captain Beach is perhaps best known for his novel Run Silent, Run Deep. During his active duty career, he commanded the first nuclear submarine to circumnavigate j the globe submerged, served as Naval Assistant to , Chairman of the Joint Chiefs of Staff General Omar N. Bradley, and as Naval Aide to the President of the United States Dwight D. Eisenhower. A highly decorated naval officer, he has also written six books i °f nonfiction on naval matters, including United States Navy: 200 Years, and two other novels.
MICHAEL GANNON
Michael Gannon’s 1991 bestselling book Operation Drumbeat so impressed Ned Beach that he persuaded Naval Institute Proceedings editor that the book merited more than a short review, and a full- Jength April 1991 article followed. A professor of history at the University of Florida in Gainesville, he Urst became interested in World War II U-boat derations along the American coast while Sj ^searching a book on Florida’s history. The ^nierican University graduate joined the American Cield Service during World War II, wrote on military subjects from Europe in the 1950s, and served as a "'ur correspondent in Vietnam in 1968.
MARC MILNER
Marc Milner, former official historian for the Canadian Department of Defence, is an Associate Professor of history at the University of New Brunswick. Author of North Atlantic Run: The °yal Canadian Navy and the Battle for the Convoys, which covered the Battle of the Atlantic up t0 1943, he is putting the finishing touches on a [Uanuscript covering the years from 1943 to 1945. . °r the Royal Canadian Air Force official history of mrrld War II, he contributed to the chapters on the battle of the Atlantic. He also directs the Military Uud Strategic Studies Program, funded nationally by u® Canadian Department of National Defence.
>- Newport: Tour and briefings at the Naval War College
>- Halifax: Visit the restored corvette HMCS Sackville and Bedford Basin with the Canadian Navy
Each seminar participant will receive autographed copies of Ned Beach’s Run Silent, Run Deep or United States Navy: 200 Years', an autographed copy of Michael Gannon’s Operation Drumbeat; and an autographed copy of Marc Milner’s North Atlantic Run. Enjoy a get- acquainted cocktail party the first night at sea.
On board MS Crown Monarch Depart Saturday, 21 August, from Alexandria, Virginia • Newport, Rhode Island • Halifax • Quebec • Arrive Saturday, 28 August, in Montreal
Cost per member and guest(s), including seminar: $995-$ 1,475 (Based on double occupancy)
$180 air add-on for return flight to the Washington, D.C., area; other air arrangements available.
CONFIRM YOUR RESERVATION NOW FOR BEST CABIN SELECTION
For more travel information and reservations, call the Naval Institute Travel Representative:
United Travel 9650 Main Street Fairfax, Virginia 22031 (703) 978-4404; (800) 394-8854
As older carriers are scrapped, they are being replaced by modern tankers with better construction features and environmental safety systems. The M/T Tartar, commissioned early this year, is the first ship equipped with her own emergency cargo transfer system.
highly competitive North Atlantic run.
Tankers and Bulk Carriers'. The market for bulk cargoes continued to operate at unhealthy levels during 1992. Freight rates were depressed, and only owners operating in certain niche markets achieved satisfactory results. Also troubling were the number of losses of tankers and bulk carriers.
Tankers:
► Aegean Sea grounded at La Coruna, Spain, in December 1992 and spilled 18 million gallons of oil.
► Braer grounded in the Shetland Islands in January 1993 and spilled 84,000 metric tons of crude oil. Vessel broke up. Total loss.
► Maersk Navigator collided in the Strait of Malacca in January 1993, spilled 22,000 tons of oil, and caught fire.
The tanker accidents and subsequent oil pollution point out the risks involved with operating large vessel units in coastal waters, where the need for expert local pilotage and increased diligence on the part of mariners is increasingly evident.
Bulkers:
► Alexandre P. sank at sea with a cargo of iron ore. (Age 17 years.)
► Algarrobo, 170,000 tons, sank at sea. (Age 19 years.)
► Pasithea, 155,000 tons, sank at sea. (Age 23 years.)
► Mineral Diamond sank at sea.
► 21 other vessels sank at sea.
>• 25 other vessels damaged beyond repair.
Also, tanker owners began to scrap very large crude carriers (VLCCs) and other tankers in ever larger numbers as their age, material condition, and concerns over tanker safety joined forces with the low freight rates to send many tankers to the scrapyards in 1992.
These older VLCCs will be replaced by more modem ships, with better construction standards and environmental safety systems installed in the years to come. Owners are hoping the oil companies will be willing to pay the cost of the new, higher quality, and safer ships to come into service in the future.
Quality Assurance in Shipping
Worldwide attention has been focused on maritime safety and quality assurance as a result of continuing major maritime accidents. The U.S. Oil Pollution Act of 1990 continues to be the driving force. This law places heavy liability on companies and persons who spill oil and requires them to be responsible for spill cleanup and environmental damage. Laws of similar substance are being considered in Europe.
Regrettably, the Oil Pollution Act does little to address the “human factor” in shipping, as it is human error that causes most accidents on the high seas and coastal waters. According to the National Transportation Safety Board, excessive speed and human error—usually some fundamental breakdown in communications among the crew on board the ship—are the primary causes of accidents.
Fortunately, some maritime operating companies had the foresight and leadership to recognize the most responsive course of action, and organized the International Ship Managers Association (ISMA), whose principal goal is to bring a uniform standard of quality operations into an industry operating without any standard. Thus was born the ISMA Code of Ship Management Standards. Companies that meet the rigorous testing and auditing standards are issued an ISMA Total Quality Management Certificate. From five original members, the group has
grown to more than 45 companies Ship Management companies such as Barber International' Hanseatic Ship Management, others have worked diligently tl’ achieve these goals, which hoW great promise for consistently highet standards of ship and fleet maH' agement operations in the future.
Navy-MarAd Relationship _______
In December 1992, the Maritinl£ | Administration (MarAd) announce1 the purchase of 12 used roll-on/roU' off ships for the Ready Reserve] Fleet at a cost of $266 million j an as-is, where-is basis. _
The costs of reflagging and seal111 enhancements will be contracted f°f in U.S. shipyards after MarAd take5 delivery of the vessels and is e*' pected to cost an additional $60 mil" j lion. Reduced funding for the arm6* services is a reality in the yeafS ahead. With less money available for most programs, including sealift it is logical to assume that the Navf will continue to attempt to consol' idate its control of sealift function5' including the Ready Reserve FRe! j currently managed by MarAd.
Regardless of which governmc®’ agency controls the fleet, most mil" j itary sealift ships probably will be I operated with civilian marine1, j crews. This is a bright spot on the I horizon for job retention in the U.S. maf' itime industry.
Conclusion __
Our country must continue to shoid' der significant world leadership an® peacekeeping responsibilities for quite some time to come, in spite of our ditf1' cult domestic economy. And free trade I among nations is universally recogniA0 I as the gateway to world peace.
However, our country will never be111 a position to play a significant role in lir ternational world trade without a suC' cessful U.S. merchant fleet. As the CH11' ton administration develops its polici65’ the maritime industry is hoping that Col1' gress will pass reform legislation in 19$' before time runs out for the U.S. Mer' | chant Marine.
Mr. Pouch, a graduate of the Maine Maritime Aca I emy, is a consultant with Barber International, a w" j engaged in international ship management and rine consulting for a fleet of commercial vessels. **.l served in the U.S. Naval Reserve as a commission® I officer in positions in Naval Control of Shipp'115’ 1 Military Sealift Command, and amphibious warfar®