Turning Around The Merchant Marine
Andrew T. Gillies, 12.17.03, 10:06 AM ET
WASHINGTON - If a nation's preeminence is measured by the size of its maritime shipping industry, then the United States is in decline. Consider: Since 1991, America's merchant fleet has dropped to 260 ships from 536, according to the American Maritime Congress, the industry group representing ocean carriers. Just 4% of U.S. trade is carried on U.S.-flagged vessels.
For Charles G. Raymond, chief executive of Charlotte, N.C.-based ocean shipper Horizon Lines, that's evidence that the government needs to do more for the industry. "Clearly, there's a need for a government focus on this," he says, adding that "there should be a high-level, blue ribbon committee that looks into what can be done and the key drivers to make it happen in a socially and fiscally responsible way."
And in a way, of course, that helps Raymond's company. Horizon Lines, which CSX (nyse: CSX - news - people ) sold in February to Washington buyout firm The Carlyle Group for $300 million, is one of America's biggest ocean haulers, moving freight on 17 ships between the continental U.S. and Alaska, Guam, Hawaii and Puerto Rico.
But Raymond and others in maritime transportation insist the matter goes well beyond their own self interest. On its Web site, the American Maritime Congress points out that 95% of military cargo must travel by sea during wartime. Raymond, who started his career as a deck officer for Sea-Land in 1965, recalls scrambling to retrofit two Sea-Land ships to haul ammunition when Japanese and Danish sailors suddenly refused to carry America's military supplies during the first Gulf War.
"When you have to sustain the surge of material going into a war zone," he says, "you find guys have gotten hurt, or they've been out at sea for 75 days and they've got family issues and need to be replaced. That's where we run into trouble as a nation, coming up with enough mariners to keep those vessels manned on a sustained basis."
On a broader level, Raymond, echoing comments from American textile magnate Roger Milliken, suggests his industry's plight doesn't exactly bode well for America's place on the world stage. Whereas once Great Britain and the U.S. were maritime powers, Raymond says, the strongest players today are in Asia--the Chinese and Koreans have 84% of the market for construction of large container vessels, and 100% of the market for building the containers themselves.
To be sure, the U.S. government already aids domestic ocean carriers. Notably, there's the Maritime Security Program (MSP), first signed into law in 1996 and reauthorized last month as part of the $400 billion National Defense Authorization Act for Fiscal 2004.
Under MSP, up to 60 ships involved in international trade can receive $2.6 million (increasing to $2.9 million in 2009 and $3.1 million in 2012) each year to offset the higher tax, labor and regulatory costs of operating as a U.S.-flag vessel.
Then there's section 27 of the 1920 Merchant Marine Act, otherwise known as the Jones Act. This provision requires that U.S.-flag vessels carry cargo shipped between U.S. ports, and particularly benefits those--such as Horizon Lines--plying the trade between the West Coast, Alaska, Hawaii and Guam. The other big player here is Alexander & Baldwin (nasdaq: ALEX - news - people ), a holding company whose Matson Navigation unit had sales of $687 million in 2002.
Still, Raymond thinks these programs don't go far enough. He'd like to see more support from the government for domestic shipbuilding and also favors setting up a short sea shipping program that would encourage shippers to move freight off U.S. highways and onto ships.
"Interstate highways cost $35 million per lane mile to build," Raymond says, "You have cargo on those highways that could move by water, and there's not a huge investment required."
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