Posted:
June 25, 2019
Central issues in the ongoing effort to expand the use of America's marine highway system and shift more cargo from the nation's overburdened ground transportation networks to U.S. coastal and inland waterways were addressed in frank and specific terms during a hearing held June 19 by the Subcommittee on Coast Guard and Maritime Transportation in the House of Representatives.
Throughout the hearing, topics involved with this objective were addressed by members of the subcommittee and witnesses, including the vital link between the Jones Act and the expansion of the U.S. short sea shipping fleet and U.S. maritime workforce.
Additionally, obstacles to greater utilization of domestic marine highways were cited in specific terms, such the double-taxation on domestic short sea transportation under the Harbor Maintenance Tax and inadequate icebreaking resources for the Great Lakes shipping trades.
Chairman Sean Patrick Maloney (D-NY) opened the hearing with the broad strokes of the importance of expanding the use of short sea shipping, and rapidly drew focus on the Maritime Administration's National Maritime Strategy, which has not yet been released.
"An invigorated short sea shipping industry would not only increase the state of good repair of the U.S. roads and bridges by reducing maintenance costs from wear and tear and improve air quality and emissions, but would help to address the critical shortage in our merchant mariner workforce," Rep. Maloney said in his opening remarks. "Administrator Buzby and other government officials have repeatedly stated that we have 1,800 fewer mariners than what is needed to address America's sealift needs. That gap would quickly begin to close if we fully utilized America's marine highways and began shipping cargo on coastwise ships.
"In order to rigorously promote Short Sea Shipping, we must develop a national multi-modal transportation and infrastructure plan that prominently features maritime transportation," Rep. Maloney said.
In his opening remarks, Subcommittee Ranking Member Bob Gibbs (R-OH) addressed the benefits of expanding domestic waterborne cargo service and also touched upon some of the obstacles, aspects of which he later probed with witnesses testifying during the hearing.
"Increased freight volumes, limited dollars to invest in new infrastructure, increased road congestion and increased interest in reducing air emissions have all been cited in recent years as reasons that short sea shipping should be examined as an alternative source of added transportation capacity," Rep. Gibbs said.
Rep. Maloney opened the first panel by asking Maritime Administrator Mark Buzby, U.S. Navy Rear Admiral (retired), when the National Maritime Strategy would be released and what it contained in the way of enhancing short sea shipping and expanding the U.S. maritime workforce.
Buzby replied the deadline for the strategy's release had been extended by Congress until February 2020, and it would be ready by or before that time. He touched on some of the strategy's elements, such as building on the Jones Act fleet, cargo preference and other key elements of U.S. maritime policy vital to the industry and merchant marine. He also referenced specific programs now underway, such as the National Security Multi-Mission Vessel program - adding that MARAD is not waiting for final approval of the overall strategy to advance some of its key elements.
Throughout his testimony, Buzby highlighted several aspects of America's Marine Highway Program (AMHP), originally established by Congress in 2007, and referenced existing and potential applications of short sea shipping. A detailed account of the AMHP and statistical documentation of the superior safety and efficiency of waterborne transportation compared with over-land modes are contained in Buzby's prepared testimony for the hearing.
In questioning witnesses, members of the subcommittee raised practical and legislative issues related to the expanded domestic use of short sea shipping.
The Jones Act
Rep. Mike Gallagher (R-WI) questioned Buzby about the link between domestic short sea shipping and the Jones Act, asking him to describe some of the misconceptions currently in circulation about the cabotage law.
The general misconception about the law is simply: "Everything that's wrong is the fault of the Jones Act, and that everything that costs more is a result of the Jones Act," Buzby said. "And that's just not borne out in the facts."
He pivoted to describing the immense value of America's cornerstone cabotage law, and the negative effects repealing it would have on the nation's existing and future maritime workforce.
"When you look at the detriment that would be caused to this nation by the Jones Act going away - in terms of impact to shipbuilding, ship repair - for the 40,000 vessels that are Jones Act vessels that are all built and repaired in U.S. shipyards, to the number of people who are employed, the American mariners that are employed, that, oh by the way, on some of the larger Jones Act ships, that I depend upon to crew up our sealift vessels - they would go away, to just the people that are ... transiting our waterways - American citizens that are a de facto layer of security for our nation," Buzby said.
"They're out there every day, they know what normal looks like. They see something wrong, they're going to say something ... I don't think we believe that could ever happen with a foreigner pushing goods up and down our internal waterways. Why would we want to turn our internal commerce over to foreign control?" Buzby said.
"For all of those reasons, it's absolutely critical."
Later in the hearing, Rep. John Garamendi (D-CA) asked Buzby what specifically Congress could do to assist in advancing the expansion of short sea shipping. Again, the value of the Jones Act industry became a topic.
"Building Jones Act vessels of the size we're talking about - tugs and barges for the most part - that's not really an issue," Buzby said. "The rest of the world doesn't build tugs and barges as well as we do for the cost that we do. We're very competitive. Our shipbuilding industry is very competitive in tug and barge."
Double-taxation on domestic short sea shipping
The Harbor Maintenance Tax is an ad valorem tax imposed on imported cargoes at their U.S. port of arrival. When these cargoes are transshipped by water from the U.S. port of arrival to another domestic destination, the tax is applied again at the second port of arrival. But when these cargoes are transshipped by rail or road from the U.S port of arrival to another U.S. port, the Harbor Maintenance Tax is not applied a second time.
This inequity discourages private investment in U.S. merchant vessels for short sea domestic service, and discourages shippers from using waterborne transportation when over-land transportation can be used without the additional cost.
This double-taxation as an obstacle to the expanded use of short sea shipping was probed specifically by Rep. Gibbs, Rep. Carol Miller (R-WV), and by Rep. Garamendi. In their questioning of witnesses and in their remarks, all expressed an interest in eliminating this obstacle, or in finding alternative ways to remedy the cost burden it imposes on shippers that use domestic waterborne transportation.
Great Lakes icebreaking
An excellent example of short sea shipping at work in U.S. domestic waterways can be found on the Great Lakes, where bulk cargoes such as iron ore, coal and stone are loaded at dedicated ports onto purpose-built vessels and transported with great efficiency to ports and customers throughout the Great Lakes region.
However, due to budgeting restrictions, the Great Lakes Navigational System is served by only one heavy icebreaker, as opposed to two - limiting commerce and creating the potential for a system-wide failure.
Both Rep. Gibbs and Rep. Garamendi raised this issue with the President of the Lake Carriers' Association, James Weakley, who testified with the second panel of witnesses.
"In the winter of (2013-14), we left 6.8 million tons on the dock because of inadequate icebreaking," Weakley said. "That cost the U.S. economy 3,800 jobs and 705 million dollars in lost economic activity because of inadequate icebreaking. In the winter of 14-15, similar numbers: 3.2 million tons, 2,000 jobs, 355 million dollars in lost economic activity.
"The reliability is abysmal," he said. "This year, four of their nine icebreakers were out of commission. Last winter, five of their icebreakers (were) simultaneously inoperable."
Weakley noted the one heavy icebreaker, Mackinaw, is a single point of failure in the Great Lakes transportation system. Originally, two were supposed to be built. If the Mackinaw fails and has to be taken out of service, there would be significant shutdowns in maritime commerce during the ice season.
The business case
Throughout the hearing, the topics addressed by members and witnesses tended to be issues that could be addressed by Congress, either through appropriations or legislation, or by state and local governments and entities. However, one prevailing theme was the importance of American entrepreneurship if America's marine highways are to be more fully utilized.
While unnecessary costs involved with domestic waterborne transportation, such as the double-taxation under the Harbor Maintenance Tax, can be addressed by government, the business case for utilizing this resource must be made to and received by the private sector. A combined effort will be needed to make the efficiency of short sea shipping accessible to commercial shippers so they, in turn, can develop business models utilizing marine highways to move cargo to customers - bulk, containerized and breakbulk.
As noted by members and witnesses, with the burden and congestion now faced by U.S. ground transportation networks, the case for doing so is becoming more urgent by the year.
"Our waterways are our one artery where we still have a lot of capacity to grow into, and if we double our cargo, as we say we're going to do over the next 30 years, we don't have any choice," Buzby said. "We will have to go into the waterways."
Issues key to expansion of U.S. short sea shipping addressed during House hearing
Central issues in the ongoing effort to expand the use of America's marine highway system and shift more cargo from the nation's overburdened ground transportation networks to U.S. coastal and inland waterways were addressed in frank and specific terms during a hearing held June 19 by the Subcommittee on Coast Guard and Maritime Transportation in the House of Representatives.
Throughout the hearing, topics involved with this objective were addressed by members of the subcommittee and witnesses, including the vital link between the Jones Act and the expansion of the U.S. short sea shipping fleet and U.S. maritime workforce.
Additionally, obstacles to greater utilization of domestic marine highways were cited in specific terms, such the double-taxation on domestic short sea transportation under the Harbor Maintenance Tax and inadequate icebreaking resources for the Great Lakes shipping trades.
Chairman Sean Patrick Maloney (D-NY) opened the hearing with the broad strokes of the importance of expanding the use of short sea shipping, and rapidly drew focus on the Maritime Administration's National Maritime Strategy, which has not yet been released.
"An invigorated short sea shipping industry would not only increase the state of good repair of the U.S. roads and bridges by reducing maintenance costs from wear and tear and improve air quality and emissions, but would help to address the critical shortage in our merchant mariner workforce," Rep. Maloney said in his opening remarks. "Administrator Buzby and other government officials have repeatedly stated that we have 1,800 fewer mariners than what is needed to address America's sealift needs. That gap would quickly begin to close if we fully utilized America's marine highways and began shipping cargo on coastwise ships.
"In order to rigorously promote Short Sea Shipping, we must develop a national multi-modal transportation and infrastructure plan that prominently features maritime transportation," Rep. Maloney said.
In his opening remarks, Subcommittee Ranking Member Bob Gibbs (R-OH) addressed the benefits of expanding domestic waterborne cargo service and also touched upon some of the obstacles, aspects of which he later probed with witnesses testifying during the hearing.
"Increased freight volumes, limited dollars to invest in new infrastructure, increased road congestion and increased interest in reducing air emissions have all been cited in recent years as reasons that short sea shipping should be examined as an alternative source of added transportation capacity," Rep. Gibbs said.
Rep. Maloney opened the first panel by asking Maritime Administrator Mark Buzby, U.S. Navy Rear Admiral (retired), when the National Maritime Strategy would be released and what it contained in the way of enhancing short sea shipping and expanding the U.S. maritime workforce.
Buzby replied the deadline for the strategy's release had been extended by Congress until February 2020, and it would be ready by or before that time. He touched on some of the strategy's elements, such as building on the Jones Act fleet, cargo preference and other key elements of U.S. maritime policy vital to the industry and merchant marine. He also referenced specific programs now underway, such as the National Security Multi-Mission Vessel program - adding that MARAD is not waiting for final approval of the overall strategy to advance some of its key elements.
Throughout his testimony, Buzby highlighted several aspects of America's Marine Highway Program (AMHP), originally established by Congress in 2007, and referenced existing and potential applications of short sea shipping. A detailed account of the AMHP and statistical documentation of the superior safety and efficiency of waterborne transportation compared with over-land modes are contained in Buzby's prepared testimony for the hearing.
In questioning witnesses, members of the subcommittee raised practical and legislative issues related to the expanded domestic use of short sea shipping.
The Jones Act
Rep. Mike Gallagher (R-WI) questioned Buzby about the link between domestic short sea shipping and the Jones Act, asking him to describe some of the misconceptions currently in circulation about the cabotage law.
The general misconception about the law is simply: "Everything that's wrong is the fault of the Jones Act, and that everything that costs more is a result of the Jones Act," Buzby said. "And that's just not borne out in the facts."
He pivoted to describing the immense value of America's cornerstone cabotage law, and the negative effects repealing it would have on the nation's existing and future maritime workforce.
"When you look at the detriment that would be caused to this nation by the Jones Act going away - in terms of impact to shipbuilding, ship repair - for the 40,000 vessels that are Jones Act vessels that are all built and repaired in U.S. shipyards, to the number of people who are employed, the American mariners that are employed, that, oh by the way, on some of the larger Jones Act ships, that I depend upon to crew up our sealift vessels - they would go away, to just the people that are ... transiting our waterways - American citizens that are a de facto layer of security for our nation," Buzby said.
"They're out there every day, they know what normal looks like. They see something wrong, they're going to say something ... I don't think we believe that could ever happen with a foreigner pushing goods up and down our internal waterways. Why would we want to turn our internal commerce over to foreign control?" Buzby said.
"For all of those reasons, it's absolutely critical."
Later in the hearing, Rep. John Garamendi (D-CA) asked Buzby what specifically Congress could do to assist in advancing the expansion of short sea shipping. Again, the value of the Jones Act industry became a topic.
"Building Jones Act vessels of the size we're talking about - tugs and barges for the most part - that's not really an issue," Buzby said. "The rest of the world doesn't build tugs and barges as well as we do for the cost that we do. We're very competitive. Our shipbuilding industry is very competitive in tug and barge."
Double-taxation on domestic short sea shipping
The Harbor Maintenance Tax is an ad valorem tax imposed on imported cargoes at their U.S. port of arrival. When these cargoes are transshipped by water from the U.S. port of arrival to another domestic destination, the tax is applied again at the second port of arrival. But when these cargoes are transshipped by rail or road from the U.S port of arrival to another U.S. port, the Harbor Maintenance Tax is not applied a second time.
This inequity discourages private investment in U.S. merchant vessels for short sea domestic service, and discourages shippers from using waterborne transportation when over-land transportation can be used without the additional cost.
This double-taxation as an obstacle to the expanded use of short sea shipping was probed specifically by Rep. Gibbs, Rep. Carol Miller (R-WV), and by Rep. Garamendi. In their questioning of witnesses and in their remarks, all expressed an interest in eliminating this obstacle, or in finding alternative ways to remedy the cost burden it imposes on shippers that use domestic waterborne transportation.
Great Lakes icebreaking
An excellent example of short sea shipping at work in U.S. domestic waterways can be found on the Great Lakes, where bulk cargoes such as iron ore, coal and stone are loaded at dedicated ports onto purpose-built vessels and transported with great efficiency to ports and customers throughout the Great Lakes region.
However, due to budgeting restrictions, the Great Lakes Navigational System is served by only one heavy icebreaker, as opposed to two - limiting commerce and creating the potential for a system-wide failure.
Both Rep. Gibbs and Rep. Garamendi raised this issue with the President of the Lake Carriers' Association, James Weakley, who testified with the second panel of witnesses.
"In the winter of (2013-14), we left 6.8 million tons on the dock because of inadequate icebreaking," Weakley said. "That cost the U.S. economy 3,800 jobs and 705 million dollars in lost economic activity because of inadequate icebreaking. In the winter of 14-15, similar numbers: 3.2 million tons, 2,000 jobs, 355 million dollars in lost economic activity.
"The reliability is abysmal," he said. "This year, four of their nine icebreakers were out of commission. Last winter, five of their icebreakers (were) simultaneously inoperable."
Weakley noted the one heavy icebreaker, Mackinaw, is a single point of failure in the Great Lakes transportation system. Originally, two were supposed to be built. If the Mackinaw fails and has to be taken out of service, there would be significant shutdowns in maritime commerce during the ice season.
The business case
Throughout the hearing, the topics addressed by members and witnesses tended to be issues that could be addressed by Congress, either through appropriations or legislation, or by state and local governments and entities. However, one prevailing theme was the importance of American entrepreneurship if America's marine highways are to be more fully utilized.
While unnecessary costs involved with domestic waterborne transportation, such as the double-taxation under the Harbor Maintenance Tax, can be addressed by government, the business case for utilizing this resource must be made to and received by the private sector. A combined effort will be needed to make the efficiency of short sea shipping accessible to commercial shippers so they, in turn, can develop business models utilizing marine highways to move cargo to customers - bulk, containerized and breakbulk.
As noted by members and witnesses, with the burden and congestion now faced by U.S. ground transportation networks, the case for doing so is becoming more urgent by the year.
"Our waterways are our one artery where we still have a lot of capacity to grow into, and if we double our cargo, as we say we're going to do over the next 30 years, we don't have any choice," Buzby said. "We will have to go into the waterways."