Maritime Administration

When Hurricane Katrina pummeled New Orleans, the fifth-largest port in the nation by cargo volume, the Maritime Administration (MARAD) became a lifeline, dedicating seven of its ships to help keep the port operating despite an estimated $1.6 billion in damage. MARAD, an agency of the Department of Transportation (DoT), had lost its own New Orleans office but focused its efforts on providing berthing space, meals, power and cranes for port workers, almost all of whom had been forced out of their homes.

It was the first time a secretary of transportation had activated ships of MARAD’s Ready Reserve Force (RRF) to support a civilian mission. The end result: The port was functioning again two weeks after the storm’s landfall.

The ships provided housing, food and support for more than 1,000 relief workers, police officers, port employees, stevedores and family members. On any given day the ships’ crews served more than 3,500 meals and provided a sense of stability for many rescue workers in the immediate aftermath of Katrina and, several weeks later, Hurricane Rita.

For operations Enduring Freedom and Iraqi Freedom, a total of 40 of the 68 ships in the reserve force were activated to deliver tanks, ammunition and sustainment cargo overseas. In Iraqi Freedom, at least 65 privately owned vessels have been called on to provide support through a voluntary program between MARAD and U.S. shippers that ensures the Defense Department access to commercial ships to move military cargo. Air Force Gen. Richard B. Myers, then-chairman of the Joint Chiefs of Staff, hailed the civilian mariners as “unsung heroes.”

The mission of MARAD is diverse and far-reaching. MARAD improves and strengthens the U.S. maritime transportation system — including infrastructure, industry and labor — to meet the nation’s economic and security needs. MARAD also seeks to ensure the United States maintains adequate shipbuilding and repair services, efficient ports, effective intermodal water and land connections and reserve shipping capacity for use in time of national emergency. MARAD is the principal advocate for an integrated waterborne transportation system and federal programs supporting the marine mode within the DoT.

Shipping provides a vital link for mobilizing U.S. armed forces for military contingencies and supporting civilian emergency response. However, changing demographics, trading patterns, economic growth and consumer demand are straining the U.S. transportation infrastructure, intensifying congestion and increasing transportation-related pollutants. Expansion of waterborne services could relieve congestion and improve air quality, and the greater integration of waterborne shipping into the overall U.S. transportation system is a MARAD priority.

Historical Perspective

The United States began as a maritime nation. One of its earliest industries was shipbuilding, and by the middle of the 19th century the United States was the world leader. In those days, U.S.-flag merchant vessels transported more than 90 percent of America’s foreign trade. Today, while 95 percent (by weight) of the nation’s overseas trade still moves by water, only about 3 percent is carried by the U.S.-flag fleet. This change has disturbing implications for national security and economic vigor.

Without a U.S.-flag fleet, the nation’s foreign commerce and auxiliary sealift capability would depend exclusively on foreign-flag ships. Auxiliary sealift provided by the U.S.-flag merchant marine played a vital role in American successes in all wars and many of the international crises in which U.S. forces have been involved.

Maritime Security Program

The continued existence of a privately owned U.S.-flag merchant marine is vital to the nation’s security since there is no completely reliable alternative. More than 80 percent of the military dry cargo transported during Operations Enduring Freedom and Iraqi Freedom was transported on U.S.-flag ships. All of the U.S.-flag ships used by the Department of Defense during these sealift operations were crewed by U.S. citizens.

The Jones Act requires that shipments between domestic ports, too, be on U.S.-flag ships on which all the officers and 75 percent of the crew are U.S. citizens, although in special circumstances, such as when oil shipping was hit hard by Hurricane Katrina, MARAD may grant waivers to this requirement.

U.S. economic security also benefits from participation by the U.S.-flag fleet in the movement of international trade.

The Maritime Security Act (MSA) of 1996 established the Maritime Security Program (MSP) under Title VI, Subtitle B, of the Merchant Marine Act of 1936. The MSP is intended to ensure that an active U.S. merchant fleet, and the trained personnel needed to operate active and reserve vessels, will be available to meet future national security requirements for sealift capacity. In addition, the MSP ensures America’s continued presence in intermodal commerce and provides a competitive bulwark against predatory pricing by foreign carriers in the movement of U.S. import and export commerce.

The MSA established a 10-year, 47-ship program with $1 billion in fixed annual federal support payments of $2.1 million per vessel to participating companies, subject to annual appropriations. These payments partially offset the higher costs of operating U.S.-flag liner ships in international trade. That program expired Sept. 30, 2005. However, the Maritime Security Act of 2003 has authorized a 60-ship program for fiscal years 2006-2015. This program provides funding of $156 million a year through fiscal 2008, increasing to $174 million for fiscal 2009-2011 and $186 million for fiscal 2012-2015, subject to annual appropriations.

Voluntary Intermodal Sealift Agreement

In return for MSP financial assistance, the carriers must commit 100 percent of their MSP vessel capacity and related intermodal transportation resources to the Defense Department’s (DoD) approved Emergency Preparedness Program, the Voluntary Intermodal Sealift Agreement (VISA) program. Some 60 companies take part in the program, with 127 oceangoing ships and 312 tugboats, barges and other vessels — representing more than 75 percent of the commercial dry-cargo shipping capacity available from U.S-flag, militarily useful ships.

MSP contributes more than three-quarters of that capacity. The MSP fleet gives DoD “assured access” to approximately 115,000 20-foot equivalent units of container capacity plus 1 million square feet. DoD has estimated the costs of replicating VISA fleet capability at approximately $9 billion and annual maintenance of the fleet at $1 billion. This does not include the cost of replacing the mariner base that the fleet provides to crew the merchant and government fleets.

The structure of MSP encourages operator flexibility while requiring the operators to maintain a specific number of ships under the U.S. flag with U.S. citizen crews. The MSP operators are able to apply to MARAD to upgrade their fleet as necessary to compete in the global environment. MARAD reviews applications and consults with DoD to ensure replacement vessels serve DoD’s needs. MARAD approvals are designed to ensure retention of modern and efficient vessels in MSP and the VISA program while improving the overall quality of the U.S.-flag fleet.

The MSA directed the establishment of an Emergency Preparedness Program to ensure sealift availability. MARAD, in consultation with DoD and the maritime industry, developed the VISA, which the secretary of defense approved in 1997 for incorporation in DoD planning as a sealift readiness program.

VISA’s objective is to provide vessel capacity, intermodal movement and cargo management for the shipment of DoD emergency cargoes. It serves as the mechanism that assures the movement of ammunition and resupply (i.e., “sustainment”) cargo, and complements DoD’s organic sealift capabilities used for the initial-deployment (“surge”) phase of a military action.

VISA can be activated in three stages, as determined by DoD, with each representing a higher level of capacity commitment. Currently, commercial shippers can volunteer capacity in Stages I and II. Stage III requires a commitment of 100-percent capacity from MSP vessels (and other vessels receiving federal subsidy), and 50 percent from the remaining VISA participants.

Under the terms of VISA, participating carriers are required to sign contingency agreements with DoD that commit the appropriate portions of their sealift capacity and intermodal equipment.

Although VISA was not activated for Operation Iraqi Freedom, 15 VISA ships (including two MSP ships) were chartered by the Military Sealift Command. In addition, the Army’s Surface Deployment and Distribution Command contracted liner service with 45 VISA ships including 38 ships enrolled in the MSP. Five additional VISA ships, including four in MSP, not chartered by either command carried cargo to support the rebuilding of Iraq.

National Defense Reserve Fleet

The RRF, established in 1976, is a component of the National Defense Reserve Fleet (NDRF), which MARAD maintains. Non-RRF ships, representing the rest of the NDRF, are operated infrequently and would require at least 30 days to be activated.

Many are prepared for long-term storage in a preserved condition, and some are awaiting disposal. In 2000, Congress gave MARAD a deadline of Sept. 30, 2006, to dispose of all obsolete vessels, but funding, industry and environmental constraints may keep MARAD from meeting this deadline. Since August 2004, about 20 ships have been dismantled.

The NDRF program was started after World War II when the Merchant Ships Sales Act of 1946 was enacted. As ships used for the war were retired, the program grew from 1,421 ships to a high point of 2,277 ships in 1950. Ship sales, donations and disposal efforts have reduced the totals while other initiatives have added newer ships to the program.

Prior to RRF operations, NDRF vessels supported emergency shipping requirements during crises, from the Korean War to Vietnam to the 2004 political crisis in Haiti. To support Operations Desert Shield and Desert Storm, for example, 79 RRF vessels were activated.

As of Oct. 31, 2005, there were 270 vessels in the NDRF, of which 58 were in the RRF, 43 were in long-term storage and 152 were ready for disposal or being prepared for disposal. Typically, they are scrapped, made into museums, sold to friendly militaries or sunk in naval exercises. One ship, the aircraft carrier Oriskany, is slated to become an artificial reef off the coast of Florida’s panhandle, although the effort’s cost has ballooned from the initial $2.8 million Congress allotted to nearly $13 million and is nearly two years behind schedule.

Most of the ships are stored at MARAD’s three main reserve fleet facilities: James River Reserve Fleet at Fort Eustis, Va.; Beaumont Reserve Fleet at Beaumont, Texas; and Suisun Bay Reserve Fleet at Benicia, Calif. An additional 17 vessels, owned by other government agencies, were also being maintained at NDRF facilities on a cost-reimbursable basis.

Ready Reserve Force

Established in 1976, the RRF adds significantly to the DoD’s overall sealift capability. A current agreement between the DoT and the DoD assures U.S. armed forces the availability of a combination of sealift platforms — including roll-on/roll-off (RO/RO) ships, breakbulk/ammo replenishment ships, auxiliary crane ships, tankers, heavy-lift barge carriers and aviation logistics support ships. Maintained by MARAD, the RRF ships routinely participate in exercises to ensure readiness and the ability to meet DoD readiness requirements. RRF appropriations come through the Navy’s National Defense Sealift Fund.

Ships in the RRF are retained in four levels of readiness. The ships in four- and five-day readiness status are in Reduced Operating Status (ROS). These ships retain cadre crews of 10 personnel, who maintain the ships and keep the propulsion and cargo systems in a high state of readiness. When ordered to activate, each ship can be fully crewed and ready to sail within the designated four- or five-day ROS period. ROS ships are based at ports located on the West, East and Gulf Coasts of the United States. ROS-4 ships conduct sea trials every year and ROS-5 ships alternate between sea trials and dock trials annually.

Ships kept in 10- or 20-day readiness status are designated as RRF-10 or RRF-20 vessels, respectively, and are located and maintained at one of MARAD’s three reserve fleet anchorages, or near a strategic port. When ordered to activate, each ship is towed to an industrial facility and crew members report aboard to reactivate the vessel and all systems. Ten-day ships undergo systematic full-power sea trials every 30 months; 20-day ships go through full-power sea trials every 60 months.

The importance of the RRF was clearly demonstrated during Operation Desert Storm, when 83 percent of the RRF was activated to transport cargo to the theater of operations. In the more than 395 no-notice activations carried out since Operation Desert Storm, more than 99 percent of the activated RRF ships were available within their assigned times.

During Iraqi Freedom operations in 2005, 22 RRF RO/ROs ships, one lighter aboard ship vessel and one auxiliary crane ship were activated, primarily to carry the ammo, equipment and supplies for various U.S. military forces to Kuwait. RRF ships continually deploy for DoD exercises and in response to emergency sealift needs. At the end of fiscal year 2005, the RRF had 31 RO/RO ships and 26 other ships on its roster.

Late August and September saw the devastating efforts of Hurricanes Katrina and Rita on the U.S. Gulf Coast. Fiscal 2005 closed with eight MARAD-owned vessels arriving in New Orleans and the lower Mississippi River. These ships included three state training ships (Empire State, Sirius and State of Maine), two crane ships (Diamond State and Equality State), two RO/ROs (Cape Knox and Cape Vincent), and one aviation logistics ship (Wright). In addition, the training ship Texas Clipper II was called into service to Lake Charles, La.

The purpose of these ships in this hurricane relief operation was to provide temporary berthing for port officials, oil spill clean-up crews, and other emergency personnel. These vessels remained under MARAD operational control, and the funding was provided by the Federal Emergency Management Agency. [See RRF ship list, page 144.]

Maritime Heritage

Obsolete parts and equipment from NDRF ships that are to be disposed of are made available to memorial ship organizations to help preserve the operational or historical character of vessels. During fiscal 2003, 140 transfers were completed, totaling approximately 2,700 items outstanding. The memorial ships Jeremiah O’Brien, Red Oak Victory and battleship Massachusetts were among the recipients of these items.

Long-term loans of historical artifacts for public display are also made available to worthy organizations. Currently, 590 items are on long-term loan. Special legislation allows donation of vessels for specific historical purposes. No ships were donated during the year. Donation legislation remains in place for ships Glacier and Sphinx.

Training Availability

NDRF vessels are made available to various groups for training purposes. Ships in the Reserve Fleet anchorages are used for military, law-enforcement and ship-interdiction training by groups in the Navy and FBI. RRF vessels standing by at port facilities are often used for cargo handling training.

A total of 82 training events were held during the year including Navy, Army and Marine Corps cargo-handling units, as well as stevedores sponsored by the Pacific Maritime Association. These RRF vessels also supported security exercises conducted by antiterrorism units from the U.S. Coast Guard and Marine Corps.

Strategic Ports

Strategic ports are commercial ports that have been specifically evaluated and selected for their militarily useful location, facilities, equipment and services. The National Port Readiness Network was established to facilitate coordination within the federal agencies that support deploying forces through these ports, in the event of a mobilization or national defense contingency. This coordination is vital to minimizing congestion and disruption of commercial activities while supporting the military’s surge and sustainment cargo operations.

The commercial ports are increasingly important to the nation’s defense as DoD downsizes and the military relies more heavily on U.S.-based forces. Fifteen commercial ports have been identified as strategic ports by the military and the National Shipping Authority, which is the defense arm of MARAD. These 15 commercial ports are: New York/New Jersey Port Complex; Philadelphia; Hampton Roads Port Complex, Va.; Morehead City, N.C.; Wilmington, N.C.; Charleston, S.C.; Savannah, Ga.; Jacksonville, Fla.; Beaumont, Texas; Corpus Christi, Texas; San Diego; Long Beach, Calif.; Oakland, Calif.; Tacoma, Wash.; and Anchorage, Alaska.

Cargo Preference

U.S.-flag ships are registered in the United States and subject to additional U.S. laws and regulations. Unlike their foreign-flag competitors, U.S.-flag commercial ships must meet strict guidelines for the construction, maintenance, environmental and safety standards, resulting in increased operation costs. To help these ships compete, and provide an incentive to remain under U.S. registry, Congress established a series of cargo preference laws that assist ship owners in defraying costs associated with maintaining their vessels under the U.S. registry. These laws, the first of which was established in 1904, require that some government-sponsored cargo shipped internationally be carried on U.S.-flag vessels.

When the government provides a benefit to help an American industry export U.S.-made products, it often establishes a quid pro quo that requires a certain portion of the exports to be carried on U.S.-flag vessels — when such vessels are available at fair and reasonable rates. Two or more industries therefore are assisted at the same time. The government recaptures the added cost: (a) through taxes on the total gross revenue of the U.S. carrier and (b) on the taxes generated as that total gross revenue flows through the American economy. Without the combination of the limited direct subsidy and the cargo-preference laws, the already much-diminished U.S.-flag foreign trade fleet might well disappear completely.

MARAD’s website (www.marad.dot.gov/usflag) makes it easier for exporters, importers and government agencies to find available U.S.-flag ships to transport cargo around the world.

Ship Operations Cooperative Program

The Ship Operations Cooperative Program (SOCP) brings together U.S.-based maritime organizations to address common problems and develop products that satisfy its members’ common needs, while sharing the costs of that work. Members work in unison to achieve improved safety, efficiency and environmental protection of ship operations. Projects include collaborative work on the Mariner Administrative Card, which has sparked interest from international circles such as the International Labor Organization; video and CD-ROM productions on topics directly related to standards of training, certification and watchkeeping; mariner training requirements; and fuel oil testing data and alternative watch schedules.

In addition, SOCP has introduced technologies with the potential for reducing the costs of maintaining shipboard equipment as well as preventing equipment failure and, in conjunction with the Coast Guard, is working to improve marine licensing and documentation. With its broad base, SOCP has also been a strong leader in taking action toward mariner recruitment and retention issues.

Maritime Labor and Training

The importance of labor to U.S. economic growth and national security is reflected in MARAD’s commitment to foster a sufficient, well-qualified and safety-conscious maritime work force. Through support of programs to improve the education, training, health, welfare and safety of U.S. citizen seafarers, MARAD is working to ensure the availability of an adequate number of mariners to crew active U.S.-flag commercial vessels during peacetime and in emergencies, as well as RRF ships activated for sealift and/or humanitarian-assistance missions.

Maritime Issues and Challenges

International trade is expected to double within 20 years to 2 billion tons. This could bring the U.S. transportation system to a major freight mobility and capacity crisis. To help address this, MARAD is promoting Short Sea Shipping as an environmentally friendly, timely and cost-effective way to expand freight capacity beyond roads and railways. Besides making Short Sea Shipping a part of DoT’s SEA-21 initiative addressing the infrastructure and investment needs of the maritime transportation system, MARAD is also supporting a reduction in certain taxes on shipping operations. Short Sea Shipping is commercial waterborne transportation that does not transit an ocean but instead uses coastal and inland waterways to move freight.

The governments of Canada, Mexico and United States signed a memorandum of cooperation on Short Sea Shipping in November 2003. The memorandum is essentially a consolidation of separate agreements among the three countries.

The focus of the agreement is to alleviate land transportation and border congestion, promote maritime commerce via Short Sea Shipping and identify institutional impediments to expanded waterborne service among the three nations. A schedule has been set and trilateral discussions will set milestones and target dates for implementation of the agreement. The first step taken is a market analysis of Canadian, Mexican and U.S. border regions to identify Short Sea Shipping possibilities. Studies are ongoing to establish a business model and to evaluate the potential for Short Sea Shipping.

The U.S.-China Maritime Agreement, signed in December 2003, is the most far-reaching bilateral U.S.-China pact in the history of maritime trade between the two nations. As a result of the agreement, which became effective in April 2004, U.S. carriers now have access to the Chinese transportation market; this provides a more balanced maritime relationship.

The agreement gives U.S. shipping companies the legal flexibility to perform an extensive range of business activities in China, including logistic operations, as well as to be able to provide services for their own vessels and alliance partnerships. In exchange, the U.S. granted to Chinese carriers permission to change freight rates without having to provide advance notice.

MARAD initialed a new bilateral maritime transportation agreement with Brazil in October 2005. The bilateral maritime agreement is an important aspect of U.S. maritime policy that seeks to preserve and expand opportunities that the market affords to U.S. carriers serving international trade.