in the Morning
U.S.-Flag Merchant Marine: Take Warning
By ROBERT W. KESTELOOT
Capt. Robert W. Kesteloot, USN (Ret.), is founder and president of K
Associates Ltd. of Reston, Va., a maritime firm that specializes in merchant
marine and national-security affairs. He also is a partner in Management
& Transportation Associates of New York City and a member of the Navy
League's Merchant Marine Affairs Committee. His last active-duty assignment
was as director of strategic sealift on the staff of the chief of naval
"The price of safety is eternal vigilance." Long the mantra
of seamen, this aphorism has taken on an extended meaning since the 9/11
terrorist attacks. U.S. Customs has warned that freight shipments may
well be the next target for a terrorist attack against the United States.
In defense of tighter cargo security measures that have made the conduct
of daily business both more difficult and more expensive, U.S. Customs
Deputy Commissioner Douglas M. Browning said last year that "The
intelligence we ... [have] is that the next vehicle for attack is cargo."
That intelligence assumed greater visibility when end-of-year reports
in The Washington Post and other publications revealed that al Qaeda has
effective control of an estimated 15 merchant ships throughout the world
that could be used for the transport of cargo, terrorists, and/or weapons
of mass destruction (WMDs). The ships themselves could be used, of course--as
the 9/11 passenger airlines were--as WMDs. The in-port destruction of
any one of those ships, loaded with hundreds if not thousands of tons
of high explosives, would cause much greater damage and much higher economic
losses than the 9/11 attacks did. The number of deaths likely to result
is impossible to estimate, but would probably be several thousand, at
least, and perhaps many times that number.
In the period of uncertainty that followed the attacks on the World Trade
Center and the Pentagon (and the crash of United Flight 93 in Shanksville,
Pa.) there was a healthy, and long overdue, focus on the need to improve
security at U.S. port facilities throughout the country. Prior to the
attacks, some optimism existed within the shipbuilding industry that was
generated by two new cruise ships under construction for the Hawaiian
trade. That optimism quickly faded following the attacks because of the
precipitous decline of the Hawaiian trade, which relies heavily on air
travel by passengers flying in from CONUS (the continental United States)
to reach their ports of embarkation. The loss to the Hawaiian cruise trade
was so great, in fact, that the two ships then under construction were
never completed. In addition, concern was voiced that the U.S. commercial
maritime manpower pool was inadequate, both in numbers and in the specific
billet skills needed for contingency operations, to fully activate government-owned
strategic sealift ships.
A Double Decline--In Ships and Manpower
At a time when "Phase II"--i.e., post-Afghanistan--of the global
war on terrorism may be about to begin, it seems appropriate to review
the status of both the U.S.-flag Merchant Marine and the manpower pool
that supports the nation's strategic sealift program, along with the most
likely lift requirements for future contingencies. As of 1 July 2002 the
number of privately owned oceangoing commercial U.S.-flag ships was down
to 231 ships, a new low that represents not only a loss of 34 additional
ships in just one year but also an acceleration of recent trends. For
comparison purposes, there were 370 U.S.-flag ships available at the start
of Desert Shield in 1990.
Exacerbating the problem is the fact that the 231 ships counted in the
July 2002 fleet included 104 ships in domestic (Jones Act) trade and 30
other ships engaged exclusively in U.S. government work. This means that,
as of the middle of last year, there were really only 97 U.S.-flag ships
operating on a daily basis in international trade, in head-to-head commercial
competition with foreign-flag ships and nations.
Not only has there been a loss of 139 ships since Desert Shield, but
the manpower pool is now considerably older than it was in 1990--when,
it should be noted, many mariners came out of retirement to permit the
manning of the 81 government-owned ships that were activated and sailed
to that conflict. However, the good news is that the logistics footprint--i.e.,
the shipping requirement--is now smaller than it was for Desert Shield/Storm.
The reduction is attributable to the transformation that is taking place
in all of the nation's armed services. Transformation not only changes
the way wars are fought, it also reduces the number of forward support
personnel needed and the huge stockpiles of sustaining supplies and equipment
that must be taken in-country. In addition, the use of precision-guided
weapons of unprecedented accuracy has reduced the amount of ammunition
required for a sustained conflict of any duration.
A greater degree of reliance on airlift from forward supply bases also
is apparent. These bases can be supplied well in advance of an anticipated
war, and that is exactly what has taken place. Starting last summer, large
numbers of ships were chartered to transport war materiel to various points
in and around the Middle East. A few surge-force ships, including a couple
of large medium-speed roll-on/roll-off (LMSR) ships and a fast sealift
ship (also a partial Ro/Ro ship), were activated to carry wheeled and
tracked vehicles. As of late December, therefore, almost everything needed
for a new war was already in place and, while there may be a requirement
to activate a few more government-owned ships for resupply, there will
be no massive activation of the entire Ready Reserve Force (RRF) as was
needed for Desert Shield. It is clear that, like the rest of the armed
forces, the role of strategic sealift has been transformed. This may permit
disposal, or at least a lowering of the readiness status, of some of the
older ships in the RRF.
Following the acts of terrorism on 9/11, then-Commandant of the U.S.
Coast Guard Adm. James M. Loy immediately invoked the concept of Marine
Domain Awareness, his plan for recognition of every potential threat approaching
from the sea. His longer-term goal was to extend ship visibility overseas
to ports of embarkation and, for the cargo, even further to the initial
shipping sources. Following his retirement from the Coast Guard, Loy was
appointed Acting Under Secretary of Transportation for Security and Administrator
of the newly created Transportation Security Administration (TSA). It
is not surprising that new programs emerging from TSA, U.S. Customs, and
the U.S. Coast Guard are built around the precepts initiated by Loy when
he was still on active duty.
An Array of Solutions
One of the original plans considered was the "Trusted Shipper Program,"
under which cargo from known, regular shippers would receive minimal attention.
More recent plans incorporate this concept, but are much more sophisticated.
Sea container planning includes the use of security seals on all containers.
Maritime containers are fitted with two interlocking rear doors closed
with a hasp that is capable of accepting a security seal, either mechanical
But there is no international requirement to exploit the inherent security
capabilities provided. That is about to change. The United States supports
the mandatory use of active electronic seals capable of storing and transmitting
large volumes of data relevant to the container and the cargo enclosed.
Scanners can be used to read tags on the container that can readily identify
both the shipper and the contents of the container. Several problems still
have to be resolved, including the need for international agreement on
a standardized system and deciding who pays for the tags and readout equipment.
Improving physical security at the load point will be essential to ensuring
cargo security. Here, a major stumbling block is achieving both national
and international acceptance of a standardized transport worker identification
card. There is currently nothing standardized about the gate identification
cards used by truck drivers and/or longshoremen. Today, truck drivers
routinely possess a half-dozen or more cards to gain entry to as many
port facilities. On the water side, the International Marine Organization
(IMO) is attempting to obtain acceptance of a standardized Transportation
Workers Identification Card for the crews of merchant ships, but is encountering
strong resistance from workers, and their unions, who claim that the background
investigations required to obtain a valid card would constitute an invasion
These problems will not be easy to solve. The need for accountability
and self-policing is both urgent and obvious, but it is necessary to find
a balance that is acceptable to all parties--and preferably on an international
level that will not stall the economy.
The task of preventing the entry into the United States (into any country,
for that matter) of a container carrying a weapon of mass destruction
is difficult at best. As one recent speaker on the subject put it, "It's
like looking for a needle in a haystack, so we are trying to reduce the
size of the haystack." To that end, there are two programs that are
presently voluntary, but probably the forerunners of follow-on programs
that will be mandatory--either under U.S. law or international regulation.
The first is the Customs-Trade Partnership Against Terrorism, better known
in the U.S. transportation industry as C-TPAT. This voluntary program
is an attempt to improve security throughout the entire supply chain.
Specific recommendations apply to a specific link in the import chain--e.g.,
a carrier, a broker, an importer, or a warehouse operator--and are meant
to serve as a guide. As the situation and/or the perceived threat changes,
though, the advice may be adjusted to further reflect input from the trade
community. A related program, called FAST (Free And Secure Trade), is
intended to align the customs commercial programs of Canada and the United
States along their shared border.
The second major "haystack" program is the Container Security
Initiative (CSI), which was started by U.S. Customs a year ago to prevent
the use of cargo containers by terrorists. To put this program in context,
it should be noted that approximately 200 million sea containers have
been moving annually in recent years between the major seaports of the
world--and the number is growing steadily. Moreover, nearly 50 percent
(by value) of all U.S. imports now comes into the United States via sea
containers--an estimated 26 million of them annually.
At the core of the CSI program is the posting of U.S. Customs inspectors
to major foreign seaports to prescreen CONUS-bound cargo containers before
they are shipped to the United States. Working in close cooperation with
their foreign counterparts, U.S. officials thus will be in good position--much
better than at any time in the past, certainly--to detect a potential
WMD in a container originating or passing through these ports and bound
Customs is focusing initially on 20 foreign ports through which pass
nearly 70 percent of all of the sea containers bound for the United States.
Fourteen of these ports already have signed on to the CSI program, and
several others are expected to do so in the near future.
On 30 October 2002, Customs issued the final regulation needed to fully
implement the CSI by ordering that ship manifests must be submitted 24
hours before a container ship seeking entry into the United States is
loaded at a foreign port. This sounds difficult, but all that has to be
done is use the Customs' Automated Manifest System (AMS), which electronically
files ship manifests that list, by container, the contents of the container,
the value of the cargo inside, the identification of the shipper, the
place of origin, and the consignee, along with other relevant information.
In ordering this final rule, scheduled to go into effect on 30 December,
Customs stated that "Al Qaeda and other terrorist organizations pose
an immediate and substantial threat. And the threat is not just to harm
and kill American citizens, it is a threat to damage and destroy the U.S.
and the world economy."
The new 24-hour rule is one of the most substantive components of the
CSI, and meets Loy's original intent to identify cargo at its point of
origin. It also provides an ingenious way to almost immediately "reduce
the size of the haystack." This was evident in the implementing rule,
in which Customs also stated that, "Once a cargo container is prescreened
in a foreign port, in the absence of additional information affecting
Customs risk analysis, Customs will rarely need to again screen the container
or inspect its contents for security purposes upon arrival in the United
New and more rigorous IMO security standards for cargo vessels, port
facilities, and offshore terminals also have been developed, and are slated
for implementation by July 2004. To permit earlier implementation not
only within U.S. ports but also aboard U.S.-flag vessels and all foreign
vessels calling at U.S. ports, the U.S. Coast Guard issued Navigation
and Vessel Inspection Circular Number 10-02 (NVIC 10-02), titled "Security
Guidelines for Vessels." These guidelines are intended to help vessel
and port facility operators meet the enhanced security requirements being
developed by the IMO and are considered "voluntary"--interpreted
to mean that noncompliance will not result in legal action.
However, U.S. Coast Guard Captains of the Port have longstanding authority
to deny entry to a port because of security concerns and/or to issue orders,
under the Magnuson Act, that would remain in effect until the new IMO
security standards are implemented and the U.S. Ports and Waterways Safety
Act is updated to reflect the new IMO regulations.
The Difficult Part
Each port and cargo-handling facility is different and, therefore, the
customized application of interoperative security procedures is required.
Discussing the difficulties of requiring standardized security procedures
at commercial airports, Secretary of Transportation Norman Y. Mineta commented
that, "If you've seen one airport ... you've seen one airport."
The same holds true for seaports and cargo-handling facilities. There
are certain superficial similarities, but in general each is unique in
its physical layout and handling procedures. Security equipment and rules
must be specifically tailored, therefore, to fit the specific flow of
cargo and people at each port and cargo-handling facility.
Speaking at the annual convention of the American Association of Port
Authorities last September, Gary Gilbert, a well-known corporate advisor
to a major port holdings corporation, issued an urgent warning: "If
ports are shut down in the same way that airports were shut down [on 11
September 2001], it could be catastrophic to us all." A small sample
of the consequences likely to result from the shutdown of U.S. ports was
evident in the disruption of West Coast cargo movements last October when
the International Longshore and Warehouse Union (ILWU) staged a work slowdown--to
which management responded with a lockout. After ten days, President Bush
invoked an injunction under the Taft-Hartley Act, which provides for an
80-day cooling-off period with federal mediators in charge of negotiations.
Those mere ten days of total port inactivity, on top of the nearly two
previous weeks of lowered productivity, clogged the harbors and stretched
every bit of any built-in elasticity available for time-definite deliveries.
At Los Angeles-Long Beach, the nation's busiest container hub, 127 ships
were waiting at anchor for dock space. Retailers across the country suddenly
became concerned over their inability to stock their shelves with holiday
Opportunists suggested waivers of the Jones Act (which restricts cargo
movement between U.S. ports to U.S.-flagged -built, and -crewed ships)
in order to shift cargo to other U.S. ports. The Maritime Administrator,
Capt. William G. Schubert, USMM, responded by issuing a list of the available
Jones Act-qualified U.S.-flag ships and barge units, complete with phone
numbers and points of contact.
Despite the fact that so many programs aimed at improving cargo and port
facility security are now in various stages of implementation, more action
is urgently needed. The establishment of the new Department of Homeland
Security (DHS) is a good start. DHS will facilitate the integration and
coordination of the programs already started, and will undoubtedly develop
a number of other initiatives to meet the still-emerging threats posed
by international terrorism. There already is a great deal of concern,
though, over the escalating cost of infrastructure security, and the economic
impact of the various counterterrorism programs has yet to be determined--as
does, of course, the initial "setting up" costs for the new
Department. However, many experts agree that the use of electronic cargo
tracking, in particular for implementation of the Customs' AMS, will permit
identification of inbound cargo along with its origin, status, and destination.
The end result, these same experts say, will be significantly increased
productivity that might well offset many of the costs attributable to
the increased security measures being mandated.
Until recently, the use of coastal shipping to reduce coastal highway
congestion, protect the environment, and improve the quality of life for
those who travel the coastal interstate highways was a common-sense idea
that elicited considerable applause but received only scant attention
from senior public officials. Last year, though, one such official did--both
in official testimony and in various interviews and speeches--publicly
endorse the possible use of coastal shipping as a solution to traffic
congestion. More specifically: Maritime Administrator Schubert sponsored
a two-day conference in New York City in November 2002 to raise public
awareness about the anticipated massive growth in freight traffic and
the concurrent increase in highway congestion that would be the inevitable
result. He also urged the transportation industry to look to the sea as
a ready-built highway waiting to be used, even referring to these water
highways as "W-95s," and pointedly commented that the W-95 highways
"[would] not require regular maintenance and periodic resurfacing."
Current transportation studies predict a doubling of freight traffic
by 2010 and a tripling by 2030. It was in that context, Schubert noted,
that the Highway Administration had advised him that, if a substantial
portion of the heavy trailers now used to carry freight can be rerouted
by water, the costs of highway and bridge maintenance would be greatly
reduced. It now costs about $32 million to add a single mile of new four-lane
highway to the interstate system, and about $100 million per interchange.
Those costs do not include the cost of land acquisition. "So it's
clear that we can't 'build out' of the [congestion] problem with additional
highway construction," Schubert said.
He acknowledged, though, that the domestic Harbor Maintenance Tax (HMT)
might be a serious deterrent to any efforts to generate a major increase
in coastal shipping. By way of background, the HMT started out not as
a tax, but as a user fee. The Water Resources Development Act of 1986
created the Harbor Maintenance Fee (HMF)--which was assessed on international
exports and imports, domestic movements, and other types of port use such
as foreign trade zones and passengers. The U.S. Customs collected the
fees on behalf of the U.S. Army Corps of Engineers and transferred it
to the Harbor Maintenance Trust Fund. The fund is used for the dredging
and maintenance of water depths necessary to promote waterborne trade.
In 1994, international exporters filed complaints with the U.S. Court
of International Trade (CIT) challenging the constitutionality of the
HMF. The CIT ruled that the HMF is in fact a tax, not a user fee. The
CIT decision was appealed by the U.S. government to the U.S. Supreme Court--which
ruled that the Harbor Maintenance Tax (HMT) on exports was and is unconstitutional.
The Court found that, because the HMT was an ad valorem tax--i.e., a tax
based on the value of the cargo--it amounts to a tax on exports, and such
taxes are prohibited by the Constitution.
The decision by the Supreme Court found the HMT on international exports
to be in violation of Article I, Section 9, of the Constitution of the
United States--which specifically states: "No Tax or Duty shall be
laid on Articles exported from any State." However, the Constitution's
very next statement says that: "No Preference shall be given by any
Regulation of Commerce or Revenue to the Ports of one State over another;
nor shall vessels bound to, or from, one State, be obliged to enter, clear,
or pay Duties in another [Sic]."
The HMT is still charged on imports and on goods shipped between states
by water--except for goods shipped to, from, or between the noncontiguous
states of Alaska, Hawaii, and the Commonwealth of Puerto Rico. In fact,
the HMT can be levied twice on the same cargo. For example, if a sea container
coming from overseas arrives by ship in New York is offloaded, then reloaded
aboard a ship or barge bound for Norfolk, Va., the tax is assessed: (1)
upon the initial arrival of the cargo in New York; and (2) again in Norfolk.
Similarly, a 53-foot domestic road trailer loaded with either domestic
or imported foreign goods that is transported by sea from Boston to, say,
Charleston, S.C., would be charged the HMT upon arrival in Charleston.
The HMT rate is presently 0.125 percent of the value of the cargo; a
valuation of $100,000, therefore, which is fairly close to the average
cargo value of a road trailer load, would result in a $125 charge to the
There is apparently no question that the Harbor Maintenance Tax is, in
fact, a tax and not a user fee. The Court of International Trade caused
even the name to be changed following its ruling. But the CIT ruling failed
to answer a related question: What is the difference between an "export"
carried from Boston to Charleston and an export carried from New York
to a foreign port? In either instance the HMT raises the landed cost of
goods produced by a citizen or U.S. corporate entity and would appear
to violate the Constitution. In short, the domestic HMT might be vulnerable
to legal challenge.
If the Maritime Administration and the Department of Transportation are
truly interested in removing trucks from the coastal interstates and promoting
an efficient coastwise shipping industry, one of their first priorities
in this area, it would seem, should be to take the action or actions needed
to remove this deterrent.
Red Sky at Night
As part of the new effort to improve U.S. maritime security there may
well be heated discussions on Capitol Hill in the near future on how to
continue to sustain a U.S.-flag Merchant Marine that is and will be, in
the words of the 1936 Merchant Marine Act, "capable of serving as
a naval and military auxiliary in time of war or national emergency."
These discussions are inevitable, if only because the Maritime Security
Program (MSP), which pays $2.1 million to each of the 47 ships currently
enrolled in the MSP--will expire in 2005. Because only 97 U.S.-flag ships
now operate in international trade, and only 47 currently receive MSP
payments, it seems likely that there will be an effort to increase the
number of ships in the program--and there is a valid argument for doing
so. The 50 U.S.-flag ships that do not currently receive MSP payments
are unlikely to be replaced as they near the end of their economic lives--except
by foreign-built and foreign-flag ships--unless the MSP is expanded to
cover all of the U.S.-flag ships now operating in international trade
and payments are increased to perhaps $3 million or so per ship per year,
a more economically realistic number. That would still be less than $300
million per year--in other words, considerably less than the acquisition
cost for just one LMSR for the RRF--and an extremely modest price to pay
to keep a cadre of militarily useful ships and, just as importantly, the
seafarer manpower pool that accompanies these ships, available for military