The mission of the Maritime Administration (MARAD), an agency of the Department of Transportation (DoT), is to improve and strengthen the U.S. maritime transportation system — including infrastructure, industry and labor — to meet the economic and security needs of the nation. 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 our 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 transportation into the overall transportation system is a MARAD priority. Strategic transportation planning at all levels of government, with a greater focus on freight mobility, will be critical to addressing current and future congestion as well as environmental issues within the transportation system as a whole.
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 to the U.S.-flag fleet or trained U.S. citizen crews. More than 88 percent of the military dry cargo transported during Operation Enduring Freedom and Operation Iraqi Freedom has been carried 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.
U.S. economic security also benefits from participation by the U.S.-flag fleet in the movement of international trade. The presence of a privately owned U.S.-flag fleet provides an alternative to foreign-flag carriers, some of which are government-owned or -controlled and/or have close affiliations with firms in their own countries that compete with U.S. businesses.
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 47-ship program for fiscal years 1996 through 2005 by providing $1 billion in fixed annual federal support payments of $2.1 million per vessel, subject to annual appropriations, to participant companies. These payments partially offset the higher costs of operating U.S.-flag liner ships in international trade.
On Nov. 24, 2003, President Bush signed the National Defense Authorization Act for fiscal year 2004 that included authorization of the Maritime Security Act of 2003, and a $1.7 billion reauthorization of the MSP for 60 ships for fiscal years 2006 through 2015. This program provides funding for 60 vessels, an increase of 13 ships over the current MSP fleet.
In return for MSP financial assistance, the carriers must commit 100 percent of their MSP vessel capacity and related intermodal transportation resources to Defense Department’s (DoD) approved Emergency Preparedness Program, the Voluntary Intermodal Sealift Agreement (VISA) program. 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 to replace 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.
Voluntary Intermodal Sealift Agreement
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, Stage I requires 15 percent of total enrolled capacity; Stage II requires 40 percent; and Stage III requires 100 percent 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, there was substantial participation of VISA carriers in moving equipment and supplies to support this effort. Fourteen 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 39 VISA ships including 35 ships enrolled in the MSP.
Ready Reserve Force
The Ready Reserve Force (RRF) ensures that the nation can maintain the surge capability needed to respond unilaterally to security threats in geographic areas not covered by NATO or other alliance commitments and to meet other national sealift requirements in the event of war or other crisis. The RRF fleet guarantees quick-response shipping with 59 vessels designed to meet special military requirements, such as in-stream discharge, the availability of non-unit containerized equipment and/or offshore petroleum delivery.
MARAD keeps RRF ships in designated states of readiness (as determined by DoD) to enable them to be activated in four, five, 10 or 20 days to meet military-surge sealift requirements. To respond quickly to military emergencies in any area of the world, RRF vessels in higher states of readiness — called Reduced Operating Status — are outported with small, highly trained and capable crews onboard. Vessels in 10- or 20-day readiness status are berthed in one of the National Defense Reserve Fleet sites.
MARAD RRF vessels carried out more than 21 72-hour sea trials in fiscal 2004 in order to more fully test the operational capabilities of the RRF upon activation. The normal maintenance sea trial schedule was impacted by the activation of vessels to support military operations.
RRF readiness is also tested in DoD “turbo” activations, which usually are short-interval exercises that include a sea trial when required, practical and possible. These sea trials are generally 24 to 72 hours in duration and serve to verify vessel material condition and readiness.
Fiscal 2004 brought with it Operation Iraqi Freedom II, which was similar in scope to the previous year’s Persian Gulf sealift, but involved only 20 RRF ships, all of which were roll-on/roll-offs (RO/ROs). The initial activation of these vessels occurred between December 2003 and mid-February 2004. These vessels were all in Reduced Operating Status, and were activated at their outport locations on all three U.S. coasts within their alloted five-day readiness status.
One of these vessels, Cape Island, was reactivated soon after its return to the U.S. West Coast in May for an additional voyage to the Persian Gulf, and was still operational (as of August 2004). The other 19 vessels have since returned to their U.S. outport locations and Reduced Operating Status after an average operational deployment of 119 days. Four additional RRF RO/ROs (Cape Horn, Cape Hudson, Cape Inscription and Cape Ducato) were activated in late June/early July.
On Aug. 9, 2004, Cape Orlando commenced activation in support of operations in Iraq at its outport location in Alameda, Calif. In the coming months, several additional RO/ROs are expected to be activated in support these operations.
Several RRF ships also were activated for various exercises and operations during fiscal 2004. In late January/early February, four RRF ships were activated for a Joint Logistics Over the Sea exercise. This exercise, named “New Horizons,” took place off the east coast of Central America and involved four distinct types of RRF vessels, including an RO/RO crane ship, Seabee, and an Offshore Petroleum Discharge Ship.
Cape Farewell was activated in March in Orange, Texas, for Exercise “Turbo Cads ’04.” This exercise involved loading the vessel on the West Coast with containerized ammunition for Far East ports. The RRF vessel Wright was activated in Baltimore in late May for an exercise called “Carolina Patriot” held off Morehead City, N.C., with a deployment of Marines on board. The Cape Girardeau was activated in Alameda, Calif., in June for a 32-day exercise called “RIMPAC ’04,” which involved several underway replenishment exercises with naval vessels off the Hawaiian Islands.
Finally the T-1 tanker, Alatna, was activated in Tsuneishi, Japan, in July, and put under Military Sealift Command’s operational control for a short period of time to load/discharge petroleum products in order to test the cargo pumping system on board. Throughout fiscal 2004 the three prepositioned vessels, Chesapeake, Petersburg and Cape Jacob, remained operational at various overseas locations.
National Defense Reserve Fleet
The RRF is a component of the National Defense Reserve Fleet (NDRF), which MARAD maintains. Non-RRF ships are operated infrequently. Many are prepared for long-term storage in a preserved condition, and some are awaiting disposal.
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. During the Korean War, 540 vessels were activated to support military forces. A worldwide tonnage shortfall from 1951 to 1953 required more than 600 ships to be activated to lift coal to Northern Europe and grain to India. From 1955 through 1964, another 600 ships were used to store grain for the Department of Agriculture.
Another tonnage shortfall following the Suez Canal closing in 1956 caused 223 cargo ships and 29 tankers to be activated. During the Berlin crisis of 1961, 18 vessels were activated and remained in service until 1970. The Vietnam conflict caused 172 vessels to be activated.
As of July 31, 2004, there were 267 vessels in the NDRF, of which 68 were in the RRF, 60 were in long-term storage and 139 were ready for disposal or being prepared for disposal. 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.
MARAD received an appropriation of $16.2 million in the fiscal 2004 budget to dispose of vessels.
Obsolete parts and equipment from NDRF ships that are to be disposed 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.
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 separate 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. During fiscal 2003, RRF vessels participated in a total of 164 calendar days of training support.
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.
In 2002, U.S. waterborne commerce amounted to 2.2 billion metric tons. International commerce accounted for 56 percent of the total, up from 52 percent five years earlier. The increase is due largely to a 16 percent increase in petroleum imports, and a 7 percent decline in petroleum shipments between U.S. domestic ports.
Preliminary data for 2003 shows a 3 percent increase in the international segment to 1.2 billion metric tons. Manufactures trades accounted for only 10 percent of U.S. waterborne commerce in 2002, but have doubled over the last 10 years. Imports accounted for virtually all of the increase.
As of year-end 2002, there were about 48,000 vessels active in U.S. foreign and domestic trades. These assets have a current-cost value of $52 billion. Of the 6,114 oceangoing vessels (10,000-plus dry weight tons), 485 were owned by U.S. companies. Of these, 221 were registered under the U.S. flag. At year-end 2003, the U.S.-flag segment stood at 218 vessels. In 2003, the U.S.-flag oceangoing fleet carried only 2 percent of U.S. foreign trade.
The gross output for marine transportation in 2002 was $27.9 billion. Of this, $21 billion were payments for intermediate inputs — energy, materials and services purchased for use in the production of marine transportation services — leaving a $6.9 billion contribution to U.S. Gross Domestic Product.
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 to 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. 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 Convention; 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. 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, and, in some areas of the nation, triple by 2020. This could bring the U.S. transportation system to a major freight mobility and capacity crisis. To help address this impending crisis, MARAD is actively promoting Short Sea Shipping as an environmentally friendly, proven, timely and cost-effective way to expand freight capacity.
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 between 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.
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 April 2004. 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.
For information, contact:
Office of Congressional and Public Affairs
400 7th St., S.W.
Washington, DC 20590
Phone: (202) 366-5807 or (800) 99-MARAD
Fax: (202) 366-5063