By ROBERT W. KESTELOOT
The Merchant Marine Act
of 1920 has always been better known as the "Jones Act," so named for its
sponsor from the state of Washington, Sen. Wesley L. Jones. The real intent of the Act was
to better define the terms and conditions for the sale of government-owned vessels that
had been built under the provisions of the 1916 Shipping Act--which was passed to
subsidize the massive increase in U.S. shipbuilding needed to meet the anticipated
shipping requirements that would result from the eventual and late (1917) entry of America
into World War I.
Senator Jones had spent
several years trying to capture the lucrative Alaskan trade for the ship owners and ship
operators that were among his strongest constituents. The 1920 legislation, with its
patriotic themes reflecting the earlier tenets of Capt. Alfred Thayer Mahan--the noted
naval historian and strategist who had died only six years previously--regarding the
absolute necessity for a maritime nation to have a merchant marine, was ideally suited for
Jones's purposes. The original Merchant Marine Act of 1920 directed the Shipping Board to
do "whatever may be necessary to develop and encourage the maintenance of a merchant
marine ... sufficient to carry the greater portion of [America's] commerce and serve as a
naval military auxiliary in time of war or national emergency ultimately to be owned and
operated privately by citizens of the United States."
Section 27 of the Act,
the work of Jones himself, reaffirmed the cabotage policy to restrict trade between any
American ports to ships of American registry. The United States had banned foreign ships
from coastwise trades since 1817, but the 1920 law made it a requirement that the ships
participating in such trade be built, crewed, and owned by Americans. Passage of the 1920
Act was rushed through Congress with little debate, and no recorded vote. The concept of
cabotage, however, has been debated and sustained many times since.
Starting in 1995, there
has been a renewed and concerted effort to repeal the Jones Act; it was not surprising,
therefore, when that effort continued into 1998. However, proponents of the status quo
felt less threatened than in the previous year. This was due entirely to House Concurrent
Resolution 65, a "sense of the Congress" resolution, originally introduced by
co-sponsors Joe Moakley (D-Mass.) and Gerald Solomon (R-N.Y.) in 1997. The resolution,
which states specifically that "the Jones Act and related statutes are critically
important components of our Nation's economic and military security and should be fully
and strongly supported," won overwhelming support from 245 other members of the
House.
The Moakley/Solomon
resolution has provided formidable armor against those who would change the status quo. It
has, for example, caused the Jones Act Reform Coalition, led by a former federal maritime
commissioner, to abandon the coalition's effort to repeal the Jones Act and to shift to a
strategy of only modifying the Act (to allow foreign-built bulk ships to carry
agricultural products in the U.S. domestic trades). That proposal also has met stiff
opposition, mainly because the coalition already had revealed its ultimate goal, and the
foreign-built, bulk-ship-only approach was recognized for what it is--the cold nose of the
camel under the tent.
The defense of the Jones
Act was further strengthened when then-Assistant Secretary of the Navy John Douglass, in
one of his last acts before leaving office, urged Senate Merchant Marine Subcommittee
Chairwoman Kay Bailey Hutchinson (R-Texas) to resist efforts to amend the Act. "The
Jones Act is vital to our national security and to the future of the U.S. Navy,"
wrote Douglass. He said that his letter was in anticipation of a Senate Commerce, Science,
and Transportation Committee hearing on proposals to amend or repeal the Jones Act. The
hearing was announced last June by Sen. John McCain (R-Ariz.), chairman of the Senate
Commerce Committee, who told Sen. Jesse Helms (R-N.C.) in a letter that "It appears
that the Jones Act has a negative economic impact on American consumers." McCain said
that he supports improving the efficiency of the domestic water transportation system.
The hearing was held in
mid-September and discussion centered on S. 2390, the Freedom to Transport Act of 1998,
introduced by Helms and Sen. Sam Brownback (R-Kan.). Their bill would allow U.S.
documentation of bulk ships of 1,000 gross tons and larger, not built in the United
States, for the transportation between U.S. ports of forest products, other bulk cargo
(including agricultural products), and/or livestock. The bill also would allow the
voluntary return of these ships to foreign registry without approval by the secretary of
Transportation (as is required by the Shipping Act of 1916 for other U.S.-flag ships). A
spokesperson for the pro-Jones Act Maritime Cabotage Task Force noted at the hearing that
the bill was not the narrowly crafted compromise described by its sponsors, and would,
moreover, "instantly kill any plans" for the revitalization of the U.S.
shipbuilding industry. The Task Force position exposed, once again, the "nose of the
camel" nature of the bill, which was never reported out of committee.
Why have there been so
many attempts to repeal or modify the Jones Act, especially when so many members of
Congress have joined in sponsoring a resolution to maintain the Jones Act in its present
form? The answer is simple economics--undiluted, it seems, by common sense. The intent of
the "reformers," according to those who want the Jones Act kept intact, is to
force down railroad freight rates on grain moving to East Coast markets from the Midwest
by raising the threat of a foreign source of water transport.
However, there is no
sustained demand for water transport of grain within the United States. Given the
protective nature of the Jones Act, it seems obvious that, if such demand existed, the
ships and barges would have been in the business long ago. There are two routes possible.
The first is the Mississippi River to the Gulf, then around Florida to North Carolina and
other mid-Atlantic states, where much of the demand exists. This is a circuitous and
inefficient route and therefore too expensive. The other possible route is through the
Great Lakes to the St. Lawrence Seaway and then south. But that route would take much
longer than shipping by rail, and is not available during the winter months--moreover,
most modern bulk ships cannot pass through the narrow locks in the Seaway.
Complicating the
viability of using either route is the absence of back-haul cargo. Ships follow the cargo,
in other words. In short, if the cargo existed and it were attractive enough economically
to carry it, the ships would already be sailing.
Foreign-built, and even
foreign-crewed, ships would not provide a lower-cost alternative to the railroads. The
real effect of all the anti-Jones Act legislation can be observed in the inaction of the
nation's domestic ship operators, many of whom, like deer frozen in headlights, hesitate
to make a move to replace their aging vessels and/or to acquire additional ships to open
new domestic markets. The possibility of lower-cost foreign-built ships is too threatening
to them--and, of perhaps greater importance, to their financial lending institutions.
Cynthia L. Brown,
president of the American Shipbuilding Association, testified on this matter at the
September hearing on S. 2390 when she suggested that the mere fact that hearings on the
Jones Act were being held had jeopardized shipbuilding contracts for American shipyards:
"No investor is going to place a contract with a U.S. shipyard if he or she believes
that the U.S. Senate is going to change the law governing the rules of competition in the
Jones Act trade."
It should be noted that
McCain took strong exception to Brown's testimony and pointed out that the committee's
charter requires it to review existing laws. However, Sen. John Breaux (D-La.), a strong
supporter of the Jones Act, agreed with Brown's statements about the market realities.
Hearings held by any committee almost always affect the industries involved.
Although it is 34 years
older than the Jones Act, there exists a similar piece of cabotage legislation that
applies to the transportation of passengers, the Passenger Vessel Act of 1886, which
states that "no foreign vessel shall transport passengers between ports or places in
the United States ... under a penalty of two hundred dollars for each passenger so
transported and landed." It came as a total surprise to the maritime industry,
therefore, when McCain, one week after the combative Jones Act hearing, announced his
intention to introduce a bill to allow foreign-built U.S.-flag cruise ships into the U.S.
domestic trades. Allowing foreign-built ships to enter the cruise trade under the U.S.
flag is not an unprecedented proposal, but his bill set no limit to the length of time the
ships would be permitted to operate under the U.S. flag, and included no requirement (as
is customary) to replace them in the near future with ships built in U.S. shipyards.
However, the greatest
difference in the McCain proposal is the almost casual inclusion in the bill of provisions
to also allow up to 30 foreign-flagged ships--largely manned by Third-World citizens who
would be paid substandard wages--to carry passengers in the domestic economy of the United
States for two cruises each year, for a maximum duration of 30 days per year. This is the
equivalent of granting AeroFlot permission to establish passenger air service between
Washington, D.C., and Phoenix, Ariz. Ed Welch, legislative director of the Passenger
Vessel Association, said that approval of the McCain proposal would create a precedent
"that should send a shiver down the spine of every business operating in America
today, especially other modes of transportation. It's the maritime industry today. Who's
next tomorrow?" Welch also noted that the "twice-a-year" provision would
allow foreign ships to earn revenue while seasonally repositioning from the Caribbean to
the Alaskan market and back again. Perhaps the most disturbing aspect of the
proposal--which very closely resembles the anti-Jones Act legislation in certain
respects--is that it attracts a new constituency, including major ports and regional
tourism organizations nationwide, that might join the Jones Act reformers.
McCain's bill failed to
generate support and never made it out of committee, but he announced later that, "I
want to put everyone on notice that we are going to come back to this issue early next
year and keep working on it until it is resolved." Bills similar to the Helms and
Brownback proposal also are certain to resurface. In short, the war on U.S. coastal
shipping cabotage laws--which are similar to the cabotage laws adopted by the world's
other major maritime nations--is beginning to resemble a guerrilla war of attrition.
At a time when America
should be making better use of its coastal and inland waterways in order to relieve the
stress on the land-transport infrastructure, and at a time when the shipbuilding and
repair industries need more domestic business to survive, the mere introduction of such
legislative proposals has resulted in the domestic maritime industry stagnating rather
than expanding.
Other
Maritime Legislation
Most political analysts
seem to agree that the 105th Congress will not be remembered for its productivity. In some
instances, this legislative "benign neglect" was beneficial to the maritime
industry. But sometimes it delayed action on urgent maritime matters. A case in point:
resolving how to pay for dredging in commercial ports after the Supreme Court declared,
last March, that the harbor maintenance tax is unconstitutional.
Congress created the tax
in 1986 by removing the cost of dredging from the general budget and shifting it to the
private sector--namely, importers and exporters.
Ports like Oakland and
New York, and most ports on the Mississippi River, cannot exist without dredging. Seattle,
on the other hand, is a naturally deep port that requires no dredging. Port officials
there contend that the imposition of the extra cost of the harbor maintenance tax makes
Seattle less competitive with nearby Vancouver.
Congressional resistance
to returning the cost of harbor dredging to the taxpayer is very strong. Complicating the
issue are enormous reimbursement claims from importers and exporters who want refunds for
taxes paid in the past that have been determined to be unconstitutional. The issue is
extremely controversial and needs to be resolved this year.
One important piece of
legislation that did make it through the process was maritime deregulation. On 4
August, after four years of debate and stalled bills, the House finally passed the Ocean
Shipping Reform Act of 1998, which brought the deregulation of international container
shipping closer to realization. Customs brokers and freight forwarders made a last-ditch
effort throughout September to derail the bill, asserting that, despite laws and contracts
to the contrary, freight middlemen and small shippers would be charged $300 to $1,000 more
per container than big shippers to obtain assured cargo space on ships.
The view of the big
shippers was that, if such violations were to occur, it would be the task of the Federal
Maritime Commission (FMC) to impose fines on behalf of the small shippers who are
victimized.
The FMC and others
question whether the commission would be capable of handling what could amount to a large
amount of "policing" activity. Congressional staff members agreed that an
amendment to the bill to provide the FMC with the tools necessary to police such illegal
behavior, and to take appropriate remedial action, might be desirable, but they were
unwilling to reopen the bill so late in the legislative session. Because the new
regulatory system created by the reform act will become effective on 1 May 1999, there was
additional pressure to pass the bill without delaying amendment procedures, which would
leave little time for carriers and shippers to prepare to contract intelligently in the
new and freer environment.
Despite all the September
turmoil, the bill was passed in the Senate by unanimous consent on 1 October. Within weeks
of passage, several major carriers announced their intent to resign from their
rate-setting conferences. At an October meeting in Amsterdam, members of TACA (the
Trans-Atlantic Conference Agreement) expressed their concern that the new Ocean Shipping
Reform Act of 1998 will allow confidential contracting between individual carriers and
shippers. They also were unhappy about a recent adverse antitrust ruling by the European
Commission. The ruling requires rate-setting conferences to give their members more
freedom to reach private deals with shippers.
Also on the agenda for
the 13-member meeting was issuance of the 1999 TACA business plan. Instead, TACA issued
this statement: "Given changes in the regulatory environment, which at this time
require clarification, publication of the 1999 business plan relating to TACA service
contracts and tariffs must be postponed."
Olav Rakkenes, CEO of
Atlantic Container Line (ACL) and chairman of the TACA conference, explained the delay in
issuing the business plan: "We cannot do that [issue the plan] until we have greater
clarity on how we can operate legally." Rakkenes also described the overall objective
of the Amsterdam meeting: "We had legal people explain to us what we can do and what
we cannot do under the new regimes in Europe and the United States."
ACL, along with Sea-Land
Services, the largest U.S. ocean carrier and a major proponent of the maritime
deregulation legislation, were co-sponsors of the Amsterdam TACA "meeting of
interested parties." A total of 20 carriers were represented at the meeting. TACA
itself is a 13-member conference.
Two days after the
Amsterdam meeting, American President Lines Ltd. (APL), provided additional evidence that
shipping deregulation will diminish the influence of rate-setting conferences. APL, a
longtime conference supporter, as well as a major proponent of deregulation, announced the
company's intent to withdraw from the Transpacific Westbound Rate Agreement (TWRA)
effective at the beginning of 1999. P&O Nedlloyd and Hapag-Lloyd, traditional
conference lines, already had withdrawn from the TWRA. An APL spokesperson said that other
TWRA members probably will follow suit. To outside observers it now seems that the very
future of rate-setting conferences is in jeopardy.
There was one other
significant piece of pending maritime legislation that did not escape the turbulence of
the 1998 political hoopla. For the fourth year, legislation implementing the OECD
(Organization for Economic Cooperation and Development) shipbuilding agreement to end
foreign government subsidies and dumping practices in shipbuilding industries throughout
the world failed to pass the Congress. Many hope that the latest failure will preclude any
further attempts at passage.
It was a close call,
however, because the House attached the OECD shipbuilding agreement to the African Growth
and Opportunity Act; the Senate version of the Africa Bill became part of an omnibus trade
bill that included the OECD agreement, "fast track" authority for the president,
the Caribbean Basin Initiative and other trade measures. Democrats feared that Republicans
were trying to push through a bundle of free-trade issues, with the closeness of the
November elections not permitting time for full debate.
Opponents of the OECD
agreement included a group of senators led by Maine Republican Olympia Snowe and a
coalition of shipbuilders and unions who were unsure of their ability to stop the omnibus
bill, despite strong arguments that they believed would defeat the OECD shipbuilding
agreement if it were allowed to stand alone. Eventually, though, the House decided to vote
on a stand-alone fast-track trade authorization bill (which failed). The failure to pass
fast-track caused the Senate omnibus trade package, with the OECD implementation bill
attached, to fall apart.
In the last week of the
second session of the 105th Congress, proponents of OECD implementation made several
attempts to attach it to other legislation. In the end, the distraction of the impeachment
inquiry and the need to consider the FY 1999 appropriation bills stopped all efforts to
achieve passage.
The OECD shipbuilding
agreement was flawed in several ways. It would not have ended foreign government subsidy
and dumping practices. It would have allowed the governments of Germany, France, Spain,
Portugal, South Korea, Greece, and Belgium to spend huge sums (more than $8 billion) to
modernize their shipyards--and thereby lock in their commercial market shares for years to
come. Moreover, these special transition sub-sidies, exemptions, and grandfathered
programs--for nearly every signatory country except the United States--would follow a
14-year period of huge foreign subsidies. During that same period, U.S. shipbuilders
received no subsidies because the United States had unilaterally ended its own
construction differential subsidies in 1981. The agreement also would not have curtailed
the "dumping" practices of Japan and South Korea (selling ships at prices below
the cost of production), and would not have had any impact on China, whose shipbuilding
industry ranks third in the world and enjoys strong government support.
The agreement would,
though, have subjected the construction of oceangoing ships for the U.S. domestic
market--i.e., the Jones Act--as well as auxiliary and reserve ships for the Department of
Defense, to the terms of the agreement. This meant that, if American shipbuilders were to
build ships for use in the U.S. domestic commerce, they would be barred from the
international market through a series of bid restrictions, bid tariffs, and other
countermeasures that could be imposed on them by the governments of the foreign
signatories of the shipbuilding agreement. In addition, the Department of Defense would
have been subject to a review by an international trade panel to determine whether the
construction of military auxiliary or reserve ships to meet military logistics
requirements were in conformity with the agreement. In short, the terms of the agreement
made opponents question the political common sense of the officials of the U.S. Trade
Representative (USTR) who had agreed in Paris (in 1994) to terms that would countenance
the review by other nations of matters that are clearly essential to U.S. national
security and to U.S. naval force-projection capabilities.
Charter
and Build
Although the procurement
accounts of all of the nation's armed services are woefully underfunded in the 19992004
future-years defense plan, SCN (ship construction, Navy), the Navy's shipbuilding account,
appears to be so short that it has become difficult for Navy leaders to say with any
degree of confidence that the Navy will achieve its long-term force-level goal of a
300-ship fleet. With an average of only 6.5 ships per year funded over the program years
2000 to 2005, and assuming similar funding levels in the outyears, the Navy will
inevitably drop to a fleet of fewer than 200 ships. At such low building rates, the
temptation--indeed, the need--is to build combatants only, and postpone replacement of the
auxiliary ships that allow the battle groups to stay at sea indefinitely. Amphibious and
mine-warfare shipbuilding programs typically suffer similar neglect during periods of low
SCN funding, and even more shipyards are likely to be driven out of business, further
eroding the U.S. defense industrial base.
One way to stretch SCN
dollars and preserve the industrial base is to obtain Congressional approval for a
"Charter and Build" (C&B) program for auxiliary-type ships that can be built
to commercial standards in shipyards accustomed to building commercial ships. Not only
would the acquisition cost be spread out over the duration of the charter, but the total
capital cost would be much less than if the ships were built in yards that traditionally
build Navy combatants. Authority to acquire up to 50 C&B auxiliary ships over a
10-year period, including the ADCX (a new class of auxiliary dry cargo ships), was
included in the original 1999 House DOD authorization bill, but was deleted in the joint
conference with the Senate. Although the Navy's immediate concern is how to acquire the
ADCX in the absence of SCN dollars, the absence of C&B authority also inhibits
planning for future Marine Corps prepositioning ships as well as replacement tonnage for
the RRF (Ready Reserve Force) ships, which are even less affordable without C&B
authority. A major readjustment in the division between services of DOD's total
obligational authority (TOA) in order to provide a greater share of funding to the Navy is
highly unlikely. Without C&B authority, therefore, the Navy will be unable to come
even close to the 300-ship fleet of the future that possesses the requisite balance of
combatant, amphibious, mine-warfare, and auxiliary support ships necessary for sustained
operations at sea.
In the absence of either
adequate SCN dollars or C&B authority, auxiliary ships almost certainly will be the
first to go, which means that higher-risk logistic support options will be necessary.
Moreover, without C&B, plans to replace the Marine Corps' Maritime Prepositioning
Ships (MPSs), whose lease charters begin to expire in 2004, and to recapitalize the aging
Ready Reserve Force ships, will never be implemented.
USMC,
OMFTS, and MPF 2010
The Marine Corps' OMFTS
(Operational Maneuver From the Sea) concept envisions the use of seabased logistics to
replace vulnerable logistic sites ashore which can be easily targeted by truck or car
bombs, even crude missiles, and are subject to other acts of terrorism or urban
warfare--as was tragically demonstrated by the bombings of the Marine Barracks in Beirut
and the Khobar Towers in Saudi Arabia. The availability of seabased logistics also would
eliminate the requirement for access to secure ports and airfields. It also would: (a)
facilitate rapid force closure; (b) eliminate the need for land-based reception and
staging areas; and (c) free the maneuver forces ashore from static security duties,
thereby making them truly mobile and able to strike specific targets to interrupt and
disable enemy operations.
The resupply needed would
come from equally mobile combat-service support units able to move necessary supplies,
food, and ammunition from offshore supply "bases" directly to the maneuver units
with speed and precision.
The offshore supply bases
would constitute what is currently known as MPF 2010--the Marine Prepositioning Force for
the year 2010 and beyond. The MPF 2010 ships would replace the ships of the three existing
Marine Prepositioning Squadrons, which have been so very successful since their initial
introduction in 1984.
The existing MPS ships
are basically roll-on/roll-off (RO/RO) ships with some container capacity, and must be
totally offloaded in order to reach much of their cargo. The MPF 2010 ships must be
capable of a much more selective offload, and would be able, in addition, to accommodate
helicopters and MV-22 Osprey tiltrotor aircraft, advanced amphibious assault vehicles
(AAAVs), and landing craft, air cushion (LCACs).
Achieving that mix of
capabilities requires not only a large flight deck, but also either a large wet well or
some sort of deployable ramp and loading platform to load and discharge cargo. The latter
is considered a more desirable option than the former, because a wet well takes up too
much of the ship's internal volume, which is better devoted to cargo space.
The MPF 2010 ships also
will need cranes adequate in capacity and number to conduct lift-off/lift-on (LO/LO)
operations as well, and they will have to have the ability to conduct organizational and
intermediate maintenance of all of the USMC combat equipment and systems they carry.
Afloat maintenance is not
a new concept. The aviation maintenance and support (T-AVB) ships USNS Wright and
USNS Curtiss both have the ability to embark an entire Marine aviation intermediate
maintenance activity (IMA) and to conduct sea-based maintenance. Each IMA, which is housed
in deployable vans, can perform aircraft maintenance in forward objective areas.
The original requirement
that persuaded DOD and Congress to add these unique ships to the Navy's strategic sealift
assets (in 1986) was the necessity to deploy aircraft maintenance facilities that could
support MPS operations overseas.
The alternative was to
add $1.7 billion in aviation spare parts to the loadout of the MPS ships. But that would
have generated another logistics nightmare, because aviation spares are in such constant
turnover undergoing field and factory changes. The T-AVB ships were accepted, therefore,
as an affordable and practical solution to a major logistics problem.
The Center for Naval
Analyses (CNA) is the lead organization in an ongoing study to determine the
characteristics that should be required on the MPF 2010 ships. When he was vice chairman
of the Joint Chiefs of Staff, Adm. William Owens (now retired), promoted the concept of a
mobile offshore base (MOB), a behemoth floating air facility with runways 3,000 to 5,000
feet long, and complete with warehousing and repair facilities. Recent cost estimates for
these enormous platforms range from $10 billion to $15 billion, numbers that exceed
today's affordability limits.
It seems doubtful, also
for cost reasons, that the MPF 2010 fleet would be made up of a single class of ship. It
is more likely that it would be a mix of ships able to provide specialized support and
sustainment. Still, the MPF 2010 ships probably will be "post-Panamax" in
size--i.e., larger than the extreme limits of ships able to transit the Panama Canal, or
more than 1,050 feet in length and/or 105 feet at the beam. These oversized ships, if and
when built, will provide the sea-based conduit for the continuous logistic support
required for the indefinite sustainment of forces ashore engaged in littoral operations.
Designing, building, and
operating the MPF 2010 ships will be extremely difficult. But focusing on them in
isolation raises two questions: (1) How will these sustainment ships be resupplied? (2)
How will the supplies be transferred to the MPF ships? The cargo volumes anticipated are
too great for traditional underway-replenishment (unrep) techniques, even if adequate
numbers of shuttle ships capable of conducting unrep operations were available. As in the
past, most resupply will necessarily come via commercial ships of the U.S.-flag fleet,
including those in the RRF, or from foreign-flag ships on charter to the United States.
The actual transfer of
supplies will have to take place in port or in well-sheltered harbors--unless the current
sea state limit (about sea state 2.5) can be breached. However, to accommodate the high
probability of having to offload commercial ships and load the MPF ships in developed and
secure ports belonging to cooperative allies, extra MPF ships that can be loaded with
homogeneous cargo loads will be necessary in order to keep a minimum number of MPF ships,
loaded with adequate resupply materials, on station in the operations area--i.e., the most
likely areas of future conflict.
Y2K and
Other Maritime Bugs
It is almost impossible
to read a recent newspaper or business magazine without finding another article on the
"millennium bug," better known as "the Year 2000 Problem" or, in
typical newsroom shorthand, simply "Y2K." This is a major computer problem that
no business can safely ignore, but the shipboard side appears to be fairly
straightforward. For example, Columbia Shipmanagement Ltd., a Cyprus-based company that
manages close to 300 ships and is acknowledged by the international maritime industry to
be one of the best, started early with a fleet survey to identify Y2K compliance problems.
In a fleet that ranges in type from small container feeder ships, to large bulk tankers,
to large container ships with capacities up to 4,000 TEU (20-foot equivalent units), to
cruise ships, ensuring that the survey was both accurate and relevant was a daunting task.
Columbia focused on four broad categories of systems and equipment: alarm and monitoring
systems; navigation and ship-control systems; communications equipment; and computer
hardware and software, and network installations. A list for each ship was compiled that
identified every control system, every monitoring system, all alarm systems, all
navigation and Global Positioning System (GPS) receivers, and all communications
equipment. On the average ship, this amounts to over 100 pieces of equipment, containing
upwards of 200 embedded chips, which must be identified by manufacturer and serial number
in order to check on Y2K compliance. For Columbia, with its multitype and multinational
fleet, this meant checking with thousands of manufacturers worldwide. Where doubt exists,
or the manufacturer either cannot be located or is nonresponsive, replacement is the only
sure solution.
Ignoring the Y2K problem
is not an option. A number of port state authorities are threatening to keep ships in port
that cannot produce evidence of Y2K compliance. Already, ship-charter parties increasingly
require the inclusion in any charter agreement of a warranty of Y2K compliance.
Responsible companies that are spending millions of dollars to identify and correct the
problem are doing their best to reassure customers of their efforts. APL, for example, has
included a "Year 2000 Compliance" page in its web site (www.apl.com) that
describes the magnitude of the company's effort and provides estimated times of
completion. (The direct URL to the APL compliance page is:
www.apl.com/content/about/y2kletter.html.)
Interestingly, GPS itself
is unfazed by the 21st-century bug. The GPS satellites use only four-digit year
annotations. Nonetheless, at 2400 hours on 21 August 1999 the GPS almanac will reset its
week count to zero. Some GPS receivers have not been designed to properly recognize this
event and may reset their internal calendars to 6 January 1980 (the first "origin
date" of the GPS week count). Clearly, those receivers need to be identified prior to
August 1999, and either be upgraded or replaced.
Assuming that all ship
monitoring, control, alarm, safety, communications, and navigation systems are compliant
by the turn of the century, not much is expected to happen on the seagoing side of the
maritime industry. The shore side, however, and the shipping electronic networks are still
of major concern to the industry. Full Y2K compliance will require organizational
discipline, diligence, and the expenditure of a lot of money. Many Third World countries
with ports and connecting transportation systems are very poor in these three necessary
categories. Jamaica, for example, recently announced that Y2K compliance would not be
possible before the year 2004. A lesson could be taken from Britain, Australia, and New
Zealand--all of which are providing tax incentives to small businesses to help them
address the problem.
Most ship operators fear
that, although private-sector firms will make certain that they are in compliance, the
public sector will lag behind. This could result in delays at public ports caused by
customs, immigration, and maritime agencies. Such delays would result in port congestion
and reduced commerce.
During the past year
there has been increased recognition of the merits of EDI (electronic data interchange),
which permits different ship operating companies to use common electronic language to
share cargo space and yet maintain accountability for: (a) booking cargo; (b) issuing
shipping instructions, bills of lading, and ship manifests; (c) forwarding bank letters of
credit and arrival notices, along with invoices; and (d) making electronic payments.
Unfortunately, EDI is the
area most vulnerable to the Y2K bug. A basic truism in assuring Y2K compliance is that a
company not only has to be confident about its own systems, but must be equally sure of
compliance by every company with which it does business by electronic means.
It behooves all
companies, therefore, to practice safe EDI until the health of all trading partners
with whom data is exchanged is proven. For many organizations, Y2K compatibility will
undergo a minitest several months before the end of 1999, when their fiscal years expire.
For the U.S. government, "H-Hour" will be midnight on 30 September 1999, when
the government's fiscal year 1999 expires.
The so-called Asian Bug
(not to be confused with the Asian Flu) also will have an adverse effect on shipping
costs, first on goods carried from China to the United States and possibly later on goods
from other countries. This bug is real rather than symbolic: the Asian long-horned beetle,
a one-inch bug that sneaks into the United States in raw hardwood pallets and packing
crates currently originating from China. It has no known predators in the United States,
and it possesses the appetite to kill off vast forests of America's favorite trees ranging
from maples and walnuts to fruit trees and evergreens.
The Asian long-horned
beetle already has been found in more than 30 warehouses, and actual forest infestation
has been found near Chicago and New York. The only known solution to date is to cut down
all of the possibly affected trees, shred them with chipping machines, and incinerate the
wood chips.
The U.S. Department of
Agriculture has now banned the importation of raw wooden pallets and crates from China.
But the use of treated wood will increase the cost of products shipped from China. To
substitute plastic or corrugated cardboard pallets would be only slightly more costly than
the use of wooden pallets, but they do not have the carrying capacity of wooden pallets.
This is a particularly troublesome problem for China, which has struggled not to
devaluate its currency, while continuing to compete on price with other Asian nations that
have devaluated their currencies. Any additional packing costs may make Chinese
products noncompetitive. As it is, all Chinese pallets and packing crates must from now on
be accompanied by official Chinese government documentation declaring not only that the
wood meets U.S. standards, but also that it has been fumigated, heat-treated, and/or
soaked in preservatives. (The only partially offsetting good news is that China is a
primary producer of the chemicals that could be used to fumigate the wood.)
The cure for the other
Far East bug, the Asian Flu that started in Thailand and rapidly infected other Asian
countries and eventually the rest of the world, is much more costly and has proven to be
extremely elusive. In the maritime world, the most noticeable effect has been on the
balance of trade--as evidenced by the plethora of containers in U.S. ports, and the
paucity of them in Asia. The Asian Flu has been, in effect, therefore a "money and
banking bug" that has made imports to the United States more attractive, while
reducing consumer demand in Asia. The lack of westbound cargo in the Pacific, combined
with record imports from Asia, has necessitated the export of empty containers from the
U.S. West Coast--where upwards of 50 percent of the westbound container cargo consists of
empty containers. The absence of backhaul cargo to Asia is, of course, exacerbating the
problems caused by cargo rates that are already too low.
Transitioning
to the New Millennium
Jumping from the 20th
century to the new millennium is not a matter of choice. It will happen, and those
who prepared for it will have few problems. But, those who are not prepared may not
survive without Herculean recovery efforts. Problems such as the millennium bug and even
the Asian long-horn beetle eventually will pass. The more pressing maritime problems of
the new millennium will have to do with how to safely move hundreds of millions more tons
of cargo, for ever-increasing numbers of people, between more countries, at an affordable
cost, while keeping the environmental damage to the minimum.
Domestically, an
acceptable alternative to the harbor maintenance tax must be developed in order to
preclude the loss of cargo from silted U.S. ports to Canadian deepwater ports. A concerted
effort also must be made to remind both the general public and elected legislators that,
for an equal amount of fuel, one ton of cargo can be moved longer distances by sea, more
safely, and with less environmental impact, than is possible with any other form of
transportation.
This, of course, is one
of the best reasons for not dropping Jones Act requirements for coastal shipping.
An intrusion into either the Jones Act or the closely related Passenger Vessel Act, for
passenger, bulk, or dry cargo transportation service, threatens all other American
cabotage laws. Jones Act shipping is now the primary source of U.S. maritime seagoing
labor and is essential to the manning of government-owned ships during periods of
international crises. Defense and maritime officials are adamant in their position that
these advantages to the nation should not be forfeited by repealing the Jones Act and/or
other maritime laws.
The ability to
significantly increase the use of the broad ocean highways that run along America's coasts
also should be examined. Much of the cargo carried by trucks on the coastal highways could
be transferred to coastal sea-lanes before the trucks on the interstates create permanent
gridlock. One solution that has been suggested is to have RO/RO fleets move trucks on
regularly scheduled routes along the Atlantic and Pacific Coasts. This not only would
remove large numbers of trucks from the coastal interstates, it also would provide the DOD
with militarily useful ships that would always be within a day and a half of U.S. loading
ports when military contingency operations require the use of such ships. As a fallout
benefit to taxpayers, the requirement to recapitalize the aging and costly RRF fleet,
which is maintained in lay-up by the Maritime Administration, could be postponed
indefinitely, and perhaps eliminated entirely.
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