Sharing my Undergrad Thesis 'Challenges Facing the Flag'

Last year I wrote an essay for the Connecticut Maritime Association, but was unfortunately unable to be there in person to present it. I was disappointed when I wasn’t able to receive feedback about it and thought that using gCaptain as a platform to share it with other people in the industry would be a fun way to hear the opinions and positions of other mariners. I attached a link to where the paper and presentation can be accessed and would love to hear whatever comes to mind!

Paper:

Presentation:

2 Likes

Essay or Thesis?

Just prior to the cancellation of the program, subsidized U.S. shipyards were responsible for constructing 77 commercial ships annually. All of which were of 1,000 gross tons or above and pledged by the company to take part in international trade under a U.S. flag. Though following its cancellation, this number dropped to just 11 new vessels.

They weren’t building 77 ships per year. Not even close: Subsidies and Misplaced Shipbuilding Nostalgia | Cato at Liberty Blog

During these sealift operations, the crews of 13 foreign-flagged vessels outright refused to go into an active war zone in order to deliver military cargo.

Not outright refused. Hesitated or refused (admittedly a small point). See page 136: https://www.jcs.mil/Portals/36/Documents/History/Monographs/Transcom.pdf

The U.S. maritime industry of today employs over 260,000 Americans and provides nearly $29 billion in wages each year.

I’m skeptical of these figures. Note the domestic maritime industry only takes credit for ~95,000 direct jobs. See last paragraph on pg. 235: SCA SEQUESTRATION SURVEY_ RESULTS.pdf - Google Drive

Unless you’re including longshoremen or something, I don’t see how you can get to 260,000.

1 Like

This is great! I appreciate you taking the time to read and respond to it, thank you. This is exactly what I was hoping for.

I am still learning about the realities of the industry as I begin working government contracts and continue to read publications and etc in my own time. So what you posted is awesome.

  1. When I mentioned that prior to the cancellation of the vessel subsidy program in 1981, the U.S. shipbuilding industry was producing 77 vessels above 1,000 gross tonnes, I was using a figure from a paper I got from the Homeland Security Digital Library (Homeland Security Digital Library: https://www.hsdl.org/?view&did=1759, page 15-3)

“Between 1987 and 1993, the industry sold only eight commercial ships over 1,000 gross tons, compared to 77 ships annually in 1975.”

The “prior” I meant was 1975, as that was a year I had multiple sources attesting to the rate of ship construction being so high.

When I review the MARAD report for 1975, I notice in Chapter 1, ‘Shipbuilding’, in paragraph 5 that:

“As of June 30th 1975, there were 83 deep-draft merchant ships, with a total deadweight of more than 8 million tons, on U.S. shipyard orderbooks , compared to 96 vessels a year earlier.”

But, under ‘Ship Deliveries’ it states that:

“Twenty-five new vessels, aggregating 1.2 million dwt, were delivered by American shipyards during fiscal year 1975”

I think there was a disconnect between the report I used in my paper as evidence and the MARAD report between the number of vessels ordered and those actually delivered during that year. I agree that the difference between ordered and delivered is substantial and I was incorrect (thank you!), MARAD also details the number of vessel deliveries supported by the subsidy program, for example in 1975 that was 12. I think my point that the significance of the vessel subsidy program was still, well, significant, is correct. 12 subsidized vessels out of a total of 25 delivered that year is still a large portion of shipyard production and I still believe that if the same subsidy program were still in use today (yes, the government budgeting is a mess and tackling the funding for such a program would be difficult/impossible without adding to national debt even further) that we would see more U.S. flagged vessels internationally and maybe even other foreign carriers basing part of their fleet in the U.S. Like what Maersk does with Maersk Line, Limited in the U.S. But this is harder to argue about because it drifts towards speculation. I accept that.

  1. I agree, hesitated or refused would have been a better way to phrase that. I think that between MSC and the vessels under the Maritime Security program not being able to support those military operations in their entirety without having to rely on foreign vessel involvement is still disappointing to see, and that we have to rely on them at all to carry out U.S. operations overseas is a problem with TRANSCOM’s strategic sealift program in its entirety.I think that the U.S. needs to be completly self sufficient when it comes to military logistics operations, either through MSC or privately owned U.S. flagged vessels. We shouldn’t assume we’d have the luxury of being able to contract with foreign vessels during future operations. And even today, with so many of MSC’s logistics vessels being transferred from FOS to ROS-5, and those in ROS moving to the reserve fleet and slated to be laid up, without making sure that that loss of sealift capability is recovered through new construction doesn’t exactly go towards fixing the problem that our involvement in the Middle East proved exist.

  2. I took those figures from a statement by the Chairman of the Subcommittee on Coast Guard and Maritime Transportation, Duncan Hunter, in 2014, I can’t find the actual minute report I used anymore, but the article by the Maritime Executive (The State of the U.S. Merchant Marine) has the beginning of that statement where he states, “ The U.S. maritime industry currently employs more than 260,000 Americans, providing nearly $29 billion in annual wages. ”. I assume that he is including longshoremen and probably other support staff beyond those directly employed onboard U.S. maritime vessels, but it is never states exactly who is included in that figure. I do believe that SCA is correct that only ~95,000 are directly employed.

.
Do you have data to show the construction figures for US flagged vessels constructed minus those constructed for MSC or other logistic vessels for the US gov? In other words USA flagged and constructed vessels for commercial use in international trade? Thanks

It’s zero. Only US-built commercial ships are for Jones Act trades. And that’s maybe 2-3 per year.

Good information. Do you have the data for the size of these vessels and their Jones Act routes? It would be interesting to know where the Jones Act vessels are mostly needed.

JA fleet is something like 56/57 tankers, ~30 containerships/ConRos/RoRos, and a handful of general cargo ships (mostly used to transport seafood from Dutch Harbor to Seattle I think). To see where the tankers are used see page 6 of this report: https://www.americanshippingco.com/wp-content/uploads/sites/2/2019/11/Q3-2019-AMSC-presentation-final.pdf Basically they operate where pipelines don’t exist (e.g. Florida or Alaska to USWC) or have capacity constraints.

Containerships and RoRos are mostly used in the domestic offshore trades: Alaska, Hawaii, Guam, and Puerto Rico. And Matson uses some on their trans-Pacific route that also stops in Okinawa (military cargo) and China. Size of the vessels is typically 2,500-3000 TEUs I think. Largest JA ship is 3600 TEUs. Tankers are mostly MR size along with several larger ones (Aframax I think) that transport AK crude.

That figure is wayyyyy off. Maybe if you’re talking vessels over a certain tonnage. However if we’re considering all commercial vessels for the Jones act trade, shipyards are active, though not as active or profitable as they need to be.

Josh, glad you found my feedback useful. I disagree, however, with this part. Continued CDS would assure more US-built ships, but I see no reason to think it would produce a larger US-flagged international fleet. Right now those ships are 100% foreign-built, so offering subsidized US-built ships that would cost the same as one built abroad does nothing to boost the attractiveness of flagging US. The only reason to flag US is to take advantage of government-impelled cargo and MSP subsidies. The size of those subsidies and cargo determines the size of the international fleet. Otherwise flagging US just brings you higher crewing costs, repair expenses, legal liability, etc.

2 Likes

I think they meant for Jones Act qualified vessels taking part in international trade, I’d have to poke around a bit for an exact number, but it is definitely tiny. Jones Act qualified ships taking part in U.S. waterborne trade are definitely the vast majority, since the only way around cabotage law is through direct waivers. That number is probably easily in the thousands since it includes tugs, other smaller feeder ships and just about every registered coastal and intercoastal vessel.

The figure is accurate for commercial oceangoing ships over 1,000 GT. If you want to talk about all commercial vessels then you’re probably looking at a few hundred river barges, ~100 tug/towboats, a dozen OSVs, a few large barges, and ~40 ferries/passenger vessels. See page 11 here: https://www.maritime.dot.gov/sites/marad.dot.gov/files/2021-06/Economic%20Contributions%20of%20U.S.%20Shipbuilding%20and%20Repairing%20Industry.pdf

I’m talking about JA-compliant oceangoing ships over 1,000 GT. Pretty sure if you run the numbers that over the past 20 years production has averaged like 3.2 ships per year. But that number is set to drop this decade with nothing on the orderbook outside of the two boxships ordered by Pasha Hawaii that were supposed to be delivered last year.

Thanks, though a bit sad the information is useful. The work you put into getting this data is greatly appreciated.
It shows that the USA is not involved in international trade shipping any longer, we all know that of course .

1 Like

Only international shipping I can think of is Matson’s CLX/CLX+ service. But I’m not sure that route works without the government-impelled cargo they get for bases on Okinawa and Guam. And the 84-ship US-flagged foreign-trading fleet is basically 100% government-impelled cargo as I understand it.

What if the U.S. were to try and transition to a hybrid registry system? Not that it would be possible with the pressure from U.S. maritime unions… Or maybe even a tiered cabotage system kinda like what Australia uses, where cargo preference and etc. would be awarded by how closely a vessel conforms to the original Jones Act requirements?
Do you think any of that would promote more competition among U.S. carriers and add to the fleet? Vessels could still choose to stick strictly with the JA requirements and deal with exclusively domestic trade while other vessels could flag U.S. and trade internationally, but be closer in requirements of an open registry. That would bring costs down for international carriers significantly and promote a larger fleet for the state to generate some more income with these registrations, while still maintaining a JA fleet for domestic trade. That money could be put back into the industry by then helping to add to MSC’s sealift capability, maintaining a strategic sealift reserve for national emergencies and foreign intervention.
U.S. mariners would still have exclusive access to domestic trading vessels, MSC and MSC OpCo vessels, and the loss of the few JA international vessels might be made up by any additions to MSC’s fleet.

Correct me if I am wrong but if the ships referenced are the ones enrolled in the MSP. They may carry government cargo but they do trade actively in international trade commercially. Most are on scheduled liner services.

2 Likes

That’s a good point about offering liner service. I’m basing my statement on this:

“It appears preference cargo now accounts for almost all of the revenues of the U.S.-flag
international fleet.” https://sgp.fas.org/crs/misc/R44254.pdf

I believe @Kennebec_Captain and @DamnYankee sailed or are currently captains on ships enrolled in the MSP. If they cared to, they could offer some experience on the runs they serviced or cargo carried. I would venture to say it was not all military or government-impelled.

Josh,

I am happy to review your thesis and send you some comments. I am a former merchant mariner and my masters thesis was on the role of the merchant marine during the Vietnam War. My doctoral dissertation was the role of the merchant marine in national defense from 1898 to 2003.

I teach at Campbell University courses in Maritime History and Maritime Security and I do a graduate level class in Maritime Industry Policy for the US Merchant Marine Academy. I am a contributor to gCaptain and I have a YouTube channel What’s Going on With Shipping.

My email is mercoglianos@campbell.edu. Happy to help out and I love your topic.

Sal Mercogliano

2 Likes