Saturday, September 29, 2012


 More on why we called for the resignation of Senator John McCain. His understanding of the Jones Act Fleets is based on 1930s facts. This is dangerous.

File:Tug & barges on Gulf Intracoastal Waterway.png
Tug and two tank barges entering locks separating two deep inland waterways

Two days ago, with great reluctance we urged Senator John McCain to retire from the U.S.Senate. Since we doubt that he will do, that we also asked the people of Arizona to recall him as a hazard to our maritime security and our economic health. His offense(s)? Senator McCain has repeatedly attacked the "Jones Act".  The day before we called for his removal from office he called the national security contribution of the Jones Act fleet as "laughable". Like many of the critics of the Jones Act Senator McCain's image of the fleet that evolved out this set of legislation is stuck somewhere in the 1930s. This reprint of an earlier report will give you a good over view of the modern contributions to our economy by the various industries that are protected by and evolved under the influence of the Jones Act". We are well aware that Senator McCain served his country well in uniform and endured much as a POW and for that we thank him. We value that he is an owner of an honorable military discharge and that experience is rarer than hens teeth in this Congress and something to be valued. But we are also students of history. We know what kind of condition China was in on the eve of the Boxer Rebellion . The Chinese of the time had ignored their cabotage (coast wise and inland maritime trades) and the result was that at first foreign merchant vessels filled the need. They were followed by foreign naval forces and overt foreign rule. If we were to actually follow Senator McCain's lead on the only protection our own cabotage has , the various laws that are referred to as "the Jones Act" we would experience exactly what China suffered through on the eve of the Boxer Rebellion. Over time we will try to provide you with enough information to under stand our outright alarm over the attitude of senator McCain.  The report below will give you a sound picture of some of the contributions of some of the segments of the Jones Act Fleets.

Report No. 1 (completed 3/09/2012)

The "Jones Act" is a term of legal art that is a generic expression for an entire series of statutes that regulate the maritime trade between the states of the United States and certain marine transportation activities on waters under U.S. jurisdiction. "Jones" simply perpetrates the name of the sponsor of section 27 of the Merchant Marine Act of 1920 (P.L. 66-261) which dealt directly with "cabotage" trade between and among U.S. Ports (Cabotage: Fr. origin "between the Capes" or "Coastwise). Generally the effect of the various combinations of statutes is that cargo and passengers carried between the states, within a state, or to and from our offshore Exclusive Economic Zone (EEC) which is generally coincidental with our Outer Continental Shelf (OCS), are to be carried on vessels built in America and crewed by American citizens or permanent residents. The real purpose of Cabotage law is national security. Any nation that allows foreign shipping to carry its cabotage trade is doomed to serious loss of sovereignty. Perhaps the worse case example is China on the eve of the Boxer Rebellion.

We (American Admiralty Books) make no bones about being in favor of serious cabotage protection. We understand what the critics of the Act say about the increased costs of domestic waterborne transportation when you ship American. But those who are critical do not count the costs of increased security requirements were we to allow wide spread use of foreign flag vessels and crews in our domestic trades. If you would like to see and feel the results of what a lack of cabotage enforcement can do to a nation we won't ask you to read some lengthy and dry economic tome. Just rent the video of the old Steve McQueen movie The Sand Pebbles. Take a good look at the misery of the Chinese people so ably depicted there and how the American and British sailors in their domestic ports, some of which were as much as 900 miles inland on their river systems acted as lords of the manor. 

The Chinese started by letting foreign flag merchant ships mostly British and American carry their domestic trade between their own ports. A few instances of river piracy and other crimes against shipping later and these same nations claimed and exercised the right to "protect their merchant marines" and so sent in their navy gun boats. Soon China was controlled like a virtual vassal by foreign shipping interests.

 In the united States we need approximately 77 strategic materials to support our economy. Of these 66 have to be imported by sea. When international shipping became too competitive with U.S. flag international shipping due to low labor coast after World War II we basically gave up after a brief period when we had the wisdom to subsidize our international carriers, our traditional, "merchant marine." Then we threw in the towel and let our post WW II fleet of nearly 5, 000 traditional merchant ships shrink down to about 200 today. Then came the events of 9/11 and we are spending far more on port security and maritime intelligence to police this foreign armada that carries goods to and from America. But thanks to "Jones Act" prohibitions the coal and grain of the Midwest still travels down the Mississippi on American barges pushed by American towboats, under the skillful hands of American pilots. Heating oil and gasoline refined in New Orleans and Baton Rouge moves up the Mississippi to the Midwestern distribution points by American tow boat and tank barge combinations. Refined oil products still move by sea between Houston and New Orleans to Baltimore by American flag coastwise tankers and tank barges. Our offshore oil industry is mostly still serviced by American supply vessels though this is under daily attack and inroads against the Jones Act protections are being made.

 We still operate our own ferries and tugs. The fact is that America has always, since colonial times carried more commerce between the states by water than it ships and receives internationally by water.  Our "Blue Water" or internationally trading merchant ship fleet has always waxed and waned in size based on international competition but when push came to shove and we had to sea lift entire armies into hostile zones only American merchant seamen on American ships our "Merchant Marine," by law a naval auxiliary, answered the call for war zone transport. How did we go from a tiny pre war international merchant marine to the massive sealift fleets of the World Wars and the rather expanded fleets of Korea and Vietnam almost over night given the the greatly reduced ship building capacity of the United States in those time frames and the time it takes to train skilled seamen at all levels? 

The answer is that we have always had plenty of reserve ship building and manning capacity in our Jones Act fleets and yards. Our "cabotage" trades are not the after thought and rear guard of the American Merchant Marine that most politicians who don't know port from starboard or bow from stern think. The Jones Act fleets and yards are the deep protected and vital HEART OF THE AMERICAN MERCHANT MARINE it has been from that heart, that core capacity that our Merchant Marine has always risen up to the combat support challenge. It is because of the conduct of our extensive cabotage trades by American flag vessels manned by American Merchant Mariners that our interior waters beyond the international docks require relatively little security attention.

Unfortunately, as previously reported here in these pages the Jones Act Fleets and yards are under constant attack and in danger of dying a death of a thousand shallow cuts. There are congressmen who daily try to protect our cabotage legal system, and Congressmen hell bent on destroying it, some in a mistaken devotion to "fair trade and openness, and lower costs of shipping" who simply don't see or understand the national security implications. Other Congressmen are attacking the Jones Act protections in direct response to the lobby efforts of well heeled foreign interests.

 Whether from treason or tragic ignorance the protections are eroding. One of the chief sources of erosion is an institutional attitude in the Coast Guard, Customs and Border protection service, and even the Department of Homeland Security and its Inspector General's office that Jones Act enforcement is a "labor issue." Yes, American merchant mariner and ship building jobs are protected by the Jones act, indeed in addition to national security, or more correctly because of it, that protection is one of the stated purposes of the Act. How and why the agencies and department charged with enforcement of these laws came to engage in selective enforcement and ease of exception making, so pleasing to foreign ship owners and American owners of foreign registered shipping, is lost to us. We only know that the pleadings of such maritime labor organizations as the National Mariner's Association (NMA) for real Jones Act enforcement in particular instances have literally been turned away at the agency and department level with the retort "that's a labor issue we can't get involved".

 Well the protection of American seamen's jobs and American yards and vessels were in part the actual object of the law. Who is an agency official to deny protection to the protected class in a statute? Treason or tragically flawed reasoning the results have been the same slowly eroding cabotage protections. It the worst happens and the proponents of "free trade" get their way, a United States that resembles pre- Boxer rebellion China is the inevitable result. Thus we stand with the American seaman on this issue and don't apologize for it.

 Since we view the Jones Act fleets and yards as vital to national security and economic prosperity we have always tracked the health of these industries through monthly review of the relevant trade journals. Today we launch our first report on the economic health of the Jones Act fleets and yards. We hope to make this a regular monthly feature but if things are very slow changing between monthly reviews we may drop back to quarterly periodically. We sincerely urge all of our readers even if you are a recreational boater or diver to follow this news which is never reported in the national general media. If you visit our "Merchant Marine Interest section you will notice that our first, and first "Recommended" selection is The Way of the Ship, a historical perspective on our domestic fleets as the heart of our Merchant Marine and commercial sea power potential. We won't be pulling that title from its pole position for years. Its truth endures.

The good news is that after a slump that reflected the slump in the general economy the Jones Act fleets and yards seem to be emerging into something of a visible growth pattern We are not seeing a rapid return to the glory days of the 1970s but we are seeing a decided up tick from the depressed days of the last several years. WORKBOAT MAGAZINE reported in its March issue Work Boat Construction Survey that 564 commercial work vessels are under construction in our "second tier yards" an increase of 30 hulls from the same time last year. Apparently order books and back logs are growing and editor David Krapf reports that the second tier yard personnel that he visited appeared "bullish on the shipyard business."

 The offshore supply vessel (OSV) industry contracts on "day rates" the cost per day to charter (contract) an OSV for service in logistic support of an offshore rig. OSV day rates were down in January, the last month for which there is strong data but utilization rates (the percentage of the OSV fleet under active paying charter) appear to be holding near steady in some sectors or rising by about 1% in others. The prognosis is that rising, even slowly rising utility rates lead to improved day rates and that leads to improved profitability for the vessel owners and operators. For large supply vessel s, those over 200 feet in length, the day rate has already risen while the day rate for smaller supply vessels is down slightly with a utilization rate of only 69% of the fleet at last report. Gulf Coastal drilling activity is on the rise so the outlook of the domestic OSV industry is guardedly optimistic.

 There are reports of new building and vessel commissioning in the day excursion vessel passenger trade. One new overnight vessel for river service has been launched, the first good news since security concerns in the wake of 9/11 idled the Delta Queen fleet of overnight passenger vessels.  Inland and coastal day passenger operating firms are predicting a good year as we approach their peak season. WORKBOAT MAGAZINE's"WorkBoat Composite Index"  which tracks a variety of publicly traded stocks of vessel operating, ship building, and service businesses opened 2012 with a big gain of 182 points after losing 240 points in 2011 or 16%. The WorkBoat Composite index shows a strong start for 2012 though it comes after a losing year. The outlook is best described as guardedly optimistic for the coming year. The U.S. towboat and barge industry has lost ground in the coal carriage trade as U.S. exports have dropped and domestic demand slackened in response to environmental laws. 

Heating oil carriage this winter was off due to mild weather, but grain carriage is expected to take up considerable slack and the inland towing industry appears to  have started the first quarter of fiscal 2012 as the rest of the Jones Act fleet and yards in a guardedly optimistic cultural mindset. Check with us next months to see how that mind set holds up at the start of the second quarter.

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