Seapower/Maritime

Sea Power, Jan 2002

Carriers have responded to these pressures in several ways, including engaging in mergers and acquisitions and forming global strategic alliances. Through operational cooperation, carriers have the opportunity to reduce costs and business risks, while offering a broader range of improved customer service options. The emergence of global markets, the improved service of nonconference carriers, and the deregulatory impact of the Ocean Shipping Reform Act of 1998 are factors that have influenced global liner shipping.

Maritime Security Program

The continued existence of a privately owned U.S.-flag merchant marine is vital to the nation's military and economic security. During national emergencies, there is no completely reliable alternative to the U.S.-flag fleet of commercial ships and to the availability of trained U.S. citizen crews.

Nearly 80 percent of the military dry cargo transported during the Persian Gulf conflict was carried on U.S.-flag ships, and more than 30 percent was carried on commercial U.S.-flag ships as part of normal liner operations or under time-charter to the Department of Defense, with no disruption to commercial service. All of the U.S.-flag ships used by DOD during these sealift operations were totally crewed by U.S. citizens.

U.S. economic security also benefits from the participation of the U.S.- flag fleet in the movement of U.S. international trade. Without a U.S.-flag fleet, the United States, the largest consumer market in the world, as well as thousands of U.S. importers and exporters, would become entirely dependent on foreign entities for transportation. 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 or have close affiliations with firms in their own countries that compete with U.S. businesses.

The Maritime Security Act (MSA) of 1996 (Public Law 104-239) established the Maritime Security Program (MSP) under Title VIA, Subtitle B, of the Merchant Marine Act of 1936 (the 1936 Act). This maritime program is intended to ensure that an active U.S. merchant fleet, and the trained personnel needed to operate both active and reserve vessels, will be available to meet 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 10-year, 47ship program providing 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.

The MSP provides the DOD with "assured access" to approximately 120,000 TEUs (20-foot equivalent units) of MSP participants' ship capacity and other intermodal assets. It substantially deregulated previous operating restrictions placed on U.S. liner operators receiving direct federal support.