Rep. Ed Case’s bills take aim at reforming Jones Act

Star-Advertiser

U.S. Rep. Ed Case of Hawaii said today he has reintroduced three bills in Congress to reform the Jones Act, which many critics say is responsible for artificially inflating the cost of shipping goods to the state.

“These three bills are meant to end a century of monopolistic closed market domestic cargo shipping to and from my isolated home state of Hawai‘i as well as the other island and separated jurisdictions of our country that lie outside the continental United States,” Case said. “The bills aim directly at one of the key drivers of our astronomically high cost of living in Hawai‘i and other similarly located jurisdictions.”

Case said because the Jones Act severely limits the supply of shipping to and from Hawaii’s communities, it has allowed a few companies to control the state’s lifeline to the outside world and, as a result, “command shipping rates way higher than the rest of the world.”

The 1920 Jones Act requires all cargo moved between two U.S. ports to be carried by vessels that are built in the country, owned by a U.S. entity and manned by an American crew.

Zim files papers to start 2021 with New York shipping IPO

TradeWinds
By Eric Martin –

Fundraiser could seek $100m as Israeli operator seeks access to public equity markets.

Zim Integrated Shipping Services has filed papers to launch an initial public offering in New York, in a bid to make good on long mooted plans to go public.

The Israeli containership operator aims to list its shares on the New York Stock Exchange, where it will trade under ticker symbol ZIM, in a move that, if successful, would break a long absence of shipping IPOs on US capital markets.

The Haifa-based company did not give a timing for the IPO but pencilled in the aggregate value for the potential share sale at $100m.

Zim said that the main goal of the effort is to add to working capital and to create a public market for its shares, which would allow it to access equity markets in the future.

“We intend to use the net proceeds from this offering to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes,” the outfit said in a draft prospectus.

The effort is backed by banks Citigroup, Goldman Sachs and Barclays as global coordinators, with Jefferies and Clarksons Platou Securities on board as joint bookrunners for the offering, according to the document.

A listing in New York would make Zim the second container liner operator listed on US stock markets, alongside Hawaii’s Matson.

International profile

Unlike Matson, which owns its vessels and is mostly focused on protected US trades, Zim brings a mostly chartered-in fleet and a global profile. It is ranked as the 10th largest operator by aggregate fleet capacity.

Its unique profile relative to other US-listed shipping stocks could work to advantage.

“The market loves logistics and hates the shippers [shipping companies], most of which erroneously get lumped into the same bucket as tankers and correlate with energy,” said J Mintzmyer, lead researcher at Value Investor’s Edge.

“I think Zim has a good chance to help break this cycle by clearly pitching the global logistics business, plus the timing is perfect as we’re in the middle of the biggest containership boom in a decade.”

Eli Glickman-led Zim, which recorded a record profit in the third quarter amid booming box rates, had made no secret of its intentions to go public. The company was reportedly eyeing London and New York as potential locations for a listing, apparently choosing latter.

“We are a global, asset-light container liner shipping company with leadership positions in niche markets where we believe we have distinct competitive advantages that allow us to maximize our market position and profitability,” Zim said in the draft prospectus filed with the US Securities and exchange commission.

The company owns just one vessel, with its remaining 69 ships brought in through charter deals, the IPO papers show.

Zim operates 66 weekly lines serving 310 ports in 80 countries. The company, which carried 2.82m teu in cargo last year, has an aggregate fleet capacity of 359,000 teu.

The company’s largest shareholder is Idan Ofer’s Kenon Holdings, which holds a 32% slice. Deutsche Bank owns 16.7% of Zim’s shares, while Greek containership owner Danaos holds 10.2%.

Congress Overrides Trump’s Veto, Enacting Maritime Priorities in NDAA

MARITIME EXECUTIVE

The U.S. Senate voted Friday to override President Donald Trump’s veto of the National Defense Authorization Act (NDAA) for FY2021, joining the House to continue an unbroken 60-year tradition of passing an annual military policy bill. In addition to servicemember pay, weapons procurement and other defense-related measures, the package contains countless legislative amendments on parallel matters – including high-priority questions for the American maritime industry, like financial relief for U.S. seaports, new rules for passenger vessel safety, and new language that applies federal offshore energy regulations (and the Jones Act) to offshore wind farms.

The NDAA contains language that ensures that offshore wind farms count as U.S. points for purposes of federal law, just like offshore oil and gas facilities. This provides certainty that foreign-flag vessels cannot be used to carry goods between U.S. ports and wind projects on the U.S. outer continental shelf.

According to the American Maritime Partnership, the NDAA also clarifies the terms and procedures that apply when an emergency administrative Jones Act waiver can be issued. In particular, a national defense waiver must be tied to a legitimate national defense need; non-defense waivers are now time-limited; and all waivers are subject to public reporting requirements whenever they are used.

“As we end this most challenging year, we are encouraged by Congress’s recognition of the contributions American Maritime makes to our security and to a healthy and resilient American economy,” said Michael Roberts, President of the American Maritime Partnership. “We are also grateful for the tangible progress made in this bill to reinforce the requirement that those who do work in our home waters must hire American workers and obey American laws. We look forward to building on that progress in the next Congress.”

The now-enacted law also creates a new Maritime Transportation System Emergency Relief Program (MTSERP) to provide funding to ports after natural disasters and emergencies, including the COVID-19 pandemic. It also raises the authorized funding level for the Port Infrastructure Development Program (PIDP) to $750 million annually, up from $500 million.

The NDAA also requires the Government Accountability Office to conduct an audit of federal agencies’ compliance with long-ignored cargo preference laws, which require government-owned and government-financed cargoes to ship aboard U.S.-flagged vessels. The audit will examine the degree of agency staff and contractor compliance, along with the past levels of enforcement effort by the Maritime Administration.

The NDAA also provides coastwise trade endorsements for three specific vessels that might not otherwise qualify. These include the St. Kitts-flagged cruise ship Safari Voyager; the formerly Russian-flagged expedition yacht Pacific Provider; and the Canadian-built tall ship Oliver Hazard Perry.

Creaking Jones Act Ships Turn to Chinese Shipyards for Maintenance Needs

Cato Institute
By Colin Grabow

Jones Act supporters, including the owners of ships operating in the domestic fleet, often claim the law is necessary to thwart China’s maritime ambitions. But it’s unclear how many of them actually believe such rhetoric. Despite professed concerns about China and the need to avoid foreign reliance for U.S. maritime needs, Jones Act shipping companies regularly make use of shipyards outside the United States for repairs, maintenance, and upgrades of their vessels. Including facilities in China.

No operator of Jones Act ships is a more enthusiastic patron of Chinese dry docks than shipping firm Matson, whose vessels have paid more than 50 visits to the state‐​owned COSCO (China Ocean and Shipping Company) shipyard in Nantong for needed work. Indeed, Matson has been such a loyal customer that COSCO hosted senior executives from the U.S. firm last year to celebrate the two companies’ 20‐​year relationship.

And Matson isn’t alone. A vessel owned by Jones Act shipping firm Pasha Hawaii, the Horizon Spirit, recently departed Nantong after nearly 50 days in a local shipyard, suggesting its stay was for more than a mere paint job.

According to maritime attorney Wayne Parker, who served for nearly eight years as in‐​house counsel to Matson and now‐​defunct Horizon Lines, “I never heard of any of our Jones Act‐​qualified container vessels being dry‐​docked, surveyed, or undergoing routine maintenance in U.S. shipyards. This was always done in foreign, usually mainland Chinese, shipyards.”

Although there is nothing objectionable about this from a free trade perspective, the irony and hypocrisy are inescapable. Both Matson and Pasha Hawaii have board of directors positions with the American Maritime Partnership, a leading Jones Act lobbying and advocacy group that frequently asserts the 100‐​year‐​old law serves as a bulwark against China. Yet these same Jones Act companies regularly send ships to the country to save on repair and maintenance costs.

Incredibly, the Jones Act actually helps keep Chinese repair yards humming. While ships plying the world’s oceans are typically scrapped at 15–20 years of age, Jones Act vessels—thanks to a U.S.-build requirement that dramatically raises the cost of buying new ships—are often kept in service until age 40 or beyond. An old fleet means more maintenance—and more business for Chinese shipyards.

Let’s review what’s going on here. By massively increasing vessel replacement costs through its U.S.-build mandate, the Jones Act promotes the use of older ships requiring more maintenance. Some of this maintenance is then hypocritically performed in Chinese state‐​owned shipyards, a portion of the cost savings from which is then spent on lobbying and advocacy work urging the Jones Act’s retention as a vital tool against China.

You can’t make this up.

Beyond the rankling hypocrisy, this use of Chinese shipyards further illustrates the gaping chasm between the Jones Act’s intended results and reality. The Jones Act has not fostered a vibrant domestic maritime industry or freed the United States from foreign reliance to meet its maritime needs. What it has produced is economic harm, a domestic fleet insufficient to meet U.S. national security needs, and shipyards so uncompetitive that vessels are dispatched to the far side of the Pacific Ocean for repair and maintenance.

This is a case study in the failure of protectionism, and one that should no longer be tolerated.

The Continuing Advance Of Automated and Autonomous Vessels

MONDAQ
By Lewis Brisbois –

In October 2019, San Francisco Marine & Energy Partner David Russo spoke at the BiLog Conference in La Spezia, Italy about the advent of autonomous and highly automated vessels. Beyond the numerous legal and technical issues raised by the advancement of this technology (discussed in this article), it was noted at the conference that this technology was accelerating. It was expected then that an extended Atlantic voyage would happen in 2020. That has now occurred.

In August 2020, the U.K. company Sea-Kit successfully operated its autonomous 12-meter vessel on a 22-day voyage mapping the ocean floor in the North Atlantic. The vessel was operated from the company’s shoreside office. This followed an earlier test crossing of the North Sea.

NYK Line has been on the forefront of this technology, having operated a 70,000-ton autonomous ship for a three-day voyage in September 2019. And earlier this year, it tested a manned but remote-operated tugboat in Tokyo Bay.

Perhaps the best sign of the significance of this developing technology was the U.S. Coast Guard’s recent action on this subject. In August 2020, the Coast Guard issued a public Request for Information to address the numerous issues raised by this technology. The Coast Guard solicited comment on matters including (1) the identification of current statutory or regulatory obstacles to the development and implementation of this technology, (2) recommendations for regulatory changes to advance the technology, (3) the benefits, costs, and risks of the technology, including impacts on the maritime workforce, safety, the environment, and cybersecurity, (4) necessary changes in training, and (5) infrastructure needs.

A variety of entities (e.g., IMO, BIMCO, American Bureau of Shipping) are already developing standards in this arena. How the Coast Guard will regulate this area remains to be seen in the years ahead. Interestingly, the Coast Guard was testing its own unmanned vessel for coastal waters surveillance in Hawaii at the time of this writing.

So, what are some of the legal implications of autonomous vessels? While we understand the concept of an unseaworthy ship with current technology, how will that change with smart ships and autonomous ships? Does every software glitch cause the vessel to be unseaworthy? What new standards will apply to define an unseaworthy ship? With the coming of the autonomous ship, we have to re-ask the questions, “What is the vessel owner’s duty of care? What will it mean to provide a reasonably safe ship when its operation is controlled by computer programs? Who will be considered the captain of the vessel? Will there be persons defined as seamen anymore, when those operating the ship are not exposed to the perils of the sea?” These are some of the questions that the courts and lawyers will have to address in the years ahead.

Video: Drone Survey of ONE Apus Container Collapse

Maritime Executive

The video and images can be viewed on Webster’s website.

The cargo claims consultancy WK Webster released the first images of its initial damage survey of the container ship ONE Apus. The company’s inspectors were in Kobe, Japan for the arrival of the vessel and they also conducted a remote drone survey as it transited Osaka Bay towards Kobe Port.

The images are being used by Webster and its clients to understand the scope of the incident while excerpts have been posted on the company’s website for the public to view. The images were taken by two drones using ultra-high definition camera technology as part of the company’s new drone survey product. The images very clearly show the scale and detail of the devastation on board and are being analyzed in conjunction with experts appointed by Webster.

The process of removing containers from the ONE Apus began on December 11 after permission was granted by the Japanese Coast Guard. The ship’s owners, Chidori Ship Holding, and managers, NYK Shipmanagement, which had operated the vessel as part of the ONE Express Network estimated that it would take “over a month” to remove the dislodged containers using a schedule formulated by stowage planners. “Once unloaded, each will be assessed, and when the discharge of cargo is complete, there will be a full assessment of damage to the vessel and subsequent repairs,” they said in a prepared statement.

Webster’s team of surveyors in Japan, however, reports that the process started slowly. Only five containers were removed from the vessel last week and work did not proceed over the weekend. Webster also termed the owner’s assessment of the timeline for the process as “optimistic.”

From its team’s initial visual assessment and the analysis of the video and still images, Webster reports that it can be seen that there are 22 bays on deck of which 16 have collapsed to both port and starboard, leaving only six intact or partially intact. “With 20 rows of containers per bay and with stack heights of between six and eight containers, we anticipate that approximately 2,250 containers have been lost or damaged,” they reported. They also noted that the vast majority appear to be 40 foot units and therefore equivalent to approximately 4,500 TEU.

“The vessel owners/operators are not currently prepared to release the vessel’s stowage/bay plans,” they said in their update making it more challenging for customers to determine the status of their shipments. Webster said it was seeking further information regarding the fate of individual containers on a case-by-case basis, but noted that “It is likely that some of the upper stowed containers were either empty or holding lighter weight goods.”

While the images clearly show the extent of the toppled stacks, thousands of containers remain on deck and will have to be examined individually to determine the full extent of any internal damage. The vessel had a capacity of 14,000 TEUs with the managers saying that a total of 1,816 containers were lost over the side when the vessel encountered heavy weather on November 30 in the Pacific at a position about 1,600 nautical miles northwest of Hawaii.

Webster and its experts are continuing to analyze the evidence with the company preliminarily saying the total loss could exceed $200 million, and it could be greater than the value of the vessel which was built in 2019.

Among the issues Webster will be considering in determining the cause of the incident are the weather conditions encountered and what was done by the vessel to mitigate the impact of the weather. They will also be looking at the lashing and securing equipment used and its adequacy, the stowage condition of the vessel on departure from Yantian, China, and the voyage planning, as well as other issues.

The owners and managers of the ONE Apus have also said that a thorough investigation is being conducted into the incident and, of course, Japan as the vessel’s flag state, and other maritime authorities are also investigating. Due to the size and complexity of the loss, it will likely take some time before a report will be available and what steps will be taken to reduce future risks.

5 Stocks With Recent Price Strength to Tap Market Rally

NASDAQ
By Nalak Das –

The U.S. stock market has performed fairly well year to date despite the coronavirus onslaught over the last few months. Wall Street has performed fairly well so far in 2020 after recovering impressively from the pandemic-led bear market. At present, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory year to date.

The Dow slipped to bear territory on Mar 11 and was joined by the S&P 500 and the Nasdaq Composite a day later. The downtrend continued till Mar 23 when all the three major stock indexes slumped. Wall Street has witnessed a V-shaped recovery since Mar 23 barring fluctuations in September and October, which helped it to exit the coronavirus-induced short bear market and form a new bull market.

On Dec 4, the three above-mentioned large-cap centric indexes along with the mid-cap specific S&P 400 and small-cap centric Russell 2000 and S&P 600 indexes recorded all-time highs. This impressive turnaround was predominantly driven by the astonishing growth of large-cap technology stocks together with the cyclical reopening stocks on COVID-19 vaccine hopes.

At this stage, wouldn’t it be a safer strategy to look for stocks that are winners and have the potential to gain further?

Sounds Good? Here’s How to Execute It:

One should primarily target stocks that have freshly been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria have narrowed down the search from over 7,700 stocks to just 14.

Here we present five out of those 14 stocks:

Aviat Networks Inc. AVNW designs, manufactures and sells an array of wireless networking products, solutions, and services in North America, Africa, the Middle East, Europe, Russia, Latin America, and the Asia Pacific.

The stock price has soared 61% in the past four weeks. The company has expected earnings growth of 95.4% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 18% over the last 30 days.

Merchants Bancorp MBIN operates as a diversified bank holding company in the United States. It operates through the Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments.

The stock price has jumped 27.1% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 33% over the last 60 days.

Honda Motor Co. Ltd. HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Life creation and Other Businesses.

The stock price has climbed 14.5% in the past four weeks. The company has expected earnings growth of 97.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 25.3% over the last 30 days.

APi Group Corp. APG provides commercial life safety solutions and industrial specialty services primarily in the United States. It operates through three segments: Safety Services, Specialty Services, and Industrial Services.

The stock price has surged 11.9% in the past four weeks. The company has expected earnings growth of 26.3% for next year. The Zacks Consensus Estimate for the current year has improved by 11.8% over the last 30 days.

Matson Inc. MATX provides ocean transportation and logistics services. Its Ocean Transportation segment offers ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska, and Guam, as well as to other island economies in Micronesia.

The stock price has gained 4.7% in the past four weeks. The company has expected earnings growth of 94.8% for the current year. The Zacks Consensus Estimate for the current year has improved 24% over the last 30 days.

Congestion, Slowdown at Ports Cause Growing Concern

Transport Topics
by Dan Ronan –

Many of the nation’s ports, especially on the West Coast, are reporting long delays to unload cargo ships, and warehouses near those facilities are filled as the supply chains are overloaded with goods.

That is the result of retailers seeing a surge in e-commerce purchases and significant changes to spending patterns of U.S. consumers and businesses.

“It’s really the perfect storm,” supply chain and logistics expert Mirko Woitzik with Resilience360 said from Cologne, Germany, in an interview with Transport Topics.

“There are so many factors that are contributing to this. There are so many different interests between the truckers, the carriers, the port operators and then put the COVID situation into this, the huge demand, and the previous huge drop in demand six months ago. It’s not probably going to be solved until the Chinese New Year, in the middle of February 2021.”

Typically, then there’s a lull in shipping as factories in Southeast Asia shut down for several weeks.

The ongoing situation is a departure from the spring, when container volumes at ports dropped dramatically as the world economy plunged into a recession because of the coronavirus.

In the most recent monthly report from the major cargo ports, most facilities reported record or near-record container volumes. The Port of Los Angeles processed 980,729 20-foot-equivalent units in October, an 18% year-over-year increase from 770,289 TEUs. It also marked the port’s best month in its history.

Some in government and the trucking industry believe the ports’ delays go deeper than just an imbalance in the supply chain and the impact of the COVID-19 pandemic.

Federal Maritime Commissioner Carl Bentzel said he supports opening a fact-finding investigation into the two Southern California ports’ ongoing congestion issues. He also said there is a growing problem at the Port Authority of New York and New Jersey.

“I believe that we have deep-seated problems that could continue for the foreseeable future, and I strongly believe we must pay immediate attention to these issues,” Bentzel wrote. “The volume surges currently overtaking the ports of Los Angeles and Long Beach, and now New York and New Jersey, shine a light on the operational vulnerabilities and reveal our supply chain weaknesses.”

Weston LaBar, CEO of Long Beach-based Harbor Trucking Association, told Transport Topics his group has asked the international ocean carriers that move millions of tons of cargo into the ports to temporarily suspend detention and demurrage fees at the ports of Los Angeles and Long Beach until the congestion issues ease.

Demurrage fees are charged when a container is still full and under the shipping line’s control and has not been cleared through customs or picked up by the consignee. Detention costs incur for using equipment, such as a chassis, beyond the given free time and typically outside of the terminal.

LaBar said the major shipping companies and shipping alliances have the ability to slow down traffic at the ports to impact the amount of fees charged to trucking companies.

“We’re just asking for a fair playing field, that when a trucker cannot pick up a container, or drop off an empty or their export booking has been canceled,” LaBar said. “They should not be the ones on the hook, paying the penalty, because the ocean carrier made a decision that benefits paying the penalty, without any remorse on how it affects the other members of the supply chain.”

Meanwhile, so-called dwell time delays are worsening.

The Pacific Merchant Shipping Association said that in October containers remained at terminals at the two Southern California ports for nearly five days, the most prolonged average period since the group began tracking data in 2016.

An official with the Port of Los Angeles told TT the delays extend to the Pacific Ocean as well. On Dec. 1, 18 ships were anchored off the Southern California coast, with nine waiting for slots at the Port of Los Angeles and nine waiting for entry into the Port of Long Beach.

Phillip Sanfield, Port of Los Angeles director of communications, told TT that usually there might be one or two ships waiting to be routed into those facilities.

“There is a several-day waiting to unload cargo, at least,” he said. “We have a little more of a backlog now because of the Thanksgiving Day holiday, and we had less staff to unload cargo.”

However, there are ways for shippers to get cargo into the West Coast facilities, but it’s costly. Many ports operate express berths, so smaller cargo ships — those carrying less than 6,000 TEUs — can reserve spots for those ships that sail direct routes.

For example, the Port of Long Beach operates what’s called the C60 terminal, where ships using direct service from Guam, Hawaii and three locations from China (Shanghai, Ningbo and Xiamen) get priority service.