Special Report: Hawaii Shippers Council on issues facing maritime industry

Pacific Business News
By Brian McInnis –

Worldwide ocean cargo shipping is playing catch-up from coronavirus-related delays at various ports, especially on the West Coast of the U.S. Mainland, but so far Hawaii has been largely insulated from additional costs.

That’s per Michael Hansen, president of the Hawaii Shippers Council, who spoke to Pacific Business News last week about trends in his industry. Hansen has been in the maritime business in Honolulu in various capacities since the early 1970s. He grew up surrounded by cargo containers; his father and both grandfathers were in the maritime industry, too.

The HSC was founded in 1997 on behalf of merchant cargo interests, or shippers, who entrust their goods for transport with ocean carriers. It was formed to support the Jones Act Reform Coalition, but also as a result of runaway costs of cargo ship construction in the U.S. as compared to peer nations, Hansen said.

The imminent threats of the day have changed.

Hansen identified a three-pronged issue as the main concern in Trans-Pacific shipping in early 2021: port congestion, which means backed-up quantities of ships and containers, due in part to a coronavirus-related workforce shortage, and in part by a surge in consumer spending; a shortage of containers in places like Asia as a consequence of them not being returned; and ship capacity shortcomings as urgency mounts to get cargo moved.

San Pedro Bay, which services the important hubs of the Ports of Los Angeles and Long Beach, has been especially affected by a backlog. Information attained from the Marine Exchange of Southern California by supplychaindive.com showed 46 ships at anchor there in January, twice the count of January 2020.

Hansen said the situation was similar at another primary West Coast port, Oakland/San Francisco Bay. He noted, however, that Hawaii’s two primary carriers, Matson and Pasha Hawaii, employ a fleet of smaller ships with mostly designated docks that allow them to bypass delays felt by other carriers. Matson, the publicly traded of the two companies, declared $193.1 million in net income in 2020, as compared to $82.7 million in 2019, spurred by heavy volume of service to China during the pandemic. Meanwhile, its container volume to Hawaii was down 0.6% in 2020. What is the consequence of the port congestions and container shortages, and how long will it last?

As a result, cargo freight rates, Eastbound and Trans-Pacific, have gone from around $2,000-$2,500 up to $4,500 for a 40-foot dry standard box. And there’s major container operators now saying, everyone is anticipating these conditions are going to last through midyear this year — at least. The big question is, will it continue long enough to actually [last into] the annual peak period prior to Christmas? In August, you start seeing cargo volumes increase for the Christmas season.

If that happens, the [carrier] companies will make lots of money, and freight rates will remain high. From what I can gather, freight rates on the Jones Act [domestic] side haven’t gone up that much, but certainly freight rates on the international side have risen substantially. How is this being felt in Hawaii?

Those freight rate increases on Trans-Pacific routes will be passed on to customers on the Mainland, there’s no doubt about that. But in the domestic Hawaii trade, we have not yet seen those kinds of major price increases in the freight rates.

The Jones Act freight rates are a whole lot higher than foreign flag freight rates, so we’re starting from a much higher level. But at some point I would expect [it could change]., depending on how long this situation of capacity shortage continues to exist. While we haven’t seen many problems or much movement in the freight rates in the Pacific domestic trade — Hawaii, Guam and Alaska — this is something that is certainly lurking in the background. Have people seen delays in getting things shipped here?

Matson, because of its unique position with dedicated terminals on the Pacific Coast, has been able to avoid these types of disruptions. And this is a major sales point for their Trans-Pacific service, because they guarantee they can deliver the cargo to the customer, and therefore charge more for freight.

Pasha, like Matson, operates relatively small containerships in the Hawaii trade — 2,300 to 2,400 TEU (20-foot equivalent units) capacity. While in the Trans-Pacific, containership capacity per vessel is approaching an average of approximately 10,000 TEU per vessel.

In 2020, the cargo volumes in Alaska and Hawaii are a bit depressed from 2019 levels. So we don’t have a capacity problem yet. That could change in the domestic trade once the lockdowns are over and the economy starts to open up again. That could be a definite possibility.

Statement of Congressman Ed Case Before the Full U.S. House of Representatives Introducing Bills To Modernize The Jones Act

Madam Speaker, today I introduce three bills 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 not part of the continental United States. In doing so, we will break the stranglehold on the peoples and economies of these exposed communities and their resulting sky-high costs of living which results from just a few domestic shipping companies controlling the lifeline of commerce upon which we absolutely depend.

These bills all amend the Merchant Marine Act of 1920, also known as the Jones Act. That federal law mandates that all cargo shipping between U.S. ports occur exclusively on U.S., not foreign, flagged vessels. Additionally, the law requires that these vessels are built in the U.S. and owned and crewed by U.S. citizens.

The Jones Act was enacted in a protectionist era under the guise of preserving a strong national merchant marine. But today it is just an anachronism: most of the world’s shipping is by way of an international merchant marine functioning in an open, competitive market. And those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to, from and within our most isolated and exposed locales – our island and offshore states and territories – that have no alternative modes of transportation such as trucking or rail.

My Hawai‘i is a classic example. Located almost 2,500 miles off the West Coast, we import well over 90 percent of our life necessities by ocean cargo. There are plenty of international cargo lines who could and would compete for a share of that market. Yet only two U.S. flag domestic cargo lines—Matson Navigation and Pasha Hawai‘i—operate a virtual duopoly over our lifeline.

While they are nominally subject to federal regulation, the fact of the matter is that cargo prices have gone in only one direction–up, fast and repeatedly, despite a surplus of international shipping–and it is indisputable that there is no downward market pressure which would otherwise result from meaningful competition. These accelerating cargo prices are not absorbed by the shipping lines, but passed through all the way down the chain, to the transporters, wholesalers, retailers, small businesses, mom-n-pops and ultimately consumers, of all of the elementals of life, from food to medical supplies, clothes, housing and virtually all other goods.

The result is a crippling drag on an already-challenged economy and the very quality of life in Hawai‘i.

The broadest, deepest effects of the Jones Act on Hawai‘i result from its impact on westbound imports from the continental United States to Hawai’i. But Hawai‘i is an export location as well, in key products such as agriculture and livestock. Here the Jones Act also effectively stifles meaningful competition in getting those products to their primary markets on the U.S. Mainland. Because the producers of these products and all that rely for their own livelihood on their successful export have to eat inflated shipping costs, these export industries, which any economist knows are the ultimate key to any economy’s prosperity, are also crippled.

Let’s take a concrete example: Hawaii’s once-prosperous ranching/cattle industry, which is so key to the economic health and the very lifestyle of so much of areas like the rural Big Island, where I was born and raised. That industry depends on getting its product, young cattle, to West Coast pens and transportation hubs in a cost-efficient manner. There are foreign cargo carriers that specialize, through custom cattle ships and overall sensitivity and adjustment to rancher timetables and needs, in such transport, but the Jones Act outright excludes them from the Hawai‘i-Mainland market. As a result, Hawaii’s ranchers are reduced to two crippling, cost magnifying options. The first is to ship their cargo by foreign carriers to Canada, where they have to go through a myriad of bureaucratic, cost-magnifying gyrations to get their product eventually to their U.S. markets. The second is to beg for the goodwill of the domestic carriers, to whom this is simply a hindrance rather than a major commitment, to ship directly to the West Coast.

And it shows: most of the cattle are first shipped from Hawaii’s Neighbor Islands, where the bulk of the cattle industry is located, to O‘ahu, in small “cow-tainers,” where they sit for days in Honolulu Harbor awaiting the return to the Mainland of one of the massive cargo ships designed and utilized for quite another purpose. The result (besides associated higher costs) is in-harbor cattle waste disposal challenges, higher in-transit cattle mortality and lower-weight cattle delivery to market. That’s what happens when you try to squeeze a square peg into a round hole.

More broadly, there is much evidence about the direct impact of the Jones Act on shipping prices to noncontiguous areas. At a basic level, the everyday goods that we rely on in Hawai‘i cost much more than on the Mainland, a difference which largely cannot be attributed to anything other than shipping costs.

Last year, the Grassroot Institute of Hawai‘i published a thorough and first-of-it-kind report, “Quantifying the Cost of the Jones Act to Hawai‘i.” The report found that:

  • The median annual cost of the Jones Act to the Hawai‘i economy is $1.2 billion.
  • The annual cost of shipping to Hawai‘i is estimated to be $654 million higher and prices $916 million higher.
  • The Jones Act annually costs each Hawai‘i resident more than $645. (3.
  • Thanks to the Jones Act, Hawai‘i has approximately 9,100 fewer jobs, representing $404 million in wages.
  • Hawai‘i families across all income groups would benefit from Jones Act reform. In the absence of Jones Act restrictions, those making between $15,000 and $70,000 annually would see an annual across-the-board economic benefit ranging from $78 million to $154 million.
  • Annual tax revenues would be $148.2 million higher.
  • Focusing solely on the Jones Act requirement that vessels be built in the United States, they found that the build provision results in a 1.2% shipping cost increase for Hawaii. This translates annually to an added cost of $531.7 million to the state’s economy, or about $296 per resident. It also means a loss of 3,860 jobs, and $30.8 million less in state and local tax revenues.

In 2012, the Federal Reserve Bank of New York studied Puerto Rico’s economy and found that “the high cost of shipping is a substantial burden on the Island’s productivity.” The New York Fed found that, “[i]t costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo (Dominican Republic) and $1,687 to Kingston (Jamaica)—destinations that are not subject to Jones Act restrictions.” There is only one reason why costs are double to ship from the continental United States to a domestic port in Puerto Rico as compared to foreign ports in the Dominican Republic and Jamaica: there is international competition on the latter routes, none on the domestic route and the shipping companies take full advantage of that lack of competition.

The three bills I introduce today say: enough is enough. If you, the continental U.S., wants to continue the Jones Act as to shipping between your locations, that’s your business. But don’t penalize us island and other noncontiguous locations by throwing us to the monopoly wolves you’ve created.

The first bill, the Noncontiguous Shipping Relief Act, exempts all noncontiguous U.S. locations, including Hawai‘i, from the Jones Act. The second, the Noncontiguous Shipping Reasonable Rate Act, benchmarks the definition of a “reasonable rate” that Jones Act shipping can charge to within ten percent of analogous international shipping rates. And the third, the Noncontiguous Shipping Competition Act, prevents monopolies or duopolies in noncontiguous Jones Act shipping. Essentially, the bills are intended to lay out options for providing relief for our U.S. noncontiguous areas. We can resolve the issue in many ways, but we must change the status quo which has had such a deep, broad and negative impact on my state and the other jurisdictions beholden to the Jones Act.

The Noncontiguous Shipping Relief Act would allow the noncontiguous jurisdictions to be serviced by non-Jones Act vessels and increase, or in some cases create any, competition in these critical shipping lanes. Again, this is a small portion of the total national Jones Act shipping where it is particularly destructive in application.

Let me address directly the argument offered up by the domestic shippers in defense of the Jones Act: that it contains important labor and environmental protections that would be lost upon repeal. My bill would retain these important protections. Specifically, it provides that all foreign shippers operating under the bill’s Jones Act exemptions must comply with the same labor, environmental, tax, documentation, U.S. locus and other laws as are applicable to non-U.S. flag ships and shippers transiting U.S. waters today.

The Noncontiguous Shipping Reasonable Rate Act would define a “reasonable rate” for the noncontiguous domestic ocean trade as no more than ten percent above the rate set by a comparable international rate recognized by the Federal Maritime Commission. Currently, the Surface Transportation Board technically has the authority to adjudicate and set precedent on what a “reasonable rate” is for Jones Act shipping, but it has almost never been used and never to a clear conclusion on what is a reasonable rate. My bill would define reasonable to remove uncertainty. Current Jones Act shipping rates vary widely and there is no central compilation of these rates. The ten percent benchmark would allow for variance but also ensure that Americans in our noncontiguous areas are not forced to pay exorbitant rates way above shipping rates which would otherwise be provided through international competition were the Jones Act not applicable.

The Noncontiguous Shipping Competition Act would exempt shipping routes to noncontiguous jurisdictions from the Jones Act requirements if a monopoly or duopoly exists on those routes. The Jones Act has resulted in the blossoming of monopolies and duopolies in our noncontiguous jurisdictions. To ensure that these communities, which are the most reliant in the country on shipping to receive necessities, are not held hostage to these dominant companies, my bill would give Jones Act exemptions to routes that are not serviced by at least three companies with separate ownership. In short, if a domestic route is in fact in a competitive environment, the Jones Act is less of a problem, but if there is no competition, then the route should be opened up to international competition by rescinding the Jones Act.

Madam Speaker, these long-overdue bills are of the utmost importance to the localities which have long borne the unfair brunt of the Jones Act. It is often difficult to pierce the veil of longstanding custom and understanding to see the real negative impacts of a law and what should instead be. It is even more difficult to change a law which provides a federally created and endorsed monopoly under which no competition exists to hold down prices. Yet clearly the time for these measures is overdue. I urge their passage.

Ed Case
1st District, Hawai’i
2210 Rayburn House Office Building
Washington, Dc 20515
Telephone: 202-225-2726
Fax: 202-225-0688

1132 Bishop Street,
Suite 1100
Honolulu, Hi 96813
Telephone: 808-650-6688
Fax: 808-533-0133
Website: Case.House.Gov

Committee On Appropriations
Subcommittees: Military Construction, Veterans Affairs and Related Agencies Commerce, Justice, Science and Related Agencies
Legislative Branch Committee On Natural Resources
Subcommittees: National Parks, Forests and Public Lands Water, Oceans and Wildlife Indigenous Peoples Of The United States

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.

USPS REVEALS HOLIDAY SHIPPING DEADLINES FOR 2020

KDHL
by LAUREN WELLS –

The holiday season is officially here and that means many of us will be shopping for those we love and can’t be with, especially in light of the COVID-19 pandemic.

With that said, the United States Postal Service has released their shipping deadlines for 2020. This includes international, domestic and military shipping deadlines.

If you are looking to ship something within the contiguous United States, you have four different options if you want your package to arrive by December 25th. (It should be noted this does not include Alaska and Hawaii.)

The deadlines are as follows:

  • USPS Retail Ground Service deadline: December 15th
  • First-Class Mail Service: December 18th
  • Priority Mail Service: December 19th
  • Priority Mail Express Service: December 23rd

If you are looking to send a package to Alaska, your deadlines are as follows:

  • First Class Mail Service: December 18th
  • Priority Mail Service: December 19th
  • Priority Mail Express Service: December 21st

if you are sending a package to Hawaii, here are your deadlines:

  • First Class Mail Service: December 15th
  • Priority Mail Service: December 15th
  • Priority Mail Express Service: December 21st

Make sure you send your gifts and / or packages to the destination by the above date so you can ensure it arrives on time. If you are sending something internationally or through military mail, your deadlines span a greater period of time. To see a full list of those deadlines, click here.

These deadlines likely mean more this year as the pandemic continues through the end of 2020. Families may not be able to travel or spend the holidays together. If this is the case, these deadlines will help make sure your packages arrive on time.

Biden Focus on Infrastructure, Environmental Improvements Could Lift Jones Act

SEAPOWER
by John M. Doyle –

ARLINGTON, Va. — President-elect Joseph R. Biden’s Jr. twin goals of rebuilding America’s infrastructure, while protecting the environment, could bolster support for maintaining the 100-year-old law that protects the U.S. maritime industry, according to a Washington think tank analyst.

The Biden campaign “had expressed interest in new infrastructure, in new green initiatives, and the maritime industry is actually a pretty good confluence of the two,” Tim Walton, a fellow at the Hudson Institute’s Center for Defense Concepts and Technology, told a Navy League webinar marking the 100th anniversary of the Jones Act.

Also known as the Merchant Marine Act of 1920, the Jones Act bars foreign-built, foreign-owned or foreign-flagged vessels from conducting coastal and inland waterway trade within the United States and between the United States and its non-contiguous states and territories such as Alaska and Puerto Rico.

The long-standing legislation could figure in plans “where we’re talking about building maritime infrastructure, building low carbon emitting transportation mechanisms, green industries that support our economy in the oceans as we build a blue economy,” Walton added. A “Blue Economy,” according to the World Bank, is built on sustainable use of ocean resources for economic growth, improved livelihoods and jobs and ocean ecosystem health.

Critics say the aged Jones Act has led to higher shipping costs, which are passed along as higher prices to vendors, retailers and consumers. They also maintain higher costs have driven the commercial shipbuilding industry overseas, leading to a smaller pool of qualified U.S. merchant mariners.

Without the law, U.S. Navy and Coast Guard officials have argued there would be no pool of U.S. noncombat ships — or trained American seafarers to man them — in a war or other national emergency. During the Nov. 12 webinar, former Coast Guard Commandant Adm. Paul Zukunft (retired) called for “a coherent maritime national strategy that connects with a national security strategy. That’s where the Jones Act needs to be woven into our national security strategies.”

Former U.S. Rep. Ernest Istook, an Oklahoma Republican, said the need for such a strategy is evident, in a world where 90% of trade is moved by ship, and Great Power competitor China is the world’s biggest shipbuilder, by some measures has the world’s largest navy, and is expanding its commercial ports and naval bases around the world.

Walton’s comment about Biden came after a webinar viewer asked where the Democrat stood on the Jones Act. Both Biden and President Donald Trump support the law, although Trump considered, but later rejected, an extended waiver for foreign carriers to deliver liquid natural gas to hurricane wracked-Puerto Rico and LNG-dependent New England States. Biden incorporated Jones Act support in his campaign’s Buy American/Ship American strategy.

“Historically, the U.S. maritime industry has been a leader in technology,” Walton said, “but now in the 21st century, the Biden administration, as it appears it’s going to be, will have an opportunity, I think, to take some leadership and, as Adm. Zukunft said, actually craft an integrated national strategy for the maritime industry, and then implement it.”

To read the new Navy League special report on the Jones Act and its impact, go here.

Biden and the maritime industry: On course with a few detours

WorkBoat
By Pamela Glass

The maritime industry will find a friendly environment in Congress and at the White House as a result of last week’s elections, but it should brace for some major policy shifts as a Biden administration pushes ahead with its promised climate change agenda.

Maritime stakeholders can expect strong support in the White House for the Jones Act, which the industry considers crucial to its future as the law reserves coastwise trade for U.S. built, owned and crewed vessels. Biden included the Jones Act as part of his economic platform, and personally assured maritime unions of his support during the campaign.

“We know President-elect Biden is a very strong supporter of the Jones Act and the U.S.-flag fleet,” Michael Sacco, president of the Marine Trades Department at the AFL-CIO, said in a statement after the election. “Vice President-elect Harris also has demonstrated her total support for the U.S. merchant marine while representing California in the U.S. Senate.”

In Congress, the number of pro-maritime lawmakers did not change significantly. Voters returned to office the majority of the industry’s strongest supporters who serve on committees that oversee maritime issues and funding, and who often speak publicly favoring the Jones Act.

“We’re looking at a 97% retention rate for all lawmakers we supported in the 2020 election cycle,” said Craig Montesano, vice president, legislative affairs at the American Waterways Operators, which represents the tug, towboat and barge industry.

Topping the list in the House, where Democrats will retain power, are Reps. Peter DeFazio, chairman of the House Transportation and Infrastructure Committee and Sean Patrick Maloney, D-NY, chair of that panel’s Coast Guard and Maritime Transportation subcommittee, as well as key members of the House appropriations committee.

DeFazio and his committee are trying to secure additional funding for the maritime industry, which was largely left out of the first Covid-19 relief bill. Work is underway on the Maritime Transportation System Emergency Relief Act, which is included in the National Defense Authorization Act. That bill has been passed by the House and Senate and a final agreement could come during the lame duck session.

In the Senate, where the majority party won’t be determined until after two run-off elections in Georgia, maritime stakeholders are also pleased with election results. They cite the re-election of Sens. Roger Wicker, R-MS, chair of the Senate Commerce Committee, which oversees maritime matters, Dan Sullivan, R-AK, and Susan Collins, R-Maine, who had a tough re-election challenge and has used her seat on the Senate Appropriations Committee to boost the industry, most notably training at the Maine Maritime Academy and shipbuilding at Bath Iron Works.

The industry will likely continue to have the bipartisan support that it has enjoyed over the years in Washington, since action on maritime policy and fiscal priorities do not generally fall along party lines.

As Biden begins to consider his cabinet positions, his selections for the Transportation, Agriculture and Energy departments and the Environmental Protection Agency will be important to the maritime industry. Although no firm decisions have been announced, under consideration for DOT are Los Angeles Mayor Eric Garcetti, a Biden loyalist, Rep. Earl Blumenauer, D-OR, who has been active on transit policy, and Beth Osborne, director of a transportation advisory group who was a deputy assistant secretary for transportation during the Obama administration. Biden has signaled that improving infrastructure is a priority for him, and that transportation initiatives will include measures to decrease carbon emissions.

The current DOT Secretary is Elaine Chao, who is also the wife of Senate Majority Leader Mitch McConnell. Chao’s family is in the shipping business and she has been a strong advocate of the Jones Act as well as marine highway and ports funding. It’s not yet clear if any of her possible successors have direct ties or deep knowledge of the maritime community.

On shipbuilding, the Biden administration will inherit the National Security Multi-Mission Vessel program, which began under President Trump and would build the next generation of training vessels for state maritime academies that would also be used during national emergencies like hurricanes. Philly Shipyard has been awarded the contract to construct up to five ships.

Under a Biden administration, the maritime industry might see its star rise as it takes on an important role in the president-elect’s plan to reduce carbon emissions across all sectors of transportation. It’s very likely that the people he appoints to key positions — such as a new administrator at the Maritime Administration — will be charged with developing strategies to create “green shipping” as part of the Biden climate change agenda.

This could mean a bolder move toward more climate-friendly shipping fuels like LNG, methanol, ammonia and biofuels, as well as a more activist role for the U.S. in influencing global shipping policies through international organizations that had been pulled back during the Trump administration.

The offshore oil and gas industry should expect fewer opportunities for exploration and development as energy policy shifts to developing alternative fuels.

This would affect the offshore vessel sector but provide opportunities for workboats in the emerging offshore wind business. It would also boost arguments favoring barging as an environmentally friendly transportation mode and developing marine highway networks that use waterways to relieve land-side traffic congestion.

The robustness and success of these policies will likely depend on which party wins the majority of the Senate. A split government with Democrats controlling the White House and House of Representatives and Republicans controlling the Senate will make it more difficult for Biden to get his policies approved. Under this scenario, Biden would likely present a less ambitious agenda, but he will still be able to make many changes through regulation and executive orders, analysts say.

How will US President-elect Biden impact shipping?

Seatrade Maritime News
by Barry Parker

Despite expectations of a massive win by Joe Biden, a Democrat, in the Presidential race, and a big “Blue Wave”, the US elections were remarkably close. Mainstream media waited four days, on the Saturday following the elections, before making their call that Joe Biden had won in the voting for President.

The President’s ability to influence policy depends on his ability to achieve desired outcomes with Congress- the legislative branch of the US government. The Democratic party will continue to hold a majority in the other legislative chamber- the House of Representatives.

Still unclear, in the ongoing morass of recounting (some mandated by existing rules, some potentially the result of possible legal actions from the Republican side), is whether the Republicans will retain control of the US Senate. In the weekend following the election, the Senate tally saw 48 Democrats and 48 Republicans holding seats, with four seats still uncertain – though many media pundits were looking for the Republicans to keep a slim majority- at 51 seats to 49, when all the dust settles. The fine print in legislation of all types is influenced by which party is controlling the respective chambers.

On the vessel side, there was not much difference between the candidates, though shipping topics never really came up in a meaningful way. Biden, like Trump, will be a continued supporter of the Jones Act, which – reserves coastwise trade for vessels built, and owned in the States, crewed by US mariners.

Biden’s ties to Pennsylvania, his “rust belt” birthplace, and the importance of Philadelphia in the election, will not be unnoticed by observers of the shipbuilding scene. Biden has stressed his ties to organised labour, and had gained the support of a number of maritime unions in the election.

On the cargo side, one obvious likely improvement will be the US trades with Cuba, set back by Trump after an opening by Trump’s predecessor Barack Obama, where Biden served as Vice President, 2009- 2019 – easing decades of sanctions. Increased movements of general cargo, both breakbulk and unitized, and vehicles would benefit both US and other carriers already serving the Caribbean islands.

The US heartland , steel-making states like Michigan and Pennsylvania (won by Biden) and , Ohio (went Republican) were frequent campaign stops for both Donald Trump and Joe Biden. Agricultural stalwarts such as Iowa, Missouri and Kansas were solid “red” states (going for Trump) but fit into the Biden mantra of supporting working Americans. Macro trade flows will see limited impact from a change in Administrations; farmers have noted Biden’s support for biofuels.

The shipping industry will be impacted in a major way, albeit over a timeframe lengthier than a US election cycle, by regulations and initiatives related to climate change. The oil business will likely be under much more pressure to ramp up its non-fossil fuel initiatives, generally, under a Biden regime.

However, macro tanker market influencers, related to fleet supply, OPEC+ actions, and by overall oil demand, not red versus blue, will drive tanker markets. The US saw exports increase during the Trump years, following an Obama late 2015 initiative, due to bigger picture fundamentals, rather than by explicit Presidential actions.

The offshore wind energy, which has seen projects pushed back several years by Trump administration inertia, will be loudly applauding the Biden victory. Under a Biden administration- with cooperation from the Legislative branch, US shipbuilders, and long-suffering owners of oil service vessels, would welcome efforts to facilitate offshore wind projects, driving US energy consumption away from fossil fuels, in a more timely manner.

US election: what will the maritime sector need from the Biden administration?

Ship Technology
by Adele Berti

As Joe Biden and Kamala Harris prepare to take over the White House after their success over Donald Trump in the US election, maritime stakeholders are waiting to find out what the ‘blue wave’ they promised during their campaign will mean for them.

Having suffered from limited activity due to the coronavirus pandemic – while remaining excluded from Trump’s transport bailout packages – the sector is hoping that the new administration will come to its rescue after months of struggle.

From regulation to shipbuilding and port development, Cozen O’Connor attorney Jeff Vogel believes that many areas are in dire need of intervention. Based in Washington, the Cozen O’Connor Maritime practice group has experience in maritime matters including tariffs, sanctions and embargo laws.

As the transition period between the two administrations kicks off, Vogel outlines the key segments of the US maritime industry that Biden should focus on during his mandate.

US-flag operators in the wake of Covid-19

In April President Trump chose to exclude the maritime industry from one of his coronavirus relief packages, leaving stakeholders empty handed and struggling for financial support. This was in contrast to the aviation industry which received significant funding.

According to Vogel, members of the sector will be expecting (and demanding) a change in this direction from the new administration, especially as the US prepares for a potential second wave of the pandemic and with seabourne traffic remaining below pre-Covid-19 levels. “The industry needs some further support and some form of relief to offset the economic impact that we’ve seen in 2020 as a result of the economic downturn and Covid-19,” he says. “The sector has been going along with reduced cargo demand and increased operational costs from the need to provide personal protective equipment to their crew members and just deal with a new operating environment.”

Work is already underway in the US Congress to secure additional funding for the sector under the lead of Peter DeFazio, who chairs the House Committee on Transportation and Infrastructure. Earlier in July he proposed implementing a Maritime Transportation System Emergency Relief Act, which will be discussed during a National Defence Authorization Act session scheduled to take place soon after the election.

Over the next four years, US-flagged preference cargo will also need renewed support, having seen a steady fall-off since the pandemic. Under the Cargo Preference Act of 1954, about 50% of Civilian Agencies cargo and Agricultural Cargo needs to be carried on US-flagged vessels, though Vogel suggests that changing the requirement to 100% could help revitalise the sector.

Increasing funding for the shipbuilding industry and sealift operations

The US shipbuilding sector has long been feeling the strain of the pandemic and enhanced competition from Asia, due to which Vogel says it will need “organic funding from the new government”.

In particular, the Trump administration has previously authorised funding for the National Security Multi Mission Vessels, a fleet of ships used for training purposes by state maritime academies and in cases of humanitarian disaster aid. “The industry needs further support in making much more significant investments into its infrastructure base, and also to training bases so that more grants are available for training,” he comments. “The US certainly needs to make more investment trying to build up that industry from the first pencil-touching-paper and design stages, all the way through the skilled labour that’s necessary to complete a shipbuilding project.”

Similar efforts will be required to bring the US’s current sealift fleet up to speed with new, younger vessels and more financial support. Owned by the Maritime Administration and the Military Sealift Command, these vessels are activated during disaster relief operations. “That fleet is made up of 46 vessels that at this point have gone well beyond their useful life,” he comments. “The average vessel age is over 50 years old and some are over 60 years old.”

These vessels are critical to national security and therefore will need modernisation and investment from the Biden administration. “But these efforts should have been started 20 years ago and the maritime labour is looking at this as a critical area,” he adds.

Continuing port development in key areas

Over the past four years the Trump administration has made significant contributions to local ports, recently agreeing to a series of port facilities and freight infrastructure grants to roll out in February and October 2020.

However, much like shipbuilding, the port sector is starting to face competition from US neighbouring states such as Canada and Mexico. “In recent years we’ve seen significant investment [for example] in Vancouver, which faced significant expansion and moved towards automation,” he mentions. “The same took place at a number of Mexican ports and the net result is that US ports are facing stiff competition with cargoes that are ultimately destined for the middle of the United States.”

This calls for increased infrastructure funding, training, research and development that will need to encompass both ports themselves and their supply chains. “There needs to be additional investment, not only in the ports but in the roads that connect to the ports and go all the way through the middle of America,” he continues. “All the infrastructure pieces that are necessary to get cargo flowing through our ports and to their ultimate destination.”

Clarifying the future of the Federal Maritime Commission

“What needs to be answered is the role of the Federal Maritime Commission in the future,” comments Vogel. Established in 1961 as an independent federal agency overlooking regulation of the US’s oceanbourne international transportation, the FMC could be subject to change under Biden’s presidency.

Having played an active role during the Trump administration, it could move from having three Republicans and two Democrats to the other way round. “The industry needs some clarity on what the role of the FMC,” he concludes. “Even though it is an independent agency and therefore isn’t subject to the same sort of changes that you see at other agencies, the change in administration [will probably lead to a change in the makeup of the Commission too.”