A fleet in peril – the need for a US-flag cargo strategy

A fleet in peril – the need for a US-flag cargo strategy

The world’s largest economy and most powerful military are supported by only 84 US-flag commercial vessels, carrying a paltry 1.5 percent of US foreign trade. These numbers are shocking and indeed should be appalling to any American. More importantly, the continued diminution of the US-flag fleet arguably represents the single greatest threat to US national and economic security. 

The US-flag fleet is the primary means by which the United States Transportation Command (USTRANSCOM) establishes sea lines of communication to sustain US military operations, delivering nearly 90 percent of wartime transportation. In this manner, the US-flag organic and commercial sealift fleet is the critical linchpin to the US military’s worldwide projection of power. Notwithstanding this indispensable strategic and operational role, the current US-flag fleet faces numerous challenges in meeting USTRANSCOM’s sealift requirements. As noted by Maritime Administrator Rear Admiral Mark Buzby (retired) during recent Congressional testimony, the current size of the US-flag fleet results in a shortage of nearly 2,000 mariners necessary to man the fleet during national emergencies. Without immediate correction, the US military’s global expeditionary capabilities are undermined, and the US warfighter is placed at risk.

The risk is perhaps greater, yet less discussed, when considering US economic security. By transporting only 1.5 percent of its foreign trade on US-flag vessels, the US has created a critical economic vulnerability. As a result, of the US-flag fleet’s diminished participation in commercial cargoes, the nation’s international commerce is susceptible to disruption — through either military or diplomatic means — which the US could not remedy without the assistance of foreign commercial allies.

The US government is acutely aware of the need to address these vulnerabilities. In 2013, the US Department of Transportation (DOT) and Maritime Administration (MARAD) began work on a national maritime strategy to strengthen the US-flag fleet. Through two public symposia on cargo opportunities and sealift capacity and domestic shipping opportunities, the agency accumulated valuable industry input on the continuing declines in government cargoes and challenges in competing for commercial cargoes. Congress buoyed MARAD’s efforts in 2014 by requiring the development of a national maritime strategy under two separate laws. 

Nearly four years later, the Government Accountability Office (GAO) released a report concluding that “decreases in the volumes of government cargo have made it more challenging to ensure the financial viability of US-flag vessels.” Based in part on this conclusion, the GAO recommended that DOT “should complete the national maritime strategy and establish and provide to Congress a timeline by which the strategy document will be issued.” Notwithstanding this recommendation, US maritime stakeholders continue to wait for both DOT’s timeline and the eventual strategy document.

Cargo is the keystone

The lack of a coherent national maritime strategy is due in part to the difficult fundamental questions underlying the strategy. Indeed, the principal strategic question also may be the most difficult to answer — how do you get more cargo on US-flag vessels?  While programs such as the Maritime Security Program (which provides an annual stipend to 60 commercially viable, militarily useful, US-flag vessels to meet national security requirements) remain critical, ultimately the answer to growing the US-flag fleet lies in additional cargo opportunities.

With the exception of the Second World War period, the US has faced these cargo challenges for more than a century. Increased international competition resulting in a reduction of US-flag participation in foreign trade led to national mandates in both the Merchant Marine Act of 1920 and the Merchant Marine Act of 1936: “It is necessary for the national defense and the development of the domestic and foreign commerce of the United States that the United States have a merchant marine sufficient to carry the waterborne domestic commerce and a substantial part of the waterborne export and import foreign commerce of the United States.” 46 U.S.C. § 50501(a)(1). It would be difficult to argue that the US is in any way following the spirit or letter of this codified national mandate.  

Congressional hearings during the development of the Cargo Preference Act of 1954 — which requires at least 50 percent of US government-impelled cargoes to be carried on US-flag vessels — further highlighted the issue. For example, during the 1954 hearings, Francis Greene, executive vice president of the American Merchant Marine Institute, stated the issue succinctly:

“Our American merchant marine exists only to carry cargoes in America’s trade in time of peace and to our troops in time of war. The only truly ‘direct’ support for America’s merchant marine is and always will be cargo. No dollars, no other form of government aid, can possibly be a substitute for cargo. If the taxpayers’ dollars are provided but at the same time American cargoes are denied, ours could become the most highly subsidized and the most unemployed merchant fleet in the world.”

At the time of the 1954 hearings, the US-flag fleet, facing increased foreign competition, carried 29.1 percent of US foreign trade. Congress viewed this shrinking participation in US foreign trade as a national and economic security threat, resulting in the passage of the Cargo Preference Act of 1954. How truly horrified Greene and his contemporaries would be to discover that US-flag participation in US foreign trade has now fallen to 1.5 percent. It is long past time to revisit — and significantly expand — the cargo polices that were laid down throughout the twentieth century.

There are numerous issues that MARAD’s national maritime strategy must address to give a long-term vision for the US-flag fleet. However, the principal focus must be on the development of new cargo opportunities. The government cargoes provided by the US Department of Defense and traditional civilian shipper agencies, such as the US Agency for International Development, simply are not enough. Without a specific strategy and Congressional action to support the transportation of additional cargoes on US-flag vessels, US national and economic security will continue to be at risk.

Jeff Vogel is a member in the Cozen O’Connor Transportation & Trade Group. Contact him at jvogel@cozen.com