Strengthening the US Domestic Network

Is Short Sea Shipping the Answer?

Lately I have been thinking about the current truck driver shortage in the United States. I wrote an article recently that discussed the problem and some creative ways that carriers and 3PL's are looking to recruit new driver talent.  The American Trucking Associations (ATA) recently claimed a shortage of up to 20,000 drivers in the US today with that number climbing to 110,000.00 by 2014. 

OK, folks are busy recruiting new drivers, but what else could be done to strengthen our domestic shipping network?  A network consists of a number of parts, so perhaps another mode of transport could help handle additional volume.

Deja Vu all Over Again...

Having spent 18 years in ocean shipping, I wondered what the late Malcolm Purcell McLean would have to say?  Malcolm McLean started the containerization revolution by attacking the issue of how to move large volumes of trailers efficiently.    In 1956, McLean sold his interests in McLean Trucking Company in North Carolina to start a shipping company that would move trailers on the deck of a converted tanker called the "Ideal X".  The route was New York to Houston Texas.   The company he founded was Sea-Land Service Company. Malcolm later sold SL to RJ Reynolds and went on to buy United States Lines.   I started at USL in 1983.  That story was drilled into new employees.   The company chairman was the founder of an industry.

McLean later went on to found Trailer-Bridge, a domestic ocean carrier with operations in the US-Puerto Rican market. Short sea shipping, which is what domestic, coastal and short distance international shipping is called, could be one answer on how to economically address a portion of the long haul driver shortage.   Moving freight from LA to Seattle, and Houston to Charleston is an ideal way to economically move hundreds of container loads each week. Short sea shipping is old news in Europe where a major percentage of freight already moves on feeder vessels in the English Channel and Baltic Sea.  Companies like Airbus, with diversified European manufacturing, simply couldn't exist without it.  Significant domestic container traffic already exists on the US-Hawaii, Alaskan and Puerto Rico trades.

Interestingly in doing some reading on this subject, I found a great article written a couple of years ago by Chuck Raymond, CEO of Horizon Lines, Inc.  Horizon is an innovative carrier with roots directly linked to Sea-Land.  When AP Moller Maersk bought Sea-Land, CSX kept the domestic operations serving Puerto Rico, Hawaii, Guam and Alaska.  Maersk got Sea-Land's international operations. CSX later spun out Horizon Lines on its own.

Raymond argued that the US needs to invest in the infrastructure necessary to include short sea shipping as a part of our intermodal network.  It's not just railroads and trucks. Ships need to be included as well as the port infrastructure to support them.  The Jones Act requires that ships engaged in US domestic commerce must be built in US shipyards.   That makes them expensive vs vessels built in Asian or North European yards, especially with the weakness of the dollar.

In considering what might be done with existing infrastructure, I think there are two or three things that might allow better use of short sea opportunities.  These are a little controversial because they involve modification of the Jones Act, which protects US shipping interests in their home waters. 

1. Allow foreign vessels to operate domestic short sea services as part of their international route structure.  If a Hapag-Lloyd vessel calls Houston and Charleston on its way to Europe, it cannot move revenue producing containers between the two US ports.  It must ONLY carry containers bound for international destinations.   Forget that the ship calls both ports already and likely has a container imbalance as well.    This is a Jones Act violation and the carrier is subject to fines. If we're going to allow Mexican truckers on US roads, we might as well do this one.

2.  Allow American ocean carriers to use foreign built vessels in  US domestic commerce.   The ships should still operate with US crews, and be US registered, but the ships shouldn't have to be built here.  The US lost it's container ship building dominance to Asia decades ago.   

3. Modernize the Jones Act to limit cabotage.   Cabotage is the protection of domestic trade for the exclusive use by domestic carriers.  Presently there are very few large cargo vessels over 1000 tons engaged in domestic container traffic in the US.    In specific, clearly under served markets, foreign carriers could increase service availability.   The Passenger Vessel Services Act already allows this for the cruise market.   I also don't buy the idea that this would be a major detriment to US national defense because there is not a huge fleet of domestic trade container vessels to perform this service now.   When Maersk is a major operator of Military Sealift Command vessels, the "foriegn aspect" doesn't ring true as it might once have.

How should the United States address Short Sea Shipping?

Eric

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Comments

[Eric]

Thanks Paul! There will be another interesting post tomorrow!

[Paul Stroup]

Great post! Very Interesting.