US Maritime Taking a Hit As Shutdown Drags On

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  • Ability to move waterborne freight could shift into crisis mode if the shutdown continues.
  • 31% of the branch’s 41,000 active duty members don’t have enough money in an emergency savings fund to cover one month’s worth of expenses.
  • Bill was introduced to provide funding to ensure pay during the shutdown. If no appropriations bill enacted, Active duty Coast Guard will miss January 15 paychecks.
  • Vessel operators may leave the MSP or re-flag their vessel if shutdown prolongs.
  • Delays in processing loans could cause an additional financial hit to US vessel operators and shipyards.

The prolonged partial government shutdown raises concern that the ability to move waterborne freight could shift into crisis mode, says FreightWaves.

Work without pay

Much of the work that gets done behind the scenes in the US maritime industry is done by civilian employees most of whom are furloughed.

Also, while much of the regulatory and enforcement responsibilities fall on the shoulders of active duty U.S. Coast Guard personnel, they’re the only branch of the military that is being required to work without getting paid.

A risky job without pay

An estimated 31% of the branch’s 41,000 active duty members don’t have enough money in an emergency savings fund to cover one month’s worth of expenses.

Congressman Peter DeFazio of Oregon, Chairman of the House Transportation & Infrastructure Committee, introduced a bill a few days back that would provide funding to ensure the members are paid during the shutdown.

“We are asking them to do their job serving and protecting our communities, which sometimes means life or death situations, without pay,” said DeFazio’s colleague, Congressman Kurt Schrader, in a statement. “Meanwhile Congress can’t do its number one job. What kind of message is that?”

Guards to miss paycheck

The Coast Guard is vital to the movement of foreign and domestic freight in and out of port areas – particularly during severe weather when it is required to make crucial decisions of when and how long to close and open cargo ports.

The cumulative effect of furloughed and unpaid personnel will start to be felt in actual freight operations the longer the shutdown continues.

“Active duty Coast Guard will miss their January 15 paychecks if there’s not an appropriations bill enacted, and that will have real effects on their lives and how well they’re able to do their jobs,” Jim Sartucci, a government affairs attorney with the law firm K&L Gates, told FreightWaves.

Areas that could be affected

Much of the document work required to credential merchant mariners that crew US-flagged vessels – coastal tankers moving fuel from refineries in Texas to consuming areas in the Northeast, for example – is performed by civilian staff, who are furloughed and off the job.

“Over time there’s an increasing impact on the merchant mariners themselves, and to a lesser extent the vessel and vessel operations,” Sartucci noted. “Right now it’s just an inconvenience, but if this shutdown lasts for several months, it could affect vessel operations” if mariners can’t obtain the required qualifications and credentials to operate them.

Another area within the maritime sector that could be affected by a prolonged shutdown is the Maritime Security Program, overseen by the U.S. Maritime Administration, an agency within the shut-down Department of Transportation.

Financial assistance

The program provides financial assistance to operators of 60 US-flagged vessels currently enrolled in MSP that meet certain qualifications.

Participating vessel operators are required to make their ships available if needed by the Secretary of Defense during times of war or national emergency, and are paid a monthly stipend to do so.

Plans to quit program or re-flag

If a long-term shutdown threatens those payments, vessel operators may decide to leave the program or re-flag their vessel, depending on the economic pressures on a particular operator and how much they rely on the stipend to compete for cargoes.

The flow of federal money that the US maritime sector relies on to build and obtain new freight capacity, such as the Federal Ship Financing Program – known as Title XI – is also in danger of being stalled.

Financial hit to the US vessels

Title XI encourages U.S. shipowners to build new vessels at American shipyards through low interest, long-term debt repayment guarantees. Program funding also helps shipyards to modernize their facilities for building and repairing vessels. Delays in processing those loans could cause an additional financial hit to US vessel operators and shipyards.

The Federal Maritime Commission, an independent federal agency that regulates US containership imports and exports, is also closed due to lack of funding. Contract disputes on international cargo and rulemakings affecting issues such as fuel surcharges and service delays have therefore been put on hold.

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Source: Freight Waves

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