New Mercantile Bill Would Support U.S. Shipbuilding

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File image courtesy Philly Shipyard

By MarEx 2018-05-22 17:13:00

On National Maritime Day, Rep. John Garamendi (D-CA), Sen. Roger Wicker (R-MS) and a bipartisan coalition from both houses of Congress announced a new version of the Energizing American Shipbuilding Act. The bill would require a portion of American crude and LNG exports to be carried aboard U.S.-built, U.S.-flagged vessels - specifically, 10 percent of American crude exports after 2032, and 15 percent of American LNG exports after 2040.

"This would result in the domestic construction of over 50 vessels, which would expand and enhance our industrial base, create thousands of jobs . . . and develop the shipbuilding capabilities vital for our national security," said Rep. Garamendi. "Our maritime industry deserves robust support from Congress, because of the hard work of people in this room I believe we're on the road to making it happen."

"If something blows up in Iraq or Afghanistan, we don't have the ships right now to move our people and equipment," said Rep. Duncan Hunter (R-CA), the chairman if the House's Coast Guard and Maritime subcommittee. "This addresses that problem . . . It's okay to be a protectionist if you're protecting the things that America needs in order to survive, [and] a strong merchant marine is just as important as the U.S. Navy."

A version of this bill introduced in 2016 would have required that thirty percent of American LNG and crude oil exports to be carried on U.S.-flagged vessels after 2025. The following year, the coalition increased the impact of this standard by requiring the same carriage percentage, but on U.S.-built vessels. 

Carriage restrictions on the nationality of vessels used in coastwise shipping are common, and are in full force in the United States in the form of the Jones Act. Comparable carriage restrictions covering deep-sea import and export commerce are relatively rare, though Indonesia and Russia have both made proposals for restrictions on foreign commodity shipments in recent months.

[Correction: An earlier version of this article referred to the Energizing American Shipbuilding Act as a "cabotage bill." This is incorrect, as "cabotage" refers exclusively to "transport services within or into a particular country," not to export shipments. Though the substance of the new bill would restrict a portion of American commerce to American vessels, it covers export cargoes only, and is therefore not a cabotage proposal.]

Defending cargo preference

Representatives Hunter and Garamendi have also led efforts to defend existing cargo preference laws, which require the carriage of federal cargoes aboard U.S.-flagged (not U.S.-built) vessels. In a recent letter to the Departments of Defense and Department of Transportation, they warned that federal agences are not always complying with cargo preference rules, and called for the full enforcement of "Ship American" requirements for government cargoes.

Cargo preference is intended to support America's civilian merchant marine by guaranteeing a steady flow of cargo in peacetime. If these opportunities diminish, and the merchant marine declines further, they warned, "we will be forced to turn over America's security interests . . . to foreign flag, foreign crewed vessels." 

The lawmakers pointed out that the U.S. already has a shortfall of an estimated 2,000 qualified mariners needed to operate the sealift fleet in the event of a national emergency, and that full enforcement of cargo preference can help bolster the U.S.-flag merchant marine. However, they alleged, federal agencies have not always complied with the carriage requirements for taxpayer-financed cargoes, thereby undercutting the availability of civilian jobs for American mariners. 

To reduce the incidence of unlawful shipments aboard non-U.S. vessels, they called for the Trump administration to ensure that cargo preference is required for federal shipments, and to affirm that the Maritime Administration gets to make the final call on specific cases.