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Section 6.0 – SSS Challenges, Opportunities, and PolicyOptionsThis section concludes the assessment of SSS options for operation in the U.S. freightmarkets by evaluating the actual or perceived impediments to expanded market penetrationand proposing several policy options.Section 6-1 reviews the issues relating potential impediments to expanded SSS markets andoperations:6-1-1 Adverse impacts of the regulatory restrictions effecting efficient choice of selfpropelledvessels;6-1-2 Potential cost impacts of the Harbor Maintenance Tax (HMT), the Jones Act, andthe USCG vessel manning requirements;6-1-3 Absence of an efficient pricing mechanism to account for external costs of freightmovement;6-1-4 Challenges arising from the absence of a feeder port system; and6-1-5 Challenges arising from the failure to integrate the domestic waterborneinfrastructure with the nation’s freight network.Section 6-2 reviews the opportunities and policy options available for promoting SSS in theU.S. by recommending:6-2-1 Support for design and construction of small self-propelled feeder vessels;6-2-2 Support for exemption of SSS moves from the HMT;6-2-3 Promotion of pricing strategies compensating SSS carriers for the environmental andcongestion mitigation benefits;6-2-4 Promotion of feeder ports and inland distribution centers for transshipment of cargocontainers (with focus on lessons-learned from the European Union experience);6-2-5 Deployment of advanced technologies which improve efficiency of the domesticmarine shipping and integrate the mode into the national freight system.6-1 Potential Impediments to Expanded SSS OperationIn general, SSS markets have not grown to efficient market size to achieve scale economiesbecause of the regulatory, pricing, and network-related barriers outlined below.6-1-1 The Jones Act and the USCG Manning Requirements haveImpeded the Deployment Self-Propelled VesselsFederal regulations guiding the design, operation and manning of vessels for domestic usehave generated unintended consequences for domestic navigation safety and efficiency.Federal regulations guiding construction and crewing standards may have stifled theONR SSS Final Report 66
development of markets for construction of higher performance self-propelled ships, led tosub-optimal use of advanced ship technology, and encouraged excessive reliance on tugbargevessels.Current federal regulations give a preferential treatment to tug-barge combinations to thedetriment of self-propelled vessels. Differential manning is often a key factor in the choicebetween self-propelled and tug-barge combinations. The USCG applies crew sizedetermination rules on the basis of the size of the vessel’s propulsion unit. As a consequenceof these manning requirements, an ATB requires a crew of 10 persons, while a tanker of thesame capacity would require a crew size of 20. This is because crew standards are based onthe size of the vessel’s propulsion engine and not its carrying capacity and other performancerequirements and risks. The tug is treated as a small vessel with lower crew requirements(the size of the barge is not relevant to crew size determination) whereas a tanker with acapacity similar to ATB combination is treated as a large ship. The labor cost advantagescan thus favor ATBs over self-propelled ships with similar construction costs despite ATBs’disadvantages in maneuverability and reliability.Some observers have maintained that the differential treatment afforded the tug-bargecombination vessels has led to inefficient choice of vessels for SSS because self-propelledships have higher fuel efficiency and better maneuverability than tug-barge vessels andATBs. This view has been expressed in a recent IHS Global Insight report on the regulatoryadvantages enjoyed by ATBs in manning, concluding that the outcome has been poor designchoices by shipbuilder. They maintain that current manning requirements have raised theoperating costs of more efficient self-propelled vessels. Because of the high costs of themore efficient self-propelled vessels, the IHS report concludes: “Current crewing laws arenot optimal from the standpoint of commerce. They distort ship choice and cause the marketto choose less efficient ships were it not for the crewing regulation.” 75 In general, theseindustry observers have maintained that federal programs in support of shipbuilding for thedomestic Jones Ac fleet may adversely affect domestic marine transport, because theprotection afforded through the cabotage regime might generate a backlash from thedifferential treatment of the domestic and foreign-trade sectors and adversely impact effortsto promote SSS for domestic cargo movement. 76Higher construction costs for the U.S. flag fleets are another potential impediment to thegrowth in SSS markets. Because of these higher vessel purchase costs, businesses may findit harder to start and sustain a SSS operation. Many SSS stakeholders have maintained thatthe Jones Act adversely affects SSS operations because it increases the startup costs sinceships built in the U.S. tend to be more expensive than those constructed abroad. TheMerchant Marine Act of 1920 (46 U.S.C. App. § 883), commonly known as the Jones Act,requires that vessels used to transport cargo and passenger to U.S. ports be owned by U.S.citizens, be built in US ship yards, and that at lease 75 percent of the crew be U.S. citizens.Industry advocacy groups such as the Coastwise Coalition have recommended removing thissignificant disincentive to coastal waterborne traffic. 7775 IHS Global Insight, IHS Global Insight, Inc., An Evaluation of Maritime Policy in Meeting the Commercialand Security Needs of the United States, Prepared for the USDOT, MARAD, January 7, 2009.76 IHS Global Insight, January 7, 2009.77 Coastwise Coalition, Paul Bea, pbea@phbpa.com and http://www.maritimeadvisors.comONR SSS Final Report 67
Page 1 and 2:
Appendix GAssessment of Short-Sea S
Page 3 and 4:
6-1-2 Harbor Maintenance Tax (HMT)
Page 5 and 6:
PrefaceThis report has been prepare
Page 7 and 8:
Section 1.0 Short Sea Shipping in t
Page 9 and 10:
1-2 Waterway Infrastructure and Fac
Page 11 and 12:
grown twofold (from 1.3 billion ton
Page 13 and 14:
Figure 3 - Trends in Domestic Water
Page 15 and 16: The SSS/Marine Highway services ide
Page 17 and 18: Table 2 (Continued)Current SSS Corr
Page 19 and 20: Figure 8 - Gulf Coast and America's
Page 21 and 22: 2-2 Current SSS Markets and Carrier
Page 23 and 24: The above list of COB carriers does
Page 25 and 26: Alaska North Slope. The ATBs’ car
Page 27 and 28: Figure 16 - LoLo Barge at Pier, Osp
Page 29 and 30: Between 1994 and 1999 Matson ran a
Page 31 and 32: Figure 18 - Envisioned West Coast S
Page 33 and 34: 3-2 Requirements for Viable SSS Ser
Page 35 and 36: 37Lack of volume commitment in a co
Page 37 and 38: volumes, density and direction, mar
Page 39 and 40: economies within the corridor are t
Page 41 and 42: Section 4.0 Vessels and their Relat
Page 43 and 44: percent of U.S. consumption of petr
Page 45 and 46: 7. Liberty Global Logistics (1 RO/R
Page 47 and 48: Figure 22 - Austal JHSVSource: Aust
Page 49 and 50: Figure 24 - Hopper Barge Loaded wit
Page 51 and 52: hull structure of the tug. The end
Page 53 and 54: Section 5.0 SSS Costs: Direct Const
Page 55 and 56: Table 11 - Optimal SSS Speed and RF
Page 57 and 58: pollution, accidents, highway conge
Page 59 and 60: Table 14 - Fuel Usage and Emission
Page 61 and 62: 5-4 Estimating Reduced Costs of Mee
Page 63 and 64: are based on different assumptions
Page 65: often need to be conducted in tande
Page 69 and 70: 6-1-3 Challenges Arising from the F
Page 71 and 72: hour could deliver the same contain
Page 73 and 74: Conventional subsidy programs that
Page 75 and 76: embarking on its second funding ini
Page 77 and 78: and max weight. The system produces
Page 79 and 80: LoLoMARADMTSNCHRPNPWIONROPAOSGOSVPA
Page 81: New Jersey Department of Transporta
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