American Flag Carriers – An industry on the move

Commercially approved carriers provide the backbone of service for the Department of Transportation (D.O.T.) and the Department of Defense (D.O.D) U.S. Transportation Command. They serve Jones Act trade routes and play an important part in moving material and equipment when U.S. Flag Carriage is required. What’s happening in the industry? Maritime Security Program Created by executive order in 1996 the Maritime Security Act requires the Secretary of Transportation and the Secretary of Defense to establish a fleet of active commercial vessels to meet national defense and U.S. security needs under the Maritime Security Program (MSP). In January 2013 the President signed the current National Defense Authorization Act extending the program through 2025. The MSP maintains a fleet of 60 U.S. Flag ships to provide access and capacity to the DOD by requiring participating operators to make their vessels available upon request by the Secretary of Defense. The program not only controls ships but also tactical infrastructure and terminal facilities as needed. U.S. crews and operating personnel may also be sequestered by the Defense Department in times of national emergency. The National Defense Reserve Fleet acts in the same capacity as the MSP providing the Department of Transportation with access to commercial vessels upon request. It’s important to note that all participating carriers must be registered in the United States even if their parent companies are foreign, and all ships must be flagged in the U.S. and manned by American merchant marine crews. U.S. Transportation Command – Universal Service Contracts The U.S. Department of Defense maintains and ongoing Universal Service Contract valued at approximately $6.75 billion with ten carriers: American President Lines Ltd., Maersk Line Ltd., Matson Navigation Co. Inc., Hapag – Lloyd USA LLC, American Roll-On Roll-Off Carriers LLC, Farrell Lines Inc., Liberty Global Logistics LLC, Central Gulf Lines Inc., TransAtlantic Lines, and TOTE Maritime Puerto Rico LLC. Fleet updates and notes of interest Tote Maritime: Tote currently maintains the newest fleet of U.S. Flag LNG ships in the Alaskan trade. They are also upgrading vessels in the Caribbean to LNG operation. Operated by Interocean Maritime Corp (Interocean), Tote was awarded a National Defense Reserve Fleet contract by MARAD this year valued at $461 million as part of the DOD’s strategic sealift mission. American Roll-On Roll-Off Carrier: ARC announced last week the re-naming of their vessel the M/V Aida to the M/V Patriot. The Patriot was re-flagged in March by U.S. Coast Guard officials in a ceremony held at the Port of New York, New Jersey. The “Patriot” will replace the aging M/V Courage as the seventh vessel serving the Department of Defense in both the Maritime Security Program and Voluntary Intermodal Sealift Agreement. The vessel can support 240,000 MT of cargo across her stern slewing ramp and is capable of carrying tracked vehicles, helicopters and out of gauge cargo. Maersk Line Ltd: Maersk maintains a fleet of container vessels, roll-on roll-off carriers and tankers under the Maersk banner and through bare boat charter with other U.S. Flag operators. In February the tanker Maersk Peary completed a resupply mission to the McMurdo Station in Antarctica as part of Operation Deep Freeze. Roll-on Roll-off service is provided to the D.O.D. and D.O.T. under their Farrell Lines subsidiary with additional ro-ro vessels chartered from Hoegh Auto Liners and other operators. Hoegh’s U.S. Flag division Alliance Navigation secures additional cargo for these vessels from commercial shippers who require American Flag service to fulfill their contracts. Central Gulf Lines: Central Gulf Lines a subsidiary of International Ship Holdings continues to offer U.S. Flag Service in the midst of reorganization by its parent company. Mobile, AL based International Ship Holdings Corp. filed Chapter 11 this month in an effort to regroup and concentrate on core assets. American Flag holdings include Central Gulf Lines, Waterman Steamship, and United Oceans Services LLC. Additional services held by ISH are LCI Shipholdings Inc., East Gulf Shipholdings Inc., CG Railway Inc. and FSI Rail. Central Gulf is in the process of completing its 2016 Universal Contract commitment and will endeavor to remain a U.S. Transportation Command service provider. American ocean carriers provide transportation for foreign aid projects, and EXIM Bank approved shipments, in short in any instance where foreign flag service is excluded. They maintain our maritime independence and support our military and governmental interests abroad. Some would argue that a true American Merchant Fleet has sailed beyond our horizons. The merger and acquisition of many of our carriers to foreign operators has changed the dynamics of American Flag Service forever. All approved vessels are flagged in the United States and operated by U.S. registered companies but with Jones Act requirements on new ship building, will American startup companies ever again rule the waves?