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Coming back to barges

By Kevin Horn

When barge lines that move 1,500-ton barge lots loaded with bulk commodities advertise “on-time delivery,” it makes one wonder if shippers will switch from rail back to barges.

In the Jan. 17 issue of The Wall Street Journal, there was a quarter-page advertisement from American Commercial Lines that touted the Jeffersonville, Ind.-based barge operator’s leadership in on-time delivery that can eliminate the cost, delays and complications associated with moving cargo by truck or rail. How interesting. Certainly the world has changed since bulk cargoes were shipped and arrived whenever and were often stockpiled for weeks and months.

The logistics of the “just-in-time inventory minimization push” has moved from extremely high value and perishable items all the way down to the lowest levels of supply chains — and this includes bulk commodities. Regularly scheduled freight transportation is now more the norm and the standard is on-time performance. Railroads and barge lines have been among the last logistics supply chain players to engage in on-time delivery for bulk commodities.

The move to scheduled bulk commodity transportation permits rail and barge players to compete on more than just price. There is a service package of delivery times that often includes incentives and penalties for exceptionally good or bad performance. Major customers that work from an efficient supply chain perspective look at the costs of excess inventory management as part of their mode and carrier choice.

Freight rates are still a very important determinant for bulk cargo. But cost that is tied to performance capabilities is playing a more important role when it comes to which transport mode to choose. While barge transport is normally considered slower than rail from a transit time perspective, reliability rather than speed is what primarily affects inventories. An advantage of barge transport is reliability, particularly when bulk unit train alternatives do not exist for smaller shipment sizes.

Inland barge companies that deliver consistently have a distinct advantage over carload rail service that have a typical transit time range measured in days. Other things being equal, a congested rail network and lack of reliable services can lead shippers back to barges.

Kevin Horn is a senior manager with GEC Inc., Delaplane, Va.

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A big jump for simulator training

By Joel Milton

Over the last decade, the use of navigation simulators to train mariners has grown and is now widespread. Nevertheless, I’ve always felt that simulators left a great deal to be desired when it came to mimicking real situations and their value as a training aid. The idea that simulator training can be substituted for sea time has always been objectionable to me.

Last October, I attended my company’s mandatory annual training at the MITAGS training and simulation center outside of Baltimore. As part of the training, we spent a morning in the simulators running down the Delaware River and making the turn into the Chesapeake and Delaware Canal. We did what we always do at work: meet or overtake ships and tug-and-barge units, going about our daily business on the river, day and night, and in all weather conditions. Dodging the occasional wayward deep-draft sailboat in the middle of the shipping channel was par for the course.

Our company’s safety and training personnel collaborated with MITAGS to tailor the training to our specific needs. I can say without reservation that MITAGS’ new full-bridge simulator is the most impressive I’ve seen to date. Not only was the program specifically tailored to tugboats, it was also geographically accurate and specific to our primary operating area. It was very realistic visually and operationally, reflecting not only our equipment but also that of other companies that operate in the Northeast. The attention to detail extends all the way to each company’s specific tugs and barges. The only thing missing was the feeling of the inertia of a large moving mass under your feet. Sorry, but there’s still no substitute for the real thing.

However, this is the first time I’ve ever felt remotely comfortable endorsing the principle that simulator time could be safely substituted for some sea time. But I make this endorsement with a stipulation: only if simulator training is used to a limited degree, and only if it meets or exceeds this new benchmark.

The good news is that it finally appears that simulation technology is catching up to the promise.

Joel Milton works on towing vessels. He can be reached at joelmilton@yahoo.com.

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Index up, broad market down

February was another rough month on Wall Street, but not for the WorkBoat Composite Index.

The Dow Jones and S&P 500 were both down over 3 percent in February, but the Index was able to eke out a gain of almost 1 percent. Losers edged winners during the month, 18-17.

Leading the way were oil service stocks, including OSV operator Trico Marine Services.

Trico was up over 23 percent for the month after the Houston-based company reported fourth-quarter earnings of $2.08 a share, topping the consensus estimate of 77 cents. Trico cited strong international results, helped by record North Sea spot rates, for the improved earnings. With softness in the U.S. Gulf market, Trico continued to mobilize vessels overseas in the fourth quarter. In 2007, Trico relocated 13 vessels to international markets.

The company also reported that for the first time in its history, average day rates for its vessels in West Africa topped Gulf of Mexico rates for 180' supply vessels. — David Krapf

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How to get more from seasonal hires

By Bernie Jacobson

At the Passenger Vessel Association’s annual meeting held recently, a series of roundtable discussions were held where operators shared their experiences with their peers.

These roundtables uncovered issues common throughout the nation’s passenger vessel industry. One is the use of seasonal employees.

The discussion on seasonal operations that are heavily dependent on college and secondary students who work during summer vacation focused on how to retain these employees during shoulder seasons and how to recruit replacement employees.
Since school vacations often end before the peak tourism season does and well before the end of the late shoulder season, incentives are needed to either retain students longer or to find replacements.

Shoulder season incentives could include higher pay after Labor Day, offering students sizable bonuses if they are willing to return to classes late, and developing more flexible part-time work hours.Other retention techniques include establishing formal orientation programs for new hires, developing internship programs with high schools and colleges, and finding new seasonal and temporary employees from other sources.

Methods for recruiting new hires include Internet sites such as craigslist.org and monster.com, highly recommended for advertising and marketing jobs. This should help seasonal operators shift their student mindset towards older, more experienced and flexible employees who often have a stronger work ethic.

Other more flexible sources include ex-military personnel, actors, artists, and senior citizens.

Be sure to ask current employees for referrals and structure financial or work rule incentives to reward lasting referrals. Foreign employees, especially from former Eastern Bloc countries, have been used successfully by a number of passenger vessel operators. However, make sure that there are no legal issues affecting how you can employ them in your business such as using them to crew U.S.-flagged vessels.

Consult with local schools and colleges to ensure that you are not breaking any child labor laws.
Finally, clear your potential new hires with an attorney knowledgeable in labor and immigration law so you don’t create more problems than you hope to solve.

 Bernie Jacobson is a management consultant specializing in passenger vessels. He can be reached at 631-749-4110 or IBJAssociates@aol.com.

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Rates mixed in February

February was another mixed month for OSV day rates and utilization in the U.S. Gulf.
Smaller supply vessels (under 200') saw day rates and utilization nudge up during February. However, several service vessel operators noted that more standard supply boats are available and day rates are slowly falling. One operator said that he was utilizing one of his 180' units outside the traditional rig service market.

Small crewboats took the biggest hit in February, with utilization falling 3 percent from January’s numbers. Several operators of smaller crewboats reported that none of their smaller units were working in mid-February. Larger crewboats fared better, with average day rates increasing slightly and utilization up 2 percent during the month.

Larger supply vessels, which mainly work in the deepwater market, posted a slight average day-rate increase in February with utilization holding steady at 94 percent.
Supply vessels and crewboats that typically work the shelf continue to suffer the most from slack demand. Unfortunately, it doesn’t appear that this will change in the near term with several more jackup rigs expected to leave the Gulf market.

In the rig market, Hercules Offshore recently agreed to buy three jackups from Transocean. All three are presently located in the Gulf of Mexico, but that may change soon. Hercules reported that it is already negotiating long-term international contracts for two of the jackups and will soon begin marketing the third overseas.

Marine insurance warranty violations can void an insurance policy

By Gene McKeever

Many of us are familiar with warranties that pay us for something, like ones that cover HDTVs or cars. In the case of a marine insurance policy, however, a warranty that is violated voids a policy. That means no coverage, plain and simple.

Since this is an important point, I’ll try to define this one more time. A warranty is an “expressed” or “implied” action. If it is not followed to the letter, it halts or suspends insurance coverage.

An example of an expressed warranty is the so-called “trading warranty” on a vessel insurance policy. A trading warranty may require that your vessel be used as a passenger vessel. If you begin using the vessel to carry propane tanks, your insurance coverage is voided.

There’s also a “navigation warranty” that spells out where your vessel can operate. If you operate outside of that particular navigation area, your insurance coverage will be suspended until you return to your expressed navigation area.

Crew warranties specify that you must have a certain number of crew to safely operate your vessel. If you have less crew onboard, your coverage is voided until you properly crew the vessel.

In one case, an insurance policy required that a cargo vessel have three crew. On a calm Sunday, a friend of the owner used the vessel, with no crew, to scout for recreational beaches. The vessel’s front loading ramp deployed while the vessel was underway and the vessel sank in more than 200 feet of water. Since the craft was being used for pleasure and was not properly manned, the insurance policy was voided. The owner received nothing, absorbing a $365,000 loss.

“Implied warranties” are another matter. There is the implied warranty of seaworthiness, which means that the vessel, without stating it, must be seaworthy at the beginning of each journey. Most tug operators are aware of this and make certain that tows are in a seaworthy condition before they go on the hip to take the tow out of port.

Gene McKeever is a marine insurance agent with Allen Agency, Camden, Maine. He can be contacted at 800-439-4311 or gmckeever@allenagency.com.

State vs. Jones Act law

By Tim Akpinar

In a recent decision in Alaska, state law trumped the Jones Act law in a maritime injury claim.

On Feb. 6, 2004, Jesse Glover was working for the Alaska Marine Highway System aboard the ferry Tustumena. The ferry’s car deck hatch was opened using a motor as it neared Cordova, Alaska. Glover was on the forecastle deck and fell through the hatch, suffering injuries that required surgery on his feet. Glover claims the ensuing injuries to his head, spine, and feet were “a direct and proximate result of the carelessness and negligence of defendant and the unseaworthiness of the vessel.” (Glover v. State of Alaska, No. S-12220)

As a resident of Alaska, Glover brought action for his Jones Act injury claim as well as a declaratory judgment that the applicable state law violates the U.S. and Alaska constitutions. The Alaska superior court granted the state’s motion for summary judgment against Glover on both counts. In general, the party filing such a motion asks for an immediate judgment, asserting there is no issue of fact at hand for the court to decide. Glover also filed an action in Washington state for his injuries. The Washington court determined that it did not have jurisdiction over the matter.

The obstacle to Glover’s claim was a 2003 amendment passed by the Alaska Legislature that revoked the state’s waiver of sovereign immunity for suits by state-employed seamen. The amendment effectively removed a Jones Act cause of action from a state-employed seaman’s list of remedies. The bill’s sponsors said it would provide a uniform equitable remedy for state employees who suffer work-related injuries under a single compensable system.

The decision demonstrates that the Jones Act, although regarded as the cornerstone of the rights of the U.S. mariner, does not necessarily operate without exception.

Although I can respect a state’s desire for uniformity in its labor laws, I’m not pleased when the result effectively strips U.S. seamen of one of their longstanding legal protections.

Tim Akpinar is a Little Neck, N.Y.-based maritime attorney and former marine engineer. He can be reached at 718-224-9824 or t.akpinar@verizon.net.

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