Congress has begun to consider ways to help the maritime industry weather the coronavirus pandemic and the aftershocks of an economic recession.
A House subcommittee held a hearing last week by video conference with representatives of the domestic maritime industry to discuss how the maritime supply chain has been impacted by Covid-19 and determine what Congress could do to help this essential industry.
The maritime sector was not eligible for federal aid in earlier economic stimulus bills passed by Congress this spring, and some lawmakers feel it’s time to boost maritime services that are needed now and will be important during the post-pandemic recovery.
“I realize that the Congress has already committed trillions in spending to address the fall-out from the pandemic,” Rep. Peter DeFazio, D-Ore., chairman of the House Committee on Transportation and Infrastructure, said in opening remarks. “Some members may feel that additional spending is unwarranted. But at this point, it would be penny wise and pound foolish to believe that we should not take aggressive action to shore up the lifeline to our national economy — the maritime supply chain.”
He said a successful approach would “treat the totality of the industry, not just one segment” since all are interconnected. The Oregon Democrat said he is drafting legislation that would give the Maritime Administration emergency authority to provide financial relief and assistance to each link in the maritime supply chain that serves both foreign and coastwise trades.
“Too much of our economic recovery and future prosperity rides on what we do over the next to couple of months to ensure that when our economy re-starts, that we have a maritime industry and supply chain able to reliably and efficiently move that commerce.”
Rep. Sean Patrick Maloney, D-N.Y., chair of the Coast Guard subcommittee, said there are numerous federal programs that boost the maritime industry — from the Jones Act, to grants to small shipyards and ports — “but these programs may not be enough to enable the industry to weather the current pandemic and associated economic downturn.”
Despite the industry’s success so far in maintaining service by adapting and implementing numerous safety measures, Maloney said that “declining cargo volumes threaten the viability of vessel owners and operators, ports, shipyards and the workers employed by those industries.” He noted that ports are projecting a 20%-30% decline in business, while some shipping trades are expecting a 50% decline in cargo for the second quarter of 2020.
“It is unclear what the U.S. maritime transportation system will face in the coming months and years,” he added. “What is clear is the need to maintain capacity across all maritime sectors. What may seem expensive now, pales in comparison to the investment that would be needed to rebuild these industries from scratch.”
What’s needed, he said is a comprehensive plan with concrete goals, action items and milestones. “Without a whole-of-government approach that addresses the entire industry, our maritime supply chain is at risk. The pandemic only amplifies that risk.”
Industry leaders told the subcommittee that their vessels and workers continue to keep the supply chain moving, but the financial toll has yet to be determined for the skyrocketing costs of operating under new safety protocols and from a slump in demand for services. “There is great uncertainty as to when the most serious economic impacts will hit, how severe they will be and how long they will last,” said Michael Roberts, senior vice president at Crowley Maritime, speaking on behalf of the American Maritime Partnership, a maritime legislative coalition.
While impacts differ for different segments of the industry, demand is almost universally lower than in normal times, Roberts said in prepared remarks. “The industry has made enormous investments in vessels, terminals, equipment and other assets to provide services to their customers. Financing for these investments was based on economic models that did not account for a black swan event we are now experiencing. These services must nevertheless continue operating through this crisis even though the revenues generated will not cover the costs of providing them.”
He and others said they would welcome temporary assistance for maritime companies facing severe economic damage. Roberts also urged Congress to “resist the efforts of opportunists to use Covid-19 as an excuse to change the Jones Act.”
The decline in cargo is already evident at the nation’s ports, and small ports have been hit especially hard. Containerized cargo declined 18% in March over the same period in 2019, according to Christopher Connor, president and CEO of the American Association of Port Authorities. At two of the largest bulk cargo ports, movements of agricultural and energy products have dropped 15%-25% over last year, while tourism at ports “has completely evaporated.”
He said furloughs and layoffs in the industry and the supply chain have started and will likely continue, while some ports are deferring planned improvement projects. Declining cargo volumes are expected to continue through at least the end of the year, Connor said. The AAPA recently asked Congress to include $1.5 billion for ports in a future coronavirus recovery bill.
Barges, tugs and towboats continue to move commodities on the waterways without interruption, following extensive safety protocols on their vessels and mariners. “The industry’s extensive experience with contingency planning, safety management systems and incident command structures has serviced it well in managing the health, safety and operational challenges posed by the pandemic,” Jennifer Carpenter, president and CEO of the American Waterways Operators, told lawmakers.
She said companies, crewmembers and regulatory agencies like the Coast Guard have worked closely together in responding to the challenges and being flexible in meeting regulatory inspection and safety obligations. “The result has been to keep Covid-19 infections among the mariner workforce to a minimum — a win-win for health and safety and for the resilience of the maritime supply chain,” she said.
Carpenter said Congress can assist the industry by supporting the Jones Act, providing robust funding for lock and dam improvements, supporting a uniform national system of laws and regulations overseeing interstate maritime transportation and passing the Coast Guard Authorization bill that includes many elements important to the barge industry. She also urged lawmakers to support prioritized Covid-19 testing for mariners.