On the surface, there may not be much news in the latest analysis of U.S. shipping. But there is plenty of fuel to stoke the rhetorical fires in Washington over the Merchant Marine Act of 1920.
The new report from the Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine was ordered up by Congress in 2014, and its authors say they did not have a lot of time for original research.
The brief letter report, titled “Impact of United States Coast Guard Regulations on United States Flag Registry,” is largely a peer review of two earlier studies of challenges that U.S. flag registry imposes on ships: a 2013 Coast Guard report and a 2011 U.S. Maritime Administration comparison of U.S. and foreign flag operating costs.
The takeaway from the board’s report on international trade is that complying with Coast Guard rules is no longer a significant regulatory burden for U.S. shipping, although “there is room for further improvement in the regulatory process that could reduce costs without increasing safety risk.”
“Over the last 30 years, considerable progress has been made in decreasing U.S. flag regulatory compliance costs while marine safety and environmental performance have seen continuous improvement,” the authors wrote. “The committee finds that the increased costs related to USCG regulatory compliance are now relatively small compared to the increased operational costs associated with crewing and insurance, and therefore concludes that USCG regulatory compliance is not a major impediment to the competitiveness of the U.S. flag registry.”
You will notice that little mention of crew pay, which amid all the drama around the Jones Act is really the heart of the debate. The 2011 MARAD cost comparison report offered this side-by-side averaging of annual costs for a U.S. flag container ship versus foreign flag competition:
U.S. flag crew costs: $5,428,280
Foreign flag crew costs: $984,770
The report goes on to discuss at length how the Coast Guard’s Alternative Compliance Program, with its use of classification societies and industry cooperation, and harmonizing U.S. and international rules have lowered costs.
Still, the report notes, “the major impediments to the competitiveness of U.S. flag vessels are the cost of U.S. crew wages and benefits and, to a lesser extent, the cost of P&I insurance.”
With continuing political pressure on the Jones Act, the Coast Guard’s investigation of the El Faro sinking and examination of how the Alternative Compliance Program treated that ship could play into the next round of debate over the law – as will the transport board’s report.