Industry Profiles » Present Status

The United States continues to depend primarily on oceanborne shipments for its international trade. As the world's largest trading nation, the United States exports and imports about one-fourth of global merchandise trade in value annually. The largest part of this merchandise trade - over 1.3 billion metric tons of cargo - is moved by water. Another billion tons of cargo is carried in domestic waterborne movements, which serve over 90 percent of the U.S. population. Based on current projections, by the year 2020 U.S. foreign trade in goods may grow to four times today's value and almost double its current tonnage, and inland waterways traffic will increase by one-third.

The United States once relied on a huge fleet of relatively small ships to provide the commercial and sealift shipping capacity appropriate for its trade. Since the end of World War II, the U.S.-flag vessel fleet has been in a continual state of decline. The United States now ranks 18th in number of oceangoing vessels, having fallen from a top-ten ranking just a few years ago. The U.S.-flag merchant fleet ranks 20th on a deadweight tonnage basis. Today, the U.S. fleet's share of oceanborne commercial foreign trade, by weight, continues to be less than five percent. Other traditional maritime powers have experienced similar declines.

While the number of vessels in the U.S. fleet has shrunk, at the same time many nations have built an international maritime presence as a means of projecting visibility and earning hard currency. These registries may not require the same level of protection for seafarer health, welfare and safety as on U.S.-flag vessels. Often, foreign-flag vessel owners do not pay any corporate income taxes on revenues earned in U.S. foreign commerce, and the crews frequently do not pay income taxes to any country. By comparison, vessels operating under the U.S. flag are subject to all the taxes and regulatory laws applicable in the United States.

Changes in maritime technology and reductions in crew sizes have contributed to a contraction of the industry's supply of vessels and manpower. Even though the size of the U.S.-flag fleet has declined in recent years, the productivity of the fleet has improved substantially. Today's fleet includes ships and barges, and also containers, chassis, computer-based data systems, rail and truck interchanges, warehouses, piers, cranes, terminals, and highly skilled people ashore and at sea. Technological advances have greatly improved the flow of cargo, resulting in virtually seamless movement of goods from origin to destination anywhere in the world. These advances have also been applied to the movement of military shipments.

The U.S.-flag industry continues to invest in the expansion and modernization of the fleet. U.S. Shipping Partners recently took delivery of the second of nine product tankers from NASSCO, a west coast shipyard subsidary of General Dynamics. Aker Philadelphia Shipyard delivered the sixth of a twelve product tanker series to be chartered to Overseas Shipholding Group, Inc. Crowley Maritime Corporation took delivery of the sixth of ten articulated tug-barges from VT Halter Marine.

The maritime issues and challenges facing the nation are significant and complex. The present and future ability of the U.S.-flag fleet to serve as a contributor to economic sovereignty and national security remains a challenge. Changes in world political trends and economies occur constantly. The 104th Congress understood the precarious situation the Nation faced when it overwhelmingly adopted the Maritime Security Act of 1996. This measure established the Maritime Security Program to support a fleet of militarily useful U.S.-flag commercial vessels and American-citizen crews necessary for the military and economic security of the Nation. In 2003, Congress reaffirmed its support for the U.S.-flag fleet by expanding the fleet to its current contingency of 60 vessels.

Types of Merchant Ships

The U.S.-flag merchant marine is made up of a variety of vessel configurations for specialized and general cargo purposes. The following is an overall synopsis of the privately owned self- propelled and non self- propelled U.S.-flag fleet as of 2009, in terms of number of vessels engaged in core areas of operation -- deep-sea foreign and domestic (in excess of 10,000 DWT), Great Lakes, and inland rivers:

Tankers (over 10,000 DWT)

58

Tankers (under 10,000 DWT

76

Dry Bulk Carriers (over 10,000 DWT)

13

Dry Bulk Carriers (under 10,000 DWT)*

2,985

Containerships (over 10,000 DWT)

81

Roll On/Roll Off

40

General (Heavy Lift)

4

Towboats

5,424

Vehicular/Rail Ferries

578

Dredges

429

Tank Barges

4,650

Dry Cargo Barges

26,652

Railroad Car Floats

26

Oceangoing Cruise Ship

1

TOTAL

40,927
 
*Includes passenger and offshore support vessels
Sources: Maritime Administration
World Dredging Mining and Construction
U.S. Army Corps of Engineers

Manpower Pool

The pool of skilled labor actively employed on U.S.-flag vessels is considered a national security asset, able to meet surge-shipping requirements during times of emergency. According to the U.S. Department of Labor, as of year-end 2008 an estimated 65,200 people were employed in the waterborne transportation industry.

Taxes Paid by the Maritime Industry

In addition to federal and state corporate and personal income taxes, the commercial maritime industry pays a number of other federal taxes yearly in order to operate both domestically and internationally. Eleven federal agencies levy approximately 124 diverse assessments, 85 of which are specific to and paid only by the maritime industry. Such taxes include the Harbor Maintenance Tax, vessel entry processing fees, vessel tonnage tax, and an inland waterways fuel tax.

The 10 federal agencies for which taxes are collected include:

The 108th Congresses adopted omnibus corporate tax legislation, which includes an alternative tonnage tax in lieu of a regular income tax that may be selected by taxpayers operating qualifying U.S.-flag vessels (10,000 net tons) in the U.S. foreign commerce. A number of other nations have already put into place the tonnage tax system as a means to increase the viability of the national fleet.

Marine Insurance

The general principles of marine insurance are the same as with other types of insurance in that there are two parties: the assured and assurer (or carrier). The complex circumstances involved in sea and inland voyages require very specific arrangements for the provision of marine insurance. Generally, the marine policy may cover the risks of a single voyage or may insure for a certain period of time. Cargo is almost always insured by voyage. Vessels are usually insured for a certain duration of time, usually year by year. Cargo policies may be on a single lot or may be open to cover cargo as shipped by the insured. Hull insurance or vessel insurance may cover a ship or a whole fleet.

Hull and Machinery (H&M) Insurance

An H&M policy covers physical damage to the vessel, its machinery and equipment. In addition, the policy normally covers general average, salvage, sue and labor and collision liability. Coverage for a vessel under an H&M policy is written with a vessel value, which has been agreed upon between the owner and the underwriters of the policy. Most H&M policies include a deductible for partial losses. Often a shipowner may elect to cover a portion of the value of a vessel for total loss only. This is done using an increased value policy, which usually costs significantly less than a full form H&M policy. There are several factors taken into account when determining the rate being charged for an H&M policy. They include the type of vessel, the value, the owner/operators experience, the loss record, the size of the deductible and the intended trade. H&M policies can be written to cover a single vessel or an entire fleet.

            There are several different types of H&M policies a vessel owner can purchase to insure his vessel:

Protection and Indemnity Insurance

A Protection and Indemnity (P&I) policy is purchased in conjunction with a hull insurance policy to provide liability protection not found in the hull policy. This type of coverage is usually placed either through a mutual P&I Club or with individual stock insurance companies.

The P&I policy provides coverage should an insured vessel cause damage to piers, wharves, bridges, cable or other fixed or removable objects. Also covered are the cost of raising, destroying or removing a wreck which is sunk and which constitutes a hazard to navigation; bodily injury, loss of life, and sickness of seamen, passengers, ship visitors, stevedores, etc; coverage for the repatriation expenses of seamen who become ill and/or injured during a voyage; and, collision risks not fully covered under a hull policy.

Further, the P&I policy provides coverage for damage to cargo caused by the insured vessel should the damage arise from the negligence of the vessel operator and for pollution risks. Operators often use this coverage to meet the requirements of the Coast Guard to obtain Certificates of Financial Responsibility. Domestically, many operators purchase pollution protection coverage through the Water Quality Insurance Syndicate (WQIS).

For those shipowners who are not members of a mutual P&I Club, the amount of insurance provided in a P&I policy is usually equivalent to the amount of insurance on the hull of the vessel. This amount of insurance is usually adequate where the shipowner may limit his personal liability to the value of the hull. However, where the owner of the ship has privy or knowledge of the events or conditions that caused a loss, this limitation on the shipowner’s liability may no longer be applicable. In those circumstances, an owner may purchase an Excess P&I policy.

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