The Federal Policy Vacuum: We Are Little Known And Less Understood

The following article is excerpted from a November 13, 1985 statement by Thomas B. Crowley, president, Crowley Maritime Corporation, before the Congressional Maritime Caucus, on behalf of the Inland and Coastal Tug and Barge Industry. Mr. Crowley is a member of the Congressional Maritime Caucus Advisory Board.

Federal policies do not yet recognize the distinct and unique character of the tug and barge industry.

For the most part, federal policymakers do not know of the scope and importance of the tug and barge industry, or understand its contribution to longstanding policy goals and objectives. This in part results from the traditional federal focus on America's deep-draft merchant fleet. However, it also stems from the fact that we in the tug and barge industry have failed ourselves, so far, in bringing our message to the Congress and the Administration.

The recognition by the Congressional Maritime Caucus that the barge and towing industry should be represented on the Industry Advisory Board is appropriate. We hope that it signals a change in the understanding and attention afforded this important segment of the U.S. maritime industry.

The concern within the barge and towing industry that we are neither known nor understood by most federal policymakers is much more than simply a matter of perception.

This vacuum has led directly to the enactment of federal laws and the adoption of policies which have had a punishing impact on the industry.

There is, of course, no malice toward our industry in these actions, but the results have been no less severe.

Indeed, it is not an overstatement to say that the depression in which the barge and towing industry finds itself today is due in large part to a litany of federal actions which were undertaken without sufficient attention to or an understanding of their direct and serious impact on the barge industry. Consequently, what our industry now needs most are thoughtful and rational laws which recognize our severely depressed condition and our vital place in the nation's transportation system, and which will restore much needed stability to our businesses.

A number of important topics must be examined in order to assist the Congressional Maritime Caucus in the development of rational and effective policies which will sustain and promote both the national interest and the barge and towing industry.

The Integrity Of The Jones Act The barge and towing industry believes that the Jones Act is the cornerstone of U.S. maritime policy.

Indeed, since 1920, the act has been the lifeblood of U.S.-flag carriers engaged in the domestic trades. The provisions of the Jones Act have fostered a stable domestic transportation market which allows for rational investment decisions regarding capital equipment, maintains healthy competition, and provides shippers with safe and reliable service. More important, it is a necessary adjunct to U.S. security.

The U.S. ownership requirement contained in the Jones Act is likewise critical to the nation's security and economy. During national emergencies, the domestic fleet of merchant vessels is called upon to transport troops and materials to support military operations. American ownership also keeps shipping revenues and taxes at home.

Another requirement for Jones Act vessels is that they be built in American shipyards. It is imperative for the U.S. to maintain a strong shipbuilding base in the event that a national emergency would require a sudden need to build additional vessels and repair damaged ones. Economically, building vessels in the United States provides billions of dollars of income to the domestic labor force, shipyards, and hundreds of allied industries.

Moreover, maintenance of the U.S.

construction provision is necessary to protect the billions of dollars invested in the existing domestic fleet. Any intrusion by foreignacquired vessels into the domestic trades would depreciate overnight billions of dollars invested by American citizens in U.S.-built capital equipment.

The barge and towing industry believes that the Congress must be vigilant if both the letter and the spirit of the Jones Act is to be maintained.

Various foreign and domestic interests continually call for and seek to weaken the provisions of this 1920 law. Additionally, attacks on the Jones Act also come in the form of proposals which would not directly change the statutory provisions of the law, but would undermine the economic foundation of the domestic trade. We encourage the Congressional Maritime Caucus to protect the act and the American investors owning Jones Act vessels by assisting the maritime industry in defending the statute against recurring and unwarranted attacks. To facilitate the strengthening of the act, we encourage the Congress to close the Alaska Third Proviso, allow only Jones Act tugs to provide assist services for all vessels calling at U.S. ports, extend the jurisdiction of the act beyond its current three-mile offshore limit, and end the Virgin Islands exemption.

Lastly, the barge and towing industry supports and applauds the efforts now underway to legislatively clarify the intent of Congress that all marine towing and support activities on the U.S. outer continental shelf are subject to the provisions of the Jones Act and are therefore reserved for American-flag vessels, we believe that this clarification of our cabotage laws is both timely and imperative, and will appropriately ensure that the significant and growing employment opportunities on the OCS are available to U.S.

operators.

Relieving The Excess Capacity-Depressed Cargo Vise On The Industry Largely through unwitting actions by the federal government, the barge industry is being crushed by too many barges chasing too few cargoes. The result: rates which are often below the cost of operating the equipment.

In the late 70s, federal government predictions of over-expanding U.S. exports of coal and grain produced feverish activity in building new barges and towboats. Then, amendments to the Internal Revenue Code at about the same time provided incentive to bring hordes of investors into barge-building partnerships to own barges for purposes of sheltering personal income.

Meanwhile, on yet another front, the federal government promoted barge building through the Title XI program administered by the Maritime Administration. In essence, this program availed companies which wished to build barges with credit on terms more favorable than those available in private lending institutions.

Overtonnage is in the range of 20 percent; one in five barges is idle.

And, about three quarters of the excess stems from misguided federal initiatives. It is arguably true that, unless the government redresses its errors which have so adversely impacted our industry, the predicted (slow) growth of tonnage along the coasts and the inland rivers will not soak up this excess capacity by the end of the century.

On the depressed cargo side of the equation, one should first look at U.S. exports of grain and coal.

Barges typically haul about half the grain bound for international export markets and about 15 percent of coal to U.S. ports where the cargoes are loaded for transshipment to foreign markets. These export cargoes constitute a very substantial part of the barging business. When they are depressed for any reason, our industry is hit hard.

At the time President Carter imposed the embargo on grain to the USSR, the United States shipped 20 million tons of grain to that country.

The window was slammed shut on that market, and the Argentines, Canadians and Australians moved in. Even though a new trade agreement was signed with the Soviet Union in September of 1983, we will probably never recover the market share we held in 1980.

The PIK program is another example of a well-intentioned initiative by the federal government which added to the woes of the industry. Farm acreage lay fallow, encouraged by "payment in kind." But, PIK was only a one-time blip compared to the ongoing federal subsidies to U.S. farmers which contribute much to price U.S. grains out of the export market. That, of course, rolls back on the barge industry.

Coal exports are a similar story.

U.S. coals are relatively uncompetitive for a variety of reasons. One reason can be traced to domestic (U.S.) transportation costs. The 1980 Staggers Rail Act freed the "revenue inadequate" railroads to hike prices charged to captive mines for the shipment of coal to East and Gulf Coast ports. The U.S. simply is not price competitive with Australian, Canadian, Polish and South African steam coals.

And, of course, overhanging the entire trade issue is the vastly overvalued U.S. dollar which has resulted in record-breaking balance of payment deficits.

An array of federal actions are urgently needed to promote U.S.

exports across the board. And, some innovative private sector-federal partnerships need to be sought to remove the excess capacity in the industry which was created by past federal policies.

Preventing New Taxes On The Industry The barge industry is in a depression, not a recession, and we are not recovering. Our industry is currently faced with economic conditions that threaten the survival of many companies. In 1981, the industry experienced a significant downturn in business. In 1982, the industry slipped further and in 1983 we continued to slide down the ever steeper slope.

Although it is apparent that this industry cannot withstand further taxation, whether it be termed as a user tax, charge, fee, or toll, it is also clear that additional fees on the inland system and new taxes in our ports are likely to be enacted. If the Congress elects to approve these additional taxes for inland waterway operators, a generous moratorium period should be authorized before escalation of the present inland waterway user tax. Coastal tug and barge operators deserve appropriate protection from unfair and discriminatory taxation by local interests for port projects from which the operators receive no benefit.

The barge and towing industry, and the merchant marine as a whole, is united and resolute in its opposition to the enactment of user taxes to recover the costs of Coast Guard-provided services. The establishment of Coast Guard user fees would require the U.S.-flag maritime industry to reimburse the Coast Guard for functions performed as a result of statutorilymandated requirements enacted by the Congress. There is no doubt that these requirements were promulgated for the public good and do not constitute benefits conferred upon the industry. The record developed by the Congress over the past four years on this issue is clear—Coast Guard user taxes are simply a mechanism for a tax increase, and represent a gross injustice to an ailing industry of vital importance to our national defense and economy.

Furthermore, the barge and towing industry supports the retention of existing federal tax policies and programs which have had a positive impact on vessel owners and operators, and which have encouraged investment in modern and more efficient equipment. The industry considers accelerated cost recovery, the investment tax credit, and the Capital Construction Fund program as important incentives to the continued modernization of the tug and barge fleet which should be maintained.

Military Competition With The Barge And Towing Industry The inland and coastal tug and barge industry has proved to be an important partner to American military forces stationed overseas in times of national emergency, additionally, when self-propelled ships generally engaged in domestic trades have been requisitioned or chartered by the government for overseas deployment, tugs and barges have quickly moved to effectively and efficiently fill the gap left in domestic service. Unfortunately, the important role played by tugs and barges in times of national emergency has not been widely recognized by national policymakers, despite many historical and contemporary examples.

Despite a solid record of achievement and reliability, the tug and barge industry continues to find an inexplicable reluctance by the military services to increase the use of commercial vessels for logistics support activities. For example, the Navy now operates over 80 large harbor tugs and has plans for constructing or acquiring 20 more. The Army maintains a fleet of 58 tugboats, and plans to replace this fleet with up to 40 modern vessels. The U.S. Air Force has a fleet of more than 70 self-propelled vessels, and is considering additional construction.

The U.S. Coast Guard is seeking funding to recondition its buoy tender fleet as an interim measure to the construction of a new fleet of buoy tenders beginning in the 1990s. The costs of each of these construction and acquisition programs promises to be immense.

With each of these military services, the commercial tug and towboat industry has expressed continued interest in performing the support functions now accomplished with military vessels and military personnel, and has pledged to do so at lesser cost.

Utilization of commercial assets would preclude the need for a substantial outlay of federal funds for the construction now contemplated.

It would also save the military services in operating expenses over the life of the vessel. Moreover, the use of commercial tug services would release military personnel from assignment to essentially civilian or commercial type billets, and enhance the ability of the industry to respond to national emergencies.

Lastly, the funds not expended on vessels performing civilian functions can be used instead for fighting ships and combatant vessels for which there is no commercial counterpart.

The barge and towing industry urges the Congressional Maritime Caucus to carefully consider the role which our industry can play in fulfilling the role of the U.S. merchant marine as the "fourth arm of national defense." We believe large tug construction programs by the military services are counterproductive to military/commercial coordination, and diminish our contribution to the defense effort. T o that extent, we also perceive them to be at odds with federal maritime policy, at considerable expense.