“As the pendulum lifts one, it leaves the other to fall”1
On December 10, 1912, a meeting of public port officials from throughout the United States convened in New York City to “exchange ideas relative to port organizations, to promote the exchange of information and the development of uniform methods of administration and possibly to provide for some permanent organization between the principal port authorities,”2 thus the American Association of Port Authorities was founded. It was organized to promote the American ports and also to coordinate their efforts, but over the course of 100 years it appears that the American port landscape has drastically shifted. The bread and butter of American commerce, the American small port, have been reduced, in favor of the big, do-it-all port. The treatment of these ports by U.S. maritime policy is much like the end of the mom and pop stores for large department/grocery/hardware stores.
Many of the ports that have been left to wade in their own silt have been the American small ports, like the Port of Georgetown, South Carolina. Once historically significant, but no longer able to handle the large ships, nor equipped to handle containers. These ports have been left in the wake of modernization by the shippers, carriers, and their port authority. Many of these ports will close and devastate their local economy, however salvation may be available.
The salvation for small ports will not be in their history, but in their future. The ability to adapt to the modern world of giant ports, much like David with his slingshot taking aim at one specific spot on the giant.
Maritime Commerce over the last 100 years
In 1914, the Panama Canal opened to commercial shipping traffic.3 The opening of the canal created a new world for global trade and forever altered shipping routes for United States ports. Now, 100 years later, by the end of 2014, the Panama Canal is scheduled to have completed its greatest expansion, more than doubling its capacity and allowing it to handle the world’s most massive ships.4 Currently, the maximum capacity of a ship crossing the Panama Canal is 4,800 TEUs (TEU is one standard shipping container).5 The improvements currently under way would allow for much bigger ships: 50 percent wider, 25 percent longer and with a volume of more than 12,000 TEUs.6 These vessels draft at a significantly lower depth and need the ability to draft at minimum from 39.5 feet to 50 feet.7
Seventeen ports across the United States are being studied for dredging by the U.S. Army Corps of Engineers, including Baltimore, Charleston, Jacksonville, Miami, Baltimore, and Savannah.8 Each of these ports is a massive, centralized port that is designed to handle the post-Panamex ships that have become the focus of maritime commerce in the modern world. Long forgotten are the break bulk ships and ports that service such rarities. With a current port required channel depth of a minimum 40 feet to handle the largest ships currently coming through the canal, many small ports are unable to accommodate such large ships. However, a loaded 8,000 TEU vessel (i.e., a Post-Panamex vessel) sits 46 to 47 feet deep in saltwater and a foot deeper in freshwater.9
This deeper draft requirement necessitates a channel depth of nearly 50 feet, which many East and Gulf Coast ports currently lack. A 2010 U.S. Army Corps of Engineers study determined that insufficient navigation channel depths restrict nearly 30% of port vessel calls; thus necessitating the need for large ports to dredge in order to incorporate larger vessels; however this need eliminates the funding available for smaller ports.10 This lack of funding available to maintain America’s small ports has led many small ports that are unable to accommodate the larger vessels, to fall into disrepair due to lack of maintenance and eventually become fully obsolete due to their inability to be accessed.
The current need to expand the Panama Canal originated in 1956 with the advent of containerization. Malcom McLean first invented the method of containerization to affect the efficiency and costs of shipping cargo from his trucking line, McLean Trucking.11 In 1961, before the container was in international use, ocean freight costs accounted for 12 percent of the value of U.S. exports and 10 percent of the value of U.S. imports. According to the staff of the Joint Economic Committee of Congress, “these costs are more significant in many cases than governmental trade barriers,” noting that the average U.S. import tariff was 7 percent.12 This process was so expensive that in many cases selling internationally it was not worthwhile, due to the costs of shipping. The container dramatically affected these costs.
The elimination of piece-by-piece freight handling brought lower expenses for long shore labor, insurance, pier rental, and the like. Containers were quickly adopted for land transportation, and the reduction in loading time and transshipment cost lowered rates for goods that moved entirely by land. As ship lines built huge vessels designed to handle containers, ocean freight rates plummeted. As container shipping became intermodal, with a seamless shifting of containers among ships, trucks, and trains, goods could move in a never-ending stream from Asian factories directly to the stockrooms of retail stores in North America or Europe, making the overall cost of transporting goods little more than a footnote in a company’s cost analysis.13
Global containerized trade, 2001 to 2011 (forecast), in million TEU global containerized trade has grown at a compound annual rate of 12 percent from 2001 to 2005. The forecast growth rate for the period 2005 to 2011 was 6.5 percent. In 2011, global containerized trade is forecast to reach 134 million TEU, 2.3 times as much as the 58 million TEU recorded in 2001. The data above represents maritime trade in fully loaded containers, not port throughout, or the movement of full and empty containers.14 The container trade continues to grow and as of 2013, represented nearly 90% of maritime commerce into the United States.15 The growth of these container ships is only a stepping stone.16
As seen in Table 1 below, and reflected in the value of its imports and exports, the United States has experienced an explosion in the growth of its involvement in international trade as trade barriers have been reduced and containerization has grown. Also noted in Table 1 is the growing significance of the international trade in goods for the economy of the United States; by the year 2000, the total value of imports and exports was equivalent to twenty percent of the total Gross Domestic Product (GDP).
Table 1. U.S. International Trade in Goods (Billions of Dollars)17
|Year||Export Value||Import Value||Total Value of Trade||U.S. GDP||Total value of International Trade
as Per Cent of U.S. GDP
The importance, value, and tonnage will continue to grow as the ships continue to grow. Steamship company Maersk’s research concluded that while an 18,000TEU vessel is expected to incur total costs per day at sea of $197,198.00 a 22,000TEU vessel would run-up costs of $220,892.00 per day and a 24,000TEU ship would incur costs of $229,693.00 per day. However, the cost per slot goes down – with an 18,000TEU vessel incurring a cost of $10.96 per TEU, per day at sea – while a 22,000TEU vessel would cost $10.04 per TEU per day at sea, and a 24,000TEU ship calculated to cost $9.57 per TEU per day at sea. In contrast, a 12,500TEU ship is currently calculated to cost $12.43 per TEU per day at sea.18
While these huge vessels carry almost three times as many shipping containers as the freighters currently passing through the canal are capable of carrying and the containers unloaded from just one giant ocean Post-Panamex vessel fill up the equivalent of more than 20 trains or 3,000 semi-trailer trucks,19 the revolution begun by Malcom McLean is still growing. Globalization of the past fifty years has resulted in a 90-fold increase in the value of foreign trade,20 thus with the advent of these massive vessels to reduce the cost of transport there is no end in sight, but the ports that can handle these ships is limited.
According to the Maritime Administration, in 1997 only four of the ten major U.S. container ports that collectively loaded and unloaded almost eighty percent of container traffic had channel and berthing areas deep enough in draft for fully laden mega-containerships.21 (Table 2).
Table 2. Water Depth for Selected U.S. Container Ports21
|Port||Channel Depth||Berth Depth||Container Port Ranking|
|New York/New Jersey||40||35-45||3|
|New Orleans||36 & 45||35||14|
The future is bright for ports that can handle containerization; however the focus on the larger container vessels has led to the decrease in funding for the smaller ports unable to accommodate such deep drafting needs. This policy has led to the destruction of lesser known ports in communities that have relied upon the port for their economic needs.
American Small Ports – “Emerging Harbors”
The Port of Georgetown, South Carolina
Georgetown is the third oldest city in South Carolina located on the Winyah Bay, the confluence of the Great Pee Dee, Waccamaw, and Sampit rivers.22 Georgetown was founded in 1729 and became an official port of entry in 1732.23 Prior to this, all foreign exports and imports had to pass through Charleston. Duties and the added freight had to be paid there.24 With the designation of Georgetown as a port of entry, the area’s merchants and planters could deal directly with all ports, bypassing Charleston.25
Georgetown is the second largest seaport in South Carolina, behind the Port of Charleston.26 The Port of Charleston is ranked fifth in the United States based upon the value on its imported cargo.27 Thus, relegating Georgetown to little sister status, although in 2000, the Port of Georgetown was handling 1.8 million tons of material.28 However, that number declined to 265,000 pounds in 2008.29 Currently the port is handling 550,000 pounds a year despite its limitations.30
The Georgetown Channel was last dredged in 2004 to its permitted depth of 29 ft., however no maintenance dredging was ever completed resulting in the current depth of 19 ft.31 In fiscal year 2000, the Georgetown Port handled 1.8 million tons of shipments, unfortunately in 2010, the Georgetown Port only handled 5 ships and 107,000 tons of cargo.32
The slow steady decline in Georgetown tonnage can potentially be blamed on a number of factors, however the United States’ own maritime policy shares responsibility in the decline of this American port.
America’s Small Ports and Harbors are suffering
With over 85 percent of our nation’s containerized freight flowing through 10 ports33, it is understandable that the vast majority of attention is paid to a select few. However, this funding strategy creates a problem for American small ports. This is not a problem for just the Port of Georgetown, SC, but it is severely affecting communities across the United States. In the Pacific Northwest at the Port of Ilwaco, the two-mile channel leading into the Columbia River has been silting in, and currently sits at a foot deep at low tide.34 The U.S. Army Corps of Engineers told officials in Port Orford that its budget for maintaining small harbors – those handling less than 1 million tons of cargo a year – was cut in half this year and is not expected to improve next year or anytime soon.35 The lack of consistent maritime policy regarding dredging our nation’s waterways is quickly becoming a commercial pandemic, which can only be described as a fiscal boondoggle for this nation.
The U.S. Maritime Administration recognized almost every one of the nation’s top 50 ports handling foreign commerce requires regular maintenance dredging,36 as well as the nation’s small ports at a substantially lower cost. While the Port of Charleston will require $13 million to complete its study and over $300 million to actually dredge the harbor,37 the Port of Georgetown (45 minutes North) will only cost $13 million to dredge, including the already completed study.38
Thus, not to be overlooked, the U.S. small and medium size ports play a vital role in the nation’s port system. These ports serve specific market niches and have developed special handling techniques for specific commodities, such as fresh produce, frozen meats, and building materials that are containerized and/or palletized. They can also be the sole source of commodities for isolated communities. Also, these ports provide redundancy and resiliency for emergency preparedness.39
American Dredging Policy
Since 1789, the federal government has authorized navigation channel improvement projects; the General Survey Act of 1824 established the U.S. Army Corps of Engineers’ role as the agency responsible for the navigation system.40 Since then, ports have worked in partnership with the Corps of Engineers to maintain waterside access to port facilities.41 Over 300 million cubic yards of dredged materials are removed from navigation channels each year.42 Another 100 million cubic yards are dredged from berths and private terminals.43 The total, 400 million cubic yards of dredged material, equals a four-lane highway, 20 feet deep, stretching from New York City to Los Angeles.44
Over 90 percent of the nation’s top 50 ports in foreign waterborne commerce require regular maintenance dredging.45 Collectively, these ports move nearly 93 percent of all U.S. waterborne commerce in a given year, and receive a large percentage of the Harbor Maintenance Trust Funding.46 The funding projects of these large ports require massive payouts that leave little funding available for the projects of small ports which generally require a small percentage of the funding necessary for a large port project.
The Harbor Maintenance Trust Fund
In 1986, the Harbor Maintenance Trust Fund was created to provide funds for the U.S. Army Corps of Engineers to use in maintaining operations of U.S. Ports.47 The Harbor Maintenance Tax (HMT) currently obligates exporters, importers, and domestic shippers,48 to pay 0.125 percent of the value of the commercial cargo they ship through the Nation’s ports.49 The HMT was imposed at the time of loading for exports and unloading for other shipments.50 It is collected by the Customs Service and deposited in the Harbor MaintenanceTrust Fund, from which Congress may appropriate amounts to pay for harbor maintenance and development projects and related expenses.51 However, the U.S. Supreme Court faced the question of whether this “fee” was constitutional under the Export Clause of the Constitution which states: “No Tax or Duty shall be laid on Articles exported from any State.”52 It had been previously held, that the Export Clause categorically bars Congress from imposing any tax on exports.53 The Clause, however, does not rule out a “user fee,” provided that the fee lacks the attributes of a generally applicable tax or duty and is, instead, a charge designed as compensation for Government supplied services, facilities, or benefits.54 The Court held that the fee, which is imposed on an ad valorem basis, was not a fair approximation of services, facilities, or benefits furnished to the exporters, and therefore do not qualify as a permissible user fee but as an unconstitutional tax.55 This Export Clause exception was found to also apply to the carriage of passengers on cruise ships.56
Even with the noted, judicial exceptions the Harbor Maintenance Trust fund is not lacking. According to the Department of Transportation, U.S. port facilities annually service the movement of more than 2 billion tons of domestic and international cargo, 3.3 billion barrels of oil, 134 million ferry passengers, and over 5 million cruise ship passengers.57 The Department of Transportation estimates that waterborne cargo contributes more than $742 billion to the U.S. gross domestic product and provides employment for more than 13 million people.58 It has been estimated that by 2020 American overseas trade will more than double, further increasing dependence on the maritime transportation system.59 All of these imports generate funds to be used in adherence with the Harbor Maintenance Trust Fund.
According to the Harbor Maintenance Trust Fund Act of 1996, the expenditures from Harbor Maintenance Trust Fund can be used:
(1) to carry out section 210 of the Water Resources Development Act of 1986 (as in effect on the date of the enactment of the Water Resources Development Act of 1996),
(2) for payments of rebates of tolls or charges pursuant to section 13(b) of the Act of May 13, 1954 (as in effect on April 1, 1987), and
(3) for the payment of all expenses of administration incurred by the Department of the Treasury, the Army Corps of Engineers, and the Department of Commerce related to the administration of subchapter A of chapter 36 (relating to harbor maintenance tax), but not in excess of $5,000,000 for any fiscal year. 60
Section 210(a) (2) of the Water Resources Development Act of 1986 reads:
(2) up to 100 percent of the eligible operations and maintenance costs assigned to commercial navigation of all harbors and inland harbors within the United States.61
Currently, the Harbor Maintenance trust fund generates roughly $1 billion per year, with equal expenditures, however the current balance including interest is roughly $8 billion.62 In the administration of the tax, there is no attempt to identify particular port usage and allocate funds accordingly. In other words, the HMT generates a national pool of funds, which is distributed without regard to which ports used triggered collection of the tax. However, the tax is meant to be a port user-charge and comparing where the tax is assessed and where the revenues are spent raises a number of policy issues especially considering Article I, section 9 of the United States Constitution:
Article I, Section 9
No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another; nor shall Vessels bound to, or from, one State, be obliged to enter, clear or pay Duties in another.63
However, the Port Preference Clause has not barred Congress from authorizing specific navigational projects, including dredging, that incidentally benefit a particular port or group of ports while exercising its power to regulate interstate commerce as shown in the table below.
Table 3. USACE HMTF Expenditures by State/Territory 65 (FY1999-FY2008)
|State/Territory||Total Expenditures, FY1999-FY2008||% of Total|
The table above indicates each states receipt from the HMTF. When this data is compared to the below list of ports with highest import cargo value (thus paying the highest tax) it is understandable why many state port authorities are calling foul.
Table 4. Top 10 Ports by Value of Imported Cargo 66 (2005, in millions of dollars)
|Rank||Port||Import Value||% of Total|
|1||Los Angeles, CA||$116,489||13.7%|
|2||New York, NY||$104,366||12.2%|
|3||Long Beach, CA||$103,801||12.2%|
|7||Hampton Roads, VA||$27,540||3.2%|
The distribution of the funding is drastically tilted in the favor of a few states, such as Louisiana. With 19.5% of all funds available, although they do not rank in the top ten in generating contributory taxes for the Harbor Maintenance Trust Fund. Meanwhile, California generates 28.7% of all tax in the Harbor Maintenance trust fund, but only receives 6.6% of funding. The most significant data to extrapolate from the above tables, is that when the funds are made available to a state port authority, the limited funding constrains their use to the large port projects, leaving very little if anything to the small ports who typically are fully reliant and unable to fund their port in solitude based on the impact of containerization.
The Future Dredging of the U.S. Small Ports
Until 1986 the federal government paid the full costs of dredging necessary for the construction, maintenance, or deepening of navigational channels leading into ports; the costs of dredging berthing areas for ships, on the other hand, were left to the ports.67 The Water Resources Development Act (WRDA) of 1986,68 however, introduced cost sharing for construction projects, with local sponsors paying between ten and fifty percent, based on the depth of navigation channels. As channels were dredged deeper, the local share of cost increased.69 The cost of maintenance dredging was left completely to the federal government except where the channel’s depth exceeded forty-five feet; in such a case the local sponsor was responsible for half of the cost of dredging.70
There is a current surplus of $8.0 billion in the Harbor Maintenance Trust Fund.71 The U.S. Congress has the authority to appropriate funds from the Harbor Maintenance Trust Fund to the U.S. Army Corps of Engineers for intended purposes of harbor maintenance, but the fund has instead repeatedly been mismanaged and underutilized.
Legislative attempts to correct this trend have been proposed, but not enacted. Senators Levin and Hutchison introduced S.3213 in 2010, to require the full use of the HMTF for the intended purpose.72 In 2010, Congressman Boustany introduced a companion bill H.R. 4844 to require the full use of the HMTF for the intended purpose.73 On January 5, 2011, Congressman Boustany introduced H.R.104 to require the full use of the HMTF for the intended purpose.74 The bill has been referred to the Transportation & Infrastructure Committee.75
In the 113th CONGRESS, 1st Session, U.S. Rep. Shuster and other representatives introduced HR 3080, Water Resources Reform and Development Act of 2013.76 This proposed legislation calls for an expanded use of the Harbor Maintenance Trust Fund.77 The Act calls for a staggered increase in the use of the Harbor Maintenance Trust Fund tax as shown below:
(1) For fiscal year 2014, 65 percent of the total amount of harbor maintenance taxes received in fiscal year 2013.
(2) For fiscal year 2015, 67 percent of the total amount of harbor maintenance taxes received in fiscal year 2014.
(3) For fiscal year 2016, 69 percent of the total amount of harbor maintenance taxes received in fiscal year 2015.
(4) For fiscal year 2017, 71 percent of the total amount of harbor maintenance taxes received in fiscal year 2016.
(5) For fiscal year 2018, 73 percent of the total amount of harbor maintenance taxes received in fiscal year 2017.
(6) For fiscal year 2019, 75 percent of the total amount of harbor maintenance taxes received in fiscal year 2018.
(7) For fiscal year 2020, and each fiscal year thereafter, 80 percent of total amount of harbor maintenance taxes received in the previous fiscal year.
The Act further defines “eligible harbors and inland harbors” as a harbor or inland harbor that, historically, as determined by the Secretary, (A) generates an amount of harbor maintenance taxes; that exceeds (B) the value of maintenance dredging work carried out for the harbor or inland harbor using amounts from the Harbor Maintenance Trust Fund.78
Further, the Act allows for the ‘expanded uses’ of the Harbor Maintenance Trust Fund to include:79
(A) The maintenance dredging of a berth in a harbor that is accessible to a Federal navigation project and that benefits commercial navigation at the harbor.
(B) The maintenance dredging and disposal of legacy-contaminated sediment, and sediment unsuitable for open water disposal, if such dredging and disposal benefits commercial navigation at the harbor; and such sediment is located in and affects the maintenance of a Federal navigation project; or is located in a berth that is accessible to a Federal navigation project.
The word “historically” provides hope to many small ports that have seen their tonnage decrease due to the negligent care of the Army Corps of Engineers in dredging activity. Reportedly, the Army Corps of Engineers’ policy is that they will not consider port maintenance for ports less than 1.0 Million Tons per year.80 Consequently, many small ports like the Georgetown Port have a chicken and egg scenario; whereas, the port cannot get the permitted depth dredged unless the volume is above the 1.0 million threshold, and the port cannot obtain enough tonnage unless the depth is adequately dredged.
The key term in HR 3080 for small ports, like Georgetown, is “historically.” When looking at the history of the many small ports, when properly maintained they were able to operate effectively and efficiently at well over 1,000,000 tons. It allows these ports to escape the “chicken and egg” situation.
Securing funding for the American Small Port
Although, HR 3080 makes American Small Ports eligible to receive funding to perform the desperately needed dredging, the question of whether the necessary funds will be allotted remains to be seen. Will the limited funds still be funneled to the larger ports, although the small ports future rest in the hands of the legislative budget?
The Port of Charleston, SC
Fifty feet, that is what the Port of Charleston, S.C. wants to attain as early as 2016.81 There are two primary drivers of this number; the first being that the Post-Panamex ships will require this new depth.
According to Jim Newsome, the Director of the South Carolina Port Authority, “We have based our growth and investment plans on the reality that fifty feet is the required depth of a true post-Panamex harbor. Charleston is the deepest harbor in the region today and will remain the deepest in the future, positioning our port as the Southeast’s hub for exporting activity.”82
However, the fifty foot depth operation and maintenance requires a cost sharing provision as outlined in Table 5 below:
Table 5. Cost-Share Requirements for Corps Harbor Projects83
Operation and Maintenance and Construction Federal Share and (Source of Funds)
Harbor Depth Operation & Maintenance Construction
< 20 feet 100% (HMTF) 80% (General Treasury)
20-45 feet 100% (HMTF) 65% (General Treasury)
> 45 feet 50% (HMTF) 40% (General Treasury)
The Army Corps estimates the cost to complete the study for the Port of Charleston, SC to be $13 million, while the actual dredging/construction costs to be $300 million.84 Based on the table above the Port Authority of South Carolina was left with the responsibility to locate $180 million to complete its dredging construction, while the U.S. General Treasury would contribute $120 million. However, the State of South Carolina is weary of the federal government’s ability/willingness to pay the allotted full $300 million to fund the dredging without outside contribution from any source.85
The second primary reason for the Port of Charleston’s dredging to fifty feet and the budgeted $300 million is to maintain “our port as the Southeast’s hub for exporting activity.”86 Savannah, GA is the Port of Charleston’s biggest competitor and Georgia’s port officials have said a 30-mile-plus stretch of the Savannah River will be deepened from 42 feet to 47 feet by as early as 2016.87 However, the State of South Carolina sued to block the $652 million project based on environmental concerns.88 This tactic by the State of South Carolina appears to be working; it is a minimum of a six-year construction timeline.89 Rep. Jim Merrill of Charleston commented, “I’d say (Charleston) is at even footing with Savannah now, with the exception that we have natural advantages Savannah does not. They still have environmental issues to be addressed and triggers to take the next step.”90
A 2019 completion for the Savannah deepening would put it on roughly the same schedule as the Charleston Harbor project; however the Port of Georgetown, SC continues to languish just north of this dispute.
The Port of Georgetown, SC
Georgetown, SC as previously described, sits on the Winyah Bay and acts as a break bulk port for shipment of dry goods; such as forest products and cement.91 Primarily, the Georgetown Port is utilized for export purposes. The Port has suffered a chronic decline in tonnage as their harbor has slowly silted in. Tonnage has dropped from 1.8 million tons in Fiscal Year 2000 to roughly 150,000 tons in 2009.92 This drop in tonnage occurs as the silt continues to rise. The Georgetown Channel was last dredged in 2004 to a depth of 29 ft., but currently rests between 17 and 19 feet in certain locations.93 The lack of maintenance dredging (100% HMTF responsibility according to Table 4) has necessitated construction dredging back to its permitted depth of 29 ft.94
As the permitted depth is 29 ft., 65% of the dredging/construction funding is expected to be provided by the US Treasury, however since 2004, the Port of Georgetown has gone with no funding, not even the $4 to $6 million needed annually to maintain the harbor.95 The dredging impact study was completed in 2011 for $400,000; however no further action has taken place to start the dredging project.96 According to the Army Corps of Engineers, the actual dredging is expected to costs $33 million and take three years.97
The South Carolina State Legislature did authorize $18.5 million in bonds to the Port of Georgetown, but noted that these funds would only be made available should the remainder of the need be found elsewhere.98 Yet again a small port is left to wallow in their own silt, or in this case pluff mud.
A simple comparison between the Port of Charleston, SC and the Port of Georgetown, SC shows that the costs of completion for the Port of Georgetown to be less than a tenth of the Port of Charleston and nearly half the time of completion. Further, while the state is willing to provide $300 million for construction and $13 million to study construction to a large port like the Port of Charleston, small ports like Georgetown, SC go neglected by those responsible for their maintenance and care. Recently, the Fiscal Year 2013 Work Plan was released by the Office of Management and Budget and included $20.4 million for the U.S. Army Corps of Engineers, Charleston District to perform a beach renourishment at Folly Beach while the Harbor of Georgetown, South Carolina received no support.99 At the same time, President Obama is touting the big harbors and ignoring the needs of the small harbors, stating “If we don’t deepen our ports all along the gulf in places like Charleston, South Carolina, Savannah, Georgia, and Jacksonville, Florida… If we don’t do that, those ships are going to go someplace else. We’ll lose jobs. Businesses won’t locate here.”100 While small ports may not be as well-known they provide a necessity to the maritime infrastructure of the United States and must be maintained to protect the commerce of larger ports as will be explained later.
The Need of the American Small Ports to American Maritime Policy
While many large ports receive funding for their construction projects, the small ports and their adjoining communities continue to suffer. The economies of these communities routinely rely on these ports and the jobs they create, however the backbone of the American maritime history lays in the small ports. Without the support of the American small ports the American maritime industry becomes exposed.
Economy of Small Town Port Communities
When the Port of Georgetown does not operate, the community suffers as shown in the table below:
However, with a properly maintained and operating port, the Community of Georgetown unemployment rate reduces immediately by 1% with the additional, direct jobs created.
Dredging to the proper depth for the Port of Georgetown, just like the many other small ports hit hardest by the recession, has the potential to reverse the downward trends of recent years. If the Port is able to attract additional business to the region, the local economy benefits not just from the jobs and income of the port, but from the activities related to the port. While large ports generally rest in large communities with a diversified tax base, the American small port is reliant on the limited resources they possess.103 Should the Georgetown Harbor be dredged to it’s permitted limit allowing 3 million tons, the impact could be tremendous, with over 51 new jobs and nearly $35 million newly generated revenue as the chart below indicates.
This is the same for many small ports across the United States. A 2013 economic impact study analyzing the small Port of Bandon, Oregon illustrates the positive economic effects small ports have on their communities. The study concluded that maintaining adequate depths at Bandon was vital to the viability and growth of 54 local businesses directly employing 441 people, with an additional 177 jobs also dependent on the same economic activity.105 In only one year, this modest-sized coastal port directly and indirectly added more than $27.4 million in value to the regional economy in 2012, while returning nearly $8 million in state, local and federal taxes.106
“As you work to fund our nation’s navigation infrastructure, we ask that you take into consideration the needs of small coastal, including Great Lakes, waterways,” Senator Cantwell wrote in a letter, “Our nations’ small ports and harbors serve as the lifeblood of their communities and greatly contribute to the nation’s economic vitality. …Without adequate funding, the navigation channels leading to these ports will silt in and the jetties protecting these communities will crumble.”107
The nation’s small ports serve or should be designated to serve as contingency in the unfortunate incident that some of America’s larger ports are targeted by terrorism, man-made disaster, or by a natural disaster.
- Natural Disaster
On August 29, 2005, Hurricane Katrina destroyed one-third of the Port of New Orleans.108 In 2003, New Orleans ranked fifth among U.S. ports in tons of cargo handled, and 12th in total foreign trade.109 Before Katrina hit on Aug. 29, the port was getting 36 to 40 ship calls a week.110 Five months after the hurricane, January 2006, the count was only 18 to 20 per week.111 The goal was to hit 70 percent of the pre-Katrina calls into the Port of New Orleans by March or April 2006.112
Most ports rest on the water (unless it is an inland port) and therefore face the consequences that come with that positioning. If New Orleans, one of U.S. busiest ports, can be severely limited, so can any other port. What is the contingency plan when the larger ports are unable to handle 100%, 50%, or 25% of the scheduled calls due to a natural disaster?
- Man Made Disaster
On March 24, 1989, shortly after midnight, the oil tanker Exxon Valdez struck Bligh Reef in Prince William Sound, Alaska, spilling more than 11 million gallons of crude oil.113 The spill was the largest in U.S. history until the Deep-water Horizon disaster. Since the incident occurred in open U.S. navigable waters, the U.S. Coast Guard’s On-Scene Coordinator had authority for all activities related to the cleanup effort.114 His first action was to immediately close the Port of Valdez to all traffic.115 No ships in or out of the Port of Valdez, a life line to the people of many remote areas of Alaska was closed. No food in or out of the Port. No clothing in or out of the port. Nothing in or out of the port.
In response, the Oil Pollution Act of 1990 (OPA 90) was passed requiring the development of Area Contingency Plans (ACP) for each port area.116 The first requirement for nearly every ACP is the directive of containment.117 Containment will generally necessitate the closure of the port to all ships for an extended period of time, until the man-made disaster, whether it is oil, chemicals, or other material is eradicated. Why are the American small ports not incorporated into the contingency plan when the larger ports are unable to handle 100%, 50%, or 25% of the scheduled calls due to a man-made disaster?
In October 2000, 17 U.S sailors were killed when an Al Qaeda suicide squad was able to ram its explosives-laden boat into the side of Navy destroyer USS Cole while it was harbored in the Yemeni port of Aden.118 In November 2008, militants used speedboats to bypass security in the Indian port of Mumbai where they carried out attacks on landmark buildings, killing more than 160 people.119
Eighty-Five (85) percent of our Nation’s containerized freight is flowing through 10 ports.120 On September 11, 2001, two planes destroyed the World Trade Center in New York City in an attempt to disrupt U.S. commerce and lives.121 The terror threat to America continues today and an attack on America’s commerce could not be greater than a targeted attack on American ports.
Meanwhile, millions of cargo containers are unloaded from ships each year at American seaports, providing countless opportunities for terrorists to smuggle and unleash a nuclear bomb or weapon of mass destruction on our shores.122 At current staffing and funding levels, U.S. Coast Guard personnel and Customs agents can thoroughly inspect only about 5 percent of the 9 million shipping containers that arrive at U.S. ports every year.123 It is estimated, that an attack on an American port could cause tens of thousands of deaths and cripple global trade, with losses ranging from $45 billion to more than $1 trillion, according to estimates by the RAND Corporation and the Congressional Research Service.124 The American small ports should be the contingency plan when the larger ports are unable to handle 100%, 50%, or 25% of the scheduled calls due to a terror caused disaster.
American small ports play a vital role in meeting the needs of the American defense and military readiness. The Merchant Marine is the fleet of privately owned ships which carries imports and exports during peacetime and becomes a naval auxiliary during wartime to deliver troops and war material.125 A vital role that our seaman serve to protect the United States.
According to the Merchant Marine Act of 1936: “It is necessary for the national defense… that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency…”126 The Merchant Marine has served the United States during World War II, the Korean, Vietnam, Persian Gulf and Iraq wars.127 The military relied on the U.S. merchant fleet to transport much-needed ammunition and supplies, in support of the logistics chain for each branch of the military.128 A soldier cannot fight without food and weapons, which is the role of the merchant marine. As the table below demonstrates that mariners served with honor and distinction during World War II:129
|Service||Number serving||War Dead||Percent||Ratio|
|Merchant Marine||243,000*||9,497**||3.90%||1 in 26|
|Marines||669,108||19,733||2.94%||1 in 34|
|Army||11,268,000||234,874||2.08%||1 in 48|
|Navy||4,183,466||36,958||0.88%||1 in 114|
|Coast Guard||242,093||574||0.24%||1 in 421|
|Total||16,576,667||295,790||1.78%||1 in 56|
* Number varies by source and ranges from 215,000 to 285,000.
**Total killed at sea, POW killed, buried in ABMC cemeteries, plus died from wounds ashore
As noted earlier, Transportation and Infrastructure Committee Chairman Bill Shuster (R-Pennsylvania) proposed legislation to improve the state of our waterways infrastructure. According to the Chairman,“(i)mproving the efficiency of our locks and dams, inland waterways, ports, and waterborne transportation is essential to maintain and improve U.S. competitiveness in the global economy.”130 These improvements, however, can’t be made if U.S. crews and vessels are not available to transport goods along America’s vast waterways system.
The majority of practical Merchant Marine experience comes from American small ports, where small to medium size vessels call home.131 Large ports service large ships which merchant mariners will not typically handle within their day to day duties. However, the U.S. Merchant Marine fleet is gradually being whittled away, by the elimination of cargo preference, the loss of experienced mariners, and the loss of available vessels.132
The closure of American small ports, whether intentional or through natural occurrences, continues to dwindle the available crews and ships to serve in the logistical role demanded by our armed forces. The U.S. mariners who transport this cargo are vital to our national security if it is to avoid this grim prognosis.133 The only ones who will win from disjointed policies that gut the U.S. merchant fleet are foreign carriers.134 These carriers are poised to take over the responsibility of transporting our military’s guns and supplies, which is the role of the American Merchant Marine.135 The closure of American small ports will only lead to the inevitable dependence upon foreign nations to support the United States military, thus we fall to their mercy and prime those nations to take control of the sea.
Saving the American small port
Small ports across the United States continue to struggle to survive. With over 90% of cargo being transported by container and this number expected to grow Post-Panamex,136 many small ports would not be able to handle these larger ships even if their channels were dredged. That leaves the questions of do we need small ports and how will the American small port survive.
Earlier the question was asked, “what will the US maritime policy be when terrorism, man-made disasters, or natural disasters close a large port?” The answer should be to have in place a contingency plan of distributing the ship calls amongst ports that can facilitate the needs of the carrier and cargo.
The Maritime Administration’s (MARAD’s) mission is to strengthen and improve the U.S. maritime transportation system including infrastructure, industry and labor to meet the nation’s economic and security needs.137 There is nothing more important to preventing the collapse of the US economy than supporting the commercial shipping industry.
A review of the majority of Area Contingency Plans, including Charleston’s Contingency Plan, does not provide a contingency to continue the shipping commerce in case of a disaster at one of our top ports.138 The reason for this may be the competitive nature of the shipping business or the inherent distrust between states of the union, but whatever the reason in the interest of the American economy, MARAD must invest time to facilitate a workable plan to preempt the chaos created (such as with Katrina) by disaster.
Instead of constantly being reactionary, maritime policy must be established to continue the import and export of necessary cargo. The American small ports are a tool that must be utilized due to their logistical prowess. The American small port is advantageous for multiple reasons including, but not limited to: the likely proximity to the larger port, the unlikely event of man-made disasters, or terror affecting their harbor, and the ability to resume operations quickly after a natural disaster with proper attention. The small port should be the strategic support for the continuation of American Commercial Shipping in case of such national emergency.
Port Specialization (niche)
America’s small communities survive due to the specific abilities of their citizens. They maximize their resources and exploit that potential; the same must be done with their ports. John Carver, Executive Vice President, Ports Airports and Global Infrastructure Group, Jones Lang LaSalle stated, “Containerized cargo represents the most coveted – and the most profitable – use for the U.S. maritime industry. It also requires the greatest upfront investment in both channel and pier-side improvements. Further, container terminals are of most value to the carrier lines and their customers when they are built to a critical mass of volume and can accommodate the larger vessels in their fleets. However, there are many other viable non-container maritime uses for the smaller ports to cater to in order to find their niche and capture market share. These can include break-bulk operations, heavy equipment, automobiles, raw materials, cold supply chain, and dedicated single-use terminals.”139
Using the same example as above what can the Port of Georgetown offer that the large Port of Charleston, SC does not offer? The Port of Georgetown, S.C. is an exclusive break bulk port which features a newly renovated on port rail service.140 The Port of Charleston does not offer on port rail service for its break-bulk port.141 Even the slightest distinction can make a difference in the competitive commercial market of shipping.
If Georgetown were to maximize its local resources it would find two companies that are perfect partners. The Georgetown Port is connected by rail to a paper mill and a steel mill, meaning that break-bulk scrap paper exports and break-bulk scrap metal imports would be natural fits for the Georgetown Port.142 Further, Georgetown is situated on a hotbed of natural resources. Right off the coast of the mouth of the Winyah Bay is the South Atlantic Bight. This area of territorial seas has 134 GW wind energy potential and 25% of the potential East Coast offshore wind generation in waters that are less than 30m.143
If the Port of Georgetown were to develop this natural resource, much like the ones in which the U.S. Department of Energy awarded $169 million to seven proposed offshore wind projects in six states, it would provide a niche, energy resource to help support that port.144 The Energy Department’s National Offshore Wind Strategy calls for 10 gigawatts of offshore wind-power capacity to be installed by 2020, the equivalent of about 10 nuclear reactors. There are no offshore turbines in operation in the U.S. now.145
Further, many small ports have the advantage of access to natural gas and oil that can be piped directly into the port and shipped or railed out.146 The Port of Georgetown has 6.65 trillion cubic ft. of natural gas and 750 million barrels of oil that remains untouched.147 Many large ports do not want the potential hazard these resources will create, the community uproar, or litigation, however the small ports are clamoring for just an opportunity to survive.
Every small port must evaluate what its niche or specialization is. They must select a service that differentiates them from the larger, more sophisticated port.148 The luxury most small ports hold is that they can make quick decisions and have beautiful locations. Many of these locations would be perfect to incorporate a mix of tourism and industry, such as hosting a river cruise which has vessels that can draft as low as 80cm.149
Using the American small port to refresh the Merchant Marine
On March 12, 2013, Denise Krepp, the former Chief Counsel at the U.S. Maritime Administration and Special Counsel to the General Counsel at the U.S. Department of Transportation, predicted that “the Merchant Marine will be dead in 10 years.”150 That is an alarming predication coming from a former attorney with MARAD. As previously described, she predicts that the lack of good maritime policy and the lack of willingness by the legislature to address the issue will continue to lead to the demise of our primary naval auxiliary and our primary military supplier in time of war.151
The objectives and Purpose of the Merchant Marine Act of 1920 are encapsulated in TITLE 46, CHAPTER 24, SECTION 861. Purpose and policy of United States:
It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States; and it is declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine, and, insofar as may not be inconsistent with the express provisions of this Act, the Secretary of Transportation shall, in the disposition of vessels and shipping property as hereinafter provided, in the making of rules and regulations, and in the administration of the shipping laws keep always in view this purpose and object as the primary end to be attained.152
However, is this still the US policy?
The President of the United States stated in 2008 that “America needs a strong and vibrant U.S.-Flag Merchant Marine. That is why you can continue to count on me to support the Jones Act (which also includes the Passenger Vessel Services Act) and the continued exclusion of maritime services in international trade agreements.”153 So what policy has been introduced to save the U.S. Merchant Marine? According to The AFL-CIO Maritime Trades Department, nothing has been done and states “the Obama Administration is asleep at the Helm.”154
There is no citable plan/policy in place to resurrect the U.S. merchant marine/naval auxiliary. In a world of terrorism our maritime fleet continues to suffer. The Navy League of the United States released a maritime policy statement indicating a need for a “Maritime Security Act that provides the foundation to support the U.S. commercial fleet in international trade and an economically viable U.S.-flag Merchant Marine for national defense and economic security. That includes a strong strategic sealift Merchant Reserve component in the U.S. Navy to ensure that critical Mariner skills and experience are retained to support Navy and strategic sealift transportation.”155
American small ports can play a critical role in the vessel requirement and crew training of the Strategic Sealift/merchant marine, many of the vessels employed at these harbors can and have served valiantly in Iraq and Afghanistan.156 They are crewed by experienced seaman who need minimal training and perform heroic tasks bravely and diligently daily. The small port seamen operate vessels that require knowledge that many large port pleasure boaters and container ship operators do not possess. The American small port should be the training ground for the new generation of Merchant Mariners.
The United States and her military need small ports to be prepared commercially and militarily. The value of the American small port cannot be underscored in its place with the economy of the U.S. in order to promote the continued growth of American Commerce. The American small port continues to suffer, but cannot be overlooked as a vital component to train competent seamen and provide necessary logistical support in the time of war.
A contingency plan must be formed as a part of the American maritime policy that exemplifies the vast resources of these small ports. The economic, cultural, and defensive value of these ports remains unheralded, yet unaltered in their place in history. The book remains unwritten as to their future; however their importance cannot be trumpeted enough.
As other nations continue to assume dominance over the high seas, the U.S. must adopt a maritime policy that promotes the growth of America’s large ports, but supports American small ports both as a vital contributor to commerce and defense. Without the American small port the U.S. ability to compete militarily and commercially will continue to dwindle and so will America’s ability to lead.