Originally Published in Nov/Dec 2017 Edition of The Maritime Executive
By: Paul Benecki
In the wake of Hurricane Maria, the Jones Act has become a bone of contention with critics claiming it hinders the Puerto Rican economy and supporters pointing to its importance for American jobs and national security.
However, the tugs and barges that move 760 million tons of cargo across the nation each year – the majority of the Jones Act fleet – are often glossed over in this debate.
According to the American Waterways Operators, 5,500 tugs and 31,000 barges serve communities all over America and beyond with an estimated economic impact exceeding $30 billion. This armada is made, owned, crewed and flagged in the U.S., and its operators are clear on the subject: Doing away with the Jones Act is not a good idea.
A third of Puerto Rico’s imports come from the U.S. mainland on Jones Act vessels like the tugs and barges operated by Trailer Bridge and Crowley Maritime, two quality-focused carriers with frequent sailings. “We have two to three calls a week in San Juan,” says Mitch Luciano, President and CEO of Trailer Bridge. “TOTE Maritime has two, Crowley has three, and National Shipping has a call every other week. You don’t get that kind of frequency and velocity from foreign-flag operators.”
Except for National Shipping, all these lines operate on the same route between Jacksonville and San Juan, giving shippers a range of competitive ro/ro and lo/lo options. A new generation of Panamax-sized vessels operated by TOTE and Crowley offers quicker speed-to-market than tug and tow, but Luciano believes towing services will remain a vital, low-cost alternative on the trade lane for a long time to come.
Critics of the Jones Act claim that foreign competition would offer even lower rates, but Luciano disagrees. Roundtrip shipping between the U.S. and Puerto Rico on a Jones Act vessel can actually be hundreds of dollars less than between the U.S. and Dominican Republic, a route with foreign-flag competition. In addition, Jones Act carriers like Trailer Bridge offer logistics services in Puerto Rico that foreign carriers simply don’t have, including chassis leasing, trucking and warehousing.
“Americans Helping Americans”
Healthy competition is the norm on the Puerto Rico trade lanes, but when Hurricane Maria hit, American tug-and-barge services teamed up in support of the relief effort. Cole Cosgrove, Vice President of Marine Operations for Crowley Liner Services, says tug operators have responded to the disaster with an unprecedented level of cooperation, pulling together to get as much cargo as possible to San Juan.
“The tug-and-barge industry has the ability to flex capacity very quickly,” he explains, “and we’ve had tremendous support from other operators. A multitude of companies have reached out and helped us including Moran, McAllister, Dann Towing, Crimson and Trailer Bridge.” With the addition of chartered-in barges and tugs, Crowley has increased its carrying capacity on the route by 67 percent.
Trailer Bridge’s Luciano adds that these partnerships came as a surprise for some industry observers but the lines are all “carrying the same goods for the same cause.” That isn’t something they take lightly, and their employees have been putting in the extra mile to keep cargo moving.
One of Crowley’s docking masters in Puerto Rico spent two days cutting through downed trees to get to a spot where he could call in to the terminal in San Juan, and many of the firm’s Puerto Rican seafarers came right back to work after checking on their families. “If you tell a mariner that someone needs help,” Cosgrove says, “they don’t ask why or how, but ‘When do you need me?’ It’s Americans helping Americans.”
As the vessel operator for Alaska Marine Lines’ barge service, Seattle-based Western Towboat transports almost all the Jones Act cargo between the lower 48 states and southeastern Alaska. It’s a remote part of the world with notoriously harsh weather and unforgiving narrow channels, and Western’s mariners have to be skilled and well-prepared. “What our people can do is what sets us apart,” says owner Bob Shrewsbury, Jr., “and not everybody can do it.”
To build that capacity, Western spends a lot of money on training including simulator time at the MITAGS/PMI campus and hands-on evaluations on smaller tugs. This kind of investment isn’t unusual among American towing operators: Their homeports are frequently their hometowns, giving them a strong incentive to take care of their crews, their customers and the regions they serve.
If the Jones Act were removed, Shrewsbury isn’t sure that competitors from overseas would provide the same level of safety and quality of service for the small fishing towns on the Alaska Panhandle. “Some of the things we do up there are not something you should have people who haven’t been trained in that area trying to do,” he says. “Not that they couldn’t learn it, but it could be costly.”
Western also builds its own tugs, at its own pace, with its own small yard and its own cash flow. “We can build our boats for about a third less than if we tried to find someone else to do it,” Shrewsbury states. “Plus we’re pretty fussy about how we like things.” He isn’t joking, and the company’s Titan Class boats have pioneering features for the line-haul trade such as azimuthing stern drives for maneuverability, towing winches that wind surge chain right onto the drum, and engine rooms neat enough for the yacht market.
Like Trailer Bridge and Western, many Jones Act tug operators thrive by doing more of the work in-house. Port of Coeymans is a private marine terminal on the Hudson River in New York State with a specialty in packaged logistics services. The port provides stevedoring and warehousing plus crane rental, trucking and marine towing, all with its own staff and equipment. Among other local projects, it has worked on New York City’s Willis Avenue Bridge, the new Tappan Zee Bridge on the Hudson River, the Astoria II power plant and the Sewaren 7 power plant.
Owning a tug-and-barge fleet is a key part of the port’s business model. “Contractors want to know that if they have project cargo coming into the country, they can get it all the way from the ship to their work site,” says Stephen Kelly, the port’s Vice President of Sales & Operations. “If you can offer a full-package solution, they are going to be more confident than if they have to work with eight or twelve different subcontractors. When we started with the port in 2008 we were hiring out for marine towing, and we found that we could never get the barges and tugs that we needed. In 2014, we decided to buy our own equipment and rely on our own services.”
The port now owns eight tugs and dozens of deck barges and wants to expand its business model to multiple locations on the eastern seaboard.
A combined service like this adds value for clients and would be hard for a foreign-flag operator to replicate. It requires local knowledge, local licensing and local connections. Introducing foreign competition for domestic voyages would make it hard for Jones Act operators like Port of Coeymans to run a full-service operation. “That would definitely be dangerous to our business,” Kelly says.
Louisiana-based Conrad Shipyard has five yards and 70 years of history on the U.S. Gulf Coast, and it makes high-quality workboats for a wide variety of customers. But it also specializes in building relationships like its decades-long partnership with Seattle-based Harley Marine. Harley has ordered two dozen vessels from Conrad over the years including three that are currently under construction and 19 that have already been delivered.
“This is an extraordinary number of vessels to be awarded from one customer and a validation of our commitment to quality,” says President, Chairman and CEO Johnny Conrad. “Harley understands best value, which takes into account quality, customer communications, and doing business with a builder you can trust to deliver on time and within contracted costs.”
Conrad’s deliveries include Harley’s four Sister Class petroleum barges, all of which are named after children with cystic fibrosis, a reflection of Harley’s efforts to raise awareness and fund research for a cure. “We strive every day to exceed our customer’s expectations and to improve the communities in which we live and operate,” notes Harley Marine Chairman and CEO Harley Franco. “Conrad Shipyard has the same philosophy as it relates to customer service and in giving back. It’s a good match and we value our relationship.”
Building in the U.S. doesn’t mean that technology can’t come from abroad. Finnish technology group Wärtsilä has been designing vessels for years, and over 1,000 tugs have been built to its blueprints. It’s also a leader in environmentally friendly propulsion, and its LNG dual-fuel packages are a popular solution for clean-running vessels all over the world including the U.S., where TOTE Maritime and Harvey Gulf have both contracted for Wärtsilä LNG technology.
Each Jones Act tug-and-barge operator has built a fleet and a business model that is well-adapted to the local environment – like hybrid-powered tractor tugs for ship-assist in Los Angeles or ro/ro barges for shipping to Puerto Rico and Hawaii. Many of them create additional businesses that complement marine towing, either by lowering their own overhead or providing a package of services for clients.
And when help is needed, these competitors are ready to join together to lend a hand, providing coastwise sealift capacity in times of need. As Crowley’s Cosgrove says, it’s “Americans helping Americans.” MarEx