This category includes companies primarily engaged in operating vessels for the transportation of freight on the deep seas between the United States and foreign ports. Establishments operating vessels for the transportation of freight which travel to foreign ports and also to noncontiguous territories are classified in this industry. A related industry group is SIC 4424: Deep Sea Domestic Transportation of Freight.
Deep Sea Freight Transportation
Deep sea foreign transportation of freight is greatly affected by the global economy and international competition. U.S. companies in this industry compete with each other and with foreign carriers. Competition in the industry is heightened in part because U.S. regulations have tended to make costs for U.S. ship owners higher than for ships bearing the flags of other nations. Many American-owned ships carry flags of nations with lower levels of expenses in order to stay competitive in the cargo transport business. By operating under the authority of other countries, U.S. shipping operations estimated they could cut labor costs by as much as 80 percent.
In the mid-2000s, U.S. merchant ships engaging in the deep sea foreign transportation of freight carried more than one billion tons of cargo. The United States remained the world's largest trading nation, with export and import trade equaling one-fourth of the global trade market. By far, the majority of this trade cargo was transported by water. Nonetheless, the U.S. fleet's share of ocean-borne commercial foreign trade, by weight, was less than 5 percent. In 2005 the U.S. fleet ranked thirteenth in the world by transported tonnage.
Although tonnage of foreign merchandise trade increased over previous years, rising costs and price competition still meant declining profits for U.S. ship owners. Some shipping firms received subsidies from the U.S. government to compensate for high U.S. flag operating costs. These subsidies fell under the Maritime Security Program, in which steamships were made available to the U.S. Defense Department should the need arise.
According to the U.S. Bureau of Transportation Statistics, in 2003 there were 415 U.S. vessels of 1,000 gross tons or more engaged in oceangoing transportation of freight, including privately owned and government-owned and active and inactive vessels. The U.S. flag merchant marine's active, privately owned oceangoing fleet totaled 224 and consisted of 81 container ships, 76 tankers, 32 roll-on/roll-off vessels, 19 dry bulk ships, and 16 others (including breakbulk, partial containership, refrigerated cargo, and specialty cargo).
The outlook for the U.S. flag fleet was predicated on several factors, including foreign competitors; costs of labor, fuel, insurance, and other operating expenses; and volume of trade in relation to available cargo space. Overcapacity has been a problem for U.S. and foreign merchant fleets for many years, resulting in lower freight rates. However, an ever-increasing globalization of the marketplace led to growing demand for freight-bearing vessels during the mid-2000s, especially for transporting exports from Asia to the United States.
In 2003 the Port of Los Angeles overtook JFK International Airport as the top U.S. international gateway based on revenues. The Port of Los Angeles handled $105 billion in imports and $17 billion in exports. Other top water gateways were the Port of New York and New Jersey ($77 billion, imports; $24 billion, exports) and Port of Long Beach ($79 billion, imports; $17 billion, exports).
The U.S. merchant deep sea fleet is made up of three categories of service: liner, non-liner (or tramp), and tanker.
Liner service includes regular, scheduled stops at ports along a route. Vessels operating as liners may be owned or chartered by an operator. Operators must accept any legal cargo they are equipped to carry, unless it does not meet the minimum freight requirements of the operator. Liner service usually carries manufactured goods. Often, two or more carriers along a route form "conferences" in order to regulate rates and competition. All conference members must charge the same freight rates, although rates may fluctuate according to supply and demand for cargo space. Liner service vessels are designed to handle the cargo most often shipped along their routes. Trip frequency depends upon the demands for shipping along that route.
Non-liner, or tramp, shipping is scheduled individually by a customer who charters the ship to carry its cargo. Tramps usually carry only one type of bulk cargo, such as coal, ores, grain, lumber, or sugar. On occasion, two shippers of the same commodity may charter the ship jointly. Freight rates vary depending on the negotiations of the ship owner and shipper and the supply of and demand for cargo space. The tramp freight market peaked in 1995 and continued to decline except for a few peak rate periods.
Tanker service carries liquid cargoes, especially crude oil and petroleum products. Tankers may be operated by privately owned companies for charter or by the oil company or other company as part of its entire industrial organization. Oil companies also charter extra ships as needed. However, they are not the only ones to employ ships exclusively for their own trade. Other companies may have specialized ships for transport of their goods. For instance, produce growing and distributing concerns operate fleets of refrigerated vessels for transportation purposes.
Some companies chartered ships on a long-term basis. Doing so provided many of the same advantages of owning a fleet without the enormous investment. By owning a fleet or contracting for long-term charter, the shipper was able to maintain complete control over shipping schedules. It could divert its ships to ports where demand for the product was high, and it could engage for service a fleet of ships with crews that had experience in handling a particular commodity.
Ships became increasingly more specialized during the twentieth century, and specialized ships were built to carry such diverse products as bulk cement, liquid chemicals, coal, iron ore, liquefied natural gas, newsprint and other paper products, petroleum and petroleum products, wood chips and wood pulp, refrigerated foods, and heavy equipment such as railroad locomotives or electric generator parts. Because many specialized ships were so expensive to build, a ship owner could agree to have a ship built for a company with the stipulation that the company agreed to lease the ship for most of its active life.
There were several federal agencies that administered laws and policies concerning the U.S. merchant fleet...