High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Bruce Vail
Lobbyists in Washington, D.C., are preparing to renew a legislative fight over U.S. government food aid shipments that pits U.S. shipping companies and maritime unions against the Obama administration and hunger-fighting groups like Oxfam and Catholic Relief Services. It’s a replay of the cargo preference sideshow in last year’s gigantic five-year farm bill struggle; this time the disputed legislation is included in a new budget authorization bill primarily designed to fund U.S. Coast Guard operations.
The fight is now festering quietly on the Senate side of Capitol Hill but could erupt into open conflict at any time between now and September, when the current U.S.C.G. funding expires, according to lawyer Charlie Papavizas of the firm Winston & Strawn. The House of Representatives passed a version of the bill earlier this year that includes a cargo preference provision favored by many U.S.-flag shipping companies, but opposition by the Obama administration threatens to sink the measure as the legislation works its way through the Senate, Papavizas said. The Obama administration is being backed by non-profit relief organizations such as Oxfam, which agree with the White House that the current practice of using U.S.-flag commercial vessels to transport food aid is wasteful and an unneeded subsidy to for-profit shipping companies.
“The situation is fluid. The Senate needs to act soon if the Coast Guard bill is going to be finished before the current funding expires. But this Congress doesn’t seem to take any budget deadlines seriously, so it’s anybody’s guess,” when Senate consideration will begin in earnest, said Papavizas, who represents the U.S. shipping company Liberty Maritime. Lobbyists for all sides in this dispute have been contacting individual senators and are beginning to count votes for a potential showdown, perhaps as early as this summer, he said.
The labor-management group American Maritime Congress (AMC) is watching developments closely, but it’s too early to say which side would prevail in a Senate vote, added AMC President Jim Caponiti. “It remains to be seen,” whether the White House can assemble the bipartisan coalition of senators needed to rewrite the Coast Guard bill to eliminate the food aid provision, he remarked. Both the supporters and the opponents of cargo preference have senatorial friends on both sides of the aisle, so any vote is unlikely to break cleanly on party lines. AMC, a group of U.S.-flag shipping companies allied with the Marine Engineers’ Beneficial Association (MEBA) union, wants the current provision kept intact, and has support from Democrats and Republicans, Caponiti said. But that support is not overwhelming, and AMC plans to continue pushing back against the lobbying by the White House and the hunger relief organizations.
Contributing to the lack of clarity on the issue is the technical nature of the legislation in question, and uncertainty about its direct financial impact. Papavizas explains that the legislation would revise the rules for the State Department’s Agency for International Development (AID) so that a larger percentage of its food aid shipments would be carried on U.S.-flag vessels. Current law mandates that the percentage must be at least 50 percent, while the new legislation would increase that to 75 percent. Such a change would benefit U.S.-flag shipping companies, he indicates, but it is no guarantee that any specific company would win additional, or more profitable, AID business. The total impact could mean as little as $15 million out of a total AID budget of $1.4 billion, but those numbers could easily be revised upward or downward depending on separate legislation on AID funding levels, Papavizas said.
Both Papavizas and Caponiti note that opponents have carried their lobbying efforts to some of the nation’s leading newspapers. A May 1 editorial in the “Washington Post,” for example, asserted that U.S. food aid programs are “overdue for reform” and called the Coast Guard bill “a step backward.” It urged senators to follow Obama’s lead in opposing the bill’s cargo preference provision. Similarly, an April 24 news story in the “New York Times” reported that the Obama administration is worried the legislation would limit the amount of food aid available to starving people in war-torn South Sudan, and elsewhere.
Despite the parallels between last year’s farm bill fight over cargo preference and the current contention over the Coast Guard measure, at least one hunger relief organization is not anxious to refight that battle. Bill O’Keefe, top lobbyist for Catholic Relief Services (CRS), reports that while his agency opposes cargo preference in food aid shipments, the Coast Guard bill is not a high priority now. “Listen, there are people literally starving to death in South Sudan as we speak. So we are interested in the Coast Guard bill, but it’s certainly not at the top our list,” of lobbying objectives, he said.
Nevertheless, CRS has communicated its opposition to the AID provision of the Coast Guard bill to a number of Senate offices, he said. “This provision would reduce the amount of food aid available to people who are suffering from hunger. So while we are not opposed to the maritime industry….it should not be at the expense of the people these (AID) programs are trying to help,” O’Keefe said. In contrast to the $15 million figure cited by Papavizas, O’Keefe estimated that as much as $75 million of the AID budget would be diverted to shipping companies as a result of the Coast Guard bill.
“We are on the same page,” as other hunger relief agencies like Mercy Corps, Save the Children, and CARE in opposing the cargo preference provision of the bill, O’Keefe continued. However, the CRS representative also said his group us “not as idealogical” as some others (an apparent reference to Oxfam) in food aid reform efforts. “The maritime industry is important in these (food aid) programs and I thin there are ways we can to improve and fine tune the programs. We consider ourselves to be reform-minded and pragmatic,” he said.
Join the 67,635 members that receive our newsletter.
Have a news tip? Let us know.