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 Caroline Winter
(Bloomberg) — Self-made millionaire Gregory Sancoff has spent a decade and $19 million building a highly unusual stealth boat. Called Ghost, it’s designed to be faster, more stable, and more fuel-efficient than anything currently in the U.S. Navy’s fleet, he says. “It’s such a smooth ride, you can sit there and drink your coffee going through six-foot swells,” he proudly told Bloomberg Businessweek in 2014.
But there’s a problem: The Pentagon doesn’t want Sancoff’s boat—and also won’t let him sell it abroad.
Early on, the government served Sancoff with secrecy orders, which meant he wasn’t allowed to show the patents or technology to anyone. Those secrecy orders were removed for a few years. But last year the government placed Juliet Marine Systems Inc. under the watch of International Traffic in Arms Regulations (ITAR). “It’s basically the same as a secrecy order,” says Sancoff. “I need government permission, if I want to show anybody anything.” Since then, the Portsmouth, N.H.-based startup has had to lay off 17 of its 20 employees, and Sancoff sued the government to recoup damages. “We’ve fallen into a very weird place,” he says. “If the U.S. doesn’t want this, fine. But why not let us sell to friendly nations? We’ve had so much interest from countries like Japan, Korea, Qatar.”
The Navy and the U.S. Department of Justice declined to comment.
The Ghost, which Sancoff says was intended as a kind of “attack helicopter of the sea,” looks more like a spacecraft than a boat. Its hull travels above the water, eliminating the jarring impact of waves. Underwater, long tubes, with propellers in front, power it with gas turbine engines, while simultaneously producing an air bubble around themselves to reduce friction. (See a video and more complete description here.)
Sancoff’s hope in building the boat was to honor his father, who served under General George Patton in World War II. Although Sancoff didn’t have a government contract for the project, as is normally required for weapons platforms, he hoped the novel vessel would so impress the Navy that it would adopt it.
As it turned out, many government officials were impressed. Former New Hampshire Senator John E. Sununu joined Juliet’s board, as did several retired naval officers, including four-star Admiral James Hogg, Rear Admiral Thomas Richards, who once oversaw all of the country’s Navy SEALs, and Rear Admiral Jay Cohen, who served as the Pentagon’s chief of naval research and as undersecretary for science and technology at the Department of Homeland Security. Sancoff says active Navy officials also showed interest but ultimately declined to work with him.
After finding out that the government would not allow him to sell abroad, Sancoff filed a lawsuit in July 2015 to recoup damages. He hopes for a trial by next summer.
“We’re spending outrageous amounts of money fighting the Justice Department. It’s killing us. We had to lay off the majority of our employees,” says Sancoff. “I never wanted to sue the government; it was the last thing I wanted.”The outlook for Juliet isn’t great. Last year, the U.S. patent office issued 95 secrecy orders—one for every 6,628 applications, as Joshua Brustein wrote in June. Most of those inventions were developed by large companies, specifically for the military or other government agencies. But as Brustein points out, the orders “are a different sort of ordeal for private inventors, about a dozen of whom file patent applications that are made secret by government mandate each year.” Inventors who break gag orders can lose their patent rights, or face fines or incarceration. And while some secrecy orders are reversed each year, others date back as far as the 1940s.
As for recouping funds? “There is a legal process to ask the government for compensation,” says Brustein, “but it takes years and almost never pays out.”
Senator Kelly Ayotte (R-N.H.) has weighed in on Sancoff’s behalf.
“It doesn’t seem right for the U.S. government to tell a company like Juliet Marine that the Department of Defense is not interested in the cutting-edge vessel and propulsion technology the company has developed at its own expense, while also telling the company that the technology is too advanced to permit them to share it with our nation’s closest allies and partners,” she said in a written statement to Businessweek. “DoD will increasingly need innovative American defense suppliers in the future, and the Pentagon would be wise to not adopt policies that will drive those companies out of business or out of the defense sector.”
For now, Sancoff has decided to stop filing patent applications altogether. “We’re afraid the government will come in and put more secrecy orders on us,” he says.
© 2016 Bloomberg L.P
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