MARAD 2004 1 
MARAD 2004 2 
MARAD 2004 3 

Maritime 

Administration 

Annual Report 

To Congress

Fiscal Year 2004 

U.S. Department of Transportation 

Norman Y. Mineta, Secretary 

John Jamian, Acting Maritime Administrator 

Headquarters 

400 7th Street, S.W. 

Washington, DC 20590 
MARAD 2004 4 

INTRODUCTION 

EXECUTIVE SUMMARY 

INDUSTRY OVERVIEW 

NATIONAL SECURITY 

• Background

• Ready Reserve Force

• National Defense Reserve Fleet

• Voluntary Intermodal Sealift Agreement

• Maritime Security Program

• War Risk Insurance

• Strategic Commercial Port Readiness

• NATO Planning Board for Ocean Shipping Participation

• Domestic (Jones Act) Fleet and National Security

• Foreign Transfers

• Merchant Mariner Availability

• Maritime Training and Education

• Port Security Grants

COMMERCIAL MOBILITY 

• Short Sea Shipping

• Marine Transportation System

• Maritime Policy Review

• Port of Anchorage

• Upper Mississippi River-Inland Waterway System Feasibility Study

• Intermodal Access to U.S. Ports and Terminals Survey

• Deepwater Port Licensing

• Prototype Mooring Buoy Project

• Port Facility Conveyance Program

• Public Port Financing

• Capital Construction Fund

• Construction Reserve Fund

• Maritime Guaranteed Loan Program (Title XI)

• TEA-21 Reauthorization 

 

Table of Contents

1 

6 

21 
MARAD 2004 5 

GLOBAL CONNECTIVITY 

• U.S.-Flag Fleet and Trade

• Cargo Preference

• International Activities

• Financial Approvals

• Cargo Handling Cooperative Program

• Agile Port

• Research, Technology, Demonstration, and Deployment Initiative

• Operating-Differential Subsidy

• Feature: New York and Great Lakes Regional Offices

ENVIRONMENTAL STEWARDSHIP 

• Ship Disposal Program

• Ready Reserve Force Environmental Program

• Environment and Marine Technology

• Environmental Stewardship Activities

• Aquatic Nuisance Species

ORGANIZATIONAL EXCELLENCE 

• President’s Management Agenda

• Feature: Transportation Leadership Program

• Civil Rights

• Customer Satisfaction

• Legal Services and Agency Decisions

• Acquisition

• Audits

• Financial Statements

• Notes to Financial Statements

• Maritime Day Proclamation, 2004 

• Organization Chart

32 

52 

58 

65-66 

67-70 

71 

72 

73 
MARAD 2004 6 

Annual Report 2004 

John Jamian 

Acting Maritime Administrator 

To Congress and Our Partners, 

Customers, and Employees

During Fiscal Year 2004, Maritime Administration programs provided vital sealift support to U.S. 

Armed Forces overseas, and advanced the departmental goals of Commercial Mobility, Global Connectivity, and Environmental Stewardship, as well as carrying forward the President’s Management 

Agenda. The Maritime Administration leverages the resources of the commercial maritime industry for 

sealift support and for planning, coordination, and development of policy. One distinguishing feature of 

this agency is its many successful cooperative ventures with private industry. You will find descriptions 

throughout this report. 

Much of our work this year was collaborative with the Marine Transportation System National Advisory 

Committee (MTSNAC), which is appointed by the Secretary of Transportation. We worked together to 

review and carry forward preparing our Marine Transportation System to meet the growing demands of 

our expanding economy. Cargo efficiency is directly linked to cargo security in that both require an effective understanding of the supply chain, which is essential for the recovery of transportation from intentional harm or natural disasters. 

MTSNAC also provided important input to the U.S. Commission on Ocean Policy report. The report 

recommended that the Interagency Committee for the Marine Transportation System be chaired by the 

Department of Transportation and promote coordination among marine transportation participants as 

well as with other modes of transportation. MARAD intends to implement the recommendations in the 

report that support maritime transportation. 

We believe that in the years to come the Maritime Administration and the rest of the U.S. Department 

of Transportation will continue our important work incorporating better use of waterborne transportation 

into our National transportation system. We are confident that we laid the foundation in Fiscal Year 

2004. 

The Maritime Administration continues to honor America’s maritime heritage, and to help build 

America’s future. 

INTRODUCTION
MARAD 2004 7 

This Annual Report of the Maritime Administration (MARAD), MARAD 2004, enumerates many of the 

agency’s measurable accomplishments during Fiscal Year 2004. In addition to these accomplishments, 

MARAD, with the Office of the Secretary of Transportation, has conducted a far-reaching review of the 

current status and future needs of America’s marine transportation system as part of an initiative to 

strengthen our Nation’s intermodal transportation system to meet anticipated demands. 

While this initiative is still in its formative stages, its goal will be to improve the efficiency and effectiveness of our Nation’s Marine Transportation System (MTS) and enhance the competitiveness of our 

maritime industry. It is expected to place renewed emphasis on the marine mode of transportation and 

integrate it more fully into the National transportation system with a focus on infrastructure development 

strengthening the U.S. merchant marine and our shipbuilding capabilities to meet our Nation’s future 

needs. More information on the MTS and can be found in the Commercial Mobility section of this report. 

MARAD also conducted a major maritime policy review in response to the interest of the House Committee on Appropriations. The committee emphasized that it was especially interested in sustaining 

U.S.-flag maritime commercial viability, while ensuring that maritime priorities are well articulated 

within the safety and infrastructure mission of the U.S. Department of Transportation (DOT). MARAD 

conducted that review, and reported the results to Congress in September 2004. More information on 

that report can also be found in the Commercial Mobility section of this report. 

In FY 2004, MARAD continued to perform its multi-faceted maritime responsibilities. Four of 

MARAD’s major accomplishments are highlighted below. 

• Sealift has been of vital importance in deploying and sustaining U.S. forces overseas during the 

Global War on Terrorism. MARAD programs provide access to the government-owned ships of the 

Ready Reserve Force and to privately-owned sealift capability under the Maritime Security Program 

and the Voluntary Intermodal Sealift Agreement. MARAD also works to ensure the supply of 

skilled American seafarers to crew the ships. The accomplishments of these programs are outlined 

in the National Security section of this report.

• MARAD led the way in global trade, especially with China, in Fiscal Year 2004. In December 

2003, six years of negotiations culminated in a new bilateral agreement that gave American carriers 

and shippers more access to China’s markets. MARAD’s Cargo Preference program has supported 

U.S. aid programs, and also sustained the U.S. merchant marine. The accomplishments in both 

these areas are outlined in the Global Connectivity section of this report.

• Stewardship of the environment is a strategic goal of the Department of Transportation, and MARAD’s largest challenge in that area has been the presence of obsolete ships in the National Defense 

Reserve Fleet--ships that posed an elevated environmental threat. MARAD disposed of fifteen such 

ships in FY 2004.

EXECUTIVE SUMMARY 
MARAD 2004 9 
MARAD 2004 8 

• MARAD has instituted an effective response to the President’s Management Agenda, the administration’s aggressive strategy for improving the management of the Federal Government. The strategy focuses on five areas of management weakness across the Government where improvements 

and the most progress can be made. MARAD’s accomplishments in the integration of budget and 

performance, the integration of business strategies and contracts, competitive sourcing, human capital, and e-government are outlined in the Organizational Excellence section of this report.

This Annual Report fulfils the reporting requirements under Section 208 of the Merchant Marine 

Act of 1936, as amended. It also fulfils requirements of reporting to Congress on Cargo Preference 

activities, plus the requirement for reporting to Congress on Title XI activities, as mandated in 2003. 

Fiscal Year 2004 accomplishments are discussed in greater detail in this report. Together they constitute a record in which MARAD’s personnel can take great pride. 
MARAD 2004 1 

Mission of the Maritime Administration 

To strengthen the U.S. maritime transportation system--including infrastructure, industry, and labor--to 

meet the economic and security needs of the Nation. 

The U.S.-flag Sealand Comet at the Port of Long Beach, CA 

INDUSTRY OVERVIEW 
MARAD 2004 2 

A kingdom, that has a large import and export, 

must abound more with industry, and that employed upon delicacies and luxuries, than a 

kingdom that rests contented with its native commodities. It is, therefore, more powerful as well 

as richer and happier. 

 David Hume, “Essay of Commerce,” 1752 

The United States is the world’s greatest trading 

Nation, accounting for nearly 20 percent of the 

world’s annual oceanborne trade. U.S. international trade amounts to $2 trillion annually. Half 

of this trade consists of manufactured goods carried in shipping containers, and more than seven 

million containers enter American ports every 

year. The U.S. marine transportation industry 

serves the needs of both foreign and domestic 

commerce. It comprises companies that carry 

freight or passengers on the open seas or inland 

waterways, offer towing services, charter vessels, operate canals and terminals, and develop 

offshore oil resources. In 2002, almost 27 percent of the Nation’s Gross Domestic Product 

(GDP) was dependent on international trade, 38 

percent of the value, and 78 percent of the volume of which moves by water. 

In the past, U.S. manufacturers and retailers had 

generous on-site warehouse capacity to provide 

for market uncertainty. Today, industries rely 

on sophisticated supply-chain logistics and justin-time delivery practices to compete globally. 

Business plans are designed accordingly, with 

little or no room for delay, using minimum storage space.

U.S. Waterborne Commerce, 2003

 (Million Metric Tons)

Domestic 

Mfgs. 57

3%

Domestic 

Petroleum 

327

15%

Intl. 

Petroleum 

652

30%

Domestic 

Primary 

Products 

536

25%

Intl. 

Primary 

Products 

440

20%

Intl. Mfgs. 

158

7%

Source: U.S. Army Corps of Engineers 

Exhibit 1 
MARAD 2004 3 

Thus, America’s continued economic health depends on the current and future efficiency of the 

marine transportation industry. 

In 2003, U.S. waterborne commerce amounted 

to 2.2 billion metric tons (Exhibit 1). This includes inland waterway commerce. International commerce accounted for 58 percent of the 

total, up from 52 percent 5 years earlier. The 

increase is due largely to a 20 percent increase in 

petroleum imports, and a 9 percent decline in 

coastwise petroleum shipments. The increasing 

share of imports in U.S. waterborne commerce 

has contributed to a rising deficit in the U.S. international ocean freight accounts (Exhibit 2). 

The growth of freight payments (to foreign companies) in absolute terms has been about twice 

the growth in payments to U.S. companies 

(gross output). 

 

Petroleum and other primary commodities (coal, 

chemicals, crude materials, and farm products) 

accounted for 90 percent of U.S. waterborne 

commerce. Manufactures trades, a category including manufactured equipment, machinery, 

and products, and primary manufactured goods, 

accounted for only 10 percent of U.S. waterborne commerce in 2002, but have doubled over 

the last 10 years. Imports accounted for virtually all of the increase. 

A total of 48,173 U.S.- and foreign-flag vessels 

were active in U.S. domestic and international 

trades in 2003; of these, 6,157 were oceangoing 

vessels (10,000+ DWT). Of the oceangoing vessels, 514 were owned by U.S. companies; of 

these, 244, fewer than half, were registered under the U.S. flag. In 2003, the U.S.-flag oceangoing fleet carried only 2 percent of U.S. international trade. In addition to the oceangoing 

U.S. Marine Transportation, Economic Indicators 

 1998 1999 2000 2001 2002 2003 

Gross Output and Components ($Mil.)

Gross Output 25,034 27,019 28,864 28,299 27,919 30,037 

Intermediate Inputs 18,519 20,606 21,642 20,996 21,004 22,480 

Value Added1 6,516 6,413 7,222 7,303 6,915 7,557 

Employee Compensation 3,077 3,359 3,455 3,578 3,650 3,760 

Net Taxes 464 504 481 364 164 366 

Operating Earnings (Surplus) 2,975 2,551 3,286 3,361 3,101 3,431 

Labor and Capital 

Employment 52,000 54,000 55,000 54,000 54,000 54,000 

Capital Stock ($Mil.) 47,600 47,000 46,600 45,900 45,900 46,100 

Return on Capital (%)2 6.2 5.4 7.1 7.3 6.8 7.4 

International Freight ($Mil.)

Receipts 3,783 3,940 4,290 3,771 3,724 4,465 

Payments 13,652 15,728 20,068 19,395 18,622 24,174 

Balance (9,869) (11,788) (15,778) (15,624) (14,898) (19,709) 

U.S. Waterborne Commerce (Mil. Metric Tons)

International 1,130 1,144 1,228 1,225 1,197 1,248 

Imports 763 781 852 863 847 912 

Petroleum 501 512 558 563 553 600 

Exports 367 363 376 362 349 337 

Domestic 992 963 971 945 926 920 

Ocean 227 208 206 202 196 201 

Petroleum 161 147 148 149 140 146 

Other 765 755 765 743 730 719 

Total 2,122 2,107 2,199 2,170 2,123 2,168 

Vessel Earnings ($/day) 

Tanker 16,630 12,261 27,206 27,963 16,362 29,351 

Dry Bulk 6,309 6,328 9,334 7,924 7,284 9,900 

Containership (2,750 TEU) 16,450 15,475 22,188 16,771 10,700 22,125 

1 Gross output less intermediate inputs. 2 Operating surplus divided by capital stock. 

 Source: Bureau of Economic Analysis; Clarkson Research Studies for vessel earnings. 

 U.S. Army Corps of Engineers for Waterborne Commerce. Exhibit 2 
MARAD 2004 4 

fleets, there were 216 bulk vessels, of which 47 

were U.S.-flag active in U.S. Great Lakes trades. 

The U.S. domestic fleet contains about 41,800 

smaller U.S.-flag vessels: tugs, barges, offshore 

supply vessels, and ferries are active in U.S. 

inland and coastal trades. 

As of year-end 2003, the value of the U.S.-

owned fleet (capital stock) was about $46 billion 

with an average age of 17 years. The capital 

stock declined slightly over the last five years, 

while industry employment has remained stable 

at 54,000 since 1999 (Exhibit 2). 

Average fleet age is likely to fall over the next 

five years with the attrition and/or replacement 

of 25+- year-old vessels. U.S. companies have 

ordered a significant number of new vessels 

from foreign and domestic shipyards. These 

include: ten (four foreign-built) double-hull 

crude carriers; 15 foreign-built double-hull product carriers; 14 U.S.-built double-hull ATB’s 

(articulated tug/tank barge units), which will 

replace older barges and product tankers in U.S. 

coastal trades; 13 foreign-built bulk carriers; six 

U.S.-built high-speed ferries for U.S. domestic 

trades, and 54 (17 foreign-built) offshore service 

vessels. All of the foreign-built vessels will be 

registered under foreign flags, and all of the 

U.S.-built vessels will be registered under U.S. 

flag. 

As of year-end 2003, 61 percent (190 vessels) of 

the U.S.-owned tanker fleet were equipped with 

double hulls. Even if there were to be no growth 

in the U.S.-owned tanker fleet, but only the expected replacement of existing single-hull vessels, 67 percent of the U.S.-owned tanker fleet 

will have double hulls by year-end 2006. 

Investments in new vessels are being driven by 

customer needs and many are tied to long-term 

customer commitments. Such arrangements integrate marine transportation into production and 

distribution processes, improve service to customers, stabilize carriers’ earnings, and offer the 

prospect of better returns. Over the last five 

years, the return on capital for marine transportation services (5.4-7.4 percent) has been below 

the return for other U.S. transportation services 

(8.3-11.9 percent). 

The historical volatility in marine transportation 

operating earnings (surplus) can be traced 

largely to the impact of changes in oil prices on 

the demand for tank vessel services (Exhibits 2 

and 3). As prices fell in 2000, 2001, and 2003, 

oil companies rebuilt depleted stocks, contributing to an upturn in petroleum trades, tank-vessel 

earnings, and industry returns. 

At the end of World War II, America’s shipbuilding industry was by far the largest and most 

advanced in the world. Since then, as other nations built up or rebuilt their shipbuilding industries and continually modernized them, the construction of commercial oceangoing vessels in 

the United States has steadily declined. The 

number of such ships built in the United States 

Crude Oil prices and Global Oil Stocks, 

1999 to 2003

10

15

20

25

30

35

40

1999:1 2001:1 2003:1

Month/Year

$/Bbl.

2.6

3.0

3.4

3.8

4.2

Bil. Bbls.

Stocks

1 Mo. Price

4 Mo. Price

Source: Energy Intelligence Group for stocks, New 

York Mercantile Exchange for oil prices. 

Exhibit 3 
MARAD 2004 5 

was 77 in 1975, 21 in 1982, and is 10 per year at 

present. 

Today in the United States, there are 24 privatesector shipyard facilities with the capability of 

handling vessels over 400 feet in length. This 

represents a 38 percent reduction from the 39 

facilities operating in 1981. Repair yards with 

dry-dock facilities dropped by 23 percent from 

1982 to the present. Most significantly overall, 

the number of production workers fell from 

111,000 in 1982 to 44,700 in 2002. The United 

States now has less than a 1 percent share of the 

world’s new construction market of commercial 

vessels of over 1000 gross tons, and lags far behind the world’s shipbuilding leaders such as 

South Korea, Japan, China, Germany, Italy, and 

Poland. 
MARAD 2004 6 

On board the Ready Reserve Force ship Cape Vincent en route to the Middle East 

Department of Transportation Strategic Objective: Security. 

Balance homeland and National security transportation requirements with the mobility needs of the 

Nation for personal travel and commerce. 

Maritime Administration Strategic Objective: National Security. 

Assure that sufficient sealift capability and intermodal transportation infrastructure exist to support 

vital homeland and National security interests. 

NATIONAL SECURITY 
MARAD 2004 7 

The United States military would be unable to 

deploy and sustain its forces 

 worldwide without using privately owned, 

U.S.-flagged commercial vessels. 

Finding of National Defense Transportation 

Association report, February 2003 

BACKGROUND 

Sixty years ago, at the end of World War II, the 

U.S. Merchant Marine was by far the strongest 

in the world. Since then, its decline—in vessels 

and seagoing personnel—has been relentless, 

even as this country grew into the largest trading 

Nation in the world. Less than 3 percent of our 

Nation’s waterborne exports and imports are 

carried on vessels under the U.S. flag. Moreover, the manpower pool of American merchant 

mariners is declining due to real wage and benefit declines, increased licensing and documentation requirements, limited career prospects in a 

shrinking fleet, the fading lure of life at sea, restrictions on shore leave, and the attractiveness 

of shoreside jobs. The number of oceangoing 

qualified U.S. merchant mariners has declined 

from 69,100 in 1970 to 14,900 today. 

National security programs of the Maritime Administration (MARAD) work to keep this decline in the merchant fleet from becoming a security weakness. MARAD programs assure sufficient sealift, as well as the necessary port and 

intermodal services, to move materiel into and 

out of the area of conflict, while maintaining the 

flow of commercial shipping and cargo, as well 

as ensuring a sufficient pool of trained mariners 

to crew the ships needed for sealift. 

Ninety-two percent of cargo moved in Operation 

Iraqi Freedom (OIF) between January 1, 2003 

and September 30, 2004, approximately 45.8 

million cubic feet, was carried aboard U.S.-flag 

vessels and moved through 13 of 14 strategic 

commercial ports. Seventeen percent of military 

cargo was carried on vessels in MARAD’s 

Ready Reserve Force. 

READY RESERVE FORCE (RRF) 

The Ready Reserve Force (RRF) is MARAD’s 

premier sealift program that uses governmentowned ships. MARAD maintains the RRF, a 

fleet of militarily useful ships, in a reserve status 

in the event that the Department of Defense 

(DOD) needs them to support the rapid, massive 

movement of military unit equipment and supplies and troops for a military exercise or largescale conflict, for which they are placed under 

the operational control of the U.S. Navy’s Military Sealift Command (MSC). The ships are 

managed by commercial companies selected by 

MARAD, and crewed by civilian merchant 

mariners. Most of the RRF ships activated for 

the conflict in the Middle East have been kept in 

reduced operating status (ROS), with partial 

crews keeping the ships in good repair and ready 

for activation. 

RRF Operations 

The tempo of operations for RRF ships during 

Fiscal Year 2004 was very high, as ships logged 

4,798 operating days supporting military missions and exercises. In the four years prior to 

the war in Iraq, the RRF program was averaging 

about 400 operating days annually, so this was a 

more than ten-fold increase. The ships and 

The RRF ship Cape Victory offloads military cargo 

at the Port of Ash Shuaybah, Kuwait 
MARAD 2004 8 

crews have performed well; the overall FY 2004 

performance, or fully mission-capable rate for 

RRF ships while under MSC operational control, 

was 99.2 percent. 

During the month of January and in early February 2004, 21 RRF ships were activated, in support of Operation Iraqi Freedom 2 (OIF2), which 

was the sealift effort supporting U.S. Armed 

Forces rotation in Iraq. All 21 vessels were rollon/roll-off (RO/RO) ships in ROS. Late in FY 

2004, six RRF roll on/roll off's were called upon 

again to support further U.S. Armed Forces deployments to the Middle East, with additional 

RRF activations expected into Fiscal Year 2005. 

More information on the activations of RRF 

ships supporting American military action in the 

Middle East is available at 

www.marad.dot.gov/programs/rrf.html. 

The RRF ships also participated in exercises at 

sea and supported peacekeeping missions during 

FY 2004. Four RRF ships were activated for a 

Joint Logistics Over the Shore exercise; the scenario was a disaster relief and humanitarian response off Central America. The Mount Washington, Cape May, Cape Trinity, and Flickertail 

State participated. Immediately following its 

participation, the Flickertail State was dispatched to carry U.S. Marine Corps equipment 

to Haiti to support the peacekeeping mission in 

progress. The crew unloaded cargo under hazardous conditions. 
MARAD 2004 9 

On July 15, 2004, in a sunlit waterside ceremony 

in Newport News, VA, Maritime Administrator 

Captain William G. Schubert presented the Professional Ship Award to the officers and crew of 

the Ready Reserve Force ship SS Flickertail 

State. The Professional Ship Award is given to 

non-military ships that achieve the highest degree of readiness, performance, efficiency, reliability, productivity, and safety. The crew was 

honored for its part in Operation Haiti, working 

under fire delivering supplies and equipment to 

the U.S. Marine Corps, and for performing that 

mission directly on the heels of completing a 

training exercise in conjunction with the U.S. 

Navy. 

In the training exercise in October 2003, the officers and crew had delivered aid cargo to Guatemala, and then had come back to participate in 

“skin-to-skin” operations in the Atlantic Ocean 

off Fort Story, VA. The operations involved atsea approaching, mooring, and cargo transfer 

between two ships. The system being tested 

minimizes heavy load swings via computer control of a crane’s movements, and since the 

Flickertail State is a crane ship, it was ideal for 

such tests. 

The crew had 

returned with the ship 

to Newport News, 

VA, and were ready 

to head home, when 

they were asked to 

leave again immediately, to load military 

materiel and take it to 

Port-au-Prince, Haiti. 

They did as requested, and arrived 

to find riots going on 

in Port-au-Prince, and 

the city in flames. 

“We could see the 

fires,” said Bosun 

David Brown. 

“There was smoke all 

over the mountain 

range. You could tell there was looting and rioting going on there, and we could hear quite a bit 

of gunfire.” 

Captain Joseph Regan said the ship’s agent was 

telling them it was getting worse. “They couldn’t get trucks into the docks because of violence 

in the streets. That was, obviously, in the back 

of our minds the whole time. But when you’re 

focused on what you have to do, focused on getting the cargo off, focused on the people around 

you, you keep it in the back of the brain, because 

you’ve got other things to think on.” 

The cargo was unloaded quickly and safely 

within nine hours, and the Flickertail State came 

home. At the award ceremony, Captain Schubert praised the officers and crew, saying, “The 

crew of the Flickertail State is an outstanding 

example of the integral role the Ready Reserve 

Force plays in our National defense operations. 

Our Nation's Ready Reserve Force helps ensure 

our security by supporting the men and women 

of the U.S. Armed Forces.” 

*** 

FEATURE: FLICKERTAIL STATE WINS PROFESSIONAL SHIP AWARD 

Presentation of the Professional Ship 

Award: Left to right: Joe Regan, Captain; 

Scott Stilianos, Chief Engineer; Maritime 

Administrator William Schubert; and Jorge 

Aguirre, President and CEO, Interocean 

Ugland Management Corporation 

Photo by Elvira May 

Flickertail State 

The Flickertail State at dawn, 

 Newport News, VA 

Photo by Susan Clark 
MARAD 2004 10 

Other RRF ships participating in exercises were 

the Wright (Exercise Carolina Patriot/Dragon 

04), the Cape Girardeau (Exercise RIMPAC 

2004), the Cape Isabel (Exercise Cobra Gold 

2004), and the Cape Farewell (Exercise TurboCADS, for a container ammo distribution system). 

Three RRF ships, the Petersburg, the Chesapeake, and the Cape Jacob, continued their service supporting DOD’s Afloat Prepositioning 

Force operating from Diego Garcia and Guam. 

The RRF’s exemplary activation record is due to 

a sound and systematic conditioning program. 

While the commercial ship managers are responsible for the overall material condition and readiness of the ships, the RRF program requires 

regular sea trials as well as dock trials and drydockings; for example, there were 15 maintenance sea trials conducted in FY 2004. The 

most conclusive test of readiness is performance 

upon activation in time of conflict or National 

emergency, and FY 2004 provided that kind of 

test for the RRF. Readiness was also tested by 

turbo activations, which are initiated by DOD 

without prior notice or planning in order to test 

vessel readiness to activate on time. In FY 

2004, there were seven such turbo activations; 

all were successfully completed within the vessels’ assigned readiness time periods. A list of 

recent turbo activations and their results is available at www.marad.dot.gov/programs/rrf.html. 

NATIONAL DEFENSE RESERVE FLEET 

(NDRF) 

MARAD is authorized to maintain the National 

Defense Reserve Fleet (NDRF), which contains 

vessels that can be activated to support cargo 

movement requirements during National emergencies. The RRF is one component of the 

NDRF; other ships may be operated infrequently, and many are prepared for long-term 

storage in a preserved condition. The NDRF 

program was started after World War II, when 

the Merchant Ships Sales Act of 1946 was enacted. In 1950, the NDRF held 2,277 ships in 

eight different anchorages. As of September 30, 

2004, there were 284 vessels in custody of 

NDRF, of which 59 were in the RRF, 69 were in 

long-term storage (retention), and 138 were 

ready for disposal or being prepared for disposal 

(non-retention). An additional 18 vessels, 

owned by other Federal agencies, were also 

maintained at NDRF facilities on a costreimbursable basis. 

Most of the vessels are maintained at three anchorages: as of September 30, 2004, there were 

81 vessels in the James River Reserve Fleet at 

Ft. Eustis, VA; 44 in the Beaumont Reserve 

Fleet at Beaumont, TX; and 86 in the Suisun 

Bay Reserve Fleet at Benicia, CA. There are 73 

vessels assigned to port facility locations. More 

information on the NDRF may be found at 

www.marad.dot.gov/programs/rrf.html. 

Maritime Heritage 

MARAD is authorized to provide obsolete parts 

and equipment from NDRF ships that will soon 

be disposed to U.S. memorial ship organizations 

for helping to preserve the operational or historical character of vessels. Long-term loans of historical artifacts for public display are also made 

available to worthy organizations. As of September 30, 2004, 38 MARAD-owned artifacts 

were on loan to such organizations. For example, the binnacle off the Sioux Falls Victory is on 

long-term loan to the Navy League of the United 

States; the binnacle is being used to commemorate the Annual Congressional Sea Services 

Award. Four hundred fifty-six pieces of equipment were on loan to museums, and another 98 

to other collections. 

In November 2003, legislation was passed to 

authorize a vessel donation program that provides ships for specific historical and other purposes. This replaces the past practice of authorizing donations only through special legislation. 
MARAD 2004 11 

Training Availability 

NDRF vessels are made available to various 

groups for training purposes. Ships in the Reserve Fleet anchorages are mostly used for vessel boarding search and seizure training that involves law enforcement and ship interdiction 

exercises by the Navy, Marines, and Coast 

Guard. In FY 2004, the anchorages supported 

training events for 8 days involving 475 individuals. RRF vessels in ROS were utilized as 

training platforms for a variety of organizations 

such as the U.S. Coast Guard Marine Safety Office and Naval Cargo Handling Battalions, and 

local law enforcement agencies. In FY 2004, 

ROS ships supported 84 training events for 184 

days involving 2,210 individuals. 

VOLUNTARY INTERMODAL SEALIFT 

AGREEMENT (VISA) 

The Voluntary Intermodal Sealift Agreement 

(VISA) program is sponsored jointly by MARAD and DOD. VISA is the DOD’s principal 

commercial sealift readiness program. It provides DOD with assured access to commercial 

intermodal capacity to move ammunition and 

sustainment cargo. This capacity can also supplement U.S. Government-owned, -controlled, -

chartered capacity used for the initial deployment or “surge.” 

More than 75 percent of available militarily useful capacity in the U.S.-flag fleet is committed to 

the VISA program. VISA companies commit 

specific vessel capacity, intermodal equipment, 

and management services. All VISA participants receive priority consideration for the 

award of DOD peacetime cargoes. As of September 30, 2004, there were 59 VISA participants. These participants are listed at 

www.marad.dot.gov/programs/rrf.html. 

Ready Reserve Force ship Cape Flattery reflects at the Beaumont Reserve Fleet in Texas 
MARAD 2004 12 

The objective of the program is to maximize 

DOD’s access to the multibillion-dollar, state-ofthe-art, U.S. commercial intermodal transportation system to serve America in peace and war, 

while minimizing disruption to commercial operations. VISA has three activation stages, with 

each stage adding more capacity commitments. 

VISA activation is time phased to streamline the 

availability of capacity to coincide with DOD 

requirements. 

An important element of the VISA program is 

the Joint Planning Advisory Group (JPAG). 

During JPAG meetings, government, industry, 

and maritime labor unions identify and discuss 

DOD’s requirements, recommend concepts of 

operations to meet requirements, test and exercise program arrangements, and comply with 

antitrust requirements for pooling/teaming arrangements. In FY 2004, MARAD and the U.S. 

Transportation Command held JPAG meetings 

in January and August. At these meetings, participants were briefed on a variety of topics including deployment and redeployment operations in support of OIF, crewing and sealift 

requirements, and force protection. As a result 

of these meetings, government and industry continued to provide efficient and effective support 

to U.S. troops in Iraq. 

Although DOD did not activate VISA stages for 

OIF, VISA carriers continued to transport equipment and supplies to support this effort. From 

January 1, 2003 to September 30, 2004, 15 

VISA ships were chartered by the MSC, and 45 

VISA ships provided liner service to the Military 

Surface Deployment and Distribution Command 

(SDDC) to support OIF. 

In FY 2004, MARAD published a notice in the 

Federal Register for the VISA “Open Season” 

enrollment; this open season is the only allowed 

period for applications to be accepted. This enrollment window was open during May 2004, 

and MARAD approved three applications. 

MARITIME SECURITY PROGRAM (MSP) 

The Maritime Security Program (MSP) is a significant component of the VISA program; many 

shipping companies and ships are participants in 

both. As a condition for receiving government 

financial support, MSP participants are required 

to enroll 100 percent of their MSP vessel capacity and a comparable mix of intermodal 

resources and services to the VISA program. 

Forty ships in the MSP, more than 85 percent of 

the fleet, participated in OIF between January 1, 

2003 and September 30, 2004. 

The MSP serves to maintain an active, privately 

owned U.S.flag and U.S.crewed liner fleet in 

international trade to support DOD sustainment 

in a contingency. The program, therefore, helps 

the United States retain an active U.S.-flag merchant fleet comprising modern, efficient, militarily useful vessels that can support National security requirements and maintain a competitive 

U.S.-flag presence in international commerce. It 

also supports a labor base of skilled and loyal 

American seafarers who are available to crew 

the U.S. Government-owned strategic sealift 

fleet, as well as the U.S. commercial fleet, both 

in peace and war. 

The binnacle from the The binnacle from the 

Sioux Falls Victory Sioux Falls Victory
MARAD 2004 13 

The MSP was originally established as a 10-year 

program under the Maritime Security Act of 

1996, and authorized more than $100 million in 

funding annually for up to 47 vessels to partially 

offset higher operating costs under U.S. registry. 

During FY 2004, the MSP was reauthorized for 

another 10 years, and the number of ships was 

expanded from 47 to 60. 

The MSP leverages relatively modest Federal 

support dollars to retain access to a robust U.S. 

commercial maritime capitalization base valued 

at more than $9 billion. Over 115,000 20-foot 

equivalent units (TEU’s) and one million square 

feet of capacity committed to DOD stem from 

MSP obligations. As of September 30, 2004, 12 

MSP carriers were receiving MSP payments for 

47 vessels. A complete list of MSP vessels and 

operators is shown in 

www.marad.dot.gov/programs/rrf.html. 

An important element of the MSP is the reflagging of new and more efficient vessels to U.S. 

registry. On October 28, 2003, the Maritime 

Administrator approved the substitution of the 

RO/RO vessel Freedom for the RO/RO vessel 

Tanabata for MSP participation. A RO/RO vessel is one which carries vehicles, be they automobiles or tanks, which “roll on” and “roll off” 

the vessel, usually under their own power. The 

Freedom, a newer and larger RO/RO vessel than 

the Tanabata, previously flew the flag of Norway. The Freedom was reflagged to U.S.-flag 

registry on October 30, 2003. A total of 18 modern commercial liner vessels, average age of less 

than four years old, have been reflagged to U.S. 

registry and are currently participating in the 

MSP. In addition, five other vessels less than 

four years old that previously flew foreign flags 

are now U.S-flag vessels after they received U.S. 

Coast Guard-expedited approval of their applications to reflag based on MARAD’s determination that the vessels would be eligible for the 

MSP. 

WAR RISK INSURANCE 

MARAD administers the standby emergency 

War Risk Insurance Program. The program protects commercial vessel operators and seafarers 

against losses resulting from war or warlike actions, and is designed to continue the flow of 

U.S. foreign commerce during periods when 

commercial insurance cannot be obtained on 

reasonable terms and conditions. 

As of September 30, 2004, there were 369 binders on vessels and barges providing eligibility 

for hull and machinery protection and indemnity, and second seamen’s war risk insurance. 

No binders related to MARAD’s standby war 

risk cargo insurance and builder’s risk insurance 

programs have been issued. All binders are effective for 30 days following an automatic terWhile the VISA program was not activated, VISA participants transported materiel for OIF. Totem Ocean 

Trailer Express, Inc. (TOTE) load military cargo on the MV North Star in Tacoma, WA. 
MARAD 2004 14 

mination of commercial insurance. 

As a result of the terrorist activities of September 11, 2001, MARAD activated the Title XII 

War Risk Insurance Program at the request of 

DOD. MARAD wrote war risk insurance on six 

vessels in conjunction with Operation Enduring 

Freedom (OEF), and on 106 in conjunction with 

OIF. MARAD issued more than 300 policies 

covering more than $9.5 billion in values and 

limits since the post-9/11 activation. As of September 30, 2004, there had been no losses. 

STRATEGIC COMMERCIAL PORT 

READINESS 

National Port Readiness Network 

For most of FY 2004, there were 14 commercial 

American ports designated as strategic ports by 

DOD and the National Shipping Authority, 

which is the National defense arm of MARAD. 

In September 2004, the number of strategic ports 

increased by one, with the designation of the 

Port of Anchorage, AK. Port readiness supports 

the National security goal of assuring that DODdesignated commercial strategic ports are available to the military during National emergencies. 

Strategic ports must handle military cargo securely, efficiently, and in a way that minimizes 

the disruption of commercial cargo. 

MARAD chairs the National Port Readiness 

Network (NPRN), which promotes the readiness 

of the ports; nine other Federal agencies are 

members. This network is responsible for supporting the movement of military forces through 

U.S. ports. Local port readiness committees 

hold regular meetings along with port readiness 

exercises. 

For FY 2004, the performance measure target 

for MARAD’s strategic port readiness activities 

was the availability of 92 percent of DODselected facilities on 48 hours notice. MARAD 

achieved 93 percent availability. 

Report to Congress on the Performance of 

Ports and the Intermodal System 

The conference report accompanying the FY 

2004 omnibus appropriations legislation requested that MARAD report on the performance 

of the intermodal system with respect to the efficiency of the most congested ports. Working 

with the U.S. Transportation Command and 

other modal offices of DOT, MARAD prepared 

a report that provided an assessment of the conditions at commercial ports, particularly those 

responsible for the movement of military cargo 

through the intermodal system during OIF 

buildup. MARAD based its assessment on data 

collected via site visits and interviews. The assessment covered the performance of the major 

components of the intermodal system and emphasized the perceived ability of the Nation's 

freight transportation infrastructure to handle an 

unexpected surge in cargo during a military deployment. MARAD found that during the OIF 

deployment, the strategic commercial ports and 

the transportation industry were able to support 

the military's requirements with minimal commercial cargo disruption. The occasional congestion problems were resolved quickly. A number of impediments were identified that need to 

be addressed so future deployments can work 

equally well, particularly as the transportation 

system becomes more congested in the years 

ahead. 

The U.S. flag- Industrial Challenger 

with a cargo of U.S. Coast Guard cutters. 
MARAD 2004 15 

NATO PLANNING BOARD FOR OCEAN 

SHIPPING PARTICIPATION 

MARAD is the focal point for U.S. participation 

in the work of the North Atlantic Treaty Organization (NATO) Planning Board for Ocean Shipping (PBOS). PBOS develops and maintains 

plans for commercial shipping support to NATO 

in crisis and war, and serves as the NATO focal 

point for advice and assistance on the protection 

of civilian maritime assets against acts of terrorism. MARAD’s Associate Administrator for 

National Security serves as chairman of PBOS, 

and a MARAD employee serves as its secretary. 

In FY 2004, PBOS developed plans for the utilization of commercial vessels for strategic sealift 

and a market advisory panel to facilitate and enhance the military’s access to the commercial 

shipping market. PBOS also has assisted NATO 

military planners by providing information and 

advice on the availability and use of commercial 

shipping to support projected operations. 

DOMESTIC (JONES ACT) FLEET AND 

NATIONAL SECURITY 

The Jones Act, which was part of the Merchant 

Marine Act of 1920, requires that cargo carried 

between U.S. ports be on vessels that are U.S. 

built, U.S. owned, and U.S. registered, and, as a 

result, U.S. crewed. The components of the domestic fleet, such as passenger ferries, tank vessels, containerships, and barges, help provide a 

secure and immediately responsive logistics capability for the domestic movement and international deployment of our armed forces. The 

commercial U.S.-flag fleet and the trained mariners it supports are integrated into military planning and operations through the MSP and VISA. 

U.S.-civilian merchant mariners crew all U.S.-

Government sealift vessels as well. The Jones 

Act fleet provides a secure transportation mode 

for cargo and passengers for domestic waterborne trade. 

FOREIGN TRANSFERS 

As mentioned earlier in this report, MARAD is 

an approving agency for a ship “flagging 

in” (adopting the U.S. flag) if the vessel is 

needed in the MSP program. MARAD is also 

the approving agency for “flagging out” (the 

process by which a U.S.-flag vessel is transferred to another registry). MARAD must approve any such transfer of vessels of specified 

sizes and ages, and bases the approval on the 

National security needs of the U.S. Government. 

During FY 2004, MARAD approved the transfer 

of 52 ships of 1,000 gross tons and over to foreign ownership and/or registry. MARAD also 

approved the transfer of two towing vessels under 1,000 gross tons to Russian registry, and approved the transfer of nine vessels that were sold 

for scrapping abroad. 

MARAD's approval of the transfer of vessels 

3,000 gross tons and over to foreign ownership 

and/or registry are subject to MARAD approval 

for any subsequent transfer of ownership and/or 

registry; vessels involved are required to remain 

available for U.S. Government requisitioning, if 

needed. At year's end, 165 vessels were subject 

to these terms, 54 of which were approved for 

subsequent transfer of ownership and/or registry 

during the year. User charges for processing 

applications for foreign transfers and similar 

actions totaled $23,220 in this reporting period. 

These activities take place under authority provided in Section 9 of the Shipping Act, 1916, as 

amended. All such activities are summarized at 

www.marad.dot.gov/programs.

MERCHANT MARINER AVAILABILITY

An essential component of ensuring sufficient 

sealift is making sure that enough qualified 

mariners are available to sail the required number of ships. During the fiscal year, despite a 

significant strain placed on the personnel base of 

merchant mariners, the effort to crew the emergency shipping needed for OIF was successful. 
MARAD 2004 16 

More than 8,000 mariners sailed aboard various 

ships in support of the operation, including almost 4,300 commercial mariners, and nearly 

3,800 civil service mariners. This successful 

execution represents a significant joint achievement by MARAD, RRF ship managers, maritime labor unions, USCG and MSC. 

MARAD continues to focus on looking beyond 

the number of mariners, to evaluate mariner 

characteristics and the skill mix of mariners 

available to sail. During FY 2004, MARAD 

leaders pursued efforts to maximize mariner 

availability. As a result of those efforts, several 

goals pertaining to mariner certification and 

availability were accomplished: 

• In cooperation with MSC, established a 

procdure for smallpox and anthrax vaccinations for RRF crews prior to deployment to 

the Persian Gulf. 

• Issued Merchant Marine Expeditionary 

Medal Certificates to 431 commercial and 

civil service mariners who participated in 

OIF 2, including those mariners who sailed 

in OIF 1. 

• Granted certification for reemployment 

rights to four mariners, and processed inquiries from numerous individuals and organizations. 

MARAD continued the development of a mariner tracking system. This new system will allow 

MARAD and its partners to maintain accurate 

and up-to-date information on mariner qualifications and will enhance our ability to crew the 

government's vessels in the critically short timeframes required during an activation. An Internet-based component will allow mariners to update contact information in a timely manner. 

American merchant mariners, members of the crew of the RRF ship Cape Vincent, on 

their return journey from the Middle East. 
MARAD 2004 17 

MARAD is also pursuing the establishment of a 

Civilian Mariner Reserve (CMR) program. The 

program would alleviate potential shortages in 

able-bodied seamen, qualified members of the 

Engine Department, and other ratings. In addition, it would provide a means to assure access 

to mariners in the event of a National emergency. The CMR would use the existing structure of the U .S. Maritime Service (USMS). 

Members would be activated for two weeks of 

training each year on U.S. Government vessels. 

Although MARAD and its industry partners remain committed to both the recruitment and retention of mariners, there is no typical mariner. 

Some can be contacted only through an e-mail 

address or post office box. Some lead more settled lives, but are interested in occasional tours 

at sea. Others alternate between sea time and 

working ashore in industry-related jobs. MARAD will have fully accomplished its goals in 

the area of mariner availability when we have a 

large stable base of qualified mariners that we 

can contact in a timely manner to crew our Nation’s vessels both in peace and in times of National emergency. 

The USCG-licensed mariners who are Navy Officers in the Merchant Marine Reserve Program 

provided superb support to the sealift operations 

for Operation Iraqi Freedom. At MARAD, they 

provided support at the Crisis Management Center for the headquarters and regional offices, providing technical assistance in the areas of manpower, ship operations, intelligence, shipbuilding and repair, port services, and ship activations 

for DOD requirements. They continue to represent the Department of the Navy at MARAD and 

other government agencies. 

MARITIME TRAINING AND EDUCATION 

MARAD vigorously supports maritime training 

and education through the U.S. Merchant Marine 

Academy, support of six State maritime academies, and several outreach and continuing education programs. 

U.S. Merchant Marine Academy (USMMA) 

MARAD operates the U.S. Merchant Marine 

Academy (USMMA) at Kings Point, NY, to 

educate young men and women for service in the 

American merchant marine, in the U.S. Armed 

Forces, and in the Nation’s intermodal transportation system. 

Graduates receive Bachelor of Science degrees 

and U.S. Coast Guard licenses as deck or engineering officers, and commissions in the U.S. 

Naval Reserve or another uniformed service. 

MARAD owns and operates USMMA’s primary 

training ship. Graduates incur an eight-year U.S. 

Naval Reserve commitment, unless they are accepted in another uniformed service, that obligates them to serve in time of war or National 

emergency. The critical maritime skills developed with their military training significantly 

increases our Nation’s defense readiness. 

Academy graduates are required to obtain a merchant marine officer’s license in order to graduate from the Academy, and to maintain the license for at least six years. The graduates are 

also committed to a five-year maritime employment service obligation. This maritime service 

obligation may be satisfied in the merchant marine as an officer aboard U.S. merchant ships, or 

in shoreside maritime or intermodal transportation industry positions if afloat employment is 

not available, and with the permission of the 

Maritime Administrator. Active military duty in 

the U.S. Armed Forces or service with the National Oceanic and Atmospheric Administration 

also satisfies the obligation as does maritime 

related employment with the Federal Government that serves the National security interests 

of the United States. 

The Class of 2004, which graduated in June, 

comprised 108 graduates licensed as third mates 

and 74 as third assistant engineers. The 16 

women graduates in 2004 brought to 495 the 

total number of female graduates since the first 

co-educational graduating class in 1978. Within 

six months of graduation, 99 percent of the 182 

graduates had obtained employment in the mari-
MARAD 2004 18 

time and transportation industry, afloat and 

ashore or were on active military duty; the 

remaining 1 percent were in graduate school. 

More information on USMMA may be obtained 

at www.usmma.edu. 

State Maritime Schools/Schoolship Program 

MARAD provides assistance to six State maritime academies to train merchant marine officers 

pursuant to the Maritime Education and Training 

Act of 1980. They are: 

• California Maritime Academy, Vallejo, CA; 

• Great Lakes Maritime Academy, Traverse 

City, MI; 

• Maine Maritime Academy, Castine, ME; 

• Massachusetts Maritime Academy, Buzzards Bay, MA; 

• State University of New York Maritime College, Fort Schuyler, NY; and 

• Texas Maritime Academy, Galveston, TX. 

State maritime academy cadets who participate 

in the Student Incentive Payment Program receive $4,000 annually, for a maximum of four 

years, with satisfactory performance, to offset 

school costs. 

Participating cadets have these obligations: 

• To complete the academy’s course of instruction; 

• To graduate from a state academy, cadets 

must pass the U.S. Coast Guard examination 

for a license as an officer in the U.S. merchant marine, and 

• To maintain that license for at least six years 

from the date of graduation; 

• To apply for and accept, if offered, an appointment as a commissioned officer in an 

armed force reserve component, and serve 

for at least six years from the date of graduation; and 

• To maintain employment in the maritime 

industry for at least three years from the date 

of graduation. 

MARAD provides training vessels to all six 

State maritime academies for use in at-sea training and as seagoing laboratories. The vessels 

provide cadets practical knowledge of vessel 

operations, and are part of MARAD’s assistance 

to the academies to train highly qualified licensed officers. 

Maritime Transportation Security Act (MTSA) 

Section 109 Training 

The Maritime Transportation Security Act 

(MTSA) called for greater maritime security 

training for maritime security professionals in 

the United States; this encompasses primarily all 

civilian personnel who are employed in connection with ships and port facilities. During FY 

2004, MARAD led the development of a National system of certification and course approval for course providers who voluntarily submit their maritime security courses for approval 

to MARAD. Through the efforts of a designated 

team at the USMMA, MARAD completed development of model courses geared towards vessel and facility personnel with specific security 

duties and the development of a maritime security awareness course. The team also worked 

closely with the Federal Law Enforcement 

Training Center towards completing a model 

course for land-based military and law enforcement officers. MARAD conducted all course 

development in coordination with the U.S. Coast 

Guard, the Transportation Security Administration, and other agencies under the Department of 

Homeland Security. 

Ship Operations Cooperative Program 

(SOCP) Mariner Recruitment 

Working Group 

The Ship Operations Cooperative Program 

(SOCP) is a cost-shared government/industry/

labor partnership whose objective is to improve 

competitiveness, ship safety, productivity, profitability, training, environmental responsiveness, 
MARAD 2004 19 

and quality of ship operations. Currently there 

are 45 members that include commercial ship 

owners/operators, government organizations, 

educational institutions, labor organizations, researchers, and classification societies. The 

SOCP is a MARAD-sponsored cooperative and 

its Mariner Recruitment Working Group in FY 

2004 implemented an awareness campaign to 

introduce youth to career and employment opportunities in the maritime industry. 

The group was instrumental in producing print 

and electronic promotional material, and it participated in forums to disseminate information 

about maritime career paths, educational institutions and other resources for careers afloat. 

SOCP launched a web site titled A Career Afloat 

– Gateway to the Future, one-stop-shop resource 

for information on educational and employment 

opportunities, virtual experiences, and U.S. 

Coast Guard Mariner and Licensing Documentation requirements. Group efforts resulted in the 

production of A Future with Adventure brochure, 

which is used in conjunction with a 30-second 

public service announcement. The group also 

co-sponsored a documentary titled U.S. Merchant Marine Serving America in Peace and 

War. 

In June 2004, through the effort of the Mariner 

Recruitment Working Group and the Maine 

Maritime Academy over 400 students were introduced to careers afloat at the SOCP’s midyear meeting in Puerto Rico. The Puerto Rican 

Port Authority facilitated full press coverage of 

the event. 

Adopt-a-Ship Program 

MARAD works with the Propeller Club of the 

United States to implement and manage the 

Adopt-a-Ship Program, an experience designed 

for students in grades 6-8, involving communicating with the masters of commercial ships during extended voyages. Teachers develop mathematics and science projects around ship operations to motivate student skill development. 

Fire Training Center 

MARAD provides training in fighting ship, 

barge, and dockside fires to a range of personnel 

who may have to deal with such fires, offering 

basic and advanced firefighting classes through 

its Fire Training Center in Swanton, OH. In FY 

2004, 469 students were trained from organizations such as the Ohio State Fire School, ToledoLucas County Port Authority, and local municipal fire departments. This also included crews 

of several U.S. Coast Guard cutters as well as 

The Training Ship State of Michigan, which 

MARAD furnished to the Great Lakes Maritime 

Academy, participated in a U.S. Coast Guard 

exercise that also included representatives from 

county police, fire and rescue, NOAA, EPA, and 

CIA. This exercise took place in May 2004. 

The Training Ship Golden Bear (background) is the 

training ship provided by MARAD to the California 

Maritime Academy. 
MARAD 2004 20 

many merchant mariners. The Fire Training 

Center also presented an outreach training program at the Upper Great Lakes Captains Association Meeting in Traverse City, MI. 

PORT SECURITY GRANTS 

MARAD has played a key role in the Port Security Grants program, ever since it began in FY 

2002. In October 2003, Congress appropriated 

$125 million for grants in FY 2004; more than 

half of that money went for grants announced in 

the previous year, and just under $50 million 

was available for the fourth round of projects. 

Grants were awarded for 154 port security projects on September 13, 2004. 

MARAD’s role has included setting up the webbased system that has managed the grant proposals since the beginning of the program. Although the program has been largely taken over 

by the Department of Homeland Security, MARAD’s region offices continue to work with the 

U.S. Coast Guard to conduct the field-level 

evaluations of grant applications, and the webbased system plays a key role in monitoring and 

administering each grant’s progress. 
MARAD 2004 21 

Port of Seattle: Photo by Richard W. Clark 

Department of Transportation Strategic Objective: Mobility. 

Advance accessible, efficient, intermodal transportation for the movement of people and goods. 

MARAD Strategic Objective: Commercial Mobility. 

Promote and facilitate a United States maritime transportation system that improves the safe and 

efficient movement of goods and people.

COMMERCIAL 

MOBILITY 
MARAD 2004 22 

The mobility activities of the Maritime Administration (MARAD) primarily address maintaining and enhancing the U.S. merchant fleet and 

U.S. shipbuilding, and congestion reduction 

through the use of waterborne transportation to 

ameliorate the impact of freight growth that is 

anticipated in our Nation’s intermodal transportation system. Currently, the Nation’s inland 

waterway, marine, and landside infrastructure is 

operating at or near capacity due to global economic changes and trade growth. These factors 

are generating additional demand for more port 

and marine terminal capacity, more efficient 

landside access, and better intermodal connections to the surface transportation system. 

The U.S. intermodal transportation system (all 

land, water, and air modes) annually moves 

more than 16.3 billion tons of freight, with a total value of over $12 trillion. DOT now projects 

that total freight volumes will increase by more 

than 50 percent in the next 20 years. 

SHORT SEA SHIPPING 

MARAD is assessing the commercial viability 

of Short Sea Shipping, which is waterborne shipping that does not traverse an ocean, to increase 

the capacity of our Nation’s intermodal transportation system. Water transportation, especially 

along our coasts and inland waterways, is potentially a sensible, economical, and environmentally friendly solution to many of our growing 

road and rail congestion problems. Short Sea 

Shipping uses our inland and coastal waterways 

to move commercial freight between domestic 

ports. 

MARAD is engaged in a Short Sea Shipping 

Initiative, exploring the obstacles to using federal, state and local government incentives, vessel financing and construction, and customer 

requirements. Activities pursued under this initiative in FY 2004 include sponsoring comprehensive conferences and encouraging the growth 

of the Short Sea Shipping Cooperative Program 

(SCOOP). 

Short Sea Shipping Conference 

The 2nd Annual Marine Transportation System 

(MTS) Short Sea Shipping Conference was held 

in Sarasota, FL, on November 4-6, 2003. The 

Conference brought together a broad representation of experienced leaders of the transportation 

industry, state and Federal agencies, as well as 

representatives from Mexico, Canada and the 

Netherlands. 

Participants were focused on future strategies to 

develop Short Sea Shipping as a viable transportation alternative to not only the United States 

domestic transportation needs but also the needs 

of the United States’ fast growing North American Free Trade Agreement (NAFTA) trading 

with Mexico and Canada. 

This meeting reflected a more comprehensive, 

sophisticated understanding of the impacts of 

highway congestion on the Nation’s economic 

growth as well as National security. There was a 

collective urgency to join together and develop 

new water-based recommendations for new surface transportation capacity. 

Short Sea Shipping Cooperative Program 

The Short Sea Shipping Cooperative Program 

(SCOOP) began as a result of a set of industry 

recommendations for the private sector to participate in a public/private cooperative program 

for the advancement of Short Sea Shipping. The 

cooperative formed as an entity officially on October 15, 2003 with approximately 25 voting 

members. At the end of FY 2004 this number 

has grown to over 51 full members and 14 associates. MARAD is the sponsor for the co-op, 

and has supported the program since its inception. In FY 2004, SCOOP continued its outreach initiatives, including the following: 

• Produced a website to provide information 

on the Cooperative and Short Sea initiatives 

at http://www.shortsea.us;

• Supported a U.S. Merchant Marine Academy team for the purposes of conducting 
MARAD 2004 23 

basic research on Short Sea Shipping;

• Provided funding and support to the 

National Ports and Waterways Institute to 

develop “National Advantages of Short Sea 

Shipping” report, which will focus on the 

environmental and economic advantages of 

a vibrant short sea shipping service; and

Engaged in an active outreach program including the sponsorship of public displays 

and other activities at shipper conferences 

and other events in order to develop interest 

in new short sea shipping systems.

Support for the I-95 Coalition 

The I-95 Coalition is a regional partnership of 

major public and private transportation agencies 

and industry associations serving the United 

States from Maine to Florida. With congestion 

an increasing concern, the Coalition has sought 

to explore alternatives to supplement road and 

rail freight transportation. In 2003, the Coalition’s Executive Board approved a MARAD 

proposal to study Short Sea Shipping freight alternatives along the I-95 corridor. This study 

will highlight potential routes that might be suitable for a successful Short Sea Shipping operation. This study is expected to be completed in 

April 2005. 

Memorandum of Cooperation among the 

United States, Canada, and Mexico for 

Advancing Short Sea Shipping. 

Border crossings continue to be plagued by congestion. Consequently, MARAD, as part of DOT 

intermodal efforts, has been working with Canada on various concepts, policies and procedures 

to ease border congestion via increased use of 

the waterways. A Memorandum of Cooperation, 

signed with Canada in FY 2003, was extended to 

Mexico on November 16, 2003. During FY 

2004, since the signing ceremony in November, 

MARAD and Canada have exchanged information on a number of topics including the U.S. 

harbor maintenance tax and the relatively new 

Canadian Customs user fees, which are seen as 

hampering Short Sea Shipping. During FY 

2004, Canada, Mexico, and the United States 

continued to work to share Short Sea Shipping 

technology and information to facilitate global 

connectivity and mobility. 

Support for the Gulf of Mexico States Accord 

(GOMSA) for Advancing Short Sea Shipping. 

GOMSA is a regional organization of the 11 

Mexican and U.S. States that border the Gulf of 

Mexico. MARAD has been working with 

GOMSA on providing solutions to cross border 

congestion and transportation alternatives that 

can improve the economies of the region. On 

November 17, 2003, MARAD signed a Memorandum of Cooperation with GOMSA and its 

associated private sector partnership to assist 

with a study to inventory the intermodal capabilities of the region. 

MARINE TRANSPORTATION SYSTEM 

The Marine Transportation System (MTS) includes all of America's coastal and inland 

waterways, more than 300 public and private 

ports, a network of navigable channels, pipelines, vessels, marine terminals, intermodal connections, and associated management and safety 

information systems. The MTS includes 25,000 

miles of commercially navigable waterways, 

which are a critically important mode of transportation and which provide the linkage between 

oceanborne transportation and highway, rail, and 

An Alaska-bound truck boards 

a Totem Ocean Trailer Express (TOTE) 

 truck ferry at the Port of Tacoma, WA 
MARAD 2004 24 

pipeline transportation. The waterborne cargo 

moving on the MTS generates more than 13 million jobs, and this economic activity contributes 

more than $750 billion to the Nation’s Gross 

Domestic Product. 

Marine Transportation System National 

Advisory Council (MTSNAC) 

MARAD continued its efforts to strengthen the 

MTS with participation in the Marine Transportation System National Advisory Council 

(MTSNAC) and its government interagency 

counterpart, the Interagency Committee on the 

Marine Transportation System (ICMTS). 

MTSNAC is a non- body, whose purpose is to 

advise the Secretary of Transportation on MTS 

issues. Its membership is comprised of leaders 

from over 30 commercial transportation firms, 

trade associations, state and local public entities, 

recreational boating interests, academics, and 

environmental groups. MARAD co-chairs the 

ICMTS with the U.S. Coast Guard. 

During FY 2004 the MTSNAC completed and 

submitted to the Secretary its recommendations 

for investment in our Nation’s Marine Transportation System as part of a coherent, coordinated, and comprehensive intermodal transportation policy. This policy would place renewed 

emphasis on the marine mode of transportation 

and integrate it more fully into the National 

transportation system. The proposed plans 

would also enable the Department of Transportation to take on a much more direct leadership 

role in the marine sector. Among the recommendations provided by MTSNAC are the prioritization of Short Sea Shipping pilot projects, 

creation of a loan guarantee program to facilitate 

port infrastructure improvements needed to support Short Sea Shipping, and the initiation of an 

MTS Awareness Program to provide on-going 

information to the public, Congress, and the Administration about the importance of the MTS to 

the Nation and its economy. The Council’s proposal was heavily referenced during the development of the Department’s initiative which began 

during the year. 

The MTSNAC also provided important input to 

the U.S. Commission on Ocean Policy Report 

(Ocean Policy Report) to the President. Recognizing the fragmented approach to the Marine 

Transportation System, MTSNAC agreed that 

the Department of Transportation be designated 

as the lead agency for planning and oversight of 

Traffic on America’s inland waterways 
MARAD 2004 25 

the MTS and that the ICMTS be elevated within 

DOT and be chaired by the Department. The 

Ocean Policy Report recommended that ICMTS 

be tasked with recommending strategies and 

plans for better informing the public of marine 

commerce and transportation; devising alternative funding scenarios to meet short- and longterm demands on the marine transportation system; matching federal revenues derived from 

marine transportation with funding needs to 

maintain and improve the system; and delineating short- and long-term priorities. It also recommended that DOT draft a new National freight 

transportation strategy to support continued 

growth of the Nation’s economy and international and domestic trade. The report was forwarded to the President late in the year for his 

review and approval. 

Inland Waterways Intermodal Cooperative 

Program 

In 2001, MARAD established the Inland Waterways Intermodal Cooperative Program (IWICP) 

to assist the Nation's inland waterway intermodal transport system operators in promoting innovations in cargo handling and new technologies. With MARAD acting as the catalyst, a core 

group was formed representing port authorities, 

barge lines, shippers, and trade organizations 

involved in doing business on the inland waterways. 

After considering a number of initiatives, the 

Cooperative agreed to focus its efforts on establishing a Container-on-Barge service between 

selected points along the inland waterway system. 

Major activities that took place during the past 

year include: 

• With the cooperation of Inland Rivers, Ports 

& Terminals, Inc. (IRPT), partnered with 

Texas Transportation Institute (TTI) to conduct an infrastructure survey of shallowdraft ports and terminals;

• Generated cargo statistics to identify inland 

river locations where a Container-on-Barge 

service could be viable;

• Signed contract agreements with IRPT to 

perform two studies regarding the establishment of an inland waterway Container-onBarge service; and

• Held meetings with industry representatives 

to investigate the feasibility of using fast/

high-speed vessels for the movement of containers on inland waterways.

Delaware River Maritime Enterprise Council 

In partnership with the Delaware River Maritime Enterprise Council (DRMEC), MARAD 

was involved with a military equipment movement project. The project involved the delivery 

of four howitzers from a depot in Alabama, 

traveling via truck, vessel, and rail, to their final 

destination in Pennsylvania. During the move, 

real time in-transit visibility information was 

provided to a user base of participants, which 

included military, government and commercial 

organizations. The project allowed participants 

to view actual location of the howitzers as they 

proceeded on their trip. The project was also 

successful in providing alerts to local law enforcement officials as the cargo moved through 

their areas of operation. The next step is to plan 

and carry out an origin-to-destination project 

moving cargo from locations in the United 

States to an overseas destination. 

MARAD oversees the work assigned to 

DRMEC by the Department of Defense through 

an agreement with the Surface Deployment and 

Distribution Command. MARAD assists 

DRMEC in promoting technology use, commercial business processes streamlining, and 

collaboration among commercial, government, 

military, and academic institutions to improve 

the flow of military cargo from commercial 

freight terminals to bases at destinations in the 
MARAD 2004 26 

U.S. and overseas. 

MARAD acts as a catalyst for DRMEC in leveraging commercial transportation and logistics 

assets to improve strategic mobility capabilities 

for the DOD during times of peace and National need, while minimizing disruptions to 

commercial operations by ensuring that open 

communications exist for all parties that are 

necessary in the military cargo movement 

 process. 

MARAD works with DRMEC to demonstrate 

technologies and innovative best practices that 

assist strategic seaports and other commercial 

ports to accomplish the following activities: 

• Reduce DOD deployment timeframes 

• Improve force protection, homeland defense, and homeland security 

• Improve information sharing between 

DOD and commercial transport providers, vendors, suppliers, and law enforcement 

• Improve the efficiency of existing transport infrastructure capacity 

• Utilize secure staging areas for storage 

and maintenance of DOD equipment and 

synchronizing the flow to marine 

 terminals 

MARITIME POLICY REVIEW 

At the request of the House Subcommittee on 

Appropriations on the Department of Transportation, Treasury, and Independent Agencies, 

MARAD conducted a maritime policy review, 

including an examination of MARAD’s mission 

and its long-term goals in the context of the reorganized Department of Transportation (DOT). 

The resulting Maritime Policy Report to Congress, submitted in September 2004, reflected 

not only the transfer of the U.S. Coast Guard to 

the Department of Homeland Security, but also 

the following factors: 

• Recognition of the importance of the MTS 

and America’s maritime industry;

• The present and projected growth of foreign trade and freight moving through the 

Nation’s ports and on the National intermodal transportation system, and the increasingly stretched surface transportation 

system;

• The decades-long decline of the Nation’s 

shipping and shipbuilding industries;

• The impact of the September 11 terrorist 

attacks on the MTS and maritime industry 

security and on the roles and missions of 

DOT and MARAD;

• The longstanding commitment of DOT and 

MARAD to the MTS and the maritime industry as essential components of the U.S. 

intermodal transportation system; and

An extensive examination of the current 

condition and future requirements of the 

MTS.

The report carefully considered Short Sea 

Shipping as a means to move cargo, not to 

displace truck or rail movements, but to add 

overall freight capacity. It also addressed 

the regulatory and tax burdens that plague 

U.S. shipping and shipbuilding, and reviewed ways in which the U.S. maritime 

sector can become more competitive in 

moving global trade. 

PORT OF ANCHORAGE

The Port of Anchorage has seen steady growth 

in the past decade, which is expected to continue 

into the future. The Port has developed a master 

plan to assess needs that include the accommodation of larger ships with deeper drafts and 

wider beams. To address the needs of Alaska's 

smaller coastal communities, the Port also needs 

to develop new barge berths and transshipment 

areas to improve the flow of goods to rural 

Alaska. Finally, the Port plans to improve and 

expand its cruise ship facilities. The Port is currently in the planning and permitting stage of the 

project with actual construction scheduled to 

begin in 2005. 
MARAD 2004 27 

In assisting the Port of Anchorage, the Maritime 

Administration is the lead agency in an innovative public/private partnership for redevelopment 

of the port complex. 

The project consists of two major initiatives. 

First, the Road and Rail Project to add intermodal connectors to the port property to improve 

road access and additional rail lines on the property for a Trailer on Flat Car (TOFC) 

interchange facility. Second, the Marine Terminal Redevelopment Project will nearly double 

the existing land area of the port terminal and 

provide additional space for ship berthing, liquid 

bulk cargo operations, RO/RO and container 

operations. The project is expected to take from 

seven to ten years to complete at a cost of approximately $437 million. 

The Port has completed an environmental assessment for the Road and Rail Project and construction has begun on the rail extension. Studies for the design and layout of the TOFC yard 

have been completed and construction contracts 

have been issued. The prime contractor has also 

made significant progress with the beginning 

phases of the Marine Terminal Redevelopment 

Project. Several studies have been completed 

and several more are ongoing that are being used 

to determine the final design and construction of 

the dock expansion portion of the project as well 

as the environmental impact that the construction will have on the surrounding area. A Draft 

Environmental Assessment has been issued for 

the Marine Terminal Redevelopment Project and 

comments are currently being addressed. 

The Port of Anchorage has been recently designated a strategic port, and will be used for the 

deployment of a new Stryker Brigade. Additionally, the 501st Airborne Division deployed to 

Afghanistan through the Port of Anchorage. An 

integral part of the Port expansion is to provide 

improved security and access and staging areas 

for deployments. 

To manage the project, MARAD has streamlined the government contracting process 

through the development of web-enabled technologies. Contracting activities are performed 

on a secure website significantly reducing the 

time to review and approve tasks. The system 

also tracks, in graphic form, the progression of 

work and funding for better project management 

and oversight. 

Upper Mississippi River-Inland Waterway 

System Feasibility Study 

MARAD Participation in the U.S Army Corps of 

Engineers (USACE) Executive Level Principals 

Group - In order to be more responsive in their 

approach to finalizing the results of a 21-year, 

multi-million-dollar study on the future of the 

Upper Mississippi River Inland Waterway System (UMR-IWW), the USACE formed an executive level Principals Group including highlevel members of the Department of Agriculture, 

Environmental Protection Agency, Department 

of the Interior (Fish and Wildlife Service), and 

DOT (MARAD) for the purpose of gaining additional advice and mutual consent on the results 

of the project. MARAD was represented at 

regular meetings of the Group throughout 2004 

by the Associate Administrator for Port, Intermodal, and Environmental Activities. The Principals Group efforts culminated in the testimony 

of MARAD leadership before the House Water 

Resources Subcommittee on June 24, 2004. The 

final study, entitled Integrated Feasibility Report 

and Programmatic Environmental Impact Statement for the Upper Mississippi River Inland Waterway System Navigation Feasibility Study, was 

released on September 24, 2004. 

Some of the recommendations of the study include proposals for six separate navigation efficiency alternatives and five ecosystem restoration measures. The USACE also offered a 

“recommended plan” in the form of an integrated proposal that balanced environmental and 

navigational concerns. In addition, the USACE 

recommended an accompanying plan for longterm ecosystem restoration to be accomplished 

in cooperation with the Fish and Wildlife Service, the five adjoining states, and private nonprofit groups. The integrated plan would be 
MARAD 2004 28 

implemented through an adaptive approach that 

will include checkpoints. 

INTERMODAL ACCESS TO U.S. PORTS 

AND TERMINALS SURVEY 

In FY 2004, MARAD completed the 2002-2003 

Intermodal Access to U.S. Ports and Terminals 

Survey Report. After extensive review of the 

completed survey data, some of the most significant findings concluded that port access conditions are generally acceptable today, but may not 

sustain continued cargo growth. However, 

“acceptable” mean only that ports, freight transportation providers, and shippers can work 

around problems and can tolerate a certain 

amount of delays and costs. It does not mean 

conditions are optimal. 

DEEPWATER PORT LICENSING

The Deepwater Port Act of 1974 provides for the 

authorization and regulation of the location, 

ownership, construction, and operations of deepwater ports in waters beyond the territorial limits 

of the United States. In 2002, the Act was 

amended to include the importation, transportation and production of liquefied natural gas 

(LNG). The authority to issue, transfer, amend 

or reinstate a license for the construction of a 

deepwater port has been delegated by the Secretary of Transportation to MARAD. 

During FY 2004, two licenses were issued: to 

Port Pelican, LLC and El Paso Energy Bridge 

Gulf of Mexico, LLC. Six applications for licenses were filed during the year: Cabrillo Port 

LNG, Gulf Landing LLC, Clearwater Port, Main 

Pass Energy Hub, Compass Port, LLC, and 

Exxon Mobil Pearl Crossing. These projects are 

expected to provide significant volumes of natural gas to the Nation’s gas distribution market, 

improving the efficiency and flexibility of the 

existing pipeline infrastructure and providing 

supply diversification. 

PROTOTYPE MOORING BUOY PROJECT 

MARAD funded a study to design and test a 

prototype-mooring buoy on the Mississippi 

River. The study was completed during FY 

2004, and it indicated the prototype buoy to be 

superior to those currently in use. The prototype buoy, which will be used near locks and 

dams on the inland river system to stage tows 

closer to the locks to increase system efficiency, 

is being implemented as part of the Mississippi 

River Navigation Study, and it is expected to be 

the design of choice for all future mooring 

buoys. 

 

PORT FACILITY CONVEYANCE 

PROGRAM 

Under the National Defense Authorization of 

1994, the Secretary of Transportation is authorized to convey surplus property to non- public 

entities for the development and operation of a 

port facility. This authority was delegated by 

the Secretary of Transportation to MARAD, 

which developed the Port Facility Conveyance 

Program. The program is designed to assist port 

communities by creating jobs and stimulating 

the economy in areas identified by the Department of Commerce as economically depressed. 

The program uses existing program criteria from 

the Departments of Labor and Commerce for the 

disposition of surplus Federal property. Port 

conveyance program applicants are required to 

submit a short application of interest to MARAD 

for consideration. 

In FY 2004, MARAD received and is currently 

reviewing three port conveyance program applications. MARAD continues to work closely with 

local communities and participating Federal 

agencies during the application process. 

PUBLIC PORT FINANCING 

MARAD maintains extensive databases of U.S. 

port financial data (covering 1978-2002) and of 

U.S. port capital expenditures (covering 1946-

2002) that permit in-depth analyses of the port 
MARAD 2004 29 

industry. In cooperation with the American Association of Port Authorities, MARAD published in FY 2004 two reports: The United States 

Port Development Expenditure Report and Public Port Finance Survey. These reports summarize information gathered from voluntaryparticipation surveys, and are available on 

MARAD’s web site. 

CAPITAL CONSTRUCTION FUND 

As part of MARAD’s commercial mobility strategic objective, operators have been assisted in 

accumulating capital to build, acquire or reconstruct vessels through the deferral of Federal 

income taxes on certain deposits into their Capital Construction Fund (CCF) accounts. 

 The CCF Program enables operators to build 

vessels for the U.S.-foreign trade, Great Lakes, 

and the noncontiguous domestic trade such as 

between the West Coast and Hawaii. It aids in 

the construction, reconstruction, or acquisition 

of a wide variety of vessels including containerships, tankers, bulk carriers, tugs, barges, supply 

vessels, ferries, and passenger vessels. During 

FY 2004, $440 million was deposited into these 

accounts. Since the program was initiated in 

1971, fundholders have deposited $8.9 billion in 

CCF accounts and withdrawn $6.3 billion for 

modernization and expansion of the U.S. merchant marine. As of September 30, 2004, approximately 139 companies were parties to CCF 

agreements. 

CONSTRUCTION RESERVE FUND 

Like the CCF, the Construction Reserve Fund 

(CRF) supports MARAD’s commercial mobility 

strategic objective by encouraging the upgrading 

of the American-flag fleet. The program allows 

eligible parties to defer taxation of capital gains 

on the sale or other disposition of a vessel if net 

proceeds are placed in a CRF account and reinvested in a new vessel within three years. 

The CRF is used predominantly by owners of 

vessels operating in coastwise trades, the inland 

waterways, and other trades not eligible for the 
MARAD 2004 30 

CCF program since its benefits are not as broad 

as those of the CCF. There were 24 companies 

with active CRF balances during FY 2004. 

MARITIME GUARANTEED LOAN 

(TITLE XI) PROGRAM 

The primary purpose of the Title XI Program is 

to promote the growth and modernization of the 

U.S. merchant marine and U.S. shipyards. Title 

XI authorizes the U.S. Government to guarantee 

the repayment of debt obligations, including unpaid interest, obtained in the private sector by: 

• U.S. or foreign shipowners for the pur

 pose or financing of refinancing either 

 U.S.-flag vessels or eligible export ves

 sels constructed, reconstructed, or recon

 ditioned in U.S. shipyards; and 

• U.S. shipyards for the purpose of financ-

 ing advanced ship building technology 

 and modern shipbuilding technology of 

 a privately owned general shipyard 

 facility located in the United States. 

The Title XI Program permits guarantees in an 

amount not to exceed 87.5 percent of the actual 

cost of projects eligible for financing. Some 

eligible projects are limited to 75 percent of actual cost. The maximum guarantee period is 25 

years. 

Title XI Activities, FY 2004 

During FY 2004, the Maritime Administration 

issued three commitments for Title XI loan guarantees. The first, a $140,000,000 commitment, 

was issued to Totem Ocean Trailer Express, Inc., 

for one RO/RO vessel built at National Steel and 

Shipbuilding Co. in San Diego, California. The 

second, an $11,969,000 commitment, was issued 

to Vane Line Bunkering, Inc. for two doublehull tank barges built at Jeffboat, LLC in Jeffsonville, Indiana. An additional $21,869,000 

commitment was issued to Petrodrill Four and 

Five Limited to aid in the completion of construction of two drilling rigs. MARAD had previously guaranteed Title XI financing for these 

two drilling rigs in the total amount of $341.8 

million. Both drilling rigs have been delivered 

by Cianbro, Inc. in Maine. 

MARAD closed on four commitments to guarantee obligations covering the financing, in part, 

of five vessels: two drilling rigs, one ferry, one 

RO/RO vessel, and one containership. These 

four commitments were for an aggregate amount 

of $231,369,000. In addition, MARAD closed 

on eight vessel deliveries, three conversions of 

financings to fixed interest rate, three debt restructures, four retirements of Title XI obligations, and the sale of one repossessed passenger 

vessel. MARAD litigated issues in three bankruptcies related to five Title XI companies; MARAD engaged in litigation in seven cases to defend MARAD’s sales of property and to resolve 

conflicting lien priorities, recover debts owed 

MARAD by defaulting Title XI obligors and 

related parties; and MARAD foreclosed upon 

one vessel mortgage. 

As of September 30, 2004 (end of FY 2004), the 

Title XI loan guarantee portfolio is $3.45 billion. 

Of this amount, $3.42 billion is for loan guarantees outstanding and $29 million is for outstanding commitments that have not yet been 

funded. The portfolio consists of 95 projects 

that include drill rigs, tankers, barges, containerships, RO/RO vessels, fast ferries, passenger 

vessels, supply vessels, tugs, and shipyard modernization projects. At the end of FY 2004, 

$40.8 million in subsidy remained available to 

issue new loan guarantee commitments while 

there is over $1.5 billion in pending applications 

for Title XI loan guarantees. Additional information on MARAD’s Title XI Program can be 

found at the Program’s web site at 

http://www.marad.dot.gov/TitleXI . 

Of MARAD’s $3.45 billion Title XI portfolio, 

$524 million (or 15 percent of projects) have 

been identified as experiencing financial difficulties and, as such, are receiving the highest 

level of monitoring. The Title XI loan guarantee 

program did not experience any defaults during 

FY 2004. 
MARAD 2004 31 

During FY 2004, the Department of Transportation Inspector General (IG) conducted and finished two audits that reviewed the management 

of the Title XI program. One of the audits was a 

follow up to a FY 2003 audit. In the FY 2004 

audit, the IG concluded that MARAD had developed policies and procedures that addressed each 

of the five recommendations from the earlier 

audit in a satisfactory manner. In addition, the 

FY 2004 audit indicated that MARAD had satisfactorily addressed the intent of three additional 

IG recommendations. The other IG audit addressed the handling of inactive obligations for 

the Title XI program. As a result of this audit, 

MARAD updated the process for reviewing outstanding obligations for the Title XI program. 

In 2003, MARAD held an auction and foreclosed on the real and personal property comprising the shipyard previously owned by Massachusetts Heavy Industries, Inc. and MHI Shipbuilding, LLC (MHI). Three lawsuits related to 

the 2003 foreclosure and to claims against MHI 

are still pending, two cases in U.S. District Court 

in Massachusetts and one case in the U.S. Court 

of Federal Claims. 

In a case decided by the U.S. Fifth Circuit Court 

of Appeals related to the foreclosure of a Title 

XI financed vessel, the Trident Crusader, MARAD prevailed against a claimant which had 

alleged that its lien on the vessel was superior to 

MARAD’s mortgage. 

Title XI Insurance Compliance 

MARAD monitors the contractual requirements 

for marine insurance coverage placed in the 

commercial market on all existing Title XI vessels on which MARAD holds the mortgage, together with ly owned vessels on charter to private operators. 

One aspect of this compliance is to assure that 

the American marine insurance market has the 

opportunity to compete for placement of marine 

insurance on these vessels. MARAD approved 

marine hull and machinery insurance during FY 

2004, with 36 percent being placed in the 

American market and 64 percent being placed in 

the foreign insurance markets. This compares 

with 37 percent American market placement of 

hull and machinery insurance in FY 2003. A 

table containing this information is available at 

http://marad.dot.gov/publications/AnnualReport/

Annual%2002/WebReady.pdf. 

TEA-21 REAUTHORIZATION 

MARAD participated in the review of the 

proposed draft for the TEA-21 reauthorization. 

MARAD provided comments on the provision 

for intermodal connectors to the National highway system. Other discussion points for 

MARAD on the TEA - 21 reauthorization 

package include: 

• Congestion Mitigation and Air Quality 

Initiative (CMAQ) funding for marine 

transport services. 

• Transportation Infrastructure Finance and 

Innovation Act (TIFIA) loans for port access 

projects. 

• Information Technology System (ITS) 

funding which could improve port access 

systems. 

 
MARAD 2004 32 

Department of Transportation/Maritime Administration Strategic Objective: Global Connectivity. 

Facilitate a more efficient global and domestic transportation system that enables economic growth 

and development. 

GLOBAL 

CONNECTIVITY 

Containers at the Port of Long Beach, CA 
MARAD 2004 33 

The growing intricacy and variety of commerce 

is adding to the advantages which a large fleet 

of ships under one management derives from its 

power of delivering goods promptly, and without 

breach of responsibility, in many different ports; 

and as regards the vessels themselves time is on 

the side of large ships. 

Over the course of the last 50 years, even as the 

United States has become the world’s largest 

trading nation, the U.S.-flag fleet carriage of 

U.S. oceanborne trade (exports, imports and domestic ocean shipments) has shrunk. In 2003, 

the U.S.-flag fleet carried 16 percent of U.S. 

oceanborne trade, down from 66 percent 50 

years ago. Excluding domestic shipments, the 

share fell from 30 percent to only 2 percent. 

While the interdependent global economy is of 

great importance to the economy and well-being 

of the Nation, the size of the U.S.-flag fleet participating in that global economy is small. 

In 2003, U.S. oceanborne trade, imports, exports 

and domestic ocean shipments, amounted to 1.4 

billion metric tons, up slightly from the year before (Exhibit 1). Recent changes in the trade 

were due largely to the depletion (2002) and rebuilding (2003) of petroleum stocks (See discussion of earnings volatility in the Industry Overview section of this report). 

From 1998 to 2003 the import share of U.S. 

oceanborne trade rose from 57 percent to 63 percent while the domestic share, which is reserved 

for U.S.-flag vessels, fell from 17 percent to 14 

percent. The change in composition was due 

largely to substitution of imports for domestic 

shipments in the petroleum trades (See Waterborne Commerce of the United States at 

www.iwr.usace.army.mil/ndc for detailed U.S. 

oceanborne commerce data). Over this period, 

petroleum imports increased by 20 percent (57 

million metric tons), while domestic ocean shipments fell by 9 percent (21 million metric tons). 

 

In 2003, 6,157 oceangoing vessels or 44 percent 

of the active world fleet were employed in U.S. 

oceanborne trades. These vessels made 56,759 

calls at U.S. ports, or 10 percent of worldwide 

port calls (Exhibit 2). Both trade volumes and 

vessel calls measure ocean transportation services. Of the U.S. port calls, 33 percent were by 

tankers, 30 percent were by containerships, 

Port of Long Beach 

Alfred Marshall, Principles of Economics, 1890 
MARAD 2004 34 

18 percent were by dry bulk carriers and 9 percent were by RO/RO (roll-on/roll-off) vessels 

(See Vessel Calls at U.S. Ports, 2003 at 

www.marad.dot.gov/marad_statistics for active 

fleets and detailed U.S. port call data). 

Tankers. From 1998 to 2003, tanker calls at 

U.S. ports increased by 10 percent. In 2003, 64 

percent (11,903) of the tanker calls at U.S. ports 

were by double hull tankers, up from 37 percent 

(6,255) 5 years earlier. For the period 1998 to 

2003, double-hull tanker calls increased by 90 

percent, while single-hull tanker calls declined 

by 38 percent. 

Containerships. From 1998 to 2003, containership calls at U.S. ports increased by 9 percent. 

Over the same period, the number of containerships calling at U.S. ports increased by 28 percent to 1,025, but, as larger containerships entered U.S. trades, the average number of calls 

per containership fell. In terms of TEU’s 

(twenty-foot equivalent units), the average size 

of containerships (per call) increased by 31 percent to 3,290 TEU’s. 

Sources: Maritime Administration, Vessel Calls at U.S. Ports, 

2002; U.S. Army Corps of Engineers, Waterborne Commerce 

of the United States.

U.S. Oceanborne Trade 

0.0

0.5

1.0

1.5

2.0

1998 1999 2000 2001 2002 2003

Year

Bil. Metric 

Tons

Imports Exports Domestic Ocean

Average Vessel Size (DWT, TEU) 

 Per U.S. Call, 1998 and 2003 

 % Ch. 

 1998 2003 98-03 

Tanker 68,670 72,387 5.4 

Container 36,872 43,168 17.1 

Container (TEU) 2,503 3,144 25.6 

Dry Bulk 41,740 42,685 2.3 

Ro-Ro 19,898 20,270 1.9 

Gas Carrier 29,954 37,818 26.3 

Combination Carrier 82,895 84,016 1.3 

General Cargo 21,409 23,655 10.5 

All Types 45,289 49,557 9.4 

Vessel Calls at U.S. Ports, 1998 and 2003 

 % Ch. 

 1998 2003 98-03 

Tanker 16,841 18,503 9.9 

Container 15,846 17,287 9.1 

Dry Bulk 12,674 10,271 -19.0 

Ro-Ro 4,251 5,191 22.1 

Gas Carrier 685 926 35.2 

Combination Carrier 846 666 -21.3 

General Cargo 4,978 3,915 -21.4 

All Types 56,121 56,759 1.1 

Exhibit 2 

Exhibit 1 Exhibit 3 
MARAD 2004 35 

Dry Bulk Carriers. A 49 percent decline in U.S. 

coal exports contributed to a 19 percent decline 

in dry bulk vessel calls at U.S. ports since 1998. 

The primary impact was on South Atlantic ports, 

which had a 51 percent decline in dry bulk calls. 

RO/RO’s/Vehicle Carriers. RO/RO calls at U.S. 

(discharge) ports increased by 22 percent from 

1998 to 2003. However, the growth occurred 

largely in the late 1990s with the 2-year, 34 percent expansion of U.S. vehicle imports. 

Gas Carriers (Liquefied Petroleum Gas (LPG) 

and Liquefied Natural Gas (LNG)). Gas carrier 

calls (only 2 percent of U.S. calls in 2003) increased by 35 percent over the last five years. 

Over the same period, the LNG segment increased by 141 percent reflecting a 130 percent 

increase in U.S. LNG imports. 

Capacity. Vessel capacity calling at U.S. ports 

(calls times vessel dead weight tons) increased 

by 11 percent from 1998 to 2003. Over this period, the number of calls increased by only 1 

percent, but average vessel size (per call) increased by 9 percent (Exhibit 3). Average vessel 

size increased for all vessel types with the largest increases for gas carriers (26 percent) and 

containerships (19 percent). 

In 2003, the average size (per call) of commercial vessels calling at U.S. ports was 16 percent 

larger than vessels calling at all ports worldwide. 

The difference was due largely to a scarcity of 

U.S. feeder and short-sea services. These services, which use smaller vessels than linehaul 

services, are common in intra-European and intra-Asia trades. Linehaul services are those that 

provide transportation from one city to another, 

as opposed to local switching service. 

Dry bulk carriers calling at U.S. ports were 12 

percent smaller than those calling at all ports 

worldwide. Grains, which are generally shipped 

on smaller vessels than other major bulk cargoes 

such as coal and ores, accounted for 51 percent 

of U.S. major dry bulk trades, compared to only 

20 percent of worldwide major bulk trades. 

U.S.-flag. In 2003, U.S.-flag vessels carried 16 

percent (227 million metric tons) of U.S. oceanborne trade, down from 19 percent (258 million 

metric tons) in 1998. The domestic ocean trades 

accounted for 25 of the 31 million metric ton 

decline. 

In 2003, 244 U.S.-flag vessels were active in 

U.S. oceanborne trades, down from 256 vessels 

in 1998. These vessels accounted for 7,819 U.S. 

port calls, down from 8,650 calls five years earlier. The decline was primarily in the general 

cargo, tanker, and containership segments as 

25+-year-old vessels were removed from service. 

CARGO PREFERENCE 

Because U.S. ships must meet higher construction, maintenance, environmental, and safety 

standards than their foreign-flag competitors, 

they incur higher operating costs. The primary 

form of assistance to all U.S.-flag vessel types is 

provided through the cargo preference laws, 

which provide economic incentives to U.S.-flag 

shipowners. Since 1904 Congress has enacted a 

series of such laws, which require exporters and 

importers to use U.S.-flag vessels to transport a 

certain percentage of any oceanborne cargoes 

While many cargo preference cargoes are grain or aid 

shipments, MARAD also ensures that equipment imported for transit projects travels aboard U.S.-flag 

vessels. This locomotive traveled from Spain to the 

Port of Albany, NY, on the U.S.-flag Industrial Challenger. 
MARAD 2004 36 

that are financed, directly or indirectly, by the 

U.S. Government. These cargoes provide a base 

to help offset the higher costs to keep carriers’ 

ships under U.S. registry. 

The cargo preference laws result in meeting the 

National security objective by assuring that sufficient sealift capability and intermodal transportation infrastructure exist to support vital homeland and National security interests. These laws 

help sustain the assured sealift capability of the 

118 U.S.-flag vessels and the related mariner 

positions that are vital to our National security. 

All U.S.-flag vessels that carry preference agricultural cargoes and most of the vessels that 

carry preference general cargoes participate in 

the Voluntary Intermodal Sealift Agreement program with the Department of Defense (DOD) 

and so provide the defense community with 

"assured access" to commercial intermodal capacity to move cargo during time of war or National emergency. 

MARAD is tasked with ensuring that cargo preference compliance is achieved by government 

agencies and their contractors. Major programs 

include humanitarian aid shipments provided by 

the U.S. Department of Agriculture (USDA) and 

U.S. Agency for International Development 

(USAID); Iraqi reconstruction; commodities 

financed by the Export-Import Bank (Ex-Im 

Bank), and other civilian agencies; Foreign Military Sales (FMS), and DOD cargoes shipped on 

commercial ocean carriers. Information on cargo 

preference laws and regulations may be viewed 

at http://www.marad.dot.gov/offices/

cargo_pref.html. 

MARAD also is charged with promoting the use 

of U.S.-flag vessels, monitoring international 

shipping agreements, and identifying discriminatory or potentially discriminatory trade practices 

against U.S.-flag vessels. MARAD’s Cargo 

Preference Web site http://www.marad.dot.gov/

usflag allows exporters, importers, and government agencies to find U.S.-flag commercial 

ships to transport cargo to or from foreign nations. 

MARAD’s Office of Cargo Preference monitors 

compliance with the following statutes: 

• The Cargo Preference Act of 1954; 

• The Military Cargo Preference Act of 

1904; 

• The Maritime Security Act of 1996; 

• Public Resolution 17 of the 73rd Congress (1934); and 

• P.L. 105-383, the Coast Guard Authorization Act of 1998, which deals 

with substandard vessels and their 

owners or operators. 

MARAD is required to report to Congress on 

compliance with those laws. DOT is responsible 

for financing certain cargo preference costs for 

foreign aid agricultural donation cargoes, as outlined in the Food Security Act of 1985. MARAD also administers measures instituted by a 

“side letter” agreement involving USAID and 

the Government of Israel, referred to as the Israeli Cash Transfer. 

Cargo Preference Act of 1954 (P.L. 83-664), as 

amended, requires that at least 50 percent of the 

gross tonnage of all Government-impelled cargo 

be transported on privately owned, U.S.-flag 

commercial vessels to the extent such vessels are 

available at fair and reasonable rates. The Food 

Security Act of 1985 amended the Merchant 

Marine Act of 1936 and raised the minimum 

requirement to 75 percent for certain agricultural 

cargoes. In addition, the Act required the reporting period for a cargo preference year (CPY) to 

be from April 1 to March 30. However, the 

Maritime Security Act of 2003 (MSA) amended 

the CPY to correspond to the fiscal year. The 

MSA also retroactively created a new 18-month 

2002-2003 cargo preference year commencing 

April 1, 2002 through September 30, 2003. 

Statistics for preference cargo in humanitarian 

food aid are kept on a Cargo Preference Year 

(CPY) basis. A total of 4,277,652 metric tons of 

humanitarian food aid commodities were exported during CPY 2003-2004, of which 74.6 

percent, or 3,193,138 metric tons, were trans- 
MARAD 2004 37 

ported on U.S.-flag vessels. This is a decrease in 

total tonnage from the 5,210,448 metric tons 

shipped during CPY 2002-2003. Wheat was the 

primary commodity shipped during the year. 

Liner type vessels transported 47 percent of the 

food aid cargoes. Tankers and bulk carriers carried 3 percent and 50 percent, respectively. 

For CPY 2003-2004, agricultural cargo preference laws generated $465,362,881 in revenue for 

U.S.-flag vessel operators. Furthermore, agricultural cargo preference laws employed a total 

of 93 U.S.-flag vessels. MARAD estimates that 

these 93 vessels trading in agricultural cargoes 

created about 4,973 merchant mariner jobs and a 

larger number of maritime and transportation 

related jobs shore-side. Of the 118 U.S.-flag 

vessels which carried preference cargoes of all 

types in 2003-2004, 93 of them participated in 

the agricultural preference cargoes in addition to 

carrying military, other ly financed project cargoes, and commercial cargoes. MARAD estimates that most of these participating vessels 

would probably not be able to maintain their 

U.S. flag registry absent these cargo preference 

laws. 
MARAD 2004 38 

GOVERNMENT-SPONSORED CARGOES—2004 

(Note: These numbers do not include domestic shipments) 

PUBLIC LAW 664 CARGOES: 

 U.S.-Flag Total U.S.-Flag Percentage 

 Revenue Metric Metric U.S.-Flag 

Program ($1,000) Tons Tons Tonnage 

Agency for International Development (AID): 

 

 P.L. 480 - Title II 

 Liner 189,453 1,552,674 1,156,547 74.5% 

 Bulker 135,451 1,543,294 1,080,917 70.0% 

 Tanker 5,899 90,591 59,269 65.4% 

 TOTAL 330,804 3,186,560 2,296,734 72.1% 

Department of Agriculture:

 P.L. 480 - Title I 

 Liner 744 23,871 5,512 23.1% 

 Bulker 18,242 229,798 203,696 88.6% 

 Tanker 0 0 0 0% 

 TOTAL 18,986 253,669 209,208 82.5%

 Food for Progress

 Liner 33,781 214,085 182,693 85.3%

 Bulker 40,415 434,114 355,057 81.8% 

 Tanker 7,734 32,741 24,741 75.6% 

 TOTAL 81,930 680,940 562,491 82.6%

Food for Education 

 Liner 16,600 101,860 83,220 81.7%

 Bulker 4,256 29,969 29,969 100% 

 Tanker 0 0 0 0% 

 TOTAL 20,856 131,829 113,189 85.9% 

 

 U.S.-Flag Total U.S.-Flag Percentage 

 Revenue Metric Metric U.S.-Flag 

Program ($1,000) Tons Tons Tonnage

Section 416(b) 

 Liner 15,915 78,097 70,247 89.9% 

 Bulker 0 0 0 0% 

 Tanker 0 0 0 0% 

TOTAL 15,915 78,097 70,247 89.9%
MARAD 2004 39 

TOTALS 

468,491 4,331,095 3,251,868 75.1%

 

Agency for International Development (AID): 

 Loans and Grants 

 Liner 3,812 50,146 38,407 76.6% 

_____________________________________________________________________________ 

Department of Transportation 

 Federal Transit Administration 

 Liner 6,845 32,725 30,303 92.6% 

 

State Department – Overseas Building Office 

 Liner 510 5,082 2,321 45.7% 

State Department – U.S. Despatch Agencies 

 Liner 4,221 60,268 58,643 97.3% 

TOTALS 15,388 148,221 129,674 8 7.5%

PUBLIC RESOLUTION 17 CARGOES:

 Total U.S.-Flag Total U.S.-Flag 

 Freight Freight Metric Metric Percentage 

 Revenue Revenue Tons Tons U.S.-Flag 

 Program 

Eximbank 

 Liner 14,049 10,290 67,177 38,418 57% 

 

Israeli Side Letter Agreement 

 U.S.-Flag Total U.S.-Flag Percentage 

 Revenue Metric Metric U.S.-Flag 

Program ($1,000) Tons Tons Tonnage

 

Government of Israel (GOI) 

 Bulker: 11,192 604,980 302,490 50.0% 

Iraq Reconstruction 

 Liner: 931 2,370 811 34.2% 
MARAD 2004 40 

Defense Security Cooperation Agency (DSCA):

Foreign Military Financing, Grant 

Transfers and related programs 

 

 Liner: 15,673 49,192 35,597 72% 

 Tanker: 16,750 375,998 375,998 100% 

 TOTAL 32,423 425,190 411,595 97% 

CARGO PREFERENCE ACT OF 1904 CARGOES: 

FISCAL YEAR 2004

Department of Defense Military Contracts1

 

 Percentage Percentage 

 U.S.-Flag U.S.-Flag 

 Measurement Tonnage Tonnage 

 Tons Total Metric Tons Total 

 Dry Cargo Dry Cargo Petroleum Petroleum

Military Contract Cargoes: 

 

U.S.-flag privately-owned vessels 4,361,551 48.6 n/a n/a 

Foreign-flag vessels 322,562 n/a n/a n/a 

U.S. Government-owned vessels 3,781,705 42.2 2,153,670 39.2 

Chartered U.S.-flag vessels 494,487 5.5 1,453,886 26.4 

Chartered Foreign-flag vessels 6,823 n/a 1,892,152 n/a 

Total Military Contract Cargoes: 8,967,128 96.3 5,499,708 65.5 

 Total U.S.-Flag Percentage 

 Metric Metric U.S.-Flag 

 Tons Tons Tonnage 

Commercial Contractor Cargoes 28,745 25,176 88.0% 

Personal Property and POV 

Shipments 313,152 313,152 100.0% 

Military U.S.-Flag Revenues:

 Dry Cargo $344,693,919 

 Commercial Contractor Cargoes $17,652,244 
MARAD 2004 41 

 Personal Property & POV Shipments $491,048,663 

 Petroleum $10,427,517 

 Total U.S.-Flag Revenue $863,822,343 

Notes 

 Tonnages and revenues are reported by Military Sealift Command (MSC) and Military Surface Deployment and Distribution Command (SDDC). Tonnages are from vessel manifests and lift reports 

of ocean carriers, and from DOD booking and payment systems to ocean carriers that carry DOD 

sponsored cargo by liner contract or charter contract during the fiscal year. Foreign Military Sales 

cargoes are excluded. “U.S.-flag privately-owned vessels” and “foreign-flag vessels” represent cargoes transported by contract with liner carriers. 

Tonnages and revenues for commercial cargoes are derived from rated ladings submitted by shippers to MARAD’s Office of Cargo Preference. Tonnages and revenues for DOD personal property 

and POV shipments are reported by SDDC from rated ladings submitted for payment by carriers 

performing under SDDC contract. 
MARAD 2004 42 

Strategic Petroleum Reserve

The Cargo Preference Act of 1954 applies to the 

Strategic Petroleum Reserve. The Strategic Petroleum Reserve is the United States’ emergency 

oil stockpile, and it is the largest emergency petroleum supply in the world. The program is 

administered by the Department of Energy, 

which is required to transport at least 50 percent 

of the oil on U.S.-flag tankers. However, due to 

a change in the program and non-availability of 

interested U.S.-flag carriers, privately owned 

U.S.-flag commercial vessel participation in the 

program stopped as of 1995. Compliance is 

monitored on a cumulative basis dating back to 

January 1981 at which time the U.S.-flag participation was at 54.6 percent. As of September 

2004, the cumulative compliance for U.S. flag 

vessels is down to 40.8 percent and continues to 

drop as the reserve is replenished with all nonU.S.-flag vessels. 

Defense Security Cooperation Agency 

The Defense Security Cooperation Agency 

(DSCA) is the sponsoring DOD agency for 

items purchased through foreign military financing and grant transfers such as those under Section 516 of the Foreign Assistance Act of 1961, 

as amended. The Cargo Preference Act of 1954 

requires that at least 50 percent of the oceanborne cargoes generated under these programs 

be transported on U.S.-flag vessels. In contrast, 

DSCA’s policy, which is consistent with its 

long-standing support for the U.S. merchant marine, is that 100 percent of such cargoes should 

be carried on U.S.-flag vessels. In this regard, 

the DSCA’s staff has recently revised the official wording of all their contracts to include specific reference to the U.S.-flag vessel requirements. This effort was made to ensure that all 

foreign government purchasing DSCA material 

would be able to identify the U.S.-flag requirement at the time of purchase. 

The Military Cargo Preference Act of 1904 

requires all items procured for or owned by U.S. 

military departments and defense agencies to be 

carried exclusively (100 percent) on U.S.-flag 

vessels as long as capacity is available at reasonable rates. Program efforts concentrate on developing and maintaining a cooperative business 

relationship with DOD transportation component 

commands and commercial military shipper parties that fosters compliance with U.S.-flag statutory requirements while meeting the Nation’s 

defense needs. 

The majority of military dry cargo is booked on 

commercial U.S.-flag liner vessels by the Surface Deployment and Distribution Command 

(SDDC). Rates and services provided by commercial ocean liner carriers constitute their transportation contracts with SDDC. The Military 

Sealift Command (MSC) negotiates charter fixtures for carriage on available commercial vessels when military cargo cannot be transported 

by liner vessels. Such circumstances are usually 

due to the physical nature of the cargo, or cargo 

volume exceeding commercial liner capacity to 

be shipped as one lot. MARAD receives volume 

and revenue figures from SDDC and MSC that 

are incorporated into MARAD’s annual cargo 

preference reports to Congress. 

MARAD also has been receiving quarterly reports from SDDC on the movement of shipments of personal effects, plus other data on the 

movement of privately owned vehicles. However, cargo that is moved by DOD contractors 

using commercial corporate traffic departments 

or third party providers frequently moves without data being reported to either DOD or MARAD. Consequently the tonnage and revenue 

data from commercial sources is less than complete, and DOD and MARAD are working to 

correct this problem. 

Under DOD acquisition regulations, cargo preference does not apply to subcontractors supplying commercial items when there is no value 

added and when ocean transportation is not the 

purpose of the contract. As a consequence, there 

may be no requirement for tonnage or revenue to 

be reported for some DOD shipments. There are 

three exceptions to this rule: (1) the contractor 

does not add value to the items; (2) the items are 

commissary or exchange items transported under 
MARAD 2004 43 

specified conditions; or (3) the items shipped are 

in direct support of U.S. military contingency 

operations or exercises or forces deployed in 

humanitarian or peace-keeping operations. For 

instance, contingency operations in Afghanistan 

and Iraq, Operation Enduring Freedom and Operation Iraqi Freedom, are examples of commercial items requiring carriage on board U.S.-flag 

ships. MARAD has made exceptions for commercial cargo a focal point with shippers to ensure adherence to cargo preference regulations. 

Further information can be obtained by contacting MARAD at 1-800-9US-FLAG or via e-mail 

at cargo.marad@marad.dot.gov. 

 

Section 17 of the Maritime Security Act of 

1996 (MSA 17) authorizes USDA's Commodity 

Credit Corporation (CCC) to take steps to allocate up to 25 percent of bagged, processed, or 

fortified commodities to Great Lakes ports on 

the basis of lowest landed cost without reference 

to the flag of the vessel. The implementation 

has resulted in a significant augmentation of 

food aid cargo movements out of the Great 

Lakes ports. The primary beneficiaries are the 

Port of Chicago and to a lesser extent the Port of 

Milwaukee. 

For the 2003-2004 cargo preference year (CPY), 

approximately 337,340 metric tons of food aid 

cargo transited via the Great Lakes ports. The 

first year of implementation was for the 1998-

1999 CPY when approximately 30,327 metric 

tons of food aid cargo transited the Great Lakes 

ports. U.S. food aid cargo rarely moved out of 

the Great Lakes prior to 1998. MARAD attributes this significant increase to the industry response to MSA 17. Transportation organizations invested additional assets in the Great 

Lakes ports to meet the requirements of MSA 

17; that resulted in the increased amounts of 

food aid transiting the region. This increased 

tonnage strengthened the U.S. maritime transportation system including the infrastructure, 

industry, and labor in the Great Lakes. 

Public Resolution (PR) 17 of the 73rd Congress (1934) requires that certain cargoes generated by Export-Import Bank (Ex-Im Bank), or a 

similar instrumentality of the government, be 

shipped on U.S.-flag vessels, unless a waiver is 

granted. Waiver procedure policy is set forth on 

MARAD’s Web site located at 

www.marad.dot.gov/offices/

CivilianAgenciesSection.htm. Also included on 

this site are lists of U.S.-flag carriers, U.S.-flag 

vessels, and U.S.-flag services. Requests for 

non-availability waivers for project cargoes have 

decreased since MARAD published revised policy procedures for granting waivers in the Federal Register. Another MARAD Web site allows electronic paperless filing of reports about 

Ex-Im Bank cargoes. These revised procedures 

were the result of a cooperative effort involving 

MARAD, Ex-Im Bank, U.S. shippers and exporters, and the U.S.-flag maritime industry, 

both labor and management. 

P.L. 105-383, Coast Guard Authorization Act 

of 1998, established that substandard vessels and 

vessels operated by owners or charterers of substandard vessels are prohibited from the carriage 

of U.S. Government-impelled cargo for up to 

one year after such determination has been published electronically. The Secretary of Transportation has delegated enforcement authority to 

MARAD. A discussion of this issue can be 

found on MARAD’s cargo preference Web site 

http://www.marad.dot.gov/offices/

cargo_memo_one.html including links to the 

U.S. Coast Guard’s listing of vessels, owners, 

and operators prohibited from carrying U.S. 

Government-impelled cargo. The easy availability of this information has resulted in increased 

industry awareness and use. 

Detailed statistics on the shipping activities of 

Federal agencies, independent entities, and Government corporations may be viewed at http://

www.marad.dot.gov/marad_statistics/

index.html. Statistics are maintained on a calendar year or fiscal year, or CPY basis, dependent 

upon program requirements. 

Food Security Act of 1985 amended sections of 

the Merchant Marine Act of 1936 and established a minimum tonnage for agricultural products exported as government-impelled cargo, 
MARAD 2004 44 

and established the Ocean Freight Differential 

Program. 

Minimum Tonnage. The tonnage of agricultural products shipped in FY 2004 was 

4,277,652 metric tons. The "minimum tonnage 

required" was calculated for FY 2004 to be 

5,915,703 metric tons. The total for FY 2004 

fell below the "minimum tonnage" by 1,638,051 

metric tons, because aid shipments declined.

Ocean Freight Differential (OFD). The Food 

Security Act of 1985 added Section 901b of the 

Merchant Marine Act of 1936 and increased the 

required percentage for U.S.-flag carriage from 

50 to 75 percent of gross tonnage of certain agricultural programs. OFD cost is the difference 

between the cost of shipping cargo on a U.S.-

flag vessel as compared to shipping the same 

cargo on a foreign-flag vessel. The Department 

of Transportation is responsible for financing 

any increased ocean freight charges resulting 

from the application of the increased U.S.-flag 

portion. MARAD reimburses USDA and AID 

for its share of the OFD costs above 50 percent 

of the gross tonnage, for ocean transportation 

only. 

MARAD reimbursed USDA's Commodity 

Credit Corporation (CCC) $60,675,515 for OFD 

invoices submitted during FY 2004. The payments were for OFD obligations incurred on 

shipments in the fiscal years 1999, 2000, 2001, 

2002, and 2003. 

The Food Security Act of 1985 also requires 

additional OFD to be reimbursed by the Secretary of Transportation. This additional OFD 

payment has been termed "Excess 20 percent" 

and is based on a fiscal year and not a CPY. 

"Excess 20 percent" is applicable if the total obligations incurred by USDA and CCC for ocean 

freight and OFD on exports of agricultural commodities and products under certain agricultural 

programs exceed 20 percent of the value of the 

commodities exported under these programs, 

ocean freight, and OFD. MARAD must reimburse CCC for any excess, if applicable. Some 

years will have no "Excess 20 percent.” In FY 

2004, MARAD received correct "Excess 20 percent" invoices from USDA and AID for the 

years FY 1995, FY 1996, FY 1997, FY 1998, 

FY 1999, FY 2000, and FY 2001. The following 

"Excess 20 percent" was paid to USDA/USAID 

in FY 2004: 

FY 1995 $10,737,754.00 

FY 1996 $ 4,380,008.00 

FY 1997 $24,236,933.34 

FY 1998 $20,830,995.42 

FY 1999 $161,650,389.62 

FY 2000 $155,301,910.66 

FY 2001 $ 92,237,993.18

Total: $469,375,984.22 

MARAD has not yet received "Excess 20 percent" invoices for FY 2002, FY 2003, and FY 

2004. 

Israeli Cash Transfer 

 

Under a “side letter” agreement, the Government 

of Israel and AID agreed that a portion of the 

bulk grain generated by the Israeli Cash Transfer 

Program would be transported on U.S.-flag vessels. The agreement, dating back to 1978, required that half the total grain purchased under 

the program move on U.S.-flag vessels. In 1978, 

the total grain purchase amounted to 1.6 million 

tons generating 800,000 tons per year for U.S.-

flag carriers. From 1979 to 1999, U.S.-flag vessels had received 800,000 tons annually regardless of the funding level, which ranged from 

$785 million to $1.2 billion. Although financial 

support for Israel continued, in 1999 it was 

agreed that the U.S.-funded grain purchase program would be reduced by $120 million per 

year, each year, until funding reaches zero. On 

this basis, privately owned U.S.-flag commercial 

vessels have carried the following decreasing 

tonnage: 

 FY 2001 643,051 tons 

 FY 2002 533,333 tons 

 FY 2003 444,444 tons 

 FY 2004 120,000 tons 
MARAD 2004 45 

INTERNATIONAL ACTIVITIES 

U.S./China Bilateral Maritime Agreement 

On April 21, 2004, Department of Transportation Under Secretary for Policy Jeffrey Shane 

and Vice Minister of Communications Hong 

Shanxiang exchanged diplomatic notes confirming the official entry into force of the Agreement 

on Maritime Transport between the Government 

of the United States of America and the Government of the People’s Republic of China, signed 

by Secretary of Transportation Norman Y. Mineta and Minister of Communications Zhang 

Chunxian in Washington, DC, in December of 

2003. The Agreement secured broad new rights 

for U.S. shipping to conduct business in China. 

Trade Agreement Negotiations 

MARAD representatives frequently participate 

in negotiations of Free Trade Agreements as part 

of the U.S. delegation led by the Office of the 

U.S. Trade Representative. Free Trade Agreements were concluded during FY 2004 with 

Australia, Morocco, and Bahrain. A single Free 

Trade Agreement was concluded with five Central American countries: Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua; negotiations continue with Panama and with delegations Bolivia, Colombia, Ecuador, and Peru. 

A bilateral maritime agreement with Brazil was 

negotiated during FY 2004, and initialed in 

April. The agreement represents a positive step 

in continuing to provide market access for U.S. 

carriers to Brazilian commercial cargoes that 

Brazilian authorities have designated as government controlled. Formal signing has been 

planned for 2005; once the agreement is signed 

the Brazilian Congress must ratify it. 

International Port Security Initiatives 

MARAD heads the delegation to the Organization of American States Inter-American Committee on Ports and serves as chair of the Committee’s Technical Advisory Group, which coordinates multilateral approaches to improving 

port security in the Western Hemisphere. This 

group has organized and conducted annual 

courses, managed by MARAD, which provide 

port security training for commercial port authority police and security personnel. More than 

500 people have been trained in these courses 

since 1998. 

MARAD also participates in U.S. interagency 

Foreign Port Security Assessments for the Latin 

America/Caribbean Region. MARAD also participated in the State Department-led initiative to 

assist Latin American and Caribbean countries 

in meeting their International Ship and Port Facilities Code compliance by the International 

Marine Organization deadline of July 1, 2004. 

MARAD was designated the lead agency for 

organizing the necessary expertise among U.S. 

agencies and other OAS member countries. 

While most OAS countries met the requirements 

at or soon after the deadline, some did not, and 

training and discussions are continuing. 

Multilateral and International Partnerships 

MARAD’s Associate Administrator for Policy 

and International Trade chaired the Maritime 

Transport Committee of the Organization for 

Economic Cooperation and Development 

(OECD). During its two meetings in FY 2004 

the committee worked on security in maritime 

transport, safety and the environment, and held a 

workshop to identify maritime transportation 

issues to be addressed by government and industry. 

MARAD serves as the DOT delegate to the International Labor Organization (ILO), and so 

participated in meetings on a new convention for 

Seafarers Identity Documents. A special session 

concluded with a consensus regarding practices 

to be employed in the development and maintenance of a “white list” containing information 

regarding those countries that have ratified the 

convention and issued seafarer identity documents in accordance with the requirements set 

forth in the Convention and its annexes. 

MARAD also led the U.S. delegation at a two 
MARAD 2004 46 

week session at the ILO that worked on a draft 

of a new Consolidated Maritime Labor Convention concerning seafarers’ working and living 

conditions. Additional work on the project is 

planned for 2005; a diplomatic conference to 

sign the new convention should be scheduled for 

early 2006. 

MARAD served as the lead for environmental 

and worker health and safety issues related to 

ship recycling at the IMO’s Marine Environment 

Protection Committee during 2004. The committee was scheduled to continue developing 

voluntary international standards for ship recycling and to consider potential measures for 

mandatory application. 

MARAD worked extensively with the International Association of Maritime Universities to 

ensure the safe waterborne carriage of Liquefied 

Natural Gas (LNG). The group consists of the 

43 leading institutions of maritime education and 

training in the world, including the U.S. Merchant Marine Academy. 

Africa 

MARAD worked with the State Department and 

the country of Nigeria to arrange for 26 Nigerian 

Government officials, along with waterfront labor and private sector maritime officials, to visit 

the port of Vera Cruz, Mexico. The purpose of 

the visit was to provide an opportunity for the 

Nigerians to study and then start to implement 

plans to privatize some of the Nigerian container 

terminals. 

MARAD’s Global Maritime and Transportation 

School (GMATS) at the U.S. Merchant Marine 

Academy hosted two weeks of courses on Nigerian transport and security, one on railroad operations and intermodal management, held in 

conjunction with the Federal Railroad Administration; a second two-week course was International Seaport Security; both courses were presented to Nigerian officials. 

MARAD and GMATS also conducted an on-site 

survey of ports in the Cape Verde islands to 

assess the extent of maritime security compliance, review completed improvements and conduct training needs assessments for advanced 

programs. 

Asia/Pacific 

At the Transportation Working Group meetings 

for the Asia-Pacific Economic Community 

(APEC), MARAD led panels on the development of appropriate maritime security training in 

support of the new worldwide requirements, presenting the courses it has developed for maritime 

security personnel training providers, as mandated by Section 109 of the Maritime Transportation Security Act of 2002. The course development is discussed further in the National Security section of this report. 

MARAD participated in the first Indo-American 

Chamber of Commerce conference in Mumbai, 

India, addressing questions on how U.S. companies can be attracted to bid on contracts and cooperate with Indian industry on making maritime 

infrastructure improvements in India. 

MARAD shared developments in technology, 

ship design trends, and possibilities for future 

innovation in the area of ship design and technology at Kyushu University in Japan. MARAD 

also assisted a team of representatives from 

Oshima shipyards visiting the United States as 

part of a research effort to gain perspective on 

new technology. 

U.S. Russia Maritime Consultations 

MARAD led the U.S. delegation in consultations 

with the Russian Federation in a meeting at the 

U.S. Merchant Marine Academy in Kings Point, 

NY, in November, 2004. Participants negotiated 

an agreement to cooperate in maritime education 

and training, and outlined commitments to work 

together to implement an exchange program for 

faculty, staff, and students. 
MARAD 2004 47 

FINANCIAL APPROVALS 

To promote and facilitate a U.S. maritime transportation system that improves the efficient 

movement of goods, the Financial Approvals 

staff provides financial and cost analyses and 

advice, internally and externally. 

This is a broad function that ranges from financial reviews of MARAD program applicants, to 

analyses of U.S. and foreign-flag vessels operation, to internal management control reviews. 

For example, MARAD is the delegated authority 

for the issuance of licenses to own, construct, 

and operate deepwater ports. MARAD assesses 

the applicant’s ability to construct and safely 

operate the deepwater port and assure that resources are available to decommission or remove the port when no longer necessary. As 

another example, MARAD does its own analysis 

of MSP applicants and marine hull insurers. 

MARAD also conducts extensive analysis of the 

crewing and the cost of crews and other vessel 

operating expenses for both U.S.-flag and foreign-flag vessels. MARAD can detail the crew 

nationalities and sizes of the various cargocarrying vessel types serving the U.S. markets 

and determine cost comparisons between U.S. 

and foreign-flag vessels. Some of this information is published or available on request by 

members of the public; more is available to 

members of Congress and other government entities. 

CARGO HANDLING COOPERATIVE 

PROGRAM 

MARAD, through the Cargo Handling Cooperative Program (CHCP), continues to work to initiate a container technology project. The goal is 

to test a selected group of technology devices for 

use with intermodal freight containers to make 

cargo movement more secure. The CHCP has 

selected light sensors, door status sensors, and 

temperature sensors, from among many possible 

technologies, to test. The project, now in the 

planning stage, will show how sensors are integrated into a package, not as individual items, to 

ensure that containers and their contents can 

move through the transportation network in a 

secure and efficient manner. 

AGILE PORT 

MARAD continues to work with a number of 

commercial and military organizations to plan a 

demonstration of simultaneous discharging and 

loading of a large container ship in the Pacific 

Northwest. The purpose of the demonstration is 

to verify the projected efficiency of this method 

of operation that promises productivity increases 

of up to 100 percent over existing methods. 

MARAD is the catalyst for this project in order 

to bring together those parties needed to complete this effort. This is part of an overall plan to 

make ports, terminals, and the surrounding infrastructure more agile in moving cargo through the 

transportation system, increasing transportation 

efficiency and moderating environmental impact. 

RESEARCH, TECHNOLOGY, 

DEMONSTRATION, AND DEPLOYMENT 

INITIATIVE 

Recognizing the need for more attention to maritime research and innovation, MARAD’s Research, Technology, Demonstration, and Deployment Initiative (RTDD) efforts resulted in a 

new web site (http://www.marad.dot.gov/

Research) launched on March 4, 2003. Efforts 

since then have been aimed at identifying and 

encouraging collaboration and partnership opportunities to address the maritime industry’s 

low level of research investment. This deficiency was highlighted in the 2002 report to 

Congress entitled Maritime Research and Technology Development (http://

www.marad.dot.gov/publications), which compared industry investments in transportation to 

those of , state, and local governments. 

 

Improved coordination within MARAD has also 

been facilitated for the better sharing of information and activities on MARAD research efforts. 

During FY 2004 the RTDD effort worked with 

the Department’s Research and Technology Co-
MARAD 2004 48 

ordinating and the Technology Innovation Committees to describe and provide points of contact 

for each of the individual MARAD programs. 

The Department’s January 2004 “Guide to 

Transportation Technology and Innovation” brochure now contains brief coordinated descriptions of MARAD’s RTDD-related program efforts (see http://t2.dot.gov) that assist with 

awareness and potential partnering between the 

program efforts and MARAD-sponsored cooperatives. 

OPERATING-DIFFERENTIAL SUBSIDY 

MARAD is required by Congress to report on 

the disbursements under the Operating Differential Subsidy Program (ODS), which has been 

phased out except for small residual payments. 

All voyages under this program ceased with the 

termination of the final ODS contract on September 18, 2001. Final payments to operators 

were concluded during FY 2003. 

The only outstanding ODS liabilities are related 

to possible subsidy claims under the ODS contracts for payments made for asbestos related 

diseases incurred by seafarers when serving on 

subsidized vessels. The obligation of the government regarding such claims is not time restricted and when presented for payment, claims 

will be reviewed and satisfied as appropriate. 

During FY 2004, one payment of $193,802 was 

made. 

Originally developed for use in the ODS program, a wage subsidy index is computed annually from data provided by the Bureau of Labor 

Statistics. It is now used as a measure of change 

in employment costs by various industry and 

business representatives to assist in forecasting 

costing trends in the industry. 
MARAD 2004 49 

MARAD has five regional offices: Norfolk, VA; 

New Orleans, LA; San Francisco, CA; New 

York, NY; and Chicago, IL, plus two one-person 

satellite offices in St. Louis, MO, and Seattle, 

WA. The three largest regions operate the three 

National Defense Reserve Fleet sites and provide support for the RRF fleet. 

However, the two smallest regional offices, the 

North Atlantic Region office in New York and 

the Great Lakes Region office in Chicago, do 

much of the interfacing with state and local entities, and with industry, to do the work of 

strengthening the U.S. marine transportation system and the maritime industry. 

Short Sea Shipping 

Both the North Atlantic Region and the Great 

Lakes Region offices have worked to promote 

Short Sea Shipping, the initiative to integrate 

waterborne transportation into the Nation’s overall transportation system. This initiative is discussed in the Commercial Mobility section of 

this report. 

The North Atlantic Region office worked with 

the Port Authority of New York and New Jersey, 

helping to support the container-on-barge service operating between the Port of Newark, NJ 

and the Port of Albany, NY. During the past 

year, 7,500 trucks transporting containers between the Port of New York and New Jersey and 

the Port of Albany have been taken off the New 

York State Thruway as a result of this local 

Short Sea Shipping Initiative, thus reducing congestion on the surface routes. Port officials in 

these ports are requesting MARAD support in 

extending Federal Government assistance to this 

successful intermodal program past next spring. 

MARAD has also encouraged a study by the 

North Jersey Transportation Planning Authority, 

examining the projected costs and operational 

feasibility of using very large, fast freight ferries 

to move rail cars and trucks across New York 

Bay from Brooklyn to Jersey City in the Port of 

FEATURE: NORTH ATLANTIC AND GREAT LAKES 

REGIONAL OFFICES 

Port of New Bedford, MA
MARAD 2004 50 

New York and New Jersey. These new ferries 

would employ efficient, environmentally cleaner 

engines and be equipped with GPS navigation 

and dynamic positioning systems to simplify and 

expedite vessel berthing and turn-around, regardless of current and wind conditions. The 

new freight ferries would also benefit from advanced rail car switching technology to expedite 

loading and unloading. 

NORTH ATLANTIC REGIONAL OFFICE: 

NEW YORK 

Area Maritime Security Initiatives 

MARAD employees are active on the Steering 

Committee of the Area Maritime Security Committee for the Port of New York and New Jersey. 

This committee discusses maritime preparedness, crisis management, and recovery plans for 

the port. Topics of discussion included the development of a Web-based U.S. Coast Guard 

Notification System utilizing phone, e-mail and 

fax communications to rapidly notify port stakeholders of changes in Maritime Security 

(MARSEC) Level status or other security developments. The system will automatically verify 

receipt of notifications. The Area Maritime Security Committee highlighted the creation of a 

landside location or marine platform to isolate 

hazardous materials and potential threats. 

MARAD is also represented on the Steering 

Committee of the Area Maritime Security Committee of Rhode Island and Southeastern Massachusetts, and met to discuss the handling of sensitive security information; a review of Round 4 

Port Security Grant Awards in Rhode Island and 

Southeastern Massachusetts; the use of security 

zones and restricted navigation areas as methods 

for protecting critical infrastructure and 

improved systems to communicate MARSEC 

threat level and other security information to 

port stakeholders as rapidly as possible. 

MARAD works with the Steering Committee of 

the Area Maritime Security Committee of the 

Port of Baltimore, which met to discuss the Area 

Maritime Security Plan for the port, as well as a 

presentation by the Chief of the Arlington 

County Fire Department on lessons learned following the September 11, 2001 terrorist attack 

on the Pentagon. 

Developing Container Storage and 

Distribution Centers 

The City of New Bedford, MA is one of three 

ports selected Nationwide as a Portfields Demonstration Pilot Port. The Portfields Program is 

a interagency partnership to address the economic and beneficial use of brownfields in local 

port communities. The term “brownfields” refers to land, the expansion, redevelopment, or 

reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. Through , 

state and city support, New Bedford is leveraging its available resources to revitalize its waterfront, improve marine transportation and develop additional commercial port facilities. Areas under discussion with the Maritime Administration’s North Atlantic Region Office include 

the increased use of fast freight ferries, new railto-water capacity, and introduction of container 

and breakbulk cargo handling capability. 

Developments in New Bedford offer a unique 

opportunity to develop Short Sea Shipping using 

existing brownfield sites as waterfront container 

storage and distribution centers. 

The Brownfields Inter-Agency Work Group is a 

joint Federal and State working group established by the U.S. Environmental Protection 

Agency to pursue the development of brownfields sites in the northeast region. Participants 

work with local communities to identify opportunities for brownfields redevelopment projects, 

including those relating to the storage and distribution of marine containers as part of MARAD’s Short Sea Shipping Initiative. Currently, 

more than 25 Federal and State agencies have 

participated in this Inter-Agency Work Group. 
MARAD 2004 51 

GREAT LAKES REGIONAL OFFICE: 

CHICAGO 

Heartland Intermodal Partnership (HIP) 

MARAD’s Great Lakes Region Office leads the 

Heartland Intermodal Partnership (HIP), a coalition of senior public and private-sector professionals from across the 24 states of the American 

heartland. This mission of HIP is to support 

economic competitiveness of the region’s business, industry and labor by improving intermodal transportation. HIP’s executive committee 

includes state departments of transportation, 

public planning organizations, railroads, trucking companies, ports, and barge and river interests, as well as representatives from MARAD 

and other DOT agencies. 

These states extend from the Great Lakes to the 

Gulf of Mexico, and have a complex network of 

highways and rail lines, the majority of the Nation’s inland waterways, half of its largest deepwater ports, and most of the major shallow water 

ports. 

The HIP Executive Committee met in Chicago, 

IL, to review the progress made during the year 

and to develop a work plan which includes research and development, administration education/public relations and membership. The Maritime Administrator participated in this meeting 

and discussed the Marine Transportation System, Short Sea Shipping, and policy developments. 

McAlpine Lock Emergency Closure 

The McAlpine Lock, located near Louisville, 

KY, was closed during August 2004 for emergency repairs. These repairs were necessary to 

avoid closing the Ohio River waterway system, 

which would have prevented navigation and 

caused major economic losses. 

The U.S. Army Corps of Engineers worked with 

the inland marine industry to provide as much 

advance notice to the ports and shippers on the 

Ohio River as possible. Despite this notice, 

however, an estimated two million tons of cargo 

were delayed in delivery and the schedules of 

numerous industries were disrupted. MARAD’s 

Great Lakes Region Office worked closely with 

the Corps of Engineers, U.S. Coast Guard, and 

inland navigation industry to prepare for the closure, mitigate its impact, and keep the Secretary 

of Transportation advised. 

Great Lakes Dredging Team 

MARAD is a charter member of the Great Lakes 

Dredging Team, a partnership of and state agencies created to assure that the dredging of U.S. 

harbors and channels throughout the Great 

Lakes, connecting channels and tributaries is 

conducted in a timely and cost-effective manner, 

while meeting environmental protection, restoration, and enhancement goals. 

 

Emergency Support for 2004 Federal 

Hurricane Response 

MARAD, as one of the agencies of the U.S. Department of Transportation, assisted in the massive response efforts to aid the hurricanebattered citizens of Florida. The DOT responded to a mission assignment from the Federal Emergency Management Agency (FEMA) 

to deliver emergency relief supplies to hurricane 

victims. The U.S. DOT performs this action as 

Emergency Support Function-1 under the National Response Plan. 

MARAD, a member of DOT’s Region V Emergency Support Team domiciled in the Great 

Lakes states, answered a call to relieve and bolster the DOT’s Region IV team providing emergency supplies to the storm-maimed area. From 

various staging areas, relief commodities were 

delivered to state distribution sites located in 

local Florida communities affected by the 

storms. Main relief supplies included water, ice, 

meals-ready-to-eat, and generators. The DOT 

team worked with FEMA, the U.S. Army Corps 

of Engineers, U.S. Forestry Service, and a distribution contractor to perform the mission. 

*** 
MARAD 2004 52 

Department of Transportation Strategic Objective: Environmental Stewardship. Promote transportation solutions that enhance communities and protect the natural and built environment. 

Maritime Administration Strategic Objective: Environment. 

Promote maritime and intermodal transportation solutions that enhance environmental stewardship. 

ENVIRONMENTAL 

STEWARDSHIP 
MARAD 2004 53 

SHIP DISPOSAL PROGRAM 

The Department of Transportation (DOT) has a 

performance goal to ensure that DOT operations 

leave no significant environmental damage behind in facilities utilized by the Department. In 

support of that goal, MARAD’s Ship Disposal 

Program strives to reduce the inventory of nonretention vessels in the National Defense Reserve Fleet (NDRF) as quickly as possible. FY 

2004 was the second year MARAD received 

direct appropriations for the Ship Disposal Program, receiving $16.2 million to dispose of obsolete vessels. 

A FY 2004 performance measure and goal for 

the Ship Disposal Program was the removal of 

four obsolete, non-retention vessels from NDRF 

sites. The actual number of vessels removed in 

FY 2004 was 15, which included 11 ships designated by MARAD as high-priority because of 

their deteriorating material condition. In addition, the number of vessels awarded in disposal 

contracts in FY 2004 was 13, in spite of the fact 

that FY 2004 funding was not received until 

March 2004. Since the cycle of vessel award/

removal/disposal crosses fiscal year boundaries, 

some of the vessel removals in 2004 resulted 

from FY 2003 funded contract actions. 

The FY 2003 contract to PRP/AbleUK for the 

disposal of 13 obsolete ships involved the export 

of ships for recycling in the United Kingdom. 

This contract has been challenged in a United 

States District Court by two environmental 

groups--the Basel Action Network and the Sierra 

Club. The challenge resulted in a temporary restraining order which allowed the export of only 

four of the 13 ships in 2003 pending a full hearing scheduled for October 2004. This challenge 

has delayed the removal of nine ships from the 

fleet site. 

The remaining high priority ships originally 

named in the contract were removed from the 

contract in FY 2004 and awarded to domestic 

facilities to expedite their disposal. MARAD has 

been vigorously defending the legal challenge 

and preparing for the District Court hearing to 

preserve the foreign recycling option for the removal of aging, high priority ships from fleet 

anchorages, which are considered environmentally sensitive habitats. 

In spite of challenges, an aggressive program of 

maximizing FY 2004 funds and pursuing all feasible disposal options resulted in the award of 

contracts of a significant number of high-priority 

vessel disposals in 2004. The award of 13 ships 

for disposal in 2004, following the 24 vessels 

awarded for disposal in 2003, has eliminated all 

but three (3) high priority ships in MARAD's 

James River Fleet-- a significant achievement. 

MARAD's actions in 2004 continue the trend of 

cost-effective, accelerated ship disposal through 

interagency initiatives, industry response to requests for innovative proposals and the export of 

obsolete ships for the first time since 1994. 

Much remains to be done, and done on a consistent basis, to eliminate the backlog of deteriorating, obsolete vessels by repeating the results 

shown in 2004. 

Excluding the disposal awards in 2004, there is 

an existing backlog of approximately 96 obsolete vessels, not under contract, awaiting disposal in MARAD's three fleet sites, with approximately 30 additional vessels projected to be 

added to MARAD's fleets over the next two 

years. 

Interagency Ship Disposal Initiatives 

MARAD has also explored a variety of ship disposal options, including cooperation with other 

agencies. 

MARAD/EPA/State Department Vessel Export 

Initiative 

MARAD and other agencies worked diligently 

with Department of Justice to overcome legal 

challenges to enable the export of the remaining 

nine (9) vessels involved in the UK contract. 

The pilot project for proof of concept/

performance and to demonstrate the feasibility 

and value of responsible foreign recycling will 

commence upon issuance of licenses and per-
MARAD 2004 54 

missions to the UK contractor. 

MARAD/EPA/Navy Vessel Artificial Reefing 

Initiative 

Draft environmental best management practices 

(BMP's) were completed in 2004. Draft BMP's 

were placed in a 60-day public review and comment period ending in October 2004. When 

completed, the BMPs will provide consistent 

National guidelines for the preparation of ships 

to be used as artificial reefs. 

MARAD/Navy Vessel Deep Sinking 

Cooperative Program 

A MARAD/Navy Memorandum of Agreement 

(MOA) was signed September 5, 2003. The first 

MARAD vessel prepared for sinking under this 

program was accomplished in 2004. 

MARAD/Navy Joint Artificial Reefing 

Program 

A MARAD/Navy Memorandum of Agreement 

(MOA) was signed October 14, 2003. The joint 

agency program leverages the resources of both 

agencies in achieving common artificial reefing 

goals. The Navy vessel Oriskany began preparation for use as an artificial reef under this MOA 

in 2004 and is scheduled to be completed in 

2005. 

Global Action Program 

MARAD solicited interest from Basel Convention countries, the International Maritime Organization, and the International Labor Organization in developing an international program to 

ensure environmentally responsible and sustainable ship disposal. MARAD continues these 

international discussions to that end. 

READY RESERVE FORCE 

ENVIRONMENTAL PROGRAM 

Although the “public vessel status” of the Ready 

Reserve Force (RRF) exempts the ships from 

compliance with the Oil Pollution Act of 1990, 

MARAD takes its environmental stewardship 

role seriously. It maintains a U.S. Coast Guardapproved Vessel Response Plan for all RRF 

tankers and a Shipboard Oil Pollution Emergency Plan for all RRF non-tankers. In addition, 

MARAD also maintains an Emergency Response Plan and Tactical Response Plan at the 

three NDRF sites. 

MARAD pursues a very aggressive oil spill prevention and containment policy. This policy 

requires oil spill containment booms at all outport sites to be in place around each individual 

RRF vessel or nest of vessels whenever physically possible or otherwise positioned adjacent 

to the vessel and readily deployable if an oil spill 

occurs. MARAD has oil spill kits aboard all its 

vessels, although such kits are required only on 

tankers. 

MARAD has a very proactive marine oil spill 

training program that includes a 24 hour “Initial 

Responder” training course that is mandatory for 

all staff appointed Qualified Individuals and the 

senior licensed ROS RRF crew members (Chief 

Mate, Chief Engineer and 1st Assistant Engineer). MARAD plans to provide the follow up 

annual 8-hour refresher training to those who 

have been certified in the 24-hour training curThe freighter Santa Cruz is towed from its berth at the 

James River Reserve Fleet, bound for disposal in 

Brownsville, TX. 
MARAD 2004 55 

riculum so that they continue to maintain their 

certification. The training is in complete compliance with OSHA statutory certification requirements. 

ENVIRONMENT AND MARINE 

TECHNOLOGY 

As maritime trade expands and increases the 

strain on the land transportation system, so will 

the potential effects that maritime transportation 

has on the environment. There are two particularly critical environmental impacts associated 

with the Marine Transportation System: one is 

the combination of air emissions and energy 

consumption, and the other is the introduction of 

aquatic nuisance species, particularly in ballast 

water. 

Air Emissions and Clean Energy

To address air pollutant emissions from marine 

vessels, MARAD has continued partnerships 

with governmental agencies, academia, and industry that have focused on fostering research 

and designing environmental policy mechanisms 

to encourage voluntary application of emissions 

reduction technology. 

MARAD is involved in new projects, supported 

through the Department of Transportation’s 

Center for Climate Change and Environmental 

Forecasting, which address marine vessel emissions. The research projects incorporate “well – 

to – hull” emissions modeling, retrofit technologies, and inventory assessments. 

Finally, MARAD has procured a Geographic 

Information System that will ultimately provide 

detailed, applied spatial analyses of emissions 

concerns and scenarios related to Short Sea 

Shipping and landside congestion. Data compilation to populate the GIS is on going. 

Marine Transportation Industry Outreach 

MARAD continues to publish its quarterly Report on Port and Shipping Safety and Environmental Protection (reports 70 -72 during FY 

2004). These reports summarize activities at the 

international and National levels concerning 

safety and environmental protection matters related to ports and shipping. Of particular importance are the summaries of activities of the International Maritime Organization (IMO). Report 

copies can be found at the following Internet 

addresses: http://www.marad.dot.gov, http://

www.marad.dot.gov/nmrec, and http://

www.socp.org. 

Shipbuilding and the Environment

MARAD assures that its Title XI loan guarantee 

projects for building ships and improving shipyards are in compliance with applicable environmentally requirements. Moreover, MARAD has 

made significant strides in establishing itself as a 

leading and coordinating force in research, development and demonstration in the critical areas of environmental efficient marine propulsion 

systems. This important work has been carried 

on by significant funding and in-kind contributions from more than 30 partners from the , state 

and local governments, private sector and academia. In addition, MARAD is represented on the 

interagency DOT team exploring the potential of 

hydrogen as an alternative, clean fuel. Through 

these activities, MARAD is the recognized 

leader in the investigation, demonstration and 

promotion of energy efficient marine propulsion 

systems. 

Dredging 

MARAD addresses dredging and dredgedmaterial management issues related to impacts to 

National ports and harbors through active participation on the National Dredging Team 

(NDT) and Regional Dredging Teams (RDT). 

The new Action Agenda for the NDT focuses on 

four main areas: beneficial uses of dredged material, sediment management, emerging issues, 

and strengthening regional teams. Federal agencies participating on the NDT are the Army 

Corps of Engineers, the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, MARAD, the Fish and 
MARAD 2004 56 

Wildlife Service, the U.S. Coast Guard, and the 

Navy. 

International Activities 

MARAD is represented on the International Marine Organization’s Marine Environment Protection Committee (MEPC). The MEPC is responsible for developing international conventions, codes, and guidelines to prevent and control pollution from ships. In addition, MARAD 

participates in the activities of the U.S. Shipping 

Coordinating Committee, which finalizes U.S. 

positions for meetings of the IMO committees 

and subcommittees, as well as for sessions of the 

IMO Assembly and Council. 

ENVIRONMENTAL STEWARDSHIP 

MARAD continues to protect the environment 

by ensuring that its facilities, ships and programs 

are in compliance with environmental laws, 

regulations, executive orders, and treaties. This 

is accomplished by conducting internal environmental compliance audits of facilities and ships. 

Since 1992, MARAD has conducted three separate rounds of multi-media environmental compliance audits, and is in the process of completing the fourth. Deficiencies identified in the 

audits have been budgeted for and corrected. 

MARAD continues to be vigilant in ensuring 

pollution prevention techniques, beneficial landscape programs, and energy management are 

employed in each facility. 

In concert with the Administration’s goals and 

Council on Environmental Quality (CEQ) policy 

goals to increase significantly the government’s 

use of environmental management systems 

(EMS) as a planning and implementation tool, 

MARAD has been fully committed to complying 

with Executive Order 13148 “Greening the Government through Leadership in Environmental 

Management,” and DOT Order 5641.1A, “U.S. 

Department of Transportation Internal Environmental Management System,” in implementing 

EMS into its facilities. In 2003, MARAD joined 

with the EPA and many U.S. ports in implementing a pilot EMS program at the James River 

Reserve Fleet (JRRF). 

In using the JRRF as a pilot, MARAD is planning to expand the full EMS program to the 

other four facilities, i.e., the Beaumont Reserve 

Fleet, the Suisun Bay Reserve Fleet, the Fire 

Training Center, and the U.S. Merchant Marine 

Academy, in 2005 and 2006. The final EMS 

will provide MARAD with a new system that 

documents environmental risks as they relate to 

environmental compliance and legal obligations. 

AQUATIC NUISANCE SPECIES 

Aquatic Nuisance Species (ANS) are plants, animals, bacteria, and pathogens, which have been 

introduced into new ecosystems, and which are 

having a harmful impact on those ecosystems. 

Such species have been introduced into the 

United States by a number of means, including 

in water that has been used as shipboard ballast. 

Many ships use water as ballast for stability and 

safety because it is available, it is low-cost, and 

easy to unload. Problems may arise when ships 

take water on in one ecosystem and discharge it 

in another. Species discharged in a new environment in such a way can have an impact on 

biological and economic resources and can also 

impact human health. The best-known example 

is that of the zebra mussel, a non-indigenous 

species that was introduced into the Great Lakes 

by shipboard ballast water, which has disturbed 

native species, clogged intake pipes for water 

supplies, and may pose serious human health 

risks. Great Lakes water users spend tens of millions of dollars on zebra mussel control every 

year. That is only one example among many. 

MARAD is the lead Federal agency in the Federal Ballast Water Demonstration Project, which 

provides opportunities for testing technologies 

for treating ballast water. The Project is seeking 

to speed the movement of promising technology 

from the laboratory to shipboard to ultimately 

eliminate this problem. Other agencies involved 

include the National Oceanographic and Atmospheric Administration (NOAA) and the U.S. 

Fish and Wildlife Service. One of MARAD's 

important contributions is the use of ships as test 

platforms. 
MARAD 2004 57 

In FY 2004, MARAD sponsored the third phase 

of testing for a promising new ballast water technology that uses a combination of filtration and a 

high-frequency sonic contact reactor with ozone 

injection. The technology is one of the few that 

have shown potential for successful shipboard 

operation. The test phase was successfully completed and the system is expected to be tested 

onboard a commercial vessel in the near future. 

The next focus of the program will be the development of test barge platforms that can accommodate technology testing in a ship-like environment. Approximately 93% of the applicants to 

the Program are at a stage that is past the laboratory but not ready to be tested under the rigorous 

conditions of an operating ship. It is the goal of 

the program to move substantially more technologies from the lab to commercially operating 

vessels and to complement other Federal and 

State ballast water initiatives. 
MARAD 2004 58 

ORGANIZATIONAL 

EXCELLENCE 
MARAD 2004 59 

PRESIDENT’S MANAGEMENT AGENDA 

The President's Management Agenda, announced in the summer of 2001, is an aggressive 

strategy for improving the management of the 

Federal Government. It focuses on five areas of 

management across the government where improvements and the most progress can be made. 

The Maritime Administration (MARAD) has 

also focused on those areas: budget and performance integration, improved financial management, competitive sourcing, strategic management of human capital, and expanded Egovernment. 

Budget and Performance Integration Initiative 

MARAD produced its second integrated performance budget when it developed the FY 2006 

budget request during FY 2004. This request 

included several important improvements that 

enhanced the readability and usefulness of the 

document. In addition to being far more concise, the FY 2006 budget also displays improved 

organization with a more explicit and detailed 

resource breakout for easier comparison between 

the resource requests and the text justifying 

those requests. 

As part of its budget development process, MARAD also continued to conduct annual and quarterly performance reviews of MARAD's programs and conducted its first program assessment using the Office of Management and 

Budget’s Program Assessment Rating Tool 

(PART). The Maritime Security Program received a PART assessment rating of 91 percent. 

This is one of the highest PART ratings received 

by a Federal program. 

Improved Financial Management 

The largest contracts MARAD administers are 

those for the maintenance, activation, and operation of Ready Reserve Force (RRF) ships. In FY 

2004 MARAD issued the first Request for Proposals (RFP) for these contracts using both a 

totally electronic solicitation, supporting the 

President’s e-commerce Initiative, and an RFP 

which will result in performance based service 

contracts. The Ship Manager Solicitation developed by RRF personnel was goal- and outcomeoriented. Contracts reached under this RFP are 

scheduled to be announced in FY 2005. 

MARAD has implemented many other improvements to management processes in FY 2004, 

including using more electronically-based budgeting and expense accounting, inventory and 

asset management, workforce planning, customer service and help desk operations. 

Competitive Sourcing 

The National Defense Reserve Fleet Anchorage 

Facilities commercial activity competition was 

completed at the end of FY 2003, and MARAD 

was the successful bidder having the most efficient organization (MEO). MARAD developed 

and submitted the bid in order to continue performing the reserve fleet operations with government employees. 

Implementation began in January 2004 and continued into April. During this time, personnel 

actions were taken to staff the new organization, 

employee training was provided, and contract 

deliverables were received. The MEO organization took over the operation on April 16, 2004, 

in compliance with the contract and the newly 

established Quality Assurance group began performing its quality oversight function. 

Strategic Development of Human Capital 

MARAD created a Human Capital Council during FY 2004. The HCC evaluates overall 

agency priorities and operations during its deliberations to determine agency personnel staffing 

requirements. The HCC is composed of the 

agency’s Associate Administrators. The Director of Human Resources serves as the Executive 

Secretary and the Director of Civil Rights serves 

as Diversity Advisor. 

The HCC is charged with reaching a consensus 

on workforce allocation and development, making recommendations to the Administrator on 
MARAD 2004 60 

agency positions to ensure that the agency can 

execute critical missions and goals as efficiently 

as possible. As an evolving entity, it will address organizational change and status as well as 

forecast the organization’s future workforce 

needs. Through the HCC, MARAD will be able 

to focus on organizational employment opportunities to help it become a high-performing, diverse organization prepared to meet today’s 

workplace challenge and opportunities. 

MARAD’s employment totaled 837 at the end of 

FY 2004. During that fiscal year, MARAD hired 

a total of 75 employees; 25 percent of the new 

hires were females, 32 percent were minority 

employees, and 5 percent were people with disabilities. 

 
MARAD 2004 61 

TRANSPORTATION LEADERSHIP 

PROGRAM 

The MARAD Transportation Leadership Program (TLP) was initiated in FY 2004 as part of 

the agency’s human capital and succession 

planning efforts. The TLP was created specifically to address these issues by ensuring that a 

pool of highly qualified internal candidates is 

trained and equipped to fill future critical 

needs. 

The TLP is a full-time, two-year program dedicated to training and equipping current high 

performing employees to assume management 

and leadership positions within the Maritime 

Administration. Participation in the program is 

open to all full-time permanent MARAD employees at the GS-13 through GS-15 level, who 

have at least two years tenure with the agency. 

Participants are selected based upon their education, experience, and demonstrated leadership potential. 

As is the case with many agencies of the Federal 

Government, MARAD is confronting the potential loss of a significant number of retirement 

eligible employees in leadership positions over 

the next five years. In FY 2004, more than 27 

percent of MARAD’s leaders were already eligible to retire and by 2008 that number will increase by nearly 60 percent. It is recognized that 

as key leadership and management positions are 

vacated over the next few years, MARAD must 

be ready to quickly fill these critical positions. 

Additionally, it is important that available financial resources be strategically targeted to ensure 

that training programs are specifically tailored to 

meet both current and future agency needs as 

gaps in critical skill sets occur. 

The first class of TLP was competitively selected in July 2004. A total of five participants, 

three from MARAD headquarters and two from 

the Regions, were selected from among 20 

highly qualified candidates. These participants 

embarked upon a two-year program involving an 

eight-week indoctrination in headquarters which 

began on October 4, 2004, rotational assignments both in headquarters and the regions, and 

completion of a Masters Degree within the twoyear period. Upon successful completion of all 

program requirements, GS-13 and GS-14 participants will receive a one-grade promotion and 

placement in a permanent job assignment based 

on agency needs. 

*** 

The first participants in MARAD’s TLP program. Left to 

right: Brian Blower, Patrick Carlton, Tracey Ford, Lennis 

Fludd, Joseph DuVal 

FEATURE : TRANSPORTATION LEADERSHIP PROGRAM 
MARAD 2004 62 

Six positions were advertised under MARAD’s 

Career Enhancement Program or the Department 

of Transportation’s Rotational Assignment Program. Six positions were established in our Career Opportunities Training Agreement Program 

(COTA), formerly known as Upward Mobility. 

Fifty-four applications were approved for tuition 

assistance through the MARAD Tuition Assistance Program. 

MARAD employees received the following 

awards: three received the Secretary’s Silver 

Medal, two received the Excellence Award, one 

received the EEO/Affirmative Action Award, 

and one received the Volunteerism/Community 

Service Award. In addition, 15 MARAD employees, as a group, received the Secretary’s 

Team Award, and 28 received the Partnering for 

Excellence Award. Fourteen employees received the Maritime Administrator’s Bronze 

Medal Award, and four employees received 

MARAD’s EEO Award in recognition of and 

appreciation for contributions made toward the 

furtherance of Equal Employment Opportunity. 

The Maritime Administrator and the Associate 

Administrator for National Security received the 

Secretary of Transportation’s War on Terrorism 

Medal for leading MARAD’s sealift efforts during Operations Enduring Freedom and Iraqi 

Freedom; 21 employees received the War on 

Terrorism Ribbon. 

Expanded Electronic Government 

In FY 2004, MARAD focused its E-government 

efforts on infrastructure upgrades, information 

systems security (INFOSEC), mission systems 

planning, and management processes. 

Infrastructure Upgrade: MARAD adopted a 

three-year hardware replacement cycle and began participating in the Microsoft Software Assurance contract to ensure MARAD’s IT infrastructure meets the demands of current and future mission needs. As result, MARAD migrated from Microsoft NT 4.0 to Microsoft Windows XP and from Office 97 to Office 2003. 

MARAD established the concept of a “fixed” 

and “mobile” seat, reducing hardware needs 

while meeting the needs of a mobile workforce. 

MARAD continued to work with the Office of 

the Secretary of Transportation on the consolidation of information technology infrastructure 

services in 2005 and 2006, as well as planning 

for the move to the new DOT headquarters 

buildings scheduled in 2006. 

Information Systems Security: MARAD certified and accredited all of its critical information 

systems. The certification process assures MARAD that adequate security controls have been 

implemented based on the sensitivity of the data. 

MARAD continued its work toward a viable 

Continuity of Operations Plan for critical information technology functions, including email 

and various business applications. The site is 

operational and provides MARAD the capability 

to perform all critical business functions. 

Mission Systems Planning: MARAD began an 

intensive effort to update, integrate, and develop 

application systems centered on its mission 

needs. An enterprise architecture document was 

produced that outlines MARAD’s current business and technical environments with recommendations for progressing toward a more integrated and productivity-enhancing architecture. 

The integrated architecture will eliminate functionality and data redundancy in its information 

technology systems while increasing user productivity and management access to data for decision making. To enable the enterprise architecture, MARAD invested in a systems development environment including Microsoft, Documentum, and Oracle development tools. These 

tools provide a robust, state-of-the-art applications development environment that will serve 

MARAD for many years to come.

CIVIL RIGHTS

The agency also developed an initiative to educate employees on equal employment opportunity programs, the concept of diversity, harassment, sexual harassment and the Notification of 

Federal Employees Anti-discrimination and Retaliation (No Fear) Act. The faculty and staff of 

the U.S. Merchant Marine Academy and three of 
MARAD 2004 63 

four regions have participated in the training, 

which was specifically designed for MARAD 

and facilitated by experienced contract civil 

rights professionals. This initiative is expected 

to be completed next fiscal year. However, MARAD will continue with employee education 

programs on an ongoing basis. 

CUSTOMER SATISFACTION 

All major MARAD programs are evaluated on a 

three-year cycle, using three forms developed by 

the MARAD Customer Satisfaction Committee: 

● The Customer Service Questionnaire, a 

mechanism to evaluate perceptions of 

how MARAD conducts business, can be 

completed by accessing MARAD’s web 

site (http://www.marad.dot.gov). 

● The Program Performance Survey identifies areas for improvement in program 

service or product delivery and to monitor the overall level of customer satisfaction. This survey is sent to customers of 

major MARAD programs. 

● The Conference/Exhibit Survey form, 

which is used to evaluate MARAD’s 

performance at MARAD-sponsored and 

co-sponsored conferences and exhibits 

in which MARAD participates. It is 

distributed at such conferences. Information using these three surveys has 

been analyzed and included in the Maritime Administration Customer Satisfaction Report – August 2004 report, which 

has been published and is currently 

available on MARAD’s web site (http://

www.marad.dot.gov) under the Programs link. 

Sixty-nine percent of the respondents rated MARAD above average or excellent in meeting their 

needs. Fifty-nine percent interact with MARAD 

two times or less a month. Forty-one percent

have been customers of MARAD 10 years or 

less, while 7 percent have interacted with us 

more than 30 years. Thirty percent cited MARAD as their primary supplier for maritime 

information and support. Ninety percent found 

MARAD’s information in clear and easy to understand plain language. 

On specific comparison factors to other entities 

with which they interact, 55 percent rated MARAD better, while only 2 percent rated MARAD 

worse. Respondents indicated positive impressions of professionalism (65 percent), friendliness (63 percent), and our willingness to work 

with customers (62 percent). One area needing 

improvement was reliability of service (4 percent). However, all but one respondent stated 

they would recommend MARAD, and all but 

one respondent indicated they would use MARAD again. 

LEGAL SERVICES AND AGENCY 

DECISIONS 

MARAD is required by law to report on its 

activities under Admiralty Law. 

Admiralty Actions 

The United States is seeking compensation for 

damages caused to three of its vessels, Mount 

Washington, Equality State ,and Diamond State, 

arising out of an allision with these vessels by 

barges in the Houston area. Settlements have 

been reached with some of the barge owners, but 

a trial on liability and damages is expected in FY 

2005. 

MARAD also concluded a limitation of liability 

proceeding, which arose out of personal injuries 

suffered during a fire aboard a MARAD vessel. 

Admiralty Claims 

An admiralty claim was received from a port 

authority in the Netherlands. This claim was 

originally filed more than ten years after the date 

of an accident, which occurred during Desert 

Shield / Desert Storm and involved the allision 

of a National Defense Reserve Fleet (NDRF) 

vessel with a dike. 
MARAD 2004 64 

The Supreme Court of the Netherlands ruled in 

MARAD’s favor, and affirmed the sovereign 

immunity abroad of such vessels operating under 

the orders of the Department of Defense. 

MARAD thus denied the claim. 

Another admiralty claim arose when an NDRF 

vessel damaged a fishing net system in South 

Korea. This claim was settled, with MARAD 

coordinating activities with the U.S. Department 

of Justice. 

Admiralty Personal Injury Matters 

At the end of the recording period, 17 personal 

injury plaintiff actions were pending in courts or 

on appeal, although certain of these were consolidated into single case proceedings. Most of 

these claims involved seafarers injured aboard 

MARAD vessels. 

Ship Disposal 

Environmental issues relating to the recycling of 

the non-retention National Defense Reserve 

Fleet vessels in the James River were the subject 

of considerable effort during the past fiscal year. 

In FY 2003, MARAD entered into a contract 

with a United Kingdom recycling facility for 15 

vessels. The U.S. Environmental Protection 

Agency issued a letter of enforcement discretion 

indicating that it would not legally challenge the 

export provided certain conditions were satisfied. Various environmental groups and individuals challenged the export of the vessels in 

U.S. District Court. The District Court allowed 

four vessels to leave the United States. The ability of MARAD to export the remaining vessels 

is currently under consideration by the U.S. District Court on cross-motions for summary judgment. 

Within the United Kingdom, challenges were 

also mounted against the validity of the U.K. 

recycler’s various environmental permits. These 

challenges ultimately resulted in judicial findings that the U.K. recycler’s amended Waste 

Management License was not issued in accordance with proper U.K. administrative procedures. The existing local council approval for 

the recycling of “marine structures” was also 

determined not to encompass vessels within its 

meaning. Rather than appeal these decisions, 

the U.K. recycler is currently applying for a new 

Waste Management License and local council 

approvals for the recycling of MARAD’s vessels. 

MARAD has also petitioned the Environmental 

Protection Agency for an administrative rule 

under the Toxic Substances Control Act approving the export of any of the listed vessels to the 

U.K. recycling facility. 

At the same time environmental groups are attempting to restrict the export of vessels from 

the James River Reserve Fleet, a citizen suit has 

been filed seeking to compel the removal from 

the JRRF of non-retention NDRF vessels. Responsive pleadings have not yet been filed in this 

proceeding. 

Asbestos 

Former and current MARAD general agents and 

ship managers have tendered for defense approximately 2,500 suits filed by seafarers to the 

U.S. Government. In these suits, plaintiffs allege exposure to asbestos aboard MARAD 

owned vessels caused personal injury. The tenders arise primarily out of litigation involving 

more than 70,000 similar merchant seafarers’ 

asbestos suits that are consolidated before the 

U.S. District Court for the Eastern District of 

Pennsylvania. The court has administratively 

closed these cases pending court order to proceed to litigation. Of the 70,000 suits, the court 

has ordered approximately 50 to proceed to litigation. MARAD is not actively involved in the 

defense of any of these cases at this time. 

Administration Procedure Act 

The dismissal of a student from the United 

States Merchant Marine Academy was challenged in U.S. District Court under the Administration Procedure Act. This matter is currently 

awaiting a decision on cross-motions for summary judgment. 
MARAD 2004 65 

Freedom of Information Act 

MARAD began the fiscal year with 44 carryover 

Freedom of Information Act (FOIA) requests for 

access to records, and received 175 new requests. One hundred forty-five requests were 

processed during FY 2004, and 64 requests were 

pending at year’s end. There was only one administrative appeal of an initial FOIA decision. 

ACQUISITION 

During FY 2004, MARAD awarded approximately $409 million in contracts for goods and 

services, continuing its vital role of performing 

MARAD’s critical missions in the context of the 

President’s Management Agenda. 

These contracts included strengthening the Nation’s security and supporting the war on terrorism, including Operation Iraqi Freedom; removal of environmentally at-risk vessels from 

Reserve Fleet anchorage, and implementation of 

programs that expand and institutionalize Egovernment. The major accomplishments during the year include: 

• Provided key contracting support for the 

activation of 40 surge sealift vessels of the 

Ready Reserve Force (RRF) in direct support of Operation Iraqi Freedom and the war 

on terrorism, as well as other DOD exercises 

and missions; 

• Designed and implemented the Virtual Office of Acquisition (VOA), providing access 

to all award documents to both the U.S. 

Government and industry; 

• Negotiated and awarded contracts to scrap 

11 environmentally at-risk vessels from the 

James River Reserve Fleet. These contracts 

represent a significant step toward meeting 

Congressional mandates and achieving one 

of the Department of Transportation’s high 

priorities: to dispose of obsolete vessels responsibly; 

• Awarded, using electronic commerce methods, over $333 million in contract actions, in 

direct support of the President’s egovernment initiative; and 

• Executed $27 million in support of the intermodal Port Expansion program, a 10-year 

port renovation project which is being executed under an innovative business partnership with the Port of Anchorage. Further 

developed the Port of Anchorage Contract 

Management System (CMS), allowing for 

electronic submission and approval of task 

orders, modifications, and other contract 

actions. Development and implementation 

of this E-contracting tool has significantly 

expedited contract actions, in spite of the 

geographic and time-zone differences. 

• Continued the effective, ongoing administration of major contracts, including, but not 

limited to, operation and maintenance of the 

RRF, logistics and repair parts and ship material replenishment support to the RRF, information technology support for the 

agency, and food service, janitorial service 

and sewage treatment at the U.S. Merchant 

Marine Academy. 

AUDITS 

In FY 2004, the Department of Transportation’s 

(DOT’s) Office of Inspector General (OIG) and 

the Government Accountability Office (GAO) 

started audit work or submitted principal final 

reports on MARAD activities as follows: 

Office of the Inspector General 

DOT’s Top Management Challenges for FY 

2004 (PT-2004-006 Dated: December 5, 2003) 

File 10-321; 

Financial Statements – FY 2004 DOT OIG Audit (Work Underway – Project No 04F3018F000 

Notification Memorandum Dated: February 27, 

2004) File 10-324; 

Policy and Procedures for Locating Federal Offices and Facilities in Rural Areas – DOT (SC2004-071 Dated: July 23, 2004) File 10-325; 

Consolidation of Accounting Functions (Work 

Underway – Project No 04F3010F000 
MARAD 2004 66 

Notification Memorandum Dated: May 7, 2004) 

File 10-326; 

Resolution of Audit Findings – Single Audits 

(Work Underway) File 10-327; 

Cargo Preference Billing and Payment Process 

(FI-2004-057 Dated: May 5, 2004) File 10-328; 

and 

Background Investigations of DOT Government 

and Contractor Employees (Work Underway – 

Project No 04B3008B000 Notification Memorandum Dated: July 7, 2004) File 10-329. 

Government Accountability Office: 

Freight Transportation: Strategies Needed to 

Address Planning and Financing Limitations 

(GAO-04-165 Dated: December 19, 2003) File 

11-403; 

Alaska Native Villages: Most Are Affected by 

Flooding and Erosion, but Few Qualify for Federal Assistance (GAO-04-142 Dated: December 

12, 2003) File 11-406; 

Monitoring and Oversight of Federal Funds 

Awarded to Bridgeport CT (GAO-04-230R 

Dated: November 26, 2003) File 11-417; 

Maritime Law Exemption: Provides Limited 

Competitive Advantage, but Barriers to Further 

Entry Under U.S. Flag Remain (GAO-04-421 

Dated: February 27, 2004) File: 11-421; 

MARAD Ship Scrapping Contracts (Work Underway - Job Code 350471 Notification Memorandum Dated: November 4, 2003) File 11-423; 

Follow-up of Maritime Transportation Security 

Act (MTSA) of 2002. (Work Underway - Job 

Code 440265 Notification Memorandum Dated: 

November 24, 2003) File 11-424; 

Maritime Security Fleet: Many Factors Determine Impact of Potential Limits on Food Aid 

Shipments (GAO-04-1065 Dated: September 13, 

2004) File: 11-426; 

Continuity Of Operations: Improved Planning 

Needed to Ensure Delivery of Essential Government Services (GAO-04-160 Dated: February 

27, 2004) File 11-428 (Also See File 11-431 

Continuity Of Operations: - Update (Job Code 

310395); 

Federal Insurance Programs (War Risk Insurance) (Work Underway - Job Code 250184 Notification Memorandum Dated: July 21, 2004) 

File 11-432; 

Assessment of Non-Intrusive Technologies for 

Cargo Security (Work Underway - Job Code 

460567 Notification Memorandum Dated: July 

8, 2004) File 11-433; 

Maritime Security: Implementation of the Automatic Vessel Identification System (GAO-04-

868 Dated: July 23, 2004) File 11-434; 

Short Sea Shipping (Work Underway - Job Code 

544095 See Memorandum Dated: July 27, 2004) 

File 11-435; and 

Progress on Addressing Major Management 

Challenges and Program Risks at DOT (Work 

Underway - Job Code 542047 Notification 

Memorandum Dated: September 13, 2004) File 

11-437. 
MARAD 2004 67 

FINANCIAL STATEMENTS

U.S. DEPARTMENT OF TRANSPORTATION--Maritime Administration

Exhibit 1. Statement of Financial Condition

September 30, 2003 and September 30, 2004 September 30

 ___________________________________ 

ASSETS 2004 2003

Selected Current Assets 

 Funded Balances with Treasury: 

 Budget Funds $546,689,000 $ 618,293,000 

 Deposit Funds 10,000 10,000

 546,699,000 618,303,000 

Federal Security Holdings 88,342,000 188,776,000 

Accounts Receivable: 

 Government Agencies 54,506,000 137,771,000 

 The Public 

 __________ __________ 

 54,506,000 137,771,000 

Advances To: 

 Government Agencies 

 The Public 

Total Selected Current Assets $ 689,547,000 $944,850,000 

Loans Receivable: 

 Repayment in Dollars 431,967,000 433,183,000 

 Allowances (-) (362,270,000) (353,496,000)

 69,697,000 79,687,000 

Real Property and Equipment: 

 Land 3,962,000 3,962,000 

 Structures and Facilities 62,261,000 68,306,000 

 Equipment, Vessels, Inventory 715,897,000 1,095,783,000 

 Leasehold Improvements 0 0 

 782,120,000 1,168,051,000 

Total Other Assets $310,048,000 $1,247,738,000

Total Assets $1,851,412,000 $2,192,588,000 

The notes to Financial Statements are an integral part of this statement. 
MARAD 2004 68 

FINANCIAL STATEMENTS

U.S. DEPARTMENT OF TRANSPORTATIONMaritime Administration

Exhibit 1. Statement of Financial Condition 

September 30, 2003 and September 30, 2004 September 30

 ___________________________________ 

LIABILITIES 2004 2003

Selected Current Liabilities (Note 2) 

 Accounts Payable (Including Funded 

 Accrued Liabilities): 

 Government Agencies $ 1,002.749,000 $ 267,859,000 

 The Public 38,311,000 33.391,000 

 1,041,060,000 301,250,000 

Accrued Liabilities for Loan Guaranteed 378,061,000 292,740,000 

Unfunded Liabilities: 

 Environmental Liabilities 528,902,000 375,000,000 

 Other Liabilities 57,538,000 235,114,000 

 Federal Employee’s Benefits Payable 20,253,000 22,689,000

 606,793,000 632,803,000 

Total Selected Current Liabilities 2,025,914,000 1,226,793,000 

Deposit Fund Liabilities 0 0 

Debt issued under borrowing Authority: 

 Borrowing from Treasury 0 0 

Other Liabilities: 

 Vessel Trade-in Allowance and Other 

 Accrued Liabilities 0 0 

Future Funding (ODS Contract Authority) 

 ___________ ___________ 

Total Liabilities $2,025,914,000 $ 1,226,793,000

Government Equity 

 Unexpended Budget Authority: 

 Unobligated 124,564,000 248,108,000 

 Undelivered Orders 237,164,000 282,138,000

 361,728,000 530,246.000 

Unfinanced Budget Authority (-) 

 Unfilled Customer Orders (91,659,000) (124,269,000) 

 Contract Authority _________ _________

 (91,659,000) (124,269,000) 
MARAD 2004 69 

The notes to Financial Statements are an integral part of this statement. 

Invested Capital (227,914,000) 559,818,000

Total Government Equity ($174,502,000) $965,795,000 

Total Liabilities and Government Equity $1851,412,000 $2,192,588,000 
MARAD 2004 70 

FINANCIAL STATEMENTS

U.S. DEPARTMENT OF TRANSPORTATIONMaritime Administration 

Exhibit 2. Statement of Operations Years Ended September 30 

 ___________________________________ 

 2004 2003

OPERATIONS OF THE MARITIME ADMINISTRATION

 Net Costs of Operating Activities 

 Reserve Fleet Programs: 

 Maintenance and Preservation $ 538,000 $ 3,229,0007 

Direct Subsidies and National Defense Costs: 

 Operating-Differential 194,000 1,118,000 

 Ocean Freight Differential 147,558,000 114,033,000 

 Title XI Credit Reform Program 10,793,000 (35,086,000) 

 and Financing Fund 

 Maritime Security Program 98,580,000 97,053,000 

 Ship Disposal Program 7,300,000 252,000 

Administrative (includes Financial Assistance to State 

Maritime Schools, 

School ships, Student Incentive 83,934,000 89,730,000 

Other Operating Income Net of Expenses 349,000 90,018.000 

Net Cost of Maritime Administration $260,524,000 $360,347,000

Operations of Revolving Funds (-Income): 

Vessel Operations Revolving Fund (18,066,000) (4,889,000) 

War Risk Revolving Fund (1,410,000) (1,721,000) 

Construction Differential Fund (1,979,000) (2,223,000) 

Federal Ship Financing Fund (1,703,000) (418,000) 

Gifts and Bequests (98,000) 629,000 

Special Studies (107,000) (3,000)

 (23,363,000) (9,883,000) 

Net Cost of Combined Operations $237,161,000 $350,464,000 

The notes to Financial Statements are an integral part of this statement. 
MARAD 2004 71 

U.S. DEPARTMENT OF TRANSPORTATION - MARITIME ADMINISTRATION

Notes to Financial Statements 

 September 30, 2003 and September 30, 2004 

1. The preceding financial statements include combining assets, liabilities, income, and expenses of the Maritime Administration (MARAD); the Vessel Operations 

Revolving Fund, the War-Risk Insurance Revolving 

Fund, and the Federal Ship Financing Fund, Programs 

of the Federal Credit Reform Act of 1990 and other 

appropriations. Fiscal Year 2003 & 2004 financial information is based on MARAD's FY 2003 & 2004 audited financial statements required by the Chief Financial Officer Act. 

2. Contingent liabilities for Title XI guaranteed loans 

aggregated $3.4 billion as of September 30, 2004. 

3. There were no conditional liabilities 

for pre-launching War-Risk Builder's Insurance on September 30, 2004. 

4. The Federal Ship Financing Fund incurred no defaults during FY 2004. 

5. The Title XI Credit Reform Program incurred no 

defaults during FY 2004. 

6. Real Property and Equipment are reported at the net 

book value (i.e., acquisition cost, minus accumulated 

depreciation) for FY 2004.
MARAD 2004 72 

National Maritime Day, 2004 

By the President of the United States of America 

A Proclamation 

National Maritime Day provides an opportunity to recognize the men and women of the United States 

Merchant Marine and their contributions to our national security and economic strength. 

Since they first offered their ships and services to assist the Continental Navy in our struggle for independence, to their distinguished service in World War II, merchant mariners have courageously sacrificed to protect our country and defend our freedoms. In 1936, America recognized the contributions of 

these patriots and established the U.S. Merchant Marine "as a naval or military auxiliary in time of war 

or national emergency." Today, merchant mariners are delivering essential supplies and equipment to 

our troops in Iraq and bravely serving the cause of liberty. They continue to play an important role in our 

Nation's efforts to advance democracy, peace, and freedom around the world, and we are grateful for 

their dedication. 

Merchant mariners also contribute significantly to the U.S. maritime transportation system. More than 

95 percent of non-North American trade enters our country through our seaports. These ports handle 

more than $740 billion and 2 billion tons of domestic and international freight each year. Those in the 

maritime industry, including merchant mariners, enhance waterborne commerce and help promote 

America's economic growth. 

Today, we honor the courage, determination, and service of our Nation's merchant mariners and remember the many who have given their lives in defense of our country. Their work reflects the patriotism and 

devotion to duty that make America great. 

In recognition of the importance of the U.S. Merchant Marine, the Congress, by joint resolution approved on May 20, 1933, as amended, has designated May 22 of each year as "National Maritime Day," 

and has authorized and requested that the President issue an annual proclamation calling for its appropriate observance. 

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, do hereby proclaim May 22, 2004, as National Maritime Day. I call upon the people of the United States to celebrate 

this observance and to display the flag of the United States at their homes and in their communities. I 

also request that all ships sailing under the American flag dress ship on that day. 

IN WITNESS WHEREOF, I have hereunto set my hand this twenty-first day of May, in the year of our 

Lord two thousand four, and of the Independence of the United States of America the two hundred and 

twenty-eighth. 

GEORGE W. BUSH 

# # # 
MARAD 2004 73 

MARITIME ADMINISTRATION 
MARAD 2004 74 
MARAD 2004 75 
MARAD 2004 76 

Department of Transportation 

Maritime Administration 

Office of Congressional and Public Affairs 

400 7th Street, SW (Room 7219) 

Washington, DC 20590 

Phone: (202) 366-5807 

Fax: (202) 366-5063 

Email: pao.marad@marad.dot.gov 

Web Site: www.marad.dot.gov