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Saturday, May 23, 2015
A Tale of Two Fleets: Canada Reforms its Version of Jones Act
By Michael Hansen @ 7:44 PM :: 3292 Views :: Jones Act

by Michael Hansen, Hawaii Shippers Council

The Detroit Free Press reported on May 18, 2015, the ongoing and robust renewal of the Canadian flag shipping on the Great Lakes due to a change in Canadian Law that allowed Canadian shipowners to acquire foreign-built ships and import them for operation in domestic Canadian trade without payment of duty. 

The article contrasts the new modern ships being added to the Canadian flag with the ageing and inefficient US flag Great Lakes fleet, noting that the US shipowners are prevented by the Jones Act from acquiring lower cost foreign built ships and domestic shipbuilding costs are too high to justify ordering newbuildings from US shipbuilders.  This situation on the Great Lakes could easily be described as a “Tale of Two Fleets.”

Key excerpts:

Seven new freighters have entered the Great Lakes trade since 2012. Another ship has been launched and is fitting out; four more are being built; and two more are on order.

They all have a couple of things in common: They're Canadian ships, and they were built overseas.

Such numbers of new freighters haven't been seen on the Great Lakes in years, said shipping experts.

"The current building boom of lake freighters, especially on the Canadian side, is unprecedented since the opening of the St. Lawrence Seaway in 1959," Skip Gillham, who has written the "On the Lakes" column in the Times Herald for 43 years, wrote in an email.

Roger LeLievre, editor and publisher of guidebook, "Know Your Ships," said Algoma Central Corp. and Canada Steamship Lines are ordering new freighters.

A change in Canadian law helped spark the shipbuilding boom, LeLievre said.

"A few years ago, Canada repealed its tax on building ships overseas," he said. "That, combined with not having any major shipyards on the Great Lakes in Canada, drove shipbuilding overseas."

He said he has been told that shipping lines can have three ships built in China or other countries for what it would cost to have one built in Canada.

"Canadian shipyards are virtually closed," Gillham said.

"They turn to China and Croatia, which allow ships to be built at a competitive market price, and sail them to the Great Lakes for service.

Debbie Murray, director of policy and regulatory for the Canadian Shipowners Association, said the government lifted an import duty of 25 percent in 2011.

"We couldn't afford to build ships here No. 1, and then No. 2, the government is looking to use shipbuilding capacity for navy vessels and Canadian Coast Guard vessels," she said.

"The bottom line was the import duty was lifted," she said. "That generated considerable investment by our membership."

She said the new freighters represent an investment of about $1 billion.

The building boom is partially in response to environmental regulations and the need to increase fuel efficiency, said Frank "Freighter Frank" Frisk at BoatNerd.com in Port Huron.

"They couldn't refit the older boats with the equipment that's required," he said. "They opted to have new boats built."

Gillham said both Algoma and Canada Steamship Lines needed to replace their "fleet of 50-year-old freighters.

"They also wanted more efficient ships and more environmentally friendly ships," he said. "The new ones are more automated and need less crew, and that keeps costs down.

"They also employ the latest pollution reducing technology and are much more fuel efficient."

Smith said the new ships are far more advanced than their older counterparts.

"The ships will have diesel engines that will use heavy marine fuels, but are equipped with integrated exhaust scrubbers, which will remove 97 percent of sulphur oxides from exhaust streams," he said.

"With the optimized hull form, larger size and better speed, we expect the ships to be 45 percent more efficient per cargo tonne mile than their predecessors."

The Canadian building boom is not being mirrored on the U.S. side, where most shippers opt to maintain or refit their existing ships.

That's because federal law doesn't allow American shippers to contract with overseas shipyards, LeLievre said.

"The U.S. fleets cannot do that," he said. "In this country we have something called the Jones Act.

"In order to sail and carry cargo between U.S. ports, the ship has to be built in the U.S. and crewed by U.S. sailors."

Since U.S. carriers can't go overseas to build new ships, they're keeping the ones they have.

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