Sea Carriers reduce Gridlock

Aftermath of September 11th |  Overview and National Impact |  Hawaii Economic Impact

Benefits to Hawaii Shippers |  A Letter from Hawai´i Governor Benjamin Cayetano

A Letter from Congressman Neil Abercrombie

SHORT SEA'S POTENTIAL ADDRESSES CONGESTION, ENERGY AND CLIMATE ISSUES

At the outset of World War II, the U.S. Maritime Commission teamed with shipbuilders as well as road and dam builders such as Henry Kaiser to mass-produce liberty ships. This resulted in 2,700 ships which acted as a maritime conveyor belt for war supplies to Asia and Europe that helped win the war. The mass-production of ships integrated lessons from dam building and helped build new ship yards in record time. The ships were built using modular ship construction and by the introduction of welding. Shipbuilding and other war industries ended the depression by providing high-paying jobs, integrated women and minorities into the workforce and initiated company healthcare services such as the Kaiser system. Unfortunately, these new shipyards were shut down after the war and the innovations and technology outsourced to Japan. As a result, Japan became a global shipbuilding power, then Korea followed Japan's lead and now China is following theirs.

Today, this lost shipbuilding opportunity may be regained by the United States, if the growing crisis of pollution, congestion and foreign oil dependency inspires americans to shift truckloads off the roads and on to ships.

As background, AAPA's SEAPORTS magazine recently warned:
Congestion and freight bottlenecks may cost the nation as much as $200 billion per year.
The cost to taxpayers of maintaining the current transportation system could rise from $235 billion in 2006 to $304 billion in 2015.

In addition, the U.S. Energy Department warns:
The global warming threat is worsened by U.S. carbon dioxide emissions rising from 5,900 million metric tons in 2004 to a projected 7,587 million metric tons in 2025. Transportation and petroleum are leading carbon dioxide contributors. U.S. dependence on foreign oil will rise from 58% of us consumption in 2005 to a projected 68% of us consumption in 2025.

Finally, in 2005, the United States trade deficit stood at $782 billion: the U.S. deficit in petroleum accounted for $229 billion or 29% .

An investment of several billion dollars can build a new American short sea shipping network that can transform the way the united states transports freight. Ships can relieve congestion along coastal corridors, diminish our reliance on petroleum and roads, reduce pollution and save shippers money.

In so doing a national short sea shipping network can:

1) Empower U.S. ports and harbor workers to become the foundation of a new containerized transportation system that eliminates thousands of daily truck trips at numerous congestion points around the country.

2) Create a new generation of U.S.-manned coastal feeder ships that can cut the need for truck fuel by 50% and by so doing also cut truck emissions that contribute to global warming.

3) Re-establish the United States as a competitive shipbuilder and create thousands of new family wage jobs in shipbuilding communities.

4) Save shippers and carriers money and reduce traffic congestion at major ports such as LA/Long Beach, Norfolk and New York.

5) Spur the development of a new generation of us-built marine engines powered by non-petroleum fuels to advance the goal of zero petroleum imports.

6) Increase education and training of mariners to meet short sea requirements at us maritime academies along with new research partnerships in marine engine development, terminal handling and vessel safety.

7) Develop new partnerships with trucking companies to deliver short sea containers.

8) Develop new, automated cargo handling systems, on - dock rail and alternative power for ships that reduce emissions and fuel consumption.

9) Use main port assessments to finance new ships and terminal upgrades backed by ocean carrier contracts.

10) Revitalize the U.S. Maritime Administration (MARAD) so as to provide research and develolpment grants for: new marine engines, new terminal handling technology, better port security, safety and emergency services.

11) Earmark $1 billion for short sea shipping as part of the MARAD Title XI program. This will finance $20 billion in loan guarantees for ships, shipyards and should add terminal modernization.

12) Implement partnerships between MARAD, U.S. Coast Guard, U.S. Customs, Army Corps of Engineers and the maritime unions. Offer the new commercial fleet to the U.S. Navy as a new military sealift reserve.

AAPA members can make a major contribution to this effort by acting as the support group for the short sea shipping initiative. A system that can streamline transport along the east, west, and gulf coasts as well as the great lakes, and inland waterways such as the mississippi river.

Feedership service can relieve congestion at main ports, save shippers money and won't need taxpayer subsidy

The obvious starting point is to relieve congestion at major ports such as LA/Long Beach, New York/New Jersey and Norfolk without huge investments in roads, bridges and tunnels. A short sea service can take containers delivered at ocean carrier terminals and move them directly on to vessels for distribution at nearby feeder ports. This transfer can be done by direct crane to feeder vessel move or an adjacent ground to crane move. The result will be a substantial increase in port productivity.

As a result, a container ship carrying 150 forty-foot containers on a seventy-five mile voyage from Oakland to Stockton or Los Angeles to San Diego, can save shippers 10% on their trucking costs. If ocean carriers contract for the vessel service, no taxpayer subsidy is required.

New U.S. shipbuilding needed:

A critical issue is developing a domestic shipbuilding capability to build small and medium size feederships in the United States. The ships need to meet demanding fuel and air emission requirements. Operating in U.S. domestic trades, ships must be built in the United States, owned by us citizens and operated by U.S. citizens under the Jones Act. This mandate is critical in an increasingly dangerous national security environment. New maritime jobs will pay family wage incomes, generate new tax revenue and provide our children with an economic future.

Establishment of a short sea fund through the U.S. Maritime Administration's Title XI loan guarantee should be a top legislative priority in 2007. A $1 billion allocation for short sea shipping can provide $20 billion in loan guarantees for ships, shipbuilding and, potentially, port modernization. Long-term contracts with carriers or shippers are needed to guarantee the loans.

Container ships have the best hydrodynamics to carry time sensitive cargoes in a cost efficient manner, although, there will also be a need for tug/barges and roll on/roll offs.

Ports with industrial land, zoned for industrial use, should hold on to these properties. They are vital for port expansion, shipbuilding and repair. Legislative protection may also be needed to prevent real estate developments obstructing the nation's sea lanes and maritime commerce .

Military sealift implications:

New short sea ships can provide a reserve of modern, fuel-efficient, shallow-draft container ships that the U.S. Navy's military sealift command can deploy in a war time emergency or for a natural disaster.

Advantages to trucking:

Short sea's development of shorter distance trucking creates a new growth opportunity for truckers, a critical supply chain link. Satellite feeder terminals will allow trucking companies more turn times over shorter distances which improves productivity, and alleviates the driver shortage problem.

Reduced emissions:

By consolidating hundreds of truckloads onto one ship, the introduction of low sulfur diesel fuel for fuel efficient marine engines can far more quickly reduce harmful emissions than the phased in replacement of new clean truck engines.

Also, the possibility exists that coastal ships might be able to eliminate petroleum use altogether by going to a cleaner alternative power source, such as natural gas or electricity. This could be a major breakthrough in the effort to cut carbon dioxide emissions and the threat of global warming.

Southern California: a regional scenario

Short sea shipping has the potential to diminish Southern California's air quality problem. Truck-generated road congestion is a key factor. Ships can shift containers from la/long beach to nearby Port Hueneme and San Diego not only reducing congestion but making deliveries directly to end users. This eliminates the additional truck trips to and from distant distribution centers. The solution begins with the cooperation of carriers and shippers to stow containers from asia on vessels so that they are ready for transfer to feeder ships on arrival. Currently california is looking at plans to expand the long beach freeway at a cost of $5.5 Billion to accommodate port generated trucking. Short sea shipping reduces this need. Initially, six 300 TEU vessels offer the potential to eliminate 1,800 trucks from the two ports at a total cost of about $150 million. Currently, ocean carrier container demands require 14,000 trucks per day to serve the la/long beach ports. So $150 million buys a 13% reduction in truck congestion. It is estimated that shippers will realize a 10% reduction on delivery charges compared to road transport.

Long-haul trucking by water:

If ships can be competitive with trucks at a distance of 75 miles, they can be competitive on longer haul trips along the I-95 corridor on the Atlantic Coast and the i-5 corridor on the Pacific Coast. Trucking companies, such as California-based Weststar Transport, are looking to develop long-haul transport of truckloads by ship.

Improved port security and emergency services:

Feeder ships create the ability to de-consolidate import volumes into smaller manageable volumes for screening at feeder ports. New terminal designs can build in improved cargo handling with automated container screening to ease hazards to longshoremen and reduce the screening overload at main ports.

Feeder ships provide a shallow draft alternative to move cargoes in and out of main ports in case of natural disasters or terrorist attack.

In the case of an emergency, rivers and coastal locations can be served by feeder ships when roads and bridges are down.

Conclusion

Short sea's advantages include: new container business for feeder ports, new terminals, new shipbuilding, new ships, numerous economic development opportunities, improved emergency services and port security. Other benefits are less global warming, lower shipping costs, less transportation spending, less delays and a giant step towards energy independence for the United States.

We have succeeded at much greater challenges in our past: we built a national railway system, we built a national highway system, we produced a war machine that helped win World War II. Our space exploration capability has taken us to the moon and beyond.

It is time for Americans to return to their maritime roots and go back to sea.

SEA CARRIERS CAN REDUCE PORT TRAFFIC, REDUCE GRIDLOCK

Imagine taking up to 1,200 container truckloads each day off of LA freeways and shifting that traffic instead onto coastal vessels -- reducing both traffic congestion and airborne pollution in the process. If that solution seems out of reach, think again.

If the Ports of Los Angeles and Long Beach were to support a waterborne solution to land-based gridlock, the benefits to businesses and to consumers would be significant.

It is no secret that container traffic from the two Ports is contributing to a growing transportation and airborne pollution problem in the LA Basin. Indeed, the situation is getting worse for everyone.

The truck drivers transporting containers in and out of the ports have been staging job actions due to higher fuel prices.

The Union Pacific Railroad, which carries many containers from the harbor by rail along the new $2.4 billion Alameda corridor, has had service problems resulting in containers going off their trains and on to trucks.

It is estimated that traffic speed in the LA Basin has been slowed by as much as 60 percent because of harbor-based container traffic.

Because of soon-to-arrive *mega container* ships, even more container truck traffic is on its way through the Ports of Los Angeles/Long Beach and along Southern California freeways.

While the Ports of Long Beach and Los Angles have done an excellent job of concentrating business from the Far East through these two ports, the increased traffic and congestion is an unfortunate side effect of this success.

Port officials say that of the nearly 6 million forty-foot containers that enter Los Angeles and Long Beach, about 50 percent - or about 3 million containers - are headed for Southern California destinations: That's about 8,000 truckloads per day. Many of these container truckloads depart from the Ports, destined for distribution centers in the desert, where they are repacked and sent back out onto freeways destined for area stores and outlets. Once emptied, the containers travel back to the harbor for loading onto ships and back to their ports of origin.

This traffic congestion is prompting the US Department of Transportation (DOT) to encourage Ports and Municipalities to look at shifting freight off of crowded roads onto coastal vessels.

In the LA Basin, a vessel service can shift up to 1,200 container loads off of LA/LGB highways, but the Ports must help make that shift happen by supporting a coastal shipping service linking the Ports of San Diego and Port Hueneme to LA/Long Beach.

The proposal will require the construction of six new American-built vessels, costing a total of about $60M. The vessels would carry 200 forty-foot containers and would operate daily services, taking containers off mega container vessels at LA/LGB for delivery to San Diego County and Northern Los Angeles and Ventura counties.

Remember: It costs about $30M to repair and expand one mile of freeway. By reducing up to 1,200 container truckloads per day, we can reduce demand for those repairs and make the air a lot cleaner in the LA Basin.

Issues that need to be addressed:

The containers need to be off-loaded for evening delivery to minimize daylight traffic at the two satellite ports. Containers need to be shipped directly from vessel to stores so as to reduce distribution center traffic and keep costs comparable to trucking.

Major importers such as Wal-Mart would need to support this re-routing of their deliveries from Asia so that containers can be dispatched through the coastal shipping system.

The International Longshoremen and Warehousemen's Union (ILWU), which loads and unloads ships, needs to support the initiative.

Some container handling infrastructure at San Diego and Port Hueneme will need to be built.

Ports, which have traditionally seen their role as landlords, may have to reinvent themselves as stewards of the greater transportation plan to reduce congestion.

Can we proceed today? How can this vision become a reality?

A US Department of Transportation (DOT) agency can provide loan guarantees for up to three quarters of the construction cost for the new vessels, protecting investors, so that risk to Ports would be limited.

This means the Ports of Los Angeles and Long Beach would need to make approximately a $12.5 M initial investment to finance the shipbuilding. Compare this to the $2.4billion spent for the Alameda Rail Corridor to relieve traffic or the $30M per mile required to repair freeways.

Finally, the Governor can play an important role by supporting the idea. He can also ask the Bush Administration for the necessary DOT loan guarantees because of the traffic, pollution, and, finally, because 2004 is an election year and innovative, do-able solutions actually get people elected and re-elected.

21st century Liberty ships

The aftermath of Sept 11 is creating more economic uncertainty and forcing companies to incorporate "terror taxes" -- security-related spending that undermines efficiency and productivity including the dilution of just-in-time inventory systems. The trend is raising fears the United States may be headed for a prolonged economic slump.

This might be the time to take a look at a fundamental problem. After a generation of conceding decent-paying American manufacturing jobs to foreign competitors, the United States needs to return to the source of its historic strength: U.S. manufacturing. This will bolster the economy with more secure, better-paying jobs rather than less secure and less well paying jobs.

Historically, shipbuilding has acted as such an economic driver for the United States and others. However, the U.S. lacks a viable merchant fleet and has not built a single container ship in 10 years. As a result the U.S. economy and its military sealift capacity are uncomfortably dependent on foreign-built, foreign-owned ships.

At the outset of World War II, government shipbuilding orders pulled the United States out of the Great Depression by bringing patriotism and economic development together as key elements in winning the war. One of the most successful programs was the building of Liberty and Victory ships to replace losses from submarine attacks. This shipbuilding effort was directed by the U.S. Maritime Commission (now the U.S. Maritime Administration) based on a concept developed by industrialist Henrys Kaiser.

Between 1941 and 1945, the Liberty ship program produced 2,770 ships built by 16 U.S. shipyards. The program pioneered the use of welding as a major efficiency, employed mass-production techniques originally developed in the auto industry, and proved the value of women workers. By war's end Liberty ships were being churned out in less than a week.

After the war, the United States relinquished its leadership role in shipbuilding, which was followed by losses in other manufacturing. Countries such as Japan, Korea and China have used shipbuilding as a springboard for ecomonmic development, because it creates spinoffs in the production of steel plate, marine engines, lifeboats, cranes, paint, electronics, etc.

The U.S. can use the strength of its national market to develop its own capability in support of a national shipbuilding initiative to replicate the Liberty success.

The Maritime Administration provides a loan guarantee, under its Title XI program that can cover as much as 87% of shipbuilding construction so as to maximize public-private investment dollars for shipbuilding. This year's proposed $33 million allocation by congress for Title XI can provide guarantees for as much as $800 million in a new shipbuilding.

Full use of the Title XI program would have several benefits:

· Modernization of U.S. domestic offshore fleet. The Jones Act, which requires vessels shipping cargoes between U.S. ports to be U.S.-built, -owned and -manned, provides U.S. commercial shipbuilding with a large domestic market with which to grow.

· U.S.-built, -manned and -owned vessels can support U.S. sealift needs in the Middle East and provide the security of U.S. ownership to counterterrorism. The armed forces can generate shipbuilding orders by chartering new U.S. container ships and tankers.

· Highway congestion, especially along the Atlantic and Pacific coasts, is slowing the movement of freight and raising costs. Coastal ships operating between U.S. ports can reduce transit and fuel costs powered by automated and less-polluting marine diesel engines.

· Sufficient container and tanker orders can improve productivity and quality, lower costs and create a market for export sales.

Unfortunately, U.S. shipbuilders often rely on taxpayer-financed ship orders that cannot be built in large numbers, often have special government requirements and result in low productivity and high costs. The result: problems with Title XI guarantees to cover one-time orders for complicated designs such as cruise ships.

The answer: Focus on tankers and container ships, using generic designs that meet market requirements, and serve both commercial and military applications.

Two U.S. yards are aggressively laying the groundwork for shipbuilding modernization. Bender Shipbuilding in Mobile, Ala., has been training employees along European lines and has developed a container ship strategy. The Kvaerner yard at Philadelphia has built a state-of-the-art facility designed for tankers.

At a time of national uncertainty, a nation shipbuilding initiative can provide both an economic stimulus and a new U.S.-built fleet of military sealift ships.

Breathing new life into the Jones Act

Who says the costs and rates of a Jones Act service have to be sky-high?

The decision by Edward M. Emmett, president of the shippers' National Industrial Transportation League, to make Jones Act reform a top priority means that efforts to change the law are likely to intensify.

Opponents and some U.S.-flag carriers argue that the law's requirement that vessels operating in U.S. coastal trade be built in the United States keeps rates high compared with using foreign-built ships. But a new carrier service may have found a way to significantly reduce this gap.

Santa Maria Shipowning and Trading is addressing these concerns as it challenges the Jones Act carriers, Matson Navigation Co. and Sea-Land Service, in the Hawaii trade. Santa Maria is offering shippers lower freight rates to Hawaii based on three-year service contracts.

The company will build two 700-TEU ships in an American shipyard using European design and construction techniques to hold costs down and increase operation and production efficiencies. Matson and Sea-Land charge more because of high initial U.S. shipbuilding costs and because their older vessels operate at higher manning, maintenance and fuel consumption levels than modern vessels.

Santa Maria has mobilized a team of maritime specialists from the United States, Holland, Britain, Denmark and Greece to reduce the U.S. shipbuilding price tag.

The effort began three years ago as a research project performed in cooperation with the Shipbuilders Council of America and the late Paul Ackerman, then head of the Domestic Shipping Division at the U.S. Maritime Administration.

Santa Maria must persuade Costco, Fleming, Sears,Wal-Mart and other Hawaii-bound shippers to sign up for the new service now so as to qualify for the lower rates once the ships are built.

If the Santa Maria experience is successful, it would have some important national implications. It would prove the Jones Act works.

A successful operation in Hawaii could be replicated on the mainland as a maritime intermodal service. Alliances with U.S ports and truckers could create new markets for transporting containers by water, instead of by road, along key routes such as the East Coast's Interstate Route 95 and the West Coast's Interstate 5. The Great Lakes and the Mississippi also have potential.

A new market for U.S.-built merchant ships lessens the reliance on foreign-flag carriers during conflicts such as the Persian Gulf war and the campaign in Kosovo.

Santa Maria has taken the following steps:Its team adopted a modern European design for a 700-TEU feeder ship to operate in the coastal waters of the United States.

Next, the team spent nearly two years working with prospective U.S. shipbuilders to implement state of the art construction techniques. Four shipyards were selected as final candidates: two in the Pacific Northwest and two on the Gulf coast.

The team selected two diesel-engine manufacturers as candidates for the project, Wartsila and MAK, because their medium-speed engines met the company's need for speed, fuel efficiency and reliability and exceeded U.S. emission standards.

The selection of Hawaii as the market was prompted by high freight rates currently charged in the service there. Santa Maria did offer both Matson and Sea-Land the chance to charter the new vessels for use in Hawaii, but both refused. A big problem for both carriers is that their aging ships keep their costs high.

Santa Maria is offering Hawaii shippers fixed per-container freight rates for three years as a replacement for the current complex tariff system imposed in the service, including container inspections to prevent tariff cheats. And the company is working with maritime unions to develop a labor-management partnership.

Challenges remain. Santa Maria still faces hurdles:Shippers must be convinced to sign up for the new service; the U.S. Maritime Administration must approve a loan guarantee under its Title XI program; the U.S. Coast Guard must pass on the vessel design and manning plan; and the winning U.S. shipyard candidate must successfully build the two ships according to cost, design and schedule requirements.

Even so, Santa Maria is getting closer to putting two new American-built container ships in the water -- and thus to creating new possibilities for the U.S.maritime industry and diminishing the Jones Act concerns of Mr. Emmett and his shippers.

Stas Margaronis is the president of Santa Maria Shipowning and Trading, which is based in Cotati, CA

Bush Declares Support For Jones Act

Economic relief may come in on new ships

Matson Navigation Co.'s announcement that ocean freight rates will rise in 1999 is driven partly by declining growth in Hawaii's economy.

However, even before economic problems arose, shippers were complaining that local rates high compared with those in other parts of the world.

Some have called for abolishing the Jones Act, federal legislation requiring that domestic waterborne freight be carried on U.S.-owned, U.S.-built, and U.S.-manned vessels.

Those critics would like to see the law changed to allow foreign carriers to compete with Matson and See-Land Service Inc. (leaders in the Hawaii trade), resulting in lower freight costs.

There may be some light at the end of the tunnel.

For the past six months, shipping specialists have been visiting Hawaii to explore the possibility of deploying State-of-the-art container ships, to be built in the United States and manned by U.S, mariners. At this point, the plan calls for the deployment of two 8,000-ton ships carrying 700 20-foot container equivalents.

Under one scenario, the two vessels would provide weekly service between San Francisco and Hawaii, serving a small number of shippers. If the service proves successful, additional vessels could be built.

Vessel features

New ships can provide savings to shippers because they incorporate a set of efficiencies driving down ocean freight rates all over the world.

The problem confronting Matson, Sea-Land and other Jones Act carriers is that U.S. shipyards have little experience building modern container vessels; so construction costs are discouragingly high.

To address this problem, the new venture has emphasized working with U.S. shipyard candidates so they can absorb foreign processes and technology to reduce costs, improve quality and boost productivity.

This will create several vessel improvements:

· a high level of automation to reduce labor costs.

· bow-thruster and advanced rudder maneuverability to expedite docking and minimize the need for tug assistance.

· modern, fuel-efficient, medium speed diesel engines with the latest pollution control system; and

· a hull design that maximizes the number of loaded containers while enhancing hydrodynamics for speed and fuel efficiency.

This is good news for Jones Act supporters because it shows that U.S. mariners can efficiently operate state of-the-art vessels, that that U.S. shipyard workers can build these vessels, and that Americans can benefit from the resulting decrease in freight rates.

Prospects of change

There are several ways in which the new container ships may be deployed in the Hawaiian trade. One is through charting or leasing vessels to major local carriers. Another is for an independent operation to sell directly to Hawaii shippers.

If the vessels are charted to Matson or Sea-Land, it will be up to them to decide how to operate the vessels and where.

In the case of independent operation, there are some serious obstacles:

· The state of Hawaii has not yet invested in its container cranes to allow open competition for container vessel operators. In Hawaii Matson and Sea-Land operate their own gantry cranes; so there is no efficient alternative for loading and unloading containers that is not controlled by them.

Economic impact

In the case of Barbers Point, the container terminal could be a catalyst for growth in the new city of Kapolei and relieve congestion in Honolulu.

The establishment of distribution centers in Kapolei and a container terminal at Barbers Point would encourage ancillary growth and new maritime-related jobs, and would support the state's long-term strategy of developing Kapolei.

But the new ships are only a catalyst. The more fundamental economic changes must rely on business and political leaders willing to support the new maritime technology.

Hawaii must improve its transportation infrastructure to streamline operating costs and develop new business.

Stas Margaronis is the president of Santa Maria Shipowning and Trading, which is based in Cotati, CA

Shipper formulating lower cargo rate

Santa Maria Shipowning and Trading Inc. aims to grab 5 percent of the West Coast-Hawaii trade by reducing the cost of operating ships and passing the savings on to shippers.

Stas Margaronis, president of Maryland-based Santa Maria Shipowning, believes he can reduce Hawaii shipping rates in three basic ways:

The small ships lower labor costs and employee overhead. Fully loaded, they will carry 12,500 40-foot containers per year. They will make weekly trips between Oahu and San Francisco.

Santa Maria Shipowning's container ships will comply with the Jones Act, a controversial federal law requiring any ship stopping at two consecutive America ports be U.S.-built, U.S.-crewed and U.S.-owned.

Four American shipyards are interested in building Santa Maria's ships, two on the East Coast and two in the Gulf of Mexico. Ship building will include European consultants.

The ships will make West Coast-Hawaii voyages at slightly slower speeds at about 19 knots. But container offloading will be quicker. That means transit time between two ports will be equivalent with competitors' service.

Margaronis said he has three interested prospective shippers and needs another two shippers. He is offering a three-year contract with no rate increases.

Santa Maria Shipowning plans to offer customers rates 5 percent to 10 percent lower than public carriers Matson Navigation Co. and Sea-Land Service Inc. It will accept cargo from contracted clients only.

While the cost of shipping varies according to item, the existing cost of hauling one container to Hawaii from the West Coast is about $3,500.

Margaronis comes from a Greek family of ship owners whose ships operate out of England and Greece. He arrived in Honolulu last week to speak with local manufacturers, agricultural and food-product shippers as well as state and labor representatives.

Tom Fujikawa, administrator for the Harbors Division of the state Department of Transportation, believes the operation Margaronis proposes is possible in Hawaii, where there also is room to berth the ships, he said.

"It would be good for Hawaii and it will increase [shipping] competition," Fujikawa said, adding that Margaronis has done a lot of homework in his research. If the plan works, it will show that Jones Act vessels can be competitive, Fujikawa said.

U.S.-flagged Jones Act vessels are more expensive to operate than non-U.S.-flagged ships that employ less costly foreign crews.

Ocean transportation costs borne by carriers are based on a round trip, which makes Hawaii unique. Mostly cargo comes here and far less leaves, according to Bill Nickson, Hawaii district manager of shipping agency Transmarine Navigation Co. and Margaronis' local representative.

"If we had exports, shipping rates would drop significantly," he said.

Meanwhile, Margaronis must seek state permitting for two cranes for loading and offloading containers.

The cranes can be placed at Pier 1, Honolulu Harbor or Barbers Point Harbor in Ewa. Crane placement depends on where shippers are located; two cranes can unload one vessel quickly, he said.

Then come the ships. They can be built under a Title 11 loan guarantee from the Maritime Administration. This is the same loan program being used by American Hawaii Cruises to build two modern interisland cruise ships.

"We have every reason to believe it's going to work," said Neil Dietz, Honolulu port agent for the Seafarers International Union. SIU members are nonofficers, performing duties in the engine-room, cooking, cleaning and standing watch.

Dietz said Santa Maria's operation will provide more jobs. But he was uncertain how many. One export possibility Margaronis is researching is in agriculture, which is growing statewide. Another item is products made in Hawaii.

Joy Oyama Kono, vice president of marketing/purchasing for Brewer Environmental Industries LLC, was interested in the idea of a new carrier serving Hawaii and West Coast. But she said the agriculture industry must be strengthened before producers can export more goods to offshore ports.

Brewer already grows agricultural products such as macadamia nuts and guavas. One solution to expand agriculture is to use more sugar cane land to plant a greater variety of crops, Kono said.

Many steps lie ahead for Margaronis and Santa Maria Shipowning. But even if the company's impact on the Hawaii market is small, its operations could have a major impact nationally.

Shipping agent Nickson said if a Hawaii operation is successful, Margaronis' shipping ideas may be adopted by other carriers. For example, shippers are experiencing delays on the East and West coasts, where high volumes of goods congest rail and truck routes resulting in calls to maritime carriers for transportation services.

"[The Hawaii service] would be a small operation that had big ramifications for the [maritime] industry," Margaronis said.

Jacob Kamhis is Staff Reporter for PBN

Letter from Congressman Neil Abercrombie

Mr. Stas Margaronis, President

Santa Maria Shipowning and Trading Company

Dear Stas:

It is a pleasure to extend my heartfelt aloha and congratulations to Santa Maria Shipping LLC and Bender Shipbuilding and Repair Co., Inc. as they join forces to build state-of-the-art vessels that will improve the transport of goods between the U.S. Mainland and Hawaii.

I applaud your vision in selecting one of the most respected shipyards in the United States to accomplish this task, and welcome the opportunity to keep in touch with you as work progresses.

Congratulations again and best wishes.

                                                        Sincerely,
                                                        Neil Abercrombie
                                                        Member of Congress

Letter from the Governor

Mr. Stas Margaronis
President
Santa Maria Shipowning and Trading Company

Dear Mr. Margaronis:

I was pleased to meet with you last month and hear about Santa Maria's proposal to operate a weekly container service in the relatively shallow waters of Barbers Point Harbor.

As I mentioned to you, I believe that a regular shipping service at the harbor would greatly enhance our efforts to make Kapolei a true "second city" on Oahu. It was also good to learn that your two state-of-the-art vessels are built by American workers and manned by American seamen.

I will encourage Senator Daniel Inouye to contact you to discuss our plans further.

Thanks again for your interest in investing in Hawaii and contributing to the economic growth of Kapolei and the State of Hawaii.

With warmest personal regards,
                                                        Aloha,
                                                        Benjamin J. Cayetano