Changes in Federal Maritime Regulation Can Increase Efficiency and Reduce Costs in the Ocean Liner Shipping Industry

Gao ID: PAD-82-11 July 2, 1982

Pursuant to a congressional request, GAO conducted an economic analysis of the international ocean liner shipping industry. The two principal objectives of the analysis were to determine whether there was any valid economic rationale for revising the Shipping Act and to assess the economic implications of frequently discussed modifications of the Act.

Certain statistics suggest that the general cargo liner portion of the U.S. merchant marine is in serious trouble. For example, the number of U.S. flag general cargo vessels declined by more than half in the last decade and, the number of carriers composing the flag carrier fleet has fallen from 19 to 9 over the same period of time. Furthermore, the U.S. fleet of general cargo vessels has fallen from being the second largest in the world to being the eighth largest in terms of total deadweight tons. However, GAO reported that recent advances in cargo handling and ship design technology suggest a different interpretation. Containerization enables fewer containerships to transport the same quantity of cargo in the same amount of time as conventional vessels. Thus, rather than indicating distress, the decline in the number of U.S. flag vessels and relative ranking of the U.S. flag liner fleet reflect significant changes in the type of ships used by U.S. flag operators to carry their cargo. GAO found that, since containerization allows a smaller number of vessels to carry the available cargo, major revisions of the Shipping Act are not required to assure the fleet's existence. However, because advances in technology are producing even larger more costly vessels, U.S. flag operators may find it increasingly difficult to replace their fleets in the future. To assure the continued success of the fleet, it may be necessary for U.S. carriers to form consortia. These arrangements would let flag operators pool their resources, while maintaining the benefits of interline competition.

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