In recent years, however, domestic shipborne commerce has generally lost ground to truck and rail freight. One reason for the declining cargo volumes of domestic coastal and Great Lakes shipping is that aspects of federal maritime policy tend to raise the cost of transporting goods by ship relative to other modes. They do not need to acquire and maintain rights-of-way like railroads and pipelines. These ships are useful for carrying such prevalent types of cargo as steel products and large pieces of equipment. The Decline of U.S. Coastal Shipping

Despite their inherent efficiencies, domestic coastal and Great Lakes shipping carry barely half as much cargo today as they did in 1960 ( Figure 1 ), even though the U.S. economy is much larger today. Reviving coastal shipping could dramatically increase the capacity of the nation's freight network. Moreover, some of the necessary infrastructure is largely in place, as many of the harbors the federal government dredges for deep-draft vessels currently have little or no ship traffic. The question is whether a different mix of federal policies would make coastal trade an attractive option for shippers and ship owners. Although barges also must be built in the United States, the cost of a U.S.-built ship is six to eight times greater than the cost of the equivalent cargo capacity in barge tows. The comparatively high cost of building ships domestically is related to the absence of foreign competition and the lack of economies of scale. Although the total tonnage carried by vessel along the coasts and on the Great Lakes has declined by 44% since 1960, closer analysis shows that ship tonnage on these waterways has decreased by 61% over that period, while barge tonnage has increased by 356%. Vessels in the U.S.-flag international fleet do not have to be U.S.-built (and none are), but they are required to have U.S. crews and be U.S.-owned. Comparatively high cargo-handling costs, especially for containers, appear to put coastwise shipping at a disadvantage with respect to other modes of transportation. U.S. container ports are widely considered to be much less efficient than ports in Europe and Asia, some of which are fully automated. A 2013 study examining the feasibility of coastal container services on the East Coast found that port handling costs were the largest cost element, greater than ship fuel and vessel capital cost, the second- and third-largest cost elements. Market Response to High Coastal Shipping Costs

U.S. shippers—that is, the owners of cargo—have responded to the comparatively high cost of domestic ships by turning to truck, rail, and pipeline transport, importing goods instead of sourcing domestically, and utilizing barges instead of ships for a growing share of coastal transport. Today, 35% of domestic ocean-shipping tonnage is employed on services between Hawaii, Puerto Rico, and Alaska and the U.S. mainland—routes where overland modes are not available.
In recent years, domestic shipborne commerce has lost much of its market to other modes. Although potential shipping routes run parallel to congested truck, railroad, and pipeline routes along the Atlantic and Pacific coasts and in the Great Lakes region, the volume of cargo carried by domestic ships has declined by 61% since 1960, while the volume carried by other modes, including river barges, has more than doubled. Use of domestic ships has retreated to routes where overland modes are not available, such as between Hawaii, Puerto Rico, and Alaska and the U.S. mainland, and where oil pipelines do not exist or are at capacity.
One reason for the comparatively lower usage of domestic coastal and Great Lakes shipping is that despite their inherent efficiencies, ships are often not the lowest-cost option for domestic shippers.
U.S.-built ships cost six to eight times more to build than the equivalent cargo capacity provided by rail and barge equipment. The comparatively high cost is related to the absence of foreign competition in shipbuilding and the lack of economies of scale at U.S. shipyards. U.S. container ports are widely considered to be much less efficient than ports in Europe and Asia, some of which are fully automated. A 2013 study examining the feasibility of coastal container services on the East Coast found that port handling costs were the largest cost element ship operators would face. Ship crewing costs are inflated by subsidies provided to U.S. crews aboard U.S. international trading ships that have government-impelled cargoes reserved for them. Domestic ship lines compete with the international fleet when hiring maritime officers.
U.S. cargo shippers have responded to the comparatively high cost of domestic ship transport by turning to land modes, exporting goods instead of selling them domestically, and utilizing oceangoing barges instead of ships for coastal transport. Oceangoing barges cost less to construct, and can require only a third as many crew as coastal ships. Since 1960, coastwise and Great Lakes tonnage carried by barges has increased 356%, while ship tonnage carried on these waters has decreased by 61%. However, oceangoing barges have significant disadvantages: they are less efficient for longer voyages, and their use does not preserve the shipbuilding and maritime crewing capabilities Congress has sought to protect. Oceangoing barges mainly carry petroleum products, suggesting that commercial shippers do not find them attractive for other types of cargo.
Reviving coastal shipping would dramatically increase the capacity of the nation's freight network. Moreover, some of the necessary infrastructure is largely in place, as many of the harbors the federal government dredges for deep-draft vessels currently have little or no ship traffic. The question is whether a different mix of federal policies would make coastal trade an attractive option for shippers and ship owners. To revive coastal shipping, the cost issues would need to be addressed. Further information on the causes of the high cost of U.S.-built ships, the justification for the crewing disparity between oceangoing barges and coastal ships, and whether automation would lower cargo-handling costs at ports would be useful in evaluating policies that might revitalize coastal shipping.