Unpaid Coast Guard Workforce Slows Maritime Business

U.S. vessel construction, sales, repairs and financing – and the transportation economy that relies on them – are caught in the fallout of the partial federal shutdown that's now over a month long.

Along with actual U.S. maritime operations – which is becoming increasingly compromised, as FreightWaves previously reported – the transactional business conducted that allows those operations to take place is also affected by the shutdown.

That's because the 43,000 uniformed members of the U.S. Coast Guard that oversee both operations and the underlying transactions are being forced to work without pay. Another 8,000 civilians who work alongside them and provide regulatory support have been furloughed and are prohibited from working.

The lapse in appropriations that's causing the shutdown has shuttered the Coast Guard's National Vessel Documentation Center, which is now unable to process commercial vessel documentation and financing critical to maritime commerce. Ship owners and operators, therefore, are unable to purchase and document U.S.-flag commercial vessels, or obtain mortgage loans on documented vessels, according to the law firm Winston & Strawn.

In addition, lenders and other creditors can't get information about vessel mortgages and liens needed for vessel financing transactions, or record mortgages against vessels to secure loans.

"When we can't get the answers we need on these issues on behalf of clients, commercial deals and projects don't happen, and that ultimately leads to a drag on the economy," Charlie Papavizas, who leads the firm's maritime practice, told FreightWaves.

Papaviza's analysis also shows that while the uniformed Coast Guard personnel still on the job who conduct vessel plan reviews ensuring that vessels are built or rebuilt in accordance with international safety regulations, their civilian colleagues who provide added expertise are not.

"As a result, plan reviews and approvals may be substantially delayed or not possible during the shutdown, Papavizas and his team found. "In addition, during the shutdown the maritime industry cannot meet with Coast Guard officials in connection with new vessel designs and innovations, or to address regulatory challenges."

Decisions not being made by the U.S. Maritime Administration and U.S. Customs and Border Protection – agencies also hit by the shutdown – on the use of U.S.-flagged, U.S.-built ships in support of burgeoning offshore wind projects, can also end up stifling progress, Papavizas said.

"Offshore wind is poised to provide an economic boom to the U.S. East Coast, with big projects rolling in," he said. "Clients can take a chance and assume the government will make a certain determination, but most have a bias toward waiting it out. But for how long?"

Coast Guard officials were not immediately available to comment. However, U.S. Coast Guard Commandant Karl Schultz has been outspoken about how he feels about his employees not getting paid - a consequence of his agency being a part of the Department of Homeland Security, and not the Department of Defense as is the case with the other branches of the armed forces.

"I find it unacceptable that the USCG members must rely on food pantries & donations to get through day-to-day life," Schultz wrote in a Twitter post yesterday. He also pointed out another "sobering milestone" – the potential non-payment this Friday of the agency's 8,000 civilians.

Since the beginning of the year, five bills have been introduced in Congress to either fully fund the Coast Guard during the shutdown or at least ensure its employees continue to get paid, but as yet none have been debated or voted on.

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