HIGHLIGHTS FROM THE FORT LAUDERDALE MARINERS CLUB MAY 2014 LUNCHEON On May 1st, 2014, FLMC Members and guests gathered at Timpano Italian Chophouse to hear from our speaker, Ted Davis of the South Broward High School on the new classes being offered in South Broward’s Marine Magnet program. It is encouraging to hear how our young people are being taught to “dive” into our industry. We are not having our next luncheon until August, but until then, we hope you will join us for Annual June Dinner Cruise, details on the first page of this Newsletter.
Photos Courtesy of Jonathan Dunleavy
Snapshot of Upcoming Events
Getaway Weekend~ July 18-20, 2014 ~ Cheeca Lodge, Islamorada Florida Keys August Luncheon ~ August 7, 2014 ~ TBD
Click on the Events Calendar for complete details of each event
Sailor's Corner: My Service in the Admiralty By: Rear Admiral Sir Hugh Turnour England
England (1889-1978) served in the cruiser Doris during the Boer War and was landed in Mossel Bay in 1901. On the outbreak of war in 1914, he was in command of the TBD Chelmer. He saw service in her at the Dardanelles and later commanded the destroyer Harpy in the Aegean where he was severely wounded in both legs below the knees. More can be found on England at http://www.nhcra-online.org/gallery/rnofficers/england.htm.
In due course, my sick leave came to an end and I was appointed to the Admiralty as assistant to my old friend, Captain Coode, who was director of Operations (Foreign). I learnt a great deal from him and admired his administrative ability, often writing long signals to be despatched and hardly ever having to alter a word. We were kept busy especially after the Armistice in 1918 and I remember Captain Coode coming back to his office after dinner sometimes working till the small hours. All sorts of situations had to be cleared up and I came in contact with very interesting people.
One of these was Lord Curzon, Foreign Secretary at that time and very pompous, apt to use wonderful language which I have never forgotten. An example of this was when, by slight mistake, a letter was sent to the Foreign Office by the Secretary of the Admiralty in Captain Coode’s blunt words. One morning I happened to go and see him when he was reading the reply from the Foreign Office to this communication, bursting with laughter, which was unusual for him at that time of day!
Starting with the usual compliments from the Secretary at the Foreign Office to his opposite number at the Admiralty, the letter went on “But the Marquis Curzon of Kedelston desires me to say that he, the Marquis considers your letter is couched in terms that surely are unusual, causing his Lordship no small surprise.” I believe the Secretary of the Admiralty took a long time to live this down.
On another occasion I attended a conference at the Foreign Office dealing with a crisis in the Arab world. Lord Curzon was Chairman, when Ibin Saud, Head of the Wahabi Arabs, was at loggerheads with Abdullah, Head of the Hashmanite sect ad the former threatened to advance with his army on Mecca and burn the holy places down. I was intrigued to hear Lord Curzon say we must sent Gertude Bell out at once and did not know that she had lived among the Arabs and had great influence with them. Actually she was not available and a man named Philby was sent out instead of her, when he carried out his mission successfully and peace was restored.
Among other operations we had to deal with after the Armistice was in the support we were giving to the White Russians fighting the Bolsheviks in North Russia, and in the Black Sea under General Kolchak from Vladivostok. It was a heavy commitment particularly as we were demobilizing our forces and, beyond providing Naval and Military missions, we were supplying them with large amount of guns and ammunition. Eventually it was stopped by Lloyd George, which I thought was wrong, but the far seeing Captain Coode considered it was the right decisions, and I had to alter my opinion.
In North Russia at Archangel, our senior Naval Officer was a comical man, Admiralty Bobby Kemp, with a large red beard and quite a character. We were almost continually receiving signals from him asking for all sorts of things to replace what he said had been removed by his Russian predecessors from his flagship, the old battleship “Mars”. At long last having received very little, he sent a long signal repeating most of his former requests and ending with the words, “There is nothing left in my cabin except a large double bed. I have neither the ability nor the inclination to use it as my Russian predecessors did and I pray my requests may be granted”. It worked and he got everything he had asked for.
One last anecdote about Lord Curzon, which was going round society at the time, I think, is worth relating. Nightclubs were coming into vogue in London and one, the Ambassadors, which had just opened was very popular. The story runs that on morning Lord Salisbury was visiting him and they were talking in his study when Lady Curzon entered. Lord Salisbury said good morning to her adding that he was glad to see her looking so well at the Ambassadors last night. Lord Curzon followed this polite remark, saying, “Mary, you told me you were playing bridge!” Lady Curzon who was very good looking was a sister of Mr. Leiter, my millionaire friend I met in China before the war.
The History of U.S. International Shipping By: Donald B. Frost Taken by the Abandoned Ocean: A History of the United States Maritime Policy
Most of the laws related to U.S. Maritime Policy have their origins in the 1916 Merchant Marine Act (using mail contracts to subsidize ocean carriers) and the 1936 Merchant Marine Act (building ships designed to be readily convertible into transport and supply vessels in time of national emergency). The idea was to have American owned and crewed vessel, government paid national defense features, government-paid construction and operating differential subsidies and structured trade routes. The review here focuses on the period 1960 to 1990.
The 1934 West Coast Waterfront Strike triggered by seafarers that lasted 83 days and the subsidies provided under the 1936 Merchant Marine Act dramatically shifted decision-making power within the maritime industry and created an unlikely union of interests between the ship owners and the seafarers’ unions. The both formed a joint lobbying effort that pressured government officials in providing cargoes and funds needed to survive. They could usually count on the Maritime Administration (“MARAD”) to support these initiatives.
The Kennedy Administration (1961-63) In the 1960s, relations between the maritime industry and the federal government became increasingly contentious. The industry, while becoming ever more dependent upon federal protection and subsidy, was also exhibiting the attitude that it was entitled to such funding and shelter from competition. Administrators tried to steer clear of the maritime policy quagmire, but the issues could not be entirely ignored.
While MARAD was generally supportive of the owners and unions, the State Department pointed out that friendly nations objected to cargo preferences and the Department of Agriculture complained of the high cost of shipping grain on U.S.-flagged ships. These issues came to a head in 1963 after a large grain sale to the Soviet Union had been agreed. The Russian grain sales were private transactions and it was assumed, not subject to existing cargo preference requirements. However, because the grain had been grown under a government agricultural subsidy program, the unions and owners claimed this made the shipment subject to the Food for Peace Program. Seeking to avoid controversy, President Kennedy decided to impose the condition that American ships be employed to the extent that they were available. When the USSR refused to pay the shipping premium, the grain dealers claimed there were no American ships available that could meet the particular conditions of the Black Sea ports where the grain was to be discharged. The seaman’s unions objected and in alliance with the longshoremen’s union, began a boycott of all Russian ships and cargoes. The ensuing stalemate killed the grain deal and postponed the opening of regular trade with the USSR for another decade.
The Johnson Administration (1963-69) Johnson made several unsuccessful attempts at resolving maritime policy issues. After the grain boycott began in his administration, the President created a grievance committee of labor and management but the unions distrusted the committee. It was soon disbanded and the grain boycott continued.
The President wanted to pull all government transportation activities into a single office and in October 1966, Congress approved the creation of a new Department of Transportation (“DOT”). The department was to take charge of all transportation functions previously exercised by the Department of Commerce. The DOT was also assigned the duties of some independent agencies and responsibility for the U.S. Coast Guard, which had been part of the Treasury Department.
Although it was originally intended that the MARAD would be located within DOT, the maritime industry opposed the move and as a result, it remained in the Department of Commerce. The rationale for keeping MARAD in the Department of Commerce was that DOT was primarily regulatory whereas the primary functions of MARAD were promotional, a function of the Department of Commerce. As the Johnson administration wound down, the estrangement between the maritime industry and government increased. Johnson’s maritime policy gridlock presented Nixon with a political opening that he exploited during the presidential campaign in 1968 and during the early years of his administration.
The Nixon Administration (1969-74) The 1970 Merchant Marine Act was enacted to revive the shipbuilding industry by coupling new shipbuilding initiatives with a rollback of construction subsidies. Title 5 of the 1936 Merchant Marine Act set the normal rate for construction differential subsidies (“CDS”) at 33 1/3%, but payments up to 50% were authorized in special circumstances. The higher rate quickly became the norm, yet the industry was still saddled with low production rates and high production costs. The President noted that the solution could only be achieved “if our builders are able to improve their efficacy and cut costs.”
To create work for the shipyards, Nixon proposed a ten-year program of thirty ships each year. As a way to force improvements in efficiency, Nixon proposed reducing the CDS in the first year from 50% to 45% and by 2% every year thereafter until a maximum of 35% had been reached. Nixon also proposed that construction subsidies be made available for building bulk carriers and liners authorized by the 1936 Act and that the subsidies be paid directly to the shipbuilders, as opposed to channeled through the ship owners. To help finance new construction, Nixon proposed that the level of federal mortgage insurance be raised from $1 billion to $3 billion.
The new program also proposed changes in the Operational Differential Subsidy (“ODS”) system. ODS was to be made available to bulk carriers with the expectation that the premium rates being paid for cargo preference would be eliminated. The 1970 Act also elevated the Maritime Administrator to the level of Assistant Secretary of Commerce and ignited a power play in the Administration. Giving the maritime administrator the additional title identified him as the administration’s chief spokesman on maritime policy.
The new law stimulated the largest peacetime private shipbuilding program in U.S. history. But even after passage of the 1970 Act, there were still two facts the merchant marine still had to contend with. First, while the new Act made significant changes in existing policies, it left in place a number of conditions that continued to make U.S. shipping a high-cost venture. Second, policies designed to promote international shipping had to be measured in the international market that was intensely competitive and changing rapidly. American shipbuilders did not succeed in lowering their costs to be competitive with world levels and when construction subsidies were eliminated, U.S. ship owners engaged in foreign trade had no choice but to buy foreign built ships or go out of business.
By 1970, the U.S. had accumulated a huge surplus of grain and the USSR was the only customer prepared to buy it. But no grain bound for the USSR could be loaded at U.S. docks so long as the longshoremen sustained the boycott. Nixon’s emissaries offered the unions a compromise that they thought would be accepted by the unions—one-third of all cargoes would be reserved for American ships while the remainder was to be divided between Soviet and third-party flag ships. The Russians and the unions accepted the agreement and the USSR was able to exploit it until their invasion of Afghanistan in 1979 caused President Carter to cut off further shipments and the longshoremen renewed their boycott.
The Ford Administration (1974-77) The Arab-Israeli War of 1973 and the following oil embargo set oil prices skyrocketing. Demand plunged and many tankers were laid up. The collapse of the market stopped the fledgling U.S. tanker-building program “dead in the water” but many U.S. maritime labor interests were determined to turn the energy crisis to their advantage. A bill that proposed that 30% of U.S. petroleum imports be shipped on U.S. ships passed in the House and Senate and was only left to the President to sign. For reasons that were never made clear, the legislation died through a “pocket veto” by President Ford.
However the 1977 law that authorized the Strategic Petroleum Reserve stipulated that 50% of all oil purchased from the Reserve had to be transported on American ships.
The Carter Administration (1977-1981) The unions refused to give up in their efforts to require U.S. tankers to carry a portion of everyday purchases of oil and put their political weight behind Carter. When Carter was elected President, a new bill was introduced that would reserve a more modest 9.5% of oil imports for U.S. ships. Carter was reportedly embarrassed by the implied quid pro quo and this cause the bill to die in the House.
The Reagan Administration (1981-89) When Regan took office, his long-time economic adviser, Martin Anderson, was appointed Assistant to the President for Policy Development. Anderson was a free trader, categorically opposed to all government subsidies and played a crucial role in axing such subsidies as CDS and ODS. MARAD’s ability to speak forcefully on behalf of the maritime industry was significantly weakened when it was transferred from the Department of Commerce to the DOT in 1981. During the transfer, the additional title of Assistant Secretary for Maritime Affairs and the responsibility for formulating maritime policy was assigned to the Secretary of Transportation and his staff.
In 1986, port services began to be paid for by fees on ships entering the ports and port users. Prior to 1986, customs duties funded nearly all of the nation’s ports. However these fees raised U.S. port costs, that are then passed on to shippers and in the case of imports, appear as higher prices paid by consumers.
The concept of “Controlled Foreign Corporation” in the U.S. Tax Code goes back to 1962. The idea was not to tax a shareholder of a corporation on the corporation’s income until the income is distributed in the U.S. as a dividend. American controlled foreign flag shipping companies were part of that. In 1985, maritime unions and their allies in Congress proposed to change this law. The change was passed in 1986 under the theory that by forcing U.S. ship owners to treat foreign income as domestic income, it would force the owners to reflag their ships to U.S. flag with U.S. crews. However, U.S. owned foreign flag ships were sold offshore to foreign owners. American President Lines was sold to Neptune Orient Lines, SeaLand Service was sold to Maersk, Lykes Lines was sold to CP Ships and Farrell Lines was sold to P&O Nedlloyd. Many other companies, including those with tankers and bulk carriers sold all or a controlling interest in their ships to foreign companies. It was the final blow to the U.S. international liner companies.
Post-Reagan (1990-2014) The foreign flag shipping provisions of the 1986 Tax Act were reversed by the American Jobs Creation Act of 2004, but the U.S. maritime industry never really recovered.
In the area of maritime policy, very little has changed in the United States. The Maritime Security Act of 1996 side steps the demise of ODS. There have been some overdue changes in the regulation of the liner sector, culminating in the Ocean Shipping Reform Act of 1999 and the Maritime Transportation Security Act of 2002. The U.S. courts have supported the P3 Network, which is the container alliance between Maersk Line, Mediterranean Shipping and CMA CGM, which operates 255 ships with 2.6 million TEU capacity on 28 service loops. This development is noteworthy, but does not represent government policy as such.
The 1986 Harbor Maintenance Trust Fund is supposed to pay for maintenance dredging of harbors and waterways, funded by the ad valorem tax on cargo. However, only half the money collected has actually been spent for the purposes intended. At a time when ships have been getting bigger and deeper every year, money for actually deepening our harbors requires separate Congressional funding that in all but a very few exceptions has been denied. Today, most of our major trading partners’ ports are deeper and/or more efficient than those of the United States.
Historical Derivation of Maritime Words and Phases
The word “slush” was coined in 17th century England as the name for half-melted snow and is first referred to in print with that meaning in Henry Best's Rural Economy in Yorkshire, 1641. Of course, that is where the name “Slushies”, the part-frozen flavored drinks, came from.
A century later, there was an alternative meaning of “slush”, which was the fat or grease obtained from meat boiled on board ship. It was referred to in 1756 like this: “He used much slush (the rancid fat of pork) among his victuals.” William Thompson made it sound even less appetizing in 1757: “Tars whose Stomachs are not very squeamish, can bear to paddle their Fingers in stinking Slush.”
Yum! Despite it not being the apex of culinary delight, “slush” was considered a perk for ships' cooks and crew and they sold the fat that they gathered from cooking meat whenever they reached port. This became known as a “slush fund” and the term joins the numerous English phrases that first saw the light of day at sea.
The author William McNally did not think much of the practice and included a description of it in Evils & Abuses in Naval & Merchant Service, 1839: “The sailors in the navy are allowed salt beef. From this provision, when cooked nearly all the fat boils off; this is carefully skimmed and put into empty beef or pork barrels, and sold, and the money so received is called the slush fund.”
In the same year, The Army and Navy Chronicle suggested that a ship's slush fund would be a suitable source of money to buy books for the crew: “To give men the use of such books as would best suit their taste, would be to appropriate what is their own, (viz.) the slush fund for the purchase of such works.”
This is the beginning of the meaning we now have for “slush fund”, that is, money put aside to make use of when required. The use of such savings for improper uses like bribes or the purchase of influence began in the USA not long afterwards. The Congressional Record for January 1894 printed this: “[Cleveland] was not elected in 1888 because of pious John Wanamaker and his $400,000 of campaign slush funds.”
So now, you know where the phrase “slush funds” come from!
June 4, 1816 Prototype steamboat WASHINGTON launched
June 6, 1944 U.S. Merchant Marines first at Normandy D-Day Invasion
June 15, 1904 New York excursion boat GENERAL SLOCUM burns 1,030 die
June 23, 1938 U.S. Maritime Service established
June 29, 1936 Jones Act, “Maritime’s Magna Carta”, passed
This Month In History
One Hundred Years Ago: President Wilson Proclaims First Mother’s Day:
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
Whereas, By a Joint Resolution approved May 8, 1914, “designating the second Sunday in May as Mother’s Day. and for other purposes,” the President is authorized and requested to issue a proclamation calling upon the government officials to display the United States flag on all government buildings, and the people of the United States to display the flag at their homes or other suitable places on the second Sunday in May as a public expression of our love and reverence for the mothers of our country;
And Whereas, By the said Joint Resolution it is made the duty of the President to request the observance of the second Sunday in May as provided for in the said Joint Resolution;
Now, Therefore, I, Woodrow Wilson, President of the United States of America, by virtue of the authority vested in me by the said Joint Resolution, do hereby direct the government officials to display the United States flag on all government buildings and do invite the people of the United States to display the flag at their homes or other suitable places on the second Sunday in May as a public expression of our love and reverence for the mothers of our country.
In witness whereof I have set my hand and caused the seal of the United States to be hereunto affixed.
Done at the City of Washington this ninth day of May in the year of our Lord one thousand nine hundred and fourteen, and of the Independence of the United States one hundred and thirty-eight.
[signed] WOODROW WILSON
By the President
[signed] William Jennings Bryan
Secretary of State
Article provided by Hurwitz & Fine, P.C.
Items of Interest
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The Ft. Lauderdale Mariners Club Proudly Supports: Boys & Girls Club of Broward County Marine Industries Association of South Florida MIASF Waterway Cleanup MIASF Plywood Regatta South Broward High School Skills USA Program Seafarers House Fort Lauderdale Shake-A-Leg Miami Women’s International Shipping & Trading Association Fort Lauderdale Sea Cadets, Spruance Division