Crowley Maritime Corp.

The impact of the terrorist acts of Sept 11th on Crowley Maritime Corp, as an ocean carrier, has required us to reemphasize and tighten our already sound security programs, and to comply with new federal, state and local requirements.

As a company, our liner services and much of our

project and tug-and-barge work is performed in the regions of Central America, Mexico, South America and the Caribbean. Therefore, due to the high incidence of drugs that transit these regions, Crowley has already established very strict security measures to meet US Customs and Carrier Initiative Program Partnership requirements, and to prevent contraband material and stowaways from coming into the US. These measures are being reevaluated for adequacy.

We work closely with unions and the USCG to assure the merchant mariners we use aboard our vessels meet the security checks and USCG standards. However it is a serious concern to use foreign flag vessels with foreign crews. Although the list of foreign crew members is forwarded to proper authorities, one has to wonder how background information can be thoroughly checked by US authorities involving foreign countries and foreign nationals.

From an operational perspective, we are evaluating what alternate port options are available to our vessels in the event a port is closed due to security reasons. This poses a difficult situation for all ocean carriers since vessels that are diverted must find adequate facilities to discharge cargo. Most ports do not have a lot of excess capacity and if a multitude of vessels were suddenly diverted, port congestion would become a problem. Additionally, arrangements may have to be made with different unions, longshoremen and linehaul carriers to deliver the cargo. Diversion would be quite disruptive to sailing schedules and the timely delivery of cargo. This would have a detrimental impact on those companies relying on just-in-time delivery. Likewise, if a loaded ship could not depart a port, then a decision would have to be made as to what must be done with the cargo, i.e. - leave it aboard ship, discharge it, etc.

In the case of Crowley and other companies that may have special load / discharge requirements, finding a suitable alternate port to provide the required facilities may be difficult to impossible. In our Puerto Rico trade, we use large, triple deck barges that require special triple level loading ramps. Merely diverting these triple deck barges to alternate ports might find that only the first deck can be loaded/discharged, since specially configured 2nd and 3rd level ramps are not available in most ports. In summary, port closings are a major concern.

In the state of Florida, where we operate Out of Jacksonville and Port Everglades, port security procedures are in effect that require individuals working in terminals along with truck drivers to undergo a fingerprint background check. ID cards will be issued as verification and only those personnel would be admitted to port locations. There is also heightened awareness involving HAZMAT movements.

A concern we now have is that currently, each port will have its own ID cards. That can be cumbersome. We hope that the ID cards are the same for all ports within a state, and perhaps, even on a national basis. Using the commercial driver license (CDL) as an example, there may be value in adopting a national standard, along with an ID card, to facilitate day-to-day operations while meeting security needs. We believe there will have to be a security program for all people involved in port operations such as the longshoremen, and for the many others who need to enter port areas to perform deliveries, maintenance and other functions.

Clearly, these new security programs and requirements will substantially increase the cost of security operations for ocean carriers.