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Details Of U.S. Maritime Subsidy Program Revealed

The Clinton Administration revealed a 10-year, $1 billion program for subsidizing the U.S. maritime industry, to be financed by increasing tonnage fees on foreign vessels entering U.S. ports. The plan, which would cost approximately $100 million per year, was incorporated into legislation recently submitted to Congress called the Maritime Security and Trade Act of 1994, and constitutes a departure from previous proposals in that it contains a plan for paying subsidy costs.

Transportation Secretary Federico Pena reportedly estimated that 52 ships would qualify for the program. However, only 32 would be allowed to enter the program in the first year.

Backing the plan, Gerry E. Studds, chairman of the House Merchant Marine & Fisheries Committee, said "The fight for maritime reform, the fight to ensure that this nation has a strong and competitive U.S.-flag fleet, and the fight to see that it happens in our lifetime, have stretched out far too long.

Secretary Pena's announcement today reinforced the commitment President Clinton made to Senator Breaux and me last year to help us win this fight, and I believe we will win." Formally debuted on March 10, the Merchant Marine and Fisheries Committee convened a hearing on the plan on March 17.

The program provides subsidies at the rate of $2.5 million per U.S.- flagged ship until 1997. The subsidies would decrease to $2 million per vessel from 1998 until 2004 when the program expires. In order to qualify for the program, owners would have to make their vessels available to the military in the event of a national emergency. Vessels would have to be U.S. flagged, have U.S. crews, and be less than 15 years old. Foreignbuilt vessels in the program can be no older than five years old. Transportation Department Maritime Administrator Albert Herberger reportedly said increased tonnage fees to support the program would amount to roughly $1.50 per teu per year. Put in other terms, it amounts to less than 15 cents per ton of bulk cargo, a penny per barrel of fuel and 38 cents added to the price of each cruise ticket. AdministratorHerberger referred to the program as deregulatory, noting that program participants would be free of U.S. limits on which routes they may serve, which cargo they may carry, and other restrictions of the current operating differential subsidy (ODS) program.

Owners of vessels in the current program may keep the vessels in that program or apply for ODS or other vessels to enter the new program, but may not apply to the new program pending termination of existing ODS agreements. The Maritime Administration will not consider applications that extend the subsidizable lives of ODS ships. Transportation Department officials reportedly warned that without the new program, the U.S. faced the possibility of losing all vessels under its flag. Among companies affected by the new legislation would be Lykes Brothers, reportedly the largest recipient of U.S. subsidization funds.

Maritime officials reportedly convinced the President that allowing U.S.-flagged vessels to re-flag would constitute disaster. U.S.-flag vessels provide sealift services to the U.S. military during military actions and wartime. Larger crews and stricter rules aboard U.S.-flag vessels make U.S.-flagging vessels as much as $1 million per vessel per year. CSX Corp.'s Sea-Land Service Inc. subsidiary reportedly said in mid-June 1993 that without subsidy reform, some of their vessels would have to be re-flagged and recrewed which might cause the loss of up to 500jobs, as well as allow the owner to refuse emergency Defense Department use of the vessels.

To pay for the ship subsidiza tion, tonnage fees for the first five entries a foreign vessel makes into the U.S from Western Hemisphere ports would be increased from $0.09 per net registered tonnage (NRT) to $0.15. Fees for foreign vessels entering U.S. ports from other foreign areas will be increased from $0.27 to $0.44 per NRT. The U.S. deep-sea merchant fleet is down to about 160 ships, employing some 27,000 civilian U.S. seafarers




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