House Passes Maritime Subsidies Bill Overwhelmingly $1.2 Billion Earmarked For Maritime Security Fleet; Series Transition Payments To Come For Yards

The House voted in favor of new subsidies to help U.S. shipping lines and shipyards to compete internationally. The bill (H.R. 2151) is perhaps the most significant piece of maritime legislation since Congress authorized the first maritime subsidies in 1936, and is driven by a fear that U.S.-flag ships will disappear unless Congress takes steps now. The legislation, which is intended to put the U.S. industry on strong, internationally-competitive footing, was a major, bipartisan effort which was passed by a vote of 347 to 65. Sponsored by Gerry E. Studds (D-MA), chairman, and JackFields (R-TX), ranking republican member of the Merchant Marine and Fisheries Committee, the bill would ensure that commercial ships fly the U.S. flag and are built in U.S. shipyards.

A 10-year, $1.2 billion Maritime Security fleet (MSF) program is authorized for militarily useful, U.S.- flag merchant ships, and a new Series Transition Payments (STP) program is created to help U.S. shipyards build vessels that are price competitive on the world market. "Our votes today will determine a new course for the national defense and the economic security of the U.S.," Mr. Studds said.

He continued by emphasizing that a strong U.S. merchant marine fleet is needed in time of war and peace. "We need one today, and we will need tomorrow, to keep the American market free and independent." The bipartisan leaders of the Committee also successfully turned back two killer amendments: one by Rep. Gene Taylor (D-Miss.), which would have limited the eligible vessels for the MSF program (defeated 64 to 362); another by Rep. Tim Penny (D-MN), which would have limited cargo preference (defeated 109 to 309).

"This is our best, if not last, hope of saving the U.S. maritime industry. Without this bipartisan legislation, the U.S. maritime industry will largely disappear, and the most powerful nation on earth...will become totally dependent upon foreign shipping interests," said Mr. Fields.

The Clinton Administration agreed to support the bill after its sponsors limited the subsidies for shipping lines to $ 1.2 billion over 10 years, starting in fiscal year 1995. That sum will support as many as 70 of the 72 oceangoing vessels now receiving subsidies.

While the bill has passed—with the next action due from the Senate Commerce Subcommittee on Merchant Marine—there are still questions as to how the measure will be funded, as there was no money in President Clinton's five year budget plan for the new subsidy program. Different From Current Plan The proposed subsidy plan embodied in H.R. 2151 differs from the current operating differential subsidy in two ways. The current plan is based on the difference in labor costs between U.S. vessels and international competitors, where the new MSF program will have fixed payments: $2.3 million per vessel for the first year; $2.1 million per vessel, per year thereafter. Also, the new plan allows ships built outside the U.S. to receive subsidies if a U.S. yard could not match the foreign yard's price.

Unrelenting Support During the House debate of the bill, not one lawmaker spoke against the basics of the bill, as both parties stressed the importance of the maritime industry to the national defense, trade and jobs.

Without congressional action, the U.S. will soon become dependent on ships of other nations," said Lynn Schenk (D-San Diego), who cosponsored the legislation. She said the measure would "assist the U.S. shipbuilding industry to re-enter the commercial market and build vessels for the U.S. and the international markets at competitive prices, and assist the U.S. shipping industry to retain American crews," to enable the domestic shipping industry to compete internationally.

The number of private U.S. flag vessels sailing international waters over the past 28 years has decreased from 620 to 151 ships. During the same period, the number of jobs on large ocean-going U.S.-flag vessels has dropped from about 51,000 to under 10,000. As of September 1, only one privately-owned vessel of more than 1,000-gt was under construction in the U.S.