Copyright 2001 Journal of Commerce, Inc.  
Journal of Commerce - JoC Week
January 15, 2001
SECTION: SPECIALS; Pg.13

LENGTH: 231 words

HEADLINE: U.S.-flag ship subsidies

BODY:
The clock is ticking for subsidized U.S.-flag ship operators. The Maritime Security Program, which provides $2.1 million annual subsidies to 47 vessels in international trade, is scheduled to expire in 2005. Uncertainty over the fate of MSP poses a planning problem for ship operators. Some of them face imminent decisions over how to replace aging vessels.

The main justification for MSP has been maintenance of a base of merchant ships and manpower to support defense needs. But that justification has become less compelling as the Defense Department has expanded its own cargo fleet. Support for renewal of a U.S.-flag subsidy program also has been undercut by the sale of APL, Lykes, Sea-Land, Crowley American Transport and Farrell to companies based outside the U.S. Two-thirds of the current MSP subsidies now go to U.S. firms that operate the vessels for non-U.S. companies.

The biggest beneficiaries of U.S.-flag subsidies are the maritime unions, whose members make up the crews of MSP-supported ships. The expectation is that a similar program will be renewed, but probably not until just before the current one expires.

An effort will be started this year, but it's worth noting that the MSP, which replaced the 1936-era Operating Differential Subsidy, was passed only after more than a decade of debate.

Outlook: Will pass eventually, but not this year.

LOAD-DATE: January 17, 2001