$1 billion subsidy plan proposed to help dwindling merchant fleet

March 11, 1994|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

The Clinton administration yesterday proposed a $1 billion plan to subsidize the dwindling number of U.S.-flag merchant ships, but the plan immediately drew criticism from Baltimore and other cities, which said the proposed fees for funding the subsidies will drive business away from U.S. ports.

The legislation, which would provide $100 million-a-year subsidies for 10 years, is the second part of the administration's strategy for reviving the country's ailing maritime industry.

Last year, the administration proposed subsidies for the shipbuilding industry -- a measure that could significantly help Baltimore's Sparrows Point shipyard.

"Finally, we could get some help for the maritime industry. It's important to have the administration pushing this," said Rep. Helen Delich Bentley, a Republican candidate for governor and long-time supporter of the shipbuilding and maritime industries.

But the plan calls for raising the tonnage tax that shipping companies pay the federal government to offset U.S. Coast Guard services.

"Already, Baltimore and other ports have called to complain that they would lose cargo to Canada," Mrs. Bentley said yesterday.

The added cost for a typical container ship per year would be about $1.50 per container, 14 cents a ton for dry-bulk ships, one cent per barrel for tankers and 38 cents per passenger for passenger ships.

Even though the fees would be increased at all U.S. ports, North Atlantic ports would be disproportionately hurt, port officials said yesterday.

"We wouldn't want to be placed at a competitive disadvantage with Canada or other ports that wouldn't have similar tonnage tax assessed," said Ray Feldmann, a spokesman for the Maryland Port Administration, which operates the five public terminals in Baltimore.

"We don't want to create a situation where shipping companies have another reason to look at a port outside the U.S.," he said.

But, in outlining the legislation yesterday, Transportation Secretary Federico F. Pena said the funding was needed to help subsidize 52 U.S. ships a year.

"The extinction of a U.S.-flag merchant fleet is unacceptable and would undermine our global competitiveness and national security," he said.

In the past, maritime reform has stalled in Congress for lack of funding. And Mrs. Bentley said yesterday that the Senate wouldn't even consider legislation that lacked a way to pay for it.

Internationally, shipping companies can register their vessels in whatever jurisdiction they choose. Vessels flagged in the United States must operate U.S.-built ships, use U.S. crews and comply with standards much tougher than those imposed on ships flagged in most other countries.

JTC Because of the higher cost of operating vessels flagged in the U.S., only a handful of companies remain here. Since 1970, the number of U.S.-flag vessels has plummeted to 350 from 840, and the number of jobs for seamen has dropped to 9,165 from 40,248.

Last summer, the nation's two largest shipping companies -- Sea-Land Service Inc. and American President Cos. -- decided to register part of their fleets under foreign flags to avoid the high costs.

That meant the loss of 900 American jobs because the two companies intended to hire lower-paid foreign crews.

Both companies had been pushing for a comprehensive maritime reform package that would provide subsidies and tax breaks.

Overall, U.S. carriers have said they need $5 billion in subsidies and tax breaks over a 15-year period.

The legislation unveiled yesterday will be merged with the administration's plan to help subsidize the shipbuilding industry. That measure passed the House of Representatives last fall and is pending in the Senate.

The plan would provide $2.5 million a year per ship through 1997, decreasing to $2.0 million a year through 2004, with no more than 32 ships allowed to join the program the first year, the department said.

U.S. ships entering the program must be 15 years old or less and foreign-built ships five years old or less.

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