Non-MSP carriers worry they could lose more business under a new deal that would allow more local sourcing of food aid.
Shipping companies that are not part of the Maritime Security Program (MSP) are expressing concern that their interests may be sacrificed as part of a deal to increase stipends paid to shipowners that are part of the MSP.
The MSP program provides $186 million to support the operation of 60 ships that are considered militarily useful. In exchange, the shipowners commit to make their vessels available to the military in times of conflict. These ships were the backbone of U.S. military sealift during the wars in Iraq and Afghanistan, and they make up the vast majority of the 80 U.S.-flag ships engaged in foreign commerce.
In addition to the support from the $3.1 million per ship stipend, the MSP vessels, which must compete with lower cost foreign flag, foreign crewed ships, rely on “preference cargo” that must be carried on U.S.-flag vessels. This includes military cargo, food aid, and other cargo that receives U.S. government support such as the goods funded by the U.S Export-Import Bank.
With the exit of U.S. troops from Iraq and Afghanistan there has been a sharp decline in preference cargo.
At a forum in April, Russell Bruner, president and chief executive officer of Maersk Line Limited, said preference cargo is down 60 percent from its peak.
“The current MSP stipend and declining preference cargo are no longer
making the math work, leaving our U.S. flag fleet vulnerable during
peacetime,” he explained.
Sources told American Shipper there are discussions of raising the MSP stipend to $5 million from $3.1 million because the current stipend is seen as not sufficient to offset the higher cost of operating a U.S.-flag, U.S.-crewed vessel.
(Unlike ships engaged in the coastal, “Jones Act” trades, U.S.-flag vessels engaged in foreign trade can be built in U.S. or foreign shipyards.)
While that would be good news for many U.S. flag operators, one source said while an increase in support to MSP may be needed, the plan in the works would obtain the money for the increase from U.S. food aid program in exchange for allowing U.S. Agency for International Development to spend 45 percent of its food aid budget on local and regional purchases rather than buying food in the U.S.
U.S. flag carriers would only be given preference for half of the remaining 55 percent spent on food aid sourced from the U.S.
The discussions are reportedly still in flux.
“Is it going to be 45 percent and $5 million? I don’t know, nobody knows,” said one source.
Ragnar Knutsen, one of the owners of Oyster Bay, N.Y-based Sealift, Inc. said if such a bargain came to pass, it could reduce the amount of agriculture cargo that would be available to be shipped in U.S. flag vessels and could lead to the “flagging out” of vessels to foreign registries or even scrapping of some U.S.-flag ships.
He said that would be another blow to the U.S.-flag ship operators, which saw the share of food aid cargo that must be handled on U.S.-flag ships reduced from 75 percent to 50 percent in 2012.
A MarAd spokesman only provided the following statement, “There are ongoing interagency discussions seeking to strengthen the viability of the U.S.-flag commercial fleet and improve the efficiency of U.S. international food assistance.”
Former USAID Administrator Rajiv Shah was a proponent of local and regional purchases, believing more of the agency’s funds could be used for food and less for transport.
In an example of locally and regionally purchased food aid described on the USAID website, USAID and its partner, the U.N.’s World Food Program “provided locally purchased maize meal and beans to internally displaced persons in North and South Kivu affected by the ongoing conflict in the Democratic Republic of the Congo. By purchasing locally, USAID and its partners support Congolese farmers and markets.”
USAID also provides food aid in the form of cash transfers and food vouchers.
While one of MarAd’s goals is to ensure there are sufficient merchant mariners available to man commercial vessels during war time, those raising the alarm about current talks say it would accomplish the opposite because if operators of non-MSP ships flag out or scrap vessels because of a lack of cargo, the mariners they employ would lose their jobs.
While reportedly $15 million might be provided to U.S. flag carriers that are not part of the MSP program, sources questioned how valuable that would be when they would have to compete against carriers in the MSP program for dwindling amount of cargo that must be sourced in the U.S..
Knudsen said if there is not enough cargo Sealift might be forced to flag out or scrap two or three ships. Other companies with U.S.-flag ships that are not in the MSP program that also carry food aid include Liberty, Schuyler, Teras Bulk and others, including various barge carriers.
Changes to Maritime Security Program could hurt some carriers
