MarAd edges closer to decision on future of U.S. Ship Management
The U.S. Maritime Administration took another step closer to finalizing its decision on a request by Maersk Line Ltd. to take control of 15 vessels operated by U.S. Ship Management in the Maritime Security Program (MSP).
Maersk Line Ltd., a U.S.-flag vessel subsidiary of A.P. Moller/Maersk Sealand, made the request for the transfer with MarAd in November 2002. The company claimed that under its 1999 MarAd-approved time charters, U.S. Ship Management agreed to transfer direct operations of the vessels to Maersk should Maersk Line Ltd. elect to become the MSP contractor.
U.S. Ship Management opposed the transfer during a public comment period. In an arbitration proceeding between U.S. Ship Management and Maersk Line Ltd., an arbitration panel decided in favor of Maersk Line Ltd.’s position that it has the authority to file an application for the transfer.
MarAd determined that Maersk Line Ltd. is eligible to submit an application to transfer the MSP operating agreements. However, no final disposition of the carrier’s application was made by the agency.
“There is no further need to keep the public docket open in this matter,” the agency said. “MarAd will now commence direct discussions with Maersk as the applicant.”
Maersk Line Ltd. praised the MarAd’s action. In a April 28 statement, the company said it “will work closely with the agency to expedite the transfer process.”
MSP was created under the 1996 Maritime Security Act and is managed by MarAd. The program provides the federal government with immediate access to 47 militarily useful commercial container and roll-on/roll-off vessels during times of war or national emergency. To help offset the higher vessel operations costs of these U.S.-flag vessels, the federal government pays the MSP operators $2.1 million per ship per year.
In November 2003, Congress reauthorized and expanded the MSP program for another 10 years, starting Oct. 1, 2005, as part of its fiscal year 2004 $400-billion defense authorization legislation. The new MSP will include 60 U.S.-flag commercial ships and an increasing annual payment per ship starting at $2.6 million per ship for fiscal years 2006-2008; $2.9 million per ship for fiscal years 2009-2011; and $3.1 million per ship for fiscal years 2012-2015.
Congress has permitted operators in the original MSP to grandfather the 47 MSP vessels in the new program.
If Maersk Line Ltd. eliminates U.S. Ship Management, the company would increase its MSP fleet from four to 19 ships, making it the largest operator in the program.
U.S. Ship Management officials, however, aren’t shrinking from the fight to retain their operating authority over the 19 ships, and protest the way MarAd has handled the issue.
“It’s a perfect example of circular reasoning used to justify what MarAd does best these days, namely pulling down the cone of silence on itself so that it can engage in ex parte communications with someone seeking to usurp the contractual rights of another company,” said U.S. Ship Management’s general counsel Stuart Breidbart in a phone interview.
“USSM intends to continue to take all steps necessary to preserve, protect and defend its operations,” he said.