Hunter wants MarAd to stand down on Maersk MSP vessel takeover
Rep. Duncan Hunter, R-Calif., chairman of the House Armed Services Committee, wants the Transportation Department’s Maritime Administration to refuse a request by Maersk Line Ltd. to take over control of 15 U.S.-flag containerships operated by U.S. Ship Management in the Maritime Security Program.
“From a policy standpoint, I believe that making the change for one company will simply open the flood gates for more applications at a time when the Congress has already successfully addressed the issue for the future,” Hunter said in a recent letter to DOT. “I urge you not to grant the request before you.”
Hunter led an effort in the House to reauthorize and expand MSP in the recently passed $400-billion 2004 Defense authorization legislation.
The new MSP program will provide the federal government with access to 60 U.S.-flag militarily useful container and roll-on/roll-off ships in times of war and national emergency, compared to 47 ships under the current MSP program. The federal government pays the vessel operators $2.1 million per ship per year to help offset the higher U.S.-flag operating costs. The original MSP program is scheduled to expire Sept. 30, 2005.
Late last year, Maersk Line Ltd., the U.S.-flag vessel operator of A.P. Moller/Maersk, asked MarAd to confirm its eligibility as a MSP provider to bring all its U.S.-flag vessels enrolled in the program under its direct management.
Maersk Line Ltd. manages four U.S.-flag vessels under the original MSP program, implemented in the 1996 Maritime Security Act, and another 15 ships indirectly under U.S. Ship Management, a section 2 citizen corporation established when A.P. Moller/Maersk took over the vessels from former Sea-Land Service.
John P. Clancey, chairman of Maersk Inc., told the House Armed Services Committee in a 2002 MSP reauthorization hearing that direct management of the 15 U.S. Ship Management ships would save the company millions of dollars in operations costs a year. While Maersk Line Ltd. received tentative support for the transfer from MarAd and backing from the nation’s maritime unions, U.S. Ship Management protested the move.
“I recognize that much has changed since the enactment of a MSP in 1996,” Hunter said. “At that time virtually all of the companies holding MSP operating agreements were U.S. owned. Over the next two years, however, these companies were purchased by foreign owned corporations.”
Hunter explained that during the drafting of the new MSP legislation he “was faced with a situation of retaining current agency imposed condition, or trying to develop a new statutory standard that would provide a comparable, and hopefully greater measure of protection, but nevertheless recognizing that much has changed commercially since 1996.”
Hunter said the current MSP program “should not be altered either legislatively, nor by administrative action prior to September 2005.” He added that this measure would ensure that existing commercial arrangements were not disrupted. “We were able to accomplish this goal, in part because, we felt that upsetting current contractual relationships was unwarranted, and extremely disruptive,” Hunter said.
The new MSP program will include 60 U.S.-flag ships for 10 years, but varied on the payment per ship. MSP vessel operators will receive $2.6 million per ship for fiscal years 2006-2008; $2.8 million per ship for fiscal years 2009-2011; and $3.1 million per ship for fiscal years 2012-2015.
For more insights into the new MSP program, read the December American Shipper, page 68.