USSM plans to continue fight against Maersk Line Ltd. takeover
The U.S. Maritime Administration may have given its approval to Maersk Line Ltd. to takeover 15 U.S.-flag vessels in the federal government’s Maritime Security Program, but the current operating company of the ships says not so fast.
“We intend to challenge this decision and we are confident that it will not survive judicial scrutiny,” said U.S. Ship Management (USSM) in response to MarAd’s decision Monday.
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 USSM agreed to transfer direct operations of the former Sea-Land Service vessels to Maersk should Maersk Line Ltd. elect to become the MSP contractor.
MSP was created in 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 government pays the MSP operators $2.1 million per ship per year.
If Maersk Line Ltd. can eliminate USSM, the company would increase its MSP fleet from four to 19 ships — the largest operator in the program.
USSM has vehemently opposed the transfer. In an arbitration proceeding between USSM and Maersk Line Ltd., the arbitration panel decided in favor of Maersk Line Ltd.’s position that it has the authority to file an application for the transfer. Thus, MarAd determined that Maersk Line Ltd. is eligible to transfer the USSM vessels under its direct control. However, in the U.S. District Court for the District of Columbia, USSM has case against MarAd (filed April 29, 2003) contesting the legality of the legal opinion. The case is ongoing.
USSM said Maersk Line Ltd. was attempting to “hijack” the MSP program. “MSP was designed first and foremost for U.S. citizens,” USSM said. “Except for a narrow exception to five vessels, the entire program was reserved for U.S. section 2 citizen companies.”
USSM emphasized that since 1997, MarAd has required each transfer of an MSP agreement from a U.S. citizen company to be a U.S. citizen company.
“Now, ignoring congressional intent, statutory and contractual requirements, and each of MarAd’s own precedents, the timing of MarAd’s acquiescence to Maersk’s request is bizarre coming so soon after the U.S. District Court’s denial of MarAd’s motion to dismiss USSM’s challenge of MarAd’s earlier ruling,” USSM said.
Maersk Line Ltd. appears unphased by USSM’s efforts to stop the transfer.
“We are extremely pleased with MarAd’s decision approving the transfer of the 15 MSP operating agreements to MLL,” said Kenneth C. Gaulden, senior vice president for Maersk Line Ltd., in a statement. “Now, we look forward to the benefits that will be brought about by streamlining operations and creating much-needed efficiencies.”
Gaulden added: “MLL will work closely with MarAd to assume direct operation of the ships in an appropriate, efficient and expeditious manner, while continuing to support our military forces engaged in the war on terrorism and serve our commercial customers.”
Maersk Line Ltd. has received support for the transfer of the USSM ships from the maritime labor unions, such as the Seafarer’s International Union; Master, Mates & Pilots; and the Marine Engineers’ Beneficial Association, in addition to several senior lawmakers.
USSM received letters of support to block the vessel transfer from Farrell Lines, a time charterer of MSP vessel and a competitor of Maersk Line Ltd. Other submitters, including Rep. Duncan Hunter, R-Calif., chairman of the House Armed Services Committee, asked MarAd to prevent increased control of U.S. assets by overseas-based operators.
Since last year, U.S.-flag vessel operators have been scrambling to firm their position in a newly established MSP program. 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.