Thursday, June 8, 2000

P&O Nedlloyd acquires Farrell
P&O Nedlloyd has announced the acquisition of Farrell Lines Incorporated subject to final agreement and regulatory clearances from the United States Maritime Administration and other agencies. The two companies have reached agreement on integrating their respective activities in the trade between the United States and the Mediterranean, which will be branded Farrell Mediterranean Express.

P&O Nedlloyd already has a major presence in the U.S.-Mediterranean trade. With the integration of the Farrell Lines' service and the combined volumes, says P&O Nedlloyd. true benefits of scale will be achieved. Furthermore, the service will be upgraded weekly to enable it to link to P&O Nedlloyd's global network. This new weekly service will call direct at a number of East Mediterranean ports and as such will be a unique product in this fast growing market area.

"We are looking forward to working with Farrell to make the integration a great commercial success. We are certain that, both in the USA and Europe, P&O Nedlloyd and Farrell's employees will rise to the challenge and combine the strengths of the two companies," said Michael Seymour, President of P&O Nedlloyd North America. In addition, Richard Gronda President of Farrell Lines commented, "With the strength of the P&O Nedlloyd Group behind us, Farrell will be in a much better position to continue to serve its traditional customer base."

Given the complimentary nature of the account base of Farrell and P&O Nedlloyd there is full confidence that both companies' businesses will be maintained following the implementation phase.

Farrell Lines Inc. operates five U.S. flag container ships of an average size of 2000 TEU in a service between the USA East Coast and the West and Eastern Mediterranean. A key cargo segment is U.S. military and Preference cargo, which require U.S. flag ships.

Newbuildings ordered for Zim
Six new 4,800 teu panamax-sized vessels have been ordered for Zim Israel Navigation from Hyundai .

These six 24 knots ships will replace seven  21 knots ships deployed today in Zim's main global service - Zim Container Service (ZCS). These seven 3,029 TEU ships will in turn be transferred to Zim's second global service - Asia Med Service - operating between the East Mediterranean, through the Suez canal to the Indian ocean and the Far East,  Pacific ocean and the west coast of North America. This global service is currently composed of  two separate services (Asia-Med and ZPS) operating smaller capacity vessels.  Hence,  these global services will also benefit from the upgrade.

"The need for this significant change, involving a $300 million dollars commitment, derives from two main objectives, "says Zim, "to give an appropriate answer to the growing needs of the company's customers in the international trade [and] to take advantage of the present new buildings' prices as compared to the current charter rates."

U.K. fine tunes tonnage tax rules
The Chief Secretary to the British Treasury, Andrew Smith MP, has introduced amendments to the tonnage tax provisions in the Finance Bill. Tonnage tax is an optional new tax regime for shipping companies - which has been widely welcomed by the industry. It is an important part of the package of measures being introduced to encourage the resurgence of the U.K .shipping industry. There has been public consultation at each stage of the development of the regime, in particular with the shipping industry and other interested parties. Most of the amendments now introduced today are the result of comments made in response to that consultation process.

Corporate Partnerships

1. Joint ventures in the shipping industry may be operated through the vehicle of a corporate partnership.

A number of the Government amendments will clarify how qualifying corporate members of shipping partnerships may bring their share of shipping profits within the tonnage tax regime.

Finance Leasing

2. These amendments relax restrictions on the availability of capital allowances to lessors who provide ships to tonnage tax companies on finance lease terms.

The amendments deal with "defeased leasing" arrangements, allowing certain types of securities provided to the lessor or to a third party guarantor to be disregarded when ascertaining whether a finance lessor is entitled to claim capital allowances

3. There are limits on the capital allowances available on ships finance- leased into tonnage tax. When a ship enters or leaves tonnage tax, there has to be a transition between the normal capital allowances regime and the limited version available within tonnage tax. The method originally set out for that transition would have affected the capital allowances available on other assets held by the leasing company, not just the leased ship in question. The amendments now tabled set out a replacement method.

Sale and Leaseback

4. Finance lessors can get no capital allowances on a ship that they buy from and lease back to a tonnage tax company (such arrangements are known as "sale and leaseback" arrangements). The new amendments mean that the sale and leaseback rules will not apply in the case of a newly built ship.


5. This amendment builds in flexibility for companies that are new to shipping, allowing them three years to come within the limit set on the proportion of tonnage that they time-charter. The change matches the flexibility available to existing shipping companies under the tonnage tax regime.


6. These amendments allow the Secretary of State to include in the regulations that deal with the operation of the tonnage tax training obligation rules to deal with two situations not catered for in the current wording of the Finance Bill.


7. Under European law, tonnage tax is a state aid and as such clearance has to be obtained from the European Commission that it is not contrary to the interests of the common market before it can be implemented. Whilst there is agreement on most aspects of the regime, discussions with the Commission on the merits of including dredgers within tonnage tax are likely to be protracted. To improve the prospect of timely clearance of the regime by the Commission, the Government has introduced amendments to remove dredgers from the scope of the tonnage tax.


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