Port Security Conference

May 19, 2003

Help for shipbuilders in HASC FY 2004 Defense Authorization Bill
There's plenty of cheery reading for American shipbuilders in the version of HR 1588, the National Defense Authorization Act for Fiscal Year 2004, that was reported out of the House Armed Services Committee May 14 by a bipartisan 58 to 2 majority.

The Committee has matched or exceeded the Administration's requests for all major Navy shipbuilding programs.

It has recommended $39.5 million for the Maritime Administration's much criticized Title XI ship mortgage guarantee program (which the Bush Administration keeps trying to zero out) plus $20 million for the disposal of obsolete ships from the National Defense Reserve fleet.

Particularly interesting, though, is the HASC's plan for Reauthorization of the Maritime Security Program.

The Maritime Security Act of 1996 provided financial assistance to U.S. flag commercial ship operators to offset the higher cost of operating under the U.S. flag.  In return owners must enter into a DOD preparedness agreement.  Under the terms of this agreement, the company’s ships as well as the company’s intermodal systems, equipment, and terminal facilities are to be made available to DOD in times of war or to respond to a surge or sustainment sealift requirement. 

While the Act does not expire until 2005, the committee believes that shipowners and operators should be given an adequate period to plan for changes in DOD requirements.  While the current program has worked reasonably well, the HASC version of HR 1588 includes a Title XXV that "may be cited as The Maritime Security Act of 2003."

This includes a shipbuilding component "to provide tanker support to our deployed forces, and grants greater flexibility for DOD to select the types of vessels it would likely need during a contingency.

The committee recommends modifying the Maritime Security Act of 1996 by:

  • increasing the number of participants from 47 ships to 60 ships;
  • providing financial assistance to construct five newly built tankers in the U.S. that are capable of carrying military petroleum products during a war;
  • extending the current program for ten additional years;
  • establishing a 30-month period to replace older ships with newer DOD approved and militarily useful ships;
  • enhancing the priority selection system to favor U.S. citizen vessel owners and operators;
  • adding DOD certification requirements on new operators; and  
  • increasing the annual payment to ship operators from $2.1 million per year to $2.6 million per year.

The product tankers envisaged by the committee are double hulled, U.S. built vessels and the U.S. Government would pay up to 75% of the actual cost of construction, but in case more than $50 million per vessel.

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