November 7, 2002

Maersk seeks clarification on MSP eligibility

Maersk Line, Limited (MLL) today asked the U.S. Maritime Administration to confirm its eligibility as a Maritime Security Program (MSP) contractor under existing law so that it company can more effectively and efficiently operate additional vessels under MSP.

This action, says Maersk Line, would increase from 4 to 19 the number of its vessels currently under contract to the Maritime Administration. Under its operating contracts with Maersk Line, Limited, U.S. Ship Management, Inc. (USSM) has agreed to transfer direct operation of the vessels in question to Maersk should MLL elect to become the MSP contractor. Those contracts were reviewed and approved by the Maritime Administration in 1999.

Maersk Line, Limited, a subsidiary of Denmark's Maersk/A.P. Moller Group, is independently controlled by a board of directors comprised entirely of U.S. citizens including Vice Admiral William H. Rowden (USN, Ret.) former commander of the Naval Sea Systems Command. The retired vice chief of naval operations and supreme allied commander, Atlantic, Admiral Harold W. Gehman, joins Admiral Rowden on the board.

Under the new arrangement, says Maersk Line, the vessels will continue to be owned by the same "Section 2" U.S. citizens that own them today, thus ensuring Defense Department control and access to assets needed to respond to national emergencies. The vessels will remain U.S. flagged and will be crewed by the same American seafarers that currently man them today.

Currently, Maersk Line, Limited maintains a separate "operating" company, USSM, to provide limited vessel management services for these 15 vessels. Maersk Line, Limited, however, currently provides the same types of management services for more than 30 vessels, including many operated for the Department of Defense. Consolidating its vessel management services under Maersk Line, Limited, will allow those services to be performed more efficiently and effectively than under the present arrangement.

In addition to its vessel management services, Maersk Line, Limited also provides the Defense Department immediate access to its global network of intermodal assets including terminals, cranes, logistical platforms, computerized management systems, containers and chassis. The proposed arrangement, it says, would more closely integrate management of the 15 MSP vessels with this global system, further strengthening the MSP for military purposes and enhancing the U.S.-flag presence in international shipping.

"Transferring the MSP operating agreements under existing law makes complete sense," said John F. Reinhart, CEO of Maersk Line, Limited. "It lets us bolster our fleet and do a better job for the U.S. government."

A favorable ruling from the Maritime Administration would strengthen national security, enhance military sealift and pave the way for MSP re- authorization, all while maintaining U.S. control of the vessels through their Section 2 U.S. citizen owners.

Maersk Line, Limited is based in Norfolk, Virginia, and is one of the Defense Department's primary shipping contractors. It says it "has been a reliable partner for the government in peacetime and war for almost 30 years." The company operates vessels registered in the United States in full compliance with U.S. laws and regulations. It manages a fleet of more than 50 ships in commercial and government service, including vessels requiring Top Secret security clearances.

"Our first priority with this action is to ensure we deliver the best possible service to the U.S. government, both in peacetime and war," said Kenneth C. Gaulden, senior vice president of Maersk Line, Limited. "We will be able to streamline our operations which means the people in the Defense Department will have to coordinate with far fewer people.

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