[Federal Register Volume 60, Number 202 (Thursday, October 19, 1995)]
[Notices]
[Pages 54099-54100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25920]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
[Docket S-925]
Brookville Shipping, Inc.; Notice of Application for Payment of
Unused Operating-Differential Subsidy
Brookville Shipping, Inc. (Brookville) is the contractor under an
Operating-Differential Subsidy Agreement (ODSA), Contract MA/MSB-272,
scheduled to expire April 13, 1996, under which five U.S.-flag dry bulk
carriers operated by Liberty Maritime Corporation (Liberty) are
eligible for subsidy. Brookville was also the contractor under Contract
MA/MSB-166(a), which expired October 9, 1994. Under Contracts MA/MSB-
272 and MA/MSB-166(a), 3,638.5 subsidy days were available to, but not
used by, Brookville from 1989 to 1994. Contract MA/MSB-272 provides for
one ship year of subsidy annually and expired Contract MA/MSB-166(a)
also provided for one ship year of subsidy, for an aggregate of two
ship years or 720 days of subsidy annually.
Brookville requests that the Maritime Subsidy Board (Board) enable
Brookville to obtain the full unused benefits of Contracts MA/MSB-272
and MA/MSB-166(a) by extending those contracts for an additional five
years beyond their expiration dates. In the alternative, Brookville
requests that the Board enter into a new five-year contract with
Brookville for payment of operating-differential subsidy (ODS) for the
number of unused subsidy days.
In connection with its request, Brookville further asks the Board
(i) to permit Brookville to share the 3,638.5 subsidy days not used
under Contracts MA/MSB-272 and MA/MSB-166(a), respectively, among the
five dry bulk carriers operated by Liberty without limitation as to the
number of days that may be used in any one year; and (ii) to permit
Brookville to substitute on a one-for-one basis any or all of four
newly constructed Panamax bulk cargo carriers that Brookville or an
affiliate would build and operate under the U.S. flag.
According to Brookville, its request would not require the Board to
authorize new subsidy days, would further the purposes and policies of
the Merchant Marine Act, 1936, as amended (Act), and is within the
legal authority of the Board to grant.
Brookville advises that five U.S.-flag dry bulk carriers--the
LIBERTY STAR, LIBERTY SUN, LIBERTY WAVE, LIBERTY SPIRIT, and LIBERTY
SEA--are eligible to receive subsidy under Contract MA/MSB-272. The
Liberty vessels were built in Korea pursuant to section 615 of the Act,
were delivered between 1984 and 1986, and are generally regarded as the
most modern and efficient in the U.S.-flag dry bulk fleet. Their cargo
capacity averages about 64,000 metric tons, with typical cargoes in the
50,000-55,000 metric ton range.
Brookville states that the primary market for the Liberty vessels
since their delivery has been transporting U.S. government food aid
cargoes reserved to the U.S.-flag under the Cargo Preference Act of
1954, along with cargoes reserved to U.S.-flag vessels under a U.S.-
Israel ``Side Letter'' agreement. Brookville advises that although the
Liberty vessels by law were entitled to subsidy for
[[Page 54100]]
preference voyages, Brookville, as well as other dry bulk ODS
contractors, voluntarily agreed--at the Maritime Administration's
request--to forego subsidy on these preference voyages.
Brookville states that consequently, Contract MA/MSB-272 has been
underused, with only 432.9 subsidy days used in the aggregate in 1989,
1990, and 1991 and no subsidy paid at all during 1992, 1993, and 1994.
Brookville also points out that Contract MA/MSB-166(a) was similarly
underused, with only 156.6 days of subsidy used in the aggregate during
1989 and 1990 and no subsidy paid during 1991, 1992, 1993, and 1994.
Overall, 589.5 subsidy days (includes reduced crew days) were used and
3,638 subsidy days were unused from 1989 to 1994. Brookville states
that during this period, the government has had the benefit of
substantially reduced subsidy payments to Brookville.
According to Brookville, in the last two years the Liberty vessels'
traditional market--food aid transportation--has shrunk because of
budget cuts. In addition, funding for the P.L. 480--Food for Peace and
section 416 programs has declined from $2.3 billion in fiscal year 1993
to $1.3 billion in fiscal year 1995, with tonnage declining from 7.9
million metric tons to 3.7 million metric tons. Brookville indicates
that under the President's fiscal year 1996 budget, food aid spending
will decline further to about $1.0 billion, which would generate only
about 2.7 million metric tons in exports.
Brookville emphasizes that past spending decreases and proposed
decreases for fiscal year 1996 disproportionately affect bulk operators
because the cuts have been largely applied to bulk-oriented Titles I
and III of Public Law 480 and section 416, as opposed to liner-oriented
Title II. Tonnage under Titles I and III and section 416 has declined
from 5.8 million metric tons in fiscal year 1993 to a projected 850,000
metric tons in fiscal year 1996. Brookville states that since a Liberty
dry bulk carrier, when fully used, can transport 300,000 metric tons of
this 850,000 metric ton cargo level per year (based on six voyages with
a 50,000 ton cargo), it is evident that the food aid program (even with
Israeli Side Letter cargoes) can no longer support the entire existing
U.S.-flag bulk fleet.
Brookville advises that as a result, Liberty's vessels increasingly
have operated in the foreign commercial trade. In 1995, Liberty vessels
so far have used 279 of 365 available subsidy days under Contract MA/
MSB-272. (This includes 63 days used by the LIBERTY BELLE, which was
scrapped in June 1995.) According to Brookville, although the Liberty
vessels are well regarded in the foreign commercial market and have
operated successfully, their operating cost structure (resulting from
U.S. citizen crews and compliance with U.S. tax, environmental, safety
and other requirements) renders them uncompetitive without subsidy.
Brookville states that traditionally, there are very few food aid
cargoes shipped between January and March and because of the severe
cutbacks in the food aid budget, very little preference activity is
expected during the first six months of 1996. Brookville also states
that unless the Board extends Brookville's ODS contract to give it the
operational flexibility Brookville requests, Liberty will have no
choice but to lay up the vessels pending MARAD's approval of a request
to re-flag some or all of the Liberty vessels so that they may compete
in the foreign market with vessels not subject to costly U.S. laws and
regulations. Brookville states that if the Liberty vessels are re-
flagged, the American merchant marine will have lost as many as five of
its best vessels and their skilled crews--which are always available in
an national emergency.
Additionally, Brookville states that if the Board fails to grant
Brookville's request, the government's cargo preference costs will also
be higher. The Liberty vessels have historically offered the lowest
U.S.-flag rates for relatively large cargo lot sizes. According to
Brookville, if the Liberty vessels are re-flagged, government cargo
preference costs will increase, offsetting at least in part the
subsidies Brookville is requesting by this letter.
Brookville states that the Board has ample legal authority to grant
Brookville's request, citing Seatrain Shipbuilding Corp. v. Shell Oil
Co, 444 U.S. 572 (1980). According to Brookville, the Board can enter
into a new contract that permits full use of the unused days over a
five-year period; alternatively, the Board can modify contracts after
they are concluded.
Brookville believes that by extending the ODS contracts, the Board
will also address an injustice in the ODS program. The standard ODS
contract is set for 20 years, to coincide with the life of a tanker.
However, as the Act recognizes, dry bulk carriers have a useful life of
25 years. According to Brookville, in essence, the program favors
tankers by awarding contracts for their entire useful life, while
disadvantaging dry bulk carriers by awarding contracts for only 80
percent of theirs.
Brookville also notes that by granting this application, the
Maritime Administration will not be affecting the Administration's
proposed liner reform legislation, under which dry bulk carriers would
be ineligible for assistance.
This application may be inspected in the Office of the Secretary,
Maritime Administration. Any person, firm, or corporation having any
interest in such request and desiring to submit comments concerning the
application must file written comments in triplicate with the
Secretary, Maritime Administration, Room 7210, Nassif Building, 400
Seventh Street SW., Washington, D.C. 20590. Comments must be received
no later than 5 p.m. on November 1, 1995. This notice is published as a
matter of discretion and publication should in no way be considered a
favorable or unfavorable decision on the application, as filed or as
may be amended. The Maritime Subsidy Board will consider any comments
submitted and take such action with respect thereto as may be deemed
appropriate.
(Catalog of Federal Domestic Assistance Program No. 20.805
(Operating-Differential Subsidies)).
By Order of the Maritime Subsidy Board.
Dated: October 13, 1995.
Joel C. Richard,
Secretary.
[FR Doc. 95-25920 Filed 10-18-95; 8:45 am]
BILLING CODE 4910-81-P
