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MTD Addresses Vital Programs, Legislative Issues
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| Capital Construction Fund, MSP, The Jones Act Covered During Biennial Convention | |||
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The Maritime Trades Department of the AFL-CIO has proposed tax incentives to boost the U.S.-flag merchant fleet. Such incentives would help American-flag ships compete with foreign-flag vessels on more equal terms, the department said in a broad resolution that also addressed the Maritime Security Program, the Jones Act, and U.S.-flag cargo preference laws. The resolution was adopted during the MTD's biennial convention in Los Angeles Oct. 7 and 8. The resolution called for greater tax parity between U.S. and foreign-flag merchant fleets. Many so-called "open registries"--more commonly referred to as flags of convenience--offer tax-free operation to attract tonnage. Many of the foreign-flag cargo ships calling at U.S. ports pay no taxes on revenues earned in U.S. trade. In addition, many foreign ship's officers and crew members pay no income taxes to any government. The tax factor helps explain why foreign-flag ships carry more than 97 percent of U.S. commercial imports and exports, the MTD noted. "Vessels operating under American registry in identical international trades are subject to an array of federal, state and local taxes," according to the resolution. "The handicap facing American ship owners is not necessarily an inability to operate in a competitive fashion, but rather domestic tax policies which add significant costs tat cannot be passed along to shippers in the highly cost-conscious world of international shipping. This condition is especially frustrating because the technology and logistics innovations developed by the U.S. industry have revolutionized international shipping." The MTD proposed expanded eligibility for tax-deferred Capital Construction Fund accounts and a limited income tax exemption for U.S. merchant marine officers and crew members. The department endorsed H.R.2159, a bill introduced in the House by Rep. Jim McCrery (R-LA) in June 1999. The McCrery bill would liberalize CCF rules and generate additional capital for vessel construction and fleet improvements in U.S. shipyards, the MTD resolution said. Under current law, taxes on the foreign trade earnings of U.S.-built and owned vessels are deferred when the earnings are used for new construction or fleet improvements in U.S. shipyards. H.R.2159 would allow deferral on the earnings of vessels owned and registered in the U.S. but built abroad and on the earnings of vessels operating exclusively in domestic trade when the earnings are reinvested in U.S. shipyard projects. "If U.S.-flag ships are to be competitive in the next century, it is essential that the field of competition be leveled," the MTD resolution explained. The competitive plane was steadied somewhat by MSP, which was authorized for 10 years in the Maritime Security Act of 1996. MSP provides up to 47 militarily useful U.S.-flag container, roll-on/roll-off, and lighter-aboard ships with a combined $100 million a year in operating assistance while in commercial foreign trade. In exchange, the ships, their crews, and all logistics support or intermodal equipment owned by the participating companies are to be made available on demand to the Department of Defense. By law, MSP must be funded each year as a direct appropriation. MSP "provides the U.S. with a core fleet of vessels that would be available to the military during a national emergency," according to the resolution. "The MTD supports this key maritime program and urges the Congress to continue to fully fund it as a sound investment in the nation's security." Another productive "partnership" between the public and private sectors is a program called Voluntary Intermodal Sealift Agreement, or VISA, the MTD said. Under VISA, the private sector would make ships, cargo space, intermodal gear, and management services available to DOD in defense emergencies. The program offers "a well-coordinated, seamless transition from peacetime to wartime for the acquisition of commercial sealift assets," according to the resolution. More than 80 percent of U.S.-flag container capacity is enrolled in VISA, and 70 percent of that participates in MSP, according to the resolution. "By partnering with the U.S.-flag commercial maritime industry, the federal government is assured access to the finest logistic capabilities the industry has to offer, including a cadre of well trained professional mariners," the resolution noted. "The MTD applauds the forward thinking that brought the government and the industry together in the VISA program. We also encourage defense and transportation planners to augment strategic sealift capability through additional private sector partnerships." Turning to domestic trade, the resolution defended the Jones Act, the 1920 cabotage law that holds waterborne cargoes between U.S. ports for vessels owned, built, documented and crewed in the U.S. The Jones Act covers an "extremely important" fleet of more than 44,000 deep-sea, Great Lakes, and inland waters vessels, the resolution noted. The Jones Act fleet accommodates 21 percent of domestic freight but less than two percent of the total transport cost. The fleet has doubled in size in the last 30 years, and its productivity has more than tripled--rising at an average annual rate 2 to 4 times higher than in other sectors. In addition, the Jones Act fleet sustains 87 percent of all U.S. seagoing jobs and accounts for much of the labor needed for strategic sealift and other defense services. While the Department of Defense "relies on its own fleet of cargo vessels for surge strategic sealift capability, these vessels are usually maintained in reduced operating or inactive status without complete operating crews," according to the resolution. "Mariners employed in domestic commerce represent an essential base for crewing government-owned ships during a national emergency. It has been estimated that nearly 3,000 trained seafarers would be needed on less than a week's notice to fully crew the government's organic surge fleet of reserve ships in a military crisis or international emergency--there is no doubt that Jones Act mariners will comprise the cadre of seafarers manning those government ships." Repealing or weakening the Jones Act and other cabotage laws--as some in Congress have proposed--would "lead inevitably" to declining maritime infrastructure, a diminished sealift labor pool, and perilously weak ship construction, repair, and supply industries, the MTD resolution warned. Equally essential are the cargo preference statutes, which reserve specific amounts of government imports and exports for U.S.-flag ships--100 percent of defense cargoes, 50 percent of all other products, and 75 percent of concessionary food exports. The MTD cited DOD and General Accounting Office studies that concluded that the U.S.-flag merchant fleet would suffer under repeal of the preference laws. "In combination with MSP and the Jones Act, cargo preference programs help to foster and maintain a (U.S.) merchant marine capable of meeting U.S. economic and national security requirements," according to the resolution. Some federal agencies routinely try to dodge the U.S.-flag mandates when arranging shipments, the resolution continued. The Maritime Administration in the Department of Transportation ought to be the "lead agency" on cargo preference law enforcement, and the agency's authority ought to be clarified and strengthened, the MTD said. Waivers of cargo preference laws ought to be considered "case by case," according to the resolution. | |||
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