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MTD Backs Maritime Tax Relief Legislation
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| Unions Urge Sufficient Funding Of Title XI, Vow To Defend Domestic Shipping Laws | |||
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The Maritime Trades Department of the AFL-CIO has endorsed tax incentives to encourage new private investment in U.S.-flag merchant ships. The incentives were proposed in identical bills filed late in 1999 by Sen. John Breaux (D-LA) and Louisiana Reps. Jim McCrery, a Republican, and William Jefferson, a Democrat. Labor's support for the legislative package--S.1858 and H.R.3225, the National Security Sealift Enhancement Act--came in February during a two-day meeting of the MTD's executive board in New Orleans, where the board also recommended additional money for ship construction loan guarantees and reaffirmed the MTD's support for embattled domestic shipping laws. In a statement later circulated in Washington, the MTD officials said foreign-flag merchant fleets had captured nearly all U.S. commercial foreign trade by offering artificially lower freight rates than their American-flag rivals-- a distinct cost advantage resulting from little or no flag-state regulation, especially in countries that host flag-of-convenience ships. "Many nations build an international maritime presence as a means of projecting visibility and earning hard currency," the statement explained. "Many times, these registries do not require the same level of protection for seafarer health, welfare, and safety as on U.S.-flag vessels." Additional advantage is gained from liberal tax policies abroad, the statement continued. "A significant cost disparity that has contributed to the competitive difficulties facing the U.S.-flag fleet is the freedom from taxation available to many foreign or 'open' registries. Often, foreign-flag vessel owners do not pay any corporate income taxes (in the U.S. or abroad) on revenues earned in U.S. foreign commerce, and the crews frequently do not pay income taxes to any country. By comparison, vessels operating under the American flag are subject to all the taxes and regulatory laws applicable in the U.S." While technology and logistics innovations developed in the U.S. have made the American fleet "highly efficient and fully competitive with foreign counterparts," the tax differences continue to handicap U.S. ship operators on the high seas, the statement said. The typical U.S.-flag shipowner pays an estimated $1 million more a year in taxes per vessel than a foreign-flag owner, and closing the gap would be a logical follow-up to the 1996 Maritime Security Act and other initiatives to promote the U.S. fleet, the statement added. S.1858-H.R.3225 would liberalize Capital Construction Fund rules to "generate additional investment capital for new U.S.-built ships and necessary operating equipment," repeal the Alternative Minimum Tax applied to shipping, expand the U.S.-flag seagoing convention tax deduction, and exempt U.S. seafarers from taxes on portions of income earned abroad under certain conditions. "As global trade expands, it is essential that we level the playing field for U.S. companies competing in the commercial maritime arena," the statement said. "The nation's tax policies should promote business growth, not stifle it." Failure to provide tax relief would mean lost opportunity for the American fleet, which the MTD board noted is "able to provide equal or higher quality service" than its foreign-flag competitors. Addressing the U.S. merchant ship construction loan and mortgage guarantee program authorized in Title XI of the 1936 Merchant Marne Act, the MTD board said the program encourages shipyard orders in the U.S. and sustains thousands of jobs. Despite its success record, funding for Title XI has declined 85 percent since 1993. Each dollar appropriated for Title XI generates approximately $20 in commercial financing for shipbuilding and shipyard projects. At the current funding level, Title XI will provide only $120 million in loan guarantees--but current and potential orders valued at $3 billion are awaiting Title XI approval from the Maritime Administration. "It is important to remember that Title XI is not a direct loan program," the board said in a policy statement. "Whatever funds are appropriated to it are not immediately expended, but remain in the U.S. Treasury, or are invested by the federal government, as a form of insurance in case of default." The statement concluded: "The Title XI shipbuilding loan guarantee program has proven its worth many times over. American military planners strongly agree that it is in our nation's best national security interest to preserve a viable shipbuilding base. Without the Title XI program being funded at adequate levels, there is no way that this can be done." The board urged the administration and Congress to agree on a minimum of $50 million for Title XI in fiscal 2001 and on a longer-term plan to adequately fund the credit guarantees. The board also took up the continuing political war over the 1920 Jones Act and the 1886 Passenger Vessel Services Act, which hold domestic cargo and cruise markets, respectively, for vessels owned, built, registered, and manned in the U.S. Both laws have been targeted for repeal or amendment in recent years. While such efforts have thus far failed to advance, the laws' critics persist. One bill pending in the Senate would strip the Jones Act's U.S. construction requirement, and legislation in the House and in the Senate would open domestic cruise markets to foreign-flag ships. "It is essential to understand that U.S. maritime power depends more on the Jones Act fleet than on our foreign trading fleet, as our international fleet represents less than 10 percent of our national maritime infrastructure." a board statement said. The Jones Act fleet includes more than 44,000 vessels of varied size and design, represents more than 75 percent of U.S.-flag shipping capacity, accounts for more than $26 billion in private capital investment, and sustains nearly 125,000 jobs at sea and ashore. "In 1995, the volume of cargo moved by the domestic fleet reached one billion tons, representing 21 percent of all freight moved in the U.S. economy, yet accounting for less than two percent of the nation's freight bill," said the statement. Moreover, 87 percent of U.S. licensed and unlicensed seafaring jobs are in the Jones Act fleet, which provides "the essential base for crewing government-owned ships during a national emergency," the statement continued. According to Department of Defense estimates 3,000 civilian officers and crew members would be needed on less than one week's notice to "crew fully" the government's organic surge fleet of reserve ships in the event of a military crisis or other national emergency." The statement noted confirmation of the Jones Act's defense merit by the U.S. Transportation Command, or TRANSCOM. Discussing the Passenger Vessel Services Act, the MTD statement noted that U.S.-based foreign-flag cruise lines "have long been in a position to capture the American cruise dollar," but there are current, credible plans to develop a U.S.-flag cruise fleet for domestic markets--plans that would be short-circuited by repeal or amendment of the PVSA. "While opponents of the U.S. maritime industry realize that they do not have the votes to gain an outright repeal of our nation's cabotage laws, they still are seeking to chip away at their integrity, especially the 'Build American' requirements," the statement advised. However, the laws have been vindicated by "highly visible" shipbuilding orders in major U.S. yards by Totem Ocean Trailer Express, American Classic Voyages, and Great Lakes Dredge and Drydock, among other U.S. cargo and cruise concerns. The MTD will work with vessel operators, shipyards, the administration, and Congress to "ensure that the basic tenets of U.S. cabotage policy ... remain whole for many years to come," the statement concluded. | |||
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