The Maritime Administration has reversed a 1988 policy decision allowing ships built overseas but re-documented under U.S. law to skip a waiting period before carrying some U.S. preference cargoes.
As a result, reflagged vessels will have to wait the traditional three years before they can haul the incremental 25 percent portion of agricultural program cargo that is reserved for U.S. carriers.Marad said interpreting the cargo preference provisions of the 1985 omnibus farm bill - which led to last summer's ruling by chief counsel Karl Bakke - "leaves room for honest difference of opinion concerning the applicability" of the three-year waiting period requirement.
The agency decided to withdraw Mr. Bakke's advisory letter, return to the ''historical status quo" and thus provide an opportunity for Congress, if it desires, "to address the ambiguity created by the absence of the three- year wait requirement" in one provision of the 1985 law.
Controversy over the policy split the maritime industry along regional lines. Great Lakes interests favored it as a means of increasing shipping activity there, while virtually the rest of the industry opposed it.
Mr. Bakke had ruled that the waiting period for reflagged vessel eligibility to carry preference cargo did not apply to the additional 25 percent of cargoes reserved to U.S.-flag vessels under the compromise hammered out in 1985.
The compromise in the farm bill increased the U.S.-flag share to 75 percent from 50 percent for various "give-away" agriculture programs, such as Food for Peace, while eliminating any preference for U.S. carriers on commercial food programs of the Department of Agriculture.
It ended a protracted battle between agriculture and maritime interests over the applicability of cargo preference laws to farm export programs.
Marad decided to review Mr. Bakke's ruling early this year and received almost 30 responses from the industry and Congress on the issue.
The agency said his ruling was a "reasonable legal interpretation." But in the face of "more than one reasonable interpretation" of the law, Marad said it had to look at the "policy considerations involved."
One of those was the "potentially adverse impact" of reflagging on existing U.S.-flag vessels, which could result in "no net increase in the cargo-carrying capacity of the U.S.-flag fleet."
Another consideration for Marad came from the comments of members of Congress involved in the farm bill compromise, who recalled that the law was supposed to "supplement, rather than supplant" the three-year rule, according to the agency.
For instance, Sen. Thad Cochran, R-Miss., who drafted the Senate version of the compromise, told Marad that "both the Senate and the conferees intended only "privately owned U.S.-flag commercial vessels" . . . to be eligible to carry the 25 percent cargoes reserved to U.S.-flag vessels by the Food Security Act."
Rep. Walter B. Jones, D-N.C., chairman of the Merchant Marine and Fisheries Committee, said Marad's first interpretation "is totally contrary" to Congress' intention under preference law to "discourage ad-hoc entry of foreign-built vessels into the foreign preference trades until they have demonstrated a commitment to U.S.-flag operations."
Rep. Jack Fields, R-Texas, commented, "As someone who was actively involved in every aspect of the now famous Cargo Preference Compromise of 1985, I can assure you without hesitation that the authors of this proposal never intended that the additional 25 percent requirement for U.S.-flag vessels would in any way affect or change the three-year waiting period requirement for reflagged vessels."