HILTON HEAD ISLAND, S.C. -- There is strong opposition to a proposal for deposits into the Capital Construction Fund to be used to finance vessels to be operated in coastwise short-sea services.
"The idea has a lot of merit. It makes a lot of sense if [the CCF] can be used for coastwise trade, but the AWO (American Waterways Operators) is opposed to opening up the CCF," William Schubert, head of the U.S. Maritime Administration, told The Journal of Commerce Short Sea Shipping Conference on Tuesday.
The CCF, created by the Merchant Marine Act of 1970, defers taxes for U.S. shipping companies by reducing net income equal to the amount that would later be used to build ships for Jones Act trades. The AWO, Schubert said, recalling a massive overbuilding of inland waterway tonnage in the 1980s that led to a collapse of freight rates, is concerned about a repeat of that scenario if the CCF were opened to coastwise vessel construction. Others at the conference said, however, that if the law were changed to allow CCF money to be used for coastwise vessels, it would specifically exclude the use of those funds for the construction of ships to be deployed on inland waterways -- a separate and distinct market -- and that the AWO should not be concerned.
The coastwise proposal to use CCF funds, which currently amount to approximately $2 billion, was one recommendation contained in a recent report to Secretary of Transportation Norman Mineta by the Marine Transportation System National Advisory Council.
But the debate over the use of CCF monies is in some ways overblown because there would be very little money available for short-sea investments, said Mark P. Schlefer, a Washington attorney. He said that of the $2 billion in the fund, $1.5 billion is held by oil companies such as Exxonmobil and BPAmoco, and would most likely be used for the construction of oil tankers for use in domestic coastwise trades. Another $250 million is held by shipping company OSG, which is unlikely to enter the short-sea business.
"It's not a great deal of money, and if you take on the AWO over this, it seems like a waste of legislative clout," Schlefer said.