FUNDING COULD SNAG SHIP-SUBSIDY LEGISLATION

FUNDING COULD SNAG SHIP-SUBSIDY LEGISLATION

Despite Thursday's overwhelming House vote for a bill extending maritime subsidies for 10 years, the legislation seems stalled indefinitely while the search for funding continues.

"This secretary of transportation (Federico Pena) means well, I think, but all the administration has done is say a program is a good idea," said Sen. Ernest Hollings, D-S.C., chairman of the Senate Commerce, Science and Transportation Committee - the next destination for the bill. "The first thing I'll look for is where the money comes from; have they found any yet. The last two secretaries supported plans, too. Without the money, we don't really have anything."House passage, which came on 347-65 vote Thursday night, marks the first steps to change the maritime subsidy system in more than 20 years. The House plan authorizes a 10-year, $1.2 billion billion vessel subsidy plan.

House maritime leaders think they have given themselves some time to come up with a way to pay for the program. Operating and ship construction subsidies under the Maritime Security and Competitiveness Act, as the bill is called, are not slated to begin until fiscal 1995, meaning legislators technically have a year to devise and pass a funding mechanism.

Considering the tight federal budget and the controversial nature of just about any funding plan - such as container taxes or ticket tax increases on cruise passengers - Congress probably will need all of that time.

In the Senate, the approach is different. Both Sens. Hollings and John Breaux, D-La., who chairs the Merchant Marine Subcommittee of the Commerce committee, said any further action is a waste of time until the funding is determined.

"Sen. Breaux will continue to talk with the administration in an attempt to find funding," a spokeswoman said Friday. But she said the Senate will not act on the House bill and no new legislation will be introduced until an agreement has been reached.

The maritime industry also is walking a delicate path. House maritime leaders have claimed their bill has the broad support of all industry segments, but it's unclear whether the plan is enough to keep the two major U.S.-flag carriers, Sea-Land Service Inc. and American President Lines Ltd., under American registry. Neither firm has commented in detail.

Representatives of the two lines have consistently insisted that subsidies

amounting to $2.5 million a vessel are essential. The House plan, depending on the number of vessels enrolled in the security fleet and the amount of money actually appropriated, would provide less than that.

A coalition of eight U.S.-flag liner companies Friday welcomed the House vote, calling it a "foundation for maritime policy reform."

The companies said they would continue working with the Senate and the Clinton administration to develop a comprehensive plan to enable U.S.-flag carriers to "compete in international trade on a more level playing field."

The Clinton administration so far has provided little guidance on the funding question, promising only to "work with Congress" to fund the maritime security fleet envisioned under the House bill. It was silent on paying for the transition subsidies devised for U.S. shipyards that agree to build vessel copies in series.

The lopsided House vote was a personal triumph for Rep. Gerry Studds, D- Mass., chairman of the House Merchant Marine and Fisheries Committee. He aggressively managed his committee's measure on the floor, gaining huge

margins from his colleagues.

The House's overwhelming rejection, by a 3-to-1 margin, of an effort to cap the freight rates charged by U.S.-flag carriers on government preference cargoes reaffirmed that chamber's traditional strong support for cargo preference.

Debate on the cap provision to limit the freight rates that U.S.-flag charge on preference cargoes to two times the relevant world rate was emotional and at times bitter. The amendment was introduced by Reps. Tim Penny, D-Minn., and Fred Grandy, R-Iowa.

"This is a cap, not a cut. This is a debate about cost containment," Rep. Grandy said.

"Our merchant marine has been shrunk and shriveled until it is only a vestige of itself," said Rep. Tom Lantos, D-Calif. "The amendment would guarantee the destruction of the merchant marine."

Rep. Jack Fields, D-Texas, ranking minority member of the maritime committee, said U.S. operators charge higher rates because they pay higher wages than foreign operators, are subject to costlier insurance and liability laws and must adhere to stricter construction and safety standards.

"It would not be wise to eliminate these measures just to save money," he said.

"The anti-cargo preference advocates do not represent U.S. taxpayers or the family farmer," said Rep. Helen Delich Bentley, R-Md. "They represent international cargo conglomerates and grain houses, all owned by foreigners."

''This was an incredibly significant vote," said James L. Henry, president of the Transportation Institute, an umbrella group for bulk, inland and liner companies. "It sends a loud and clear message that the House is not prepared to give up U.S.-flag shipping capabilities."

Mr. Henry said the House vote, the largest majority in support of cargo preference in many years, was due in large part to the maritime industry explaining the benefits of the program to Congress.

"People are looking at cargo preference differently now, as a public policy tool," he said. "They see that the United States is far from alone in having a cargo policy."

THE HOUSE SUBSIDY

These are the major points of the Maritime Security and Competitiveness Act that passed the House last week.

* A 10-year, $1.2 billion 'maritime security fleet' program to replace the existing operating subsidy program.

* Subsidy payments of $2.1 million for each vessel enrolled in the program.

* Subsidy eligibility for foreign-built vessels under certain conditions - for instance, if a vessel was built in an unsubsidized foreign shipyard and the owner subsequently contracts to build another ship in a U.S. yard, or if ship construction subsidies to U.S. yards aren't available.

* Transitional ship construction subsidy payments for U.S. yards that build a continuing series of standard ship designs. Initial funding is set at $200 million.

* Permission for U.S. operators to reflag their ships if they are unable to get subsidies for an eligible vessel.

* Elimination of trade route and service restrictions in the current subsidy program.

* Provisions to make the cargo preference system more efficient.