EXECUTIVE TAKES US TO TASK FOR NEGLECTING MERCHANT FLEET

EXECUTIVE TAKES US TO TASK FOR NEGLECTING MERCHANT FLEET

A top shipping executive and former chairman of the Federal Maritime

Commission criticized the federal government for building sealift vessels but remaining unwilling to support private-sector vessels.

Christopher Koch said it is shameful that the federal government will spend $3.5 billion to build new sealift vessels but is unwilling to spend $200 million a year to support private-sector vessels that could satisfy most of the na- tion's defense transportation needs.Mr. Koch, who joined Sea-Land Service Inc. this summer as vice president of law, said there is a nagging misconception in Washington that a failing U.S. shipping industry needs government subsidies to survive.

If Congress and the administration continue to buy into this misconception, it will mean the end of the U.S. merchant marine, he said.

"It's not the industry that has to be subsidized, but the ship that has higher costs imposed upon it by U.S. law," Mr. Koch said.

The Defense Department since July has committed itself to spend $3.5 billion to build and operate roll-on, roll-off vessels for its fast sealift operations. These vessels would be used to move equipment and supplies in the early stages of a military conflict.

Gil Roeder, a spokesman for American President Lines Ltd. , said in a telephone interview from Oakland that APL shares Sea-Land's concerns about the government's emphasis upon operating its own vessels for defense transportation.

"The military seems to be focusing almost exclusively on its own ships rather than improving upon and expanding a very capable fleet in the private sector," Mr. Roeder said.

Mr. Koch last weekend told Wesccon, the annual meeting of West Coast brokers and freight forwarders, that if the government is willing to spend that much money for national security it should be willing to support U.S.-flag ships in the interests of the commercial security of the nation.

He said a typical container vessel costs $3 million more a year to operate under the U.S. flag than under most foreign flags. Although much of the increased cost is due to higher wages and benefits for American crews, a significant factor is also government-mandated requirements for U.S.-flag ships that foreign-flag ships in the U.S. trades do not face.

These costs - over which the shipping lines have no control - include higher taxes, stricter Coast Guard safety requirements and a 50 percent duty every time a U.S.-flag vessel is repaired in a foreign shipyard.

Given these inequities, Mr. Koch said the government should reimburse U.S.-flag companies to cover the added costs that result from government regulations and lift the more burdensome regulations.

Unfortunately, he added, it appears maritime reform legislation that would accomplish these goals may not pass again this year. As a result, Sea-Land has requested permission to place 13 of its vessels under a foreign flag.

APL on June 29 also requested permission from the Maritime Administration to place 13 of its vessels under foreign flags.

Mr. Koch said Sea-Land is not seeking subsidies because it is losing money. Sea-Land has almost doubled its revenues over the last five years, and plans to continue investing in new equipment and expanding its services.

"The fact is, we can do it as a foreign-flag carrier, but we fervently hope to do it as a U.S.-flag carrier," he said.

If U.S. shipping lines reflag, the nation's importers and exporters will be totally dependent upon foreign-flag operators to carry their goods, Mr. Koch said.

"No other government would allow all of their goods to be carried on foreign-flag ships," he added.

The failure of Congress and the administration to agree on who will pay for a subsidy program killed reform legislation last year, and may do so again this year.

Mr. Koch said the basic problem is that Washington still hasn't decided if it wants a viable merchant marine.

"As a nation, we must decide first, if we want a U.S.-flag industry, and second, if we'll pay for it, but we haven't even gotten to that threshold yet," he said.