Letters

MCTF Opposes Chartering of Government Ships for Commerical Operation

February 12, 2007

Rear Admiral Robert D. Reilly, Jr., USN
Commander
Military Sealift Command
914 Charles Morris Ct. SE
Washington, D.C. 20528

Dear Admiral Reilly:

The Maritime Cabotage Task Force (MCTF) is comprised of more than 400 American companies, associations, shipyards, labor organizations, defense groups, and others that are interested in maintaining America's strong domestic maritime industry. Since its inception in 1995, the MCTF has strongly and publicly supported the Jones Act and U.S. maritime laws. The MCTF has reviewed the Military Sealift Command's (MSC) January 16, 2007 Request for Information/Market Survey regarding the proposed bareboat charters of Watson and Shughart Class LMSRs for commercial operation, and wishes to register its strong opposition to that proposal.

The Jones Act creates an unsubsidized level playing field for all participants in United States' domestic waterborne commerce. The result of the Jones Act is a dynamic, highly competitive industry that has grown dramatically over the last 35 years. The Jones Act fleet today has twice as many vessels as its 1965 counterpart - vessels that are larger, faster, more productive, and more militarily useful. As a result of the continuing investment in new privately-owned vessels by Jones Act shipowners, including modern roll-on/roll-off vessels, containerships, and product tankers, productivity in the deep-sea domestic fleet, comprised mainly of those operating in the coastwise and non-contiguous trades, has increased tenfold since the 1960s.

The Task Force strenuously objects to MSC's proposed chartering of Government ships for commercial operation, and is particularly concerned about their availability for operation in the domestic trades. The result would be a massive and disruptive infusion of surplus Government vessel capacity that would compete directly with the privately-owned U.S. Merchant Marine. Permitting Government-owned vessels to enter into competition with privately-owned commercial vessels at potentially below market bareboat charter rates would be an unprecedented Government intrusion into private commercial markets that are already well-serviced by the private sector.

It has been the longstanding policy of the United States to prohibt the use in commercial service of U.S. Government-built or owned vessels in competition with privately-owned United States flag shipping. See, e.g., the Shipping Act, 1916. Nowhere is this prohibition applied more strictly than in the domestic segment of the industry, where subsidized vessels of any nature, including United States-flag vessels employed in international trades, are prohibited from operation. See, e.g., Section 805 of the Merchant Marine Act, 1936, as amended, 46 App. U.S.C. 1223(a).

The proposed commercial charters of the LMSRs is contrary to longstanding U.S. Government policies and could severely damage United States-flag commercial carriers' ability to provide value to the Defense Transportation System (DTS). The threat of such employment poses a long-term disincentive for private investment in the Jones Act fleet, investment that is vital to the continued ability of that fleet to serve its commercial and military customers. The Task Force must strongly oppose the placement of taxpayer-financed vessels into commercial markets in direct competition with the industry that the Commander of the U.S. Transportation Command has praised for its contributions to the economy and national defense. The Task Force understands the budgetary pressures on the Department of Defense. There is no question, however, that MSC's proposed bareboat charters will result in the disruption of commercial markets to the long-term detriment of the maritime industry upon which the U.S. miliatry depends for both sealift capacity, as well as qualified U.S. citizen seafarers

We urge you in the stongest terms to abandon this counter-productive proposal.

Sincerely,

Philip Grill
Chairman

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