United States Lines, Inc.'s, Operating Differential Subsidy Agreement

CED-81-154: Published: Sep 4, 1981. Publicly Released: Sep 4, 1981.

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Pursuant to a congressional request, GAO reported on the United States Lines, Inc.'s acquisition of Farrell Lines, Inc.'s rights to Federal operating differential subsidies on a trade route running between the U.S. North Atlantic ports and certain ports in the United Kingdom and continental Europe. GAO was asked: (1) how much United States Lines would pay Farrell for the subsidy rights to the trade route; (2) how the vessel replacement provisions in the United States Lines' subsidy contract for the trade route differ from the standard subsidy vessel replacement provisions; and (3) whether the United States Lines' pending application for subsidy on its other trade routes contain similar vessel replacement provisions.

GAO reported that: (1) United States Lines would pay Farrell about $15 million for the subsidy rights to the trade route and the bareboat charter rights to two container vessels; (2) the vessel replacement provisions in the United States Lines' subsidy contract were unique because of the age of the vessels, the reduced construction differential subsidy funding, and contemplated legislative changes to the construction subsidy program; and (3) United States Lines and the Maritime Administration had not reached agreement on the replacement provisions to be included in the United States Lines' pending subsidy application.

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