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Maritime Subsidy Requirements Hinder U.S.-Flag Operators' Competitive Position

CED-82-2 Published: Nov 30, 1981. Publicly Released: Nov 30, 1981.
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Highlights

GAO evaluated the effectiveness of the operating differential subsidy program through which the Maritime Administration provides a subsidy to U.S. operators to cover the difference between certain U.S. vessel costs and similar costs of foreign competition. The policy was enacted to help U.S. operators compete with their foreign counterparts. The review primarily focused on the liner or general cargo segment of the subsidized U.S.-flag fleet. However, most of the issues discussed also affected the bulk operators.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
Congress should amend the Merchant Marine Act of 1936 to extend and clarify the Secretary of Transportation's authority to allow subsidized operators to build vessels overseas. Congress should require the Secretary, in permitting overseas building, to consider the adequacy of the construction differential subsidy (CDS) ceiling, vessel delivery dates, the availability of CDS funds, and the effect of overseas building on the U.S. shipbuilding base. In revising the 1936 Act, Congress should consider the propriety of using such vessels in domestic trade and the role of the Maritime Administration's other financial assistance programs in aiding the operator to build these vessels.
Closed – Not Implemented
Legislation to deal with this recommendation was introduced in the 98th Congress but failed to pass. Presently, it is not known whether legislative action to deal with this recommendation is to be reintroduced.
Congress should consider revising U.S. policies for promoting the U.S. ship repair industry with the objective of making them more equitable to U.S.-flag operators. When considering these policies, Congress should address the effect of the maintenance and repair subsidy, the maintenance and repair penalties, and the maintenance and repair 50-percent tariff on U.S.-flag operators.
Closed – Not Implemented
Legislation to deal with this recommendation was introduced in the 98th Congress but failed to pass. Presently, it is not known whether legislative action to deal with this recommendation is to be reintroduced.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Transportation The Secretary of Transportation should direct the Administrator of the Maritime Administration to assign a high priority to its review of the section 605(c) hearing process and to assign a deadline for the issuance of the revised procedures.
Closed – Not Implemented
Legislation to deal with this recommendation was introduced in the 98th Congress but failed to pass. Presently, it is not known whether legislative action to deal with this recommendation is to be reintroduced.
Department of Transportation The Secretary of Transportation should direct the Administrator of the Maritime Administration to implement, on a trial basis, operating differential subsidy liner wage payment procedures based on a revised tentative wage subsidy rate. During this trial period, the costs and benefits of these payment procedures should be evaluated to determine whether the procedures should be permanently adopted.
Closed – Not Implemented
Legislation to deal with this recommendation was introduced in the 98th Congress but failed to pass. Presently, it is not known whether legislative action to deal with this recommendation is to be reintroduced.

Full Report

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Topics

Administrative hearingsCompetitionConstruction costsDifferential subsidiesForeign trade policiesLabor costsMaintenance costsMerchant marineRepair costsShipbuilding industry