[Federal Register Volume 60, Number 202 (Thursday, October 19, 1995)]
[Notices]
[Pages 54099-54100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25920]



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DEPARTMENT OF TRANSPORTATION
Maritime Administration
[Docket S-925]


Brookville Shipping, Inc.; Notice of Application for Payment of 
Unused Operating-Differential Subsidy

    Brookville Shipping, Inc. (Brookville) is the contractor under an 
Operating-Differential Subsidy Agreement (ODSA), Contract MA/MSB-272, 
scheduled to expire April 13, 1996, under which five U.S.-flag dry bulk 
carriers operated by Liberty Maritime Corporation (Liberty) are 
eligible for subsidy. Brookville was also the contractor under Contract 
MA/MSB-166(a), which expired October 9, 1994. Under Contracts MA/MSB-
272 and MA/MSB-166(a), 3,638.5 subsidy days were available to, but not 
used by, Brookville from 1989 to 1994. Contract MA/MSB-272 provides for 
one ship year of subsidy annually and expired Contract MA/MSB-166(a) 
also provided for one ship year of subsidy, for an aggregate of two 
ship years or 720 days of subsidy annually.
    Brookville requests that the Maritime Subsidy Board (Board) enable 
Brookville to obtain the full unused benefits of Contracts MA/MSB-272 
and MA/MSB-166(a) by extending those contracts for an additional five 
years beyond their expiration dates. In the alternative, Brookville 
requests that the Board enter into a new five-year contract with 
Brookville for payment of operating-differential subsidy (ODS) for the 
number of unused subsidy days.
    In connection with its request, Brookville further asks the Board 
(i) to permit Brookville to share the 3,638.5 subsidy days not used 
under Contracts MA/MSB-272 and MA/MSB-166(a), respectively, among the 
five dry bulk carriers operated by Liberty without limitation as to the 
number of days that may be used in any one year; and (ii) to permit 
Brookville to substitute on a one-for-one basis any or all of four 
newly constructed Panamax bulk cargo carriers that Brookville or an 
affiliate would build and operate under the U.S. flag.
    According to Brookville, its request would not require the Board to 
authorize new subsidy days, would further the purposes and policies of 
the Merchant Marine Act, 1936, as amended (Act), and is within the 
legal authority of the Board to grant.
    Brookville advises that five U.S.-flag dry bulk carriers--the 
LIBERTY STAR, LIBERTY SUN, LIBERTY WAVE, LIBERTY SPIRIT, and LIBERTY 
SEA--are eligible to receive subsidy under Contract MA/MSB-272. The 
Liberty vessels were built in Korea pursuant to section 615 of the Act, 
were delivered between 1984 and 1986, and are generally regarded as the 
most modern and efficient in the U.S.-flag dry bulk fleet. Their cargo 
capacity averages about 64,000 metric tons, with typical cargoes in the 
50,000-55,000 metric ton range.
    Brookville states that the primary market for the Liberty vessels 
since their delivery has been transporting U.S. government food aid 
cargoes reserved to the U.S.-flag under the Cargo Preference Act of 
1954, along with cargoes reserved to U.S.-flag vessels under a U.S.-
Israel ``Side Letter'' agreement. Brookville advises that although the 
Liberty vessels by law were entitled to subsidy for 

[[Page 54100]]
preference voyages, Brookville, as well as other dry bulk ODS 
contractors, voluntarily agreed--at the Maritime Administration's 
request--to forego subsidy on these preference voyages.
    Brookville states that consequently, Contract MA/MSB-272 has been 
underused, with only 432.9 subsidy days used in the aggregate in 1989, 
1990, and 1991 and no subsidy paid at all during 1992, 1993, and 1994. 
Brookville also points out that Contract MA/MSB-166(a) was similarly 
underused, with only 156.6 days of subsidy used in the aggregate during 
1989 and 1990 and no subsidy paid during 1991, 1992, 1993, and 1994. 
Overall, 589.5 subsidy days (includes reduced crew days) were used and 
3,638 subsidy days were unused from 1989 to 1994. Brookville states 
that during this period, the government has had the benefit of 
substantially reduced subsidy payments to Brookville.
    According to Brookville, in the last two years the Liberty vessels' 
traditional market--food aid transportation--has shrunk because of 
budget cuts. In addition, funding for the P.L. 480--Food for Peace and 
section 416 programs has declined from $2.3 billion in fiscal year 1993 
to $1.3 billion in fiscal year 1995, with tonnage declining from 7.9 
million metric tons to 3.7 million metric tons. Brookville indicates 
that under the President's fiscal year 1996 budget, food aid spending 
will decline further to about $1.0 billion, which would generate only 
about 2.7 million metric tons in exports.
    Brookville emphasizes that past spending decreases and proposed 
decreases for fiscal year 1996 disproportionately affect bulk operators 
because the cuts have been largely applied to bulk-oriented Titles I 
and III of Public Law 480 and section 416, as opposed to liner-oriented 
Title II. Tonnage under Titles I and III and section 416 has declined 
from 5.8 million metric tons in fiscal year 1993 to a projected 850,000 
metric tons in fiscal year 1996. Brookville states that since a Liberty 
dry bulk carrier, when fully used, can transport 300,000 metric tons of 
this 850,000 metric ton cargo level per year (based on six voyages with 
a 50,000 ton cargo), it is evident that the food aid program (even with 
Israeli Side Letter cargoes) can no longer support the entire existing 
U.S.-flag bulk fleet.
    Brookville advises that as a result, Liberty's vessels increasingly 
have operated in the foreign commercial trade. In 1995, Liberty vessels 
so far have used 279 of 365 available subsidy days under Contract MA/
MSB-272. (This includes 63 days used by the LIBERTY BELLE, which was 
scrapped in June 1995.) According to Brookville, although the Liberty 
vessels are well regarded in the foreign commercial market and have 
operated successfully, their operating cost structure (resulting from 
U.S. citizen crews and compliance with U.S. tax, environmental, safety 
and other requirements) renders them uncompetitive without subsidy.
    Brookville states that traditionally, there are very few food aid 
cargoes shipped between January and March and because of the severe 
cutbacks in the food aid budget, very little preference activity is 
expected during the first six months of 1996. Brookville also states 
that unless the Board extends Brookville's ODS contract to give it the 
operational flexibility Brookville requests, Liberty will have no 
choice but to lay up the vessels pending MARAD's approval of a request 
to re-flag some or all of the Liberty vessels so that they may compete 
in the foreign market with vessels not subject to costly U.S. laws and 
regulations. Brookville states that if the Liberty vessels are re-
flagged, the American merchant marine will have lost as many as five of 
its best vessels and their skilled crews--which are always available in 
an national emergency.
    Additionally, Brookville states that if the Board fails to grant 
Brookville's request, the government's cargo preference costs will also 
be higher. The Liberty vessels have historically offered the lowest 
U.S.-flag rates for relatively large cargo lot sizes. According to 
Brookville, if the Liberty vessels are re-flagged, government cargo 
preference costs will increase, offsetting at least in part the 
subsidies Brookville is requesting by this letter.
    Brookville states that the Board has ample legal authority to grant 
Brookville's request, citing Seatrain Shipbuilding Corp. v. Shell Oil 
Co, 444 U.S. 572 (1980). According to Brookville, the Board can enter 
into a new contract that permits full use of the unused days over a 
five-year period; alternatively, the Board can modify contracts after 
they are concluded.
    Brookville believes that by extending the ODS contracts, the Board 
will also address an injustice in the ODS program. The standard ODS 
contract is set for 20 years, to coincide with the life of a tanker. 
However, as the Act recognizes, dry bulk carriers have a useful life of 
25 years. According to Brookville, in essence, the program favors 
tankers by awarding contracts for their entire useful life, while 
disadvantaging dry bulk carriers by awarding contracts for only 80 
percent of theirs.
    Brookville also notes that by granting this application, the 
Maritime Administration will not be affecting the Administration's 
proposed liner reform legislation, under which dry bulk carriers would 
be ineligible for assistance.
    This application may be inspected in the Office of the Secretary, 
Maritime Administration. Any person, firm, or corporation having any 
interest in such request and desiring to submit comments concerning the 
application must file written comments in triplicate with the 
Secretary, Maritime Administration, Room 7210, Nassif Building, 400 
Seventh Street SW., Washington, D.C. 20590. Comments must be received 
no later than 5 p.m. on November 1, 1995. This notice is published as a 
matter of discretion and publication should in no way be considered a 
favorable or unfavorable decision on the application, as filed or as 
may be amended. The Maritime Subsidy Board will consider any comments 
submitted and take such action with respect thereto as may be deemed 
appropriate.

(Catalog of Federal Domestic Assistance Program No. 20.805 
(Operating-Differential Subsidies)).

    By Order of the Maritime Subsidy Board.

    Dated: October 13, 1995.
Joel C. Richard,
Secretary.
[FR Doc. 95-25920 Filed 10-18-95; 8:45 am]
BILLING CODE 4910-81-P