Ship Operators Covet Subsidies as RRF Cuts Confirmed

Published May 4, 2006 12:01 AM by The Maritime Executive

U.S. flag ship owners and operators have been put on notice by the U.S. government that reductions to the Ready Reserve Fleet (RRF) will be significantly larger than previously thought.

Eight companies now under contract to operate ships are facing the possibility of cancellation of as much as half of the existing contracts by the end of fiscal year 2007.

A total of 10 vessels are scheduled for removal from the RRF during this fiscal year. The need to replace 300,000 square feet of capacity that will depart from the RRF roughly coincides with a request for information issued to U.S.-flag ship owners earlier this month by MARAD). U.S. military planners constantly monitor logistics requirements and the assets needed to support those missions. Programs such at the RRF, Military Sealift command (MSC), and the ships of the Maritime Security Program (MSP) make up the maritime component of those contingencies.

Any reduction in RRF numbers or capabilities will ultimately require probing the commercial market for replacement tonnage. Ship owners hope that this could translate into still more ship subsidies which would allow operators to keep ships under the U.S. Flag. The MSP program, consisting of 60 ships, each receiving a $2.6 million annual operating subsidy, allows the United States to keep private vessels with military value on retainer for emergency call-up.

TransCom has not yet disclosed which vessel types or operators might be slated for elimination, but MARAD has issued recent requests for information from U.S. commercial operators for RO-RO tonnage.

The May 3 issue of the Federal Register (Vol. 71, No. 85) also provides notice of open season for enrollment in the Voluntary Intermodal Sealift Agreement (VISA). U.S. Flag vessels not currently enrolled in the program are invited to participate, with applications due no later than May 31, 2006. VISA provides for “the phased availability of participants’ shipping services/systems to meet contingency requirements” through contractual arrangements between the government and participants. In exchange, VISA participants receive “priority consideration” for the award of DOD peacetime cargo.