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The Honorable J. Dennis Hastert
Speaker of the House of Representatives
Washington, D.C. 20515
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March 16, 1999
The Honorable Al Gore
President of the Senate
Washington, D.C. 20510

Dear Mr. President:

There is transmitted herewith a proposed bill,

This proposal authorizes appropriations for certain maritime programs to promote a strong U.S. Merchant Marine at the funding levels contained in the President's budget for Fiscal Year 2000 and 2001. These programs include operations and training activities and the cost of guaranteed loans under the Title XI loan guarantee program, as required by the Federal Credit Reform Act of 1990.

Operations and training funds requested in the proposal include the costs incurred by headquarters and region staffs in the administration and direction of the various Maritime Administration (MARAD) programs. Operations and training funds also include funds for the operation of the United States Merchant Marine Academy at Kings Point, New York, and continuing assistance to the six state maritime academies in the form of direct payments, incentive payments to cadets currently enrolled in the Student Incentive Payment (SIP) Program, and funding for maintenance and repair of MARAD ships on loan to the academies for use as training ships.

The Title XI loan guarantee program allows the Government to guarantee private sector debt financing for the construction or reconstruction in U.S. shipyards of U.S.-flag vessels and export vessels, as well as U.S. shipyard modernization and improvement projects. As a result, a small investment by the Federal Government can leverage a much larger investment by the private sector.

This request also includes proposed amendments to the Title XI loan guarantee program. These amendments will help to make the program more efficient while bolstering the Government’s security interest on individual construction projects.

Additionally, this proposal seeks to eliminate the three-year period that a newly registered bulk or breakbulk vessel must wait in order to carry government-impelled cargo. In return, these vessels will be required to perform non-emergency shipyard repairs and other shipyard work necessary to conform the vessels to U.S.-flag standards in a U.S. shipyard. It is anticipated that this amendment will improve the vessel profile of the U.S.-flag dry bulk fleet, add jobs for U.S. merchant mariners and increase the percentage of U.S. foreign commerce carried in U.S.-flag vessels. The measure would also amend current law to make the cargo preference year for determining compliance coincide with the Federal Government Fiscal Year.

The proposal would also extend until June 30, 2005, the Secretary of Transportation's authority to provide policies for vessel war risk insurance to vessel operators, without premium, at the request of the Secretary of Defense whenever it appears that such insurance cannot be obtained on reasonable terms and conditions from commercial underwriters. This amendment will ensure that the Department of Defense can continue to rely on the immediate availability of war risk insurance during national emergencies such as Operation DESERT SHIELD/DESERT STORM and, most recently, the Iraq confrontation in February of 1998.

Finally, the proposal seeks to change MARAD’s requirement to submit an annual report to Congress detailing its activities to a biennial report, and to clarify the ownership status of the vessel JEREMIAH O’BRIEN.

This draft bill would affect direct spending; therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget and Reconciliation Act pf 1990 (OBRA). OMB’s estimate is that the net effect of this proposal would be to increase receipts during fiscal years 2000-2003 by less than $1 million.

The Office of Management and Budget advises that there is no objection to the presentation of this proposed legislation to Congress and that its enactment would be in accord with the program of the President.

Sincerely,

/s/

Rodney E. Slater

Enclosures

Draft bill

Section-by-Section Analysis