Page 11: of Maritime Reporter Magazine (February 2001)

Legal Beat

Dear President Bush

By: Duncan C. Smith III and

James S.W. Drewry

One of the first important official acts of new U.S. President George W. Bush will be to submit to Congress a budget request for the entire U.S. Government for fiscal year 2002. For Americans with a stake in shipbuilding, a key bud- getary concern is the amount of funding that will be requested for the Federal

Ship Financing Program administered by the Maritime Administration ("MarAd"). The Program is commonly known as the "Title XI Program" because its statutory authority is spelled out under Title XI of the Merchant

Marine Act, 1936.

Well over $5 billion in these loan guarantees have been provided since 1993 by MarAd for a wide range of con- struction projects, ranging from large cruise ships and double-hulled tankers to fast ferries and a variety of cargo ves- sels. Further, the six U.S. shipyards that take the lead in ship construction for the

U.S. Department of Defense point to the

Title XI Program as important to the maintenance of the American national security industrial base. In addition,

MarAd's conscientious effort to ensure that only the most meritorious projects receive funding has led to minimal defaults and a net gain to the U.S. Trea- sury of over $150 million from fees and interest since FY 1993.

Until the last few years, the Program's funding levels have been close to the $50 million per year average contem- plated in 1993 when the National Ship- building Initiative was enacted. Howev- er, budgetary pressures related in part to the cost of the 2000 census led to a pre- cipitous drop in appropriations for Title

XI for FY 1999 and FY 2000. Together with further underfunding in the FY 2001 appropriations Act, these meager appropriations have resulted in a $108 million shortfall. The $40 million avail- able at the beginning of FY 2001 is his- torically the lowest amount of available funding since 1993, only enough to cover about $800 million in new project loans, with almost $5 billion worth of applications for new loans pending.

To make up for three years of drastic underfunding and to ensure that funding will be sufficient to finance the projects likely to be approved by October 1 of this year, some shipbuilding advocates are pressing for $60 million in supple- mental appropriations. They argue that this should be followed by at least $75 million for FY 2002 to further close the shortfall and to maintain the Title XI

Program at the $50 million per year annual appropriation level. ... Reasons for More Title XI Funding

Background

Prior to the implementation of the

Federal Credit Reform Act ("FCRA") in the early 1990s, appropriations were not required for the issuance of a federal loan guarantee. However, thanks to the passage of the FCRA, the risk of default for every loan to be guaranteed by the

U.S. Government must now be covered by appropriated dollars. Therefore, funds have been appropriated annually to provide risk reserves for Title XI loan guarantees from fiscal year 1993 to the present. In recognition of the long-term nature of shipbuilding projects, appro- priations Acts do not require Title XI appropriations to be spent in a particular fiscal year but permit them to be carried forward from year to year until spent (so- called "no-year money").

Before a Title XI loan guarantee may • Construction complies with United States

Navy and Coast Guard Specifications. • Core consists of closed-cell, resilient, energy absorbing foam, covcred with a protective, seamless polyurethane elastomer skin. Filament nylon tire cord reinforcement is continously wound in the skin for added strength and durability. Will not mark or scratch vessel hulls. • Constructed with integral swivel end fittings, internally connected with a heavy duty chain. • Easy to install with very little maintenance. • Light weight and extremely buoyant with a lower reaction force than either hard rubber or pneumatic fenders. (Almost 40% higher energy absorption than pneumatic fenders.)

URETHANE PRODUCTS CORPORATION (800) 913-0062 9076 Rosecrans Avenue

Bellflower, CA 90706

Phone (562) 630-4982 • Fax (562) 630-6974

Circle 283 on Reader Service Card

Stocking Distributors:

Waterman Supply Company 910 Mahar, Wilmington, CA 90744, U.S.A. 1-800-322-3131

Tel (310) 522-9698 • Fax (310) 522-1043

Anchor Marine &

Industrial Supply, Inc. 6545 Lindbergh, Houston, TX 77087, U.S.A. 1-800-233-8014

Tel (713) 644-1183 • Fax (713) 644-1185

Foam Filled Marine

Fenders

Marine Guard

The Ultimate

Protector for Ships,

Harbor Craft,

Wharves & Piers.

February, 2001 www.maritimetoday.com 11