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Posted: January 6, 2020

Appropriations measures fund key maritime programs for balance of FY 2020, reauthorize Export-Import Bank

Two pieces of appropriations legislation signed into law in late December averted a shutdown of the federal government, allotted funding for key maritime programs for the remainder of fiscal year 2020, and reauthorized the U.S. Export-Import Bank for a period of seven years, the charter for which was due to expire in December.

The efficacy of the U.S. Export-Import Bank has been limited in recent years by the failure of the U.S. Senate to confirm the President's nominees to the agency's board of directors, thereby keeping the bank's board below the minimum number required for a quorum. In 2019, enough of the President's nominees to the bank's board were confirmed to establish a full administrative quorum, which is required to approve transactions valued at more than $10 million.

At no cost to U.S. taxpayers, the Export-Import Bank provides loan guarantees, loan insurance and financing for U.S. manufacturers. These activities generate heavy-lift and other project cargoes for U.S.-flagged merchant ships, as goods produced and shipped as a result of these transactions are subject to U.S. cargo preference requirements. The bank's activities are self-funding through fees the bank collects for the financial services it provides.

The legislation signed into law in December extends the charter of the U.S. Export-Import Bank until December 31, 2026. The measure also includes a provision to prevent a lapse in a quorum on the bank's board, which will allow the agency to continue to function as intended. Specifically, if there is an insufficient number of directors to constitute a quorum for 120 days, a temporary board consisting of the U.S. trade representative, U.S. treasury secretary, U.S. commerce secretary and the members of the board of directors will convene to conduct business.

The appropriations legislation provides full funding for the Maritime Security Program fleet - $300 million for the fiscal year. The Maritime Security Program (MSP) supports a fleet of 60 militarily-useful U.S.-flagged ships, which are crewed by U.S. merchant mariners and operate in international commercial trades. The ships and their corresponding privately-owned intermodal cargo systems and networks are available to the Department of Defense for military sealift operations and in national security emergencies. The cost of the MSP amounts to a small fraction of the projected $65 billion it would cost the government to replicate this sealift capacity and the intermodal infrastructure provided to the DOD by private-sector MSP participants.

The appropriations act also provides funding for U.S. food-aid programs through the current fiscal year. Food for Peace Title II - the primary source of food-aid cargoes for U.S.-flagged vessels - is now funded at $1.725 billion, an increase over 2019. In the previous fiscal year, the program had been funded at $1.5 billion.

Under U.S. cargo preference requirements, at least 50 percent of U.S. government impelled food-aid shipments must be carried by U.S.-flagged vessels. These cargoes help keep U.S.-flagged commercial vessels in service and U.S. merchant mariners, who are needed to man surge and reserve military sealift vessels in times of war and crisis, employed and current on their skills and certifications.

The appropriations act provides the National Security Multi-Mission Vessel Program with $300 million, covering construction, planning, administration and design of maritime academy training ships, which could also be used in defense sealift and humanitarian crisis missions domestically and abroad.

The act also provides $3 million for administrative expenses related to the Maritime Administration's Title XI shipbuilding loan guarantee program, which eases access to commercial credit for the construction of merchant vessels in U.S. shipyards.

Ready Reserve Force

One of the two appropriations bills signed into law in December provides approximately $352 million for the maintenance, administration and activities of the National Defense Reserve Fleet (NDRF) for fiscal year 2020, which includes the Maritime Administration's Ready Reserve Force. During fiscal year 2019, the NDRF appropriation was $310.8 million, and in the year prior to that, it was $289.3 million.