Ship America – New Domestic Preference?

A bill introduced in the waning days of the 114th Congress would impose a new domestic preference on shipping. Unlike U.S. cargo preference laws that have long mandated use of U.S.-flag vessels for ocean-borne cargo purchased or financed by the U.S. government, the proposal measure would apply to private entities that export liquefied natural gas (LNG) or crude oil. They would be required to transport a certain percentage of their exports on U.S.-built and U.S.-flag vessels.

Congressman John Garamendi, a Democrat from California, introduced the legislation, “Energizing American Shipbuilding and Maritime Act” (HR 6454), on December 7th. It  would direct the Secretary of Energy in approving exports of LNG to require the applicant to transport a portion of the exports on vessels built in the United States and documented under U.S. laws. For each year from 2020 through 2024, the requirement would apply to 15% of the authorized LNG exports; that percentage would increase to 30% beginning in 2025. The same conditions would apply to the transport of exports of crude oil, with the only difference being that the President would apply the requirement.

This “Ship America” legislation would also add a labor condition to permits for LNG exports. It would require entities receiving LNG permits to provide opportunities for both U.S.-licensed and unlicensed mariners “to receive experience and training necessary for them to become credentialed in working on an LNG vessel”.

With the adjournment of the current Congress, the bill will not receive further consideration – unless it is reintroduced in the next Congress. The adoption of such a measure could signal a deepening of U.S. domestic preferences, and serve as yet another bone of contention with U.S. trading partners.

Jean Heilman Grier

December 16, 2016

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