Secretary Dole Promulgates CDS Repayment Rule

Subsequent to Mr. Rice's writing of this article, just as we went to press with this issue, Secretary of Transportation Elizabeth Dole promulgated a rule permitting the owners of U.S.- flag tankers built with the assistance of construction differential subsidy (CDS) for the foreign trades to repay to the government the subsidy on the vessels, thus allowing these tankers to operate in the domestic trades.

The Department of Transportation, in a press release, stated that the CDS repayment rule will "introduce newer, more efficient tankers" into the Alaskan North Slope crude oil trade, increase competition, and "minimize government obstacles to marketplace decisions." DoT analysis predicts that seven VLCCs will take advantage of the one-year window, and the CDS repayment on these ships could provide the treasury with $277 million including interest.

The refunding rule is scheduled to take effect June 6 this year. Accompanying documents are devoid of any in-depth analysis of the rule's effect on national security or the shipbuilding industry. This action by Secretary Dole was not unexpected; protracted litigation should follow.

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