The U.S. paid $5 million each to keep 60 commercial ships under its flag in 2018; Defence can call on every vessel during war or a national emergency

In March 2018, the US government backed a $300 million programme to support 60 privately owned commercial vessels, allocating the equivalent of $5 million annually to each ship. The arrangement was more than a subsidy for shipping companies. It was a defence strategy designed to ensure that the military could access commercial ships, trained American sailors and international transport networks during a war or national emergency.

According to the US Government Accountability Office (GAO), the Maritime Security Program was authorised to provide annual stipends per vessel for the 2018 to 2020 financial years, subject to available appropriations. Congress provided the full $300 million in funding for 2018, restoring the programme to its authorised capacity of 60 ships. The arrangement highlighted a less visible aspect of military preparedness: moving equipment, supplies and personnel across oceans without relying entirely on government-owned vessels.

A financial incentive to keep ships under the American flag


The programme, administered by the Maritime Administration (MARAD), dates back to 1996, when the Maritime Security Act established a system to maintain a commercially active fleet that could serve national defence requirements. Operating under the US flag can be more expensive than registering a ship elsewhere. According to the GAO's 2018 report on maritime security, the additional annual operating cost of a US-flagged vessel compared with a foreign-flagged counterpart rose from about $4.8 million in 2009 and 2010 to between $6.2 million and $6.5 million by 2018. Higher operating expenses and declining government cargo volumes pressured shipping companies.

The annual payment partly compensated for this drawback, even if it did not cover the full cost difference. One study on the topic, published in Maritime Policy & Management, focused on the role of financial incentives in ship investments, while another, which appeared in Transportation Research Part E, explored the impact of institutions on flag registration of ships. The issue was also economic. Because of weak economic incentives, companies might prefer to register their ships under other flags.

How commercial shipping became a military resource

The arrangement gave the Department of Defence access to more than the vessels themselves. Participating operators agreed to make their ships and associated commercial transportation resources available when requested by the Secretary of Defence during war or a national emergency. As explained in the GAO's 2020 report on the national maritime strategy, operators receiving the stipend had to keep the participating vessel, or an equivalent ship, under the US flag for the duration of their operating agreements. They also had to join the Voluntary Intermodal Sealift Agreement, which allowed the military to access commercial shipping capacity and logistics assets.

These networks include port facilities, cargo-handling services and logistics management facilities. This infrastructure is needed to move military equipment from U.S. ports to distant destinations. The ships remain commercial property, carry cargo in peacetime and are available for military use when required. Companies that participate in the agreement are preferred by the Department of Defence for certain cargo contracts in peacetime. Department of Transportation estimates that the initiative helped support about 2,400 trained American merchant mariners. The program also supports thousands of shore-based maritime jobs.

Why the payments could not solve every problem

However, financial support did not solve the fleet shortage. According to the GAO, the number of U.S.-flagged vessels in international trade fell by about 60% from 1990 to 2017, from 199 ships to 82. Two critical issues were keeping U.S.-flagged vessels commercially viable and ensuring enough American seafarers to crew government-owned reserve vessels in an emergency.

Cargo preference laws direct government cargo to be shipped on U.S.-flag carriers. The law generally requires military cargo to be shipped on U.S.-flagged vessels unless the rates are excessive and unreasonable. However, the GAO also noted that cargo preference laws could make it more costly to transport cargo in some non-defence programs, such as food aid. The payments were a calculated risk: the government used public funds to preserve commercial capabilities that would be difficult and costly to rebuild in a crisis.

The Maritime Security Program did not convert private shipping companies into military transport ships. Instead, the programme provided a way for commercial shipping vessels to be integrated into America’s defence logistics chain. In 2018, the $5 million annual payments helped keep all 60 designated vessels in the programme. Subsequent funding increases raised the annual stipend to $5.3 million per vessel through fiscal year 2025 and to $5.8 million for fiscal years 2026 through 2028. The challenge remained ensuring that ships and other resources would be available when needed.