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Marine Log

December 21, 2007

Congress kills tonnage tax repeal attempt

Horizon Lines, Inc. (NYSE: HRZ) says that the tax writing committees in Congress chose to strike the Puerto Rico tonnage tax repeal language from the Technical Corrections Act legislation passed by Congress this week. "This progress is in no small part due to the active support of our maritime unions, the US Chamber of Commerce and the government of Puerto Rico," says Horizon.

The original intention of the tonnage tax election as an alternative to the corporate income tax was to encourage investment and job creation, says the company.

"One exciting product of the tonnage tax," it says, "has been Horizon's ability to begin serious exploration into initiating short sea shipping operations on the east coast of the United States."

The recent focus on Congressional action relating to the tonnage tax has overshadowed additional and significant progress toward enabling short sea shipping activity and other progress for the U.S.-flag maritime industry. Contained in the omnibus appropriations legislation passed by Congress is $5 million in new funds for the Title XI shipbuilding program. The program has a 20-1 guarantee structure that will effectively provide $100 million in loan guarantees for new ship construction. This represents a reinstitution of funding for the title XI program after years of zero funding and bodes well for the future. In addition, included in the energy legislation already signed into law are reforms to the Capital Construction Fund (CCF) that will allow CCF vessels to operate in coastwise trade. When combined with pending legislation that would provide Harbor Maintenance Tax relief for coastwise trade, we believe that the outlook for short sea shipping, and the accompanying job creation and environmental relief, is very positive and deserves the attention of the maritime and environmental community.

Horizon Lines says it will continue to work aggressively with its maritime unions and the broader business community to secure final passage of this remaining short sea shipping agenda and to make coastwise trade a reality.

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