Operating Differential Subsidy (ODS)
An Operating Differential Subsidy (ODS) is a payment to an American-flag carrier by the U.S. government to offset the difference in operating costs between U.S. and foreign vessels. The subsidy is intended to level the playing field so that American carriers can compete for business on a more equal footing with their foreign counterparts.
Operating costs can vary widely from one country to another, and even within individual countries:
- For example, labor costs are typically much lower in developing countries than in developed ones.
- This means that carriers based in developing countries have a significant cost advantage over those based in developed countries like the United States.
The ODS program was created to help offset this cost disadvantage and make it possible for American carriers to compete more effectively against foreign carriers. The subsidy is paid directly to the carrier and can be used to cover a variety of operating expenses, including fuel, crew salaries, and port fees.
The ODS program has been criticized by some as being a form of corporate welfare. However, its supporters argue that it is necessary to ensure that American carriers are able to compete in the global marketplace.
Operating Differential Subsidy Definition – Operations & Supply Chain Dictionary