1299716--3/14/2008--U.S._Shipping_Partners

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Risks Inherent in Our Business We may not have sufficient available cash to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner. The amount of cash we have available for distribution to unitholders depends primarily on our liquidity and cash flow and not solely on profitability. As a result of the expiration of the Hess support agreement, we are no longer assured minimum charter rates on our ITBs, and the employment of our ITBs is now subject to market conditions. Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or repealed. Because we must make substantial expenditures to comply with mandatory drydocking requirements for our fleet, and because these expenditures may be higher than we currently anticipate, we may not have sufficient available cash to pay the minimum quarterly distribution in full. We will need to acquire OPA 90 compliant vessels in order to maintain a significant presence in the domestic coastwise transportation of petroleum products, which will be expensive, and may cause us to reduce the amount of our cash distributions or prevent us from raising the amount of our cash distributions. Our general partner is required to deduct estimated maintenance capital expenditures from basic surplus each quarter, which may result in less cash available to unitholders than if actual maintenance capital expenditures were deducted. In addition, the amount of estimated maintenance capital expenditures our general partner is required to deduct from basic surplus each quarter is based on our current estimates and could increase in the future. Capital expenditures and other costs necessary to operate and maintain our vessels tend to increase with the age of the vessel and may increase due to changes in governmental regulations, safety or other equipment standards. If we are unable to fund our capital expenditures, we may not be able to continue to operate some of our vessels, which would have a material adverse effect on our business and our ability to pay the minimum quarterly distribution on our units and to pay interest on, and principal of, our indebtedness. A decline in demand for refined petroleum, petrochemical and commodity chemical products, or decreases in U.S. refining activity, particularly in the coastal regions of the United States, or a decrease in the cost of importing refined petroleum products, could cause demand for U.S. flag tank vessel capacity and charter rates and vessel values to decline, which would decrease our revenues, our ability to pay the minimum quarterly distribution on our units and to pay interest on, and principal of, our indebtedness and our estimated return from our investment in the Joint Venture. Marine transportation has inherent operating risks, and our insurance may not be adequate to cover our losses. Because we obtain some of our insurance through protection and indemnity associations, we may be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations. Decreased utilization of our vessels due to bad weather could have a material adverse effect on our operating results and financial condition. An increase in the price of fuel may adversely affect our business and results of operations. We rely on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could adversely affect our business and operating results. We may not be able to renew our long-term contracts when they expire, or obtain contracts for the vessels we have under construction, which could adversely affect our operations. Industry trends away from long-term charters in favor of shorter-term charters may impact our ability to finance newly built vessels. We have a limited number of vessels, and any loss of use of a vessel could adversely affect our results of operations. Increased competition in the domestic tank vessel industry could result in reduced profitability and loss of market share for us. If no market for retrofitted or repurposed ITBs develops, our business and our ability to pay the minimum quarterly distribution on our units and to pay interest on, and principal of, our indebtedness could be adversely affected. Our vessels, particularly our ITBs, may be limited from international transportation of petroleum products due to international regulations similar to OPA 90. This may limit the overseas opportunities of our vessels. Delays or cost overruns in the construction of a new vessel or the drydock maintenance of existing vessels could adversely affect our business. Revenue from new or retrofitted vessels may not be immediate or as high as expected. We could lose part or all of our investment in the Joint Venture and the growth of our business may be adversely affected. The recent acceleration of the product tankers' construction by the Joint Venture may require the Joint Venture to obtain additional financing for the construction of the product tankers. Our purchase of existing vessels involves risks that could adversely affect our results of operations. We may not be able to grow or effectively manage our growth. We are subject to complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business and which may affect our ability to sell, lease, charter or otherwise transfer our vessels. We depend upon unionized labor for the provision of our services. Any work stoppages or labor disturbances could disrupt our business. Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws. We depend on key personnel for the success of our business and some of those persons face conflicts in the allocation of their time to our business. Terrorist attacks have resulted in increased costs and any new attacks could disrupt our business. Changes in international trade agreements could affect our ability to provide marine transportation services at competitive rates. Risks Inherent in an Investment in Us Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of our unitholders. The members of Shipping Master, including our executive officers, and their affiliates and the Joint Venture may engage in activities that compete directly with us. Our partnership agreement limits our general partner's fiduciary duties to unitholders and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty. Even if unitholders are dissatisfied, they cannot initially remove our general partner without its consent. We may issue additional common units without your approval, which would dilute your ownership interests. Our partnership agreement currently limits the ownership of our partnership interests by individuals or entities that are not U.S. citizens. This restriction could limit the liquidity of our common units. Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price and is not required to obtain a fairness opinion in connection with the exercise of its call right. Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units. Cost reimbursements due to our general partner and its affiliates, which will be determined by our general partner, will reduce available cash for distribution to you. The control of our general partner may be transferred to a third party without unitholder consent. We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to make cash distributions. Our leverage may limit our ability to borrow additional funds, comply with the terms of our indebtedness or capitalize on business opportunities. Restrictions in our debt agreements will limit our ability to pay distributions upon the occurrence of certain events. We can borrow money under our amended and restated credit facility to pay distributions, which would reduce the amount of revolving credit available to operate our business. Our common unit price is volatile, which could adversely affect your investment. Unitholders may have liability to repay distributions that were wrongfully distributed to them. We have a holding company structure in which our subsidiaries conduct our operations and own our operating assets. The right to receive payments on our senior notes and the related subsidiary guarantees is secured by a second priority lien on the collateral and will be effectively subordinated to our existing and future indebtedness secured by a first lien on such collateral, as well as to any existing and future indebtedness of our subsidiaries that do not guarantee the senior notes or that is secured by assets that do not constitute collateral for the senior notes. If there is a default, the value of the collateral may not be sufficient to repay holders of the senior notes. The lien-ranking agreements set forth in the indenture governing the senior notes and in the intercreditor agreement will limit the rights of the holders of the senior notes and their control with respect to the collateral securing the senior notes. Bankruptcy laws may limit the ability of holders of senior notes to realize value from the collateral. Any future pledges of collateral may be avoidable. The collateral is subject to casualty risks. The collateral agent's ability to exercise remedies is limited. Rights of holders of the senior notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral or the perfection of liens on the collateral by other creditors. A court may use fraudulent conveyance considerations to avoid or subordinate the subsidiary guarantees. We may not be able to repurchase the senior notes upon a change of control. Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to entity-level taxation by states. If the IRS were to treat us as a corporation or if we were to become subject to entity-level taxation for state tax purposes, this would reduce cash available for distribution to unitholders. Unitholders may be required to pay taxes on income from us even if they do not receive any cash distributions from us. Tax gain or loss on the disposition of our common units could be different than expected. Unitholders may be subject to state, local and foreign taxes and return filing requirements as a result of investing in our common units. We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate-level income taxes. Tax-exempt entities and foreign persons face unique tax issues from owning common units that may result in adverse tax consequences to them. We will treat each purchaser of units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units. The sale or exchange of 50% or more of our capital and profits interests during any 12-month period will result in the termination of our partnership for federal income tax purposes.

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1299716--3/14/2008--U.S._Shipping_Partners_L.P.