[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
MARITIME TRANSPORTATION: THE ROLE OF U.S. SHIPS AND MARINERS
=======================================================================
(113-16)
HEARING
BEFORE THE
SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2013
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
VACANCY
------ 7
Subcommittee on Coast Guard and Maritime Transportation
DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska JOHN GARAMENDI, California
HOWARD COBLE, North Carolina ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey CORRINE BROWN, Florida
PATRICK MEEHAN, Pennsylvania RICK LARSEN, Washington
STEVE SOUTHERLAND, II, Florida, TIMOTHY H. BISHOP, New York
Vice Chair JANICE HAHN, California
TOM RICE, South Carolina LOIS FRANKEL, Florida
TREY RADEL, Florida NICK J. RAHALL, II, West Virginia
VACANCY (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Panel 1
Hon. John D. Porcari, Deputy Secretary, U.S. Department of
Transportation................................................. 3
General William M. Fraser III, Commander, U.S. Transportation
Command........................................................ 3
Panel 2
Fred Harris, President, General Dynamics NASSCO, on behalf of
Shipbuilders Council of America................................ 20
Joseph H. Pyne, Chairman and Chief Executive Officer, Kirby
Corporation, on behalf of American Maritime Partnership........ 20
Mike Jewell, President, Marine Engineers' Beneficial Association. 20
Augustin Tellez, Executive Vice President, Seafarers
International Union............................................ 20
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Hon. John D. Porcari:
Prepared statement........................................... 36
Answers to questions from the following Representatives:
Hon. Duncan Hunter, of California........................ 42
Hon. John Garamendi, of California....................... 43
General William M. Fraser III:
Prepared statement........................................... 47
Answers to questions from the following Representatives:
Hon. Duncan Hunter, of California........................ 52
Hon. John Garamendi, of California....................... 53
Fred Harris:
Prepared statement........................................... 55
Answers to questions from Hon. John Garamendi, of California. 77
Joseph H. Pyne:
Prepared statement........................................... 86
Answers to questions from Hon. John Garamendi, of California. 94
Mike Jewell:
Prepared statement........................................... 103
Answers to questions from Hon. John Garamendi, of California. 112
Augustin Tellez:
Prepared statement........................................... 115
Answers to questions from the following Representatives:
Hon. Duncan Hunter, of California........................ 122
Hon. John Garamendi, of California....................... 122
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MARITIME TRANSPORTATION: THE ROLE OF U.S. SHIPS AND MARINERS
----------
TUESDAY, MAY 21, 2013
House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
Room 2167, Rayburn House Office Building, Hon. Duncan Hunter
(Chairman of the subcommittee) presiding.
Mr. Hunter. The subcommittee will come to order. Good
morning.
The subcommittee is meeting today to review the current
state of the U.S. maritime sector and examine the importance of
U.S.-flag vessels and American mariners to our economy and
national security.
The U.S. maritime industry currently employs more than
260,000 Americans, providing more than $29 billion in annual
wages. There are more than 40,000 commercial vessels currently
flying the American flag. The vast majority of these vessels
are engaged in domestic commerce, moving over 100 million
passengers and $400 billion worth of goods between ports in the
U.S. on an annual basis. Each year, the U.S. maritime industry
accounts for over $100 billion in economic output.
Beyond the important contributions to our economy, a
healthy maritime industry is vital to our national security.
Throughout our history, the Navy has relied upon U.S.-flag
commercial vessels crewed by American merchant mariners to
carry troops, weapons, and supplies to the battlefield. During
Operations Enduring Freedom and Iraqi Freedom, U.S.-flag
commercial vessels transported 63 percent of all military cargo
moved to Afghanistan and Iraq.
Since we cannot rely on foreign vessels and crews to
provide for our national security, it is critical that we
maintain a robust fleet of U.S.-flag vessels, a large cadre of
skilled American mariners, and a strong shipyard industrial
base. Unfortunately, over the last 35 years, the number of
U.S.-flag vessels sailing in the international trade has
dropped from 850 to less than 100. In the same period, we have
lost over 300 shipyards and thousands of jobs for American
mariners.
To make matters worse, the President has sent Congress a
budget that proposes to restructure the highly successful Food
for Peace program. Since 1954, the Food for Peace program has
provided agricultural commodities grown by U.S. farmers and
transported by U.S. mariners on U.S.-flag vessels to those
threatened by starvation throughout the world. The President's
restructuring of Food for Peace will eliminate a vital program
for our farmers, put U.S. mariners out of work, and undermine
our national security by cutting the domestic sealift capacity
on which our military depends. I hope my colleagues will join
me in rejecting this misguided proposal.
We are joined today by the Deputy Secretary of
Transportation. I thank him for being here.
As he is keenly aware, the Maritime Administration has
faced very valid criticism in recent years over its handling of
Jones Act waivers and enforcement of our cargo preference laws.
I hope that the new leadership that will be taking over at both
the Department and MarAd in the coming months take seriously
their mission to promote and protect the U.S. maritime
industry.
I hope to see a renewed commitment to programs like Title
XI that help to grow jobs, expand our economy, and maintain
critical shipyard industrial capacity. I also hope the new
leadership at MarAd and DOT will work closely with industry to
reduce Jones Act waivers. Finally, I hope they will stand up
when other Federal agencies seek to disregard our cargo
preference laws and use the authority Congress gave them to
stop them in their tracks.
If we want to grow our economy and remain a world power
capable of defending ourselves and our allies, we must work
together to strengthen and preserve our maritime industry.
I thank the witnesses for appearing today and look forward
to working with them to accomplish these important goals.
With that, I yield to Ranking Member Garamendi.
Mr. Garamendi. I thank you, Mr. Chairman. And thank you for
your leadership on this critical issue and for scheduling
today's hearing to examine the status and role of the U.S.
merchant marine within the Marine Transportation System. Such
an examination is both overdue and important.
Tomorrow is National Maritime Day. Since establishment in
1933, we pause on May 22nd to recognize the many selfless
contributions made by the men and women of the U.S. merchant
marines, both past and present, in meeting our country's
economic and security needs in both wartime and peace. Such
recognition is well-deserved, and it is appreciated by a
grateful Nation.
Yet, despite the voluminous history of the U.S. merchant
marine, the current challenges facing the maritime industry
portend a future that offers anything but smooth sailing.
Today, the U.S.-flag oceangoing fleet in foreign trade is
comprised of fewer than 100 ships, a decline of over 80 percent
from the 1979 fleet level of 576 vessels. As a result, of the
78 percent of U.S. exports and imports transported by water,
less than 1.5 percent is carried under the U.S. flag.
The U.S. coastwise fleet has fared better and continues to
provide vital maritime transportation within the U.S. coastal
waters and inland waterways. Nevertheless, the Jones Act
continues to come under attack by critics, despite the fact
that Jones Act trade constitutes a substantial component of
U.S. shipyard activity and is necessary for maintaining our
national defense capability.
Cargo preference requirements continue to be whittled away,
if not ignored, by Federal agencies, as if those requirements
were a hindrance and not the law of the land. Not only does
this reduce the number of job opportunities for U.S. seafarers,
it denies important cargoes to U.S. carriers, which also
provide invaluable sealift capabilities when our armed services
are deployed abroad.
Mr. Chairman, your comments on P.L. 480, the Food for Peace
program, are well-taken, and I agree with you.
In closing, Mr. Chairman, on National Maritime Day it is
important that we celebrate our maritime heritage. But this
year we would be wise to examine how we can reinvigorate the
U.S.-flag fleet, what we might do to rebuild and expand the
U.S. shipbuilding capacity, and what we can do to ensure that
our maritime transportation remains prominent in the
discussions of our national foreign policy.
I look forward to the hearing. I thank our witnesses, and
let's get on with it.
Mr. Chairman, I yield.
Mr. Hunter. I thank the ranking member.
On our first panel of witnesses today are the Honorable
John Porcari, Deputy Secretary of Transportation; and General
William Fraser, Commander of U.S. Transportation Command.
Deputy Secretary Porcari, you are recognized for your
statement.
TESTIMONY OF HON. JOHN D. PORCARI, DEPUTY SECRETARY, U.S.
DEPARTMENT OF TRANSPORTATION; AND GENERAL WILLIAM M. FRASER
III, COMMANDER, U.S. TRANSPORTATION COMMAND
Mr. Porcari. I thank you, Chairman Hunter and Ranking
Member Garamendi. I appreciate the opportunity to be here today
to discuss maritime transportation issues.
A strong maritime industry is critical to America's
national and economic security. President Obama and all of us
at the Department of Transportation are committed to working
with our public and private partners to train new mariners and
provide support for our foreign and domestic trading fleets,
U.S. ports, and shipyards.
The maritime industry is facing many challenges. In the
wake of the global recession, low freight rates can still be
found on many international trading routes. Preference cargoes
have also begun to decline for U.S.-flag vessels that
participate solely in foreign trade. These changes are due in
large part to falling volumes of Department of Defense cargoes
associated with the drawdown of military operations in Iraq and
Afghanistan, as well as declines in agriculture preference
cargoes. We expect that in the near term the industry will
continue to adjust to the market.
Despite these ongoing fluctuations, U.S.-flag commercial
vessels involved in military sealift are strongly supported
through the MarAd-administered Maritime Security Program. The
MSP, as you know, is a fleet of 60 privately owned vessels.
These ships are active, commercially viable, and available to
meet national defense and other security requirements. And
thanks to the 2013 National Defense Authorization Act, which
President Obama signed in January, existing MSP operating
agreements have been offered through 2025.
The Department of Transportation continues to support
compliance with the Jones Act, and ships that are trading under
it continue to do well.
Likewise, the recent surge in domestic crude oil production
has increased demand for domestic self-propelled tanker
vessels. A recent industry projection foresees 10 to 14 new
oceangoing tankers entering the fleet by 2018.
New containership orders being placed under the Jones Act
are also encouraging. These containerships would be powered by
U.S.-produced liquefied natural gas and would be among the most
environmentally friendly forms of freight transportation on
Earth.
The Nation's ports are also successfully preparing for the
future. The American Association of Port Authorities reports
that U.S. seaport agencies and their private-sector partners
plan to invest a combined $46 billion over the next 5 years in
capital improvements to their marine operations and other port
properties.
The Department of Transportation is complementing these
investments. Since 2009, we have awarded more than $350 million
in TIGER grants that are helping to modernize our ports,
improve rail infrastructure serving ports, and increase
exports. We have also awarded more than $149 million in small
shipyard grants to 120 projects in 28 States and Guam. These
investments have helped small shipyards get new contracts and
have increased exports of commercially built vessels.
Additionally, the Maritime Guaranteed Loan Program, better
known as Title XI, has helped leverage more than $650 million
in new investments in U.S. shipbuilding during the first term
of the Obama administration. We currently have the budget
authority to guarantee $420 million worth of additional
shipbuilding projects.
The Department of Transportation is also committed to
educating and training the next generation of maritime
professionals. As part of this commitment, we have placed a
renewed focus on preparing thousands of young people to enter
the maritime workforce through the U.S. Merchant Marine Academy
and six State maritime academies.
As I said earlier, all of us in the administration are
committed to a strong maritime industry. We are working to
balance our long-term needs with the challenges of today.
As part of the President's 2014 budget request, we have
proposed restructuring the Public Law 480 Title II food aid
program to allow local and regional procurement of food and to
improve the ability of U.S. food aid to reach emergency needs
quickly and with less adverse impacts on markets and farmers in
countries receiving the food aid.
Under the President's proposal, 55 percent of Title II food
aid funds would still be spent in the United States. Of that,
50 percent of the cargoes would move on U.S.-flag vessels. In
its initial assessment, DOD has stated that changes in the food
aid program will not impact the maritime industry's ability to
crew the surge fleet and deploy forces and cargo.
Furthermore, to mitigate any impact on vessels and
mariners, the administration is proposing a $25 million
targeted operating subsidy for military-useful vessels.
Preliminary planning for this funding envisions a three-pronged
approach whereby some of the funding would provide a stipend
for militarily useful vessels not enrolled in the MSP, other
sums would be used to reimburse eligible cost for mariners to
retain or renew active U.S. Coast Guard-issued merchant marine
credentials, and some funds would provide apprentice training
for key merchant mariner skills. We will work with our key
stakeholders and our Federal partners on how best to use this
funding to minimize any impact.
I thank you, Mr. Chairman, for allowing me to share this
time with you today. I look forward to answering any questions
that you might have.
Mr. Hunter. Thank you, Mr. Porcari.
General Fraser, you are recognized.
General Fraser. Chairman Hunter, Ranking Member Garamendi,
and distinguished members of this committee, it is indeed an
honor to be here with you today as the Commander of United
States Transportation Command.
Our total force team of men and women, military and
civilian, are dedicated to providing reliable, seamless
logistical support to our warfighters and their families around
the globe. The dedicated professionals at the United States
Transportation Command simply could not accomplish this global
mission without the capabilities provided by the United States
strategic sealift fleet and our steadfast merchant mariners.
USTRANSCOM relies on both Government-owned vessels and
those accessed via commercial industry. Our Government-owned
fleet includes 60 total vessels from the Military Sealift
Command's surge fleet and the Maritime Administration's Ready
Reserve Force. All Government-owned and commercial vessels are
critical for the Department of Defense's ability to surge to
meet future global requirements. I am grateful to the Congress
for your continued support of this global mobility requirement
and capability, which is unique to the United States.
Although our organic assets are vital during contingency
operations, the vast majority of the sealift needs during
steady state and nonsurge periods comes from our commercial
partners. Access to the commercial fleet is formalized through
programs such as the Voluntary Intermodal Sealift Agreement,
the Maritime Security Program, and the Voluntary Tanker
Agreement. These programs allow us and the Department of
Defense to gain access to United States commercial capabilities
while ensuring the availability of a viable U.S.-flag fleet and
United States citizen merchant mariner pool in times of the
national emergency.
The Maritime Security Program provides access to a fleet of
60 military-useful commercial vessels that are operating in
international commerce and exercising intermodal networks
throughout the world and jobs for our United States merchant
mariners. I also want to thank Congress for extending the MSP
program an additional 10 years to 2025.
Maintaining a responsive sealift capacity and experienced
merchant mariners to crew our ships in a time of need is
essential to meeting the Nation's defense requirements. I am
confident the U.S. maritime industry will continue to meet our
defense needs with the capacity and the responsiveness that
befits their heritage, and I will work closely with the
Maritime Administration and our industry partners to ensure we
can rely on that capability for many years to come.
Chairman Hunter, Ranking Member Garamendi, distinguished
members of this committee, I want to thank you again for your
continued support of United States Transportation Command and
our total force team. I am grateful for the opportunity to
appear before this committee today and would ask that my
written statement be submitted for the record. I look forward
to your questions.
Thank you, sir.
Mr. Hunter. Gentlemen, thank you very much. And let me
start by saying, thank you both for your service to the
country, whether it is in transportation or the military. We
all appreciate it.
Mr. Porcari, let's start with this. You talked about the
Title XI program. You talked about the small shipyards grants
program. Yet the administration didn't fund either one of them.
So I expect that the administration knew or thought that
Congress would fill in the blanks for them on that.
So, if it is so beneficial, as you stated, why wouldn't the
President request funding for it?
Mr. Porcari. First, Mr. Chairman--it is a great question.
Mr. Hunter. In fact, let me specify, too, the President has
never requested funding for Title XI, ever.
Mr. Porcari. Mr. Chairman, on Title XI, we currently have
about $420 million of authority for additional projects for----
Mr. Hunter. That is about $30 million, right?
Mr. Porcari. It is--approximately. And, given what is in
the pipeline, we believe we can process the applications that
are currently in the pipeline. There may be need for additional
capacity beyond that. It is a situation that we would like to
be in.
But Title XI is one of the tools that we use. I would also
point out, you mentioned small shipyard grants, which we have
made good use of. Third, it is not strictly a maritime program,
but the single biggest winner, in some ways, of our TIGER
program has been the maritime industry because we have been
focusing on the landside connections as well. Ports in the
maritime industry only function as well as the intermodal
connections. And we have been trying to remove bottlenecks,
whether it is on dock, whether it is with the freight railroads
or in other places. It is a holistic approach to trying to
encourage the maritime industry.
We believe very strongly in a U.S.-flag fleet, and we will
continue to do so.
Mr. Hunter. I would agree, the landside improvements are
vitally important as well.
Let me ask you this. I am seeking about $70 million in
Title XI funding to bring it up to $100 million, which is about
a billion dollars or more, $1.3 or $1.4 billion in funding.
What do you estimate that would do to the shipbuilding industry
if that over a billion dollars in funding was able to be made
of use and granted to the industry to build commercial ships?
Mr. Porcari. Should Congress provide those funds, Mr.
Chairman, we would work to, first of all, make sure that we are
improving the process of Title XI loans. We know that, in terms
of the timing, the responsiveness, and the interaction with
applicants, the process can be and needs to be reengineered.
And we would focus on that for a more responsive Title XI
process.
We would also try to encourage, wherever possible, loan
applications that most directly benefit both shipbuilding and
long-term employment of U.S. mariners.
Mr. Hunter. And for both gentlemen, my last question; then
I will yield to Mr. Garamendi.
As the Food for Peace program gets slashed, you said, Mr.
Porcari, that DOD has stated that right now that will not have
an impact on the crewing of the vessels that are needed for
military capacity.
But let's look out 5 or 10 years, and I would like you both
to just tell us here very bluntly: What do you think the impact
is going to be over the next decade if we cut the Food for
Peace program and those ships go away and those mariners go
away and that training pool for our ship drivers and ship crew
goes away?
Mr. Porcari. Mr. Chairman, first and foremost, we can't
afford to lose that capacity, whether it is the actual vessels
or, more importantly in some ways, the U.S. crews.
We know that the industry is changing. Food aid is only one
component of it. What we want to focus on is things like energy
transport, where we believe in the future there are growth
opportunities in the industry for a U.S.-flag fleet and U.S.
mariners.
Going out 5 or 10 years, I personally can't really project
that, but I don't think that we should have overdependence on
any portion of the cargo spectrum, including food aid.
Mr. Hunter. Before General Fraser answers, I would venture
that if you are going to offset this with energy or if we have
other plans, that you do them simultaneously or maybe make sure
one is in place first before cutting the, you know, current
program. Otherwise, you are not going to have that capacity to
move the energy stuff because it will be gone.
General Fraser?
General Fraser. Chairman, thank you very much.
As previously stated, DOD did take a look at this
initially, and as it stands alone, it would not have a
significant impact on our ability to reach into the merchant
mariner pool to satisfy our military requirements.
As the global distribution synchronizer and provider of
transportation for DOD, I do look at where industry has been,
and what history has shown us. Both you and Ranking Member
Garamendi spoke in your opening comments about how we have seen
things change over time. I think that is something that, as we
look forward to the future, and not being a predictor of the
future, we need to take into consideration as we work together.
I promise to continue to work very closely with MarAd as we
define what the military requirements are in the future in
meeting our surge capacity and capability and those merchant
mariners that are needed, which are great value to our surge
capacity in the future. And we will do that.
Mr. Hunter. General, did you use food aid mariners to crew
ships whose capacity you used in Enduring Freedom and Iraqi
Freedom?
General Fraser. Sir, when we actually go out and seek
merchant mariners, I do not know where they come from. We work
with MarAd as they man the ships----
Mr. Hunter. To the best of your knowledge.
General Fraser [continuing]. Because there is a large pool
of merchant mariners from which they reach to obtain both the
licensed and the unlicensed personnel to crew these ships.
Mr. Hunter. Would it be reasonable to say that you use
those crews that crew the food aid ships?
General Fraser. Sir, I think that is something that I would
have to dig into the details as to exactly where they came
from. But I know that those who are working in the commercial
industry who are maintaining their licenses, the skill sets of
those merchant mariners from which we pull, are sailing on all
kinds of ships that are in the commercial industry.
Mr. Hunter. Thank you, General.
Mr. Garamendi, you are recognized.
Mr. Garamendi. Thank you, Mr. Chairman.
And, gentlemen, thank you for your service as well as for
your testimony today.
I am not at all sure that we have an overall strategy to
maintain the merchant marine capability and its direct effect
upon national security. The trend lines are terrible. This
industry, if one were to take a look at this as a--the overall
trend lines, you have to say it is disappearing, perhaps to the
point where we will not have the capability for national
defense or to maintain a vital part of our economy.
I think what I would like to really focus on are some of
the specific elements in it. I think the administration is
dead-wrong with regard to Food for Peace for a variety of
reasons. One of them is the loss of capacity within the United
States. A second one is a breakup of the political support for
the food program overall. That current support comes from
farmers, the merchant marine industry, and those who are
interested in making sure people around the world have food to
eat when they don't have it otherwise available.
So I think the administration is wrong on this one. I am
going to do everything I can to reverse the administration's
position. I understand you two gentlemen are good soldiers and
carrying out your task.
So, having said that, apparently there is a loss of
capacity. Otherwise, the administration would not be proposing
the $25 million to somehow make up for that loss.
Mr. Porcari, how exactly is that supposed to work?
Mr. Porcari. Well, first of all, the food aid proposal is
designed to be more efficient, deliver more food aid, and
minimize disruption on local markets.
The $25 million that you refer to is a reflection of the
fact that we know that the industry is changing. We need to
preserve key skills. Doing that through potential concepts like
aid to militarily useful vessels that are not currently in the
MSP fleet; making sure the Coast Guard credentials, oceangoing
credentials of mariners are maintained; apprenticeship training
for specific skilled trades, for example, that are critical
today and tomorrow in the merchant marine fleet. Those are some
of the ways that we think that this $25 million proposed by the
President can be used.
It is a reflection of the understanding that we know that
the maritime world is changing and we know that we need to
preserve the capacity both on the vessel side and, importantly,
with the crews.
Mr. Garamendi. Is the $25 million over and above the
ongoing Food for Peace P.L. 480 program?
Mr. Porcari. Yes. This is an additional $25 million, Mr.
Garamendi, that is specifically for assistance to the merchant
marine----
Mr. Garamendi. Wouldn't we be better off if we put $25
million directly into the P.L. 480 program and just have more
capacity and more food aid around the world, rather than trying
to carry on a program of maintaining the skill sets through
what appears to be a hopeful program but not yet in existence?
We have $25 million extra. Why don't we just provide more
food where it may be needed around the world?
Mr. Porcari. We know that with the steady loss of merchant
marine capacity since World War II that we need to do things
differently, that we need to actually make sure that we are
building on things that work. We know, for example, the MSP
program has worked, and it has worked well, with its 60
vessels.
Going beyond that to both vessels and crews that would
provide additional capacity is something that we believe we can
use this $25 million usefully for. And we look forward to input
from industry, our partners at DOD, and others to determine the
best ways to use it. It is a way to pivot toward the future and
start getting directly to some of the skilled trades and other
needs.
Mr. Garamendi. Mr. Porcari, do you have a specific plan of
action for the use of the $25 million? You have mentioned
several different ways it could be spent. Is there a specific
program that you can give to us that you are going to--how you
are going to spend that money?
Mr. Porcari. These are potential options right now, the
once that I mentioned. We do not want to move forward without
specific input from industry from----
Mr. Garamendi. So the correct answer is ``no.''
Mr. Porcari. The correct answer is ``no.''
Mr. Garamendi. Thank you.
It just seems to me, somewhere the administration has found
25 million extra dollars to backfill and to handle a problem
that it is creating by changing the P.L. 480 program.
Wouldn't it be better to put that $25 million directly into
the P.L. 480 program, provide the additional support around the
world for food and emergency relief, rather than to create what
amounts to a welfare program for unemployed mariners and ships
that are not being used?
Mr. Porcari. The long-term prospects for food aid, because
they are uncertain as a useful tool for the maritime industry,
using the $25 million and targeting what we know are needed
skills and needed vessels, we believe, is a good option.
Mr. Garamendi. Well, I disagree. I will let it go at that
and just say I strongly disagree, and I will do everything I
can to see that the $25 million goes into providing food aid
directly rather than in trying to find some way to educate,
reeducate mariners that are not able to work because you have
taken the program away from them and the farmers. And you have
also created a very serious political problem, in that the
support base for the Food for Peace is going to be
significantly eroded.
Now, there are a bunch of other questions. I have occupied
more than 5 minutes, but I like the way my clock runs, because
it doesn't. But I think I had best let it go at that, Mr.
Chairman, and come back with another round later.
Mr. Hunter. I thank the ranking member.
Mr. Coble is recognized.
Mr. Coble. Thank you, Mr. Chairman.
Good to have you gentlemen with us this morning.
Mr. Porcari, as you know, the Jones Act requires
merchandise and passengers moving between two points in the
U.S. to be carried only on U.S.-flagged, U.S.-crewed, U.S.-
owned, and U.S.-built vessels.
The Coast Guard and Maritime Transportation Act of 2012
included language to improve the level of disclosure and
accountability in the Jones Act waiver process. What steps has
the administration taken to implement the requirements of the
2012 act?
Mr. Porcari. We have, first of all, worked very closely
with our partners at DHS and other agencies in the Jones Act
waiver evaluation process.
I would point out that in previous opportunities with the
Strategic Petroleum Reserve, a blanket waiver had always been
issued. We took the unprecedented step of not issuing a Jones
Act waiver with the last SPR release, with the idea that we
could maximize the use of Jones Act vessels wherever possible.
That is something we take very seriously. We are obviously
complying with the requirements that were put in place in 2012.
We think, beyond that, doing work upfront, for example, with
the Department of Energy, on sizing of vessels, the timing of
any SPR release, just as one example, is very helpful in
maximizing the ability of Jones Act vessels to compete.
We have recently during Hurricane Sandy issued, for the
first time, because it was a true emergency, a limited blanket
waiver of limited duration. And it was from point to point, so
instead of a blanket waiver that would allow widespread use of
non-Jones Act vessels, it was very much targeted for a short-
term issue until the refineries, the pipelines, and the
distribution system were back up and running in New York.
We think that kind of very specific, targeted use of the
waiver process as a last resort where we have to is the way to
go. We will work very closely on the notification process, as
required.
Mr. Coble. I thank you for that.
General, if there is a significant reduction in the number
of trained American mariners and military-capable U.S.-flag
commercial vessels, how would that impact the ability of
TRANSCOM to successfully conduct its mission?
General Fraser. Well, thank you very much.
As I look at this particular PB that is put forward, P.L.
480 will not have a significant impact on our ability to reach
into the merchant mariner fleet to satisfy our requirements.
As I take a look, though, at the trend that we have
discussed here previously, I think that is something that we
need to continue to work with the Maritime Administration to
ensure that our requirements are met in the future.
We completed a Mobility Capabilities Requirements Study,
which defines the amount of square footage that we need in
order to meet our military requirements. Right now that is
slightly in excess of 19 million square feet. We have those
ships identified that meet that requirement, as well as the
pool of merchant mariners that would help us fulfill the
requirements to meet our military needs.
So we would continue to work with the Maritime
Administration if further reductions were to take place.
Mr. Coble. Thank you, gentlemen. Good to have you both with
us.
Mr. Chairman, I yield back.
Mr. Hunter. I thank the gentleman.
Ms. Hahn is recognized.
Ms. Hahn. Thank you, Mr. Chairman.
And I want to say that it certainly is timely that we are
holding this hearing on the role of U.S. ships and mariners
today, as tomorrow is National Maritime Day in this country.
And until I came to Congress, I attended every single year a
wonderful ceremony that we have in San Pedro, where we actually
have a memorial to merchant mariners, and we honor them every
year, a group of men and a few women.
More merchant mariners were lost in our wars than any other
branch of the military. Our merchant mariners, by the way,
still don't receive the benefits that they deserve, and I plan
on reintroducing legislation that will maybe compel this
Congress to pay the survivors the benefits that they deserve.
This is a branch of our military that really, many times, goes
unrecognized and unhonored as they should, so it really
troubles me.
And I would like to associate my remarks with my friend and
colleague from California, Ranking Member Garamendi, who says,
as I do, that we completely disagree with the administration's
attempt to restructure the Food for Peace program. It will
reduce the amount of U.S.-flag vessels participating in this
program.
In an industry that employs more than 260,000 American
workers and contributes $29 billion to our economy in their
annual wages, I have serious concerns with what this could mean
for our maritime workers. That is why I signed a letter, led by
my friend, Congressman Cummings, opposing any changes that
would ultimately lead to job losses in the American shipping
industry.
While you two sit here today and talk about the $25 million
that will be used to reimburse the U.S.-flag vessel operators
for this program, many of our merchant mariners and our
maritime friends were walking the halls of Congress last month,
going from office to office expressing their very deep concern
of what this is going to do to this industry, to their lives,
preserving the ships, preserving these kinds of skills.
So I still can't figure out--maybe, Mr. Porcari, you can
address this--why the administration is pursuing a policy that
will devastate the U.S. shipping industry and put American jobs
at risk.
And is there a way that we could work with you to ensure
your concerns--which I am not really clear on what the concerns
are--without making these kinds of changes that will harm good
American jobs?
I am kind of with John Garamendi. Why don't we take this
$25 million, put it toward the program and strengthen it?
Mr. Porcari. Well, first, we are happy to work with you on
this proposal.
For the Maritime Administration and the Department of
Transportation, we see an essential element that we have to
preserve. I mentioned earlier that the Maritime Security
Program is successful by any standards.
It is important to point out that, in the current fiscal
year, between the continuing resolution and then the sequester
following it, for the first time we have been unable to honor
our current commitments to the 60 vessels in the program.
And I know your question is related to food aid. I do want
to point out that it is imperative that we have a program that
we know works, that is preserving the jobs, that is preserving
the capacity for urgent national needs in times of the
emergency. And we want to make sure that we are continuing to
fully fund it. The President has proposed that for fiscal year
2014.
On the food aid proposal, the administration proposal is
aimed at being more effective and efficient in actually
delivering food to needed recipients and minimizing the
distortion on the local markets at the same time. We, in
interagency discussions, have really focused on the ability to
do that and make sure that we are not impacting the merchant
marine industry.
And it has also provided us an opportunity to continue to
outline how critical this capacity is for the Nation, from a
jobs perspective, from a national defense perspective, and for
responding to natural disasters.
Ms. Hahn. I know my time is up, and I will have more
questions maybe on the next round. But, again, it seems like
this is counterintuitive to the program that exists now. It is
a successful program. It creates good American jobs. There is
an apprenticeship program built into it.
It is also, you know, something we are proud of in this
country. We love this Food for Peace program. This is our
ships, our Americans. We are doing, you know, what America is
known for. And it feels good that we are using ships and
American crews to do something peaceful and something good
instead of just always employing them in times of war.
So this is a program that I think the American people
support, and I agree that it is a bad idea to get rid of it.
Thank you.
Mr. Hunter. I thank the gentlelady. And we will have a
second round.
Ms. Hahn. OK, good.
Mr. Hunter. Mr. Rice is recognized.
Oh, he is not--I would like to add then, it almost seems--
the upsetting part isn't that the Food for Peace program was
canceled, but it almost seems like it was flippantly cancelled.
Because you have an ongoing study on--or you haven't done a
study yet on exactly how you are going to use the $25 million
in the MSP, but you are going to use it there somehow. DOD has
an ongoing study. And you are able to say that right now there
is not going to be any impact to be able to crew ships, but you
can't tell me in 10 years what the impact is going to be. You
haven't done a study on that; you don't know.
So it seems like Congress and different administrations
sometimes have a very shortsighted view on things like national
security, where it looks good right now and we realize in 5
years that it was a horrible mistake and it is going to cost us
20 times as much to recapitalize the fleet and to get more
mariners so we can crew these ships.
So I would say that, at the very least, this was done
flippantly without regard to knowing exactly how many people
you need to have going into the future. This committee is not
going to make the mistake of being shortsighted.
Mr. Cummings is recognized.
Mr. Cummings. Thank you very much, Mr. Chairman.
It is good to see both of you here, and thank you for being
here.
Secretary Porcari, MarAd has informed U.S. vessels that,
due to sequestration, it will not be able to pay the full
monthly MSP stipend in August 2013, which is, of course, right
around the corner, and it will not pay any stipend in September
2013.
What will be the effect of these reduced or missed payments
on the vessels participating in the MSP program?
Mr. Porcari. Mr. Cummings, thank you for the question.
This is first time that we have not been able to honor the
Maritime Security Program commitments. As you point out, the
cumulative effects of first being funded through a continuing
resolution, which kept the dollar number at $174 million rather
than $186 million, and then taking an additional $19.1 million
out through sequester has had a very direct impact in the
middle of a fiscal year.
In discussions with leadership of the companies that
participate in MSP, we know it is going to have a very dramatic
impact. We feel strongly that we owe consistency and
predictability to the industry so that they can make investment
decisions and they can grow. This directly cuts against that
consistency and predictability.
We know it will have a negative impact. We will do
everything we can to minimize it.
Mr. Cummings. Well, if sequestration continues and the MSP
program continues to be reduced, do you believe this may cause
vessels to leave the program?
Mr. Porcari. It certainly could happen.
It is important to point out that the President is
requesting full funding of the MSP program for fiscal year 2014
in his budget. We believe very strongly that that for fiscal
year 2014 and beyond is needed to stabilize the program.
Again, this is a program that we know works for the
Nation's needs and is a very cost-effective investment for
times of emergency.
Mr. Cummings. Now, according to the talking points prepared
by DOD, and I quote, ``Military cargoes represent the
preponderance of U.S. Government-impelled cargoes,'' end of
quote.
Assuming you agree that this is the case, what is the
impact of the drawdown from Iraq and now Afghanistan on the
U.S.-flag fleet?
Mr. Porcari. The drawdown in Iraq and now Afghanistan
clearly has a negative impact on U.S.-flag fleet. Military
cargoes, as you point out, are one of the most important parts
of the cargo base that the U.S.-flag fleet relies on. This is
happening at the same time that the MSP program is not fully
funded. It is happening at the same time as other impacts on
the industry.
We know that this argues for a strong maritime strategy
across the board that fully utilizes all U.S. cargoes. We have
been working with the Export-Import Bank, for example, to make
sure that we are capturing cargo opportunities that we haven't
before. We have been working directly with the Department of
Energy to make sure that, where they have cargoes for wind
energy projects and other things, that we are capturing cargoes
wherever possible.
In sum, we know that the U.S.-flag fleet needs a stable
base to grow on. We think the energy sector and others will be
part of that base in the future, but we need to get there, we
need to transition to that.
Mr. Cummings. Uh-huh.
Let me ask you, General Fraser, how important is the
maintenance of a viable U.S. merchant marine to our military?
General Fraser. Sir, the maintenance of merchant mariners
is critical to our ability to meet the requirements that we
have laid out in the Mobility Capabilities Requirements Study,
as they would man those ships for us in a time of emergency
response.
Mr. Cummings. Let me ask you, finally, Secretary Porcari,
MarAd is granted sole authority by section 3511 of the Duncan
Hunter National Defense Authorization Act for Fiscal Year 2009
to ensure that shippers are complying with our cargo preference
laws. Those who do not comply with these laws can face civil
penalties for each day they remain in violation.
How many potential violations of cargo preference laws has
MarAd investigated in the last year? And has any entity ever
faced a civil penalty for violating the cargo preference laws?
Mr. Porcari. Mr. Cummings, I am not sure if any shipper has
faced penalties for that. I will check and respond for the
record.
[Please see Mr. Porcari's response to Hon. Hunter's first
question for the record on page 42 and Hon. Garamendi's first
question for the record on page 43.]
Mr. Porcari. I do know that we have a much higher level of
engagement within the Department of Defense on this, with the
idea of, before a violation would happen and before cargo
transportation selections are made, engaging the appropriate
people and making sure that both the letter and the spirit of
the law is being followed. You can expect that we will be even
more aggressive about that in the future.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Hunter. I thank the gentlemen.
Mr. Rice is recognized.
Mr. Rice. Thank you, gentlemen, for being here.
And I am certainly no expert in maritime affairs; I am a
tax lawyer. I am very concerned about U.S. competitiveness and
United States jobs.
And I sit here and look at these statistics that were
provided by the committee, and it says there are 93 currently
employed ships, currently employed in international commerce,
moving goods between U.S. and foreign ports. Over the last 35
years, the number of U.S.-flag vessels sailing in international
trade has dropped from 850 to 93, I guess. The percentage of
international commercial cargoes carried on the U.S.-flag
vessels has fallen from 25 percent in 1955 to approximately 2
percent today.
Obviously, we are not doing something right. Do you guys
have any suggestions for how we can make our American
commercial fleet more competitive in the world?
Mr. Porcari. If I may, sir, just to start, yes, we believe
that, first of all, the Government-impelled cargoes that are
currently carried by the U.S.-flag fleet form the foundation of
the viability of the fleet.
And I would point out that the vast majority of nations
that are engaged substantially in maritime trade do some
version of the same thing, that some Jones Act-like provisions
provide a base capacity for many of those nations.
We know that in the future the cargo mix is likely to be
different, the types of vessels are likely to be a different
mix. And, as I previously mentioned, focusing, among other
things, on energy transport, given the rising domestic energy
production, we think has real prospects for the Jones Act
trade, both coastwise and inland. That is certainly a growth
opportunity and one that we are going to work very hard to
exploit.
Mr. Rice. This also says, since 1983 the U.S. has lost
approximately 300 shipyards. Seems like the Jones Act is--it
seems like we are backing up. I mean, clearly, this is not
working. What can we do? How can we make ourselves more
competitive?
I mean, I think what you just said is that the business
provided by the Government provides a base for these 93
remaining vessels. If the Government wasn't providing them this
business, would we be down to zero?
Mr. Porcari. If we weren't down to zero, it would certainly
be a substantial reduction. But that is one of the reasons we
believe so strongly in cargo preference and the Jones Act.
Mr. Rice. Why are we not competitive today? What is it
about our American fleet that makes it where we can't compete
with the rest of the world and we are only carrying 2 percent
of commercial cargo? How can we fix it?
Mr. Porcari. Well, the U.S.-flag fleet, I would point out,
follows safety standards that not everyone else in the world
does. In terms of maritime worker training, we generally do
more than others. There are other nations that subsidize,
either directly or indirectly, use of maritime vessels. And
those are, in that sense, competitive disadvantages.
That is why it is important to make sure, whether we are
talking about the maritime crews, the ships, the shipyards, or
all of the associated parts of the industry that are all vital,
that we have to make sure that we are keeping a base of
industry and U.S. crews that can serve the Nation in the
future.
Mr. Rice. I guess, you know, the definition of ``insanity''
is to keep doing the same thing and expect a different outcome.
We have lost almost 90 percent of our fleet in the last 35
years. I think we need to rethink our policies and do what we
can to make our--I don't know why in the world--America can
compete in anything. We are the greatest Nation on Earth. And
to sit here and watch our industry die makes absolutely no
sense to me.
We need to start from the ground up, and we need to come up
with policies where our mariners can compete.
Thank you very much for being here.
Mr. Hunter. I thank the gentleman.
We are going to start one more round of questions. And we
will try to do it quickly because we have a second panel we
would like to get to, as well.
General Fraser, I have some stuff in front of me. Let me
see if I can phrase this right, too. I have different quotes
from different people.
General McNabb testified before Congress about the critical
role cargo preference laws have in ensuring TRANSCOM has a
domestic sealift capacity to successfully conduct its mission.
He says, ``While cargo preference laws and national defense
sealift policies ensure the viability of a U.S.-flag commercial
fleet''--and he also wrote a letter to Congressman LaTourette
in 2011. And he says--this is from your predecessor--``The
movement of U.S. international food aid has been a major
contributor to the cargo we have moved under the cargo
preference law that our U.S. commercial sealift industry
depends on. Any reductions will have to be offset in other ways
to maintain current DOD sealift readiness.''
There is no plan yet for the $25 million in offset. So have
things changed so that it is no longer needed and his concerns
are no longer valid?
General Fraser. Sir, merchant mariners continue to be
critical to our ability to meet our requirements.
And as we look at the size, if I might, based on the size
of the merchant mariner pool that we have to pull from and the
requirements as laid out in our requirements study, we have
sufficient mariners to meet those requirements should we have
to generate the surge fleet and the Ready Reserve Force.
As we continue to move forward and if there are other
changes, we will continue to work very closely with MarAd to
ensure that that requirement is not only understood but we are
able to meet that requirement moving into the future and not
increasing risk to our readiness.
Mr. Hunter. General, let me ask you this. If you know that
right now you meet the requirement, how much in excess over the
requirement are we right now? So if you know what the
requirement is and you know what that number is, then you
should know the number of people that we are in excess of the
requirement.
General Fraser. Based on the numbers that I have, the
merchant mariner pool right now is slightly in excess of 15,000
mariners, of which at any time there are approximately 7,000 or
so that are at sea doing their job. The others are maintaining
certification, getting ready to go, doing these types of
things.
So that, then, leaves a pool of which we need approximately
3,000 mariners to man our surge and Ready Reserve Fleet. So we
would draw from that remaining pool of merchant mariners that
are current, qualified, certified, licensed to fulfill that
requirement.
Mr. Hunter. So, out of those 15,000 then, as you say, 7,000
are active doing stuff, being mariners, the other 7,000 are not
at any given time. And out of that 7,000 that are active, you
pull 3,000?
General Fraser. The others are getting ready to go,
maintaining their certifications, doing these types of things.
They are part of the pool. We would pull from the pool. We
would turn to MarAd, who would then reach out to industry based
on the capabilities that we would need to man the ships,
depending upon the types of ships that we were getting
underway. They would then put this team, this crew together and
then be ready to sail in minimum time.
Mr. Hunter. So, as the cargo preference laws change, if
they do, and the Food for Peace program gets slashed, what do
those numbers go to? What is your estimate? You go from 15,000
to 10,000, 8,000? As those U.S.-flag vessels go foreign-flag,
how many mariners do we lose?
Mr. Porcari. I am----
Mr. Hunter. I am sure the administration wouldn't cut the
program without knowing how many mariners we would lose out of
that pool.
Mr. Porcari. Mr. Chairman, I don't have that number. I will
be happy to provide the committee with what information we do
have.
Mr. Hunter. All right. I thank the gentleman.
Ms. Hahn, do you have more questions?
Ms. Hahn. Yes.
Mr. Hunter. Ms. Hahn is recognized.
Ms. Hahn. I just want to say on this, about building more
ships, more American-flag ships in this country, shipbuilding
is such, again, another overlooked industry that can add to the
economy. These are great jobs when we build ships. You know,
these are, like, our machinists, our electricians, our
metalworkers. I mean, these are great jobs and skills that we
are losing in this country.
One of the areas that we are not involved in is the cruise
industry. And according to a 2011 statistical snapshot taken
last year by MarAd, the American cruise industry had a record
year, with 71.8 million passengers. In fact, the North American
cruise industry has been one of the bright spots in the
shipping industry. It has consistently done well year after
year, even as we remain in an otherwise sluggish economy.
However, except for a few small coastwise vessels and
riverboats, nearly all of the 200 oceangoing cruise ships in
the North American market are foreign-flag ships. This
discrepancy is also evident in our cargo fleet, where only 2
percent of the international commercial cargo is carried by
U.S.-flag vessels, down from 25 percent 60 years ago.
I represent the Port of Los Angeles, and I am supporting
all ships that call on American ports and serve American
passengers. I do wish we could focus more on how we could build
more U.S.-flag ships for our cruise industries.
Why aren't we creating more U.S.-flag ships in this
country? And what can we do to ensure that more of these ships
are built and operated, owned and operated here? And is MarAd's
policy to refrain from financing new cruise ships one of the
major hurdles preventing U.S.-flag cruise fleets?
Mr. Porcari. Well, first, if I may, the cruise ship
industry, with its dramatic growth to and from U.S. ports, does
present a potential opportunity, and we recognize that. And,
further, with only one exception that I am aware of, they are
not American-flag vessels.
It is an industry that we would like very much to
encourage. There may well be opportunities in the future to do
that. I am aware of only one potential proposal for a Title XI
loan guarantee for a cruise vessel that in this administration
never got beyond the discussion stage.
The speculative nature and financial viability of some of
those vessels and companies is an open question. We have a
fiduciary responsibility, as you know, in the Title XI program
to make sure that the loan guarantees are being used for
projects and employing people at shipyards with a very high
degree of likelihood of success. And that is the tact we have
taken.
I would put the cruise ship business on the opportunity
list, along with some others that I have mentioned, again,
including energy.
Ms. Hahn. So you are saying here today that you are not
going to have a policy to refrain from financing new
opportunities for cruise ships?
Mr. Porcari. Current policy is not to finance cruise ships
through the Title XI program. There have not--I have not seen
or am not aware of any proposals that would drive us to change
that policy, because----
Ms. Hahn. Well, there are probably not any proposals,
because the policy exists.
Mr. Porcari. Well, we actually have had at least one
proposal that I am aware of, but again the financial viability
of which was shaky at best.
Ms. Hahn. Well, I really think this is an opportunity and I
would hope that MarAd would consider lifting this policy and
looking to possibly finance. This is a huge opportunity. I
mean, the fact that we have no U.S.-flag cruise ships, and as
we have seen recently, there have been some major disasters at
sea, it seems there is an opportunity to build a better cruise
ship, one that is safer and more efficient.
We also have a problem, I know in Los Angeles, of detaining
foreign crews from disembarking from the cruise ships in port
because of the potential opportunity for folks who want to flee
and come to this country. So there are problems that I think we
could address with building U.S.-flag cruise ships.
Mr. Porcari. If there is a----
Ms. Hahn. I mean, even Disney. I couldn't believe the
Disney ship was not, I mean, U.S.-flag. That just hurt.
Mr. Porcari. Well, first, I think U.S. industry and U.S.
labor would certainly point out that a U.S. built and
maintained and a U.S. Coast Guard certified cruise ship fleet
is a safer, better alternative and more reliable.
What I will tell you is if we have a viable proposal on a
cruise ship, we will certainly entertain that.
Ms. Hahn. OK. Thank you.
Mr. Hunter. Mr. Rice is recognized.
Mr. Rice. Thank you, Mr. Chairman. You know, sitting here
and listening and looking at these statistics, I don't think I
have ever seen a more clear example of a failure of a
protectionist policy, and I really don't want to sit here and
continue what we are doing and watch our maritime industry
disappear. So I would ask the chairman if we could convene
another hearing with some maritime commercial shippers and ask
them their opinion about what we can do differently to try to
make our ship building business more competitive.
Mr. Hunter. The gentleman is in luck. That is the next
panel.
Mr. Rice. Great.
Mr. Hunter. Yeah. In about 5 minutes. Does the gentleman
yield back his time?
Mr. Rice. I do.
Mr. Hunter. I would like to recognize the ranking member
for one last question.
Mr. Garamendi. Thank you. I am really concerned here. The
talk is good, that is, the direction that you want to go is
good, but the programs and policies are going the opposite
direction. General Fraser, in your testimony you talked about
the need to recapitalize, yet money for recapitalization is not
available. We talk about the need for encouraging the use of
American shipping, and yet the administration calls for repeal
of Public Law 480 that goes exactly the opposite direction. We
have Title XI out there that is supposed to be used, but yet
very little has been done in new programs, takes forever to get
a loan approved, if at all. We just heard in response to Ms.
Hahn's question that, no, we are not going to do the
commercial--the tourist ships.
So it goes on and on, but there isn't an overall strategy
and an implementation of a strategy. The pieces of the puzzle
are disjointed and in some cases are taken off the board. So I
think we really need to settle on do we want, do we need, must
we have a domestic merchant marine available for national
security purposes, General Fraser? If so, then what are we
going to do to make that happen? How are we going to
recapitalize? Where is the money going to come from? Do we want
a commercial merchant marine for any number of reasons, for
jobs, for enhancing the American economy? Do we want a ship
building industry in the United States?
If the answer to these questions is yes, then we need to
have a coherent national policy and the money to support it. We
have seen five fiscal crises in the last 2 years. Each one has
diminished the money available for Federal programs, including
programs that are being discussed today.
So I would like to work with the administration, the
Department of Transportation and, General Fraser, in your
programs in developing a coherent national strategy that fully
employs the commercial marine base and meets the needs of
national security. I don't think it exists today. I think it is
incoherent, I think it is incomplete, and in many ways one hand
is harming the other, so one program is harming the other
program.
With that said, I am going to yield back my time. I want to
thank the gentlemen for participating. Mr. Porcari and General
Fraser, thank you very much for your testimony. I know that I,
and I am sure the chairman, look forward to working with you on
developing a coherent program, one in which every element
necessary for national defense and for economic growth in this
Nation is in place, vibrant and healthy.
I yield back.
Mr. Hunter. Thank the ranking member.
Mr. Porcari, for the record, could you get back to us, too,
on when the shipyard economic benefit study is due to be
released, too?
Mr. Porcari. I will be happy to. I know it is imminent. I
will get you an exact date.
Mr. Hunter. Thank you, gentlemen, for your time. If there
are no further questions, so we will call the second panel of
witnesses. Thank you.
Mr. Porcari. Thank you.
Mr. Hunter. All right. We will convene now. Is everybody
ready? Thank you for being here. Our second panel of witnesses
include Mr. Fred Harris, president of General Dynamics NASSCO,
appearing today on behalf of the Shipbuilders Council of
America; Mr. Joseph Pyne, chairman and CEO of Kirby
Corporation, appearing today on behalf of the American Maritime
Partnership; Mr. Mike Jewell, president of the Marine
Engineers' Beneficial Association; and Mr. Augi Tellez,
executive vice president of the Seafarers International Union.
And we will start with Mr. Harris. You are now recognized.
TESTIMONY OF FRED HARRIS, PRESIDENT, GENERAL DYNAMICS NASSCO,
ON BEHALF OF SHIPBUILDERS COUNCIL OF AMERICA; JOSEPH H. PYNE,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KIRBY CORPORATION, ON
BEHALF OF AMERICAN MARITIME PARTNERSHIP; MIKE JEWELL,
PRESIDENT, MARINE ENGINEERS' BENEFICIAL ASSOCIATION; AND
AUGUSTIN TELLEZ, EXECUTIVE VICE PRESIDENT, SEAFARERS
INTERNATIONAL UNION
Mr. Harris. Chairman Hunter, Ranking Member Garamendi and
members of the subcommittee, I am Fred Harris, president of
General Dynamics NASSCO. We build U.S. Navy ships and large
oceangoing commercial ships in San Diego. We repair and
maintain Navy ships in San Diego, Norfolk, and Mayport. I am
vice chair of the Shipbuilders Council of America, which
represents shipyards and partners that supply and support U.S.
vessel construction and repair.
It is a pleasure to testify regarding the industry and the
important Federal policies, including the Jones Act and the
Title XI loan guarantee program. Our Navy and Coast Guard are
without equal and their strategic importance is unquestionable;
however, our commercial maritime industry is often overlooked
as a vital element of our Nation's maritime strength. It
ensures skilled mariners and ships are available in time of war
or emergency to transport material by sea. From 2002 to 2008,
U.S.-flag vessels carried 97 percent of sealift material to
Iraq and Afghanistan. A significant portion of that material
was transported by way of activating the ready reserve fleet.
The Jones Act is critical to our Nation's maritime
strength. The act requires that cargo transported between U.S.
ports be moved on U.S.-built, U.S.-flagged, and U.S.-crewed and
-owned ships. It ensures that experienced U.S. mariners are
available to crew ships in times of crisis or conflict,
enabling the timely movement of supplies. Maintaining the Jones
Act is vital to ensure America preserves its commercial
shipbuilding industry and thus its naval shipbuilding industry
and capability.
A number of U.S. shipbuilders are internationally
competitive in the offshore support vessel marketplace and
others are becoming world leaders in propulsion LNG
technologies.
The Jones Act dry cargo fleet needs to be recapitalized.
Also, projected demand is high for new crude and product
carriers. The Jones Act ensures this work will be performed in
the U.S., helping maintain our workforce of skilled engineers
and trades people. In addition, it ensures development of
innovative technologies and best practices that benefit both
commercial and military shipbuilding.
General Dynamics NASSCO has proven we can dramatically
lower the cost and reduce the time it takes to build high-
quality naval vessels while also constructing Jones Act ships.
Today we are achieving major efficiency gains and setting new
standards constructing the mobile landing platform ships for
the Navy. We recently signed a two-ship contract with TOTE, a
forward-looking Jones Act owner, to construct the world's
largest LNG-powered container ships, which will be dramatically
more fuel efficient and exceed all emission requirements.
Building those and other commercial ships will reduce the costs
of U.S. Government shipbuilding.
Revitalizing the Maritime Administration's Title XI loan
guarantee program is essential to modernizing the Jones Act
fleet and sustaining the shipbuilding industry in the U.S.
Title XI provides Government guarantees on private sector loans
for commercial shipowners constructing new ships and offers
better terms and low-interest rates, leveraging an average of
$11 of private investment for every $1 of Federal guaranteed
funds.
The program has provided strong support for the industry;
however, the Title XI program must receive adequate
congressional support to be beneficial to the commercial
shipbuilding industry. First and foremost is sustained,
dependable finding. No funds were appropriated to support this
program in fiscal year 2013 and none are proposed in PB 2014.
We are grateful for continued efforts in Congress to provide
Title XI funding, including the efforts of Chairman Hunter and
other Members.
Second, the loan guarantee process requires significant
reform to restore the program's effectiveness as a timely aid
to ship construction financing.
The shipbuilding subcommittee of the DOT Maritime
Transportation System National Advisory Council has made
thoughtful recommendations regarding needed reform, the details
of which are in my written testimony.
Thank you again for the opportunity to address the
committee. I look forward to your questions.
Mr. Hunter. Thank you, Mr. Harris.
Mr. Pyne, you are now recognized.
Mr. Pyne. Thank you, Mr. Chairman. Chairman Hunter, Ranking
Member Garamendi, committee members, good morning. My name is
Joe Pyne. I am the chairman and CEO of the Kirby Corporation.
Kirby is the Nation's largest maritime company. Kirby is a
publicly traded New York Stock Exchange company with a market
cap of about $4.6 billion. We employ over 4,600 people, some
2,500 of them are Jones Act mariners, and we operate a fleet of
over 1,300 Jones Act vessels.
I am here today on behalf of the American Maritime
Partnership, AMP. AMP is the coalition that represents the U.S.
domestic maritime industry.
The Jones Act not only helps ensure national security, but
it also provides good paying jobs with good benefits for
workers in America. The domestic maritime industry sustains
approximately a half a million jobs. Our industry takes care of
its people. At Kirby, entry-level vessel jobs pay an average of
$45,000 a year. With some hard work and training, which we
provide at our training center, a high school graduate working
for Kirby can earn over $130,000 a year after a few years on
one of our boats.
Many segments of the fleet are growing and recapitalizing.
For example, my company, Kirby, has invested over $2.1 billion
in Jones Act assets in the last 5 years. TOTE, a west coast
company, is building a new state-of-the-art LNG-powered ship
for the Puerto Rican trade. Hornbeck Offshore is building a new
generation of offshore supply vessels that will work in both
domestic and international trades, demonstrating that American
vessels can compete in world markets. And Crowley Marine has
recently invested about a half a billion dollars in two new
tankers and two large articulated tug barge units, each with a
capacity of 330,000 barrels.
Year in and year out, the domestic fleet serves the needs
of America. Nobody talks about waiving the Jones Act when the
market for our services is soft. When the markets are tight and
owners need to add capacity, even discussing waivers or changes
to the Jones Act makes matters worse. It sends a chilling
message to operators who need to build new vessels to support
shippers' needs. It causes shippers to be less committed to
supporting new Jones Act vessels to support their requirements.
The Jones Act is a key part of our national defense. The
vessels themselves, the people who man them, the shipyards who
build them each play a critical role. The Jones Act supports
homeland security also. Our mariners are the eyes and ears of
homeland security on the water. They safely and securely
transport hazardous cargoes through many parts of our Nation
and through populated areas. We do not want to turn these
cargoes over to foreign workers on foreign vessels.
The Jones Act sustains American jobs, plays a vital role in
national defense and helps protect the homeland. How can
Congress support this? I suggest the best form of support is to
maintain the certainty that has been expressed by generations
of American leaders that our domestic merchant marine is not
for sale and the Jones Act will remain the law of the land.
Our industry is making a huge commitment to serve the
future transportation needs of this Nation. Vessels are 30- to
40-year lived assets. In order to make these long-term
investments, we need confidence that the Jones Act is secure.
On behalf of AMP, thank you for your support of the Jones
Act and all that it represents for America. And thank you for
the opportunity to be here today.
Mr. Hunter. Thank you, Mr. Pyne.
Mr. Jewell, you are recognized for 5 minutes.
Mr. Jewell. Chairman Hunter, Ranking Member Garamendi and
members of the subcommittee, I am pleased to have the
opportunity to appear before you on behalf of the American
Maritime Officers, Master Mates and Pilots, and my union, the
Marine Engineers' Beneficial Association.
History has repeatedly proven and policymakers have
recognized that it is in the best interest of the United States
to maintain and support a strong U.S. merchant marine. As
stated in the Merchant Marine Act of 1936, it is necessary for
the national defense and development of its foreign and
domestic commerce that the United States shall have a merchant
marine sufficient to carry its domestic waterborne commerce and
a substantial portion of the waterborne export and import
foreign commerce.
Today U.S.-flag commercial vessels and our American
merchant mariners are responsible for transporting only 2
percent of our country's foreign commerce. Mr. Chairman, that
is hardly a substantial portion.
We believe the best way to achieve the goals of the 1936
act is for Congress and the administration to fund and protect
existing programs and promote forward-thinking policies that
encourage new tonnage to operate under the U.S. flag.
Other nations around the world are now recognizing the
value of their merchant fleets. Just yesterday it was reported
that the Chinese are increasing the support to their maritime
industry, implementing subsidies, encouraging long-term supply
chain contracts and strengthening their influence within the
marketplace.
The Maritime Security Program and U.S. cargo preference
statutes are among the cornerstones of American merchant
policy. In May of 2011, General Duncan McNabb, Commander of
USTRANSCOM, stated, to date over 90 percent of all cargo to
Afghanistan and Iraq is moved by the U.S.-flag vessels. He went
on to note that the U.S. cargo preference laws have helped to
ensure the continued viability of both the U.S. fleet and the
pool of citizen mariners who man these vessels.
Sequestration is having a major impact upon the Maritime
Security Program, because in August, the MSP funding runs out.
This coupled with the fact that the U.S. military cargo
preference cargoes continue to decline and the administration's
budget proposal on the Food for Peace program has left our deep
sea carriers in doubt if they can continue to fly the American
flag.
We are deeply troubled by the administration's recent
proposal to begin replacing the existing Food for Peace program
with a program that simply provides U.S. taxpayers' dollars to
other nations to purchase foreign agricultural commodities and
use foreign shipping services. Americans should be proud that
the Food for Peace program not only demonstrates the generosity
of the American people to help the world's most needy people,
but also results in significant economic and strategic benefits
for our country.
As Congress considers a broad overhaul of the U.S. tax
policies, the competitiveness of the U.S. merchant fleet and
U.S. mariners should be top priority. To this end, we believe
changes should be made in our tax laws that can foster the
growth of the United States maritime industry and equal the
playing field for the U.S.-flag merchant marine as we compete
internationally.
We would note that we greatly appreciate the support of the
members of this subcommittee for the enactment of the 2004
tonnage tax legislation for U.S.-flag vessels.
Congress should enact policies to promote a vibrant short
sea shipping industry. We ask the committee, through its
formation of the Panel on 21st-Century Freight Transportation,
to include maritime and short sea shipping as a top priority.
The export of liquefied national gas and the growth of the
cruise ship industry represent a very large and potentially
booming industry for the U.S. merchant marine. Our unions
supply LNG deck and engineering officers to crew and operate
LNG ships. U.S. merchant marine officers are now working aboard
LNG carriers operating in the international fleet. We ask the
committee to encourage the employment of the U.S. merchant
mariners aboard these vessels participating in the export of
natural gas.
With regard to the cruise industry, 10 million passengers
boarded cruise ships in the United States in 2012, yet U.S.
mariners are notably absent aboard these cruise ships
internationally. We ask Congress and the administration to
encourage the employment of the U.S. merchant marine aboard
these cruise vessels.
President Ronald Reagan once said that the maritime
industry is a key contributor to our economic strength and
security of our Nation when the Nation was founded. Its
continued growth and prosperity is necessary to the overall
growth of the economics in America, and we agree.
We look forward to working with you, Mr. Chairman, and your
subcommittee in order to promote and expand the U.S. merchant
marine.
Mr. Hunter. Perfectly timed, by the way, Mr. Jewell. Thank
you.
Mr. Tellez, you are recognized.
Mr. Tellez. Good morning. Thank you, Mr. Chairman, Ranking
Member Garamendi, members of the committee. A special good
morning to our friend, Lucinda. My name is Augi Tellez. I am
the executive vice president of the Seafarers International
Union, and I bring you greetings and salutations from my boss,
Michael Sacco, president of the Seafarers International Union.
Thank you for holding this hearing. And a special thank you
to Chairman Hunter for his excellent op-ed in the Washington
Times earlier this month. I would also ask that my written
testimony be added to the record.
Listening to the previous speakers, I am going to go off
script and beg your indulgence while I do a little soapbox
here.
My colleagues and I, the union officials in this room and
throughout the country, are proud to represent thousands of
patriotic Americans, men and women who ply their trades every
day, along with others who are not represented by us, but they
all do the same thing. They ply their trades on the rivers,
lakes, domestic waters and international waters under
conditions, whatever conditions nature or our enemies decide to
throw at us. We do so every day with little or no fanfare
unless we are attacked by pirates and Tom Hanks decides to make
a movie about us.
We have been a critical component of our country's economic
and national security from the founding days of the republic.
We are a critical part of every armed conflict, from the
Revolution to today's conflict in Iraq and Afghanistan, as
mentioned before, carrying over 95 percent of all seaborne
cargoes going into the theater.
We have rebuilt and fed the world since General Marshall
had a plan, including the most recent disasters in--the tsunami
and in Haiti, and we continue to feed the world under the
current Public Law 480 cargoes program.
We are always there when the balloon goes up and we hope to
be there whenever the balloon goes up, but in order to do that
we need to have a strong foundation of a vibrant and viable
commercial fleet. And unfortunately in this world, in order to
maintain that, it has to be a public-private partnership.
The other speakers have mentioned the components of that
three-legged stool, number one being the Jones Act. I won't
expound on the Jones Act, because Mr. Pyne has done an
admirable job both in his oral and his written testimony. I
will add one thing, and it is a hot-off-the-press study
indicating, contrary to assertions by folks that the Jones Act
is responsible for a rise in gas price, the percentage of
gasoline that is carried and impacted by the Jones Act turns
out to be 6.7 percent of the gasoline in this country. The
major impact happens to be the Tampa area, and the impact on
price there is.015 cents. So for those who get up and bemoan
the Jones Act and its impact on gasoline prices, they are just
way off base.
MSP. MSP is critical to the efforts by TRANSCOM to support
our troops. It ensures that 60 vessels, modern vessels, are
there carrying that cargo. One of the objectives that is
sometimes forgotten in the MSP program was to recapitalize our
international fleet. So even though it is less than 100, the 60
ships in the MSP program, because of the way the program was
set up, are new ships. Currently as we are speaking, I believe
Mike can correct me if I am wrong, Maersk, Inc., has just
replaced and recapitalized two of their vessels, if not three,
with new vessels coming in as part--the beginning of their
recapitalization program.
Public Law 480. You notice that when unencumbered by the
administration's contrary view, past commanders of TRANSCOM
attest to the value of the Public Law 480 program and its
importance. So we will grant General Fraser our benefit of the
doubt. He is a good partner and a good leader and a good
soldier.
MarAd itself has an internal study that does in fact show
that 10 years, when you take that long-term view, somewhere
down the line there is a looming shortage in particular areas
of the fleet, of the manpower pool, rather. When you couple
that with less than 100 ships in international trade, then one
ship, let alone eight or 10, is just one too many to lose. It
will have an impact on our ability to man ships and create a
manpower pool.
Congress has always saw fit to support the merchant marine
and the United States maritime industry. We hope that you will
continue that fight, and we look forward to working with you to
ensure that the United States merchant marine is there whenever
we are needed. I thank you for your time. I am prepared to
answer any questions.
Mr. Hunter. Perfectly timed, too, Mr. Tellez. You guys must
have practiced this, I am guessing.
Well, let me say thank you for being here. And there is a
good quote that I like to repeat as often as possible, and it
is he who controls the oceans controls the world, whether you
are talking merchant mariners, you are talking the U.S. Navy.
You know, 20, 30 years ago we had over 400, I think 480
something, probably higher, naval ships that we operated. Now
we are going to be dropping down probably below 300. The Navy
comes out with study after study showing that as the world gets
crazier and things get worse and worse, we somehow need fewer
ships, not more.
So my question for all of you is, and if you can tell me
there is--we have mentioned MSP, we have mentioned food aid, we
have talked about Title XI. If you were to say what is the most
important thing in the industry to keeping those shipyards
rolling so that if we do have a need--which I think if you take
the 50-year view, you are going to have another conventional
war in the ocean again. You have a lot of smart Ph.D.'s from
different military schools saying you are never going to have
surface fleets fighting each other again on the open oceans. I
would disagree. And you as commercial shipbuilders are going to
be the ones who have to build those naval ships the way that GM
used to have to make tanks. And if we get in a big protracted
war again, that is what is going to happen.
You are vital to the Nation's security interests, and I
would like to know the most important thing you think can be
done in a private-public way with the U.S. Government's help to
keep your industry going.
Mr. Harris. And by the way, Fred, I don't think that is a
San Diego accent you have, is it?
Mr. Harris. Mr. Chairman, it is not.
Mr. Hunter. OK.
Mr. Harris. Let me start by saying from the Government
side, because we build both commercial and Government ships in
this country, from the Government side, having a shipbuilding
plan where you understood what was in front of you and was
every year consistent and didn't change every month would be a
big start to help the shipbuilding industry. The Government
would like us to invest hundreds of millions of dollars in
facilities. Generally, shipyards don't have a problem in doing
that as long as they understand what the investment is and what
the return may be in front of them. So sustained and steady
shipbuilding, understanding the Government policy.
From the commercial side, I think the biggest value for
American shipbuilding would be keep the Jones Act and then
support Title XI. How do you support Title XI? We need to have
adequate funding on a yearly basis and we need to sustain that
year after year after year. And I am not telling you that is a
lot of money, because of the multiplication factors. I think in
the neighborhood of $50 million, $60 million, in some years
even less, but in that range would give the shipbuilding
industry and the owners the ability to go borrow money and
build and recapitalize the fleets.
The other thing that has to go on is, and some of it was
mentioned this morning, is that the Maritime Administration has
to get to be much more streamlined and much more responsive to
loan applications. I can design a ship and build it before an
owner will get notification he either is or is not approved for
a loan. Design it and build it, 2 years. That is really not
healthy, because how could you as an owner go forward to plan
your recapitalization if you are not sure if you are going to
get a loan or not in that timeframe?
Now, it is not just MarAd's fault. It is also sometimes the
owners don't provide all the information, but it is a
combination, and a restructuring or review of that policy would
be a good thing for the American commercial shipbuilding
industry here. And again, as I said, maintaining the Jones Act
and keeping the Jones Act strong and safe will help American
shipbuilding.
As you mentioned, in this country 300 shipyards have gone
out of business since 1953. There are somewhere around 400,000
people involved directly in U.S. shipbuilding, either
Government or commercial, doing supplies, equipment, or
building ships themselves.
It takes us a good 5 years in the shipbuilding business to
learn the skill of shipbuilding. When you take our high-end
trades, our electricians, our welding specialists, it is a 5-
year journey. Losing them and trying to revitalize or
reconstitute the industry would never work. I have been
involved in a number of different evaluations in different
countries, like the U.K. They have lost their shipbuilding
industry. It is gone. And once it is lost, it will be very
difficult, if ever, regained again. And in the U.K., for
example, they recently just went and bought three tankers for
their Royal Navy Auxiliary, and they bought them from Korea. No
one in the U.K. was able to bid on them and build those ships.
So it doesn't take long for the industry to go away. If it
does, it will be very difficult to recapitalize or to
reconstitute.
So keeping the Jones Act strong and getting Title XI
funding fixed are important. And I think also the point you
made earlier about a national maritime policy. We do not have
one. And right now today if you said, what is our national
maritime policy? It is very fragmented. And looking at since
1936, MarAd has made some 800 loans on ships that were built
under the Title XI or previous program, but a guaranteed loan
program. Recently the funding is not there, it hasn't been
appropriated, and it has taken so long for owners to go in,
ships are just aging in place. The noncontiguous liner fleet is
some 30-plus years old, inefficient, highly pollutant, won't
meet the international standards unless the ships are rebuilt.
Mr. Hunter. Thank you, Mr. Harris. And we will come back
around. I would like to get all of your answers for that
question on what the most important thing is, and we will wait
till my colleagues have a chance to ask questions.
Mr. Garamendi.
Mr. Garamendi. Well, as much as I like to listen to myself,
I would like to have your question answered by the gentlemen.
So let's just continue on.
Mr. Pyne. I think I can be succinct. To remove uncertainty
and confirm the importance of the Jones Act----
Mr. Hunter. Mic. Pull that closer to you, the microphone
closer to you. Thank you.
Mr. Pyne. Is that better? OK.
Remove the uncertainty and confirm the Jones Act.
Investors, operators, owners, shipyards have a hard time
dealing with uncertainty, and if Congress sends, and Government
agencies send mixed messages, it really does dampen the
enthusiasm for making the investment.
I think that we are actually in a unique time in America.
We are in the middle of an energy revolution that is going to
drive lots of transportation requirements. And those
transportation requirements are not only going to be marine,
they are going to be rail, pipeline, even truck. Volume drives
utilization in our business. Utilization drives efficiency and
price and produces the comfort level to make investments.
The more ships we build, the more efficient we will become.
We will lower the cost of construction. That happens in the
barge business. We build a lot of barges. We do it
competitively on a global basis. I think we can do that from a
ship perspective if we build enough of them.
What we don't need is a mixed message that says we are
going to compromise the Jones Act, which makes it much more
difficult for a company like Kirby to invest in it.
Mr. Jewell. I agree with the ranking member that we need a
strategic plan. It is best summed up in three things. Without a
company or a ship built in the United States, we cannot crew
it. And without a crew, you can't sail. But without a ship, you
can't have the crew to do that.
And I do disagree with an earlier panel member, I truly
believe that there are not 15,000 mariners out there; it is
significantly less. And when we lose ships, we lose our
membership. And once the membership is gone, it trickles down
to all the schools. And take the $25 million. I am clueless on
where it goes. Is it a 1-year deal? Is it a 2-year deal? We all
have schools, we are all highly skilled. What are you going to
reeducate us to do with that $25 million?
But I truly believe it is the three things. You have to
have a company to order the ships built in the United States,
and then we can crew it. Thank you.
Mr. Tellez. In the General's defense, that 15,000 number
was given to him by one of his staff, and that 15,000 probably
represents a number of deep sea licenses and documents issued
in a particular time period. The actual manpower pool that he
can grab onto to support his ships is, as Mike said, far less
than that.
Compounding that issue is also there is a group, the mean
age, I believe, within the officers is somewhere 55 years old,
so you have a whole generation of officers that are soon to be
retiring out. Where is the training? Where are the platforms
where you train the people to replace them to move up? And that
is the concern with those numbers.
If I were a shipowner, I guess I would say the most
important thing to me would be the preservation of cargo. What
can Congress, what can the Government do to make sure that I
have got cargo? And the first thing is probably to enforce the
existing laws on the books to make sure that there is no
leakage. And by that I mean if a cargo is deemed to be reserved
for a U.S.-flag ship, well, then it should be on the U.S.-flag
ship and not be circumvented and put on someone else's ship.
The second part of that is to maybe apply the cargo
preference laws to other cargoes that have been excluded in the
past. That way you broaden the base and, therefore, keep those
ships that Mike is talking about going.
I believe cargo would be the most important thing to keep.
With cargo on your ship, everything else falls in place. Cargo
is what makes a ship go. So I would say the most important
thing would be the preservation and the expansion of cargo for
our vessels.
Mr. Garamendi. Thank you, Mr. Chairman. And I thank you for
the answers. We really have all the elements of a strategic
plan, it is just they are not pulled together in a way that
directs the policy of the U.S. Government.
You mentioned cargo. We have cargo rules. We have laws. We
do need to have regulations written. And I was talking to the
chairman about the necessity of MarAd writing the regulations
of a 2009 law. So that needs to be done.
The waivers, there is a meeting going on I think next door
with the outgoing Secretary of Transportation. I had a
discussion with him about waivers that were routinely available
in previous administrations. He said he was going to stop the
waivers. And I think Mr. Porcari now looks at every waiver in
the surface transportation, but I don't think he is looking at
every waiver in maritime transportation. He ought to. And he
ought not allow many of them, if any of them, because that is
your cargo.
On the other side, the loan programs, you know, why are
they not being processed? And why are we not appropriating a
steady flow of money? There is nothing more damaging to an
industry than start-stop. And the two gentlemen, you spoke to
that. If you don't have certainty, you are not going to make
the investment that is necessary for the future productivity of
that shipyard, for example.
And so we need to on our side have a continuity in our
appropriations and in our policy. The administration needs to
make sure that a waiver is absolutely essential, just not a
routine matter, so that you have the cargo side of it.
I am perplexed by the administration's 480 policy and their
new welfare program. The $25 million, you correctly--where is
it going? What is it going to be used for? Is it going to
continue, or is it simply a way of buying off some element of
opposition? I suspect that this is exactly what it is about. So
I would just as soon put the money back into the Food for Peace
program and help more people around the world survive.
There is a whole series of questions that we have, and Mr.
Chairman, if we could for the record provide questions to these
gentlemen, specific responses, as well as to the previous
gentlemen, if you could authorize that.
Mr. Hunter. Without objection.
Mr. Garamendi. Thank you. I think we have covered it here
with your questions about what is the most important thing to
be done. And there were four different answers, and that is
very, very helpful to me.
I think what I would like to do is to address each one of
you and ask you if there are things that you specifically think
we need to know that have not yet been said. And for me, I
would like that in the context of a national strategy, what
could be added to that? As I said, I think we have the elements
that are already in law, so it is a matter of pulling that
together in a comprehensive way. But I will leave it open to
you. What else do we need to do, meaning Congress?
And we will start--let's go reverse. Mr. Tellez.
Mr. Tellez. Well, again, as I said, to enforce and really
put some teeth into the laws that exist. I think you also need
to take a long-term view, as the chairman is apt to say,
instead of looking at, you know, fiscal year terms or even 5-
year terms, the security of this Nation and the future of the
merchant marine, you have to take a look in 10- and 20-year
terms, what can we do now that is going to make sure that we
are around in 10 and 20 years.
A strong defense put up by Congress against some of these
folks who are trying to whittle away at all the programs is a
start, but as Mr. Pyne said, there is a future industry growing
in this country that has to do with energy, whether it is LNG,
whether it is gas, whether it is wind, and it is incumbent upon
the industry to make sure we capture whatever we can from these
emerging industries to make sure that we are part of that.
Now, I have been going to meetings and meetings and
conferences for the last 11 years either on short sea shipping
or the new national marine highway, and I have yet to see a
boat in the water. And we can talk and talk and talk, but at
some point if you want a short sea shipping system, if you want
a Federal marine highway, you have to get some boats in the
water to make this thing work. And there are some good ideas
out there that just need to be acted on, need to be grasped,
understood and acted on to expand the business of business for
our folks.
Mr. Garamendi. Mr. Jewell.
Mr. Jewell. The one major thing I would like to say is
about the education and training of the mariner pool. It
roughly takes 8 to 10 years to become a chief engineer or a
master of the vessel, and they are the top guys on those
vessels who take these ships around the world. Recently,
because of the DOD drawdown, we just lost four ships. They will
be gone at the end of this month, and they are called the C-
10s. And that pool of mariners are gone, because once they
actually get to sleep in their own beds, they don't come back.
They don't come back. They truly don't. And we have lost the
expertise and training for these individuals. We are very
skilled, we are very trained in making sure that that ship gets
from point A to point B.
And I look at the food aid. When we deliver that cargo, we
know at least that cargo got to the docks.
So to me, the biggest thing is educating and keeping this
trained pool that General Fraser is counting on, because once
they leave, they are gone. They don't come back to the
industry, and we can't afford to lose one ship.
Mr. Pyne. You know, I actually think that if we define the
parameters and then--and everybody understands what they are
and then you let the market work within these parameters, this
business will thrive, and that is taking out uncertainty so
that you can make investments and know that the rules aren't
going to change after you have made an investment that is in a
30-year lived asset. It means a stable regulatory environment,
tax policy that people understand, a consistent energy policy.
If you do those things, I think that you will see this business
grow and thrive.
Our issue is just all the uncertainty that occurs when we
start talking about, you know, waivers for the Jones Act when
capacity is out there that can carry the cargoes. We talk about
compromises to programs that support the maritime business. If
we could just get a more certain set of rules, I think we would
do fine.
Mr. Garamendi. Mr. Harris.
Mr. Harris. Yeah. I would concur with Mr. Pyne that----
Mr. Hunter. Microphone.
Mr. Harris. Sorry--that, you know, sustained policies,
sustained programs, good understanding of what is coming in the
next 5 years to 10 years so you can invest. There has been a
lot of press lately about being able to, for example, in this
country build the number of ships necessary. Somebody talked
about we need 30 product carriers in the next 3 to 4 years. The
industry today could probably build 10 a year. It would take us
a year to sort of get the design done and then start building.
So there is capacity here to do that and there is capability
and talent here to do that, and capability and talent to man
the ships. So thinking that it is all done is wrong, but
putting forth a sustained maritime policy, the Government
shipbuilding program, we understand what is in front of us, we
will bring people back into this business and industry.
Mr. Garamendi. Mr. Chairman, with the ability to send
specific questions off to the panel, I think I will let it go
at that. The marine highway, we haven't discussed that much,
but the consistency of policy and a national strategy that is
implemented through the years, coherent, each element in place
with a consistent level of funding through the years is I think
where the answer will lie to most of this.
Mr. Chairman, I yield.
Mr. Hunter. Thank the gentleman. Mr. Rice is finally
recognized.
Mr. Rice. Thank you, Mr. Chairman.
Mr. Pyne, why have we lost 90 percent of our capacity in
the last 35 years? What is it that makes us not competitive?
Mr. Pyne. I think that--excuse me, Congressman.
You know, foreign-flag vessels play by a different set of
rules. If they played by the same rules that U.S.-flag vessels
played by, I think that you wouldn't have lost that capacity.
Mr. Rice. You said if we played by the same rules that the
U.S.-flag vessels played by?
Mr. Pyne. Yes. That is correct. If you applied the same set
of laws, if you applied the labor laws, environmental laws, in
some cases higher standards, paid foreign crews at U.S. labor
rates, which aren't excessive, and made them pay taxes. There
are a lot of foreign owners who do not pay taxes and there are
a number of countries that actually subsidize their maritime
businesses. It is not a level playing field. If you had a level
playing field, I think that indeed you would recapture a lot of
that lost cargo.
Mr. Rice. Yeah. I am just trying to understand and learn,
and if I sound too aggressive, I am not trying to attack you, I
am just trying to understand why. Where are--you know, we are
building ships in the United States today, correct?
Mr. Pyne. Yes, we are.
Mr. Rice. How many do we build in a year?
Mr. Pyne. I will defer to Mr. Harris.
Mr. Harris. Yes. Generally between Navy ships and
oceangoing commercial ships, maybe an average of 12 to 15.
Mr. Rice. And how many are being built worldwide?
Mr. Harris. Oh, we build less than .2 percent of the total
population. There are shipyards in Korea that build in 1 year
what we would build in 15.
Mr. Rice. And why is Korea--why is this business located in
Korea? Why can't we compete with Korea? Is it again because of
the Government regulation you were talking about?
Mr. Harris. It is some of that. With Government
regulations, OSHA standards, environmental standards, they are
absolutely not where we are today, so they get to build their
ships in a bit different environment. But the other thing is
that today, for example, in Korea, we are not talking about
having a committee meeting. There is a cabinet position called
the ministry--the Minister of Shipbuilding. That is his job.
One job. It is an important national item.
Talking about American shipbuilding as compared to Korean
shipbuilding is apples and watermelons. The volume is the
issue. Mr. Pyne referenced volume. Volume is the issue. When
you are building 12 to 15 ships a year in 5 or 6 different
shipyards around the U.S. and you are building 225 in 1
shipyard alone in Korea, you quickly--not only from a material
standpoint. Steel. In this country in shipbuilding, we consume
about 100,000 pounds--I mean, 100,000 tons of steel a year. In
Korea, for their shipbuilding industry, it is about 16 million
tons a year. So when I go buy steel, and I buy at the best
price I can get it in the U.S., I buy steel, it is at least
$300 a ton more than the steel bought in Korea.
Mr. Rice. Just because of their volume?
Mr. Harris. Because of their volume.
Mr. Rice. OK. Well, I would like to get our volume up.
Korean ships, the ones that are built there, are they all
flagged in Korea?
Mr. Harris. They are flagged internationally.
Mr. Rice. Everywhere.
Mr. Harris. All over the----
Mr. Rice. All over the place. And what determines where
they flag them?
Mr. Harris. Whoever the owner is who comes to buy them.
Mr. Rice. But why does an owner choose--where are most
ships flagged?
Mr. Harris. Where are they flagged?
Mr. Rice. Yeah. Where are they mostly flagged?
Mr. Pyne. Well, they are----
Mr. Harris. Mic.
Mr. Pyne. Yeah. Panama, the Bahamas.
Mr. Harris. Liberia.
Mr. Pyne. Liberia.
Mr. Rice. Why? Why would they choose to flag in Panama, for
example?
Mr. Harris. No Coast Guard regulations, not like U.S.-flag
ships, you know, different----
Mr. Rice. More Government regulation and taxes is what you
are saying, right?
Mr. Harris. But also they don't pay the tax or any of it,
and they crew--you may have a Liberian registered flag,
Panamanian flag with a crew from halfway around the world in
some other country.
Mr. Rice. All right. U.S. ships, the ones that we are
building, are they flagged around the world or mostly flagged
in the United States?
Mr. Harris. Flagged in the U.S. So by----
Mr. Rice. Are all of them flagged in the United States?
Mr. Harris. I don't know for sure. There may be some
smaller ones that are not, but I would say the vast majority.
Mr. Rice. Most all of them. Why would a U.S.-flag ship not
be flagged in Panama?
Mr. Harris. Because if they wanted to engage in Jones Act
trade, they have to be U.S.-flagged and U.S.-built. And they
also then have to pay U.S. taxes and have to be subject to U.S.
OSHA requirements, safety requirements and built with those
requirements.
Mr. Rice. Well, you know, I hear you saying that one of the
reasons we can't compete is because other countries subsidize
their shipping fleet, but, gosh, looking through this notebook
and the Jones Act itself, it appears to me the United States is
really heavily subsidizing our shipping fleet.
What you are telling me, I think the basis of it is, is
that because of Government tax and regulation, we can't
compete. Is that what you are saying? I mean, when you boil it
down, that----
Mr. Harris. No, I am saying this, and I will say it
clearly: volume is a big issue, and no matter what you do with
volume, unless you have comparable volume----
Mr. Rice. Yeah, but we had the volume at one time. We did.
We were building, I think they said, 25 percent of the ships.
We had the volume and we lost it.
Mr. Harris. And then----
Mr. Rice. And why did we lose it? That is what I am trying
to get to. And what I want to do is change whatever that is to
make us more competitive.
Mr. Harris. What happened is internationally shipowners
that are not American shipowners, many of them found that they
could build ships overseas for much, much, much less cost and
then register them under some other flag and not end up being
U.S. inspected.
Mr. Rice. OK. Well, if that is the problem, if they found
that they could flag it for much less cost, then what we need
to do is structure ours where they can flag it here for no more
expensive, right? I mean, why can't we be competitive with the
rest of the world? There needs to be a balance between, you
know, regulation and cost. And if our regulatory policy is so
expensive that it destroys an entire industry, which it looks
like where we are headed here, we have lost 90 percent of ours
in the last 35 years, then maybe we ought to look at our
regulatory policy.
Mr. Pyne. And, Congressman, we wouldn't disagree with that,
but it is more complex than that. In your State the textile
industry has essentially been exported for many of the same
reasons. It is just a lot cheaper to make something in
Bangladesh than it is in the United States. So it is a very,
very complicated economic situation.
Having said that, we would welcome the opportunity to come
visit with you and----
Mr. Rice. I would love that. I need to learn more about
this.
And with respect to the textile industry, you know, I agree
with you that the vast bulk of it has been exported, but that
being said, you know, we are carrying 2 percent American-flag
ships, I think you said carrying 2 percent of the world's
cargo, sounds like most of that is coming from the U.S.
Government.
Mr. Pyne. Well, no. There is a much broader tug and barge
business, which I represent, that carries, you know, millions
of tons of cargo, millions of barrels of cargo competitively on
the inland waterway system of the United States as well as the
three coasts and Alaska and Hawaii. So there--we are talking
about a hundred ship fleet mostly here, but there is a much
broader commercial maritime business in the U.S. than just
those ships.
Mr. Rice. Well, you know, as bad as the textile industry
has been hurt, I promise you a lot more than 2 percent of the
textiles in the world are being created in the United States.
Mr. Pyne. Right.
Mr. Rice. But we don't have the apparent protectionist
policies with respect to that industry that we do here.
Mr. Pyne. Yeah.
Mr. Rice. One more thing. My time is way over, I am sorry,
but post-Panama canal ships, these huge containers that, you
know, are going to drive down the cost of shipping worldwide,
are we building any of those in the United States?
Mr. Harris. No.
Mr. Rice. I think that is a----
Mr. Harris. We are not. We are building in the neighborhood
of 3,500 TDU would be the upper end of the ships we are
building.
Mr. Rice. That is a very sad commentary. Are any of those
going to be flagged in the United States? Any of them?
Mr. Harris. Not that I know of.
Mr. Rice. Gosh, we need to reexamine this. We are doing
something very, very clearly wrong. Anyway, I would love to
talk to you about it, I would love to learn more about it. I
know that I am not----
Mr. Harris. Well, just to add one more thing here, when Mr.
Pyne talked about what happens in the world, for example, right
now what is going on in large container ship shipbuilding,
Hanjin, a company in Korea, has been established in Korea for
years. They just opened up a brand-new shipyard in the
Philippines, 20,000 shipyard workers building ships. They pay
their shipyard workers in Korea about $35 an hour. They pay
their shipyard workers in the Philippines $3 an hour. So trying
to compete with that internationally is very difficult.
Mr. Rice. I said in a Ports Subcommittee meeting a month
ago--I have repeated this a lot of times--but a representative
of the Maersk shipping line was there, and he said that they
were building distribution centers in the Caribbean because
they didn't want to deal with the United States Government.
That is a mighty scary statement to make. People used to come
here because they wanted to deal with the United States
Government.
We need to reexamine these policies, and we need to come up
with something to help you guys be competitive.
Thank you very much.
Mr. Tellez. May I just clarify something? And it goes back
to what Mr. Pyne was saying.
The domestic Jones Act industry is a vibrant, growing
industry. It is viable, and there are companies out there--
along with Kirby, there is Crowley--there are companies out
there that have invested billions of dollars in recapitalizing
their fleets for domestic trade. So the domestic trades, the
Jones Act fleets are growing, they are being modernized, and
they are a going concern.
So we have to differentiate between the loss of the
international fleet and their cargoes and the Jones Act and the
domestic fleet. Two very different animals.
Mr. Hunter. Gentlemen, thank you. This has been one of the
most informative and interesting hearings we have had,
especially getting the administration and DOD's side prior to
your testimony. So thanks for what you are doing for the
industry and for the country.
And, with that, the subcommittee stands adjourned.
[Whereupon, at 11:35 a.m., the subcommittee was adjourned.]