[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 __________ Printed for the use of the Committee on Transportation and Infrastructure Available online at: http://www.gpo.gov/fdsys/browse/ committee.action?chamber=house&committee=transportation U.S. GOVERNMENT PRINTING OFFICE 81-148 WASHINGTON : 2014 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected]. 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 [GRAPHIC] [TIFF OMITTED] T1148.001 [GRAPHIC] [TIFF OMITTED] T1148.002 [GRAPHIC] [TIFF OMITTED] T1148.003 [GRAPHIC] [TIFF OMITTED] T1148.004 [GRAPHIC] [TIFF OMITTED] T1148.005 [GRAPHIC] [TIFF OMITTED] T1148.006 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.]