[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
MARITIME TRANSPORTATION REGULATIONS:
IMPACTS ON SAFETY, SECURITY, JOBS,
AND THE ENVIRONMENT, PART 1
=======================================================================
(113-34)
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
__________
SEPTEMBER 10, 2013
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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Available online at: http://www.gpo.gov/fdsys/browse/
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______
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
------ 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 RICK LARSEN, Washington
PATRICK MEEHAN, Pennsylvania TIMOTHY H. BISHOP, New York
STEVE SOUTHERLAND, II, Florida, LOIS FRANKEL, Florida
Vice Chair CORRINE BROWN, Florida
TOM RICE, South Carolina JANICE HAHN, California
TREY RADEL, Florida NICK J. RAHALL, II, West Virginia
MARK SANFORD, South Carolina (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ v
TESTIMONY
Panel 1
Rear Admiral Joseph A. Servidio, Assistant Commandant for
Prevention Policy, United States Coast Guard................... 4
Hon. Mario Cordero, Chairman, Federal Maritime Commission........ 4
Hon. Paul N. Jaenichen, Maritime Acting Administrator, Maritime
Administration................................................. 4
Panel 2
Thomas A. Allegretti, President and CEO, The American Waterways
Operators...................................................... 24
Captain William G. Schubert, USA Maritime........................ 24
Kenneth D. Franke, President, Sportfishing Association of
California..................................................... 24
Geoffrey C. Powell, Vice President, National Customs Brokers and
Forwarders Association of America.............................. 24
Rear Admiral Rick G. Gurnon, USMS, President, Massachusetts
Maritime Academy, on behalf of the Consortium of State Maritime
Academies...................................................... 24
Patrick L. Wojahn, Public Policy Analyst, National Disability
Rights Network, on behalf of the Consortium for Citizens With
Disabilities Transportation Task Force......................... 24
PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS
Hon. John Garamendi, of California............................... 43
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Rear Admiral Joseph A. Servidio:
Prepared statement........................................... 45
Answers to questions from Hon. John Garamendi, of California. 51
Hon. Mario Cordero:
Prepared statement........................................... 55
Answers to questions from Hon. John Garamendi, of California. 61
Hon. Paul N. Jaenichen:
Prepared statement........................................... 66
Answers to questions from Hon. John Garamendi, of California. 70
Thomas A. Allegretti:
Prepared statement........................................... 75
Answers to questions from Hon. John Garamendi, of California. 84
Captain William G. Schubert:
Prepared statement........................................... 88
Answers to questions from Hon. John Garamendi, of California. 102
Kenneth D. Franke:
Prepared statement........................................... 104
Answers to questions from Hon. John Garamendi, of California. 108
Geoffrey C. Powell:
Prepared statement........................................... 113
Answers to questions from Hon. John Garamendi, of California. 122
Rear Admiral Rick G. Gurnon:
Prepared statement........................................... 126
Answers to questions from Hon. John Garamendi, of California. 132
Patrick L. Wojahn:
Prepared statement........................................... 134
Answers to questions from Hon. John Garamendi, of California. 142
SUBMISSIONS FOR THE RECORD
Rear Admiral Joseph A. Servidio, Assistant Commandant for
Prevention Policy, United States Coast Guard, responses to
requests for information from Hon. Elijah E. Cummings, of
Maryland, regarding:
Why the Coast Guard has not implemented promotion selections
by specialty despite being granted authority to do so by
the Coast Guard Authorization Act of 2010.................. 17
The amount of time and resources the Coast Guard would need
to carry out in-water trials on survival craft............. 22
ADDITION TO THE RECORD
National Customs Brokers and Forwarders Association of America,
statement in response to hearing remarks made by Hon. Mario
Cordero, Chairman, Federal Maritime Commission, regarding Ocean
Transportation Intermediary (OTI) licensing and bonds.......... 146
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MARITIME TRANSPORTATION REGULATIONS: IMPACTS ON SAFETY, SECURITY, JOBS,
AND THE ENVIRONMENT, PART 1
----------
TUESDAY, SEPTEMBER 10, 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 10:33 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.
The subcommittee is meeting today to review regulations
affecting the maritime industry, and we are interested in how
the implementation of these regulations is impacting vessel
safety, the flow of commerce through our ports, and the ability
to grow jobs in the maritime sector.
The Coast Guard, Federal Maritime Commission, and Maritime
Administration have broad authority to regulate maritime
commerce, including establishing and enforcing rules to ensure
vessel and passenger safety, protect consumers, and promote the
U.S.-flag industry. With such vast authority comes great
responsibility to regulate industry in a manner that is fair
and does not stifle competition and job growth.
This hearing is the first of a two-part hearing focusing on
ensuring these agencies are meeting that responsibility.
Today's hearing will review pending rules impacting the safety
and security of our ports and waterways, as well as the
regulations affecting business practices and the viability of
the U.S. flag. On October 10th, we will reconvene to review
environmental regulations impacting the maritime sector.
Maritime commerce is essential to the U.S. economy. While
regulations must address concerns related to safety, security
and stewardship, they must also balance the importance of
maintaining the free flow of maritime commerce. Domestic
shipping alone is responsible for over 500,000 American jobs
and $100 billion in annual economic output. In addition, 90
percent of all global trade and over 25 percent of our GDP
moves via the sea. With the economy still in a fragile state,
it is imperative that the Federal Government foster an
atmosphere where our maritime industry can compete and expand.
To that end, I am concerned about the cost and impact of
several rulemakings that will affect the maritime sector;
specifically forthcoming Coast Guard regulations affecting the
commercial and recreational fishing industry will place
significant economic burdens on these small businesses.
I am also concerned that the proposed rules by the FMC are
misguided and will do little to further consumer protections,
but will impose enormous regulatory burdens and costs on
business. If these and other rules are not written and executed
in a commonsense manner, I am concerned they could make it
financially impossible for the U.S. maritime sector to expand
and grow jobs.
The Maritime Administration's mission is to foster,
promote, and develop the merchant maritime industry in the
United States. In 2008, Congress strengthened the agency's
ability to fulfill that mission by ensuring it could properly
enforce our cargo preference laws. Unfortunately, the
administration continues to drag their feet and refuses to
promulgate rules to implement the law. Meanwhile, the number of
ships flying the U.S. flag in the overseas trade continues to
dwindle. The inaction on implementing the 2008 law, coupled
with the President's misguided efforts to restructure the Food
for Peace Program has left me baffled. It would appear by their
actions that this administration simply does not understand or
care about the very critical role the U.S.-flag industry plays
in expanding our economy and ensuring our national security.
If we want to grow our economy and remain a world power
capable of defending ourselves and projecting power for
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 their testimony.
With that, I yield to Ranking Member Garamendi.
Mr. Garamendi. Mr. Hunter, this is remarkable. We are
actually, Democrats and Republicans, agreeing. I would make a
statement here, and I will read it, but it is exactly the same
direction you are going, and that is to ask what we must do to
strengthen our maritime industry. And we are really together
here.
You know, I am going to read this thing because it is
really a brilliant statement written by my colleague here to
the right. But the bottom line of it is we are going to do
everything necessary, including legislation, to make it happen,
to really build the American maritime industry. And there are
many, many pieces to that. We talked about it. I heard you
speak this weekend in Los Angeles on that issue, Mr. Hunter. I
followed you. We are in unison here. And so our message is
today, tomorrow, and every day beyond is that we are going to
use this subcommittee to strengthen the American maritime
industry.
Now, to read a brilliant statement. Maybe I won't read all
of it. You said, Mr. Hunter, you laid out the facts of the
importance of maritime to the American economy. I won't repeat
all of that. But for the Coast Guard, you have got a real
challenge out ahead of you. And we are concerned about the fact
that the regulations that you have been hanging onto for the
last 2 years haven't been forthcoming. Why? That is a question.
When it comes your turn, I would like you to answer that.
Specifically, it seems to be stuck. A neat little
statement, I got to hand it to my colleague--my staff here, a
back eddy. We love that, don't we? A back eddy. You are stuck,
these regulations seem to be stuck in a back eddy. What is
going on? And we are talking here specifically about the Towing
Vessel Safety Rule. Normally these things get stuck in a back
eddy because of opposition from the industry. That is not the
case. Industry wants it. Why hasn't it moved?
With regard to the Federal Maritime Commission and the
Maritime Administration, why haven't you been enforcing the
laws about American cargo? What is going on here? What is
happening? Is it the MarAd or is it someplace else? I just left
a lengthy meeting with the White House Chief of Staff
McDonough. It was on Syria. But is that where it is stuck? Are
we getting blowback from the administration? Are we getting
blowback from the Department of Transportation? Why are we not
enforcing the laws with regard to American cargo and the
shipment of it? What is going on here? What is happening?
All of these issues we need to pursue. And, frankly, it is
our task, I think, as a committee to also pursue a maritime
policy, to lay out clearly what the maritime policy is for the
United States. What is it that we need to accomplish? Are the
rules, are the laws unclear? Are they fractured, different
pieces that are not coherent and coordinated in a way that
makes sense?
I know I am going to pursue this, I know Mr. Hunter has
great interest in this also. And we need clarity of American
policy and, frankly, we need the money to back it up. A little
later this week, maybe even as early as Thursday, there is
going to be a CR on the floor. That continuing resolution, is
it going to provide the money necessary to carry out the task?
And I know that MarAd is short a third of the money they need
to carry out their tasks. This is an issue for us. Are we going
to provide the money necessary to carry out the American
policies with regard to the maritime industry? And there is a
host of them.
Apparently, based on the resolution that is likely to be on
the floor, the answer is no, because it does not provide the
money necessary to carry out the American policies with regard
to the maritime industry. That is us, and we have our
obligations here, but this is really about those of you that
are testifying today.
I am going to ask that my brilliant statement written by my
staff be entered into the record, and I will let it go at that.
Mr. Hunter, you and I have other obligations in the armed
services, so you want to play back and forth here?
Mr. Hunter. Yeah.
Mr. Garamendi. I will run and go and listen for a while and
then I will come back.
Mr. Hunter. Yeah. Switch off.
Mr. Garamendi. We will go back and forth and hopefully
carry on the obligations of this committee. With that, I yield
back whatever time is left here, ask that my statement be
written into the record, and we will go from there.
Mr. Hunter. Without objection. Thank the gentleman.
And, you know, it is great to see at least some of us
getting along and working together towards the same end. It is
a good thing. And I think John would agree, if you control the
oceans, you control the world. And we are a maritime Nation,
and we need to make sure we stay strong.
So we are going to go have to step out. Mr. Southerland
from Florida is going to take my place in a little bit. Not
that the other witnesses are any more important or less
important than you, but, you know, Syria is on everybody's
mind, and that is the committee hearing. Right now we have
Secretary Kerry and Chuck Hagel and Martin Dempsey, too, in
that hearing going on right now. So, unfortunately, we are
going to have to step out and come back.
Mr. Garamendi. Mr. Chairman, my place will be held by
Congresswoman Hahn when she arrives. I will stay until she gets
here.
Mr. Hunter. Thank you.
On our first panel of witnesses today are Rear Admiral
Joseph Servidio, Assistant Commandant for Prevention Policy at
the United States Coast Guard; the Honorable Mario Cordero,
Chairman of the Federal Maritime Commission; and the Honorable
Chip Jaenichen, Acting Administrator of the Maritime
Administration.
Admiral Servidio, you are recognized for your statement.
TESTIMONY OF REAR ADMIRAL JOSEPH A. SERVIDIO, ASSISTANT
COMMANDANT FOR PREVENTION POLICY, UNITED STATES COAST GUARD;
HON. MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME COMMISSION; AND
HON. PAUL N. JAENICHEN, MARITIME ACTING ADMINISTRATOR, MARITIME
ADMINISTRATION
Admiral Servidio. Good morning, Chairman Hunter, Ranking
Member Garamendi, and distinguished members of the
subcommittee. It is my pleasure to be here today to discuss the
Coast Guard's regulatory program.
The Coast Guard's regulatory program focuses on managing
maritime risks through the establishment of proficiency,
safety, and security standards to protect life, property, and
maritime and coastal environments. Key objectives of our
regulatory program are to ensure our regs are reasonable, they
do not impose an undue burden on waterway users and industry,
and they facilitate the safe and efficient flow of commerce.
To meet these objectives, the Coast Guard continues to
build upon our regulatory development program, which includes
improving our professional workforce, strengthening
transparency, streamlining processes, and carefully
scrutinizing regulatory actions to ensure they achieve desired
outcomes.
These efforts and the notable support of this subcommittee
have yielded positive results. For example, last Friday the
Coast Guard submitted a final rulemaking on nontank vessel
response plans, establishing standards for oil pollution
response plans for over 15,000 vessels. In March, we published
the Notice of Proposed Rulemaking for the Transportation Worker
Identification Credential, or the TWIC readers. This rule
proposes requirements for biometric-capable readers on
designated high-risk facilities and vessels, as required by the
Maritime Transportation Security Act.
We are in the final phase of the Standards for Training,
Certification and Watchkeeping, or STCW rulemaking, which as
proposed would align U.S. mariner standards with those
established internationally through the International Maritime
Organization.
Throughout the rulemaking process, the Coast Guard ensures
that we engage with industry to address concerns and minimize
unreasonable costs and disruptions. For example, as we continue
to work towards a final rule for towing vessel safety, we have
actively engaged with the towing industry to implement the
voluntary compliance program. In 2009, we started a towing
vessel safety bridging program to assist towing vessel
operators and owners in meeting the new inspection
requirements. We have worked with industry to monitor and
refine the program, and thus far in the Coast Guard's Eighth
District, over 3,600 industry-initiated voluntary inspections
have been completed, representing over 95 percent of the entire
fleet within the district and the majority of towing vessels
nationwide.
These types of programs are vital parts of our Coast Guard
commitment to working with industry to implement rules that
help achieve desired safety, security, and environmental
outcomes, enable a more level playing field, and provide better
support for U.S. companies, and enhance maritime global
competitiveness.
While we continue to build on the successes I have
discussed, I know we have challenges ahead. Despite noteworthy
progress, including reducing by a third our original backlog of
rulemaking projects, from 97 in 2008 to 68 today, and reducing
the average cycle time for projects, from a high of over 6
years in 2009 to a little bit over 4 years today, we are not
where we want to be.
In 2013, the number of rulemakings has increased and we
project a backlog of 76 projects by the end of the year.
Increased rulemaking complexity and scrutiny have made the
workload per rule more time and more resource intensive.
Through our Regulatory Development Program, we continue to
focus on gaining efficiencies while ensuring proper procedures
are followed, that benefits outweigh costs, that appropriate
compliance mechanisms exist, and that our rules are
understandable and reduce regulatory uncertainty. We developed
an Enterprise Project Management System that allows us to
examine resources and track performance metrics across our
rulemaking projects, a capability we did not have before. As a
result, our program is ISO 9000 compliant and includes regular
internal audits and continuous improvement processes.
In short, we are making every possible effort to ensure the
regs we publish are timely, cost-effective, and derive from a
thorough review and evaluation of public comments.
I want to thank Congress, and this subcommittee in
particular, for your support and your investments. You have
enabled our rulemaking program improvements. Thank you for the
opportunity to be here today, and I look forward to answering
your questions.
Mr. Hunter. Thank you, Admiral.
And since I won't be able to ask you questions later unless
I come back, I just want to tell you I am looking forward to
talking with you about the distant tuna fleet, manning issues,
and the rulemaking process, simply just why it is so hard to
make a rule based off of statute. I understand there is a lot
of room for public comment later and that is how the system
works, but to take 6 years to do the towing regulations, you
should be able to get stuff out in 6 months, I would say. So
anyway.
Mr. Cordero, your turn.
Mr. Cordero. Good morning, Chairman Hunter, Ranking Member
Garamendi, and members of the subcommittee. Thank you for the
opportunity to address you today on matters related to the
Commission's regulations. With me today are my fellow
Commissioners, William Doyle, Rebecca Dye, Michael Khouri, and
Richard Lidinsky.
I am pleased to report that the Commission has taken a
systematic approach in reviewing its regulations in order to
minimize unnecessary burdens while ensuring a cost-effective
regulatory regime that ensures economic security for those
involved in the international oceanborne commerce, and the
consumers that rely on it.
The Commission's review process first identifies rules that
are obsolete, unnecessary, unjustified, excessively burdensome,
or counterproductive. Once identified, we aim to either
strengthen, modernize, or repeal these rules so as to make the
agency's regulatory program more effective and less burdensome.
Throughout the process, we have carried out our review with an
eye toward maximizing public participation.
I would like to take a moment to highlight some of the
recent regulatory modifications that we have implemented. In
2004, the Commission addressed potentially restrictive
practices by the Government of China by creating the ability
for U.S. non-vessel operating common carriers, NVOCCs, to
obtain alternative, U.S.-based FMC-administered financial
instruments to be accepted in lieu of China's cash deposit
requirement. This allowed NVOCCs to put into use tens of
thousands of dollars in capital that would have otherwise been
deposited in Chinese financial institutions as dollar-for-
dollar collateral.
In February 2011, the Commission issued a final rule
streamlining its rules of practice and procedure to reduce the
burden on parties to Commission proceedings. It has been
estimated that these changes will save parties approximately
$260,000 a year in reproduction, postal, and courier costs.
In March 2011, the Commission issued a final rule allowing
licensed NVOCCs that enter into negotiated rate agreements
exemption from the tariff rate publication requirements of the
Shipping Act. Before the exemption, NVOCCs were required to
publish rate changes for each charge to a shipper. It has been
estimated that if all 3,400 licensed NVOCCs take advantage of
the exemption, total annual savings could exceed 600,000
person-hours, or $40 million.
In March 2012, the Commission used a final rule that allows
companies to enter into service contracts to reference freight
indices or other external information. This rule recognizes new
tools that common carriers and shippers may use to manage
freight rate volatility and other market risks common to the
commercial maritime industry.
In February 2013, the Commission updated its passenger
vessel operator regulations. These measures strengthened
protections for consumers with regard to their deposits and
prepayments while at the same time reducing financial
responsibility requirements imposed on the smaller cruiser
lines.
I hope these examples give you a better understanding of
the work the Commission has recently done with respect to
reviewing and updating our regulations.
Now I will turn to the Commission's review of ocean
transportation intermediary rules. In 1999, as directed by the
Ocean Shipping Reform Act, or OSRA, the Commission adopted new
regulations affecting ocean freight forwarders and NVOCCs, now
designated as OTIs. The Commission has not substantially
revisited the rules governing licensing, financial
responsibility, or general duties of OTIs since 1999. This
review has been an open and transparent process, as detailed in
my written testimony.
I will now summarize current Advance Notice of Proposed
Rulemaking for OTIs. The Advance Notice includes a proposal for
adjusting the minimum bonding requirements for OTIs; a proposal
that licensed OTIs renew their license registrations; proposes
disclosure of OTI agent/principal relationships; proposes to
clarify the OTI experience requirement in order to become a
licensed OTI; proposes that foreign-based OTIs establish a
dedicated and staffed office in the United States; seeks
comments on setting claims, payment, priorities, and ways to
improve reporting provisions by surety bond companies; proposes
further streamlining the revocation process within the
Commission; and proposes to eliminate the $10,000 bonding
requirement for each individual OTI branch office.
As the comment period ended only 11 days ago, we are still
in the process of carefully evaluating the comments, and will
be using those comments to further assess the proposed
regulations.
Mr. Chairman, as we proceed through this process, I look
forward to working closely with the subcommittee and with our
stakeholders. I am happy to answer any questions you may have.
Thank you.
Mr. Southerland [presiding]. Thank you very much.
Mr. Jaenichen.
Mr. Jaenichen. Good morning, Chairman Hunter, Ranking
Member Garamendi, and members of the subcommittee. Thank you
for the opportunity to present testimony to the subcommittee
regarding marine transportation regulations, their impact on
safety, security, jobs, and the environment.
The statutory mission, as Chairman Hunter pointed out, is
to foster, promote, develop the maritime industry of the United
States. The purpose of that mission is to meet the economic and
security needs of the Nation. To achieve this mission, MarAd is
focused not only on how to sustain the U.S. merchant marine as
it exists today, but also to improve and grow the industry to
ensure its viability in the future.
Overall, our marine transportation is strong and resilient,
but there are opportunities for improvement and growth, and it
is essential that we capitalize on these opportunities.
As I have heard from the industry stakeholders, as well as
Members of Congress, a maritime strategy is needed that will
enable the United States as a maritime Nation to sustain
leadership in the international community. Not only will this
benefit the maritime industry, but will also help achieve other
key goals, including job creation and employment, enhancement
of economic competitiveness through energy efficiency and
innovation, environmental sustainability, and improvement of
improved transportation capacity through interoperability
between ports, waterways, rail, and highways.
To focus on a long-term strategy, the Maritime
Administration is working to organize a public meeting to
concentrate on U.S.-flagged maritime cargo and sealift
capacity. The public meeting, which is tentatively scheduled to
be held by the end of the year, will be designed to elicit an
unconstrained set of ideas for improving and expanding and
strengthening the maritime transportation system, to vet those
ideas in a public forum, and to derive a list of items for
further study, action, or voluntary adoption.
The key areas to address would include transportation
speed, efficiency, reliability, availability, and cost-
effectiveness, the Marine Transportation System's contribution
to the overall U.S. economic competitiveness, environmental
sustainability, interoperability between modes of
transportation, the number of qualified U.S. citizen mariners,
the number and quality of U.S.-flagged ships engaged in
commerce internationally and domestically, and the volume,
value, and innovation of U.S. shipbuilding and repair.
As part of this strategy, the Maritime Administration also
plans to analyze the costs of operating under U.S. flag
compared to foreign flag and to determine if the agency can
take actions to make the U.S. flag more competitive.
In addition, MarAd will be looking at challenges facing the
U.S. shipbuilding industry and options to promote this
industry, which has proven to be beneficial to the Nation from
both an economic and a defense perspective. MarAd expects to do
extensive public outreach on these issues and others to
identify changes that would strengthen the U.S. merchant
marine.
As Congress has recognized, the carriage of cargo and
sealift capacity are essential to the Marine Transportation
System. One of the Maritime Administration's immediate goals is
to increase cargo on U.S.-flagged vessels by identifying
additional Federal programs with international transportation
opportunities. The Maritime Administration is currently engaged
in an intensive rule development process to update its cargo
preference regulations and to implement statutory changes to
the cargo preference law contained in the Duncan Hunter
National Defense Authorization Act for Fiscal Year 2009.
I acknowledge the frustration that has been expressed about
the delay in implementing this rule; however, significant
efforts have been put into the proposed rulemaking by the
Department of Transportation and the Maritime Administration
over the last several years. These efforts will inform and
guide the proposed rulemaking that we are currently drafting.
Other regulatory action that the Maritime Administration is
working on involves implementation of statutory changes that
were made in last year's National Defense Authorization Act and
also the Coast Guard Authorization Act. These include the
extension of the Maritime Security Program through 2025 and
changes to America's Marine Highway Program eligibility
criteria.
In addition, the Maritime Administration is preparing to
implement a training certification program that is called for
in the Cruise Vessel Security and Safety Act of 2010. As many
of the committee members are aware, the Maritime Administration
also plans to issue an Advance Notice of Proposed Rulemaking to
gather comments on whether the agency's existing U.S.
citizenship criteria for its ship managers and agents benefit
the Nation's maritime commercial and national security, and
provide also the most current, effective, and best approach for
supporting National Defense Reserve Fleet operations.
The agency last examined this regulation more than 20 years
ago, and despite significant changes in the maritime industry,
no change has been made to the citizenship requirements.
Currently there is no intention on whether this change is going
to be--or we have made a position on that, but we believe it is
appropriate to seek public comment on the issue to determine
whether to propose any changes to the existing regulations
going forward.
Thank you for the opportunity to discuss the marine
transportation regulations, and I look forward to the
subcommittee's questions.
Mr. Southerland. Very good. Thank you all for your
testimony.
We are going to get into a round of questions. And there
are three of us currently on the panel, and on the committee,
so we may do a couple rounds if that is all right with you.
My first question from me is to Admiral Servidio, and this
is kind of close to home. Admiral, as you know, last year's
Coast Guard authorization bill included provisions authorizing
two new vessel determinations for vessels that had significant
work performed after their original construction date. Last
October a shipyard in my district delivered a $40 million
state-of-the-art offshore supply vessel with a similar
background. In that case, the hull was constructed in 2007 but
never operated after suffering a major fire in the original
shipyard.
The Keith Cowan, a significantly redesigned offshore supply
vessel, complying with the latest rules and regulations, was
built from that hull. Upon completion of that vessel last year,
the Coast Guard issued a certificate of inspection showing a
2012 delivery date, but a certificate of documentation showing
a 2007 build date, 5 years earlier. As a practical matter, that
discrepancy results in a 25-percent shortening of the vessel's
useful commercial life.
The Coast Guard did not object to the two new vessel
determinations in last year's Coast Guard bill. So today I am
asking for your confirmation that the Coast Guard will have no
objection to legislation designating the actual 2012 delivery
date as the official build date for the Keith Cowan.
Admiral Servidio. Mr. Chairman, we would not object to that
provision; however, I think it is important that everyone
recognizes that with a 2012 build date, there will be a number
of other international requirements that would be part of what
the vessel would need to comply with in order to operate. But
we would be more than willing to work with S.E.A. Corp on those
issues, sir.
Mr. Southerland. Very good. And it is my understanding that
they understand that. So thank you for clearing that up.
Admiral, one more question, or a couple questions on a
different subject before I move down the panel. The Coast Guard
Authorization Act of 2010 prohibits the use of survival craft
that leave any part of an individual submerged in water. The
Coast Guard and Maritime Transportation Act of 2012 required
the Coast Guard to study the issue before implementing the
mandate. Last month the Coast Guard delivered its report to the
committee.
Prior to the mandate in the 2010 act, the Coast Guard
reviewed the benefits requiring out-of-water survival craft on
certain vessels and determined that vessels operating in
certain environments did not need to carry such craft. Under
what circumstances do vessels already carry out-of-the-water
survival craft and why did the Coast Guard determine that only
these vessels should have to carry such craft?
Admiral Servidio. Mr. Chairman, I apologize. I believe that
there might have been some administrative errors in getting
that report to Congress, and I apologize if there were any
hiccups with that.
We did do our study, sir, and we looked closely at the
number of casualties that took place during that time window,
and we looked to see whether we could find definitive proof
that out-of-water would have prevented some of those
casualties, sir, and we did not find that in going through our
data, and hence, that is why we came up with that finding in
our report, sir.
Mr. Southerland. What vessels, based on what you have
found, what vessels would be required to carry out-of-water
survival craft as a result of that mandate, just for some of us
who are new?
Admiral Servidio. Yes, sir. Generally out-of-water survival
craft are required on vessels sailing internationally--cruise
ships, large deep draft vessels, oil rigs, mobile offshore
drilling units. Those types of vessels, sir, would have to have
that.
Mr. Southerland. Very good. And now with the few minutes
that I have remaining, I want to ask Chairman Cordero a
question. The Federal Maritime Commission currently retains
jurisdiction over the Consolidated Chassis Management, or the
CCM Pool Agreement. As a result, CCM, which is in the business
of operating and managing chassis pools, enjoys antitrust
immunity under the Shipping Act of 1984. There are some facts
as a result of that that I would like to state.
Number one, the operation and management of chassis is a
domestic land-based business. Number two, CCM and its
subsidiaries are separately incorporated limited liability
companies that are neither ocean common carriers nor marine
terminal operators. Fact number three, by CCM's own admission,
the shipping lines that initially formed CCM for the purpose of
operating chassis pools, to which they contributed chassis they
owned or leased, will have sold all but approximately 20
percent of their collective chassis fleet by the end of this
year. And four, the shipping lines continue to offer less and
less intermodal through rates as a part of their service
offerings to the shippers and consignees, and increasingly are
required that such parties pay separately for the use of these
chassis and the transport of container from port to rail ramp.
My question based on those four facts: How does FMC justify
continuing to retain jurisdiction over the CCM Pool Agreement
as a result of these facts and continue to afford CCM antitrust
immunity under the Shipping Act?
Mr. Cordero. Thank you, Congressman, for your question.
First of all, some history on that issue, as you have alluded
to. The history of this question becomes centered on the fact
that the carriers exclusively own chassis. On that question
alone, it was most definitive within the purview of the FMC to
address agreements in related to that scenario.
Now, as you have stated, over the years this is one of the
aspects of the changed industry conditions. The question before
the FMC, among some of the aspects that we look to in these
areas, is adopting to these changed conditions. Presently there
is a discussion, there is a dialogue with regard to the
development in the chassis pool area, and at this point, again,
all I could represent to the subcommittee is that dialogue is
ongoing. And given the transition, these are some of the
questions that most definitively the FMC will be asking.
Mr. Southerland. So you can clearly state definitively that
you recognize this change and how the industry is moving or it
is evolving, and you will continue to work as necessary and
report to this subcommittee based on those discussions with the
acknowledgment that there needs to be change?
Mr. Cordero. Yes.
Mr. Southerland. OK.
Mr. Cordero. We will continue to work with the subcommittee
with that acknowledgment in terms of developments with regard
to the chassis pool as it relates to the interests that the
carriers hold or do not hold in the future.
Mr. Southerland. Very good. Very good.
All right. I have exceeded my time. And with that, I
recognize Ms. Hahn.
Ms. Hahn. Thank you, Mr. Chairman.
Thank you to all the witnesses for testifying before us
today, and especially I always like to give a shout-out to
Chairman Cordero, who I have worked with and have been friends
with for many years back in the trenches in the harbors of Los
Angeles and Long Beach.
So I would like to talk briefly about the Federal Maritime
Commission's proposed rules governing ocean transportation
intermediaries. The FMC has recently proposed increasing the
required bond amount for OTIs in order to better protect market
participants from suffering losses. While I think we would all
like to ensure that no intermediaries are cut out of the
industry because of the increased bond requirement, it is
imperative that the FMC update existing regulations so that
they can adequately address the concerns of the current market.
In your testimony you note, Chairman Cordero, that the rule
in question hasn't been updated in nearly 15 years and the
FMC's proposed rule is merely a reflection of the current
market. In fact, the new bond amount for certain common
carriers, $100,000, I think, is still lower than it would be if
the 1999 required amount was adjusted for inflation, which I
think in today's market would be $105,000.
So I know there is some concern about this. There are some
feelings that this could really have a negative impact. So I
would ask you, Chairman Cordero, is it normal for regulatory
bodies such as the FMC to periodically review and update their
rules to ensure that they are up to date and reflect the
current concerns of the market? And maybe you can expand on
what are some of the dangers of failing to update outdated
regulations.
Mr. Cordero. Well, first of all, it is normal for agencies
to review their rules. In the case of the FMC, we are doing so
in accordance with the plan for Retrospective Review of the
Existing Rules. There is a plan to this.
Now, as to the question of the bonding amount, again, you
have properly indicated that we have not reviewed those amounts
since the onset of OSRA in 1999, so we have not reviewed the
bond limits in 14, 15 years. I think it is fair to recognize
that in some of the comments that have been filed by our
stakeholders, I will represent, that even our stakeholders do
indicate that there is merit to this issue; that is, there is
merit to discussing this issue and dialogue on this issue. And,
of course, for the same reason that you just stated, that based
on the consumer index, you know, we will need to review that.
And, in fact, what is being proposed is below, in some cases,
the index.
And lastly I will say we need to keep in mind with regard
to how this industry has evolved, more particularly and more
specifically, if I may say, in regard to containerization. Look
to where we were in 1999 and where are we now in 2013. Nineteen
ninety-nine, we had 2,000, 4,000 TEU container ships. Beginning
in 2005, those vessels increased to a size of 8,000 TEUs.
Today, in 2013, we are seeing major carriers now on order with
18,000 TEUs. The reason I bring that into context, imagine the
amount of transactions that are occurring in relation to this
industry. In 2000, to the present date of 2013, we have today
almost doubled the amount of licensed OTIs. Much less when you
look at it in terms of the number, that number is higher.
I mention these factors because it is important to keep in
mind that part of the mission of the FMC is to address
unlawful, deceptive practices that occur by some of the bad
players in this industry. And, again, I emphasize ``some.'' So
I think it is particularly important for us to address these
issues and look at the bonding amount.
Ms. Hahn. Thank you. And let me also discuss one of the
other issues that our stakeholders are having anxiety about,
and that is the proposed rule requiring OTIs to update their
information every 2 years. I know there is some concern that
this is an overly burdensome process, so how exactly does a
stakeholder update their information, and why is this
important? And maybe you could allay some of those fears today
by walking us through the process of updating an OTI's
information with the FMC.
Mr. Cordero. Thank you. And I will do so, referencing
common ground here. I think it is also fair to say that the
comments that we received from the various stakeholders do
indicate not only a concern, but with regard to the need, to
make sure that everybody updates the information that is
required. This has been a discussion within the FMC for many
years and has evolved now to this announced rule.
Now, as to the concern that it may be overly burdensome, I
think there is a perception out there that it may be, but I
hopefully here will have the opportunity to clear that
perception. What we are talking about essentially is a two-page
form. This is it. A two-page form that you file online. There
are basically nine questions. Six of the nine you basically
check off the box. And basically what it does, it updates the
information: change of address, owners, qualified individuals.
These are just simple data that is not only required by the
Shipping Act, but again, required with regard to our regulatory
effectiveness.
Let me lastly comment that there is a definitive problem
with regard to people who are not updating properly with the
FMC. A recent audit of this by our staff indicated that of the
2.5 percent people that were audited, again keeping in mind
this figure of over 6,000 OTIs, almost 25 percent had failed to
comply with updating the FMC.
So in conclusion, I hope I cleared the perception that this
is not a burdensome application process. It is basically a two-
page form that you could do online and would take you no more
than 5 minutes.
Ms. Hahn. Thank you. I have some other questions, but I
will do it on the second round.
Mr. Southerland. Thank you, Ms. Hahn.
Now we will recognize Mr. Rice.
Mr. Rice. Thank you, Mr. Chairman.
You know, this just appears to me to be absolutely absurd.
We are here today talking about rules on rulemaking and the
time it takes to put out our rules. And in the last hearing
that we had in this committee we were told that American
international shipping has dwindled by 90 percent in the last
50 years. It appears to me that with our excess of rules that
we have choked off a valuable American industry in shipping and
international shipping and shipbuilding, and now we are working
on commercial fishing, I think we are doing a pretty good job
of choking them off, and I am sure private will be next.
So, you know, when we have this graph that you have
presented here on the average rule development time going down,
I think it should go up. In fact, we probably should have a
rule that says that we can't issue a rule until 50 years of
study. When we have got the number of rules coming out every
year increasing, I think that is exactly the opposite of what
we need. I think we need to have the number of rules going down
every year. You know, all this has happened, the dwindling of
our commercial fleet, despite probably the most protectionist
statute I have ever heard of in the Jones Act.
What I would like to know from each of you is, I am
interested in rebuilding our international shipping fleet in
particular, so what rules do we have to implement or do away
with that would entice large shippers to start flagging their
ships here? And let's go one at a time across.
Admiral Servidio. Yes, sir. Thank you for the question. The
Coast Guard's philosophy is we don't initiate a domestic rule
unless there is a need to implement something internationally
or whether there is an obvious safety, security, environmental
gap that needs to be addressed, and I will get to that in a
second, sir, or it is required through an authorization act.
And the majority of the rules that we initiate, sir, are in
order to implement international requirements or authorization
act requirements.
Again, sir, our philosophy is we don't want new rules. If
we can use an international existing rule, that is our
preference. If there is classification society rules that would
address the safety or environmental aspects, we will go with
that.
Mr. Rice. Admiral, how many commercial shippers would we
have if we didn't have the Jones Act internationally?
Admiral Servidio. Our offshore supply vessel fleet and our
offshore fleet is very, very competitive, sir, without the
Jones Act. There are other aspects of our fleet that are not as
competitive.
Mr. Rice. So we haven't lost 90 percent of our
international shipping in the last 50 years? That is what we
were told at our last hearing.
Admiral Servidio. I can't comment on that, sir. I will say
that we are looking to harmonize our rules with the
international rules so we have a level playing field with U.S.
and with the foreign carriers that come into our waters, sir.
Mr. Rice. How many ships of foreign carriers are
registered, flagged in the United States? Do you know that,
sir?
Admiral Servidio. How many of our ships, sir?
Mr. Rice. No. Ships of foreign carriers. How many are
flagged in the United States?
Admiral Servidio. We worked with Maersk Industries just
this summer, sir, to reflag eight vessels from foreign into the
U.S.
Mr. Rice. Are they done? Did that happen.
Admiral Servidio. Yes, sir.
Mr. Rice. Because I have talked to Maersk, and they told me
that none, they don't have any.
Admiral Servidio. They did, sir, as part of the MSP
program, and we conducted that at Activities Europe, and it was
very successful. We worked closely with Maersk on that project.
Mr. Rice. And these are international ships.
Admiral Servidio. Yes, sir. Deep draft vessels, sir.
Mr. Rice. Mr. Cordero, what do you think we need to do to
entice foreign shippers to start flagging ships in the United
States.
Mr. Cordero. Thank you for your question, Congressman.
First of all, I will note the FMC is an independent
regulatory agency, and our mission, of course, is to foster a
fair, efficient, and reliable international ocean
transportation system. In that regard, our focus is, in fact,
with the foreign carriers.
As it relates to specifically your question, Congressman, I
could provide you further information with regard to the
relevance of the FMC on that issue; however, I will defer to
the gentlemen to my right and to my left with regard to the
Jones Act questions, given it is more within their purview. So
as to the FMC, again, we are addressing basically the
regulatory aspects within our purview of the foreign carriers.
Mr. Rice. Thank you, sir.
Mr. Jaenichen.
Mr. Jaenichen. Yes. The Jones Act itself really affects
domestic trade as to trade between two ports in the United
States. The international trade that you are referring to
obviously has changed. There are----
Mr. Rice. It is also requires American-flagged ships to
carry American Government things internationally.
Mr. Jaenichen. That is cargo preference, yes, sir.
Mr. Rice. Yes, sir. And I think there are only, what we
were told in our last hearing, less than 90 international
American ships in international commerce, and we were told at
our last hearing that if we didn't have the Jones Act we may
have none or close to none.
Mr. Jaenichen. There are actually two different issues that
are being affected there, sir. The Jones Act itself, as I said
before, is really for domestic trade between two ports. The
cargo preference rules that we have requires carriage on U.S.
flag. For the Department of Defense, it is 100 percent, for
food aid it is 50 percent, as what is required by current
statute.
The number of ships carrying U.S. flag is really determined
by a number of other factors. There is a significant cost
difference between the cost of having a U.S. flag versus having
a foreign flag. And a lot of those have to do with open
registries, tax structure, and various things like that,
including insurance. Those are the areas where we need to go
take a look at those to see if we can identify policy and
changes to be able to reduce that.
Mr. Rice. That is one rule I would like to see happen in
less than 5 years.
What I would like from you and the Admiral particularly, if
you all could give me a list of things that we need to do to
have--I want to make our shipping industry competitive again,
so I want to know a list of rules that we need to adopt that
would make international shippers want to flag here again. That
would help me a lot.
Mr. Jaenichen. Yes, sir.
Mr. Rice. Thank you.
Mr. Southerland. Thank you, Mr. Rice.
I now recognize Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman. I have a
number of questions.
Acting Administrator Jaenichen, 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 and it will not pay
any stipend in 2013. Have any vessels left the MSP program as a
result of this situation? I am going to run through a lot of
questions, so just answer me yes or no.
Mr. Jaenichen. Sir, we have had one vessel that has
reflagged and then they have replaced a vessel. So currently,
until that vessel comes back in on the 1st of October, we are
down to 59 vessels.
Mr. Cummings. All right. As bad as this is, I understand
that a variety of different budget scenarios may cause MSP to
actually have to push as many as 10 vessels out of the program.
And I note that these vessels can immediately leave the U.S.
flag and join the flag of another nation. Can you very briefly
describe these scenarios, budget scenarios, and the extent of
possible vessel losses?
Mr. Jaenichen. Thank you for that question. Sir, by statute
we are really taking a look at just sort of the mathematics of
it. Now, the program itself is authorized at $186 million, and
you break that down for the 60 vessels, that is $3.1 million
paid on a monthly basis. Any reduction of 3.1 or a fraction
thereof results in the loss of one vessel.
Currently under the situation that we are, we are operating
under the fiscal year 2013 budget, which actually went back to
fiscal year 2012, and took a look, because we had carryover
when we developed that budget. That difference is $12 million,
and so that effectively equates to four ships.
Depending on the target number that we are given for
sequestration and that overall rate, it will work to affect the
number of losses. Unless there is a change in the
appropriations for that program, we will have to begin removing
ships. We are required, if there are insufficient
appropriations, to remove ships from the program.
Mr. Cummings. And what would the impact be on our national
security and the viability of our merchant marine if vessels
were forced to leave the MSP program and if they then decided
to leave the U.S. flag?
Mr. Jaenichen. Sir, those 60 ships provide for 2,700
mariners onboard each ship. A loss of one ship out of the
program that ultimately reflags to foreign flag would be a loss
of 45 jobs for U.S. mariners.
We are currently--I discussed this with the maritime labor
unions--we are at a tipping point with regard to the number of
maritime labor personnel that are available to man our reserve
sealift and our commercial sealift ships going forward. And if
those mariners are lost, it is not likely that they will come
back, and so we will be at a situation where we may not be able
to man all of our ships that are required for sealift to
support the Department of Defense in the event of a national
emergency.
Mr. Cummings. So that is a major problem.
Mr. Jaenichen. Sir, we are at that point, yes, sir.
Mr. Cummings. I think the cuts required under sequestration
are wrong and I think they are harmful to the United States and
I think that they should be ended. That said, right now I think
we need to be careful that we don't lose what remains of our
U.S.-flag oceangoing fleet.
What steps will you take right now to address this urgent
issue and try to preserve and strengthen the United States-flag
fleet?
Mr. Jaenichen. Sir, thank you for that question. We are
actually going through the process to ensure that we are
meeting all of the various requirements to the Paperwork
Reduction Act and also the Federal Advisory Committee rules
with regard to soliciting information. We will be putting out a
Federal Register notice that will announce a maritime strategy
symposium that will be held at the Department of Defense before
the end of the year. The plan is to have a 3-day event where we
set the agenda based on the various ideas and be able to debate
those and then put together an actionable list of things that
can be done to help support and develop the U.S. maritime flag.
Mr. Cummings. Thank you.
Admiral, on May 23rd, 2013, the DHS inspector general
issued a report entitled ``Marine Accident Reporting,
Investigations, and Enforcement in the United States Coast
Guard.'' The report's main finding is the following, quote:
``The Coast Guard does not have adequate processes or
sufficient personnel to investigate, take correct actions and
enforce regulations related to the reporting of marine
accidents as required by the Federal regulations and Coast
Guard policy,'' end of quote.
Obviously, while this finding is alarming, it is not new.
When I was chairman of the subcommittee we convened a long
series of hearings to examine the decline in the Coast Guard
marine's safety capability.
My time here is very short, but I need to know, what are
you going to do about this? Or given the sequestration, must we
simply be resigned to a continuing decline in the Coast Guard's
ability to ensure the safety of our Marine Transportation
System, and what would this mean for the safety of life at sea?
Admiral Servidio. Thank you for that question, sir. We are
focused on it. I see this as a challenge going forward. The
Marine Safety Enhancement Plan allowed us to bring a number of
people into the Coast Guard, sir, but our focus really needs to
be on some of the competency issues of those people. And we are
building a plan now, given this budgetary environment, which is
different from 2008 timeframe, sir, on how we are going to
retain those competencies and increase efficiencies, and we are
looking at that, sir. And we recognize it is a challenge, but
as the industry gets more complicated, it is one we have to
address.
Mr. Cummings. With the chairman's indulgence, just two more
questions.
Admiral, the inspector general stated that the Coast Guard
has not implemented the authorities granted by the 2010
authorization act to allow promotion by specialty. Why hasn't
the Coast Guard implemented this step? Why hasn't the Coast
Guard taken this and other actions available to it that would
help retain at least the current level of expertise in the
Marine Safety Program at little or no cost?
Admiral Servidio. Thank you for the question, sir. The
enhanced status quo is an authority the Coast Guard has. It is
something I will be meeting with our Office of Personnel
Management and see where we stand with that, sir. I am going to
have to get back to you on the record, sir, with regards to
specifics of where we stand with implementing that authority,
sir.
[The information follows:]
A mature Officer Specialty Management System (OSMS) is a
prerequisite for the Service before Enhanced Status Quo (ESQ)
can be implemented. On 26 June 2013, the Coast Guard launched
the OSMS. OSMS provides a means to quantify the number of
specialists in select fields and assists our Service with
meeting current and future demands. OSMS also fosters and
focuses professionalism within specialties with sanctioned
requirements set by Specialty Managers providing the
competencies, education, training, and licenses/certification
needed to earn and maintain a given specialty.
Any use of ESQ will come by recommendation of the Assistant
Commandant for Human Resources, and approval by the Commandant.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Southerland. Thank you very much.
We are going to do another quick round of questions,
because we do have a second panel, and I would ask the Members
if we could be mindful of our time. We went a little over
because of the few of us that are here. So I have, just in the
second round, I have just two quick questions.
Mr. Jaenichen, when can we expect to see draft regulations
to implement the 2008 cargo preference enforcement regulations?
Mr. Jaenichen. Sir, our intent is to have them internally
reviewed by the Department of Transportation by the end of the
year, and then we would start the interagency process yet
again. I cannot tell you how long it will take once we get into
that process, but I intend to have something written down that
we can start reviewing within the interagency by the end of the
year.
Mr. Southerland. OK. So by December 31st we will have----
Mr. Jaenichen. That is for the Department, and then after
that we then start the interagency process.
Mr. Southerland. OK. Very good.
And, Admiral, let me ask you a question. Will the current
Commandant be able to promulgate the towing vessel inspection
rule before the end of his term? I think that is in May of next
year.
Admiral Servidio. Unfortunately, sir, I can't speculate on
the various processes of public comment and the processes of
clearance, but I recognize the authorization act and the
timeline, sir. We are aggressively adjudicating the 3,000
comments we received on our Advance Notice of Proposed
Rulemaking, sir. And a number of issues were brought up in
those comments about, for example, third-party organizations,
safety management systems and the requirements for making them
mandatory, redundancy of vital systems, and grandfathering
positions.
There is somewhat of a balance between a quick rule, sir,
and a good rule, and we are trying to do both of them at the
same time. And I recognize the timelines and our need to try to
get this out as quickly as possible.
Mr. Southerland. Very good. Very good.
All right. With that, I recognize Mrs. Hahn.
Ms. Hahn. Thank you, Mr. Chairman. I am glad you asked
about cargo preference, because that was going to be one of my
questions.
But this is for Rear Admiral Servidio. As you know, the
TWIC program was launched shortly after 9/11 in order to ensure
sensitive areas and facilities, such as our ports, are
protected against potential security breaches. However, we know
that since then, there have been a number of challenges with
its implementation, from inaccuracies with its background
checks to its delays in completing its pilot program for TWIC
readers, this program has repeatedly incurred setbacks since
its implementation. Now I understand that earlier this year the
Coast Guard finally issued a proposed rule requiring TWIC
readers to be installed at our Nation's highest risk
facilities.
Considering that the Department of Homeland Security is
still having problems developing and installing card readers at
port facilities, a problem that was highlighted by a recent GAO
report, how are our Nation's highest risk ports expected to
fully comply with the law? And should the Coast Guard, along
with DHS and TSA, consider GAO's recommendation to search for
alternative credentialing approaches?
Admiral Servidio. Thank you for the question. I have met
with representatives from your port area several times about
this issue. We have had four public meetings. We have 150
comments that we are taking into account as we go to a final
rule on TWIC. I think the number of comments reflect that it
was a well-thought-out Notice of Proposed Rulemaking. Most of
those comments are either, We believe we should be included in
the high-risk facilities or specific vessels saying they think
that their vessel shouldn't be included in those high-risk
facilities. But those are the preponderance of the comments.
That said, we are working with DHS and with TSA on
evaluating other potential cards at this time. And we are
taking into account the GAO reports with respect to some of the
problems with readers. But I think it is important that some of
that was a prototype and I think some of those problems have
been worked through. So I can tell you that we are aware of the
concerns, and we will be moving forward with an eye towards
what those concerns are.
Ms. Hahn. And we know that many thousands of those cards
will be expiring, a lot of them at the same time. And that is
also what causes me concern. What do we do the day after
hundreds of thousands of those cards have expired?
Admiral Servidio. We have stood up an executive steering
committee just looking at the TWIC program. I speak to Steve
Sadler of TSA weekly with regards to how we are doing on this.
And we have monthly meetings, looking at a suite of metrics. I
share your concern. We are keeping our eye on that ball. Thus
far, we have been able to address those issues, and we are
seeing cycle times improving. But it is a concern going
through, and it is one that we recognize we need to----
Ms. Hahn. Yes, and it is also very urgent because I am out
there on port facilities all the time with signs everywhere,
``Do not allow any entrance of a person with an expired card.''
So I certainly don't want commerce to come to a screeching halt
because we have not figured out what to do the day after these
cards have expired.
This is very urgent. So I appreciate your attention to
this. We can figure this one out.
Admiral Servidio. Yes, we can.
Ms. Hahn. We are smart enough.
Admiral Servidio. Thank you.
Mr. Southerland. Thank you, Ms. Hahn. I now recognize Mr.
Rice.
Mr. Rice. Gentlemen, my primary focus is American
competitiveness. And I truly believe that our regulatory morass
is strangling commerce in this country, and it will strangle
our entire economy if we don't get it under control. And I can
think of no more glaring example of, you know, the strangling
of an entire industry than the regulatory mess that we have
created in this particular industry.
So we desperately need jobs. We desperately need industry.
It would be my goal to see the rebirth of the American
shipbuilding industry and the rebirth of the American
international commercial fleet. So I don't want to be talking
about 100 ships. I want to be talking about 1,000 American-
flagged ships. And I am desperate to know what we can do to get
there. I think that we should not be creating new rules. I want
to you stop that. I want to you change your mindset and start
doing away with rules that are strangling our shipbuilding
economy. And I really look forward, Admiral and Mr. Jaenichen,
to your suggestions to what we need to do to have people want
to flag here again. Because if you will give me that, I will
work on it. When do you think I can get that?
Mr. Jaenichen. Sir, as I indicated before, we are going to
have that first public debate by the end of this year.
Mr. Rice. OK. That is not what I am talking about. I want
to you write down what you think your suggestions would be that
we could entice people to start flagging here again. And I
don't want to wait until the end of the year. I am talking a
couple of weeks. Can we not get that?
Mr. Jaenichen. Sir, one of the things, there are a of
different ideas. And if they were easy to implement and do,
they would have been done already. The challenge that we have
is we need to have the stakeholder input to evaluate. What my
team puts together is going to be very limited in terms of what
kind of feedback I get. I need to have that public debate in
order to be able to have a program that I think is viable going
forward.
Mr. Rice. Do you need a public debate for you to tell me
what your ideas would be of things we need to change to get
people to start flagging here again?
Mr. Jaenichen. Sir, those are ideas by people who are not
involved in it intimately on a daily basis in the maritime
industry. I have a lot of good ideas, but I don't know whether
they are actually supportable or achievable inside with the
stakeholders.
Mr. Rice. Well, how long have you been with this group?
Mr. Jaenichen. Sir, I have been the Acting Maritime
Administrator since June and I have been with the Maritime
Administration as a deputy administrator since last July.
Mr. Rice. OK. If you could please give me your suggestions,
I would love to see them. Admiral, can I get some suggestions
from you?
Admiral Servidio. We recently provided a report to
Congress, sir, on some of these issues so we can take some of
that, sir, and I can provide highlights from that report for
you, sir.
Mr. Rice. OK. I want to revitalize this industry. I don't
want to strangle them anymore. And I hope we keep our hands off
the commercial fishing fleet. They have been through enough. So
I implore you, let's stop ruling these people to death, get off
their backs and let them do their business. Thank you very
much.
Mr. Southerland. Thank you, Mr. Rice. Mr. Cummings.
Mr. Cummings. Mr. Jaenichen, the first thing you ought to
put on that list is end sequestration. Make sure you put that
on the list because you just provided testimony that we are
pushing ships out because of sequestration. So make sure you
put that number one on the list. If you need me to write it, I
will write it.
Mr. Jaenichen. Sir, I have got it loud and clear, sir.
Mr. Cummings. And those are ships that are there now and
jobs that we have now that we are going to lose--not for a day,
not for an hour, not for a month, but forever. That is real.
And it is dwindling. Our ships are dwindling, dwindling,
dwindling. My mother only had a second grade education, a
former sharecropper. She said, I want to you go up the ladder,
but I don't want you to fall down. In other words, preserve
what you have. Protect what you have. And that is what we have
got to do. You can write that down and tweet it.
Admiral, as you know, the 2010 Coast Guard Authorization
Act required that beginning in 2015, only survival craft that
would ensure that no part of the body is immersed in water
should be used. The most recent authorization delayed this
requirement until 30 months after the date on which the Coast
Guard submitted a report on the use of such survival craft. The
NTSB has been recommending the elimination of survival craft
that don't provide out-of-the-water protection for decades.
Your study concludes that the cost of switching to such a craft
would outweigh the benefits. However, the study was based on a
review of past casualties and the study itself notes, ``In
general, the bulk of the data available were inconclusive as to
whether the use of out-of-the-water survival craft would have
affected the outcomes of these casualties. Casualty reports
were inconsistent in addressing how many liferafts or
inflatable buoyant apparatus were used during a casualty as
well as the number of survivors found in each device when
used.''
``The study was also asked to look specifically at the
survivability of individuals, including persons with
disabilities, children, and the elderly.''
Regarding this issue, your report states the following,
``The age or disability of personnel casualties were generally
not included in the casualty data reviewed in this analysis.
Therefore, there is no empirical evidence to support that
survivability of persons with disabilities, children, or
elderly is different than an able-bodied person using either a
lifefloat inflatable buoyant apparatus or liferaft.
Nevertheless''--and it goes on to state--``it is clear
intuitively that such demographics may present unusual risks
and practical challenges to vessel operations. Although the
Coast Guard considers some suggestions from stakeholders to
carry out practical in-water trials in this area in connection
with this report, this was not practical due to time and
resource constraints.''
Admiral, should a disabled veteran who became paralyzed
while serving our Nation in Iraq or Afghanistan be condemned to
die because the charter fishing boat on which he is a passenger
sinks or capsizes? Or should that vessel be required to have a
survival craft that can give that veteran the chance of
surviving by keeping his or her body out of the water? That is
question number one. Number two, Admiral, was this report
prepared by marine safety professionals who were fully
qualified as either investigators or inspectors? And does this
report represent only their professional opinion?
Final question, Admiral, how much time and how many
resources would it require to carry out practical in-water
trials?
Admiral Servidio. Thank you for the question, sir. The
report was prepared by marine safety professionals, sir. We
have limitations with respect to the data that our system
carries. I would obviously share your concerns with respect to
disabled people, sir. We worked, when I was captain of a port
in numerous ports, on making arrangements so that we could
address the safety aspects and allow for disabled veterans, in
Tampa specifically, sir, to go out on commercial vessels and
enjoy and take part in the pleasure of our maritime ecosystem.
I am going to have to get back to you, sir, on what we
would need to do in order for in-water tests and get back to
you on the record for that, sir.
[The information follows:]
A practical test program addressing the relative survivability
of the disabled, elderly, and children vs. able-bodied persons
in various types of survival craft would be a complex and
potentially risky undertaking. While some limited preliminary
work could be carried out in controlled, simulated conditions
such as a wave/wind tank, valid and meaningful conclusions
would require full-scale trials in realistic conditions in
order to reliably model the dynamics of evacuation of persons
of differing abilities from a floating vessel into different
types of survival craft. Given that the survival craft on these
smaller commercial vessels are generally not davit-launched,
there would be potential risk of injury to the test subjects
just entering the craft, so the test parameters would need to
be carefully controlled and monitored for personnel safety.
The Coast Guard does not have the staff resources or
infrastructure to carry out such a test program in-house. While
we would seek to leverage interagency expertise and resources
from experts such as DOT's Access Board, and could likely
perform some preliminary work at a facility such as our rescue
swimmer training facility in Elizabeth City, the bulk of the
work for this study would have to be contracted out. Our
technical and economic staff developed detailed minimum time
and cost estimates to conduct such a program on a contract
basis, including preliminary computer modeling to inform
development of appropriate parameters and methods for practical
testing; the acquisition/lease of test vessels/crews and test
equipment; identification (or simulation) and compensation of
test subjects in the desired demographics; travel and per diem
costs for government and lab personnel and test subjects;
logistical and documentary support; standby personnel/
facilities for health and safety oversight; and government
staff time for test plan development and data/report review.
These estimates are considered to be minimums; possible
unanticipated problems (such as issues with coordination of
scheduling with variations in weather and sea conditions,
personnel, and equipment performance) could substantially
increase the time and cost. Given the uniqueness and
substantial risks of the proposed test program, and absent any
history of previous such tests to inform the development of our
estimates, a 20 percent risk premium was applied to our initial
raw estimate in anticipation of possible overruns.
Taking into account the uncertainties associated with such a
test protocol, the estimated cost for a contractor to conduct
and document trials using representative test subjects to
simulate evacuation from typical vessels and to evaluate
survivability in different types of survival craft is $2.24
million (including the premium discussed above), and is
estimated to take approximately 18 months after issuance of a
contract. This includes preliminary computer modeling,
arrangement for suitable test vessel(s), recruitment of
suitable test subjects, preliminary subject testing/evaluation,
acquisition of representative test survival craft (liferafts,
buoyant apparatus/lifefloats, inflatable buoyant apparatus),
conducting open water tests, and collection and analysis of
data to develop a final report.
Development, solicitation, and award of a contract is estimated
to require 9 months beforehand. In addition to direct
contractor costs, we estimate approximately one full-time
equivalent in contracting support and currently unanticipated
USCG technical/project management time would be required to
guide and oversee the complete test program with post-test
report development, analysis, and review. Absent additional
compensating staff resources, this would have a substantial
negative impact on current projects and customer response
times.
The anticipated timeline for conducting such a study is:
Contract Development.............................. 6 months
Contract Solicitation & Award..................... 3 months
Preliminary Test Prep/Analysis.................... 6 months
Gov't/CG Review................................... 1 month
Prelim Test Data Review and Report................ 4 months
Gov't/CG Review................................... 1 month
Open Water Test Prep & Execution.................. 2 months
Data Review, Interim.............................. 2 months
Gov't/CG Review................................... 1 month
Final Report...................................... 1 month
---------------------
Total Time...................................... 27 months
Mr. Cummings. We can do better. We can do better. And I
hope you take that back to the Coast Guard. Thank you, Mr.
Chairman. And I am looking forward to your responses.
Mr. Southerland. Thank you very much. If there are no other
questions, I want to thank the witnesses for their testimony.
And I want to say, Mr. Jaenichen, I know before in your
comments, you made a reference to the cost of shipbuilding in
this country. And you have all three been given the
responsibility of creating a list. I would like to encourage
all of you to include on that list the cost of American jobs
because of the EPA and the regulation on our shipbuilders.
Their boot is on the neck of our shipbuilders. So I understand
the fury over sequestration and the jobs that you have alluded
to. But I would also like on your list to please give me an
idea of the tens of thousands of jobs--not thousands, but tens
of thousands as a result of those regulations and how they are
crushing the American shipbuilder because that adds to the
costs. And I agree with you, Mr. Jaenichen, and you
acknowledged it, the cost of what it takes to produce these
vessels in the United States.
So I would like to thank all of you for being here. And
with that, we will move on to our second panel. And I would ask
that those individuals on our second panel to please come
forward.
All right. Our second panel of witnesses today includes Mr.
Thomas Allegretti, president and CEO of The American Waterways
Operators; Captain William Schubert of USA Maritime; Mr. Ken
Franke, president of the Sportfishing Association of
California; Mr. Geoffrey Powell, vice president of the National
Customs Brokers and Forwarders Association of America; Rear
Admiral Rick Gurnon, president of the Massachusetts Maritime
Academy, appearing today on behalf of their Consortium of the
State Maritime Academies; and Patrick Wojahn, public policy
analyst for the National Disability Rights Network.
Mr. Allegretti, you are recognized for 5 minutes.
TESTIMONY OF THOMAS A. ALLEGRETTI, PRESIDENT AND CEO, THE
AMERICAN WATERWAYS OPERATORS; CAPTAIN WILLIAM G. SCHUBERT, USA
MARITIME; KENNETH D. FRANKE, PRESIDENT, SPORTFISHING
ASSOCIATION OF CALIFORNIA; GEOFFREY C. POWELL, VICE PRESIDENT,
NATIONAL CUSTOMS BROKERS AND FORWARDERS ASSOCIATION OF AMERICA;
REAR ADMIRAL RICK G. GURNON, USMS, PRESIDENT, MASSACHUSETTS
MARITIME ACADEMY, ON BEHALF OF THE CONSORTIUM OF STATE MARITIME
ACADEMIES; AND PATRICK L. WOJAHN, PUBLIC POLICY ANALYST,
NATIONAL DISABILITY RIGHTS NETWORK, ON BEHALF OF THE CONSORTIUM
FOR CITIZENS WITH DISABILITIES TRANSPORTATION TASK FORCE
Mr. Allegretti. Good morning, Chairman Southerland, Ranking
Member Hahn. Thank you for the opportunity to appear before the
subcommittee today. I am here today on behalf of AWO members to
convey a simple message and an urgent request. We need prompt
publication of a Coast Guard rule on towing vessel inspection
that is consistent with the intent of Congress and with the
recommendations of the congressionally authorized Towing Safety
Advisory Committee. We need this regulation published right
away. The cause of marine safety demands it.
Congress directed the Coast Guard to undertake this
rulemaking more than 9 years ago. The statutory deadline for
issuance of a final rule passed nearly 2 years ago. Those facts
alone create a cause for action. But the enactment date and the
missed deadlines are not the only reasons why immediate
publication is imperative. Even more compelling is the fact
that the rulemaking offers an historic opportunity to take
safety in our industry to a new level, akin to the
transformation of the oil transportation industry after the Oil
Pollution Act of 1990.
There is widespread--indeed, overwhelming industry and
public support for moving forward with this rule right away.
And the administration, Congress, and our industry have real
vulnerability and will face hard questions from the American
public if this long overdue rulemaking is not finalized soon
and a serious accident should occur.
For more than 20 years, our industry has been engaged on a
journey of continuous improvement. The Coast Guard, Congress,
and our industry shipper-customers have been active partners in
that journey. The voyage has been marked by private sector
leadership and responsible public policymaking, both of which
have produced meaningful results. But we have not yet achieved
our goal of zero harm. And the most important step we can take
now, a critical missing link in the safety chain, is the
publication of the towing vessel inspection rule.
Mr. Chairman, there is a continuing and heightened risk to
marine safety each day that this important regulation is not
promulgated. Thirteen years ago, the NTSB published a report on
the 1998 ramming of the Eads Bridge in St. Louis Harbor and the
near breakaway of the President Casino with 2,000 passengers
aboard. The NTSB recommended that the Coast Guard seek
statutory authority to require towing companies to implement
safety management systems, calling the lack of a safety
management system requirement ``a threat to waterway safety.''
Five years ago, after another serious accident, a 2008
collision in which nearly 300,000 gallons of oil were spilled
into the lower Mississippi River, I testified before this
subcommittee on actions needed to prevent such accidents. I
said then that had the inspection regulations been in place,
the collision might have been prevented because the Coast Guard
would have been notified when the operator of the vessel failed
a safety management system audit prior to the casualty. This
would have forced the company to either improve its procedures
or risk losing its license to operate.
AWO members are frustrated that this rulemaking has taken
so long when the benefits of action are so great, the
consequences of inaction are so severe, and our industry is
asking to be regulated. The fact is that this rulemaking is not
particularly controversial. There is widespread support from
industry, from the public, from bipartisan Members of Congress
for moving forward with the central tenets of this rulemaking.
AWO is especially concerned about the potential for delays
at the Department of Homeland Security. We are very concerned
that the Coast Guard will finish its work on the inspection
rulemaking only to have it languish at the Department. This is
not a hypothetical concern. The proposed rule on towing vessel
inspection was sent to DHS in early 2009 and was not published
in the Federal Register until August 2011, more than 2 years
later. We cannot afford a delay like that again.
So here is what we recommend: We urge the Coast Guard to
commit to finalizing the towing vessel inspection rule and
sending it to DHS this fall. We urge DHS to complete its review
process this year so that the rule can be cleared by OMB and
published next spring during this commandant's watch. And we
urge Congress to continue to exercise its oversight to ensure
that the towing vessel inspection rule is published without
further delay. Today's hearing is an important step in that
oversight process, and we thank you for your leadership in
holding it.
Mr. Southerland. Thank you, Mr. Allegretti.
Captain Schubert, you are now recognized.
Mr. Schubert. Mr. Chairman and members of the subcommittee,
thank you for the invitation to speak here today. I am here on
behalf of USA Maritime, and also to offer my own personal
perspective as a former U.S. Maritime Administrator from 2001
to 2005.
USA Maritime is a coalition of ship owning companies,
maritime labor organizations, and maritime trade associations
which represent virtually every one of the privately owned
U.S.-flagged vessels operating regularly in the foreign trade.
As this subcommittee knows, the U.S.-flagged merchant marine
engaged in foreign trade, which is so vital to our Nation's
defense, depends heavily on the Maritime Security Program and
the cargo preference laws for its survival.
The two programs are inseparable and necessary to support a
peacetime merchant marine. Regrettably, we face a serious
challenge to both critical support programs. First, the
Maritime Security Program--MSP--is facing drastic and
potentially crippling cuts due to sequestration. MarAd has
recently informed the industry that up to one-third of the 60
ships--that is 20 ships--supported by MSP may be lost if
automatic cuts occur. Combined with the percentage reduction in
cargo preference reservation applicable to food aid from 75 to
50 percent and the drawdown in operations in Afghanistan, this
will have a disastrous consequence for the U.S. merchant
marine.
It is no exaggeration at all to say that the U.S. merchant
marine stands at the edge of a cliff from which it may never
recover. The U.S. merchant marine has a proud and illustrious
heritage, going back to the beginning of the Republic,
including valiant and sacrificial achievements in every
conflict Americans have fought. But unfortunately, the U.S.
merchant marine operating around the world will not survive
much longer if MSP is drastically cut.
We urge Congress to consider that the fleet has already
shrunk to a bare minimum to support national defense needs. I
could further state from my firsthand experience as the
administrator during Operation Iraqi Freedom and Operation
Enduring Freedom, co-managing one of the largest sealift
operations in American history that this statement is no
exaggeration.
Simply put, any further cuts will be devastating to our
industry and will surely cost the U.S. Government and the
taxpayers billions of dollars to replicate the lost sealift
capacity. The second challenge facing the industry is the
current lack of MarAd's ability to conduct serious enforcement
of the cargo preference laws. Ships cannot remain active in
peacetime unless they have cargo, and the cargo preference laws
are designed to ensure that U.S.-flagged vessels carry a fair
share of U.S. Government impelled cargoes and at reasonable
freight rates.
Persistent and active enforcement of cargo preference is
essential to ensure that those laws work as Congress intended
and to meet national security policy objectives. Almost exactly
2 years ago, MarAd, to its credit, held a public listening
session as to how to improve enforcement of cargo preference.
Virtually every witness called for increased transparency,
expedited staffing of vacant cargo preference positions, and
most of all, promulgation of a rule implementing the 2008 cargo
preference amendment enacted by Congress and designed to
improve cargo preference enforcement.
Now 2 years later, MarAd has made some commendable progress
filling positions and improving our working relationships with
the U.S. Ex-Im Bank and their stakeholders. But it remains
difficult, if not impossible, to get enforcement and compliance
information from the other Government agencies subject to the
law. And there is still no rule. In 2008, Congress saw a need
to improve cargo preference enforcement. MarAd must do its part
in promulgating the rule and vigorously enforcing the law. The
industry can no longer wait. MarAd must find a way to get the
rule promulgated and start enforcing the law as Congress so
wisely intended.
We look forward to working with the subcommittee and the
full committee on working to preserve and strengthen the U.S.-
flagged merchant marine. And thank you again for focusing on
these issues. I would be pleased to take any questions at the
appropriate time. Thank you, Mr. Chairman.
Mr. Southerland. Thank you, Captain Schubert.
Mr. Franke, you are now recognized.
Mr. Franke. Thank you, Mr. Chairman.
Thank you, chairman and subcommittee members, for providing
this opportunity to make comment on the U.S. Coast Guard report
to Congress on survival craft safety.
I am Ken Franke, president of the Sportfishing Association
of California and additionally speaking on behalf of the Golden
Gate Fishermen's Association as well as the National
Association of Charter Boat Owners.
SAC, GGFA, and NACBO are industry associations that
represent over 3,000 small passenger vessel companies based on
all maritime borders of the United States. This fleet
transports several million passengers annually. And rest
assured, passenger safety and appropriate lifesaving equipment
aboard our vessels is the absolute number one priority.
With regard to the Coast Guard report on survival craft
safety, we applaud the level of detail and factual clarity
contained in the document. A review of the report makes it easy
to conclude that the current system of equipping the small
passenger vessels with safety equipment is working.
At issue, however, is, what do we do with the information?
And how do we proceed effectively without incurring waste or
even harm to the national small passenger vessel fleet? Key
comments we felt were applicable to small passenger vessels in
the report are quoted as follows: A, based on analysis of
available casualty data, carriage of out-of-water survival
craft in place of lifefloats and buoyant apparatus is not
anticipated to have a significant effect on vessel safety. B,
for inspected small passenger vessels--those are inspected by
the U.S. Coast Guard--for which the vessel data and casualty
reports are more complete, the absence of fatalities attributed
to the type or number of survival craft since 1996 suggests
that the current requirements phased in between 1996 and 2006
have provided adequate protection. It does not support a
compelling need for additional requirements for out-of-water
survival craft for these vessels. C, for passenger vessels
where the passenger capacity is limited by weight, in some
cases, the increased weight of inflatable survival craft may
require some reduction in the number of persons that can be
carried with possible consequential long-term loss of passenger
revenue. And D, it is important to note that in a significant
number of cases on small passenger vessels, other lifesaving
equipment that might have mitigated the severity of the
casualty was not used or may have been used improperly.
Based on these comments, it would seem that retrofitting
the vessels with inflatable liferafts would not be reducing
threat to life. What it would do is cost a small business owner
and jobs to incur a $350 million bill over 10 years that, in
some cases, would put them out of business. We feel it is
important to mention our vessels and passenger safety have been
a progressive evolving story with an emphasis on improved
design training and technology over the past 10 years. This
results in a reduction in those incidents where survival craft
is employed. The statistics in the Coast Guard report support
this fact. We refer to the following examples: GPS positioning
ensures precise navigation, improved vessel safety movement,
and ensures high-speed response by rescuers by necessary;
plotting software and improved radar and sonar systems further
reduce the risk of collision or grounding; EPIRB emergency
transmitters provide improved response times by first
responders.
Communications equipment has vastly improved, with movement
to satellite intercoms and networks capable of broadcasting to
entire fleets with clarity during an emergency. Vessel design
and bulkheads to divide compartments substantially reduces the
likelihood of a vessel sinking. Vessel traffic centers help
reduce conflict on the water by ensuring separation of vessels
in congested areas. Licensing requirements and new crew
training have become much more intensive.
These factors, all of which reduce the risk of the need to
deploy a survival craft, combined with the intensive annual and
random inspections by the Coast Guard personnel have led to a
robust and layered life protection system aboard our vessels.
Therefore, it is our opinion that retrofitting, in many cases,
large portions of small passenger vessels to accommodate
inflatable liferafts is inappropriate and a waste of money.
Additionally, we feel it is not prudent to move forward
with implementing a rule that there is no basis to indicate
will save a life any more than the current risk-based survival
craft requirements in place.
Based on all of the above comments, we recommend to the
subcommittee that action be taken to legislatively amend the
previous instruction to the Coast Guard to continue to utilize
risk-based survival craft guidelines. Further, if as a result
of this report they feel there is an area that can be improved
on by policy development, then the Coast Guard should pursue
addressing the deficiencies and report back to the subcommittee
on the actions taken.
Speaking specific to my own fleet, to which the statistics
are most familiar to me, with the Coast Guard's oversight, our
fleet moved 10 million passengers over 10 years with no death
attributed to the lack of an inflatable liferaft. The system
works.
In closing, we compliment the hard work of the Coast Guard
in both protecting our fleet and preparing this report. This
was an outstanding document. I venture to guess everyone wishes
we had it 2 years ago. We commend them for their achievement.
With that, I submit to any questions you may have.
Mr. Young [presiding]. Mr. Powell.
Mr. Powell. Mr. Chairman, thank you for this opportunity to
testify on behalf of the National Customs Brokers and
Forwarders Association of America, the NCBFAA. I am Geoffrey
Powell, vice president of the association. NCBFAA's 800 member
companies and 28 affiliated regional associations represent the
majority of licensed ocean freight forwarders and non-vessel
operating common carriers, or NVOCCs and are, therefore,
directly affected by maritime regulation.
Your invitation to us to testify is extremely timely. The
Association is greatly concerned that a recent proposed
rulemaking by the Federal Maritime Commission is inconsistent
with the important goals of job creation, improving the
national economy, and reducing, not increasing, the burdens of
unnecessary regulation.
Ocean transportation intermediaries, or OTIs, play an
important role, ensuring that U.S. importers and exporters of
all sizes can move their goods in international commerce
efficiently and economically. They consolidate smaller
shipments that could not otherwise be economically transported.
They provide the full range of logistical services that are
necessary to export or import cargo from and to the United
States.
The rulemaking sprung from an investigation of the barrel
trade, but then failed to address any of the issues that
surfaced; in that instance, the movement of household goods.
Instead, it focused on something completely different, the
regulation of OTIs. There are a myriad of issues raised by the
proposal; however, I will highlight three of the more
problematic. First, the Shipping Act provides for OTIs to
obtain licenses without term limits as a condition for doing
business. Without any explanation, justification, or statutory
authority, the FMC proposes to convert all licenses to 2-year
terms that require biennial renewals. This will be a
burdensome, time consuming, and expensive proposition,
including requiring parties to pay as yet undetermined filing
fees. There is no record of abuse, no specific legislative
authority under the Shipping Act, no direction from Congress
for the FMC to take these steps with respect to OTIs.
The FMC justifies this burden by arguing it needs to ensure
that it has current corporate information concerning its
licenses. However, the FMC's existing regulations already
require that these changes must be provided to the FMC as they
occur. We must also say that the FMC cannot effectively meet
the challenge of issuing new licenses under existing
regulations, a process which often takes 2 to 3 months or more.
Adding to this additional renewal requirement would inundate
FMC staff and grind the entire process to a halt.
A fundamental flaw in the Commission's rulemaking process
was its failure to meet with the industry in order to identify
any problems and then, if necessary, jointly find solutions
that are the least burdensome. Secondly, without any apparent
supporting rationale, the proposal also authorizes suspension
or revocation of a license in terms that are vague, overbroad,
and in some instances unreasonable. In a related vein, the
proposed regulations establish procedures for licensed
revocations which raise due process concerns and are contrary
to the U.S. Constitution and the Administrative Procedure Act.
The proposal, which would take away a company's ability to do
business, provides for no right of discovery, no apparent right
to a hearing, no right to cross-examine witnesses, and no right
to appeal from the decision of the designated hearing officer.
Our last example is the Commission's proposal to increase
ocean forwarder and NVOCC bonds by 50 and 33.33 percent,
respectively. This would result in increased bond premiums for
the several thousands of licensees on an annual basis. Despite
the fact that the Commission was able to cite only two
instances in which the bond was insufficient to cover
outstanding claims, the proposed increase would not
dramatically increase any potential claimant's level of
protection since the proposed increased bond would still fall
far short of the amounts that were cited in the two examples
relied upon by the Commission.
Regrettably, the Commission has failed to exercise good
judgment in these proposed regulations which will only serve to
increase cost to the industry and make smaller OTIs less
competitive, all for no apparent reason. For these reasons, the
Association respectfully requests that the subcommittee require
that the FMC explain why it is proceeding along this path.
Mr. Chairman, we are grateful for the subcommittee's
interest in this matter.
Mr. Young. Thank you, Mr. Powell.
I think it is Rear Admiral Gurnon.
Admiral Gurnon. Good afternoon, Chairman Young and members
of the committee.
Mr. Young. I can't see too well this early in the morning.
Admiral Gurnon. I understand. You have time zones to cross
from Alaska.
I am Rick Gurnon, president of the Massachusetts Maritime
Academy. I am speaking today on behalf of the Consortium of
State Maritime Academies. Our colleges are located in
Massachusetts, New York, Maine, California, Texas, and
Michigan. Although students from every State represented on
your committee are enrolled at our colleges at reduced rates
due to regional status.
I would like to take a moment and introduce the other two
academy presidents who are with me today, Rear Admiral Wendi
Carpenter from SUNY Maritime and Rear Admiral Robert Smith of
Texas A&M Galveston and Texas A&M Maritime Academy. Together,
we represent a vital component of the national economy, and I
thank you for the opportunity to appear before you today to
discuss two very important issues of great concern to us.
First, the impact of the ever-increasing regulatory burden on
our institutions; and second, the need to replace our aging
training ships owned by the Federal Government and critical to
our ability to train our students for jobs and meet Federal
requirements.
Collectively, the six State maritime academies graduate
over 70 percent of the licensed deck and engineering officers
in our country. While a sufficient pool of American merchant
mariners is always important for the free flow of commerce and
to support our troops overseas, that pool of officers becomes
critically important in the event of a national emergency. All
of the bombs, beans, bullets, boots, Bradleys, and Black Hawks
that get to the Middle East moved by ship, with graduates of
the State maritime academies at the helm and in the engine room
of those vessels.
In addition to their bachelor's degrees, State maritime
academy graduates are well prepared for positions of
significant responsibility and technical difficulty, not just
as mates and engineers aboard ships, but as senior leaders
across many industries, in Government, in the military, from
the seabed to space. Unfortunately, the State academies now
face a number of challenges that threaten our success. And our
primary concern is the regulatory burden.
When the international convention on Standards of Training,
Certification and Watchkeeping Code, STCW, was first
implemented in 1997, it launched an ever-increasing layered set
of requirements which are onerous, unnecessary, and result in
unfunded mandates with significantly higher cost for the
students and no measurable improvements in safety or security.
The original intent of STCW was to increase the training and
professionalism of other nations' mariners. Despite over a
decade of STCW requirements, we are not aware of any study that
has determined that its implementation has improved U.S.
maritime safety. The unintended consequence is that already
high-quality American mariners were saddled with additional
time-consuming and costly requirements that drove many mariners
out of the profession because of the excessive energy, time,
and money now needed to attain or retain their qualifications.
Because of the rigid manner of the Coast Guard's
interpretation of STCW, we estimate that the implementation
adds $1,850 to the cost to educating each student or over $5
million for us collectively each year. Of particular concern to
us is the fact that the Coast Guard continues to interpret STCW
without input from the academies. Our second concern is the
need to replace our aging training ships. Each of the six State
maritime academies has a federally owned training ship assigned
through the Maritime Administration. The ships are the primary
means by which our students receive their required seatime, and
are essential components of our approved training programs.
Because of the Federal requirements that these ships be
built in the United States, they are either old merchant ships
or converted Navy ships, and they average 35 years old. The
SUNY Maritime training ship, originally designed in 1963, is a
break bulk cargo ship, is over 51 years old, and needs
replacement.
The Maritime Administration has presented a business case
for the construction of a new national security multimission
vessel and estimates the project would support 600 to 1,000
high-paying manufacturing jobs per ship in the United States.
New multimission training ships would also serve as platforms
for disaster relief, humanitarian assistance, and logistics
support for the Department of Defense. In fact, training ships
have been utilized in disaster relief during Hurricane Sandy
and Katrina and in humanitarian assistance in both Haiti and
Mogadishu. During Hurricane Sandy, for example, MarAd testifies
that the use of the Kennedy and the Empire State resulted in a
cost avoidance of approximately $3.7 million to the taxpayer.
In closing, let me emphasize that the State maritime
academies hold the U.S. Coast Guard and Maritime Administration
in high regard. Our reason to exist is to train our students to
become competent professional leaders in the maritime industry,
but that task is becoming evermore difficult due to an
increasing regulatory burden on the academies and the aging of
our federally owned training ships.
Thank you very much. I stand by for questions.
Mr. Young. Thank you, Admiral. Mr. Wojahn.
Mr. Wojahn. Good afternoon, Chairman Young. My name is
Patrick Wojahn, and I serve as a public policy analyst at the
National Disability Rights Network. I am here as a
representative of the Consortium for Citizens With Disabilities
Transportation Task Force. I thank you for holding this hearing
today and appreciate the opportunity to testify on the
important safety and civil rights issue of out-of-water
survival craft. CCD is a coalition of national disability
organizations working together to advocate for national public
policy that ensures the self-determination, independence,
empowerment, integration, and inclusion of children and adults
with disabilities in all aspects of society. The transportation
task force focuses on ensuring that national policy regarding
transportation move society toward the ultimate goal of access
to adequate transportation to accommodate the needs of
employment, housing, and recreation for all people with
disabilities.
In order to be effective for people with disabilities,
elderly people, and infants, survival craft must provide out-
of-water protection. This is a matter of life and death, as
many people with disabilities, elderly people, and infants lack
the ability to hold onto survival craft that allows any part of
them to remain immersed in water. For them, lifefloats and
buoyant apparatus that does not keep them fully out of water
are effectively useless.
The benefits of survival craft that keep people entirely
out of water to both people with disabilities and people
without disabilities have been well understood by the Coast
Guard and the National Transportation Safety Board, but have
consistently recommended use of these craft as safety devices
for at least 70 years.
The Federal Government has also recognized for many decades
that accessibility for people with disabilities, which would be
supported by the use of out-of-water survival craft, is a civil
right. In particular, the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990 have enshrined the
principle of equal opportunity for people with disabilities
into Federal law. Equal opportunity requires that people with
disabilities be able to ride on surface vessels, transporting
passengers without greater fear of dying due to inadequate
survival craft.
Veterans who risk their lives to protect our country and
who now have a disability should not have to risk their lives
to go sportfishing or ride a ferry. Unfortunately, the cost-
benefit analysis that the Coast Guard submitted regarding the
requirement of out-of-water survival craft included in the
August 26, 2013, Coast Guard report to Congress, does not
consider the civil rights factors discussed above. It also
includes a deeply flawed analysis of the costs and benefits of
this requirement of out-of-water survival craft.
Although the report acknowledges that there are a number of
uncertainties in determining the number of lives that might be
saved by out-of-water survival craft, it appears to
consistently resolve these uncertainties in favor of finding
that fewer lives would be saved. Of the approximately 60 vessel
casualties and over 160 deaths in vessels carrying passengers
that occurred between 2002 and 2011, the Coast Guard found,
without explanation, that only 21 of these fatalities, one-
third of these lives lost could have been prevented had an out-
of-water survival craft been available. This is particularly
astounding given the report's finding that out-of-water
survival craft increased the fatality rate for passengers in
the incidents where they are available by 73.74 percent.
Additionally, the cost-benefit analysis undervalues the
lives of people who die as a result of safety vessels that do
not protect people out of the water. The Coast Guard, to
determine the value of a statistical life, relies on a review
of studies by the Department of Homeland Security that place
the value of a statistical life, or VSL, at $6.3 million in
2007 dollars. Other recent Federal Government studies, however,
place the VSL at a much higher amount.
A recent OSHA analysis of crystalline silica determined
that the value of each fatality avoided would have been $8.7
million. A recent EPA cost-benefit analysis placed the value of
a statistical life at $8 million in 1990 dollars and $9.6
million in 2020 dollars. There is at best a great deal of
uncertainty regarding the appropriate measure of the value of a
statistical life.
Given that these numbers are a matter of life and death for
people with disabilities, the value of human life should not be
monetized and cannot be monetized to the person whose life is
lost nor to that person's family. History is rife with examples
of cost-benefit analyses such as Ford's analysis of the Ford
Pinto being used to justify pure precautionary measures by
looking at the value of a statistical life until the point
where people actually begin to die.
And who would want to be the one to contact the family
member of a veteran with a disability and inform them that that
person died because Congress determined that the profit to the
industry operating vessels transporting passengers was more
important than that person's life? The cost to use out-of-water
survival craft is minimal compared to the benefit of saving
someone's life.
In conclusion, the Consortium for Citizens With
Disabilities supports retaining the statute that requires the
Coast Guard to approve only survival craft that keep people out
of the water. Passenger vessels required to carry survival
craft should only carry survival craft that provide out-of-the-
water protection for all passengers. Thank you for the
opportunity to testify this morning.
Mr. Young. Thank you, sir.
And now we will open it up for questions. Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Wojahn, let me start with you. When I walked out in the
hall just now, I said to the admiral, I said, Admiral, I am
really looking forward to your report, particularly on the
disability issue. And he said something very interesting. He
said, You have got to understand that it may not be practical
to come up with a solution to that problem, and it may have to
be done on an individual basis. Maybe you have heard that
before. Have you heard that before?
Mr. Wojahn. Yes.
Mr. Cummings. Can you keep your voice up and respond to
that so that when he sends me what he is----
Maybe I will preempt him. You give me the information so I
can write the right question to him so that I don't have him
giving me the answer that he just gave me.
Do you understand what I just said?
Mr. Wojahn. No. I am not sure I do.
Mr. Cummings. Help me help him. Help me help you.
In other words, he is saying that it is not practical. And
that is the answer that he is going to probably give me----
Mr. Wojahn. Right.
Mr. Cummings [continuing]. To the issues that you are
raising. And I am saying, he says that maybe it is better that
you deal with the disabled on an individual basis. And all I am
asking you is, what is your response to that, so that I can
preempt his response.
Mr. Wojahn. Well, thank you. I appreciate your question.
And I think I do understand it.
I think while civil rights may not always be considered
practical, it may not, on an individual case, be considered
cost-effective or practical to implement, accessibility has
been recognized as something that we value as a country. And
the ability of people with disabilities to be included in every
recreational opportunity is enshrined in the Americans with
Disabilities Act. So it is not just a question of practicality.
It is a question of what do we need to do for the people--for
veterans with disabilities who have sacrificed or risked their
lives for our country?
Mr. Cummings. All right. OK. Got you.
Mr. Allegretti, you urged in your statement that the Coast
Guard issue the long overdue touring vessel inspection rule.
Given the findings of the DHS IG, are you confident that the
Coast Guard has the resources or the expertise to bring towing
vessels under inspection?
Mr. Allegretti. Yes, sir. I am. And I am not looking so
much at the internal competence of the Coast Guard, which I
can't speak to in this particular area, but I can look to the
process of collaboration that the Coast Guard used over the
last 9 years, where it extensively tapped the expertise of
industry, of labor to understand how to implement this rule and
how to deal with the technical requirements of the rule.
At each step along the way, there was a lot of input to the
Coast Guard. So I am confident that if they have used that
information, the rule should come out largely right.
Mr. Cummings. And I take it that some of your members of
the organization, have they been involved in that process?
Mr. Allegretti. Extensively, sir. It was done under the
aegis of the Towing Safety Advisory Committee, which is a
congressionally authorized advisory committee to the Coast
Guard. TSAC provided the umbrella to allow all of this work to
take place. And what is important about that is that it was
inclusive and open to the public. Anybody who had an interest
in this issue was invited to participate.
Mr. Cummings. Can you update me on your current
discussions, if any, with DOT regarding enforcement of the
Jones Act. Have you been talking to them?
Mr. Allegretti. We have been talking to them. We have been
specifically talking to Administrator Jaenichen. And he is a
strong supporter of the Jones Act, has professed that publicly
to our leadership, and has asked for the opportunity to work
with us to figure out how to make sure that within the
Department of Transportation, they are doing all of the things
necessary to enforce the law and to send public signals about
their intent to enforce the law.
Mr. Cummings. Well, I am pleased to say that--I had a
meeting with Secretary Foxx. And I am so glad--and I asked him
to please make sure maritime is taken off the floor and put on
the stove--not the back burner, but on the stove, because I
think maritime has been a stepchild to the other
transportation--
And I agree with you. Jaenichen is a breath of fresh air.
Let's hope that he moves forward and has the support that he
needs.
Thank you, Mr. Chairman.
Mr. Young. Thank you, sir. Mr. Rice.
Mr. Rice. Captain Schubert, I am curious. You were talking
about enforcement of cargo preferences and the effect of
sequestration on the U.S. maritime fleet, the international
fleet as well, particularly focused on here. Who owns those
ships?
Mr. Schubert. Well, every shipowner who has a U.S.-flagged
vessel has to meet citizenship requirements, documentation.
Mr. Rice. Does the Government own them?
Mr. Schubert. No. We are talking about privately owned
merchant marine ships.
Mr. Rice. What difference does sequestration make? If they
are privately owned, why do they worry about sequestration?
Mr. Schubert. Well, respectfully, we have two issues. One
is the enforcement of cargo preference. Incidentally, cargo
preference dates back----
Mr. Rice. Let's talk about sequestration.
Mr. Schubert. Sequestration is directly related to the
Maritime Security Program. You might call it a retainer that is
paid to the carriers.
Mr. Rice. So the Government is paying these guys money?
Mr. Schubert. Yes, they are.
Mr. Rice. OK. Now why is it--you know, there are privately
owned vessels all over this world carrying cargo all over the
place. I think I learned last time that we carry 2 percent of
the world's international cargo. Why aren't we competitive? Why
do they have to rely on the Government? Why can't we be
competitive? Why can't they carry cargo and make money just
like every other ship in the world?
Mr. Schubert. Respectfully, sir, they do carry cargo and
make money. But the cost of operating a ship under U.S. flag is
more than the international competition. And it has to do
with--
I mean, if you visit our ports, you will see foreign-flag
ships come in and out all the time. And I have to tell you that
the wages that they pay their seamen--sometimes they don't even
pay wages. We call them ``ships of shame.'' This is the same
international fleet that our U.S.-flagged carriers have to
compete against. And I have to say, the $3.1 million MSP
payment per vessel is probably about 50 percent of the annual
cost differential it takes to operate a ship under U.S. flag
when compared to ships under foreign flag.
Mr. Rice. OK. So you are saying the Government pays these
ships $3.1 million a year----
Mr. Schubert. Yes, sir.
Mr. Rice [continuing]. To be U.S.-flagged ships?
Mr. Schubert. To help offset the cost of operating under
U.S. flag.
Mr. Rice. All right. Why can't they be competitive?
Mr. Schubert. Well, actually, at least the carriers that
operate within the 60-ship maritime security fleet program are
very competitive internationally. We have one of the most
modern----
Mr. Rice. So we are carrying international cargo?
Mr. Schubert. We are carrying international cargo.
Mr. Rice. Not just on cargo preference?
Mr. Schubert. Not just on cargo preference. They couldn't
exist otherwise without MSP. Just to give you an example, I
believe the container carriers that we have--the three
container carriers that we have under the MSP program are the
largest, number one, probably the fourth largest, and the
seventh largest carrier in the world. They don't do that on
cargo preference. They do that because they are internationally
competitive, and they operate U.S.-flagged ships.
Mr. Rice. You said MSP programs?
Mr. Schubert. Maritime Security Program which is the----
Mr. Rice. American-flagged vessels that carry the cargo
preferences?
Mr. Schubert. Well, there are two different programs. The
Maritime Security Program is a retainer much like the Civil
Reserve Air Fleet--CRAF--program that the airline industry has
to help offset the cost and be there and be available to
provide the global scope. It is not just the ships that we get
with MSP. We also get the entire network of terminals, trucks,
chassis. MSP is one of the best bang for the buck programs that
the taxpayer can get. It is----
Mr. Rice. OK. You say we have got three container ships?
Mr. Schubert. Well, there are three container carriers that
are world-class container carriers. The military----
Mr. Rice. Is that all that we have got is three?
Mr. Schubert. Well, those are companies. There are three
companies that own container ships. We have several roll-on/
roll-off carriers. We have a very diversified----
Mr. Rice. How many container ships do we have? I know we
have only got like, what, 80 or 90 U.S.-flagged ships.
Mr. Schubert. I want to say there are about 47 or so U.S.-
flag container ships in foreign trade. I don't know if I have
the most up-to-date information. But the point is that we have
ships, and we depended on those ships during Operation Iraqi
Freedom and Operation Enduring Freedom. I was the Maritime
Administrator at the start of those operations. It was the
largest, most successful sealift in American history in terms
of speed and efficiency, and we could not have executed that
conflict and supplied the troops in the field with everything
from beans to bullets----
Mr. Rice. I am running out of time. So I have to stop you
for a second here.
I want to go back and I want to get a specific answer to a
question. I asked why we aren't competitive.
Mr. Young. Mr. Congressman, go ahead. I have time. You just
keep on going.
Mr. Rice. Thank you. I asked you why aren't we competitive.
You mentioned low wages. What else? Why aren't we competitive?
Mr. Schubert. Well, to be honest with you, we did a study
on this during my term as Maritime Administrator, and the Tax
Code has some issues. The international fleet, just through the
Tax Code, has competitive advantages over the U.S. flag.
Mr. Rice. What else? Tax code and wages. What else?
Mr. Schubert. Well, we have some laws that I believe are
outdated. It is also in the area of tax. If a U.S.-flagged
vessel undertakes a nonemergency repair in a foreign shipyard,
it is subject to payment of a 50-percent ad valorem tax on
those repairs.
Mr. Rice. I didn't know that. That is a U.S. tax?
Mr. Schubert. That is a U.S. tax. Fifty percent. Now there
are some exceptions with some of the free trade agreements that
we have. But the point is--and I really commend Administrator
Jaenichen for taking a top-to-bottom review of maritime policy.
It is long overdue. He has the full support of the industry and
USA Maritime in that effort. But we really can't afford to lose
a single ship right now. We are at the very bare minimum.
Mr. Rice. See, I want to change that. That is why I keep
asking what we need to do to be competitive. And what I want to
know is, what is it going to take to have foreign companies
flagging ships in the United States? What is it going to take?
What are we going to have to change to make our regulatory
structure, our tax structure--what are we going to have to
change to make us competitive? I mean, we sit here and watch
our shipbuilding industry die on the vine. We have sat here and
watched our international shipping die on the vine. It is a
horrible state of affairs. It is almost unimaginable. And I
want to figure out what we have got to do to change it to make
us competitive again.
Mr. Schubert. Well, we do need to enforce the cargo
preference laws that are on the books, and that is important.
Mr. Rice. That is not making us competitive. That is giving
the Government a crutch. I want to know what it is going to
take to make us competitive.
Mr. Schubert. Well, we are up against international
competition that--
I mean, I would say that if you were going to build a gas
turbine generator in China, they are going to build it cheaper
than they are going to build it here. It is the same issue in
terms of our industrial base. We are up against international
competition.
By the way, the MSP program replaced the operating-
differential subsidy program in the mid-1990s. At that time, we
were paying the carriers as much as--in U.S. dollars in 1990--
approximately $5 million per ship annually to stay U.S.
flagged. The fact that we are today only paying $3.1 million
annually in current dollars is a big step in the right
direction.
Mr. Rice. I want our carriers so competitive that we don't
pay them anything. So here is what I would like from you. I
would like a list of 10 suggestions, things we need to change
that we can help make our shippers competitive. If it is
changing Coast Guard regulations, if it is changing our hiring
policies, if it is changing our tax structure, I want to know
what we can change to make us competitive.
Mr. Schubert. I would like to make one comment about the
Coast Guard. I personally think that they have gone to great
lengths to help remove obstacles to reflag ships. During my
time--and it actually started before I showed up--ships meeting
international standards can, in some instances, reflag to U.S.
registry. It didn't used to be that way. So Coast Guard has
done a lot to help in terms of removing obstacles to
reflagging.
Mr. Rice. I hear you, Mr. Schubert. And you know far more
about this than I do. And I appreciate that. But I am just
looking at the big picture. And the big picture is, we do not
have 100 United States ships flagged in international shipping.
Something is terribly wrong.
Mr. Schubert. We have a little bit more work to do on the
Tax Code.
MR. Rice. I would sure love to see your suggestions.
Mr. Schubert. Sure.
Mr. Rice. Thank you, sir.
Mr. Young. Thank you, Mr. Rice.
I want to thank the panel.
Mr. Allegretti, liquefied natural gas has begun to be used
as a marine fuel for vessels at a great expense, by the way, as
well as vessels carrying LNG as a commodity. The Coast Guard
has begun to slowly make a policy, regulating vessels fueled by
LNG or carrying LNG as a cargo. What is AWO's position on LNG
and how will you work with the Coast Guard on forthcoming
rules?
Mr. Allegretti. Thanks, Mr. Chairman.
Generally speaking, many of our members are excited about
the potential to use LNG as a means of propulsion and the
opportunity to carry it as cargo. So I think generally
speaking, the position of our association, of our membership
is, we would like to do whatever we can to help the Coast Guard
facilitate movement in both of those directions.
Mr. Young. Hydraulic fracking--I can't figure out what this
has got to do--produces wastewater that must be transported to
a disposable site. There is not currently a standard for
transporting this wastewater by barge. Answering requests from
the industry, the Coast Guard is working on policy guidance
that will establish the conditions under which shale gas
wastewater can be transported by boat, by barge. Does the AWO
support the carriage of shale gas wastewater by barge?
Mr. Allegretti. Absolutely, sir. We think that that is a
great business opportunity in the future of our industry. We
think it could be done safely, practically, cost effectively.
So the Coast Guard's development of policy guidance in this
area will be very helpful to establishing the standards of
carriage. And barges move lots and lots of hazardous cargoes.
There is no reason why we can't move wastewater as well.
Mr. Young. Thank you.
Mr. Powell, why is the FMC producing this rulemaking?
Aren't there current regulations governing the activities of
OTIs? Are they deficient or are they sufficient?
Mr. Powell. Mr. Chairman, we don't think so. We think this
ANPRM began with their investigation, Commissioner Khouri's
investigation of the barrel trade and looking at the movement
of household personal effects. We think there are the proper
checks and balances within the OTI industry, if not with the
FMC, certainly with the customers who employ us. We have moved
from regulation to contractual obligations to our shippers. So
we think there is ample protection and control in there for the
buyer of those services.
Mr. Young. What you are telling me that there were two
instances in this whole thing and they changed the whole
regulatory platform?
Mr. Powell. They cited two examples in the Advance Notice
of Proposed Rulemaking where a bond did not cover what the
companies went after the bonding companies for. And even with
the amounts that they cited, the increase in bonds still would
not have covered that.
Mr. Young. Well, it is sort of interesting, because, Rear
Admiral, you were talking about regulations. I would like a
list from both of you of what you think are offensive about any
regulations, because this is my pet peeve, for everybody
sitting at this table, regulations.
Just give you an example, in the last 4 years this Congress
passed 628 laws in 4 years and signed by the President. In the
same time, the agencies passed 13,883 regulatory laws that do
nothing other than cause you more headaches; doesn't really
solve any problems, because we got people who don't understand
the industry.
And, Captain, I got to tell you one thing. I am a person
that believes in America's maritime fleet. I happen to support
your organization. I do not like to see my Navy, my maritime
commercial fleet become foreign. Of course, I only have to deal
with the Jones Act, which I am a big supporter of, the only
elected official in Alaska that does support it, by the way.
But to me what we have done to our maritime fleet from 1945
until now is really very not for good for this country. And I
am not an isolationist. We do have to be competitive, and the
ships of shame, for instance, we are getting product from the
foreign countries, consuming it, then we have this holier than
thou attitude where we don't enforce those rules that should
make us competitive, when they have the ability to do that, at
a great cost to humanity. No one says a word.
Rear Admiral, I want to say one more thing. I have this
burn with the Coast Guard right now, and I am going to try to
change it, because I am big supporter of the Coast Guard.
Everybody supports the Coast Guard. But they are lawyered up.
There are too many lawyers in the Coast Guard now. And they
will give you 100 reasons why you can't do something instead
of, OK, what can we do safely? What can make it work? And for
those lawyers in the room, that is your problem. That is one of
the things wrong with this country right now.
But lastly, Rear Admiral, I would like to really have you
think about your training ships. Maybe we can be in this
together, because I don't see this Congress spending the money
they have to do to take and develop your training ships. I
think that is reality, unfortunately. So is there a way we can
get a ship in your hands that is more reasonably cost? I think
that could be a way to do it. And I am talking about leasing
and I am talking about being able to take and have a long-term
contract if you wish to do it. But we need to have these newer
ships, because you get trained on a 50-year-old ship, it is not
the same ship. I want us to look and explore this.
Coast Guard keeps saying, well, we want to own them. And
the cost factor is about 50 percent more. It is not going to
happen. I am talking about icebreakers, you are talking about
training ships. Your ships are more important than ours are.
And just comment on that.
Admiral Gurnon. We agree, Congressman. This is an important
part of our training. We are training on 50-year-old antique
vessels. It is shameful. Mexico can do it, the Indonesian
countries can do it. We can't do it.
We have had a lot of comments about shipbuilding and the
lack of shipbuilding in America. You need only look at Great
Britain to see the dire straits that they are in. They are
unable, for 20 years been unable to produce a new aircraft
carrier because they let their shipbuilding capacity atrophy to
the point where it impacts their national defense.
I believe that we can do it. I believe that we can do it.
It is good jobs at good wages. Previous training ships were
acquired through the earmark program. That is not going to
happen in probably my lifetime, so we are going to have to----
Mr. Young. Don't say that. I am 80 years old and I am going
to have earmarks sooner or later, you would think. Don't say
that. Because it is the dumbest thing we ever did, by the way,
I will say. And my party did it. The dumbest thing. You know,
look, I am going to shoot myself in the foot. That is how you
shoot yourself in the foot. But that is not your problem, but
don't say we are not going to get them.
Admiral Gurnon. Yes, sir. Strike my last.
We believe that you can do it. We think you can do it in
America. And if you look at the big high-tech ships coming out
that Americans go on, all of the Carnival cruise line vessels,
they are built in Germany and they are built in Italy, not
exactly Third World countries. They can do it competitively.
Mr. Young. And I think we can do it if you do one thing,
very simple, because what you said--you said, and most of you,
I think, will agree.
Tom, how many regulations do you believe you are faced with
that you didn't have 30 years ago?
Mr. Allegretti. Dozens. At least dozens.
Mr. Young. And that would be something for all of you to
just sort of put down: This is what was not in existence 30
years ago. And then try to explain to me why they were
necessary. What has it accomplished for the people of America?
We can become competitive if we just stop this nonsense that we
have 100--and by the way, never voted on, never vetted by the
people, decided by the bureaucracy. And the bureaucracy is an
extension of the executive branch, and this Congress no longer
governs America. We don't. It is governed by someone that is
never elected, never been vetted, cannot be fired, extension of
the executive branch, and as Americans we sit here and take it.
And we cannot be competitive in the shipbuilding business,
the shipping of products, the inland waterways, we cannot be
competitive if we keep allowing this to occur, because the
people who write them don't understand the effect upon the
total effort of the industry.
I used to be in this business. I had a business license, a
captain's license, and my pilot's license. I go back to the
same company I worked for, started by the same people, they
have a stack of Coast Guard regulations that high. That is not
too bad. That high. If one of their clerks does not file the
correct form or fill it out exactly right, the company can be
fined or their ships cannot leave the dock. But that is not too
bad.
Then you have Homeland Security. That is a great agency.
Does anybody feel more secure with Homeland Security nowadays?
If you do, you are dumber than a mud fence right now. But they
have a stack of regulations, same shipping company, that high
that you have to fill. They have got 12 people working in an
office now filling out those forms, serving the same people I
did, and if one makes a mistake, they can be fined by that
agency. There is no appeal unless you appeal to the agency. And
you can be put in jail without judicial process. And their
argument to me is, well, there may be a terrorist on the Yukon
River. On the Yukon River, a terrorist? There is only one. That
is me. But this is the silliness this country has got to today.
Every committee I sit on and listen to witness tell me
this, this, this. If we address the issue and if America would
wake up, it is not the Congress. Our problem is we have allowed
it to occur, and it is bleeding the economy of this country,
including your industry. This is not about safety.
I am on my soap box. I have served my time, Mr. Chairman.
You can take over now. I have done enough damage. Thank you.
Mr. Hunter. You can't tell that Mr. Young liked being
chairman, can you? We liked it, too.
I am sorry that I am late. I do have a couple of questions,
though, for my good friend, Ken Franke, he came up from San
Diego.
Ken, let me just say hi. Thanks for coming out.
Last time I saw him, we were fishing with a bunch of
wounded marines there about 2 weeks ago.
Mr. Franke. Yes, sir.
Mr. Hunter. So my question is about that, actually. If we
were to have gone out past 3 miles, according to the new law
that is going to go into effect in about 2\1/2\ years, we would
have had to have had lifeboats. If we would have gone out past
3 miles with those number of people, over six people past 3
miles, you have to have lifeboats. So tell me, would you have
to retrofit fishing vessels to match the lifeboat law?
Mr. Franke. Yes. Actually, you know, this is one-size-fits-
all, and that is kind of the concern.
I want to preface my comments with we have nationwide a lot
of boats with inflatable liferafts. The Coast Guard does a lot
of analysis before they give a certificate of inspection of one
of our boats. So some boats will have inflatable liferafts,
other ones will have lifefloats. In inland waters, like in
Mission Bay, for instance, where the water is 6 feet deep, the
river paddle wheeler that is 30 feet tall doesn't have any
liferafts, because if it sunk, the people would stand on the
upper deck.
So we have a risk-based management that exists. And
specifics especially to ADA stuff or, you know, severely
handicapped people, that is when we in the industry make sure
that they are on a vessel with the capabilities to support
them. I use it as an example, 2 weeks ago I had a gentleman
that has a breathing apparatus and his chair weighs 400 pounds.
A little 30-foot boat was not capable of accommodating him and
his family. We put them on a much bigger boat that had actually
the lifesaving equipment that he needed handy to him, with
ramps capable of supporting his wheelchair. So there is
infrastructure to deal with those ADA situations and those
people that may not necessarily have the dexterity to amble
around a 25-foot little sportfishing boat.
The issue comes down to, though, do we go back and tell the
mom and pop that own that little fishing boat, I am sorry, you
have to go out of business because you need to buy a $10,000
liferaft to mount up on the roof of your boat and go through a
new stability test with the Coast Guard. That is what it comes
down to at the end of the road.
The bigger boats, a lot of them have inflatable liferafts,
because the Coast Guard analysis of their route says, yeah,
this is the safest thing to do. The offshore boats, most of
them have the inflatable liferafts. The coastal boats, with the
layers of safety that we have, all the communications
equipment, the safety compartments on the boats, the division
of the bulkheads, we have a good layered approach. And that is
why, you know, I mentioned in my statement, we held 10 million
people over the last 10 years in my little fleet. We didn't
have a single death. That speaks huge when we can have that
layer of safety.
So in answer to your question, yeah, we would end up having
to retrofit them all, and I would honestly speculate I would
probably lose 5 percent of our fleet out of business. Thank
you.
Mr. Hunter. We probably took--two of those marines didn't
have legs at all on the fishing vessel we were on.
Mr. Franke. Right.
Mr. Hunter. Was there a detachable liferaft?
Mr. Franke. We had lifefloats on that boat, sir.
Mr. Hunter. Lifefloats. Probably every single marine on
that was missing at least one limb.
Mr. Franke. Yes.
Mr. Hunter. I don't know how more disabled you can get, and
they seemed to get around just fine.
Mr. Franke. Yeah. No, we had 25 disabled aboard the boat.
Mr. Hunter. Yeah. So with that, I don't have any other
questions. I apologize for my absence. We had Secretary Kerry
and Hagel and General Dempsey trying to convince us to go to
war in Syria, and that is where I have been at. But I want to
thank everybody for their time and for being here. And if there
are no further questions, I thank the witnesses for their
testimony, the Members that are now gone for their
participation. The subcommittee stands adjourned.
[Whereupon, at 12:49 p.m., the subcommittee was adjourned.]
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