[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




              THE STATE OF THE U.S.-FLAG MARITIME INDUSTRY

=======================================================================

                                (115-32)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 17, 2018

                               __________

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             Committee on Transportation and Infrastructure




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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee,      ELEANOR HOLMES NORTON, District of 
  Vice Chair                             Columbia
FRANK A. LoBIONDO, New Jersey        JERROLD NADLER, New York
SAM GRAVES, Missouri                 EDDIE BERNICE JOHNSON, Texas
DUNCAN HUNTER, California            ELIJAH E. CUMMINGS, Maryland
ERIC A. ``RICK'' CRAWFORD, Arkansas  RICK LARSEN, Washington
LOU BARLETTA, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
BLAKE FARENTHOLD, Texas              GRACE F. NAPOLITANO, California
BOB GIBBS, Ohio                      DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida              STEVE COHEN, Tennessee
JEFF DENHAM, California              ALBIO SIRES, New Jersey
THOMAS MASSIE, Kentucky              JOHN GARAMENDI, California
MARK MEADOWS, North Carolina         HENRY C. ``HANK'' JOHNSON, Jr., 
SCOTT PERRY, Pennsylvania                Georgia
RODNEY DAVIS, Illinois               ANDRE CARSON, Indiana
MARK SANFORD, South Carolina         RICHARD M. NOLAN, Minnesota
ROB WOODALL, Georgia                 DINA TITUS, Nevada
TODD ROKITA, Indiana                 SEAN PATRICK MALONEY, New York
JOHN KATKO, New York                 ELIZABETH H. ESTY, Connecticut, 
BRIAN BABIN, Texas                       Vice Ranking Member
GARRET GRAVES, Louisiana             LOIS FRANKEL, Florida
BARBARA COMSTOCK, Virginia           CHERI BUSTOS, Illinois
DAVID ROUZER, North Carolina         JARED HUFFMAN, California
MIKE BOST, Illinois                  JULIA BROWNLEY, California
RANDY K. WEBER, Sr., Texas           FREDERICA S. WILSON, Florida
DOUG LaMALFA, California             DONALD M. PAYNE, Jr., New Jersey
BRUCE WESTERMAN, Arkansas            ALAN S. LOWENTHAL, California
LLOYD SMUCKER, Pennsylvania          BRENDA L. LAWRENCE, Michigan
PAUL MITCHELL, Michigan              MARK DeSAULNIER, California
JOHN J. FASO, New York
A. DREW FERGUSON IV, Georgia
BRIAN J. MAST, Florida
JASON LEWIS, Minnesota
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                  DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska                    JOHN GARAMENDI, California
FRANK A. LoBIONDO, New Jersey        ELIJAH E. CUMMINGS, Maryland
GARRET GRAVES, Louisiana             RICK LARSEN, Washington
DAVID ROUZER, North Carolina         JARED HUFFMAN, California
RANDY K. WEBER, Sr., Texas           ALAN S. LOWENTHAL, California
BRIAN J. MAST, Florida               ELEANOR HOLMES NORTON, District of 
JASON LEWIS, Minnesota, Vice Chair       Columbia
BILL SHUSTER, Pennsylvania (Ex       PETER A. DeFAZIO, Oregon (Ex 
    Officio)                             Officio)

























                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               WITNESSES
                                Panel 1

Rear Admiral John P. Nadeau, Assistant Commandant for Prevention 
  Policy, U.S. Coast Guard:

    Testimony....................................................     3
    Prepared statement...........................................    42
    Responses to questions for the record from Hon. John 
      Garamendi of California....................................    45
Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), Administrator, 
  Maritime Administration:

    Testimony....................................................     3
    Prepared statement...........................................    51
    Responses to questions for the record from Hon. John 
      Garamendi of California....................................    61

                                Panel 2

Matt Woodruff, Chairman, American Maritime Partnership:

    Testimony....................................................    21
    Prepared statement...........................................    65
Eric P. Ebeling, President and Chief Executive Officer, American 
  Roll-On Roll-Off Carrier Group, on behalf of USA Maritime:

    Testimony....................................................    21
    Prepared statement...........................................    72
Aaron C. Smith, President and Chief Executive Officer, Offshore 
  Marine Service Association:

    Testimony....................................................    21
    Prepared statement...........................................    77
    Responses to questions for the record from Hon. David Rouzer 
      of North Carolina..........................................    84
Matthew Paxton, President, Shipbuilders Council of America:

    Testimony....................................................    21
    Prepared statement...........................................    86
Bill Van Loo, Secretary Treasurer, Marine Engineers' Beneficial 
  Association, on behalf of American Maritime Officers; Masters, 
  Mates and Pilots; and the Seafarers International Union:

    Testimony....................................................    21
    Prepared statement...........................................    95

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. John Garamendi of California................................    39

                       SUBMISSIONS FOR THE RECORD

Rear Admiral John P. Nadeau, Assistant Commandant for Prevention 
  Policy, U.S. Coast Guard, responses to requests for information 
  from Hon. John Garamendi of California and Hon. Garret Graves 
  of Louisiana...................................................    13
  
  
  
  
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              THE STATE OF THE U.S.-FLAG MARITIME INDUSTRY

                              ----------                              


                      WEDNESDAY, JANUARY 17, 2018

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:06 a.m. in 
room 2167, Rayburn House Office Building, Hon. Duncan Hunter 
(Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. Good 
morning.
    The subcommittee is convening today to review the state of 
the U.S.-flag maritime industry, including the U.S. merchant 
marine.
    The Jones Act was enacted in 1920 as part of the Merchant 
Marine Act. It encouraged a strong merchant marine to support 
both national defense and economic security. For a vessel to 
move merchandise or passengers between two points in the United 
States, also called the coastwise trade, a vessel is required 
to be owned by a U.S. citizen, U.S. flagged, built in the 
United States, and crewed with U.S. mariners.
    There are over 41,000 U.S.-flag vessels in the U.S. 
coastwise trade moving 115 million passengers and nearly $300 
billion worth of goods between U.S. ports on an annual basis. 
The use of a U.S. flagged, built, and crewed vessel in the 
domestic coastwise trade can be waived by the Secretary of 
Homeland Security in two ways under section 501 of title 46, 
United States Code.
    The first waiver authority, outlined in subsection 501(a), 
is at the request of the Secretary of Defense for the purposes 
of national defense. The second, outlined in subsection 501(b), 
is also for the purpose of national defense; however, MARAD is 
required to make a determination that no U.S. vessel is 
available. The subsection 501(a) waiver authority was used by 
the Secretary of Homeland Security for responses to Hurricanes 
Harvey, Irma, and Maria. U.S industry raised concerns regarding 
the use of the waiver authority, as did we.
    Out of the over 41,000 U.S.-flag vessels, there are only 82 
vessels active in international commerce, down from 850 vessels 
35 years ago. The United States has cargo preference 
requirements where a percentage of U.S. Government cargo, 
including international food aid, be transported on U.S.-flag 
vessels. One intention behind the requirement is to ensure a 
merchant marine--both vessels and mariners--remain available 
and capable to provide sealift capacity in times of conflict or 
national emergencies. Out of those 82 vessels, 60 vessels 
participate in the Maritime Security Program which provides an 
annual stipend to military-useful oceangoing vessels to support 
military sealift operations.
    So, without the MSP we would have 20 vessels that can 
operate without a stipend, basically.
    In order to maintain the capabilities necessary to assist 
military operations and continue to conduct coastwise trade 
operations, the U.S.-flagged fleet needs a strong, proficient 
pool of U.S. merchant mariners. Officials in the administration 
have reported to the committee that the active pool of U.S. 
merchant mariners is decreasing due to retirements and low 
recruitment rates.
    To work to address any potential gaps, members of this 
subcommittee support increasing the opportunities for military 
mariners to transition into civilian mariners. Mariners in the 
Armed Forces have skills that can successfully translate into 
the civilian workforce. Military mariners just need to know 
about what civilian opportunities are available and how they 
can attain the proper certificates during their military career 
to successfully transition into a civilian career.
    The subcommittee held two listening sessions in 2016 that 
included military and civilian participants to discuss what 
needs to be done to create a more seamless process for military 
mariners to transition into a civilian mariner career. In 
addition, the Department of Defense reported that in 2016 and 
2017, the Navy, Army and Coast Guard participated in MERPAC 
meetings, conferences, and working groups to make further 
progress on this issue.
    I look forward to discussing where we are now and the 
importance of ensuring the United States has a strong, stable 
merchant marine. The civilian mariner workforce is facing a 
potential shortage and military mariners can be a way to bridge 
any gaps, as well as provide an ongoing source of retired, 
experienced military mariners.
    I thank our witnesses for being here today and I look 
forward to hearing their thoughts on issues regarding the state 
of the U.S.-flag maritime industry.
    And I will now yield to Ranking Member Garamendi.
    You are recognized.
    Mr. Garamendi. I thank you, Mr. Chairman, I appreciate your 
testimony and laying out the issues before us. It has been 
almost 3 years now since we last convened an oversight hearing, 
although we did have the listening sessions on the status of 
the U.S. maritime industry. Thank you very much for acting on 
my suggestion, and scheduling this morning's hearing, as this 
is a perfect opportunity to assess where the industry stands 
and gather suggestions for issues that this subcommittee can 
take up in the second session of the 115th Congress.
    We already realize several items deserve our dedicated 
attention. But by no means do these items represent the entire 
universe of issues and challenges.
    First and foremost, we cannot become complacent in our 
defense of the Jones Act and our efforts, along with many other 
organizations, some of whom will be testifying this morning, to 
raise public awareness of the need for and the many benefits 
that flow from this longstanding maritime policy that has stood 
for nearly a century.
    Second, we need to address the need to find new cargoes for 
the U.S.-flag vessels in both the international and coastwide 
trades. More cargo means more ships, and more ships mean more 
good-paying maritime jobs that both directly and indirectly 
support the hundreds of thousands of U.S. workers and bolster 
national security. And, by the way, I have got some ideas on 
how we can do that. The export of oil and natural gas give us 
such an opportunity. But more about that later.
    To this end, we need better enforcement of the existing 
cargo preference requirements, especially for the food aid 
shipments. We need to utilize new trades, such as the export of 
crude oil and natural gas. We also need to look creatively at 
how best to recapitalize our Nation's Ready Reserve, Military 
Sealift, and Maritime Security Program Fleets.
    In addition, if there is going to be an infrastructure bill 
this year--and I hope there is--we need to make sure that the 
infrastructure needs of our domestic maritime industries are 
not left behind at the dock. Moreover, we have to begin shaping 
a tractable plan to recruit and retain a new generation of 
licensed and unlicensed seafarers. The crew and cadre of 
mariners, which have served commerce and national security of 
the United States so admirably since the end of the Vietnam 
War, is quickly aging out, along with the ships.
    It is imperative that the Federal Government, along with 
its partners in the State and maritime academies and maritime 
unions, develop a comprehensive plan to ensure that the absence 
of qualified and experienced mariners in the workforce does not 
become an Achilles heel limiting our military sealift 
operations and our national security.
    I am sure that our witnesses here this morning will offer 
their own suggestions. And with that thought in mind, I welcome 
the witnesses and look forward to engaging in the discussion.
    Thank you, Mr. Chairman. I yield back.
    Mr. Hunter. I thank the gentleman from California. We will 
have two panels of witnesses today. On the first panel we will 
hear from Rear Admiral John Nadeau. Yes, you like that? Got it 
right--Assistant Commandant for Prevention Policy for the 
United States Coast Guard.
    And Rear Admiral Mark Buzby--Mark ``Buz'' Buzby--U.S. Navy 
Retired, Administrator, Maritime Administration.
    Admiral Nadeau, you are recognized to give your statement.

TESTIMONY OF REAR ADMIRAL JOHN P. NADEAU, ASSISTANT COMMANDANT 
FOR PREVENTION POLICY, U.S. COAST GUARD; AND REAR ADMIRAL MARK 
      H. BUZBY, U.S. NAVY (RET.), ADMINISTRATOR, MARITIME 
                         ADMINISTRATION

    Admiral Nadeau. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and distinguished members of the 
subcommittee. I am honored to be here today to discuss the 
state of the U.S. maritime industry and the Coast Guard's role 
serving that industry.
    Mr. Chairman, on behalf of all the Coast Guard's men and 
women, thank you for your leadership and strong support of the 
Coast Guard.
    The Coast Guard offers enduring value to our Nation. It is 
the only branch of the U.S. armed services within DHS. It is 
uniquely positioned to secure our ports, protect the maritime 
transportation system, and safeguard America's national and 
economic security.
    As the Commandant said, years of fiscal constraint and 
increasing mission demands have eroded our ability to fully 
execute our suite of missions and remain ready to effectively 
respond to all contingencies. We need to make investments to 
rebuild and sustain Coast Guard capability and capacity, 
including our marine safety programs.
    The Nation's Marine Transportation System includes 25,000 
miles of waterway traveled by several thousand vessels serving 
361 U.S. ports every day. This system supports more than 
250,000 American jobs and over $4.5 trillion of economic 
activity every year. This system connects American consumers, 
producers, manufacturers, and farmers, domestic and global 
markets, and provides access to our Nation's vast natural 
resources.
    The Coast Guard ensures this system remains safe, secure, 
and resilient. A strong U.S. maritime industry enables us to 
protect U.S. interests and project power overseas. Ninety 
percent of the military equipment used by the Nation's 
warfighters is loaded in U.S. ports and delivered to theater on 
Coast Guard-inspected U.S.-flag vessels that are operated by 
Coast Guard-licensed, credentialed U.S. mariners.
    Our support to the maritime industry is critical to our 
Nation's military readiness and national security. Our robust 
population of U.S. mariners is needed to maintain an effective 
military sealift capability.
    Coast Guard and industry are working together to mitigate 
challenges facing mariners today. Our advisory committees 
contain experienced merchant mariners, educators to the 
maritime academies, and industry representatives. They help us 
identify strategies to address challenges as they emerge.
    Congress clearly recognizes the importance of having a 
sufficient number of qualified mariners. DoD and DHS are 
working together to implement the Military to Mariner program, 
and make it easier for military members to receive credit for 
experience, training, and qualification received while in the 
military. We have partnered with the Navy to establish a 
credentialing program and improved military member awareness of 
civilian-mariner opportunities. We have cut through redtape, 
and we continue to work closely with our fellow armed services 
to make improvements to this program.
    We know a healthy mariner workforce requires a safe, 
secure, and competitive U.S. maritime fleet. The industry faces 
a number of challenges beyond those of the workforce, including 
an aging population of strategic sealift vessels. At the same 
time, the complexity and pace of change in the industry have 
never been greater. Industry is integrating new technology into 
vessels and facilities to improve efficiency and effectiveness, 
to increase capacity, and to reduce the environmental 
footprint. This activity is making ships, facilities, and 
ports, and the entire system more complex.
    The use of third parties has helped industry and the Coast 
Guard evolve to keep pace with these changes. Today, like other 
flag states around the globe, the U.S. relies far more on third 
parties than ever before. The vast majority of vessels in our 
sealift fleet use third parties for many of their compliance 
activities. The third-party programs have gone from an option 
to a necessity.
    The benefits of third parties are well documented. A study 
by the National Academies of Sciences that was directed by the 
subcommittee and published in 2016 concluded that our third-
party programs provide additional technical expertise, promote 
innovation, and reduce cost for the U.S. Fleet.
    However, third-party programs are not infallible. Third-
party programs require effective Coast Guard oversight and 
clear accountability to realize these benefits. The Coast Guard 
has the authority and competency we need. We will instill 
better governance, we will improve our policy and training, and 
we will provide increased accountability. We are also 
supporting a safe, secure, and competitive U.S. Fleet.
    In closing, a healthy U.S. maritime industry and a robust 
pool of civilian mariners are vital to our Nation's economic 
prosperity and national security. The Coast Guard's regulatory, 
credentialing, and compliance programs are evolving to keep 
pace with industry change. We are focused on ensuring every one 
of our actions sustains a safe, secure, environmentally sound, 
and productive operation of the Marine Transportation System 
without imposing unnecessary costs or burdens.
    Mr. Chairman, we thank you for this subcommittee, for your 
strong leadership and support of the Coast Guard. I ask that my 
written statement be entered into the record. Thank you.
    Mr. Hunter. Without objection.
    Thank you, Admiral.
    Admiral, you are recognized.
    Admiral Buzby. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and distinguished members of the 
subcommittee, thank you for inviting me to discuss the state of 
the U.S. maritime industry and the Maritime Administration's 
programs that support it.
    Our country's military relies on U.S.-flag ships, crewed by 
volunteer American civilian mariners to move our combat forces' 
equipment and sustainment whenever and wherever it needs to go.
    Three-quarters of MARAD's budget goes to programs that help 
to ensure that America has a viable commercial merchant marine, 
one with enough ships and enough qualified merchant mariners to 
meet our needs in peacetime and, critically, our emergency 
sealift during times of crisis.
    Unfortunately, over the past few decades, the U.S. maritime 
industry has suffered significant losses, as companies, ships, 
and jobs moved overseas. Cargo is one of the main factors 
determining the number of ships in the U.S.-flag fleet.
    Since 1992, the number of U.S.-flag ships has dropped from 
183 ships to 82 now. This leaves us at the lowest number in the 
deep-sea fleet in recent history. That has, in turn, 
contributed to a loss of jobs available to U.S. citizen 
mariners and international trade. Today, due to the 
historically low number of ships, MARAD is concerned that there 
might not be enough qualified mariners to sustain a prolonged 
activation of the sealift fleet. I am working closely with 
USTRANSCOM, the U.S. Navy's Military Sealift Command, the U.S. 
Coast Guard, and the commercial maritime industry to develop 
plans to maintain an adequate number of trained mariners.
    This coordinated effort includes advancing the Military to 
Mariner initiative, making it easier for transitioning veterans 
to obtain their mariner credentials based on their service 
experience. That is, however, only a small part of the 
solution. To reverse this trajectory, my initial priorities as 
Maritime Administrator have been to leverage the current 
mainstays of the merchant marine--the Jones Act, cargo 
preference, and the Maritime Security Program--and to rethink 
how we address long-term strategic issues facing the industry.
    The Jones Act ensures the U.S.-flag fleet in domestic trade 
by requiring American built, owned, and crewed vessels to 
transport passengers and cargo between U.S. ports.
    Cargo preference laws, which require shippers to use U.S.-
flag vessels for oceanborne transport of certain cargoes 
purchased with Federal funds, help ensure that the U.S.-flag 
fleet has enough cargo to remain viable in international trade.
    The Maritime Security Program, which supports 60 militarily 
useful commercial vessels and their crews, along with a global 
network of intermodal facilities, provides funding to help 
offset the higher costs operating under the U.S. flag.
    Continuing, strengthening, and adding to these three 
pillars, the Jones Act, cargo preference, and the MSP, is 
essential for maintaining the economic competitiveness, safety, 
and productivity of the U.S. maritime transportation system. 
They bolster the U.S.-flag fleet's ability to support the 
national and economic security needs of the Nation.
    MARAD provides funding support for mariner training 
programs at our Nation's flagship maritime training facility, 
and my proud alma mater, Kings Point, as well as the six State 
maritime academies across the Nation. Virtually all entry-level 
officers with unlimited U.S. Coast Guard licenses graduate from 
these schools. These merchant mariners support the peacetime 
U.S. maritime transportation infrastructure and serve our 
Nation during military operations worldwide, in national 
emergencies, and humanitarian crises.
    Part of our assistance to the six State maritime academies 
comes in the form of training ships, two of which are more than 
50 years old. MARAD also manages and maintains the bulk of our 
Nation's surge sealift capacity found in the Ready Reserve 
Fleet. These 46 ships with an average age of 43 years are well 
past their design service life. MARAD is working with the U.S. 
Transportation Command and the U.S. Navy to determine how to 
best recapitalize the RRF to ensure the continued readiness of 
these vessels.
    That is a brief overview of the priority action items that 
I am involved in at MARAD. I appreciate the subcommittee's 
continuing support for maritime programs, and will be happy to 
respond to any questions you and the members of the 
subcommittee may have this morning.
    I ask that my written testimony be entered into the record. 
Thank you, sir.
    Mr. Hunter. Without objection.
    Thank you, Admiral.
    And Admiral, I will start by recognizing myself. Let's play 
this out and set the scenario. So let's say that country X goes 
off, and it is a real war, not counterinsurgency, or 
counterterrorism. And you got to bring a bunch of stuff really 
fast. Lay it out for us right now. What would move and what 
wouldn't move? What is your guess on how many ships out of the 
RRF we can actually get up and going. How would that look? 
Right now.
    Admiral Buzby. As we speak, as of this morning, the Ready 
Reserve Force readiness was at 98 percent, which means that our 
metrics that we use to measure how ready those ships are to----
    Mr. Hunter. So let's break it down into a real scenario. 
You told me you are doing a test right now.
    Admiral Buzby. Correct.
    Mr. Hunter. You are doing a callup on one of the biggest 
Ready Reserve ships that you have, they have 5 days----
    Admiral Buzby. Four of them, actually.
    Mr. Hunter. Four of them.
    Admiral Buzby. Right.
    Mr. Hunter. And they have 5 days to prep.
    Admiral Buzby. Correct.
    Mr. Hunter. Your 98 percent is not coming from that. So if 
you were to just guess and say in your mind, how many of your 
ships could you get underway, loaded to the brim with ammo, 
food, supplies, and everything that you would need? You could 
get 98 percent of the Ready Reserve Fleet right now moving?
    Admiral Buzby. Within the 5-day period, yes, sir. I have 
good confidence that, as I said, 98 percent of those--we would 
be able, within the 5-day period, to light off, crew up, and--
--
    Mr. Hunter. When does that fall off and we start losing 
that capacity? I mean if we don't do anything, you have got 
steam engine Ready Reserve ships.
    Admiral Buzby. Right.
    Mr. Hunter. You have mariners that don't know how to work 
steam engines any more, or parts. So you are at 98 percent, 
which is awesome. But at some point I am guessing it goes to 
95, 98, 85.
    Admiral Buzby. Sure.
    Mr. Hunter. Right?
    Admiral Buzby. Yes, sir.
    Mr. Hunter. When does that drop-off happen?
    Admiral Buzby. Without funding commensurate with the age of 
those ships as they become more difficult to maintain, I would 
say we could start seeing that happen at any time, going 
forward. You know, as I said, these ships are 43 years old; 24 
of them will be 50 years old here by 2020. And each year that 
an old ship gets older, it becomes more challenging to 
maintain, and we won't be able to guarantee that readiness.
    Mr. Hunter. How long does it take to figure out whether a 
ship can be fixed up, or whether you just have to build a new 
one and scrap it?
    Admiral Buzby. We----
    Mr. Hunter. That analysis.
    Admiral Buzby. Actually going on board and doing the site 
surveys and kicking the steel and that sort of thing, you know, 
to do an entire survey of the fleet? We are constantly doing 
that. But I would say to do a real focus survey, probably 
several months to really get through----
    Mr. Hunter. And you are going to be doing that?
    Admiral Buzby. We are doing it constantly, because that is 
part of our recapitalization effort, is to look and see what 
ships potentially have----
    Mr. Hunter. You will be able to come back to us in 6 months 
or 4 months and say these are how many ships we need to build, 
these are how many ships we can fix up?
    Admiral Buzby. Conceivably, we could. Yes, sir.
    Mr. Hunter. OK.
    Admiral Buzby. Yes, sir.
    Mr. Hunter. Well, let me switch really quick. I got 2 
minutes.
    Let's talk people. Let's talk first, Admiral Nadeau, it was 
Navy in the beginning that had the big issue from transferring 
a mariner's occupational specialty and certifications over to 
the civilian world, right? The Navy had a lot of issues with 
that. The Army was actually pretty good at it. How is it going 
with the Coast Guard?
    Admiral Nadeau. Sir, we have made a lot of progress, as 
well. The Coast Guard has----
    Mr. Hunter. Do you mind pulling the microphone closer to 
you? I have got artillery ears.
    Admiral Nadeau. Is that better?
    The Coast Guard has two pieces to this. One is providing 
experienced military members that can apply their skill sets 
and the training to merchant credentials. We also have, of 
course, the credentialing program. We are the ones that issue 
those credentials.
    Working with MERPAC and others and our partners in DoD and 
in DOT, we have come up with about 88-some-odd recommendations 
that we have been working to implement. And we have made 
significant progress.
    Around this time we have approved about 200 different 
courses from different services. About 60-some-odd of those are 
Coast Guard courses that allow the members to take again their 
direct training they have had while in uniform and apply that 
to obtaining a merchant mariner credential.
    Mr. Hunter. So you are helping the Navy walk through this, 
too?
    Admiral Nadeau. Yes, sir. We have developed a crosswalk 
that allows members to look again at their training and their 
qualifications in the Service, and how they can apply that 
directly to merchant mariner credentials.
    Mr. Hunter. What is MARAD doing on the same line?
    Admiral Buzby. Mr. Chairman, I cochair a subcommittee of 
the Committee on the Marine Transportation System, along with 
Commander of Military Sealift Command, which has members of all 
of the sea services--NOAA, Army Corps of Engineers, anybody 
that has mariners, Government mariners--to identify what are 
the impediments, what are the roadblocks to keeping those folks 
from transitioning cleanly using the Coast Guard certified 
courses into the commercial maritime.
    We have identified a lot of roadblocks and are--that is 
actually a fairly active committee that we are--that is 
producing some good results.
    Mr. Hunter. Good. I look forward to hearing about it. I 
have got one last question, if the Members will indulge me.
    You have about 40,000 ships that are doing not coastwise 
trade, but inland waterways trade, mostly.
    Admiral Buzby. Jones Act trade, yes, sir.
    Mr. Hunter. Admiral Nadeau, you are the head of prevention 
policy, right?
    Admiral Nadeau. Correct.
    Mr. Hunter. So I would guess that means preventing bad guys 
from doing bad things too on the waters. All 40,000 of those 
ships have been approved by the U.S. Coast Guard, right? I mean 
they have passed their certifications, they are crewed by 
Americans, and they are American-made ships. You got American-
crewed, Coast Guard-approved crews and ships operating on the 
rivers throughout all the ports in the entire country.
    In your professional opinion as a military man, both of 
you, would you like to see foreign ships in the inland 
waterways? Chinese, Pakistani, name it.
    Admiral Nadeau. Sir, I would say that you are absolutely 
right. Right now, in the current laws and regulations, all of 
those ships are U.S.-built, operated by U.S.-licensed, U.S.----
    Mr. Hunter. From a homeland security point of view, how 
important is it to you that you have U.S.-crewed, Coast Guard-
certified ships and crews operating where there is no 
oversight, where you are going into middle America with 
thousands of ships every day carrying chemicals, all kinds of 
cargo? How important is it to you and homeland security?
    Admiral Nadeau. Security is very important, sir. And you 
are right, that would be a different paradigm, should that not 
all be U.S. mariners, U.S. citizens on board those ships.
    Admiral Buzby. Sir, you hit the nail on the head. Those 
mariners are a de facto layer of our national security. If they 
see something, they will say something. They know what is 
normal on the waterways.
    Mr. Hunter. And the Jones Act makes that possible, period.
    Admiral Nadeau. Yes, sir.
    Mr. Hunter. Thank you very much. I yield to the ranking 
member, Mr. Garamendi.
    Mr. Garamendi. Thank you, Mr. Chairman.
    Well, let's start with Russia. There is legislation passed 
by the Russian Parliament that requires that all ships 
transiting the Northern Sea Route--that is, along the 4,000 
miles of the Russian Territory--be Russian flagged, with a 
small exception. Is that a Russian Jones Act? Either of the two 
of you would like to respond?
    And, if so, does this also indicate that our own Northern 
Sea Route should have a similar program?
    Admiral Buzby. I will take a crack at that first. Like 
about 44 other countries around the world that have cabotage-
type laws, from at least my knowledge of what the Russian 
proposal is, it sounds like a cabotage-type law, which, for all 
the various same reasons why we want to have a Jones Act and 
think a Jones Act is important----
    Mr. Garamendi. Now, the United States is now an exporter of 
LNG and oil. Would it be in the American interest in creating 
cargo to have some percentage of that export of LNG and oil be 
on American-flagged and American-built ships? Would that create 
a cargo opportunity for the American maritime industry?
    Admiral Buzby. Yes, sir. I think it would. You know, cargo 
is king, as we have said, and as you all have pointed out. What 
generates cargo generates ships and, therefore, generates jobs. 
So, you know, where we can generate cargo in international 
trade, that would be ultimately likely to the benefit of our 
industry.
    Mr. Garamendi. That now brings me to the issue of cargo 
preference enforcement, which is a MARAD program--to some 
extent also the Coast Guard.
    The 2008 NDAA [National Defense Authorization Act] directed 
MARAD to promulgate regulations to strengthen its enforcement 
of cargo preference requirements. Since then, MARAD has been 
unable to clear a proposal through the OMB office.
    Admiral Buzby?
    Admiral Buzby. Sir?
    Mr. Garamendi. You are new at this. Are you going to give 
it another shot? And are you capable of overcoming OMB, with 
our help?
    Admiral Buzby. That is a good question, sir, which we will 
have to kind of see how that plays out.
    Mr. Garamendi. Let the last question go. But the first 
question, are you ready to proceed?
    Admiral Buzby. Sure. The first part, sir, our cargo 
preference office actually is very heavily engaged on both 
sides, both with shippers and with the Government agencies that 
ship cargo preference cargo. And we are working with them 
actually pretty well to ensure that currently the 50-percent 
cargo preference requirement is being met.
    And where it is not specifically being met for a particular 
cargo, we are doing what I would call a catchup procedure, 
where if it is through the nonavailability of a U.S.-flag ship 
to carry a particular cargo, we can make an exception to allow 
that cargo to go on a foreign-flagged ship. However, another 
cargo that is being shipped by an agency that may not be 
required to be cargo preferenced, that gets made to be cargo 
preference, so it catches up and fulfills the requirement.
    Mr. Garamendi. Well, the cargo preference laws are more 
than just food aid. They are also material goods that have been 
financed by the Federal Government. So it is a very broad array 
of things.
    Admiral Buzby. Yes, sir.
    Mr. Garamendi. The more active and the more aggressive you 
are in investigating, quantifying, and reporting on these cargo 
opportunities and missed opportunities, the more likely it is 
that we will develop the cargo. If you are not willing to do 
that, and if you are not active--and I hope you would be very, 
very aggressive at this--it will move us towards more cargo, 
rather than less.
    So, we will, I hope--and certainly I think the chairman 
would agree with this--we will hold you accountable for your 
efforts and for your activity and investigating, quantifying, 
and fully developing the information about all cargo that is 
impelled on American ships.
    Admiral Buzby. Yes, sir.
    Mr. Garamendi. You ready for that?
    Admiral Buzby. Absolutely, sir.
    Mr. Garamendi. Good. I want to go to the issue of the Outer 
Continental Shelf.
    Admiral Nadeau, I want to talk to you about your B-1 visas. 
Now, this is going to be a subject from the second panel, but 
since you won't be around after the second panel, or for it, 
let's get into it.
    The Coast Guard issues B-1 visas for foreign mariners to 
operate on either American or foreign ships, providing services 
in the Outer Continental Shelf. How many visas have you issued?
    Admiral Nadeau. Sir, I think that the Coast Guard issues a 
letter of nonavailability to the vessels. We don't actually 
issue the visas. So we do issue letters of nonavailability to 
foreign-flagged vessels that are majority foreign-owned. Under 
the Outer Continental Shelf Lands Act, OCSLA, there are 
provisions in there----
    Mr. Garamendi. The visas start with your letter, don't 
they?
    Admiral Nadeau. Yes, sir. That is correct.
    Mr. Garamendi. OK. Then how many letters?
    Admiral Nadeau. I would have to take that back and get you 
exact numbers. I wouldn't want to make an estimate here. We 
deal with those routinely. They come in, they are evaluated, we 
issue them. And then, if there is a change in ownership or 
change in operations, those operators are supposed to come back 
to us to have them reevaluate it. But I can----
    Mr. Garamendi. When can you get the information for me?
    Admiral Nadeau. I would hope that we have good records, 
sir, but it would be as soon as possible.
    Mr. Garamendi. This afternoon?
    Admiral Nadeau. I will do my best.
    Mr. Garamendi. Good. You are aware that about half the 
vessels that provide services to the Outer Continental Shelf, 
or the--and inner shelf--are laid up?
    Admiral Nadeau. Yes, sir. That is correct. We met with OMSA 
last week, and they provided us an update.
    Mr. Garamendi. And do you have information on the number of 
ships that have foreign mariners, rather than American 
mariners, of those?
    So if half of the fleet is laid up, why? Is it foreign 
competition?
    Admiral Nadeau. At this time, sir, my understanding is it 
is more because there is not as much activity in the Gulf of 
Mexico.
    Mr. Garamendi. OK.
    Admiral Nadeau. So if we are talking strictly Gulf of 
Mexico, my understanding is that the U.S. Fleet, a lot of those 
vessels are tied up. I wouldn't have any statistics for the 
global fleet.
    Mr. Garamendi. I notice my colleague down the dais here 
wants to jump in on this. So I guess you are going to be next. 
And I would appreciate you jumping in and carrying on this 
discussion. It is a big issue, because it not only affects the 
mariners, but it affects the entire workforce and the ships. 
And I think part of the problem is created by the Coast Guard, 
with your letters. We want to get into this in detail.
    When you issue a letter, do you also investigate whether 
the individual that is working on these ships is qualified?
    Admiral Nadeau. Sir, again, we issue a letter to the 
vessel, and then that allows them to go out and find qualified 
people that meet whatever standards you are trying to fulfill. 
So there is----
    Mr. Garamendi. You then investigate whether the jobs that 
are being made available are filled by qualified foreign 
nationals?
    Admiral Nadeau. Foreign-flagged vessels are subject to the 
manning as specified by the flag that they fly. Just like U.S. 
vessels, we determine the manning to the state--we have to make 
sure they meet SCCW, but for a lot of jobs in question, they 
are back deck, where they have specialized skill sets.
    Mr. Garamendi. So we may have foreign mariners operating in 
the Outer Continental Shelf and the inner that may or may not 
be qualified under U.S. law. Is that the case?
    Admiral Nadeau. Sir, I would say U.S. law provides us to 
issue those exemptions, which we issue to the vessel. Then it 
is Department of State that issues the visa to the actual 
crewmember. And then CBP [U.S. Customs and Border Protection] 
handles the entry process as they come into the States.
    Mr. Garamendi. But my question goes to the qualifications 
of the mariner. Now, if they are American ships and American 
mariners, they have to meet a certain qualification, correct?
    Admiral Nadeau. That is correct, sir.
    Mr. Garamendi. Do these foreign nationals providing these 
services, do they meet the same qualifications?
    Admiral Nadeau. Probably SCCW, the international 
convention.
    Mr. Garamendi. They do?
    Admiral Nadeau. Yes, sir. For a foreign ship----
    Mr. Garamendi. Who is responsible for checking whether they 
do or do not?
    Admiral Nadeau. The foreign flag? If they are a foreign-
flagged ship, that nation sets the manning and handles the 
licensing for----
    Mr. Garamendi. So you don't know whether they are qualified 
or not.
    Admiral Nadeau. As part of our routine port state control 
boardings, we do go on board and we check the licensing 
certificates and documentation of all members on board----
    Mr. Garamendi. We will go into this in more detail. 
Unfortunately, you will not be here after we hear from other 
witnesses.
    I yield back.
    Mr. Hunter. I thank the gentleman. Mr. Graves is 
recognized.
    Mr. Graves of Louisiana. Thank you, Admirals. I appreciate 
you being here today. And I want to start on the line of Mr. 
Garamendi's line of questioning, which I think is excellent.
    Admiral Nadeau, do you know how many countries you have 
issued letters to under the waiver program, under the B-1?
    Admiral Nadeau. So I think--we issue them to the vessel.
    Mr. Graves of Louisiana. Right. I am sorry, yes, the flag 
of those nations.
    Admiral Nadeau. Off the top of my head I do not, sir. We 
will have to try and get----
    Mr. Graves of Louisiana. Do you know if there are any 
vessels that are flagged from nations that would be considered 
perhaps unfriendly to the United States that are operating in 
the OCS?
    Admiral Nadeau. Unfriendly? Like North Korea or Venezuela?
    Mr. Graves of Louisiana. Take your pick.
    Admiral Nadeau. I really doubt that, but I can provide 
those numbers for you, or do my best to get those answers.
    Mr. Graves of Louisiana. If we had a submarine, a Russian 
sub sitting off the coast, a few miles off our coast, would 
that concern you?
    Admiral Nadeau. Absolutely.
    Mr. Graves of Louisiana. Do you think it is possible that 
some of these vessels perhaps are out there doing intelligence-
collecting and other things under the auspices of operating in 
our OCS?
    Admiral Nadeau. I guess it is possible.

    [The U.S. Coast Guard has submitted the following in response to 
the preceding line of questioning from Congressman John Garamendi and 
Congressman Garret Graves. Congressman Garamendi asked how many Letters 
of Non-Applicability the U.S. Coast Guard has issued:]

        The Coast Guard issues Letters of Non-Applicability (LOAs) to 
        foreign owned or controlled foreign-flagged vessels that wish 
        to operate on the Outer Continental Shelf. An LOA is evidence 
        of a vessel's compliance with OCSLA and it authorizes the 
        foreign-flagged vessel to engage in OCS activity (i.e., those 
        activities pursuant to OCSLA). The Coast Guard has issued 459 
        LOAs since 2006. Of those 459, only 373 remain valid.

    [Congressman Garret Graves asked if the U.S. Coast Guard knows if 
there are any vessels flagged under the flag of nations considered 
unfriendly to the United States operating, based on a LOA on the U.S. 
Outer Continental Shelf (OCS):]

        The Coast Guard has not issued an LOA for any Venezuelan 
        registered vessel or chartered Venezuelan vessel, nor has the 
        Coast Guard issued an LOA for a North Korean registered vessel 
        or chartered North Korean vessel.

    Mr. Graves of Louisiana. It is possible. Yes, Admiral, just 
this week I had a meeting with a number of constituents. In 
fact, probably over 100 of them, expressing concern over the H-
2B visa program, a program whereby, if you are unable to get 
domestic workforce, you can bring in foreign workforce to 
address surge capacity in different industries. It has to be a 
temporary basis, you have to demonstrate there is not American 
workforce available.
    In this case, it is clear--and I want to follow the 
question that Mr. Garamendi asked--it is clear that there is 
additional work in the OCS that American-crewed, American-
built, American-flagged ships could be doing. Otherwise, the 
foreign vessels wouldn't be there, of course.
    So there are numerous vessels tied up at Port Fourchon and 
a number of other ports along the gulf coast that could be 
doing this work. So I want to be very clear that there is a 
strong sensitivity on our part, and I think I speak for many 
members of this committee, that the perhaps lackadaisical 
enforcement by our Federal Government--and I know there are 
other agencies involved--is having an impact on American 
workforce, on American investment, and, most importantly, just 
on the families, on families right here in the United States.
    I think that every person I know in south Louisiana knows 
someone or has personally been impacted or laid off or lost 
their jobs in these industries. And so, to watch these foreign 
vessels come in is especially concerning.
    Admiral, the CBP has admitted a lack of enforcement in the 
OCS, has admitted violations and lack of enforcement. What is 
the Coast Guard's position there? I mean do you think that it 
is appropriate to have some of these foreign vessels operating 
just miles off our coast, when we have domestic vessels that 
are capable of doing this same work in compliance with the law?
    Admiral Nadeau. Sir, we try to apply the laws and 
regulations as they are given to us, and try to establish a 
level playing field. There is tension between the citizenship 
and under OCSLA and with the U.S. flag and trying to provide a 
competitive fleet. We are in discussions about this with OMSA, 
we had a discussion about it last week. We look forward to 
working with industry to try and resolve some of that.
    We know we have an extremely capable U.S. Fleet. Over the 
past few years there are some amazing vessels that have been 
built down in the Gulf of Mexico that can do amazing things. We 
are committed to work with industry, with Congress, to try to 
find out how we can best employ those vessels to serve the 
Nation.
    Mr. Graves of Louisiana. Well, I want to urge you to do so 
with some urgency. As you know better than I, this isn't just 
about employment and economy. This has national security 
implications, when this snowballs, as you well know. And I 
think it is important that we do keep this on the front burner.
    Changing gears, Admiral Buzby, were you consulted whenever 
the administration proposed to waive the Jones Act for some of 
the hurricane response activities?
    Admiral Buzby. No, sir.
    Mr. Graves of Louisiana. You were not. Now, that is not 
required under the law, as I recall, but I think it----
    Admiral Buzby. Not under the 501(a) statute, which was used 
to grant those waivers. There were some other waivers that were 
discussed earlier in support of Hurricane Harvey that went 
through the 501(b) process that MARAD was consulted in. Our 
role in that process is to provide CBP with a list of U.S.-flag 
vessels that could be available to meet the needs with the 
waivers being requested for----
    Mr. Graves of Louisiana. As I recall, there were one or two 
vessels perhaps that took advantage of those waivers. And when 
I went down to Puerto Rico with Chairman Shuster, Ranking 
Member DeFazio, and others, it was clear to me after seeing it 
myself, after talking to folks, that the real challenge was the 
internal infrastructure, perhaps the distribution system within 
Puerto Rico that was significantly damaged, rather than 
actually getting the cargo there. In fact, the ports were 
clogged with cargo. Is that a fair assessment?
    Admiral Buzby. That is my understanding of the situation, 
yes, sir. From talking with all of the Jones Act shippers--and 
I talked with all of them--they could not push any more cargo 
into the ports. They literally could not get it outside the 
gates.
    Mr. Graves of Louisiana. So strong concern that we waived a 
law. And again, I think it was a solution searching for a 
problem. And I think that in many hearings that we had in this 
committee and roundtables we had in this committee, that that 
issue has come up.
    And certainly I understand that there are a lot of 
considerations at play when something like that happens. I 
certainly would request that you weigh in and share your 
expertise in this area in the event that something like this 
happens in the future. We are going to continue to be working 
to perhaps legislate a little bit better approach, perhaps, to 
disasters in the future.
    Last question. Admiral Nadeau, if you go back and you look 
at the FRC, the OPC, and other programs that you are running, 
that the Coast Guard is running right now, did you have just 
one shipyard that bid for some of these boats?
    Admiral Nadeau. I am not on the acquisition profession, but 
no, I believe there were multiple yards that competed for that 
work.
    Mr. Graves of Louisiana. And I understand that it is not 
your program, specifically, but certainly I think these are 
things that most folks--and certainly I think you would have 
some awareness of. The yards that are building some of these 
boats, do these yards only do Government work?
    Admiral Nadeau. The shipyards we are currently using? No, 
sir. They also do private commercial work.
    Mr. Graves of Louisiana. Do you appreciate the role that 
the Jones Act plays in terms of ensuring we have an industrial 
base here to ensure that we can build these vessels, that we 
can build the latest technology, that we can build the safest, 
most modern vessels available for our Coasties, that 
relationship between the Jones Act--for example, if you are a 
pilot and we said, ``Hey, we need you to come fly a plane once 
every 10 years,'' my guess is you are going to say, ``Well, you 
know what? I really need to have some type of gap training'' 
apply in this case. Does that make sense?
    Admiral Nadeau. Absolutely. We do rely on the same yards 
that use commercial work. We benefit from that tremendously.
    Mr. Graves of Louisiana. Great, thank you.
    Mr. Chairman, I apologize for going over. I yield back.
    Mr. Hunter. I thank the gentleman. Mr. Larsen is 
recognized.
    Mr. Larsen. Thank you, Mr. Chairman.
    Admiral Buzby, I just have a couple questions. They are 
both for you.
    Admiral Buzby. Sir.
    Mr. Larsen. So the President and the administration has ran 
on and announced, and rumors are flying as we sit here today 
that a $1 trillion infrastructure package will find its way up 
here to the Hill, at least principles for a package. And part 
of infrastructure ought to be supporting the U.S. maritime 
industry.
    So my question is for you and if MARAD itself has been 
consulted on part of that conversation within the 
administration on what parts of the infrastructure package 
would best serve maritime. And, if so, what parts?
    Admiral Buzby. Thank you, sir. The answer to your question, 
the short answer, is yes, we have been involved within the 
Secretary of Transportation's office. We have been working very 
closely with her staff, who have obviously, then, inputted into 
the national strategy. We have made a very strong point that 
our ports are our gateways to our economy.
    I mean virtually everything in our economy flows through 
our ports. Our key gateway ports and then all of our smaller 
feeder ports really is where the majority of this Nation's 
commerce gets done. And the importance of those ports and the 
connections from those ports, via highway, via rail, via 
adjacent airports, and via the waterways that we spoke of 
earlier, using Jones Act vessels to move that cargo 
intercoastal throughout our country are all very, very vital 
and need further investment if we want to keep pace with the--
our growth to keep the flow moving.
    Mr. Larsen. So perhaps you can't share with us, but are 
there specific elements that you at MARAD brought to that 
discussion?
    Admiral Buzby. We thought that the maritime highway 
initiatives was very important. That is, in our opinion, kind 
of an underutilized mode of transport in our country that could 
significantly impact the highway congestion by removing a lot 
of containers that are moved around this country off of there 
where it makes sense to, where it economically makes sense.
    And we have several operating marine highways in this 
country right now that are doing just that. It cuts down on 
pollution. Instead of having a whole lot of diesel engines 
moving things, you have one diesel engine moving cargo around. 
So we think there is great benefit there.
    Mr. Larsen. All right. Let me ask about one particular 
program. It has been around since 2008 or so, the Small 
Shipyard Grant Program. Do you anticipate this year that you 
will be tendering grant applications for small shipyard grants? 
And do you know yet how much MARAD will have to allocate for 
that?
    Admiral Buzby. I haven't seen any of the final numbers. I 
expect that the program will continue to exist and be utilized. 
It is a very popular program. We get roughly about 10 times the 
amount of requests for grants, and they are typically small 
amounts of money, but they have big impact across the maritime 
industry, typically in the maintenance and repair area that are 
very critical to maintaining the Coast Guard's vessels, the 
Ready Reserve Force vessels, Military Sealift Command vessels. 
We all benefit from investments in these small----
    Mr. Larsen. I am glad to hear that. In its early life, once 
it got started, it did have some struggles staying alive. But 
members of this committee have been very strong advocates of 
the program, of the Small Shipyard Grant Program. So I was glad 
to see the allocation last year, and hope to see continued 
support from this administration for that.
    Thank you, I yield back.
    Mr. Hunter. I thank the gentleman. Mr. Weber is recognized.
    Mr. Weber. Thank you. That was a great exchange between 
Congressman Garamendi about the B-1 visas. And so, Admiral 
Nadeau, my question is--and you may not know the specifics--but 
have there been instances where sailors, foreigners on those 
vessels--I know you said you issue certificates to the vessel, 
but are there any reported incidences where we have discovered 
sailors that were not qualified?
    Admiral Nadeau. Not to my knowledge on the OCS, no.
    Mr. Weber. OK, fair enough. So I think one of the comments 
that was made earlier is about the Jones Act and vessels up in 
the waterways from the chairman, which I am all about, being 
sure that we keep the Jones Act in place and be sure that we 
protect the integrity of our country. Have there been any 
incidents, Admiral--still with you--where there has been 
discovered on the interior waterways--I mean I don't have what 
happened, so I am just asking you--foreign-flagged vessels or 
sailors that were not qualified?
    Admiral Nadeau. Again, not to my knowledge. Those vessels--
and there are thousands of them--are manned, crewed by U.S. 
citizens. They are credentialed by the Coast Guard.
    Mr. Weber. How many thousands would you estimate?
    Admiral Nadeau. In the heartland, it is hard to estimate. I 
can tell you, sir, that we are embarking right now on 
implementing subchapter M, which includes about 5,500 different 
vessels. Then you got to add other vessels. Not just towboats, 
but there are many other types of vessels, from pasture 
ferries--but it has got to be more than 5,000, probably closer 
to 7,000.
    Mr. Weber. What is your biggest challenge around the 
country? Is it the deep water ports of the West? Is it the Gulf 
of Mexico? Where would you say most of your agency's time is 
spent?
    Admiral Nadeau. Well, distributed across the United 
States--and I think that workload is--again, we see it--was a 
lot of activity in the gulf coast. Some of that has shifted. 
Certainly throughout the heartland, throughout the Marine 
Transportation System, the 25,000 miles of rivers and those 360 
ports, it is distributed across the country, sir. So it is hard 
to say there is one particular area that is more important than 
another. We have people----
    Mr. Weber. Well, no. I didn't say ``important.'' I said 
``activity.'' I chose my words carefully.
    Admiral Nadeau. Yes, sir. I would hesitate to say. It 
depends on the activity, because we are doing many different 
functions and missions. Whether that is vessel inspection, 
whether that is, again, the licensing and manning functions, 
the investigations piece of this, the port security piece, 
there is a lot of different activity, sir, by the Coast Guard 
across the entire Nation.
    Mr. Weber. Is there a particular product, whether it is 
container or bulk, or whether it is tank vessels, is there a 
particular product that presents the most problem to you all?
    Admiral Nadeau. I wouldn't say there is one that presents a 
problem. We established a regulatory regime to address the 
challenges, and we have a risk-based, performance-based regime 
in place to help make sure that we monitor and address whatever 
challenges those might be.
    Mr. Weber. Going to the gulf coast, Hurricane Harvey, 
which--you guys did a fabulous job, by the way, the first three 
coastal counties of Texas, starting at Louisiana, that other 
foreign country, and Jefferson County, Galveston County, and 
the southern half of Brazoria County. Were you all well 
prepared for Hurricane Harvey and that kind of response, or is 
there something we could have done better?
    Admiral Nadeau. Sir, again, a little bit outside my 
wheelhouse, but through talking with my peers, I mean, we are 
always looking to improve. I thank you for the compliments to 
our fabulous crew we had down there, I am very proud of them. 
But we always look to improve, so we will be going through an 
after-action process to make sure that we can improve.
    Mr. Weber. Fair enough. Yes, I appreciate that.
    Admiral Buzby, I am going to jump over to you now, and some 
of the other questions.
    You weren't consulted by the administration over the waiver 
of the Jones Act you said.
    Admiral Buzby. It is not required that MARAD be. No, sir.
    Mr. Weber. Well, I get that. But we would have appreciated 
that, right?
    Is there a way or method or mechanism or a--I don't know 
what you want to call it--an avenue where, in the future, going 
forward, maybe you could establish that and say, hey, look, you 
know, guys, going forward we would appreciate if maybe you 
might want to check with us. Have you thought about an avenue 
for that?
    Admiral Buzby. Well, short of changing the statute, there 
would be no legal precedent for that.
    Mr. Weber. I get that.
    Admiral Buzby. However, certainly there is, you know, 
informal liaison that can go on. And we had heard that some of 
that was occurring.
    Mr. Weber. You didn't hear it through Twitter, did you?
    Admiral Buzby. No, sir.
    Mr. Weber. I am just asking.
    Admiral Buzby. I don't tweet.
    Mr. Weber. OK. Smart man. All right. Getting--what--and 
Admiral, I will stay with you for just a minute--what is--your 
opinion, what is the greatest hindrance that we currently faced 
to keeping the Jones Act in place and making sure that it does 
well for our country? What is the greatest hindrance?
    Admiral Buzby. I think it is probably a misunderstanding by 
many of exactly the role, the critical role, that the Jones Act 
plays. A lot of people, I think, focus on strictly an economic 
view of the impact of the Jones Act, and fail to recognize the 
significance to national security.
    Mr. Weber. Well, I would submit that if we don't have a 
good economy then our national security is going to lag behind.
    Admiral Buzby. Right, but by economy, you know, it is--I 
mean the costs----
    Mr. Weber. Sure.
    Admiral Buzby [continuing]. Associated with the Jones Act 
that people allege that adds to the cost of----
    Mr. Weber. Let me jump over--I am a little bit out of 
time--to you, Admiral. What is the greatest asset that we have 
that is helping us with the Jones Act? What is the best thing 
in place? I am going to do the opposite of what I asked him, 
what is the greatest hindrance. Now to you, what is the 
greatest thing we have making sure that we preserve the Jones 
Act?
    Admiral Nadeau. That is a tough one, sir. Again, the Jones 
Act has been in place for nearly 100 years. And we see many 
benefits and many impacts. Should one look to perhaps unwind 
some of that, we have to be mindful second- and third-order 
effects.
    But we see tremendous benefits to the Jones Act, in terms 
of safety and equality, the mariners, our industrial base, and 
we would just offer that----
    Mr. Weber. I am going to come back full circle, and that is 
why I was questioning earlier about have we caught any sailors 
that weren't qualified on foreign-flagged vessels, because that 
would serve as a basis for us to say, look, we want to keep the 
Jones Act in place and make sure that we have got American 
vessels, make sure that we are doing our job. It is helping our 
economy and it is helping our national security. So maybe it is 
education, you guys helping educate?
    Admiral Nadeau. Yes, sir. Coming back to your question 
about mariners, I was answering directly for the Gulf of 
Mexico. But we do, as part of our port state control boardings, 
we go on foreign vessels, we do assess the competency of the 
foreign crewmembers, and we do on occasion find that they are 
not meeting the international standards.
    Mr. Weber. So what happens with that vessel that you have 
issued a certificate or a letter to when they have someone on 
board that doesn't qualify?
    Admiral Nadeau. We intervene on the International 
Convention and ensure that appropriate steps are taken to 
correct the deficiencies, whatever they might be.
    Mr. Weber. Does that vessel lose its ability to come back 
into our area?
    Admiral Nadeau. They must take corrective action to bring 
it to the proper level of safety before they are allowed to 
operate.
    Mr. Weber. And who follows up on that?
    Admiral Nadeau. The Coast Guard.
    Mr. Weber. OK. Thank you, Mr. Chairman. I yield back.
    Mr. Hunter. I thank the gentleman. Great, great questions. 
I think that is it for this panel. No further questions.
    Mr. Garamendi is recognized.
    Mr. Garamendi. Thank you, Mr. Chairman. I appreciate the 
opportunity for an additional question.
    We went round and round on this issue of foreign vessels 
operating in the Outer Continental Shelf. It seems to me that 
the Outer Continental Shelf Lands Act is very, very clear that 
it is a Jones Act region. Is there any doubt about that?
    Admiral Nadeau. We have many foreign vessels with foreign 
mariners that are permitted to work on the Outer Continental 
Shelf, sir.
    Mr. Garamendi. So there is doubt as to whether or not the 
Outer Continental Shelf is subject to the Jones Act?
    Admiral Nadeau. It is subject to the Jones Act if it is 
moving cargo that is subject to Jones Act. But a vessel that is 
just working out on the Outer Continental Shelf that is not 
transferring cargo--can go out and work on the shelf.
    Mr. Garamendi. And we are going to go into this a little 
more in the second panel, I am sure. But I want to just ask the 
question about the letter of nonavailability. That is issued by 
the Coast Guard?
    Admiral Nadeau. Yes, sir.
    Mr. Garamendi. Is there a timeframe in which that letter of 
nonavailability is applicable, or is it just available and then 
goes on for an unlimited period of time?
    Admiral Nadeau. Unless the circumstances change, it is 
issued to the vessel based on the ownership of the vessel and 
the flag of the vessel. If those conditions don't change, the 
letter remains in effect.
    Mr. Garamendi. OK. So you issue a letter of 
nonavailability, authorizing a foreign-flagged vessel to 
operate on the Outer Continental Shelf, correct?
    Admiral Nadeau. Yes, sir. It allows them to use foreign----
    Mr. Garamendi. OK.
    Admiral Nadeau [continuing]. Foreign workers.
    Mr. Garamendi. And now we have a situation where some 50 
percent of the American vessels that would provide services in 
the Outer Continental Shelf are laid up. Is there a 
nonavailability today?
    Admiral Nadeau. Is your question are there vessels that are 
applying for letters of nonavailability today?
    Mr. Garamendi. Wouldn't it be appropriate that, since half 
of the American vessels are laid up, that there is no question 
of availability, and therefore the letters of nonavailability 
should terminate?
    Admiral Nadeau. Sir, we are applying OCSLA and the domestic 
law and statutes as they are presented to us, trying to enhance 
a level and fair playing field. But there are some tensions 
between, again, the citizenship, and trying to make sure we 
recognize that in OCSLA, and then trying to keep our fleet 
competitive. There is some tension there.
    Mr. Garamendi. OK.
    Admiral Nadeau. I would be happy to come back and get a 
more detailed brief for you, though, sir.
    Mr. Garamendi. I would appreciate that. Thank you.
    Admiral Nadeau. Thank you.
    Mr. Hunter. Just closing here, I think you heard from quite 
a few Members. We have seen the crew lists of some of these 
ships, where you have Moldovans, Chechens, Kazakhs, you got all 
kinds of people on these ships, and you don't know who they 
are.
    You don't know who they are, which means the Department of 
Homeland Security doesn't know who they are, which means U.S. 
Government and the American people don't know who they are, 
either. They could be great guys, they could be bad guys. You 
don't know, because you issue that letter to the ship and say, 
you got to comply now. And if they are a bad actor, they are 
not going to comply, but they don't have to worry about it 
because you don't check their crews.
    And if you have Americans able to do it right now, and you 
are having Moldovans and Kazakhs and Chechens out there, you 
don't know who is out there on a Norwegian ship. You got a 
Norwegian captain, a Norwegian first mate or whatever chief, 
then you could have whoever. And we would like to know who is 
manning those ships and, at the same time, we are curious as to 
why you are allowing them at all, when you have U.S. ships able 
to do it.
    So at least make it more stringent on them so you have to 
say, hey, you have got a terrorist on your ship that is maybe 
bad, all right?
    So with that, there are no more questions. Rear Admirals, 
thank you very much for your time and your expertise and for 
being with us today. And with that, we are going to move on to 
the second panel. I appreciate it.
    [Pause.]
    Mr. Hunter. All right, panel two. OK. We are now going to 
hear from Mr. Matt Woodruff, chairman of the board of 
directors, American Maritime Partnership; Mr. Eric Ebeling, 
president and chief executive officer of American Roll-On Roll-
Off Carrier Group on behalf of USA Maritime; Mr. Aaron Smith, 
president and chief executive officer, Offshore Marine Service 
Association; Mr. Matthew Paxton, president, Shipbuilders 
Council of America; and Mr. Bill Van Loo, secretary treasurer 
for the Marine Engineers' Beneficial Association and on behalf 
of American Maritime Officers; Masters, Mates and Pilots; and 
the Seafarers International Union.
    Great to see you all here. Thank you for being here.
    And Mr. Woodruff, you are now recognized to give your 
statement.
    Mr. Weber. Turn on your mic.
    Mr. Woodruff. Absolutely, sorry.

    TESTIMONY OF MATT WOODRUFF, CHAIRMAN, AMERICAN MARITIME 
  PARTNERSHIP; ERIC P. EBELING, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, AMERICAN ROLL-ON ROLL-OFF CARRIER GROUP, ON BEHALF OF 
  USA MARITIME; AARON C. SMITH, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, OFFSHORE MARINE SERVICE ASSOCIATION; MATTHEW PAXTON, 
 PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA; AND BILL VAN LOO, 
SECRETARY TREASURER, MARINE ENGINEERS' BENEFICIAL ASSOCIATION, 
  ON BEHALF OF AMERICAN MARITIME OFFICERS; MASTERS, MATES AND 
         PILOTS; AND THE SEAFARERS INTERNATIONAL UNION

    Mr. Woodruff. The American Maritime Partnership is the 
largest maritime trade association in America, representing 
vessel owners and operators, shipbuilders and repair yards, 
dredging and marine construction contractors, trade 
associations, pro-defense groups, and more.
    And I would say that, on balance, the state of our industry 
is good. There are bright spots, yet there are also very 
significant causes for concern.
    There has been a massive recapitalization in our industry 
of late. And in some segments, that process is ongoing. 
Billions have been invested. We have new tank, container, 
offshore service vessels, dredges, towboats and tugboats built 
at shipyards all around America, sailing all around America.
    Our business tends to run in cycles, and many segments of 
the domestic industry have been in a down cycle for some time. 
So as I talk about the positive aspects of our industry, we 
shouldn't forget that, for many of our companies right now, 
even entire segments of our industry, they are having a really 
hard time right now.
    Despite our challenges, our industry continues to serve its 
customers well with vessels that are purpose-built for the 
needs of our markets.
    The foundation of everything we do is the Jones Act. It 
exists to protect America by enhancing our economic, national, 
and homeland security. America needs the benefits provided by 
the Jones Act as much today as it ever has. Our industry needs 
certainty, as we invest in long-life assets. And we know we 
will never get that certainty from the marketplace. But we need 
regulatory certainty from our Government. We need the Jones Act 
to remain the settled law of the land.
    Hurricanes were a big issue for us in the past year, and 
our people rose to the challenge. They implemented their 
hurricane plans, they rode out the storms with remarkably 
little damage. And when the rains stopped falling and the wind 
stopped blowing, they got back to doing what they do best: 
moving cargo for America, dredging channels impacted by the 
storm, serving the offshore oil and gas industry.
    In many cases, the people of our industry put aside the 
damage to their own homes because they knew that the cargo they 
carried represented a lifeline to the affected communities.
    Florida was a case in point. Florida depends on tank 
vessels to deliver its fuel and storm preparations, and 
evacuations deplete fuel supplies. The ports closed during the 
storms, but when they reopened, in the words of one reporter, a 
Jones Act armada was waiting to resupply the State with 
petroleum. Dozens of Jones Act vessels were streaming into 
Florida ports to help their fellow Americans.
    Puerto Rico was another example. As you all know, the 
original story was that the Jones Act was impairing the 
recovery effort. That was patently false. Thanks to your 
hearing last October, among other factors, the story quickly 
changed and the truth came out. The Jones Act fleet was 
steadily delivering containers to the island, which were 
stacking up on the terminals due to infrastructure issues 
inland. The Jones Act fleet was and continues to be a major 
part of the recovery effort, with almost 80,000 containers 
delivered to the island so far. Our carriers stepped up to help 
Puerto Rico, and they remain committed to Puerto Rico for the 
long term.
    I would be remiss if I didn't finish by mentioning our 
industry's commitment to hiring veterans. When we have jobs to 
offer, we love for those jobs to be filled with veterans. AMP 
has run a series of programs to encourage hiring of veterans, 
and we will be doing more. AMP has a new Military to Maritime 
website, militarytomaritime.org, which is a central location 
where applicants can go to receive information on careers in 
the maritime industry.
    I appreciate the opportunity to represent our industry here 
today. As we face the challenges ahead and work to see our 
industry return at least to profitability, if not prosperity, 
we are grateful that the members of this subcommittee have 
taken the time to understand our industry. And never was that 
understanding more important than during the recent hurricanes. 
With the airwaves filled with so much misinformation, you 
helped set the record straight and we are so grateful for that. 
Thank you.
    The American Maritime Partnership stands ready to help as 
you address the issues related to our industry. We would be 
happy to answer any questions now or in the future. And I would 
request that my written remarks be entered into the record.
    Mr. Hunter. Without objection, so ordered.
    And our condolences, too, on your promotion.
    [Laughter.]
    Mr. Hunter. Mr. Ebeling, you are recognized.
    Mr. Ebeling. Good morning, Chairman Hunter, Ranking Member 
Garamendi, and members of the committee. Thank you for the 
opportunity to appear before you today to discuss the state of 
the U.S.-flag international fleet. My name is Eric Ebeling, and 
I am here today on behalf of USA Maritime, a coalition 
consisting of American vessel owners and operators, trade 
associations, and maritime labor.
    As the president and CEO of American Roll-On Roll-Off 
Carrier Group, a New Jersey-headquartered company, it is my 
honor to lead an incredibly talented team of men and women at 
the largest U.S.-flag RORO operator. We own and operator eight 
roll-on roll-off vessels in international trade, all of which 
are enrolled in the Maritime Security Program. Our newest 
ships, MV Patriot and MV Liberty, joined the fleet in 2016 and 
2017, respectively. All our vessels are crewed by American 
mariners and fly the American flag.
    The commitment U.S. carriers make to the national security 
of the U.S., through programs like the Maritime Security 
Program, MSP, and ironclad contracts like the Voluntary 
Intermodal Sealift Agreement, VISA, and the global shipping, 
intermodal, and logistics services U.S. carriers provide to the 
Department of Defense, are a clear best value buy for the 
taxpayer.
    It is well documented that the U.S. Government does not 
have a sufficient organic fleet, nor the intermodal and 
logistics capabilities to do the job entirely on its own. 
Studies have shown that it would cost the U.S. Government tens 
of billions of dollars to organically obtain those same ships 
and services. We have a great industry-Government-labor 
partnership with clear and significant advantages, mutual 
benefit, and we must maintain it or risk losing the ability to 
deploy and sustain such asymmetrical logistics advantages.
    According to MARAD, there are currently 82 non-Jones Act 
U.S.-flag international fleet vessels. Over the last 5 years, 
the U.S.-flag international fleet has decreased by about 25 
percent. Not only do U.S.-flag carriers in international trade 
compete in a hypercompetitive global marketplace, but we are 
also uniquely sensitive to the ebb and flow of Government 
policymaking, which, when translated to an economic impact on 
the U.S.-flag carriers, can destabilize or support or even 
turbocharge investment in the U.S.-flag international fleet.
    The two most effective policies that support the U.S.-flag 
international fleet are MSP and the cargo preference laws. MSP 
is a proven national security program enacted to ensure that 
the United States has the U.S.-flag sealift capability and 
trained American citizen merchant mariners it needs in time of 
war or other national emergency.
    At the ship-naming ceremony for ARC's MV Liberty in June 
2017, Department of Transportation Secretary Elaine Chao called 
MSP a model public-private partnership. At a cost of $300 
million per year, as currently authorized, the program is an 
exceptional value for DoD and the taxpayer. But the program is 
only authorized until 2025, and it is critical that it is 
extended beyond 2025 as soon as possible.
    Participating companies must finance the purchase of 
replacement tonnage, a 30-year asset that may cost up to $80 to 
$100 million, based on a program that expires in a few years, 
and is subject to the annual appropriations process. This could 
be considered akin to going to your local bank with a proposal 
to buy a home with a 30-year mortgage, knowing that you only 
have 1 year of income. Carriers have collectively invested 
billions of dollars. But for this investment to continue or 
increase, continued stable funding is vital. And the program 
must be extended or simply made permanent.
    Cargoes generated by the cargo preference laws are the key 
incentive for U.S.-flag operators operating in international 
trade to remain under U.S. registry, and are part of Congress' 
long-established intent to support the privately owned and 
operated U.S.-flag fleet and merchant marine. It is a rather 
simple equation: without cargo, carriers will not invest in 
ships and, without ships, there will not be jobs for merchant 
mariners.
    Without those merchant mariners, the Government-owned 
Reserve Fleet cannot be crewed. To that end, we offer three 
suggestions.
    First, as the ranking member noted earlier, Congress passed 
legislation in 2008 to give MARAD stronger cargo preference 
enforcement tools. Unfortunately, the previous administration 
did not implement them. Congress should work with the 
administration to ensure faithful implementation and execution 
of these laws.
    Second, under America's cargo preference laws, 100 percent 
of all military cargoes and at least half of all civilian 
agency cargoes must be shipped on U.S.-flag vessels. Why not 
require 100 percent of all Government-owned or financed cargoes 
to move on U.S.-flag ships?
    Lastly, Ex-Im Bank, the national export credit agency of 
the U.S., needs a board quorum that can approve new projects. 
Without an Ex-Im Bank, America has effectively unilaterally 
disarmed. And while most of the impact has been felt by the 
American manufacturing base and workforce, there has been an 
attendant impact to national security in the form of a reduced 
U.S.-flag fleet and reduced manpower pool.
    The U.S.-flag fleet has been at a crossroads in recent 
years. We now have knowledgeable support of leaders at both the 
Department of Transportation in Secretary Elaine Chao, and the 
Maritime Administration in Administrator Buz Buzby. We also 
have had steadfast leadership and support from USTRANSCOM and 
its commander, General Darren McDew.
    As General Darren McDew noted in an October 2017 speech, 
``We don't know when, but some day the Nation is going to come 
calling. When she does, she will need us, she will need our 
ships, she will need our mariners...if we do nothing now, the 
strength of the maritime fleet that brought the Nation to war 
throughout history...that strength will not be here. It is 
already in decline.''
    It is incumbent on all of us as Americans to stay that 
decline and ensure that this crown jewel capability continues 
to be available to USTRANSCOM and the Nation. And you can help 
by continuing to support laws and policies like MSP and cargo 
preference that enhance the fleet.
    Thank you. I look forward to your questions.
    Mr. Hunter. Thank you. Thank you, Mr. Ebeling.
    Mr. Aaron Smith is recognized as the president and CEO of 
Offshore Marine Service Association.
    Mr. Smith. Thank you, Chairman Hunter, Ranking Member 
Garamendi, members of the subcommittee. Thank you for allowing 
me time to speak this morning. My name again is Aaron Smith. I 
am president and CEO of the Offshore Marine Service 
Association. I ask for my full remarks to be submitted for the 
record.
    OMSA----
    Mr. Hunter. Without objection.
    Mr. Smith. Thank you, sir.
    OMSA is the association of owners and operators of U.S.-
flag vessels engaged in constructing, servicing, and 
maintaining offshore energy assets on our OCS. In total, we 
represent 170 member companies, U.S. companies, and their 
12,000 employees. We are a strong Jones Act supporter.
    The first offshore well was drilled 11 miles off the coast 
of Louisiana in approximately 18 feet of water. Today, instead 
of 11 miles, projects are routinely done 100 miles from shore. 
And instead of 18 feet of water, they are done in 10,000 feet 
of water. This increasingly complex work yields increasingly 
complex vessels. To keep up, OMSA members modernize and 
recapitalize their fleet in U.S. shipyards and invest in 
thousands of highly skilled and compensated U.S. mariners.
    In turn, these mariners participate in the Ready Reserve 
Force, and these shipyards build assets for the Navy and Coast 
Guard. In short, when enforced, the Jones Act works as 
intended.
    The prolonged downturn in the worldwide energy markets has 
greatly impacted OMSA members. As Ranking Member Garamendi 
alluded to, more than half of OMSA member fleets are currently 
in cold stack or laid up in the mud. Those that are working are 
working at day rates below even OPEX. A recent IHS market 
survey found that vessels that were commanding a day rate of 
$40,000 in 2012 now are working for a day rate of between 
$9,500 and $15,000.
    However, as Matt alluded to, we are in a cyclical industry. 
We understand this. These are forces we understand. We have 
been through downturns before. We understand we will come out 
on the other side. So my members get that, they have been there 
before. The challenges that OMSA members can't understand is 
understanding why the Government fails to enforce the Jones 
Act.
    More than the market downturn, this failure degrades the 
confidence in our industry and pits U.S. vessels against those 
that do not have to comply with the same tax, labor, or 
regulatory costs.
    As you know, current law, as represented by the Jones Act 
in combination with OCSLA, is simple. It prohibits foreign 
vessels from picking up cargo at U.S. ports and transporting it 
to points on the U.S. OCS. Unfortunately, Customs and Border 
Protection has confused and degraded that clear standard via 
their issuing of private interpretations of the Jones Act 
between 1976 and 2009. Many of these letter rulings, as they 
are known, are directly contrary to the statute of the Jones 
Act.
    In 2009, CBP realized their errors and issued a notice of 
its intent to revoke many of these flawed letter rulings. That 
notice was very candid in admitting that these letter rulings 
are ``contrary to the legislative intent of the Jones Act.'' 
However, after accepting public comments on the revocation 
notice, and at the urging of foreign vessel owners and 
charters, CBP punted, saying a new issue would be issued ``in 
the near future.''
    Spurred by this potential enforcement of the Jones Act, 
OMSA members invested $2 billion in U.S. shipyards, building 
dozens of state-of-the-art vessels capable of serving the 
market covered by this revocation notice. But we had to wait 8 
years for that ``near future'' to arrive. It finally came 364 
days ago, when CBP again issued a notice of its intent to 
revoke these flawed letter rulings.
    Again, CBP accepted public comments on their notice. Like 
in 2009, OMSA members and thousands of our employees submitted 
comments in support, as did 34 Members of Congress and 10 
Senators.
    I would like to note half of this subcommittee signed those 
letters. Thank you all.
    Despite this acknowledgment, second acknowledgment that CBP 
itself was not following the law, and despite this public and 
political support, CBP again decided not to enforce the Jones 
Act on May 10th, issuing a notice that they were ending the 
revocation effort.
    It is clear who benefitted from this decision. A London-
based trade association for the international competitors of 
OMSA issued a press release saying that everyone should 
``celebrate a positive result.'' OMSA members were not in a 
celebratory mood. Twelve days after CBP stopped their 
revocation effort, one of my members lost a previously secured 
lucrative contract on the OCS. That vessel was provided cover 
by the same letter rulings that CBP had sought to revoke. It 
leveraged its lack of U.S. tax, labor, and regulatory 
compliance costs to underbid my member.
    The problem continues. In September, CBP reversed a $22 
million Jones Act penalty. We believe that that penalty was 
issued under those same letter rulings that they sought to 
revoke. We believe this to be a strong signal to the 
international market that the U.S. OCS is open to foreign 
vessels.
    Again, the Jones Act has proven time and again that it can 
provide for our national, homeland, and economic security. But 
it can only do so when it is properly enforced.
    I welcome any questions you have and thank you all again.
    Mr. Hunter. Thank you, Mr. Smith.
    Mr. Paxton, you are recognized for 5 minutes.
    Mr. Paxton. Thank you, Chairman Hunter, Ranking Member 
Garamendi, and members of the subcommittee, for the opportunity 
to provide testimony on the state of the U.S.-flag maritime 
industry. I ask that my entire testimony be submitted for the 
record.
    Mr. Hunter. Without objection.
    Mr. Paxton. In December 2016, the Navy released a new force 
structure assessment that called for a fleet of 355 ships. To 
achieve this buildup, a substantial and sustained investment is 
required in both procurement and readiness, but our industry 
stands ready to build and repair this fleet of the future.
    Also critical to achieving this goal is strong 
congressional and administrative support of the Jones Act. The 
Jones Act ensures a commercial shipbuilding industry, supplier 
chain, and workforce that can support building and maintaining 
these Navy assets, making it a major national security benefit.
    It is for this reason that the U.S. Navy has always and 
continues to support the Jones Act. Long term, there needs to 
be a workforce expansion, and some shipyards will need to 
reconfigure or expand production lines to meet demands for both 
Government and commercial construction. However, the 
shipbuilding industry, like so many other manufacturing 
sectors, faces an aging workforce. Attracting and retaining the 
next generation shipyard worker is critical. Funding, 
predictability, and sustainability, along with fully and 
consistently enforcing the Jones Act, will allow industry to 
invest in facilities and more effectively grow its skilled 
workforce.
    Consistent enforcement of the Jones Act is critical. A 
recent decision by the Department of Homeland Security to not 
revoke a series of letter rulings that have allowed foreign-
built and foreign-crewed offshore supply vessels to operate in 
violation of the Jones Act has created uncertainty and resulted 
in numerous new U.S. vessel construction contracts to be 
canceled. I raise this issue as an example of how a decision by 
an agency to not properly enforce the Jones Act can adversely 
impact the entire shipyard industrial base.
    Shipyard capacity is critical to recapitalize the Coast 
Guard's desperately needed fleet modernization, including 
inland waterway vessels, cutters of all sizes, and icebreakers. 
Almost all of the shipyards that are building Coast Guard 
vessels also build Jones Act vessels. It is because of this law 
that the Coast Guard is receiving such robust competition to 
build its various classes of ship, including the polar 
icebreaker.
    As we look at the current state of the U.S.-flag maritime 
industry, we need to ask ourselves what is next. Recently, our 
shipyards effectively built for the increased demand in the 
tanker market, due to the oil and gas boom. It is a testament 
to the Jones Act that the commercial shipbuilding sector 
mobilized rapidly to meet the market demand and built state-of-
the-art tankers for that market. It was a true success for our 
industry.
    In addition, our shipyards recently delivered numerous 
large oceangoing containerships to recapitalize the 
noncontiguous fleets. Vessel construction for these important 
shipping routes is ongoing at several shipyards, and will be 
completed in the coming years. A common misconception, however, 
is that without large vessel construction, the U.S. shipyard 
industry is dormant.
    However, nothing could be further from the truth. In 2015 
our industry delivered 1,438 Jones Act vessels. And in 2016 we 
delivered 1,329 vessels. Looking towards the future, we expect 
there will be strong investment in expanded ferry and passenger 
vessel services, hopper dredges, commercial fishing fleet 
recapitalization, and a robust ATB market. We will also need to 
be ready to build training ships to support our maritime 
academies and recapitalize the severely aging Ready Reserve 
Force.
    As a closing observation, it is important to highlight to 
this committee that U.S. shipyards do not compete on a level 
playing field in the worldwide market. For example, last year 
South Korea's Government injected $2.6 billion into one of 
their most prominent shipyards in order to keep the yard from 
going bankrupt. A September report from an international think 
tank found evidence that shipyard costs in China decreased 
between 13 and 20 percent between 2006 and 2012, leading to a 
substantial misallocation of global production with no 
significant consumer gains.
    These are examples of the direct and indirect Government 
subsidies provided by South Korea, Japan, and China that have 
resulted in shipyards from those countries building for markets 
that did not exist at rates subsidized by those foreign 
governments. It is, therefore, an extreme misrepresentation to 
compare foreign subsidized shipyard markets to that of the 
Jones Act.
    Thank you, Chairman Hunter and Ranking Member Garamendi for 
allowing me to testify along such distinguished witnesses 
today, and I look forward to your questions.
    Mr. Hunter. Thank you, sir.
    Mr. Van Loo, you are recognized.
    Mr. Van Loo. Chairman Hunter, Ranking Member Garamendi, and 
distinguished members of the subcommittee, my name is Bill Van 
Loo, secretary treasurer of the Marine Engineers' Beneficial 
Association and a third-generation marine engineer. I am 
pleased to present testimony on behalf of the MEBA, the 
American Maritime Officers, the Masters, Mates and Pilots, and 
the Seafarers International Union.
    Combined, our unions represent the men and women who 
operate U.S.-flag vessels in both the domestic and 
international trades, and we continue the patriotic tradition 
of supporting the military whenever and wherever needed. We are 
the fourth arm of defense.
    Despite constant warnings from leaders in the Department of 
Defense, the pool of mariners has shrunk to a critical level. 
Without action, the military will no longer be able to rely on 
the American merchant marine. We appreciate the subcommittee's 
commitment to ensure the existence of a vibrant maritime 
industry.
    Since 2011, the U.S.-flag international fleet has shrunk 
from 106 to 82. This should be concerning to every American. In 
order to change course and reverse the downward trend, we must 
protect and fully fund existing programs and create new 
programs and opportunities that will increase the number of 
U.S.-flag vessels. That effort should start with national 
maritime policy that ensures a steady stream of cargo which, in 
turn, creates employment opportunities for militarily needed 
U.S. merchant mariners.
    By providing a minimal level of cargo, U.S.-flag preference 
shipping requirements are an essential to maintaining a strong 
industry. We strongly urge Congress to restore the U.S.-flag 
share of P.L. 480 Food for Peace cargoes to the 75-percent 
level that was in place since 1985 until 2012, when it was 
reduced to a mere 50 percent. It is no coincidence that the 
size of the U.S.-flag fleet has shrunk by more than 26 percent 
as a result.
    All too often, Federal departments and agencies and 
Government contractors have ignored U.S.-flag shipping 
requirements for the carriage of cargoes paid for by the U.S. 
American taxpayer. Not only are U.S.-flag vessels denied those 
cargoes, but there is no recourse when it is ultimately 
determined that the law was violated. We implore Congress and 
the administration to reinforce to all Federal agencies and 
their contracting officers that cargo preference laws must be 
adhered to.
    In 2008, Congress passed the Duncan Hunter National Defense 
Authorization Act that made it abundantly clear that the 
Maritime Administration was the final enforcer of cargo 
preference. Unfortunately, the administration has failed to 
fully adopt that language, and we must be concerned that the 
refusal to implement this law indicates an unwillingness to 
abide by cargo preference laws. Congress required the 
administration to fully comply with cargo preference laws.
    We also recommend that Congress should receive a detailed 
record of the bills of lading associated with the program.
    It is very simple. Without cargo, our ships do not sail, 
and our mariners will not be standing by in times of need.
    Another key component of American maritime policy is the 
Maritime Security Program. The MSP is a unique public-private 
partnership that ensures that the DoD has the sealift 
capability and intermodal network it needs while cutting costs. 
It would cost the Government over $65 billion to replicate the 
capacity provided by the MSP.
    While Government cargoes continue to decline, the MSP 
allows American ship operators to compete for commercial cargo 
with vessels that do not comply with our more stringent laws 
and regulations. We are pleased that Congress recently 
reaffirmed support for the program by increasing the authorized 
funding amount. In order to secure the availability of U.S.-
flag ships and the American mariners, we ask for your help to 
secure full appropriations for the program.
    The export of strategic American energy assets presents an 
opportunity to increase the size of the fleet and associated 
employment opportunities. We support the efforts of Congressmen 
Hunter, Garamendi, and Duncan, and their legislation to require 
the exports of strategic energy assets to travel on U.S.-flag 
vessels.
    I am a third-generation merchant mariner, and it is 
incredibly important to me and the labor organizations that I 
represent today that this industry is viable for generations to 
come. Not just for the important source of reliable middle-
class jobs, but for the vital role that the U.S. merchant 
marine serves to safeguard our country's military, economic, 
and homeland security.
    We are encouraged that the administration and Congress seem 
poised to consider comprehensive infrastructure policy. It is 
important that renewal of the U.S. merchant marine is 
considered as a part of that discussion. We stand ready to work 
with you to achieve these objectives. Thank you.
    Mr. Hunter. Thank you, Mr. Van Loo. And thank you to all of 
you. I am going to recognize myself.
    I guess my first question is this. You have all very 
eloquently laid out how important the Jones Act is, the 
benefits of it, and the downside to losing it. What do you 
think is behind--you might even call it a deep state in our own 
Government with CBP and the administration. Why do you think 
that U.S. officials, or U.S. Government employees that work for 
the American people, want to get rid of the Jones Act? Why? Why 
do you think that is?
    Mr. Woodruff. I will take----
    Mr. Hunter. Because it--yes, please. Go ahead, Mr. 
Woodruff.
    Mr. Woodruff. I think they are misguided. I think that they 
have people who are trying to get an undue advantage over a 
situation who are trying to tell them things that aren't 
necessarily true. And you know, there are a lot of people out 
there who are trying to make a buck, and they think that they 
can do so by promoting a false narrative about cost 
associated----
    Mr. Hunter. Well, let me make my question more explicit, 
then, so you all have a better way to answer it, maybe.
    Why would an American Government employee, whether it is 
CBP or Department of Energy or anything, want to outsource all 
of the shipping that they do? Meaning why would they not want 
Americans to do it? I mean they are not making money off of 
energy company X from Great Britain, right? They work for CBP. 
So why would they want to give preferential treatment of 
foreign countries over Americans?
    [Pause.]
    Mr. Woodruff. I can't----
    Mr. Hunter. Any of you, please. Help me out here.
    Mr. Paxton. Chairman Hunter, I think there is some inherent 
belief in free trade that the Jones Act is a protectionist 
statute, and therefore there is a belief that they don't want 
to enforce this or being guided by an administration that 
might----
    Mr. Hunter. Do any of you know of any maritime nation--I 
mean a nation around the world that is on the ocean or that can 
get to the ocean that does not have cabotage laws? Does one 
exist?
    [No response.]
    Mr. Hunter. So every maritime nation in the world has a 
Jones Act, and we are one of them. We are not special. Every 
single maritime nation that I know of, industrialized nation, 
has cabotage laws. Why do you think people in our Government 
want to give foreign interests preferential treatment over 
Americans?
    [No response.]
    Mr. Garamendi. I think you stumped them.
    Mr. Hunter. I mean there has got to be a reason. Any of 
you?
    Mr. Smith. Mr. Chairman, if I could----
    Mr. Hunter. Well, we have all laid out the--what is going 
on, right? So tell me why.
    Mr. Smith. For CBP's part, in many cases, what I think you 
saw from 1976 through 2009 was lack of understanding of our 
industry.
    Many of these letter rulings had confusing terms in them 
that built one upon each other, that talked about--when we 
finally got into CBP and explained what we were doing, they 
didn't understand that these blowout preventers or wellheads or 
jumpers or compressors, things that are one-quarter of the size 
of this room, were left on the sea floor. They thought, from 
the rulings they were given, or from the letter requests they 
were given, that that was ``equipment of the vessel,'' and 
stayed with the vessel. And it wasn't until we told them that, 
no, that is left on the OCS for perpetuity, that they 
understood what was going on. And when they did, they issued 
the 2009 notice of revocation.
    And so there is a lack of understanding for some when you 
receive a request for a ruling to understand what is actually 
going on.
    Mr. Hunter. Thank you. Anybody else want a try at this one?
    No? OK. I will just finish up by saying the absurdity of 
trying to take away America's cabotage laws, the reason that 
Great Britain was able to conquer the world from a little 
island is because they had a great navy. The reason we have 
been left untouched and didn't have the wars like World War I 
and II is because we got the Pacific and the Atlantic, so 
people can't drive tanks across our borders here.
    In order for us to maintain the way of life as we know it, 
as a Nation that is secure and is able to project power, be it 
navy power or commercial power, the Jones Act is intrinsic to 
that. It is the cornerstone of all of them. And I think you all 
very eloquently laid out how important it is.
    But the absurdities of some of those in this Congress and 
in Government, to think that you want Korean or Chinese or 
name-your-country-made ships and taking away the entire 
American workforce of making ships and driving them and getting 
something from point A to point B in America, it is all--it is 
stupid, it is absurd. And I hope that we just keep educating 
and educating, because that is what it is going to take so that 
people understand what this is and how it is one of the 
cornerstones of our entire country's national security 
apparatus.
    It is the Jones Act, and it is what allows us to project 
power and be the greatest country in the world. It is the Jones 
Act. That is one of the cornerstones. And I firmly believe 
that.
    Thank you for your testimony. I am going to yield to the 
ranking member.
    Mr. Garamendi. Mr. Chairman, I couldn't agree with you more 
on your point about the Jones Act and a cornerstone.
    Into the details, gentlemen, I want to thank all of you for 
your testimony. And I want to get into a series of questions 
that we discussed with Admiral Nadeau. And it has to do with 
the letters of nonavailability.
    If half of the offshore marine supply and work vessels are 
laid up, how can there be a nonavailability? Mr. Smith?
    Mr. Smith. Yes, sir. I believe the term for the letter is 
non-applicability, as in OCSLA does not apply to that vessel. 
And what they are being utilized for is, in some cases, yes, 
those letters, the vessels that have those letters, are taking 
work away from the vessels that my members own and operate.
    In other cases, those vessels are doing completely legal 
activities, such as a drill ship or a MODU [mobile offshore 
drilling unit]. Those type of vessels are not transporting 
merchandise between two points on the OCS. And we do not have 
those vessels. So those vessels have letters of non-
applicability, I am sure, and it would not matter.
    But there are also foreign supply vessels that have letters 
of non-applicability that are operating on the OCS--those are 
the vessels that are taking work away from U.S.-built, U.S.-
crewed, and U.S.-owned vessels.
    Mr. Garamendi. You said earlier in your testimony that this 
dates back to 1976, and a series of letters that have come 
forward from the CBP, Customs and Border Patrol. Could you--and 
in your testimony you also discussed efforts that have been 
made to rectify the inaccuracy in those letters. Could you go 
into that in just a little bit more detail here, and lay out 
for this committee, and specifically what we might be able to 
do to rectify the situation?
    Mr. Smith. Certainly, sir. So, yes, starting in 1976 was 
the first letter ruling that we look at dealing with 
merchandise on the OCS. And that letter dealt with a pipeline 
barge that was transporting merchandise. From that it was 
declared that the lane of that pipeline was not a Jones Act 
activity. And that is not a point we are challenging right now, 
I do want to make that clear. But the other activities, the 
ancillary activities, we are looking at.
    Now, the CBP revocation effort also kept that pipeline 
ability in there, but also said you can't transport pipeline 
connectors, tools, or other materials and leave them on the 
OCS.
    Additional letter rulings have been issued for items such 
as de minimis activities. Basically, as long as you are not 
breaking the law too much, you can do what you are doing. Or 
unforeseen repairs was an interesting letter ruling. Someone 
submitted a letter ruling request for preventative maintenance, 
and CBP responded and said no, preventative maintenance is an 
intrinsically foreseeable activity. Well, the next letter 
ruling that came in said, well, we have an intrinsically 
unforeseeable activity. Is that allowed? CBP said yes.
    We also had some for other similar activities. Hey, we are 
doing a permitted activity. And while we are doing that 
permitted activity, we would also like to do an unpermitted 
activity. Would you allow that? That was also agreed to. So 
that was kind of the letter rulings that built upon 
themselves----
    Mr. Garamendi. I understand that you filed a lawsuit to try 
to clear up this situation. Is that correct?
    Mr. Smith. Yes, we have, sir.
    Mr. Garamendi. And that suit is proceeding?
    Mr. Smith. Yes, it is.
    Mr. Garamendi. What can we do, by law or--well, basically, 
by law to make clear that there is a differentiation between 
reasonable activities and unreasonable activities? Is there a 
lack of clarification in the current law? Does it need to be 
clarified?
    Mr. Smith. As I said in my testimony, sir, I think OCSLA 
and the Jones Act are very clear. If you are transporting 
merchandise from point A to point B, that has to be on a U.S.-
built, U.S.-crewed vessel.
    Mr. Garamendi. So it is really about the enforcement of the 
law.
    Mr. Smith. Yes, it is, sir. And I understand that the 
committee is going to be having a hearing later this month on 
that, and I applaud that effort. Thank you all.
    Mr. Garamendi. OK, very good. I want to go into another 
question area, and I am out of time, so I will wait until we 
come back around.
    Mr. Hunter. Mr. Weber is recognized.
    Mr. Weber. Gosh, John, you shocked me there. I thought you 
had 3 or 4 minutes left in you.
    Mr. Garamendi. Thank you for yielding, and I will carry on.
    Mr. Weber. Next time.
    We appreciate you guys being here. I want to go back to 
something the chairman said--and, Mr. Chairman, you have been 
at this a lot longer than I have. You know, you are asking why 
was that happening, for example, with CBP. And y'all talked 
about some different ideas.
    Well, I would submit this, that sometimes, in the name of 
free trade, maybe our bureaucrats think we need to be fair, we 
ought to be fair in this. There is a world market out there, 
and somehow we have got to, you know, be world-market-oriented 
and fair about it. But there is nothing fair when you are 
dealing with a lot of other countries who subsidize and do all 
the things that we know that they do.
    So Duncan, maybe that is the answer to the question. 
Somehow we have gotten this idea that we need to be fair, we 
need to be the leader in fairness. Well, I submit that we want 
our economy to be the best. We need to be fairly in the lead. 
We want our national security to be best. We need to be fairly 
in that lead, and that is the fairness we ought to be concerned 
about.
    Let me jump over to LNG. I know that--many of you may not 
know that I represent the gulf coast of Texas--the first three 
counties from Louisiana. The Sabine-Neches Waterway is 
currently sending out about 95 percent of the LNG from my 
country.
    So we want to be in the lead, and we want to maintain that 
as long as we can. So the United States has become a leader in 
regard to LNG-powered vessels. How can we maintain that 
position to the benefit of the fleet, overall, as well as the 
safety and security, national security, and the economy of our 
Nation?
    I will start with you, Mr. Woodruff.
    Mr. Woodruff. You know, LNG propulsion, I think, is what 
you are----
    Mr. Weber. You bet.
    Mr. Woodruff [continuing]. Speaking of. It is a great 
opportunity to bring a cleaner, more environmentally friendly 
way of running a lot of our vessels. And I think it is just a 
matter of building out the infrastructure.
    We have vessels that are LNG-capable now in the domestic 
fleet. The first containership that was capable of running on 
LNG in the world was built in America for the American market.
    Mr. Weber. How long ago was that, do you----
    Mr. Woodruff. It was about a year and a half ago----
    Mr. Weber. Got you.
    Mr. Woodruff [continuing]. That that vessel went into 
service, thereabouts. And there are many more coming along 
behind it. Now we are in the process of building out the bunker 
barges and the other infrastructure necessary. And so I think 
it is just going to be a matter of time. You have a bit of a 
chicken and an egg. You need the vessels out there in order to 
incentivize the building of the bunker vessels. They are under 
construction now. And so I think it is something you will see 
growing over time.
    Mr. Weber. Anybody else want to weigh in?
    Mr. Smith. Congressman, I have one of my members has a 
dual-fuel fleet of OSVs that run on both natural gas and 
diesel. They have seen some good success with those. It lets 
the vessel stay out a long time because when you run out of one 
you just switch to the other. I am, of course, oversimplifying 
it.
    But they have had some good success with those. If you are 
ever down in south Louisiana and it is not snowing in south 
Louisiana I would invite you to come tour that vessel.
    Mr. Weber. Is it snowing there today?
    Mr. Smith. It looks like it was. Yes, sir.
    Mr. Weber. OK.
    Mr. Van Loo. U.S. mariners do have experience with LNG. And 
as LNG evolves and we get more experience, it will be 
beneficial for the industry.
    Mr. Weber. Well, we would love to see that coming from our 
district, because that is very, very important to our district. 
And on the national market, you know, the United States is 
going to be sending a lot of LNG around the world, and we want 
to continue that. So everything we can to push that.
    Let me change gears just a little bit here. A question for 
each of you. Does the strength of the U.S.-flag fleet bolster 
the credibility of the United States and the International 
Maritime Organization, or other international maritime 
organizations? And if you think that it does, how so?
    We will start down here on this end, Mr. Van Loo.
    Mr. Van Loo. Absolutely. Strength in numbers. The more U.S. 
flags we have on the international worldwide, the stronger the 
U.S. will look in the IMO and all the other international 
organizations.
    Mr. Weber. And I will let you each go and then I have got a 
followup question.
    Mr. Paxton?
    Mr. Paxton. Yes, sir. I think what you look at, if you look 
at our domestic fleet of 40,000 vessels waving the U.S. flag, 
we are the envy of the world. I think that is why you see so 
many foreign operators trying to----
    Mr. Weber. That actually is part of my second question, let 
me interrupt you. How close to other--who is the second country 
to that? We have 40,000. Who is second?
    Mr. Paxton. Well, because of the Jones Act, we have 40,000 
vessels that operate under the U.S. flag in our waterway----
    Mr. Weber. I mean would you be privy to the information--
China, how many vessels they have, or----
    Mr. Paxton. I was going to go to my next point, which is 
you will often hear of reports of Australia lamenting the fact 
that they don't have a similar cabotage law, and they will have 
foreign operators run aground and hurt Australians and, you 
know, folks on those vessels. We don't have that problem here.
    And so, I think that is the power of the U.S. flag, and it 
is also the power of the national security asset to have those 
vessels plying the waters----
    Mr. Weber. And we want to maintain that.
    Mr. Smith?
    Mr. Smith. Yes, Congressman. We have--OMSA has sent 
delegations to the IMO in most years in recent memory. And I 
know we have individuals going to the IMO within the next 
month. We look forward to that, and I know we are well 
respected and well received there because of the strength of 
our maritime industry and because of not only its number, but 
our technological capabilities and how, especially in our 
industry, we have led the world in developing these, these 
vessel types and capabilities.
    Mr. Weber. OK. Mr. Ebeling?
    Mr. Ebeling. Thank you. Yes, the chairman mentioned 
actually the Jones Act as being one of the cornerstones, and 
you are----
    Mr. Weber. Absolutely.
    Mr. Ebeling [continuing]. Mentioning that, as well. I would 
argue that there are actually three cornerstones, or a three-
legged stool, if you will. It is the Jones Act, which obviously 
is essential, but also MSP, the Maritime Security Program, and 
the cargo preference laws. All three are essential to national 
security and economic security. And the strength of each leads 
us to having a stronger representation at the international 
level, including the Coast Guard being able to represent us at 
the IMO level as strongly as they do.
    So thank you for the question.
    Mr. Weber. Mr. Woodruff?
    Mr. Woodruff. As the domestic fleet, we don't deal with 
IMO. We answer to you, who answer in turn to the American 
people. And we think that is the way it should stay. We don't 
think that the IMOs should be telling us how to move cargo 
within America.
    Mr. Weber. Sure. But you all would all agree that the fact 
we have got 40,000 flagged vessels is probably a pretty good 
arrow in our quiver when it comes to national/international 
security.
    Mr. Chairman, I thank you, I yield back.
    Mr. Hunter. I thank the gentleman.
    Mr. Lowenthal, you are recognized.
    Dr. Lowenthal. Thank you, Mr. Chair, and I thank all the 
panelists for being here. My question is for Mr. Smith.
    As you have pointed out, last spring the CBP reversed its 
notice on the application of the Jones Act to oil field 
operations on the Outer Continental Shelf. That notice would 
have reversed, as you pointed out, a series of misguided 
rulings, and would clarify that subsea construction and other 
activities do fall under the Jones Act requirement.
    And also from your testimony and also from an analysis from 
your association, you have identified over $2 billion in 
investment to construct or retrofit 31 vessels to service these 
operations with Jones Act-compliant ships, and that this 
shipbuilding activity occurred between CBP's announcement in 
2009 that it would revoke the flawed interpretations of the 
Jones Act regarding undersea operations and the new notice in 
2017.
    So with that as a frame, I want to ask you four questions, 
each one separately.
    My first question is after this notice was revoked by the 
administration, what is the current status of these newly built 
or retrofitted vessels? And I will ask you the other questions 
after.
    Mr. Smith. Certainly. Thank you, sir. For these dozens of 
vessels referred to as multipurpose support vessels, or MPSVs, 
they are doing different things. Some are still on contract and 
engaged with different operators and different charters. They 
are capable of doing this work, they can beat any international 
vessel in doing this work. So they do get employed. Others are 
on Government contracts, and are doing services for NOAA or MSC 
or other Government agencies. But the majority of them are 
currently at the dock.
    Dr. Lowenthal. So they are sitting idle.
    Mr. Smith. They are--yes, sir. They are sitting idle.
    Now, there are vessels that are--last I looked, there are, 
you know, let's call it circa 5 to 10 foreign MPSVs in the gulf 
right now, taking work away from Jones Act-qualified vessels. 
So there is some of that. That is down from historical 
averages, because of the downturn. But even outside of the 
downturn, we have, as you mentioned, built enough to cover 
capacity.
    Dr. Lowenthal. So you have--so I want--you have already 
answered my second question. So some have been shifted to other 
operations, oil operations or other duties, and some are 
sitting idle.
    So a question I am asking you is was this a waste of $2 
billion? What do your members think? Did they waste its money 
now?
    Mr. Smith. I certainly would hope they wouldn't think of it 
as a waste, because we have a Government agency, which has 
twice said that they are not following the law. Sooner or 
later, that is going, I believe, to prove us right, to prove 
that we have been right. So these vessels have a long life span 
and will be utilized.
    Additionally, and maybe it is a very small victory, but by 
building these vessels we have recapitalized some of Mr. 
Paxton's shipyards here, which have then enabled those 
shipyards to participate in some very big Government projects. 
And again, I think that in itself proves that the Jones Act 
works as intended. And I am not saying that is worth $2 
billion, but I do think that that shows something.
    Dr. Lowenthal. All right. So let's say, as you say--you 
know, you are assuming that at some point we will do the right 
thing and CBP will change its interpretation and come back to 
the rightful interpretation that the Jones Act does cover this.
    So the question is, if that occurs, what economic benefits 
do you think this proper enforcement of the Jones Act will have 
for your members? How will this impact your members? If what 
you are saying is ultimately the CBP understands and makes the 
right interpretation, how will this impact your members?
    Mr. Smith. You know, I think it will definitely provide an 
economic benefit for our members.
    But more than that, I would look at what it would provide 
for our Nation. And looking at that, my organization hired a 
domestic economist here from within the United States. And that 
economist found that correct interpretation of the Jones Act by 
CBP would create 3,200 new jobs in the United States, would put 
$700 million into the United States economy, and would create 
wages of $155 million--increase. That is, of course, in 
addition to the 500,000 men and women in this country that are 
already employed due to the Jones Act.
    Dr. Lowenthal. So what you are saying is if there was a 
correct interpretation of the Jones Act by the CBP, we truly 
would make America great again.
    Thank you, and I yield back.
    Mr. Hunter. Amen. I would like to close here by yielding to 
the ranking member, Mr. Garamendi.
    Mr. Garamendi. I will try to do this quickly. Mr. Weber 
appropriately raised the question of the export of a strategic 
national asset, natural gas and LNG. It is estimated that just 
10 years from now that it will take about 140 ships to export 
the potential LNG that is available in the United States for 
foreign trade. If just 5 percent of that were on American-built 
ships, we are talking some seven ships. Probably four, maybe 
five, would have to be built in the meantime.
    Similarly, on crude oil, by 2028, if just 5 percent of the 
crude oil were to be shipped on American-built ships, we are 
talking some 12 ships. So if we were to require, as we once did 
with the North Slope of Alaska, that all of that oil be on 
American-built ships--but let's not be greedy, let's just say 5 
percent--we could substantially increase the number of ships 
built in America by a significant number. Maybe half a dozen by 
2028 in LNG, maybe a little less. Crude oil, probably in the 
range of 12 to 15 ships in just 10 years, giving new life to 
the commercial shipbuilding industry in the United States.
    Now, the fact that we are proposing a piece of legislation 
that would do that brings me to the question to Mr. Paxton.
    Can you do it? Is it possible that we could actually build 
commercial LNG ships for the international trade, as well as 
crude oil----
    Mr. Paxton. Yes.
    Mr. Garamendi [continuing]. In that range over the next 
decade?
    Mr. Paxton. Well, first, I want to say thank you very much, 
Congressman----
    Mr. Garamendi. Microphone.
    Mr. Paxton [continuing]. The work you have been doing on 
this. Your staff has been excellent. I appreciate your time 
spent with a lot of my members, working on really hard 
legislation.
    But yes, the answer is we can meet that demand. Again, we 
still want to build that 355-ship navy. But, truly, building 
commercial vessels for LNG and crude export is what we did with 
the North Slope. I mean that was part of the deal.
    And so, if we could have some configuration of that again, 
you know, I know you have been working with my trade 
association for a long time on this. We want to get it right, 
we want it to be defensible, and we want to fight for it along 
with this committee and with you, sir.
    But yes, the answer is yes, we could do that.
    I would say on LNG, as you know, sir, that is a very 
complex vessel. We haven't built those in a little while now. 
But based on my members and what I have been told, we could 
gear that up in time with timelines that we have seen in some 
proposals that you have been working on.
    Mr. Garamendi. I thank you.
    Mr. Van Loo, are the mariners available over that period of 
time?
    Mr. Van Loo. That is a concern. Because as the industry 
continues to decline, we are going to lose more mariners. So 
hopefully we have bottomed out, flat-lined, and we will be able 
to supply the mariners if it stays consistent or we can grow a 
little bit. It is tough to recruit when you are talking to 
young people about an industry that is not doing very well.
    Mr. Garamendi. Well, our goal is to make sure this industry 
remains strong for the benefit of the committee members here. 
We will soon be bringing to all of our attention a piece of 
legislation that I think will have support from the 
shipbuilding industry, as well as the mariners, and probably 
not the petroleum industry, but 5 percent, 10 percent--they can 
do it, they could live with that.
    With that, Mr. Chairman, you have a hard stop at 12 
o'clock, so I will yield back my remaining 1 minute.
    Mr. Hunter. I thank the gentleman. There are no further 
questions.
    I want to thank all of you, just for all you do, all the 
time and effort you put in, and for doing something that is 
more important than just business. I mean this is, like we 
talked about, a national security cornerstone and an economic 
cornerstone of this Nation. So thank you very much for all that 
you do.
    And with that, this subcommittee stands adjourned.
    [Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
    
    
    
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