[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE STATUS OF THE MERCHANT MARINE
=======================================================================
(113-82)
HEARING
BEFORE THE
SUBCOMMITTEE ON
COAST GUARD AND MARITIME TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 10, 2014
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available online at: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=transportation
_________
U.S. GOVERNMENT PUBLISHING OFFICE
89-707 PDF WASHINGTON : 2016
_________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
DAVID W. JOLLY, Florida
------ 7
Subcommittee on Coast Guard and Maritime Transportation
DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska JOHN GARAMENDI, California
HOWARD COBLE, North Carolina ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey RICK LARSEN, Washington
PATRICK MEEHAN, Pennsylvania TIMOTHY H. BISHOP, New York
STEVE SOUTHERLAND, II, Florida, LOIS FRANKEL, Florida
Vice Chair CORRINE BROWN, Florida
TOM RICE, South Carolina JANICE HAHN, California
MARK SANFORD, South Carolina NICK J. RAHALL, II, West Virginia
DAVID W. JOLLY, Florida (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Mark Tabbutt, chairman, Saltchuk Resources, on behalf of the
American Maritime Partnership.................................. 3
Niels M. Johnsen, chairman, Central Gulf Lines, Inc. and Waterman
Steamship Corporation, on behalf of USA Maritime............... 3
Don Marcus, president, International Organization of Masters,
Mates and Pilots, on behalf of American Maritime Officers,
Marine Engineers' Beneficial Association, Marine Firemen's
Union, Sailors' Union of the Pacific, and Seafarers
International Union............................................ 3
Matthew Paxton, president, Shipbuilders Council of America....... 3
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Mark Tabbutt:
Prepared statement........................................... 25
Answers to questions for the record issued by Hon. John
Garamendi, a Representative in Congress from the State of
California................................................. 34
Niels M. Johnsen:
Prepared statement........................................... 37
Answers to questions for the record issued by Hon. John
Garamendi, a Representative in Congress from the State of
California................................................. 46
Don Marcus:
Prepared statement........................................... 50
Answers to questions for the record issued by Hon. John
Garamendi, a Representative in Congress from the State of
California................................................. 63
Matthew Paxton:
Prepared statement........................................... 67
SUBMISSIONS FOR THE RECORD
Hon. John Garamendi, a Representative in Congress from the State
of California, submission of the following articles and
supplemental material:
``China Pushes to Build Its Own Ships to Deliver Gas,''
Reuters, August 5, 2014.................................... 72
Moyoun Jin, ``South Korea to Support Shipbuilding Industry,''
IHS Maritime 360, August 18, 2014.......................... 74
``GAIL to Buy One-Third of LNG Ships From Indian
Shipbuilders,'' The Economic Times, July 30, 2014.......... 75
``The Global LNG Fleet Needs to Grow by 225 Vessels by the
End of 2020. How are Foreign Governments Supporting Their
Shipbuilding Industries?" Memo from staff of Hon. John
Garamendi.................................................. 77
MarEx ``China to Modernize Shipping Industry,'' Reuters,
September 3, 2014.......................................... 78
``China Publishes First `White List' of 51 Shipyards,''
Reuters, September 4, 2014................................. 79
Questions for the record for Matthew Paxton, president,
Shipbuilders Council of America............................ 80
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
THE STATUS OF THE MERCHANT MARINE
----------
WEDNESDAY, SEPTEMBER 10, 2014
House of Representatives,
Subcommittee on Coast Guard and Maritime
Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 9:40 a.m., in
Room 2167, Rayburn House Office Building, Hon. Duncan Hunter
(Chairman of the subcommittee) presiding.
Mr. Hunter. The subcommittee will come to order.
Good morning. The subcommittee is meeting today to review
issues impacting the U.S. merchant marine, the important role
it plays in our economy and national security and ways we can
work together to strengthen and expand the merchant marine.
The U.S. maritime industry currently employs more than
260,000 Americans, providing nearly $29 billion in annual
wages. There are more than 40,000 commercial vessels currently
flying the American flag.
The vast majority of these vessels are engaged in domestic
commerce, moving over 100 million passengers and $400 billion
worth of goods between ports in the U.S. on an annual basis.
Each year the U.S. maritime industry accounts for over $100
billion in economic output.
Beyond the important contributions to our economy, a
healthy merchant marine is vital to our national security.
Throughout our history, our Nation has relied on U.S.-flag
commercial vessels crewed by American merchant mariners to
carry troops, weapons, and supplies to the battlefield.
During Operations Enduring Freedom and Iraqi Freedom, U.S.-
flag commercial vessels transported 63 percent of all military
cargoes moved to Afghanistan and Iraq. Unfortunately, over the
last 35 years, the number of U.S.-flag vessels sailing in the
international trade has dropped from 850 to less than 90. Less
than 2 percent of the world's tonnage now moves on U.S.-flag
vessels.
In the same period, we have lost over 300 shipyards and
thousands of jobs for American mariners. For the sake of our
national and economic security, we need to reverse this trend.
We cannot rely on foreign vessels and crews to provide for our
national security.
It is critical that we maintain a robust fleet of U.S.-flag
vessels to carry critical supplies to the battlefield, a large
cadre of skilled American mariners to man those vessels, and a
strong shipyard industrial base to ensure we have the
capability to build and replenish our naval forces in time of
war.
I know the new Maritime Administrator is hard at work on a
national maritime strategy that will hopefully include
recommendations to strengthen the merchant marine. As soon as
the strategy is complete, I look forward to calling him before
the subcommittee to present it.
In the meantime, representatives of maritime industry and
labor have been working on a similar proposal at the request of
Ranking Member Garamendi and myself. I look forward to hearing
about the proposal today as well as other recommendations our
witnesses may have.
If we want to grow our economy and remain a world power
capable of defending ourselves and our allies, we must work
together to strengthen our merchant marine.
I thank the witnesses for appearing today and look forward
to working with them. I thank the witnesses--I already put
that.
And, with that, I yield to Ranking Member Garamendi.
Mr. Garamendi. Chairman Hunter, thank you.
I am downright excited about this hearing. I am excited
about the potential that we have to really strengthen our
maritime industry and to build the American economy and provide
a significant number of jobs.
The status of the U.S. merchant marine could not be a
better topic for us to take up in the waning days in the 113th
Congress. We have got a stretch run. Maybe we can get something
done in the last couple of months of this session.
Our merchant marine has been a fundamental element of our
national defense and a key industry in our national economy
since the founding of this Republic more than 230 years ago.
Unfortunately, recent history over the past five decades
has not been very kind to our maritime industry. For example,
the number of vessels serving the U.S. international trade has
shrunk from 850 in the mid-1980s to roughly 90 vessels in 2014.
Since 1983, the United States has lost approximately 300
shipyards and only 10 shipyards are capable now of building
large naval vessels and oceangoing commercial ships. Such
losses are very disturbing.
Nevertheless, despite the setbacks of the recent past and
the ongoing challenges, a strong maritime foundation endures,
especially in coastwide trade that has remained protected under
the Jones Act.
I am convinced now more than ever that, with purposeful
cooperation and action, our merchant marine can again flourish
and resume its standing as a vital contributor to our national
defense and economic might.
Progress has been made. We have successfully fought off
ill-advised waivers of the Jones Act. We have rallied and
beaten back some of the worst proposals to rewrite our cargo
preference laws.
We have also succeeded in reauthorizing and fully funding
the Maritime Security Program to ensure that the Pentagon
retains the sealift capability it needs to move our military
quickly, efficiently, and securely.
But just as sure, real challenges remain. We need to
recapitalize our Ready Reserve Fleet, to modernize our sealift
vessels, and provide new job opportunities for our shipyards.
We need to better utilize existing financial assistance
programs, such as Title XI of the Maritime Loan Guarantee
Program, to again demonstrate that the Federal Government is a
willing partner in the maritime industry.
We should note that our competitors around the world are
more than willing and, in fact, are doing significant support
to their--for their maritime industry.
And perhaps most important, we must take advantage of the
recent emergence of a U.S. LNG export trade to ensure that the
export of this strategic national resource does not more than
merely increase the profits of the energy exporters, but also
directly benefits our merchant marine and the expansion of our
domestic shipbuilding industry.
To that end, in this hearing, I want to hear the views of
our witnesses on this emerging LNG trade and, also, seek their
comments on legislation recently introduced by Chairman Hunter
and myself, H.R. 5270, the Growing American Shipping Act, or
GAS Act. I like that.
Thank you very much.
Mr. Hunter. I thank the ranking member.
The witnesses today are Mr. Mark Tabbutt, chairman of
Saltchuk Resources, on behalf of the American Maritime
Partnership; Mr. Niels Johnsen, chairman of Central Gulf Lines,
on behalf of USA Maritime; Captain Don Marcus, president of the
International Organization of Masters, Mates and Pilots, on
behalf of maritime labor organizations; and Mr. Matthew Paxton,
president of the Shipbuilders Council of America.
TESTIMONY OF MARK TABBUTT, CHAIRMAN, SALTCHUK RESOURCES, ON
BEHALF OF THE AMERICAN MARITIME PARTNERSHIP; NIELS M. JOHNSEN,
CHAIRMAN, CENTRAL GULF LINES, INC. AND WATERMAN STEAMSHIP
CORPORATION, ON BEHALF OF USA MARITIME; DON MARCUS, PRESIDENT,
INTERNATIONAL ORGANIZATION OF MASTERS, MATES AND PILOTS, ON
BEHALF OF AMERICAN MARITIME OFFICERS, MARINE ENGINEERS'
BENEFICIAL ASSOCIATION, MARINE FIREMEN'S UNION, SAILORS' UNION
OF THE PACIFIC, AND SEAFARERS INTERNATIONAL UNION; AND MATTHEW
PAXTON, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA
Mr. Hunter. Mr. Tabbutt, you are recognized for your
statement.
Mr. Tabbutt. Good morning, Chairman Hunter, Ranking Member
Garamendi, and members of this subcommittee.
My name is Mark Tabbutt, and I am here today on behalf of
the American Maritime Partnership. We represent all segments of
our industry--shipping companies, ship construction and repair
yards--and our industry's skilled workforce.
I am also the chairman of the board of Saltchuk, which is a
family of transportation companies. We employ 7,500 people and
have operations in the United States, stretching from the U.S.
Virgin Islands to Barrow, Alaska.
In our domestic shipping operations, we currently carry
one-third of all general cargo that moves to Alaska and about
30 percent of all general cargo carried to Puerto Rico.
In Hawaii, we provide a lifeline to the islands by
transporting significant amounts of general cargo, moving on
the water between the islands. We are a privately owned second-
generation family business.
My testimony today comes on behalf of the American domestic
maritime industry. That is the shipping industry that operates
exclusively between points within the United States. Of the
total U.S.-flag fleet, the overwhelming majority operates
within the Jones Act, the business of transporting cargo by
water from one U.S. port to another.
I want to thank this subcommittee for its consistent
support of the Jones Act. Certainty in Government policy is the
principle and critical ingredient in the success of the
domestic maritime industry. Without it, the investment picture
and growth profile I am about to describe could not take place.
I also want to thank you, Chairman Hunter and
Representative Garamendi, for your leadership, exploring ways
to expand the U.S. fleet in all trades.
I am happy to report that this industry is experiencing an
extraordinary renaissance. Our industry is investing billions
to construct new state-of-the-art vessels in shipyards across
the land and serving our customers with modern fuel and cost-
efficient vessels.
The largest sector of our domestic marine transportation
industry supports our energy infrastructure with the movement
of crude, refined petroleum products and chemicals. This sector
has seen dramatic growth as a result of the shale oil
revolution.
But the growth is not limited to the energy sector. Our
company and others like us are building large modern container
ships to serve the noncontiguous areas of the United States. I
have provided much more detail about these ships in my written
testimony.
We are seeing growth in the offshore supply business as the
Gulf of Mexico oil industry rebounds. The inland trades remain
strong. We have inland shipyards that are building and
launching an average of one new barge every single day of the
year.
My written testimony includes a long list of large vessels
under construction and under contract to be built in the
future. I would add that these vessels feature cutting-edge
technologies, like engines that will burn natural gas as a
fuel, breaking new ground not only in the United States, but,
also, as the first of their kind in the world. This is American
ingenuity at its best.
In fact, while we have the best trained maritime workforce
in the world, our industry is growing so fast that, at times,
it has been difficult to hire all the skilled personnel that we
need. To help address that situation, our industry recently
launched a major initiative to hire veterans for jobs in the
domestic maritime industry.
We had 400 veterans at our Military2Maritime job fair last
week in Houston, and a similar number attended earlier this
year at an event in Jacksonville. Our industry has always hired
veterans, especially from the sea services, but we are ramping
up that effort today. We love hiring veterans.
This spike in commercial vessel construction is coming at a
time when military ship construction in the United States is
sharply declining due to deep Federal budget cuts. As such, the
expansion in commercial work helps keep shipping--shipyards
operating and the technical expertise fully subscribed.
Shipbuilding is critical to our Nation's defense industrial
base, and commercial vessel construction has helped fill the
gaps caused by the cutbacks in military ship construction.
It is a very good time to be a part of our industry. Our
industry's contributions to American's economic, national, and
homeland security have never been greater. We deeply appreciate
this subcommittee's support for the Jones Act, and we thank you
for understanding the need for certainty in legal and
regulatory framework that is the foundation of our industry.
Thank you.
Mr. Hunter. Thank you.
Mr. Johnsen.
Mr. Johnsen. Thank you, Mr. Chairman.
I am Niels M. Johnsen, chairman of Central Gulf Lines and
Waterman Steamship Corporation, U.S.-owned section 2 citizen
companies that, together with their affiliates, operate 16 U.S.
commercial vessels.
I am testifying on behalf----
Mr. Hunter. Would you mind pulling--would you mind pulling
the mic a little bit closer? You can move the whole thing over.
Thank you.
Mr. Johnsen. I am testifying today on behalf of USA
Maritime and its member companies, a coalition representing all
the privately owned U.S.-flag oceangoing vessels operating in
foreign trade.
I will highlight the present challenges confronting the
merchant marine and suggest ways in which Congress and the
administration can provide much needed support to our industry.
Mr. Chairman, the Congress and the administration have to
answer a simple question: Do we want a robust U.S.-flag
merchant marine to support our national and economic security
for the rest of this century and beyond? The simple answer is
yes. The maritime industry strongly believes that the only
answer to this question is yes.
To achieve this objective, the Federal Government must act
quickly to develop a comprehensive national maritime strategy,
absent which, we fear, the decline of our industry will only
accelerate.
In July, the Maritime Administration advised Congress that
the number of U.S.-flag vessels in international trade had
decreased by 18 percent between 2008 and 2013, from 101 vessels
to 84 vessels, and that a further decline is anticipated. This
has been caused by a sharp decline in military cargo, food aid,
and other Government cargoes moving on U.S.-flag vessels.
History has proven that the United States depends heavily
upon the U.S.-flag merchant marine to support our Nation's
military and economic security. U.S.-flag vessels provided
direct support to DOD during World War II, the Korean war, the
Vietnam war, Operation Desert Shield Storm, Operation Enduring
Freedom in Afghanistan, and Operation Iraqi Freedom.
U.S.-flag vessels carried more than 90 percent of the war
materiel to forward-operating bases during the Afghanistan and
Iraqi conflicts.
While the U.S.-flag fleet is in decline, challenges on the
world stage multiply rapidly. In the past few months, we have
witnessed the emergence of the Islamic State of Iraq and Syria,
significant turmoil in Libya, Israel and the Ukraine, and
several provocative actions by China.
We cannot predict when the American military will be called
upon to respond to these or other conflicts, but our military
must be ready to answer the call when it inevitably comes,
including the strategic sealift support provided to DOD by
U.S.-flag merchant marine.
We are pleased to recommend several specific initiatives
that can lay the foundation for a new maritime strategy. First,
a strong, fully funded Maritime Security Program must be a key
component of any future maritime policy.
MSP provides a privately owned U.S.-flag fleet of 60
militarily useful commercial vessels to support the sustainment
of U.S. forces throughout the world. Under this program, U.S.
carriers commit their vessels and their global logistics
network of ports, rail, trucking, and infrastructure to support
American troops and to maintain America's readiness.
The capital cost to DOD to replicate this fleet would be
$13 billion, and it would cost another $52 billion to replicate
the worldwide intermodal system that has been developed by the
MSP participants.
In 2012, the Congress reaffirmed its support for the MSP by
reauthorizing this program through 2025. In his fiscal year
2015 budget, the President requested a fully authorized annual
amount of $186 million for MSP.
While the Senate recommended funding at this level, the
House bill, unfortunately, recommended only $166 million, a $20
million cut that, if enacted, would undoubtedly result in a
reduction of the MSP fleet and a further decline in the U.S.
merchant marine.
So our most immediate request is for Congress--and we know
this is in process--to fully fund the MSP in fiscal year 2015
at the authorized level of $186 million.
Once that is accomplished, we need to address the
appropriate level of funding required to sustain the MSP fleet
in future years. It is critically important that the level of
support for MSP vessels be adjusted to achieve commercial
viability and a more level playing field for MSP vessels.
When the MSP was created, Congress sought to incentivize
shipowners to document modern vessels under the U.S. flag and
enroll those vessels in the MSP with the full cooperation of
the Coast Guard.
For 15 years, the Coast Guard adhered to the original
intent of Congress by working closely with MSP carriers to
expedite the documentation of dozens of modern vessels.
Unfortunately, the Coast Guard recently issued guidance
that alters this longstanding cooperative approach. NVIC 01-13
requires vessels entering the MSP to comply with more costly
standards that exceed international standards routinely
accepted by the Coast Guard.
USA Maritime urges this subcommittee to request the Coast
Guard to revoke this NVIC and return to the prior practice that
has worked so effectively since the inception of the MSP.
In addition to MSP, it is critically important for U.S.-
flag vessels to have access to a broad array of Government
cargo. We strongly support cargo preference requirements for
the transportation of Government-impelled cargo.
The three most important cargo preference statutes are the
Cargo Preference Act of 1904, Public Resolution 17, and the
Cargo Preference Act of 1954, requiring that at least 50
percent of all Government cargoes and 75 percent of all food
aid cargoes be transported on U.S.-flag vessels.
Unfortunately, the food aid percentage was reduced in 2012
from 75 percent to 50 percent, which very negatively impacts
the U.S.-flag fleet. We strongly support the provision that you
and Congressman Garamendi included in the Coast Guard bill to
restore the U.S.-flag share of food aid cargoes to the 75-
percent level.
Unfortunately, the volume of military and food aid cargoes
has declined precipitously in recent years. This dwindling
cargo base has put pressure on MSP carriers and will lead to
additional shrinkage of the U.S.-flag fleet unless action is
taken by Congress to address insufficient MSP funding levels
and otherwise assist in increasing the available pool of
Government cargoes for U.S.-flag vessels. We urge MarAd to
redouble its efforts to enforce the cargo preference laws and
ensure that all Federal agencies comply with all such
requirements.
Mr. Chairman, we support the additional cargo preference
enforcement language that your subcommittee has included in the
Coast Guard bill that, again, clarifies that MarAd has the
responsibility to determine if a Federal program is subject to
cargo preference.
Another challenge for U.S.-flag carriers is that numerous
countries continue to erect barriers that exclude or limit the
ability of U.S.-flag vessels to access those markets. A new
maritime strategy should include provisions designed to
eliminate unfair anticompetitive practices of our trading
partners.
We are ready to work with all facets of the Federal
Government, particularly the trade representative, in a
sustained effort to eliminate those barriers wherever they
exist.
In conclusion, Mr. Chairman, the state of the U.S. merchant
marine is precarious. Our industry is in the midst of a perfect
storm: dwindling U.S. military cargoes, a precipitous drop in
food aid cargoes, escalating costs and regulations from the
Coast Guard and other agencies, and intense low-cost foreign
competition.
A national maritime strategy that addresses these issues in
a comprehensive way must be developed immediately. It must
preserve an enhanced Maritime Security Program, reinforce and
expand existing U.S.-flag cargo preference requirements, and
strengthen commercial opportunities for U.S.-flag vessels with
our trading partners.
Thank you, Mr. Chairman.
Mr. Hunter. Thank you.
Mr.--Captain Marcus.
Captain Marcus. Thank you, Chairman Hunter, Ranking Member
Garamendi, and members of the subcommittee.
I am Don Marcus, president of the International
Organization of Masters, Mates and Pilots and a professional
mariner, having been employed as third mate through master
aboard U.S.-flag commercial vessels engaged in foreign trade.
I am speaking on behalf of Masters, Mates and Pilots, the
American Maritime Officers, the Marine Engineers' Beneficial
Association, the Marine Firemen's Union, the Sailors' Union of
the Pacific, and Seafarers International Union.
Our organizations represent the men and women who supply
our military overseas. We also ensure that the seaborne trade
that our economy depends upon is not carried exclusively in the
hands of foreign vessels with foreign crews. ``In peace and
war'' is the motto of the U.S. merchant marine.
The critical need for our industry has been recognized in
every conflict during our Nation's history. I am proud to say,
as was pointed out earlier, that 90 percent of the military
supplies carried to our troops in Afghanistan and Iraq were
carried by American labor. Despite the indisputable need for a
strong American maritime industry, the U.S. merchant marine is
in jeopardy.
The declaration of policy of the Merchant Marine Act of
1936 states, ``It is necessary for the defense and the
development of its foreign and domestic commerce that the
United States shall have a merchant marine sufficient to carry
a substantial portion of its waterborne export and import
foreign commerce of the United States.'' This policy objective
is not being met.
U.S.-flag commercial vessels and their American citizen
crews are subject to a variety of Federal rules, regulations,
and tax obligations that are not applicable to our foreign-flag
competition.
As a result, there has been a disastrous decline in the
share of U.S. foreign trade carried by U.S.-flag commercial
vessels, the number of U.S. vessels engaged in foreign trade
has declined, and there has been a loss an of jobs and
employment security for American mariners.
It must be emphasized that it takes many years for an
individual to gain the experience and sea time necessary to
obtain U.S. Coast Guard-issued licenses and credentials. Our
young people will not be encouraged to enter an industry that
has been abandoned by our policymakers and that promises no
future.
Our Government, U.S.-flag shipping companies, and America's
maritime labor organizations must work together to modify
existing programs and create new programs and opportunities
that will increase the amount of cargo, the number of vessels,
and the employment opportunities in the American merchant
marine.
For example, as stated earlier today, the Maritime Security
Program is a key component of our military security. It is
critical that Congress appropriate the full $186 million that
has been authorized.
The current $20 million funding shortfall may cost as many
as seven ships in the U.S. 60-ship fleet if not rectified.
Considering the cost of replacement of this program, it makes
no sense to begin the process of gutting our sealift
capability.
Another key component of maritime strategy is the cargo
preference statutes. These provide U.S. cargo baselines and a
number of advantages and protection for our U.S.-flag foreign
fleet.
Congress must direct that Maritime Administration enforce
the U.S.-flag shipping requirements and report on MarAd's
enforcement activities. Congress must restore the U.S. flag of
P.L. 480 Food for Peace cargoes to the 75-percent level.
It would be far better to streamline the P.L. 480 program
rather than replace it with a cash handout program that gives
cash to third parties. Cash handouts do not guarantee that the
needy of the world will receive more food. The generosity of
American taxpayers should be tangible and transparent if the
U.S. constituency that supports foreign aid is to be sustained.
On another matter pertaining to the competitiveness of the
U.S. maritime industry, the Merchant Marine Act of 1920 sets
out the legal remedy available in the event a seaman is killed
or injured aboard ship. Congress should work with maritime
labor and management to determine whether an alternative remedy
should be available.
Our maritime union strongly supports H.R. 5270, the Growing
American Shipping Act, which encourages the use of LNG U.S.-
flag vessels. We urge Congress to allow foreign-built LNG
vessels to be documented under the U.S. flag in order to engage
in our international export trade, provided that they meet
standards for vessels--international standards for vessels
entering U.S. waters.
Also, extending the provisions of the Internal Revenue
Code's foreign-source income exclusion to American mariners
working aboard LNG export vessels would also be a means of
reducing the competitive advantage of foreign-flag LNG
carriers.
American labor salutes you all. We thank you for your
legislative support and your commitment to the U.S. merchant
marine. A healthy U.S. merchant marine will safeguard our
country's military economic and homeland security. American
labor stands ready to work with you to achieve these
objectives.
Thank you.
Mr. Hunter. Thanks, Captain.
Mr. Paxton.
Mr. Paxton. Thank you. And good morning.
On behalf of the Shipbuilders Council of America, I would
like to thank Chairman Hunter, Ranking Member Garamendi, and
members of the subcommittee for the opportunity to provide a
brief overview of the domestic commercial shipbuilding
industry, some recent market trends, and issues facing the
industry.
The shipyard industry is a vital component of any robust
merchant marine. And today I am pleased to inform the committee
that the state of America's commercial shipyard industry is the
strongest it has been in decades.
Today the American shipyard industry represents a strong
manufacturing sector contributing hundreds of thousands of jobs
and billions of dollars to the economy. According to a recent
report by the U.S. Maritime Administration, the shipyard
industry supports over 400,000 jobs in all 50 States,
representing nearly $24 billion in labor income and contributes
over $36 billion to the GDP.
In fact, when explaining the economic impact of our
industry, it is important to point out that, on average, over
the past 4 years, American shipyards have delivered
approximately 1,300 ships per year.
Moreover, shipyards have a big impact on the local
communities and the country at large. With over 300 facilities
located in 27 States and a supplier base that provides economic
impacts in all 435 congressional districts, each direct job
leads to another 2.7 jobs nationally. The men and women who are
employed by the shipyard industry are highly skilled. And, in
2011, the average labor income per job was approximately
$73,000 a year. The salary is 45 percent higher than the
national average for the private-sector economy.
Much of the growth of the commercial shipyard sectors has
been in response to the country's oil and natural gas
revolution. The result has been a boom for shipyards who are
currently building out 19--that is options included--large
crude and petroleum product carriers, representing millions of
barrels of new capacity for coastwise transportation.
At the same time, U.S. shipyards currently have seven--
including options--large container ships on order to serve the
noncontiguous trades. All of these vessels and several of the
petroleum product carriers will be powered by liquefied natural
gas or will be LNG-conversion-ready.
In fact, the world's first LNG-powered container ships are
going to be built out in San Diego at General Dynamics NASSCO,
which is a huge feather in the cap of the shipyard industry.
Shipbuilding and ship repair associated with the offshore
oil and gas sector in the Gulf of Mexico is equally important.
With roughly 4,000 offshore oil and gas platforms in the Gulf
of Mexico, there has been steady shipbuilding and repair
contracts for this sector for many years now.
In 2013, shipyards entered into 111 contracts for offshore
oil and gas support vessels. As a result of this strong order
book, the U.S. is now a leader in offshore workboat
shipbuilding, so much so, we now build for international
markets exporting these vessels to work worldwide.
Finally, the industry continues a steady stream of building
tugboats, ferries, inland barges, patrol and fireboats, as well
as other craft. All of these vessels provide important merchant
mariner jobs, which contribute the eyes and ears of the
waterfront and waterways, a true national security success
story.
Commercial vessel construction represents billions of
dollars in investments each year, underscoring the importance
of maintaining the Jones Act. Each dollar invested in new
commercial vessel construction is done so with the
understanding that the Jones Act is the law of the land. So it
is absolutely critical that any attempts to undermine the law
are not entertained, which includes unnecessary waivers.
Before closing, I do want to mention another challenge. The
shipbuilding industry, like so many other manufacturing
sectors, faces an aging workforce. Attracting a younger
generation towards a career path inside the shipyard industry
must begin in our high schools, trade schools, and community
colleges. SCA has recently set up a workforce development
committee to begin to address this issue. We look forward to
discussing the workforce development in any future national
maritime strategy.
Today the state of commercial shipbuilding is strong
relative to past decades. However, SCA is looking ahead for new
market opportunities, those opportunities such as the ones I
know you guys are working on in H.R. 5270.
SCA sincerely appreciates this committee's support of the
Jones Act and efforts to grow the industry. SCA also
appreciates this committee's efforts to raise the visibility of
the domestic maritime industry as a whole by advancing the
conversation for a national maritime policy. We look forward to
continuing to work with you in these discussions.
Thank you very much. And I look forward to any questions
you might have.
Mr. Hunter. OK. Thank you.
Thank you all again for being here.
I guess the first thing I would say is you can look around
you, at least on the Republican side, and you can see the
impact that this subcommittee--or that these issues have in
Congress.
If you go to a Subcommittee on Aviation hearing, a
Subcommittee on Highways and Transit hearing, or a Subcommittee
on Railroads, Pipelines, and Hazardous Materials hearing, you
have a lot more people there. You have a lot more Members up
here listening. I would say, number one, that is on the ranking
member and I, but it is also on you. And I think this is a
great starting point for that.
I would ask, too, that--after this, that the type of
coalition that you have--that you are right now in the position
paper that you come up with, that it doesn't kind of disband
and go off with the wind. I think you need to stay more engaged
and get more engaged so that you have Members sitting up here
listening and caring about what your issues are.
Because right now those other three subcommittees that I
mentioned, they just dwarf you. Even though, in terms of
economic output and in terms of districts that you touch and
people that you employ and the actual industrial strength that
you guys bring, it is not reflected, I don't think, by Members
showing up here and listening to what you have to say.
So I would encourage more of this. And we will work
together, John and I will, with you to make sure that, when you
come up here in 6 months, you have some more interested Members
of Congress listening and learning. Because right now that is
just not reflected.
Number one, I guess the first question, Mr. Tabbutt--in
fact, I will ask all of you.
My first question is: Can you talk about the Ex-Im Bank,
the Export-Import Bank, and what it does for you, if anything.
I am just curious. That is to anybody that wants to answer
that.
Mr. Johnsen. The Export-Import Bank is very important to
international trading, U.S.-flag vessels, because it provides
the cargo base that is required by Ex-Im Bank regulation.
So if the Ex-Im Bank goes away, that will be a further
degradation of the cargo base that I referred to in my remarks
that is so critical and you will see--unfortunately, you will
see vessels moving out of U.S. flag if that happens.
I can't tell you how many it would be at this point because
it depends on the cargo base, ultimately, but it is an
extremely critical issue to the U.S.-flag merchant marine.
Captain Marcus. Yes, Mr. Chairman. I would just like to
follow up on Mr. Johnsen and reiterate that the Ex-Im Bank is
important. Some 50 percent of the Ex-Im Bank exports go aboard
U.S.-flag vessels, project cargo being a big component of that.
Our particular organization, Masters, Mates and Pilots, has
at least two ships running right now that are dependent on
project cargo, one of which is with Waterman/Central Gulf.
So we feel very strongly that destruction of this program
as far as U.S. shipping would be negative and, of course, it
would be a negative for the U.S. economy and jobs, generally.
Jobs are the concern of labor, and these are an important
source of jobs for us.
Thank you.
Mr. Hunter. Thank you.
Next question. I am just watching Congressman Ed Royce, who
is chairman of the Foreign Affairs Committee. He has got his
eye out on cargo preference. I think it was his--he had a bill
on the floor that tried to cut cargo preference even more.
And last year--I think it was the Under Secretary of
Defense, Frank Kendall, wrote a letter in response to
Congressman Royce's question about cargo preference, and
Kendall's response, the U.S. Department of Defense's response,
was, ``You can lower cargo preference and it will not have an
impact in any way on the military's capability to move goods
and services.''
Have you seen that--the response?
Captain Marcus. Yes, sir. I remember reading that with
dismay, quite frankly. Because if you take away cargo, people
don't operate ships. And this is an important stream of cargo,
and to say that this is not an important source of cargo is
ridiculous.
Plus, the ships need to run to keep men and women employed
in the industry. If you start reducing cargo, you could, of
course, put ships in reserve status. You could have a bunch of
gray hulls sitting around, but you won't have the manpower to
operate the ships.
So to say that this would not affect or impact the
Department of Defense, I have to disagree heartily. Manpower is
critical and, if you don't have trained crew, you won't have
ships operating under U.S. flag when you need them.
Thank you.
Mr. Hunter. Captain, let me ask you one more question,
then.
Have you and the Department of Defense come together on a
number of merchant mariners that are in the pool--in the work
pool, basically?
Captain Marcus. Well, we have had----
Mr. Hunter. Do you agree on that?
Captain Marcus. We have had discussions and sent numbers to
USTRANSCOM and MarAd regarding how many deep-sea mariners there
are in the industry. So, yes, we have an understanding of the
approximate number that are available. And USTRANSCOM, of
course, in terms of number of ships, has been very outspoken on
the need for the 60-ship maritime security fleet.
Mr. Hunter. Thank you.
Mr. Tabbutt, one last question here. We hear about Jones
Act waivers all the time and whether or not the waivers are
actually--whether they are needed, whether there aren't
American ships--American-flag vessels available.
We have heard that sometimes there are--and we actually
know this to be the case sometimes--and still U.S. Government
agencies go with foreign flag.
So, in your opinion, why is this happening? And do you
think that there is an organized effort to basically water down
the Jones Act simply by waiving it all the time?
Mr. Tabbutt. First of all, the American Maritime
Partnership works with anybody requesting a waiver of the Jones
Act and, when there is no capacity, it does not exist, the
American Maritime Partnership position is it will not object to
a waiver.
The--today the biggest voice that you have just expressed
is on the--on domestic movement of crude and the--and the
shipyards are building at record pace the number of tankers.
The industry is responding, and there is a backlog of
orders to get--to meet the demand that has come up. And if--if
there is a demand for a vessel that--in the Jones Act that
doesn't exist, there are dozens and dozens of companies that
stand ready to make that investment. And we have ourselves.
Mr. Hunter. OK. So who do you think is motivating the
effort to get more Jones Act waivers? And do you think that
that exists?
And anybody else, feel free to answer.
Mr. Tabbutt. It seems that--it seems to go from time to
time to different very targeted, very specific tonnage, and I
don't--I don't think it is an organized effort between all
those. I think they are disconnected.
Mr. Hunter. Sir.
Captain Marcus. Yes, sir. I would like to say that there
are some instances when waivers are appropriate. For example,
if there are U.S.-built ships that were built for international
trade in years gone by, there is no reason why those ships
couldn't be brought back in to serve sectors of the industry
that are not currently served.
For example, there were three LNG ships several years ago
that were U.S.-built, built in Quincy, Massachusetts. A waiver
was approved in Congress for those ships to come back into the
domestic Jones Act LNG trade if there is a shipper that needs
those vessels. Similarly, there are a couple small pocket
drugstore chemical tankers available that waiver is being
sought.
So, in some cases, the waivers make sense. In other cases,
for example, the strategic oil movement of a couple of years
ago, it made no sense. So I think it is a case-by-case
situation.
Thank you.
Mr. Hunter. Thank you.
Mr. Garamendi.
Mr. Garamendi. Mr. Chairman, thank you very much for your
leadership in promoting the maritime industry. It is
exceedingly important.
I want to go to a series of questions dealing with the
export of LNG. But before I do those questions, I want to enter
into the record a series of news articles that have recently
come to light.
This one is August 5th, ``China Pushes to Build Its Own
Ships to Deliver Gas.'' This one, August 18th, ``South Korea to
Support Shipbuilding Industry.''
And this one, a July 30th article, GAIL, which is the
national--which is the Indian Government's gas utility program,
they want to build nine ships to ferry liquefied natural gas
from U.S. producers to India, and they are going to require
that three of those nine ships be built in India.
And, also, a memo from my staff entitled ``The global LNG
fleet needs to grow by 225 vessels by the end of 2020. How are
foreign governments supporting their shipbuilding industries?''
and another article on the modernization of the--``China to
Modernize Shipping Industry,'' basically the support that the
Chinese Government is giving to the shipbuilding industry; and
a series of maps on the LNG facilities that have been suggested
for the United States.
So, with your permission, Mr. Chairman, I would like to
enter those into the record.
Mr. Hunter. Without objection.
[The information appears on pages 72-79.]
Mr. Garamendi. And now a series of questions.
As I mentioned at the close of my opening statement, Mr.
Hunter, you and I have introduced legislation, H.R. 5270, the
Growing American Shipping Act, to promote the use of American-
flag vessels for the looming export of liquefied natural gas.
So the questions I have to solicit the view of our
witnesses, first and foremost, for the record, do each of your
organizations--you and your organizations support the bill as
introduced?
And then at the same time you might answer. Are there any
changes that you recommend to the bill to improve it? And are
there amendments that you would like to see in the legislation?
Let's start from Mr. Paxton, and then we will go down the
aisle.
Mr. Paxton. Congressman Garamendi, yes. The Shipbuilders
Council of America does support the Growing American Shipping
Act. Sorry. We do support that.
I probably wouldn't suggest at this point we have
amendments that we would offer to you. We understand how
technical this legislation can be, especially when you start
requiring shipbuilding construction as element, which this
legislation does not do.
So we would just want to work with you on continuing to see
how this evolves. We obviously support our--our--the maritime
industry international trades. We want to see that grow.
Mr. Garamendi. Very good.
Captain.
Captain Marcus. Thank you, Mr. Garamendi and Mr. Chairman,
for bringing forward this legislation.
Of course, we fully support it. We think that it could be
more expansive. We would love to see an encouragement of, for
example, bilateral trade agreements.
We would love to see the provision of reflagging foreign-
flag LNG carriers into the U.S. flag be eased so, if they meet
international standards, they could export American cargoes.
We have numerous things in mind. But, in my mind, when you
look at the vast fortunes being made in this industry, there is
no reason why some sort of bilateral trade agreement couldn't
be part of any kind of export strategy.
Thank you.
Mr. Garamendi. Mr. Johnsen.
Mr. Johnsen. USA Maritime is still reviewing the bill. But
speaking on behalf of our companies, we always support anything
that increases the utilization of U.S.-flag vessels.
Mr. Garamendi. Thank you.
Mr. Tabbutt.
Mr. Tabbutt. Thank you.
We are also very supportive of all efforts to promote our
industry. And specifically to our narrow focus of the domestic
operation, we would be very interested in building Jones Act
LNG tankers and have had discussions with both Puerto Rico and
Hawaii in that effort.
Mr. Garamendi. Thank you.
The next question is--the emergence of the LNG export
market is an economic phenomena that virtually no one
anticipated as recently as 3 to 4 years ago.
The bill, 5270, intends to utilize the emerging trade to
revitalize the U.S.-flag fleet because analysis of the global
LNG market indicate favorable conditions for the development of
a long-term sustainable LNG export trade and trade that could
sustain a resurgence of the U.S.-flag fleet.
In general--my question: In general, does each of you agree
that--with the analysis projections finding that a U.S. LNG
export trade will be sustainable and a viable export market
that could provide a future new trade for the U.S. foreign
trade fleet?
And, secondly, what initiatives has the maritime community
made to reach out to the LNG energy industry to identify
opportunities to take advantage of this emerging LNG export
market to the benefit of the maritime operators?
I think you have answered this, in part, Mr. Tabbutt. If
you would like to expand and just take it from there.
Mr. Tabbutt. It makes sense for any place that is off the
grid to participate in the LNG to go from heavy oil to burning
LNG, and we stand ready. And if we find the right customer,
then that--we will build and be part of that.
And we are working very closely with industry and supply of
our vessels for liquid natural gas both in the Pacific
Northwest for the Alaska operation and the supply down in
Florida for our Puerto Rican operation.
Mr. Garamendi. Thank you.
Any comments from the flag ship--Captain?
Captain Marcus. Yes, Mr. Garamendi. With Masters, Mates and
Pilots and I think every other union in this room, we have all
made various efforts to reach out and place some of our members
aboard LNGs.
I know there are a handful of American officers working
aboard foreign-flag LNGs, and certainly it is the interest of
the U.S. Merchant marine to build a pool of American mariners
working on U.S.-flag vessels. We believe that it is
sustainable.
In the case of Masters, Mates and Pilots, we have worked
closely with the marine engineers on some projects, and we know
the other unions have as well. So we are enthusiastic about it.
We see a future for it. And we hope to continue to get the
support of this subcommittee.
Thank you.
Mr. Garamendi. Mr. Paxton.
Mr. Paxton. Yes, sir. The SCA participated in the American
Gas Association Policy Summit where we were really highlighting
the growing use of LNG as a marine fuel. And so we have been
talking to the--to a lot of the industry that is going to be
producing this and the fact that we are--we will be a sector
that will be using it. And that is for domestic use, of course.
But per your legislation, any--any signals of the
Government that Congress can send to industry that they are
serious about this new energy being a national security
imperative, being something that is so crucial to our industry
that they are going to require some level of U.S. manning or
U.S. building, those signals are absolutely wonderful for
purposes of establishing the market and the cargoes. So we
appreciate that.
Mr. Garamendi. Mr. Chairman, I am significantly over my
time. I have two other questions, one of which I will just ask
for the record and written response from the witnesses.
But one, I would, with your acquiescence, put before the
witnesses.
Mr. Hunter. Sure.
Mr. Garamendi. Thank you.
Mr. Hunter. We will probably have time, if you want, to go
to Ms. Hahn and then back to you again.
Mr. Garamendi. Let's do that.
Mr. Hunter. OK. Ms. Hahn, you are recognized.
Ms. Hahn. Thank you, Mr. Chairman, Ranking Member
Garamendi.
I have really enjoyed listening to all of our witnesses
this morning sharing their expertise as it relates to our
merchant marines. I am a big supporter of our merchant
mariners.
Every May 22nd, National Maritime Day, if I am not here, I
am attending the memorial service in San Pedro, where we are
one of the few communities that has a merchant marine veterans
memorial right along Harbor Boulevard. So I am a big supporter.
Unfortunately, it's still true that our merchant mariners
who served this country in World War II were not considered
veterans and, therefore, have never received veteran benefits.
Last year I introduced H.R. 1936, the Honoring Our World
War II Merchant Mariners Act of 2013. This bill, which has been
introduced a couple of times, would provide a modest $1,000
monthly benefit to the nearly 10,000 surviving World War II
mariners.
I know that this bill is not in the jurisdiction of this
committee, but the Committee on Veterans' Affairs is currently
not considering it. And I would like to see our subcommittee
encourage them to take this bill up. We don't have much time
left in Congress, and we don't have much time left with our
merchant mariners. Many of them are in their 80s. We are losing
them every single day.
I think it would be fitting and proper and an honor for
this country to finally honor the World War II merchant
mariners. More merchant mariners were lost in World War II than
any other branch of the military.
So I think it is time at that we honor them. I think it is
a meager amount, and I would hope this Congress or maybe next
Congress would finally honor them. So I appreciate this
hearing.
I think, just listening to you, we have already, I think,
realized more and more how important our merchant mariners are
to this country and what they mean to the fabric of industry
and commerce as well as internationally through the help that
we give through Food for Peace.
Mr. Paxton, I appreciate you bringing up General Dynamics.
I was able to tour General Dynamics in San Diego, and I learned
a lot about the shipbuilding industry in southern California.
And much more needs to be done, I think, in this industry.
And you are absolutely right. Shipbuilding, that is a great
career. I mean, those are great skills; ironworkers and
electricians have great skills. These are skills to pay bills
that a lot of our young people could really benefit from. And I
would love to see this start in our high schools and our
community colleges. These are the kind of vocational classes
that are so important. What a great career, to be building
ships in this country.
Captain Marcus, you talked, as well as Mr. Johnsen, about
Food for Peace, and I would like to focus on that a little bit.
This great program, since 1954, has played such a critical
role in times of crisis by providing emergency food assistance
as well as money. It is critical to supporting employment among
our U.S. farmers and our merchant mariners.
After the typhoon in the Philippines in 2013, Food for
Peace was right there. It was able to provide $20 million in
food aid, such as rice, emergency food bars to the devastated
region, and helped to connect both our U.N. and private aid to
the devastated islands.
I worked hard to support this program. I wrote a letter to
the House appropriators, requesting that they fully fund Food
for Peace by adding $800 million to the program.
In addition, last year, I worked really hard on the House
floor to defeat an amendment that was on the floor that would
reduce its funding. Unfortunately, this year the President
proposed reducing the budget for Food for Peace by cutting 26
percent from the 2015 budget.
Can you talk again to us on what you think the impact of
reducing funding for this program or changing how it operates
would be on your industry. How would such a cut affect the
amount of food that would be able to be transported in times of
emergency?
Mr. Johnsen. Just a brief comment first. The action that
was taken in reducing the percentage participation that I
mentioned in my remarks has already resulted in a cargo loss
that exceeds the 25-percent reduction, and it just shows you,
if that continues to happen, the cargo base will go away for a
very important constituency of the U.S.-flag fleet. So it has
to be maintained. Otherwise, we lose more vessels and, as
Captain Marcus was talking about, we lose--we lose jobs for--
for the mariners.
Captain Marcus. Yes, Ms. Hahn. I would just reiterate that,
in order for companies like Waterman/Central Gulf and the major
carriers--the American carriers to have faith in maintaining
their ships in U.S. flag, they need to have a reliable stream
of cargo, and this provides a reliable stream of cargo and--not
only on bulk carriers, but also aboard containerized vessels.
And it is critical that, in times when we have a drawdown
such as now where the military cargo is less because of the
withdrawals in Afghanistan and Iraq, we have got a reliable
stream of cargo to help keep our ships afloat.
If they are not carrying cargo, they are not making money
and the carriers will lay up ships or they will reflag ships to
foreign flag. It is as simple as that.
So thank you.
Ms. Hahn. Thank you.
I know my time is up, but I want to point out that there is
a thought process out there that asserts we would do better to
give our money, our foreign aid, directly to the country and
help support their agriculture and their farmers.
And, yet, when you look at the Philippines typhoon, the
place was destroyed and it wouldn't have made any sense to try
to give money to use their own agriculture and their farms. The
place was destroyed. And if it had not been for Food for Peace
bringing that emergency money and agriculture in, many more
lives would have been lost.
Captain Marcus. If I might just add one thing, I mean, on
that particular point, in our belief, there has been a lot of
cynicism and mistruth spread around.
There was something put out by USAID that the cost
differential was some $78 million when, in fact, it is closer
to about $7 million, and the differential--in our view, this--
this debate has taken on a life of its own and there is more
mistruth than fact in it.
But the baseline is, it seems, if you want a constituency
that supports foreign aid, you need to have some kind of
secondary benefit for American workers and American agriculture
and you need a transparent system where the food is actually
delivered.
Having been aboard a ship that delivered 25,000 tons of
grain to India, you physically see it there. You see bags with
the U.S. flag on it, you see the handshake cargo, and you know
it is there. It is not just some invisible cash that has
changed hands.
And, of course, it is somewhat absurd to think that you
would be buying local produce. If that was the case, people
wouldn't be starving in the first place. So there seems to be
kind of a logical and a factual disconnect in this whole
argument.
Thank you.
Ms. Hahn. Thank you very much.
Mr. Chairman, I yield back.
Mr. Hunter. I thank the gentlelady.
A quick question about Coast Guard.
Mr. Johnsen, you talked--you mentioned a few times that the
Coast Guard is increasing your cost, as an operator, through
different rules and regulations and that MSP vessels have
different standards--the Coast Guard has different standards
for MSP vessels than they have for similarly--for similar
foreign-flag vessels.
Could you just give us some examples--some specific
examples?
Mr. Johnsen. When we first started reflagging some vessels
from international flag to U.S. flag back in the mid-1980s, the
Coast Guard had a series of regulations in place that required
us to replace equipment on board those vessels, which were
perfectly suitable for their purposes, which were approved by
the Safety of Life at Sea, SOLAS, regulations, and it was--in
my mind, it was a ridiculous waste of money.
And I remember on those first reflags we spent millions of
dollars to reflag the vessels. We subsequently continued an
initiative to talk to the Coast Guard and see if there was some
way to resolve this disconnect between what the Coast Guard
wanted and what was internationally acceptable.
And we came up with a program, working together with the
Coast Guard, which we called a gap analysis, and we analyzed,
for example, the piping systems. We analyzed the life rafts
that were on board, and the different components of the vessel.
And I hasten to say that--and our friends in labor know
this--our culture is all about safety. So we never do anything
that would jeopardize the safety of the mariners on our
vessels. So we have been very, very studious about that in
working with the Coast Guard.
Going through this process eventually produced a situation
where we could bring a ship under U.S. flag, do some
modifications to the ship, approximately $400,000 or $500,000,
rather than millions of dollars, to complete a reflag. And that
was simply because we weren't throwing away perfectly good
equipment.
What we are concerned about with this new NVIC is that it
is regressing back, and our sense is, as we review it--and
there is a lot of technicalities in it relating to the life
rafts, relating to the firefighting systems, relating to the
controls between the bridge and the engine room, that are
perfectly OK, but we need to get back to this cooperative
attitude of doing a gap analysis.
So I hope that the Coast Guard is going to come around and
understand that that is what ought to be done because all they
are doing is layering on expense--hundreds of thousands of
dollars of expense that is totally unnecessary.
Mr. Hunter. Thank you.
Does anybody else have any specific examples?
Captain Marcus. Well, this is less a specific example than
just sort of an observation.
Having a delegation from labor that participates in IMO
proceedings and knowing full well that the U.S. Coast Guard has
full voice with the U.S. delegation at all of these IMO
Maritime Safety Committee meetings and setting the standards--
the international standards, the whole purpose of these
international conventions is to have some kind of uniformity
and to be part of the rulemaking process internationally.
And then to come back when we had the understanding that
the international requirements would be what is necessary to
reflag a vessel and then those international agreements and
impose your own agreements that do not enhance safety, but
increase cost, in our view, it just doesn't make sense.
Thank you.
Mr. Hunter. Thank you.
Mr. Garamendi is recognized again.
Mr. Garamendi. Thank you very much, Mr. Chairman.
Let me find my place here. I was anxiously listening to
what was being said about the Coast Guard and the rulemaking
and the like.
The next questions really deal with the capacity of the
American shipbuilding industry to produce LNG tankers. We have
heard that a lot of things are going on. There is a resurgence
in--there is a boom in the industry. State-of-the-art vessels
are being made.
I know, Mr. Tabbutt, you and I were talking about the
vessels that you currently are having made in San Diego at the
NASSCO yard.
So this question arises, ``Well, we can't build them
here.'' I would just note one of the things I put in the
record, but didn't mention, is that India requires that the LNG
ships be built and available within 2.5 years; however, 6 years
for the ships built in India. So there is a waiver.
My question really goes to this issue of the ability of the
American shipyards to build LNG tankers. So for the record,
does the U.S. shipbuilding industry retain the technology and
industrial capacity to build LNG tankers should the U.S. LNG
export trade take off and we require that at least some, if not
all, of those tankers be American-built and American-flagged?
Mr. Paxton, if you would like to get at this, and then we
will go down the line.
Mr. Paxton. Thank you, Congressman Garamendi.
The answer is yes. The U.S. shipyard industry built LNG
carriers for a long time. Unfortunately, we stopped building
those carriers in the 1980s. So the answer is yes. If this
market was there, we would be building for it.
I am sure Mark will have some comments about the domestic
moves of LNG if we moved it around the United States. We can do
that, too. That is a different size of an LNG carrier. If we
are talking international trade, that is a larger LNG vessel.
But the fact of the matter is we built them.
The other fact is we have three of them that just got
waived back in--or would be waived back into the Jones Act if
there was actually the infrastructure there to start moving LNG
around domestically. We can do that, too. We built those ships
also in the 1980s. So the answer is yes.
As you know--because we have had many meetings on this--if
we had that market right now, it would probably be a 5-year
process to get that LNG carrier built and ready to go. I have
been told that by our shipyards to that effect. But we do have
the capability and we have the capacity. Our shipyards are
seeing red.
And the other example of that is, when this new market came
up to move petroleum and crude around domestically, we are
building for that market and we are answering that demand. So
our shipyards stand by to do that, sir.
And, also, a last point on this, our shipyards also work
with international partners, NASSCO with Daewoo. We don't stand
idly by just looking inward. We look outward. We want to see
what best practices are, benchmark ourselves against those, and
build as competitively as we can.
So I think some aspect of this would probably look at,
``Hey, what are the best things internationally that are being
done? And can we partner with those guys and get it done
right?''
Mr. Garamendi. Thank you.
Mr. Tabbutt, I know that you and I discussed this, if you
would like to comment.
Mr. Tabbutt. Sure.
Through NASSCO, General Dynamics, we have actually engaged
in conversations with them about building domestic LNG
carriers. They have supplied us several different models that
would be different capacities that are being made
internationally.
And we would have all the confidence in the world to sign
with them and to build them. We don't see any issue about our
domestic capability--or the yard's domestic capability to build
them.
Mr. Garamendi. Mr. Johnsen, Captain, if you would like to
comment on this or if it is in your territory or out of your
territory. Good.
I think that, as I understand this--this is my comment; the
expert I am not--but, in discussions, is that there is a phase-
in, we can't build these things this year or next year.
But if there is a market out there, that is, if the United
States policy drives towards the development of a market, it
can be done, but it would be phased in over a period of time.
India is giving its shipbuilding industry 6 years to build
the ships. Mr. Paxton, if we gave the American shipbuilding
industry 6 years to build ships for the trade, could we do it?
Mr. Paxton. And just to be clear, we are talking
international trade, not just domestic trade?
Mr. Garamendi. Correct.
Mr. Paxton. And, with that, as we discussed in the past,
any international requirements would have to just make sure we
get by any treaty obligations we have, GATT implications, and
we would be very careful of that because we don't want to take
down the build requirement that is exempt in the--under GATT.
But if that was all done through some type of national
security imperative, my shipbuilders have told me it would be a
5-year process by which they could--from contract to delivery
to do it. But there is many steps in that process to make sure
we do it legally and we do it under our trade obligations, sir.
Mr. Garamendi. A very, very good point.
The final comment that I will make on this is that India is
going to buy American gas, LNG. India is requiring that that
gas be shipped--at least one-third of the ships be Indian-
built.
It seems to me that we could have a trade agreement with
India that would say, ``Terrific. How about the second third
being American ships?'' Now we have an agreement. We are not
violating any trade agreement. We are not writing any law. We
are simply good negotiators. I think we can get at that issue
in this way without the trade laws.
The second point is the Trans-Pacific Partnership trade
agreement is in discussion. We need to be very, very careful
and very watchful that we are not giving away--negotiating away
a strategic American asset, LNG, and the shipbuilding that
could go with that.
I think we have covered my issues, Mr. Chairman. I have two
questions that I would present to the witnesses in writing. And
that will complete my time, with a final comment, since I don't
see another round coming down.
I appreciate the testimony of the witnesses and
particularly the opportunity that presents all of America to
rebuild our manufacturing base one ship at a time or maybe 100
ships at a time.
It is imperative that this sector of the American economy
rally around the potential that exists, maintenance of the
Jones Act, Food for Peace, all of the things that have been
discussed here.
Each one of these are pieces of a large puzzle of economic
development, and we need to be mindful of each piece of that
puzzle as we promote this extraordinary opportunity, in this
case, the Jones Act, but it is also Food for Peace, and it is
the other elements, the military cargo and the like.
One thing I would ask all of the participants--the
witnesses and anybody else that is participating in this
hearing is that we may not know where the next waiver is.
But if we knew where the next waiver of the Jones Act
occurs, we might be able to do something about it. So let us
know if you hear something or are aware of something. Assume
that we don't know.
But I know that the chairman and I are more than willing--
at least I and the chairman, from his past record on this--more
than willing to jump on one of our administrative agencies that
is waivering the Jones Act unnecessarily. So help us understand
that.
Final point. We have a new employment training law in
place. It is a rewrite of the old law and it is done in such a
way as to encourage the Labor Department, Education Department,
and other Federal agencies that are involved in employment
training to work with the industries in developing training
programs.
And so the money flows in a different way rather than to
the--rather than for the benefit of the organizations that are
doing the training, rather to the benefit of the employers that
need trained workers.
And so for this industry, wherever you happen to be, keep
that in mind. And it should help address some of the concerns
that were expressed here in the committee hearing.
Mr. Chairman, thank you very, very much for conducting this
hearing.
Mr. Hunter. I thank the ranking member for his points and
discussion here.
And thanks to all of you, too.
This is a great industry, and I think we are doing God's
work in this committee by, like Mr. Garamendi said,
strengthening our industrial base, our ability to build ships,
our ability to work with steel, and not become one of these
bygone countries that used to rule the oceans 50 years ago and
that can't even build an aircraft carrier anymore. I think we
know what country we are talking about.
Mr. Garamendi. Name names. Go ahead. Name names.
Mr. Hunter. For Great Britain, it is not going to be so
great anymore. It is going to be ``Little Britain'' if the
Scots get their way.
But this is important. This is as important as anything
else that this whole committee does, the Committee on
Transportation and Infrastructure. And we will keep working. We
will keep growing.
And we need to make sure that we have these seats filled
with other Members that need to, at least--at the least, learn
about your industry, about what you do, about what is
important, and how we can make it grow and make you stronger,
not just for yourselves, but for the American people, and our
strength.
Oh. We have--I almost gavelled.
Does this mean I can't go now?
Mr. Cummings. Sorry.
Mr. Hunter. The gentleman is recognized.
Mr. Cummings. Thank you very much, Mr. Chairman. I
apologize. I was in a full committee hearing.
Mr. Johnsen, you wrote in your testimony that, ``In order
to achieve a robust U.S.-flagged merchant marine sufficient in
size and capabilities to support our national and economic
security, the Federal Government must act quickly and
decisively to preserve the long-term health and viability of
this industry. Absent aggressive action to develop and
implement a comprehensive national maritime strategy, we fear
that the decline of our industry will only accelerate.'' That
was your testimony.
Do you believe that vessels in the U.S. flag--would that
include any vessels participating in the MSP program?--are
currently poised to leave the flag? And, if so, do you have a
sense of how many that might be?
Mr. Johnsen. My sense is that, if we do not aggressively
pursue a reorganization and a reevaluation of the current MSP
stipend, that we will force vessels to leave.
I cannot put a number on that, but I can assure you that it
will happen, because that, combined with the cargo--military
cargo base dwindling and the pressure that we talked about on
the food aid programs, it is just sucking business away from
U.S.-flag vessels. And vessels need cargoes to pay the bills
and they just won't be able to do it.
Mr. Cummings. Well, what do you believe should be the
essential components of a national maritime strategy?
Mr. Johnsen. I believe the--as I said in my oral testimony,
that the--we talk about it as a three-legged stool. We need the
MSP program, we need a military cargo program, and we need a
food aid program.
And the food aid program--I am lumping together with that
the Ex-Im Bank requirements and the other cargo generation that
the Maritime Administration should be policing and ensuring
compliance.
And that--that is part of their job, and they have got to
continue to be aggressive and require U.S. flag when it is
required by the statutes.
Mr. Cummings. Well, Mr. Johnsen, you also wrote--and I
quote--``It is critically important that the level of support
for MSP vessels be adjusted to achieve commercial viability and
a more level playing field for MSP vessels when competing
against foreign-flag vessels.''
And, similarly, Mr. Marcus, you wrote, ``Looking forward,
we believe it is critically important that the per vessel
support level authorized for the MSP as part of defense
authorizations legislation enacted in 2012 be reviewed and
adjusted as appropriate.''
Let me ask both of you: What level of support do you think
needs to be provided through MSP to ensure that vessels
participating in the program remain commercially viable?
Captain Marcus. Thank you, Congressman Cummings.
First--on your first question, I would just like to add
that we were just informed about 2 weeks ago by one of our
employers that one ship will be leaving the MSP program. So we
have been formally informed that one ship will be going before
the end of the year.
With response to the----
Mr. Cummings. I guess they don't come back.
Captain Marcus. Well, we expect to meet with that company.
But as far as we have been signaled, that--they do not intend
to take this particular slot back. At least that is what they
have told us at this point.
Mr. Cummings. All right. Go ahead.
Captain Marcus. But we believe that, because of the level
of support and the cost disadvantage that we have relative to
foreign-flag and flag-of-convenience vessels, that the
authorization level called for in 2012, as soon as it is
politically practical, that there be some kind of an escalation
so that, as time goes on, there will be appropriate escalation
just to keep in tune with the usual inflationary escalation of
costs.
So we don't have a particular number, but we believe that,
at some point, that the total number needs to be addressed if
we are going to be competitive.
Thank you, sir.
Mr. Cummings. Mr. Johnsen, you have 12--9 seconds.
Mr. Johnsen. The stipend needs to be increased. There have
been a number of independent studies done to try to determine
the differential between international-flag cost and U.S.-flag
cost.
According to the Maritime Administration and these studies,
that differential, that delta, is something between $5 million
and $7 million. That has to be kept in mind when the MSP
stipend is being looked at.
It is important that there be a coordinated approach to the
stipend, including discussions--ongoing discussions that we
have with USTRANSCOM and the Department of Defense and the
Maritime Administration. But there does need to be an increase
to some degree.
Mr. Cummings. Thank you, Mr. Chairman.
Mr. Hunter. I thank the gentleman.
And, with that, I thank the witnesses for their testimony
and Members for their participation.
The subcommittee stands adjourned.
[Whereupon, at 10:56 a.m., the subcommittee was adjourned.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]