[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
               CREATING JOBS AND INCREASING U.S. EXPORTS 
                            BY ENHANCING THE 
                      MARINE TRANSPORTATION SYSTEM 

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

                                (112-36)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 14, 2011

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


         Available online at: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=house&committee=transportation

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey        Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire       RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
Tennessee

                                  (ii)

  


        Subcommittee on Coast Guard and Maritime Transportation

                FRANK A. LoBIONDO, New Jersey, Chairman

DON YOUNG, Alaska                    RICK LARSEN, Washington
HOWARD COBLE, North Carolina         ELIJAH E. CUMMINGS, Maryland
ANDY HARRIS, Maryland                CORRINE BROWN, Florida
FRANK C. GUINTA, New Hampshire       TIMOTHY H. BISHOP, New York
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              MICHAEL H. MICHAUD, Maine
JEFFREY M. LANDRY, Louisiana,        NICK J. RAHALL II, West Virginia
  Vice Chair                           (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)

                                 (iii)






















                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Cox, Joseph J., President and CEO, Chamber of Shipping of America     4
Matsuda, Hon. David T., Administrator, Maritime Administration...     4
Mohr, John M., Executive Director, Port of Everett, Washington...     4
Roberts, Michael G., Senior Vice President and General Counsel, 
  Crowley Maritime Corporation, on behalf of American Maritime 
  Partnership....................................................     4
Tellez, Augustin, Executive Vice President, Seafarers 
  International Union............................................     4

           PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS

Hirono, Hon. Mazie K., of Hawaii.................................    28

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Cox, Joseph J....................................................    30
Matsuda, Hon. David T............................................    35
Mohr, John M.....................................................    42
Roberts, Michael G...............................................    53
Tellez, Augustin.................................................    61

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                      CREATING JOBS AND INCREASING
                     U.S. EXPORTS BY ENHANCING THE
                      MARINE TRANSPORTATION SYSTEM

                              ----------                              


                         TUESDAY, JUNE 14, 2011

                  House of Representatives,
                    Subcommittee on Coast Guard and
                           Maritime Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, Hon. Frank LoBiondo 
(chairman of the subcommittee) presiding.
    Mr. LoBiondo. The subcommittee will come to order.
    The Subcommittee is meeting today to review the current 
condition of the Maritime Transportation System, as well as to 
examine ways to improve the system to create jobs to improve 
the flow of commerce and increase U.S. exports.
    Last month, the subcommittee met to examine the Coast 
Guard's rulemaking process in an attempt to reduce burdensome 
regulations that stifle commerce and job creation. Today's 
hearing is a logical extension of that effort, as we will step 
back and examine the system as a whole for similar 
efficiencies.
    The MTS is a vast resource that facilitates our robust 
maritime commerce. It consists of waterways, ports and 
intermodal landside connections that allow for movement of 
passengers and cargo on the water. The MTS includes nearly 
360,000 miles of navigable channels, railways, and highways, as 
well as 238 locks and 3,700 marine terminals.
    The commerce which moves on the MTS fuels the economy. 
Approximately 99 percent of the volume of overseas trades 
enters or leaves the United States by water. The movement of 
cargo and associated activities on the Marine Transportation 
System adds more than $649 billion annually to the U.S. gross 
domestic product, sustains more than 13 million jobs, and 
contributes over $212 billion in annual Federal, State, and 
local taxes.
    Domestic shipping alone is responsible for over half a 
million American jobs and a $100 billion in annual economic 
output. As such, ongoing maintenance and improvement of the MTS 
is essential to any effort to create jobs and expand exports.
    In July of 2008, the Cabinet level Committee on the Marine 
Transportation System released its ``National Strategy for the 
Maritime Transportation System: A Framework for Action,'' which 
identifies current challenges to marine transportation and 
several actions to address these challenges. I look forward to 
hearing about the progress on those actions.
    Similarly, I hope that our witnesses will touch on ways to 
revitalize our marine highways. These rivers, canals and 
coastal routes are the most economical, environmentally 
sustainable, and safest mode of commercial freight 
transportation. I look forward to hearing about efforts to 
support and enhance the marine highways programs.
    As our economy struggles to recover, every agency in the 
Federal Government must seek ways to promote growth. That means 
exploring ways to create jobs, increase exports, and save 
taxpayers money. A robust Marine Transportation System can 
potentially accomplish all three.
    However, as we focus our efforts on ways to maximize the 
system's potential, it is imperative that the policies we 
develop promote the transportation of goods on American ships, 
built in American shipyards, and operated by American mariners.
    I want to thank the witnesses for being here today. I look 
forward to hearing their testimony.
    And now I would like to yield to Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Thank you for holding this morning's hearing on how the 
Maritime Transportation System, our Nation's network of ports, 
marine terminals, navigable waterways, vessels, and intermodal 
rail and highway connections, can do more to create jobs, boost 
exports, and stimulate economic growth.
    For the maritime industries and workers in my district, few 
issues are as important so I am particularly pleased to welcome 
John Mohr here today, the executive director from the Port of 
Everett, my home town, to this morning's hearing.
    It is one of the goals of my office to implement a forward-
thinking plan for long-term economic growth, Mr. Chairman, that 
works for all of us through the investment and the skills and 
knowledge of our people, support for innovation and 
infrastructure, all in order to maintain our economic 
leadership in the world.
    Last week at home, I spoke at a rail summit held by one of 
our county executives. The summit made it clear that rail and 
freight infrastructure is critical to our long-term economic 
growth. My office has established an export assistance program 
that connects local small manufacturers with people and 
resources they need to export their goods and create jobs.
    In order to remain competitive in a global economy, 
improving domestic infrastructure as well is a sound strategy 
to promote growth and efficiency, support increased 
manufacturing, feed the American market and serve as an export 
platform for manufactured goods around the world. Our economic 
prosperity is closely tied to and heavily dependent upon 
international trade. Since approximately 99 percent by volume 
of this overseas trade is moved by water, it underscores how 
pivotal the Maritime Transportation System is to our goal of 
supply chains and consequently to our economic and national 
security.
    You have noted the numbers with regard to waterborne cargo, 
Mr. Chairman, that contributes $649 billion annually to the 
U.S. gross domestic product and more than 13 million jobs. An 
announcement last week from the Commerce Department reaffirmed 
these numbers. New trade figures for U.S. exports of goods and 
services for April revealed a 1.3-percent increase from March 
to a record $175.6 billion, still with a trade deficit but 
causing the trade deficit to decline by 6.7 percent from the 
preceding month.
    However, because of much of the system's infrastructure is 
aging and constrained by capacity limitations, this projection 
raises the fundamental question: Will the MTS be able to meet 
these new demands and continue to provide a seamless, 
integrated multimodal transportation system.
    In response to the 2004 Ocean Action Plan, the Committee on 
the Marine Transportation System did release in 2008 a national 
strategy that offered 34 recommendations to maintain and 
enhance the MTS, especially the system's capacity, safety and 
security, environmental stewardship, resilience and 
reliability, and long-term financing.
    In general, progress towards fulfilling the national 
strategy is incomplete at best. Certainly efforts by this 
Administration to establish a pilot program for marine highways 
and to designate the marine highway corridors and grants 
awarded under the Recovery Act to fund MTS infrastructure 
investments have been positive steps, but they don't seem to be 
enough and much more needs to be done.
    Unfortunately, the prospects don't seem to be very good 
under present Federal budget constraints for finding new 
resources to maintain necessary infrastructure investments to 
maintain, enhance and expand the system to meet its future 
challenges. Nevertheless, we must find a way forward.
    With this in mind, I look forward to hearing the 
recommendations from our witnesses on how we might creatively 
and constructively address the needs of the Marine 
Transportation System. I will learn how we might leverage 
greater public and private investments to improve the 
efficiency and reliability of the system and how we can utilize 
the system to drive job creation and revitalize our maritime 
industries.
    The overarching reality is that our economic future and the 
Maritime Transportation System are closely intertwined. To 
think that our economy can fully recover and grow if we fail to 
invest in this critical infrastructure is both unrealistic and 
shortsighted. We must summon the world to invest in this system 
or we risk choking off the very conduit that makes our economy 
hum, that drives job creation and that ensures the U.S. market 
remains pre-eminent in global trade. Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you, Mr. Larsen.
    And Rick, thank you for suggesting this hearing.
    Our witnesses today include the Honorable David Matsuda, 
administrator of the Maritime Administration; Mr. Joseph Cox, 
president of the Chamber of Shipping of America; Mr. Michael 
Roberts, testifying on behalf of the American Maritime 
Partnership; Mr. Augustin Tellez, executive vice president of 
the Seafarers International Union; and John Mohr, executive 
director of the Port of Everett in Washington. We thank you all 
for being here.
    Oh, excuse me. Do you have an opening statement?
    Mr. Cravaack. Sorry, Mr. Chairman. That is what I get for 
being late.
    Mr. LoBiondo. That is what you get for being late.
    Mr. Cravaack. Thank you, Mr. Chairman.
    And thank you Mr. Larsen for holding this important hearing 
today.
    I would like to welcome our witnesses as well to our panel.
    I appreciate the opportunity to hear from today's witnesses 
about ways to create jobs through enhancing our Nation's 
Maritime Transportation System.
    As a representative from Duluth, Minnesota, I understand 
the critical importance of the maritime transportation to our 
State and our Great Lakes region. Accordingly, I am very 
interested to hear how our Nation can further utilize maritime 
transportation by removing barriers, like double taxation under 
the Harbor Maintenance Tax.
    As a new Member of the House, I was disturbed to find how 
Congress has failed to use all of the harbor maintenance tax 
revenues for their intended use; namely, the dredging of our 
harbors and our channels. Presently, the harbor maintenance 
trust fund is running a $5 billion surplus. At a time when our 
Nation's vessels are unable to carry full loads because of 
inadequate channel and harbor depths, it is imperative that we 
better utilize the Harbor Maintenance Trust Fund to increase 
transportation productivity.
    Again, I look forward to your testimony. And I thank you 
for being here today.
    And I yield back, sir.
    Mr. LoBiondo. Thank you very much.
    Mr. Matsuda, the floor is yours.

  TESTIMONY OF THE HONORABLE DAVID T. MATSUDA, ADMINISTRATOR, 
  MARITIME ADMINISTRATION; JOSEPH J. COX, PRESIDENT AND CEO, 
CHAMBER OF SHIPPING OF AMERICA; MICHAEL G. ROBERTS, SENIOR VICE 
PRESIDENT AND GENERAL COUNSEL, CROWLEY MARITIME CORPORATION, ON 
   BEHALF OF AMERICAN MARITIME PARTNERSHIP; AUGUSTIN TELLEZ, 
 EXECUTIVE VICE PRESIDENT, SEAFARERS INTERNATIONAL UNION; AND 
 JOHN M. MOHR, EXECUTIVE DIRECTOR, PORT OF EVERETT, WASHINGTON

    Mr. Matsuda. Good morning, Chairman LoBiondo, Ranking 
Member Larsen, members of the subcommittee.
    Thank you for inviting me here to testify on behalf of U.S. 
Transportation Secretary Ray LaHood. Before I begin, I would 
like to pass along my condolences to Congressman Cummings. He 
and his family are certainly within our thoughts and prayers at 
the Maritime Administration.
    With the subcommittee's permission, I would like to submit 
my written testimony for the record and summarize it briefly.
    Now, let me take the opportunity to speak to you about the 
Marine Transportation System and its role in creating jobs and 
increasing exports.
    The Marine Transportation System supports millions of jobs, 
facilitates trade, moves people and goods in a safe, cost-
effective, and efficient manner and allows our Nation to be 
competitive in the global marketplace.
    As the members of the subcommittee know, export markets are 
fundamental to our manufacturing and agricultural industries. 
And as a result of sustained efforts, exports have rebounded to 
near 2008 levels within the first year of President Obama's 
National Export Initiative. With the understanding that the 
export initiative's success is indelibly linked to the 
transportation industry, the Maritime Administration continues 
to execute a number of initiatives and grants to promote the 
continued growth of American exports.
    As one example, I am pleased to report that I recently 
approved the Federal financing of a $290 million export project 
at a shipyard in Panama City, Florida. I recall the 
subcommittee's interest in this project when I was last before 
you. This project will result in 300 new shipbuilding jobs as 
workers construct five new off-shore supply vessels for service 
in Brazilian waters.
    Another way we are supporting export goals is by developing 
America's marine highway. The comprehensive report on marine 
highways sent to this committee in April can now be found on 
the Maritime Administration Web site. As the chairman alluded 
to, this DOT initiative promotes the use of waterways to move 
freight, providing shippers with a transportation alternative 
that reduces oil consumption and greenhouse gas emissions and 
reduces the wear and tear on our surface infrastructure.
    The department has also made targeted investments in our 
Nation's port and rail lines for the first time ever through 
the TIGER grant program. Created in the Recovery Act, TIGER 
plays a critical role in creating jobs and supporting the 
National Export Initiative. It has been a tremendous success.
    As I describe the broad reach and range of these and other 
programs described in my written testimony and their role in 
our economic success, please note that these results would not 
have been possible without the partnership of many other 
agencies.
    The Committee on the Marine Transportation System chaired 
by Secretary LaHood brings various agency representatives 
together to facilitate the improvement of the U.S. supply chain 
through policy coordination, and we are working with our 
Federal maritime partners, the Coast Guard, the Army Corps, 
NOAA, a total of 27 agencies, continuing to build on these 
efforts.
    Much is changing in the maritime industry and may increase 
export opportunities. Larger ships, more calls on America's 
ports, and potential shifts in trade lanes due to expansion of 
the Panama Canal, as well as other factors, will all change the 
way in which we ship goods. In May, Agriculture Secretary Tom 
Vilsack reported that farm exports reached an all-time high of 
$75 billion during the first half of fiscal year 2011. In fact, 
every dollar in exports generates $1.31 in economic activity.
    At the same time, we are focused on improving our U.S.-flag 
fleet's international competitiveness. That is why we are 
studying the various impediments to the use of the U.S.-flag 
registry, and we are expecting the study to be completed the 
summer of 2011. We are also focusing on cargo opportunities for 
U.S. carriers both at home and abroad. And by partnering with 
agencies like the Department of Energy, we will continue to 
strengthen these opportunities.
    As I hope you can see, we are fully committed to utilizing 
the Marine Transportation System to increase our exports and 
support our domestic maritime industry. We believe that while 
it is critical to our economy today, it has the potential to 
create even greater economic growth tomorrow.
    At this time, I am pleased to take any questions you have.
    Mr. LoBiondo. Mr. Cox.
    Mr. Cox. Good morning, Chairman LoBiondo and Ranking Member 
Larsen. I appreciate the opportunity to be here.
    With your permission, Chair, I will submit my testimony and 
just make a few comments relative to it here.
    Marine Transportation System, as I look at this, gentlemen, 
I wonder if our Marine Transportation System as we describe it 
shares an equal status with our rail and road brethren, and I 
do think that is an important question that we in this Nation 
are going to have to face if we are going to move cargo and 
people in the future.
    In the past, the Maritime Administration was engaged in 
something called the Marine Transportation System National 
Advisory Council. We participated in that. We did not have a 
high degree of confidence in what came out of that. We would 
hope that the new Committee on Marine Transportation System 
does a better job than we did in the past.
    I am pleased to say that as president of the Chamber of 
Shipping of America, I am also chairman of the Marine Highways 
Cooperative, a public-private partnership among the Government, 
Maritime Administration, that is, and the private sector. And I 
should say that the private sector does fund at this point a 
little bit more than half the money that goes into the 
cooperative. It is a very modest budget, Mr. Chairman, but at 
the same time, we are dedicated to educating our own community 
about the benefits of what we call short sea shipping.
    And as I speak, we are putting on our Web site a calculator 
which shippers, the marine community, those who desire to have 
an investment in the maritime industry, and others can plug in 
the numbers into that system, which would include road and rail 
modes of transport, to see what is the most beneficial choice. 
We think one of the more useful aspects of it is carbon.
    We know carbon currently doesn't have a price tag 
associated with it. I don't want to get started with the 
politics of carbon. But at the same time, I think the public is 
becoming aware of the issue and so carbon is going to be an 
important consideration, we think, among the retailers of 
America. And this tool will enable them to utilize that when 
they make their decisions relative to transportation logistics.
    And Chairman, I am going to talk quickly about the harbor 
maintenance tax. Sir, you are not the Ways and Means Committee, 
I understand that. But the harbor maintenance tax is a major 
psychological impediment, in my opinion, to the furtherance of 
a review of short sea shipping, and there could be arguments as 
to whether it should be or not, but I think those arguments can 
be had behind doors. I think in the eyes of the industry, the 
taxation, if you will, a double taxation on shipping cargo 
through short sea shipping modes is simply something that is 
inappropriate and ditto, Mr. Cravaack. Thank you for your 
earlier comments.
    Sir, I am going to talk quickly about business expectations 
because no one invests in anything in this country without an 
expectation of what they are going to have to face in the 
future relative to their cost structure. And I think that two 
items spring to mind. There may be others.
    But the first one in the maritime industry is ballast water 
and controls. We have a regrettable situation now where we do 
not have that necessary ingredient for us to consider what our 
investments are in shipping because the investment in ballast 
water technology controls is not an inconsequential one. So a 
decision in this area is certainly very important to the 
industry. And we need a uniform national standard.
    Now, I don't know how strict it can or can't be, but it 
should be as strict as technology permits with upgrading 
available as technology becomes more available. I think that we 
owe it to ourselves as a Nation to have a single uniform 
national standard.
    The second area is national ocean policy. There is a 
deliberation among the Administration where they have called 
the agencies together to involve a consideration of national 
ocean policy. This is geospatial planning, marine spacial 
planning. We are very concerned with whether or not that is 
operating to the full effect of what would be to the benefit of 
our sector of the usage of the oceans. And we certainly invite 
any oversight that the legislature might want to engage in with 
respect to the national ocean policy.
    Chairman, I don't make any public comments unless I make 
this comment, and that is about piracy. Piracy is active. It is 
in place. It is a growing phenomenon in the Indian Ocean. Our 
seafarers are exposed. Other seafarers are exposed, and I 
believe, sir, that the U.S. should take and should continue to 
take a leading role in combatting piracy.
    And in conclusion, sir, our thoughts and prayers are also 
with Mr. Cummings and family during these difficult times.
    Thank you.
    Mr. LoBiondo. Thank you.
    Mr. Roberts.
    Mr. Roberts. Good morning, Mr. Chairman, Mr. Larsen, 
members of the subcommittee.
    My name is Mike Roberts. I work for Crowley Maritime. I am 
here today as a representative for the American Maritime 
Partnership, or the AMP. Thank you for holding this hearing and 
inviting us to testify.
    With your permission, I would like to offer brief comments 
and ask my written testimony be included in the record.
    Let me first briefly introduce the American Maritime 
Partnership. We believe it is the largest maritime coalition 
ever formed. It includes companies that build ships in U.S. 
shipyards using union labor and non-union labor. It includes 
companies that operate U.S.-flag ships using union and non-
union labor. It includes virtually all labor unions touching 
the maritime industry, other transportation industry 
stakeholders, defense groups, such as the Navy League of the 
United States. It is a very large and comprehensive 
organization.
    We came together in 1995 around the simple proposition that 
the American domestic maritime industry should stay American; 
that the vessels should be built in the United States; that 
they should be owned, controlled, and crewed by American 
citizens; that those vessels should be fully subject to the 
laws of this country and not the laws of Liberia or the 
Marshall Islands or any other country that may be chosen by the 
ship's owner.
    They always have been true-blue American vessels, and 
nothing we have seen suggests that should change.
    This structure supports half a million American jobs, a 
$100 billion in economic activity, as your opening comments 
noted, and at the same time, provides our military, the 
seafarers, the ships, the shipyards they need to get support to 
our troops around the world.
    Domestic shipping is the mainstay of the American maritime 
industry. This is partly because international shipping is 
overwhelmingly dominated by foreign--low cost--foreign--lowest 
cost foreign ships. While there are always ways to make 
American ships more competitive, the gap between American 
living standards on the one hand and lowest cost foreign 
shipping on the other is too large so that the only realistic 
way American ships with fully American crews can stay involved 
in international trade is through promotional programs like the 
Maritime Security Program.
    Those programs should be expanded, perhaps radically 
expanded, to assure there is a broad enough base of American 
skills and assets in this indispensably important industry. 
Simply put, America needs to have American sailing commercial 
vessels and Naval vessels all over the world.
    And as we draw down our budgets and look for smarter, more 
cost-effective ways to achieve national security goals, the MSP 
and other programs are proven performers that should serve as a 
model for other public-private partnerships.
    Viewed in that context, the very notion that we should 
allow foreign workers to take over our domestic maritime 
industry ought be a nonstarter. And thanks to your leadership 
and the leadership of others on this committee, we have not 
faced the kind of existential threats that initially brought us 
together.
    Your support for the Jones Act is vitally important to 
maintaining a strong domestic maritime industry. It encourages 
private sector investment and keeps jobs in American hands.
    Our industry has faced serious concerns but more of a 
technical nature. It is possible for clever lawyers to define 
the cabotage laws out of existence without many people 
recognizing it. It is possible to create exceptions to the laws 
that are so broad or so frequent or so unjustified that those 
of us who invest in U.S. shipping begin to wonder whether that 
is a very smart business strategy.
    The fact that we genuinely believe in the American maritime 
industry, that we are willing to risk literally billions of 
dollars building ships in American shipyards, providing tens of 
thousands of jobs to American workers in the shipyards and on 
the vessel, that is a good start. But it is vitally important 
that those who make and enforce the rules support those 
decisions.
    Again, we appreciate support from this committee and from 
the Administration in helping making sure that these very real 
threats are properly addressed.
    In terms of what the Government can do to help create jobs 
and grow the American maritime industry, our message is fairly 
simple. Our Government needs to pay more attention to this 
committee and the opportunities that this committee pursues. We 
desperately need to modernize our maritime infrastructure, our 
rivers, and harbors. Money has always been the issue. We can 
provide jobs to Americans instead of handouts. We can transform 
our infrastructure at a fraction of what it would have cost 5 
years ago. We can take the money we are borrowing from our 
children and make an investment that would actually pay 
dividends to our children.
    We know that that is an agenda that you have promoted, and 
we want you to know that we wholeheartedly support you in that 
endeavor.
    And I will end at this point.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you.
    Mr. Tellez.
    Mr. Tellez. Good morning and happy Flag Day, Chairman 
LoBiondo, Mr. Larsen, and the rest of the members of the 
committee. On behalf of the Seafarers International Union of 
North America and our fellow maritime unions, the master mates 
and pilots, marine engineers, and American maritime officers, I 
thank you for conducting this hearing, for the opportunity to 
testify, and for your continued support for the U.S. Merchant 
Marine. On their behalf also, I would like to offer our 
collective condolences to Congressman Cummings and his family 
for his tragic loss.
    As the organizations that represent merchant mariners, we 
have a deep interest in our Nation's economy and national 
security. Our organizations are focused on jobs, increasing the 
size of our U.S.-Flag Merchant Marine and seeking opportunities 
for workers across America to obtain good-paying, secure 
American jobs that keep our economy moving forward. And we will 
do our best to make sure that Mike Roberts is proud to state 
that he is 100 percent union the next time he testifies.
    We strongly support the National Export Initiative and will 
work with Congress and the Administration to ensure its 
success. Doubling exports is an ambitious goal, but we believe 
it is an achievable one. However, in order for us to meet that 
goal, we must ensure that the American maritime industry 
remains strong both at home and abroad. We must ensure that our 
ports and infrastructure can handle the additional capacity 
needed to meet these goals.
    We must defend programs that support the Merchant Marine, 
like the Jones Act, the Maritime Security Program and cargo 
preference. We must innovate and expand our capacity by 
developing our coastwise trade through America's Marine 
Highways Program. We must reform the harbor maintenance tax, 
expand the tonnage tax, and create a national regulatory regime 
for vessel discharge. Only by supporting our existing programs, 
reducing the regulatory burden on the industry, and seeking 
opportunities to expand the industry will we be able to create 
jobs and increase U.S. exports.
    Congress and the Administration must support the Jones Act 
and our cargo preference laws. Both have been under 
considerable attack recently, and losing either one of them 
would destroy the United States Merchant Marine. The Jones Act 
ensures we have the domestic job base in peacetime that we need 
to support our troops in wartime. And our cargo preference laws 
provide the cargo we need to keep our ships moving.
    Put simply, the maritime industry's lifeblood is cargo. It 
is what creates jobs, and it is what will help continue our 
Nation's economic recovery. Though we cannot just simply defend 
the Jones Act and our laws, we must actively work to expand the 
industry. We must redevelop and recreate our coastwise trade 
industry.
    Europe has already discovered that using feeder vessels to 
move cargo between ports is an economical and fast way of 
getting goods and people from place to place. They have done 
it, and their model will work well here in America. It is time 
for America to redevelop our coastwise trade. It will not only 
create thousands of jobs, but by utilizing the latest 
technologies offers an opportunity to provide an effective 
green solution to the dangerous overcrowding of our highways 
and infrastructure and the serious issues this situation 
represents.
    We hope Congress will work with the industry to make the 
Marine Highways Program a reality.
    We also need to defend our cargo preference laws and ensure 
that they are being enforced. The efforts of some to cut PL 480 
Food for Peace Program, if successful, will harm many of our 
ships operators beyond repair. We must not allow that to 
happen, and lax enforcement of the programs in place has 
resulted in many preference cargoes being shipped on foreign 
vessels, which also hurts our operators and our mariners. We 
need strong enforcement of the cargo preference laws.
    In terms of enhancing the Maritime Transportation System, a 
simple means of doing so is regulatory reform, not only to help 
the ship operator but the mariner as well. Today, mariners have 
to jump through dozens of hoops just to enter the industry, and 
that is a deterrent to attracting new mariners. When a mariner 
goes for her physical of drug screening, they need to bring 
roughly a 100 pages worth of supporting documentation for 
review. Hundreds of pages of documentation, and that is before 
they apply for a TWIC, a Merchant Mariner credential and an 
STDW certificate and whatever else may be required for the job. 
We need to seriously consider how to make it easier for 
potential mariners to enter our industry.
    In conclusion, maritime labor believes the best way to 
enhance our Maritime Transportation System and create jobs is 
to protect our existing programs, expand the ones that work 
well, redevelop our coastwise trade, and ensure that our 
existing laws are enforced. Doing so will keep America 
competitive, put mariners to work, and allow us to help us meet 
the goals of the National Export Initiative.
    I thank the committee for allowing me to testify today. And 
I will be happy to answer any questions.
    Thank you, sir.
    Mr. LoBiondo. Mr. Mohr.
    Mr. Mohr. Good morning, Mr. Chairman and distinguished 
members of the subcommittee. My name is John Mohr, I am the 
executive director of the Port of Everett in Washington State. 
I have submitted my written testimony and will briefly 
summarize my remarks.
    It is my pleasure to be here today to discuss how Federal 
policies can help Washington State ports and ports throughout 
our great country create jobs and facilitate increased U.S. 
exports. From our earliest history, the United States has been 
an exporting country, adding strength to our economy. 
Worldwide, countries have learned from our example and have in 
some ways have gone us one better.
    In a country as large as the United States, public ports 
are critical gateways for international trade and drivers of 
economic activity. American seaports are responsible for $3.2 
trillion in annual trade value and support nearly 13.3 million 
family wage jobs. U.S. customs collections from waterborne 
commerce or waterborne cargo imports also provide tens of 
billion of dollars a year to the Federal Government.
    In fiscal 2008, Customs duties from waterborne cargo 
contributed $24.1 billion to the Federal Government. In 
Washington State, one of four jobs is tied to trade, making 
Washington State the most trade-dependent in the United States.
    Everett is home to the Boeing company's largest 
manufacturing facility. The port serves a critical function in 
support of our Nation's manufacturing and construction base, 
especially in the aerospace industry. The Port of Everett 
handles all of the oversize oceangoing parts for Boeing 747, 
767 and 777 airplanes. Given that Boeing is the Nation's number 
one exporter by value, it is not surprising that in 2010 the 
Port of Everett Customs District was attributed with more than 
$9.2 billion in exports, according to the U.S. Customs Report.
    Naturally, we support the National Export Initiative to 
double exports over the next 5 years. However, to accomplish 
this goal, we will need major investments in our freight 
transportation system nationwide. In the U.S., ports have 
tended to be viewed more as a private industry so State and 
Federal governments have limited their participation in 
promoting and investing in port facilities.
    For an alternative example of promoting international trade 
activity, let me focus on the Canadian challenge. In 2006, 
Canada kicked off its Asia Pacific Gateway and Corridor 
Initiative with a commitment to invest nearly $1 billion to 
make British Columbia ports a viable alternative for U.S.-bound 
cargo. Other Western Hemisphere countries, governments are also 
investing in their ports, such as Brazil, Panama, Colombia, and 
Mexico.
    With this background, we believe there are four steps the 
U.S. Government can that would enhance our Maritime 
Transportation System so it can achieve a doubling of U.S. 
exports while increasing our competitiveness with Canadian and 
Mexican ports.
    First, the U.S. Government can help streamline permit 
requirements to expedite the construction of port facilities. 
In Washington State, it can take up to 10 years to build a new 
terminal facility and up to 25 years to deepen a shipping 
channel, depending on State and Federal regulatory requirements 
and related litigation. These delays result in high costs to 
U.S. exporters and cargo opportunities lost to our foreign 
competitors.
    Quite simply, regulatory agencies must look for ways to 
partner with project sponsors to successfully build a terminal 
and deepen channels instead of simply saying ``no.''
    Second, the Federal Government must continue to invest in 
port infrastructure. The TIGER program is the first Federal 
program that I am aware of that allows ports to propose 
waterside projects for funding consideration. The program was 
so popular that U.S. DOT received $1.6 billion of grant 
requests from the ports in the first round. We support the 
effort to support a permanent and adequately funded port 
infrastructure grant program in the upcoming Surface 
Transportation Reauthorization Bill.
    Third, the Federal Government should change the current 
harbor maintenance tax system. The Federal Government should 
ensure equal treatment by taxing all U.S.-bound cargoes with an 
exemption for cargoes arriving by the marine highway but 
including cargoes that arrive by rail.
    We also support the effort to make sure that all funds 
collected through the HMT are spent on harbor maintenance. If 
all of the HMT taxes that were collected each year were 
reinvested in harbor maintenance, an additional half billion 
dollars would have been invested in U.S. port infrastructure in 
2010 alone.
    Finally, the Port of Everett supports a high-speed rail 
corridor modeled after the Canadian Asian-Pacific gateway to 
increase the speed at which U.S. manufacturers and farmers can 
export their products overseas. In 2009, the Great Northern 
Corridor, which serves ports in Washington and Oregon among 
other regions, moved over 124 million tons of freight.
    In conclusion, Mr. Chairman, to double our exports, U.S. 
ports need Federal Government help to increase capacity and to 
keep ports competitive by reducing our permitting burden, 
modifying the harbor maintenance tax to increase revenues and 
to establish a level playing field, and finally, investing in 
port and high-speed rail infrastructure.
    The time for a passive Federal role is behind us. We need 
the Federal Government to make the policy changes necessary to 
ensure that the U.S. Marine Transportation System, including 
rail, road connectors and the marine highway, is efficient, 
effective and competitive.
    Thank you.
    Mr. LoBiondo. Thank you.
    We will go to Mr. Larsen first for questions.
    Mr. Larsen. Thank you, Mr. Chairman.
    And not surprisingly, my first questions are for Mr. Mohr 
from Everett, Port of Everett.
    Could you just again compare maybe briefly historically the 
Canadian Government's model of investment in their port 
infrastructure, rail infrastructure, to how we have done it in 
the U.S. and then where that puts us sort of in relative 
development terms.
    Mr. Mohr. Up until the early 2000s, the Canadian system was 
much like the U.S. In fact, they provided much less support to 
their facilities than we did in the U.S. With the initiation of 
the Pacific Gateway, they made the determination that they 
would bring together all of their faculties to improve their 
marine terminals, improve their rail connections and actually 
make strategic purchases of U.S. Rail to be able to extend 
their cargoes down into the U.S. from Canada.
    As a result, the majority of the containerized cargo growth 
on the West Coast since these improvements began being made in 
Vancouver and in Prince Rupert has been in the Canadian area.
    The recognition that a continuous system of freight 
movement that is modern and efficient can be competitive with 
the U.S. was a real revelation in Canada. It is my 
understanding that there is a similar port being considered in 
the northeast in Nova Scotia that would also then compete with 
our northeast ports to provide higher speed cargo and rail 
access movements into the U.S. and, frankly, out of the U.S. in 
terms of our exports.
    But there is a distinct advantage currently in moving 
cargo. Much of the cargo that comes in through Prince Rupert 
does not pay a harbor maintenance tax, therefore my reference 
to equally taxing all of the rail cargoes that come in. And in 
talking actually with leaders in Mexico, and although they are 
in real disarray right now, there is a similar plan in Mexico 
to bring cargoes in through Mexico and then into the Southwest 
via rail.
    Mr. Larsen. So with regards to financing infrastructure 
investment in ports, what are your alternatives?
    Mr. Mohr. Currently the financing in terms of 
infrastructure of ports, really our only opportunities are 
through private investment, through port-generated investment 
and to eliminate the harbor maintenance tax. There is no 
specific connection at this point between the ports and rail, 
that rail is--the rail services of course, the track beds are 
owned by the private rail, and there is real confusion once 
that rail gets off the main line and then is moved into the 
ports in terms of how that is best and most efficiently 
handled.
    Mr. Larsen. And the role of the TIGER grants?
    Mr. Mohr. TIGER grants did provide a real funding source 
for ports in the United States. Mr. Matsuda mentioned the 
investment that was made in the shipyard in Florida. There are 
a number of other investments that have been made through the 
TIGER program to improve port infrastructure. This is the first 
program that I am aware of, and I believe I am correct, the 
first program where actual infrastructure investments have been 
funded through Federal grant programs.
    Mr. Larsen. My questions have focused on infrastructure, 
and I am going to continue that for Mr. Matsuda, and I will 
have questions about other aspects that have been brought up by 
other members of the panel on the second round.
    But Mr. Matsuda, the CBO has estimated the U.S. needs to 
spend about $20 billion more a year just to maintain its 
infrastructure at current and, I would say, inadequate levels. 
Do you know how U.S. investment in the Marine Transportation 
System compares to other nations and is adequate to the CMTS? 
Have you considered that question?
    Mr. Matsuda. I can tell you they have not considered that 
question, but it is something we can certainly take to have the 
committee take a look at.
    The other countries have different geography, different 
needs. We certainly would like to think that the needs of the 
Maritime Transportation System here in the U.S. fit within a 
broader range of investments within the National Transportation 
System. I think the TIGER program is one that clearly 
demonstrates that because you have got port projects that are 
eligible to be competing against rail projects or transit 
projects or road projects and that the port projects seem to 
compete very well.
    Mr. Larsen. The economist last week did a report about U.S. 
investment and transport and water infrastructure overall and 
showed that as a percentage of GDP, it has fallen in the U.S. 
since--in the last 40 years or so, but doesn't really break it 
out by particular aspects of infrastructure.
    Meanwhile, Europe as a continent is about 5 percent of GDP, 
and China is about 9 percent of GDP; 9 percent of their GDP is 
invested in infrastructure.
    So just to give us comparisons of where we stand relative 
to the other areas of the world, but getting that number 
regarding Marine Transportation System would be especially 
helpful. And I would appreciate it if you could take a look at 
that.
    And finally, just for Mr. Matsuda, and I will turn it back 
over, I understand that the Department of Transportation 
intends to develop a national trade policy. We have legislation 
that has been introduced by, I believe, Mrs. Richardson, which 
I am a cosponsor of, to develop a national freight policy and 
try to see what we can do to include that in a final surface 
transportation bill. Is that in fact--is that a fact that the 
department intends to develop a national freight policy, and 
how would you estimate that policy would help create jobs and 
increase exports and answer the questions that we are asking 
today?
    Mr. Matsuda. I think that having a more coordinated freight 
policy would help on a number of levels. Currently, the 
Administration is examining those types of activities that can 
bring Federal agencies closer together to look at--for 
instance, let me give you a specific example, and this is one 
where the Committee on Marine Transportation System is actually 
working together to solve the problem for a particular project. 
And it is a railroad bridge in Iowa.
    This is a privately funded bridge by a railroad that would 
very much help alleviate a bottleneck in the supply chain. 
Given the various permitting requirements and the Federal 
agencies that are involved, the committee has provided a place 
where we can come together and actually help accelerate the 
process for clearing the permitting of this bridge. And I think 
it is a good example, one spurred by the Deputy Secretary at 
the department to really show how we can help improve and 
facilitate supply chain effectiveness.
    Mr. Larsen. Thank you, Mr. Chairman. I will wait for a 
second round.
    Mr. LoBiondo. Thank you, Mr. Larsen.
    Mr. Matsuda, the National Strategy for Marine 
Transportation System, what is the status of the work plan that 
you developed as a result of the National Strategy for this 
Marine Transportation System.
    Mr. Matsuda. Well, it continues as we are trying to tackle 
it. As you know, we have limited ability with limited funds. 
There is no specific funding provided for the committee. All of 
it is basically taken from individual agencies. So we are 
trying to make as best progress as we can on the strategy.
    Mr. LoBiondo. So the strategy calls for 34 different 
actions. Can you tell us how many have been completed or 
implemented, and how many do you plan to complete prior to 
2013?
    Mr. Matsuda. I can give you a full report card on that. I 
would have to follow up with my staff.
    Mr. LoBiondo. Do you have any examples of specific actions 
taken as a result of the National Strategy for the Marine 
Transportation System?
    Mr. Matsuda. Again, I will have to follow up with you as 
far as specific examples of what the committee has 
accomplished.
    Mr. LoBiondo. Can you tell us how often the Cabinet level 
committee meets?
    Mr. Matsuda. I can tell you the Cabinet level committee 
does not meet very regularly. I believe the last meeting was 
2007. But there is a coordinating board that meets, and that is 
made up of more agencies that come to the table that get more 
hands-on opportunities to deal with the direct issues involved. 
And that is quarterly meeting.
    Mr. LoBiondo. OK.
    MARAD set the rules for the use of capital construction 
fund at a privately held tax-deferred ship construction finance 
account plan. Does the capital construction fund--it is limited 
to construction or acquisition activities only as it stands now 
is my understanding. Would MARAD support the extension of the 
program to cover long-term lease payments or vessel repair 
projects?
    Mr. Matsuda. That is something we are evaluating because it 
could have the potential to stimulate shipbuilding in the U.S., 
but the Administration does not have a position on it at this 
time.
    Mr. LoBiondo. OK.
    Mr. Cox, shipping is one of the most highly regulated 
industries in the world. Vessel operators comply with a whole 
host of big, long 9 yards that you have got to comply with all 
kinds of State, Federal, international regulations. Has the 
industry identified current or emerging Federal regulations 
that may be duplicative, outdated or overly burdensome that we 
could focus on and try to get relief with?
    Mr. Roberts. Thank you, Mr. Chairman. I think I referred in 
my testimony to this ballast water issue that we have before 
us. I think that would be a rather critical one for our 
Government to solve on a national basis. I think with respect 
to--we say a lot of things about the degree to which this 
industry is regulated, but I must tell you that we comply with 
all of those regulations, and I think all of our people are 
trained to comply with those regulations. And I think the vast 
majority have a very good intent.
    And I think that over the years, we have been able to fine 
tune our compliance with the requirements so that we are 
operating, in my opinion, sir, probably the most safe and 
environmentally protective industry that we possibly can for 
the American people.
    So when you say, what is a duplication, I think that 
currently my main concern that I would talk to my members about 
is that the States are becoming more active in areas where they 
in turn are duplicating what we feel are Federal jurisdictional 
requirements. And I think that we are trying to get the message 
out to them but perhaps the message to you and this committee 
is that in the maritime industry, there is a need for a 
national uniformity with respect to regulations and 
requirements. And to the degree to which there isn't--to which 
there is duplication of effort among the various States, I am 
not saying they have a negative intent. They have a positive 
intent. But at the same time, it is not beneficial for the 
industry to go from port to port, region to region and be faced 
with various different requirements that they have to meet. The 
captain of the ship, then, the gentleman is not engaged then in 
navigating his vessel to the utmost. He is engaged in trying to 
make sure that he is in total compliance and therefore not 
putting himself at personal danger of being arrested for being 
in noncompliance with some requirement.
    Mr. LoBiondo. Mr. Robert. On the Jones Act, the Jones Act 
requires merchandise and passengers moving between two points 
in the United States to be carried only on U.S.-flagged, U.S.-
crewed, U.S.-owned, and U.S.-built vessels, something I 
strongly support. In your opinion, do you feel the Jones Act is 
being adequately enforced?
    Mr. Roberts. Thank you, Mr. LoBiondo.
    I think, as Joe put it, by and large, people comply with 
the law, and we see--we don't have major issues most of the 
time. Where we do have exceptions, where we have compliance 
problems, the agencies have not uniformly responded forcefully, 
as forcefully as we would like. And it is, as I mentioned in my 
testimony, it is very concerning to make the kinds of billion-
dollar investments that we are making based on an assumption 
about what the law requires and to see exceptions come through.
    So we believe it is very important to have enforcement. And 
generally we are getting good enforcement, but there are 
exceptions that we have to be vigilant about.
    Mr. LoBiondo. Well, I thank you for that.
    I will speak for myself and I think for at least some 
members of the committee. I feel very strongly about this. I 
hear rumors from time to time about ideas or suggestions that 
can be advanced either legislatively or otherwise that would 
dramatically change or weaken the Jones Act. I can assure you 
that as chair of this committee, I'll do everything in my power 
not to allow that to happen.
    One more question for you, Mr. Roberts, on the shipbuilding 
programs, the capital construction fund that we have talked 
about. Do you believe the shipbuilding industry supports the 
expansion of the program to cover long-term lease payments or 
vessel repair projects.
    Mr. Roberts. Yes, sir. Generally speaking, I believe we do 
support that proposal.
    Mr. LoBiondo. OK. Thank you.
    Ms. Hirono.
    Ms. Hirono. Thank you, Mr. Chairman.
    And thank you for your strong support of the Jones Act. 
Like you, I am a strong supporter of that Act and I just want 
to note for the record that in Hawaii, Jones Act shippers 
provide--Jones Act activities, I should say, provide for 23,000 
jobs just in Hawaii and approximately $1.1 billion in wages and 
benefits to Hawaii's economy.
    And a number of you have testified as to the impact of the 
Jones Act in terms of job creation, 40,000 Jones vessels, 
500,000 jobs nationwide, a $100 billion in annual economic 
output. And yet practically not a year goes by where the Jones 
Act does not come under attack.
    Most recently, former OMB Director Peter Orszag stated in a 
recent Newsweek article that the Jones Act represents a 
``operating tax on all of us'' and that ``the solution is to 
rescind the law to get an efficient and cost-effective mode of 
shipping.''
    Now those of you who are testifying in support of the Jones 
Act, which perhaps is all of you, would you like to comment on 
this most recent assault on the Jones Act? Any of you?
    Mr. Roberts. Well, I will take a shot at it. I think there 
is a--there is a perception. There is a group of people who 
wake up in the morning and think about expanding international 
trade, and that that is all they focus on. They may have a 
certain perspective on the Jones Act that is not the same as 
those of us who worry about American jobs, American 
productivity, American economic growth and our national 
security interests. And if you focus on those other issues, the 
American jobs and so on, you support the Jones Act. If you are 
more wake up and think about something different, then you may 
question it.
    Ms. Hirono. Yes, go ahead.
    Mr. Cox. As the Chamber of Shipping of America, Ms. Hirono, 
we represent American companies that own and operate ships. And 
they operate both foreign flag and U.S. flag, and they are 
engaged in domestic shipping as well as international shipping. 
And we do support the Jones Act, and our members recognize 
that.
    And the question comes to mind when this is raised, and I 
just wonder why water is considered somewhat different when we 
are dealing with American cargoes moving between American 
ports; why are we being treated differently than the railroads 
or trucking or airlines? Would anybody at all suggest that we 
should have foreign truck operators moving our cargo because 
after all, it would be cheaper. Yet, when it comes to water, 
this seems to just likely be thrown out there, why are 
Americans moving cargo between American ports using American 
equipment run by Americans? It is a bizarre question in my 
opinion.
    And I operate internationally in many areas. And on one 
committee, I have to keep telling my friends and colleagues in 
the international community, Europe in particular, saying well, 
you look across the river, and you are making an international 
movement. Here, you look across the river and you see another 
State. That is why we treat ourselves in a particular way, and 
the Jones Act is used by some as sort of this pejorative 
reference as to how we are operating. I look at it as an 
American way of operating.
    Ms. Hirono. Mr. Cox, you make a very good point, and I wish 
that more of our community and people who continue to raise the 
issue of the Jones Act adding to consumer costs, they should 
hear from you.
    And I also want to make sure, Mr. Matsuda, I would like to 
know what the U.S. DOT's position is on the Jones Act for the 
record.
    Mr. Matsuda. Absolutely supportive. It is the lifeblood of 
the Merchant Marine, the U.S. maritime industry, and it helps 
not just with the economy, but there are so many ways in which 
it supports our national security.
    Ms. Hirono. Thank you. And as we are focusing on creating 
jobs and making it in America, I do have some--I have a wish 
that our shipbuilding industry in this country becomes much 
more robust, and it is really gone from what used to be a much 
more--a very robust industry, manufacturing, in our country to 
something far, far less.
    And Mr. Tellez, you mentioned that you would like to 
support the shipbuilding industry in our country and enhance 
opportunities for domestic shipbuilding, do you or any of the 
others have a big idea on what we can do to promote our 
domestic shipbuilding industry?
    Mr. Tellez. Big ideas? First of all, Aloha and Mahalo, for 
your recent support of the Jones Act on the floor. We thank you 
very much for that.
    We talk about the marine highway and short sea shipping as 
one of the vehicles to achieve this overall expansion and 
creation of jobs. That is going to require a tremendous--if 
left alone for the private sector, that will require a 
tremendous private investment. And there will be no private 
investments if there is no proof of life. No one is going to 
invest that kind of money without proof that there is going to 
be a trade there for them to get their return on their money.
    So to start to initiate it, I hate to use the word 
stimulate, but to stimulate it and to get this project started, 
this marine highway project started, it is going to need and 
require Federal support. And to be frank and honest, the 
recent--the $7 million thrown at the idea by the Federal 
Government by DOT is, frankly, a paltry sum in the face of 
bigger investments in other trades. You are talking about a 
major shipbuilding initiative. You are talking about major port 
infrastructure initiatives. So it is going to require a major, 
major investment.
    On another point to that matter, the short sea shipping 
takes care of a lot of ills created by the overcrowding of the 
highways. Anyone who has taken a family trip down to Disneyland 
by car will testify to the problems they face. Short sea 
shipping can alleviate and take care of a lot of those problems 
in a very green and environmentally safe manner.
    Again, it is going to take investment. And it is also going 
to take not competing the truckers but becoming an adjunct and 
a partner to the truckers by taking a long-haul industry and 
converting that to a short-haul industry. We think we can get 
that done.
    Ms. Hirono. Mr. Chairman, thank you for your indulgence. My 
time is up. I yield back.
    Mr. LoBiondo. Mr. Cravaack.
    Mr. Cravaack. Thank you, Mr. Chairman.
    I appreciate the testimony today. It has been very 
enlightening.
    Being a retired Navy captain, I understand the importance 
of a maritime industry, and how important it is to have a U.S.-
flag, U.S.-crewed vessel ensuring that when we do have to go 
over the horizon, we have the proper assets to do it and the 
proper people that have been trained in a way that we need to 
make sure that they will be able to carry the flag when the 
rubber starts hitting the road. So I highly support U.S. 
Vessels and the U.S. Jones Act as well.
    But how do we get there? That is the big thing for me. I am 
seeing a lot of challenges.
    Lake Superior, for example, the harbor maintenance tax. Mr. 
Cox, can you help me help us making sure that the right money 
gets to the right projects to start making sure that our 
vessels can get into our harbors to start exporting product? 
But also, expound upon that a little bit more, and just like we 
were talking about shipping within the United States, the 
double taxation that occurs as well. We need to get commerce 
rolling. That is how we get good shipbuilding. I don't think we 
have had a salty or a laker built in Superior for decades. So 
what we need to do is get the economy rolling, get jobs 
rolling. That is how we start inspiring our shipping industry. 
Mr. Cox, if you would, sir.
    Mr. Cox. Thank you, Mr. Cravaack.
    I am going to stay away from which ports need dredging and 
support therefore. But I think your point about the harbor 
maintenance tax is an important one, and the double taxation. 
We have never spent what we have collected in the harbor 
maintenance tax. So it sits in a pot; and I understand we 
borrow from that pot, and we put an IOU in it so it is a 
convenient repository for cash flow purposes.
    But at the same time, if we are talking about removal of a 
double taxation, I think that it is very small right now and I 
can't give you numbers, Chairman and Members, but it is very 
small because we are trying to initiate short sea shipping. In 
fact, as we sit here, I think there is some short sea shipping 
in California that is occurring right now. There is, I believe, 
the Richmond barge ship movement is happening. And I know that 
the American Feeder Line, in fact yesterday, just started their 
initial short sea shipping.
    So I think we have to try and support that. I think that 
the elimination of that double tax might be one of those little 
prods that lets everyone in the industry know that yes, our 
Government is behind us, that they are supportive of us. Does 
that mean that we look to you for the answers to everything? 
No, but at least take an impediment out of our way. I think 
that signal would be important to the industry with respect to 
the harbor maintenance tax.
    I am going to stop because I will get into which ports 
deserving dredging and which don't, and I am going to stay away 
from that.
    Mr. Cravaack. I appreciate that. We do have $5 billion 
sitting in that account. And you are right, they have been used 
as offsets. One of the chief concerns I have, especially coming 
from the Lake Superior region, is the locks and dams. Even 
going down the Mississippi as well. The locks and dams 
associated with the age of these, they are well over their 
actual life span. So I am very concerned with that, and making 
sure that we start spending the money to support our shipping 
industry because I, like Mr. Tellez says, I strongly believe 
that this will be part of a component of getting commerce 
rolling here in the United States.
    Mr. Cox, if I can just ask you about another thing, a 
proposal has been introduced where the House would exempt 
nonbulk, primarily containerized cargoes from the harbor 
maintenance tax if it is transported between U.S. ports and 
Canada and U.S. ports of the Great Lakes and the St. Lawrence 
Seaway for the purpose of reducing costs of container movements 
by ship and barge. Do you think this would be a good proposal 
in getting traffic rolling on the seaway?
    Mr. Cox. Yes, sir. That would be the removal of the double 
taxation that I'm speaking of. Focusing on containerized cargo, 
of course, is focusing on the more valuable cargo. And since 
harbor maintenance tax is ad valorem, then you are getting the 
bulk of the coverage that we expect. I think with bulk trade, 
we are not quite as--the value there probably doesn't have the 
same meaning as the containerized movement would. In fact, my 
thought begins to say we are moving a lot of bulk in containers 
now, too. Grain is moving in containers because of ease of 
movement.
    But I think we ought to also review the bulk area. I think 
a lot of bulk is included now in the double taxation. So I am 
not sure how much more we would have to change that language to 
include the totality of cargo movement in the country.
    Mr. Cravaack. I am trying to get containerized vessels on 
Lake Superior. That is one of my main objectives.
    Mr. Cox. I am fully supportive of that, sir.
    Mr. Cravaack. Thank you.
    Mr. Chairman, I yield back.
    Mr. LoBiondo. Mr. Harris.
    Dr. Harris. Thank you, Mr. Chairman. I thank the panel for 
coming here to testify today.
    Mr. Matsuda, let me ask, we heard a lot about the harbor 
maintenance trust fund. I know it is a big issue for the port 
of Baltimore. What is the position of the Administration on the 
use of that harbor maintenance trust fund? Does the Maritime 
Administration feel that if we used all of that $1.3 billion, 
we could work through our backlog of dredging projects which 
would permit our ships to be at least fully loaded coming into 
our ports? It seems it is pretty inefficient if 30 percent of 
our vessels can't carry a full load because of a dredging 
backlog?
    Mr. Matsuda. Well, the Administration doesn't have a formal 
position other than fiscal year 2012 budget proposal for use of 
the harbor maintenance.
    Dr. Harris. Do you agree with that proposal that doesn't 
fully use all of the funds submitted for the harbor maintenance 
trust fund for dredging projects?
    Mr. Matsuda. It is the position of the Administration.
    Dr. Harris. What do you think, within the shipping 
community, is it a reasonable request, do you think, that they 
have to use those taxes that they pay for the purpose for which 
they are collected?
    Mr. Matsuda. Well, certainly there is that expectation. I 
think that there are----
    Dr. Harris. You can see the reason behind that expectation, 
I guess?
    Mr. Matsuda. Yes.
    Dr. Harris. OK. Thank you very much.
    Mr. Mohr, you have mentioned some of the regulations that 
may keep us from being competitive with regards to I guess 
permitting regulations, things like that. Can you be specific 
about any regulations that as a subcommittee we should be 
looking at where the Federal Government is at a competitive 
disadvantage, America is at a competitive disadvantage to other 
countries with regard to shipping?
    Mr. Mohr. Thank you very much.
    Particularly when you look in Asia, they can take a port 
from concept to operation in about 5 years. They are able to 
meet their demands. They are able to focus on their exports. In 
the U.S., we tend to go through a number of layers of 
regulatory review, having separate reviews at the Corps of 
Engineers, at EPA, and at U.S. Fish and Wildlife and so on. 
These reviews are all done independently and then combined, and 
if there is an issue with one, it is an issue for the entire 
process.
    Frankly, the permit process tends to be almost a fetch rock 
sort of an effort. You bring in your rock, and they tell you if 
they like it or not. And if they don't, you go get another 
rock.
    Dr. Harris. Well, thank you. Let me just ask you, because 
Mr. Cox testified that some of the issues and regulations with 
regards to the different States having different regulations, 
but your impression with regard to at least port enhancements, 
that a lot of these problems are Federal level?
    Mr. Mohr. I think there are issues at all levels. Certainly 
I agree with Mr. Cox that certain issues need to be dealt with 
entirely at the Federal level. The ballast water issue is one 
where we don't want to balkanize the process and have different 
requirements for different shipping regions. There needs to be 
uniformity on issues such as this.
    But I think a more collaborative approach, particularly 
from the Federal regulators on how we address the construction 
of a facility or the deepening of a channel is much more 
productive, in which we could, in fact, work together to be 
able to define a reasonable response rather than trying to meet 
a standard that can change actually over the period of time 
that the permit is in play.
    Dr. Harris. When that process becomes long, I'm sure that 
can happen.
    Mr. Roberts, what is AMP's vision for the marine highway? 
This projects seems like a project that is worthwhile idea. Of 
course, in the fiscal year 2012 budget, I believe that 
feasibility moneys have been eliminated. But what does AMP 
think about this?
    Mr. Roberts. Yes, the AMP certainly supports the marine 
highway system. We stand united with our brothers on this panel 
in that regard. It already exists in certain respects. If you 
consider there are 40,000 vessels in domestic commerce 
operating now, there is a lot of cargo that moves in coastwise 
trade.
    The focus of the marine highway is on intermodal cargoes 
that now currently move predominantly on the highways. Getting 
those cargoes off the highways and on the waterways makes 
abundant sense and would be a great project to do.
    I have to say that we have not been asked by our customers 
to create such a system, and that leads to the suggestion that 
is sort of consistent with the harbor maintenance tax reforms 
that are being discussed, that the harbor maintenance tax falls 
on the customers. If you can remove that disincentive that the 
customers have to using the waterways, and focus on providing 
incentives for customers to use the waterways, we think that 
may be a very effective way of stimulating demand and then 
allowing the private sector to respond to that demand.
    Also, continue making the Government investments in 
infrastructure. Those are critically important, and the harbor 
maintenance tax is there to support that.
    Dr. Harris. Thank you very much, Mr. Roberts.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Thank you.
    Mr. Cummings, we first offer you our deepest sympathy and 
wish you and your family peace and strength during this 
difficult time.
    You are recognized for 5 minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Matsuda, as you know, last year I convened two hearings 
in this subcommittee to examine the state of U.S.-flag vessels 
in the foreign trade. According to data provided by MARAD and 
compiled in part by contractors engaged by MARAD to assess the 
U.S. maritime transportation system, the U.S.-flag fleet, which 
was comprised of 94 vessels as of March 2010, was carrying less 
than 2 percent of the U.S. foreign trade. How many vessels are 
currently in the U.S.-flag ocean-going fleet, and what 
percentage of U.S. foreign trade is it carrying?
    Mr. Matsuda. Currently there are about 120, or slightly 
below that, in U.S. ocean-going trade; but there is also about 
the same amount of cargo, relatively speaking, carried on those 
vessels versus overall foreign trade of the U.S.
    Mr. Cummings. So what steps has MARAD taken in the last 
year to increase the number of vessels in the U.S.-flag ocean-
going fleet?
    Mr. Matsuda. Well, our strategy was multifaceted. First, we 
wanted to make sure that we got a full understanding of the 
situation and that is why we launched the study in cooperation 
with the subcommittee last year. That study is nearing 
conclusion. We are getting work back from our contractors. And, 
obviously, we want to make sure that it is accurate and are 
satisfied with the result.
    But secondly, it is securing the cargoes that are necessary 
to build the industry. That starts with the cargo preference 
program. As you know, we have made headway with a number of our 
agencies that ship Federal products--or finance Federal 
shipments recently with the Department of Energy. Also, we held 
the first ever Federal shipper forum, where we brought these 
agencies together and started the conversation about how we can 
more effectively run this program to make sure that they are 
complying with the law and that cargoes that are federally 
financed are going on U.S.-flag vessels.
    Mr. Cummings. Now you said the report is due soon?
    Mr. Matsuda. Yes. We expect this summer.
    Mr. Cummings. This summer. Can you give us a date? We like 
deadlines.
    Mr. Matsuda. I do, too, sir. We always want to make sure 
that we are releasing the best quality product.
    Mr. Cummings. Give us a date. Give us some kind of date 
now. Don't take us into the winter. When are you talking about?
    Mr. Matsuda. Our best estimate is September 1.
    Mr. Cummings. Well, see if you can get it by September 15. 
That would give you 2 extra weeks; how about that?
    Mr. Matsuda. Thank you, sir.
    Mr. Cummings. Sure. What trends do you project regarding 
the size of the U.S.-flag fleet in the foreign trade over the 
next 5 years?
    Mr. Matsuda. Well, it largely depends on cargo. As we heard 
from a number of the witnesses today, the support that the 
Federal Government provides this industry is what largely 
dictates what cargo opportunities will be there. It is not just 
a matter of subsidies. These companies in return are providing 
a very useful, in fact vital, support to the U.S. military and 
other parts of the Government. We respond to humanitarian 
missions, carry food aid, and do a number of things that carry 
out the Government's mission. So it largely depends upon 
whatever kind of support the Federal Government can provide.
    Mr. Cummings. How many MSP eligible vessels are currently 
documented in the U.S. but are not receiving payments because 
the MSP program is fully subscribed?
    Mr. Matsuda. Approximately 55.
    Mr. Cummings. On another note, what steps has MARAD taken 
since the President established his export initiative to ensure 
that U.S.-flag ocean-going fleet is part of and benefits from 
that export initiative?
    Mr. Matsuda. Well, we have met with the Export-Import Bank. 
We have also participated in meetings with the National Export 
Council. As you know, Secretary LaHood serves on that council.
    It is true that the United States maritime industry does 
provide an export service, whatever we are carrying that is not 
something that a foreign flagship is carrying or a foreign 
company is carrying, so working within this system and trying 
to make sure that these opportunities exist to carry the 
Nation's export cargo as it continues to grow, make sure that 
we can help provide more opportunities for the fleet as a 
whole, and grow the industry.
    Mr. Cummings. Mr. Chairman, I yield back. Thank you very 
much.
    Mr. LoBiondo. The gentleman from coastal Louisiana.
    Mr. Landry. Thank you, Mr. Chairman.
    Mr. Matsuda, we have been following closely the efforts of 
MARAD's ship disposal program. The National Maritime Heritage 
Act requires you all to dispose of vessels at the least cost to 
the Government and regardless of whether a vessel is disposed 
of through a procurement contract or sale to a private party 
for recycling. Each contract, and I quote, ``shall use full and 
open competition.'' My concern is that you all recently awarded 
a contract on a noncompetitive basis totaling $3.1 million to a 
California recycler of you all's choosing, even before the 
recycler's yard was fully operational. Why was this facility 
given these contracts, and why did your agency not utilize a 
fully transparent process when awarding this contract?
    Mr. Matsuda. First, I can speak to that. This was the 
contract awarded to ADR Systems in Vallejo, California. ADR is 
a certified facility that meets all of the regulatory and 
environmental requirements in order to operate a ship recycling 
facility in the U.S.
    The process for awarding this contract was followed whereby 
we do publish in the Federal Register a rationale for awarding 
it. The bottom line is that, frankly, if we had not done this, 
we would be stuck working with sole-source contracts to clean 
up and dispose of ships in the Suisun Bay fleet for the time to 
come. We needed to end that cycle of sole-source contracts by, 
unfortunately, presenting a sole-source contract.
    Mr. Landry. Well, in order to participate, and I am glad 
you brought up the certification of facilities because I am 
also concerned with that, too. There is a facility in my 
district whose certification has languished in your agency for 
more than a year while evidently other facilities have been 
certified. Even facilities that have had questionable 
environmental histories, have seen their certifications kind of 
fly through your agency.
    I received a letter from a particular company in my 
district who has been trying to get their certification done. 
This facility is specifically in Amelia, Louisiana, and if you 
are not familiar with it, if you can send me some information 
as to why that facility has languished in its certification, I 
would appreciate it.
    Mr. Matsuda. I am happy to follow up with you on that, sir.
    Mr. Landry. OK, thank you.
    Mr. Chairman, I yield back.
    Mr. LoBiondo. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    We talked about infrastructure and the Jones Act. We talked 
about a variety of things, but I want to talk about the people.
    Mr. Tellez, you noted that the present paperwork required 
for mariner licenses is an impediment to expanding the maritime 
job market. Has your organization and others approached the 
Coast Guard about this?
    Mr. Tellez. Yes, sir.
    Mr. Larsen. Can you talk about what you recommended----
    Mr. Tellez. As I mentioned, one of the big impediments has 
been the recent NVIC on medical requirements instituted by the 
Coast Guard. It was causing a major problem. The commandant 
called a meeting of all the maritime unions and training 
centers. We met. To their credit, one of the actions that they 
took part in was to kind of focus on the medical review 
process. They added some folks at the National Maritime Center. 
They created a dedicated 800-telephone number just to handle 
folks who have problems with the medical review. That has 
somewhat alleviated the problem; but the problem still exists.
    It is caused mainly by the myriad number of various kinds 
of documents that are required to support whatever application 
you are submitting. Unless those documents, that documentation 
comes in beforehand, or rather with the application, you are 
going to run into a lot of delays. The word we are getting out 
there is it is up to a couple of months, maybe even longer if 
that documentation isn't fully submitted with the initial 
application.
    Again, they are trying, but I would suggest that even their 
correction and their improvement still leaves a major hold up 
of folks trying to get their licenses.
    Mr. Larsen. If you could keep us up to speed on your 
thoughts and your evaluation of the progress, we would 
appreciate it.
    Mr. Tellez. Yes, sir.
    Mr. Larsen. Mr. Roberts, we haven't asked about Title 11, 
Federal ship financing. It provides for a full faith and credit 
guarantee by the U.S. Government to promote the growth and 
modernization of the U.S. Merchant Marine and U.S. shipyards. 
Does AMP have any recommendations for changes to Title 11 
amending the act to raise the cap on the overall amount on 
guarantee, smaller scale programs to be more responsive to the 
needs of smaller ports and harbors, has AMP taken positions on 
those or other reforms?
    Mr. Roberts. No, Mr. Larsen, we have not considered those 
issues. We do support the Title 11 program. We believe it is 
basically sound, that the valuation criteria make sense, and 
that they are consistent with commercial underwriting 
requirements. And we would encourage an efficient processing of 
applications. I know there are challenges there sometimes, but 
generally we very much support the program. We would be glad to 
take a look at some of the suggestions that you have presented.
    Mr. Larsen. Excellent. I would appreciate if you would do 
that.
    Mr. Mohr, at least one of your tenants at the port is a 
shipyard, a smaller shipyard, and I know they have been a 
recipient of an assistance to small shipyard grant to be able 
to expand their facilities and improve the footprint and 
efficiency of the facility. Can you comment on your view, the 
port's view of the effectiveness of this grant program as it 
applies to the shipyard?
    Mr. Mohr. I can, Mr. Larsen. The yard you are referring to, 
Everett Shipyard, a subsidiary of Vigor Marine, has increased 
its employment by about 30 percent since the grant has been 
received. The facility that we are referring to largely does 
U.S. ferry work for the Washington State ferry system and also 
Navy work and has been able to add, in addition to that some--
as a matter of fact, Crowley tug boats have been in there 
recently and some barge work and other things to fill in.
    But the grant that they received added stability to the 
overall organization. Prior to that, they were largely kind of 
a boom-bust kind of an operation. When they received bids, they 
were busy; when they didn't, they were virtually empty. But the 
work that has been done to date, and I believe they are 
continuing to apply for these grants, has added substantially 
to the stability of the employment, and they are able to 
additional facilities and take on additional work as well.
    Mr. Larsen. Can you provide, Port of Everett being an 
example, and obviously you are not a larger port like a Seattle 
or Tacoma or L.A.-Long Beach on the West Coast, but you do have 
a variety of niche markets you are serving so your 
infrastructure needs would be smaller than your larger ports. 
But as an example, for your capital plan, what are your 
infrastructure needs in terms of total amount of dollars you 
need every year, if it is a 1-year or 5-year timeframe, 
whatever you use?
    Mr. Mohr. Our current infrastructure plan requires just 
over $100 million in investment. It includes the strengthening 
and expansion of our facilities. Our community is a historic 
industrial community; and as such, included in that money, 
there is a substantial amount for cleanup for past pollution 
that has taken place by the manufacturing facility that was 
located there previously.
    Mr. Larsen. When you say previously, give us the timeframe 
of previously?
    Mr. Mohr. From about 1930 to 1981.
    Mr. Larsen. And you are still cleaning it up?
    Mr. Mohr. We are cleaning it up, yes. It was the site of a 
former pulp and paper mill.
    We also are deepening our facilities in recognition of 
the--we do have natural draft at our port and require very 
little dredging. But by moving our docks out just another 100 
feet, we are able to pick up another 5 feet of depth at 
dockside, which adds substantial advantage.
    Our port really serves a very narrow market in our support 
for the aerospace industry, but we also handle a lot of value-
added type of products and manufactured products, windmills and 
such. But we export large pieces of machinery because of our 
specialty in handling very expensive, one-off types of 
equipment. So we move a lot of mining equipment, a lot of farm 
equipment, and a lot of critical path equipment into Asia and 
into the Arctic Circle area of Russia.
    Mr. Larsen. Equipment manufactured in the United States?
    Mr. Mohr. Equipment manufactured in the United States.
    Mr. Larsen. But the point I want to make is you are a 
smaller port, you serve niche markets, and your capital plan is 
still $100 million?
    Mr. Mohr. It is. In fact--any time you talk to any port in 
the United States that is doing a serious infrastructure 
upgrade or expansion, it is always in the hundred million 
dollars. Even a small barge dock that we built to handle 
aerospace parts was a $30 million endeavor.
    But having said that, we also support 31,000 jobs in our 
community directly from the products that we do handle.
    Mr. Larsen. Thank you.
    One final question. Mr. Roberts, I think maybe this 
question has been asked a little bit, but how likely is it that 
an expansion of U.S. exports would trigger cargo preference 
requirements to increase the demand for U.S.-flag vessels and 
U.S. crews?
    Mr. Roberts. Can you ask that again? I'm not sure I got 
your question.
    Mr. Larsen. How likely is it that an expansion of U.S. 
exports would trigger cargo preference requirements to increase 
the demand for U.S.-flag vessels and U.S. crews?
    Mr. Roberts. I am afraid I haven't thought about that. I 
would be happy to do so and get back to you.
    Mr. Larsen. Mr. Tellez?
    Mr. Tellez. Although the initiative has been created to 
double the exports over 5 years, that doesn't happen just 
because somebody says it. The Government has to basically start 
that off. One of the major players in starting that off is 
going to be Ex-Im Bank projects, which are projects funded by 
taxpayer dollars that by law have to be carried on U.S.-flag 
ships.
    If the national initiative is going to be a very real 
effort, that is where it is going to start. When those Ex-Im 
Bank projects get going, you will see an expansion, and we have 
already seen expansion. We have seen at least four new U.S.-
flag vessels flagged in to take advantage of this cargo. The 
more that those Ex-Im Bank cargoes are generated, you will see 
more U.S. jobs, more ships reflagged to take advantage of those 
that are in that business get full employment for at least the 
next 5 years.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Tellez, do you feel that the cargo 
preference laws are being adequately enforced?
    Mr. Tellez. Anecdotally, I can only say no. I don't have 
any numbers or proof. But just from the industry and from what 
we hear from the industry, no.
    Mr. LoBiondo. If you come across anything that would be 
specific, if you can pass it on to us, I would appreciate it.
    Mr. Tellez. Again, other than what we have already spoken 
about, the Department of Energy cargoes and some of these Ex-Im 
Bank cargoes, that I know specifically, if those laws are 
enacted--or, rather, enforced, as I just mentioned, we will get 
our full share of employment and of U.S.-flag vessels employed.
    Mr. LoBiondo. Thank you.
    One last question. Mr. Matsuda, help me understand this. 
You needed to end sole-source contracting by awarding a sole-
source contract? I don't get it.
    Mr. Matsuda. This was a particular problem with the ship 
disposal program. We have got a number of vessels in the Suisun 
Bay reserve fleet which are required by court order to be 
disposed of within a certain time schedule. To meet that time 
schedule, we needed to add capacity to help either recycle 
those vessels locally or have their hulls and cleaned of 
invasive species and transported to other recycling facilities 
around the country.
    Unfortunately, we were dealing with only one single 
shipyard which was large enough to process these vessels before 
they could be transported around to other facilities, and we 
had to deal with them on a sole-source basis for a number of 
contracts.
    By certifying and working with the new facility in the Bay 
Area Region, we now introduced competition so that there are in 
fact two shipyards that can compete for that work.
    The reason we issued it as a sole source, it still was 
within the limits obviously and in accordance with the law, we 
had to have a fair and reasonable price, and it turns out that 
the price that was negotiated was lower than the average of all 
of the other ships that had been disposed of.
    Mr. LoBiondo. I am not sure that I fully get it, but OK.
    I would like to thank all of the panel members for being 
here today. I think this was helpful and informative. The 
committee now stands adjourned.
    [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
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