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







  SINKING THE MARINE INDUSTRY: HOW REGULATIONS ARE AFFECTING TODAY'S 
                          MARITIME BUSINESSES

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

                                HEARING

                               before the

       SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS



                             SECOND SESSION

                               __________

                              HEARING HELD
                             JULY 12, 2012

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



            Small Business Committee Document Number 112-078
              Available via the GPO Website: www.fdsys.gov

                                _____

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76-485                    WASHINGTON : 2012
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                     Barry Pineles, General Counsel
                  Michael Day, Minority Staff Director



















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Mike Coffman................................................     1
Hon. Allen West..................................................     2
Hon. Scott Tipton................................................     2

                               WITNESSES

Kristina Hebert, Chief Operating Officer, Ward's Marine Electric, 
  Inc., Fort Lauderdale, FL......................................     3
Mark Ducharme, Vice President and Chief Financial Officer, 
  Monterey Boats, Williston, FL..................................     4
Captain Steve Engemann, President, Herman Sand and Gravel, 
  Herman, MO.....................................................     6
Rashid Sumaila, Ph.D., UBC Fisheries Centre, Aquatic Ecosystems 
  Research Laboratory (AERL), The University of British Columbia, 
  Vancouver, BC, Canada..........................................     8

                                APPENDIX

Prepared Statements:
    Kristina Hebert, Chief Operating Officer, Ward's Marine 
      Electric, Inc., Fort Lauderdale, FL........................    22
    Mark Ducharme, Vice President and Chief Financial Officer, 
      Monterey Boats, Williston, FL..............................    27
    Captain Steve Engemann, President, Herman Sand and Gravel, 
      Herman, MO.................................................    32
    Rashid Sumaila, Ph.D., UBC Fisheries Centre, Aquatic 
      Ecosystems Research Laboratory (AERL), The University of 
      British Columbia, Vancouver, BC, Canada....................    35
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Materials for the Record:
    Letter to U.S. Small Business Administration.................    37
    Marine Retailers Association Statement for the Record........    42
    National Council on Compensation Insurance, Inc. Letter for 
      the Record.................................................    44
    Constituent Testimony from Congressman Allen West............    50
    Florida Yacht Brokers Statement for the Record...............    54
    Worth Avenue Yachts Letter for the Record....................    60

 
  SINKING THE MARINE INDUSTRY: HOW REGULATIONS ARE AFFECTING TODAY'S 
                          MARITIME BUSINESSES

                              ----------                              


                        THURSDAY, JULY 12, 2012

              House of Representatives,    
               Committee on Small Business,
                    Subcommittee on Investigations,
                                 Oversight and Regulations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10 a.m., in room 
2360, Rayburn House Office Building. Hon. Mike Coffman 
(chairman of the subcommittee) presiding.
    Present: Representatives Coffman, Tipton, and West.
    Chairman Coffman. This hearing is called to order. Good 
morning.
    This hearing--first of all, I would like to thank you all 
for joining us today as we examine federal policy and 
regulatory impediments for small businesses in the marine 
industry. I know that each of our witnesses have traveled quite 
a bit to be with us, and we here at the Committee appreciate 
that.
    The coastal and inland water transportation system is often 
the economic lifeblood of the regions where they are located. A 
healthy and vibrant water transportation system is critical to 
the small businesses that directly use the system, as well as 
those who support those firms. While proven as being one of the 
most efficient and environmentally friendly methods of 
transporting goods across the country, an aging system of 
locks, dams, and undredged channels threatens the continued 
viability of these waterways as reliable shipping avenues.
    It is not just the regular wear and tear on these avenues 
that is negatively impacting the small businesses that utilize 
them. State and federal policies, and regulatory impediments 
also threaten the continued viability of these long-standing 
industries. We will hear numerous examples today from our 
witnesses on these issues.
    This hearing represents a forum for us to hear firsthand 
how important the maritime industry is to our nation and the 
problems that are preventing economic growth. Again, I want to 
thank each of our witnesses for taking the time to be with us 
today. Unfortunately, I have an unavoidable scheduling conflict 
and must leave the hearing. I know that one of my colleagues 
has been working on issues facing the maritime industry since 
he came to Washington. And I would ask that the gentleman from 
Florida, Mr. West, to now chair the hearing.
    Mr. West. Good morning, ladies and gentlemen. Thank you to 
Chairman Coffman for allowing me the opportunity to host this 
important meeting and also to my colleague, Mr. Tipton, from 
Colorado.
    Welcome to our distinguished panelists and thank you for 
taking the time to answer our questions. As some of you may 
know, the marine industry in the state of Florida alone is 
responsible for the creation of more than 200,000 jobs and 
represents an $18 billion industry. These numbers are only a 
portion of the large impact that this industry has on our 
nation. Representing a sizeable chunk of our working 
population, I see no better time to zero in on the industry 
which is paramount to our way of life in South Florida and 
throughout this nation.
    I have heard from many in the marine industry and South 
Florida about how the abundance of regulations emanating from 
Washington, DC., is making it harder to conduct and maintain 
successful businesses. Regulations are creating a toxic 
business environment for so many from builders, manufacturers, 
and retailers to craftsmen, technicians, and suppliers that are 
affecting job creators across the board. It is our duty in the 
House Committee on Small Business to assess these challenges 
and provide solutions to help businesses grow. It is also my 
hope that regulators will take note of the valuable insight 
that is given here today. I look forward to hearing each of 
your perspectives as we move forward.
    Before we begin, I want to give a special thank you to Ms. 
Kristina Hebert and also Katie McGowan and the entire South 
Florida marine community for helping to bring this very 
important and critical issue to our Committee's attention. And 
at this time I would like to ask would any other member--Mr. 
Tipton would like to make an opening statement.
    Mr. Tipton. Thank you.
    Mr. West. Now I would like to talk about the hearing rules. 
The timing lights that you have before you, each of you will 
have five minutes to deliver your testimony. The light in front 
of you will start out as green. When you have one minute 
remaining, the light will turn yellow. Finally, at the end of 
your five minutes, it will turn red. Because of the fact we do 
not have many members here on the panel we can go a little bit 
over. I ask that you try to adhere though to that time limit.
    Our first witness is Kristina Hebert, chief operating 
officer for Ward's Marine Electric, Inc., in Fort Lauderdale, 
Florida. Ward's is a 62-year-old third generation family owned 
and operated business dedicated to providing for the electrical 
needs of the recreational marine industry. The company provides 
mobile dockside service, engineering, engraving, and design 
services, as well as distributes a complete line of marine 
electric equipment, and most of their service work is performed 
in marinas and boatyards where they act as subcontractors. 
Thank you for being with us today, Ms. Hebert, and we look 
forward to hearing your testimony.

STATEMENTS OF KRISTINA HEBERT, CHIEF OPERATING OFFICER, WARD'S 
   MARINE ELECTRIC, INC., ON BEHALF OF THE MARINE INDUSTRY'S 
ASSOCIATION OF SOUTH FLORIDA; MARK DUCHARME, VICE PRESIDENT AND 
   CHIEF FINANCIAL OFFICER, MONTEREY BOATS; STEVE ENGEMANN, 
  PRESIDENT, HERMANN SAND AND GRAVEL; U. RASHID SUMAILA, UBC 
    FISHERIES CENTRE, AQUATIC ECOSYSTEMS RESEARCH LABORATORY

                  STATEMENT OF KRISTINA HEBERT

    Ms. Hebert. Thank you. And I appreciate the opportunity. 
Thank you, Congressman West, and thank you Congressman Tipton 
for this opportunity to have this very important hearing to 
discuss something very significant to our industry.
    As stated, my name is Kristina Hebert. I am representing as 
president the Marine Industry's Association of South Florida, 
and I am also a board member of the U.S. Superyacht 
Association.
    As Congressman West mentioned, I am third generation owner 
and operator of Ward's Marine Electric. My family business has 
been in Fort Lauderdale for 62 years, and as he also mentioned, 
we do dockside service. And while I have technicians that can 
travel anywhere across the globe, there is no place better in 
the entire world than the United States that has the greatest 
concentration of skilled labor and tradesmen, and specifically 
in South Florida.
    Just to give you an idea, I know the congressman mentioned 
the statistics for the state of Florida, but in the Tri-County 
area, which is Broward, Dade, and Palm Beach County, the 
recreational marine industry represents an $8.9 billion 
economic impact; 107,000 jobs; and $3.06 billion in wages and 
earnings. That is extremely significant. This is about workers. 
These are families that are able to purchase homes, go to 
school, so on and so forth.
    As I stated, my company can travel all across the world. 
However, we want to make sure that they are able to stay here. 
As a small business, one of the most--the largest operating 
expense is obviously workers' compensation. And in my company, 
customer service does not come first; safety comes first. My 
employees' safety and the boats' safety. If those two are safe, 
we will get the customer satisfaction.
    With that being said though, workers' compensation is one 
of our number one operating expenses and it is cumbersome to do 
that for small businesses. Just to give you an idea, the 
recreational marine industry is 95 percent as far as the Marine 
Industry's Association of South Florida. Ninety-five percent of 
our members are small businesses. They either work for 
themselves or they work for a small business. And when I say 
small business, I mean 10 or fewer employees.
    The workers' compensation that is required in the marine 
industry for these workers falls under two categories. One, you 
have stat compensation; and two, you have longshore and harbor 
workers' compensation. Congress for many years has sought 
relief for this, for the recreational industry. Clearly, our 
workers are not commercial. We are not exposed to the same 
hazards and have sought numerous times to afford relief to the 
industry.
    In 1984, there was relief done for boats 65 feet. In 2009, 
as part of the American Recovery and Restoration Act H.R. 1, an 
amendment was made that would exclude the recreational repair 
industry instead of creating a footage to exclude it, capture 
it.
    We worked very hard for many years to show the safety 
record, the risks that are not there for the recreational 
industry, and paired with the insurance industry. Congress did 
a great job. You did your job. The amendment was made and it 
finally afforded an opportunity for small businesses to be able 
to stick with state workers' compensation, have it be 
affordable, have our labor rates be comparable to those 
international, and keep the jobs in the United States to be 
able to have those 200,000 jobs.
    The Department of Labor is the agency in charge of 
monitoring and enacting that legislation as it relates to the 
Longshore and Harbor Workers' Compensation Act. They had a 
rule. I understand agencies have to do rule implementations and 
there was a lot in the rule that came out that made a lot of 
sense. And I realize there were some dates and there was some 
clarification. And as far as the recreational industry on the 
manufacturing side, they did a great job. There was a clear 
line established for workers to be able to get covered. What is 
recreational? What is commercial? Great job.
    On the repair side, not so much. There was, number one, a 
misunderstanding of what the industry represents. Number two, 
there was not a communication with that segment of the 
industry. And number three, a definition was put in that 
relates to commercial maritime shipping and really was not 
related to the repair industry and has never been a part of the 
legislative history.
    Is there a solution? Why are we here today? Yes. We have 
language that we would like to be able to substitute, the 
language that was used to for the manufacturing side, and we 
know that that would be the intent given that the agency should 
keep the intent of the congressional amendment that was made in 
2009, and it would help small businesses and keep workers 
covered. Otherwise, they will go without the coverage because 
it will not be something they can afford.
    I thank you for your time and look forward to the 
resolution.
    Mr. West. Thank you, Ms. Hebert.
    Next up is Mr. Mark Ducharme, vice president and chief 
financial officer of Monterey Boats in Williston, Florida. 
Founded in 1985, Monterey Boats employs about 270 people and 
designs, engineers, and manufacturers several types of boats, 
pleasure crafts, and cruisers. Mark received his bachelor of 
science in accounting from the University of Florida and his 
master's degree in taxation from the University of South 
Florida. Welcome to the Small Business Committee, Mr. Ducharme.

                   STATEMENT OF MARK DUCHARME

    Mr. Ducharme. Good morning, Congressmen. Thank you for the 
opportunity to address you this morning on the business 
activity tax nexus issue. I am here today representing a broad 
group of organizations and businesses--the Coalition for 
Interstate Tax Fairness and Job Growth--a group working 
together for enactment of the Business Activity Tax 
Simplification Act. Our coalition has several hundred 
supporters. Among those are small businesses such as my own, 
Monterey Boats.
    Attempts by some states to assess sales, gross receipts or 
income taxes on business that have customers but no physical 
presence in the jurisdiction is simply arbitrary and wrong.
    We understand states face the great temptation of raising 
tax revenues from those who do not vote in its elections or 
utilize state resources. We only engage in interstate commerce 
by providing products or services and do so without any 
physical presence in the state, but efforts to expand 
traditional definitions of ``tax nexus'' have become completely 
absurd.
    For example, the State of Michigan secured a copy of 
Monterey Boats' federal tax return and assessed a 2011 ``gross 
receipts tax'' in the amount of $376,000, by allocating our 
entire worldwide sales to the state. Monterey Boats, it should 
be pointed out, has no property in Michigan, no sales offices 
in Michigan, no agents in Michigan, and no employees in 
Michigan. Yet, Michigan claimed the authority to tax our sales 
based merely on the fact that Monterey Boats has customers in 
its jurisdiction, and considers nexus is achieved with only one 
day of contact in the state, including delivery in company-
owned rented, leased, or borrowed trucks.
    Another example is New Jersey. We receive a phone call in 
October 2004, from an agent with the New Jersey Division of 
Taxation notifying our truck was being impounded along with a 
shipment of boats until we remitted $176,000. After retaining 
an attorney and negotiating the release of the truck, the 
driver, and the load of boats, we received a formal jeopardy 
assessment from the state. We remitted funds to the state and 
began the appeals process. In addition, the state placed a lien 
on any receivables due to Monterey for boats sold anywhere in 
the country. After seven years, in August 2011, and after over 
$100,000 in legal fees and countless man-hours accumulating 
information, we received a final determination from the state 
upholding their position and requiring us to file annual tax 
returns.
    Although we still have the ability to file a final appeal 
with the New Jersey tax court, it is not economically feasible 
to do so and they are completely aware of that fact. What is 
worse is that Michigan and New Jersey are not alone. 
Massachusetts, for example, claims that a business has 
established the necessary nexus for corporate income tax 
purposes if that business has vehicles that travel through 
Massachusetts more than 12 times in one year, even if it has no 
employees, offices, or inventory in Massachusetts.
    It should be easy for the members of this Committee to see 
the possibilities and the dangers here. States cast covetous 
eyes on the potential tax revenue from out-of-state 
corporations. The previously mentioned tax bills are not part 
of the budget in planning for Monterey, and it will hinder us 
as a manufacturer as we attempt to survive in a super 
competitive environment and keep our 250 employees working 
steadily and producing our fine boats.
    Unless Congress steps in to clarify that the U.S. 
Constitution requires a physical presence nexus and sets forth 
a clear bright-line test for what constitutes physical 
presence, then we will continue to have impossible-to-plan-for 
laws, regulations, and enforcement action that vary across the 
50 states.
    There is, in fact, legislation that has been reported 
favorably by the House Judiciary Committee that we believe 
would solve the problem. This legislation, the Business 
Activity Tax Simplification Act (BATSA) would require a 
business to have some type of physical presence in a given 
state, excluding a de minimus presence of fewer than 14 days 
during a taxable year, before a state would be permitted to 
impose a tax on the business. We believe this is a reasonable 
and bright-line standard and that businesses could use to plan 
for their tax responsibilities so that they are not hit 
unexpectedly with large tax liabilities from states in which 
they have no physical presence.
    BATSA would end the confusion that exists as a result of 
contradictory state court decisions and the refusal of the 
Supreme Court to decide the issue. It would apply to business 
activity taxes, including income and franchise taxes, but it 
would not apply to transaction taxes, such as sales tax. We 
believe it is fair for a state to tax instate businesses as 
though they regularly conduct business there, but we believe it 
is grossly unfair for any state to reach out and assert that 
simply passing through the state or selling a few products in 
the state allows a tax based on total countrywide income. A 
business should only pay income and similar taxes where it is 
physically present, and therefore, receives the benefits and 
protections of the state government.
    There is no reason to delay any longer, members of the 
Subcommittee. The time is right to end unfair business taxation 
and to make it clear that state taxation of out-of-state 
entities can only be done within certain well-defined limits. 
American businesses are not asking for a handout from the 
Congress, only a fair and level playing field, free from the 
unexpected tax surprises that I have described to you today. 
Thank you for your time.
    Mr. West. Thank you, Mr. Ducharme.
    Our next witness is Captain Steve Engemann, president of 
Hermann Sand and Gravel in Hermann, Missouri. Missouri or 
Missoura?
    Mr. Engemann. It depends on where you are from.
    Mr. West. Okay. Steve completed his river pilot training at 
the River School in Memphis, Tennessee, in 2002, and has been 
employed at Hermann Sand and Gravel since 2000. He began 
managing the plant in 2005, and in 2010, he became president of 
the company that employs 10 people. Hermann Sand offers a wide 
variety of services to his clients, including the sale of sand 
and gravel; commercial towing services on the Missouri River 
from St. Louis to Sioux City, Iowa; transportation of 
construction equipment; tugboat service; and commercial dock 
repair assistance. Thank you for being with us today, Captain 
Engemann.

                  STATEMENT OF STEVE ENGEMANN

    Mr. Engemann. Good morning, Chairman, members of the 
Committee. I want to thank you for the invitation to come. My 
name is Steve Engemann. I am here representing the marine 
industry as president of Hermann Sand and Gravel, Inc., located 
in Hermann, Missouri, about an hour and a half west of St. 
Louis. We are a small family business that operates on the 
Missouri River that was founded in 1978. It is owned by my 
mother, Melba, my brother, Tim, and myself. We operate two sand 
and gravel plants, one in Hermann, Missouri, and the other in 
Jefferson City, Missouri, and we employ 10. We have recently 
grown our business by leasing a tow line vessel which employs 
seven at any time it is operating. We pay above average wages, 
and although the local economy has stretched our budget, we 
continue to offer 100 percent of employer-paid health care 
coverage. While other businesses in the area have closed, we 
continue to research new ways to retain and maintain security 
for our business and our employees.
    Today I have been asked to speak about the impediments of 
regulation on small business in the maritime industry. I can 
assure you that these regulations and federal policies have 
constricted my business, and if left unchecked, will be the 
ultimate demise of my business and others that work on the 
Missouri River.
    Let me begin by communicating which government agencies 
regulate our business. These agencies include the U.S. Coast 
Guard, U.S. Army Corps of Engineers, the U.S. Department of 
Labor, Mine Safety and Health Administration, the Department of 
Transportation, the U.S. Fish and Wildlife Service, and the 
Department of Natural Resources.
    I have been trying to get dredging permits renewed since I 
came to work for the company in 2000. We have spent $185,952 in 
the last five years for an environmental impact statement and 
litigation pending to restore our permits to their original 
tonnage.
    There have been numerous meetings, trips, seminars, 
conferences I have attended so I can press the issue.
    The condition that hurts us the most is a 300,000 tons per 
five mile limit which was imposed on us last year. We are 
permitted to dredge 120,000 tons at that spot of our permit and 
once we compete with other companies in that area that have 
much larger permits, we have to go farther up the river, about 
seven miles, and our dredging equipment is not big enough so 
then we are just out the tonnage.
    MSHA is an inspection agency that will come and inspect our 
equipment. They will fine us for anything that is wrong before 
we are given a chance to fix anything. We certainly are for 
safety. I believe that you should be fined if you are negligent 
if you do not fix your equipment, but if you fix it you should 
not be fined.
    After dredging permits were limited in 2008, we started 
looking for other work that would create new jobs for our 
employees. We had a mine that was close to our facility that 
was looking for barge transportation and we were able to ship 
22,000 tons of commercial freight out of our sand dock in 2009, 
and this year we are going to be estimating that we ship 60,000 
tons.
    The Coast Guard is making vessels go through inspections on 
a regular basis. I agree with the need for a safe vessel, but 
they seem to have lost their desire to mark the channel with 
navigational aids. The Coast Guard can shut my vessel down, but 
it seems to be okay if we do not have a proper channel or a 
properly marked channel. I believe that it should be a joint 
effort to ensure that businesses like ours continue to succeed 
while understanding the need for regulations, and I feel like 
we should have the opportunity to audit the Coast Guard and the 
Corps just like they audit us, and we can work to grow the 
betterment of the river maritime industry.
    The rivers, and particularly the Missouri River, could give 
great relief to the highways of Missouri and beyond. The 
Missouri River is a world highway and allows our small company 
to compete on a global market. There are numerous benefits to a 
successful barge traffic. You have 64 semi loads on just one 
barge.
    There is a lot of freight on the Missouri River and willing 
and hungry terminals that want to ship the product. The 
obstacle standing between small business and successful revenue 
is the government.
    One thing that is most important to us is something that 
you can help with at Congress. You must pass a budget. 
Operating without a budget, it gives--the government entity 
cannot provide any assistance to the public if they do not know 
how much money they will be allotted. Our goal is to move 
enough river commerce to be a fully funded river on the 
Missouri River, which is a billion ton miles.
    All the while, I am supposed to be running a business, 
piloting a boat, managing and maintaining my fleet. I spend 
hours a day trying to work with the same governing agencies 
that seem to put me out of business. I am not expecting 
handouts. I am not looking for a grant. I want the government 
to provide me the service and stick with the plan that our 
forefathers laid out ahead of us. We are proud Americans with a 
strong German heritage in Hermann, Missouri, and we are 
determined that we want to leave this business to our children, 
just as our father did for us. We want to provide a safe, 
secure, and honest living for our employees. Thank you.
    Mr. West. Our final witness is Dr. U. Rashid Sumaila, 
professor and director of the Fisheries Economics Research Unit 
at the University of British Columbia's Fisheries Centre. He 
specializes in bioeconomics, marine ecosystem valuation, and 
the analysis of global issues, such as fisheries subsidies 
(illegal reported unregulated) fishing, and the economics of 
high and deep seas fisheries. Dr. Sumaila has experience 
working in fisheries and natural resource projects in Norway, 
Canada, and the North Atlantic Region, Namibia, and the 
Southern African region, Ghana and West African region, and 
Hong Kong and the South China Sea. You have a lot of frequent 
flyer miles. Thank you for your participation in this hearing, 
Dr. Sumaila.

                 STATEMENT OF U. RASHID SUMAILA

    Mr. Sumaila. Thank you very much, Congressman West. I am 
really grateful for having an opportunity to share some of our 
research results with you.
    The first point I want to make is that my research area 
does not cover specific statutes and legislative proposals 
being discussed here at this hearing, but my hope is that our 
global broad-based economic research, will enrich the hearing, 
even though I am not into the specifics of the hearing.
    Essentially, what we do at my center and my group, in 
particular, we study the ocean, fisheries, and try to inform 
and provide research to society in order to find ways that we 
can maintain the flows of benefits from our oceans through time 
for the benefit of both the current generation of people and 
businesses like you and future generations.
    So we look at marine recreational activities and in there 
we are looking at recreational fishing, whale watching, marine 
mammal watching, diving, kayaking, and all sorts of things that 
take place on the ocean. And our research shows that this is a 
huge source of economic values and benefits to the U.S. and to 
countries around the world. For example, we estimate that over 
one million people get their income and jobs from marine-
related activities world-wide, and the U.S. provides a big 
chunk of this. About $50 billion are made out of marine 
recreational activities and what is more interesting, about 110 
million people around the world go to the ocean for fun. This 
is where the jobs come from and where the profits and the 
dollars come from. So this is a very important source, and the 
way we manage them and ensure that they keep going is very 
important.
    Now, I have told you how important this is economically, 
but we all agree, I think, that the basis of this economic 
well-being is actually the ecosystem. We need to maintain the 
ecosystem, make it healthy, because upon that comes all these 
benefits. So that is fundamental.
    So if you go to the economic theory of common property, I 
mean, if you want to keep a healthy ecosystem, which is a 
common pool, then unfortunately you will have to have some 
regulation and I think you agree to that. The key thing is to 
see how to do this in such a way that it does not stop small 
businesses from surviving, but regulation we need because of 
the common property nature of the ocean. And I draw from Adam 
Smith, one of the main economic heroes, and I think for many he 
was an invisible hand economist who is the most famous one, I 
think. He sees that nature and the resources they contain 
belongs to every generation, and the current generation has no 
right to bind it up for future generations. He said this in 
1766, in a lecture in the U.K. I was not there but it looks 
like I was there at the time. So we need to manage these 
resources for all generations, and this is Adam Smith, himself, 
talking. And that means that some regulation is needed, some 
management. We need to bring all activities into a management 
system that will ensure that we keep drawing the benefits 
through time.
    Now, in terms of conclusion, I think, as I have said again 
and again, our research and those of colleagues around the 
world show that marine recreational activities support billions 
of dollars of businesses and that these businesses have impacts 
on the ecosystem and that is a part of the equation. You know, 
the more we go there, you have 110 million going, there are 
going to be impacts, and therefore, we need to find a way to 
manage that if we want these benefits to continue coming 
through. And from an economic theory of common property, as I 
said earlier, deregulating completely, deregulating common pool 
resources can be risky because of the general push to grab the 
resources. If there is money to be made, we will all want to 
make it so we need to have some ways to regulate so that we can 
continue to get the benefits.
    Finally, it is important to not forget the fact that a 
healthy environment is the basis of any economy, no matter how 
sophisticated the economy is. I made this point at the recent 
Rio +20 Summit. There was a big dialogue there and I was one of 
the panelists. Economies, we realize that an economy is based 
on taking resources from nature. We take the fish. We take the 
oil, the gas from the oceans and so on, and we do all our 
economic activities. And what do we do at the end of it? We 
pump out the things we do not like into nature. Right? The 
pollutants, the pollution into the ocean. So it is important to 
recognize that you need nature, and anything we can do to 
maintain our ecosystems is really important and good for the 
jobs and the money and the fun we derive from nature. And I 
just wanted to make this clear today to the Committee. Thank 
you very much.
    Mr. West. Thank you, Doctor. And we can start with my 
colleague, Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. Mr. Chairman, I would 
like to thank you for your leadership on this issue. I know it 
is something that is incredibly passionate for you and 
obviously, listening, important for our country as well. I come 
from the high water country of the entire nation in Colorado, 
so our oceans are a little limited up there, but this is 
something that we obviously all have, I believe, truly in 
common in terms of regulations that we are feeling as 
businesses. And Dr. Sumaila, I agree with you and I think 
everybody on the panel would as well. No one is calling for 
absolute deregulation. It is just common sense regulations that 
we would like to be able to see because we are part of the 
ecosystem as well and need to be able to survive. And as we see 
overreaches from government that are hampering our ability to 
be able to dredge a river and to be able to keep those people 
employed, to being able to sell boats in Michigan when you are 
coming out of Florida, to being able to keep those recreational 
fleets moving out as well, I have often found that people get a 
real appreciation actually for the environment when they are 
exposed to it, and a real appreciation for what is out there. 
So I do appreciate all of our panel here for being here as well 
today.
    I have a couple of questions here. Ms. Hebert, you were 
talking about a pretty big industry, $8.9 billion if I wrote 
that down correctly 107,000 jobs, 95 percent of your businesses 
are small businesses, people that are trying to be able to 
provide for their families and actually to be able to 
contribute back into those communities as well. You had 
mentioned that there is language to be able to restore 
congressional intent from 2009. Has it been your experience 
over the course of your participation in this industry that you 
see a regulatory body that at times runs off on its own track 
and exceeds congressional intent or completely distorts 
congressional intent?
    Ms. Hebert. I would have to say I can only really answer on 
this issue. And I think the difference between, you know, the 
marine industry, a lot of people think of it as a hobby, and it 
is something that people enjoy, but the fact is that we are an 
industry. In this case, Congress spent a lot of time. The part 
that is really frustrating, I actually have a letter here that 
I am going to hold up and it is from August 4, 2004, thanking 
me for testifying on this issue by a congressman at the time, 
vice chairman, Subcommittee of Workforce Protections, Judy 
Biggert. That is eight years almost to the day we vetted this. 
There was research that was done and yes, for this regulatory 
agency to supersede the intent, this was bipartisan. This was 
numerous administrations, and so on and so forth. I do not 
think it was done wantfully. I honestly think sometimes there 
is just a misunderstanding of the industry. We are not here 
advocating on behalf of yacht owners. We are here advocating on 
behalf of those 107,000 jobs and families that buy property and 
have their kids in school and that are Americans. So I think it 
is more of a misunderstanding versus anything wantful.
    Mr. Tipton. I am just kind of curious. There are some of us 
who believe that before a lot of these regulations go final, it 
might be a good idea for the regulatory body, so that we do not 
have these type of misunderstandings or misinterpretations, go 
on to be able to bring those regs back for review to the 
authoritative committee. Would that be a sensible approach in 
your mind?
    Ms. Hebert. Absolutely. Because we would like the 
opportunity to simply say--and I think what happened, the 
intent was not to cause more of a problem. I think there was 
just a misunderstanding of what the impact would be and the 
significance of what that impact was. And therefore, if we had 
had an opportunity to really talk about here is this 
definition, here is why that will not work. And the other part 
I want to make very clear is it is not only just about the 
recreational industry and small businesses having a problem. It 
is also the insurance industry. The insurance industry needs a 
bright line to be able to go, you are under longshore or you 
are not. And remember, you do not get any exclusions from the 
longshore unless you have state compensation. Every worker must 
be covered. So the insurance industry is even more confused, 
and honestly, what has happened is we are much worse because 
the insurance industry is saying there is no bright line. We do 
not really know what this definition means. So pretty much 
everybody in the repair industry, all of your work is now 
considered commercial under this definition, and I really do 
not believe that that would have been the case. Had we had the 
opportunity to review it, I think there would have been that 
discovery.
    Mr. Tipton. You brought up the American Recovery and 
Reinvestment Act and how it impacted your businesses. Was that 
a success, failure as it affected your businesses?
    Ms. Hebert. Well, I will say this. I am not happy with a 
lot that is in there but page 862, where there was the 
amendment for the longshore, that absolutely affected my 
business. I will tell you, I was able to hire three additional 
people after that went through. Just to give you an 
understanding of what this longshore means, and I am not sure. 
I do not want to take up too much time, but the recreational 
marine industry makes--the difference between, let us say you 
have got longshore and you have got state comp. Okay. The 
difference is when it comes into total disability and you have 
death benefits and lifetime. And, you know what, that is 
something that is absolutely deserving for those people that 
are working in those hazardous environments. The recreational 
industry makes up .001 percent of total disability workers' 
comp claims. Meaning 99.99 percent of the time it has nothing 
to do with our industry. Therefore, when you compare apples to 
apples, state comp is adequate with longshore. However, when 
you are talking about money, the money to that, it takes my 
workers' comp and multiplies it three times. So now I am up to 
upwards of $50 for every $100 of payroll going to workers' 
comp. I cannot have labor rates that are competitive. In South 
Florida, they are going to go to the Bahamas and in the Pacific 
Northwest, they are going to go to Canada, in the Pacific 
Southwest, they are going to go to Mexico. These boats are 
mobile and they have choices.
    So for us that was extremely significant because it was 
immediately jobs stayed here. Boatyards saved hundreds of 
thousands of dollars, and it is the boatyards that enable 
workers like myself to come in--plumbers, electricians, 
builders. So honestly, the ARRA saved our industry with that. 
We were able to be in a position that we could hold tight when 
our economy was really not going to go well.
    Mr. Tipton. Thanks for your testimony.
    Mr. Ducharme, I am a small business buy, too, and one of 
the frustrations I think that many of us have is we continue to 
see moving goalposts, not only in terms of the regulatory 
process that Ms. Hebert was just talking about but also in 
regards to the tax code. Can you maybe speak to the importance 
of being able to have some real certainty in terms of what we 
need to have in terms of tax code and regulation in this 
country?
    Mr. Ducharme. Absolutely. The issue that arises is twofold. 
The first one being not the most significant but it is 
significant in the sense that from a competitive standpoint, if 
the tax regs are not consistently applied and applied to 
everyone in the industry that you are in, then the price point 
that you are charging for your boat would need to be higher to 
offset those tax liabilities, and ultimately, you will not be 
competitive in your industry. So having a clear understanding 
across the entire breadth of your competitors allows you to 
compete on a level playing field.
    Mr. Tipton. So common sense and some real certainty, you 
could save a lot of money probably in terms of attorney fees 
that you mentioned, $100,000 I think is what I wrote down?
    Mr. Ducharme. Yes.
    Mr. Tipton. You probably would have invested that in your 
business.
    Mr. Ducharme. Absolutely.
    Mr. Tipton. Help keep people employed.
    Mr. Ducharme. Absolutely.
    Mr. Tipton. Expanded your business and tried to be able to 
grow it. And the government's policies are inhibiting that 
development of capital to be directed in those directions.
    Mr. Ducharme. Well, the state's actions by aggressively 
pursuing those out-of-state corporations and us needing the 
federal government to keep that flow of interstate commerce 
going without the impediments of states saying we are looking 
for revenue, out-of-state corporations seem to be the easiest 
to get that revenue from, so let us go after them, because they 
know at the end of the day the cost to actually argue and go to 
court and fight for what appears to be obvious is very 
expensive.
    Mr. Tipton. Right. I appreciate that.
    Captain, I wanted to be able to ask, and I apologize I am 
going over time, Mr. Chairman, here a little bit.
    Mr. West. Continue on.
    Mr. Tipton. With the dredging permits, how long is it 
taking you to be able to get these permits renewed?
    Mr. Engemann. We have been on extension since 2000.
    Mr. Tipton. Since 2000. We are in 2012.
    Mr. Engemann. Right.
    Mr. Tipton. Twelve years to be able to do that.
    Mr. Engemann. Sometimes they will give you a six-month 
extension, sometimes it is a year.
    Mr. Tipton. Does that create some uncertainty for you?
    Mr. Engemann. Yes. Why would I invest in my business? You 
do not know if you are going to be dredging next year. The 
sales are always there and the sand is always there, you know, 
but if you cannot get a permit to operate then why invest?
    Mr. Tipton. I think that speaks to a very important point 
that we have tried to address through this Committee and 
through a variety of committees in terms of the regulatory 
uncertainty that we are seeing and the inability apparently of 
this government to be able to give some certainty to people in 
the private sector when it gets down to some of the permitting. 
It is an unending process that we are dealing with it seems 
like that is truly hurting our ability to be able to create 
jobs.
    I want to go a little bit to your point in regards to MSHA 
as well and the thoughts that they come in the door and it 
seems to be a fine and punish mentality as opposed to improve 
and correct. Is that a fair assessment?
    Mr. Engemann. Right. Whenever they come, anything they find 
wrong is a fine depending on how severe the fine or how 
dangerous the situation is that they may have found. And then 
it is an allotted fine based on your employees, based on how 
many times you have been fined for that same thing before. It 
is quite an equation to come up with your fine amount. We try 
to do the best that we can, you know, to prevent them, 
obviously, because we want to have a safe work environment for 
our employees. But we would fix anything that they found wrong, 
and most everything that they do find wrong, after the fine we 
have it fixed before they leave, the inspector leaves, or at a 
minimum of 24 hours by the time they come back to close out our 
inspection. So a fine does not--it is just an extra expense 
that you have to put in your budget every year. It does not 
make our company any safer to me.
    Mr. Tipton. Well, I appreciate that. Believe it or not, we 
have that in a lot of businesses. I have dealt with OSHA as 
well with the same principle of wanting to be able to come in 
and fine and punish.
    I guess I would like to close, and if you would speak to 
this, Captain, you indicated that you are held to a high 
standard. You have one problem with that. You want to make sure 
that you are doing it safely, doing it properly, but government 
is not holding itself to that same high standard. If they do 
not mark the channels correctly, you can actually have a 
problem with being able to safely operate your business because 
government has failed to do the job that they are charged with 
doing. How many fines has government paid?
    Mr. Engemann. I do not know. My tugboat has been stuck for 
two days in a spot that we cannot get through.
    Mr. Tipton. How much is that costing you?
    Mr. Engemann. It is probably $4,500 a day. We have a crew 
of seven. We are pushing fertilizer to Nebraska City.
    Mr. Tipton. And whose responsibility, just to be clear, was 
it to be able to mark that channel? Was it yours?
    Mr. Engemann. No.
    Mr. Tipton. Whose?
    Mr. Engemann. The Coast Guard and the Corps of Engineers.
    Mr. Tipton. Okay. And the Corps of Engineers.
    Mr. Engemann. The Corps of Engineers would make the channel 
navigable, but we are having issues on the Missouri River with 
the Endangered Species Act where they make habitats and we have 
more water going through the habitat channels than we have in 
the river, navigable river. There is a 40-foot deep channel 
where the pallid sturgeon are supposed to be swimming and I 
have got seven feet where my barge is supposed to be.
    Mr. Tipton. I appreciate that and again, I appreciate our 
panel taking the time to be able to be here. I know it is an 
expense when you could actually be out doing your job as 
opposed to sitting in Washington, but I think this is important 
just to be able to shine the light of day that government can 
have some real impact. Sometimes there are a few positives that 
are out there, but we have got to be able to bring some common 
sense to this regulatory policy, to the taxation policy, and to 
be able to make sure that we have that common sense balance to 
be able to meet the needs, not only of our environment but that 
other portion of the environment, the American people as well. 
So thank you, and I yield back, Mr. Chairman.
    Mr. West. Thank you, Mr. Tipton.
    My first question overall to the panel, do you think that 
there is a negative stigma that is associated with the marine 
industry here in the United States of America?
    Ms. Hebert. Yes.
    Mr. West. Can you elaborate?
    Ms. Hebert. Absolutely. I, again, think it is a 
misunderstanding that this is all about gluttonous, having fun, 
that rich yacht owners are, you know, taking advantage of the 
government and you do not want to be regulated. There is 
nothing that could be further from the truth. In fact, I think 
that the government should mandate that anybody that makes over 
a certain amount of money be forced to buy a boat of a certain 
size because the quickest way to put money into the economy is 
buy a boat. You are either going to constantly be fueling, 
provisionally, repairing, all of those things. And all of those 
things, each and every step of the way, create jobs and money. 
So there is a huge misunderstanding.
    Mr. West. Anyone else? On average, per year, with one, you 
know, give an example, what is the provisioning for one boat or 
one yacht or recreational vessel that you see?
    Ms. Hebert. Well, I can give you one example of a boat that 
is a 150-foot boat, U.S. built. Their annual budget is $4.5 
million. And that is just maintenance. That is I am going to 
get some repair. I am going to provision. That does not include 
fuel, which every state, anywhere they go to get fuel, those 
taxes go, and especially in the state of Florida, they go to 
the general revenue. But that is, basically, you have crew to 
maintain it. You are going to Whole Foods or Publix or your 
Stop and Shop or your Kroger's or whatever your grocery store 
is. That is a general maintenance, $4.5 million.
    Mr. West. Dr. Sumaila, you talked about balancing 
ecosystems, and I thoroughly agree with you. I am a master 
scuba diver myself, and of course, you cannot get out to dive 
unless you have a boat. One of the things that we have down in 
South Florida, we are finding is that an invasionary species 
was introduced there. The lion fish has no natural predators, 
and one of the things that is promoted locally are lion fish 
rodeos where you get, you know, dive boats to go out and, you 
know, whack these little rascals and they are good eating as 
well.
    So I think that we do have those systems in place. It does 
not always have to be by the government coming down with 
regulation, but you have people that understand that the 
ecosystem is necessary for them to be able to go out and enjoy, 
you know, the boating. So I think that you have a system of 
policing oneself. My question to you is that when you sit and 
look at the recreational industry, boating industry here in the 
United States of America as far as them taking care of their 
ecosystem, how does that compare to some of the other places 
that you have been in your travels?
    Mr. Sumaila. You are right, Congressman, that regulation is 
not just about the government. It is about the people 
themselves and it goes all through the system. We talk about 
co-management a lot in places where you have business people 
meeting with government officials to find a way to do it in the 
co-management fashion. And you also have situations where the 
businesses and the communities take care of their things. So 
there is a wide range of ways of making sure that we make and 
keep the ecosystem healthy.
    Mr. West. But when you do a comparative analysis between 
what you see here in America, as you say, you have done studies 
here and research with other countries where you travel, how 
does the United States of America rate as far as our 
recreational marine industry and how we are caring for our 
ecosystem?
    Mr. Sumaila. This is a question I have not specifically 
looked at, so I would not be able to give you the scientific 
kind of answer. But if you go to South Africa, in Namibia, they 
do have recreational fisheries. And when I compared them and 
the U.S., it is reasonably similar actually because they do a 
good job, too, relatively, to the U.S. So yeah, South Africa 
and Namibia look similar to the U.S. in terms of managing.
    Mr. West. Ms. Hebert, one of the things--you talked about 
how this statute, this amendment was part of the American 
Reinvestment Recovery Act. That is law. And so how do you think 
it is possible that a government agency can come back and all 
of a sudden supersede something that was law?
    Ms. Hebert. I am not sure. I think that as Congressman 
Tipton suggested, I do not know that that was their intention. 
I think that there was a statute with a definition and they 
thought, well, let us make the definition better to understand 
that intent. Had they sat down with the repair segment of the 
industry and had that conversation and gone through the review 
and done the legislative review of that, they would have seen 
that that was inaccurate. I think it is communication. I do not 
know why that was the case.
    Mr. West. So they did not do any type of checking with the 
industry whatsoever?
    Ms. Hebert. There was a comment period put out. We did 
provide comments. I know that there was some discussion with 
the manufacturing portion of the industry and there was a very 
positive relationship. I just think on the repair side it was 
deemed insignificant. It was never reviewed by the Office of 
Budget and Management because, again, it was deemed 
insignificant.
    Mr. West. Is it deemed insignificant to you?
    Ms. Hebert. Absolutely not.
    Mr. West. Okay. So again, we have an instance where 
regulatory fiat trumped the legislative process in your 
estimation?
    Ms. Hebert. And long term. And I do want to say that this 
was a long, many Congresses different presidents. Whether it 
was a republican or democrat administration, this spanned over 
four congresses. The work was done.
    Mr. West. Mr. Ducharme, question. You ship your boats 
worldwide. Can you give us a comparison between the problems 
that you have that you brought up with Michigan and New Jersey 
or some others as opposed to when you are shipping your product 
worldwide? I mean, do you find yourself being at a greater 
disadvantage doing operations right here within the United 
States of American than doing it globally?
    Mr. Ducharme. Well, it is the most difficult to understand 
and the most cumbersome, absolutely. But from an international 
standpoint we ship to 20 different countries around the world 
and our responsibility stops once we deliver our product to the 
boat. So my understanding and information that I have about the 
European Union or Russia or China is pretty limited. But 
domestically, it is cumbersome. It is impossible to capture and 
understand what state or what municipality may be going after 
our industry and what tactics they may use to determine if they 
are going to send you a questionnaire, call you on the phone, 
tell you that they have your boats, you have got to pay some 
money in order to get them. So it is not easy to plan for.
    Mr. West. With the growth and the advent of the Internet, 
do you think that that will provide you the right type of 
presence in other states? Do you think that would meet that 
qualification?
    Mr. Ducharme. As far as the Internet and selling our 
product?
    Mr. West. Well, being able to have a presence in some of 
these other states because that is what you were talking about, 
this ability to say that you have a presence so that you do not 
receive this type of taxation.
    Mr. Ducharme. Physical presence, correct.
    Mr. West. Yes.
    Mr. Ducharme. So if there is a bright-line standard that 
says if you have these particular employees, property, payroll, 
and you have contact with our state that exceed a certain 
number of times per year because you are aggressive soliciting 
sales in our state, then you are going to fall under our taxing 
jurisdiction. Otherwise, we are not trying to avoid tax but you 
need to--you will still pay tax within the state that you are 
domiciled.
    Mr. West. Do you have any other state taxes that you get 
hit on?
    Mr. Ducharme. Yes, we pay in the state of Washington, 
Michigan I mentioned, New Jersey, and Louisiana, and Texas, and 
New Hampshire.
    Mr. West. Captain Engemann, you bring up a great point that 
affects, I think, this industry as a whole with our inland 
waterways, our ports and what have you. Why do you think it is 
taking so long for the Corps of Engineers to get through 
dredging permits?
    Mr. Engemann. There is a vast region that we are permitted. 
We are all permitted together on the Missouri River as one 
permit. We have individual permits to our company but we have 
Kansas City to the mouth at St. Louis, and there is a wide 
range of problems that the local graders may or may not have, 
like, in Kansas City, they have a bad degradation issue that is 
not the same where I operate. In Hermann, Missouri, we do not 
have that issue but I am still delayed with my permits.
    Mr. West. You mentioned earlier in your testimony all the 
different agencies that you have to go through, all the 
wickets. Do they ever have monthly or quarterly coordination 
meetings where you can sit down and do the one-stop shopping 
instead of having to stovepipe with each one of these agencies? 
And do you find there is no crosstalk and coordination between 
these agencies that you have to contend with?
    Mr. Engemann. There is no crosstalk, excuse me. A similar 
issue with, like you say, my dredge operator got an injury a 
few weeks ago. I reported an accident report to MSHA and the 
Coast Guard because he is a marine employee, but it means we 
are regulated by MSHA. We have to report it as my incident as 
well. So just one example. We are crossing all the time.
    Mr. West. You talked about the navigation devices. How 
often have you told the Coast Guard about this issue with the 
navigation devices and what type of response have you gotten 
back?
    Mr. Engemann. After a few months go by of negligence, then 
you will get some response and then they will come out and try 
to do better. There are big opportunities on the Missouri River 
to be successful if we can get the Coast Guard and the Corps of 
Engineers to work with us. We have increased our business 
tremendously this year and it has got a lot of potential.
    Mr. West. When you talk about the penalties and fines that 
you get, are you aware of these checklists that they have? Are 
there spot inspections? Are they scheduled inspections? If you 
are, as you said, able to rectify the situation on the spot 
while the inspector is there, do you still find yourself 
getting penalized and fined?
    Mr. Engemann. Still get fined. Yes, sir.
    Mr. West. Even if you correct it right there on the spot?
    Mr. Engemann. Even if we correct it right there.
    Mr. West. Annually, last year, how much of an economic 
impact did that have on you?
    Mr. Engemann. I would say $4,000 or $5,000 probably. We try 
to do our best. Like I say, we appeal something if it is a 
large fee or something.
    Mr. West. But even in appealing, does that cost you money 
in the appealing process?
    Mr. Engemann. It takes my time personally. You have a book 
of regulations from every agency that you try to follow, and in 
a large company they probably could have a full-time person be 
a safety inspector.
    Mr. West. Compliance person.
    Mr. Engemann. But in a small business you cannot afford it.
    Mr. West. Because you only have 10 employees.
    Mr. Engemann. I only have 10 employees.
    Mr. West. And most of them are out there on the river?
    Mr. Engemann. Exactly.
    Mr. West. To include yourself.
    Mr. Engemann. Including myself.
    Mr. West. Do you sometimes feel that these folks are coming 
down and they are working counter to you?
    Mr. Engemann. Yes, sir. We will hire a consultant 
sometimes, like a safety consultant, if I feel like we are not 
keeping up as good as we should or a new regulation that I do 
not understand, then I hire a professional consultant.
    Mr. West. Once again that cuts into your profit margin.
    Mr. Engemann. Minimum of $1,500 for basically a day or two. 
They will come out and might do a safety audit on your company 
or check for noise or dust or something. There is no way we 
could ever be out of those limits. It is not possible.
    Just for an example, dust. We have to check that annually. 
MSHA checks it annually. We are dredging sand that is wet. I 
mean, it is never going to have dust. But we still have to 
check it.
    Mr. West. Excuse me for laughing.
    Mr. Engemann. And it gets to be very frustrating. We intend 
to be there a long time and we have got long-term employees. We 
have been here 20 years and growing, and everything we invest 
in our community, in our business, and this is very 
frustrating.
    Mr. West. You know, you and Ms. Hebert are generational 
businesses. How do you look at the death tax and how that is 
going to affect you? If we are talking about taking this from 
35 percent bracket to 55 percent bracket, dropping the minimum 
exemption level from $5 million down to $1 million, I mean, are 
we going to be able to continue to pass on to subsequent 
generations the businesses that your fathers and forefathers 
created for you?
    Ms. Hebert. In my opinion, no. I think it is going to 
create such a disincentive or hurdles that instead of being 
focused on investing in our businesses and figuring out how, I 
mean, I plan on being there for our 100th anniversary, and I 
want to make sure that that happens. But when you have these 
hurdles such as this, I mean, how do you overcome that? And I 
think what is going to happen is there will be a way and 
eventually it will right itself. How many travesties and how 
many businesses are not going to be there or are not going to 
make it through?
    And at the same time, while our government, as Captain 
Engemann said, we are not looking for subsidies. We are not 
looking for any support. Congressman, where is the world's 
largest boat show?
    Mr. West. Fort Lauderdale.
    Ms. Hebert. Fort Lauderdale. The city, the state, and the 
county have contributed in the 53 years of this show zero 
dollars, and that is okay, because it is still the world's 
largest boat show. But when you have governments--I just came 
back from Taiwan last week. In Taiwan, the United States is 
between number two and number five on the global order book. 
Taiwan is number seven. This government, in addition to 
creating a regulatory environment that does not have hurdles 
for generations--which by the way that is very generational--
they are touting themselves, marching towards status as the 
world's luxury yacht manufacturing capital of the world. And 
with incentives and regulations that are for--I mean, they are 
building an entire waterfront. And you talk about the Army 
Corps of Engineers. I saw a boatyard change its facilities in 
one year and they now are able to put their boats in the water. 
Dredging was done in six months. There was not an Army Corps. 
Now, is that going to happen overnight? But when these 
countries figure it out, that we are going to overregulate 
ourselves, the business will go elsewhere, just like other 
industries it has. And I think that the death tax is very 
symbolic of that. Again, I do not think it will be forever gone 
but there will be many businesses. It will recreate our 
industry. We will not have the heritage.
    Mr. Ducharme. As a small family business, we take pride and 
our goal is we raise our kids in the family business. They are 
a part of our everyday life. And if you have to pay 50 percent 
tax for the next generation just to get it, that is not going 
to happen. You would end up selling the business.
    Mr. West. Would you say that our marine industry is a 
generational industry?
    Mr. Ducharme. Yes, sir. We are second generation, going to 
be going on third, hopefully.
    Mr. West Anything else, Mr. Tipton?
    Mr. Tipton. I just had maybe one more, Mr. Chairman. 
Showing the picture of the yacht, I have a friend and he said 
the only thing better than owning your own boat is having a 
friend who owns a boat--when you were talking about the ongoing 
expenses. But it obviously does create employment.
    You know, I do serve on the Small Business Subcommittee and 
chair, oversee Energy, Ag, and Trade, and one thing that we are 
always looking for is ways to be able to help American 
businesses really to be able to export. You are talking about 
the Taiwanese wanting to become the world's largest yacht 
builders, to be able to export those boats over here. But I am 
a little surprised because I think it is positive and we would 
like to be able to see that grow. U.S. exports, being about--we 
export about 21 percent of the powerboats manufactured here. 
Given that many of you are involved in, to some degree, 
exporting or facilitating some of the exporting that is going 
on, are there any additional steps that you see that Congress 
should be considering and should be undertaking to streamline 
or improve that part of the process?
    Ms. Hebert. I will answer quickly on that. Because I am not 
in the manufacturing and as far as the export, what I would say 
is remember that these are boats and they can come back. That 
if we export them, they do not have to go away because they can 
come right back. And let us make it easy for them to come back 
as foreign goods, and let us make sure that we still give them 
every incentive to come back and spend money in our U.S. 
waters.
    Mr. Tipton. Great. Thank you, Mr. Chairman.
    Mr. West. My final question comes back to the first 
question. We talked about the negative stigma on the marine 
industry. I would like to ask each and every one of you, what 
do you think that we can do to put a true American face on this 
industry to make sure that we do not have regulatory agencies 
that are coming up with their own little rules and changing 
rules to go against law? That we can make sure that agencies 
are out there supporting our business growth and ensure that we 
can have production manufacturing and also the transfer of 
goods along our inland waterways? So what would be your 
suggestions to help us to ensure that we keep the marine 
industry vibrant and safe to go on for future generations?
    Mr. Ducharme. Well, I think the point that you make that 
putting a human face on the industry is the most critical. We 
work with and are a member of the National Marine Manufacturers 
Association and each one of the manufactures that are a member 
of the group contribute based on the number of engines that 
they buy from the likes of Mercury and/or Volvo. And 
advertising and putting the human face on the family aspect and 
the jobs that all manufacturers create within the United 
States, it is a luxury good but it is for enjoyment, and 
responsible boaters are passionate boaters and they take care 
of waterways and they take responsibility for the environmental 
impact. And you find now that as Ms. Hebert mentioned, it is an 
expensive hobby. And you do not go into it unless you have a 
lot of passion for boating. And that is the face and the 
relationship that we have to make with manufacturing and 
pleasure boating within the U.S.
    Mr. Engemann. The one thing is that the agencies that 
regulate us need to have personal interaction with our 
companies, whether it be the Corps, Coast Guard, or MSHA, 
especially the people that make the rules. I want them to come 
talk to me. I want them to get on my equipment. I want them to 
get in my mind and see how we work. See how their rules are 
going to affect us. And there has got to be a common sense 
approach. You look at how this company's exports go for 
basically money. I mean, we have got a terrific debt. And the 
goods that we are shipping in the Missouri River is cash. You 
know, we are taking soybeans out of the Midwest that are very 
valuable globally. And that has got to be very important to 
hold that transportation asset open so we can safely transit. 
You know, the more goods we get down that river, the more cash 
comes in. To me that is very simple. I would consider the 
Missouri River to be the eighth wonder of the world. It was a 
feat. Whenever they built and designed this thing for 2,500 
miles between the dams and the property that was created to 
grow crops and then they had the most efficient transportation 
mode highway built along the same--to try to get--I do not know 
how many states it is, all thinking the same, that is a feat. 
And now we are blowing holes in it. They lost the common sense 
approach to keeping our marine system active, viable, and 
efficient. Thank you.
    Mr. Sumaila. The key point is for the U.S. to do all the 
country can do to maintain a healthy ecosystem. Taiwan, 
Thailand, if they keep allowing things to be taken down and the 
U.S. maintains its own, the businesses will come back here. So 
that is crucial. And how to do that is the common sense 
regulation, and you have to think of the businesses. Make sure 
you are not putting too much betting on them whilst we do all 
we can to maintain the ecosystem.
    And another thing that maybe the U.S. can do because the 
U.S. is an influential and powerful nation, is actually looking 
at these other countries and using whatever instruments and 
mechanisms to make sure that they do not disadvantage U.S. 
companies. I think that always you can do that. So Taiwan, if 
you want to do business with the U.S., there are some things 
you have got to do or we do not do business with you because 
that will help us avoid getting into what economies say race 
them to the bottom. Because if we all just keep saying, okay, 
if you regulate us and they do not do it with a disadvantage 
which is true, they are going to keep going down that way, lose 
the ecosystems that we all need and depend on for these 
businesses to go on. So maybe that could be another channel to 
use.
    Ms. Hebert. I think I am probably going to reiterate what 
all of my colleagues have said, is that a lot of it is 
communication. I have to say in fairness, I have never sat down 
with a legislator, regardless of where they are from, and by 
the end of the conversation not have them understand that the 
marine industry--many times there is an aha moment depending on 
where they are from. Not everybody is blessed to be a South 
Florida representative, but there is always an understanding 
once it is explained. So some of that onus is on our behalf, 
and I think it is all working together. I think having a level 
playing field with trade agreements, being able to do some 
things back and forth so there is not that incentive one way or 
the other that is heavy, and just really getting past the word 
``yacht'', and knowing that is okay. Big boats are good things 
and big boats equal big jobs.
    Mr. West. Well, thank you all again for being with us 
today. And as Chairman Coffman noted in his opening statement, 
the coastal and inland water transportation system is often the 
economic lifeblood of the regions where they are located. Small 
businesses across the country utilize our ports, our rivers, 
our lakes for a wide variety of applications for commerce and 
recreational alike. The maritime industry is a significant 
contributor to our national economy, and the federal government 
needs to do a better job of balancing priorities so that these 
waterways are maintained so that they remain valuable resources 
that they are.
    I look forward to working with all of you on these issues 
presented today, and again, I appreciate you being with us 
today and thank you for your testimony.
    I ask for unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record. And without objection, so ordered. This hearing 
is now adjourned.
    [Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]


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