[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                      PRESIDENT'S FISCAL YEAR 2014
                   BUDGET REQUEST FOR COAST GUARD AND
                    MARITIME TRANSPORTATION PROGRAMS

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

                                (113-9)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 16, 2013

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of 
JOHN J. DUNCAN, Jr., Tennessee,          Columbia
  Vice Chair                         JERROLD NADLER, New York
JOHN L. MICA, Florida                CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri                 RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York           JOHN GARAMENDI, California
DANIEL WEBSTER, Florida              ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
VACANCY
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                  DUNCAN HUNTER, California, Chairman
DON YOUNG, Alaska                    JOHN GARAMENDI, California
HOWARD COBLE, North Carolina         ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        CORRINE BROWN, Florida
PATRICK MEEHAN, Pennsylvania         RICK LARSEN, Washington
STEVE SOUTHERLAND, II, Florida,      TIMOTHY H. BISHOP, New York
  Vice Chair                         JANICE HAHN, California
TOM RICE, South Carolina             LOIS FRANKEL, Florida
TREY RADEL, Florida                  NICK J. RAHALL, II, West Virginia
VACANCY                                (Ex Officio)
BILL SHUSTER, Pennsylvania (Ex 
    Officio)
 
 
 
 
 
 
 
 
 				CONTENTS

                                                                   Page

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

                               TESTIMONY

Admiral Robert J. Papp, Jr., Commandant, United States Coast 
  Guard..........................................................     3
Master Chief Michael P. Leavitt, Master Chief Petty Officer of 
  the Coast Guard, United States Coast Guard.....................     3
Hon. Mario Cordero, Chairman, Federal Maritime Commission........     3
Hon. David T. Matsuda, Administrator, Maritime Administration....     3

           PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS

Hon. John Garamendi, of California...............................    30

 PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED 
                              BY WITNESSES

Admiral Robert J. Papp, Jr.:

    Prepared statement...........................................    31
    Answers to questions for the record from the following 
      Representatives:

        Hon. John Garamendi, of California.......................    40
        Hon. Rick Larsen, of Washington..........................    52
Master Chief Michael P. Leavitt \\
Hon. Mario Cordero:

    Prepared statement...........................................    53
    Answers to questions for the record from Hon. John Garamendi, 
      of California..............................................    66
Hon. David T. Matsuda:

    Prepared statement...........................................    70
    Answers to questions for the record from Hon. John Garamendi, 
      of California..............................................    77

                       SUBMISSIONS FOR THE RECORD

United States Coast Guard, 4 inserts for the record......14, 18, 22, 24

----------
\\ Master Chief Michael P. Leavitt did not submit a 
  prepared statement.
  
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                      PRESIDENT'S FISCAL YEAR 2014
                   BUDGET REQUEST FOR COAST GUARD AND
                    MARITIME TRANSPORTATION PROGRAMS

                              ----------                              


                        TUESDAY, APRIL 16, 2013

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met pursuant to notice at 2:28 p.m. in the 
Rayburn House Office Building, Room 2167, the Honorable Duncan 
Hunter (Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. Sorry 
about that. We had some votes and we will probably have some 
more folks trickle in as we go.
    So, the subcommittee is meeting today to hear testimony on 
the President's fiscal year 2014 budget request from the 
leaders of the Coast Guard, the Federal Maritime Commission and 
the Maritime Administration. The President requests $7.9 
billion for the discretionary accounts of the Coast Guard in 
fiscal year 2014 and an 8-percent cut below the current level. 
This is the second year in a row the President has forced the 
Coast Guard to have reductions to offset his questionable 
spending in other agencies.
    The President guts the Coast Guard acquisition budget, 
reducing it by $634 million or 41 percent below the fiscal year 
2013 enacted level. The President's request proposes to 
terminate or delay the acquisition of critically needed 
replacement assets, including Response Boat-Mediums, Fast 
Response Cutters, and Maritime Patrol Aircraft. The request 
also slashes the budget to improve shoreside installations by 
nearly 95 percent, and zeroes out funding to renovate derelict 
housing for servicemembers and their dependents.
    The President's request will severely undermine efforts to 
recapitalize the Service's aging and failing legacy assets, 
increase acquisition costs for taxpayers, and seriously degrade 
mission effectiveness. The subcommittee has worked for over a 
decade to implement a meaningful acquisitions program, which 
will enable the Coast Guard to carry out its missions in 5, 10, 
and 15 years. This budget slows that effort and dooms us to a 
future in which a down-sized Coast Guard is unable to 
accomplish even its most basic missions.
    For the fiscal year 2014 operating budget, the President 
proposes to reduce the number of Coast Guard servicemembers and 
reservists by nearly 2,000; eliminate tuition assistance for 
officers; reduce the number of foreign-flag vessels boarded for 
inspection; cut the number of foreign ports security 
inspections; close air stations; take recently upgraded 
helicopters out of service; and exacerbate the gaps in 
readiness by cutting training for personnel and retiring assets 
before their replacements arrive. In this budget environment, 
no agency can escape budget cuts, and I think there are ways to 
find savings in the Coast Guard's budget in a responsible 
manner; but, the budget the President sent us makes cuts that 
could adversely impact the safety and security of our ports and 
waterways.
    I commend Admiral Papp for his honesty in describing what 
these cuts will mean for the ability of the Service to 
successfully conduct its missions, and I appreciate the 
Admiral's efforts to do his best with the hand that was dealt 
him. The budget request for the Maritime Administration 
represents a 3.6-percent increase over the current level, but 
the increase comes as a result of the President's misguided 
effort to effectively eliminate the hugely successful Food for 
Peace Program. Since 1954 the Food for Peace Program has 
provided agricultural commodities grown by U.S. farmers and 
transported by U.S. mariners on U.S.-flag vessels to those 
threatened by starvation throughout the world.
    The President's restructuring of Food for Peace will 
eliminate a vital program for our farmers, put U.S. mariners 
out of work, and undermine our national security by reducing 
the domestic sea lift capacity on which our military depends. I 
would add that the President's attempt to placate the concerns 
of U.S. mariners by throwing some additional money at the 
Maritime Security Program for 1 year will not work. I hope my 
colleagues will join me in rejecting the President's misguided 
proposal.
    Finally, the budget request for the Federal Maritime 
Commission proposes a nearly 10-percent increase over current 
levels. Although a 10-percent increase in the FMC budget 
amounts to little more than $2 million, I think it sends the 
wrong signal in the current fiscal environment. While other 
agencies have implemented hiring freezes, the Commission 
proposes to add more employees. The Commission needs to take a 
much closer look at their operations and present a more 
realistic budget.
    Our Nation is facing a very tough budget climate. This 
Congress must work together to bring our exploding national 
debt under control. I look forward to working with my 
colleagues to achieve this goal in a responsible manner.
    With that, I yield to Ranking Member Garamendi.
    Mr. Garamendi. Mr. Chairman, thank you very much. There is 
much to be said following your comments.
    I have a written statement that I would like to put in the 
record for openers, but I think I'm just going to go off the 
written statement for a moment and simply say that much of the 
problem that this organization faces, or these three 
organizations face, and much of the rest of Government, is of 
the making of Congress. It is Congress that enacted the 
sequester and it is Congress that over the last several years 
has repeatedly diminished the Federal spending and raised much 
revenue. So, indeed, I agree with you. We need to address this 
issue in a comprehensive way.
    I know the Coast Guard is taking a big hit here and the 
budget as presented is not one that I like at all. I don't like 
the 480 program. I think that's a mistake, having spent 40 
years of my life working on famine and food issues around the 
world. I don't think this is the right way to go about solving 
that problem for the reasons that you stated and many others.
    With regard to the Coast Guard acquisition programs, we are 
going to have to work on that. The President's budget is not 
correct on that and we have to work on it. But, there's a 
larger issue that permeates everything we are doing in every 
budget in every hearing, and it is that we are unwilling to 
fund the Government that we really need.
    With that, I will yield back and ask that my written 
statement be printed in the record.
    Mr. Hunter. Without objection.
    I thank the ranking member, and with that our witnesses 
today are Admiral Robert Papp, Commandant of the Coast Guard; 
Michael Leavitt, MCPO of the Coast Guard; the Honorable Mario 
Cordero, Chairman of the Federal Maritime Commission; and the 
Honorable David Matsuda, Administrator of the Maritime 
Administration.
    Admiral, you are recognized for your statement.

 TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED 
  STATES COAST GUARD; MASTER CHIEF MICHAEL P. LEAVITT, MASTER 
  CHIEF PETTY OFFICER OF THE COAST GUARD, UNITED STATES COAST 
     GUARD; HON. MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME 
COMMISSION; AND HON. DAVID T. MATSUDA, ADMINISTRATOR, MARITIME 
                         ADMINISTRATION

    Admiral Papp. Thank you, Chairman Hunter, and to Ranking 
Member Garamendi, it is an honor to be here in front of you and 
the distinguished members of the subcommittee. And before I get 
into the bulk of my statement, I would just like to say the 
collective hearts of the entire Coast Guard family go out to 
the people of Boston. It was a tragedy, yesterday, but it is a 
tragedy for the Coast Guard as well.
    Our people are home-based within Boston. It has been a 
great, traditional port for us; but, in spite of everything 
going on, we were able to respond immediately with boats and 
boat crews from Sector Boston, the Maritime Safety and Security 
Team, an armed helicopter and boarding teams to enhance the 
overall Maritime Transportation Security posture.
    Now, our ability to respond like that is a direct result of 
the tremendous support that the Congress and the Administration 
have given us over the last 12 years, and that support enabled 
major responses this past year as well. During Hurricane Sandy 
we rescued 14 crewmembers from the H.M.S. Bounty in 30-foot 
seas and 60-knot winds, 80 miles offshore. In the Port of New 
York and New Jersey we serve eight channels; evaluated 
waterfront facilities; restored the AIDS Navigation System; 
and, worked across Government and industry to reopen the port.
    To meet the growing demands in the Arctic, we completed 
Operation Arctic Shield, a 9-month inner agency effort 
including the deployment of a National Security Cutter, two 
ice-capable buoy tenders, and two helicopters, 300 miles above 
the Arctic Circle. Given the lack of shore infrastructure and 
the extreme conditions in the Arctic, the capabilities provided 
by our National Security Cutter were critical to our operation.
    In executing the Department of Homeland Security, layered 
security strategy, the Coast Guard detected and interdicted 
threats as far offshore as possible. Targeting Central America 
coastal traffic routes, our cutters and aircraft teamed with 
interagency aircraft detected and interdicted drug-smuggling 
vessels carrying 107 metric tons of cocaine with a street value 
of nearly $15 billion, and we disrupted transnational criminal 
organizations.
    Closer to shore we responded to the growing threat of small 
go-fast vessels that smugglers are increasingly using to avoid 
increased security along the southwest U.S. border. Drug 
smuggling, human trafficking and other illicit maritime 
activity continues to threaten our Nation. Those engaged in 
this trade are growing smarter and bolder, and they are 
increasing the danger to our homeland.
    In December I presided over the memorial service for Senior 
Chief Boatswain's Mate Terrell Horne III of Coast Guard Cutter 
Halibut. Rep. Hahn, I want to thank you once again for being 
there for that ceremony and speaking to his family. He was 
killed by smugglers when they rammed his Coast Guard pursuit 
boat near San Diego. Our commitment to the Nation and our duty 
to honor the memory of SC Horne strengthens our resolve to 
defeat these threats.
    Unfortunately, much like the weather and the seas the Coast 
Guard faces on a daily basis, the Coast Guard cannot control 
the fiscal environment that we operate within. We will make the 
very best use of the resources you provide to safely and 
effectively conduct operations in areas of greatest risk to the 
Nation, while recapitalizing our cutters, boats and aircraft to 
address current and emerging threats, particularly in the 
offshore environment.
    The President's 2014 budget helps us to do that. This past 
year we made great strides in recapitalizing the Coast Guard's 
aging fleet. In October we'll christen the fourth National 
Security Cutter. Number 5 is under construction and Number 6 
will be under contract soon with the money in the 2013 budget.
    To date, we have taken delivery of 5 Fast Response Cutters 
with funding for another 19, and we have had the 14th of our HC 
144 aircraft delivered. We have also contracted for the ninth 
AC-130J and completed a midlife availability on our patrol 
boats, and we are nearly complete with the midlife availability 
on our Medium Endurance Cutters at the Coast Guard yard. 
Despite these successes, we have a long way to go to 
recapitalize the Coast Guard with ships, boats, and aircraft 
the Nation needs. The Capital Investment Plan should inform 
this discussion, and I look forward to getting it to you as 
soon as possible.
    As the Department of Defense rebalances to the Pacific and 
our maritime activities increase in the Arctic, offshore demand 
for Coast Guard capabilities is increasing. Our older, High 
Endurance Cutters have served offshore for nearly 50 years; 
but, as I have testified before, they are at the end of their 
service lives.
    I am very happy to report that I received the support of 
the Secretary and the President on my highest acquisition 
priority, including funding for the seventh National Security 
Cutter in the 2014 budget. The 2014 budget sustains the most 
critical frontline operations while funding our most critical 
acquisition projects. In the current fiscal environment, this 
required tough decisions informed by my highest priorities.
    They were difficult decisions for me and for my Service, 
but they were the best decisions to ensure we provide the next 
generation of Coast Guardsmen the tools required to protect our 
Nation. As I look back over the past year, I have never been 
more convinced of the value your Coast Guard provides to the 
Nation, and I have never been prouder of my Coast Guard people.
    While realistic and mindful of the current fiscal 
environment, I remain optimistic about the future of the Coast 
Guard. And it is my duty to look beyond the annual budget cycle 
and prepare and adapt the Service and keep moving it forward to 
address the greatest maritime safety and security risk to the 
Nation, not just now, but into the future. The men and women of 
the Coast Guard give all for the sacrifices they make every 
day, putting their country first, and we owe it to them to give 
them our very best efforts to provide the support they need.
    I want to thank this subcommittee for longstanding support 
for the Coast Guard in recognizing the sacrifices of our 
people; and, on behalf of my Coast Guard shipmates I say thank 
you, and I look forward to answering your questions.
    Mr. Hunter. Thank you, Commandant.
    Master Chief Leavitt, you are now recognized.
    Mr. Leavitt. Good afternoon, Mr. Chairman and distinguished 
members of the subcommittee. It is an honor and a privilege to 
appear before you today and to represent the dedicated men and 
women of the United States Coast Guard who stand to watch every 
day, always protecting and serving our Nation.
    Coast Guardsmen are charged with maintaining operational 
excellence across a very broad and diverse spectrum of 
missions. They are standing the watch overseas, on the high 
seas and our Nation's ports and waterways, and often in remote 
coastal communities. They are saving lives, protecting property 
and natural resources, conducting law enforcement, marking 
navigational channels for shipping, breaking ice, performing 
national defense missions, responding to national disasters and 
humanitarian needs, performing environmental prevention and 
response, building partnerships, internationally and locally, 
and so much more.
    As I begin my final year as a Master Chief Petty Officer of 
the Coast Guard, I continue to be amazed by the dedication and 
professionalism of our Coast Guard men and women and the 
support they receive from their families. Coast Guardsmen 
operate in some of the most challenging and unforgiving 
environmental conditions imaginable. Performing missions and 
conducting training in a maritime environment is inherently 
dangerous. A stark reminder of this reality was the tragic loss 
of the crew of our Coast Guard helo 6535 while they were 
training to operational proficiency.
    Last month the Coast Guard aircraft located a drug-
smuggling vessel 25 nautical miles off the Colombian coast. The 
aircraft vectored in a nearby Coast Guard cutter, which 
launched its helicopter to investigate. When the vessel tried 
to escape, the helicopter used warning shots which compelled 
them to stop. We boarded the vessel and prevented 2,000 pounds 
of cocaine from ending up on our streets. This case is a 
perfect example of how well-trained, equipped and proficient 
crews continue to carry out Coast Guard missions.
    Keeping illegal drugs out of our cities and towns is in our 
Nation's best interest. We do this by interdicting drugs close 
to the source at sea, where larger seizures are made with 
greatest effect. However, our efforts are not without a cost. 
As you have already heard, last December we lost one of our 
shipmates, Senior Chief Terrell Horne, who had made the 
ultimate sacrifice to the service of our Nation. His sacrifice 
will never be forgotten.
    That said, as leaders, we have responsibility to equip, 
train and care for our workforce and their families. We face 
challenges. The majority of our major cutters are over 40 years 
old, some even reaching 50. There is a cost to maintaining old-
fleeted cutters, and that is not just in dollars. The new 
assets that are requested in the 2014 budget, including the 
seventh National Security Cutter, are safer, much more capable 
and allow our crews to execute Coast Guard missions as 
efficiently as possible. The Sentinel Class Fast Response 
Cutters funded in previous budgets and requested in our 2014 
budget are now in service, and performing extremely well.
    I thank you for your continued support in helping the Coast 
Guard recapitalize our aging cutters, despite the challenging 
fiscal environment. Last year to my testimony I discussed some 
of the challenges our Coast Guardsmen and their families face 
in regards to adequate housing and childcare. We are truly 
grateful for the housing enhancements made possible in the 2013 
budget. These resources have helped to better support our 
military members and their families, and the 2014 budget will 
continue to do the same.
    Providing adequate housing for our Coast Guardsmen and 
their families remains a high priority. We recently completed 
an assessment of all our housing across the Nation, including 
Alaska, Hawaii and Puerto Rico. In this constrained fiscal 
environment, we will leverage to find that assessment to ensure 
funding is directed to those housing units that provide the 
greatest benefit for active duty workforce and their families. 
Additionally, with your support we are beginning to bridge the 
gap with the DOD in regards to offering childcare services.
    Since 2011 Coast Guard-sponsored childcare services have 
increased by 27 percent. Mr. Chairman, members of the 
committee, on behalf of the men and women of the United States 
Coast Guard and their families, I thank you for your continued 
support and I thank you for the opportunity to discuss some of 
the highlights and challenges Coast Guard men and women face, 
and I look forward to answering any questions you may have.
    Mr. Hunter. Thank you, Master Chief.
    Chairman Cordero.
    Mr. Cordero. Mr. Chairman, Ranking Member, members of the 
subcommittee, thank you for this opportunity to present the 
President's fiscal year 2014 budget for the Federal Maritime 
Commission. With me today are my fellow colleagues, 
Commissioners Rebecca Dye, Michael Khouri and William Doyle.
    Commissioner Lidinsky is unable to attend today due to a 
prior medical commitment, but does send his best regards. With 
the committee's permission, I would like to summarize my 
testimony and request that my full statement be submitted as 
part of the record.
    The President's budget for the Federal Maritime Commission 
provides $25 million for fiscal year 2014. This represents an 
increase of $2,160,575 over the enacted post-sequestration 
fiscal year 2013 appropriation, and funds 126 full-time 
positions. Our fiscal year 2014 budget request contains 
$18,478,000 for salaries and benefits to support the 
Commission's programs. This figure includes funds for salaries 
and benefits for 123 positions expected to be onboard by end of 
fiscal year 2013.
    It provides funding for three entry-level positions to 
backfill some critical positions. Rent, salary and benefits 
alone account for approximately 95 percent of our budget. The 
Commission's budget represents the spending levels necessary to 
conduct the Commission's basic operations, reduce regulatory 
burdens and cultivate the regulatory system that furthers 
competition, facilitates commerce and ensures reliable services 
to U.S. exporters and importers.
    The recovery in the U.S. liner trades that began 2 years 
ago continued in 2012, but at a slower rate, with U.S. 
container volumes increasing to a mere 3 percent to reach 29.8 
million TEUs. With this increase, total container volumes now 
surpass their 2007 rescission peak, and 2012 was a record year 
for export volumes. The Commission continues to work diligently 
to support the Nation's push to increase exports, the vast 
majority of which travel to a port and by ocean. Ports are the 
gateways that serve more than 80 percent of the volume of 
international trade.
    The Commission continues to work with Federal agencies on 
projects aimed at better understanding and finding solutions to 
supply chain bottlenecks that might negatively affect U.S. 
exporters. One such project is the USDA's ``Ocean Shipping 
Container Availability Report,'' also known as OSCAR. OSCAR 
provides agriculture shippers with estimates of equipment 
availability. A concern has been previously raised by this 
committee.
    The Commission has also developed a search tool, now 
available on our Web site, that shows consumers where to find 
licensed and bonded freight forwarders or nonvessel-operating 
common carriers. The Commission analyzes the impacts of 
industry innovations aimed at productivity, sustainability and 
efficient use of resources, such as the use and control of 
equipment used to move international ocean-going containers.
    The Commission actively monitors the industry to watch for 
canceled bookings, cargo rolled to the next sailing, and rapid 
increases in rates and surcharges that are identified by 
Commissioner Rebecca Dye who led Fact-Finding Investigation 
Number 26 back in the year 2010. As a result of that fact-
finding, the Commission's Office of Consumer Affairs and 
Dispute Resolution Services' Rapid Response Team still served 
the industry to quickly and cost-effectively resolve shipping 
disputes.
    To reduce regulatory burdens, the Commission has expended 
tariff exemptions and eliminated unnecessary recordkeeping 
requirements. We are also reviewing regulations governing and 
licensing and oversight of ocean transportation intermediaries, 
the review of filed agreements and service contract filings. 
The Commission will continue to engage with the shipping public 
and the regulatory industry to explore through its 
retrospective review of regulations, how it streamlines and 
improves rules and regulations.
    Earlier this year, the Commission increased the maximum 
coverage requirement of large cruise lines for nonperformance 
of wages from $15 million to $30 million per cruise line. At 
the same time, the Commission said it would provide on a case 
by case basis relief for smaller cruise ship operators by 
allowing them to reduce their coverage requirements and 
recognizing that there may be alternative options for financial 
protection available to their customers.
    In accordance with the mandate of Section 19 of the 
Merchant Marine Act of 1920, the Foreign Shipping Practices Act 
of 1988 and the Controller Carrier Act of 1978, the Commission 
studies the maritime practices for our trading partners. Not 
yet completed when the Commission last appeared before the 
subcommittee, the Commission released in July of 2012 the 
``Study of U.S. Inland Containerized Cargo Moving Through 
Canadian and Mexican Seaports.''
    Environmental sustainability concerns continue to play an 
important role in the agreements and shipping practices the 
Commission regulates. The Commission's internal Maritime 
Environmental Committee, originally established in the year 
2009 by my predecessor Chairman Lidinsky, studies environmental 
initiatives in the industry and highlights innovations in this 
area.
    The Commission's Bureau of Enforcement, its area 
representatives is located in key maritime corridors, and its 
investigative staff continue to take action to thwart shipping 
practices that are unfair and deceptive. Targeted violations 
have included illegal or unfulfilled agreements among ocean 
common carriers, unfair and fraudulent practices affecting 
household goods shippers, and misdescription of cargo. These 
violations affect not only shipping costs, but can also post 
serious safety and security risks. In fiscal year 2012 the 
Commission collected $838,000 in civil penalties per Shipping 
Act violations.
    The Commission-appropriated level of $24,100,000 for fiscal 
year 2012 was subsequently reduced by $1,260,575 through 
sequestration and rescission of an additional .2 percent. These 
reductions have resulted in a fiscal year 2013 funding level of 
$22,839,425, an amount roughly equal to the Commission's fiscal 
year 2009 appropriation. As a very small regulatory agency with 
an extremely lean budget, options to reduce costs, 
substantially, without furloughing staff are limited.
    As previously noted, salaries, benefits and rent account 
approximately for 95 percent of the Commission's budget. As a 
result, we estimate that FMC employees have approximately 10 to 
14 furlough days. Unfortunately, the measures we have been 
recently required to take will affect the Commission's ability 
to oversee the shipping industry, resolve problems through 
direct negotiations, monitor activities of regulated entities, 
consult with foreign trading partners to ensure harmony in 
international regulatory affairs, and expand compliance 
oversight.
    Mr. Chairman and members of the committee, I thank you for 
your support and ongoing support of the Federal Maritime 
Commission through the many years. It is an honor to appear 
before the subcommittee, and I am happy to answer any questions 
you may have. Thank you very much.
    Mr. Hunter. Thank you, Chairman.
    Administrator Matsuda, you are recognized for your 
statement.
    Mr. Matsuda. Good afternoon, Chairman Hunter, Ranking 
Member Garamendi and members of the subcommittee. Thank you for 
the opportunity to discuss the President's fiscal year 2014 
budget priorities and initiatives for the Maritime 
Administration.
    I know, as the Commandant mentioned, all of us are thinking 
of yesterday's events in Boston, and I would like to begin by 
expressing on behalf of the men and women of the Maritime 
Administration my most heartfelt condolences to those impacted 
by this tragedy.
    Our agency's programs help to ensure that the ocean 
transportation services our Nation requires at a moment's 
notice will be available to us when needed. The effectiveness 
of these programs and the ability of the U.S. Merchant Marine 
to respond quickly in a time of crisis were clearly 
demonstrated during the response to Superstorm Sandy last year.
    At the request of the Federal Emergency Management 
Administration, we work with the Defense Department to deploy 
the National Defense Reserve Fleet training ships Empire State 
and Kennedy, along with Ready Reserve Force Vessel Wright, to 
the New York region. Those three ships and their crews housed 
and fed nearly a thousand emergency responders and relief 
workers a night, providing warm beds, hot meals, and places to 
recharge communications devices. This action saved the Federal 
Government millions of dollars in hotel and per diem cost while 
not taking up local accommodations needed for displaced 
families. It is a great example of successful collaboration 
among Federal agencies and highlights the effectiveness of both 
our readiness programs and the U.S. Merchant Marine.
    The President's budget request reflects our continued 
commitment to the future of the industry, including educational 
excellence at the U.S. Merchant Marine Academy. The Maritime 
Administration has made significant progress over the past year 
in shaping the course and direction of the academy, including 
the appointment of new leadership and a new strategic plan. 
This budget request will allow the academy to build upon this 
progress by providing $81 million in funding. Of this amount, 
$14 million is dedicated to capital improvements to continue 
our efforts to create an enriching, educational environment.
    In addition, the budget request continues Federal support 
for State maritime academies. This includes funding for 
maintenance and repair costs for training ships like the two 
used in Superstorm Sandy response. The President's budget 
request also recognizes the important role of a militarily 
useful fleet and crews by proposing funding for the Maritime 
Security Program. This program provides the Federal Government 
assured access to a fleet of 60 militarily useful vessels, 
intermodal networks throughout the world, and shipboard jobs 
for 2,700 U.S. mariners.
    Late last year a major milestone was reached when the 
President signed into law legislation requested by the 
Administration, effectively extending the program from 2015 to 
the year 2025. This law helps provide long-term stability to a 
militarily useful U.S.-flag fleet, and I thank the subcommittee 
for supporting passage of that legislation.
    In addition, the budget requests $25 million for a new 
initiative aimed at mitigating the impact on sealift capacity 
and mariner jobs resulting from proposed food aid program 
reform. Should Congress approve this funding, the Maritime 
Administration will work with stakeholders to best leverage 
these resources to preserve U.S.-flag ships and mariner jobs.
    The budget also supports our priority to develop America's 
ports and marine highways. Included in this year's request is 
$2 million in new funding for port infrastructure development. 
Initially, we will target improvement of port planning 
activities and propose to develop a pilot grant program to help 
ports determine more effective investment strategies.
    Finally, the President's budget request addresses pressing 
environmental issues facing the maritime industry. It provides 
$2 million to continue critical research to identify solutions 
for better management of invasive species and ballast water, 
energy use and air emissions. It also provides funding to 
continue the steady and significant progress we have made in 
removing and disposing of obsolete ships from the National 
Defense Reserve Fleet. We are proud to report that the number 
of nonretention ships is at a historic low, and we are nearly 2 
years ahead of schedule in our cleanup of the Suisun Bay 
Reserve Fleet in California.
    Mr. Chairman, I look forward to working with the 
subcommittee on advancing maritime transportation in the United 
States and I am happy to respond to any questions you and the 
members of the subcommittee might have. Thank you.
    Mr. Hunter. Thank you, Administrator.
    I will now recognize Members for questions, beginning with 
myself. Admiral Papp, we are going to start on what I see as 
the three biggest issues here in regards to funding.
    Number one, the law requires that your Coast Guard provide 
us a 5-year Capital Improvement Plan in conjunction with the 
President's budget. We have not received that. Capital 
Investment Plan--excuse me. Is it investment or improvement? I 
have both written down. I could ask you or the staff up here, 
because somebody is.
    Improvement plan--Capital Improvement Plan that was made in 
law in 2012--why haven't we received it?
    Admiral Papp. Sir, I am just as unhappy that you don't have 
it in your hands, because the Capital Improvement Plan helps to 
inform the discussion on what we are purchasing this year and 
how that fits into the overall picture going into the out 
years. So I would prefer to have that here. It is currently 
being reviewed by the Administration; and, based on a hearing 
we had this morning, we contacted the Department of Homeland 
Security and they said it would be delivered to the Congress on 
the 1st of May.
    Mr. Hunter. How could a 42-percent cut over your 
acquisitions account be made while not having a Capital 
Improvement Plan or to plan out why those cuts would be made, 
and what you can do with those cuts?
    Admiral Papp. Well, sir, that's----
    Mr. Hunter. Clearly, no one else has done, and how do you 
get the 42 percent?
    Admiral Papp. Right. Being mindful of the situation we find 
ourselves in in this fiscal environment, we had to make some 
very tough decisions based upon the money that was available 
and make decisions based upon our highest priorities. The 
highest priority for me is getting our offshore fleet 
completed. The National Security Cutter is a large part of 
that.
    Once that decision is made and supported in the budget, 
then the top line figure determines how much of everything else 
we can buy. This pushes everything to the right. It increases 
the price, because we are not able to order an economic 
quantity numbers, and delays the implementation of our fleet 
plan that we started out on a number of years ago.
    The other thing it does is it increases the soft, 
significantly, of maintaining the current assets, the old ships 
that are out there, those that are 25, 30, and up to 50 years 
old. The maintenance costs on them never go down. They continue 
to increase and take a larger bite out of our operating funds. 
Our operating funds, if you look at them superficially, remain 
fairly stable, but the costs within there, whether it's pay 
raises or increased maintenance on antiquated, obsolete 
equipment, continues to erode the buying power of those 
operating funds.
    Mr. Hunter. So there is no maintenance offset in the 
President's budget to make up for the cutting of your 
acquisition account?
    Admiral Papp. No, sir. Within our operating funds we need 
to make sacrifices in other areas in order to be able to pay 
for the increased maintenance costs.
    Mr. Hunter. So let me ask you this, then. Why do you think 
that the Administration basically canceled the Coast Guard's 
acquisition program with this budget?
    Admiral Papp. Well, the entire program is not canceled. We 
are continuing; but, as I said, National Security Cutter is a 
big one.
    Mr. Hunter. I am being a little bit facetious.
    Admiral Papp. Right.
    Mr. Hunter. It is a 42-percent cut. That's a pretty big 
cut.
    Admiral Papp. I have no insight onto why that number was 
established. I gave my requirements. It's a negotiation 
process, and at the end of the day I am giving a top line that 
I have to live within, and hopefully my priorities are 
reflected within that. National Security Cutter is a priority, 
because we need to get those eight ships constructed.
    Fast Response Cutter is another high priority, because our 
patrol boats are failing; but, given the room in the budget 
that was left over after fitting in the National Security 
Cutter and other priorities, we were limited to two Fast 
Response Cutters in that budget. Another one is our aircraft 
program. These are tough decisions. We completed ordering 18 of 
our AC-144 aircraft, our medium-range, fixed-wing aircraft. We 
are taking a pause on that.
    Mr. Hunter. Those Air Force C-27s are looking pretty good 
right now.
    Admiral Papp. Absolutely, yes, sir, and we are in 
negotiations to see what we can do, because that would save us 
a lot of upfront costs and I think provide us with a very 
capable aircraft into the future. But with the way the language 
was written in the Defense Authorization Bill, there's a split 
of those aircraft between the Forest Service and the Coast 
Guard.
    We are working with the Forest Service right now to see how 
we determine this, because, obviously, you have to have a 
certain number of aircraft to make it economically feasible to 
operate with your logistics program and training programs.
    Mr. Hunter. Last question. So this is just looking forward 
with this budget. Let's say that everything stays where it is. 
What are you going to have to cut back on in the coming years 
in order to move the money from operations to maintenance to 
take care of the older ships that you would have decommissioned 
upon getting newer ships? What is going to happen in the next 
year? In what way is your capability and your ability to reach 
out and touch throughout the oceans? How is it going to be 
limited?
    Admiral Papp. Well, sir, you mentioned in your opening 
statement the fact that there are personnel losses. We could 
probably quibble over the numbers, but just as importantly as 
maintaining and getting the new equipment is sustaining our 
workforce. Our uniform personnel, just shy of 42,000, are at 
the level the Coast Guard was in 1990.
    During the 1990s, we got reduced down to 36,000 people in 
uniform and it was almost impossible for us to carry out our 
missions and do proper support for our training capabilities 
and everything else. It is nearly as high a priority for me as 
the new equipment to maintain that workforce, and we are doing 
everything we can to keep as many people as we can, because we 
depend upon our military and civilian workforce to work as a 
team to get the job done.
    On the personnel side, I would have to use a term that was 
used by somebody else, that we are probably at the tipping 
point. I think we have whittled away enough on our personnel 
that now we're going to start eating into training programs. We 
are reducing the numbers of officers or cadets, potential 
officers coming into the Coast Guard Academy. We have reduced 
our input at Cape May to 1500 people this year.
    As far as I know, that is the lowest we have ever brought 
into our training center at Cape May since World War II. And, 
commensurately, we have to reduce training staffs along the way 
as well. These have long-term impacts for us that would be 
difficult to recover from. Incrementally, we can make due, but 
as you accumulate them over the years as we have seen over the 
last couple of budget cycles with personnel, it will have a 
longstanding impact for us.
    Mr. Hunter. Thank you, Admiral. And, before I recognize the 
ranking member, I would like to throw one thing out there.
    We would like to say that Congress did this, and we blamed 
this on sequester. And we would like to say that this fiscal 
environment that we find ourselves in, but from 2001 to 2006, 
the Coast Guard had some problems with its acquisitions 
program. It is questionable how much money just kind of went 
down the hole. You can say it is roughly $300 million just went 
away.
    And I think this committee and your leadership and others 
are responsible for getting that out of the trenches, again, 
that acquisition system back onboard. So it is a lot of 
people's problem we find ourselves right now, but it is not 
solely that of Congress. I just want to say that, and with that 
I recognize Ranking Member Mr. Garamendi.
    Mr. Garamendi. Thank you, Chairman Hunter.
    Admiral Papp, Chairman Hunter went through a series of 
questions about the acquisition programs. I am sure that he and 
I and the members of this committee will do whatever we can to 
try to restore as much money as possible to the Coast Guard 
overall account. It would be helpful to us--well, before I go 
there, I think it is unlikely that we are going to see 
restoration of the full authorization.
    For example, in acquisition construction improvement, you 
are authorized at $1\1/2\ billion; you are down to $909 million 
right now. Assuming we have any success of restoring money for 
the Coast Guard from the President's budget increase, it would 
be helpful for us to know your priorities. If we were able to 
get $1 back, where would you spend it?
    If we were able to get $100 million back, where would you 
spend it? So, if you could, share with us that information, 
probably not today, but in the near future so that our efforts 
can be targeted.
    Admiral Papp. Well, I would be happy to address at least a 
large portion of that, sir. First of all, last year when we 
sent up the Capital Improvement Plan, there was no National 
Security Cutter Number 7 in it for the 2014 budget; none for 
National Security Cutter Number 8 in a subsequent budget. So I 
am grateful for the fact that we now have the money for 
National Security Cutter Number 7 in the budget.
    That was helped, quite frankly, last year by both the House 
and the Senate providing long lead money for Number 7. Getting 
long lead money in the construction of the National Security 
Cutter saves us money in the long run; gives the shipyard 
predictability, so they can plan out economically; and helps us 
in our negotiating position when we work towards the contract 
on the next cutter, after that, of course, the Fast Response 
Cutter.
    The shipyard is set up to construct six or receive orders 
for six Fast Response Cutters a year. We only had money for two 
last year. We are grateful that Congress put money for four 
more, so that we are potentially able to order six in fiscal 
year 2013. But, as it stands now, I only have enough money left 
within our acquisition counts to offer up two.
    The next dollars I would spend would be on the Fast 
Response Cutter, because ordering two per year, first of all, 
is below the minimum quantity. We'd have to renegotiate the 
contract, which ultimately ends up in a higher cost, building 
them at a slower rate and stretches out that program, probably, 
over the course of about 15 years at a much higher cost as our 
current patrol boat fleet is failing us rapidly and we are not 
getting the number of hours we need out of them. So, continuing 
construction on the National Security Cutter and the Fast 
Response Cutters are my next highest priorities.
    Mr. Garamendi. Well, if you could assign dollar numbers to 
each of those programs so that, certainly, for me, and I 
suspect the chair also, would then have specific numbers to go 
to the Appropriations Committee and try to alter the 
President's budget.
    So, that would be useful. And then just your ranking; start 
with your highest ranked number of dollars, and then all the 
way down to the lowest so that your full authorization is 
complete.
    Admiral Papp. Yes, sir. We will be happy to provide that 
for the record.
    [The information follows:]

        The Coast Guard and Maritime Transportation Act of 2012 
        (P.L. 112-213) requires the submission of a Report 
        containing the Coast Guard's Capital Investment Plan 
        and a list of each unfunded priority for the Coast 
        Guard. This product has been drafted and is with the 
        Administration for review.

    Mr. Garamendi. And I'm sure we will go to bat for that and 
see if we can make some progress and restore some of the cuts 
that are in the President's budget. Personnel on the other side 
of it also, if you would take a look at that, so that we have 
some sense of what might be possible, so that we know what we 
can work on.
    I do have a couple of other questions. I am concerned 
about, Mr. Matsuda--excuse me. This would be for Mr. Cordero. 
I'll get my act together here in a moment. The Title XI loan 
program is not funded. So what is your mission? How do you 
carry out your mission of providing support for the maritime 
industry? Title XI is not covered, so what are we doing here?
    Mr. Matsuda. I would be happy to answer that, sir.
    Currently, the Maritime Administration possesses $38 
million in carryover funding from previous years for the Title 
XI program. So the Administration did request funding to 
continue the program, continue to monitor the portfolio $2 
billion worth of shipbuilding projects that we are overseeing. 
We will continue to process applications as they come in.
    Mr. Garamendi. So you have money from previous 
appropriations that have not yet been encumbered.
    Mr. Matsuda. We do. We have enough to fund $420 million 
worth of shipbuilding projects. I will point out that there are 
other shipbuilding incentive programs that contain up to close 
to $3 billion worth of tax-protected funds that could be used 
by the private sector to build ships in the U.S.
    Mr. Garamendi. Thank you. The food program, 480 program, 
the chairman mentioned, this is his concern. I share that 
concern. I also come at this from a different perspective, and 
that is the availability of food in those parts of the world 
where there is hunger. And the proposal by the Administration 
is essentially one of purchasing food regionally rather than 
using American commodities and on American ships to be 
delivered to those areas.
    I don't think it works. I've been at this for 40 years, and 
I don't think it works. I am trying to figure out where the 
regional food purchasing is available. Presumably, there is a 
shortage of food in that area, so what is the region. Do you 
have any idea when they say ``region'' what is a region?
    Mr. Matsuda. Well, I'm probably not in the best position to 
get into the specifics of the proposal. I can tell you that 
there will be an impact to the maritime industry, and we do 
include funding in the budget proposal to help address any 
potential loss of ships, the U.S. flag or mariners to the 
mariner pool.
    Mr. Garamendi. Yeah. But the proposal puts that entire 
industry on a downhill slope to the point where it won't exist, 
because the program doesn't exist upon which it is based.
    Mr. Matsuda. Well, the program in 2014 would. The proposal 
would cut it to 55 percent of the current funding level, so 
there would be some U.S.-sourced food as well as flexibility 
for other ways to implement those programs.
    Mr. Garamendi. And then beyond? And the succeeding years?
    Mr. Matsuda. Well, the current proposal addresses fiscal 
year 2014.
    Mr. Garamendi. Well, it is kind of like a short-term 
unemployment insurance program with no job in the future.
    Mr. Matsuda. Well, I know that my colleagues in the 
Administration are certainly anxious to talk more about the 
specifics, especially with those that administer the food aid 
programs, to convey the details about the local purchasing part 
of the program.
    Mr. Garamendi. So, for me, there are two parts to this, two 
problems that have been presented by the Administration. First, 
the availability of food within a region where there is hunger 
and the impact that this might have in that area, or the 
unavailability of that food; and, secondly, the impact within 
the United States, both in agriculture as well as in shipping. 
These are questions that I have not yet received answers to 
from the Administration, and I await those answers.
    Mr. Chairman, there are about a thousand other questions, 
but I will yield back at this point.
    Mr. Hunter. Thank the gentleman.
    Mr. LoBiondo is recognized.
    Mr. LoBiondo. Thank you, Mr. Chairman.
    I want to join in with the chorus and express my strong 
opposition to the proposed cuts in the President's budget for 
the Coast Guard. And, as you mentioned, Mr. Chairman, a 43-
percent cut in Coast Guard acquisition account, it is just 
wrong. It is just absolutely wrong. I mean we haven't learned 
our lessons in the past, and can blame this on sequestration, 
if you want. But this is the second year in a row the President 
is separated from the reality of what the Coast Guard is 
expected to do.
    The budget also includes heavy cuts in training. Admiral 
Papp, you talked about this for a minute. The only Coast Guard 
recruit training center in the Nation happens to be in my 
district, and I am pretty proud of it. The work that's being 
done there, it's scaled back to 1500 a year. The intangible is 
what it is going to do to morale. The intangible is what it is 
going to do to our officer corps. The intangible is what it is 
going to do to the ranks of the Coast Guard.
    The immediate is what these cuts are going to mean to 
satisfy the needs of the Coast Guard, but it is just wrong. 
And, as noted out by the chairman and ranking member, the 
Administration's decision to restructure the Food for Peace 
Program, I think is, again, absolutely wrong. These are 
American jobs that will be lost. This is American capacity that 
will be lost; and, again, it is a separation from the reality 
of a program that really works.
    I have a couple questions, Administrator Matsuda. The 
fiscal year 2009 NDAA Bill contained language authorizing MarAd 
to draft long-sought regulations that would provide the agency 
with enforcement authority over cargo preference laws, 
including fines and debarment. The bill was signed into law in 
2008, yet 4\1/2\ years later, despite repeated promptings, 
urgings, cajolings, these regulations still have not been 
promulgated.
    With a pool of available preference cargoes in rapid 
decline for a number of various reasons, cargo preference laws 
are more important than ever and will help ensure the U.S.-
flagged industry as being utilized as required by law. What is 
the status of this and what's been the holdup, and what can we 
expect?
    Mr. Matsuda. Well, we continue to work within the 
Administration to try and get that rulemaking into place. In 
the meantime, we try to address the problem of working with the 
specific agencies that have either historically or had reported 
problems in getting compliance with the cargo preference laws. 
But, in any event, we are fully pursuing both the rulemaking 
and any action we can take to try and gain full compliance. In 
many cases, we found it is simply a matter of education, that 
the staff of other agencies just either were unfamiliar with 
the law or the folks making the sourcing decisions.
    Mr. LoBiondo. Is the rulemaking at OMB or MarAd?
    Mr. Matsuda. Currently, we are developing it.
    Mr. LoBiondo. Well, you know, I have got to say, Mr. 
Chairman, I don't know. You know. Years and years, and we are 
at a critical juncture now. I mean, at a certain point, if you 
are on this side of the table--you are anybody in the real 
world--you say, the bureaucracy is wagging the dog here. I mean 
any prospect 2 months, 6 months, 6 years?
    Mr. Matsuda. I couldn't say. I can tell you it is a top 
priority for the Maritime Administration.
    Mr. LoBiondo. Oh. With all due respect, Mr. Chairman, I 
think that is an unacceptable answer.
    For the Commandant, my question is the Air Force recently 
made available 21, brand new, C-27 J cargo transport planes as 
excess defense articles. Could these aircraft fill any near or 
long-term capacity shortfalls in the Coast Guard's ability for 
airlift? And, if so, have you informed the Secretary of Defense 
of the Coast Guard's interest in receiving these aircraft?
    Admiral Papp. Yes, sir. They will definitely fill a need. 
They will be a great replacement for additional AC-144s that we 
would have to buy brand new; and, frankly, they are such a 
capable aircraft that we can probably replace some of our C-
130s, the older C-130H models, with C-27s.
    I have not spoken directly to the Secretary of Defense, but 
I have spoken to the Chief of Staff of the Air Force and the 
Secretary of the Air Force. They are well aware of our desire 
for those aircraft and support that; but the current 
legislation requires a split of those aircraft between us and 
the Forest Service. 14 is the minimum number that would make 
economic sense, because we have to outfit multiple air 
stations. We need at least 14 to do multiple air stations and 
have some for our product line in maintenance at Elizabeth 
City.
    We would love to get all 21 of those aircraft, because that 
would be not only a superb aircraft, but would allow us to do 
more air stations in outfitting them. So we will continue to 
work with them.
    Mr. LoBiondo. Thank you.
    And that's it, Mr. Chairman, except I hope that we can talk 
further with you and any interested members of the subcommittee 
of how almost 5 years later we can't get these rules 
promulgated. I think that is just inexcusable.
    I yield back.
    Mr. Hunter. I thank the former chairman of the 
subcommittee. Ms. Hahn is recognized for 5 minutes.
    Ms. Hahn. Thank you, Mr. Chairman, Ranking Member Garamendi 
for convening this very important hearing today focused on the 
President's budget.
    I want to thank all the distinguished guests for appearing 
before us today, Administrator Matsuda, and again my thanks to 
you for graciously coming out to Los Angeles/Long Beach, having 
a meeting in my office with the stakeholders at the port so 
that they could share with you some of their concerns about the 
future of that port complex. And, of course, I always want to 
say hello to my friend, Hon. Mario Cordero, and congratulate 
you on your appointment as chairman of the Federal Maritime 
Commission.
    And, Admiral Papp, thanks again for--you know--always 
remembering our Senior Chief Petty Officer Horne. Every time we 
get together we should remember him. And if there was any 
silver lining to his tragic death, it was maybe Americans began 
to really see what the Coast Guard actually does day in and day 
out and the danger that they experience. You have for so long 
done your jobs with strength and dignity, but sometimes 
quietly, just doing what you're supposed to do. But I think his 
death brought it to light, really, the dangers, particularly 
since 9/11, what we are facing out there.
    So I represent the Port of Los Angeles and next door in 
Long Beach we represent probably the largest port complex. 
Well, we do in the country, and really in the world. And so one 
of my priorities is, of course, to keep that complex running 
safely and efficiently, and without disruption. So I do not 
know if I am misinformed, but I was told that we actually have 
no plan moving forward from either the TSA or the Coast Guard 
to prepare for the nearly 60,000 port workers who will need to 
renew their TWIC badges this year.
    I met last week with the director of security for the Port 
of Long Beach, and he stated that he is concerned that this 
event, the renewal of these badges, has the potential to 
completely shut down the entire Port complex. Longshoremen 
would not be able to load goods onto the ships; truckers would 
not be able to access the port to ship their goods, and the 
port responsible for moving over 40 percent of our Nation's 
goods could be shut down.
    And I know there is a grace period for expiring TWIC cards, 
which I think is about 37 days, which is not nearly long enough 
to accommodate all of the workers at the port the size of the 
L.A. and Long Beach, and I know that TSA is responsible for 
implementing the program. But the Coast Guard has told me that 
they're responsible for enforcing the program. So my question 
to you is what does the Coast Guard expect to do when possibly 
60,000 port workers try to access the port with expired TWIC 
cards this year?
    Admiral Papp. Ma'am, you have caught me cold on that one. 
Frankly, I am not aware of that problem, and TWIC is of 
significant interest to me as might be expected.
    Wherever I travel and I run into a transportation worker, I 
ask them, and I ask them about the process and how easy or 
difficult it is to get it. I was in the Rhode Island Airport 
just last Saturday night coming back here, and I was listening 
to a couple of merchant mariners talking about how easy it was 
for them to get their TWIC card the last time. So, all the 
feedback I've had in terms of getting the cards has been 
positive. I am not aware of this particular situation. I will 
find out about it immediately; and, if you don't mind, will 
provide you the information.
    Ms. Hahn. Good. Great. And, I don't know, David or Mario, 
if you are aware of this potential problem of all the cards or 
many of the cards expiring at the same time and the ability for 
us to actually process that. And, again, what do we do when 
they show up and they've got expired cards? What are we going 
to do?
    And, Admiral Papp, I appreciate you kind of not being aware 
about this. I wasn't either until it was brought to my 
attention last week. But I thought since I had you here and we 
were talking about the budget, it might be a good opportunity 
to tell you that I think it is a problem, and I think we better 
figure out what we are going to do.
    Admiral Papp. Yes, ma'am. One thing though is if they have 
a TWIC and if we are aware of this problem, a solution can be 
found, because part of the beauty of TWIC is having one, 
identifiable card across the entire industry that we can use 
instead of multiple ones. So it makes it much easier if there 
is a problem to come up with a unified position that we can 
take to either accept those cards, and know that even though 
the date might be expired that we continue to use it for some 
certain period of time until it is resolved. But, once again, I 
don't have the detail. So we'll have to get back to you.
    [The information follows:]

        (1) TSA is responsible for processing TWIC 
        applications, vetting the applicants, issuing the 
        cards, and associated administrative functions.

        The Coast Guard and TSA encourage TWIC holders to begin 
        their TWIC renewal or application for an Extended 
        Expiration Date (EED) TWIC from up to 4 months prior to 
        the expiration of their current TWIC to ensure timely 
        processing.

        (2) Coast Guard regulations grant an individual up to 7 
        days of unescorted access without a TWIC while they 
        await delivery of a replacement credential. To minimize 
        business disruptions, the Coast Guard also developed a 
        policy which allows owner/operators of MTSA regulated 
        vessels, facilities, and OCS facilities to extend this 
        provision an additional 30 days (37 days total), for 
        workers who have applied for a TWIC renewal prior to 
        its expiration, and through no fault of their own, are 
        not able to take possession of their TWIC due to a 
        significant delay in the application, production, 
        issuance, and/or activation process.

        The Coast Guard will continue to consider and evaluate 
        the impact and effectiveness of this policy to meet 
        challenges while ensuring a secure and reliable TWIC 
        program. To date the Coast Guard is not aware of any 
        facility that has had to shut down operations due to 
        workers being unable to obtain replacement TWICs.

    Ms. Hahn. Great. Well, when you come up with a plan, let me 
know.
    Admiral Papp. Yes, ma'am.
    Ms. Hahn. Thank you. Thank you, Mr. Chairman.
    Mr. Hunter. Thank the gentlelady, and just some information 
I didn't know this either. TSA has--you can get a 3-year 
extension while you are waiting for the readers for the badges 
right now. They are trying to do that. If there is no reader 
and you don't have the badge for the reader, you can get an 
extension.
    So, now, we all know that, at least we can go from there. 
With that, Mr. Southerland is recognized for 5 minutes.
    Mr. Southerland. Thank you, Mr. Chairman.
    I would like to thank each of you for being here today. As 
I listen to the discussion regarding the budget, I try to keep 
everything in context. And I know it is clear you are 
performing a constitutional requirement of Government to 
provide for the security. You do that. You do that well and I 
am bothered, as other Members have expressed today.
    I am bothered by the disproportionate cuts that you seem to 
take regarding the overall budget, but also in acquisition, the 
42. As a business owner, 42 percent is I think unreasonable. I 
know in the last year we have heard a lot of people say that a 
1.3-percent cut to food stamps is cruel, and when food stamps 
have increased 50 percent in the last 4 years. The 2-percent 
sequestration, we have heard that characterized; but, a 42-
percent cut, I don't know anyone who thinks that that is--well, 
no one here today thinks that is proper.
    I couldn't help, Admiral, you had mentioned over the last 
few moments, you mentioned forestry several times. I happened 
to sit in a forestry hearing last week, because I serve on the 
Natural Resources Committee. You can understand. When I hear 
that 42 percent cut in acquisition, you can imagine what is 
going through my mind when I recall that hearing last week when 
the Forestry Service came to us and asked for in the 
President's budget a 58-percent increase in land acquisition.
    So when we are talking about really understanding the 
budget in its entirety, when we see that part of the 
President's budget is asking for this massive increase to buy 
more land, they already own 12 million acres in the United 
States; and, yet, you have a constitutional responsibility to 
provide for the security of this country. You can imagine my 
bewilderment at the consistency here.
    How do you come to that conclusion? I don't understand 
that. And so I am bothered that we are looking at such--really, 
draconian is the word that seems to be used up here oftentimes. 
But when you are talking about a 42-percent cut in acquisition 
for a constitutionally mandated program, and then we are 
looking at a 58-percent increase in land that we can't even 
manage now, and we are asking for more. And to whom much is 
given, much is expected. I am just curious.
    I mean, in any of your careers have you known a 42-percent 
cut in a department? Mr. Matsuda?
    Mr. Matsuda. You know. I have been in Washington about a 
decade or more. I have seen quite a bit. You know.
    Mr. Southerland. I know that is an unfair question and I 
hate that I even have to ask it. I hate that I am even put in 
the position to have to ask you that, but that just seems to me 
to be an outlier. It just seems to be--you know. And, look. I 
am a fiscal hawk. OK? But I do believe as a business owner in 
gradual phasing in and phasing out, and this just seems to be 
off the chart. And I can't help but focus on it.
    Again, I don't want to put any of you in a bad situation, 
but, so why don't we just leave this as a comment and not a 
question. I think you all, probably all four, would like that.
    Let me ask you a quick question, Mr. Matsuda, on the small 
shipyards. In your experience, since you've been here, has this 
program over the years had job producing effects to our 
domestic shipyards? And if someone asked you that question 
before, I apologize. I may not have heard it.
    Mr. Matsuda. This is a good program. We have administered 
the $9.5 million that was provided by Congress for this year. 
It is currently out there. We are receiving applications for 
this round, but the past several rounds, including the Recovery 
Act amount of $98 million, we continue to administer all of 
these grants around the country. They are to help modernize our 
shipyards with new equipment, with training programs for the 
workers; and what I have seen is that they tend to have longer 
term impacts where there are really investments in the long-
term competitiveness of our small shipyards.
    Mr. Southerland. OK. So that is obviously good for jobs and 
makes us far more competitive as we compete in this global 
market.
    Mr. Matsuda. Yes.
    Mr. Southerland. Great. Thank you.
    My time has expired, Mr. Chairman. I yield back.
    Mr. Hunter. Thank the gentleman.
    Mr. Larsen is recognized.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. Matsuda, the answer to the last question is yes, 
especially in places like my district. But with regard to the 
Jones Act, the committee enacted a part of the Coast Guard 
Authorization Bill, a provision designed to encourage the use 
of U.S. flight vessels prior to issuance of administrative 
waivers of the Jones Act.
    First, have any Jones Act waivers been requested or 
approved since the enactment of the new law, and are any being 
contemplated by the Administration?
    Mr. Matsuda. Sir, as you know, the Customs and Border 
Protection is the agency that administers the waivers of the 
Jones Act at this time. I am not aware of anybody seeking any 
waivers. I do know that a waiver was sought after Superstorm 
Sandy hit in order to allow additional fuel shipments to be 
brought in to the Northeast, and we worked with the U.S.-flag 
industry to try to find available vessels, first and foremost, 
which is always our priority. And, secondly, when a waiver was 
requested and issued, we worked with the Customs and Border 
Protection to include a reporting requirement so that we could 
see exactly which foreign-flag ships were carrying what, when 
and where, and that made a big difference in being able to 
administer those waivers and enforce them, and fully assess the 
need for any future ones.
    Mr. Larsen. Mr. Cordero, can you explain a little better 
what FMC is doing independently of other Federal agencies to 
increase exports in the U.S.?
    Mr. Cordero. Thank you for your question, Congressman. As I 
indicated in my opening statement, that is a priority. We are 
working with other agencies to work on that question. As an 
example, with USDA, I mentioned the OSCAR program with regard 
to our in-house agency issues.
    With regard to that, we are trying to make the whole export 
process easier when it comes to the bureaucracy, as an example, 
the paperwork related to negotiated rate agreements that we 
just passed; and, also address specifically the question of 
container availability. As you know, the FMC, a few years back, 
addressed that issue. And as I mentioned Commissioner Rebecca 
Dye's fact-finding study in effect was relevant to the 
availability issue, which of course is a big question when it 
relates to our exports and to make sure that we have an 
efficient export transportation process.
    Mr. Larsen. All right. Thanks.
    Admiral Papp, last year the Coast Guard requested $8 
million for survey design activities for a new icebreaking 
fleet. This year they request $2 million. Can you give me a 
little insight into why there is less money being requested 
this year? And would you characterize that as a step back from 
the commitment to developing icebreakers?
    Admiral Papp. No, sir. It signals increased commitment. The 
fact of the matter is we tried to exercise some good 
stewardship as we were going through the protracted, continued 
resolution; and, we were not able to execute on a new project. 
Of course, we are halfway into the year by the time we got an 
approved budget. So, looking at carrying over some of that $8 
million in the 2013 budget into 2014, and combined with the $2 
million allows us to continue our work.
    I don't think it will result in much of a setback, but we 
are formally committed to getting this new icebreaker built; 
and, as I said, I would have hoped that the CIP would have been 
up here so that we could look at projections. But as we go into 
the out years, there will be sequential funding to take us 
through, probably, a 10-year period until we have that new 
icebreaker produced.
    Mr. Larsen. Right. We will look at the CIP when it gets up 
here then on that question.
    With regards to the business case analysis that we had 
asked for in the Authorization Bill regarding reactivating the 
Polar Sea, where are you and is the Coast Guard engaged with 
shipbuilders to determine what the cost for reactivation would 
be?
    Admiral Papp. I have not received a report on that 
recently, but I am anxious to get that report. If you will, 
sir, I can provide response for the record. We are continuing 
along, working on that study, and anxious to get that 
completed. And I believe we have to work with industry, because 
they give us the estimates. A bigger shipyard, in particular, 
has just worked on Polar Star and got her put back into shape. 
They have got good experience with it, and I will give you a 
better projection when I have a chance to check up on it.
    Mr. Larsen. Well, if you would take that, for the record, I 
would appreciate it. I am eager for the report. In about 2 
months I will be anxious for it.
    Admiral Papp. Yes, sir.
    [The information follows:]

        The Coast Guard and Maritime Transportation Act of 2012 
        (P.L. 112-213) requires the submission of a Report 
        containing the CGC Polar Sea Business Case Analysis no 
        later than September 9, 2013. The Coast Guard is on 
        schedule to meet this congressionally set deadline.

    Mr. Larsen. And then, finally, the OPC, continued 
development of the OPC is in the budget. I see $25 million for 
the Offshore Patrol Cutter?
    Admiral Papp. Yes, sir. And that should not be interpreted 
as diminishing in commitment either. We just, once again, 
looking at how do we get the most out of our acquisition money 
coming into this year. We looked at unspent accounts that we 
can carry over and continue the process going.
    I am very pleased. I don't know for sure how many responses 
we got, because I am not supposed to as we are in the 
acquisition process. But I am told it is somewhere between 8 
and 12, which is a robust response for our request for 
proposal. We will have those down-selected to the final three 
best candidates by the end of this year; and, then, once we 
have the detailed designs on all three of those, we will make 
our down-selection in fiscal year 2015 and then be off to the 
races, hopefully, with counted on funding to get that ship 
construction.
    Mr. Larsen. Just to clarify, that will be end of calendar 
year or end of fiscal year?
    Admiral Papp. Fiscal year.
    Mr. Larsen. Fiscal year.
    Admiral Papp. Yes, sir.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. Hunter. The gentleman, a former chairman of the full 
committee is now recognized, Mr. Young.
    Mr. Young. Thank you, Mr. Chairman.
    First, I would like to remind everybody it is the 
President's budget, but we write the budget, and I want 
everybody to remember that. And this cut is dramatic and I just 
want to know that I don't support it.
    Mr. Cordero, according to published reports, morale at the 
FMC has fallen dramatically. This is your second week as the 
chairman. You may not know it, but what change will you make at 
the Commission headquarters to address the concerns of 
employees at the Commission to make them feel supported by your 
office?
    Mr. Cordero. Thank you, Congressman. I appreciate your 
question.
    First and foremost, that is a high priority for us. And to 
answer your question in terms of specific actions taken, just 
last week we had an all-hands meeting at the agency. And I 
communicated to the personnel that this question is a priority 
for the Commission.
    Going forward, we do have a plan of action to address that 
issue. I will say, some employees feel that they are not 
empowered, they are not valued. Here, I am referring to the 
employees' survey, but I can assure you and I can assure this 
committee this is a priority for the Commission, and we are 
addressing the issue.
    Mr. Young. Good answer, and I appreciate it. And keep us 
informed of progress.
    Mr. Cordero. Thank you, Congressman, and I appreciate the 
question.
    Mr. Young. Admiral, I understand this morning you told the 
Appropriations Committee that you would reconsider the 
requirement for the Offshore Patrol Cutter and reopen the 
design competition. If that is correct, how long will this 
delay construction of much of the needed cutters? I mean what 
will happen?
    Admiral Papp. Sir, that wasn't quite an accurate report. I 
said that we remain committed to the Offshore Patrol Cutter, 
and I was asked if the ability to operate in sea state 5 was 
hard and fast. And I said, ``The highest requirement for the 
Offshore Patrol Cutter is affordability.'' And, as we evaluate 
the candidate vessels, we may need to go back and look at some 
of the requirements. I am hopeful that we don't have to.
    I think we hammered out these requirements, in fact reduced 
some of them when I came to this Commandant, because I want to 
make sure this ship is affordable. And I have reported to this 
subcommittee and other subcommittees that we are intent on 
making this an affordable ship for the Coast Guard.
    If we had opened it up to revise the seakeeping capability, 
there probably would be a delay, but I have no intent to open 
that up at this point. We have to evaluate all the candidates 
that we have, and I am hopeful that we will find three 
candidates that look affordable, because we are going to need 
to operate this ship in Alaska, and it is going to need to be 
able to launch and recover boats and aircraft while operating 
in the Bering Sea.
    Mr. Young. Speaking of affordability, when we built the 
three icebreakers, I found out--and you can correct me if not--
a lot of times when something would break on the vessel because 
of the requirement of buying the cheapest product, sometimes, 
you have to buy inferior product to repair something in the 
engine room or something like that. That is correct?
    Admiral Papp. I have no knowledge on that.
    Mr. Young. Could you find out this, because I understood 
that one of the reasons those ships have been such a pain in 
the neck--and they were good ships when they were built, but 
things wore out. When you put onto purchase, a procurement 
program, you are required, I think by law, to buy the cheapest 
product that is offered to fill the spot. That's in case you've 
got a bastardized ship. So you check that out for me and get 
back to me.
    Admiral Papp. Yes, sir. We will provide that to you for the 
record.
    [The information follows:]

        The Polar Class icebreakers are unique, highly complex 
        vessels that operate in the most arduous maritime 
        environment in the world. They are designed to 
        continuously transit through ice up to 6 feet thick and 
        to break through up to 21 feet of ice by backing and 
        ramming. The Polar Class icebreakers are inherently 
        maintenance-intensive due to their design and mission 
        profile; not due to the purchase of inferior parts and 
        services.

        All parts and services for Polar Class icebreakers have 
        been purchased in accordance with the requirements of 
        the Federal Acquisition Regulations. These regulations 
        do not limit contract awards solely to the lowest 
        bidder, but allow for a best value determination.

        Improvements to reliability, both large and small, have 
        been pursued throughout the 30-year design service 
        lives of these vessels, culminating in the recent 
        completion of the reactivation of USCGC Polar Star 
        (WAGB 10). This 3-year project included numerous major 
        system upgrades that specifically targeted low 
        reliability/high-cost-to-repair systems for renewal.

        The Coast Guard's challenge is to effectively maintain 
        these aged vessels beyond their design service lives 
        when the original vendors for many shipboard systems 
        have long been out of business. In some cases, the 
        existing technical documentation may not allow a new 
        vendor to reverse engineer obsolete components. When 
        reverse engineering is possible, there are long lead 
        times and high production costs associated with these 
        custom fabrication projects.

    Mr. Young. Forest Service, I happen to agree with the 
gentleman, Mr. Southerland. I will do everything in my power to 
make sure you get those airplanes.
    Mr. Chairman, I want you to remember this is the right way 
to go. The Forest Service is a lousy agency right now. They are 
not doing anything but playing with themselves. They don't do 
anything, and they want 12\1/2\ million acres of what? And I'm 
saying this is wrong. You need these. So we can get them to 
you.
    And I think we ought to pressure the appropriate committees 
and Appropriations Committee to make sure that the Coast Guard 
gets these aircraft instead of the Forest Service. They are 
letting their timber burn. They have burned 9,600,000 acres of 
trees last year, and if you add that up, it's over 900 million 
barrels of oil, because there is 100 barrels of volatility on 
each acre. And they say they are managing.
    They are not managing; and, trying to put out fires, where 
if they would let us log and cut it, it would be all right and 
get it done. But I just wanted you to know I feel pretty 
strongly about it. Are you up to speed as far as the Coast 
Guard reimbursement because of the rise in spill? Are you 
pretty much working with the BP or whoever is involved here?
    Admiral Papp. For the Deepwater Horizon?
    Mr. Young. Yes.
    Admiral Papp. Yes, sir. We have been involved with the 
Justice Department all along and are participating in that.
    Mr. Young. And are you receiving money?
    Admiral Papp. Yes, sir. Money. There has been reimbursement 
for our services along the way, and also the Oil Spill 
Liability Trust Fund.
    Mr. Young. But, in your case, you use it for the Coast 
Guard, I hope.
    Admiral Papp. There has been no direct reimbursement to us. 
I believe everything that is reimbursed goes into the general 
treasury.
    Mr. Young. Well, that is our fault, Mr. Chairman. I mean 
you spend it. It takes it out of your budget. It takes away 
from your other duties. You ought to be able to get reimbursed. 
So we will talk about that later. Thank you. I yield back.
    Mr. Hunter. I thank the gentleman. Mr. Cummings is 
recognized.
    Mr. Cummings. I agree with Chairman Young. We need to 
figure out a way, Admiral, to deal with that, what you just 
talked about, this whole idea, Deepwater Horizon and 
reimbursement money. I take it that is what you are talking 
about.
    Admiral Papp. Yes, sir.
    Mr. Cummings. The question you just answered?
    Admiral Papp. Yes, sir.
    Mr. Cummings. OK. First, let me say I oppose the cuts 
proposed to the Coast Guard's budget and the President's 
request. The request would cut the Coast Guard's acquisitions 
budget by more than $600 million, cut the operating budget by 
more than $56 million, and reduce the end strength by hundreds 
of servicemembers.
    The terrible events in Boston, yesterday, demonstrate that 
our homeland remains at risk, and yet we are confronted with a 
budget that would result in real deductions in the Coast 
Guard's capabilities. This budget demonstrates as vividly as 
possible how senseless sequestration is and how its effects in 
the form of loss, even capabilities, and delayed acquisitions 
will ripple for years to come.
    We cannot continue to stretch the Coast Guard and assume 
that it will still be able to complete all of the missions we 
have assigned to it, and I deeply appreciate the candor and 
leadership of Admiral Papp that you have shown in identifying 
the Service's challenges. You know I have tremendous amount of 
respect for you. We have worked closely together to bring the 
Coast Guard to where it's come to after having some real 
problems. And I don't want to see us lose our progress.
    Now, it is up to the Congress to listen to what we are 
being told. If we continue to cut the Coast Guard's budget, we 
need to identify those missions it will no longer be expected 
to perform, including those areas it will no longer be expected 
to guard, those boats will no longer be expected to inspect, 
and those patrols it will no longer be able to conduct. That's 
real.
    Ladies and gentlemen, when you have cuts there are 
consequences. I am also deeply concerned by measures proposed 
in the Administration's budget that would have devastating 
consequences for our Merchant Marine. In 1975 we had 857 ocean-
going ships under the United States flag, according to a 2009 
study produced by IHS global insight for the U.S. Maritime 
Administration. Today, there are approximately 100 ocean-going 
vessels in the U.S. flag, and they carry barely 2 percent of 
our commercial cargoes.
    Ladies and gentlemen, we are not just slipping. We have 
slipped. It is ridiculous the downward spiral that we have in 
that area. Sadly, we haven't even developed policies that will 
reverse this decline. Recent policy developments threaten only 
to drive more vessels away from our flag. As we are all aware, 
Section 100124 are MAP-21 legislation. A provision slipped into 
the Highway Bill in the dead of night, reduce the amount of 
U.S. food aid required to be carried on U.S.-flag ships from 75 
percent to just 50 percent. Something is absolutely wrong with 
that picture, Mr. Matsuda.
    In the last Congress I introduced legislation to reverse 
Section 100124. I intend to introduce that legislation again 
with Congressman Scott Rigell. And I thank my colleagues on the 
subcommittee for their support.
    Now, the President's budget would significantly change the 
food program, the Food for Peace Program, while we are still 
examining specifics of the proposal, to shift funds away from 
Public Law 480 and to allow some measure of available funding 
to purchase food in recipient nations or even to provide cash 
transfers, the budget also provides $25 million per year for 
``additional targeted operating subsidies for militarily used 
vessels,'' and states that ``Worker adjustment would be 
available for the remaining eligible mariners.''
    Now, Mr. Matsuda, I must tell you I am concerned about your 
performance, and there are a lot of people that are concerned 
about your performance. And I don't usually make these kinds of 
statements, but if they don't tell you, I am telling you. And, 
so, I want to know why does the Administration believe it would 
be sufficient to subsidize seafarers to allow them to maintain 
the unlimited deep ocean credentials, if there is no cargo or 
ship for them to sail on?
    And then I want you to tell us what you are doing with 
regard to what our last reauthorization said, that just would 
be fostering, promoting and developing the merchant and 
maritime ministry in the United States. I want to know what you 
are doing. I want to know what you are doing to make that 
happen, because, I am telling you, I am getting very, very 
frustrated.
    Mr. Chairman, if he could just answer my question, I will 
yield back.
    Mr. Hunter. You have all the time in the World, Mr. 
Cummings.
    Mr. Matsuda. Thank you, Congressman.
    Well, first, let me say that the U.S. Merchant Marine has 
throughout history and currently been able and willing to carry 
whatever, whenever, a cargo's needed. This proposal by the 
Administration is not about--the intent was not to cut cargo 
opportunities. I think that is a second order effect. Their 
primary goal is to reform the way that the food aid programs 
are administered, and we understand there will be an impact to 
the U.S. Merchant Marine.
    There is funding, and I would say this is the first time 
new funding for a new incentive program has been proposed in a 
very long time for the U.S. Merchant Marine. We recognize that 
we have to do whatever we can to try to retain those vessels 
and those crews as mariners are extremely valuable, both to the 
commercial industry and to the U.S. when we need them to crew 
up, reserve Government-owned vessels.
    Mr. Cummings. One last question, Mr. Chairman, just one 
question.
    And I will get to some substance, but you need to answer 
this one. You talked about, a few minutes ago, after Sandy. You 
said there were waiver requests, and I think you said you all 
monitored the ships to see who was available and all that kind 
of thing. What success did you have making sure that oil was 
carried on U.S. ships? Tell me about the success, because that 
is your job.
    Mr. Matsuda. Absolutely, sir. I can tell you that since I 
have been here, we have completely----
    Mr. Cummings. You were not talking about that, the one that 
you talked about.
    Mr. Matsuda. That's right.
    Mr. Cummings. OK.
    Mr. Matsuda. I am talking about the way that the Jones Act 
has been administered by this administration. In previous 
administrations, when a President signs a waiver of the Jones 
Act, it has been either so broad or with no transparency that 
we heard reports that after Hurricane Katrina there were 
vessels on the west coast, foreign flag, carrying cargoes 
between U.S. ports.
    What we have attempted to do is bring more transparency to 
the process to make sure if a waiver is administered, it is 
done in a way so that the public can see what is going on, who 
is carrying what. But, our primary goal, and especially in the 
aftermath of Superstorm Sandy, was to find all available 
vessels to bring fuel into the Northeast to prevent----
    Mr. Cummings. How many? Just tell me. I am begging you. How 
many vessels carried the oil, U.S.-flag vessels? And how many 
waivers were given?
    Mr. Matsuda. Every available U.S. flag----
    Mr. Cummings. No. You are not answering my question. You 
should know that. You know that that is a priority for many of 
us in Congress. Please answer my question. How many vessels?
    Mr. Matsuda. I am answering it, sir.
    Mr. Cummings. Yes. Was it one? Two? Three? And how many 
waivers? One? Two? Three? Give me some numbers, and then I am 
finished, Mr. Chairman.
    Mr. Matsuda. It was every available U.S.-flag vessel and 
then 11 additional foreign-flag vessels brought fuel into the 
Northeast in the aftermath of Hurricane Sandy.
    Mr. Hunter. I thank the gentleman for his questions.
    I have got a couple of questions to close with here, 
Administrator Matsuda. I am sure that there was analyses done 
when you were arguing against changing the Food for Peace 
Program. Right? So when you did your analysis on that, and 
MarAd did its analysis on that, how many international U.S.-
flag ships did you figure we would lose by losing the Food for 
Peace Program?
    Mr. Matsuda. Well, the challenge in developing policy 
proposals, sometimes, you don't always have the information you 
need in front of you. But we know that there are 50 vessels 
that carry some food aid currently in the last year for which 
we have data. Twenty of those are a part of the Maritime 
Security Program, and an additional 30 carried some food in to 
some extent.
    We believe that is the pool of U.S.-flag vessels that could 
be at risk. Now, keep in mind that 55 percent of the funds 
would still be proposed in fiscal year 2014 for U.S.-based food 
aid. So these are funds that would still continue to see U.S.-
sourced food aid on U.S.-flag ships subject to the cargo 
preference rule.
    Mr. Hunter. But there is $25 million set aside and there is 
$186 million in the NMSP for 60 ships, roughly. Right? And 
there is $20 million for the remaining 30 that are Food for 
Peace ships that are not in the MSP, those 20. Right? So that 
leaves about 30 that would be affected purely by Food for 
Peace. I think you have about $25 million associated with them 
in the budget. Right?
    Mr. Matsuda. Well, the $25 million proposal is something 
that we feel we do need dialogue with the industry to ensure 
that we offer incentives that will continue to attract and 
retain, as much as possible, as much militarily useful vessels 
and U.S. mariners as possible.
    Mr. Hunter. How many ships is that, roughly, based on your 
analysis? How many ships out of that 30 will $25 million keep 
you?
    Mr. Matsuda. It really depends on the type of incentive. I 
would say for comparison purposes, the Maritime Security 
Program, a portion is currently $3.1 million per vessel. So 
that would be about eight vessels; however, that does rely upon 
available cargoes to ensure that these vessels can stay 
commercially viable.
    Mr. Hunter. So, I think you realize from the committee and 
the feedback that we are going to try to save the Food for 
Peace Program for basic industrial capability and capacity for 
our shipbuilders, our operators, our mariners and industry in 
general.
    So, let us move on. Last thing, Title XI. I think Ranking 
Member Garamendi asked about it, and you said that there is 
plenty of money there, right now. How many Title XI loans has 
the Administration given out, let's say, last year?
    Mr. Matsuda. In the past year?
    Mr. Hunter. Yeah.
    Mr. Matsuda. I am not sure I have that in front of me. I do 
know that in all over a half billion dollars' worth of projects 
have been approved in the previous 4 years.
    Mr. Hunter. So, 4 years, $500 million. So it is a magnitude 
of 10, roughly. Right? You get 10 times the amount in loan 
guarantees? What is the number you use as your multiplier?
    Mr. Matsuda. Well, it is a pretty complex formula; 
somewhere between 5 and 20, I think. Is that fair?
    Mr. Hunter. OK. 5 and 20, so there is $38 million there 
now. Right? This is your calculation that I am reading, so 
there is $38 million in Title XI loan subsidies. That equals 
$420 million in available loan guarantees. So I just did a 
factor of 10. Is that OK to do?
    Mr. Matsuda. Yeah. That's fair.
    Mr. Hunter. OK. So let's say it is 10. Right? So if you 
wanted about a billion dollars, which is what we think it would 
be if you had a billion dollars' worth of loan guarantees to 
really kick-start the industry, that would mean having about 
$70 million added to that $38 million that's in there now. That 
would give you about a billion dollars in loan guarantees. Is 
that right?
    Mr. Matsuda. I believe so.
    Mr. Hunter. So based on your analysis, what do you think it 
has to be to really kick-start the commercial industry?
    Mr. Matsuda. Well, the Title XI program, it simply helps 
cover the cost of capital. There still has to be a market for 
these new ships to be built in. We have heard from some members 
of parts of the industry that they are interested in availing 
themselves of the program, and we have seen some Jones Act 
vessels start to commence design and construction.
    So we do anticipate some interest in the program, but again 
it's a capital program, and we can only incentivize so much. 
But we try to make sure we can use every available dollar to 
build as many vessels in U.S. yards as we can. That's the real 
purpose.
    Mr. Hunter. You know. To get efficiencies and scale, and in 
building you have to do more than one. And if you have a $400 
million ship or a $200 million ship, and you only have a 
billion dollars available, that means that for a $200 million 
ship, you can build five. Right. You can get a loan for five.
    Mr. Matsuda. True. There are smaller vessels that are built 
in U.S. yards where they can build that many in scale, but we 
have seen as far as orders come in for the larger vessels, they 
come in in ones and twos.
    Mr. Hunter. With that, let me thank the panel for your 
time, for your service to your Nation. And the committee is 
adjourned. The hearing is adjourned.
    [Whereupon, at 3:57 p.m., the subcommittee was adjourned.]