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



 
      MARITIME TRANSPORTATION: THE ROLE OF U.S. SHIPS AND MARINERS

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

                                (113-16)

                                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

                               __________

                              MAY 21, 2013

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


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



                  U.S. GOVERNMENT PRINTING OFFICE
81-148                    WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  

             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
                                Panel 1

Hon. John D. Porcari, Deputy Secretary, U.S. Department of 
  Transportation.................................................     3
General William M. Fraser III, Commander, U.S. Transportation 
  Command........................................................     3

                                Panel 2

Fred Harris, President, General Dynamics NASSCO, on behalf of 
  Shipbuilders Council of America................................    20
Joseph H. Pyne, Chairman and Chief Executive Officer, Kirby 
  Corporation, on behalf of American Maritime Partnership........    20
Mike Jewell, President, Marine Engineers' Beneficial Association.    20
Augustin Tellez, Executive Vice President, Seafarers 
  International Union............................................    20

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

Hon. John D. Porcari:

    Prepared statement...........................................    36
    Answers to questions from the following Representatives:

        Hon. Duncan Hunter, of California........................    42
        Hon. John Garamendi, of California.......................    43
General William M. Fraser III:

    Prepared statement...........................................    47
    Answers to questions from the following Representatives:

        Hon. Duncan Hunter, of California........................    52
        Hon. John Garamendi, of California.......................    53
Fred Harris:

    Prepared statement...........................................    55
    Answers to questions from Hon. John Garamendi, of California.    77
Joseph H. Pyne:

    Prepared statement...........................................    86
    Answers to questions from Hon. John Garamendi, of California.    94
Mike Jewell:

    Prepared statement...........................................   103
    Answers to questions from Hon. John Garamendi, of California.   112
Augustin Tellez:

    Prepared statement...........................................   115
    Answers to questions from the following Representatives:

        Hon. Duncan Hunter, of California........................   122
        Hon. John Garamendi, of California.......................   122

[GRAPHIC] [TIFF OMITTED] T1148.001

[GRAPHIC] [TIFF OMITTED] T1148.002

[GRAPHIC] [TIFF OMITTED] T1148.003

[GRAPHIC] [TIFF OMITTED] T1148.004

[GRAPHIC] [TIFF OMITTED] T1148.005

[GRAPHIC] [TIFF OMITTED] T1148.006



      MARITIME TRANSPORTATION: THE ROLE OF U.S. SHIPS AND MARINERS

                              ----------                              


                         TUESDAY, MAY 21, 2013

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:35 a.m., in 
Room 2167, Rayburn House Office Building, Hon. Duncan Hunter 
(Chairman of the subcommittee) presiding.
    Mr. Hunter. The subcommittee will come to order. Good 
morning.
    The subcommittee is meeting today to review the current 
state of the U.S. maritime sector and examine the importance of 
U.S.-flag vessels and American mariners to our economy and 
national security.
    The U.S. maritime industry currently employs more than 
260,000 Americans, providing more than $29 billion in annual 
wages. There are more than 40,000 commercial vessels currently 
flying the American flag. The vast majority of these vessels 
are engaged in domestic commerce, moving over 100 million 
passengers and $400 billion worth of goods between ports in the 
U.S. on an annual basis. Each year, the U.S. maritime industry 
accounts for over $100 billion in economic output.
    Beyond the important contributions to our economy, a 
healthy maritime industry is vital to our national security. 
Throughout our history, the Navy has relied upon U.S.-flag 
commercial vessels crewed by American merchant mariners to 
carry troops, weapons, and supplies to the battlefield. During 
Operations Enduring Freedom and Iraqi Freedom, U.S.-flag 
commercial vessels transported 63 percent of all military cargo 
moved to Afghanistan and Iraq.
    Since we cannot rely on foreign vessels and crews to 
provide for our national security, it is critical that we 
maintain a robust fleet of U.S.-flag vessels, a large cadre of 
skilled American mariners, and a strong shipyard industrial 
base. Unfortunately, over the last 35 years, the number of 
U.S.-flag vessels sailing in the international trade has 
dropped from 850 to less than 100. In the same period, we have 
lost over 300 shipyards and thousands of jobs for American 
mariners.
    To make matters worse, the President has sent Congress a 
budget that proposes to restructure the highly 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 cutting the domestic sealift capacity 
on which our military depends. I hope my colleagues will join 
me in rejecting this misguided proposal.
    We are joined today by the Deputy Secretary of 
Transportation. I thank him for being here.
    As he is keenly aware, the Maritime Administration has 
faced very valid criticism in recent years over its handling of 
Jones Act waivers and enforcement of our cargo preference laws. 
I hope that the new leadership that will be taking over at both 
the Department and MarAd in the coming months take seriously 
their mission to promote and protect the U.S. maritime 
industry.
    I hope to see a renewed commitment to programs like Title 
XI that help to grow jobs, expand our economy, and maintain 
critical shipyard industrial capacity. I also hope the new 
leadership at MarAd and DOT will work closely with industry to 
reduce Jones Act waivers. Finally, I hope they will stand up 
when other Federal agencies seek to disregard our cargo 
preference laws and use the authority Congress gave them to 
stop them in their tracks.
    If we want to grow our economy and remain a world power 
capable of defending ourselves and our allies, we must work 
together to strengthen and preserve our maritime industry.
    I thank the witnesses for appearing today and look forward 
to working with them to accomplish these important goals.
    With that, I yield to Ranking Member Garamendi.
    Mr. Garamendi. I thank you, Mr. Chairman. And thank you for 
your leadership on this critical issue and for scheduling 
today's hearing to examine the status and role of the U.S. 
merchant marine within the Marine Transportation System. Such 
an examination is both overdue and important.
    Tomorrow is National Maritime Day. Since establishment in 
1933, we pause on May 22nd to recognize the many selfless 
contributions made by the men and women of the U.S. merchant 
marines, both past and present, in meeting our country's 
economic and security needs in both wartime and peace. Such 
recognition is well-deserved, and it is appreciated by a 
grateful Nation.
    Yet, despite the voluminous history of the U.S. merchant 
marine, the current challenges facing the maritime industry 
portend a future that offers anything but smooth sailing. 
Today, the U.S.-flag oceangoing fleet in foreign trade is 
comprised of fewer than 100 ships, a decline of over 80 percent 
from the 1979 fleet level of 576 vessels. As a result, of the 
78 percent of U.S. exports and imports transported by water, 
less than 1.5 percent is carried under the U.S. flag.
    The U.S. coastwise fleet has fared better and continues to 
provide vital maritime transportation within the U.S. coastal 
waters and inland waterways. Nevertheless, the Jones Act 
continues to come under attack by critics, despite the fact 
that Jones Act trade constitutes a substantial component of 
U.S. shipyard activity and is necessary for maintaining our 
national defense capability.
    Cargo preference requirements continue to be whittled away, 
if not ignored, by Federal agencies, as if those requirements 
were a hindrance and not the law of the land. Not only does 
this reduce the number of job opportunities for U.S. seafarers, 
it denies important cargoes to U.S. carriers, which also 
provide invaluable sealift capabilities when our armed services 
are deployed abroad.
    Mr. Chairman, your comments on P.L. 480, the Food for Peace 
program, are well-taken, and I agree with you.
    In closing, Mr. Chairman, on National Maritime Day it is 
important that we celebrate our maritime heritage. But this 
year we would be wise to examine how we can reinvigorate the 
U.S.-flag fleet, what we might do to rebuild and expand the 
U.S. shipbuilding capacity, and what we can do to ensure that 
our maritime transportation remains prominent in the 
discussions of our national foreign policy.
    I look forward to the hearing. I thank our witnesses, and 
let's get on with it.
    Mr. Chairman, I yield.
    Mr. Hunter. I thank the ranking member.
    On our first panel of witnesses today are the Honorable 
John Porcari, Deputy Secretary of Transportation; and General 
William Fraser, Commander of U.S. Transportation Command.
    Deputy Secretary Porcari, you are recognized for your 
statement.

   TESTIMONY OF HON. JOHN D. PORCARI, DEPUTY SECRETARY, U.S. 
  DEPARTMENT OF TRANSPORTATION; AND GENERAL WILLIAM M. FRASER 
          III, COMMANDER, U.S. TRANSPORTATION COMMAND

    Mr. Porcari. I thank you, Chairman Hunter and Ranking 
Member Garamendi. I appreciate the opportunity to be here today 
to discuss maritime transportation issues.
    A strong maritime industry is critical to America's 
national and economic security. President Obama and all of us 
at the Department of Transportation are committed to working 
with our public and private partners to train new mariners and 
provide support for our foreign and domestic trading fleets, 
U.S. ports, and shipyards.
    The maritime industry is facing many challenges. In the 
wake of the global recession, low freight rates can still be 
found on many international trading routes. Preference cargoes 
have also begun to decline for U.S.-flag vessels that 
participate solely in foreign trade. These changes are due in 
large part to falling volumes of Department of Defense cargoes 
associated with the drawdown of military operations in Iraq and 
Afghanistan, as well as declines in agriculture preference 
cargoes. We expect that in the near term the industry will 
continue to adjust to the market.
    Despite these ongoing fluctuations, U.S.-flag commercial 
vessels involved in military sealift are strongly supported 
through the MarAd-administered Maritime Security Program. The 
MSP, as you know, is a fleet of 60 privately owned vessels. 
These ships are active, commercially viable, and available to 
meet national defense and other security requirements. And 
thanks to the 2013 National Defense Authorization Act, which 
President Obama signed in January, existing MSP operating 
agreements have been offered through 2025.
    The Department of Transportation continues to support 
compliance with the Jones Act, and ships that are trading under 
it continue to do well.
    Likewise, the recent surge in domestic crude oil production 
has increased demand for domestic self-propelled tanker 
vessels. A recent industry projection foresees 10 to 14 new 
oceangoing tankers entering the fleet by 2018.
    New containership orders being placed under the Jones Act 
are also encouraging. These containerships would be powered by 
U.S.-produced liquefied natural gas and would be among the most 
environmentally friendly forms of freight transportation on 
Earth.
    The Nation's ports are also successfully preparing for the 
future. The American Association of Port Authorities reports 
that U.S. seaport agencies and their private-sector partners 
plan to invest a combined $46 billion over the next 5 years in 
capital improvements to their marine operations and other port 
properties.
    The Department of Transportation is complementing these 
investments. Since 2009, we have awarded more than $350 million 
in TIGER grants that are helping to modernize our ports, 
improve rail infrastructure serving ports, and increase 
exports. We have also awarded more than $149 million in small 
shipyard grants to 120 projects in 28 States and Guam. These 
investments have helped small shipyards get new contracts and 
have increased exports of commercially built vessels.
    Additionally, the Maritime Guaranteed Loan Program, better 
known as Title XI, has helped leverage more than $650 million 
in new investments in U.S. shipbuilding during the first term 
of the Obama administration. We currently have the budget 
authority to guarantee $420 million worth of additional 
shipbuilding projects.
    The Department of Transportation is also committed to 
educating and training the next generation of maritime 
professionals. As part of this commitment, we have placed a 
renewed focus on preparing thousands of young people to enter 
the maritime workforce through the U.S. Merchant Marine Academy 
and six State maritime academies.
    As I said earlier, all of us in the administration are 
committed to a strong maritime industry. We are working to 
balance our long-term needs with the challenges of today.
    As part of the President's 2014 budget request, we have 
proposed restructuring the Public Law 480 Title II food aid 
program to allow local and regional procurement of food and to 
improve the ability of U.S. food aid to reach emergency needs 
quickly and with less adverse impacts on markets and farmers in 
countries receiving the food aid.
    Under the President's proposal, 55 percent of Title II food 
aid funds would still be spent in the United States. Of that, 
50 percent of the cargoes would move on U.S.-flag vessels. In 
its initial assessment, DOD has stated that changes in the food 
aid program will not impact the maritime industry's ability to 
crew the surge fleet and deploy forces and cargo.
    Furthermore, to mitigate any impact on vessels and 
mariners, the administration is proposing a $25 million 
targeted operating subsidy for military-useful vessels. 
Preliminary planning for this funding envisions a three-pronged 
approach whereby some of the funding would provide a stipend 
for militarily useful vessels not enrolled in the MSP, other 
sums would be used to reimburse eligible cost for mariners to 
retain or renew active U.S. Coast Guard-issued merchant marine 
credentials, and some funds would provide apprentice training 
for key merchant mariner skills. We will work with our key 
stakeholders and our Federal partners on how best to use this 
funding to minimize any impact.
    I thank you, Mr. Chairman, for allowing me to share this 
time with you today. I look forward to answering any questions 
that you might have.
    Mr. Hunter. Thank you, Mr. Porcari.
    General Fraser, you are recognized.
    General Fraser. Chairman Hunter, Ranking Member Garamendi, 
and distinguished members of this committee, it is indeed an 
honor to be here with you today as the Commander of United 
States Transportation Command.
    Our total force team of men and women, military and 
civilian, are dedicated to providing reliable, seamless 
logistical support to our warfighters and their families around 
the globe. The dedicated professionals at the United States 
Transportation Command simply could not accomplish this global 
mission without the capabilities provided by the United States 
strategic sealift fleet and our steadfast merchant mariners.
    USTRANSCOM relies on both Government-owned vessels and 
those accessed via commercial industry. Our Government-owned 
fleet includes 60 total vessels from the Military Sealift 
Command's surge fleet and the Maritime Administration's Ready 
Reserve Force. All Government-owned and commercial vessels are 
critical for the Department of Defense's ability to surge to 
meet future global requirements. I am grateful to the Congress 
for your continued support of this global mobility requirement 
and capability, which is unique to the United States.
    Although our organic assets are vital during contingency 
operations, the vast majority of the sealift needs during 
steady state and nonsurge periods comes from our commercial 
partners. Access to the commercial fleet is formalized through 
programs such as the Voluntary Intermodal Sealift Agreement, 
the Maritime Security Program, and the Voluntary Tanker 
Agreement. These programs allow us and the Department of 
Defense to gain access to United States commercial capabilities 
while ensuring the availability of a viable U.S.-flag fleet and 
United States citizen merchant mariner pool in times of the 
national emergency.
    The Maritime Security Program provides access to a fleet of 
60 military-useful commercial vessels that are operating in 
international commerce and exercising intermodal networks 
throughout the world and jobs for our United States merchant 
mariners. I also want to thank Congress for extending the MSP 
program an additional 10 years to 2025.
    Maintaining a responsive sealift capacity and experienced 
merchant mariners to crew our ships in a time of need is 
essential to meeting the Nation's defense requirements. I am 
confident the U.S. maritime industry will continue to meet our 
defense needs with the capacity and the responsiveness that 
befits their heritage, and I will work closely with the 
Maritime Administration and our industry partners to ensure we 
can rely on that capability for many years to come.
    Chairman Hunter, Ranking Member Garamendi, distinguished 
members of this committee, I want to thank you again for your 
continued support of United States Transportation Command and 
our total force team. I am grateful for the opportunity to 
appear before this committee today and would ask that my 
written statement be submitted for the record. I look forward 
to your questions.
    Thank you, sir.
    Mr. Hunter. Gentlemen, thank you very much. And let me 
start by saying, thank you both for your service to the 
country, whether it is in transportation or the military. We 
all appreciate it.
    Mr. Porcari, let's start with this. You talked about the 
Title XI program. You talked about the small shipyards grants 
program. Yet the administration didn't fund either one of them. 
So I expect that the administration knew or thought that 
Congress would fill in the blanks for them on that.
    So, if it is so beneficial, as you stated, why wouldn't the 
President request funding for it?
    Mr. Porcari. First, Mr. Chairman--it is a great question.
    Mr. Hunter. In fact, let me specify, too, the President has 
never requested funding for Title XI, ever.
    Mr. Porcari. Mr. Chairman, on Title XI, we currently have 
about $420 million of authority for additional projects for----
    Mr. Hunter. That is about $30 million, right?
    Mr. Porcari. It is--approximately. And, given what is in 
the pipeline, we believe we can process the applications that 
are currently in the pipeline. There may be need for additional 
capacity beyond that. It is a situation that we would like to 
be in.
    But Title XI is one of the tools that we use. I would also 
point out, you mentioned small shipyard grants, which we have 
made good use of. Third, it is not strictly a maritime program, 
but the single biggest winner, in some ways, of our TIGER 
program has been the maritime industry because we have been 
focusing on the landside connections as well. Ports in the 
maritime industry only function as well as the intermodal 
connections. And we have been trying to remove bottlenecks, 
whether it is on dock, whether it is with the freight railroads 
or in other places. It is a holistic approach to trying to 
encourage the maritime industry.
    We believe very strongly in a U.S.-flag fleet, and we will 
continue to do so.
    Mr. Hunter. I would agree, the landside improvements are 
vitally important as well.
    Let me ask you this. I am seeking about $70 million in 
Title XI funding to bring it up to $100 million, which is about 
a billion dollars or more, $1.3 or $1.4 billion in funding. 
What do you estimate that would do to the shipbuilding industry 
if that over a billion dollars in funding was able to be made 
of use and granted to the industry to build commercial ships?
    Mr. Porcari. Should Congress provide those funds, Mr. 
Chairman, we would work to, first of all, make sure that we are 
improving the process of Title XI loans. We know that, in terms 
of the timing, the responsiveness, and the interaction with 
applicants, the process can be and needs to be reengineered. 
And we would focus on that for a more responsive Title XI 
process.
    We would also try to encourage, wherever possible, loan 
applications that most directly benefit both shipbuilding and 
long-term employment of U.S. mariners.
    Mr. Hunter. And for both gentlemen, my last question; then 
I will yield to Mr. Garamendi.
    As the Food for Peace program gets slashed, you said, Mr. 
Porcari, that DOD has stated that right now that will not have 
an impact on the crewing of the vessels that are needed for 
military capacity.
    But let's look out 5 or 10 years, and I would like you both 
to just tell us here very bluntly: What do you think the impact 
is going to be over the next decade if we cut the Food for 
Peace program and those ships go away and those mariners go 
away and that training pool for our ship drivers and ship crew 
goes away?
    Mr. Porcari. Mr. Chairman, first and foremost, we can't 
afford to lose that capacity, whether it is the actual vessels 
or, more importantly in some ways, the U.S. crews.
    We know that the industry is changing. Food aid is only one 
component of it. What we want to focus on is things like energy 
transport, where we believe in the future there are growth 
opportunities in the industry for a U.S.-flag fleet and U.S. 
mariners.
    Going out 5 or 10 years, I personally can't really project 
that, but I don't think that we should have overdependence on 
any portion of the cargo spectrum, including food aid.
    Mr. Hunter. Before General Fraser answers, I would venture 
that if you are going to offset this with energy or if we have 
other plans, that you do them simultaneously or maybe make sure 
one is in place first before cutting the, you know, current 
program. Otherwise, you are not going to have that capacity to 
move the energy stuff because it will be gone.
    General Fraser?
    General Fraser. Chairman, thank you very much.
    As previously stated, DOD did take a look at this 
initially, and as it stands alone, it would not have a 
significant impact on our ability to reach into the merchant 
mariner pool to satisfy our military requirements.
    As the global distribution synchronizer and provider of 
transportation for DOD, I do look at where industry has been, 
and what history has shown us. Both you and Ranking Member 
Garamendi spoke in your opening comments about how we have seen 
things change over time. I think that is something that, as we 
look forward to the future, and not being a predictor of the 
future, we need to take into consideration as we work together.
    I promise to continue to work very closely with MarAd as we 
define what the military requirements are in the future in 
meeting our surge capacity and capability and those merchant 
mariners that are needed, which are great value to our surge 
capacity in the future. And we will do that.
    Mr. Hunter. General, did you use food aid mariners to crew 
ships whose capacity you used in Enduring Freedom and Iraqi 
Freedom?
    General Fraser. Sir, when we actually go out and seek 
merchant mariners, I do not know where they come from. We work 
with MarAd as they man the ships----
    Mr. Hunter. To the best of your knowledge.
    General Fraser [continuing]. Because there is a large pool 
of merchant mariners from which they reach to obtain both the 
licensed and the unlicensed personnel to crew these ships.
    Mr. Hunter. Would it be reasonable to say that you use 
those crews that crew the food aid ships?
    General Fraser. Sir, I think that is something that I would 
have to dig into the details as to exactly where they came 
from. But I know that those who are working in the commercial 
industry who are maintaining their licenses, the skill sets of 
those merchant mariners from which we pull, are sailing on all 
kinds of ships that are in the commercial industry.
    Mr. Hunter. Thank you, General.
    Mr. Garamendi, you are recognized.
    Mr. Garamendi. Thank you, Mr. Chairman.
    And, gentlemen, thank you for your service as well as for 
your testimony today.
    I am not at all sure that we have an overall strategy to 
maintain the merchant marine capability and its direct effect 
upon national security. The trend lines are terrible. This 
industry, if one were to take a look at this as a--the overall 
trend lines, you have to say it is disappearing, perhaps to the 
point where we will not have the capability for national 
defense or to maintain a vital part of our economy.
    I think what I would like to really focus on are some of 
the specific elements in it. I think the administration is 
dead-wrong with regard to Food for Peace for a variety of 
reasons. One of them is the loss of capacity within the United 
States. A second one is a breakup of the political support for 
the food program overall. That current support comes from 
farmers, the merchant marine industry, and those who are 
interested in making sure people around the world have food to 
eat when they don't have it otherwise available.
    So I think the administration is wrong on this one. I am 
going to do everything I can to reverse the administration's 
position. I understand you two gentlemen are good soldiers and 
carrying out your task.
    So, having said that, apparently there is a loss of 
capacity. Otherwise, the administration would not be proposing 
the $25 million to somehow make up for that loss.
    Mr. Porcari, how exactly is that supposed to work?
    Mr. Porcari. Well, first of all, the food aid proposal is 
designed to be more efficient, deliver more food aid, and 
minimize disruption on local markets.
    The $25 million that you refer to is a reflection of the 
fact that we know that the industry is changing. We need to 
preserve key skills. Doing that through potential concepts like 
aid to militarily useful vessels that are not currently in the 
MSP fleet; making sure the Coast Guard credentials, oceangoing 
credentials of mariners are maintained; apprenticeship training 
for specific skilled trades, for example, that are critical 
today and tomorrow in the merchant marine fleet. Those are some 
of the ways that we think that this $25 million proposed by the 
President can be used.
    It is a reflection of the understanding that we know that 
the maritime world is changing and we know that we need to 
preserve the capacity both on the vessel side and, importantly, 
with the crews.
    Mr. Garamendi. Is the $25 million over and above the 
ongoing Food for Peace P.L. 480 program?
    Mr. Porcari. Yes. This is an additional $25 million, Mr. 
Garamendi, that is specifically for assistance to the merchant 
marine----
    Mr. Garamendi. Wouldn't we be better off if we put $25 
million directly into the P.L. 480 program and just have more 
capacity and more food aid around the world, rather than trying 
to carry on a program of maintaining the skill sets through 
what appears to be a hopeful program but not yet in existence?
    We have $25 million extra. Why don't we just provide more 
food where it may be needed around the world?
    Mr. Porcari. We know that with the steady loss of merchant 
marine capacity since World War II that we need to do things 
differently, that we need to actually make sure that we are 
building on things that work. We know, for example, the MSP 
program has worked, and it has worked well, with its 60 
vessels.
    Going beyond that to both vessels and crews that would 
provide additional capacity is something that we believe we can 
use this $25 million usefully for. And we look forward to input 
from industry, our partners at DOD, and others to determine the 
best ways to use it. It is a way to pivot toward the future and 
start getting directly to some of the skilled trades and other 
needs.
    Mr. Garamendi. Mr. Porcari, do you have a specific plan of 
action for the use of the $25 million? You have mentioned 
several different ways it could be spent. Is there a specific 
program that you can give to us that you are going to--how you 
are going to spend that money?
    Mr. Porcari. These are potential options right now, the 
once that I mentioned. We do not want to move forward without 
specific input from industry from----
    Mr. Garamendi. So the correct answer is ``no.''
    Mr. Porcari. The correct answer is ``no.''
    Mr. Garamendi. Thank you.
    It just seems to me, somewhere the administration has found 
25 million extra dollars to backfill and to handle a problem 
that it is creating by changing the P.L. 480 program.
    Wouldn't it be better to put that $25 million directly into 
the P.L. 480 program, provide the additional support around the 
world for food and emergency relief, rather than to create what 
amounts to a welfare program for unemployed mariners and ships 
that are not being used?
    Mr. Porcari. The long-term prospects for food aid, because 
they are uncertain as a useful tool for the maritime industry, 
using the $25 million and targeting what we know are needed 
skills and needed vessels, we believe, is a good option.
    Mr. Garamendi. Well, I disagree. I will let it go at that 
and just say I strongly disagree, and I will do everything I 
can to see that the $25 million goes into providing food aid 
directly rather than in trying to find some way to educate, 
reeducate mariners that are not able to work because you have 
taken the program away from them and the farmers. And you have 
also created a very serious political problem, in that the 
support base for the Food for Peace is going to be 
significantly eroded.
    Now, there are a bunch of other questions. I have occupied 
more than 5 minutes, but I like the way my clock runs, because 
it doesn't. But I think I had best let it go at that, Mr. 
Chairman, and come back with another round later.
    Mr. Hunter. I thank the ranking member.
    Mr. Coble is recognized.
    Mr. Coble. Thank you, Mr. Chairman.
    Good to have you gentlemen with us this morning.
    Mr. Porcari, as you know, the Jones Act requires 
merchandise and passengers moving between two points in the 
U.S. to be carried only on U.S.-flagged, U.S.-crewed, U.S.-
owned, and U.S.-built vessels.
    The Coast Guard and Maritime Transportation Act of 2012 
included language to improve the level of disclosure and 
accountability in the Jones Act waiver process. What steps has 
the administration taken to implement the requirements of the 
2012 act?
    Mr. Porcari. We have, first of all, worked very closely 
with our partners at DHS and other agencies in the Jones Act 
waiver evaluation process.
    I would point out that in previous opportunities with the 
Strategic Petroleum Reserve, a blanket waiver had always been 
issued. We took the unprecedented step of not issuing a Jones 
Act waiver with the last SPR release, with the idea that we 
could maximize the use of Jones Act vessels wherever possible.
    That is something we take very seriously. We are obviously 
complying with the requirements that were put in place in 2012. 
We think, beyond that, doing work upfront, for example, with 
the Department of Energy, on sizing of vessels, the timing of 
any SPR release, just as one example, is very helpful in 
maximizing the ability of Jones Act vessels to compete.
    We have recently during Hurricane Sandy issued, for the 
first time, because it was a true emergency, a limited blanket 
waiver of limited duration. And it was from point to point, so 
instead of a blanket waiver that would allow widespread use of 
non-Jones Act vessels, it was very much targeted for a short-
term issue until the refineries, the pipelines, and the 
distribution system were back up and running in New York.
    We think that kind of very specific, targeted use of the 
waiver process as a last resort where we have to is the way to 
go. We will work very closely on the notification process, as 
required.
    Mr. Coble. I thank you for that.
    General, if there is a significant reduction in the number 
of trained American mariners and military-capable U.S.-flag 
commercial vessels, how would that impact the ability of 
TRANSCOM to successfully conduct its mission?
    General Fraser. Well, thank you very much.
    As I look at this particular PB that is put forward, P.L. 
480 will not have a significant impact on our ability to reach 
into the merchant mariner fleet to satisfy our requirements.
    As I take a look, though, at the trend that we have 
discussed here previously, I think that is something that we 
need to continue to work with the Maritime Administration to 
ensure that our requirements are met in the future.
    We completed a Mobility Capabilities Requirements Study, 
which defines the amount of square footage that we need in 
order to meet our military requirements. Right now that is 
slightly in excess of 19 million square feet. We have those 
ships identified that meet that requirement, as well as the 
pool of merchant mariners that would help us fulfill the 
requirements to meet our military needs.
    So we would continue to work with the Maritime 
Administration if further reductions were to take place.
    Mr. Coble. Thank you, gentlemen. Good to have you both with 
us.
    Mr. Chairman, I yield back.
    Mr. Hunter. I thank the gentleman.
    Ms. Hahn is recognized.
    Ms. Hahn. Thank you, Mr. Chairman.
    And I want to say that it certainly is timely that we are 
holding this hearing on the role of U.S. ships and mariners 
today, as tomorrow is National Maritime Day in this country. 
And until I came to Congress, I attended every single year a 
wonderful ceremony that we have in San Pedro, where we actually 
have a memorial to merchant mariners, and we honor them every 
year, a group of men and a few women.
    More merchant mariners were lost in our wars than any other 
branch of the military. Our merchant mariners, by the way, 
still don't receive the benefits that they deserve, and I plan 
on reintroducing legislation that will maybe compel this 
Congress to pay the survivors the benefits that they deserve. 
This is a branch of our military that really, many times, goes 
unrecognized and unhonored as they should, so it really 
troubles me.
    And I would like to associate my remarks with my friend and 
colleague from California, Ranking Member Garamendi, who says, 
as I do, that we completely disagree with the administration's 
attempt to restructure the Food for Peace program. It will 
reduce the amount of U.S.-flag vessels participating in this 
program.
    In an industry that employs more than 260,000 American 
workers and contributes $29 billion to our economy in their 
annual wages, I have serious concerns with what this could mean 
for our maritime workers. That is why I signed a letter, led by 
my friend, Congressman Cummings, opposing any changes that 
would ultimately lead to job losses in the American shipping 
industry.
    While you two sit here today and talk about the $25 million 
that will be used to reimburse the U.S.-flag vessel operators 
for this program, many of our merchant mariners and our 
maritime friends were walking the halls of Congress last month, 
going from office to office expressing their very deep concern 
of what this is going to do to this industry, to their lives, 
preserving the ships, preserving these kinds of skills.
    So I still can't figure out--maybe, Mr. Porcari, you can 
address this--why the administration is pursuing a policy that 
will devastate the U.S. shipping industry and put American jobs 
at risk.
    And is there a way that we could work with you to ensure 
your concerns--which I am not really clear on what the concerns 
are--without making these kinds of changes that will harm good 
American jobs?
    I am kind of with John Garamendi. Why don't we take this 
$25 million, put it toward the program and strengthen it?
    Mr. Porcari. Well, first, we are happy to work with you on 
this proposal.
    For the Maritime Administration and the Department of 
Transportation, we see an essential element that we have to 
preserve. I mentioned earlier that the Maritime Security 
Program is successful by any standards.
    It is important to point out that, in the current fiscal 
year, between the continuing resolution and then the sequester 
following it, for the first time we have been unable to honor 
our current commitments to the 60 vessels in the program.
    And I know your question is related to food aid. I do want 
to point out that it is imperative that we have a program that 
we know works, that is preserving the jobs, that is preserving 
the capacity for urgent national needs in times of the 
emergency. And we want to make sure that we are continuing to 
fully fund it. The President has proposed that for fiscal year 
2014.
    On the food aid proposal, the administration proposal is 
aimed at being more effective and efficient in actually 
delivering food to needed recipients and minimizing the 
distortion on the local markets at the same time. We, in 
interagency discussions, have really focused on the ability to 
do that and make sure that we are not impacting the merchant 
marine industry.
    And it has also provided us an opportunity to continue to 
outline how critical this capacity is for the Nation, from a 
jobs perspective, from a national defense perspective, and for 
responding to natural disasters.
    Ms. Hahn. I know my time is up, and I will have more 
questions maybe on the next round. But, again, it seems like 
this is counterintuitive to the program that exists now. It is 
a successful program. It creates good American jobs. There is 
an apprenticeship program built into it.
    It is also, you know, something we are proud of in this 
country. We love this Food for Peace program. This is our 
ships, our Americans. We are doing, you know, what America is 
known for. And it feels good that we are using ships and 
American crews to do something peaceful and something good 
instead of just always employing them in times of war.
    So this is a program that I think the American people 
support, and I agree that it is a bad idea to get rid of it.
    Thank you.
    Mr. Hunter. I thank the gentlelady. And we will have a 
second round.
    Ms. Hahn. OK, good.
    Mr. Hunter. Mr. Rice is recognized.
    Oh, he is not--I would like to add then, it almost seems--
the upsetting part isn't that the Food for Peace program was 
canceled, but it almost seems like it was flippantly cancelled. 
Because you have an ongoing study on--or you haven't done a 
study yet on exactly how you are going to use the $25 million 
in the MSP, but you are going to use it there somehow. DOD has 
an ongoing study. And you are able to say that right now there 
is not going to be any impact to be able to crew ships, but you 
can't tell me in 10 years what the impact is going to be. You 
haven't done a study on that; you don't know.
    So it seems like Congress and different administrations 
sometimes have a very shortsighted view on things like national 
security, where it looks good right now and we realize in 5 
years that it was a horrible mistake and it is going to cost us 
20 times as much to recapitalize the fleet and to get more 
mariners so we can crew these ships.
    So I would say that, at the very least, this was done 
flippantly without regard to knowing exactly how many people 
you need to have going into the future. This committee is not 
going to make the mistake of being shortsighted.
    Mr. Cummings is recognized.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    It is good to see both of you here, and thank you for being 
here.
    Secretary Porcari, MarAd has informed U.S. vessels that, 
due to sequestration, it will not be able to pay the full 
monthly MSP stipend in August 2013, which is, of course, right 
around the corner, and it will not pay any stipend in September 
2013.
    What will be the effect of these reduced or missed payments 
on the vessels participating in the MSP program?
    Mr. Porcari. Mr. Cummings, thank you for the question.
    This is first time that we have not been able to honor the 
Maritime Security Program commitments. As you point out, the 
cumulative effects of first being funded through a continuing 
resolution, which kept the dollar number at $174 million rather 
than $186 million, and then taking an additional $19.1 million 
out through sequester has had a very direct impact in the 
middle of a fiscal year.
    In discussions with leadership of the companies that 
participate in MSP, we know it is going to have a very dramatic 
impact. We feel strongly that we owe consistency and 
predictability to the industry so that they can make investment 
decisions and they can grow. This directly cuts against that 
consistency and predictability.
    We know it will have a negative impact. We will do 
everything we can to minimize it.
    Mr. Cummings. Well, if sequestration continues and the MSP 
program continues to be reduced, do you believe this may cause 
vessels to leave the program?
    Mr. Porcari. It certainly could happen.
    It is important to point out that the President is 
requesting full funding of the MSP program for fiscal year 2014 
in his budget. We believe very strongly that that for fiscal 
year 2014 and beyond is needed to stabilize the program.
    Again, this is a program that we know works for the 
Nation's needs and is a very cost-effective investment for 
times of emergency.
    Mr. Cummings. Now, according to the talking points prepared 
by DOD, and I quote, ``Military cargoes represent the 
preponderance of U.S. Government-impelled cargoes,'' end of 
quote.
    Assuming you agree that this is the case, what is the 
impact of the drawdown from Iraq and now Afghanistan on the 
U.S.-flag fleet?
    Mr. Porcari. The drawdown in Iraq and now Afghanistan 
clearly has a negative impact on U.S.-flag fleet. Military 
cargoes, as you point out, are one of the most important parts 
of the cargo base that the U.S.-flag fleet relies on. This is 
happening at the same time that the MSP program is not fully 
funded. It is happening at the same time as other impacts on 
the industry.
    We know that this argues for a strong maritime strategy 
across the board that fully utilizes all U.S. cargoes. We have 
been working with the Export-Import Bank, for example, to make 
sure that we are capturing cargo opportunities that we haven't 
before. We have been working directly with the Department of 
Energy to make sure that, where they have cargoes for wind 
energy projects and other things, that we are capturing cargoes 
wherever possible.
    In sum, we know that the U.S.-flag fleet needs a stable 
base to grow on. We think the energy sector and others will be 
part of that base in the future, but we need to get there, we 
need to transition to that.
    Mr. Cummings. Uh-huh.
    Let me ask you, General Fraser, how important is the 
maintenance of a viable U.S. merchant marine to our military?
    General Fraser. Sir, the maintenance of merchant mariners 
is critical to our ability to meet the requirements that we 
have laid out in the Mobility Capabilities Requirements Study, 
as they would man those ships for us in a time of emergency 
response.
    Mr. Cummings. Let me ask you, finally, Secretary Porcari, 
MarAd is granted sole authority by section 3511 of the Duncan 
Hunter National Defense Authorization Act for Fiscal Year 2009 
to ensure that shippers are complying with our cargo preference 
laws. Those who do not comply with these laws can face civil 
penalties for each day they remain in violation.
    How many potential violations of cargo preference laws has 
MarAd investigated in the last year? And has any entity ever 
faced a civil penalty for violating the cargo preference laws?
    Mr. Porcari. Mr. Cummings, I am not sure if any shipper has 
faced penalties for that. I will check and respond for the 
record.
    [Please see Mr. Porcari's response to Hon. Hunter's first 
question for the record on page 42 and Hon. Garamendi's first 
question for the record on page 43.]
    Mr. Porcari. I do know that we have a much higher level of 
engagement within the Department of Defense on this, with the 
idea of, before a violation would happen and before cargo 
transportation selections are made, engaging the appropriate 
people and making sure that both the letter and the spirit of 
the law is being followed. You can expect that we will be even 
more aggressive about that in the future.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Hunter. I thank the gentlemen.
    Mr. Rice is recognized.
    Mr. Rice. Thank you, gentlemen, for being here.
    And I am certainly no expert in maritime affairs; I am a 
tax lawyer. I am very concerned about U.S. competitiveness and 
United States jobs.
    And I sit here and look at these statistics that were 
provided by the committee, and it says there are 93 currently 
employed ships, currently employed in international commerce, 
moving goods between U.S. and foreign ports. Over the last 35 
years, the number of U.S.-flag vessels sailing in international 
trade has dropped from 850 to 93, I guess. The percentage of 
international commercial cargoes carried on the U.S.-flag 
vessels has fallen from 25 percent in 1955 to approximately 2 
percent today.
    Obviously, we are not doing something right. Do you guys 
have any suggestions for how we can make our American 
commercial fleet more competitive in the world?
    Mr. Porcari. If I may, sir, just to start, yes, we believe 
that, first of all, the Government-impelled cargoes that are 
currently carried by the U.S.-flag fleet form the foundation of 
the viability of the fleet.
    And I would point out that the vast majority of nations 
that are engaged substantially in maritime trade do some 
version of the same thing, that some Jones Act-like provisions 
provide a base capacity for many of those nations.
    We know that in the future the cargo mix is likely to be 
different, the types of vessels are likely to be a different 
mix. And, as I previously mentioned, focusing, among other 
things, on energy transport, given the rising domestic energy 
production, we think has real prospects for the Jones Act 
trade, both coastwise and inland. That is certainly a growth 
opportunity and one that we are going to work very hard to 
exploit.
    Mr. Rice. This also says, since 1983 the U.S. has lost 
approximately 300 shipyards. Seems like the Jones Act is--it 
seems like we are backing up. I mean, clearly, this is not 
working. What can we do? How can we make ourselves more 
competitive?
    I mean, I think what you just said is that the business 
provided by the Government provides a base for these 93 
remaining vessels. If the Government wasn't providing them this 
business, would we be down to zero?
    Mr. Porcari. If we weren't down to zero, it would certainly 
be a substantial reduction. But that is one of the reasons we 
believe so strongly in cargo preference and the Jones Act.
    Mr. Rice. Why are we not competitive today? What is it 
about our American fleet that makes it where we can't compete 
with the rest of the world and we are only carrying 2 percent 
of commercial cargo? How can we fix it?
    Mr. Porcari. Well, the U.S.-flag fleet, I would point out, 
follows safety standards that not everyone else in the world 
does. In terms of maritime worker training, we generally do 
more than others. There are other nations that subsidize, 
either directly or indirectly, use of maritime vessels. And 
those are, in that sense, competitive disadvantages.
    That is why it is important to make sure, whether we are 
talking about the maritime crews, the ships, the shipyards, or 
all of the associated parts of the industry that are all vital, 
that we have to make sure that we are keeping a base of 
industry and U.S. crews that can serve the Nation in the 
future.
    Mr. Rice. I guess, you know, the definition of ``insanity'' 
is to keep doing the same thing and expect a different outcome. 
We have lost almost 90 percent of our fleet in the last 35 
years. I think we need to rethink our policies and do what we 
can to make our--I don't know why in the world--America can 
compete in anything. We are the greatest Nation on Earth. And 
to sit here and watch our industry die makes absolutely no 
sense to me.
    We need to start from the ground up, and we need to come up 
with policies where our mariners can compete.
    Thank you very much for being here.
    Mr. Hunter. I thank the gentleman.
    We are going to start one more round of questions. And we 
will try to do it quickly because we have a second panel we 
would like to get to, as well.
    General Fraser, I have some stuff in front of me. Let me 
see if I can phrase this right, too. I have different quotes 
from different people.
    General McNabb testified before Congress about the critical 
role cargo preference laws have in ensuring TRANSCOM has a 
domestic sealift capacity to successfully conduct its mission. 
He says, ``While cargo preference laws and national defense 
sealift policies ensure the viability of a U.S.-flag commercial 
fleet''--and he also wrote a letter to Congressman LaTourette 
in 2011. And he says--this is from your predecessor--``The 
movement of U.S. international food aid has been a major 
contributor to the cargo we have moved under the cargo 
preference law that our U.S. commercial sealift industry 
depends on. Any reductions will have to be offset in other ways 
to maintain current DOD sealift readiness.''
    There is no plan yet for the $25 million in offset. So have 
things changed so that it is no longer needed and his concerns 
are no longer valid?
    General Fraser. Sir, merchant mariners continue to be 
critical to our ability to meet our requirements.
    And as we look at the size, if I might, based on the size 
of the merchant mariner pool that we have to pull from and the 
requirements as laid out in our requirements study, we have 
sufficient mariners to meet those requirements should we have 
to generate the surge fleet and the Ready Reserve Force.
    As we continue to move forward and if there are other 
changes, we will continue to work very closely with MarAd to 
ensure that that requirement is not only understood but we are 
able to meet that requirement moving into the future and not 
increasing risk to our readiness.
    Mr. Hunter. General, let me ask you this. If you know that 
right now you meet the requirement, how much in excess over the 
requirement are we right now? So if you know what the 
requirement is and you know what that number is, then you 
should know the number of people that we are in excess of the 
requirement.
    General Fraser. Based on the numbers that I have, the 
merchant mariner pool right now is slightly in excess of 15,000 
mariners, of which at any time there are approximately 7,000 or 
so that are at sea doing their job. The others are maintaining 
certification, getting ready to go, doing these types of 
things.
    So that, then, leaves a pool of which we need approximately 
3,000 mariners to man our surge and Ready Reserve Fleet. So we 
would draw from that remaining pool of merchant mariners that 
are current, qualified, certified, licensed to fulfill that 
requirement.
    Mr. Hunter. So, out of those 15,000 then, as you say, 7,000 
are active doing stuff, being mariners, the other 7,000 are not 
at any given time. And out of that 7,000 that are active, you 
pull 3,000?
    General Fraser. The others are getting ready to go, 
maintaining their certifications, doing these types of things. 
They are part of the pool. We would pull from the pool. We 
would turn to MarAd, who would then reach out to industry based 
on the capabilities that we would need to man the ships, 
depending upon the types of ships that we were getting 
underway. They would then put this team, this crew together and 
then be ready to sail in minimum time.
    Mr. Hunter. So, as the cargo preference laws change, if 
they do, and the Food for Peace program gets slashed, what do 
those numbers go to? What is your estimate? You go from 15,000 
to 10,000, 8,000? As those U.S.-flag vessels go foreign-flag, 
how many mariners do we lose?
    Mr. Porcari. I am----
    Mr. Hunter. I am sure the administration wouldn't cut the 
program without knowing how many mariners we would lose out of 
that pool.
    Mr. Porcari. Mr. Chairman, I don't have that number. I will 
be happy to provide the committee with what information we do 
have.
    Mr. Hunter. All right. I thank the gentleman.
    Ms. Hahn, do you have more questions?
    Ms. Hahn. Yes.
    Mr. Hunter. Ms. Hahn is recognized.
    Ms. Hahn. I just want to say on this, about building more 
ships, more American-flag ships in this country, shipbuilding 
is such, again, another overlooked industry that can add to the 
economy. These are great jobs when we build ships. You know, 
these are, like, our machinists, our electricians, our 
metalworkers. I mean, these are great jobs and skills that we 
are losing in this country.
    One of the areas that we are not involved in is the cruise 
industry. And according to a 2011 statistical snapshot taken 
last year by MarAd, the American cruise industry had a record 
year, with 71.8 million passengers. In fact, the North American 
cruise industry has been one of the bright spots in the 
shipping industry. It has consistently done well year after 
year, even as we remain in an otherwise sluggish economy.
    However, except for a few small coastwise vessels and 
riverboats, nearly all of the 200 oceangoing cruise ships in 
the North American market are foreign-flag ships. This 
discrepancy is also evident in our cargo fleet, where only 2 
percent of the international commercial cargo is carried by 
U.S.-flag vessels, down from 25 percent 60 years ago.
    I represent the Port of Los Angeles, and I am supporting 
all ships that call on American ports and serve American 
passengers. I do wish we could focus more on how we could build 
more U.S.-flag ships for our cruise industries.
    Why aren't we creating more U.S.-flag ships in this 
country? And what can we do to ensure that more of these ships 
are built and operated, owned and operated here? And is MarAd's 
policy to refrain from financing new cruise ships one of the 
major hurdles preventing U.S.-flag cruise fleets?
    Mr. Porcari. Well, first, if I may, the cruise ship 
industry, with its dramatic growth to and from U.S. ports, does 
present a potential opportunity, and we recognize that. And, 
further, with only one exception that I am aware of, they are 
not American-flag vessels.
    It is an industry that we would like very much to 
encourage. There may well be opportunities in the future to do 
that. I am aware of only one potential proposal for a Title XI 
loan guarantee for a cruise vessel that in this administration 
never got beyond the discussion stage.
    The speculative nature and financial viability of some of 
those vessels and companies is an open question. We have a 
fiduciary responsibility, as you know, in the Title XI program 
to make sure that the loan guarantees are being used for 
projects and employing people at shipyards with a very high 
degree of likelihood of success. And that is the tact we have 
taken.
    I would put the cruise ship business on the opportunity 
list, along with some others that I have mentioned, again, 
including energy.
    Ms. Hahn. So you are saying here today that you are not 
going to have a policy to refrain from financing new 
opportunities for cruise ships?
    Mr. Porcari. Current policy is not to finance cruise ships 
through the Title XI program. There have not--I have not seen 
or am not aware of any proposals that would drive us to change 
that policy, because----
    Ms. Hahn. Well, there are probably not any proposals, 
because the policy exists.
    Mr. Porcari. Well, we actually have had at least one 
proposal that I am aware of, but again the financial viability 
of which was shaky at best.
    Ms. Hahn. Well, I really think this is an opportunity and I 
would hope that MarAd would consider lifting this policy and 
looking to possibly finance. This is a huge opportunity. I 
mean, the fact that we have no U.S.-flag cruise ships, and as 
we have seen recently, there have been some major disasters at 
sea, it seems there is an opportunity to build a better cruise 
ship, one that is safer and more efficient.
    We also have a problem, I know in Los Angeles, of detaining 
foreign crews from disembarking from the cruise ships in port 
because of the potential opportunity for folks who want to flee 
and come to this country. So there are problems that I think we 
could address with building U.S.-flag cruise ships.
    Mr. Porcari. If there is a----
    Ms. Hahn. I mean, even Disney. I couldn't believe the 
Disney ship was not, I mean, U.S.-flag. That just hurt.
    Mr. Porcari. Well, first, I think U.S. industry and U.S. 
labor would certainly point out that a U.S. built and 
maintained and a U.S. Coast Guard certified cruise ship fleet 
is a safer, better alternative and more reliable.
    What I will tell you is if we have a viable proposal on a 
cruise ship, we will certainly entertain that.
    Ms. Hahn. OK. Thank you.
    Mr. Hunter. Mr. Rice is recognized.
    Mr. Rice. Thank you, Mr. Chairman. You know, sitting here 
and listening and looking at these statistics, I don't think I 
have ever seen a more clear example of a failure of a 
protectionist policy, and I really don't want to sit here and 
continue what we are doing and watch our maritime industry 
disappear. So I would ask the chairman if we could convene 
another hearing with some maritime commercial shippers and ask 
them their opinion about what we can do differently to try to 
make our ship building business more competitive.
    Mr. Hunter. The gentleman is in luck. That is the next 
panel.
    Mr. Rice. Great.
    Mr. Hunter. Yeah. In about 5 minutes. Does the gentleman 
yield back his time?
    Mr. Rice. I do.
    Mr. Hunter. I would like to recognize the ranking member 
for one last question.
    Mr. Garamendi. Thank you. I am really concerned here. The 
talk is good, that is, the direction that you want to go is 
good, but the programs and policies are going the opposite 
direction. General Fraser, in your testimony you talked about 
the need to recapitalize, yet money for recapitalization is not 
available. We talk about the need for encouraging the use of 
American shipping, and yet the administration calls for repeal 
of Public Law 480 that goes exactly the opposite direction. We 
have Title XI out there that is supposed to be used, but yet 
very little has been done in new programs, takes forever to get 
a loan approved, if at all. We just heard in response to Ms. 
Hahn's question that, no, we are not going to do the 
commercial--the tourist ships.
    So it goes on and on, but there isn't an overall strategy 
and an implementation of a strategy. The pieces of the puzzle 
are disjointed and in some cases are taken off the board. So I 
think we really need to settle on do we want, do we need, must 
we have a domestic merchant marine available for national 
security purposes, General Fraser? If so, then what are we 
going to do to make that happen? How are we going to 
recapitalize? Where is the money going to come from? Do we want 
a commercial merchant marine for any number of reasons, for 
jobs, for enhancing the American economy? Do we want a ship 
building industry in the United States?
    If the answer to these questions is yes, then we need to 
have a coherent national policy and the money to support it. We 
have seen five fiscal crises in the last 2 years. Each one has 
diminished the money available for Federal programs, including 
programs that are being discussed today.
    So I would like to work with the administration, the 
Department of Transportation and, General Fraser, in your 
programs in developing a coherent national strategy that fully 
employs the commercial marine base and meets the needs of 
national security. I don't think it exists today. I think it is 
incoherent, I think it is incomplete, and in many ways one hand 
is harming the other, so one program is harming the other 
program.
    With that said, I am going to yield back my time. I want to 
thank the gentlemen for participating. Mr. Porcari and General 
Fraser, thank you very much for your testimony. I know that I, 
and I am sure the chairman, look forward to working with you on 
developing a coherent program, one in which every element 
necessary for national defense and for economic growth in this 
Nation is in place, vibrant and healthy.
    I yield back.
    Mr. Hunter. Thank the ranking member.
    Mr. Porcari, for the record, could you get back to us, too, 
on when the shipyard economic benefit study is due to be 
released, too?
    Mr. Porcari. I will be happy to. I know it is imminent. I 
will get you an exact date.
    Mr. Hunter. Thank you, gentlemen, for your time. If there 
are no further questions, so we will call the second panel of 
witnesses. Thank you.
    Mr. Porcari. Thank you.
    Mr. Hunter. All right. We will convene now. Is everybody 
ready? Thank you for being here. Our second panel of witnesses 
include Mr. Fred Harris, president of General Dynamics NASSCO, 
appearing today on behalf of the Shipbuilders Council of 
America; Mr. Joseph Pyne, chairman and CEO of Kirby 
Corporation, appearing today on behalf of the American Maritime 
Partnership; Mr. Mike Jewell, president of the Marine 
Engineers' Beneficial Association; and Mr. Augi Tellez, 
executive vice president of the Seafarers International Union.
    And we will start with Mr. Harris. You are now recognized.

 TESTIMONY OF FRED HARRIS, PRESIDENT, GENERAL DYNAMICS NASSCO, 
 ON BEHALF OF SHIPBUILDERS COUNCIL OF AMERICA; JOSEPH H. PYNE, 
  CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KIRBY CORPORATION, ON 
     BEHALF OF AMERICAN MARITIME PARTNERSHIP; MIKE JEWELL, 
   PRESIDENT, MARINE ENGINEERS' BENEFICIAL ASSOCIATION; AND 
     AUGUSTIN TELLEZ, EXECUTIVE VICE PRESIDENT, SEAFARERS 
                      INTERNATIONAL UNION

    Mr. Harris. Chairman Hunter, Ranking Member Garamendi and 
members of the subcommittee, I am Fred Harris, president of 
General Dynamics NASSCO. We build U.S. Navy ships and large 
oceangoing commercial ships in San Diego. We repair and 
maintain Navy ships in San Diego, Norfolk, and Mayport. I am 
vice chair of the Shipbuilders Council of America, which 
represents shipyards and partners that supply and support U.S. 
vessel construction and repair.
    It is a pleasure to testify regarding the industry and the 
important Federal policies, including the Jones Act and the 
Title XI loan guarantee program. Our Navy and Coast Guard are 
without equal and their strategic importance is unquestionable; 
however, our commercial maritime industry is often overlooked 
as a vital element of our Nation's maritime strength. It 
ensures skilled mariners and ships are available in time of war 
or emergency to transport material by sea. From 2002 to 2008, 
U.S.-flag vessels carried 97 percent of sealift material to 
Iraq and Afghanistan. A significant portion of that material 
was transported by way of activating the ready reserve fleet.
    The Jones Act is critical to our Nation's maritime 
strength. The act requires that cargo transported between U.S. 
ports be moved on U.S.-built, U.S.-flagged, and U.S.-crewed and 
-owned ships. It ensures that experienced U.S. mariners are 
available to crew ships in times of crisis or conflict, 
enabling the timely movement of supplies. Maintaining the Jones 
Act is vital to ensure America preserves its commercial 
shipbuilding industry and thus its naval shipbuilding industry 
and capability.
    A number of U.S. shipbuilders are internationally 
competitive in the offshore support vessel marketplace and 
others are becoming world leaders in propulsion LNG 
technologies.
    The Jones Act dry cargo fleet needs to be recapitalized. 
Also, projected demand is high for new crude and product 
carriers. The Jones Act ensures this work will be performed in 
the U.S., helping maintain our workforce of skilled engineers 
and trades people. In addition, it ensures development of 
innovative technologies and best practices that benefit both 
commercial and military shipbuilding.
    General Dynamics NASSCO has proven we can dramatically 
lower the cost and reduce the time it takes to build high-
quality naval vessels while also constructing Jones Act ships. 
Today we are achieving major efficiency gains and setting new 
standards constructing the mobile landing platform ships for 
the Navy. We recently signed a two-ship contract with TOTE, a 
forward-looking Jones Act owner, to construct the world's 
largest LNG-powered container ships, which will be dramatically 
more fuel efficient and exceed all emission requirements. 
Building those and other commercial ships will reduce the costs 
of U.S. Government shipbuilding.
    Revitalizing the Maritime Administration's Title XI loan 
guarantee program is essential to modernizing the Jones Act 
fleet and sustaining the shipbuilding industry in the U.S. 
Title XI provides Government guarantees on private sector loans 
for commercial shipowners constructing new ships and offers 
better terms and low-interest rates, leveraging an average of 
$11 of private investment for every $1 of Federal guaranteed 
funds.
    The program has provided strong support for the industry; 
however, the Title XI program must receive adequate 
congressional support to be beneficial to the commercial 
shipbuilding industry. First and foremost is sustained, 
dependable finding. No funds were appropriated to support this 
program in fiscal year 2013 and none are proposed in PB 2014. 
We are grateful for continued efforts in Congress to provide 
Title XI funding, including the efforts of Chairman Hunter and 
other Members.
    Second, the loan guarantee process requires significant 
reform to restore the program's effectiveness as a timely aid 
to ship construction financing.
    The shipbuilding subcommittee of the DOT Maritime 
Transportation System National Advisory Council has made 
thoughtful recommendations regarding needed reform, the details 
of which are in my written testimony.
    Thank you again for the opportunity to address the 
committee. I look forward to your questions.
    Mr. Hunter. Thank you, Mr. Harris.
    Mr. Pyne, you are now recognized.
    Mr. Pyne. Thank you, Mr. Chairman. Chairman Hunter, Ranking 
Member Garamendi, committee members, good morning. My name is 
Joe Pyne. I am the chairman and CEO of the Kirby Corporation. 
Kirby is the Nation's largest maritime company. Kirby is a 
publicly traded New York Stock Exchange company with a market 
cap of about $4.6 billion. We employ over 4,600 people, some 
2,500 of them are Jones Act mariners, and we operate a fleet of 
over 1,300 Jones Act vessels.
    I am here today on behalf of the American Maritime 
Partnership, AMP. AMP is the coalition that represents the U.S. 
domestic maritime industry.
    The Jones Act not only helps ensure national security, but 
it also provides good paying jobs with good benefits for 
workers in America. The domestic maritime industry sustains 
approximately a half a million jobs. Our industry takes care of 
its people. At Kirby, entry-level vessel jobs pay an average of 
$45,000 a year. With some hard work and training, which we 
provide at our training center, a high school graduate working 
for Kirby can earn over $130,000 a year after a few years on 
one of our boats.
    Many segments of the fleet are growing and recapitalizing. 
For example, my company, Kirby, has invested over $2.1 billion 
in Jones Act assets in the last 5 years. TOTE, a west coast 
company, is building a new state-of-the-art LNG-powered ship 
for the Puerto Rican trade. Hornbeck Offshore is building a new 
generation of offshore supply vessels that will work in both 
domestic and international trades, demonstrating that American 
vessels can compete in world markets. And Crowley Marine has 
recently invested about a half a billion dollars in two new 
tankers and two large articulated tug barge units, each with a 
capacity of 330,000 barrels.
    Year in and year out, the domestic fleet serves the needs 
of America. Nobody talks about waiving the Jones Act when the 
market for our services is soft. When the markets are tight and 
owners need to add capacity, even discussing waivers or changes 
to the Jones Act makes matters worse. It sends a chilling 
message to operators who need to build new vessels to support 
shippers' needs. It causes shippers to be less committed to 
supporting new Jones Act vessels to support their requirements.
    The Jones Act is a key part of our national defense. The 
vessels themselves, the people who man them, the shipyards who 
build them each play a critical role. The Jones Act supports 
homeland security also. Our mariners are the eyes and ears of 
homeland security on the water. They safely and securely 
transport hazardous cargoes through many parts of our Nation 
and through populated areas. We do not want to turn these 
cargoes over to foreign workers on foreign vessels.
    The Jones Act sustains American jobs, plays a vital role in 
national defense and helps protect the homeland. How can 
Congress support this? I suggest the best form of support is to 
maintain the certainty that has been expressed by generations 
of American leaders that our domestic merchant marine is not 
for sale and the Jones Act will remain the law of the land.
    Our industry is making a huge commitment to serve the 
future transportation needs of this Nation. Vessels are 30- to 
40-year lived assets. In order to make these long-term 
investments, we need confidence that the Jones Act is secure.
    On behalf of AMP, thank you for your support of the Jones 
Act and all that it represents for America. And thank you for 
the opportunity to be here today.
    Mr. Hunter. Thank you, Mr. Pyne.
    Mr. Jewell, you are recognized for 5 minutes.
    Mr. Jewell. Chairman Hunter, Ranking Member Garamendi and 
members of the subcommittee, I am pleased to have the 
opportunity to appear before you on behalf of the American 
Maritime Officers, Master Mates and Pilots, and my union, the 
Marine Engineers' Beneficial Association.
    History has repeatedly proven and policymakers have 
recognized that it is in the best interest of the United States 
to maintain and support a strong U.S. merchant marine. As 
stated in the Merchant Marine Act of 1936, it is necessary for 
the national defense and development of its foreign and 
domestic commerce that the United States shall have a merchant 
marine sufficient to carry its domestic waterborne commerce and 
a substantial portion of the waterborne export and import 
foreign commerce.
    Today U.S.-flag commercial vessels and our American 
merchant mariners are responsible for transporting only 2 
percent of our country's foreign commerce. Mr. Chairman, that 
is hardly a substantial portion.
    We believe the best way to achieve the goals of the 1936 
act is for Congress and the administration to fund and protect 
existing programs and promote forward-thinking policies that 
encourage new tonnage to operate under the U.S. flag.
    Other nations around the world are now recognizing the 
value of their merchant fleets. Just yesterday it was reported 
that the Chinese are increasing the support to their maritime 
industry, implementing subsidies, encouraging long-term supply 
chain contracts and strengthening their influence within the 
marketplace.
    The Maritime Security Program and U.S. cargo preference 
statutes are among the cornerstones of American merchant 
policy. In May of 2011, General Duncan McNabb, Commander of 
USTRANSCOM, stated, to date over 90 percent of all cargo to 
Afghanistan and Iraq is moved by the U.S.-flag vessels. He went 
on to note that the U.S. cargo preference laws have helped to 
ensure the continued viability of both the U.S. fleet and the 
pool of citizen mariners who man these vessels.
    Sequestration is having a major impact upon the Maritime 
Security Program, because in August, the MSP funding runs out. 
This coupled with the fact that the U.S. military cargo 
preference cargoes continue to decline and the administration's 
budget proposal on the Food for Peace program has left our deep 
sea carriers in doubt if they can continue to fly the American 
flag.
    We are deeply troubled by the administration's recent 
proposal to begin replacing the existing Food for Peace program 
with a program that simply provides U.S. taxpayers' dollars to 
other nations to purchase foreign agricultural commodities and 
use foreign shipping services. Americans should be proud that 
the Food for Peace program not only demonstrates the generosity 
of the American people to help the world's most needy people, 
but also results in significant economic and strategic benefits 
for our country.
    As Congress considers a broad overhaul of the U.S. tax 
policies, the competitiveness of the U.S. merchant fleet and 
U.S. mariners should be top priority. To this end, we believe 
changes should be made in our tax laws that can foster the 
growth of the United States maritime industry and equal the 
playing field for the U.S.-flag merchant marine as we compete 
internationally.
    We would note that we greatly appreciate the support of the 
members of this subcommittee for the enactment of the 2004 
tonnage tax legislation for U.S.-flag vessels.
    Congress should enact policies to promote a vibrant short 
sea shipping industry. We ask the committee, through its 
formation of the Panel on 21st-Century Freight Transportation, 
to include maritime and short sea shipping as a top priority.
    The export of liquefied national gas and the growth of the 
cruise ship industry represent a very large and potentially 
booming industry for the U.S. merchant marine. Our unions 
supply LNG deck and engineering officers to crew and operate 
LNG ships. U.S. merchant marine officers are now working aboard 
LNG carriers operating in the international fleet. We ask the 
committee to encourage the employment of the U.S. merchant 
mariners aboard these vessels participating in the export of 
natural gas.
    With regard to the cruise industry, 10 million passengers 
boarded cruise ships in the United States in 2012, yet U.S. 
mariners are notably absent aboard these cruise ships 
internationally. We ask Congress and the administration to 
encourage the employment of the U.S. merchant marine aboard 
these cruise vessels.
    President Ronald Reagan once said that the maritime 
industry is a key contributor to our economic strength and 
security of our Nation when the Nation was founded. Its 
continued growth and prosperity is necessary to the overall 
growth of the economics in America, and we agree.
    We look forward to working with you, Mr. Chairman, and your 
subcommittee in order to promote and expand the U.S. merchant 
marine.
    Mr. Hunter. Perfectly timed, by the way, Mr. Jewell. Thank 
you.
    Mr. Tellez, you are recognized.
    Mr. Tellez. Good morning. Thank you, Mr. Chairman, Ranking 
Member Garamendi, members of the committee. A special good 
morning to our friend, Lucinda. My name is Augi Tellez. I am 
the executive vice president of the Seafarers International 
Union, and I bring you greetings and salutations from my boss, 
Michael Sacco, president of the Seafarers International Union.
    Thank you for holding this hearing. And a special thank you 
to Chairman Hunter for his excellent op-ed in the Washington 
Times earlier this month. I would also ask that my written 
testimony be added to the record.
    Listening to the previous speakers, I am going to go off 
script and beg your indulgence while I do a little soapbox 
here.
    My colleagues and I, the union officials in this room and 
throughout the country, are proud to represent thousands of 
patriotic Americans, men and women who ply their trades every 
day, along with others who are not represented by us, but they 
all do the same thing. They ply their trades on the rivers, 
lakes, domestic waters and international waters under 
conditions, whatever conditions nature or our enemies decide to 
throw at us. We do so every day with little or no fanfare 
unless we are attacked by pirates and Tom Hanks decides to make 
a movie about us.
    We have been a critical component of our country's economic 
and national security from the founding days of the republic. 
We are a critical part of every armed conflict, from the 
Revolution to today's conflict in Iraq and Afghanistan, as 
mentioned before, carrying over 95 percent of all seaborne 
cargoes going into the theater.
    We have rebuilt and fed the world since General Marshall 
had a plan, including the most recent disasters in--the tsunami 
and in Haiti, and we continue to feed the world under the 
current Public Law 480 cargoes program.
    We are always there when the balloon goes up and we hope to 
be there whenever the balloon goes up, but in order to do that 
we need to have a strong foundation of a vibrant and viable 
commercial fleet. And unfortunately in this world, in order to 
maintain that, it has to be a public-private partnership.
    The other speakers have mentioned the components of that 
three-legged stool, number one being the Jones Act. I won't 
expound on the Jones Act, because Mr. Pyne has done an 
admirable job both in his oral and his written testimony. I 
will add one thing, and it is a hot-off-the-press study 
indicating, contrary to assertions by folks that the Jones Act 
is responsible for a rise in gas price, the percentage of 
gasoline that is carried and impacted by the Jones Act turns 
out to be 6.7 percent of the gasoline in this country. The 
major impact happens to be the Tampa area, and the impact on 
price there is.015 cents. So for those who get up and bemoan 
the Jones Act and its impact on gasoline prices, they are just 
way off base.
    MSP. MSP is critical to the efforts by TRANSCOM to support 
our troops. It ensures that 60 vessels, modern vessels, are 
there carrying that cargo. One of the objectives that is 
sometimes forgotten in the MSP program was to recapitalize our 
international fleet. So even though it is less than 100, the 60 
ships in the MSP program, because of the way the program was 
set up, are new ships. Currently as we are speaking, I believe 
Mike can correct me if I am wrong, Maersk, Inc., has just 
replaced and recapitalized two of their vessels, if not three, 
with new vessels coming in as part--the beginning of their 
recapitalization program.
    Public Law 480. You notice that when unencumbered by the 
administration's contrary view, past commanders of TRANSCOM 
attest to the value of the Public Law 480 program and its 
importance. So we will grant General Fraser our benefit of the 
doubt. He is a good partner and a good leader and a good 
soldier.
    MarAd itself has an internal study that does in fact show 
that 10 years, when you take that long-term view, somewhere 
down the line there is a looming shortage in particular areas 
of the fleet, of the manpower pool, rather. When you couple 
that with less than 100 ships in international trade, then one 
ship, let alone eight or 10, is just one too many to lose. It 
will have an impact on our ability to man ships and create a 
manpower pool.
    Congress has always saw fit to support the merchant marine 
and the United States maritime industry. We hope that you will 
continue that fight, and we look forward to working with you to 
ensure that the United States merchant marine is there whenever 
we are needed. I thank you for your time. I am prepared to 
answer any questions.
    Mr. Hunter. Perfectly timed, too, Mr. Tellez. You guys must 
have practiced this, I am guessing.
    Well, let me say thank you for being here. And there is a 
good quote that I like to repeat as often as possible, and it 
is he who controls the oceans controls the world, whether you 
are talking merchant mariners, you are talking the U.S. Navy. 
You know, 20, 30 years ago we had over 400, I think 480 
something, probably higher, naval ships that we operated. Now 
we are going to be dropping down probably below 300. The Navy 
comes out with study after study showing that as the world gets 
crazier and things get worse and worse, we somehow need fewer 
ships, not more.
    So my question for all of you is, and if you can tell me 
there is--we have mentioned MSP, we have mentioned food aid, we 
have talked about Title XI. If you were to say what is the most 
important thing in the industry to keeping those shipyards 
rolling so that if we do have a need--which I think if you take 
the 50-year view, you are going to have another conventional 
war in the ocean again. You have a lot of smart Ph.D.'s from 
different military schools saying you are never going to have 
surface fleets fighting each other again on the open oceans. I 
would disagree. And you as commercial shipbuilders are going to 
be the ones who have to build those naval ships the way that GM 
used to have to make tanks. And if we get in a big protracted 
war again, that is what is going to happen.
    You are vital to the Nation's security interests, and I 
would like to know the most important thing you think can be 
done in a private-public way with the U.S. Government's help to 
keep your industry going.
    Mr. Harris. And by the way, Fred, I don't think that is a 
San Diego accent you have, is it?
    Mr. Harris. Mr. Chairman, it is not.
    Mr. Hunter. OK.
    Mr. Harris. Let me start by saying from the Government 
side, because we build both commercial and Government ships in 
this country, from the Government side, having a shipbuilding 
plan where you understood what was in front of you and was 
every year consistent and didn't change every month would be a 
big start to help the shipbuilding industry. The Government 
would like us to invest hundreds of millions of dollars in 
facilities. Generally, shipyards don't have a problem in doing 
that as long as they understand what the investment is and what 
the return may be in front of them. So sustained and steady 
shipbuilding, understanding the Government policy.
    From the commercial side, I think the biggest value for 
American shipbuilding would be keep the Jones Act and then 
support Title XI. How do you support Title XI? We need to have 
adequate funding on a yearly basis and we need to sustain that 
year after year after year. And I am not telling you that is a 
lot of money, because of the multiplication factors. I think in 
the neighborhood of $50 million, $60 million, in some years 
even less, but in that range would give the shipbuilding 
industry and the owners the ability to go borrow money and 
build and recapitalize the fleets.
    The other thing that has to go on is, and some of it was 
mentioned this morning, is that the Maritime Administration has 
to get to be much more streamlined and much more responsive to 
loan applications. I can design a ship and build it before an 
owner will get notification he either is or is not approved for 
a loan. Design it and build it, 2 years. That is really not 
healthy, because how could you as an owner go forward to plan 
your recapitalization if you are not sure if you are going to 
get a loan or not in that timeframe?
    Now, it is not just MarAd's fault. It is also sometimes the 
owners don't provide all the information, but it is a 
combination, and a restructuring or review of that policy would 
be a good thing for the American commercial shipbuilding 
industry here. And again, as I said, maintaining the Jones Act 
and keeping the Jones Act strong and safe will help American 
shipbuilding.
    As you mentioned, in this country 300 shipyards have gone 
out of business since 1953. There are somewhere around 400,000 
people involved directly in U.S. shipbuilding, either 
Government or commercial, doing supplies, equipment, or 
building ships themselves.
    It takes us a good 5 years in the shipbuilding business to 
learn the skill of shipbuilding. When you take our high-end 
trades, our electricians, our welding specialists, it is a 5-
year journey. Losing them and trying to revitalize or 
reconstitute the industry would never work. I have been 
involved in a number of different evaluations in different 
countries, like the U.K. They have lost their shipbuilding 
industry. It is gone. And once it is lost, it will be very 
difficult, if ever, regained again. And in the U.K., for 
example, they recently just went and bought three tankers for 
their Royal Navy Auxiliary, and they bought them from Korea. No 
one in the U.K. was able to bid on them and build those ships. 
So it doesn't take long for the industry to go away. If it 
does, it will be very difficult to recapitalize or to 
reconstitute.
    So keeping the Jones Act strong and getting Title XI 
funding fixed are important. And I think also the point you 
made earlier about a national maritime policy. We do not have 
one. And right now today if you said, what is our national 
maritime policy? It is very fragmented. And looking at since 
1936, MarAd has made some 800 loans on ships that were built 
under the Title XI or previous program, but a guaranteed loan 
program. Recently the funding is not there, it hasn't been 
appropriated, and it has taken so long for owners to go in, 
ships are just aging in place. The noncontiguous liner fleet is 
some 30-plus years old, inefficient, highly pollutant, won't 
meet the international standards unless the ships are rebuilt.
    Mr. Hunter. Thank you, Mr. Harris. And we will come back 
around. I would like to get all of your answers for that 
question on what the most important thing is, and we will wait 
till my colleagues have a chance to ask questions.
    Mr. Garamendi.
    Mr. Garamendi. Well, as much as I like to listen to myself, 
I would like to have your question answered by the gentlemen. 
So let's just continue on.
    Mr. Pyne. I think I can be succinct. To remove uncertainty 
and confirm the importance of the Jones Act----
    Mr. Hunter. Mic. Pull that closer to you, the microphone 
closer to you. Thank you.
    Mr. Pyne. Is that better? OK.
    Remove the uncertainty and confirm the Jones Act. 
Investors, operators, owners, shipyards have a hard time 
dealing with uncertainty, and if Congress sends, and Government 
agencies send mixed messages, it really does dampen the 
enthusiasm for making the investment.
    I think that we are actually in a unique time in America. 
We are in the middle of an energy revolution that is going to 
drive lots of transportation requirements. And those 
transportation requirements are not only going to be marine, 
they are going to be rail, pipeline, even truck. Volume drives 
utilization in our business. Utilization drives efficiency and 
price and produces the comfort level to make investments.
    The more ships we build, the more efficient we will become. 
We will lower the cost of construction. That happens in the 
barge business. We build a lot of barges. We do it 
competitively on a global basis. I think we can do that from a 
ship perspective if we build enough of them.
    What we don't need is a mixed message that says we are 
going to compromise the Jones Act, which makes it much more 
difficult for a company like Kirby to invest in it.
    Mr. Jewell. I agree with the ranking member that we need a 
strategic plan. It is best summed up in three things. Without a 
company or a ship built in the United States, we cannot crew 
it. And without a crew, you can't sail. But without a ship, you 
can't have the crew to do that.
    And I do disagree with an earlier panel member, I truly 
believe that there are not 15,000 mariners out there; it is 
significantly less. And when we lose ships, we lose our 
membership. And once the membership is gone, it trickles down 
to all the schools. And take the $25 million. I am clueless on 
where it goes. Is it a 1-year deal? Is it a 2-year deal? We all 
have schools, we are all highly skilled. What are you going to 
reeducate us to do with that $25 million?
    But I truly believe it is the three things. You have to 
have a company to order the ships built in the United States, 
and then we can crew it. Thank you.
    Mr. Tellez. In the General's defense, that 15,000 number 
was given to him by one of his staff, and that 15,000 probably 
represents a number of deep sea licenses and documents issued 
in a particular time period. The actual manpower pool that he 
can grab onto to support his ships is, as Mike said, far less 
than that.
    Compounding that issue is also there is a group, the mean 
age, I believe, within the officers is somewhere 55 years old, 
so you have a whole generation of officers that are soon to be 
retiring out. Where is the training? Where are the platforms 
where you train the people to replace them to move up? And that 
is the concern with those numbers.
    If I were a shipowner, I guess I would say the most 
important thing to me would be the preservation of cargo. What 
can Congress, what can the Government do to make sure that I 
have got cargo? And the first thing is probably to enforce the 
existing laws on the books to make sure that there is no 
leakage. And by that I mean if a cargo is deemed to be reserved 
for a U.S.-flag ship, well, then it should be on the U.S.-flag 
ship and not be circumvented and put on someone else's ship.
    The second part of that is to maybe apply the cargo 
preference laws to other cargoes that have been excluded in the 
past. That way you broaden the base and, therefore, keep those 
ships that Mike is talking about going.
    I believe cargo would be the most important thing to keep. 
With cargo on your ship, everything else falls in place. Cargo 
is what makes a ship go. So I would say the most important 
thing would be the preservation and the expansion of cargo for 
our vessels.
    Mr. Garamendi. Thank you, Mr. Chairman. And I thank you for 
the answers. We really have all the elements of a strategic 
plan, it is just they are not pulled together in a way that 
directs the policy of the U.S. Government.
    You mentioned cargo. We have cargo rules. We have laws. We 
do need to have regulations written. And I was talking to the 
chairman about the necessity of MarAd writing the regulations 
of a 2009 law. So that needs to be done.
    The waivers, there is a meeting going on I think next door 
with the outgoing Secretary of Transportation. I had a 
discussion with him about waivers that were routinely available 
in previous administrations. He said he was going to stop the 
waivers. And I think Mr. Porcari now looks at every waiver in 
the surface transportation, but I don't think he is looking at 
every waiver in maritime transportation. He ought to. And he 
ought not allow many of them, if any of them, because that is 
your cargo.
    On the other side, the loan programs, you know, why are 
they not being processed? And why are we not appropriating a 
steady flow of money? There is nothing more damaging to an 
industry than start-stop. And the two gentlemen, you spoke to 
that. If you don't have certainty, you are not going to make 
the investment that is necessary for the future productivity of 
that shipyard, for example.
    And so we need to on our side have a continuity in our 
appropriations and in our policy. The administration needs to 
make sure that a waiver is absolutely essential, just not a 
routine matter, so that you have the cargo side of it.
    I am perplexed by the administration's 480 policy and their 
new welfare program. The $25 million, you correctly--where is 
it going? What is it going to be used for? Is it going to 
continue, or is it simply a way of buying off some element of 
opposition? I suspect that this is exactly what it is about. So 
I would just as soon put the money back into the Food for Peace 
program and help more people around the world survive.
    There is a whole series of questions that we have, and Mr. 
Chairman, if we could for the record provide questions to these 
gentlemen, specific responses, as well as to the previous 
gentlemen, if you could authorize that.
    Mr. Hunter. Without objection.
    Mr. Garamendi. Thank you. I think we have covered it here 
with your questions about what is the most important thing to 
be done. And there were four different answers, and that is 
very, very helpful to me.
    I think what I would like to do is to address each one of 
you and ask you if there are things that you specifically think 
we need to know that have not yet been said. And for me, I 
would like that in the context of a national strategy, what 
could be added to that? As I said, I think we have the elements 
that are already in law, so it is a matter of pulling that 
together in a comprehensive way. But I will leave it open to 
you. What else do we need to do, meaning Congress?
    And we will start--let's go reverse. Mr. Tellez.
    Mr. Tellez. Well, again, as I said, to enforce and really 
put some teeth into the laws that exist. I think you also need 
to take a long-term view, as the chairman is apt to say, 
instead of looking at, you know, fiscal year terms or even 5-
year terms, the security of this Nation and the future of the 
merchant marine, you have to take a look in 10- and 20-year 
terms, what can we do now that is going to make sure that we 
are around in 10 and 20 years.
    A strong defense put up by Congress against some of these 
folks who are trying to whittle away at all the programs is a 
start, but as Mr. Pyne said, there is a future industry growing 
in this country that has to do with energy, whether it is LNG, 
whether it is gas, whether it is wind, and it is incumbent upon 
the industry to make sure we capture whatever we can from these 
emerging industries to make sure that we are part of that.
    Now, I have been going to meetings and meetings and 
conferences for the last 11 years either on short sea shipping 
or the new national marine highway, and I have yet to see a 
boat in the water. And we can talk and talk and talk, but at 
some point if you want a short sea shipping system, if you want 
a Federal marine highway, you have to get some boats in the 
water to make this thing work. And there are some good ideas 
out there that just need to be acted on, need to be grasped, 
understood and acted on to expand the business of business for 
our folks.
    Mr. Garamendi. Mr. Jewell.
    Mr. Jewell. The one major thing I would like to say is 
about the education and training of the mariner pool. It 
roughly takes 8 to 10 years to become a chief engineer or a 
master of the vessel, and they are the top guys on those 
vessels who take these ships around the world. Recently, 
because of the DOD drawdown, we just lost four ships. They will 
be gone at the end of this month, and they are called the C-
10s. And that pool of mariners are gone, because once they 
actually get to sleep in their own beds, they don't come back. 
They don't come back. They truly don't. And we have lost the 
expertise and training for these individuals. We are very 
skilled, we are very trained in making sure that that ship gets 
from point A to point B.
    And I look at the food aid. When we deliver that cargo, we 
know at least that cargo got to the docks.
    So to me, the biggest thing is educating and keeping this 
trained pool that General Fraser is counting on, because once 
they leave, they are gone. They don't come back to the 
industry, and we can't afford to lose one ship.
    Mr. Pyne. You know, I actually think that if we define the 
parameters and then--and everybody understands what they are 
and then you let the market work within these parameters, this 
business will thrive, and that is taking out uncertainty so 
that you can make investments and know that the rules aren't 
going to change after you have made an investment that is in a 
30-year lived asset. It means a stable regulatory environment, 
tax policy that people understand, a consistent energy policy. 
If you do those things, I think that you will see this business 
grow and thrive.
    Our issue is just all the uncertainty that occurs when we 
start talking about, you know, waivers for the Jones Act when 
capacity is out there that can carry the cargoes. We talk about 
compromises to programs that support the maritime business. If 
we could just get a more certain set of rules, I think we would 
do fine.
    Mr. Garamendi. Mr. Harris.
    Mr. Harris. Yeah. I would concur with Mr. Pyne that----
    Mr. Hunter. Microphone.
    Mr. Harris. Sorry--that, you know, sustained policies, 
sustained programs, good understanding of what is coming in the 
next 5 years to 10 years so you can invest. There has been a 
lot of press lately about being able to, for example, in this 
country build the number of ships necessary. Somebody talked 
about we need 30 product carriers in the next 3 to 4 years. The 
industry today could probably build 10 a year. It would take us 
a year to sort of get the design done and then start building. 
So there is capacity here to do that and there is capability 
and talent here to do that, and capability and talent to man 
the ships. So thinking that it is all done is wrong, but 
putting forth a sustained maritime policy, the Government 
shipbuilding program, we understand what is in front of us, we 
will bring people back into this business and industry.
    Mr. Garamendi. Mr. Chairman, with the ability to send 
specific questions off to the panel, I think I will let it go 
at that. The marine highway, we haven't discussed that much, 
but the consistency of policy and a national strategy that is 
implemented through the years, coherent, each element in place 
with a consistent level of funding through the years is I think 
where the answer will lie to most of this.
    Mr. Chairman, I yield.
    Mr. Hunter. Thank the gentleman. Mr. Rice is finally 
recognized.
    Mr. Rice. Thank you, Mr. Chairman.
    Mr. Pyne, why have we lost 90 percent of our capacity in 
the last 35 years? What is it that makes us not competitive?
    Mr. Pyne. I think that--excuse me, Congressman.
    You know, foreign-flag vessels play by a different set of 
rules. If they played by the same rules that U.S.-flag vessels 
played by, I think that you wouldn't have lost that capacity.
    Mr. Rice. You said if we played by the same rules that the 
U.S.-flag vessels played by?
    Mr. Pyne. Yes. That is correct. If you applied the same set 
of laws, if you applied the labor laws, environmental laws, in 
some cases higher standards, paid foreign crews at U.S. labor 
rates, which aren't excessive, and made them pay taxes. There 
are a lot of foreign owners who do not pay taxes and there are 
a number of countries that actually subsidize their maritime 
businesses. It is not a level playing field. If you had a level 
playing field, I think that indeed you would recapture a lot of 
that lost cargo.
    Mr. Rice. Yeah. I am just trying to understand and learn, 
and if I sound too aggressive, I am not trying to attack you, I 
am just trying to understand why. Where are--you know, we are 
building ships in the United States today, correct?
    Mr. Pyne. Yes, we are.
    Mr. Rice. How many do we build in a year?
    Mr. Pyne. I will defer to Mr. Harris.
    Mr. Harris. Yes. Generally between Navy ships and 
oceangoing commercial ships, maybe an average of 12 to 15.
    Mr. Rice. And how many are being built worldwide?
    Mr. Harris. Oh, we build less than .2 percent of the total 
population. There are shipyards in Korea that build in 1 year 
what we would build in 15.
    Mr. Rice. And why is Korea--why is this business located in 
Korea? Why can't we compete with Korea? Is it again because of 
the Government regulation you were talking about?
    Mr. Harris. It is some of that. With Government 
regulations, OSHA standards, environmental standards, they are 
absolutely not where we are today, so they get to build their 
ships in a bit different environment. But the other thing is 
that today, for example, in Korea, we are not talking about 
having a committee meeting. There is a cabinet position called 
the ministry--the Minister of Shipbuilding. That is his job. 
One job. It is an important national item.
    Talking about American shipbuilding as compared to Korean 
shipbuilding is apples and watermelons. The volume is the 
issue. Mr. Pyne referenced volume. Volume is the issue. When 
you are building 12 to 15 ships a year in 5 or 6 different 
shipyards around the U.S. and you are building 225 in 1 
shipyard alone in Korea, you quickly--not only from a material 
standpoint. Steel. In this country in shipbuilding, we consume 
about 100,000 pounds--I mean, 100,000 tons of steel a year. In 
Korea, for their shipbuilding industry, it is about 16 million 
tons a year. So when I go buy steel, and I buy at the best 
price I can get it in the U.S., I buy steel, it is at least 
$300 a ton more than the steel bought in Korea.
    Mr. Rice. Just because of their volume?
    Mr. Harris. Because of their volume.
    Mr. Rice. OK. Well, I would like to get our volume up. 
Korean ships, the ones that are built there, are they all 
flagged in Korea?
    Mr. Harris. They are flagged internationally.
    Mr. Rice. Everywhere.
    Mr. Harris. All over the----
    Mr. Rice. All over the place. And what determines where 
they flag them?
    Mr. Harris. Whoever the owner is who comes to buy them.
    Mr. Rice. But why does an owner choose--where are most 
ships flagged?
    Mr. Harris. Where are they flagged?
    Mr. Rice. Yeah. Where are they mostly flagged?
    Mr. Pyne. Well, they are----
    Mr. Harris. Mic.
    Mr. Pyne. Yeah. Panama, the Bahamas.
    Mr. Harris. Liberia.
    Mr. Pyne. Liberia.
    Mr. Rice. Why? Why would they choose to flag in Panama, for 
example?
    Mr. Harris. No Coast Guard regulations, not like U.S.-flag 
ships, you know, different----
    Mr. Rice. More Government regulation and taxes is what you 
are saying, right?
    Mr. Harris. But also they don't pay the tax or any of it, 
and they crew--you may have a Liberian registered flag, 
Panamanian flag with a crew from halfway around the world in 
some other country.
    Mr. Rice. All right. U.S. ships, the ones that we are 
building, are they flagged around the world or mostly flagged 
in the United States?
    Mr. Harris. Flagged in the U.S. So by----
    Mr. Rice. Are all of them flagged in the United States?
    Mr. Harris. I don't know for sure. There may be some 
smaller ones that are not, but I would say the vast majority.
    Mr. Rice. Most all of them. Why would a U.S.-flag ship not 
be flagged in Panama?
    Mr. Harris. Because if they wanted to engage in Jones Act 
trade, they have to be U.S.-flagged and U.S.-built. And they 
also then have to pay U.S. taxes and have to be subject to U.S. 
OSHA requirements, safety requirements and built with those 
requirements.
    Mr. Rice. Well, you know, I hear you saying that one of the 
reasons we can't compete is because other countries subsidize 
their shipping fleet, but, gosh, looking through this notebook 
and the Jones Act itself, it appears to me the United States is 
really heavily subsidizing our shipping fleet.
    What you are telling me, I think the basis of it is, is 
that because of Government tax and regulation, we can't 
compete. Is that what you are saying? I mean, when you boil it 
down, that----
    Mr. Harris. No, I am saying this, and I will say it 
clearly: volume is a big issue, and no matter what you do with 
volume, unless you have comparable volume----
    Mr. Rice. Yeah, but we had the volume at one time. We did. 
We were building, I think they said, 25 percent of the ships. 
We had the volume and we lost it.
    Mr. Harris. And then----
    Mr. Rice. And why did we lose it? That is what I am trying 
to get to. And what I want to do is change whatever that is to 
make us more competitive.
    Mr. Harris. What happened is internationally shipowners 
that are not American shipowners, many of them found that they 
could build ships overseas for much, much, much less cost and 
then register them under some other flag and not end up being 
U.S. inspected.
    Mr. Rice. OK. Well, if that is the problem, if they found 
that they could flag it for much less cost, then what we need 
to do is structure ours where they can flag it here for no more 
expensive, right? I mean, why can't we be competitive with the 
rest of the world? There needs to be a balance between, you 
know, regulation and cost. And if our regulatory policy is so 
expensive that it destroys an entire industry, which it looks 
like where we are headed here, we have lost 90 percent of ours 
in the last 35 years, then maybe we ought to look at our 
regulatory policy.
    Mr. Pyne. And, Congressman, we wouldn't disagree with that, 
but it is more complex than that. In your State the textile 
industry has essentially been exported for many of the same 
reasons. It is just a lot cheaper to make something in 
Bangladesh than it is in the United States. So it is a very, 
very complicated economic situation.
    Having said that, we would welcome the opportunity to come 
visit with you and----
    Mr. Rice. I would love that. I need to learn more about 
this.
    And with respect to the textile industry, you know, I agree 
with you that the vast bulk of it has been exported, but that 
being said, you know, we are carrying 2 percent American-flag 
ships, I think you said carrying 2 percent of the world's 
cargo, sounds like most of that is coming from the U.S. 
Government.
    Mr. Pyne. Well, no. There is a much broader tug and barge 
business, which I represent, that carries, you know, millions 
of tons of cargo, millions of barrels of cargo competitively on 
the inland waterway system of the United States as well as the 
three coasts and Alaska and Hawaii. So there--we are talking 
about a hundred ship fleet mostly here, but there is a much 
broader commercial maritime business in the U.S. than just 
those ships.
    Mr. Rice. Well, you know, as bad as the textile industry 
has been hurt, I promise you a lot more than 2 percent of the 
textiles in the world are being created in the United States.
    Mr. Pyne. Right.
    Mr. Rice. But we don't have the apparent protectionist 
policies with respect to that industry that we do here.
    Mr. Pyne. Yeah.
    Mr. Rice. One more thing. My time is way over, I am sorry, 
but post-Panama canal ships, these huge containers that, you 
know, are going to drive down the cost of shipping worldwide, 
are we building any of those in the United States?
    Mr. Harris. No.
    Mr. Rice. I think that is a----
    Mr. Harris. We are not. We are building in the neighborhood 
of 3,500 TDU would be the upper end of the ships we are 
building.
    Mr. Rice. That is a very sad commentary. Are any of those 
going to be flagged in the United States? Any of them?
    Mr. Harris. Not that I know of.
    Mr. Rice. Gosh, we need to reexamine this. We are doing 
something very, very clearly wrong. Anyway, I would love to 
talk to you about it, I would love to learn more about it. I 
know that I am not----
    Mr. Harris. Well, just to add one more thing here, when Mr. 
Pyne talked about what happens in the world, for example, right 
now what is going on in large container ship shipbuilding, 
Hanjin, a company in Korea, has been established in Korea for 
years. They just opened up a brand-new shipyard in the 
Philippines, 20,000 shipyard workers building ships. They pay 
their shipyard workers in Korea about $35 an hour. They pay 
their shipyard workers in the Philippines $3 an hour. So trying 
to compete with that internationally is very difficult.
    Mr. Rice. I said in a Ports Subcommittee meeting a month 
ago--I have repeated this a lot of times--but a representative 
of the Maersk shipping line was there, and he said that they 
were building distribution centers in the Caribbean because 
they didn't want to deal with the United States Government. 
That is a mighty scary statement to make. People used to come 
here because they wanted to deal with the United States 
Government.
    We need to reexamine these policies, and we need to come up 
with something to help you guys be competitive.
    Thank you very much.
    Mr. Tellez. May I just clarify something? And it goes back 
to what Mr. Pyne was saying.
    The domestic Jones Act industry is a vibrant, growing 
industry. It is viable, and there are companies out there--
along with Kirby, there is Crowley--there are companies out 
there that have invested billions of dollars in recapitalizing 
their fleets for domestic trade. So the domestic trades, the 
Jones Act fleets are growing, they are being modernized, and 
they are a going concern.
    So we have to differentiate between the loss of the 
international fleet and their cargoes and the Jones Act and the 
domestic fleet. Two very different animals.
    Mr. Hunter. Gentlemen, thank you. This has been one of the 
most informative and interesting hearings we have had, 
especially getting the administration and DOD's side prior to 
your testimony. So thanks for what you are doing for the 
industry and for the country.
    And, with that, the subcommittee stands adjourned.
    [Whereupon, at 11:35 a.m., the subcommittee was adjourned.]
