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






                  MARITIME TRANSPORTATION REGULATIONS:
                   IMPACTS ON SAFETY, SECURITY, JOBS,
                      AND THE ENVIRONMENT, PART 1

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

                                (113-34)

                                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

                               __________

                           SEPTEMBER 10, 2013
                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

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

        Subcommittee on Coast Guard and Maritime Transportation

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

                                                                   Page

Summary of Subject Matter........................................     v

                               TESTIMONY
                                Panel 1

Rear Admiral Joseph A. Servidio, Assistant Commandant for 
  Prevention Policy, United States Coast Guard...................     4
Hon. Mario Cordero, Chairman, Federal Maritime Commission........     4
Hon. Paul N. Jaenichen, Maritime Acting Administrator, Maritime 
  Administration.................................................     4

                                Panel 2

Thomas A. Allegretti, President and CEO, The American Waterways 
  Operators......................................................    24
Captain William G. Schubert, USA Maritime........................    24
Kenneth D. Franke, President, Sportfishing Association of 
  California.....................................................    24
Geoffrey C. Powell, Vice President, National Customs Brokers and 
  Forwarders Association of America..............................    24
Rear Admiral Rick G. Gurnon, USMS, President, Massachusetts 
  Maritime Academy, on behalf of the Consortium of State Maritime 
  Academies......................................................    24
Patrick L. Wojahn, Public Policy Analyst, National Disability 
  Rights Network, on behalf of the Consortium for Citizens With 
  Disabilities Transportation Task Force.........................    24

           PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS

Hon. John Garamendi, of California...............................    43

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

Rear Admiral Joseph A. Servidio:

    Prepared statement...........................................    45
    Answers to questions from Hon. John Garamendi, of California.    51
Hon. Mario Cordero:

    Prepared statement...........................................    55
    Answers to questions from Hon. John Garamendi, of California.    61
Hon. Paul N. Jaenichen:

    Prepared statement...........................................    66
    Answers to questions from Hon. John Garamendi, of California.    70
Thomas A. Allegretti:

    Prepared statement...........................................    75
    Answers to questions from Hon. John Garamendi, of California.    84
Captain William G. Schubert:

    Prepared statement...........................................    88
    Answers to questions from Hon. John Garamendi, of California.   102
Kenneth D. Franke:

    Prepared statement...........................................   104
    Answers to questions from Hon. John Garamendi, of California.   108
Geoffrey C. Powell:

    Prepared statement...........................................   113
    Answers to questions from Hon. John Garamendi, of California.   122
Rear Admiral Rick G. Gurnon:

    Prepared statement...........................................   126
    Answers to questions from Hon. John Garamendi, of California.   132
Patrick L. Wojahn:

    Prepared statement...........................................   134
    Answers to questions from Hon. John Garamendi, of California.   142

                       SUBMISSIONS FOR THE RECORD

Rear Admiral Joseph A. Servidio, Assistant Commandant for 
  Prevention Policy, United States Coast Guard, responses to 
  requests for information from Hon. Elijah E. Cummings, of 
  Maryland, regarding:

    Why the Coast Guard has not implemented promotion selections 
      by specialty despite being granted authority to do so by 
      the Coast Guard Authorization Act of 2010..................    17
    The amount of time and resources the Coast Guard would need 
      to carry out in-water trials on survival craft.............    22

                         ADDITION TO THE RECORD

National Customs Brokers and Forwarders Association of America, 
  statement in response to hearing remarks made by Hon. Mario 
  Cordero, Chairman, Federal Maritime Commission, regarding Ocean 
  Transportation Intermediary (OTI) licensing and bonds..........   146

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MARITIME TRANSPORTATION REGULATIONS: IMPACTS ON SAFETY, SECURITY, JOBS, 
                      AND THE ENVIRONMENT, PART 1

                              ----------                              


                      TUESDAY, SEPTEMBER 10, 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 10:33 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.
    The subcommittee is meeting today to review regulations 
affecting the maritime industry, and we are interested in how 
the implementation of these regulations is impacting vessel 
safety, the flow of commerce through our ports, and the ability 
to grow jobs in the maritime sector.
    The Coast Guard, Federal Maritime Commission, and Maritime 
Administration have broad authority to regulate maritime 
commerce, including establishing and enforcing rules to ensure 
vessel and passenger safety, protect consumers, and promote the 
U.S.-flag industry. With such vast authority comes great 
responsibility to regulate industry in a manner that is fair 
and does not stifle competition and job growth.
    This hearing is the first of a two-part hearing focusing on 
ensuring these agencies are meeting that responsibility. 
Today's hearing will review pending rules impacting the safety 
and security of our ports and waterways, as well as the 
regulations affecting business practices and the viability of 
the U.S. flag. On October 10th, we will reconvene to review 
environmental regulations impacting the maritime sector.
    Maritime commerce is essential to the U.S. economy. While 
regulations must address concerns related to safety, security 
and stewardship, they must also balance the importance of 
maintaining the free flow of maritime commerce. Domestic 
shipping alone is responsible for over 500,000 American jobs 
and $100 billion in annual economic output. In addition, 90 
percent of all global trade and over 25 percent of our GDP 
moves via the sea. With the economy still in a fragile state, 
it is imperative that the Federal Government foster an 
atmosphere where our maritime industry can compete and expand.
    To that end, I am concerned about the cost and impact of 
several rulemakings that will affect the maritime sector; 
specifically forthcoming Coast Guard regulations affecting the 
commercial and recreational fishing industry will place 
significant economic burdens on these small businesses.
    I am also concerned that the proposed rules by the FMC are 
misguided and will do little to further consumer protections, 
but will impose enormous regulatory burdens and costs on 
business. If these and other rules are not written and executed 
in a commonsense manner, I am concerned they could make it 
financially impossible for the U.S. maritime sector to expand 
and grow jobs.
    The Maritime Administration's mission is to foster, 
promote, and develop the merchant maritime industry in the 
United States. In 2008, Congress strengthened the agency's 
ability to fulfill that mission by ensuring it could properly 
enforce our cargo preference laws. Unfortunately, the 
administration continues to drag their feet and refuses to 
promulgate rules to implement the law. Meanwhile, the number of 
ships flying the U.S. flag in the overseas trade continues to 
dwindle. The inaction on implementing the 2008 law, coupled 
with the President's misguided efforts to restructure the Food 
for Peace Program has left me baffled. It would appear by their 
actions that this administration simply does not understand or 
care about the very critical role the U.S.-flag industry plays 
in expanding our economy and ensuring our national security.
    If we want to grow our economy and remain a world power 
capable of defending ourselves and projecting power for 
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 their testimony.
    With that, I yield to Ranking Member Garamendi.
    Mr. Garamendi. Mr. Hunter, this is remarkable. We are 
actually, Democrats and Republicans, agreeing. I would make a 
statement here, and I will read it, but it is exactly the same 
direction you are going, and that is to ask what we must do to 
strengthen our maritime industry. And we are really together 
here.
    You know, I am going to read this thing because it is 
really a brilliant statement written by my colleague here to 
the right. But the bottom line of it is we are going to do 
everything necessary, including legislation, to make it happen, 
to really build the American maritime industry. And there are 
many, many pieces to that. We talked about it. I heard you 
speak this weekend in Los Angeles on that issue, Mr. Hunter. I 
followed you. We are in unison here. And so our message is 
today, tomorrow, and every day beyond is that we are going to 
use this subcommittee to strengthen the American maritime 
industry.
    Now, to read a brilliant statement. Maybe I won't read all 
of it. You said, Mr. Hunter, you laid out the facts of the 
importance of maritime to the American economy. I won't repeat 
all of that. But for the Coast Guard, you have got a real 
challenge out ahead of you. And we are concerned about the fact 
that the regulations that you have been hanging onto for the 
last 2 years haven't been forthcoming. Why? That is a question. 
When it comes your turn, I would like you to answer that.
    Specifically, it seems to be stuck. A neat little 
statement, I got to hand it to my colleague--my staff here, a 
back eddy. We love that, don't we? A back eddy. You are stuck, 
these regulations seem to be stuck in a back eddy. What is 
going on? And we are talking here specifically about the Towing 
Vessel Safety Rule. Normally these things get stuck in a back 
eddy because of opposition from the industry. That is not the 
case. Industry wants it. Why hasn't it moved?
    With regard to the Federal Maritime Commission and the 
Maritime Administration, why haven't you been enforcing the 
laws about American cargo? What is going on here? What is 
happening? Is it the MarAd or is it someplace else? I just left 
a lengthy meeting with the White House Chief of Staff 
McDonough. It was on Syria. But is that where it is stuck? Are 
we getting blowback from the administration? Are we getting 
blowback from the Department of Transportation? Why are we not 
enforcing the laws with regard to American cargo and the 
shipment of it? What is going on here? What is happening?
    All of these issues we need to pursue. And, frankly, it is 
our task, I think, as a committee to also pursue a maritime 
policy, to lay out clearly what the maritime policy is for the 
United States. What is it that we need to accomplish? Are the 
rules, are the laws unclear? Are they fractured, different 
pieces that are not coherent and coordinated in a way that 
makes sense?
    I know I am going to pursue this, I know Mr. Hunter has 
great interest in this also. And we need clarity of American 
policy and, frankly, we need the money to back it up. A little 
later this week, maybe even as early as Thursday, there is 
going to be a CR on the floor. That continuing resolution, is 
it going to provide the money necessary to carry out the task? 
And I know that MarAd is short a third of the money they need 
to carry out their tasks. This is an issue for us. Are we going 
to provide the money necessary to carry out the American 
policies with regard to the maritime industry? And there is a 
host of them.
    Apparently, based on the resolution that is likely to be on 
the floor, the answer is no, because it does not provide the 
money necessary to carry out the American policies with regard 
to the maritime industry. That is us, and we have our 
obligations here, but this is really about those of you that 
are testifying today.
    I am going to ask that my brilliant statement written by my 
staff be entered into the record, and I will let it go at that.
    Mr. Hunter, you and I have other obligations in the armed 
services, so you want to play back and forth here?
    Mr. Hunter. Yeah.
    Mr. Garamendi. I will run and go and listen for a while and 
then I will come back.
    Mr. Hunter. Yeah. Switch off.
    Mr. Garamendi. We will go back and forth and hopefully 
carry on the obligations of this committee. With that, I yield 
back whatever time is left here, ask that my statement be 
written into the record, and we will go from there.
    Mr. Hunter. Without objection. Thank the gentleman.
    And, you know, it is great to see at least some of us 
getting along and working together towards the same end. It is 
a good thing. And I think John would agree, if you control the 
oceans, you control the world. And we are a maritime Nation, 
and we need to make sure we stay strong.
    So we are going to go have to step out. Mr. Southerland 
from Florida is going to take my place in a little bit. Not 
that the other witnesses are any more important or less 
important than you, but, you know, Syria is on everybody's 
mind, and that is the committee hearing. Right now we have 
Secretary Kerry and Chuck Hagel and Martin Dempsey, too, in 
that hearing going on right now. So, unfortunately, we are 
going to have to step out and come back.
    Mr. Garamendi. Mr. Chairman, my place will be held by 
Congresswoman Hahn when she arrives. I will stay until she gets 
here.
    Mr. Hunter. Thank you.
    On our first panel of witnesses today are Rear Admiral 
Joseph Servidio, Assistant Commandant for Prevention Policy at 
the United States Coast Guard; the Honorable Mario Cordero, 
Chairman of the Federal Maritime Commission; and the Honorable 
Chip Jaenichen, Acting Administrator of the Maritime 
Administration.
    Admiral Servidio, you are recognized for your statement.

    TESTIMONY OF REAR ADMIRAL JOSEPH A. SERVIDIO, ASSISTANT 
 COMMANDANT FOR PREVENTION POLICY, UNITED STATES COAST GUARD; 
HON. MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME COMMISSION; AND 
HON. PAUL N. JAENICHEN, MARITIME ACTING ADMINISTRATOR, MARITIME 
                         ADMINISTRATION

    Admiral Servidio. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and distinguished members of the 
subcommittee. It is my pleasure to be here today to discuss the 
Coast Guard's regulatory program.
    The Coast Guard's regulatory program focuses on managing 
maritime risks through the establishment of proficiency, 
safety, and security standards to protect life, property, and 
maritime and coastal environments. Key objectives of our 
regulatory program are to ensure our regs are reasonable, they 
do not impose an undue burden on waterway users and industry, 
and they facilitate the safe and efficient flow of commerce.
    To meet these objectives, the Coast Guard continues to 
build upon our regulatory development program, which includes 
improving our professional workforce, strengthening 
transparency, streamlining processes, and carefully 
scrutinizing regulatory actions to ensure they achieve desired 
outcomes.
    These efforts and the notable support of this subcommittee 
have yielded positive results. For example, last Friday the 
Coast Guard submitted a final rulemaking on nontank vessel 
response plans, establishing standards for oil pollution 
response plans for over 15,000 vessels. In March, we published 
the Notice of Proposed Rulemaking for the Transportation Worker 
Identification Credential, or the TWIC readers. This rule 
proposes requirements for biometric-capable readers on 
designated high-risk facilities and vessels, as required by the 
Maritime Transportation Security Act.
    We are in the final phase of the Standards for Training, 
Certification and Watchkeeping, or STCW rulemaking, which as 
proposed would align U.S. mariner standards with those 
established internationally through the International Maritime 
Organization.
    Throughout the rulemaking process, the Coast Guard ensures 
that we engage with industry to address concerns and minimize 
unreasonable costs and disruptions. For example, as we continue 
to work towards a final rule for towing vessel safety, we have 
actively engaged with the towing industry to implement the 
voluntary compliance program. In 2009, we started a towing 
vessel safety bridging program to assist towing vessel 
operators and owners in meeting the new inspection 
requirements. We have worked with industry to monitor and 
refine the program, and thus far in the Coast Guard's Eighth 
District, over 3,600 industry-initiated voluntary inspections 
have been completed, representing over 95 percent of the entire 
fleet within the district and the majority of towing vessels 
nationwide.
    These types of programs are vital parts of our Coast Guard 
commitment to working with industry to implement rules that 
help achieve desired safety, security, and environmental 
outcomes, enable a more level playing field, and provide better 
support for U.S. companies, and enhance maritime global 
competitiveness.
    While we continue to build on the successes I have 
discussed, I know we have challenges ahead. Despite noteworthy 
progress, including reducing by a third our original backlog of 
rulemaking projects, from 97 in 2008 to 68 today, and reducing 
the average cycle time for projects, from a high of over 6 
years in 2009 to a little bit over 4 years today, we are not 
where we want to be.
    In 2013, the number of rulemakings has increased and we 
project a backlog of 76 projects by the end of the year. 
Increased rulemaking complexity and scrutiny have made the 
workload per rule more time and more resource intensive.
    Through our Regulatory Development Program, we continue to 
focus on gaining efficiencies while ensuring proper procedures 
are followed, that benefits outweigh costs, that appropriate 
compliance mechanisms exist, and that our rules are 
understandable and reduce regulatory uncertainty. We developed 
an Enterprise Project Management System that allows us to 
examine resources and track performance metrics across our 
rulemaking projects, a capability we did not have before. As a 
result, our program is ISO 9000 compliant and includes regular 
internal audits and continuous improvement processes.
    In short, we are making every possible effort to ensure the 
regs we publish are timely, cost-effective, and derive from a 
thorough review and evaluation of public comments.
    I want to thank Congress, and this subcommittee in 
particular, for your support and your investments. You have 
enabled our rulemaking program improvements. Thank you for the 
opportunity to be here today, and I look forward to answering 
your questions.
    Mr. Hunter. Thank you, Admiral.
    And since I won't be able to ask you questions later unless 
I come back, I just want to tell you I am looking forward to 
talking with you about the distant tuna fleet, manning issues, 
and the rulemaking process, simply just why it is so hard to 
make a rule based off of statute. I understand there is a lot 
of room for public comment later and that is how the system 
works, but to take 6 years to do the towing regulations, you 
should be able to get stuff out in 6 months, I would say. So 
anyway.
    Mr. Cordero, your turn.
    Mr. Cordero. Good morning, Chairman Hunter, Ranking Member 
Garamendi, and members of the subcommittee. Thank you for the 
opportunity to address you today on matters related to the 
Commission's regulations. With me today are my fellow 
Commissioners, William Doyle, Rebecca Dye, Michael Khouri, and 
Richard Lidinsky.
    I am pleased to report that the Commission has taken a 
systematic approach in reviewing its regulations in order to 
minimize unnecessary burdens while ensuring a cost-effective 
regulatory regime that ensures economic security for those 
involved in the international oceanborne commerce, and the 
consumers that rely on it.
    The Commission's review process first identifies rules that 
are obsolete, unnecessary, unjustified, excessively burdensome, 
or counterproductive. Once identified, we aim to either 
strengthen, modernize, or repeal these rules so as to make the 
agency's regulatory program more effective and less burdensome. 
Throughout the process, we have carried out our review with an 
eye toward maximizing public participation.
    I would like to take a moment to highlight some of the 
recent regulatory modifications that we have implemented. In 
2004, the Commission addressed potentially restrictive 
practices by the Government of China by creating the ability 
for U.S. non-vessel operating common carriers, NVOCCs, to 
obtain alternative, U.S.-based FMC-administered financial 
instruments to be accepted in lieu of China's cash deposit 
requirement. This allowed NVOCCs to put into use tens of 
thousands of dollars in capital that would have otherwise been 
deposited in Chinese financial institutions as dollar-for-
dollar collateral.
    In February 2011, the Commission issued a final rule 
streamlining its rules of practice and procedure to reduce the 
burden on parties to Commission proceedings. It has been 
estimated that these changes will save parties approximately 
$260,000 a year in reproduction, postal, and courier costs.
    In March 2011, the Commission issued a final rule allowing 
licensed NVOCCs that enter into negotiated rate agreements 
exemption from the tariff rate publication requirements of the 
Shipping Act. Before the exemption, NVOCCs were required to 
publish rate changes for each charge to a shipper. It has been 
estimated that if all 3,400 licensed NVOCCs take advantage of 
the exemption, total annual savings could exceed 600,000 
person-hours, or $40 million.
    In March 2012, the Commission used a final rule that allows 
companies to enter into service contracts to reference freight 
indices or other external information. This rule recognizes new 
tools that common carriers and shippers may use to manage 
freight rate volatility and other market risks common to the 
commercial maritime industry.
    In February 2013, the Commission updated its passenger 
vessel operator regulations. These measures strengthened 
protections for consumers with regard to their deposits and 
prepayments while at the same time reducing financial 
responsibility requirements imposed on the smaller cruiser 
lines.
    I hope these examples give you a better understanding of 
the work the Commission has recently done with respect to 
reviewing and updating our regulations.
    Now I will turn to the Commission's review of ocean 
transportation intermediary rules. In 1999, as directed by the 
Ocean Shipping Reform Act, or OSRA, the Commission adopted new 
regulations affecting ocean freight forwarders and NVOCCs, now 
designated as OTIs. The Commission has not substantially 
revisited the rules governing licensing, financial 
responsibility, or general duties of OTIs since 1999. This 
review has been an open and transparent process, as detailed in 
my written testimony.
    I will now summarize current Advance Notice of Proposed 
Rulemaking for OTIs. The Advance Notice includes a proposal for 
adjusting the minimum bonding requirements for OTIs; a proposal 
that licensed OTIs renew their license registrations; proposes 
disclosure of OTI agent/principal relationships; proposes to 
clarify the OTI experience requirement in order to become a 
licensed OTI; proposes that foreign-based OTIs establish a 
dedicated and staffed office in the United States; seeks 
comments on setting claims, payment, priorities, and ways to 
improve reporting provisions by surety bond companies; proposes 
further streamlining the revocation process within the 
Commission; and proposes to eliminate the $10,000 bonding 
requirement for each individual OTI branch office.
    As the comment period ended only 11 days ago, we are still 
in the process of carefully evaluating the comments, and will 
be using those comments to further assess the proposed 
regulations.
    Mr. Chairman, as we proceed through this process, I look 
forward to working closely with the subcommittee and with our 
stakeholders. I am happy to answer any questions you may have. 
Thank you.
    Mr. Southerland [presiding]. Thank you very much.
    Mr. Jaenichen.
    Mr. Jaenichen. Good morning, Chairman Hunter, Ranking 
Member Garamendi, and members of the subcommittee. Thank you 
for the opportunity to present testimony to the subcommittee 
regarding marine transportation regulations, their impact on 
safety, security, jobs, and the environment.
    The statutory mission, as Chairman Hunter pointed out, is 
to foster, promote, develop the maritime industry of the United 
States. The purpose of that mission is to meet the economic and 
security needs of the Nation. To achieve this mission, MarAd is 
focused not only on how to sustain the U.S. merchant marine as 
it exists today, but also to improve and grow the industry to 
ensure its viability in the future.
    Overall, our marine transportation is strong and resilient, 
but there are opportunities for improvement and growth, and it 
is essential that we capitalize on these opportunities.
    As I have heard from the industry stakeholders, as well as 
Members of Congress, a maritime strategy is needed that will 
enable the United States as a maritime Nation to sustain 
leadership in the international community. Not only will this 
benefit the maritime industry, but will also help achieve other 
key goals, including job creation and employment, enhancement 
of economic competitiveness through energy efficiency and 
innovation, environmental sustainability, and improvement of 
improved transportation capacity through interoperability 
between ports, waterways, rail, and highways.
    To focus on a long-term strategy, the Maritime 
Administration is working to organize a public meeting to 
concentrate on U.S.-flagged maritime cargo and sealift 
capacity. The public meeting, which is tentatively scheduled to 
be held by the end of the year, will be designed to elicit an 
unconstrained set of ideas for improving and expanding and 
strengthening the maritime transportation system, to vet those 
ideas in a public forum, and to derive a list of items for 
further study, action, or voluntary adoption.
    The key areas to address would include transportation 
speed, efficiency, reliability, availability, and cost-
effectiveness, the Marine Transportation System's contribution 
to the overall U.S. economic competitiveness, environmental 
sustainability, interoperability between modes of 
transportation, the number of qualified U.S. citizen mariners, 
the number and quality of U.S.-flagged ships engaged in 
commerce internationally and domestically, and the volume, 
value, and innovation of U.S. shipbuilding and repair.
    As part of this strategy, the Maritime Administration also 
plans to analyze the costs of operating under U.S. flag 
compared to foreign flag and to determine if the agency can 
take actions to make the U.S. flag more competitive.
    In addition, MarAd will be looking at challenges facing the 
U.S. shipbuilding industry and options to promote this 
industry, which has proven to be beneficial to the Nation from 
both an economic and a defense perspective. MarAd expects to do 
extensive public outreach on these issues and others to 
identify changes that would strengthen the U.S. merchant 
marine.
    As Congress has recognized, the carriage of cargo and 
sealift capacity are essential to the Marine Transportation 
System. One of the Maritime Administration's immediate goals is 
to increase cargo on U.S.-flagged vessels by identifying 
additional Federal programs with international transportation 
opportunities. The Maritime Administration is currently engaged 
in an intensive rule development process to update its cargo 
preference regulations and to implement statutory changes to 
the cargo preference law contained in the Duncan Hunter 
National Defense Authorization Act for Fiscal Year 2009.
    I acknowledge the frustration that has been expressed about 
the delay in implementing this rule; however, significant 
efforts have been put into the proposed rulemaking by the 
Department of Transportation and the Maritime Administration 
over the last several years. These efforts will inform and 
guide the proposed rulemaking that we are currently drafting.
    Other regulatory action that the Maritime Administration is 
working on involves implementation of statutory changes that 
were made in last year's National Defense Authorization Act and 
also the Coast Guard Authorization Act. These include the 
extension of the Maritime Security Program through 2025 and 
changes to America's Marine Highway Program eligibility 
criteria.
    In addition, the Maritime Administration is preparing to 
implement a training certification program that is called for 
in the Cruise Vessel Security and Safety Act of 2010. As many 
of the committee members are aware, the Maritime Administration 
also plans to issue an Advance Notice of Proposed Rulemaking to 
gather comments on whether the agency's existing U.S. 
citizenship criteria for its ship managers and agents benefit 
the Nation's maritime commercial and national security, and 
provide also the most current, effective, and best approach for 
supporting National Defense Reserve Fleet operations.
    The agency last examined this regulation more than 20 years 
ago, and despite significant changes in the maritime industry, 
no change has been made to the citizenship requirements. 
Currently there is no intention on whether this change is going 
to be--or we have made a position on that, but we believe it is 
appropriate to seek public comment on the issue to determine 
whether to propose any changes to the existing regulations 
going forward.
    Thank you for the opportunity to discuss the marine 
transportation regulations, and I look forward to the 
subcommittee's questions.
    Mr. Southerland. Very good. Thank you all for your 
testimony.
    We are going to get into a round of questions. And there 
are three of us currently on the panel, and on the committee, 
so we may do a couple rounds if that is all right with you.
    My first question from me is to Admiral Servidio, and this 
is kind of close to home. Admiral, as you know, last year's 
Coast Guard authorization bill included provisions authorizing 
two new vessel determinations for vessels that had significant 
work performed after their original construction date. Last 
October a shipyard in my district delivered a $40 million 
state-of-the-art offshore supply vessel with a similar 
background. In that case, the hull was constructed in 2007 but 
never operated after suffering a major fire in the original 
shipyard.
    The Keith Cowan, a significantly redesigned offshore supply 
vessel, complying with the latest rules and regulations, was 
built from that hull. Upon completion of that vessel last year, 
the Coast Guard issued a certificate of inspection showing a 
2012 delivery date, but a certificate of documentation showing 
a 2007 build date, 5 years earlier. As a practical matter, that 
discrepancy results in a 25-percent shortening of the vessel's 
useful commercial life.
    The Coast Guard did not object to the two new vessel 
determinations in last year's Coast Guard bill. So today I am 
asking for your confirmation that the Coast Guard will have no 
objection to legislation designating the actual 2012 delivery 
date as the official build date for the Keith Cowan.
    Admiral Servidio. Mr. Chairman, we would not object to that 
provision; however, I think it is important that everyone 
recognizes that with a 2012 build date, there will be a number 
of other international requirements that would be part of what 
the vessel would need to comply with in order to operate. But 
we would be more than willing to work with S.E.A. Corp on those 
issues, sir.
    Mr. Southerland. Very good. And it is my understanding that 
they understand that. So thank you for clearing that up.
    Admiral, one more question, or a couple questions on a 
different subject before I move down the panel. The Coast Guard 
Authorization Act of 2010 prohibits the use of survival craft 
that leave any part of an individual submerged in water. The 
Coast Guard and Maritime Transportation Act of 2012 required 
the Coast Guard to study the issue before implementing the 
mandate. Last month the Coast Guard delivered its report to the 
committee.
    Prior to the mandate in the 2010 act, the Coast Guard 
reviewed the benefits requiring out-of-water survival craft on 
certain vessels and determined that vessels operating in 
certain environments did not need to carry such craft. Under 
what circumstances do vessels already carry out-of-the-water 
survival craft and why did the Coast Guard determine that only 
these vessels should have to carry such craft?
    Admiral Servidio. Mr. Chairman, I apologize. I believe that 
there might have been some administrative errors in getting 
that report to Congress, and I apologize if there were any 
hiccups with that.
    We did do our study, sir, and we looked closely at the 
number of casualties that took place during that time window, 
and we looked to see whether we could find definitive proof 
that out-of-water would have prevented some of those 
casualties, sir, and we did not find that in going through our 
data, and hence, that is why we came up with that finding in 
our report, sir.
    Mr. Southerland. What vessels, based on what you have 
found, what vessels would be required to carry out-of-water 
survival craft as a result of that mandate, just for some of us 
who are new?
    Admiral Servidio. Yes, sir. Generally out-of-water survival 
craft are required on vessels sailing internationally--cruise 
ships, large deep draft vessels, oil rigs, mobile offshore 
drilling units. Those types of vessels, sir, would have to have 
that.
    Mr. Southerland. Very good. And now with the few minutes 
that I have remaining, I want to ask Chairman Cordero a 
question. The Federal Maritime Commission currently retains 
jurisdiction over the Consolidated Chassis Management, or the 
CCM Pool Agreement. As a result, CCM, which is in the business 
of operating and managing chassis pools, enjoys antitrust 
immunity under the Shipping Act of 1984. There are some facts 
as a result of that that I would like to state.
    Number one, the operation and management of chassis is a 
domestic land-based business. Number two, CCM and its 
subsidiaries are separately incorporated limited liability 
companies that are neither ocean common carriers nor marine 
terminal operators. Fact number three, by CCM's own admission, 
the shipping lines that initially formed CCM for the purpose of 
operating chassis pools, to which they contributed chassis they 
owned or leased, will have sold all but approximately 20 
percent of their collective chassis fleet by the end of this 
year. And four, the shipping lines continue to offer less and 
less intermodal through rates as a part of their service 
offerings to the shippers and consignees, and increasingly are 
required that such parties pay separately for the use of these 
chassis and the transport of container from port to rail ramp.
    My question based on those four facts: How does FMC justify 
continuing to retain jurisdiction over the CCM Pool Agreement 
as a result of these facts and continue to afford CCM antitrust 
immunity under the Shipping Act?
    Mr. Cordero. Thank you, Congressman, for your question. 
First of all, some history on that issue, as you have alluded 
to. The history of this question becomes centered on the fact 
that the carriers exclusively own chassis. On that question 
alone, it was most definitive within the purview of the FMC to 
address agreements in related to that scenario.
    Now, as you have stated, over the years this is one of the 
aspects of the changed industry conditions. The question before 
the FMC, among some of the aspects that we look to in these 
areas, is adopting to these changed conditions. Presently there 
is a discussion, there is a dialogue with regard to the 
development in the chassis pool area, and at this point, again, 
all I could represent to the subcommittee is that dialogue is 
ongoing. And given the transition, these are some of the 
questions that most definitively the FMC will be asking.
    Mr. Southerland. So you can clearly state definitively that 
you recognize this change and how the industry is moving or it 
is evolving, and you will continue to work as necessary and 
report to this subcommittee based on those discussions with the 
acknowledgment that there needs to be change?
    Mr. Cordero. Yes.
    Mr. Southerland. OK.
    Mr. Cordero. We will continue to work with the subcommittee 
with that acknowledgment in terms of developments with regard 
to the chassis pool as it relates to the interests that the 
carriers hold or do not hold in the future.
    Mr. Southerland. Very good. Very good.
    All right. I have exceeded my time. And with that, I 
recognize Ms. Hahn.
    Ms. Hahn. Thank you, Mr. Chairman.
    Thank you to all the witnesses for testifying before us 
today, and especially I always like to give a shout-out to 
Chairman Cordero, who I have worked with and have been friends 
with for many years back in the trenches in the harbors of Los 
Angeles and Long Beach.
    So I would like to talk briefly about the Federal Maritime 
Commission's proposed rules governing ocean transportation 
intermediaries. The FMC has recently proposed increasing the 
required bond amount for OTIs in order to better protect market 
participants from suffering losses. While I think we would all 
like to ensure that no intermediaries are cut out of the 
industry because of the increased bond requirement, it is 
imperative that the FMC update existing regulations so that 
they can adequately address the concerns of the current market.
    In your testimony you note, Chairman Cordero, that the rule 
in question hasn't been updated in nearly 15 years and the 
FMC's proposed rule is merely a reflection of the current 
market. In fact, the new bond amount for certain common 
carriers, $100,000, I think, is still lower than it would be if 
the 1999 required amount was adjusted for inflation, which I 
think in today's market would be $105,000.
    So I know there is some concern about this. There are some 
feelings that this could really have a negative impact. So I 
would ask you, Chairman Cordero, is it normal for regulatory 
bodies such as the FMC to periodically review and update their 
rules to ensure that they are up to date and reflect the 
current concerns of the market? And maybe you can expand on 
what are some of the dangers of failing to update outdated 
regulations.
    Mr. Cordero. Well, first of all, it is normal for agencies 
to review their rules. In the case of the FMC, we are doing so 
in accordance with the plan for Retrospective Review of the 
Existing Rules. There is a plan to this.
    Now, as to the question of the bonding amount, again, you 
have properly indicated that we have not reviewed those amounts 
since the onset of OSRA in 1999, so we have not reviewed the 
bond limits in 14, 15 years. I think it is fair to recognize 
that in some of the comments that have been filed by our 
stakeholders, I will represent, that even our stakeholders do 
indicate that there is merit to this issue; that is, there is 
merit to discussing this issue and dialogue on this issue. And, 
of course, for the same reason that you just stated, that based 
on the consumer index, you know, we will need to review that. 
And, in fact, what is being proposed is below, in some cases, 
the index.
    And lastly I will say we need to keep in mind with regard 
to how this industry has evolved, more particularly and more 
specifically, if I may say, in regard to containerization. Look 
to where we were in 1999 and where are we now in 2013. Nineteen 
ninety-nine, we had 2,000, 4,000 TEU container ships. Beginning 
in 2005, those vessels increased to a size of 8,000 TEUs. 
Today, in 2013, we are seeing major carriers now on order with 
18,000 TEUs. The reason I bring that into context, imagine the 
amount of transactions that are occurring in relation to this 
industry. In 2000, to the present date of 2013, we have today 
almost doubled the amount of licensed OTIs. Much less when you 
look at it in terms of the number, that number is higher.
    I mention these factors because it is important to keep in 
mind that part of the mission of the FMC is to address 
unlawful, deceptive practices that occur by some of the bad 
players in this industry. And, again, I emphasize ``some.'' So 
I think it is particularly important for us to address these 
issues and look at the bonding amount.
    Ms. Hahn. Thank you. And let me also discuss one of the 
other issues that our stakeholders are having anxiety about, 
and that is the proposed rule requiring OTIs to update their 
information every 2 years. I know there is some concern that 
this is an overly burdensome process, so how exactly does a 
stakeholder update their information, and why is this 
important? And maybe you could allay some of those fears today 
by walking us through the process of updating an OTI's 
information with the FMC.
    Mr. Cordero. Thank you. And I will do so, referencing 
common ground here. I think it is also fair to say that the 
comments that we received from the various stakeholders do 
indicate not only a concern, but with regard to the need, to 
make sure that everybody updates the information that is 
required. This has been a discussion within the FMC for many 
years and has evolved now to this announced rule.
    Now, as to the concern that it may be overly burdensome, I 
think there is a perception out there that it may be, but I 
hopefully here will have the opportunity to clear that 
perception. What we are talking about essentially is a two-page 
form. This is it. A two-page form that you file online. There 
are basically nine questions. Six of the nine you basically 
check off the box. And basically what it does, it updates the 
information: change of address, owners, qualified individuals. 
These are just simple data that is not only required by the 
Shipping Act, but again, required with regard to our regulatory 
effectiveness.
    Let me lastly comment that there is a definitive problem 
with regard to people who are not updating properly with the 
FMC. A recent audit of this by our staff indicated that of the 
2.5 percent people that were audited, again keeping in mind 
this figure of over 6,000 OTIs, almost 25 percent had failed to 
comply with updating the FMC.
    So in conclusion, I hope I cleared the perception that this 
is not a burdensome application process. It is basically a two-
page form that you could do online and would take you no more 
than 5 minutes.
    Ms. Hahn. Thank you. I have some other questions, but I 
will do it on the second round.
    Mr. Southerland. Thank you, Ms. Hahn.
    Now we will recognize Mr. Rice.
    Mr. Rice. Thank you, Mr. Chairman.
    You know, this just appears to me to be absolutely absurd. 
We are here today talking about rules on rulemaking and the 
time it takes to put out our rules. And in the last hearing 
that we had in this committee we were told that American 
international shipping has dwindled by 90 percent in the last 
50 years. It appears to me that with our excess of rules that 
we have choked off a valuable American industry in shipping and 
international shipping and shipbuilding, and now we are working 
on commercial fishing, I think we are doing a pretty good job 
of choking them off, and I am sure private will be next.
    So, you know, when we have this graph that you have 
presented here on the average rule development time going down, 
I think it should go up. In fact, we probably should have a 
rule that says that we can't issue a rule until 50 years of 
study. When we have got the number of rules coming out every 
year increasing, I think that is exactly the opposite of what 
we need. I think we need to have the number of rules going down 
every year. You know, all this has happened, the dwindling of 
our commercial fleet, despite probably the most protectionist 
statute I have ever heard of in the Jones Act.
    What I would like to know from each of you is, I am 
interested in rebuilding our international shipping fleet in 
particular, so what rules do we have to implement or do away 
with that would entice large shippers to start flagging their 
ships here? And let's go one at a time across.
    Admiral Servidio. Yes, sir. Thank you for the question. The 
Coast Guard's philosophy is we don't initiate a domestic rule 
unless there is a need to implement something internationally 
or whether there is an obvious safety, security, environmental 
gap that needs to be addressed, and I will get to that in a 
second, sir, or it is required through an authorization act. 
And the majority of the rules that we initiate, sir, are in 
order to implement international requirements or authorization 
act requirements.
    Again, sir, our philosophy is we don't want new rules. If 
we can use an international existing rule, that is our 
preference. If there is classification society rules that would 
address the safety or environmental aspects, we will go with 
that.
    Mr. Rice. Admiral, how many commercial shippers would we 
have if we didn't have the Jones Act internationally?
    Admiral Servidio. Our offshore supply vessel fleet and our 
offshore fleet is very, very competitive, sir, without the 
Jones Act. There are other aspects of our fleet that are not as 
competitive.
    Mr. Rice. So we haven't lost 90 percent of our 
international shipping in the last 50 years? That is what we 
were told at our last hearing.
    Admiral Servidio. I can't comment on that, sir. I will say 
that we are looking to harmonize our rules with the 
international rules so we have a level playing field with U.S. 
and with the foreign carriers that come into our waters, sir.
    Mr. Rice. How many ships of foreign carriers are 
registered, flagged in the United States? Do you know that, 
sir?
    Admiral Servidio. How many of our ships, sir?
    Mr. Rice. No. Ships of foreign carriers. How many are 
flagged in the United States?
    Admiral Servidio. We worked with Maersk Industries just 
this summer, sir, to reflag eight vessels from foreign into the 
U.S.
    Mr. Rice. Are they done? Did that happen.
    Admiral Servidio. Yes, sir.
    Mr. Rice. Because I have talked to Maersk, and they told me 
that none, they don't have any.
    Admiral Servidio. They did, sir, as part of the MSP 
program, and we conducted that at Activities Europe, and it was 
very successful. We worked closely with Maersk on that project.
    Mr. Rice. And these are international ships.
    Admiral Servidio. Yes, sir. Deep draft vessels, sir.
    Mr. Rice. Mr. Cordero, what do you think we need to do to 
entice foreign shippers to start flagging ships in the United 
States.
    Mr. Cordero. Thank you for your question, Congressman.
    First of all, I will note the FMC is an independent 
regulatory agency, and our mission, of course, is to foster a 
fair, efficient, and reliable international ocean 
transportation system. In that regard, our focus is, in fact, 
with the foreign carriers.
    As it relates to specifically your question, Congressman, I 
could provide you further information with regard to the 
relevance of the FMC on that issue; however, I will defer to 
the gentlemen to my right and to my left with regard to the 
Jones Act questions, given it is more within their purview. So 
as to the FMC, again, we are addressing basically the 
regulatory aspects within our purview of the foreign carriers.
    Mr. Rice. Thank you, sir.
    Mr. Jaenichen.
    Mr. Jaenichen. Yes. The Jones Act itself really affects 
domestic trade as to trade between two ports in the United 
States. The international trade that you are referring to 
obviously has changed. There are----
    Mr. Rice. It is also requires American-flagged ships to 
carry American Government things internationally.
    Mr. Jaenichen. That is cargo preference, yes, sir.
    Mr. Rice. Yes, sir. And I think there are only, what we 
were told in our last hearing, less than 90 international 
American ships in international commerce, and we were told at 
our last hearing that if we didn't have the Jones Act we may 
have none or close to none.
    Mr. Jaenichen. There are actually two different issues that 
are being affected there, sir. The Jones Act itself, as I said 
before, is really for domestic trade between two ports. The 
cargo preference rules that we have requires carriage on U.S. 
flag. For the Department of Defense, it is 100 percent, for 
food aid it is 50 percent, as what is required by current 
statute.
    The number of ships carrying U.S. flag is really determined 
by a number of other factors. There is a significant cost 
difference between the cost of having a U.S. flag versus having 
a foreign flag. And a lot of those have to do with open 
registries, tax structure, and various things like that, 
including insurance. Those are the areas where we need to go 
take a look at those to see if we can identify policy and 
changes to be able to reduce that.
    Mr. Rice. That is one rule I would like to see happen in 
less than 5 years.
    What I would like from you and the Admiral particularly, if 
you all could give me a list of things that we need to do to 
have--I want to make our shipping industry competitive again, 
so I want to know a list of rules that we need to adopt that 
would make international shippers want to flag here again. That 
would help me a lot.
    Mr. Jaenichen. Yes, sir.
    Mr. Rice. Thank you.
    Mr. Southerland. Thank you, Mr. Rice.
    I now recognize Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. I have a 
number of questions.
    Acting Administrator Jaenichen, 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 and it will not pay 
any stipend in 2013. Have any vessels left the MSP program as a 
result of this situation? I am going to run through a lot of 
questions, so just answer me yes or no.
    Mr. Jaenichen. Sir, we have had one vessel that has 
reflagged and then they have replaced a vessel. So currently, 
until that vessel comes back in on the 1st of October, we are 
down to 59 vessels.
    Mr. Cummings. All right. As bad as this is, I understand 
that a variety of different budget scenarios may cause MSP to 
actually have to push as many as 10 vessels out of the program. 
And I note that these vessels can immediately leave the U.S. 
flag and join the flag of another nation. Can you very briefly 
describe these scenarios, budget scenarios, and the extent of 
possible vessel losses?
    Mr. Jaenichen. Thank you for that question. Sir, by statute 
we are really taking a look at just sort of the mathematics of 
it. Now, the program itself is authorized at $186 million, and 
you break that down for the 60 vessels, that is $3.1 million 
paid on a monthly basis. Any reduction of 3.1 or a fraction 
thereof results in the loss of one vessel.
    Currently under the situation that we are, we are operating 
under the fiscal year 2013 budget, which actually went back to 
fiscal year 2012, and took a look, because we had carryover 
when we developed that budget. That difference is $12 million, 
and so that effectively equates to four ships.
    Depending on the target number that we are given for 
sequestration and that overall rate, it will work to affect the 
number of losses. Unless there is a change in the 
appropriations for that program, we will have to begin removing 
ships. We are required, if there are insufficient 
appropriations, to remove ships from the program.
    Mr. Cummings. And what would the impact be on our national 
security and the viability of our merchant marine if vessels 
were forced to leave the MSP program and if they then decided 
to leave the U.S. flag?
    Mr. Jaenichen. Sir, those 60 ships provide for 2,700 
mariners onboard each ship. A loss of one ship out of the 
program that ultimately reflags to foreign flag would be a loss 
of 45 jobs for U.S. mariners.
    We are currently--I discussed this with the maritime labor 
unions--we are at a tipping point with regard to the number of 
maritime labor personnel that are available to man our reserve 
sealift and our commercial sealift ships going forward. And if 
those mariners are lost, it is not likely that they will come 
back, and so we will be at a situation where we may not be able 
to man all of our ships that are required for sealift to 
support the Department of Defense in the event of a national 
emergency.
    Mr. Cummings. So that is a major problem.
    Mr. Jaenichen. Sir, we are at that point, yes, sir.
    Mr. Cummings. I think the cuts required under sequestration 
are wrong and I think they are harmful to the United States and 
I think that they should be ended. That said, right now I think 
we need to be careful that we don't lose what remains of our 
U.S.-flag oceangoing fleet.
    What steps will you take right now to address this urgent 
issue and try to preserve and strengthen the United States-flag 
fleet?
    Mr. Jaenichen. Sir, thank you for that question. We are 
actually going through the process to ensure that we are 
meeting all of the various requirements to the Paperwork 
Reduction Act and also the Federal Advisory Committee rules 
with regard to soliciting information. We will be putting out a 
Federal Register notice that will announce a maritime strategy 
symposium that will be held at the Department of Defense before 
the end of the year. The plan is to have a 3-day event where we 
set the agenda based on the various ideas and be able to debate 
those and then put together an actionable list of things that 
can be done to help support and develop the U.S. maritime flag.
    Mr. Cummings. Thank you.
    Admiral, on May 23rd, 2013, the DHS inspector general 
issued a report entitled ``Marine Accident Reporting, 
Investigations, and Enforcement in the United States Coast 
Guard.'' The report's main finding is the following, quote: 
``The Coast Guard does not have adequate processes or 
sufficient personnel to investigate, take correct actions and 
enforce regulations related to the reporting of marine 
accidents as required by the Federal regulations and Coast 
Guard policy,'' end of quote.
    Obviously, while this finding is alarming, it is not new. 
When I was chairman of the subcommittee we convened a long 
series of hearings to examine the decline in the Coast Guard 
marine's safety capability.
    My time here is very short, but I need to know, what are 
you going to do about this? Or given the sequestration, must we 
simply be resigned to a continuing decline in the Coast Guard's 
ability to ensure the safety of our Marine Transportation 
System, and what would this mean for the safety of life at sea?
    Admiral Servidio. Thank you for that question, sir. We are 
focused on it. I see this as a challenge going forward. The 
Marine Safety Enhancement Plan allowed us to bring a number of 
people into the Coast Guard, sir, but our focus really needs to 
be on some of the competency issues of those people. And we are 
building a plan now, given this budgetary environment, which is 
different from 2008 timeframe, sir, on how we are going to 
retain those competencies and increase efficiencies, and we are 
looking at that, sir. And we recognize it is a challenge, but 
as the industry gets more complicated, it is one we have to 
address.
    Mr. Cummings. With the chairman's indulgence, just two more 
questions.
    Admiral, the inspector general stated that the Coast Guard 
has not implemented the authorities granted by the 2010 
authorization act to allow promotion by specialty. Why hasn't 
the Coast Guard implemented this step? Why hasn't the Coast 
Guard taken this and other actions available to it that would 
help retain at least the current level of expertise in the 
Marine Safety Program at little or no cost?
    Admiral Servidio. Thank you for the question, sir. The 
enhanced status quo is an authority the Coast Guard has. It is 
something I will be meeting with our Office of Personnel 
Management and see where we stand with that, sir. I am going to 
have to get back to you on the record, sir, with regards to 
specifics of where we stand with implementing that authority, 
sir.
    [The information follows:]

        A mature Officer Specialty Management System (OSMS) is a 
        prerequisite for the Service before Enhanced Status Quo (ESQ) 
        can be implemented. On 26 June 2013, the Coast Guard launched 
        the OSMS. OSMS provides a means to quantify the number of 
        specialists in select fields and assists our Service with 
        meeting current and future demands. OSMS also fosters and 
        focuses professionalism within specialties with sanctioned 
        requirements set by Specialty Managers providing the 
        competencies, education, training, and licenses/certification 
        needed to earn and maintain a given specialty.

        Any use of ESQ will come by recommendation of the Assistant 
        Commandant for Human Resources, and approval by the Commandant.

    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Southerland. Thank you very much.
    We are going to do another quick round of questions, 
because we do have a second panel, and I would ask the Members 
if we could be mindful of our time. We went a little over 
because of the few of us that are here. So I have, just in the 
second round, I have just two quick questions.
    Mr. Jaenichen, when can we expect to see draft regulations 
to implement the 2008 cargo preference enforcement regulations?
    Mr. Jaenichen. Sir, our intent is to have them internally 
reviewed by the Department of Transportation by the end of the 
year, and then we would start the interagency process yet 
again. I cannot tell you how long it will take once we get into 
that process, but I intend to have something written down that 
we can start reviewing within the interagency by the end of the 
year.
    Mr. Southerland. OK. So by December 31st we will have----
    Mr. Jaenichen. That is for the Department, and then after 
that we then start the interagency process.
    Mr. Southerland. OK. Very good.
    And, Admiral, let me ask you a question. Will the current 
Commandant be able to promulgate the towing vessel inspection 
rule before the end of his term? I think that is in May of next 
year.
    Admiral Servidio. Unfortunately, sir, I can't speculate on 
the various processes of public comment and the processes of 
clearance, but I recognize the authorization act and the 
timeline, sir. We are aggressively adjudicating the 3,000 
comments we received on our Advance Notice of Proposed 
Rulemaking, sir. And a number of issues were brought up in 
those comments about, for example, third-party organizations, 
safety management systems and the requirements for making them 
mandatory, redundancy of vital systems, and grandfathering 
positions.
    There is somewhat of a balance between a quick rule, sir, 
and a good rule, and we are trying to do both of them at the 
same time. And I recognize the timelines and our need to try to 
get this out as quickly as possible.
    Mr. Southerland. Very good. Very good.
    All right. With that, I recognize Mrs. Hahn.
    Ms. Hahn. Thank you, Mr. Chairman. I am glad you asked 
about cargo preference, because that was going to be one of my 
questions.
    But this is for Rear Admiral Servidio. As you know, the 
TWIC program was launched shortly after 9/11 in order to ensure 
sensitive areas and facilities, such as our ports, are 
protected against potential security breaches. However, we know 
that since then, there have been a number of challenges with 
its implementation, from inaccuracies with its background 
checks to its delays in completing its pilot program for TWIC 
readers, this program has repeatedly incurred setbacks since 
its implementation. Now I understand that earlier this year the 
Coast Guard finally issued a proposed rule requiring TWIC 
readers to be installed at our Nation's highest risk 
facilities.
    Considering that the Department of Homeland Security is 
still having problems developing and installing card readers at 
port facilities, a problem that was highlighted by a recent GAO 
report, how are our Nation's highest risk ports expected to 
fully comply with the law? And should the Coast Guard, along 
with DHS and TSA, consider GAO's recommendation to search for 
alternative credentialing approaches?
    Admiral Servidio. Thank you for the question. I have met 
with representatives from your port area several times about 
this issue. We have had four public meetings. We have 150 
comments that we are taking into account as we go to a final 
rule on TWIC. I think the number of comments reflect that it 
was a well-thought-out Notice of Proposed Rulemaking. Most of 
those comments are either, We believe we should be included in 
the high-risk facilities or specific vessels saying they think 
that their vessel shouldn't be included in those high-risk 
facilities. But those are the preponderance of the comments.
    That said, we are working with DHS and with TSA on 
evaluating other potential cards at this time. And we are 
taking into account the GAO reports with respect to some of the 
problems with readers. But I think it is important that some of 
that was a prototype and I think some of those problems have 
been worked through. So I can tell you that we are aware of the 
concerns, and we will be moving forward with an eye towards 
what those concerns are.
    Ms. Hahn. And we know that many thousands of those cards 
will be expiring, a lot of them at the same time. And that is 
also what causes me concern. What do we do the day after 
hundreds of thousands of those cards have expired?
    Admiral Servidio. We have stood up an executive steering 
committee just looking at the TWIC program. I speak to Steve 
Sadler of TSA weekly with regards to how we are doing on this. 
And we have monthly meetings, looking at a suite of metrics. I 
share your concern. We are keeping our eye on that ball. Thus 
far, we have been able to address those issues, and we are 
seeing cycle times improving. But it is a concern going 
through, and it is one that we recognize we need to----
    Ms. Hahn. Yes, and it is also very urgent because I am out 
there on port facilities all the time with signs everywhere, 
``Do not allow any entrance of a person with an expired card.'' 
So I certainly don't want commerce to come to a screeching halt 
because we have not figured out what to do the day after these 
cards have expired.
    This is very urgent. So I appreciate your attention to 
this. We can figure this one out.
    Admiral Servidio. Yes, we can.
    Ms. Hahn. We are smart enough.
    Admiral Servidio. Thank you.
    Mr. Southerland. Thank you, Ms. Hahn. I now recognize Mr. 
Rice.
    Mr. Rice. Gentlemen, my primary focus is American 
competitiveness. And I truly believe that our regulatory morass 
is strangling commerce in this country, and it will strangle 
our entire economy if we don't get it under control. And I can 
think of no more glaring example of, you know, the strangling 
of an entire industry than the regulatory mess that we have 
created in this particular industry.
    So we desperately need jobs. We desperately need industry. 
It would be my goal to see the rebirth of the American 
shipbuilding industry and the rebirth of the American 
international commercial fleet. So I don't want to be talking 
about 100 ships. I want to be talking about 1,000 American-
flagged ships. And I am desperate to know what we can do to get 
there. I think that we should not be creating new rules. I want 
to you stop that. I want to you change your mindset and start 
doing away with rules that are strangling our shipbuilding 
economy. And I really look forward, Admiral and Mr. Jaenichen, 
to your suggestions to what we need to do to have people want 
to flag here again. Because if you will give me that, I will 
work on it. When do you think I can get that?
    Mr. Jaenichen. Sir, as I indicated before, we are going to 
have that first public debate by the end of this year.
    Mr. Rice. OK. That is not what I am talking about. I want 
to you write down what you think your suggestions would be that 
we could entice people to start flagging here again. And I 
don't want to wait until the end of the year. I am talking a 
couple of weeks. Can we not get that?
    Mr. Jaenichen. Sir, one of the things, there are a of 
different ideas. And if they were easy to implement and do, 
they would have been done already. The challenge that we have 
is we need to have the stakeholder input to evaluate. What my 
team puts together is going to be very limited in terms of what 
kind of feedback I get. I need to have that public debate in 
order to be able to have a program that I think is viable going 
forward.
    Mr. Rice. Do you need a public debate for you to tell me 
what your ideas would be of things we need to change to get 
people to start flagging here again?
    Mr. Jaenichen. Sir, those are ideas by people who are not 
involved in it intimately on a daily basis in the maritime 
industry. I have a lot of good ideas, but I don't know whether 
they are actually supportable or achievable inside with the 
stakeholders.
    Mr. Rice. Well, how long have you been with this group?
    Mr. Jaenichen. Sir, I have been the Acting Maritime 
Administrator since June and I have been with the Maritime 
Administration as a deputy administrator since last July.
    Mr. Rice. OK. If you could please give me your suggestions, 
I would love to see them. Admiral, can I get some suggestions 
from you?
    Admiral Servidio. We recently provided a report to 
Congress, sir, on some of these issues so we can take some of 
that, sir, and I can provide highlights from that report for 
you, sir.
    Mr. Rice. OK. I want to revitalize this industry. I don't 
want to strangle them anymore. And I hope we keep our hands off 
the commercial fishing fleet. They have been through enough. So 
I implore you, let's stop ruling these people to death, get off 
their backs and let them do their business. Thank you very 
much.
    Mr. Southerland. Thank you, Mr. Rice. Mr. Cummings.
    Mr. Cummings. Mr. Jaenichen, the first thing you ought to 
put on that list is end sequestration. Make sure you put that 
on the list because you just provided testimony that we are 
pushing ships out because of sequestration. So make sure you 
put that number one on the list. If you need me to write it, I 
will write it.
    Mr. Jaenichen. Sir, I have got it loud and clear, sir.
    Mr. Cummings. And those are ships that are there now and 
jobs that we have now that we are going to lose--not for a day, 
not for an hour, not for a month, but forever. That is real. 
And it is dwindling. Our ships are dwindling, dwindling, 
dwindling. My mother only had a second grade education, a 
former sharecropper. She said, I want to you go up the ladder, 
but I don't want you to fall down. In other words, preserve 
what you have. Protect what you have. And that is what we have 
got to do. You can write that down and tweet it.
    Admiral, as you know, the 2010 Coast Guard Authorization 
Act required that beginning in 2015, only survival craft that 
would ensure that no part of the body is immersed in water 
should be used. The most recent authorization delayed this 
requirement until 30 months after the date on which the Coast 
Guard submitted a report on the use of such survival craft. The 
NTSB has been recommending the elimination of survival craft 
that don't provide out-of-the-water protection for decades. 
Your study concludes that the cost of switching to such a craft 
would outweigh the benefits. However, the study was based on a 
review of past casualties and the study itself notes, ``In 
general, the bulk of the data available were inconclusive as to 
whether the use of out-of-the-water survival craft would have 
affected the outcomes of these casualties. Casualty reports 
were inconsistent in addressing how many liferafts or 
inflatable buoyant apparatus were used during a casualty as 
well as the number of survivors found in each device when 
used.''
    ``The study was also asked to look specifically at the 
survivability of individuals, including persons with 
disabilities, children, and the elderly.''
    Regarding this issue, your report states the following, 
``The age or disability of personnel casualties were generally 
not included in the casualty data reviewed in this analysis. 
Therefore, there is no empirical evidence to support that 
survivability of persons with disabilities, children, or 
elderly is different than an able-bodied person using either a 
lifefloat inflatable buoyant apparatus or liferaft. 
Nevertheless''--and it goes on to state--``it is clear 
intuitively that such demographics may present unusual risks 
and practical challenges to vessel operations. Although the 
Coast Guard considers some suggestions from stakeholders to 
carry out practical in-water trials in this area in connection 
with this report, this was not practical due to time and 
resource constraints.''
    Admiral, should a disabled veteran who became paralyzed 
while serving our Nation in Iraq or Afghanistan be condemned to 
die because the charter fishing boat on which he is a passenger 
sinks or capsizes? Or should that vessel be required to have a 
survival craft that can give that veteran the chance of 
surviving by keeping his or her body out of the water? That is 
question number one. Number two, Admiral, was this report 
prepared by marine safety professionals who were fully 
qualified as either investigators or inspectors? And does this 
report represent only their professional opinion?
    Final question, Admiral, how much time and how many 
resources would it require to carry out practical in-water 
trials?
    Admiral Servidio. Thank you for the question, sir. The 
report was prepared by marine safety professionals, sir. We 
have limitations with respect to the data that our system 
carries. I would obviously share your concerns with respect to 
disabled people, sir. We worked, when I was captain of a port 
in numerous ports, on making arrangements so that we could 
address the safety aspects and allow for disabled veterans, in 
Tampa specifically, sir, to go out on commercial vessels and 
enjoy and take part in the pleasure of our maritime ecosystem.
    I am going to have to get back to you, sir, on what we 
would need to do in order for in-water tests and get back to 
you on the record for that, sir.
    [The information follows:]

        A practical test program addressing the relative survivability 
        of the disabled, elderly, and children vs. able-bodied persons 
        in various types of survival craft would be a complex and 
        potentially risky undertaking. While some limited preliminary 
        work could be carried out in controlled, simulated conditions 
        such as a wave/wind tank, valid and meaningful conclusions 
        would require full-scale trials in realistic conditions in 
        order to reliably model the dynamics of evacuation of persons 
        of differing abilities from a floating vessel into different 
        types of survival craft. Given that the survival craft on these 
        smaller commercial vessels are generally not davit-launched, 
        there would be potential risk of injury to the test subjects 
        just entering the craft, so the test parameters would need to 
        be carefully controlled and monitored for personnel safety.

        The Coast Guard does not have the staff resources or 
        infrastructure to carry out such a test program in-house. While 
        we would seek to leverage interagency expertise and resources 
        from experts such as DOT's Access Board, and could likely 
        perform some preliminary work at a facility such as our rescue 
        swimmer training facility in Elizabeth City, the bulk of the 
        work for this study would have to be contracted out. Our 
        technical and economic staff developed detailed minimum time 
        and cost estimates to conduct such a program on a contract 
        basis, including preliminary computer modeling to inform 
        development of appropriate parameters and methods for practical 
        testing; the acquisition/lease of test vessels/crews and test 
        equipment; identification (or simulation) and compensation of 
        test subjects in the desired demographics; travel and per diem 
        costs for government and lab personnel and test subjects; 
        logistical and documentary support; standby personnel/
        facilities for health and safety oversight; and government 
        staff time for test plan development and data/report review. 
        These estimates are considered to be minimums; possible 
        unanticipated problems (such as issues with coordination of 
        scheduling with variations in weather and sea conditions, 
        personnel, and equipment performance) could substantially 
        increase the time and cost. Given the uniqueness and 
        substantial risks of the proposed test program, and absent any 
        history of previous such tests to inform the development of our 
        estimates, a 20 percent risk premium was applied to our initial 
        raw estimate in anticipation of possible overruns.

        Taking into account the uncertainties associated with such a 
        test protocol, the estimated cost for a contractor to conduct 
        and document trials using representative test subjects to 
        simulate evacuation from typical vessels and to evaluate 
        survivability in different types of survival craft is $2.24 
        million (including the premium discussed above), and is 
        estimated to take approximately 18 months after issuance of a 
        contract. This includes preliminary computer modeling, 
        arrangement for suitable test vessel(s), recruitment of 
        suitable test subjects, preliminary subject testing/evaluation, 
        acquisition of representative test survival craft (liferafts, 
        buoyant apparatus/lifefloats, inflatable buoyant apparatus), 
        conducting open water tests, and collection and analysis of 
        data to develop a final report.

        Development, solicitation, and award of a contract is estimated 
        to require 9 months beforehand. In addition to direct 
        contractor costs, we estimate approximately one full-time 
        equivalent in contracting support and currently unanticipated 
        USCG technical/project management time would be required to 
        guide and oversee the complete test program with post-test 
        report development, analysis, and review. Absent additional 
        compensating staff resources, this would have a substantial 
        negative impact on current projects and customer response 
        times.

        The anticipated timeline for conducting such a study is:

 
 
 
Contract Development..............................  6 months
Contract Solicitation & Award.....................  3 months
Preliminary Test Prep/Analysis....................  6 months
Gov't/CG Review...................................  1 month
Prelim Test Data Review and Report................  4 months
Gov't/CG Review...................................  1 month
Open Water Test Prep & Execution..................  2 months
Data Review, Interim..............................  2 months
Gov't/CG Review...................................  1 month
Final Report......................................  1 month
                                                   ---------------------
  Total Time......................................  27 months
 


    Mr. Cummings. We can do better. We can do better. And I 
hope you take that back to the Coast Guard. Thank you, Mr. 
Chairman. And I am looking forward to your responses.
    Mr. Southerland. Thank you very much. If there are no other 
questions, I want to thank the witnesses for their testimony. 
And I want to say, Mr. Jaenichen, I know before in your 
comments, you made a reference to the cost of shipbuilding in 
this country. And you have all three been given the 
responsibility of creating a list. I would like to encourage 
all of you to include on that list the cost of American jobs 
because of the EPA and the regulation on our shipbuilders. 
Their boot is on the neck of our shipbuilders. So I understand 
the fury over sequestration and the jobs that you have alluded 
to. But I would also like on your list to please give me an 
idea of the tens of thousands of jobs--not thousands, but tens 
of thousands as a result of those regulations and how they are 
crushing the American shipbuilder because that adds to the 
costs. And I agree with you, Mr. Jaenichen, and you 
acknowledged it, the cost of what it takes to produce these 
vessels in the United States.
    So I would like to thank all of you for being here. And 
with that, we will move on to our second panel. And I would ask 
that those individuals on our second panel to please come 
forward.
    All right. Our second panel of witnesses today includes Mr. 
Thomas Allegretti, president and CEO of The American Waterways 
Operators; Captain William Schubert of USA Maritime; Mr. Ken 
Franke, president of the Sportfishing Association of 
California; Mr. Geoffrey Powell, vice president of the National 
Customs Brokers and Forwarders Association of America; Rear 
Admiral Rick Gurnon, president of the Massachusetts Maritime 
Academy, appearing today on behalf of their Consortium of the 
State Maritime Academies; and Patrick Wojahn, public policy 
analyst for the National Disability Rights Network.
    Mr. Allegretti, you are recognized for 5 minutes.

   TESTIMONY OF THOMAS A. ALLEGRETTI, PRESIDENT AND CEO, THE 
AMERICAN WATERWAYS OPERATORS; CAPTAIN WILLIAM G. SCHUBERT, USA 
     MARITIME; KENNETH D. FRANKE, PRESIDENT, SPORTFISHING 
ASSOCIATION OF CALIFORNIA; GEOFFREY C. POWELL, VICE PRESIDENT, 
NATIONAL CUSTOMS BROKERS AND FORWARDERS ASSOCIATION OF AMERICA; 
  REAR ADMIRAL RICK G. GURNON, USMS, PRESIDENT, MASSACHUSETTS 
MARITIME ACADEMY, ON BEHALF OF THE CONSORTIUM OF STATE MARITIME 
   ACADEMIES; AND PATRICK L. WOJAHN, PUBLIC POLICY ANALYST, 
NATIONAL DISABILITY RIGHTS NETWORK, ON BEHALF OF THE CONSORTIUM 
    FOR CITIZENS WITH DISABILITIES TRANSPORTATION TASK FORCE

    Mr. Allegretti. Good morning, Chairman Southerland, Ranking 
Member Hahn. Thank you for the opportunity to appear before the 
subcommittee today. I am here today on behalf of AWO members to 
convey a simple message and an urgent request. We need prompt 
publication of a Coast Guard rule on towing vessel inspection 
that is consistent with the intent of Congress and with the 
recommendations of the congressionally authorized Towing Safety 
Advisory Committee. We need this regulation published right 
away. The cause of marine safety demands it.
    Congress directed the Coast Guard to undertake this 
rulemaking more than 9 years ago. The statutory deadline for 
issuance of a final rule passed nearly 2 years ago. Those facts 
alone create a cause for action. But the enactment date and the 
missed deadlines are not the only reasons why immediate 
publication is imperative. Even more compelling is the fact 
that the rulemaking offers an historic opportunity to take 
safety in our industry to a new level, akin to the 
transformation of the oil transportation industry after the Oil 
Pollution Act of 1990.
    There is widespread--indeed, overwhelming industry and 
public support for moving forward with this rule right away. 
And the administration, Congress, and our industry have real 
vulnerability and will face hard questions from the American 
public if this long overdue rulemaking is not finalized soon 
and a serious accident should occur.
    For more than 20 years, our industry has been engaged on a 
journey of continuous improvement. The Coast Guard, Congress, 
and our industry shipper-customers have been active partners in 
that journey. The voyage has been marked by private sector 
leadership and responsible public policymaking, both of which 
have produced meaningful results. But we have not yet achieved 
our goal of zero harm. And the most important step we can take 
now, a critical missing link in the safety chain, is the 
publication of the towing vessel inspection rule.
    Mr. Chairman, there is a continuing and heightened risk to 
marine safety each day that this important regulation is not 
promulgated. Thirteen years ago, the NTSB published a report on 
the 1998 ramming of the Eads Bridge in St. Louis Harbor and the 
near breakaway of the President Casino with 2,000 passengers 
aboard. The NTSB recommended that the Coast Guard seek 
statutory authority to require towing companies to implement 
safety management systems, calling the lack of a safety 
management system requirement ``a threat to waterway safety.''
    Five years ago, after another serious accident, a 2008 
collision in which nearly 300,000 gallons of oil were spilled 
into the lower Mississippi River, I testified before this 
subcommittee on actions needed to prevent such accidents. I 
said then that had the inspection regulations been in place, 
the collision might have been prevented because the Coast Guard 
would have been notified when the operator of the vessel failed 
a safety management system audit prior to the casualty. This 
would have forced the company to either improve its procedures 
or risk losing its license to operate.
    AWO members are frustrated that this rulemaking has taken 
so long when the benefits of action are so great, the 
consequences of inaction are so severe, and our industry is 
asking to be regulated. The fact is that this rulemaking is not 
particularly controversial. There is widespread support from 
industry, from the public, from bipartisan Members of Congress 
for moving forward with the central tenets of this rulemaking.
    AWO is especially concerned about the potential for delays 
at the Department of Homeland Security. We are very concerned 
that the Coast Guard will finish its work on the inspection 
rulemaking only to have it languish at the Department. This is 
not a hypothetical concern. The proposed rule on towing vessel 
inspection was sent to DHS in early 2009 and was not published 
in the Federal Register until August 2011, more than 2 years 
later. We cannot afford a delay like that again.
    So here is what we recommend: We urge the Coast Guard to 
commit to finalizing the towing vessel inspection rule and 
sending it to DHS this fall. We urge DHS to complete its review 
process this year so that the rule can be cleared by OMB and 
published next spring during this commandant's watch. And we 
urge Congress to continue to exercise its oversight to ensure 
that the towing vessel inspection rule is published without 
further delay. Today's hearing is an important step in that 
oversight process, and we thank you for your leadership in 
holding it.
    Mr. Southerland. Thank you, Mr. Allegretti.
    Captain Schubert, you are now recognized.
    Mr. Schubert. Mr. Chairman and members of the subcommittee, 
thank you for the invitation to speak here today. I am here on 
behalf of USA Maritime, and also to offer my own personal 
perspective as a former U.S. Maritime Administrator from 2001 
to 2005.
    USA Maritime is a coalition of ship owning companies, 
maritime labor organizations, and maritime trade associations 
which represent virtually every one of the privately owned 
U.S.-flagged vessels operating regularly in the foreign trade. 
As this subcommittee knows, the U.S.-flagged merchant marine 
engaged in foreign trade, which is so vital to our Nation's 
defense, depends heavily on the Maritime Security Program and 
the cargo preference laws for its survival.
    The two programs are inseparable and necessary to support a 
peacetime merchant marine. Regrettably, we face a serious 
challenge to both critical support programs. First, the 
Maritime Security Program--MSP--is facing drastic and 
potentially crippling cuts due to sequestration. MarAd has 
recently informed the industry that up to one-third of the 60 
ships--that is 20 ships--supported by MSP may be lost if 
automatic cuts occur. Combined with the percentage reduction in 
cargo preference reservation applicable to food aid from 75 to 
50 percent and the drawdown in operations in Afghanistan, this 
will have a disastrous consequence for the U.S. merchant 
marine.
    It is no exaggeration at all to say that the U.S. merchant 
marine stands at the edge of a cliff from which it may never 
recover. The U.S. merchant marine has a proud and illustrious 
heritage, going back to the beginning of the Republic, 
including valiant and sacrificial achievements in every 
conflict Americans have fought. But unfortunately, the U.S. 
merchant marine operating around the world will not survive 
much longer if MSP is drastically cut.
    We urge Congress to consider that the fleet has already 
shrunk to a bare minimum to support national defense needs. I 
could further state from my firsthand experience as the 
administrator during Operation Iraqi Freedom and Operation 
Enduring Freedom, co-managing one of the largest sealift 
operations in American history that this statement is no 
exaggeration.
    Simply put, any further cuts will be devastating to our 
industry and will surely cost the U.S. Government and the 
taxpayers billions of dollars to replicate the lost sealift 
capacity. The second challenge facing the industry is the 
current lack of MarAd's ability to conduct serious enforcement 
of the cargo preference laws. Ships cannot remain active in 
peacetime unless they have cargo, and the cargo preference laws 
are designed to ensure that U.S.-flagged vessels carry a fair 
share of U.S. Government impelled cargoes and at reasonable 
freight rates.
    Persistent and active enforcement of cargo preference is 
essential to ensure that those laws work as Congress intended 
and to meet national security policy objectives. Almost exactly 
2 years ago, MarAd, to its credit, held a public listening 
session as to how to improve enforcement of cargo preference. 
Virtually every witness called for increased transparency, 
expedited staffing of vacant cargo preference positions, and 
most of all, promulgation of a rule implementing the 2008 cargo 
preference amendment enacted by Congress and designed to 
improve cargo preference enforcement.
    Now 2 years later, MarAd has made some commendable progress 
filling positions and improving our working relationships with 
the U.S. Ex-Im Bank and their stakeholders. But it remains 
difficult, if not impossible, to get enforcement and compliance 
information from the other Government agencies subject to the 
law. And there is still no rule. In 2008, Congress saw a need 
to improve cargo preference enforcement. MarAd must do its part 
in promulgating the rule and vigorously enforcing the law. The 
industry can no longer wait. MarAd must find a way to get the 
rule promulgated and start enforcing the law as Congress so 
wisely intended.
    We look forward to working with the subcommittee and the 
full committee on working to preserve and strengthen the U.S.-
flagged merchant marine. And thank you again for focusing on 
these issues. I would be pleased to take any questions at the 
appropriate time. Thank you, Mr. Chairman.
    Mr. Southerland. Thank you, Captain Schubert.
    Mr. Franke, you are now recognized.
    Mr. Franke. Thank you, Mr. Chairman.
    Thank you, chairman and subcommittee members, for providing 
this opportunity to make comment on the U.S. Coast Guard report 
to Congress on survival craft safety.
    I am Ken Franke, president of the Sportfishing Association 
of California and additionally speaking on behalf of the Golden 
Gate Fishermen's Association as well as the National 
Association of Charter Boat Owners.
    SAC, GGFA, and NACBO are industry associations that 
represent over 3,000 small passenger vessel companies based on 
all maritime borders of the United States. This fleet 
transports several million passengers annually. And rest 
assured, passenger safety and appropriate lifesaving equipment 
aboard our vessels is the absolute number one priority.
    With regard to the Coast Guard report on survival craft 
safety, we applaud the level of detail and factual clarity 
contained in the document. A review of the report makes it easy 
to conclude that the current system of equipping the small 
passenger vessels with safety equipment is working.
    At issue, however, is, what do we do with the information? 
And how do we proceed effectively without incurring waste or 
even harm to the national small passenger vessel fleet? Key 
comments we felt were applicable to small passenger vessels in 
the report are quoted as follows: A, based on analysis of 
available casualty data, carriage of out-of-water survival 
craft in place of lifefloats and buoyant apparatus is not 
anticipated to have a significant effect on vessel safety. B, 
for inspected small passenger vessels--those are inspected by 
the U.S. Coast Guard--for which the vessel data and casualty 
reports are more complete, the absence of fatalities attributed 
to the type or number of survival craft since 1996 suggests 
that the current requirements phased in between 1996 and 2006 
have provided adequate protection. It does not support a 
compelling need for additional requirements for out-of-water 
survival craft for these vessels. C, for passenger vessels 
where the passenger capacity is limited by weight, in some 
cases, the increased weight of inflatable survival craft may 
require some reduction in the number of persons that can be 
carried with possible consequential long-term loss of passenger 
revenue. And D, it is important to note that in a significant 
number of cases on small passenger vessels, other lifesaving 
equipment that might have mitigated the severity of the 
casualty was not used or may have been used improperly.
    Based on these comments, it would seem that retrofitting 
the vessels with inflatable liferafts would not be reducing 
threat to life. What it would do is cost a small business owner 
and jobs to incur a $350 million bill over 10 years that, in 
some cases, would put them out of business. We feel it is 
important to mention our vessels and passenger safety have been 
a progressive evolving story with an emphasis on improved 
design training and technology over the past 10 years. This 
results in a reduction in those incidents where survival craft 
is employed. The statistics in the Coast Guard report support 
this fact. We refer to the following examples: GPS positioning 
ensures precise navigation, improved vessel safety movement, 
and ensures high-speed response by rescuers by necessary; 
plotting software and improved radar and sonar systems further 
reduce the risk of collision or grounding; EPIRB emergency 
transmitters provide improved response times by first 
responders.
    Communications equipment has vastly improved, with movement 
to satellite intercoms and networks capable of broadcasting to 
entire fleets with clarity during an emergency. Vessel design 
and bulkheads to divide compartments substantially reduces the 
likelihood of a vessel sinking. Vessel traffic centers help 
reduce conflict on the water by ensuring separation of vessels 
in congested areas. Licensing requirements and new crew 
training have become much more intensive.
    These factors, all of which reduce the risk of the need to 
deploy a survival craft, combined with the intensive annual and 
random inspections by the Coast Guard personnel have led to a 
robust and layered life protection system aboard our vessels. 
Therefore, it is our opinion that retrofitting, in many cases, 
large portions of small passenger vessels to accommodate 
inflatable liferafts is inappropriate and a waste of money.
    Additionally, we feel it is not prudent to move forward 
with implementing a rule that there is no basis to indicate 
will save a life any more than the current risk-based survival 
craft requirements in place.
    Based on all of the above comments, we recommend to the 
subcommittee that action be taken to legislatively amend the 
previous instruction to the Coast Guard to continue to utilize 
risk-based survival craft guidelines. Further, if as a result 
of this report they feel there is an area that can be improved 
on by policy development, then the Coast Guard should pursue 
addressing the deficiencies and report back to the subcommittee 
on the actions taken.
    Speaking specific to my own fleet, to which the statistics 
are most familiar to me, with the Coast Guard's oversight, our 
fleet moved 10 million passengers over 10 years with no death 
attributed to the lack of an inflatable liferaft. The system 
works.
    In closing, we compliment the hard work of the Coast Guard 
in both protecting our fleet and preparing this report. This 
was an outstanding document. I venture to guess everyone wishes 
we had it 2 years ago. We commend them for their achievement.
    With that, I submit to any questions you may have.
    Mr. Young [presiding]. Mr. Powell.
    Mr. Powell. Mr. Chairman, thank you for this opportunity to 
testify on behalf of the National Customs Brokers and 
Forwarders Association of America, the NCBFAA. I am Geoffrey 
Powell, vice president of the association. NCBFAA's 800 member 
companies and 28 affiliated regional associations represent the 
majority of licensed ocean freight forwarders and non-vessel 
operating common carriers, or NVOCCs and are, therefore, 
directly affected by maritime regulation.
    Your invitation to us to testify is extremely timely. The 
Association is greatly concerned that a recent proposed 
rulemaking by the Federal Maritime Commission is inconsistent 
with the important goals of job creation, improving the 
national economy, and reducing, not increasing, the burdens of 
unnecessary regulation.
    Ocean transportation intermediaries, or OTIs, play an 
important role, ensuring that U.S. importers and exporters of 
all sizes can move their goods in international commerce 
efficiently and economically. They consolidate smaller 
shipments that could not otherwise be economically transported. 
They provide the full range of logistical services that are 
necessary to export or import cargo from and to the United 
States.
    The rulemaking sprung from an investigation of the barrel 
trade, but then failed to address any of the issues that 
surfaced; in that instance, the movement of household goods. 
Instead, it focused on something completely different, the 
regulation of OTIs. There are a myriad of issues raised by the 
proposal; however, I will highlight three of the more 
problematic. First, the Shipping Act provides for OTIs to 
obtain licenses without term limits as a condition for doing 
business. Without any explanation, justification, or statutory 
authority, the FMC proposes to convert all licenses to 2-year 
terms that require biennial renewals. This will be a 
burdensome, time consuming, and expensive proposition, 
including requiring parties to pay as yet undetermined filing 
fees. There is no record of abuse, no specific legislative 
authority under the Shipping Act, no direction from Congress 
for the FMC to take these steps with respect to OTIs.
    The FMC justifies this burden by arguing it needs to ensure 
that it has current corporate information concerning its 
licenses. However, the FMC's existing regulations already 
require that these changes must be provided to the FMC as they 
occur. We must also say that the FMC cannot effectively meet 
the challenge of issuing new licenses under existing 
regulations, a process which often takes 2 to 3 months or more. 
Adding to this additional renewal requirement would inundate 
FMC staff and grind the entire process to a halt.
    A fundamental flaw in the Commission's rulemaking process 
was its failure to meet with the industry in order to identify 
any problems and then, if necessary, jointly find solutions 
that are the least burdensome. Secondly, without any apparent 
supporting rationale, the proposal also authorizes suspension 
or revocation of a license in terms that are vague, overbroad, 
and in some instances unreasonable. In a related vein, the 
proposed regulations establish procedures for licensed 
revocations which raise due process concerns and are contrary 
to the U.S. Constitution and the Administrative Procedure Act. 
The proposal, which would take away a company's ability to do 
business, provides for no right of discovery, no apparent right 
to a hearing, no right to cross-examine witnesses, and no right 
to appeal from the decision of the designated hearing officer.
    Our last example is the Commission's proposal to increase 
ocean forwarder and NVOCC bonds by 50 and 33.33 percent, 
respectively. This would result in increased bond premiums for 
the several thousands of licensees on an annual basis. Despite 
the fact that the Commission was able to cite only two 
instances in which the bond was insufficient to cover 
outstanding claims, the proposed increase would not 
dramatically increase any potential claimant's level of 
protection since the proposed increased bond would still fall 
far short of the amounts that were cited in the two examples 
relied upon by the Commission.
    Regrettably, the Commission has failed to exercise good 
judgment in these proposed regulations which will only serve to 
increase cost to the industry and make smaller OTIs less 
competitive, all for no apparent reason. For these reasons, the 
Association respectfully requests that the subcommittee require 
that the FMC explain why it is proceeding along this path.
    Mr. Chairman, we are grateful for the subcommittee's 
interest in this matter.
    Mr. Young. Thank you, Mr. Powell.
    I think it is Rear Admiral Gurnon.
    Admiral Gurnon. Good afternoon, Chairman Young and members 
of the committee.
    Mr. Young. I can't see too well this early in the morning.
    Admiral Gurnon. I understand. You have time zones to cross 
from Alaska.
    I am Rick Gurnon, president of the Massachusetts Maritime 
Academy. I am speaking today on behalf of the Consortium of 
State Maritime Academies. Our colleges are located in 
Massachusetts, New York, Maine, California, Texas, and 
Michigan. Although students from every State represented on 
your committee are enrolled at our colleges at reduced rates 
due to regional status.
    I would like to take a moment and introduce the other two 
academy presidents who are with me today, Rear Admiral Wendi 
Carpenter from SUNY Maritime and Rear Admiral Robert Smith of 
Texas A&M Galveston and Texas A&M Maritime Academy. Together, 
we represent a vital component of the national economy, and I 
thank you for the opportunity to appear before you today to 
discuss two very important issues of great concern to us. 
First, the impact of the ever-increasing regulatory burden on 
our institutions; and second, the need to replace our aging 
training ships owned by the Federal Government and critical to 
our ability to train our students for jobs and meet Federal 
requirements.
    Collectively, the six State maritime academies graduate 
over 70 percent of the licensed deck and engineering officers 
in our country. While a sufficient pool of American merchant 
mariners is always important for the free flow of commerce and 
to support our troops overseas, that pool of officers becomes 
critically important in the event of a national emergency. All 
of the bombs, beans, bullets, boots, Bradleys, and Black Hawks 
that get to the Middle East moved by ship, with graduates of 
the State maritime academies at the helm and in the engine room 
of those vessels.
    In addition to their bachelor's degrees, State maritime 
academy graduates are well prepared for positions of 
significant responsibility and technical difficulty, not just 
as mates and engineers aboard ships, but as senior leaders 
across many industries, in Government, in the military, from 
the seabed to space. Unfortunately, the State academies now 
face a number of challenges that threaten our success. And our 
primary concern is the regulatory burden.
    When the international convention on Standards of Training, 
Certification and Watchkeeping Code, STCW, was first 
implemented in 1997, it launched an ever-increasing layered set 
of requirements which are onerous, unnecessary, and result in 
unfunded mandates with significantly higher cost for the 
students and no measurable improvements in safety or security. 
The original intent of STCW was to increase the training and 
professionalism of other nations' mariners. Despite over a 
decade of STCW requirements, we are not aware of any study that 
has determined that its implementation has improved U.S. 
maritime safety. The unintended consequence is that already 
high-quality American mariners were saddled with additional 
time-consuming and costly requirements that drove many mariners 
out of the profession because of the excessive energy, time, 
and money now needed to attain or retain their qualifications.
    Because of the rigid manner of the Coast Guard's 
interpretation of STCW, we estimate that the implementation 
adds $1,850 to the cost to educating each student or over $5 
million for us collectively each year. Of particular concern to 
us is the fact that the Coast Guard continues to interpret STCW 
without input from the academies. Our second concern is the 
need to replace our aging training ships. Each of the six State 
maritime academies has a federally owned training ship assigned 
through the Maritime Administration. The ships are the primary 
means by which our students receive their required seatime, and 
are essential components of our approved training programs.
    Because of the Federal requirements that these ships be 
built in the United States, they are either old merchant ships 
or converted Navy ships, and they average 35 years old. The 
SUNY Maritime training ship, originally designed in 1963, is a 
break bulk cargo ship, is over 51 years old, and needs 
replacement.
    The Maritime Administration has presented a business case 
for the construction of a new national security multimission 
vessel and estimates the project would support 600 to 1,000 
high-paying manufacturing jobs per ship in the United States. 
New multimission training ships would also serve as platforms 
for disaster relief, humanitarian assistance, and logistics 
support for the Department of Defense. In fact, training ships 
have been utilized in disaster relief during Hurricane Sandy 
and Katrina and in humanitarian assistance in both Haiti and 
Mogadishu. During Hurricane Sandy, for example, MarAd testifies 
that the use of the Kennedy and the Empire State resulted in a 
cost avoidance of approximately $3.7 million to the taxpayer.
    In closing, let me emphasize that the State maritime 
academies hold the U.S. Coast Guard and Maritime Administration 
in high regard. Our reason to exist is to train our students to 
become competent professional leaders in the maritime industry, 
but that task is becoming evermore difficult due to an 
increasing regulatory burden on the academies and the aging of 
our federally owned training ships.
    Thank you very much. I stand by for questions.
    Mr. Young. Thank you, Admiral. Mr. Wojahn.
    Mr. Wojahn. Good afternoon, Chairman Young. My name is 
Patrick Wojahn, and I serve as a public policy analyst at the 
National Disability Rights Network. I am here as a 
representative of the Consortium for Citizens With Disabilities 
Transportation Task Force. I thank you for holding this hearing 
today and appreciate the opportunity to testify on the 
important safety and civil rights issue of out-of-water 
survival craft. CCD is a coalition of national disability 
organizations working together to advocate for national public 
policy that ensures the self-determination, independence, 
empowerment, integration, and inclusion of children and adults 
with disabilities in all aspects of society. The transportation 
task force focuses on ensuring that national policy regarding 
transportation move society toward the ultimate goal of access 
to adequate transportation to accommodate the needs of 
employment, housing, and recreation for all people with 
disabilities.
    In order to be effective for people with disabilities, 
elderly people, and infants, survival craft must provide out-
of-water protection. This is a matter of life and death, as 
many people with disabilities, elderly people, and infants lack 
the ability to hold onto survival craft that allows any part of 
them to remain immersed in water. For them, lifefloats and 
buoyant apparatus that does not keep them fully out of water 
are effectively useless.
    The benefits of survival craft that keep people entirely 
out of water to both people with disabilities and people 
without disabilities have been well understood by the Coast 
Guard and the National Transportation Safety Board, but have 
consistently recommended use of these craft as safety devices 
for at least 70 years.
    The Federal Government has also recognized for many decades 
that accessibility for people with disabilities, which would be 
supported by the use of out-of-water survival craft, is a civil 
right. In particular, the Rehabilitation Act of 1973 and the 
Americans with Disabilities Act of 1990 have enshrined the 
principle of equal opportunity for people with disabilities 
into Federal law. Equal opportunity requires that people with 
disabilities be able to ride on surface vessels, transporting 
passengers without greater fear of dying due to inadequate 
survival craft.
    Veterans who risk their lives to protect our country and 
who now have a disability should not have to risk their lives 
to go sportfishing or ride a ferry. Unfortunately, the cost-
benefit analysis that the Coast Guard submitted regarding the 
requirement of out-of-water survival craft included in the 
August 26, 2013, Coast Guard report to Congress, does not 
consider the civil rights factors discussed above. It also 
includes a deeply flawed analysis of the costs and benefits of 
this requirement of out-of-water survival craft.
    Although the report acknowledges that there are a number of 
uncertainties in determining the number of lives that might be 
saved by out-of-water survival craft, it appears to 
consistently resolve these uncertainties in favor of finding 
that fewer lives would be saved. Of the approximately 60 vessel 
casualties and over 160 deaths in vessels carrying passengers 
that occurred between 2002 and 2011, the Coast Guard found, 
without explanation, that only 21 of these fatalities, one-
third of these lives lost could have been prevented had an out-
of-water survival craft been available. This is particularly 
astounding given the report's finding that out-of-water 
survival craft increased the fatality rate for passengers in 
the incidents where they are available by 73.74 percent.
    Additionally, the cost-benefit analysis undervalues the 
lives of people who die as a result of safety vessels that do 
not protect people out of the water. The Coast Guard, to 
determine the value of a statistical life, relies on a review 
of studies by the Department of Homeland Security that place 
the value of a statistical life, or VSL, at $6.3 million in 
2007 dollars. Other recent Federal Government studies, however, 
place the VSL at a much higher amount.
    A recent OSHA analysis of crystalline silica determined 
that the value of each fatality avoided would have been $8.7 
million. A recent EPA cost-benefit analysis placed the value of 
a statistical life at $8 million in 1990 dollars and $9.6 
million in 2020 dollars. There is at best a great deal of 
uncertainty regarding the appropriate measure of the value of a 
statistical life.
    Given that these numbers are a matter of life and death for 
people with disabilities, the value of human life should not be 
monetized and cannot be monetized to the person whose life is 
lost nor to that person's family. History is rife with examples 
of cost-benefit analyses such as Ford's analysis of the Ford 
Pinto being used to justify pure precautionary measures by 
looking at the value of a statistical life until the point 
where people actually begin to die.
    And who would want to be the one to contact the family 
member of a veteran with a disability and inform them that that 
person died because Congress determined that the profit to the 
industry operating vessels transporting passengers was more 
important than that person's life? The cost to use out-of-water 
survival craft is minimal compared to the benefit of saving 
someone's life.
    In conclusion, the Consortium for Citizens With 
Disabilities supports retaining the statute that requires the 
Coast Guard to approve only survival craft that keep people out 
of the water. Passenger vessels required to carry survival 
craft should only carry survival craft that provide out-of-the-
water protection for all passengers. Thank you for the 
opportunity to testify this morning.
    Mr. Young. Thank you, sir.
    And now we will open it up for questions. Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Wojahn, let me start with you. When I walked out in the 
hall just now, I said to the admiral, I said, Admiral, I am 
really looking forward to your report, particularly on the 
disability issue. And he said something very interesting. He 
said, You have got to understand that it may not be practical 
to come up with a solution to that problem, and it may have to 
be done on an individual basis. Maybe you have heard that 
before. Have you heard that before?
    Mr. Wojahn. Yes.
    Mr. Cummings. Can you keep your voice up and respond to 
that so that when he sends me what he is----
    Maybe I will preempt him. You give me the information so I 
can write the right question to him so that I don't have him 
giving me the answer that he just gave me.
    Do you understand what I just said?
    Mr. Wojahn. No. I am not sure I do.
    Mr. Cummings. Help me help him. Help me help you.
    In other words, he is saying that it is not practical. And 
that is the answer that he is going to probably give me----
    Mr. Wojahn. Right.
    Mr. Cummings [continuing]. To the issues that you are 
raising. And I am saying, he says that maybe it is better that 
you deal with the disabled on an individual basis. And all I am 
asking you is, what is your response to that, so that I can 
preempt his response.
    Mr. Wojahn. Well, thank you. I appreciate your question. 
And I think I do understand it.
    I think while civil rights may not always be considered 
practical, it may not, on an individual case, be considered 
cost-effective or practical to implement, accessibility has 
been recognized as something that we value as a country. And 
the ability of people with disabilities to be included in every 
recreational opportunity is enshrined in the Americans with 
Disabilities Act. So it is not just a question of practicality. 
It is a question of what do we need to do for the people--for 
veterans with disabilities who have sacrificed or risked their 
lives for our country?
    Mr. Cummings. All right. OK. Got you.
    Mr. Allegretti, you urged in your statement that the Coast 
Guard issue the long overdue touring vessel inspection rule. 
Given the findings of the DHS IG, are you confident that the 
Coast Guard has the resources or the expertise to bring towing 
vessels under inspection?
    Mr. Allegretti. Yes, sir. I am. And I am not looking so 
much at the internal competence of the Coast Guard, which I 
can't speak to in this particular area, but I can look to the 
process of collaboration that the Coast Guard used over the 
last 9 years, where it extensively tapped the expertise of 
industry, of labor to understand how to implement this rule and 
how to deal with the technical requirements of the rule.
    At each step along the way, there was a lot of input to the 
Coast Guard. So I am confident that if they have used that 
information, the rule should come out largely right.
    Mr. Cummings. And I take it that some of your members of 
the organization, have they been involved in that process?
    Mr. Allegretti. Extensively, sir. It was done under the 
aegis of the Towing Safety Advisory Committee, which is a 
congressionally authorized advisory committee to the Coast 
Guard. TSAC provided the umbrella to allow all of this work to 
take place. And what is important about that is that it was 
inclusive and open to the public. Anybody who had an interest 
in this issue was invited to participate.
    Mr. Cummings. Can you update me on your current 
discussions, if any, with DOT regarding enforcement of the 
Jones Act. Have you been talking to them?
    Mr. Allegretti. We have been talking to them. We have been 
specifically talking to Administrator Jaenichen. And he is a 
strong supporter of the Jones Act, has professed that publicly 
to our leadership, and has asked for the opportunity to work 
with us to figure out how to make sure that within the 
Department of Transportation, they are doing all of the things 
necessary to enforce the law and to send public signals about 
their intent to enforce the law.
    Mr. Cummings. Well, I am pleased to say that--I had a 
meeting with Secretary Foxx. And I am so glad--and I asked him 
to please make sure maritime is taken off the floor and put on 
the stove--not the back burner, but on the stove, because I 
think maritime has been a stepchild to the other 
transportation--
    And I agree with you. Jaenichen is a breath of fresh air. 
Let's hope that he moves forward and has the support that he 
needs.
    Thank you, Mr. Chairman.
    Mr. Young. Thank you, sir. Mr. Rice.
    Mr. Rice. Captain Schubert, I am curious. You were talking 
about enforcement of cargo preferences and the effect of 
sequestration on the U.S. maritime fleet, the international 
fleet as well, particularly focused on here. Who owns those 
ships?
    Mr. Schubert. Well, every shipowner who has a U.S.-flagged 
vessel has to meet citizenship requirements, documentation.
    Mr. Rice. Does the Government own them?
    Mr. Schubert. No. We are talking about privately owned 
merchant marine ships.
    Mr. Rice. What difference does sequestration make? If they 
are privately owned, why do they worry about sequestration?
    Mr. Schubert. Well, respectfully, we have two issues. One 
is the enforcement of cargo preference. Incidentally, cargo 
preference dates back----
    Mr. Rice. Let's talk about sequestration.
    Mr. Schubert. Sequestration is directly related to the 
Maritime Security Program. You might call it a retainer that is 
paid to the carriers.
    Mr. Rice. So the Government is paying these guys money?
    Mr. Schubert. Yes, they are.
    Mr. Rice. OK. Now why is it--you know, there are privately 
owned vessels all over this world carrying cargo all over the 
place. I think I learned last time that we carry 2 percent of 
the world's international cargo. Why aren't we competitive? Why 
do they have to rely on the Government? Why can't we be 
competitive? Why can't they carry cargo and make money just 
like every other ship in the world?
    Mr. Schubert. Respectfully, sir, they do carry cargo and 
make money. But the cost of operating a ship under U.S. flag is 
more than the international competition. And it has to do 
with--
    I mean, if you visit our ports, you will see foreign-flag 
ships come in and out all the time. And I have to tell you that 
the wages that they pay their seamen--sometimes they don't even 
pay wages. We call them ``ships of shame.'' This is the same 
international fleet that our U.S.-flagged carriers have to 
compete against. And I have to say, the $3.1 million MSP 
payment per vessel is probably about 50 percent of the annual 
cost differential it takes to operate a ship under U.S. flag 
when compared to ships under foreign flag.
    Mr. Rice. OK. So you are saying the Government pays these 
ships $3.1 million a year----
    Mr. Schubert. Yes, sir.
    Mr. Rice [continuing]. To be U.S.-flagged ships?
    Mr. Schubert. To help offset the cost of operating under 
U.S. flag.
    Mr. Rice. All right. Why can't they be competitive?
    Mr. Schubert. Well, actually, at least the carriers that 
operate within the 60-ship maritime security fleet program are 
very competitive internationally. We have one of the most 
modern----
    Mr. Rice. So we are carrying international cargo?
    Mr. Schubert. We are carrying international cargo.
    Mr. Rice. Not just on cargo preference?
    Mr. Schubert. Not just on cargo preference. They couldn't 
exist otherwise without MSP. Just to give you an example, I 
believe the container carriers that we have--the three 
container carriers that we have under the MSP program are the 
largest, number one, probably the fourth largest, and the 
seventh largest carrier in the world. They don't do that on 
cargo preference. They do that because they are internationally 
competitive, and they operate U.S.-flagged ships.
    Mr. Rice. You said MSP programs?
    Mr. Schubert. Maritime Security Program which is the----
    Mr. Rice. American-flagged vessels that carry the cargo 
preferences?
    Mr. Schubert. Well, there are two different programs. The 
Maritime Security Program is a retainer much like the Civil 
Reserve Air Fleet--CRAF--program that the airline industry has 
to help offset the cost and be there and be available to 
provide the global scope. It is not just the ships that we get 
with MSP. We also get the entire network of terminals, trucks, 
chassis. MSP is one of the best bang for the buck programs that 
the taxpayer can get. It is----
    Mr. Rice. OK. You say we have got three container ships?
    Mr. Schubert. Well, there are three container carriers that 
are world-class container carriers. The military----
    Mr. Rice. Is that all that we have got is three?
    Mr. Schubert. Well, those are companies. There are three 
companies that own container ships. We have several roll-on/
roll-off carriers. We have a very diversified----
    Mr. Rice. How many container ships do we have? I know we 
have only got like, what, 80 or 90 U.S.-flagged ships.
    Mr. Schubert. I want to say there are about 47 or so U.S.-
flag container ships in foreign trade. I don't know if I have 
the most up-to-date information. But the point is that we have 
ships, and we depended on those ships during Operation Iraqi 
Freedom and Operation Enduring Freedom. I was the Maritime 
Administrator at the start of those operations. It was the 
largest, most successful sealift in American history in terms 
of speed and efficiency, and we could not have executed that 
conflict and supplied the troops in the field with everything 
from beans to bullets----
    Mr. Rice. I am running out of time. So I have to stop you 
for a second here.
    I want to go back and I want to get a specific answer to a 
question. I asked why we aren't competitive.
    Mr. Young. Mr. Congressman, go ahead. I have time. You just 
keep on going.
    Mr. Rice. Thank you. I asked you why aren't we competitive. 
You mentioned low wages. What else? Why aren't we competitive?
    Mr. Schubert. Well, to be honest with you, we did a study 
on this during my term as Maritime Administrator, and the Tax 
Code has some issues. The international fleet, just through the 
Tax Code, has competitive advantages over the U.S. flag.
    Mr. Rice. What else? Tax code and wages. What else?
    Mr. Schubert. Well, we have some laws that I believe are 
outdated. It is also in the area of tax. If a U.S.-flagged 
vessel undertakes a nonemergency repair in a foreign shipyard, 
it is subject to payment of a 50-percent ad valorem tax on 
those repairs.
    Mr. Rice. I didn't know that. That is a U.S. tax?
    Mr. Schubert. That is a U.S. tax. Fifty percent. Now there 
are some exceptions with some of the free trade agreements that 
we have. But the point is--and I really commend Administrator 
Jaenichen for taking a top-to-bottom review of maritime policy. 
It is long overdue. He has the full support of the industry and 
USA Maritime in that effort. But we really can't afford to lose 
a single ship right now. We are at the very bare minimum.
    Mr. Rice. See, I want to change that. That is why I keep 
asking what we need to do to be competitive. And what I want to 
know is, what is it going to take to have foreign companies 
flagging ships in the United States? What is it going to take? 
What are we going to have to change to make our regulatory 
structure, our tax structure--what are we going to have to 
change to make us competitive? I mean, we sit here and watch 
our shipbuilding industry die on the vine. We have sat here and 
watched our international shipping die on the vine. It is a 
horrible state of affairs. It is almost unimaginable. And I 
want to figure out what we have got to do to change it to make 
us competitive again.
    Mr. Schubert. Well, we do need to enforce the cargo 
preference laws that are on the books, and that is important.
    Mr. Rice. That is not making us competitive. That is giving 
the Government a crutch. I want to know what it is going to 
take to make us competitive.
    Mr. Schubert. Well, we are up against international 
competition that--
    I mean, I would say that if you were going to build a gas 
turbine generator in China, they are going to build it cheaper 
than they are going to build it here. It is the same issue in 
terms of our industrial base. We are up against international 
competition.
    By the way, the MSP program replaced the operating-
differential subsidy program in the mid-1990s. At that time, we 
were paying the carriers as much as--in U.S. dollars in 1990--
approximately $5 million per ship annually to stay U.S. 
flagged. The fact that we are today only paying $3.1 million 
annually in current dollars is a big step in the right 
direction.
    Mr. Rice. I want our carriers so competitive that we don't 
pay them anything. So here is what I would like from you. I 
would like a list of 10 suggestions, things we need to change 
that we can help make our shippers competitive. If it is 
changing Coast Guard regulations, if it is changing our hiring 
policies, if it is changing our tax structure, I want to know 
what we can change to make us competitive.
    Mr. Schubert. I would like to make one comment about the 
Coast Guard. I personally think that they have gone to great 
lengths to help remove obstacles to reflag ships. During my 
time--and it actually started before I showed up--ships meeting 
international standards can, in some instances, reflag to U.S. 
registry. It didn't used to be that way. So Coast Guard has 
done a lot to help in terms of removing obstacles to 
reflagging.
    Mr. Rice. I hear you, Mr. Schubert. And you know far more 
about this than I do. And I appreciate that. But I am just 
looking at the big picture. And the big picture is, we do not 
have 100 United States ships flagged in international shipping. 
Something is terribly wrong.
    Mr. Schubert. We have a little bit more work to do on the 
Tax Code.
    MR. Rice. I would sure love to see your suggestions.
    Mr. Schubert. Sure.
    Mr. Rice. Thank you, sir.
    Mr. Young. Thank you, Mr. Rice.
    I want to thank the panel.
    Mr. Allegretti, liquefied natural gas has begun to be used 
as a marine fuel for vessels at a great expense, by the way, as 
well as vessels carrying LNG as a commodity. The Coast Guard 
has begun to slowly make a policy, regulating vessels fueled by 
LNG or carrying LNG as a cargo. What is AWO's position on LNG 
and how will you work with the Coast Guard on forthcoming 
rules?
    Mr. Allegretti. Thanks, Mr. Chairman.
    Generally speaking, many of our members are excited about 
the potential to use LNG as a means of propulsion and the 
opportunity to carry it as cargo. So I think generally 
speaking, the position of our association, of our membership 
is, we would like to do whatever we can to help the Coast Guard 
facilitate movement in both of those directions.
    Mr. Young. Hydraulic fracking--I can't figure out what this 
has got to do--produces wastewater that must be transported to 
a disposable site. There is not currently a standard for 
transporting this wastewater by barge. Answering requests from 
the industry, the Coast Guard is working on policy guidance 
that will establish the conditions under which shale gas 
wastewater can be transported by boat, by barge. Does the AWO 
support the carriage of shale gas wastewater by barge?
    Mr. Allegretti. Absolutely, sir. We think that that is a 
great business opportunity in the future of our industry. We 
think it could be done safely, practically, cost effectively. 
So the Coast Guard's development of policy guidance in this 
area will be very helpful to establishing the standards of 
carriage. And barges move lots and lots of hazardous cargoes. 
There is no reason why we can't move wastewater as well.
    Mr. Young. Thank you.
    Mr. Powell, why is the FMC producing this rulemaking? 
Aren't there current regulations governing the activities of 
OTIs? Are they deficient or are they sufficient?
    Mr. Powell. Mr. Chairman, we don't think so. We think this 
ANPRM began with their investigation, Commissioner Khouri's 
investigation of the barrel trade and looking at the movement 
of household personal effects. We think there are the proper 
checks and balances within the OTI industry, if not with the 
FMC, certainly with the customers who employ us. We have moved 
from regulation to contractual obligations to our shippers. So 
we think there is ample protection and control in there for the 
buyer of those services.
    Mr. Young. What you are telling me that there were two 
instances in this whole thing and they changed the whole 
regulatory platform?
    Mr. Powell. They cited two examples in the Advance Notice 
of Proposed Rulemaking where a bond did not cover what the 
companies went after the bonding companies for. And even with 
the amounts that they cited, the increase in bonds still would 
not have covered that.
    Mr. Young. Well, it is sort of interesting, because, Rear 
Admiral, you were talking about regulations. I would like a 
list from both of you of what you think are offensive about any 
regulations, because this is my pet peeve, for everybody 
sitting at this table, regulations.
    Just give you an example, in the last 4 years this Congress 
passed 628 laws in 4 years and signed by the President. In the 
same time, the agencies passed 13,883 regulatory laws that do 
nothing other than cause you more headaches; doesn't really 
solve any problems, because we got people who don't understand 
the industry.
    And, Captain, I got to tell you one thing. I am a person 
that believes in America's maritime fleet. I happen to support 
your organization. I do not like to see my Navy, my maritime 
commercial fleet become foreign. Of course, I only have to deal 
with the Jones Act, which I am a big supporter of, the only 
elected official in Alaska that does support it, by the way. 
But to me what we have done to our maritime fleet from 1945 
until now is really very not for good for this country. And I 
am not an isolationist. We do have to be competitive, and the 
ships of shame, for instance, we are getting product from the 
foreign countries, consuming it, then we have this holier than 
thou attitude where we don't enforce those rules that should 
make us competitive, when they have the ability to do that, at 
a great cost to humanity. No one says a word.
    Rear Admiral, I want to say one more thing. I have this 
burn with the Coast Guard right now, and I am going to try to 
change it, because I am big supporter of the Coast Guard. 
Everybody supports the Coast Guard. But they are lawyered up. 
There are too many lawyers in the Coast Guard now. And they 
will give you 100 reasons why you can't do something instead 
of, OK, what can we do safely? What can make it work? And for 
those lawyers in the room, that is your problem. That is one of 
the things wrong with this country right now.
    But lastly, Rear Admiral, I would like to really have you 
think about your training ships. Maybe we can be in this 
together, because I don't see this Congress spending the money 
they have to do to take and develop your training ships. I 
think that is reality, unfortunately. So is there a way we can 
get a ship in your hands that is more reasonably cost? I think 
that could be a way to do it. And I am talking about leasing 
and I am talking about being able to take and have a long-term 
contract if you wish to do it. But we need to have these newer 
ships, because you get trained on a 50-year-old ship, it is not 
the same ship. I want us to look and explore this.
    Coast Guard keeps saying, well, we want to own them. And 
the cost factor is about 50 percent more. It is not going to 
happen. I am talking about icebreakers, you are talking about 
training ships. Your ships are more important than ours are. 
And just comment on that.
    Admiral Gurnon. We agree, Congressman. This is an important 
part of our training. We are training on 50-year-old antique 
vessels. It is shameful. Mexico can do it, the Indonesian 
countries can do it. We can't do it.
    We have had a lot of comments about shipbuilding and the 
lack of shipbuilding in America. You need only look at Great 
Britain to see the dire straits that they are in. They are 
unable, for 20 years been unable to produce a new aircraft 
carrier because they let their shipbuilding capacity atrophy to 
the point where it impacts their national defense.
    I believe that we can do it. I believe that we can do it. 
It is good jobs at good wages. Previous training ships were 
acquired through the earmark program. That is not going to 
happen in probably my lifetime, so we are going to have to----
    Mr. Young. Don't say that. I am 80 years old and I am going 
to have earmarks sooner or later, you would think. Don't say 
that. Because it is the dumbest thing we ever did, by the way, 
I will say. And my party did it. The dumbest thing. You know, 
look, I am going to shoot myself in the foot. That is how you 
shoot yourself in the foot. But that is not your problem, but 
don't say we are not going to get them.
    Admiral Gurnon. Yes, sir. Strike my last.
    We believe that you can do it. We think you can do it in 
America. And if you look at the big high-tech ships coming out 
that Americans go on, all of the Carnival cruise line vessels, 
they are built in Germany and they are built in Italy, not 
exactly Third World countries. They can do it competitively.
    Mr. Young. And I think we can do it if you do one thing, 
very simple, because what you said--you said, and most of you, 
I think, will agree.
    Tom, how many regulations do you believe you are faced with 
that you didn't have 30 years ago?
    Mr. Allegretti. Dozens. At least dozens.
    Mr. Young. And that would be something for all of you to 
just sort of put down: This is what was not in existence 30 
years ago. And then try to explain to me why they were 
necessary. What has it accomplished for the people of America? 
We can become competitive if we just stop this nonsense that we 
have 100--and by the way, never voted on, never vetted by the 
people, decided by the bureaucracy. And the bureaucracy is an 
extension of the executive branch, and this Congress no longer 
governs America. We don't. It is governed by someone that is 
never elected, never been vetted, cannot be fired, extension of 
the executive branch, and as Americans we sit here and take it.
    And we cannot be competitive in the shipbuilding business, 
the shipping of products, the inland waterways, we cannot be 
competitive if we keep allowing this to occur, because the 
people who write them don't understand the effect upon the 
total effort of the industry.
    I used to be in this business. I had a business license, a 
captain's license, and my pilot's license. I go back to the 
same company I worked for, started by the same people, they 
have a stack of Coast Guard regulations that high. That is not 
too bad. That high. If one of their clerks does not file the 
correct form or fill it out exactly right, the company can be 
fined or their ships cannot leave the dock. But that is not too 
bad.
    Then you have Homeland Security. That is a great agency. 
Does anybody feel more secure with Homeland Security nowadays? 
If you do, you are dumber than a mud fence right now. But they 
have a stack of regulations, same shipping company, that high 
that you have to fill. They have got 12 people working in an 
office now filling out those forms, serving the same people I 
did, and if one makes a mistake, they can be fined by that 
agency. There is no appeal unless you appeal to the agency. And 
you can be put in jail without judicial process. And their 
argument to me is, well, there may be a terrorist on the Yukon 
River. On the Yukon River, a terrorist? There is only one. That 
is me. But this is the silliness this country has got to today.
    Every committee I sit on and listen to witness tell me 
this, this, this. If we address the issue and if America would 
wake up, it is not the Congress. Our problem is we have allowed 
it to occur, and it is bleeding the economy of this country, 
including your industry. This is not about safety.
    I am on my soap box. I have served my time, Mr. Chairman. 
You can take over now. I have done enough damage. Thank you.
    Mr. Hunter. You can't tell that Mr. Young liked being 
chairman, can you? We liked it, too.
    I am sorry that I am late. I do have a couple of questions, 
though, for my good friend, Ken Franke, he came up from San 
Diego.
    Ken, let me just say hi. Thanks for coming out.
    Last time I saw him, we were fishing with a bunch of 
wounded marines there about 2 weeks ago.
    Mr. Franke. Yes, sir.
    Mr. Hunter. So my question is about that, actually. If we 
were to have gone out past 3 miles, according to the new law 
that is going to go into effect in about 2\1/2\ years, we would 
have had to have had lifeboats. If we would have gone out past 
3 miles with those number of people, over six people past 3 
miles, you have to have lifeboats. So tell me, would you have 
to retrofit fishing vessels to match the lifeboat law?
    Mr. Franke. Yes. Actually, you know, this is one-size-fits-
all, and that is kind of the concern.
    I want to preface my comments with we have nationwide a lot 
of boats with inflatable liferafts. The Coast Guard does a lot 
of analysis before they give a certificate of inspection of one 
of our boats. So some boats will have inflatable liferafts, 
other ones will have lifefloats. In inland waters, like in 
Mission Bay, for instance, where the water is 6 feet deep, the 
river paddle wheeler that is 30 feet tall doesn't have any 
liferafts, because if it sunk, the people would stand on the 
upper deck.
    So we have a risk-based management that exists. And 
specifics especially to ADA stuff or, you know, severely 
handicapped people, that is when we in the industry make sure 
that they are on a vessel with the capabilities to support 
them. I use it as an example, 2 weeks ago I had a gentleman 
that has a breathing apparatus and his chair weighs 400 pounds. 
A little 30-foot boat was not capable of accommodating him and 
his family. We put them on a much bigger boat that had actually 
the lifesaving equipment that he needed handy to him, with 
ramps capable of supporting his wheelchair. So there is 
infrastructure to deal with those ADA situations and those 
people that may not necessarily have the dexterity to amble 
around a 25-foot little sportfishing boat.
    The issue comes down to, though, do we go back and tell the 
mom and pop that own that little fishing boat, I am sorry, you 
have to go out of business because you need to buy a $10,000 
liferaft to mount up on the roof of your boat and go through a 
new stability test with the Coast Guard. That is what it comes 
down to at the end of the road.
    The bigger boats, a lot of them have inflatable liferafts, 
because the Coast Guard analysis of their route says, yeah, 
this is the safest thing to do. The offshore boats, most of 
them have the inflatable liferafts. The coastal boats, with the 
layers of safety that we have, all the communications 
equipment, the safety compartments on the boats, the division 
of the bulkheads, we have a good layered approach. And that is 
why, you know, I mentioned in my statement, we held 10 million 
people over the last 10 years in my little fleet. We didn't 
have a single death. That speaks huge when we can have that 
layer of safety.
    So in answer to your question, yeah, we would end up having 
to retrofit them all, and I would honestly speculate I would 
probably lose 5 percent of our fleet out of business. Thank 
you.
    Mr. Hunter. We probably took--two of those marines didn't 
have legs at all on the fishing vessel we were on.
    Mr. Franke. Right.
    Mr. Hunter. Was there a detachable liferaft?
    Mr. Franke. We had lifefloats on that boat, sir.
    Mr. Hunter. Lifefloats. Probably every single marine on 
that was missing at least one limb.
    Mr. Franke. Yes.
    Mr. Hunter. I don't know how more disabled you can get, and 
they seemed to get around just fine.
    Mr. Franke. Yeah. No, we had 25 disabled aboard the boat.
    Mr. Hunter. Yeah. So with that, I don't have any other 
questions. I apologize for my absence. We had Secretary Kerry 
and Hagel and General Dempsey trying to convince us to go to 
war in Syria, and that is where I have been at. But I want to 
thank everybody for their time and for being here. And if there 
are no further questions, I thank the witnesses for their 
testimony, the Members that are now gone for their 
participation. The subcommittee stands adjourned.
    [Whereupon, at 12:49 p.m., the subcommittee was adjourned.]

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