[Congressional Record Volume 145, Number 20 (Thursday, February 4, 1999)]
[Senate]
[Pages S1284-S1285]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 SENATE RESOLUTION 32--TO EXPRESS THE SENSE OF THE SENATE REAFFIRMING 
            THE CARGO PREFERENCE POLICY OF THE UNITED STATES

  Mr. INOUYE submitted the following resolution; which was referred to 
the Committee on Commerce, Science, and Transportation:

                               S. Res. 32

       Resolved,
       Whereas the maritime policy of the United States expressly 
     provides that the United States have a merchant marine 
     sufficient to carry a substantial portion of the 
     international waterborne commerce of the United States;
       Whereas the maritime policy of the United States expressly 
     provides that the United States have a merchant marine 
     sufficient to serve as a fourth arm of defense in time of war 
     and national emergency;
       Whereas the Federal Government has expressly recognized the 
     vital role of the United States merchant marine during 
     Operation Desert Shield and Operation Desert Storm;
       Whereas cargo reservation programs of Federal agencies are 
     intended to support the privately owned and operated United 
     States-flag merchant marine by requiring a certain percentage 
     of government-impelled cargo to be carried on United States-
     flag vessels;
       Whereas when Congress enacted Federal cargo reservation 
     laws Congress contemplated that Federal agencies would incur 
     higher program costs to use the United States-flag vessels 
     required under such laws;
       Whereas section 2631 of title 10, United States Code, 
     requires that all United States military cargo be carried on 
     United States-flag vessels;
       Whereas Federal law requires that cargo purchased with loan 
     funds and guarantees from the Export-Import Bank of the 
     United States established under section 635 of title 12, 
     United States Code, be carried on United States-flag vessels;
       Whereas section 901b of the Merchant Marine Act, 1936 (46 
     U.S.C. App. 1241f) requires that 75 percent of the gross 
     tonnage of certain agricultural exports that are the subject 
     of an export activity of the Commodity Credit Corporation or 
     the Secretary of Agriculture be carried on United States-flag 
     vessels;
       Whereas section 901(b) of such Act (46 U.S.C. App. 1241(b)) 
     requires that at least 50 percent of the gross tonnage of 
     other ocean borne cargo generated directly or indirectly by 
     the Federal Government be carried on United States-flag 
     vessels;
       Whereas cargo reservation programs are very important for 
     the shipowners of the United States who require compensation 
     for maintaining a United States-flag fleet;
       Whereas the United States-flag vessels that carry reserved 
     cargo provide quality jobs for seafarers of the United 
     States;
       Whereas, according to the most recent statistics from the 
     Maritime Administration, in 1997, cargo reservation programs 
     generated $900,000,000 in revenue to the United States fleet 
     and accounted for one-third of all revenue from United 
     States-flag foreign trade cargo;
       Whereas the Maritime Administration has indicated that the 
     total volume of cargoes moving under the programs subject to 
     Federal cargo reservation laws is declining and will continue 
     to decline;
       Whereas, in 1970 Congress found that the degree of 
     compliance by Federal agencies with the requirements of the 
     cargo reservation laws was chaotic, uneven, and varied 
     from agency to agency;
       Whereas, to ensure maximum compliance by all agencies with 
     Federal cargo reservation laws, Congress enacted the Merchant 
     Marine Act of 1970 (Public Law 91-469) to centralize 
     monitoring and compliance authority for all cargo reservation 
     programs to the Maritime Administration;
       Whereas, notwithstanding section 901(b) of the Merchant 
     Marine Act, 1936 (46 U.S.C. App. 1241(b)), and the purpose 
     and policy of the Federal cargo reservation programs, 
     compliance by Federal agencies with Federal cargo reservation 
     laws continues to be inadequate;
       Whereas the Maritime Administrator cited the limited 
     enforcement powers of the Maritime Administration with 
     respect to Federal agencies that fail to comply with section 
     901(b) of the Merchant Marine Act, 1936 (46 U.S.C. App. 
     1241(b)) and other Federal cargo reservation laws; and
       Whereas the Maritime Administrator recommended that 
     Congress grant the Maritime Administration the authority to 
     settle any cargo reservation disputes that may arise between 
     a ship operator and a Federal agency: Now, therefore, be it

     Resolved, That it is the sense of the Senate that--
       (1) each Federal agency shall administer programs of the 
     Federal agency that are subject to Federal cargo reservation 
     laws (including regulations of the Maritime Administration) 
     to ensure that such programs are in compliance with the 
     intent and purpose of such cargo reservation laws; and
       (2) the Maritime Administration shall closely and strictly 
     monitor any cargo that is subject to such cargo reservation 
     laws and shall provide directions and decisions to such 
     Federal agencies as will ensure maximum compliance with the 
     cargo preference laws.

 Mr. INOUYE. Mr. President, the law of the land, specifically 
section (1) of the Merchant Marine Act of 1936, declares that the 
United States shall have a merchant marine sufficient to, among other 
things, carry a substantial portion of our international waterborne 
commerce and to serve as a fourth arm of defense in time of war and 
national emergency.
  The importance of these requirements has been dramatically 
illustrated by the vital role of our merchant marine in World War II, 
Korea, Vietnam, during operations Desert Shield and Desert Storm, and 
most recently in Haiti, Somalia, and Bosnia.
  While the privately owned and operated U.S.-flag merchant marine has 
performed so magnificently and effectively in times of crisis, it has 
also made extraordinary efforts to ensure that a substantial portion of 
commercial cargo bound to and from the United States moves on U.S. 
vessels. Given the chronic overtonnaging in international shipping, 
cut-throat competition, and the competitive edge our trading partners 
give their national flags, this has not been easy. In addition to 
competition with subsidized foreign carriers, U.S.-flag carriers are 
forced to complete with flag of convenience carriers. Over two-thirds 
of the

[[Page S1285]]

international vessels operating in commerce are operating under flags 
of convenience. Flag of convenience registries include such major 
maritime powers as Panama, Liberia, the Marshall Islands, and Vanuatu. 
These registries only require their vessel owners to pay registration 
fees. Shipowners are not required to pay tax on revenues earned and 
employees do not have to pay income tax. Further, the shipowner has 
little or no obligation to comply with the law of the nation of 
registry.
  Nevertheless, if our commercial fleet is to continue to be an 
effective auxiliary in times of war or national emergency, it must 
first be commercially viable in times of peace. Otherwise, there will 
be no merchant fleet when the need arises.
  I think we all would agree that there is a substantial national 
interest in promoting our merchant fleet. I think, also, that we would 
all agree that U.S. national security and economic security interests 
should not be held hostage by insufficient U.S.-controlled sealift 
assets. Given the diminution of the flag fleets of our NATO allies it 
will be more important in the future to sustain a viable U.S.-flag 
presence. Indeed, several laws of our land recognize that national 
interest and spell out specifically how the U.S. government is to go 
about promoting it. Federal laws require that U.S. military cargo, 
cargo purchased with loan funds and guarantees from the Export-Import 
Bank, 75 percent of concessionary agricultural cargo, and at least 50 
percent of all other international ocean borne cargo generated directly 
or indirectly by the federal government be carried on U.S.-flag 
vessels. The alarming news is that according to the Maritime 
Administration (MARAD) the total volume of cargo moving under these 
programs is declining and will continue to do so.
  According to a report by Nathan Associates, Inc., the 1992 economic 
impact of cargo preference for the United States was 40,000 direct, 
indirect and induced jobs; $2.2 billion in direct, indirect and induced 
household earnings; $354 million in direct, indirect and induced 
federal personal and business income tax revenues--$1.20 for every 
dollar of government outlay on cargo preference; and $1.2 billion in 
foreign exchange.
  It is, therefore, imperative that U.S.-flag vessels carry every ton 
of cargo which these programs and the law intend, and in fact require, 
them to carry. This brings me to the reason for the resolution I am 
submitting today. These are two substantial problems which threaten the 
viability of these programs and, therefore, the viability of our 
merchant fleet.
  Several agencies administering cargo reservation programs continue to 
evade the spirit and letter of the reservation laws by finding the law 
inapplicable to a particular program or employing other loopholes.
  This problem of evasion and uneven confidence led the Congress to 
amend the Merchant Marine Act of 1970 to centralize monitoring and 
compliance authority for all cargo reservation programs in the MARAD. 
Nevertheless, the problem remains. Critics of the MARAD maintain the 
agency is too timid, and does not discharge its obligation 
aggressively. The MARAD, on the other hand, says it has limited 
enforcement powers over those government agencies which are not in 
compliance.
  Recently, the United States District Court for the District of 
Columbia entered an unopposed order upon consideration of the joint 
motion of the parties in Farrell Lines Incorporated versus United 
States Department of Agriculture (USDA) and Sea-Land Service, Inc. The 
order affirms the appropriate roles of the MARAD in administering the 
cargo preference laws with respect to Food for Progress and Section 
416(b) programs, and the USDA in complying with those laws and the 
MARAD's policies and regulations implementing them.
  Mr. President, the resolution I am submitting today expresses the 
sense of the Senate that all of these federal agencies must fully 
comply with both the intent and purpose of existing cargo reservation 
laws, and that the MARAD should provide directions and decisions to 
these agencies to ensure maximum compliance with these laws.

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