i know that he knows that he personally requested this hearing to be held by the subcommittee vessels that supply the coastal trade in the united states providing service between domestic destinations must comply with the requirements of the jones act meaning that they must be built in the united states shipyard owned by an american and crew by americans hundred fifty six action did not define the term rebuild and my nine hundred sixty vessels were using united states shipyards to install middle sections called mid bodies that have been built in foreign shipyards into jones act vessels in response congress resigns the second proviso in an effort to close a loophole that allows the mid bodies to be installed in domestic vessels not until nineteen ninety six however did the coast guard issue regulations to clarify the specific standards that would be applied to determine whether jones vessel had been rebuilt in a foreign shipyard these regulations state regardless of   vessels steel weight prior to the work for a vessel may be considered rebuilt when work be formed on its call superstructure constitutes more than seven point five percent but not more than ten percent of the vessel is still weight prior to the work a vessel is not considered rebuilt when work performed on its fall superstructure seven point five percent or less of the vessel steel weight prior to the work that currently a p r has to exist a lack of clarity regarding what can be done to a vessel in a foreign shipyard within the parameters that have been established by these relations specifically there is confusion regarding what constitutes a major component of applied particularly in terms of calculating vessel stealing these issues have been the subject of several recent court cases including one that exam that was converted from a container ship to a roll on roll off vessel part of the work on that vessel was completed in a chinese ship yard and find was done in the united states rather it counted only the amount of steel added another case involving insulation in a junk that vessel in or hall which essentially converted the vessel from a single to a double hull to meet the standards of the old pollution act of one nine hundred ninety in this case the coast guard determined that a second home was not a major component of the hull or superstructure hole was not separable from the our own home because the manner because the manner in which it was constructed and ruling on this case a united states court stated that the manner in which the overarching issues we were examined today is the lack of transparency to this assessment process shipyards and vessel owners must continually cement freedom of information act request border protection agency post this letter rulings regarding the transportation of merchandise in the jones that trade on the internet so that the maritime industry can see their parents interpretation  it is difficult if not impossible to obtain the background information regarding how long the coast guard came to the conclusion expressed in the letter this makes it difficult for the coast guard to obtain the views of both sides declined our invitation without their testimony i believe that it will be very difficult for the subcommittee to decide on any statutory waivers of the jones act requirements that might be proposed for these companies and they should need them as a result of care a court case i look forward to the testimony of all today's witnesses and now i recognize mr poe will stand in for our ranking member foreign shipyards and at least two instances and perhaps several more the coast guard has determined that these modifications do not qualify as rebuilding under federal statutes and regulations i'm concerned about the process that has been used to make these determinations and the impacts the coastguards decisions have been on the u s maritime industry over the past century congress has acted many times to preserve and strengthen the nation's shipbuilding capacity and domestic commercial fleet this is first national security and economic reasons the primary protections provided to the united states maritime industry include the statutes commonly referred to as the jones act one of the all this vessels engaged in the united states coast wide trade all require to be owned by u s citizens built in the united states and crude by u s merchant mariners the act also provides that the rebuilding of the vessel must take place in the united states in the united states shipyard to maintain the vessels eligibility to participate in the jones act trade however several vessel operators have recently entered into contracts with foreign shipyards to substantially modify u s flag jones act qualified vessels with the coast guard's apparent approval it is in our nation's interest to have a robust domestic slate and merchant marine enforce u s law however we should not rely solely on the jones act to maintain strong maritime industry i hope that the witnesses will share with the subcommittee their thoughts on what american shipyards can do to better compete with their foreign counterparts and how we can encourage young people to enter the maritime trade i want to thank the chairman for holding support and hearing and i look forward to hearing from all of the witnesses now you back thank you very much mr chairman let me thank you the very aggressive and thorough job you do and as chairman for the hearing you had on the one hundred twenty three football and your class ships for this hearing today guards are very honorable service and on a day to day basis they almost always do the right thing in the case of stretching those votes somebody screwed up and to date no one in that organization has stepped forward and said screwed up which is completely contrary to what they teach every recruit every day in the case of this somebody screwed up some of the coast guard wasn't doing their job so what i would hope we would have are is a result of today's hearing i hope the ad someone will step forward and tell us what the rules are who's supposed to enforce the who in the coast guard is responsible for enforcing this law that was obviously broken overall in china if they don't  if they have adequate manpower then who screwed up if they don't have the adequate manpower to enforce the law what are you going to ask for and above all hope i won't hear that the coast guard similar to the biology class grew up one step forward and say well we gave that responsibility to the private sector and somebody let us now so again i want to thank you for having us here and how welcome the admiral for being here again i want to emphasize the vast majority of the coast guard does the right thing in this instance they did but we need to find out what went wrong and we need if there's a mistake that was made let's correct it if there's a loophole that has to be closed let's do so and i very much jones act but hopefully with this hearing we can emphasize the critical importance of what it means in terms to our overall economy especially our maritime economy and i think for homeland security i think it's it's critical that these laws be enforced and not be open to such a broad interpretation as we're dealing with mr taylor just referred to which clearly something is very wrong so i'm very proud to join with most of my colleagues in very strong support of the jones act and thank you for bringing attention to this critical issue thank you very much but still i mean i know mr bishop thank you mr chairman i want to thank you for holding this hearing and inviting these witnesses here to participate in this important discussion i look forward to the testimony from the coast guard from industry and advocacy groups discuss the jones act and most importantly the second proviso of the jones act and determination is made by the u s coast guard related to vessels rebuild overseas as we all know congress enacted the jones act to protect the us ship building and ship repair industry congress amended the jones act to provide assistance to shipyards here in the us by excluding foreign rebuild vessels from u s domestic tra without any question the most important issue here is the coast guard determinations with respect to rebuild cases and i am most concerned about the transparency of the existing process and what we can do to ensure that u s companies which abide by the spirit of the jones act in the construction and rebuild of their vessels are not put at a disadvantage to companies which take their business overseas i want to thank the panelists for their participation was to say mr chairman i yield back the balance of my time thank you very much proviso and looking forward to the coast guard comments about how they are going to help us help them make sure there's appropriate direction given to the application second proviso in the future thank you thank you want to thank all of the panel for your brave opening statements really appreciate it i will now go to our witnesses period and other members may have to do the same thing that we will hear from you and thank you all for being with us thank you good morning  patricia the director of the national debt for documentation center the in the d c is the coast guard headquarters unit located in folly waters west virginia i assume the role of director this past april upon the retirement of the former director thomas sowell of but i have served as the second in command of the m p d c since its formation in one nine hundred ninety five the in the d c as you know administers the battle documentation program which includes foreign rebuild determination i have in some way participated in the definitive rule makings of rebuild determination nine hundred ninety two when i assumed the role that coast guard headquarters so i look forward to discussing this area  committee my name is rear admiral james a watson i'm director prevention policy at the coast guard it's a pleasure to appear before you today to discuss the rebuilding of vessels under the jones act i would like to briefly explain o regulations and highlight the challenges of recent coast guard rebuild determinations vessel rebuild determinations under the jones act are administered by the coast guard at the national vessel documentation center the national vessel documentation center is the coast guard's only one hundred percent civilian operated command its mission requires the same day to day professionalism and connectivity with the maritime industry as other coast guard units do in the main stream the current regulations at forty six c f r sixty seven point one seven seven provide key tenants for foreign rebuild determinations as detail in these regulations a vessel is deemed rebuilt far and when any considerable part of its haul or superstructure is built upon or substantially altered outside of the united states in determining whether a vessel is rebuilt foreign following parameters apply regardless of its material reconstruction a vessel is deemed rebuilt when a major component of the hall or superstructure not built in the united states is added to the vessel for a vessel of which the holl superstructure is constructed of steel or aluminum a vessel is deemed rebuilt when work performed on its haul or superstructure constitutes more than ten percent of its vessel steel weight a vessel may be consider rebel when the work performed on its haul or superstructure constitute more than seventy seven point five percent but not more than ten percent of the vessel still weight prior to the work a vessel is not considered rebuilt when work performed on its color superstructure constitutes seven point five percent or less of the vessel steel weight prior to the work the coast guard has attempted to steer a consistent path in applying these regulations despite challenges from my lack of express definitions in some areas the term major component has not been expressly defined its addition as a parameter to the current regulation received no comment from industry when it appeared in the notice of proposed rule making in april of one thousand nine hundred four last year the shipbuilders council america filed a complaint in the district court for the eastern district of virginia for review of agency action and for a debt collector or a and injunctive relief related in part to the coastguards application of these terms this action followed the issuance by the coast guard on may twentieth two thousand and five a favorable pulmonary rebuilt four and determination as to the sea bulk trader and the c bulk challenge and the issuance of a certificate of documentation with a coastwise trade indorsement the c bulk trader on may ninth two thousand and seven following the completion of the work on that vessel in china on april twenty fourth two thousand and eight the district court for the eastern district of virginia issued an adverse decision on that challenge to the coast guard's determination to issue a coastwise endorsement to the siebel trade or the co the court ordered the coast guard to revoke the sebald traitors coastwise endorsement and remand the case back to the coast guard for further proceedings and consideration as to whether one a major component was added to the vessel in china to whether the foreign work exceeded the permissible steel weight threshold and three whether the work resulted in the installation of required segregated ballast tanks which must by law be installed in the united states as a vessel desires to maintain its coastwise privileges on sea both requests the court granted a temporary stay pending appeal of sixty days on may ninth two thousand and eight and directed the parties to she ations on an appropriate appeal bond the deadline for filing a notice of appeal is june twenty third two thousand and eight the coast guard is working closely with the department justice on its next course of action in this case and because the case is still in litigation all other questions about it must be referred to the department of justice the way forward regarding any improvement to bessel rebuilded terminations will hinge on at least one of three types of actions the first one judicial action although the coast guard cannot discuss or specific recommendations or intended action with respect to an appeal of the decision in the sebald traitor clarity could result from actions by the court in this matter however with regard to action by the court generally speaking it seems equally possible that clarity going forward from this or other judicial actions could be uncertain and might not necessarily resemble the intent of congress second type of action agency action the coast guard could propose new regulations rulemaking is time consuming process and without any additional clear guidance from congress may continue a policy which is misaligned with congressional purpose and be subject to more judicial actions third is legislative action congress could act to bring greater legislative clarity to the jones act the coast guard would welcome such action we have we have more than fifty years of spearing is with bessel determinations and are committed to working as extensively as necessary with congress to garner more precise statutory context the coast guard seeks to administer the jones act in good faith through consistent regulatory actions and vessel determinations additional legislative clarity would necessarily involve refinement of more precise definitions of statutory terms major component and considerable part thank you for the opportunity to testify today i look forward to discussing these and other facets of our responsibilities during today's hearing thank you very much both of you emma launch and let me start with you as evidenced by today's hearing a lot of questions about the coastguards interpretation of the second proviso of the jones act and whether united states ship owners are complying with the intent of the law and it appears that there is room for clarification that those card regulations on this matter as a coastguard first will have the authority to revise its rebuilding regulations without further congressional action and in light of the concerns expressed about the coastguards regulations by ship yards in operators and now again by the court a court of law does the coast guard now plan to revisit its regulations guard has no plans to revisit the regulations at this time we i think are not limited in proposing regulations related to this subject matter  we intend to obviously watch closely the outcomes of these judicial actions and depending on their outcome and whether or not there is any changes to the jones act itself legislatively we would make a decision at that time and that then leads me to my next question in your statement you said that the coast guard believes that additional repeal on the united states bill requirement when the coast guard can clarify and standards by regulation sir with regard to the gap that certainly out of the coast guard's  purview of expertise and i know what i know is that that statement you made is definitely something that needs to be considered we feel that simply providing clarity and not expanding on or making changes to the jones act but rather just clarifying to communicate the intent of congress  is in the safe area with regard to to get but that would be the coast guard's view on it only and you would be better off to get advisement from the from the t balance of of outcomes that need to be looked at and we are experiencing right now the outcome of taking the purely regulatory imagine for the business side is at a standstill until all this can get resolved certainly clarification is important i think whenever anyone is  in business they have to have clarity with regard to the law not only because of they want to comply but they also want to make sure that they can properly plan any business person will tell you that planning is of utmost importance and all of this would certainly go into their consideration is just two more questions and then we'll go to mister  than the combined weight of such feeling can you comment on this policy is to use the greater the second the greater the steel w the steel added versus removed and finally the calculations and considerations related to rebuilding decisions as we can see are very complex them all decisions relating to steel weight of the vessel assessment of whether certain items constitute major components and the analysis of where the work being performed is applied to the hull and superstructure of a  but as we all know during any construction process disko to work changes to address for example and for scene issues and to make improvements to the planned designs so my question is do the owners submit to the coast guard a detailed list of proposed changes or disguise in detail the potential impact of these changes on the rebuilding on the rebuilding analysis and what effort does the coast guard make to verify that the representations of the owners are accurate before making a final rebuild determination that they can rely on before they embark on a large project so at the vessel documentation center the information is evaluated and a determination is made  accurate calculation we have in a number of cases when there is reason to do so sent all of that information all of the detailed plans to our naval architecture branch at coast guard headquarters provided to the structural and engineers and naval architects to do a complete duplications in terms of the calculations of what's been submitted and determined by the applicant and that can be done at the pulmonary determination and then again at the end of the process with the detailed information coming from the shipyard when the work is complete did you have something to end this way and if i might when we issue a determination in a rebuild case we caution the applicants that the work had to be done that the rebuild a termination of favorable applies only if work is done in conformance with what they've outlined in a detailed plan and the information provided to us up front if the project changes dramatically from those submissions they are required to resubmit and we can at any point ask for additional information for the clarity and an applicant then can make dramatically what do you mean if the calculate the german well if the work done and the owners and the owners and the owners agent determine that the scope of the work is us only at the entire rebuilding including the construction of any major component of the whole or superstructure was done in the united states how does the coast guard define rebuilding either one of you or both exceeding ten percent of the vessels over all their work is done outside of the us what's the difference in rebuilding and repair there is no difference depends on the extent of the word the percentages on a repair are considered in the calculation for rebuilding terminations as is any other type of source for the coast guard is concerned rebuilding and repair are synonymous they could  on the end like a lining like we say in texas you know you have a for your pickup truck you know your truck that has a pickup would you require that that new hole inside of the it's not done as a as a major component issue but that we're looking at the separable parts that were used to do that work and i'll climb the test of the seven and i have to ten percent then it could not it could be determined not to venerate let's go to the opposite leave the hole on the ship and you put a one on the outside of it would that have to be done in the united states i guess it would be it would be depended on the method of application so you don't know is that what you're telling me i'm just trying to make see what the coastguards position is all things equal you put it on the outside that would generate that be done united states or you would say that may not be a i'm going to read selective parts of it back to this is from page three this is the second to last paragraph there is no requirement however that vessel owners seek a preliminary determination before having foreign work done i'm going to skip down a few sentences there is no requirement that a vessel owner a final determination after having foreign work done what i read into that and please correct me is you doing this on the honor system that basically if i want to beat the system if i want to take advantage of chief foreign labor still engage and it goes well i basically let you know that i'm going to do some work but i'm not going to show you what it is i'm going to take it overseas and we get more work done cheap i want to come back into the jones act and i don't have to tell you what i did it just as long as i pay the fee for a new documentation and and again giving their screw up on the one hundred three and there's no nice word for eight ruined vessels the nation's at a ninety million dollars no one in your gazebo stepped forward to say you know what i should have caught it nobody on the contractor side stepped forward and said we screwed you just a true investment but i can tell you the sop now become a master at hogging and sagging calculations and i realize that when you start chopping up a hole there are vulnerabilities that come out of that so what you're basically telling someone is you can go overseas so long as you don't ask for permission of front you can come back and say i did it but it was much work and you really can create a situation where your hole is now vulnerable as a result of the work you've done overseas and it can be documented again by the coast guard and no one has taken the time to see that they've taken a safe vessel like the one ten and turn it into a one and unsafe vessel like the one twenty three it we've got a situation now where we're encouraging work that we do to certification vessels and to ensure that they're in compliance with air safety standards in the case of these large vessels we're talking about they are typically built to class society standards and they're referenced through our air safety regulations and quite often they and an a b s surveyor or another class society surveyor  that's attending that work in the shipyard and there's a lot of correspondence between the coast guard is in the navy this is job to enforce american law sir no particularly with regard to the jones act no i'm who processes of validating that there's been safe construction practices the requisite amount of structural material being put in to prevent buckling and hogging and sagging as you mentioned at all of the other circumstances related to stability and environmental protection that's all being done under our safety side and the process of issuing a vessel documentation certificate is done by the vessel documentation as you safety talk to the documentation side or does the safety take the attitude ok it's not going to create an old build even if they broke the law so we won't tell these guys over in the documentation office well the safety people are focused on safety and environmental protection and when the vessel documentation center needs that level of expertise to calculate steel weight and the kinds of things that are necessary to make a determination for vessel documentation they do go to those experts that can do those sorts of calculations but i think you accurately characterize this system for documentation it it does involve a certain amount of of an honor system here what you have in place is a very extreme penalty and that penalty has been considered the motivator for honesty and compliance with with the standards and there's a lot of transparency in the competition too with regard to these issues of of reconstruction in a foreign shipyard obviously there's a lot of people in this room and there's people that go to the extent of actually time had constituents who have documented vessels call me up and i'm probably going to get the word wrong which one of you regs says there's a threshold coming off the deck going into a vessel i believe has to be six inches rebuilt in china certified by the united states coast guard like nothing happened does that strike you as selective enforcement because certainly strikes me as selective enforce quarter of an inch here a container ship converted to a row ship there and you guys can't catch it and so it leads to the question is it that you getting a message from the administration look the other way is it a lack of manpower is a lack of expertise or lastly is it a lack of will within the coast guard because i've actually had i wouldn't hold this but one of my staffers had a conversation with one uniformed coast guard officer who said something to the extent that the jones act is an antiquated law that ought to be off the books you know number one if it's on the books out expect you guys to enforce it and quite frankly i don't think coast guard ought to be in the position of picking and choosing which laws they're going to enforce and if that officer feels that way about the jones act  congress and try to change the law until then he ought to live by the law so what is it of the scenarios that you get told by the administration don't enforce the law are you short on manpower or do you just don't give a flip and in the case so we feel like we've consistently enforce this law that's not a very consistent ad well it and we sent you these photos a long time ago and it took the court case to do something about it the coast guard didn't do anything about it until the courts did something about it so why is that sir what i was going to say is that that that's a lot of work there had been ships with a lot of work done for the last i guess fifty years we've never had a program that is exe like we have for safety to do enforcement for the purpose of jones act where where we would actually go and be resident in a shipyard or be involved with doing the detail plan review strictly for the purpose of doing jones act so so when i mention consistent that's what i mean now whether that's that adequate whether some changes should be made and in this era that would be something that should be discussed but i would say that we we have been consistent both doing safety and doing our jones act so how do you explain this admiral what happened what happened then in that case is that  first of all i think there's a an explanation that deems to be made about what constitutes the considerable  a combination of a considerable part that was evaluated added to that a a lot of parts that were not to be structural which looks like a lot of shit but things like doors and ramps and bolt on structures that are not what we consider  nonstructural are not considered as part of that considerable part and then add with all due respect mr this ship was gutted this ship was taken down to the bare hole and rebuilt are you going to tell me no one in the coast guard could recognize that you couldn't get out of cape may and he could make that determination so i believe that was one of the ships that we did take a close look at in our naval architecture department but it it didn't add up to the greater than ten percent rule that we have as a lot of this is based on trust i am listening and i'm thinking that there must be a big trust factor because that night seems to be the kind of verification that i would think would be appropriate and trust is nice but i'm just wondering when you know my millions upon millions upon millions of dollars you know sometimes people may find ways to get around that if the ship is pretty much decided and this is where we end somebody is not doing something right there's something awfully wrong with this picture and it does concern me and i think concerning the rest of the many and i want to go back to his question which you may answer now throughout answering other people's question do we have a lack of manpower do we have a lack of expertise do we have regulations that i just just didn't need to be done over again because they're just not clear enough is legislative  action necessary and so exactly what is that again we have to have clear meaning to for these people are in this business and so that we can make sure that the laws that we are putting forth right here to us don't need us to set up and go through these changes if the laws are not going to be here today and and they must be administered in a consistent manner very important mr larsen you can answer that and throughout the well one of the one of the triggers would be when we hear from people in the industry and and we and we hear that on a regular basis but if it if it is  projects and whether there is any doubt with regard to their ability to to do accurate calculations those would be some of the circumstances where we would choose to do that do you have a formal process for that then or is it mainly hearing hearing from folks on the outside that would cause the coast guard to sit down and make its own determination about whether or not to send this material other than an architect's office i don't think we have a bright line if that's what you're looking for where we would you know automatically send these plans to the to the naval architects the people that we have at the vessel documentation center or are all civilians they've been there a long time they've done these cases for many years and the system is been like that and that's where we draw that's right draw my statements that i think that there is consistency here the there's a lot of a lot of variations in the projects and some look pretty significantly different in pictures than others but the evaluation and whether or not they go to the naval architect says i think consistent by virtue of the people on the repetitive and this is their process of the vessel documentation center my understanding is that if i might add that we might say in the d c might require determination from the naval architecture branch of whether work is actually structural to the hollow superstructure that's without getting any feedback from any competitor or from the they undertake the work without requesting any type of review because it was the nature of emergency repair in a foreign shipyard in the work the level of by greater than twenty five percent and they did in fact that for a ruling and which case we court's decision leaving aside the issue of whether or not the court's decision was right my question has to do is when the coast guard has the opportunity to exercise discretion and you have that opportunity off and what principles guide that exercise how do you make the judgment and and again revisiting this decision you made the judgment or the judgment was made that the construction of an inner hall did not constitute a major rebuild court found the involved here there's the consideration of whether this work is or company in which case we would be looking to see if it was a single component that was still structural and added to the vessel example that would be like a bulbous bow a new transom excluding all of its fuel and engines and outfitting then that would be rebuilt that would that would be a determination that you can't sail coastwise the other thing that we look for is whether there is metal that's added to the structural parts of the ship built built up the sections replaced sections this could include the maintenance that we've been talking about where you replace steel and and that would also include the major components as well if you add all that up all over the whole ship and that exceeds the seven point five percent of that steel light ship then we would start to consider that this could be a rebuilt case and there is some discretion and there's other considerations one where between seven point five and ten percent if it exceeds ten percent it is definitely a rebuild i guess the difficulty that i'm having and i will confess to being a layman with respect to naval architecture but it just seems that the second proviso of the jones act i mean the intent of it is clear it is to protect american shipbuilding and to not give an unfair advantage to those who who have not engaged in shipbuilding in america and the construction of an inner hall it strikes me as a major retrofit of the vessel and it  just i just don't understand why if the if we have a law where the intent is clear and the activity undertaken by a ship builder at a minimum is subject to a choice why that choice would not history and how we got to this to this longstanding coast guard interpretation of the intent was a case that occurred in one nine hundred sixty where a clarification occurred with regard to this issue in the what was going on there was a whole mid body section was being floated into the united states from a foreign shipyard and then it was going to be put into into a ship that was being rebuilt actually in a u s shipyard with this foreign major company in so this this first level of the determination of whether or not you're putting in a major compound it really relates back to the to the determination the clarification that we got in nineteen sixty that had to do with this actual major single component thing that could be floated from one ship yard to another and installed in this vessel as a rebuilt and there's never been any other determination on or clarity about major company that's just been  of the court cases then had to do with the stablish for many of these percentages for steel that's added on to structures and they can and the definition of a considerable part but not major company mr chairman be given one additional question please ok again staying inseparable distinction that the coast guard was making would lead to arbitrary applications of the jones act do you foresee the coast guard now rethinking that separable inseparable distinction so that there would be greater clarity going forward to mind is that the siebel case is not the only case out there and there are several cases and it's possible that different judges could render different decisions on circumstances that are very thank you i think my colleagues have done a pretty good job about dealing with the specifics of the issue today what i'd like to do i think is talk about the bigger problem which hopefully can get us to some resolution i'm new on the committee and back in may we had a hearing of this group a body of the coast guard national transportation safety board casualty invest investigation program and at that time the i'm best a gator general found that five out of six of your folks who were assigned to the marine casualty investigators in the sector of san francisco were unqualified for these positions further in the report it stated and that's why it's a good thing that members stay around so we can remember from one week to the next of what's said in the reported said in august of two thousand and seven the coast guard issued a revised standard which both improved in detracted from the qualifications for marine casualty investigators the coast  improved the standards by updating the tasks that an investigator must perform to qualify for this position these tasks include preparing for an investigation initiating a then we get to the key point here which is why we're here today however in august of two thousand and seven the standard also removed the preferred qualification requirement as a whole or machinery and small vessel investigator which in essence lowered the standard coast guard personnel that knowledge in these specialty areas is essential to the ability of investigators to correctly identify the causes of marine casualties and issue appropriate safety alerts and recommendations in our opinion removing this prequalification standard may negatively affect the qualifications and the capabilities of the coast guard marine casualty investigators now i realize that one is one issue and one is the other but sir i've got to tell you also then when i look at the report of the testimony of catherine higgens where they suggest that we were last here and we were fighting over who should have jurisdiction and you guys have done it over the years and that's why you still want to do it i got to tell you and i'm  summarize what i recommend that this committee do is that i think when we get a new administration we need to send a letter to the department and a complete reevaluation needs to be made of the job and qualifications and what the coast guard does with all due respect sir you are out there fighting a war you're doing a whole bunch of things that many of us didn't anticipate you were going to have to do at this level and hence we're having problems with marine accident investigations we're having problems with this and i really believe that you are stretched too far and whether it's your inability to fight with the current administration to demand that you have appropriate personnel i don't know what it is but i believe it needs to be seriously re looked at based upon your current involvement with the war efforts that we have maybe what you did previously in non war environments was ok but i believe that we're just seeing holes in the ship all around us and it's got to change so what i'm going to ask of our chairman is that we do a letter and i think we need to seriously re evaluate all of these different things that you're required to do and determine which ones are the most critical and the ones that you can maybe somebody else needs to do them but this is not working do you have a comment on that the only comment i'd like to make is that there really isn't a difference in the subject matter we're talking about here and it's an issue of of clarity of the standard i think to characterize that the people that we have at the at the national vessel documentation center as having done the not the requisite experience and competence i think is really not they have the accurate characterization for this particular issue well you just said several members here who went t questions and asked to if you were completely redoing the hall didn't you see it didn't you know didn't you understand and there were some serious concerns here at the ability to do the job well in the process of issuing a certificate of documentation there there is no field visit to the ship i mean that was one thing that we absolutely agree with this is a process that relies on honesty on the part of the applicant to do those calculations and we we don't have in the course of every document documented vessel a an inspector that goes out just for the purpose of doing the documentation about you ation that this is done at the best documentation center with the information that's provided the same way it's been provided for for years and years and the people that we have there are very experienced and it's  really not an issue of training it's an issue of standards and and clarity of purpose on the on the part of the statute well what i would say as i close because my time has expired honesty only works if it's going all the way and if it's not going all the way then obviously we need another process to deal with it and so what i'm frustrated with is i sit on this committee and in a couple of months i've seen multiple instances where you operation has failed and so i'm willing to give you the fact that i don't think necessarily the failure is soley that people don't want to do a good job or the people that are there are capable to do the job what i'm saying is i think of all the things that i see that you're doing it seems to be a little too much and so we there one need to get enough people there to do the job in a quality fashion or two we need to re evaluate all of what you do but we shouldn't be fighting over as we were just here you saying that you want to jurisdiction of another area when i see areas that you have jurisdiction over where it's not working so at some point these pieces need to come together and that's what i'm concerned about thank you you both had a chance to look at the testimony of michael roberts to be i think speaking on the second panel you had a chance to look at that by chance i'm not trying to blindside you here just i looked i looked at it one time through survive ok i'll be happy it's a question well what's intriguing to me is mr roberts may a number of points here about possible changes in the procedures of n v d c and i'm just interested a to a layman they seem like reasonable   i'm trying to remember all those suggestions but i notice there was some that were related to the let me just summarize in real quickly just a name and these are not hostile questions by any means their concern particularly out the basically the confidentiality the close nature of the m d c determination process suggests that some of the procedures changes should be public notice that applications been filed an opportunity for third parties to participate in the proceeding with restrictions appropriate restrictions to protect confidentiality  proprietary information a reasonable opportunity for pursuing an administrative appeal within the coastguard judicial review under the administrative procedures act and publishing and indexing of coast guard decisions on these issues as i read it i think that the premise is that that others might want to have input into this and maybe offer a different perspective possibly than n b c or postcard might determine and then again to a layman that seems to a layman i should say supports the jones act in principle and in this purpose avoid the current practice of requiring and then the time it takes to process that and as long as there's nothing that we inadvertently could we have to look at our letters more carefully to make sure that we have and violated someone's privacy or all the other stipulations in the foyer one of the unintended consequences of changing to that sort of a process is that the overall process could be slowed down by adding this amount of information out so that there's a lot of dialogue that goes on  we could do that it seems to be happening anyway so if it could eliminate something else yes sir that might that might be a net gain one thing that we cannot do and this applies in all of our areas of working with the maritime industry i spent four years and my career early doing plan review is that you you  cannot release proprietary plans of one company to another company and that's described very clearly in the foyer so one of the limitations that we may not be able to overcome that's suggested there is that there is that they could have all of the information needed to value wait this is a third party it is the only way they could get that would be to go directly to the company that made the application and provided it all to us because we're not at liberty to release any of that information mrs williams did you care to comment just to add to what that what the admiral said is that  we've already seen complaints about giving our only our determination letter doesn't provide enough information that a third party would necessarily require to make any type of comment our decision  and most of that information would be with taliban to fully yeah i think the challenge here is that to the extent that you're empowered to make some of these consequential decisions if there's not confidence in the intent  comments suggesting that we laws that are in place are archaic or anachronistic or leads one to wonder is that the role of the people in that division to make those assertions and what what are the consequences of somebody who's empowered to be a little bit like a police officer stand when i've just never really bought into the seventy mile an hour speed limit myself  you wonder if that's the role of the police officer or their role is to enforce the seventy mile an hour speed limit and and what are the consequences of that happening in two senses one of the consequences for the individuals who manage to express such  opinions and more important what are the consequences to the public who are depending on such individuals to enforce the laws as they're written and you can get a comment on that sir i never heard anybody in the in the coast guard make that kind of comment certainly not the position of the united states coast guard and you know we we do regret when our employees make comments like that  but it's impossible to control everybody's comments and it's hard to say where that was heard if if someone is you know in the fischel capacity and they are going to make a speech or you know  n we do try to review our public public comments by official people in the coast guard we just would simply say no that's that's not the position of the coast guard you can't say that if they were to have said it and it comes back to us we would certainly look into the circumstances and whether you know we need to do something about that individual but obviously we don't condone that when our purpose is to enforce the laws of the united states and acts is a very important long and i appreciate that i would just close by saying it's all important the vast majority the members of the congress of the united states support it and we support a b because we believe in a draw a strong domestic shipbuilding industry and i think we would look on favorably about anybody who mistake was made a major rebuild occurred coast guard signed off on i should move to the courts to tell you he made a mistake so let's let's leave it at that what i am curious about is on this major rebuild and i really do think any kit coming out of cape may would have said made you reveal who in your organization look at that and who signed off on it and what is the procedure it was  civilian that made his call the uniform officer signs off on it what's the procedure second thing the i am trying to get you some slack here is some i do not have a law degree and i realize that gas we don't have law degrees or making these calls every day so i read two things to you it is coming out at forty six c a for a regardless of materials construction vessel is the deemed repealed when a major component of the whole prior to work also known as discounted light weight now trying to cut you some slack the guy in may who's worked on boats says a lot of this work could be curved very slow manually intensive very expensive or if you just go by weight a lot that could have been straight could have been done by machine pretty cheap to do to the people in your organization look at the complexity of the work have the technical expertise to go that's going to be slow painful and expensive or that quick and dirty do you see is that language confusing to you or did they just automatically fall to the denver example and i'm not and again i'm trying to ask this because i want to solve this problem and i'm trying to figure out where the problem is is  a lack of expertise within your office is a lack of guidance in the law is a lack of national will and lastly and i sure hope the last one is way off but you being leaned on by this administration or any shipyards denmark total access visited one shipyard the people's republic and i was assigned a good who's at my face all day i'm just curious when your folks are shipyard are they no one from the national that's the documentation center would be in the shipyard if you're talking about that's a correct so you so used to go on again then you're counting on the honesty the applicant no one's looking over their shoulder never ok in that in that the reason for that decision is that dollars limited budget is in manpower is a good the way it's always i'm just curious i think the way it's always been we've documented we have a total of three hundred fifty boat and say do you guys have any undersize snapper on board and the folks with the instinctively say no and they say would you mind if we look in your eyes yes so if there's something as simple as the size of a not for the purpose of this i mean that said i want to get on the record thanks thank you for being forthright with us i don't have any additional questions anyone else again thank you for being here we've obviously got something that needs to be addressed very much appreciate your appearing before the comm and members of the committee my name is john love i am a vice president of pasha white transport lines and i appreciate the opportunity to testified today before the subcommittee on coast guard and maritime transportation ph d l is a u flag carrier that operates the gene and us bill that's all carrying roll on roll of cargoes in the west coast and hawaiian islands trades the gene and is a state of the art your car and truck carrier delivered by bt hole to marine in mississippi in two thousand and five she meets all of the requirements of the jones act as you know the jones act requires that u flag vessels be built and rebuilt in the united states in order to retain domestic trading privileges if a major component is added to a vessel in a foreign shipyard it is rebuilt farm per se we knew this rebuilt in china shipyards the root of the problem begins with the fact that the decision making process employed by the coast guard is a secret proceeding close to the public a typical application for  rebuild the terminations contrary to the testimony that you heard here this morning consists of a lawyers letter with a general description of the project even though the coastguards regulations mandate submission of detailed information along with accurate sketches and blueprints in the most none of this happened what was described this morning by ivan watson by ms williams is the process as it should have been but not what actually happened to make things more difficult the only way to obtain a copy of the ruling is to file a request under the freedom of information act even when the ruling is finally obtained it is difficult to ascertain just exactly what it is the coast guard has approved there is no meaningful appeal process headquarters and disadvantage shipowners have found that the only relief available is to file a complaint in federal court i'm going to digress a moment from my written comments here to address some comments by  undertaking china on the moki honorable unbeknownst to us the day before that we submitted a letter the general counsel and senior vice president of madison had submitted a letter to the  telling the coastguard that their project was over seven and a half percent not as originally presented to the coast guard and confirming to the coast guard that now that they had detailed plans and had entered into their contracts the steel percentage was now accurately know what happened next is really incredible and i'm just going to turn to the administrative record from the coast guard because as soon as manson navigation and the national vessel documentation center became aware of our protest and that's an withdrew the latter admitting that that project was all of a sudden and i have percent and we received a one sentence letter from thomas sowell us director of the national vessel documentation cent saying i refer to your letter of october twenty seventh two thousand and six requesting reconsideration of the policeman or a rebuild determination dated june twenty third two thousand and four concerning maps and navigation c nine class in accordance with the provisions of forty six part one dot zero three that action is no longer subject to review or consideration so we were told to take a walk that's the transparent process not only is the procedural process flawed but the decision making process is flawed as well while the rebuild the terminations are inconsistent there is one discernible trend but coastguards enforcement of the has gotten increasingly lame lenient or nonexistent the coastguards regulations purportedly used to test to determine if a vessel is rebuilt a major component and a steel weight test in recent rulings th coast guard has written the requirement that major components be constructed in the united states completely out of the jones act rather than look at what is being added to the vessel overall argued that it should look only at the weight of the largest piece of the major component this approach has been soundly rejected by the federal court in a recent case and another ruling the court the coastguard held that a two hundred sixty five point five ton deck added in china is not a major component because the head lifted by the chinese shipyards crane was only twenty six point nine tons this is obviously not what congress intended the coast guard implementation of the percentage deal way test also shows an increased willingness to sanction foreign rebuilding has further described in my written testimony for example the coast guard typically does not count outfitting when when counting steel work as outfitting has been historically defined as inventory of quitman furnishing and stores  guard has expanded the definition to include vehicle decks as outfitting on the ground but they are non structural steel work although this distinction the distinction between structural or non structural was rejected by another united states district court judge almost twenty years ago according to the coast guard and confirmed by the court's parliamentary rebuild determinations conveyed no legal rights applicants seeking to rebuild ruling have been aware for years of the increasingly lax enforcement of the coast guard they have asked for rebuild rulings that they know would never be approved by and by an agency that's dedicated to enforcing the jones act applicants who have obtained these rulings and who push the envelope took a calculated risk that it would be business as usual now that the courts are responding these companies should not be bailed out by congress this would not be fair to those of us who followed the rules and invested tens of millions of dollars and trust in us shipyards the problems at the coast guard are having ripple effects although we disagree with this approach the maritime administration is following the coast guard in determining what constitutes a farm rebuilding for purposes of the capital construction fund this has resulted in the sizeable tax benefits of vessels rebuilt overseas and chinese shipyards when the benefits were designed to encourage work in u s shipyards in addition while some of these projects are clearly major conversions requiring an environmental and safety upgrades the marine safety center part of the coast guard also appears to be following the rest of the coast guard and by so doing so may be creating issues concerning u s compliance with adds putting us at a significant competitive disadvantage because we chose to play by the rules the jones act was intended to create a level playing field we asked that congress take steps to encourage the coast guard to enforce the jones by among other things making the rebuild application process completely transparent with input from all concerned requiring the applicant to submit sufficiently detailed information in support of its application and conducting meaningful investigations and the case of the moki on a you have a three page letter from the general counsel and senior vice president madsen with three paragraphs that comprise half a page that describes the project you have a couple of crude renderings of the profile of the ship and one page of calculations that a u s federal judge as characterized as the work of a five year old that was the application to the coastguard that was approved mr love you were pretty generous we gave you ten minutes on your thank you sir ok thank you very much baxter thank you chairman taylor and members of the subcommittee for the opportunity of the shiploads counsel america to testify at this important hearing i'm not the paxton president shipbuilders council of america the largest trade association representing u s shipyards represents thirty one promote and protect the jones act which requires vessels that operate the domestic trade to be built in u s shipyards and own crude by u s citizens and the ships are prospective the jones act ensures that the u s maintains critical shipyard infrastructure and skilled workforce they can rebuild a repair the genetic jones act that consists of over thirty eight thousand vessels these vessels were built in u s shipyards and represent an aggregate forty billion dollar investment however over the last decade the u s ship repair and astri's experienced a substantial decline in the amount of maintenance and rebuilding work on the jones act fleet increasingly more jones act that fools are going overseas to perform major real but rebuild work this work previously sustained a us ship preparing to stream there is all too has been significant downsizing a major ship repair facilities loss of critical ship repair assets closure of shipyards and the outsourcing of skilled labor needed to maintain the domestic fleet this is not the first time the us should guard have been faced with a loss of work on jones act vessels one hundred fifty six t congress introduced a bill to add a second proviso to the jones act at this time at that time this committee provided in its house report the company the passage of the second provides a bill to quote with major developments in technology in recent years there have been instances of american american built bustles which have been substantially rebuilt in foreign shipyards this appears to be a gap in the law which is clearly inconsistent with traditional policy a gap in the law which is clearly inconsistent with traditional policy that exists today is  discretion to determine that a vessel has been rebuilt foreign when work projects involve twenty seven point five percent and ten percent of the full steel weight in stand with no analysis the coast guard is simply implemented a defacto ten percent still work threshold test determine whether a vessel is been rebuilt for it's important to note to the committee that a ten percent total steel weight rebuilding is a large job and u s shipyards can do it and very much want to do this work for the compliment complicate coastguards regulations is the fact the standards and test for accounting for real projects are constantly changing the coast guard once counted the total steel added and steel removed from about full now it only counts the greater of either the steel removed or added the calculating the ten percent threshold test the agency to determine that adding an entire hole to a single hole vessels not consider a rebuild we've heard a lot about this today the work they concluded was quote intrinsic to the whole itself and not a component and they went on to further define this is saying considered separable components instead applied a new test the looked at whether or not any crane in the chinese shipyard to lift a single component weighing at least one point five percent of the steel weigh the vessel upon determining the chinese shipyard did not have cranes that could lift a component of this size the coast guard determined no rebuilding took place the lift capacity of cranes in a foreign shipyard has nothing to do with the second proviso it serves only to frustrate congressional purpose intent and to prohibit the for rebuilding of jones act vessels the lack of enforcement of the second proviso by the coast guard has resulted in confusion and uncertainty not just for us shipyards but across the maritime industry jobs act operators no longer at what the capital construction costs are to operate the domestic trade regulations to provide a transparent and predictable process so everyone of the maritime industry understands the standards for rebuilding jones accept this clarification should take a commonsense approach to the identification component of the whole and superstructure component should be looked at in its entire your spectrum of this manner of installation u s district court for the eastern district of virginia recently remanded revoked because was indorsement of the jones act nestle rebuilt in china because quote however the manner in which the component is added to the vessel piece by piece or wholesale is irrelevant to whether income component is major although a decorous component of the whole can be added to a vessel as one discrete preconstructed structure surely can be added piece by piece being by be revered by r company based in jacksonville florida i've been represented crowley on maritime regulatory and policy issues since one thousand nine hundred one of has spent a large part of that time involved in jones act issues i want to compliment you for  holding this hearing it is a very important subject and i feel a little bit like a member of the choir singing to the preacher here but we have the jones act because we need an american maritime industry for reasons of national security could we have cheaper ships and cheaper transportation if we left it up to the chinese or others to take care of that of course but congress has said very clearly that you can't do that in american domestic markets and to a large extent that is the reason that is how we maintain an american maritime industry the issue to day concerns what it means to rebuild a vessel what kind of work can be done on the jones act vessel in a foreign shipyard without disqualifying that vessel domestic trades it is very important to the industry that we get this right the american shipping companies have been told essentially this build ships in the united states for domestic trade don't worry that those ships are much more expensive than ships built overseas they will compete on a level playing field in our domestic trades that's a risky proposition unless there is real confidence that foreign built ships or foreign rebuilds ships are in fact excluded from domestic trade and unfortunately some recent decisions by the coast guard have undermined that confidence by letting foreign rebuild vessels into domestic trades how quickly go over how this issue has come up in the tanker business when congress passed the pollution act of one thousand nine hundred eighty requiring the phase out of all single hole tankers crowl another company o s t and other tanker owners had a tough decision to make do they start replacing tankers building them in the united states or not keep in mind that if they build the ships in the united states the cost is going to be much higher they're not going to be competitive in international trade from a capital cost perspective what crowley did its analysis lots of analysis of lots of different options including retrofitting older s tankers in u s shipyards and decided that the economics work out for building a series of new tanks vassals in the united states crowley and always g r in the middle of building programs that will run about a billion dollars for each company to build new tankers in the united states about twenty nine of them altogether at this point for use in domestic trades in taking that step these companies are not only complying with the jones act but they are making a very large fine natural contribution to american security interests by helping to keep us shipyards active and modernizing this is precisely what congress asked the industry to do the other company in this to scenario seebach didn't want to take the risk of building new ships in the united states and felt it was just too expensive to retrofit older tankers in u s shipyards although two companies have done exactly that so c book asks lawyers to send a letter in to the coast guard the letter describe the basic double whole retrofit project and argue that if the book were to go ahead with the project in  never lets keep its jones act privileges nobody knew anything about this letter except siebold and the coast guard from what we can tell the coast guard didn't dig into it very much didn't ask the hard questions and went ahead and issued a private letter ruling as the book requested while these rulings are not published eventually it all came out not only that sebald had obtained permission for to retrofit vessels but the two other companies had obtained similar already for a total of ten vessels that would be retrofitted in china with double holes those decisions if implemented would destroy the market that crowley and others had planned on when they made their investment decisions so at that point in april two thousand and seven crowley filed a twenty five page appeal to the coast guard commandant giving the coast guard a chance to clean up this mess and we still haven't without looking further into it this was finally the final agency action that we needed to take the matter to court crowley was joined by o s g and the shipbuilders counsel in a lawsuit against the coast guard you know the results of that lawsuit at this point a conservative court in the eastern district of virginia reversed the coastguards ruling on three different grounds seabrook has appealed that decision to the four circuit and that's where things stand at this point i would like to make two brief observations if i may first the practical effect of the coastguards letter ruling dealt with one issue only where the work could be done by letting people do the retrofit project in china instead of the united states the ruling was like a discount coupon worth two thirds off the regular price crowley o s c and others have been paying full rate retail price and contributing hundreds of millions of dollars to u s security by complying with the jones act and yet the coast guard is rewarded seebach with a two thirds off coupon for taking its ship to china and that chinese american ship has put crowleys vessels at a tremendous disadvantage competitive disadvantage its return my second point quickly gets to the procedures and i can talk further about that during the q and a if you'd like but we genuinely believe that the issue was not as bad procedure and not bad faith on the part of the coast guard and i think it's been echoed across the board here and i will say that we have as an industry worked out and least said to some level set of procedures that we think would would improve plans to a nuclear submarine we probably don't want on the internet plans for a launch to an aircraft carrier we spend a lot of money to develop that we probably don't want that on the internet would there be anything of the  the plans for the conversion of the scene nine would not be very helpful to anybody else that i can think of in the end also the concept and the process of building a vehicle carrier well known to everybody in the end the story actually knew since you were present the ship builders and so on i guess i'm going asking you on behalf of the ship builders would you have a problem with congress mandating that these proposed changes be called public information because again with my limited knowledge and see a modification to our hatch adding a ball this battle adding a  body section i really can't see anything about that that would fall into the category of requirement to be classified information absolutely not sure we support a great deal of process transparency in case in point we we've been on these projects are shipyards a bit on the double hauling so information was made available to the extent that yards got to bid on these projects there may be some confidential aspects of it but the fact of the matter is information is made available such that we could bid on these projects and we were told were too expensive before they headed off to china so absolutely not we would support greater process greater transparency and  much have worked with mr roberts on the process of using the federal registry as a way to put out comments on proposals to do extensive work on deciles overseas mr roberts yes i think only do we not know that an application is found not only do not see what the application says at any point in the process but even when we go to court the court reviews the decision under the administrative procedures act which says the agency record is the only thing you're supposed to look at the agency record is what the applicant put in so we've been through litigation now for over a year in this in the book as we  haven't we were extraordinarily fortunate getting some information but we've taken no depositions we've got no further than that so the confidentiality works and very very much to the benefit of the applicant and and as a consequence naturally tends to erode the jones act i would only say that there may be engineering issues that are involved in a proposed project that a company has spent money on the  architecture and wants to keep that confidential that's not unusual that that happens all the time there's mechanisms confidentiality agreements protective orders and so on so that the information can be disclosed to a limited extent as necessary to to evaluate it but not broadcast to the world thank you very much chairman mr roberts in your testimony on page four i think you lay out five steps to not mistaken the five possible changes to the procedures to ask a few questions specifically about those steps and then ask a question  e impact on something else first one is public notice an application is filed by that do you mean the public notice that that a preliminary rebuilt determination has been in question from the coast guard yes i think that would be appropriate the preliminary build application notice that it's been filed lawsuits filed and then the opportunity for instance third parties to participate in the proceeding in the proceedings how would then that manifest itself that could be handled on the basis of a thirty day comment period simply submit comments if there is information that submitted with the continue to apply to these decisions and then publishing an indexing of the decisions on these issues i think would be fairly important given the fact that there's a lot of talk of consistency but i'm not gathering that there is there has been consistent application it seems you know congressman i think that the the fact that you can't even obtain the decisions without submitting a freedom of information act request just shows you how how untransparent the current process is the coast guard testified earlier about the response to my question about the triggers that exist to send something over the naval office and they have suggestions for what those ought to be i am sure my colleagues may want to comment on that on that issue i would say that if you allowed public participation participation of competitors and others who may have an interest in this in a particular application you'll take care of a lot of that a lot of those issues i don't think very often i don't believe very often that was the information that the naval architecture branch is going to necessarily decide the case or not so i think that the core is getting the public involved but i'll  the total still out and you're below the seven point five percent threshold so you're not rebuild and then four years later they said well now our test is the that we we have the greater us so i think  process a healthy amount of process is absolutely necessary is absolutely needed but before we can get to that process we've got to know what the rules of the game are and that that we're not constantly moving the goal post for what counts several versus purple that was cast aside when the court decided structural versus nonstructural wasn't something we could look at so i just think the coast guard and i agree with mike that the coast guard isn't trying to undermine this process i think the coast guard is has followed poor pressman after poor pressman has got them to a point now where they're there they're looking at crane with capacities to determine whether or not of us has been rebuilt so i would also recommend that we need to get the standards down first before we can have a healthy public process a need to ask a question before my time is up and that has to do with the b t o in that yet because there are concerns that have been expressed about making any major changes t questions is it your belief that if you made changes to the process as you're suggesting would that trigger a review and second if we were  somehow able to get the coast guard to actually enforce the second proviso as we see it which would apparently be different than it is being seen today so the law wouldn't change it would just import as it was as we see it would that do you believe that trigger a review i'll answer that i think the answer to the to the first question is no that that the provision it has nothing to do with the procedures that are followed it making a determination whether or not this particular project complies or doesn't comply so i think there's no no risk at all from a gaffe perspective to improve these procedures i think if the coast guard tightens its enforcement activities and make determinations that are more consistent with as you say with what congress intended in the second proviso again i don't think that that would create a great problem where we're really clarifying and enforcing the laws of it as it was written and as it was meant to be enforced and and that's that's not becoming more restrictive that's not legislating a more restrictive regime so i think in both cases we that we should not have a problem and i would just add one part to that the court case the recent court case in the sea both matter threw into question all of this because the court clearly said there's been no analysis for any of these tests there may be a test called counting the greater of the still removed are still at it but you haven't done in alice so i would i would pose that any clarification of the r around it so i don't think that would be a violation because we're actually trying to argue implement what you say and we're not we're not putting in or amending the second proviso the second brother speaks to major components so we would say force the miss williams said that the coast guard gets very detailed information but the administrative record and the case that i'm involved in for example shows that there is no detail information at all and in fact even though the matter was eventually referred to the architectural division there was no analysis done by the architectural division as was described here so i think that  because i think you've noticed that you're going to have a fairy favorable response my gut tells me from the subcommittee i don't can speak for the full committee can't speak for the full house and i certainly can't speak for the other body but i would think the skeptics would come back and say well it's just a temporary thing this administration has chosen not to enforce the law so my question to you is is that accurate is it something that is just unique to that over the last ten years there has been rough numbers only forty rebuild determination so an average of four for a year i have my own personal now the coast guard is defending the indefensible there have been very intelligent determinations by the  the national vessel documentation center over the years but in recent years that was just a let's say a cultural predisposition by the single person who really could influence those whole process and finding some way in every case to justify of avoiding the application of the second proviso so this is a process i think that could be easily fixed and would not involve the world of the trade issues of who is in the white house my sense is that it's not a and it is too far down into the weeds to be something that the administration would likely i have an involvement and i really think  that that it is it is very technical it's very complex it's just that it's isolated from the main physically isolated in west virginia from the main coast guard activity here in  c and i think you know i hate to be sort of johnny one note here but but i really do believe that the procedures are such that they inherently favor decisions that erode the jones act the only people who go to ask for these decisions there are people who want to do work in foreign shipyards nobody else knows about those requests and nobody knows about the decision so so the natural tendency human nature i believe is for the people to try and satisfy the people in front of you who in these case happen to be people who want to do work in foreign shipyards if you are this is coming from our staff if you were allowed to comment what would your reaction be to notice that a ship boat or proposed to i'm quoting install a double install a double in a tanker in a foreign shipyard where we wouldn't we wouldn't hesitate to say you can't do that i mean it's very true in our opinion if you add a second hole to a vessel the second hole is a major component component of the whole and so we would have no doubt i don't want to turn that around ok what is the penalty that you pay for living by of that vessel if you call if you're caught but again you have to in effect tell the coastguard that you lied on your application because no one is going to check you on like that snapper boat captain today who's there going to look in his eyes just break out the tape measure them to check on something that you think is suspicious in effect they did not check that it took the federal court to get you some really is that correct that's correct chairman if you take the case of the vessel that was guided in china for example the gutting process the removal process is very very expensive and it's especially expensive the it's done in an environmental y responsible great point all of the work on the hull on that particular vessel and the superstructure of the vessel was done in china although when you mention the curves w that the heavy decks all of the heavy lifting was done in china what was what the u s shipyard was allowed to do was the strait wells as you mentioned they built a box and the foundation for that box was all the work that was done in china the access to that box was all of the work that was done in china so if you were to take the example of that container ship that was converted to a combination ro container would say that a very high percentage of the expense of doing a whole job in the united states was the work that was done in china in between the environmental compliance lower garage that was manufactured in china so what you had was if you had the demolition so you took out the transfers took out the holes took out the weather deck the  covers took it right down to the frames very very expensive work and now you're in the portion of the ship and you're also doing the work that is the foundation for the upper garage and only heavy vehicles are only supported on the work that was done in china the work that was done in the united states was soley concerned with the carriage of automobiles so the lion's share if you look at it from a square footage basis for example they added over two hundred thousand square feet of vehicle storage on the vessel between the work that was done in the united states and the work that was done in china more than fifty percent of that square footage was done in the united states but that that fifty percent over fifty percent was much less expensive than the work that was done in china i would be curious to your reaction and i realize that the easiest thing that could happen is for the folks in the bureaucracy to change their interpretation because the most difficult would because when you bring up environmental factors when you bring up the the skills the work all the other things that are involved i think i personally believe the present rules just doesn't work in sample the question is to just abolish the upper limit test and they want to strip test a test that you look at major rebuild projects we understand it repair work goes overseas what we have a difficult time with is when large big projects are continually going overseas to the one point five percent that major component analysis is never is taken into place would prohibit a lot of this work going overseas and it's not just  prepare crowley made a calculated guess not a guess calculate decision based on the law that they're going to build new so that helped the new build yards but the rebuild yards could still do a lot of this work to repair yards  so enforcing the second proviso helps new construction and repair so i guess my question for clarification we would we want strong test that of course what the second proviso stands for maybe ten percent too high i don't know but but clearly if forcing that first test that one point five whatever it may be major component test would would prohibit a lot of work instead of getting into the vagaries of a ten percent what we're counting and not counting i'll  test and i'm not sure how we would replace it i guess it depends on what happens at that point but if we took the ten percent test down to two percent test or one and a half percent test i'd be very concerned about how that might be  mr lowe but i'm looking for clarification it takes congress is asked by the american people to try to clean up the environment reacting to that request they passed some fairly stringent rules on things like cost associated with these are the same whether it's the individual breathing apparatus or someone working around that disposing of it properly there's a cost associated with all that and the people who live by the rules pay those c i doubt any of those rules are followed in some of these foreign shipyards we're talking about that name and so what i'm getting at is in addition to not only just the line of a well but the difficulty of and i guess what i'm asking is we are looking for something more appropriate than this interpretation and we welcome your comments on that whether you're comfortable doing it now or later i think mr chairman also just to define the scale of the issue i'm ok hon i went to china to do the rebuilding but since it was in china they also did a dry dock and it also did sand blasting and cutting of the hole and also d numerous repaired projects around the vessel all of which was lost to the u s shipyards because of the failed to enforce the rebuilding thanks lot of responsibility and they basically based on what you said you use the word acting on his own but they basically make a decision as to whether somebody meets t standard or not work work done on a ship meets the standard the jones act or not is that right that's correct as is your understanding that's the way it's supposed to be that a single person vague and is supposed to do that is that any of you any of you i would think that that's the major issues that the coast guard should be addressing which is an oversight of these decisions made too and i just think that when you have a situation and this is not knocking mr mr welch it's not beating up on ms williams but to me if i've got one person making a decision that  could determine whether a company makes millions of dollars that is something that i wouldn't want in other words i wouldn't want it if i were the person making decisions because i would want always to have somebody with me trying to help make those decisions and somebody to give some balance to what i'm deciding but the other thing i would like is the invitation invitation but the climate that is right with possibilities not probabilities but possibilities of some wrongdoing not accusing anybody of anything just saying what i would prefer and and again when you talk about millions upon millions of dollars and i tell you that some of these decisions are kind of discretionary are they not hello yes the is anybody and so it seems to me that if you have a decision that does not favor and say the losing party and you have a lot of discretion in there it seems like it would be almost impossible to have any type of true  think the process is entirely one sided with no transparency not to defend the national vessel documentation center but they're out there in west virginia they have there they're supposed to look at these documents and then decide on those on the materials in front of them whether or not this vessel can go overseas and do major work well all the information given to that to that person is entirely geared from the standpoint of the person who in fact wants to go overseas and do the work and not build in the u s so the process is very dark and very one sided so they so i think this is where a lot of the problems exist in the course the standards change over time to allow more and bigger jobs to be permitted overseas and missed in your testimony you state that you are competing against two vessels that operate substantial course savings after having been built rebuilding the chinese shipyards years ago with government subsidy if my recollection is correct the us government subsidized the building of these vessels to the tune of about forty eight million dollars each they were not eligible to be in the jones act until a were in service was either twenty or twenty five years and they the vessels were designed to carry only advantage because of the nature of the work which is something that mr taylor was putting his finger on and that is all of the demolition work that had to be done on this on this old ship which is very costly in the united states for environmental reasons safety reasons and the like and all of the work that had to be done in very very difficult area with the plate visualize that the weather deck was removed from the vessel the transfer from remote from the vessels the cargo holds the combings the hatch covers everything this is extremely expensive work and then six decks were added in china and  the lang for the project the length of the coast guard cutter we talk about it being asked of the engine room casing but that's what talking about a garage that's two hundred seventy feet long it was a it was a monumental project jobs is always hard to tell the fact of the matter is over the one nine hundred ninety s we saw a significant decline in our ship repair facilities in the case in point is the west coast if we look to the west coast our ship preparing our ship should build facilities have been harmed and there harmed because there are cycles in the ship building industry but what we see is that ship repair and history benefits from this work this is work they can do this is work they want to do case in point we used to have a  dry dock they could dry dock to alaska class tankers we no longer have that dry dock it was sold off to barbados and that was on the west coast these assets we lose these assets are protected supposedly by the jones act so we have the skill sets and we have the infrastructure to do this type work but over time this is a roading of the second proviso has led to more and more work that would go into those yards to go into the seas i could overseas i couldn't put a exact number on the amount of went to us shipyards got bids for that work it came out in an article in two thousand and six and basically said it's just too expensive we're not going to do it may not it states and the figure they gave at that time that it would be three times more expensive to do the work in the united states than in that in china and that we had in the in the case of these projects is ten million dollars spent in china so you figure thirty forty million dollars in the united states to do each one of these ships and that's the kind of capital cost advantage that they have over u s operators who comply with the law and build their ships in the united states and the main reason is labor cost difference i  about paying those costs once we want to pay those points we're proud of our skilled labor force and we point to them as being the best in the world but the fact is in china they do use bamboo scaffolding they don't have any of the environmental or health standards that and see a farce is not adequate in light of the environmental rules the difficulty of the type of work coming in a one foot well for example on a straight line versus a one foot weld and he sort of both one foot of welding but one is a heck of a lot more difficult than the other one is a heck of a lot more expensive than the other one done overhead is a whole lot more difficult than the one done on the deck there are so many factors that the ten percent rule does not take into account that and again the more labor intensive the more environmentally sensitive the more expensive and none of that is taken into account and obviously the more labor intensive the more environmentally sensitive it actually becomes an incentive for someone to take their ship overseas it circumvents the intent of american ball ins and so for a lot of reasons i think we need to i would hope we would revisit it in a way that makes sense to the shipyards into the operators so that's why i was asking for their guidance we would really really appreciate that your getting back to say within the next thirty days and steering all of its i mean recommendations it is a very complicated situation and i realize that when you are dealing with a complicated situation clear as we can make them and they should lend themselves to being able to be applied consistently and so into the measure the law judge system and one of our concerns in that system was whether when people walk in the door and did they feel that they had a fair shot period didn't want any advantage but didn't want disadvantage everybody fashion and that's what i want to make sure happens here that those who come before and in a sense this is a decision making body although it apparently one person they have a fair opportunity to present their case and being granted a fair opinion and and this juncture i must tell you that i think you situation where things are so confusing that you don't know when you've got a fair opinion or not i think you can be in a situation where there's so much discretion that you're not sure when you've got a fair opinion and there's so much discretion that it's almost impossible to appeal successfully something that way the standards are not as clear as they should be now the question is whether we can actually create those standards and as i've said many times i believe that we can send a man to the moon we ought to be able to do some of these things on earth that is put these kinds of things in place but it does it is it does concern me i gotta tell you when you have one person making these kind of decisions i just think it just the allegation was that the project was under seven and i have was one under seven and a half percent of the discounted steal away when we filed our protest contemporaneously with our filing of the protest that was a letter from the general counsel madsen that i mentioned earlier where he admitted that now that they had a more precise definition of the job that these discounted steel weight was over seven and a half percent that lighter was withdrawn by the owner of moki when they became aware of our protest and later when the final rebuild determination was granted the allegation was that the project was under seven and a half and i'd like to make two points one is that the letter written by the general counsel and senior vice president of the owner of the vessel that was withdrawn disappeared from the administrative record and we only found out about it during a hearing before a judge ellis and district court and judge ellis ordered the coast guard to produce the letter the coast guard produced a letter without the exhibit and the exhibit was as a smoking gun of being over eighty seven and i have percent the department of justice refused to give us the exhibit and only when the time of the original application for the parliamentary rebuild the term a nation and the granting of the final rebuild a determination the drive that was done in china grew dramatically was a much bigger mr chairman i would request that the subcommittee request from the coast guard that letter because i think it goes very much to the heart of your concerns everyone's concerns obviously somebody in the coast guard not only apparently cut a sweetheart deal for somebody then realize they got caught doing a sweetheart deal and then just tried to hide all the evidence in and it goes straight to your point this should not be happening and we need an explanation from the common on the coast guard how this is allowed to happen what's being done to keep it from happening again very well we will take care that one of those suggestion some of these issues with the guards the jones act and second proviso and and hear from here from them exactly as well maybe the ways and means committee folks hear from them specifically what changes cause us may cause problems or what directions more probably may cause us problems in which directions wrong that sounds good understand what we're trying to do as we move through here is trying to make sure that this process is fair and that the law is obeyed is nothing more nothing less and we want to do whatever is necessary to accomplish those goals i want to thank you all very much for your testimony it's been extremely helpful  our separate many tries to take the information we get and do something with it not just let it sit on the shelf somewhere for another committee to take it up seven years from now this is under our watch and we're going to do the best we can to correct it because if it waited another seven years that means a whole lot of american jobs possibly possibly design down the tubes a lot of