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80–436 PDF 2014

PRESIDENT’S FISCAL YEAR 2014 

BUDGET REQUEST FOR COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

(113–9) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 16, 2013 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

SAM GRAVES, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

STEVE SOUTHERLAND, II, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

STEVE DAINES, Montana 

TOM RICE, South Carolina 

MARKWAYNE MULLIN, Oklahoma 

ROGER WILLIAMS, Texas 

TREY RADEL, Florida 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

VACANCY 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

TIMOTHY J. WALZ, Minnesota 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

FRANK A. LOBIONDO, New Jersey 

PATRICK MEEHAN, Pennsylvania 

STEVE SOUTHERLAND, II, Florida, 

Vice Chair 

TOM RICE, South Carolina 

TREY RADEL, Florida 

VACANCY 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

CORRINE BROWN, Florida 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

JANICE HAHN, California 

LOIS FRANKEL, Florida 

NICK J. RAHALL, II, West Virginia 

(Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

Admiral Robert J. Papp, Jr., Commandant, United States Coast Guard ........... 3 

Master Chief Michael P. Leavitt, Master Chief Petty Officer of the Coast 

Guard, United States Coast Guard .................................................................... 3 

Hon. Mario Cordero, Chairman, Federal Maritime Commission ......................... 3 

Hon. David T. Matsuda, Administrator, Maritime Administration .................... 3 

PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS 

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

PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE 

RECORD SUBMITTED BY WITNESSES 

Admiral Robert J. Papp, Jr.: 

Prepared statement .......................................................................................... 31 

Answers to questions for the record from the following Representatives: 

Hon. John Garamendi, of California ........................................................ 40 

Hon. Rick Larsen, of Washington ............................................................ 52 

Master Chief Michael P. Leavitt †

Hon. Mario Cordero: 

Prepared statement .......................................................................................... 53 

Answers to questions for the record from Hon. John Garamendi, of California .............................................................................................................. 66 

Hon. David T. Matsuda: 

Prepared statement .......................................................................................... 70 

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

SUBMISSIONS FOR THE RECORD 

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

†Master Chief Michael P. Leavitt did not submit a prepared statement. 

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(1) 

PRESIDENT’S FISCAL YEAR 2014 

BUDGET REQUEST FOR COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

TUESDAY, APRIL 16, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met pursuant to notice at 2:28 p.m. in the 

Rayburn House Office Building, Room 2167, the Honorable Duncan 

Hunter (Chairman of the subcommittee) presiding. 

Mr. HUNTER. The subcommittee will come to order. Sorry about 

that. We had some votes and we will probably have some more 

folks trickle in as we go. 

So, the subcommittee is meeting today to hear testimony on the 

President’s fiscal year 2014 budget request from the leaders of the 

Coast Guard, the Federal Maritime Commission and the Maritime 

Administration. The President requests $7.9 billion for the discretionary accounts of the Coast Guard in fiscal year 2014 and an 8- 

percent cut below the current level. This is the second year in a 

row the President has forced the Coast Guard to have reductions 

to offset his questionable spending in other agencies. 

The President guts the Coast Guard acquisition budget, reducing it by $634 million or 41 percent below the fiscal year 2013 enacted 

level. The President’s request proposes to terminate or delay the 

acquisition of critically needed replacement assets, including Response Boat-Mediums, Fast Response Cutters, and Maritime Patrol 

Aircraft. The request also slashes the budget to improve shoreside 

installations by nearly 95 percent, and zeroes out funding to renovate derelict housing for servicemembers and their dependents. 

The President’s request will severely undermine efforts to recapitalize the Service’s aging and failing legacy assets, increase acquisition costs for taxpayers, and seriously degrade mission effectiveness. The subcommittee has worked for over a decade to implement 

a meaningful acquisitions program, which will enable the Coast 

Guard to carry out its missions in 5, 10, and 15 years. This budget 

slows that effort and dooms us to a future in which a down-sized 

Coast Guard is unable to accomplish even its most basic missions. 

For the fiscal year 2014 operating budget, the President proposes 

to reduce the number of Coast Guard servicemembers and reservists by nearly 2,000; eliminate tuition assistance for officers; reduce 

the number of foreign-flag vessels boarded for inspection; cut the 

2 

number of foreign ports security inspections; close air stations; take 

recently upgraded helicopters out of service; and exacerbate the 

gaps in readiness by cutting training for personnel and retiring assets before their replacements arrive. In this budget environment, 

no agency can escape budget cuts, and I think there are ways to 

find savings in the Coast Guard’s budget in a responsible manner; 

but, the budget the President sent us makes cuts that could adversely impact the safety and security of our ports and waterways. 

I commend Admiral Papp for his honesty in describing what 

these cuts will mean for the ability of the Service to successfully 

conduct its missions, and I appreciate the Admiral’s efforts to do 

his best with the hand that was dealt him. The budget request for 

the Maritime Administration represents a 3.6-percent increase over 

the current level, but the increase comes as a result of the President’s misguided effort to effectively eliminate the hugely successful Food for Peace Program. Since 1954 the Food for Peace Program has provided agricultural commodities grown by U.S. farmers 

and transported by U.S. mariners on U.S.-flag vessels to those 

threatened by starvation throughout the world. 

The President’s restructuring of Food for Peace will eliminate a 

vital program for our farmers, put U.S. mariners out of work, and 

undermine our national security by reducing the domestic sea lift 

capacity on which our military depends. I would add that the President’s attempt to placate the concerns of U.S. mariners by throwing 

some additional money at the Maritime Security Program for 1 

year will not work. I hope my colleagues will join me in rejecting 

the President’s misguided proposal. 

Finally, the budget request for the Federal Maritime Commission 

proposes a nearly 10-percent increase over current levels. Although 

a 10-percent increase in the FMC budget amounts to little more 

than $2 million, I think it sends the wrong signal in the current 

fiscal environment. While other agencies have implemented hiring 

freezes, the Commission proposes to add more employees. The 

Commission needs to take a much closer look at their operations 

and present a more realistic budget. 

Our Nation is facing a very tough budget climate. This Congress 

must work together to bring our exploding national debt under control. I look forward to working with my colleagues to achieve this 

goal in a responsible manner. 

With that, I yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Mr. Chairman, thank you very much. There is 

much to be said following your comments. 

I have a written statement that I would like to put in the record 

for openers, but I think I’m just going to go off the written statement for a moment and simply say that much of the problem that 

this organization faces, or these three organizations face, and much 

of the rest of Government, is of the making of Congress. It is Congress that enacted the sequester and it is Congress that over the 

last several years has repeatedly diminished the Federal spending 

and raised much revenue. So, indeed, I agree with you. We need 

to address this issue in a comprehensive way. 

I know the Coast Guard is taking a big hit here and the budget 

as presented is not one that I like at all. I don’t like the 480 program. I think that’s a mistake, having spent 40 years of my life 

3 

working on famine and food issues around the world. I don’t think 

this is the right way to go about solving that problem for the reasons that you stated and many others. 

With regard to the Coast Guard acquisition programs, we are 

going to have to work on that. The President’s budget is not correct 

on that and we have to work on it. But, there’s a larger issue that 

permeates everything we are doing in every budget in every hearing, and it is that we are unwilling to fund the Government that 

we really need. 

With that, I will yield back and ask that my written statement 

be printed in the record. 

Mr. HUNTER. Without objection. 

I thank the ranking member, and with that our witnesses today 

are Admiral Robert Papp, Commandant of the Coast Guard; Michael Leavitt, MCPO of the Coast Guard; the Honorable Mario 

Cordero, Chairman of the Federal Maritime Commission; and the 

Honorable David Matsuda, Administrator of the Maritime Administration. 

Admiral, you are recognized for your statement. 

TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED STATES COAST GUARD; MASTER CHIEF 

MICHAEL P. LEAVITT, MASTER CHIEF PETTY OFFICER OF 

THE COAST GUARD, UNITED STATES COAST GUARD; HON. 

MARIO CORDERO, CHAIRMAN, FEDERAL MARITIME COMMISSION; AND HON. DAVID T. MATSUDA, ADMINISTRATOR, MARITIME ADMINISTRATION 

Admiral PAPP. Thank you, Chairman Hunter, and to Ranking 

Member Garamendi, it is an honor to be here in front of you and 

the distinguished members of the subcommittee. And before I get 

into the bulk of my statement, I would just like to say the collective 

hearts of the entire Coast Guard family go out to the people of Boston. It was a tragedy, yesterday, but it is a tragedy for the Coast 

Guard as well. 

Our people are home-based within Boston. It has been a great, 

traditional port for us; but, in spite of everything going on, we were 

able to respond immediately with boats and boat crews from Sector 

Boston, the Maritime Safety and Security Team, an armed helicopter and boarding teams to enhance the overall Maritime Transportation Security posture. 

Now, our ability to respond like that is a direct result of the tremendous support that the Congress and the Administration have 

given us over the last 12 years, and that support enabled major responses this past year as well. During Hurricane Sandy we rescued 

14 crewmembers from the H.M.S. Bounty in 30-foot seas and 60- 

knot winds, 80 miles offshore. In the Port of New York and New 

Jersey we serve eight channels; evaluated waterfront facilities; restored the AIDS Navigation System; and, worked across Government and industry to reopen the port. 

To meet the growing demands in the Arctic, we completed Operation Arctic Shield, a 9-month inner agency effort including the deployment of a National Security Cutter, two ice-capable buoy 

tenders, and two helicopters, 300 miles above the Arctic Circle. 

Given the lack of shore infrastructure and the extreme conditions 

4 

in the Arctic, the capabilities provided by our National Security 

Cutter were critical to our operation. 

In executing the Department of Homeland Security, layered security strategy, the Coast Guard detected and interdicted threats as 

far offshore as possible. Targeting Central America coastal traffic 

routes, our cutters and aircraft teamed with interagency aircraft 

detected and interdicted drug-smuggling vessels carrying 107 metric tons of cocaine with a street value of nearly $15 billion, and we 

disrupted transnational criminal organizations. 

Closer to shore we responded to the growing threat of small gofast vessels that smugglers are increasingly using to avoid increased security along the southwest U.S. border. Drug smuggling, 

human trafficking and other illicit maritime activity continues to 

threaten our Nation. Those engaged in this trade are growing 

smarter and bolder, and they are increasing the danger to our 

homeland. 

In December I presided over the memorial service for Senior 

Chief Boatswain’s Mate Terrell Horne III of Coast Guard Cutter 

Halibut. Rep. Hahn, I want to thank you once again for being there 

for that ceremony and speaking to his family. He was killed by 

smugglers when they rammed his Coast Guard pursuit boat near 

San Diego. Our commitment to the Nation and our duty to honor 

the memory of SC Horne strengthens our resolve to defeat these 

threats. 

Unfortunately, much like the weather and the seas the Coast 

Guard faces on a daily basis, the Coast Guard cannot control the 

fiscal environment that we operate within. We will make the very 

best use of the resources you provide to safely and effectively conduct operations in areas of greatest risk to the Nation, while recapitalizing our cutters, boats and aircraft to address current and 

emerging threats, particularly in the offshore environment. 

The President’s 2014 budget helps us to do that. This past year 

we made great strides in recapitalizing the Coast Guard’s aging 

fleet. In October we’ll christen the fourth National Security Cutter. 

Number 5 is under construction and Number 6 will be under contract soon with the money in the 2013 budget. 

To date, we have taken delivery of 5 Fast Response Cutters with 

funding for another 19, and we have had the 14th of our HC 144 

aircraft delivered. We have also contracted for the ninth AC–130J 

and completed a midlife availability on our patrol boats, and we 

are nearly complete with the midlife availability on our Medium 

Endurance Cutters at the Coast Guard yard. Despite these successes, we have a long way to go to recapitalize the Coast Guard 

with ships, boats, and aircraft the Nation needs. The Capital Investment Plan should inform this discussion, and I look forward to 

getting it to you as soon as possible. 

As the Department of Defense rebalances to the Pacific and our 

maritime activities increase in the Arctic, offshore demand for 

Coast Guard capabilities is increasing. Our older, High Endurance 

Cutters have served offshore for nearly 50 years; but, as I have testified before, they are at the end of their service lives. 

I am very happy to report that I received the support of the Secretary and the President on my highest acquisition priority, including funding for the seventh National Security Cutter in the 2014 

5 

budget. The 2014 budget sustains the most critical frontline operations while funding our most critical acquisition projects. In the 

current fiscal environment, this required tough decisions informed 

by my highest priorities. 

They were difficult decisions for me and for my Service, but they 

were the best decisions to ensure we provide the next generation 

of Coast Guardsmen the tools required to protect our Nation. As I 

look back over the past year, I have never been more convinced of 

the value your Coast Guard provides to the Nation, and I have 

never been prouder of my Coast Guard people. 

While realistic and mindful of the current fiscal environment, I 

remain optimistic about the future of the Coast Guard. And it is 

my duty to look beyond the annual budget cycle and prepare and 

adapt the Service and keep moving it forward to address the greatest maritime safety and security risk to the Nation, not just now, 

but into the future. The men and women of the Coast Guard give 

all for the sacrifices they make every day, putting their country 

first, and we owe it to them to give them our very best efforts to 

provide the support they need. 

I want to thank this subcommittee for longstanding support for 

the Coast Guard in recognizing the sacrifices of our people; and, on 

behalf of my Coast Guard shipmates I say thank you, and I look 

forward to answering your questions. 

Mr. HUNTER. Thank you, Commandant. 

Master Chief Leavitt, you are now recognized. 

Mr. LEAVITT. Good afternoon, Mr. Chairman and distinguished 

members of the subcommittee. It is an honor and a privilege to appear before you today and to represent the dedicated men and 

women of the United States Coast Guard who stand to watch every 

day, always protecting and serving our Nation. 

Coast Guardsmen are charged with maintaining operational excellence across a very broad and diverse spectrum of missions. 

They are standing the watch overseas, on the high seas and our 

Nation’s ports and waterways, and often in remote coastal communities. They are saving lives, protecting property and natural resources, conducting law enforcement, marking navigational channels for shipping, breaking ice, performing national defense missions, responding to national disasters and humanitarian needs, 

performing environmental prevention and response, building partnerships, internationally and locally, and so much more. 

As I begin my final year as a Master Chief Petty Officer of the 

Coast Guard, I continue to be amazed by the dedication and professionalism of our Coast Guard men and women and the support 

they receive from their families. Coast Guardsmen operate in some 

of the most challenging and unforgiving environmental conditions 

imaginable. Performing missions and conducting training in a maritime environment is inherently dangerous. A stark reminder of 

this reality was the tragic loss of the crew of our Coast Guard helo 

6535 while they were training to operational proficiency. 

Last month the Coast Guard aircraft located a drug-smuggling 

vessel 25 nautical miles off the Colombian coast. The aircraft 

vectored in a nearby Coast Guard cutter, which launched its helicopter to investigate. When the vessel tried to escape, the helicopter used warning shots which compelled them to stop. We 

6 

boarded the vessel and prevented 2,000 pounds of cocaine from 

ending up on our streets. This case is a perfect example of how 

well-trained, equipped and proficient crews continue to carry out 

Coast Guard missions. 

Keeping illegal drugs out of our cities and towns is in our Nation’s best interest. We do this by interdicting drugs close to the 

source at sea, where larger seizures are made with greatest effect. 

However, our efforts are not without a cost. As you have already 

heard, last December we lost one of our shipmates, Senior Chief 

Terrell Horne, who had made the ultimate sacrifice to the service 

of our Nation. His sacrifice will never be forgotten. 

That said, as leaders, we have responsibility to equip, train and 

care for our workforce and their families. We face challenges. The 

majority of our major cutters are over 40 years old, some even 

reaching 50. There is a cost to maintaining old-fleeted cutters, and 

that is not just in dollars. The new assets that are requested in the 

2014 budget, including the seventh National Security Cutter, are 

safer, much more capable and allow our crews to execute Coast 

Guard missions as efficiently as possible. The Sentinel Class Fast 

Response Cutters funded in previous budgets and requested in our 

2014 budget are now in service, and performing extremely well. 

I thank you for your continued support in helping the Coast 

Guard recapitalize our aging cutters, despite the challenging fiscal 

environment. Last year to my testimony I discussed some of the 

challenges our Coast Guardsmen and their families face in regards 

to adequate housing and childcare. We are truly grateful for the 

housing enhancements made possible in the 2013 budget. These resources have helped to better support our military members and 

their families, and the 2014 budget will continue to do the same. 

Providing adequate housing for our Coast Guardsmen and their 

families remains a high priority. We recently completed an assessment of all our housing across the Nation, including Alaska, Hawaii and Puerto Rico. In this constrained fiscal environment, we 

will leverage to find that assessment to ensure funding is directed 

to those housing units that provide the greatest benefit for active 

duty workforce and their families. Additionally, with your support 

we are beginning to bridge the gap with the DOD in regards to offering childcare services. 

Since 2011 Coast Guard-sponsored childcare services have increased by 27 percent. Mr. Chairman, members of the committee, 

on behalf of the men and women of the United States Coast Guard 

and their families, I thank you for your continued support and I 

thank you for the opportunity to discuss some of the highlights and 

challenges Coast Guard men and women face, and I look forward 

to answering any questions you may have. 

Mr. HUNTER. Thank you, Master Chief. 

Chairman Cordero. 

Mr. CORDERO. Mr. Chairman, Ranking Member, members of the 

subcommittee, thank you for this opportunity to present the President’s fiscal year 2014 budget for the Federal Maritime Commission. With me today are my fellow colleagues, Commissioners Rebecca Dye, Michael Khouri and William Doyle. 

Commissioner Lidinsky is unable to attend today due to a prior 

medical commitment, but does send his best regards. With the comVerDate Aug 31 2005 10:18 Nov 20, 2014 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\4-16-1~1\80436.TXT JEAN
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mittee’s permission, I would like to summarize my testimony and 

request that my full statement be submitted as part of the record. 

The President’s budget for the Federal Maritime Commission provides $25 million for fiscal year 2014. This represents an increase of $2,160,575 over the enacted post-sequestration fiscal year 

2013 appropriation, and funds 126 full-time positions. Our fiscal 

year 2014 budget request contains $18,478,000 for salaries and 

benefits to support the Commission’s programs. This figure includes funds for salaries and benefits for 123 positions expected to 

be onboard by end of fiscal year 2013. 

It provides funding for three entry-level positions to backfill some 

critical positions. Rent, salary and benefits alone account for approximately 95 percent of our budget. The Commission’s budget 

represents the spending levels necessary to conduct the Commission’s basic operations, reduce regulatory burdens and cultivate the 

regulatory system that furthers competition, facilitates commerce 

and ensures reliable services to U.S. exporters and importers. 

The recovery in the U.S. liner trades that began 2 years ago continued in 2012, but at a slower rate, with U.S. container volumes 

increasing to a mere 3 percent to reach 29.8 million TEUs. With 

this increase, total container volumes now surpass their 2007 rescission peak, and 2012 was a record year for export volumes. The 

Commission continues to work diligently to support the Nation’s 

push to increase exports, the vast majority of which travel to a port 

and by ocean. Ports are the gateways that serve more than 80 percent of the volume of international trade. 

The Commission continues to work with Federal agencies on 

projects aimed at better understanding and finding solutions to 

supply chain bottlenecks that might negatively affect U.S. exporters. One such project is the USDA’s ‘‘Ocean Shipping Container 

Availability Report,’’ also known as OSCAR. OSCAR provides agriculture shippers with estimates of equipment availability. A concern has been previously raised by this committee. 

The Commission has also developed a search tool, now available 

on our Web site, that shows consumers where to find licensed and 

bonded freight forwarders or nonvessel-operating common carriers. 

The Commission analyzes the impacts of industry innovations 

aimed at productivity, sustainability and efficient use of resources, 

such as the use and control of equipment used to move international ocean-going containers. 

The Commission actively monitors the industry to watch for canceled bookings, cargo rolled to the next sailing, and rapid increases 

in rates and surcharges that are identified by Commissioner Rebecca Dye who led Fact-Finding Investigation Number 26 back in 

the year 2010. As a result of that fact-finding, the Commission’s 

Office of Consumer Affairs and Dispute Resolution Services’ Rapid 

Response Team still served the industry to quickly and cost-effectively resolve shipping disputes. 

To reduce regulatory burdens, the Commission has expended tariff exemptions and eliminated unnecessary recordkeeping requirements. We are also reviewing regulations governing and licensing 

and oversight of ocean transportation intermediaries, the review of 

filed agreements and service contract filings. The Commission will 

continue to engage with the shipping public and the regulatory inVerDate Aug 31 2005 10:18 Nov 20, 2014 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\4-16-1~1\80436.TXT JEAN
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dustry to explore through its retrospective review of regulations, 

how it streamlines and improves rules and regulations. 

Earlier this year, the Commission increased the maximum coverage requirement of large cruise lines for nonperformance of 

wages from $15 million to $30 million per cruise line. At the same 

time, the Commission said it would provide on a case by case basis 

relief for smaller cruise ship operators by allowing them to reduce 

their coverage requirements and recognizing that there may be alternative options for financial protection available to their customers. 

In accordance with the mandate of Section 19 of the Merchant 

Marine Act of 1920, the Foreign Shipping Practices Act of 1988 and 

the Controller Carrier Act of 1978, the Commission studies the 

maritime practices for our trading partners. Not yet completed 

when the Commission last appeared before the subcommittee, the 

Commission released in July of 2012 the ‘‘Study of U.S. Inland 

Containerized Cargo Moving Through Canadian and Mexican Seaports.’’ 

Environmental sustainability concerns continue to play an important role in the agreements and shipping practices the Commission 

regulates. The Commission’s internal Maritime Environmental 

Committee, originally established in the year 2009 by my predecessor Chairman Lidinsky, studies environmental initiatives in the 

industry and highlights innovations in this area. 

The Commission’s Bureau of Enforcement, its area representatives is located in key maritime corridors, and its investigative staff 

continue to take action to thwart shipping practices that are unfair 

and deceptive. Targeted violations have included illegal or 

unfulfilled agreements among ocean common carriers, unfair and 

fraudulent practices affecting household goods shippers, and 

misdescription of cargo. These violations affect not only shipping 

costs, but can also post serious safety and security risks. In fiscal 

year 2012 the Commission collected $838,000 in civil penalties per 

Shipping Act violations. 

The Commission-appropriated level of $24,100,000 for fiscal year 

2012 was subsequently reduced by $1,260,575 through sequestration and rescission of an additional .2 percent. These reductions 

have resulted in a fiscal year 2013 funding level of $22,839,425, an 

amount roughly equal to the Commission’s fiscal year 2009 appropriation. As a very small regulatory agency with an extremely lean 

budget, options to reduce costs, substantially, without furloughing 

staff are limited. 

As previously noted, salaries, benefits and rent account approximately for 95 percent of the Commission’s budget. As a result, we 

estimate that FMC employees have approximately 10 to 14 furlough days. Unfortunately, the measures we have been recently required to take will affect the Commission’s ability to oversee the 

shipping industry, resolve problems through direct negotiations, 

monitor activities of regulated entities, consult with foreign trading 

partners to ensure harmony in international regulatory affairs, and 

expand compliance oversight. 

Mr. Chairman and members of the committee, I thank you for 

your support and ongoing support of the Federal Maritime Commission through the many years. It is an honor to appear before 

9 

the subcommittee, and I am happy to answer any questions you 

may have. Thank you very much. 

Mr. HUNTER. Thank you, Chairman. 

Administrator Matsuda, you are recognized for your statement. 

Mr. MATSUDA. Good afternoon, Chairman Hunter, Ranking Member Garamendi and members of the subcommittee. Thank you for 

the opportunity to discuss the President’s fiscal year 2014 budget 

priorities and initiatives for the Maritime Administration. 

I know, as the Commandant mentioned, all of us are thinking of 

yesterday’s events in Boston, and I would like to begin by expressing on behalf of the men and women of the Maritime Administration my most heartfelt condolences to those impacted by this tragedy. 

Our agency’s programs help to ensure that the ocean transportation services our Nation requires at a moment’s notice will be 

available to us when needed. The effectiveness of these programs 

and the ability of the U.S. Merchant Marine to respond quickly in 

a time of crisis were clearly demonstrated during the response to 

Superstorm Sandy last year. 

At the request of the Federal Emergency Management Administration, we work with the Defense Department to deploy the National Defense Reserve Fleet training ships Empire State and Kennedy, along with Ready Reserve Force Vessel Wright, to the New 

York region. Those three ships and their crews housed and fed 

nearly a thousand emergency responders and relief workers a 

night, providing warm beds, hot meals, and places to recharge communications devices. This action saved the Federal Government 

millions of dollars in hotel and per diem cost while not taking up 

local accommodations needed for displaced families. It is a great example of successful collaboration among Federal agencies and highlights the effectiveness of both our readiness programs and the 

U.S. Merchant Marine. 

The President’s budget request reflects our continued commitment to the future of the industry, including educational excellence 

at the U.S. Merchant Marine Academy. The Maritime Administration has made significant progress over the past year in shaping 

the course and direction of the academy, including the appointment 

of new leadership and a new strategic plan. This budget request 

will allow the academy to build upon this progress by providing $81 

million in funding. Of this amount, $14 million is dedicated to capital improvements to continue our efforts to create an enriching, 

educational environment. 

In addition, the budget request continues Federal support for 

State maritime academies. This includes funding for maintenance 

and repair costs for training ships like the two used in Superstorm 

Sandy response. The President’s budget request also recognizes the 

important role of a militarily useful fleet and crews by proposing 

funding for the Maritime Security Program. This program provides 

the Federal Government assured access to a fleet of 60 militarily 

useful vessels, intermodal networks throughout the world, and 

shipboard jobs for 2,700 U.S. mariners. 

Late last year a major milestone was reached when the President 

signed into law legislation requested by the Administration, effectively extending the program from 2015 to the year 2025. This law 

10 

helps provide long-term stability to a militarily useful U.S.-flag 

fleet, and I thank the subcommittee for supporting passage of that 

legislation. In addition, the budget requests $25 million for a new initiative 

aimed at mitigating the impact on sealift capacity and mariner jobs 

resulting from proposed food aid program reform. Should Congress 

approve this funding, the Maritime Administration will work with 

stakeholders to best leverage these resources to preserve U.S.-flag 

ships and mariner jobs. 

The budget also supports our priority to develop America’s ports and marine highways. Included in this year’s request is $2 million 

in new funding for port infrastructure development. Initially, we 

will target improvement of port planning activities and propose to 

develop a pilot grant program to help ports determine more effective investment strategies. 

Finally, the President’s budget request addresses pressing envi- ronmental issues facing the maritime industry. It provides $2 million to continue critical research to identify solutions for better 

management of invasive species and ballast water, energy use and 

air emissions. It also provides funding to continue the steady and 

significant progress we have made in removing and disposing of obsolete ships from the National Defense Reserve Fleet. We are proud 

to report that the number of nonretention ships is at a historic low, 

and we are nearly 2 years ahead of schedule in our cleanup of the 

Suisun Bay Reserve Fleet in California. 

Mr. Chairman, I look forward to working with the subcommittee 

on advancing maritime transportation in the United States and I 

am happy to respond to any questions you and the members of the 

subcommittee might have. Thank you. 

Mr. HUNTER. Thank you, Administrator. 

I will now recognize Members for questions, beginning with myself. Admiral Papp, we are going to start on what I see as the three 

biggest issues here in regards to funding. 

Number one, the law requires that your Coast Guard provide us 

a 5-year Capital Improvement Plan in conjunction with the President’s budget. We have not received that. Capital Investment 

Plan—excuse me. Is it investment or improvement? I have both 

written down. I could ask you or the staff up here, because somebody is. 

Improvement plan—Capital Improvement Plan that was made in 

law in 2012—why haven’t we received it? 

Admiral PAPP. Sir, I am just as unhappy that you don’t have it 

in your hands, because the Capital Improvement Plan helps to inform the discussion on what we are purchasing this year and how 

that fits into the overall picture going into the out years. So I 

would prefer to have that here. It is currently being reviewed by 

the Administration; and, based on a hearing we had this morning, 

we contacted the Department of Homeland Security and they said 

it would be delivered to the Congress on the 1st of May. 

Mr. HUNTER. How could a 42-percent cut over your acquisitions 

account be made while not having a Capital Improvement Plan or 

to plan out why those cuts would be made, and what you can do 

with those cuts? 

Admiral PAPP. Well, sir, that’s—— 

11 

Mr. HUNTER. Clearly, no one else has done, and how do you get 

the 42 percent? 

Admiral PAPP. Right. Being mindful of the situation we find ourselves in in this fiscal environment, we had to make some very 

tough decisions based upon the money that was available and 

make decisions based upon our highest priorities. The highest priority for me is getting our offshore fleet completed. The National 

Security Cutter is a large part of that. 

Once that decision is made and supported in the budget, then the 

top line figure determines how much of everything else we can buy. 

This pushes everything to the right. It increases the price, because 

we are not able to order an economic quantity numbers, and delays 

the implementation of our fleet plan that we started out on a number of years ago. 

The other thing it does is it increases the soft, significantly, of 

maintaining the current assets, the old ships that are out there, 

those that are 25, 30, and up to 50 years old. The maintenance 

costs on them never go down. They continue to increase and take 

a larger bite out of our operating funds. Our operating funds, if you 

look at them superficially, remain fairly stable, but the costs within 

there, whether it’s pay raises or increased maintenance on antiquated, obsolete equipment, continues to erode the buying power of 

those operating funds. 

Mr. HUNTER. So there is no maintenance offset in the President’s 

budget to make up for the cutting of your acquisition account? 

Admiral PAPP. No, sir. Within our operating funds we need to 

make sacrifices in other areas in order to be able to pay for the increased maintenance costs. 

Mr. HUNTER. So let me ask you this, then. Why do you think that 

the Administration basically canceled the Coast Guard’s acquisition 

program with this budget? 

Admiral PAPP. Well, the entire program is not canceled. We are 

continuing; but, as I said, National Security Cutter is a big one. 

Mr. HUNTER. I am being a little bit facetious. 

Admiral PAPP. Right. 

Mr. HUNTER. It is a 42-percent cut. That’s a pretty big cut. 

Admiral PAPP. I have no insight onto why that number was established. I gave my requirements. It’s a negotiation process, and 

at the end of the day I am giving a top line that I have to live within, and hopefully my priorities are reflected within that. National 

Security Cutter is a priority, because we need to get those eight 

ships constructed. 

Fast Response Cutter is another high priority, because our patrol 

boats are failing; but, given the room in the budget that was left 

over after fitting in the National Security Cutter and other priorities, we were limited to two Fast Response Cutters in that budget. 

Another one is our aircraft program. These are tough decisions. We 

completed ordering 18 of our AC–144 aircraft, our medium-range, 

fixed-wing aircraft. We are taking a pause on that. 

Mr. HUNTER. Those Air Force C–27s are looking pretty good 

right now. 

Admiral PAPP. Absolutely, yes, sir, and we are in negotiations to 

see what we can do, because that would save us a lot of upfront 

costs and I think provide us with a very capable aircraft into the 

12 

future. But with the way the language was written in the Defense 

Authorization Bill, there’s a split of those aircraft between the Forest Service and the Coast Guard. 

We are working with the Forest Service right now to see how we 

determine this, because, obviously, you have to have a certain number of aircraft to make it economically feasible to operate with your 

logistics program and training programs. 

Mr. HUNTER. Last question. So this is just looking forward with 

this budget. Let’s say that everything stays where it is. What are 

you going to have to cut back on in the coming years in order to 

move the money from operations to maintenance to take care of the 

older ships that you would have decommissioned upon getting 

newer ships? What is going to happen in the next year? In what 

way is your capability and your ability to reach out and touch 

throughout the oceans? How is it going to be limited? 

Admiral PAPP. Well, sir, you mentioned in your opening statement the fact that there are personnel losses. We could probably 

quibble over the numbers, but just as importantly as maintaining 

and getting the new equipment is sustaining our workforce. Our 

uniform personnel, just shy of 42,000, are at the level the Coast 

Guard was in 1990. 

During the 1990s, we got reduced down to 36,000 people in uniform and it was almost impossible for us to carry out our missions 

and do proper support for our training capabilities and everything 

else. It is nearly as high a priority for me as the new equipment 

to maintain that workforce, and we are doing everything we can to 

keep as many people as we can, because we depend upon our military and civilian workforce to work as a team to get the job done. 

On the personnel side, I would have to use a term that was used 

by somebody else, that we are probably at the tipping point. I think 

we have whittled away enough on our personnel that now we’re 

going to start eating into training programs. We are reducing the 

numbers of officers or cadets, potential officers coming into the 

Coast Guard Academy. We have reduced our input at Cape May to 

1500 people this year. 

As far as I know, that is the lowest we have ever brought into 

our training center at Cape May since World War II. And, commensurately, we have to reduce training staffs along the way as well. 

These have long-term impacts for us that would be difficult to recover from. Incrementally, we can make due, but as you accumulate them over the years as we have seen over the last couple of 

budget cycles with personnel, it will have a longstanding impact for 

us. 

Mr. HUNTER. Thank you, Admiral. And, before I recognize the 

ranking member, I would like to throw one thing out there. 

We would like to say that Congress did this, and we blamed this 

on sequester. And we would like to say that this fiscal environment 

that we find ourselves in, but from 2001 to 2006, the Coast Guard 

had some problems with its acquisitions program. It is questionable 

how much money just kind of went down the hole. You can say it 

is roughly $300 million just went away. 

And I think this committee and your leadership and others are 

responsible for getting that out of the trenches, again, that acquisition system back onboard. So it is a lot of people’s problem we find 

13 

ourselves right now, but it is not solely that of Congress. I just 

want to say that, and with that I recognize Ranking Member Mr. 

Garamendi. 

Mr. GARAMENDI. Thank you, Chairman Hunter. 

Admiral Papp, Chairman Hunter went through a series of questions about the acquisition programs. I am sure that he and I and 

the members of this committee will do whatever we can to try to 

restore as much money as possible to the Coast Guard overall account. It would be helpful to us—well, before I go there, I think it 

is unlikely that we are going to see restoration of the full authorization. 

For example, in acquisition construction improvement, you are authorized at $11⁄2 billion; you are down to $909 million right now. 

Assuming we have any success of restoring money for the Coast 

Guard from the President’s budget increase, it would be helpful for 

us to know your priorities. If we were able to get $1 back, where 

would you spend it? 

If we were able to get $100 million back, where would you spend 

it? So, if you could, share with us that information, probably not 

today, but in the near future so that our efforts can be targeted. 

Admiral PAPP. Well, I would be happy to address at least a large 

portion of that, sir. First of all, last year when we sent up the Capital Improvement Plan, there was no National Security Cutter 

Number 7 in it for the 2014 budget; none for National Security 

Cutter Number 8 in a subsequent budget. So I am grateful for the 

fact that we now have the money for National Security Cutter 

Number 7 in the budget. 

That was helped, quite frankly, last year by both the House and 

the Senate providing long lead money for Number 7. Getting long 

lead money in the construction of the National Security Cutter 

saves us money in the long run; gives the shipyard predictability, 

so they can plan out economically; and helps us in our negotiating 

position when we work towards the contract on the next cutter, 

after that, of course, the Fast Response Cutter. 

The shipyard is set up to construct six or receive orders for six 

Fast Response Cutters a year. We only had money for two last 

year. We are grateful that Congress put money for four more, so 

that we are potentially able to order six in fiscal year 2013. But, 

as it stands now, I only have enough money left within our acquisition counts to offer up two. 

The next dollars I would spend would be on the Fast Response 

Cutter, because ordering two per year, first of all, is below the minimum quantity. We’d have to renegotiate the contract, which ultimately ends up in a higher cost, building them at a slower rate and 

stretches out that program, probably, over the course of about 15 

years at a much higher cost as our current patrol boat fleet is failing us rapidly and we are not getting the number of hours we need 

out of them. So, continuing construction on the National Security 

Cutter and the Fast Response Cutters are my next highest priorities. 

Mr. GARAMENDI. Well, if you could assign dollar numbers to each 

of those programs so that, certainly, for me, and I suspect the chair 

also, would then have specific numbers to go to the Appropriations 

Committee and try to alter the President’s budget. 

14 

So, that would be useful. And then just your ranking; start with 

your highest ranked number of dollars, and then all the way down 

to the lowest so that your full authorization is complete. 

Admiral PAPP. Yes, sir. We will be happy to provide that for the 

record. 

[The information follows:] 

The Coast Guard and Maritime Transportation Act of 2012 

(P.L. 112–213) requires the submission of a Report containing the Coast Guard’s Capital Investment Plan and a 

list of each unfunded priority for the Coast Guard. This 

product has been drafted and is with the Administration 

for review. 

Mr. GARAMENDI. And I’m sure we will go to bat for that and see 

if we can make some progress and restore some of the cuts that are 

in the President’s budget. Personnel on the other side of it also, if 

you would take a look at that, so that we have some sense of what 

might be possible, so that we know what we can work on. 

I do have a couple of other questions. I am concerned about, Mr. 

Matsuda—excuse me. This would be for Mr. Cordero. I’ll get my act 

together here in a moment. The Title XI loan program is not funded. So what is your mission? How do you carry out your mission 

of providing support for the maritime industry? Title XI is not covered, so what are we doing here? 

Mr. MATSUDA. I would be happy to answer that, sir. 

Currently, the Maritime Administration possesses $38 million in 

carryover funding from previous years for the Title XI program. So 

the Administration did request funding to continue the program, 

continue to monitor the portfolio $2 billion worth of shipbuilding 

projects that we are overseeing. We will continue to process applications as they come in. 

Mr. GARAMENDI. So you have money from previous appropriations that have not yet been encumbered. 

Mr. MATSUDA. We do. We have enough to fund $420 million 

worth of shipbuilding projects. I will point out that there are other 

shipbuilding incentive programs that contain up to close to $3 billion worth of tax-protected funds that could be used by the private 

sector to build ships in the U.S. 

Mr. GARAMENDI. Thank you. The food program, 480 program, the 

chairman mentioned, this is his concern. I share that concern. I 

also come at this from a different perspective, and that is the availability of food in those parts of the world where there is hunger. 

And the proposal by the Administration is essentially one of purchasing food regionally rather than using American commodities 

and on American ships to be delivered to those areas. 

I don’t think it works. I’ve been at this for 40 years, and I don’t 

think it works. I am trying to figure out where the regional food 

purchasing is available. Presumably, there is a shortage of food in 

that area, so what is the region. Do you have any idea when they 

say ‘‘region’’ what is a region? 

Mr. MATSUDA. Well, I’m probably not in the best position to get 

into the specifics of the proposal. I can tell you that there will be 

an impact to the maritime industry, and we do include funding in 

15 

the budget proposal to help address any potential loss of ships, the 

U.S. flag or mariners to the mariner pool. 

Mr. GARAMENDI. Yeah. But the proposal puts that entire industry on a downhill slope to the point where it won’t exist, because 

the program doesn’t exist upon which it is based. 

Mr. MATSUDA. Well, the program in 2014 would. The proposal 

would cut it to 55 percent of the current funding level, so there 

would be some U.S.-sourced food as well as flexibility for other 

ways to implement those programs. 

Mr. GARAMENDI. And then beyond? And the succeeding years? 

Mr. MATSUDA. Well, the current proposal addresses fiscal year 

2014. 

Mr. GARAMENDI. Well, it is kind of like a short-term unemployment insurance program with no job in the future. 

Mr. MATSUDA. Well, I know that my colleagues in the Administration are certainly anxious to talk more about the specifics, especially with those that administer the food aid programs, to convey 

the details about the local purchasing part of the program. 

Mr. GARAMENDI. So, for me, there are two parts to this, two problems that have been presented by the Administration. First, the 

availability of food within a region where there is hunger and the 

impact that this might have in that area, or the unavailability of 

that food; and, secondly, the impact within the United States, both 

in agriculture as well as in shipping. These are questions that I 

have not yet received answers to from the Administration, and I 

await those answers. 

Mr. Chairman, there are about a thousand other questions, but 

I will yield back at this point. 

Mr. HUNTER. Thank the gentleman. 

Mr. LoBiondo is recognized. 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

I want to join in with the chorus and express my strong opposition to the proposed cuts in the President’s budget for the Coast 

Guard. And, as you mentioned, Mr. Chairman, a 43-percent cut in 

Coast Guard acquisition account, it is just wrong. It is just absolutely wrong. I mean we haven’t learned our lessons in the past, 

and can blame this on sequestration, if you want. But this is the 

second year in a row the President is separated from the reality of 

what the Coast Guard is expected to do. 

The budget also includes heavy cuts in training. Admiral Papp, 

you talked about this for a minute. The only Coast Guard recruit 

training center in the Nation happens to be in my district, and I 

am pretty proud of it. The work that’s being done there, it’s scaled 

back to 1500 a year. The intangible is what it is going to do to morale. The intangible is what it is going to do to our officer corps. 

The intangible is what it is going to do to the ranks of the Coast 

Guard. 

The immediate is what these cuts are going to mean to satisfy 

the needs of the Coast Guard, but it is just wrong. And, as noted 

out by the chairman and ranking member, the Administration’s decision to restructure the Food for Peace Program, I think is, again, 

absolutely wrong. These are American jobs that will be lost. This 

is American capacity that will be lost; and, again, it is a separation 

from the reality of a program that really works. 

16 

I have a couple questions, Administrator Matsuda. The fiscal 

year 2009 NDAA Bill contained language authorizing MarAd to 

draft long-sought regulations that would provide the agency with 

enforcement authority over cargo preference laws, including fines 

and debarment. The bill was signed into law in 2008, yet 41⁄2 years 

later, despite repeated promptings, urgings, cajolings, these regulations still have not been promulgated. 

With a pool of available preference cargoes in rapid decline for 

a number of various reasons, cargo preference laws are more important than ever and will help ensure the U.S.-flagged industry as 

being utilized as required by law. What is the status of this and 

what’s been the holdup, and what can we expect? 

Mr. MATSUDA. Well, we continue to work within the Administration to try and get that rulemaking into place. In the meantime, 

we try to address the problem of working with the specific agencies 

that have either historically or had reported problems in getting 

compliance with the cargo preference laws. But, in any event, we 

are fully pursuing both the rulemaking and any action we can take 

to try and gain full compliance. In many cases, we found it is simply a matter of education, that the staff of other agencies just either were unfamiliar with the law or the folks making the sourcing 

decisions. 

Mr. LOBIONDO. Is the rulemaking at OMB or MarAd? 

Mr. MATSUDA. Currently, we are developing it. 

Mr. LOBIONDO. Well, you know, I have got to say, Mr. Chairman, 

I don’t know. You know. Years and years, and we are at a critical 

juncture now. I mean, at a certain point, if you are on this side of 

the table—you are anybody in the real world—you say, the bureaucracy is wagging the dog here. I mean any prospect 2 months, 

6 months, 6 years? 

Mr. MATSUDA. I couldn’t say. I can tell you it is a top priority 

for the Maritime Administration. 

Mr. LOBIONDO. Oh. With all due respect, Mr. Chairman, I think 

that is an unacceptable answer. 

For the Commandant, my question is the Air Force recently 

made available 21, brand new, C–27 J cargo transport planes as 

excess defense articles. Could these aircraft fill any near or longterm capacity shortfalls in the Coast Guard’s ability for airlift? 

And, if so, have you informed the Secretary of Defense of the Coast 

Guard’s interest in receiving these aircraft? 

Admiral PAPP. Yes, sir. They will definitely fill a need. They will 

be a great replacement for additional AC–144s that we would have 

to buy brand new; and, frankly, they are such a capable aircraft 

that we can probably replace some of our C–130s, the older C– 

130H models, with C–27s. 

I have not spoken directly to the Secretary of Defense, but I have 

spoken to the Chief of Staff of the Air Force and the Secretary of 

the Air Force. They are well aware of our desire for those aircraft 

and support that; but the current legislation requires a split of 

those aircraft between us and the Forest Service. 14 is the minimum number that would make economic sense, because we have 

to outfit multiple air stations. We need at least 14 to do multiple 

air stations and have some for our product line in maintenance at 

Elizabeth City. 

17 

We would love to get all 21 of those aircraft, because that would 

be not only a superb aircraft, but would allow us to do more air 

stations in outfitting them. So we will continue to work with them. 

Mr. LOBIONDO. Thank you. 

And that’s it, Mr. Chairman, except I hope that we can talk further with you and any interested members of the subcommittee of 

how almost 5 years later we can’t get these rules promulgated. I 

think that is just inexcusable. 

I yield back. 

Mr. HUNTER. I thank the former chairman of the subcommittee. 

Ms. Hahn is recognized for 5 minutes. 

Ms. HAHN. Thank you, Mr. Chairman, Ranking Member 

Garamendi for convening this very important hearing today focused on the President’s budget. 

I want to thank all the distinguished guests for appearing before 

us today, Administrator Matsuda, and again my thanks to you for 

graciously coming out to Los Angeles/Long Beach, having a meeting in my office with the stakeholders at the port so that they could 

share with you some of their concerns about the future of that port 

complex. And, of course, I always want to say hello to my friend, 

Hon. Mario Cordero, and congratulate you on your appointment as 

chairman of the Federal Maritime Commission. 

And, Admiral Papp, thanks again for—you know—always remembering our Senior Chief Petty Officer Horne. Every time we 

get together we should remember him. And if there was any silver 

lining to his tragic death, it was maybe Americans began to really 

see what the Coast Guard actually does day in and day out and 

the danger that they experience. You have for so long done your 

jobs with strength and dignity, but sometimes quietly, just doing 

what you’re supposed to do. But I think his death brought it to 

light, really, the dangers, particularly since 9/11, what we are facing out there. 

So I represent the Port of Los Angeles and next door in Long 

Beach we represent probably the largest port complex. Well, we do 

in the country, and really in the world. And so one of my priorities 

is, of course, to keep that complex running safely and efficiently, 

and without disruption. So I do not know if I am misinformed, but 

I was told that we actually have no plan moving forward from either the TSA or the Coast Guard to prepare for the nearly 60,000 

port workers who will need to renew their TWIC badges this year. 

I met last week with the director of security for the Port of Long 

Beach, and he stated that he is concerned that this event, the renewal of these badges, has the potential to completely shut down 

the entire Port complex. Longshoremen would not be able to load 

goods onto the ships; truckers would not be able to access the port 

to ship their goods, and the port responsible for moving over 40 

percent of our Nation’s goods could be shut down. 

And I know there is a grace period for expiring TWIC cards, 

which I think is about 37 days, which is not nearly long enough 

to accommodate all of the workers at the port the size of the L.A. 

and Long Beach, and I know that TSA is responsible for implementing the program. But the Coast Guard has told me that 

they’re responsible for enforcing the program. So my question to 

you is what does the Coast Guard expect to do when possibly 

18 

60,000 port workers try to access the port with expired TWIC cards 

this year? 

Admiral PAPP. Ma’am, you have caught me cold on that one. 

Frankly, I am not aware of that problem, and TWIC is of significant interest to me as might be expected. 

Wherever I travel and I run into a transportation worker, I ask 

them, and I ask them about the process and how easy or difficult 

it is to get it. I was in the Rhode Island Airport just last Saturday 

night coming back here, and I was listening to a couple of merchant mariners talking about how easy it was for them to get their 

TWIC card the last time. So, all the feedback I’ve had in terms of 

getting the cards has been positive. I am not aware of this particular situation. I will find out about it immediately; and, if you 

don’t mind, will provide you the information. 

Ms. HAHN. Good. Great. And, I don’t know, David or Mario, if 

you are aware of this potential problem of all the cards or many 

of the cards expiring at the same time and the ability for us to actually process that. And, again, what do we do when they show up 

and they’ve got expired cards? What are we going to do? 

And, Admiral Papp, I appreciate you kind of not being aware 

about this. I wasn’t either until it was brought to my attention last 

week. But I thought since I had you here and we were talking 

about the budget, it might be a good opportunity to tell you that 

I think it is a problem, and I think we better figure out what we 

are going to do. 

Admiral PAPP. Yes, ma’am. One thing though is if they have a 

TWIC and if we are aware of this problem, a solution can be found, 

because part of the beauty of TWIC is having one, identifiable card 

across the entire industry that we can use instead of multiple ones. 

So it makes it much easier if there is a problem to come up with 

a unified position that we can take to either accept those cards, 

and know that even though the date might be expired that we continue to use it for some certain period of time until it is resolved. 

But, once again, I don’t have the detail. So we’ll have to get back 

to you. 

[The information follows:] 

(1) TSA is responsible for processing TWIC applications, 

vetting the applicants, issuing the cards, and associated 

administrative functions. 

The Coast Guard and TSA encourage TWIC holders to 

begin their TWIC renewal or application for an Extended 

Expiration Date (EED) TWIC from up to 4 months prior 

to the expiration of their current TWIC to ensure timely 

processing. 

(2) Coast Guard regulations grant an individual up to 7 

days of unescorted access without a TWIC while they 

await delivery of a replacement credential. To minimize 

business disruptions, the Coast Guard also developed a 

policy which allows owner/operators of MTSA regulated 

vessels, facilities, and OCS facilities to extend this provision an additional 30 days (37 days total), for workers who 

have applied for a TWIC renewal prior to its expiration, 

19 

and through no fault of their own, are not able to take possession of their TWIC due to a significant delay in the application, production, issuance, and/or activation process. 

The Coast Guard will continue to consider and evaluate 

the impact and effectiveness of this policy to meet challenges while ensuring a secure and reliable TWIC program. To date the Coast Guard is not aware of any facility 

that has had to shut down operations due to workers being 

unable to obtain replacement TWICs. 

Ms. HAHN. Great. Well, when you come up with a plan, let me 

know. 

Admiral PAPP. Yes, ma’am. 

Ms. HAHN. Thank you. Thank you, Mr. Chairman. 

Mr. HUNTER. Thank the gentlelady, and just some information I 

didn’t know this either. TSA has—you can get a 3-year extension 

while you are waiting for the readers for the badges right now. 

They are trying to do that. If there is no reader and you don’t have 

the badge for the reader, you can get an extension. 

So, now, we all know that, at least we can go from there. With 

that, Mr. Southerland is recognized for 5 minutes. 

Mr. SOUTHERLAND. Thank you, Mr. Chairman. 

I would like to thank each of you for being here today. As I listen 

to the discussion regarding the budget, I try to keep everything in 

context. And I know it is clear you are performing a constitutional 

requirement of Government to provide for the security. You do 

that. You do that well and I am bothered, as other Members have 

expressed today. 

I am bothered by the disproportionate cuts that you seem to take 

regarding the overall budget, but also in acquisition, the 42. As a 

business owner, 42 percent is I think unreasonable. I know in the 

last year we have heard a lot of people say that a 1.3-percent cut 

to food stamps is cruel, and when food stamps have increased 50 

percent in the last 4 years. The 2-percent sequestration, we have 

heard that characterized; but, a 42-percent cut, I don’t know anyone who thinks that that is—well, no one here today thinks that 

is proper. 

I couldn’t help, Admiral, you had mentioned over the last few 

moments, you mentioned forestry several times. I happened to sit 

in a forestry hearing last week, because I serve on the Natural Resources Committee. You can understand. When I hear that 42 percent cut in acquisition, you can imagine what is going through my 

mind when I recall that hearing last week when the Forestry Service came to us and asked for in the President’s budget a 58-percent 

increase in land acquisition. 

So when we are talking about really understanding the budget 

in its entirety, when we see that part of the President’s budget is 

asking for this massive increase to buy more land, they already 

own 12 million acres in the United States; and, yet, you have a 

constitutional responsibility to provide for the security of this country. You can imagine my bewilderment at the consistency here. 

How do you come to that conclusion? I don’t understand that. 

And so I am bothered that we are looking at such—really, draconian is the word that seems to be used up here oftentimes. But 

20 

when you are talking about a 42-percent cut in acquisition for a 

constitutionally mandated program, and then we are looking at a 

58-percent increase in land that we can’t even manage now, and we 

are asking for more. And to whom much is given, much is expected. 

I am just curious. 

I mean, in any of your careers have you known a 42-percent cut 

in a department? Mr. Matsuda? 

Mr. MATSUDA. You know. I have been in Washington about a 

decade or more. I have seen quite a bit. You know. 

Mr. SOUTHERLAND. I know that is an unfair question and I hate 

that I even have to ask it. I hate that I am even put in the position 

to have to ask you that, but that just seems to me to be an outlier. 

It just seems to be—you know. And, look. I am a fiscal hawk. OK? 

But I do believe as a business owner in gradual phasing in and 

phasing out, and this just seems to be off the chart. And I can’t 

help but focus on it. 

Again, I don’t want to put any of you in a bad situation, but, so 

why don’t we just leave this as a comment and not a question. I 

think you all, probably all four, would like that. 

Let me ask you a quick question, Mr. Matsuda, on the small 

shipyards. In your experience, since you’ve been here, has this program over the years had job producing effects to our domestic shipyards? And if someone asked you that question before, I apologize. 

I may not have heard it. 

Mr. MATSUDA. This is a good program. We have administered the $9.5 million that was provided by Congress for this year. It is currently out there. We are receiving applications for this round, but 

the past several rounds, including the Recovery Act amount of $98 

million, we continue to administer all of these grants around the 

country. They are to help modernize our shipyards with new equipment, with training programs for the workers; and what I have 

seen is that they tend to have longer term impacts where there are 

really investments in the long-term competitiveness of our small 

shipyards. 

Mr. SOUTHERLAND. OK. So that is obviously good for jobs and 

makes us far more competitive as we compete in this global market. 

Mr. MATSUDA. Yes. 

Mr. SOUTHERLAND. Great. Thank you. 

My time has expired, Mr. Chairman. I yield back. 

Mr. HUNTER. Thank the gentleman. 

Mr. Larsen is recognized. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Mr. Matsuda, the answer to the last question is yes, especially 

in places like my district. But with regard to the Jones Act, the 

committee enacted a part of the Coast Guard Authorization Bill, a 

provision designed to encourage the use of U.S. flight vessels prior 

to issuance of administrative waivers of the Jones Act. 

First, have any Jones Act waivers been requested or approved 

since the enactment of the new law, and are any being contemplated by the Administration? 

Mr. MATSUDA. Sir, as you know, the Customs and Border Protection is the agency that administers the waivers of the Jones Act at 

this time. I am not aware of anybody seeking any waivers. I do 

21 

know that a waiver was sought after Superstorm Sandy hit in 

order to allow additional fuel shipments to be brought in to the 

Northeast, and we worked with the U.S.-flag industry to try to find 

available vessels, first and foremost, which is always our priority. 

And, secondly, when a waiver was requested and issued, we 

worked with the Customs and Border Protection to include a reporting requirement so that we could see exactly which foreign-flag 

ships were carrying what, when and where, and that made a big 

difference in being able to administer those waivers and enforce 

them, and fully assess the need for any future ones. 

Mr. LARSEN. Mr. Cordero, can you explain a little better what 

FMC is doing independently of other Federal agencies to increase 

exports in the U.S.? 

Mr. CORDERO. Thank you for your question, Congressman. As I 

indicated in my opening statement, that is a priority. We are working with other agencies to work on that question. As an example, 

with USDA, I mentioned the OSCAR program with regard to our 

in-house agency issues. 

With regard to that, we are trying to make the whole export 

process easier when it comes to the bureaucracy, as an example, 

the paperwork related to negotiated rate agreements that we just 

passed; and, also address specifically the question of container 

availability. As you know, the FMC, a few years back, addressed 

that issue. And as I mentioned Commissioner Rebecca Dye’s factfinding study in effect was relevant to the availability issue, which 

of course is a big question when it relates to our exports and to 

make sure that we have an efficient export transportation process. 

Mr. LARSEN. All right. Thanks. Admiral Papp, last year the Coast Guard requested $8 million for 

survey design activities for a new icebreaking fleet. This year they 

request $2 million. Can you give me a little insight into why there 

is less money being requested this year? And would you characterize that as a step back from the commitment to developing icebreakers? 

Admiral PAPP. No, sir. It signals increased commitment. The fact 

of the matter is we tried to exercise some good stewardship as we 

were going through the protracted, continued resolution; and, we 

were not able to execute on a new project. Of course, we are halfway into the year by the time we got an approved budget. So, looking at carrying over some of that $8 million in the 2013 budget into 

2014, and combined with the $2 million allows us to continue our 

work. 

I don’t think it will result in much of a setback, but we are formally committed to getting this new icebreaker built; and, as I 

said, I would have hoped that the CIP would have been up here 

so that we could look at projections. But as we go into the out 

years, there will be sequential funding to take us through, probably, a 10-year period until we have that new icebreaker produced. 

Mr. LARSEN. Right. We will look at the CIP when it gets up here 

then on that question. 

With regards to the business case analysis that we had asked for 

in the Authorization Bill regarding reactivating the Polar Sea, where are you and is the Coast Guard engaged with shipbuilders 

to determine what the cost for reactivation would be? 

22 

Admiral PAPP. I have not received a report on that recently, but 

I am anxious to get that report. If you will, sir, I can provide response for the record. We are continuing along, working on that 

study, and anxious to get that completed. And I believe we have 

to work with industry, because they give us the estimates. A bigger 

shipyard, in particular, has just worked on Polar Star and got her 

put back into shape. They have got good experience with it, and I 

will give you a better projection when I have a chance to check up 

on it. 

Mr. LARSEN. Well, if you would take that, for the record, I would 

appreciate it. I am eager for the report. In about 2 months I will 

be anxious for it. 

Admiral PAPP. Yes, sir. 

[The information follows:] 

The Coast Guard and Maritime Transportation Act of 2012 

(P.L. 112–213) requires the submission of a Report containing the CGC Polar Sea Business Case Analysis no 

later than September 9, 2013. The Coast Guard is on 

schedule to meet this congressionally set deadline. 

Mr. LARSEN. And then, finally, the OPC, continued development 

of the OPC is in the budget. I see $25 million for the Offshore Patrol Cutter? 

Admiral PAPP. Yes, sir. And that should not be interpreted as diminishing in commitment either. We just, once again, looking at 

how do we get the most out of our acquisition money coming into 

this year. We looked at unspent accounts that we can carry over 

and continue the process going. 

I am very pleased. I don’t know for sure how many responses we 

got, because I am not supposed to as we are in the acquisition process. But I am told it is somewhere between 8 and 12, which is a 

robust response for our request for proposal. We will have those 

down-selected to the final three best candidates by the end of this 

year; and, then, once we have the detailed designs on all three of 

those, we will make our down-selection in fiscal year 2015 and then 

be off to the races, hopefully, with counted on funding to get that 

ship construction. 

Mr. LARSEN. Just to clarify, that will be end of calendar year or 

end of fiscal year? 

Admiral PAPP. Fiscal year. 

Mr. LARSEN. Fiscal year. 

Admiral PAPP. Yes, sir. 

Mr. LARSEN. Thank you, Mr. Chairman. 

Mr. HUNTER. The gentleman, a former chairman of the full committee is now recognized, Mr. Young. 

Mr. YOUNG. Thank you, Mr. Chairman. 

First, I would like to remind everybody it is the President’s budget, but we write the budget, and I want everybody to remember 

that. And this cut is dramatic and I just want to know that I don’t 

support it. 

Mr. Cordero, according to published reports, morale at the FMC 

has fallen dramatically. This is your second week as the chairman. 

You may not know it, but what change will you make at the ComVerDate Aug 31 2005 10:18 Nov 20, 2014 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\4-16-1~1\80436.TXT JEAN
23 

mission headquarters to address the concerns of employees at the 

Commission to make them feel supported by your office? 

Mr. CORDERO. Thank you, Congressman. I appreciate your question. 

First and foremost, that is a high priority for us. And to answer 

your question in terms of specific actions taken, just last week we 

had an all-hands meeting at the agency. And I communicated to 

the personnel that this question is a priority for the Commission. 

Going forward, we do have a plan of action to address that issue. 

I will say, some employees feel that they are not empowered, they 

are not valued. Here, I am referring to the employees’ survey, but 

I can assure you and I can assure this committee this is a priority 

for the Commission, and we are addressing the issue. 

Mr. YOUNG. Good answer, and I appreciate it. And keep us informed of progress. 

Mr. CORDERO. Thank you, Congressman, and I appreciate the 

question. 

Mr. YOUNG. Admiral, I understand this morning you told the Appropriations Committee that you would reconsider the requirement 

for the Offshore Patrol Cutter and reopen the design competition. 

If that is correct, how long will this delay construction of much of 

the needed cutters? I mean what will happen? 

Admiral PAPP. Sir, that wasn’t quite an accurate report. I said 

that we remain committed to the Offshore Patrol Cutter, and I was 

asked if the ability to operate in sea state 5 was hard and fast. And 

I said, ‘‘The highest requirement for the Offshore Patrol Cutter is 

affordability.’’ And, as we evaluate the candidate vessels, we may 

need to go back and look at some of the requirements. I am hopeful 

that we don’t have to. 

I think we hammered out these requirements, in fact reduced 

some of them when I came to this Commandant, because I want 

to make sure this ship is affordable. And I have reported to this 

subcommittee and other subcommittees that we are intent on making this an affordable ship for the Coast Guard. 

If we had opened it up to revise the seakeeping capability, there 

probably would be a delay, but I have no intent to open that up 

at this point. We have to evaluate all the candidates that we have, 

and I am hopeful that we will find three candidates that look affordable, because we are going to need to operate this ship in Alaska, and it is going to need to be able to launch and recover boats 

and aircraft while operating in the Bering Sea. 

Mr. YOUNG. Speaking of affordability, when we built the three 

icebreakers, I found out—and you can correct me if not—a lot of 

times when something would break on the vessel because of the requirement of buying the cheapest product, sometimes, you have to 

buy inferior product to repair something in the engine room or 

something like that. That is correct? 

Admiral PAPP. I have no knowledge on that. 

Mr. YOUNG. Could you find out this, because I understood that 

one of the reasons those ships have been such a pain in the neck— 

and they were good ships when they were built, but things wore 

out. When you put onto purchase, a procurement program, you are 

required, I think by law, to buy the cheapest product that is offered 

24 

to fill the spot. That’s in case you’ve got a bastardized ship. So you 

check that out for me and get back to me. 

Admiral PAPP. Yes, sir. We will provide that to you for the 

record. 

[The information follows:] 

The Polar Class icebreakers are unique, highly complex 

vessels that operate in the most arduous maritime environment in the world. They are designed to continuously 

transit through ice up to 6 feet thick and to break through 

up to 21 feet of ice by backing and ramming. The Polar 

Class icebreakers are inherently maintenance-intensive 

due to their design and mission profile; not due to the purchase of inferior parts and services. 

All parts and services for Polar Class icebreakers have 

been purchased in accordance with the requirements of the 

Federal Acquisition Regulations. These regulations do not 

limit contract awards solely to the lowest bidder, but allow 

for a best value determination. 

Improvements to reliability, both large and small, have 

been pursued throughout the 30-year design service lives 

of these vessels, culminating in the recent completion of 

the reactivation of USCGC Polar Star (WAGB 10). This 3- 

year project included numerous major system upgrades 

that specifically targeted low reliability/high-cost-to-repair 

systems for renewal. 

The Coast Guard’s challenge is to effectively maintain 

these aged vessels beyond their design service lives when 

the original vendors for many shipboard systems have long 

been out of business. In some cases, the existing technical 

documentation may not allow a new vendor to reverse engineer obsolete components. When reverse engineering is 

possible, there are long lead times and high production 

costs associated with these custom fabrication projects. 

Mr. YOUNG. Forest Service, I happen to agree with the gentleman, Mr. Southerland. I will do everything in my power to make 

sure you get those airplanes. 

Mr. Chairman, I want you to remember this is the right way to 

go. The Forest Service is a lousy agency right now. They are not 

doing anything but playing with themselves. They don’t do anything, and they want 121⁄2 million acres of what? And I’m saying 

this is wrong. You need these. So we can get them to you. 

And I think we ought to pressure the appropriate committees 

and Appropriations Committee to make sure that the Coast Guard 

gets these aircraft instead of the Forest Service. They are letting 

their timber burn. They have burned 9,600,000 acres of trees last 

year, and if you add that up, it’s over 900 million barrels of oil, because there is 100 barrels of volatility on each acre. And they say 

they are managing. 

They are not managing; and, trying to put out fires, where if 

they would let us log and cut it, it would be all right and get it 

done. But I just wanted you to know I feel pretty strongly about 

25 

it. Are you up to speed as far as the Coast Guard reimbursement 

because of the rise in spill? Are you pretty much working with the 

BP or whoever is involved here? 

Admiral PAPP. For the Deepwater Horizon? 

Mr. YOUNG. Yes. 

Admiral PAPP. Yes, sir. We have been involved with the Justice 

Department all along and are participating in that. 

Mr. YOUNG. And are you receiving money? 

Admiral PAPP. Yes, sir. Money. There has been reimbursement 

for our services along the way, and also the Oil Spill Liability Trust 

Fund. 

Mr. YOUNG. But, in your case, you use it for the Coast Guard, 

I hope. 

Admiral PAPP. There has been no direct reimbursement to us. I 

believe everything that is reimbursed goes into the general treasury. 

Mr. YOUNG. Well, that is our fault, Mr. Chairman. I mean you 

spend it. It takes it out of your budget. It takes away from your 

other duties. You ought to be able to get reimbursed. So we will 

talk about that later. Thank you. I yield back. 

Mr. HUNTER. I thank the gentleman. Mr. Cummings is recognized. 

Mr. CUMMINGS. I agree with Chairman Young. We need to figure 

out a way, Admiral, to deal with that, what you just talked about, 

this whole idea, Deepwater Horizon and reimbursement money. I 

take it that is what you are talking about. 

Admiral PAPP. Yes, sir. 

Mr. CUMMINGS. The question you just answered? 

Admiral PAPP. Yes, sir. 

Mr. CUMMINGS. OK. First, let me say I oppose the cuts proposed 

to the Coast Guard’s budget and the President’s request. The request would cut the Coast Guard’s acquisitions budget by more 

than $600 million, cut the operating budget by more than $56 million, and reduce the end strength by hundreds of servicemembers. 

The terrible events in Boston, yesterday, demonstrate that our 

homeland remains at risk, and yet we are confronted with a budget 

that would result in real deductions in the Coast Guard’s capabilities. This budget demonstrates as vividly as possible how senseless 

sequestration is and how its effects in the form of loss, even capabilities, and delayed acquisitions will ripple for years to come. 

We cannot continue to stretch the Coast Guard and assume that 

it will still be able to complete all of the missions we have assigned 

to it, and I deeply appreciate the candor and leadership of Admiral 

Papp that you have shown in identifying the Service’s challenges. 

You know I have tremendous amount of respect for you. We have 

worked closely together to bring the Coast Guard to where it’s 

come to after having some real problems. And I don’t want to see 

us lose our progress. 

Now, it is up to the Congress to listen to what we are being told. 

If we continue to cut the Coast Guard’s budget, we need to identify 

those missions it will no longer be expected to perform, including 

those areas it will no longer be expected to guard, those boats will 

no longer be expected to inspect, and those patrols it will no longer 

be able to conduct. That’s real. 

26 

Ladies and gentlemen, when you have cuts there are consequences. I am also deeply concerned by measures proposed in the 

Administration’s budget that would have devastating consequences 

for our Merchant Marine. In 1975 we had 857 ocean-going ships 

under the United States flag, according to a 2009 study produced 

by IHS global insight for the U.S. Maritime Administration. Today, 

there are approximately 100 ocean-going vessels in the U.S. flag, 

and they carry barely 2 percent of our commercial cargoes. 

Ladies and gentlemen, we are not just slipping. We have slipped. 

It is ridiculous the downward spiral that we have in that area. 

Sadly, we haven’t even developed policies that will reverse this decline. Recent policy developments threaten only to drive more vessels away from our flag. As we are all aware, Section 100124 are 

MAP–21 legislation. A provision slipped into the Highway Bill in 

the dead of night, reduce the amount of U.S. food aid required to 

be carried on U.S.-flag ships from 75 percent to just 50 percent. 

Something is absolutely wrong with that picture, Mr. Matsuda. 

In the last Congress I introduced legislation to reverse Section 

100124. I intend to introduce that legislation again with Congressman Scott Rigell. And I thank my colleagues on the subcommittee 

for their support. 

Now, the President’s budget would significantly change the food 

program, the Food for Peace Program, while we are still examining 

specifics of the proposal, to shift funds away from Public Law 480 

and to allow some measure of available funding to purchase food 

in recipient nations or even to provide cash transfers, the budget 

also provides $25 million per year for ‘‘additional targeted operating subsidies for militarily used vessels,’’ and states that ‘‘Worker 

adjustment would be available for the remaining eligible mariners.’’ 

Now, Mr. Matsuda, I must tell you I am concerned about your 

performance, and there are a lot of people that are concerned about 

your performance. And I don’t usually make these kinds of statements, but if they don’t tell you, I am telling you. And, so, I want 

to know why does the Administration believe it would be sufficient 

to subsidize seafarers to allow them to maintain the unlimited deep 

ocean credentials, if there is no cargo or ship for them to sail on? 

And then I want you to tell us what you are doing with regard 

to what our last reauthorization said, that just would be fostering, 

promoting and developing the merchant and maritime ministry in 

the United States. I want to know what you are doing. I want to 

know what you are doing to make that happen, because, I am telling you, I am getting very, very frustrated. 

Mr. Chairman, if he could just answer my question, I will yield 

back. 

Mr. HUNTER. You have all the time in the World, Mr. Cummings. 

Mr. MATSUDA. Thank you, Congressman. 

Well, first, let me say that the U.S. Merchant Marine has 

throughout history and currently been able and willing to carry 

whatever, whenever, a cargo’s needed. This proposal by the Administration is not about—the intent was not to cut cargo opportunities. I think that is a second order effect. Their primary goal is to 

reform the way that the food aid programs are administered, and 

we understand there will be an impact to the U.S. Merchant Marine. 

27 

There is funding, and I would say this is the first time new funding for a new incentive program has been proposed in a very long 

time for the U.S. Merchant Marine. We recognize that we have to 

do whatever we can to try to retain those vessels and those crews 

as mariners are extremely valuable, both to the commercial industry and to the U.S. when we need them to crew up, reserve Government-owned vessels. 

Mr. CUMMINGS. One last question, Mr. Chairman, just one question. 

And I will get to some substance, but you need to answer this 

one. You talked about, a few minutes ago, after Sandy. You said 

there were waiver requests, and I think you said you all monitored 

the ships to see who was available and all that kind of thing. What 

success did you have making sure that oil was carried on U.S. 

ships? Tell me about the success, because that is your job. 

Mr. MATSUDA. Absolutely, sir. I can tell you that since I have 

been here, we have completely—— 

Mr. CUMMINGS. You were not talking about that, the one that 

you talked about. 

Mr. MATSUDA. That’s right. 

Mr. CUMMINGS. OK. 

Mr. MATSUDA. I am talking about the way that the Jones Act has 

been administered by this administration. In previous administrations, when a President signs a waiver of the Jones Act, it has been 

either so broad or with no transparency that we heard reports that 

after Hurricane Katrina there were vessels on the west coast, foreign flag, carrying cargoes between U.S. ports. 

What we have attempted to do is bring more transparency to the 

process to make sure if a waiver is administered, it is done in a 

way so that the public can see what is going on, who is carrying 

what. But, our primary goal, and especially in the aftermath of 

Superstorm Sandy, was to find all available vessels to bring fuel 

into the Northeast to prevent—— 

Mr. CUMMINGS. How many? Just tell me. I am begging you. How 

many vessels carried the oil, U.S.-flag vessels? And how many 

waivers were given? 

Mr. MATSUDA. Every available U.S. flag—— 

Mr. CUMMINGS. No. You are not answering my question. You 

should know that. You know that that is a priority for many of us 

in Congress. Please answer my question. How many vessels? 

Mr. MATSUDA. I am answering it, sir. 

Mr. CUMMINGS. Yes. Was it one? Two? Three? And how many 

waivers? One? Two? Three? Give me some numbers, and then I am 

finished, Mr. Chairman. 

Mr. MATSUDA. It was every available U.S.-flag vessel and then 

11 additional foreign-flag vessels brought fuel into the Northeast in 

the aftermath of Hurricane Sandy. 

Mr. HUNTER. I thank the gentleman for his questions. 

I have got a couple of questions to close with here, Administrator 

Matsuda. I am sure that there was analyses done when you were 

arguing against changing the Food for Peace Program. Right? So 

when you did your analysis on that, and MarAd did its analysis on 

that, how many international U.S.-flag ships did you figure we 

would lose by losing the Food for Peace Program? 

28 

Mr. MATSUDA. Well, the challenge in developing policy proposals, 

sometimes, you don’t always have the information you need in 

front of you. But we know that there are 50 vessels that carry some 

food aid currently in the last year for which we have data. Twenty 

of those are a part of the Maritime Security Program, and an additional 30 carried some food in to some extent. 

We believe that is the pool of U.S.-flag vessels that could be at 

risk. Now, keep in mind that 55 percent of the funds would still 

be proposed in fiscal year 2014 for U.S.-based food aid. So these are 

funds that would still continue to see U.S.-sourced food aid on U.S.- 

flag ships subject to the cargo preference rule. 

Mr. HUNTER. But there is $25 million set aside and there is $186 

million in the NMSP for 60 ships, roughly. Right? And there is $20 

million for the remaining 30 that are Food for Peace ships that are 

not in the MSP, those 20. Right? So that leaves about 30 that 

would be affected purely by Food for Peace. I think you have about 

$25 million associated with them in the budget. Right? 

Mr. MATSUDA. Well, the $25 million proposal is something that 

we feel we do need dialogue with the industry to ensure that we 

offer incentives that will continue to attract and retain, as much 

as possible, as much militarily useful vessels and U.S. mariners as 

possible. 

Mr. HUNTER. How many ships is that, roughly, based on your 

analysis? How many ships out of that 30 will $25 million keep you? 

Mr. MATSUDA. It really depends on the type of incentive. I would 

say for comparison purposes, the Maritime Security Program, a 

portion is currently $3.1 million per vessel. So that would be about 

eight vessels; however, that does rely upon available cargoes to ensure that these vessels can stay commercially viable. 

Mr. HUNTER. So, I think you realize from the committee and the 

feedback that we are going to try to save the Food for Peace Program for basic industrial capability and capacity for our shipbuilders, our operators, our mariners and industry in general. 

So, let us move on. Last thing, Title XI. I think Ranking Member 

Garamendi asked about it, and you said that there is plenty of 

money there, right now. How many Title XI loans has the Administration given out, let’s say, last year? 

Mr. MATSUDA. In the past year? 

Mr. HUNTER. Yeah. 

Mr. MATSUDA. I am not sure I have that in front of me. I do 

know that in all over a half billion dollars’ worth of projects have 

been approved in the previous 4 years. 

Mr. HUNTER. So, 4 years, $500 million. So it is a magnitude of 

10, roughly. Right? You get 10 times the amount in loan guarantees? What is the number you use as your multiplier? 

Mr. MATSUDA. Well, it is a pretty complex formula; somewhere 

between 5 and 20, I think. Is that fair? 

Mr. HUNTER. OK. 5 and 20, so there is $38 million there now. 

Right? This is your calculation that I am reading, so there is $38 

million in Title XI loan subsidies. That equals $420 million in 

available loan guarantees. So I just did a factor of 10. Is that OK 

to do? 

Mr. MATSUDA. Yeah. That’s fair. 

29 

Mr. HUNTER. OK. So let’s say it is 10. Right? So if you wanted 

about a billion dollars, which is what we think it would be if you 

had a billion dollars’ worth of loan guarantees to really kick-start 

the industry, that would mean having about $70 million added to 

that $38 million that’s in there now. That would give you about a 

billion dollars in loan guarantees. Is that right? 

Mr. MATSUDA. I believe so. 

Mr. HUNTER. So based on your analysis, what do you think it has 

to be to really kick-start the commercial industry? 

Mr. MATSUDA. Well, the Title XI program, it simply helps cover 

the cost of capital. There still has to be a market for these new 

ships to be built in. We have heard from some members of parts 

of the industry that they are interested in availing themselves of 

the program, and we have seen some Jones Act vessels start to 

commence design and construction. 

So we do anticipate some interest in the program, but again it’s 

a capital program, and we can only incentivize so much. But we try 

to make sure we can use every available dollar to build as many 

vessels in U.S. yards as we can. That’s the real purpose. 

Mr. HUNTER. You know. To get efficiencies and scale, and in 

building you have to do more than one. And if you have a $400 million ship or a $200 million ship, and you only have a billion dollars 

available, that means that for a $200 million ship, you can build 

five. Right. You can get a loan for five. 

Mr. MATSUDA. True. There are smaller vessels that are built in 

U.S. yards where they can build that many in scale, but we have 

seen as far as orders come in for the larger vessels, they come in 

in ones and twos. 

Mr. HUNTER. With that, let me thank the panel for your time, 

for your service to your Nation. And the committee is adjourned. 

The hearing is adjourned. 

[Whereupon, at 3:57 p.m., the subcommittee was adjourned.] 

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Æ 


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