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MARITIME TRANSPORTATION REGULATIONS: 

IMPACTS ON SAFETY, SECURITY, JOBS, 

AND THE ENVIRONMENT, PART 1 

(113–34) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 10, 2013 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

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 

MARK SANFORD, South Carolina 

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 

MARK SANFORD, South Carolina 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

LOIS FRANKEL, Florida 

CORRINE BROWN, Florida 

JANICE HAHN, California 

NICK J. RAHALL, II, West Virginia 

(Ex Officio) 

(III) 

CONTENTS Page 

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

TESTIMONY 

PANEL 1 

Rear Admiral Joseph A. Servidio, Assistant Commandant for Prevention Policy, United States Coast Guard .......................................................................... 4 

Hon. Mario Cordero, Chairman, Federal Maritime Commission ......................... 4 

Hon. Paul N. Jaenichen, Maritime Acting Administrator, Maritime Administration ................................................................................................................... 4 

PANEL 2 

Thomas A. Allegretti, President and CEO, The American Waterways Operators ........................................................................................................................ 24

Captain William G. Schubert, USA Maritime ....................................................... 24 

Kenneth D. Franke, President, Sportfishing Association of California ............... 24 

Geoffrey C. Powell, Vice President, National Customs Brokers and Forwarders Association of America .......................................................................... 24 

Rear Admiral Rick G. Gurnon, USMS, President, Massachusetts Maritime 

Academy, on behalf of the Consortium of State Maritime Academies ............ 24 

Patrick L. Wojahn, Public Policy Analyst, National Disability Rights Network, 

on behalf of the Consortium for Citizens With Disabilities Transportation 

Task Force ............................................................................................................ 24 

PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS 

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

PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE 

RECORD SUBMITTED BY WITNESSES 

Rear Admiral Joseph A. Servidio: 

Prepared statement .......................................................................................... 45 

Answers to questions from Hon. John Garamendi, of California ................. 51 

Hon. Mario Cordero: 

Prepared statement .......................................................................................... 55 

Answers to questions from Hon. John Garamendi, of California ................. 61 

Hon. Paul N. Jaenichen: 

Prepared statement .......................................................................................... 66 

Answers to questions from Hon. John Garamendi, of California ................. 70 

Thomas A. Allegretti: 

Prepared statement .......................................................................................... 75 

Answers to questions from Hon. John Garamendi, of California ................. 84 

Captain William G. Schubert: 

Prepared statement .......................................................................................... 88 

Answers to questions from Hon. John Garamendi, of California ................. 102 

Kenneth D. Franke: 

Prepared statement .......................................................................................... 104 

Answers to questions from Hon. John Garamendi, of California ................. 108 

Geoffrey C. Powell: 

Prepared statement .......................................................................................... 113 

Answers to questions from Hon. John Garamendi, of California ................. 122 

Rear Admiral Rick G. Gurnon: 

Prepared statement .......................................................................................... 126 

Page

IV 

Rear Admiral Rick G. Gurnon—Continued 

Answers to questions from Hon. John Garamendi, of California ................. 132 

Patrick L. Wojahn: 

Prepared statement .......................................................................................... 134 

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

SUBMISSIONS FOR THE RECORD 

Rear Admiral Joseph A. Servidio, Assistant Commandant for Prevention Policy, United States Coast Guard, responses to requests for information from 

Hon. Elijah E. Cummings, of Maryland, regarding: 

Why the Coast Guard has not implemented promotion selections by specialty despite being granted authority to do so by the Coast Guard 

Authorization Act of 2010 ............................................................................ 17 

The amount of time and resources the Coast Guard would need to carry 

out in-water trials on survival craft ............................................................ 22 

ADDITION TO THE RECORD 

National Customs Brokers and Forwarders Association of America, statement 

in response to hearing remarks made by Hon. Mario Cordero, Chairman, 

Federal Maritime Commission, regarding Ocean Transportation Intermediary (OTI) licensing and bonds ..................................................................... 146 

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(1) 

MARITIME TRANSPORTATION REGULATIONS: 

IMPACTS ON SAFETY, SECURITY, JOBS, AND 

THE ENVIRONMENT, PART 1 

TUESDAY, SEPTEMBER 10, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:33 a.m., in Room 

2167, Rayburn House Office Building, Hon. Duncan Hunter (Chairman of the subcommittee) presiding. 

Mr. HUNTER. The subcommittee will come to order. 

The subcommittee is meeting today to review regulations affecting the maritime industry, and we are interested in how the implementation of these regulations is impacting vessel safety, the flow 

of commerce through our ports, and the ability to grow jobs in the 

maritime sector. 

The Coast Guard, Federal Maritime Commission, and Maritime 

Administration have broad authority to regulate maritime commerce, including establishing and enforcing rules to ensure vessel 

and passenger safety, protect consumers, and promote the U.S.-flag 

industry. With such vast authority comes great responsibility to 

regulate industry in a manner that is fair and does not stifle competition and job growth. 

This hearing is the first of a two-part hearing focusing on ensuring these agencies are meeting that responsibility. Today’s hearing 

will review pending rules impacting the safety and security of our 

ports and waterways, as well as the regulations affecting business 

practices and the viability of the U.S. flag. On October 10th, we 

will reconvene to review environmental regulations impacting the 

maritime sector. 

Maritime commerce is essential to the U.S. economy. While regulations must address concerns related to safety, security and stewardship, they must also balance the importance of maintaining the 

free flow of maritime commerce. Domestic shipping alone is responsible for over 500,000 American jobs and $100 billion in annual economic output. In addition, 90 percent of all global trade and over 

25 percent of our GDP moves via the sea. With the economy still 

in a fragile state, it is imperative that the Federal Government foster an atmosphere where our maritime industry can compete and 

expand. 

2 

To that end, I am concerned about the cost and impact of several 

rulemakings that will affect the maritime sector; specifically forthcoming Coast Guard regulations affecting the commercial and recreational fishing industry will place significant economic burdens 

on these small businesses. 

I am also concerned that the proposed rules by the FMC are misguided and will do little to further consumer protections, but will 

impose enormous regulatory burdens and costs on business. If 

these and other rules are not written and executed in a commonsense manner, I am concerned they could make it financially impossible for the U.S. maritime sector to expand and grow jobs. 

The Maritime Administration’s mission is to foster, promote, and 

develop the merchant maritime industry in the United States. In 

2008, Congress strengthened the agency’s ability to fulfill that mission by ensuring it could properly enforce our cargo preference 

laws. Unfortunately, the administration continues to drag their feet 

and refuses to promulgate rules to implement the law. Meanwhile, 

the number of ships flying the U.S. flag in the overseas trade continues to dwindle. The inaction on implementing the 2008 law, coupled with the President’s misguided efforts to restructure the Food 

for Peace Program has left me baffled. It would appear by their actions that this administration simply does not understand or care 

about the very critical role the U.S.-flag industry plays in expanding our economy and ensuring our national security. 

If we want to grow our economy and remain a world power capable of defending ourselves and projecting power for ourselves and 

our allies, we must work together to strengthen and preserve our 

maritime industry. 

I thank the witnesses for appearing today and look forward to 

their testimony. 

With that, I yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Mr. Hunter, this is remarkable. We are actually, Democrats and Republicans, agreeing. I would make a statement here, and I will read it, but it is exactly the same direction 

you are going, and that is to ask what we must do to strengthen 

our maritime industry. And we are really together here. 

You know, I am going to read this thing because it is really a 

brilliant statement written by my colleague here to the right. But 

the bottom line of it is we are going to do everything necessary, including legislation, to make it happen, to really build the American 

maritime industry. And there are many, many pieces to that. We 

talked about it. I heard you speak this weekend in Los Angeles on 

that issue, Mr. Hunter. I followed you. We are in unison here. And 

so our message is today, tomorrow, and every day beyond is that 

we are going to use this subcommittee to strengthen the American 

maritime industry. 

Now, to read a brilliant statement. Maybe I won’t read all of it. 

You said, Mr. Hunter, you laid out the facts of the importance of 

maritime to the American economy. I won’t repeat all of that. But 

for the Coast Guard, you have got a real challenge out ahead of 

you. And we are concerned about the fact that the regulations that 

you have been hanging onto for the last 2 years haven’t been forthcoming. Why? That is a question. When it comes your turn, I would 

like you to answer that. 

3 

Specifically, it seems to be stuck. A neat little statement, I got 

to hand it to my colleague—my staff here, a back eddy. We love 

that, don’t we? A back eddy. You are stuck, these regulations seem 

to be stuck in a back eddy. What is going on? And we are talking 

here specifically about the Towing Vessel Safety Rule. Normally 

these things get stuck in a back eddy because of opposition from 

the industry. That is not the case. Industry wants it. Why hasn’t 

it moved? 

With regard to the Federal Maritime Commission and the Maritime Administration, why haven’t you been enforcing the laws 

about American cargo? What is going on here? What is happening? 

Is it the MarAd or is it someplace else? I just left a lengthy meeting with the White House Chief of Staff McDonough. It was on 

Syria. But is that where it is stuck? Are we getting blowback from 

the administration? Are we getting blowback from the Department 

of Transportation? Why are we not enforcing the laws with regard 

to American cargo and the shipment of it? What is going on here? 

What is happening? 

All of these issues we need to pursue. And, frankly, it is our task, 

I think, as a committee to also pursue a maritime policy, to lay out 

clearly what the maritime policy is for the United States. What is 

it that we need to accomplish? Are the rules, are the laws unclear? 

Are they fractured, different pieces that are not coherent and coordinated in a way that makes sense? 

I know I am going to pursue this, I know Mr. Hunter has great 

interest in this also. And we need clarity of American policy and, 

frankly, we need the money to back it up. A little later this week, 

maybe even as early as Thursday, there is going to be a CR on the 

floor. That continuing resolution, is it going to provide the money 

necessary to carry out the task? And I know that MarAd is short 

a third of the money they need to carry out their tasks. This is an 

issue for us. Are we going to provide the money necessary to carry 

out the American policies with regard to the maritime industry? 

And there is a host of them. 

Apparently, based on the resolution that is likely to be on the 

floor, the answer is no, because it does not provide the money necessary to carry out the American policies with regard to the maritime industry. That is us, and we have our obligations here, but 

this is really about those of you that are testifying today. 

I am going to ask that my brilliant statement written by my staff 

be entered into the record, and I will let it go at that. 

Mr. Hunter, you and I have other obligations in the armed services, so you want to play back and forth here? 

Mr. HUNTER. Yeah. 

Mr. GARAMENDI. I will run and go and listen for a while and then 

I will come back. 

Mr. HUNTER. Yeah. Switch off. 

Mr. GARAMENDI. We will go back and forth and hopefully carry 

on the obligations of this committee. With that, I yield back whatever time is left here, ask that my statement be written into the 

record, and we will go from there. 

Mr. HUNTER. Without objection. Thank the gentleman. 

And, you know, it is great to see at least some of us getting along 

and working together towards the same end. It is a good thing. 

4 

And I think John would agree, if you control the oceans, you control the world. And we are a maritime Nation, and we need to 

make sure we stay strong. 

So we are going to go have to step out. Mr. Southerland from 

Florida is going to take my place in a little bit. Not that the other 

witnesses are any more important or less important than you, but, 

you know, Syria is on everybody’s mind, and that is the committee 

hearing. Right now we have Secretary Kerry and Chuck Hagel and 

Martin Dempsey, too, in that hearing going on right now. So, unfortunately, we are going to have to step out and come back. 

Mr. GARAMENDI. Mr. Chairman, my place will be held by Congresswoman Hahn when she arrives. I will stay until she gets here. 

Mr. HUNTER. Thank you. 

On our first panel of witnesses today are Rear Admiral Joseph 

Servidio, Assistant Commandant for Prevention Policy at the 

United States Coast Guard; the Honorable Mario Cordero, Chairman of the Federal Maritime Commission; and the Honorable Chip 

Jaenichen, Acting Administrator of the Maritime Administration. 

Admiral Servidio, you are recognized for your statement. 

TESTIMONY OF REAR ADMIRAL JOSEPH A. SERVIDIO, ASSISTANT COMMANDANT FOR PREVENTION POLICY, UNITED 

STATES COAST GUARD; HON. MARIO CORDERO, CHAIRMAN, 

FEDERAL MARITIME COMMISSION; AND HON. PAUL N. 

JAENICHEN, MARITIME ACTING ADMINISTRATOR, MARITIME ADMINISTRATION 

Admiral SERVIDIO. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and distinguished members of the subcommittee. It is my pleasure to be here today to discuss the Coast 

Guard’s regulatory program. 

The Coast Guard’s regulatory program focuses on managing maritime risks through the establishment of proficiency, safety, and security standards to protect life, property, and maritime and coastal 

environments. Key objectives of our regulatory program are to ensure our regs are reasonable, they do not impose an undue burden 

on waterway users and industry, and they facilitate the safe and 

efficient flow of commerce. 

To meet these objectives, the Coast Guard continues to build 

upon our regulatory development program, which includes improving our professional workforce, strengthening transparency, 

streamlining processes, and carefully scrutinizing regulatory actions to ensure they achieve desired outcomes. 

These efforts and the notable support of this subcommittee have 

yielded positive results. For example, last Friday the Coast Guard 

submitted a final rulemaking on nontank vessel response plans, establishing standards for oil pollution response plans for over 15,000 

vessels. In March, we published the Notice of Proposed Rulemaking 

for the Transportation Worker Identification Credential, or the 

TWIC readers. This rule proposes requirements for biometric-capable readers on designated high-risk facilities and vessels, as required by the Maritime Transportation Security Act. 

We are in the final phase of the Standards for Training, Certification and Watchkeeping, or STCW rulemaking, which as proposed 

5 

would align U.S. mariner standards with those established internationally through the International Maritime Organization. 

Throughout the rulemaking process, the Coast Guard ensures 

that we engage with industry to address concerns and minimize 

unreasonable costs and disruptions. For example, as we continue to 

work towards a final rule for towing vessel safety, we have actively 

engaged with the towing industry to implement the voluntary compliance program. In 2009, we started a towing vessel safety bridging program to assist towing vessel operators and owners in meeting the new inspection requirements. We have worked with industry to monitor and refine the program, and thus far in the Coast 

Guard’s Eighth District, over 3,600 industry-initiated voluntary inspections have been completed, representing over 95 percent of the 

entire fleet within the district and the majority of towing vessels 

nationwide. 

These types of programs are vital parts of our Coast Guard commitment to working with industry to implement rules that help 

achieve desired safety, security, and environmental outcomes, enable a more level playing field, and provide better support for U.S. 

companies, and enhance maritime global competitiveness. 

While we continue to build on the successes I have discussed, I 

know we have challenges ahead. Despite noteworthy progress, including reducing by a third our original backlog of rulemaking 

projects, from 97 in 2008 to 68 today, and reducing the average 

cycle time for projects, from a high of over 6 years in 2009 to a little bit over 4 years today, we are not where we want to be. 

In 2013, the number of rulemakings has increased and we project 

a backlog of 76 projects by the end of the year. Increased rulemaking complexity and scrutiny have made the workload per rule 

more time and more resource intensive. 

Through our Regulatory Development Program, we continue to 

focus on gaining efficiencies while ensuring proper procedures are 

followed, that benefits outweigh costs, that appropriate compliance 

mechanisms exist, and that our rules are understandable and reduce regulatory uncertainty. We developed an Enterprise Project 

Management System that allows us to examine resources and track 

performance metrics across our rulemaking projects, a capability 

we did not have before. As a result, our program is ISO 9000 compliant and includes regular internal audits and continuous improvement processes. 

In short, we are making every possible effort to ensure the regs 

we publish are timely, cost-effective, and derive from a thorough 

review and evaluation of public comments. 

I want to thank Congress, and this subcommittee in particular, 

for your support and your investments. You have enabled our rulemaking program improvements. Thank you for the opportunity to 

be here today, and I look forward to answering your questions. 

Mr. HUNTER. Thank you, Admiral. 

And since I won’t be able to ask you questions later unless I 

come back, I just want to tell you I am looking forward to talking 

with you about the distant tuna fleet, manning issues, and the 

rulemaking process, simply just why it is so hard to make a rule 

based off of statute. I understand there is a lot of room for public 

comment later and that is how the system works, but to take 6 

6 

years to do the towing regulations, you should be able to get stuff 

out in 6 months, I would say. So anyway. 

Mr. Cordero, your turn. 

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

the opportunity to address you today on matters related to the 

Commission’s regulations. With me today are my fellow Commissioners, William Doyle, Rebecca Dye, Michael Khouri, and Richard 

Lidinsky. 

I am pleased to report that the Commission has taken a systematic approach in reviewing its regulations in order to minimize unnecessary burdens while ensuring a cost-effective regulatory regime 

that ensures economic security for those involved in the international oceanborne commerce, and the consumers that rely on it. 

The Commission’s review process first identifies rules that are 

obsolete, unnecessary, unjustified, excessively burdensome, or counterproductive. Once identified, we aim to either strengthen, modernize, or repeal these rules so as to make the agency’s regulatory 

program more effective and less burdensome. Throughout the process, we have carried out our review with an eye toward maximizing 

public participation. 

I would like to take a moment to highlight some of the recent 

regulatory modifications that we have implemented. In 2004, the 

Commission addressed potentially restrictive practices by the Government of China by creating the ability for U.S. non-vessel operating common carriers, NVOCCs, to obtain alternative, U.S.-based 

FMC-administered financial instruments to be accepted in lieu of 

China’s cash deposit requirement. This allowed NVOCCs to put 

into use tens of thousands of dollars in capital that would have otherwise been deposited in Chinese financial institutions as dollarfor-dollar collateral. 

In February 2011, the Commission issued a final rule streamlining its rules of practice and procedure to reduce the burden on 

parties to Commission proceedings. It has been estimated that 

these changes will save parties approximately $260,000 a year in 

reproduction, postal, and courier costs. 

In March 2011, the Commission issued a final rule allowing licensed NVOCCs that enter into negotiated rate agreements exemption from the tariff rate publication requirements of the Shipping 

Act. Before the exemption, NVOCCs were required to publish rate 

changes for each charge to a shipper. It has been estimated that 

if all 3,400 licensed NVOCCs take advantage of the exemption, 

total annual savings could exceed 600,000 person-hours, or $40 million. 

In March 2012, the Commission used a final rule that allows 

companies to enter into service contracts to reference freight indices or other external information. This rule recognizes new tools 

that common carriers and shippers may use to manage freight rate 

volatility and other market risks common to the commercial maritime industry. 

In February 2013, the Commission updated its passenger vessel 

operator regulations. These measures strengthened protections for 

consumers with regard to their deposits and prepayments while at 

7 

the same time reducing financial responsibility requirements imposed on the smaller cruiser lines. 

I hope these examples give you a better understanding of the 

work the Commission has recently done with respect to reviewing 

and updating our regulations. 

Now I will turn to the Commission’s review of ocean transportation intermediary rules. In 1999, as directed by the Ocean Shipping Reform Act, or OSRA, the Commission adopted new regulations affecting ocean freight forwarders and NVOCCs, now designated as OTIs. The Commission has not substantially revisited 

the rules governing licensing, financial responsibility, or general 

duties of OTIs since 1999. This review has been an open and transparent process, as detailed in my written testimony. 

I will now summarize current Advance Notice of Proposed Rulemaking for OTIs. The Advance Notice includes a proposal for adjusting the minimum bonding requirements for OTIs; a proposal 

that licensed OTIs renew their license registrations; proposes disclosure of OTI agent/principal relationships; proposes to clarify the 

OTI experience requirement in order to become a licensed OTI; proposes that foreign-based OTIs establish a dedicated and staffed office in the United States; seeks comments on setting claims, payment, priorities, and ways to improve reporting provisions by surety bond companies; proposes further streamlining the revocation 

process within the Commission; and proposes to eliminate the 

$10,000 bonding requirement for each individual OTI branch office. 

As the comment period ended only 11 days ago, we are still in 

the process of carefully evaluating the comments, and will be using 

those comments to further assess the proposed regulations. 

Mr. Chairman, as we proceed through this process, I look forward to working closely with the subcommittee and with our stakeholders. I am happy to answer any questions you may have. Thank 

you. 

Mr. SOUTHERLAND [presiding]. Thank you very much. 

Mr. Jaenichen. 

Mr. JAENICHEN. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and members of the subcommittee. Thank you 

for the opportunity to present testimony to the subcommittee regarding marine transportation regulations, their impact on safety, 

security, jobs, and the environment. 

The statutory mission, as Chairman Hunter pointed out, is to 

foster, promote, develop the maritime industry of the United 

States. The purpose of that mission is to meet the economic and 

security needs of the Nation. To achieve this mission, MarAd is focused not only on how to sustain the U.S. merchant marine as it 

exists today, but also to improve and grow the industry to ensure 

its viability in the future. 

Overall, our marine transportation is strong and resilient, but 

there are opportunities for improvement and growth, and it is essential that we capitalize on these opportunities. 

As I have heard from the industry stakeholders, as well as Members of Congress, a maritime strategy is needed that will enable 

the United States as a maritime Nation to sustain leadership in 

the international community. Not only will this benefit the maritime industry, but will also help achieve other key goals, including 

8 

job creation and employment, enhancement of economic competitiveness through energy efficiency and innovation, environmental 

sustainability, and improvement of improved transportation capacity through interoperability between ports, waterways, rail, and 

highways. 

To focus on a long-term strategy, the Maritime Administration is 

working to organize a public meeting to concentrate on U.S.-flagged 

maritime cargo and sealift capacity. The public meeting, which is 

tentatively scheduled to be held by the end of the year, will be designed to elicit an unconstrained set of ideas for improving and expanding and strengthening the maritime transportation system, to 

vet those ideas in a public forum, and to derive a list of items for 

further study, action, or voluntary adoption. 

The key areas to address would include transportation speed, efficiency, reliability, availability, and cost-effectiveness, the Marine 

Transportation System’s contribution to the overall U.S. economic 

competitiveness, environmental sustainability, interoperability between modes of transportation, the number of qualified U.S. citizen 

mariners, the number and quality of U.S.-flagged ships engaged in 

commerce internationally and domestically, and the volume, value, 

and innovation of U.S. shipbuilding and repair. 

As part of this strategy, the Maritime Administration also plans 

to analyze the costs of operating under U.S. flag compared to foreign flag and to determine if the agency can take actions to make 

the U.S. flag more competitive. 

In addition, MarAd will be looking at challenges facing the U.S. 

shipbuilding industry and options to promote this industry, which 

has proven to be beneficial to the Nation from both an economic 

and a defense perspective. MarAd expects to do extensive public 

outreach on these issues and others to identify changes that would 

strengthen the U.S. merchant marine. 

As Congress has recognized, the carriage of cargo and sealift capacity are essential to the Marine Transportation System. One of 

the Maritime Administration’s immediate goals is to increase cargo 

on U.S.-flagged vessels by identifying additional Federal programs 

with international transportation opportunities. The Maritime Administration is currently engaged in an intensive rule development 

process to update its cargo preference regulations and to implement 

statutory changes to the cargo preference law contained in the 

Duncan Hunter National Defense Authorization Act for Fiscal Year 

2009. 

I acknowledge the frustration that has been expressed about the 

delay in implementing this rule; however, significant efforts have 

been put into the proposed rulemaking by the Department of 

Transportation and the Maritime Administration over the last several years. These efforts will inform and guide the proposed rulemaking that we are currently drafting. 

Other regulatory action that the Maritime Administration is 

working on involves implementation of statutory changes that were 

made in last year’s National Defense Authorization Act and also 

the Coast Guard Authorization Act. These include the extension of 

the Maritime Security Program through 2025 and changes to 

America’s Marine Highway Program eligibility criteria. 

9 

In addition, the Maritime Administration is preparing to implement a training certification program that is called for in the 

Cruise Vessel Security and Safety Act of 2010. As many of the committee members are aware, the Maritime Administration also plans 

to issue an Advance Notice of Proposed Rulemaking to gather comments on whether the agency’s existing U.S. citizenship criteria for 

its ship managers and agents benefit the Nation’s maritime commercial and national security, and provide also the most current, 

effective, and best approach for supporting National Defense Reserve Fleet operations. 

The agency last examined this regulation more than 20 years 

ago, and despite significant changes in the maritime industry, no 

change has been made to the citizenship requirements. Currently 

there is no intention on whether this change is going to be—or we 

have made a position on that, but we believe it is appropriate to 

seek public comment on the issue to determine whether to propose 

any changes to the existing regulations going forward. 

Thank you for the opportunity to discuss the marine transportation regulations, and I look forward to the subcommittee’s questions. 

Mr. SOUTHERLAND. Very good. Thank you all for your testimony. 

We are going to get into a round of questions. And there are 

three of us currently on the panel, and on the committee, so we 

may do a couple rounds if that is all right with you. 

My first question from me is to Admiral Servidio, and this is 

kind of close to home. Admiral, as you know, last year’s Coast 

Guard authorization bill included provisions authorizing two new 

vessel determinations for vessels that had significant work performed after their original construction date. Last October a shipyard in my district delivered a $40 million state-of-the-art offshore 

supply vessel with a similar background. In that case, the hull was 

constructed in 2007 but never operated after suffering a major fire 

in the original shipyard. 

The Keith Cowan, a significantly redesigned offshore supply vessel, complying with the latest rules and regulations, was built from 

that hull. Upon completion of that vessel last year, the Coast 

Guard issued a certificate of inspection showing a 2012 delivery 

date, but a certificate of documentation showing a 2007 build date, 

5 years earlier. As a practical matter, that discrepancy results in 

a 25-percent shortening of the vessel’s useful commercial life. 

The Coast Guard did not object to the two new vessel determinations in last year’s Coast Guard bill. So today I am asking for your 

confirmation that the Coast Guard will have no objection to legislation designating the actual 2012 delivery date as the official build 

date for the Keith Cowan. 

Admiral SERVIDIO. Mr. Chairman, we would not object to that 

provision; however, I think it is important that everyone recognizes 

that with a 2012 build date, there will be a number of other international requirements that would be part of what the vessel would 

need to comply with in order to operate. But we would be more 

than willing to work with S.E.A. Corp on those issues, sir. 

Mr. SOUTHERLAND. Very good. And it is my understanding that 

they understand that. So thank you for clearing that up. 

10 

Admiral, one more question, or a couple questions on a different 

subject before I move down the panel. The Coast Guard Authorization Act of 2010 prohibits the use of survival craft that leave any 

part of an individual submerged in water. The Coast Guard and 

Maritime Transportation Act of 2012 required the Coast Guard to 

study the issue before implementing the mandate. Last month the 

Coast Guard delivered its report to the committee. 

Prior to the mandate in the 2010 act, the Coast Guard reviewed 

the benefits requiring out-of-water survival craft on certain vessels 

and determined that vessels operating in certain environments did 

not need to carry such craft. Under what circumstances do vessels 

already carry out-of-the-water survival craft and why did the Coast 

Guard determine that only these vessels should have to carry such 

craft? 

Admiral SERVIDIO. Mr. Chairman, I apologize. I believe that 

there might have been some administrative errors in getting that 

report to Congress, and I apologize if there were any hiccups with 

that. 

We did do our study, sir, and we looked closely at the number 

of casualties that took place during that time window, and we 

looked to see whether we could find definitive proof that out-ofwater would have prevented some of those casualties, sir, and we 

did not find that in going through our data, and hence, that is why 

we came up with that finding in our report, sir. 

Mr. SOUTHERLAND. What vessels, based on what you have found, 

what vessels would be required to carry out-of-water survival craft 

as a result of that mandate, just for some of us who are new? 

Admiral SERVIDIO. Yes, sir. Generally out-of-water survival craft 

are required on vessels sailing internationally—cruise ships, large 

deep draft vessels, oil rigs, mobile offshore drilling units. Those 

types of vessels, sir, would have to have that. 

Mr. SOUTHERLAND. Very good. And now with the few minutes 

that I have remaining, I want to ask Chairman Cordero a question. 

The Federal Maritime Commission currently retains jurisdiction 

over the Consolidated Chassis Management, or the CCM Pool 

Agreement. As a result, CCM, which is in the business of operating 

and managing chassis pools, enjoys antitrust immunity under the 

Shipping Act of 1984. There are some facts as a result of that that 

I would like to state. 

Number one, the operation and management of chassis is a domestic land-based business. Number two, CCM and its subsidiaries 

are separately incorporated limited liability companies that are neither ocean common carriers nor marine terminal operators. Fact 

number three, by CCM’s own admission, the shipping lines that 

initially formed CCM for the purpose of operating chassis pools, to 

which they contributed chassis they owned or leased, will have sold 

all but approximately 20 percent of their collective chassis fleet by 

the end of this year. And four, the shipping lines continue to offer 

less and less intermodal through rates as a part of their service offerings to the shippers and consignees, and increasingly are required that such parties pay separately for the use of these chassis 

and the transport of container from port to rail ramp. 

My question based on those four facts: How does FMC justify 

continuing to retain jurisdiction over the CCM Pool Agreement as 

11 

a result of these facts and continue to afford CCM antitrust immunity under the Shipping Act? 

Mr. CORDERO. Thank you, Congressman, for your question. First 

of all, some history on that issue, as you have alluded to. The history of this question becomes centered on the fact that the carriers 

exclusively own chassis. On that question alone, it was most definitive within the purview of the FMC to address agreements in related to that scenario. 

Now, as you have stated, over the years this is one of the aspects 

of the changed industry conditions. The question before the FMC, 

among some of the aspects that we look to in these areas, is adopting to these changed conditions. Presently there is a discussion, 

there is a dialogue with regard to the development in the chassis 

pool area, and at this point, again, all I could represent to the subcommittee is that dialogue is ongoing. And given the transition, 

these are some of the questions that most definitively the FMC will 

be asking. 

Mr. SOUTHERLAND. So you can clearly state definitively that you 

recognize this change and how the industry is moving or it is evolving, and you will continue to work as necessary and report to this 

subcommittee based on those discussions with the acknowledgment 

that there needs to be change? 

Mr. CORDERO. Yes. 

Mr. SOUTHERLAND. OK. 

Mr. CORDERO. We will continue to work with the subcommittee 

with that acknowledgment in terms of developments with regard to 

the chassis pool as it relates to the interests that the carriers hold 

or do not hold in the future. 

Mr. SOUTHERLAND. Very good. Very good. 

All right. I have exceeded my time. And with that, I recognize 

Ms. Hahn. 

Ms. HAHN. Thank you, Mr. Chairman. 

Thank you to all the witnesses for testifying before us today, and 

especially I always like to give a shout-out to Chairman Cordero, 

who I have worked with and have been friends with for many years 

back in the trenches in the harbors of Los Angeles and Long Beach. 

So I would like to talk briefly about the Federal Maritime Commission’s proposed rules governing ocean transportation intermediaries. The FMC has recently proposed increasing the required 

bond amount for OTIs in order to better protect market participants from suffering losses. While I think we would all like to ensure that no intermediaries are cut out of the industry because of 

the increased bond requirement, it is imperative that the FMC update existing regulations so that they can adequately address the 

concerns of the current market. 

In your testimony you note, Chairman Cordero, that the rule in 

question hasn’t been updated in nearly 15 years and the FMC’s 

proposed rule is merely a reflection of the current market. In fact, 

the new bond amount for certain common carriers, $100,000, I 

think, is still lower than it would be if the 1999 required amount 

was adjusted for inflation, which I think in today’s market would 

be $105,000. 

So I know there is some concern about this. There are some feelings that this could really have a negative impact. So I would ask 

12 

you, Chairman Cordero, is it normal for regulatory bodies such as 

the FMC to periodically review and update their rules to ensure 

that they are up to date and reflect the current concerns of the 

market? And maybe you can expand on what are some of the dangers of failing to update outdated regulations. 

Mr. CORDERO. Well, first of all, it is normal for agencies to review their rules. In the case of the FMC, we are doing so in accordance with the plan for Retrospective Review of the Existing Rules. 

There is a plan to this. 

Now, as to the question of the bonding amount, again, you have 

properly indicated that we have not reviewed those amounts since 

the onset of OSRA in 1999, so we have not reviewed the bond limits in 14, 15 years. I think it is fair to recognize that in some of 

the comments that have been filed by our stakeholders, I will represent, that even our stakeholders do indicate that there is merit 

to this issue; that is, there is merit to discussing this issue and dialogue on this issue. And, of course, for the same reason that you 

just stated, that based on the consumer index, you know, we will 

need to review that. And, in fact, what is being proposed is below, 

in some cases, the index. 

And lastly I will say we need to keep in mind with regard to how 

this industry has evolved, more particularly and more specifically, 

if I may say, in regard to containerization. Look to where we were 

in 1999 and where are we now in 2013. Nineteen ninety-nine, we 

had 2,000, 4,000 TEU container ships. Beginning in 2005, those 

vessels increased to a size of 8,000 TEUs. Today, in 2013, we are 

seeing major carriers now on order with 18,000 TEUs. The reason 

I bring that into context, imagine the amount of transactions that 

are occurring in relation to this industry. In 2000, to the present 

date of 2013, we have today almost doubled the amount of licensed 

OTIs. Much less when you look at it in terms of the number, that 

number is higher. 

I mention these factors because it is important to keep in mind 

that part of the mission of the FMC is to address unlawful, deceptive practices that occur by some of the bad players in this industry. And, again, I emphasize ‘‘some.’’ So I think it is particularly 

important for us to address these issues and look at the bonding 

amount. 

Ms. HAHN. Thank you. And let me also discuss one of the other 

issues that our stakeholders are having anxiety about, and that is 

the proposed rule requiring OTIs to update their information every 

2 years. I know there is some concern that this is an overly burdensome process, so how exactly does a stakeholder update their information, and why is this important? And maybe you could allay 

some of those fears today by walking us through the process of updating an OTI’s information with the FMC. 

Mr. CORDERO. Thank you. And I will do so, referencing common 

ground here. I think it is also fair to say that the comments that 

we received from the various stakeholders do indicate not only a 

concern, but with regard to the need, to make sure that everybody 

updates the information that is required. This has been a discussion within the FMC for many years and has evolved now to this 

announced rule. 

13 

Now, as to the concern that it may be overly burdensome, I think 

there is a perception out there that it may be, but I hopefully here 

will have the opportunity to clear that perception. What we are 

talking about essentially is a two-page form. This is it. A two-page 

form that you file online. There are basically nine questions. Six of 

the nine you basically check off the box. And basically what it does, 

it updates the information: change of address, owners, qualified individuals. These are just simple data that is not only required by 

the Shipping Act, but again, required with regard to our regulatory 

effectiveness. 

Let me lastly comment that there is a definitive problem with regard to people who are not updating properly with the FMC. A recent audit of this by our staff indicated that of the 2.5 percent people that were audited, again keeping in mind this figure of over 

6,000 OTIs, almost 25 percent had failed to comply with updating 

the FMC. 

So in conclusion, I hope I cleared the perception that this is not 

a burdensome application process. It is basically a two-page form 

that you could do online and would take you no more than 5 minutes. 

Ms. HAHN. Thank you. I have some other questions, but I will 

do it on the second round. 

Mr. SOUTHERLAND. Thank you, Ms. Hahn. 

Now we will recognize Mr. Rice. 

Mr. RICE. Thank you, Mr. Chairman. 

You know, this just appears to me to be absolutely absurd. We 

are here today talking about rules on rulemaking and the time it 

takes to put out our rules. And in the last hearing that we had in 

this committee we were told that American international shipping 

has dwindled by 90 percent in the last 50 years. It appears to me 

that with our excess of rules that we have choked off a valuable 

American industry in shipping and international shipping and 

shipbuilding, and now we are working on commercial fishing, I 

think we are doing a pretty good job of choking them off, and I am 

sure private will be next. 

So, you know, when we have this graph that you have presented 

here on the average rule development time going down, I think it 

should go up. In fact, we probably should have a rule that says 

that we can’t issue a rule until 50 years of study. When we have 

got the number of rules coming out every year increasing, I think 

that is exactly the opposite of what we need. I think we need to 

have the number of rules going down every year. You know, all this 

has happened, the dwindling of our commercial fleet, despite probably the most protectionist statute I have ever heard of in the 

Jones Act. 

What I would like to know from each of you is, I am interested 

in rebuilding our international shipping fleet in particular, so what 

rules do we have to implement or do away with that would entice 

large shippers to start flagging their ships here? And let’s go one 

at a time across. 

Admiral SERVIDIO. Yes, sir. Thank you for the question. The 

Coast Guard’s philosophy is we don’t initiate a domestic rule unless 

there is a need to implement something internationally or whether 

there is an obvious safety, security, environmental gap that needs 

14 

to be addressed, and I will get to that in a second, sir, or it is required through an authorization act. And the majority of the rules 

that we initiate, sir, are in order to implement international requirements or authorization act requirements. 

Again, sir, our philosophy is we don’t want new rules. If we can 

use an international existing rule, that is our preference. If there 

is classification society rules that would address the safety or environmental aspects, we will go with that. 

Mr. RICE. Admiral, how many commercial shippers would we 

have if we didn’t have the Jones Act internationally? 

Admiral SERVIDIO. Our offshore supply vessel fleet and our offshore fleet is very, very competitive, sir, without the Jones Act. 

There are other aspects of our fleet that are not as competitive. 

Mr. RICE. So we haven’t lost 90 percent of our international shipping in the last 50 years? That is what we were told at our last 

hearing. 

Admiral SERVIDIO. I can’t comment on that, sir. I will say that 

we are looking to harmonize our rules with the international rules 

so we have a level playing field with U.S. and with the foreign carriers that come into our waters, sir. 

Mr. RICE. How many ships of foreign carriers are registered, 

flagged in the United States? Do you know that, sir? 

Admiral SERVIDIO. How many of our ships, sir? 

Mr. RICE. No. Ships of foreign carriers. How many are flagged in 

the United States? 

Admiral SERVIDIO. We worked with Maersk Industries just this 

summer, sir, to reflag eight vessels from foreign into the U.S. 

Mr. RICE. Are they done? Did that happen. 

Admiral SERVIDIO. Yes, sir. 

Mr. RICE. Because I have talked to Maersk, and they told me 

that none, they don’t have any. 

Admiral SERVIDIO. They did, sir, as part of the MSP program, 

and we conducted that at Activities Europe, and it was very successful. We worked closely with Maersk on that project. 

Mr. RICE. And these are international ships. 

Admiral SERVIDIO. Yes, sir. Deep draft vessels, sir. 

Mr. RICE. Mr. Cordero, what do you think we need to do to entice 

foreign shippers to start flagging ships in the United States. 

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

First of all, I will note the FMC is an independent regulatory 

agency, and our mission, of course, is to foster a fair, efficient, and 

reliable international ocean transportation system. In that regard, 

our focus is, in fact, with the foreign carriers. 

As it relates to specifically your question, Congressman, I could 

provide you further information with regard to the relevance of the 

FMC on that issue; however, I will defer to the gentlemen to my 

right and to my left with regard to the Jones Act questions, given 

it is more within their purview. So as to the FMC, again, we are 

addressing basically the regulatory aspects within our purview of 

the foreign carriers. 

Mr. RICE. Thank you, sir. 

Mr. Jaenichen. 

Mr. JAENICHEN. Yes. The Jones Act itself really affects domestic 

trade as to trade between two ports in the United States. The 

15 

international trade that you are referring to obviously has changed. 

There are—— 

Mr. RICE. It is also requires American-flagged ships to carry 

American Government things internationally. 

Mr. JAENICHEN. That is cargo preference, yes, sir. 

Mr. RICE. Yes, sir. And I think there are only, what we were told 

in our last hearing, less than 90 international American ships in 

international commerce, and we were told at our last hearing that 

if we didn’t have the Jones Act we may have none or close to none. 

Mr. JAENICHEN. There are actually two different issues that are 

being affected there, sir. The Jones Act itself, as I said before, is 

really for domestic trade between two ports. The cargo preference 

rules that we have requires carriage on U.S. flag. For the Department of Defense, it is 100 percent, for food aid it is 50 percent, as 

what is required by current statute. 

The number of ships carrying U.S. flag is really determined by 

a number of other factors. There is a significant cost difference between the cost of having a U.S. flag versus having a foreign flag. 

And a lot of those have to do with open registries, tax structure, 

and various things like that, including insurance. Those are the 

areas where we need to go take a look at those to see if we can 

identify policy and changes to be able to reduce that. 

Mr. RICE. That is one rule I would like to see happen in less than 

5 years. 

What I would like from you and the Admiral particularly, if you 

all could give me a list of things that we need to do to have—I 

want to make our shipping industry competitive again, so I want 

to know a list of rules that we need to adopt that would make 

international shippers want to flag here again. That would help me 

a lot. 

Mr. JAENICHEN. Yes, sir. 

Mr. RICE. Thank you. 

Mr. SOUTHERLAND. Thank you, Mr. Rice. 

I now recognize Mr. Cummings. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I have a 

number of questions. 

Acting Administrator Jaenichen, MarAd has informed U.S. vessels that due to sequestration it will not be able to pay the full 

monthly MSP stipend in August 2013 and it will not pay any stipend in 2013. Have any vessels left the MSP program as a result 

of this situation? I am going to run through a lot of questions, so 

just answer me yes or no. 

Mr. JAENICHEN. Sir, we have had one vessel that has reflagged 

and then they have replaced a vessel. So currently, until that vessel comes back in on the 1st of October, we are down to 59 vessels. 

Mr. CUMMINGS. All right. As bad as this is, I understand that a 

variety of different budget scenarios may cause MSP to actually 

have to push as many as 10 vessels out of the program. And I note 

that these vessels can immediately leave the U.S. flag and join the 

flag of another nation. Can you very briefly describe these scenarios, budget scenarios, and the extent of possible vessel losses? 

Mr. JAENICHEN. Thank you for that question. Sir, by statute we 

are really taking a look at just sort of the mathematics of it. Now, 

the program itself is authorized at $186 million, and you break 

16 

that down for the 60 vessels, that is $3.1 million paid on a monthly 

basis. Any reduction of 3.1 or a fraction thereof results in the loss 

of one vessel. 

Currently under the situation that we are, we are operating 

under the fiscal year 2013 budget, which actually went back to fiscal year 2012, and took a look, because we had carryover when we 

developed that budget. That difference is $12 million, and so that 

effectively equates to four ships. 

Depending on the target number that we are given for sequestration and that overall rate, it will work to affect the number of 

losses. Unless there is a change in the appropriations for that program, we will have to begin removing ships. We are required, if 

there are insufficient appropriations, to remove ships from the program. 

Mr. CUMMINGS. And what would the impact be on our national 

security and the viability of our merchant marine if vessels were 

forced to leave the MSP program and if they then decided to leave 

the U.S. flag? 

Mr. JAENICHEN. Sir, those 60 ships provide for 2,700 mariners 

onboard each ship. A loss of one ship out of the program that ultimately reflags to foreign flag would be a loss of 45 jobs for U.S. 

mariners. 

We are currently—I discussed this with the maritime labor 

unions—we are at a tipping point with regard to the number of 

maritime labor personnel that are available to man our reserve 

sealift and our commercial sealift ships going forward. And if those 

mariners are lost, it is not likely that they will come back, and so 

we will be at a situation where we may not be able to man all of 

our ships that are required for sealift to support the Department 

of Defense in the event of a national emergency. 

Mr. CUMMINGS. So that is a major problem. 

Mr. JAENICHEN. Sir, we are at that point, yes, sir. 

Mr. CUMMINGS. I think the cuts required under sequestration are 

wrong and I think they are harmful to the United States and I 

think that they should be ended. That said, right now I think we 

need to be careful that we don’t lose what remains of our U.S.-flag 

oceangoing fleet. 

What steps will you take right now to address this urgent issue 

and try to preserve and strengthen the United States-flag fleet? 

Mr. JAENICHEN. Sir, thank you for that question. We are actually 

going through the process to ensure that we are meeting all of the 

various requirements to the Paperwork Reduction Act and also the 

Federal Advisory Committee rules with regard to soliciting information. We will be putting out a Federal Register notice that will 

announce a maritime strategy symposium that will be held at the 

Department of Defense before the end of the year. The plan is to 

have a 3-day event where we set the agenda based on the various 

ideas and be able to debate those and then put together an actionable list of things that can be done to help support and develop the 

U.S. maritime flag. 

Mr. CUMMINGS. Thank you. 

Admiral, on May 23rd, 2013, the DHS inspector general issued 

a report entitled ‘‘Marine Accident Reporting, Investigations, and 

Enforcement in the United States Coast Guard.’’ The report’s main 

17 

finding is the following, quote: ‘‘The Coast Guard does not have 

adequate processes or sufficient personnel to investigate, take correct actions and enforce regulations related to the reporting of marine accidents as required by the Federal regulations and Coast 

Guard policy,’’ end of quote. 

Obviously, while this finding is alarming, it is not new. When I 

was chairman of the subcommittee we convened a long series of 

hearings to examine the decline in the Coast Guard marine’s safety 

capability. 

My time here is very short, but I need to know, what are you 

going to do about this? Or given the sequestration, must we simply 

be resigned to a continuing decline in the Coast Guard’s ability to 

ensure the safety of our Marine Transportation System, and what 

would this mean for the safety of life at sea? 

Admiral SERVIDIO. Thank you for that question, sir. We are focused on it. I see this as a challenge going forward. The Marine 

Safety Enhancement Plan allowed us to bring a number of people 

into the Coast Guard, sir, but our focus really needs to be on some 

of the competency issues of those people. And we are building a 

plan now, given this budgetary environment, which is different 

from 2008 timeframe, sir, on how we are going to retain those competencies and increase efficiencies, and we are looking at that, sir. 

And we recognize it is a challenge, but as the industry gets more 

complicated, it is one we have to address. 

Mr. CUMMINGS. With the chairman’s indulgence, just two more 

questions. 

Admiral, the inspector general stated that the Coast Guard has 

not implemented the authorities granted by the 2010 authorization 

act to allow promotion by specialty. Why hasn’t the Coast Guard 

implemented this step? Why hasn’t the Coast Guard taken this and 

other actions available to it that would help retain at least the current level of expertise in the Marine Safety Program at little or no 

cost? 

Admiral SERVIDIO. Thank you for the question, sir. The enhanced 

status quo is an authority the Coast Guard has. It is something I 

will be meeting with our Office of Personnel Management and see 

where we stand with that, sir. I am going to have to get back to 

you on the record, sir, with regards to specifics of where we stand 

with implementing that authority, sir. 

[The information follows:] 

A mature Officer Specialty Management System (OSMS) is a prerequisite 

for the Service before Enhanced Status Quo (ESQ) can be implemented. On 

26 June 2013, the Coast Guard launched the OSMS. OSMS provides a 

means to quantify the number of specialists in select fields and assists our 

Service with meeting current and future demands. OSMS also fosters and 

focuses professionalism within specialties with sanctioned requirements set 

by Specialty Managers providing the competencies, education, training, and 

licenses/certification needed to earn and maintain a given specialty. 

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

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. SOUTHERLAND. Thank you very much. 

We are going to do another quick round of questions, because we 

do have a second panel, and I would ask the Members if we could 

18 

be mindful of our time. We went a little over because of the few 

of us that are here. So I have, just in the second round, I have just 

two quick questions. 

Mr. Jaenichen, when can we expect to see draft regulations to 

implement the 2008 cargo preference enforcement regulations? 

Mr. JAENICHEN. Sir, our intent is to have them internally reviewed by the Department of Transportation by the end of the 

year, and then we would start the interagency process yet again. 

I cannot tell you how long it will take once we get into that process, 

but I intend to have something written down that we can start reviewing within the interagency by the end of the year. 

Mr. SOUTHERLAND. OK. So by December 31st we will have—— 

Mr. JAENICHEN. That is for the Department, and then after that 

we then start the interagency process. 

Mr. SOUTHERLAND. OK. Very good. 

And, Admiral, let me ask you a question. Will the current Commandant be able to promulgate the towing vessel inspection rule 

before the end of his term? I think that is in May of next year. 

Admiral SERVIDIO. Unfortunately, sir, I can’t speculate on the 

various processes of public comment and the processes of clearance, 

but I recognize the authorization act and the timeline, sir. We are 

aggressively adjudicating the 3,000 comments we received on our 

Advance Notice of Proposed Rulemaking, sir. And a number of 

issues were brought up in those comments about, for example, 

third-party organizations, safety management systems and the requirements for making them mandatory, redundancy of vital systems, and grandfathering positions. 

There is somewhat of a balance between a quick rule, sir, and 

a good rule, and we are trying to do both of them at the same time. 

And I recognize the timelines and our need to try to get this out 

as quickly as possible. 

Mr. SOUTHERLAND. Very good. Very good. 

All right. With that, I recognize Mrs. Hahn. 

Ms. HAHN. Thank you, Mr. Chairman. I am glad you asked about 

cargo preference, because that was going to be one of my questions. 

But this is for Rear Admiral Servidio. As you know, the TWIC 

program was launched shortly after 9/11 in order to ensure sensitive areas and facilities, such as our ports, are protected against 

potential security breaches. However, we know that since then, 

there have been a number of challenges with its implementation, 

from inaccuracies with its background checks to its delays in completing its pilot program for TWIC readers, this program has repeatedly incurred setbacks since its implementation. Now I understand that earlier this year the Coast Guard finally issued a proposed rule requiring TWIC readers to be installed at our Nation’s 

highest risk facilities. 

Considering that the Department of Homeland Security is still 

having problems developing and installing card readers at port facilities, a problem that was highlighted by a recent GAO report, 

how are our Nation’s highest risk ports expected to fully comply 

with the law? And should the Coast Guard, along with DHS and 

TSA, consider GAO’s recommendation to search for alternative 

credentialing approaches? 

19 

Admiral SERVIDIO. Thank you for the question. I have met with 

representatives from your port area several times about this issue. 

We have had four public meetings. We have 150 comments that we 

are taking into account as we go to a final rule on TWIC. I think 

the number of comments reflect that it was a well-thought-out Notice of Proposed Rulemaking. Most of those comments are either, 

We believe we should be included in the high-risk facilities or specific vessels saying they think that their vessel shouldn’t be included in those high-risk facilities. But those are the preponderance of the comments. 

That said, we are working with DHS and with TSA on evaluating other potential cards at this time. And we are taking into account the GAO reports with respect to some of the problems with 

readers. But I think it is important that some of that was a prototype and I think some of those problems have been worked 

through. So I can tell you that we are aware of the concerns, and 

we will be moving forward with an eye towards what those concerns are. 

Ms. HAHN. And we know that many thousands of those cards will 

be expiring, a lot of them at the same time. And that is also what 

causes me concern. What do we do the day after hundreds of thousands of those cards have expired? 

Admiral SERVIDIO. We have stood up an executive steering committee just looking at the TWIC program. I speak to Steve Sadler 

of TSA weekly with regards to how we are doing on this. And we 

have monthly meetings, looking at a suite of metrics. I share your 

concern. We are keeping our eye on that ball. Thus far, we have 

been able to address those issues, and we are seeing cycle times 

improving. But it is a concern going through, and it is one that we 

recognize we need to—— 

Ms. HAHN. Yes, and it is also very urgent because I am out there 

on port facilities all the time with signs everywhere, ‘‘Do not allow 

any entrance of a person with an expired card.’’ So I certainly don’t 

want commerce to come to a screeching halt because we have not 

figured out what to do the day after these cards have expired. 

This is very urgent. So I appreciate your attention to this. We 

can figure this one out. 

Admiral SERVIDIO. Yes, we can. 

Ms. HAHN. We are smart enough. 

Admiral SERVIDIO. Thank you. 

Mr. SOUTHERLAND. Thank you, Ms. Hahn. I now recognize Mr. 

Rice. 

Mr. RICE. Gentlemen, my primary focus is American competitiveness. And I truly believe that our regulatory morass is strangling 

commerce in this country, and it will strangle our entire economy 

if we don’t get it under control. And I can think of no more glaring 

example of, you know, the strangling of an entire industry than the 

regulatory mess that we have created in this particular industry. 

So we desperately need jobs. We desperately need industry. It 

would be my goal to see the rebirth of the American shipbuilding 

industry and the rebirth of the American international commercial 

fleet. So I don’t want to be talking about 100 ships. I want to be 

talking about 1,000 American-flagged ships. And I am desperate to 

know what we can do to get there. I think that we should not be 

20 

creating new rules. I want to you stop that. I want to you change 

your mindset and start doing away with rules that are strangling 

our shipbuilding economy. And I really look forward, Admiral and 

Mr. Jaenichen, to your suggestions to what we need to do to have 

people want to flag here again. Because if you will give me that, 

I will work on it. When do you think I can get that? 

Mr. JAENICHEN. Sir, as I indicated before, we are going to have 

that first public debate by the end of this year. 

Mr. RICE. OK. That is not what I am talking about. I want to 

you write down what you think your suggestions would be that we 

could entice people to start flagging here again. And I don’t want 

to wait until the end of the year. I am talking a couple of weeks. 

Can we not get that? 

Mr. JAENICHEN. Sir, one of the things, there are a of different 

ideas. And if they were easy to implement and do, they would have 

been done already. The challenge that we have is we need to have 

the stakeholder input to evaluate. What my team puts together is 

going to be very limited in terms of what kind of feedback I get. 

I need to have that public debate in order to be able to have a program that I think is viable going forward. 

Mr. RICE. Do you need a public debate for you to tell me what 

your ideas would be of things we need to change to get people to 

start flagging here again? 

Mr. JAENICHEN. Sir, those are ideas by people who are not involved in it intimately on a daily basis in the maritime industry. 

I have a lot of good ideas, but I don’t know whether they are actually supportable or achievable inside with the stakeholders. 

Mr. RICE. Well, how long have you been with this group? 

Mr. JAENICHEN. Sir, I have been the Acting Maritime Administrator since June and I have been with the Maritime Administration as a deputy administrator since last July. 

Mr. RICE. OK. If you could please give me your suggestions, I 

would love to see them. Admiral, can I get some suggestions from 

you? 

Admiral SERVIDIO. We recently provided a report to Congress, 

sir, on some of these issues so we can take some of that, sir, and 

I can provide highlights from that report for you, sir. 

Mr. RICE. OK. I want to revitalize this industry. I don’t want to 

strangle them anymore. And I hope we keep our hands off the commercial fishing fleet. They have been through enough. So I implore 

you, let’s stop ruling these people to death, get off their backs and 

let them do their business. Thank you very much. 

Mr. SOUTHERLAND. Thank you, Mr. Rice. Mr. Cummings. 

Mr. CUMMINGS. Mr. Jaenichen, the first thing you ought to put 

on that list is end sequestration. Make sure you put that on the 

list because you just provided testimony that we are pushing ships 

out because of sequestration. So make sure you put that number 

one on the list. If you need me to write it, I will write it. 

Mr. JAENICHEN. Sir, I have got it loud and clear, sir. 

Mr. CUMMINGS. And those are ships that are there now and jobs 

that we have now that we are going to lose—not for a day, not for 

an hour, not for a month, but forever. That is real. And it is dwindling. Our ships are dwindling, dwindling, dwindling. My mother 

only had a second grade education, a former sharecropper. She 

21 

said, I want to you go up the ladder, but I don’t want you to fall 

down. In other words, preserve what you have. Protect what you 

have. And that is what we have got to do. You can write that down 

and tweet it. 

Admiral, as you know, the 2010 Coast Guard Authorization Act 

required that beginning in 2015, only survival craft that would ensure that no part of the body is immersed in water should be used. 

The most recent authorization delayed this requirement until 30 

months after the date on which the Coast Guard submitted a report on the use of such survival craft. The NTSB has been recommending the elimination of survival craft that don’t provide out-ofthe-water protection for decades. Your study concludes that the 

cost of switching to such a craft would outweigh the benefits. However, the study was based on a review of past casualties and the 

study itself notes, ‘‘In general, the bulk of the data available were 

inconclusive as to whether the use of out-of-the-water survival craft 

would have affected the outcomes of these casualties. Casualty reports were inconsistent in addressing how many liferafts or inflatable buoyant apparatus were used during a casualty as well as the 

number of survivors found in each device when used.’’ 

‘‘The study was also asked to look specifically at the survivability 

of individuals, including persons with disabilities, children, and the 

elderly.’’ 

Regarding this issue, your report states the following, ‘‘The age 

or disability of personnel casualties were generally not included in 

the casualty data reviewed in this analysis. Therefore, there is no 

empirical evidence to support that survivability of persons with disabilities, children, or elderly is different than an able-bodied person 

using either a lifefloat inflatable buoyant apparatus or liferaft. 

Nevertheless’’—and it goes on to state—‘‘it is clear intuitively that 

such demographics may present unusual risks and practical challenges to vessel operations. Although the Coast Guard considers 

some suggestions from stakeholders to carry out practical in-water 

trials in this area in connection with this report, this was not practical due to time and resource constraints.’’ 

Admiral, should a disabled veteran who became paralyzed while 

serving our Nation in Iraq or Afghanistan be condemned to die because the charter fishing boat on which he is a passenger sinks or 

capsizes? Or should that vessel be required to have a survival craft 

that can give that veteran the chance of surviving by keeping his 

or her body out of the water? That is question number one. Number two, Admiral, was this report prepared by marine safety professionals who were fully qualified as either investigators or inspectors? And does this report represent only their professional opinion? 

Final question, Admiral, how much time and how many resources would it require to carry out practical in-water trials? 

Admiral SERVIDIO. Thank you for the question, sir. The report 

was prepared by marine safety professionals, sir. We have limitations with respect to the data that our system carries. I would obviously share your concerns with respect to disabled people, sir. We 

worked, when I was captain of a port in numerous ports, on making arrangements so that we could address the safety aspects and 

allow for disabled veterans, in Tampa specifically, sir, to go out on 

22 

commercial vessels and enjoy and take part in the pleasure of our 

maritime ecosystem. 

I am going to have to get back to you, sir, on what we would 

need to do in order for in-water tests and get back to you on the 

record for that, sir. 

[The information follows:] 

A practical test program addressing the relative survivability of the disabled, elderly, and children vs. able-bodied persons in various types of survival craft would be a complex and potentially risky undertaking. While 

some limited preliminary work could be carried out in controlled, simulated 

conditions such as a wave/wind tank, valid and meaningful conclusions 

would require full-scale trials in realistic conditions in order to reliably 

model the dynamics of evacuation of persons of differing abilities from a 

floating vessel into different types of survival craft. Given that the survival 

craft on these smaller commercial vessels are generally not davit-launched, 

there would be potential risk of injury to the test subjects just entering the 

craft, so the test parameters would need to be carefully controlled and monitored for personnel safety. 

The Coast Guard does not have the staff resources or infrastructure to 

carry out such a test program in-house. While we would seek to leverage 

interagency expertise and resources from experts such as DOT’s Access 

Board, and could likely perform some preliminary work at a facility such 

as our rescue swimmer training facility in Elizabeth City, the bulk of the 

work for this study would have to be contracted out. Our technical and economic staff developed detailed minimum time and cost estimates to conduct 

such a program on a contract basis, including preliminary computer modeling to inform development of appropriate parameters and methods for 

practical testing; the acquisition/lease of test vessels/crews and test equipment; identification (or simulation) and compensation of test subjects in the 

desired demographics; travel and per diem costs for government and lab 

personnel and test subjects; logistical and documentary support; standby 

personnel/facilities for health and safety oversight; and government staff 

time for test plan development and data/report review. These estimates are 

considered to be minimums; possible unanticipated problems (such as 

issues with coordination of scheduling with variations in weather and sea 

conditions, personnel, and equipment performance) could substantially increase the time and cost. Given the uniqueness and substantial risks of the 

proposed test program, and absent any history of previous such tests to inform the development of our estimates, a 20 percent risk premium was applied to our initial raw estimate in anticipation of possible overruns. 

Taking into account the uncertainties associated with such a test protocol, 

the estimated cost for a contractor to conduct and document trials using 

representative test subjects to simulate evacuation from typical vessels and 

to evaluate survivability in different types of survival craft is $2.24 million 

(including the premium discussed above), and is estimated to take approximately 18 months after issuance of a contract. This includes preliminary 

computer modeling, arrangement for suitable test vessel(s), recruitment of 

suitable test subjects, preliminary subject testing/evaluation, acquisition of 

representative test survival craft (liferafts, buoyant apparatus/lifefloats, inflatable buoyant apparatus), conducting open water tests, and collection 

and analysis of data to develop a final report. 

Development, solicitation, and award of a contract is estimated to require 

9 months beforehand. In addition to direct contractor costs, we estimate approximately one full-time equivalent in contracting support and currently 

unanticipated USCG technical/project management time would be required 

to guide and oversee the complete test program with post-test report development, analysis, and review. Absent additional compensating staff resources, this would have a substantial negative impact on current projects 

and customer response times. 

The anticipated timeline for conducting such a study is: 

23 

Contract Development .................................... 6 months 

Contract Solicitation & Award ....................... 3 months 

Preliminary Test Prep/Analysis ....................... 6 months 

Gov’t/CG Review ............................................. 1 month 

Prelim Test Data Review and Report ............ 4 months 

Gov’t/CG Review ............................................. 1 month 

Open Water Test Prep & Execution ................ 2 months 

Data Review, Interim ..................................... 2 months 

Gov’t/CG Review ............................................. 1 month 

Final Report .................................................... 1 month 

Total Time ............................................. 27 months 

Mr. CUMMINGS. We can do better. We can do better. And I hope 

you take that back to the Coast Guard. Thank you, Mr. Chairman. 

And I am looking forward to your responses. 

Mr. SOUTHERLAND. Thank you very much. If there are no other 

questions, I want to thank the witnesses for their testimony. And 

I want to say, Mr. Jaenichen, I know before in your comments, you 

made a reference to the cost of shipbuilding in this country. And 

you have all three been given the responsibility of creating a list. 

I would like to encourage all of you to include on that list the cost 

of American jobs because of the EPA and the regulation on our 

shipbuilders. Their boot is on the neck of our shipbuilders. So I understand the fury over sequestration and the jobs that you have alluded to. But I would also like on your list to please give me an 

idea of the tens of thousands of jobs—not thousands, but tens of 

thousands as a result of those regulations and how they are crushing the American shipbuilder because that adds to the costs. And 

I agree with you, Mr. Jaenichen, and you acknowledged it, the cost 

of what it takes to produce these vessels in the United States. 

So I would like to thank all of you for being here. And with that, 

we will move on to our second panel. And I would ask that those 

individuals on our second panel to please come forward. 

All right. Our second panel of witnesses today includes Mr. 

Thomas Allegretti, president and CEO of The American Waterways 

Operators; Captain William Schubert of USA Maritime; Mr. Ken 

Franke, president of the Sportfishing Association of California; Mr. 

Geoffrey Powell, vice president of the National Customs Brokers 

and Forwarders Association of America; Rear Admiral Rick 

Gurnon, president of the Massachusetts Maritime Academy, appearing today on behalf of their Consortium of the State Maritime 

Academies; and Patrick Wojahn, public policy analyst for the National Disability Rights Network. 

Mr. Allegretti, you are recognized for 5 minutes. 

24 

TESTIMONY OF THOMAS A. ALLEGRETTI, PRESIDENT AND 

CEO, THE AMERICAN WATERWAYS OPERATORS; CAPTAIN 

WILLIAM G. SCHUBERT, USA MARITIME; KENNETH D. 

FRANKE, PRESIDENT, SPORTFISHING ASSOCIATION OF 

CALIFORNIA; GEOFFREY C. POWELL, VICE PRESIDENT, NATIONAL CUSTOMS BROKERS AND FORWARDERS ASSOCIATION OF AMERICA; REAR ADMIRAL RICK G. GURNON, USMS, 

PRESIDENT, MASSACHUSETTS MARITIME ACADEMY, ON BEHALF OF THE CONSORTIUM OF STATE MARITIME ACADEMIES; AND PATRICK L. WOJAHN, PUBLIC POLICY ANALYST, 

NATIONAL DISABILITY RIGHTS NETWORK, ON BEHALF OF 

THE CONSORTIUM FOR CITIZENS WITH DISABILITIES 

TRANSPORTATION TASK FORCE 

Mr. ALLEGRETTI. Good morning, Chairman Southerland, Ranking 

Member Hahn. Thank you for the opportunity to appear before the 

subcommittee today. I am here today on behalf of AWO members 

to convey a simple message and an urgent request. We need 

prompt publication of a Coast Guard rule on towing vessel inspection that is consistent with the intent of Congress and with the recommendations of the congressionally authorized Towing Safety Advisory Committee. We need this regulation published right away. 

The cause of marine safety demands it. 

Congress directed the Coast Guard to undertake this rulemaking 

more than 9 years ago. The statutory deadline for issuance of a 

final rule passed nearly 2 years ago. Those facts alone create a 

cause for action. But the enactment date and the missed deadlines 

are not the only reasons why immediate publication is imperative. 

Even more compelling is the fact that the rulemaking offers an historic opportunity to take safety in our industry to a new level, akin 

to the transformation of the oil transportation industry after the 

Oil Pollution Act of 1990. 

There is widespread—indeed, overwhelming industry and public 

support for moving forward with this rule right away. And the administration, Congress, and our industry have real vulnerability 

and will face hard questions from the American public if this long 

overdue rulemaking is not finalized soon and a serious accident 

should occur. 

For more than 20 years, our industry has been engaged on a 

journey of continuous improvement. The Coast Guard, Congress, 

and our industry shipper-customers have been active partners in 

that journey. The voyage has been marked by private sector leadership and responsible public policymaking, both of which have produced meaningful results. But we have not yet achieved our goal 

of zero harm. And the most important step we can take now, a critical missing link in the safety chain, is the publication of the towing vessel inspection rule. 

Mr. Chairman, there is a continuing and heightened risk to marine safety each day that this important regulation is not promulgated. Thirteen years ago, the NTSB published a report on the 

1998 ramming of the Eads Bridge in St. Louis Harbor and the near 

breakaway of the President Casino with 2,000 passengers aboard. 

The NTSB recommended that the Coast Guard seek statutory authority to require towing companies to implement safety manageVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
25 

ment systems, calling the lack of a safety management system requirement ‘‘a threat to waterway safety.’’ 

Five years ago, after another serious accident, a 2008 collision in 

which nearly 300,000 gallons of oil were spilled into the lower Mississippi River, I testified before this subcommittee on actions needed to prevent such accidents. I said then that had the inspection 

regulations been in place, the collision might have been prevented 

because the Coast Guard would have been notified when the operator of the vessel failed a safety management system audit prior 

to the casualty. This would have forced the company to either improve its procedures or risk losing its license to operate. 

AWO members are frustrated that this rulemaking has taken so 

long when the benefits of action are so great, the consequences of 

inaction are so severe, and our industry is asking to be regulated. 

The fact is that this rulemaking is not particularly controversial. 

There is widespread support from industry, from the public, from 

bipartisan Members of Congress for moving forward with the central tenets of this rulemaking. 

AWO is especially concerned about the potential for delays at the 

Department of Homeland Security. We are very concerned that the 

Coast Guard will finish its work on the inspection rulemaking only 

to have it languish at the Department. This is not a hypothetical 

concern. The proposed rule on towing vessel inspection was sent to 

DHS in early 2009 and was not published in the Federal Register 

until August 2011, more than 2 years later. We cannot afford a 

delay like that again. 

So here is what we recommend: We urge the Coast Guard to 

commit to finalizing the towing vessel inspection rule and sending 

it to DHS this fall. We urge DHS to complete its review process 

this year so that the rule can be cleared by OMB and published 

next spring during this commandant’s watch. And we urge Congress to continue to exercise its oversight to ensure that the towing 

vessel inspection rule is published without further delay. Today’s 

hearing is an important step in that oversight process, and we 

thank you for your leadership in holding it. 

Mr. SOUTHERLAND. Thank you, Mr. Allegretti. 

Captain Schubert, you are now recognized. 

Mr. SCHUBERT. Mr. Chairman and members of the subcommittee, 

thank you for the invitation to speak here today. I am here on behalf of USA Maritime, and also to offer my own personal perspective as a former U.S. Maritime Administrator from 2001 to 2005. 

USA Maritime is a coalition of ship owning companies, maritime 

labor organizations, and maritime trade associations which represent virtually every one of the privately owned U.S.-flagged vessels operating regularly in the foreign trade. As this subcommittee 

knows, the U.S.-flagged merchant marine engaged in foreign trade, 

which is so vital to our Nation’s defense, depends heavily on the 

Maritime Security Program and the cargo preference laws for its 

survival. 

The two programs are inseparable and necessary to support a 

peacetime merchant marine. Regrettably, we face a serious challenge to both critical support programs. First, the Maritime Security Program—MSP—is facing drastic and potentially crippling 

cuts due to sequestration. MarAd has recently informed the indusVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
26 

try that up to one-third of the 60 ships—that is 20 ships—supported by MSP may be lost if automatic cuts occur. Combined with 

the percentage reduction in cargo preference reservation applicable 

to food aid from 75 to 50 percent and the drawdown in operations 

in Afghanistan, this will have a disastrous consequence for the U.S. 

merchant marine. 

It is no exaggeration at all to say that the U.S. merchant marine 

stands at the edge of a cliff from which it may never recover. The 

U.S. merchant marine has a proud and illustrious heritage, going 

back to the beginning of the Republic, including valiant and sacrificial achievements in every conflict Americans have fought. But unfortunately, the U.S. merchant marine operating around the world 

will not survive much longer if MSP is drastically cut. 

We urge Congress to consider that the fleet has already shrunk 

to a bare minimum to support national defense needs. I could further state from my firsthand experience as the administrator during Operation Iraqi Freedom and Operation Enduring Freedom, comanaging one of the largest sealift operations in American history 

that this statement is no exaggeration. 

Simply put, any further cuts will be devastating to our industry 

and will surely cost the U.S. Government and the taxpayers billions of dollars to replicate the lost sealift capacity. The second 

challenge facing the industry is the current lack of MarAd’s ability 

to conduct serious enforcement of the cargo preference laws. Ships 

cannot remain active in peacetime unless they have cargo, and the 

cargo preference laws are designed to ensure that U.S.-flagged vessels carry a fair share of U.S. Government impelled cargoes and at 

reasonable freight rates. 

Persistent and active enforcement of cargo preference is essential 

to ensure that those laws work as Congress intended and to meet 

national security policy objectives. Almost exactly 2 years ago, 

MarAd, to its credit, held a public listening session as to how to 

improve enforcement of cargo preference. Virtually every witness 

called for increased transparency, expedited staffing of vacant 

cargo preference positions, and most of all, promulgation of a rule 

implementing the 2008 cargo preference amendment enacted by 

Congress and designed to improve cargo preference enforcement. 

Now 2 years later, MarAd has made some commendable progress 

filling positions and improving our working relationships with the 

U.S. Ex-Im Bank and their stakeholders. But it remains difficult, 

if not impossible, to get enforcement and compliance information 

from the other Government agencies subject to the law. And there 

is still no rule. In 2008, Congress saw a need to improve cargo preference enforcement. MarAd must do its part in promulgating the 

rule and vigorously enforcing the law. The industry can no longer 

wait. MarAd must find a way to get the rule promulgated and start 

enforcing the law as Congress so wisely intended. 

We look forward to working with the subcommittee and the full 

committee on working to preserve and strengthen the U.S.-flagged 

merchant marine. And thank you again for focusing on these 

issues. I would be pleased to take any questions at the appropriate 

time. Thank you, Mr. Chairman. 

Mr. SOUTHERLAND. Thank you, Captain Schubert. 

Mr. Franke, you are now recognized. 

27 

Mr. FRANKE. Thank you, Mr. Chairman. 

Thank you, chairman and subcommittee members, for providing 

this opportunity to make comment on the U.S. Coast Guard report 

to Congress on survival craft safety. 

I am Ken Franke, president of the Sportfishing Association of 

California and additionally speaking on behalf of the Golden Gate 

Fishermen’s Association as well as the National Association of 

Charter Boat Owners. 

SAC, GGFA, and NACBO are industry associations that represent over 3,000 small passenger vessel companies based on all 

maritime borders of the United States. This fleet transports several 

million passengers annually. And rest assured, passenger safety 

and appropriate lifesaving equipment aboard our vessels is the absolute number one priority. 

With regard to the Coast Guard report on survival craft safety, 

we applaud the level of detail and factual clarity contained in the 

document. A review of the report makes it easy to conclude that 

the current system of equipping the small passenger vessels with 

safety equipment is working. 

At issue, however, is, what do we do with the information? And 

how do we proceed effectively without incurring waste or even 

harm to the national small passenger vessel fleet? Key comments 

we felt were applicable to small passenger vessels in the report are 

quoted as follows: A, based on analysis of available casualty data, 

carriage of out-of-water survival craft in place of lifefloats and 

buoyant apparatus is not anticipated to have a significant effect on 

vessel safety. B, for inspected small passenger vessels—those are 

inspected by the U.S. Coast Guard—for which the vessel data and 

casualty reports are more complete, the absence of fatalities attributed to the type or number of survival craft since 1996 suggests 

that the current requirements phased in between 1996 and 2006 

have provided adequate protection. It does not support a compelling need for additional requirements for out-of-water survival craft 

for these vessels. C, for passenger vessels where the passenger capacity is limited by weight, in some cases, the increased weight of 

inflatable survival craft may require some reduction in the number 

of persons that can be carried with possible consequential longterm loss of passenger revenue. And D, it is important to note that 

in a significant number of cases on small passenger vessels, other 

lifesaving equipment that might have mitigated the severity of the 

casualty was not used or may have been used improperly. 

Based on these comments, it would seem that retrofitting the 

vessels with inflatable liferafts would not be reducing threat to life. 

What it would do is cost a small business owner and jobs to incur 

a $350 million bill over 10 years that, in some cases, would put 

them out of business. We feel it is important to mention our vessels 

and passenger safety have been a progressive evolving story with 

an emphasis on improved design training and technology over the 

past 10 years. This results in a reduction in those incidents where 

survival craft is employed. The statistics in the Coast Guard report 

support this fact. We refer to the following examples: GPS positioning ensures precise navigation, improved vessel safety movement, and ensures high-speed response by rescuers by necessary; 

plotting software and improved radar and sonar systems further 

28 

reduce the risk of collision or grounding; EPIRB emergency transmitters provide improved response times by first responders. 

Communications equipment has vastly improved, with movement 

to satellite intercoms and networks capable of broadcasting to entire fleets with clarity during an emergency. Vessel design and 

bulkheads to divide compartments substantially reduces the likelihood of a vessel sinking. Vessel traffic centers help reduce conflict 

on the water by ensuring separation of vessels in congested areas. 

Licensing requirements and new crew training have become much 

more intensive. 

These factors, all of which reduce the risk of the need to deploy 

a survival craft, combined with the intensive annual and random 

inspections by the Coast Guard personnel have led to a robust and 

layered life protection system aboard our vessels. Therefore, it is 

our opinion that retrofitting, in many cases, large portions of small 

passenger vessels to accommodate inflatable liferafts is inappropriate and a waste of money. 

Additionally, we feel it is not prudent to move forward with implementing a rule that there is no basis to indicate will save a life 

any more than the current risk-based survival craft requirements 

in place. 

Based on all of the above comments, we recommend to the subcommittee that action be taken to legislatively amend the previous 

instruction to the Coast Guard to continue to utilize risk-based survival craft guidelines. Further, if as a result of this report they feel 

there is an area that can be improved on by policy development, 

then the Coast Guard should pursue addressing the deficiencies 

and report back to the subcommittee on the actions taken. 

Speaking specific to my own fleet, to which the statistics are 

most familiar to me, with the Coast Guard’s oversight, our fleet 

moved 10 million passengers over 10 years with no death attributed to the lack of an inflatable liferaft. The system works. 

In closing, we compliment the hard work of the Coast Guard in 

both protecting our fleet and preparing this report. This was an 

outstanding document. I venture to guess everyone wishes we had 

it 2 years ago. We commend them for their achievement. 

With that, I submit to any questions you may have. 

Mr. YOUNG [presiding]. Mr. Powell. 

Mr. POWELL. Mr. Chairman, thank you for this opportunity to 

testify on behalf of the National Customs Brokers and Forwarders 

Association of America, the NCBFAA. I am Geoffrey Powell, vice 

president of the association. NCBFAA’s 800 member companies 

and 28 affiliated regional associations represent the majority of licensed ocean freight forwarders and non-vessel operating common 

carriers, or NVOCCs and are, therefore, directly affected by maritime regulation. 

Your invitation to us to testify is extremely timely. The Association is greatly concerned that a recent proposed rulemaking by the 

Federal Maritime Commission is inconsistent with the important 

goals of job creation, improving the national economy, and reducing, not increasing, the burdens of unnecessary regulation. 

Ocean transportation intermediaries, or OTIs, play an important 

role, ensuring that U.S. importers and exporters of all sizes can 

move their goods in international commerce efficiently and ecoVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
29 

nomically. They consolidate smaller shipments that could not otherwise be economically transported. They provide the full range of 

logistical services that are necessary to export or import cargo from 

and to the United States. 

The rulemaking sprung from an investigation of the barrel trade, 

but then failed to address any of the issues that surfaced; in that 

instance, the movement of household goods. Instead, it focused on 

something completely different, the regulation of OTIs. There are 

a myriad of issues raised by the proposal; however, I will highlight 

three of the more problematic. First, the Shipping Act provides for 

OTIs to obtain licenses without term limits as a condition for doing 

business. Without any explanation, justification, or statutory authority, the FMC proposes to convert all licenses to 2-year terms 

that require biennial renewals. This will be a burdensome, time 

consuming, and expensive proposition, including requiring parties 

to pay as yet undetermined filing fees. There is no record of abuse, 

no specific legislative authority under the Shipping Act, no direction from Congress for the FMC to take these steps with respect 

to OTIs. 

The FMC justifies this burden by arguing it needs to ensure that 

it has current corporate information concerning its licenses. However, the FMC’s existing regulations already require that these 

changes must be provided to the FMC as they occur. We must also 

say that the FMC cannot effectively meet the challenge of issuing 

new licenses under existing regulations, a process which often 

takes 2 to 3 months or more. Adding to this additional renewal requirement would inundate FMC staff and grind the entire process 

to a halt. 

A fundamental flaw in the Commission’s rulemaking process was 

its failure to meet with the industry in order to identify any problems and then, if necessary, jointly find solutions that are the least 

burdensome. Secondly, without any apparent supporting rationale, 

the proposal also authorizes suspension or revocation of a license 

in terms that are vague, overbroad, and in some instances unreasonable. In a related vein, the proposed regulations establish procedures for licensed revocations which raise due process concerns and 

are contrary to the U.S. Constitution and the Administrative Procedure Act. The proposal, which would take away a company’s ability 

to do business, provides for no right of discovery, no apparent right 

to a hearing, no right to cross-examine witnesses, and no right to 

appeal from the decision of the designated hearing officer. 

Our last example is the Commission’s proposal to increase ocean 

forwarder and NVOCC bonds by 50 and 33.33 percent, respectively. 

This would result in increased bond premiums for the several thousands of licensees on an annual basis. Despite the fact that the 

Commission was able to cite only two instances in which the bond 

was insufficient to cover outstanding claims, the proposed increase 

would not dramatically increase any potential claimant’s level of 

protection since the proposed increased bond would still fall far 

short of the amounts that were cited in the two examples relied 

upon by the Commission. 

Regrettably, the Commission has failed to exercise good judgment in these proposed regulations which will only serve to increase cost to the industry and make smaller OTIs less competitive, 

30 

all for no apparent reason. For these reasons, the Association respectfully requests that the subcommittee require that the FMC explain why it is proceeding along this path. 

Mr. Chairman, we are grateful for the subcommittee’s interest in 

this matter. 

Mr. YOUNG. Thank you, Mr. Powell. 

I think it is Rear Admiral Gurnon. 

Admiral GURNON. Good afternoon, Chairman Young and members of the committee. 

Mr. YOUNG. I can’t see too well this early in the morning. 

Admiral GURNON. I understand. You have time zones to cross 

from Alaska. 

I am Rick Gurnon, president of the Massachusetts Maritime 

Academy. I am speaking today on behalf of the Consortium of State 

Maritime Academies. Our colleges are located in Massachusetts, 

New York, Maine, California, Texas, and Michigan. Although students from every State represented on your committee are enrolled 

at our colleges at reduced rates due to regional status. 

I would like to take a moment and introduce the other two academy presidents who are with me today, Rear Admiral Wendi Carpenter from SUNY Maritime and Rear Admiral Robert Smith of 

Texas A&M Galveston and Texas A&M Maritime Academy. Together, we represent a vital component of the national economy, 

and I thank you for the opportunity to appear before you today to 

discuss two very important issues of great concern to us. First, the 

impact of the ever-increasing regulatory burden on our institutions; 

and second, the need to replace our aging training ships owned by 

the Federal Government and critical to our ability to train our students for jobs and meet Federal requirements. 

Collectively, the six State maritime academies graduate over 70 

percent of the licensed deck and engineering officers in our country. 

While a sufficient pool of American merchant mariners is always 

important for the free flow of commerce and to support our troops 

overseas, that pool of officers becomes critically important in the 

event of a national emergency. All of the bombs, beans, bullets, 

boots, Bradleys, and Black Hawks that get to the Middle East 

moved by ship, with graduates of the State maritime academies at 

the helm and in the engine room of those vessels. 

In addition to their bachelor’s degrees, State maritime academy 

graduates are well prepared for positions of significant responsibility and technical difficulty, not just as mates and engineers 

aboard ships, but as senior leaders across many industries, in Government, in the military, from the seabed to space. Unfortunately, 

the State academies now face a number of challenges that threaten 

our success. And our primary concern is the regulatory burden. 

When the international convention on Standards of Training, 

Certification and Watchkeeping Code, STCW, was first implemented in 1997, it launched an ever-increasing layered set of requirements which are onerous, unnecessary, and result in unfunded mandates with significantly higher cost for the students 

and no measurable improvements in safety or security. The original intent of STCW was to increase the training and professionalism of other nations’ mariners. Despite over a decade of 

STCW requirements, we are not aware of any study that has deterVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
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mined that its implementation has improved U.S. maritime safety. 

The unintended consequence is that already high-quality American 

mariners were saddled with additional time-consuming and costly 

requirements that drove many mariners out of the profession because of the excessive energy, time, and money now needed to attain or retain their qualifications. 

Because of the rigid manner of the Coast Guard’s interpretation of STCW, we estimate that the implementation adds $1,850 to the 

cost to educating each student or over $5 million for us collectively 

each year. Of particular concern to us is the fact that the Coast 

Guard continues to interpret STCW without input from the academies. Our second concern is the need to replace our aging training 

ships. Each of the six State maritime academies has a federally 

owned training ship assigned through the Maritime Administration. The ships are the primary means by which our students receive their required seatime, and are essential components of our 

approved training programs. 

Because of the Federal requirements that these ships be built in 

the United States, they are either old merchant ships or converted 

Navy ships, and they average 35 years old. The SUNY Maritime 

training ship, originally designed in 1963, is a break bulk cargo 

ship, is over 51 years old, and needs replacement. 

The Maritime Administration has presented a business case for 

the construction of a new national security multimission vessel and 

estimates the project would support 600 to 1,000 high-paying manufacturing jobs per ship in the United States. New multimission 

training ships would also serve as platforms for disaster relief, humanitarian assistance, and logistics support for the Department of 

Defense. In fact, training ships have been utilized in disaster relief 

during Hurricane Sandy and Katrina and in humanitarian assistance in both Haiti and Mogadishu. During Hurricane Sandy, for 

example, MarAd testifies that the use of the Kennedy and the Empire State resulted in a cost avoidance of approximately $3.7 million to the taxpayer. 

In closing, let me emphasize that the State maritime academies 

hold the U.S. Coast Guard and Maritime Administration in high 

regard. Our reason to exist is to train our students to become competent professional leaders in the maritime industry, but that task 

is becoming evermore difficult due to an increasing regulatory burden on the academies and the aging of our federally owned training 

ships. 

Thank you very much. I stand by for questions. 

Mr. YOUNG. Thank you, Admiral. Mr. Wojahn. 

Mr. WOJAHN. Good afternoon, Chairman Young. My name is Patrick Wojahn, and I serve as a public policy analyst at the National 

Disability Rights Network. I am here as a representative of the 

Consortium for Citizens With Disabilities Transportation Task 

Force. I thank you for holding this hearing today and appreciate 

the opportunity to testify on the important safety and civil rights 

issue of out-of-water survival craft. CCD is a coalition of national 

disability organizations working together to advocate for national 

public policy that ensures the self-determination, independence, 

empowerment, integration, and inclusion of children and adults 

with disabilities in all aspects of society. The transportation task 

32 

force focuses on ensuring that national policy regarding transportation move society toward the ultimate goal of access to adequate 

transportation to accommodate the needs of employment, housing, 

and recreation for all people with disabilities. 

In order to be effective for people with disabilities, elderly people, 

and infants, survival craft must provide out-of-water protection. 

This is a matter of life and death, as many people with disabilities, 

elderly people, and infants lack the ability to hold onto survival 

craft that allows any part of them to remain immersed in water. 

For them, lifefloats and buoyant apparatus that does not keep 

them fully out of water are effectively useless. 

The benefits of survival craft that keep people entirely out of 

water to both people with disabilities and people without disabilities have been well understood by the Coast Guard and the National Transportation Safety Board, but have consistently recommended use of these craft as safety devices for at least 70 years. 

The Federal Government has also recognized for many decades 

that accessibility for people with disabilities, which would be supported by the use of out-of-water survival craft, is a civil right. In 

particular, the Rehabilitation Act of 1973 and the Americans with 

Disabilities Act of 1990 have enshrined the principle of equal opportunity for people with disabilities into Federal law. Equal opportunity requires that people with disabilities be able to ride on surface vessels, transporting passengers without greater fear of dying 

due to inadequate survival craft. 

Veterans who risk their lives to protect our country and who now 

have a disability should not have to risk their lives to go 

sportfishing or ride a ferry. Unfortunately, the cost-benefit analysis 

that the Coast Guard submitted regarding the requirement of outof-water survival craft included in the August 26, 2013, Coast 

Guard report to Congress, does not consider the civil rights factors 

discussed above. It also includes a deeply flawed analysis of the 

costs and benefits of this requirement of out-of-water survival craft. 

Although the report acknowledges that there are a number of uncertainties in determining the number of lives that might be saved 

by out-of-water survival craft, it appears to consistently resolve 

these uncertainties in favor of finding that fewer lives would be 

saved. Of the approximately 60 vessel casualties and over 160 

deaths in vessels carrying passengers that occurred between 2002 

and 2011, the Coast Guard found, without explanation, that only 

21 of these fatalities, one-third of these lives lost could have been 

prevented had an out-of-water survival craft been available. This 

is particularly astounding given the report’s finding that out-ofwater survival craft increased the fatality rate for passengers in 

the incidents where they are available by 73.74 percent. 

Additionally, the cost-benefit analysis undervalues the lives of 

people who die as a result of safety vessels that do not protect people out of the water. The Coast Guard, to determine the value of 

a statistical life, relies on a review of studies by the Department 

of Homeland Security that place the value of a statistical life, or 

VSL, at $6.3 million in 2007 dollars. Other recent Federal Government studies, however, place the VSL at a much higher amount. 

A recent OSHA analysis of crystalline silica determined that the 

value of each fatality avoided would have been $8.7 million. A reVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
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cent EPA cost-benefit analysis placed the value of a statistical life 

at $8 million in 1990 dollars and $9.6 million in 2020 dollars. 

There is at best a great deal of uncertainty regarding the appropriate measure of the value of a statistical life. 

Given that these numbers are a matter of life and death for people with disabilities, the value of human life should not be monetized and cannot be monetized to the person whose life is lost nor 

to that person’s family. History is rife with examples of cost-benefit 

analyses such as Ford’s analysis of the Ford Pinto being used to 

justify pure precautionary measures by looking at the value of a 

statistical life until the point where people actually begin to die. 

And who would want to be the one to contact the family member 

of a veteran with a disability and inform them that that person 

died because Congress determined that the profit to the industry 

operating vessels transporting passengers was more important 

than that person’s life? The cost to use out-of-water survival craft 

is minimal compared to the benefit of saving someone’s life. 

In conclusion, the Consortium for Citizens With Disabilities supports retaining the statute that requires the Coast Guard to approve only survival craft that keep people out of the water. Passenger vessels required to carry survival craft should only carry 

survival craft that provide out-of-the-water protection for all passengers. Thank you for the opportunity to testify this morning. 

Mr. YOUNG. Thank you, sir. 

And now we will open it up for questions. Mr. Cummings. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. Wojahn, let me start with you. When I walked out in the hall 

just now, I said to the admiral, I said, Admiral, I am really looking 

forward to your report, particularly on the disability issue. And he 

said something very interesting. He said, You have got to understand that it may not be practical to come up with a solution to 

that problem, and it may have to be done on an individual basis. 

Maybe you have heard that before. Have you heard that before? 

Mr. WOJAHN. Yes. 

Mr. CUMMINGS. Can you keep your voice up and respond to that 

so that when he sends me what he is—— 

Maybe I will preempt him. You give me the information so I can 

write the right question to him so that I don’t have him giving me 

the answer that he just gave me. 

Do you understand what I just said? 

Mr. WOJAHN. No. I am not sure I do. 

Mr. CUMMINGS. Help me help him. Help me help you. 

In other words, he is saying that it is not practical. And that is 

the answer that he is going to probably give me—— 

Mr. WOJAHN. Right. 

Mr. CUMMINGS [continuing]. To the issues that you are raising. 

And I am saying, he says that maybe it is better that you deal with 

the disabled on an individual basis. And all I am asking you is, 

what is your response to that, so that I can preempt his response. 

Mr. WOJAHN. Well, thank you. I appreciate your question. And 

I think I do understand it. 

I think while civil rights may not always be considered practical, 

it may not, on an individual case, be considered cost-effective or 

practical to implement, accessibility has been recognized as someVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
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thing that we value as a country. And the ability of people with 

disabilities to be included in every recreational opportunity is enshrined in the Americans with Disabilities Act. So it is not just a 

question of practicality. It is a question of what do we need to do 

for the people—for veterans with disabilities who have sacrificed or 

risked their lives for our country? 

Mr. CUMMINGS. All right. OK. Got you. 

Mr. Allegretti, you urged in your statement that the Coast Guard 

issue the long overdue touring vessel inspection rule. Given the 

findings of the DHS IG, are you confident that the Coast Guard 

has the resources or the expertise to bring towing vessels under inspection? 

Mr. ALLEGRETTI. Yes, sir. I am. And I am not looking so much 

at the internal competence of the Coast Guard, which I can’t speak 

to in this particular area, but I can look to the process of collaboration that the Coast Guard used over the last 9 years, where it extensively tapped the expertise of industry, of labor to understand 

how to implement this rule and how to deal with the technical requirements of the rule. 

At each step along the way, there was a lot of input to the Coast 

Guard. So I am confident that if they have used that information, 

the rule should come out largely right. 

Mr. CUMMINGS. And I take it that some of your members of the 

organization, have they been involved in that process? 

Mr. ALLEGRETTI. Extensively, sir. It was done under the aegis of 

the Towing Safety Advisory Committee, which is a congressionally 

authorized advisory committee to the Coast Guard. TSAC provided 

the umbrella to allow all of this work to take place. And what is 

important about that is that it was inclusive and open to the public. Anybody who had an interest in this issue was invited to participate. 

Mr. CUMMINGS. Can you update me on your current discussions, 

if any, with DOT regarding enforcement of the Jones Act. Have you 

been talking to them? 

Mr. ALLEGRETTI. We have been talking to them. We have been 

specifically talking to Administrator Jaenichen. And he is a strong 

supporter of the Jones Act, has professed that publicly to our leadership, and has asked for the opportunity to work with us to figure 

out how to make sure that within the Department of Transportation, they are doing all of the things necessary to enforce the law 

and to send public signals about their intent to enforce the law. 

Mr. CUMMINGS. Well, I am pleased to say that—I had a meeting 

with Secretary Foxx. And I am so glad—and I asked him to please 

make sure maritime is taken off the floor and put on the stove— 

not the back burner, but on the stove, because I think maritime 

has been a stepchild to the other transportation— 

And I agree with you. Jaenichen is a breath of fresh air. Let’s 

hope that he moves forward and has the support that he needs. 

Thank you, Mr. Chairman. 

Mr. YOUNG. Thank you, sir. Mr. Rice. 

Mr. RICE. Captain Schubert, I am curious. You were talking 

about enforcement of cargo preferences and the effect of sequestration on the U.S. maritime fleet, the international fleet as well, particularly focused on here. Who owns those ships? 

35 

Mr. SCHUBERT. Well, every shipowner who has a U.S.-flagged 

vessel has to meet citizenship requirements, documentation. 

Mr. RICE. Does the Government own them? 

Mr. SCHUBERT. No. We are talking about privately owned merchant marine ships. 

Mr. RICE. What difference does sequestration make? If they are 

privately owned, why do they worry about sequestration? 

Mr. SCHUBERT. Well, respectfully, we have two issues. One is the 

enforcement of cargo preference. Incidentally, cargo preference 

dates back—— 

Mr. RICE. Let’s talk about sequestration. 

Mr. SCHUBERT. Sequestration is directly related to the Maritime 

Security Program. You might call it a retainer that is paid to the 

carriers. 

Mr. RICE. So the Government is paying these guys money? 

Mr. SCHUBERT. Yes, they are. 

Mr. RICE. OK. Now why is it—you know, there are privately 

owned vessels all over this world carrying cargo all over the place. 

I think I learned last time that we carry 2 percent of the world’s 

international cargo. Why aren’t we competitive? Why do they have 

to rely on the Government? Why can’t we be competitive? Why 

can’t they carry cargo and make money just like every other ship 

in the world? 

Mr. SCHUBERT. Respectfully, sir, they do carry cargo and make 

money. But the cost of operating a ship under U.S. flag is more 

than the international competition. And it has to do with— 

I mean, if you visit our ports, you will see foreign-flag ships come 

in and out all the time. And I have to tell you that the wages that 

they pay their seamen—sometimes they don’t even pay wages. We 

call them ‘‘ships of shame.’’ This is the same international fleet 

that our U.S.-flagged carriers have to compete against. And I have 

to say, the $3.1 million MSP payment per vessel is probably about 

50 percent of the annual cost differential it takes to operate a ship 

under U.S. flag when compared to ships under foreign flag. 

Mr. RICE. OK. So you are saying the Government pays these 

ships $3.1 million a year—— 

Mr. SCHUBERT. Yes, sir. 

Mr. RICE [continuing]. To be U.S.-flagged ships? 

Mr. SCHUBERT. To help offset the cost of operating under U.S. 

flag. 

Mr. RICE. All right. Why can’t they be competitive? 

Mr. SCHUBERT. Well, actually, at least the carriers that operate 

within the 60-ship maritime security fleet program are very competitive internationally. We have one of the most modern—— 

Mr. RICE. So we are carrying international cargo? 

Mr. SCHUBERT. We are carrying international cargo. 

Mr. RICE. Not just on cargo preference? 

Mr. SCHUBERT. Not just on cargo preference. They couldn’t exist 

otherwise without MSP. Just to give you an example, I believe the 

container carriers that we have—the three container carriers that 

we have under the MSP program are the largest, number one, 

probably the fourth largest, and the seventh largest carrier in the 

world. They don’t do that on cargo preference. They do that beVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
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cause they are internationally competitive, and they operate U.S.- 

flagged ships. 

Mr. RICE. You said MSP programs? 

Mr. SCHUBERT. Maritime Security Program which is the—— 

Mr. RICE. American-flagged vessels that carry the cargo preferences? 

Mr. SCHUBERT. Well, there are two different programs. The Maritime Security Program is a retainer much like the Civil Reserve 

Air Fleet—CRAF—program that the airline industry has to help 

offset the cost and be there and be available to provide the global 

scope. It is not just the ships that we get with MSP. We also get 

the entire network of terminals, trucks, chassis. MSP is one of the 

best bang for the buck programs that the taxpayer can get. It 

is—— 

Mr. RICE. OK. You say we have got three container ships? 

Mr. SCHUBERT. Well, there are three container carriers that are 

world-class container carriers. The military—— 

Mr. RICE. Is that all that we have got is three? 

Mr. SCHUBERT. Well, those are companies. There are three companies that own container ships. We have several roll-on/roll-off 

carriers. We have a very diversified—— 

Mr. RICE. How many container ships do we have? I know we 

have only got like, what, 80 or 90 U.S.-flagged ships. 

Mr. SCHUBERT. I want to say there are about 47 or so U.S.-flag 

container ships in foreign trade. I don’t know if I have the most upto-date information. But the point is that we have ships, and we 

depended on those ships during Operation Iraqi Freedom and Operation Enduring Freedom. I was the Maritime Administrator at 

the start of those operations. It was the largest, most successful 

sealift in American history in terms of speed and efficiency, and we 

could not have executed that conflict and supplied the troops in the 

field with everything from beans to bullets—— 

Mr. RICE. I am running out of time. So I have to stop you for 

a second here. 

I want to go back and I want to get a specific answer to a question. I asked why we aren’t competitive. 

Mr. YOUNG. Mr. Congressman, go ahead. I have time. You just 

keep on going. 

Mr. RICE. Thank you. I asked you why aren’t we competitive. 

You mentioned low wages. What else? Why aren’t we competitive? 

Mr. SCHUBERT. Well, to be honest with you, we did a study on 

this during my term as Maritime Administrator, and the Tax Code 

has some issues. The international fleet, just through the Tax 

Code, has competitive advantages over the U.S. flag. 

Mr. RICE. What else? Tax code and wages. What else? 

Mr. SCHUBERT. Well, we have some laws that I believe are outdated. It is also in the area of tax. If a U.S.-flagged vessel undertakes a nonemergency repair in a foreign shipyard, it is subject to 

payment of a 50-percent ad valorem tax on those repairs. 

Mr. RICE. I didn’t know that. That is a U.S. tax? 

Mr. SCHUBERT. That is a U.S. tax. Fifty percent. Now there are 

some exceptions with some of the free trade agreements that we 

have. But the point is—and I really commend Administrator 

Jaenichen for taking a top-to-bottom review of maritime policy. It 

37 

is long overdue. He has the full support of the industry and USA 

Maritime in that effort. But we really can’t afford to lose a single 

ship right now. We are at the very bare minimum. 

Mr. RICE. See, I want to change that. That is why I keep asking 

what we need to do to be competitive. And what I want to know 

is, what is it going to take to have foreign companies flagging ships 

in the United States? What is it going to take? What are we going 

to have to change to make our regulatory structure, our tax structure—what are we going to have to change to make us competitive? 

I mean, we sit here and watch our shipbuilding industry die on the 

vine. We have sat here and watched our international shipping die 

on the vine. It is a horrible state of affairs. It is almost unimaginable. And I want to figure out what we have got to do to change 

it to make us competitive again. 

Mr. SCHUBERT. Well, we do need to enforce the cargo preference 

laws that are on the books, and that is important. 

Mr. RICE. That is not making us competitive. That is giving the 

Government a crutch. I want to know what it is going to take to 

make us competitive. 

Mr. SCHUBERT. Well, we are up against international competition 

that— 

I mean, I would say that if you were going to build a gas turbine 

generator in China, they are going to build it cheaper than they are 

going to build it here. It is the same issue in terms of our industrial base. We are up against international competition. 

By the way, the MSP program replaced the operating-differential 

subsidy program in the mid-1990s. At that time, we were paying 

the carriers as much as—in U.S. dollars in 1990—approximately $5 

million per ship annually to stay U.S. flagged. The fact that we are 

today only paying $3.1 million annually in current dollars is a big 

step in the right direction. 

Mr. RICE. I want our carriers so competitive that we don’t pay 

them anything. So here is what I would like from you. I would like 

a list of 10 suggestions, things we need to change that we can help 

make our shippers competitive. If it is changing Coast Guard regulations, if it is changing our hiring policies, if it is changing our tax 

structure, I want to know what we can change to make us competitive. 

Mr. SCHUBERT. I would like to make one comment about the 

Coast Guard. I personally think that they have gone to great 

lengths to help remove obstacles to reflag ships. During my time— 

and it actually started before I showed up—ships meeting international standards can, in some instances, reflag to U.S. registry. 

It didn’t used to be that way. So Coast Guard has done a lot to help 

in terms of removing obstacles to reflagging. 

Mr. RICE. I hear you, Mr. Schubert. And you know far more 

about this than I do. And I appreciate that. But I am just looking 

at the big picture. And the big picture is, we do not have 100 

United States ships flagged in international shipping. Something is 

terribly wrong. 

Mr. SCHUBERT. We have a little bit more work to do on the Tax 

Code. 

MR. RICE. I would sure love to see your suggestions. 

Mr. SCHUBERT. Sure. 

38 

Mr. RICE. Thank you, sir. 

Mr. YOUNG. Thank you, Mr. Rice. 

I want to thank the panel. 

Mr. Allegretti, liquefied natural gas has begun to be used as a 

marine fuel for vessels at a great expense, by the way, as well as 

vessels carrying LNG as a commodity. The Coast Guard has begun 

to slowly make a policy, regulating vessels fueled by LNG or carrying LNG as a cargo. What is AWO’s position on LNG and how 

will you work with the Coast Guard on forthcoming rules? 

Mr. ALLEGRETTI. Thanks, Mr. Chairman. 

Generally speaking, many of our members are excited about the 

potential to use LNG as a means of propulsion and the opportunity 

to carry it as cargo. So I think generally speaking, the position of 

our association, of our membership is, we would like to do whatever we can to help the Coast Guard facilitate movement in both 

of those directions. 

Mr. YOUNG. Hydraulic fracking—I can’t figure out what this has 

got to do—produces wastewater that must be transported to a disposable site. There is not currently a standard for transporting this 

wastewater by barge. Answering requests from the industry, the 

Coast Guard is working on policy guidance that will establish the 

conditions under which shale gas wastewater can be transported by 

boat, by barge. Does the AWO support the carriage of shale gas 

wastewater by barge? 

Mr. ALLEGRETTI. Absolutely, sir. We think that that is a great 

business opportunity in the future of our industry. We think it 

could be done safely, practically, cost effectively. So the Coast 

Guard’s development of policy guidance in this area will be very 

helpful to establishing the standards of carriage. And barges move 

lots and lots of hazardous cargoes. There is no reason why we can’t 

move wastewater as well. 

Mr. YOUNG. Thank you. 

Mr. Powell, why is the FMC producing this rulemaking? Aren’t 

there current regulations governing the activities of OTIs? Are they 

deficient or are they sufficient? 

Mr. POWELL. Mr. Chairman, we don’t think so. We think this 

ANPRM began with their investigation, Commissioner Khouri’s investigation of the barrel trade and looking at the movement of 

household personal effects. We think there are the proper checks 

and balances within the OTI industry, if not with the FMC, certainly with the customers who employ us. We have moved from 

regulation to contractual obligations to our shippers. So we think 

there is ample protection and control in there for the buyer of those 

services. 

Mr. YOUNG. What you are telling me that there were two instances in this whole thing and they changed the whole regulatory 

platform? 

Mr. POWELL. They cited two examples in the Advance Notice of 

Proposed Rulemaking where a bond did not cover what the companies went after the bonding companies for. And even with the 

amounts that they cited, the increase in bonds still would not have 

covered that. 

Mr. YOUNG. Well, it is sort of interesting, because, Rear Admiral, 

you were talking about regulations. I would like a list from both 

39 

of you of what you think are offensive about any regulations, because this is my pet peeve, for everybody sitting at this table, regulations. 

Just give you an example, in the last 4 years this Congress 

passed 628 laws in 4 years and signed by the President. In the 

same time, the agencies passed 13,883 regulatory laws that do 

nothing other than cause you more headaches; doesn’t really solve 

any problems, because we got people who don’t understand the industry. 

And, Captain, I got to tell you one thing. I am a person that believes in America’s maritime fleet. I happen to support your organization. I do not like to see my Navy, my maritime commercial fleet 

become foreign. Of course, I only have to deal with the Jones Act, 

which I am a big supporter of, the only elected official in Alaska 

that does support it, by the way. But to me what we have done to 

our maritime fleet from 1945 until now is really very not for good 

for this country. And I am not an isolationist. We do have to be 

competitive, and the ships of shame, for instance, we are getting 

product from the foreign countries, consuming it, then we have this 

holier than thou attitude where we don’t enforce those rules that 

should make us competitive, when they have the ability to do that, 

at a great cost to humanity. No one says a word. 

Rear Admiral, I want to say one more thing. I have this burn 

with the Coast Guard right now, and I am going to try to change 

it, because I am big supporter of the Coast Guard. Everybody supports the Coast Guard. But they are lawyered up. There are too 

many lawyers in the Coast Guard now. And they will give you 100 

reasons why you can’t do something instead of, OK, what can we 

do safely? What can make it work? And for those lawyers in the 

room, that is your problem. That is one of the things wrong with 

this country right now. 

But lastly, Rear Admiral, I would like to really have you think 

about your training ships. Maybe we can be in this together, because I don’t see this Congress spending the money they have to 

do to take and develop your training ships. I think that is reality, 

unfortunately. So is there a way we can get a ship in your hands 

that is more reasonably cost? I think that could be a way to do it. 

And I am talking about leasing and I am talking about being able 

to take and have a long-term contract if you wish to do it. But we 

need to have these newer ships, because you get trained on a 50- 

year-old ship, it is not the same ship. I want us to look and explore 

this. 

Coast Guard keeps saying, well, we want to own them. And the 

cost factor is about 50 percent more. It is not going to happen. I 

am talking about icebreakers, you are talking about training ships. 

Your ships are more important than ours are. And just comment 

on that. 

Admiral GURNON. We agree, Congressman. This is an important 

part of our training. We are training on 50-year-old antique vessels. It is shameful. Mexico can do it, the Indonesian countries can 

do it. We can’t do it. 

We have had a lot of comments about shipbuilding and the lack 

of shipbuilding in America. You need only look at Great Britain to 

see the dire straits that they are in. They are unable, for 20 years 

40 

been unable to produce a new aircraft carrier because they let their 

shipbuilding capacity atrophy to the point where it impacts their 

national defense. 

I believe that we can do it. I believe that we can do it. It is good 

jobs at good wages. Previous training ships were acquired through 

the earmark program. That is not going to happen in probably my 

lifetime, so we are going to have to—— 

Mr. YOUNG. Don’t say that. I am 80 years old and I am going 

to have earmarks sooner or later, you would think. Don’t say that. 

Because it is the dumbest thing we ever did, by the way, I will say. 

And my party did it. The dumbest thing. You know, look, I am 

going to shoot myself in the foot. That is how you shoot yourself 

in the foot. But that is not your problem, but don’t say we are not 

going to get them. 

Admiral GURNON. Yes, sir. Strike my last. 

We believe that you can do it. We think you can do it in America. 

And if you look at the big high-tech ships coming out that Americans go on, all of the Carnival cruise line vessels, they are built in 

Germany and they are built in Italy, not exactly Third World countries. They can do it competitively. 

Mr. YOUNG. And I think we can do it if you do one thing, very 

simple, because what you said—you said, and most of you, I think, 

will agree. 

Tom, how many regulations do you believe you are faced with 

that you didn’t have 30 years ago? 

Mr. ALLEGRETTI. Dozens. At least dozens. 

Mr. YOUNG. And that would be something for all of you to just 

sort of put down: This is what was not in existence 30 years ago. 

And then try to explain to me why they were necessary. What has 

it accomplished for the people of America? We can become competitive if we just stop this nonsense that we have 100—and by the 

way, never voted on, never vetted by the people, decided by the bureaucracy. And the bureaucracy is an extension of the executive 

branch, and this Congress no longer governs America. We don’t. It 

is governed by someone that is never elected, never been vetted, 

cannot be fired, extension of the executive branch, and as Americans we sit here and take it. 

And we cannot be competitive in the shipbuilding business, the 

shipping of products, the inland waterways, we cannot be competitive if we keep allowing this to occur, because the people who write 

them don’t understand the effect upon the total effort of the industry. 

I used to be in this business. I had a business license, a captain’s 

license, and my pilot’s license. I go back to the same company I 

worked for, started by the same people, they have a stack of Coast 

Guard regulations that high. That is not too bad. That high. If one 

of their clerks does not file the correct form or fill it out exactly 

right, the company can be fined or their ships cannot leave the 

dock. But that is not too bad. 

Then you have Homeland Security. That is a great agency. Does 

anybody feel more secure with Homeland Security nowadays? If 

you do, you are dumber than a mud fence right now. But they have 

a stack of regulations, same shipping company, that high that you 

have to fill. They have got 12 people working in an office now fillVerDate Aug 31 2005 15:33 Nov 19, 2014 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\2013\9-10-1~1\82685.TXT JEAN
41 

ing out those forms, serving the same people I did, and if one 

makes a mistake, they can be fined by that agency. There is no appeal unless you appeal to the agency. And you can be put in jail 

without judicial process. And their argument to me is, well, there 

may be a terrorist on the Yukon River. On the Yukon River, a terrorist? There is only one. That is me. But this is the silliness this 

country has got to today. 

Every committee I sit on and listen to witness tell me this, this, 

this. If we address the issue and if America would wake up, it is 

not the Congress. Our problem is we have allowed it to occur, and 

it is bleeding the economy of this country, including your industry. 

This is not about safety. 

I am on my soap box. I have served my time, Mr. Chairman. You 

can take over now. I have done enough damage. Thank you. 

Mr. HUNTER. You can’t tell that Mr. Young liked being chairman, 

can you? We liked it, too. 

I am sorry that I am late. I do have a couple of questions, 

though, for my good friend, Ken Franke, he came up from San 

Diego. 

Ken, let me just say hi. Thanks for coming out. 

Last time I saw him, we were fishing with a bunch of wounded 

marines there about 2 weeks ago. 

Mr. FRANKE. Yes, sir. 

Mr. HUNTER. So my question is about that, actually. If we were 

to have gone out past 3 miles, according to the new law that is 

going to go into effect in about 21⁄2 years, we would have had to 

have had lifeboats. If we would have gone out past 3 miles with 

those number of people, over six people past 3 miles, you have to 

have lifeboats. So tell me, would you have to retrofit fishing vessels 

to match the lifeboat law? 

Mr. FRANKE. Yes. Actually, you know, this is one-size-fits-all, and 

that is kind of the concern. 

I want to preface my comments with we have nationwide a lot 

of boats with inflatable liferafts. The Coast Guard does a lot of 

analysis before they give a certificate of inspection of one of our 

boats. So some boats will have inflatable liferafts, other ones will 

have lifefloats. In inland waters, like in Mission Bay, for instance, 

where the water is 6 feet deep, the river paddle wheeler that is 30 

feet tall doesn’t have any liferafts, because if it sunk, the people 

would stand on the upper deck. 

So we have a risk-based management that exists. And specifics 

especially to ADA stuff or, you know, severely handicapped people, 

that is when we in the industry make sure that they are on a vessel with the capabilities to support them. I use it as an example, 

2 weeks ago I had a gentleman that has a breathing apparatus and 

his chair weighs 400 pounds. A little 30-foot boat was not capable 

of accommodating him and his family. We put them on a much bigger boat that had actually the lifesaving equipment that he needed 

handy to him, with ramps capable of supporting his wheelchair. So 

there is infrastructure to deal with those ADA situations and those 

people that may not necessarily have the dexterity to amble around 

a 25-foot little sportfishing boat. 

The issue comes down to, though, do we go back and tell the 

mom and pop that own that little fishing boat, I am sorry, you have 

42 

to go out of business because you need to buy a $10,000 liferaft to 

mount up on the roof of your boat and go through a new stability 

test with the Coast Guard. That is what it comes down to at the 

end of the road. 

The bigger boats, a lot of them have inflatable liferafts, because 

the Coast Guard analysis of their route says, yeah, this is the 

safest thing to do. The offshore boats, most of them have the inflatable liferafts. The coastal boats, with the layers of safety that we 

have, all the communications equipment, the safety compartments 

on the boats, the division of the bulkheads, we have a good layered 

approach. And that is why, you know, I mentioned in my statement, we held 10 million people over the last 10 years in my little 

fleet. We didn’t have a single death. That speaks huge when we 

can have that layer of safety. 

So in answer to your question, yeah, we would end up having to 

retrofit them all, and I would honestly speculate I would probably 

lose 5 percent of our fleet out of business. Thank you. 

Mr. HUNTER. We probably took—two of those marines didn’t 

have legs at all on the fishing vessel we were on. 

Mr. FRANKE. Right. 

Mr. HUNTER. Was there a detachable liferaft? 

Mr. FRANKE. We had lifefloats on that boat, sir. 

Mr. HUNTER. Lifefloats. Probably every single marine on that 

was missing at least one limb. 

Mr. FRANKE. Yes. 

Mr. HUNTER. I don’t know how more disabled you can get, and 

they seemed to get around just fine. 

Mr. FRANKE. Yeah. No, we had 25 disabled aboard the boat. 

Mr. HUNTER. Yeah. So with that, I don’t have any other questions. I apologize for my absence. We had Secretary Kerry and 

Hagel and General Dempsey trying to convince us to go to war in 

Syria, and that is where I have been at. But I want to thank everybody for their time and for being here. And if there are no further 

questions, I thank the witnesses for their testimony, the Members 

that are now gone for their participation. The subcommittee stands 

adjourned. 

[Whereupon, at 12:49 p.m., the subcommittee was adjourned.] 

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