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89–707 PDF 2016

THE STATUS OF THE MERCHANT MARINE 

(113–82) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 10, 2014 

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 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

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 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

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 .................................................................................... iv 

TESTIMONY 

Mark Tabbutt, chairman, Saltchuk Resources, on behalf of the American 

Maritime Partnership .......................................................................................... 3 

Niels M. Johnsen, chairman, Central Gulf Lines, Inc. and Waterman Steamship Corporation, on behalf of USA Maritime ................................................... 3 

Don Marcus, president, International Organization of Masters, Mates and 

Pilots, on behalf of American Maritime Officers, Marine Engineers’ Beneficial Association, Marine Firemen’s Union, Sailors’ Union of the Pacific, 

and Seafarers International Union ..................................................................... 3 

Matthew Paxton, president, Shipbuilders Council of America ............................ 3 

PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE 

RECORD SUBMITTED BY WITNESSES 

Mark Tabbutt: 

Prepared statement .......................................................................................... 25 

Answers to questions for the record issued by Hon. John Garamendi, 

a Representative in Congress from the State of California ....................... 34 

Niels M. Johnsen: 

Prepared statement .......................................................................................... 37 

Answers to questions for the record issued by Hon. John Garamendi, 

a Representative in Congress from the State of California ....................... 46 

Don Marcus: 

Prepared statement .......................................................................................... 50 

Answers to questions for the record issued by Hon. John Garamendi, 

a Representative in Congress from the State of California ....................... 63 

Matthew Paxton: 

Prepared statement .......................................................................................... 67 

SUBMISSIONS FOR THE RECORD 

Hon. John Garamendi, a Representative in Congress from the State of California, submission of the following articles and supplemental material: 

‘‘China Pushes to Build Its Own Ships to Deliver Gas,’’ Reuters, August 

5, 2014 ............................................................................................................ 72 

Moyoun Jin, ‘‘South Korea to Support Shipbuilding Industry,’’ IHS Maritime 360, August 18, 2014 ........................................................................... 74 

‘‘GAIL to Buy One-Third of LNG Ships From Indian Shipbuilders,’’ The 

Economic Times, July 30, 2014 .................................................................... 75 

‘‘The Global LNG Fleet Needs to Grow by 225 Vessels by the End of 

2020. How are Foreign Governments Supporting Their Shipbuilding 

Industries?′′ Memo from staff of Hon. John Garamendi ............................ 77 

MarEx ‘‘China to Modernize Shipping Industry,’’ Reuters, September 3, 

2014 ................................................................................................................ 78 

‘‘China Publishes First ‘White List’ of 51 Shipyards,’’ Reuters, September 

4, 2014 ............................................................................................................ 79 

Questions for the record for Matthew Paxton, president, Shipbuilders 

Council of America ........................................................................................ 80 

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(1) 

THE STATUS OF THE MERCHANT MARINE 

WEDNESDAY, SEPTEMBER 10, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:40 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. 

Good morning. The subcommittee is meeting today to review 

issues impacting the U.S. merchant marine, the important role it 

plays in our economy and national security and ways we can work 

together to strengthen and expand the merchant marine. 

The U.S. maritime industry currently employs more than 

260,000 Americans, providing nearly $29 billion in annual wages. 

There are more than 40,000 commercial vessels currently flying the 

American flag. 

The vast majority of these vessels are engaged in domestic commerce, moving over 100 million passengers and $400 billion worth 

of goods between ports in the U.S. on an annual basis. Each year 

the U.S. maritime industry accounts for over $100 billion in economic output. 

Beyond the important contributions to our economy, a healthy 

merchant marine is vital to our national security. Throughout our 

history, our Nation has relied on U.S.-flag commercial vessels 

crewed by American merchant mariners to carry troops, weapons, 

and supplies to the battlefield. 

During Operations Enduring Freedom and Iraqi Freedom, U.S.- 

flag commercial vessels transported 63 percent of all military cargoes moved to Afghanistan and Iraq. Unfortunately, over the last 

35 years, the number of U.S.-flag vessels sailing in the international trade has dropped from 850 to less than 90. Less than 2 

percent of the world’s tonnage now moves on U.S.-flag vessels. 

In the same period, we have lost over 300 shipyards and thousands of jobs for American mariners. For the sake of our national 

and economic security, we need to reverse this trend. We cannot 

rely on foreign vessels and crews to provide for our national security. 

It is critical that we maintain a robust fleet of U.S.-flag vessels 

to carry critical supplies to the battlefield, a large cadre of skilled 

American mariners to man those vessels, and a strong shipyard inVerDate Aug 31 2005 14:12 Feb 10, 2016 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\CG&JOI~1\9-10-1~1\89707.TXT JEAN
2 

dustrial base to ensure we have the capability to build and replenish our naval forces in time of war. 

I know the new Maritime Administrator is hard at work on a national maritime strategy that will hopefully include recommendations to strengthen the merchant marine. As soon as the strategy 

is complete, I look forward to calling him before the subcommittee 

to present it. 

In the meantime, representatives of maritime industry and labor 

have been working on a similar proposal at the request of Ranking 

Member Garamendi and myself. I look forward to hearing about 

the proposal today as well as other recommendations our witnesses 

may have. 

If we want to grow our economy and remain a world power capable of defending ourselves and our allies, we must work together 

to strengthen our merchant marine. 

I thank the witnesses for appearing today and look forward to 

working with them. I thank the witnesses—I already put that. 

And, with that, I yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Chairman Hunter, thank you. 

I am downright excited about this hearing. I am excited about 

the potential that we have to really strengthen our maritime industry and to build the American economy and provide a significant 

number of jobs. 

The status of the U.S. merchant marine could not be a better 

topic for us to take up in the waning days in the 113th Congress. 

We have got a stretch run. Maybe we can get something done in 

the last couple of months of this session. 

Our merchant marine has been a fundamental element of our national defense and a key industry in our national economy since 

the founding of this Republic more than 230 years ago. 

Unfortunately, recent history over the past five decades has not 

been very kind to our maritime industry. For example, the number 

of vessels serving the U.S. international trade has shrunk from 850 

in the mid-1980s to roughly 90 vessels in 2014. 

Since 1983, the United States has lost approximately 300 shipyards and only 10 shipyards are capable now of building large 

naval vessels and oceangoing commercial ships. Such losses are 

very disturbing. 

Nevertheless, despite the setbacks of the recent past and the ongoing challenges, a strong maritime foundation endures, especially 

in coastwide trade that has remained protected under the Jones 

Act. 

I am convinced now more than ever that, with purposeful cooperation and action, our merchant marine can again flourish and 

resume its standing as a vital contributor to our national defense 

and economic might. 

Progress has been made. We have successfully fought off ill-advised waivers of the Jones Act. We have rallied and beaten back 

some of the worst proposals to rewrite our cargo preference laws. 

We have also succeeded in reauthorizing and fully funding the 

Maritime Security Program to ensure that the Pentagon retains 

the sealift capability it needs to move our military quickly, efficiently, and securely. 

3 

But just as sure, real challenges remain. We need to recapitalize 

our Ready Reserve Fleet, to modernize our sealift vessels, and provide new job opportunities for our shipyards. 

We need to better utilize existing financial assistance programs, 

such as Title XI of the Maritime Loan Guarantee Program, to 

again demonstrate that the Federal Government is a willing partner in the maritime industry. 

We should note that our competitors around the world are more 

than willing and, in fact, are doing significant support to their— 

for their maritime industry. 

And perhaps most important, we must take advantage of the recent emergence of a U.S. LNG export trade to ensure that the export of this strategic national resource does not more than merely 

increase the profits of the energy exporters, but also directly benefits our merchant marine and the expansion of our domestic shipbuilding industry. 

To that end, in this hearing, I want to hear the views of our witnesses on this emerging LNG trade and, also, seek their comments 

on legislation recently introduced by Chairman Hunter and myself, 

H.R. 5270, the Growing American Shipping Act, or GAS Act. I like 

that. 

Thank you very much. 

Mr. HUNTER. I thank the ranking member. 

The witnesses today are Mr. Mark Tabbutt, chairman of 

Saltchuk Resources, on behalf of the American Maritime Partnership; Mr. Niels Johnsen, chairman of Central Gulf Lines, on behalf 

of USA Maritime; Captain Don Marcus, president of the International Organization of Masters, Mates and Pilots, on behalf of 

maritime labor organizations; and Mr. Matthew Paxton, president 

of the Shipbuilders Council of America. 

TESTIMONY OF MARK TABBUTT, CHAIRMAN, SALTCHUK RESOURCES, ON BEHALF OF THE AMERICAN MARITIME PARTNERSHIP; NIELS M. JOHNSEN, CHAIRMAN, CENTRAL GULF 

LINES, INC. AND WATERMAN STEAMSHIP CORPORATION, ON 

BEHALF OF USA MARITIME; DON MARCUS, PRESIDENT, 

INTERNATIONAL ORGANIZATION OF MASTERS, MATES AND 

PILOTS, ON BEHALF OF AMERICAN MARITIME OFFICERS, 

MARINE ENGINEERS’ BENEFICIAL ASSOCIATION, MARINE 

FIREMEN’S UNION, SAILORS’ UNION OF THE PACIFIC, AND 

SEAFARERS INTERNATIONAL UNION; AND MATTHEW 

PAXTON, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA 

Mr. HUNTER. Mr. Tabbutt, you are recognized for your statement. 

Mr. TABBUTT. Good morning, Chairman Hunter, Ranking Member Garamendi, and members of this subcommittee. 

My name is Mark Tabbutt, and I am here today on behalf of the 

American Maritime Partnership. We represent all segments of our 

industry—shipping companies, ship construction and repair 

yards—and our industry’s skilled workforce. 

I am also the chairman of the board of Saltchuk, which is a family of transportation companies. We employ 7,500 people and have 

operations in the United States, stretching from the U.S. Virgin Islands to Barrow, Alaska. 

4 

In our domestic shipping operations, we currently carry one-third 

of all general cargo that moves to Alaska and about 30 percent of 

all general cargo carried to Puerto Rico. 

In Hawaii, we provide a lifeline to the islands by transporting 

significant amounts of general cargo, moving on the water between 

the islands. We are a privately owned second-generation family 

business. 

My testimony today comes on behalf of the American domestic 

maritime industry. That is the shipping industry that operates exclusively between points within the United States. Of the total 

U.S.-flag fleet, the overwhelming majority operates within the 

Jones Act, the business of transporting cargo by water from one 

U.S. port to another. 

I want to thank this subcommittee for its consistent support of 

the Jones Act. Certainty in Government policy is the principle and 

critical ingredient in the success of the domestic maritime industry. 

Without it, the investment picture and growth profile I am about 

to describe could not take place. 

I also want to thank you, Chairman Hunter and Representative 

Garamendi, for your leadership, exploring ways to expand the U.S. 

fleet in all trades. 

I am happy to report that this industry is experiencing an extraordinary renaissance. Our industry is investing billions to construct new state-of-the-art vessels in shipyards across the land and 

serving our customers with modern fuel and cost-efficient vessels. 

The largest sector of our domestic marine transportation industry supports our energy infrastructure with the movement of crude, 

refined petroleum products and chemicals. This sector has seen 

dramatic growth as a result of the shale oil revolution. 

But the growth is not limited to the energy sector. Our company 

and others like us are building large modern container ships to 

serve the noncontiguous areas of the United States. I have provided much more detail about these ships in my written testimony. 

We are seeing growth in the offshore supply business as the Gulf 

of Mexico oil industry rebounds. The inland trades remain strong. 

We have inland shipyards that are building and launching an average of one new barge every single day of the year. 

My written testimony includes a long list of large vessels under 

construction and under contract to be built in the future. I would 

add that these vessels feature cutting-edge technologies, like engines that will burn natural gas as a fuel, breaking new ground not 

only in the United States, but, also, as the first of their kind in the 

world. This is American ingenuity at its best. 

In fact, while we have the best trained maritime workforce in the 

world, our industry is growing so fast that, at times, it has been 

difficult to hire all the skilled personnel that we need. To help address that situation, our industry recently launched a major initiative to hire veterans for jobs in the domestic maritime industry. 

We had 400 veterans at our Military2Maritime job fair last week 

in Houston, and a similar number attended earlier this year at an 

event in Jacksonville. Our industry has always hired veterans, especially from the sea services, but we are ramping up that effort 

today. We love hiring veterans. 

5 

This spike in commercial vessel construction is coming at a time 

when military ship construction in the United States is sharply declining due to deep Federal budget cuts. As such, the expansion in 

commercial work helps keep shipping—shipyards operating and the 

technical expertise fully subscribed. Shipbuilding is critical to our 

Nation’s defense industrial base, and commercial vessel construction has helped fill the gaps caused by the cutbacks in military 

ship construction. 

It is a very good time to be a part of our industry. Our industry’s 

contributions to American’s economic, national, and homeland security have never been greater. We deeply appreciate this subcommittee’s support for the Jones Act, and we thank you for understanding the need for certainty in legal and regulatory framework 

that is the foundation of our industry. 

Thank you. 

Mr. HUNTER. Thank you. 

Mr. Johnsen. 

Mr. JOHNSEN. Thank you, Mr. Chairman. 

I am Niels M. Johnsen, chairman of Central Gulf Lines and Waterman Steamship Corporation, U.S.-owned section 2 citizen companies that, together with their affiliates, operate 16 U.S. commercial vessels. 

I am testifying on behalf—— 

Mr. HUNTER. Would you mind pulling—would you mind pulling 

the mic a little bit closer? You can move the whole thing over. 

Thank you. 

Mr. JOHNSEN. I am testifying today on behalf of USA Maritime 

and its member companies, a coalition representing all the privately owned U.S.-flag oceangoing vessels operating in foreign 

trade. 

I will highlight the present challenges confronting the merchant 

marine and suggest ways in which Congress and the administration can provide much needed support to our industry. 

Mr. Chairman, the Congress and the administration have to answer a simple question: Do we want a robust U.S.-flag merchant 

marine to support our national and economic security for the rest 

of this century and beyond? The simple answer is yes. The maritime industry strongly believes that the only answer to this question is yes. 

To achieve this objective, the Federal Government must act 

quickly to develop a comprehensive national maritime strategy, absent which, we fear, the decline of our industry will only accelerate. 

In July, the Maritime Administration advised Congress that the 

number of U.S.-flag vessels in international trade had decreased by 

18 percent between 2008 and 2013, from 101 vessels to 84 vessels, 

and that a further decline is anticipated. This has been caused by 

a sharp decline in military cargo, food aid, and other Government 

cargoes moving on U.S.-flag vessels. 

History has proven that the United States depends heavily upon 

the U.S.-flag merchant marine to support our Nation’s military and 

economic security. U.S.-flag vessels provided direct support to DOD 

during World War II, the Korean war, the Vietnam war, Operation 

Desert Shield Storm, Operation Enduring Freedom in Afghanistan, 

and Operation Iraqi Freedom. 

6 

U.S.-flag vessels carried more than 90 percent of the war materiel to forward-operating bases during the Afghanistan and Iraqi 

conflicts. 

While the U.S.-flag fleet is in decline, challenges on the world 

stage multiply rapidly. In the past few months, we have witnessed 

the emergence of the Islamic State of Iraq and Syria, significant 

turmoil in Libya, Israel and the Ukraine, and several provocative 

actions by China. 

We cannot predict when the American military will be called 

upon to respond to these or other conflicts, but our military must 

be ready to answer the call when it inevitably comes, including the 

strategic sealift support provided to DOD by U.S.-flag merchant 

marine. 

We are pleased to recommend several specific initiatives that can 

lay the foundation for a new maritime strategy. First, a strong, 

fully funded Maritime Security Program must be a key component 

of any future maritime policy. 

MSP provides a privately owned U.S.-flag fleet of 60 militarily 

useful commercial vessels to support the sustainment of U.S. forces 

throughout the world. Under this program, U.S. carriers commit 

their vessels and their global logistics network of ports, rail, trucking, and infrastructure to support American troops and to maintain 

America’s readiness. 

The capital cost to DOD to replicate this fleet would be $13 billion, and it would cost another $52 billion to replicate the worldwide intermodal system that has been developed by the MSP participants. 

In 2012, the Congress reaffirmed its support for the MSP by reauthorizing this program through 2025. In his fiscal year 2015 

budget, the President requested a fully authorized annual amount 

of $186 million for MSP. 

While the Senate recommended funding at this level, the House 

bill, unfortunately, recommended only $166 million, a $20 million 

cut that, if enacted, would undoubtedly result in a reduction of the 

MSP fleet and a further decline in the U.S. merchant marine. 

So our most immediate request is for Congress—and we know 

this is in process—to fully fund the MSP in fiscal year 2015 at the 

authorized level of $186 million. 

Once that is accomplished, we need to address the appropriate 

level of funding required to sustain the MSP fleet in future years. 

It is critically important that the level of support for MSP vessels 

be adjusted to achieve commercial viability and a more level playing field for MSP vessels. 

When the MSP was created, Congress sought to incentivize shipowners to document modern vessels under the U.S. flag and enroll 

those vessels in the MSP with the full cooperation of the Coast 

Guard. 

For 15 years, the Coast Guard adhered to the original intent of 

Congress by working closely with MSP carriers to expedite the documentation of dozens of modern vessels. 

Unfortunately, the Coast Guard recently issued guidance that alters this longstanding cooperative approach. NVIC 01–13 requires 

vessels entering the MSP to comply with more costly standards 

7 

that exceed international standards routinely accepted by the 

Coast Guard. 

USA Maritime urges this subcommittee to request the Coast 

Guard to revoke this NVIC and return to the prior practice that 

has worked so effectively since the inception of the MSP. 

In addition to MSP, it is critically important for U.S.-flag vessels 

to have access to a broad array of Government cargo. We strongly 

support cargo preference requirements for the transportation of 

Government-impelled cargo. 

The three most important cargo preference statutes are the 

Cargo Preference Act of 1904, Public Resolution 17, and the Cargo 

Preference Act of 1954, requiring that at least 50 percent of all 

Government cargoes and 75 percent of all food aid cargoes be 

transported on U.S.-flag vessels. 

Unfortunately, the food aid percentage was reduced in 2012 from 

75 percent to 50 percent, which very negatively impacts the U.S.- 

flag fleet. We strongly support the provision that you and Congressman Garamendi included in the Coast Guard bill to restore 

the U.S.-flag share of food aid cargoes to the 75-percent level. 

Unfortunately, the volume of military and food aid cargoes has 

declined precipitously in recent years. This dwindling cargo base 

has put pressure on MSP carriers and will lead to additional 

shrinkage of the U.S.-flag fleet unless action is taken by Congress 

to address insufficient MSP funding levels and otherwise assist in 

increasing the available pool of Government cargoes for U.S.-flag 

vessels. We urge MarAd to redouble its efforts to enforce the cargo 

preference laws and ensure that all Federal agencies comply with 

all such requirements. 

Mr. Chairman, we support the additional cargo preference enforcement language that your subcommittee has included in the 

Coast Guard bill that, again, clarifies that MarAd has the responsibility to determine if a Federal program is subject to cargo preference. 

Another challenge for U.S.-flag carriers is that numerous countries continue to erect barriers that exclude or limit the ability of 

U.S.-flag vessels to access those markets. A new maritime strategy 

should include provisions designed to eliminate unfair anticompetitive practices of our trading partners. 

We are ready to work with all facets of the Federal Government, 

particularly the trade representative, in a sustained effort to eliminate those barriers wherever they exist. 

In conclusion, Mr. Chairman, the state of the U.S. merchant marine is precarious. Our industry is in the midst of a perfect storm: 

dwindling U.S. military cargoes, a precipitous drop in food aid cargoes, escalating costs and regulations from the Coast Guard and 

other agencies, and intense low-cost foreign competition. 

A national maritime strategy that addresses these issues in a 

comprehensive way must be developed immediately. It must preserve an enhanced Maritime Security Program, reinforce and expand existing U.S.-flag cargo preference requirements, and 

strengthen commercial opportunities for U.S.-flag vessels with our 

trading partners. 

Thank you, Mr. Chairman. 

Mr. HUNTER. Thank you. 

8 

Mr.—Captain Marcus. 

Captain MARCUS. Thank you, Chairman Hunter, Ranking Member Garamendi, and members of the subcommittee. 

I am Don Marcus, president of the International Organization of 

Masters, Mates and Pilots and a professional mariner, having been 

employed as third mate through master aboard U.S.-flag commercial vessels engaged in foreign trade. 

I am speaking on behalf of Masters, Mates and Pilots, the American Maritime Officers, the Marine Engineers’ Beneficial Association, the Marine Firemen’s Union, the Sailors’ Union of the Pacific, 

and Seafarers International Union. 

Our organizations represent the men and women who supply our 

military overseas. We also ensure that the seaborne trade that our 

economy depends upon is not carried exclusively in the hands of 

foreign vessels with foreign crews. ‘‘In peace and war’’ is the motto 

of the U.S. merchant marine. 

The critical need for our industry has been recognized in every 

conflict during our Nation’s history. I am proud to say, as was 

pointed out earlier, that 90 percent of the military supplies carried 

to our troops in Afghanistan and Iraq were carried by American 

labor. Despite the indisputable need for a strong American maritime industry, the U.S. merchant marine is in jeopardy. 

The declaration of policy of the Merchant Marine Act of 1936 

states, ‘‘It is necessary for the defense and the development of its 

foreign and domestic commerce that the United States shall have 

a merchant marine sufficient to carry a substantial portion of its 

waterborne export and import foreign commerce of the United 

States.’’ This policy objective is not being met. 

U.S.-flag commercial vessels and their American citizen crews 

are subject to a variety of Federal rules, regulations, and tax obligations that are not applicable to our foreign-flag competition. 

As a result, there has been a disastrous decline in the share of 

U.S. foreign trade carried by U.S.-flag commercial vessels, the 

number of U.S. vessels engaged in foreign trade has declined, and 

there has been a loss an of jobs and employment security for American mariners. 

It must be emphasized that it takes many years for an individual 

to gain the experience and sea time necessary to obtain U.S. Coast 

Guard-issued licenses and credentials. Our young people will not be 

encouraged to enter an industry that has been abandoned by our 

policymakers and that promises no future. 

Our Government, U.S.-flag shipping companies, and America’s 

maritime labor organizations must work together to modify existing programs and create new programs and opportunities that will 

increase the amount of cargo, the number of vessels, and the employment opportunities in the American merchant marine. 

For example, as stated earlier today, the Maritime Security Program is a key component of our military security. It is critical that 

Congress appropriate the full $186 million that has been authorized. 

The current $20 million funding shortfall may cost as many as 

seven ships in the U.S. 60-ship fleet if not rectified. Considering 

the cost of replacement of this program, it makes no sense to begin 

the process of gutting our sealift capability. 

9 

Another key component of maritime strategy is the cargo preference statutes. These provide U.S. cargo baselines and a number 

of advantages and protection for our U.S.-flag foreign fleet. 

Congress must direct that Maritime Administration enforce the 

U.S.-flag shipping requirements and report on MarAd’s enforcement activities. Congress must restore the U.S. flag of P.L. 480 

Food for Peace cargoes to the 75-percent level. 

It would be far better to streamline the P.L. 480 program rather 

than replace it with a cash handout program that gives cash to 

third parties. Cash handouts do not guarantee that the needy of 

the world will receive more food. The generosity of American taxpayers should be tangible and transparent if the U.S. constituency 

that supports foreign aid is to be sustained. 

On another matter pertaining to the competitiveness of the U.S. 

maritime industry, the Merchant Marine Act of 1920 sets out the 

legal remedy available in the event a seaman is killed or injured 

aboard ship. Congress should work with maritime labor and management to determine whether an alternative remedy should be 

available. 

Our maritime union strongly supports H.R. 5270, the Growing 

American Shipping Act, which encourages the use of LNG U.S.-flag 

vessels. We urge Congress to allow foreign-built LNG vessels to be 

documented under the U.S. flag in order to engage in our international export trade, provided that they meet standards for vessels—international standards for vessels entering U.S. waters. 

Also, extending the provisions of the Internal Revenue Code’s foreign-source income exclusion to American mariners working aboard 

LNG export vessels would also be a means of reducing the competitive advantage of foreign-flag LNG carriers. 

American labor salutes you all. We thank you for your legislative 

support and your commitment to the U.S. merchant marine. A 

healthy U.S. merchant marine will safeguard our country’s military 

economic and homeland security. American labor stands ready to 

work with you to achieve these objectives. 

Thank you. 

Mr. HUNTER. Thanks, Captain. 

Mr. Paxton. 

Mr. PAXTON. Thank you. And good morning. 

On behalf of the Shipbuilders Council of America, I would like 

to thank Chairman Hunter, Ranking Member Garamendi, and 

members of the subcommittee for the opportunity to provide a brief 

overview of the domestic commercial shipbuilding industry, some 

recent market trends, and issues facing the industry. 

The shipyard industry is a vital component of any robust merchant marine. And today I am pleased to inform the committee 

that the state of America’s commercial shipyard industry is the 

strongest it has been in decades. 

Today the American shipyard industry represents a strong manufacturing sector contributing hundreds of thousands of jobs and 

billions of dollars to the economy. According to a recent report by 

the U.S. Maritime Administration, the shipyard industry supports 

over 400,000 jobs in all 50 States, representing nearly $24 billion 

in labor income and contributes over $36 billion to the GDP. 

10 

In fact, when explaining the economic impact of our industry, it 

is important to point out that, on average, over the past 4 years, 

American shipyards have delivered approximately 1,300 ships per 

year. 

Moreover, shipyards have a big impact on the local communities 

and the country at large. With over 300 facilities located in 27 

States and a supplier base that provides economic impacts in all 

435 congressional districts, each direct job leads to another 2.7 jobs 

nationally. The men and women who are employed by the shipyard 

industry are highly skilled. And, in 2011, the average labor income 

per job was approximately $73,000 a year. The salary is 45 percent 

higher than the national average for the private-sector economy. 

Much of the growth of the commercial shipyard sectors has been 

in response to the country’s oil and natural gas revolution. The result has been a boom for shipyards who are currently building out 

19—that is options included—large crude and petroleum product 

carriers, representing millions of barrels of new capacity for coastwise transportation. 

At the same time, U.S. shipyards currently have seven—including options—large container ships on order to serve the noncontiguous trades. All of these vessels and several of the petroleum product carriers will be powered by liquefied natural gas or will be 

LNG-conversion-ready. 

In fact, the world’s first LNG-powered container ships are going 

to be built out in San Diego at General Dynamics NASSCO, which 

is a huge feather in the cap of the shipyard industry. 

Shipbuilding and ship repair associated with the offshore oil and 

gas sector in the Gulf of Mexico is equally important. With roughly 

4,000 offshore oil and gas platforms in the Gulf of Mexico, there 

has been steady shipbuilding and repair contracts for this sector for 

many years now. 

In 2013, shipyards entered into 111 contracts for offshore oil and 

gas support vessels. As a result of this strong order book, the U.S. 

is now a leader in offshore workboat shipbuilding, so much so, we 

now build for international markets exporting these vessels to work 

worldwide. 

Finally, the industry continues a steady stream of building tugboats, ferries, inland barges, patrol and fireboats, as well as other 

craft. All of these vessels provide important merchant mariner jobs, 

which contribute the eyes and ears of the waterfront and waterways, a true national security success story. 

Commercial vessel construction represents billions of dollars in 

investments each year, underscoring the importance of maintaining 

the Jones Act. Each dollar invested in new commercial vessel construction is done so with the understanding that the Jones Act is 

the law of the land. So it is absolutely critical that any attempts 

to undermine the law are not entertained, which includes unnecessary waivers. 

Before closing, I do want to mention another challenge. The shipbuilding industry, like so many other manufacturing sectors, faces 

an aging workforce. Attracting a younger generation towards a career path inside the shipyard industry must begin in our high 

schools, trade schools, and community colleges. SCA has recently 

set up a workforce development committee to begin to address this 

11 

issue. We look forward to discussing the workforce development in 

any future national maritime strategy. 

Today the state of commercial shipbuilding is strong relative to 

past decades. However, SCA is looking ahead for new market opportunities, those opportunities such as the ones I know you guys 

are working on in H.R. 5270. 

SCA sincerely appreciates this committee’s support of the Jones 

Act and efforts to grow the industry. SCA also appreciates this 

committee’s efforts to raise the visibility of the domestic maritime 

industry as a whole by advancing the conversation for a national 

maritime policy. We look forward to continuing to work with you 

in these discussions. 

Thank you very much. And I look forward to any questions you 

might have. 

Mr. HUNTER. OK. Thank you. 

Thank you all again for being here. 

I guess the first thing I would say is you can look around you, 

at least on the Republican side, and you can see the impact that 

this subcommittee—or that these issues have in Congress. 

If you go to a Subcommittee on Aviation hearing, a Subcommittee on Highways and Transit hearing, or a Subcommittee on 

Railroads, Pipelines, and Hazardous Materials hearing, you have a 

lot more people there. You have a lot more Members up here listening. I would say, number one, that is on the ranking member and 

I, but it is also on you. And I think this is a great starting point 

for that. 

I would ask, too, that—after this, that the type of coalition that 

you have—that you are right now in the position paper that you 

come up with, that it doesn’t kind of disband and go off with the 

wind. I think you need to stay more engaged and get more engaged 

so that you have Members sitting up here listening and caring 

about what your issues are. 

Because right now those other three subcommittees that I mentioned, they just dwarf you. Even though, in terms of economic output and in terms of districts that you touch and people that you 

employ and the actual industrial strength that you guys bring, it 

is not reflected, I don’t think, by Members showing up here and listening to what you have to say. 

So I would encourage more of this. And we will work together, 

John and I will, with you to make sure that, when you come up 

here in 6 months, you have some more interested Members of Congress listening and learning. Because right now that is just not reflected. 

Number one, I guess the first question, Mr. Tabbutt—in fact, I 

will ask all of you. 

My first question is: Can you talk about the Ex-Im Bank, the Export-Import Bank, and what it does for you, if anything. I am just 

curious. That is to anybody that wants to answer that. 

Mr. JOHNSEN. The Export-Import Bank is very important to 

international trading, U.S.-flag vessels, because it provides the 

cargo base that is required by Ex-Im Bank regulation. 

So if the Ex-Im Bank goes away, that will be a further degradation of the cargo base that I referred to in my remarks that is so 

12 

critical and you will see—unfortunately, you will see vessels moving out of U.S. flag if that happens. 

I can’t tell you how many it would be at this point because it depends on the cargo base, ultimately, but it is an extremely critical 

issue to the U.S.-flag merchant marine. 

Captain MARCUS. Yes, Mr. Chairman. I would just like to follow 

up on Mr. Johnsen and reiterate that the Ex-Im Bank is important. 

Some 50 percent of the Ex-Im Bank exports go aboard U.S.-flag 

vessels, project cargo being a big component of that. 

Our particular organization, Masters, Mates and Pilots, has at 

least two ships running right now that are dependent on project 

cargo, one of which is with Waterman/Central Gulf. 

So we feel very strongly that destruction of this program as far 

as U.S. shipping would be negative and, of course, it would be a 

negative for the U.S. economy and jobs, generally. Jobs are the concern of labor, and these are an important source of jobs for us. 

Thank you. 

Mr. HUNTER. Thank you. 

Next question. I am just watching Congressman Ed Royce, who 

is chairman of the Foreign Affairs Committee. He has got his eye 

out on cargo preference. I think it was his—he had a bill on the 

floor that tried to cut cargo preference even more. 

And last year—I think it was the Under Secretary of Defense, 

Frank Kendall, wrote a letter in response to Congressman Royce’s 

question about cargo preference, and Kendall’s response, the U.S. 

Department of Defense’s response, was, ‘‘You can lower cargo preference and it will not have an impact in any way on the military’s 

capability to move goods and services.’’ 

Have you seen that—the response? 

Captain MARCUS. Yes, sir. I remember reading that with dismay, 

quite frankly. Because if you take away cargo, people don’t operate 

ships. And this is an important stream of cargo, and to say that 

this is not an important source of cargo is ridiculous. 

Plus, the ships need to run to keep men and women employed 

in the industry. If you start reducing cargo, you could, of course, 

put ships in reserve status. You could have a bunch of gray hulls 

sitting around, but you won’t have the manpower to operate the 

ships. 

So to say that this would not affect or impact the Department 

of Defense, I have to disagree heartily. Manpower is critical and, 

if you don’t have trained crew, you won’t have ships operating 

under U.S. flag when you need them. 

Thank you. 

Mr. HUNTER. Captain, let me ask you one more question, then. 

Have you and the Department of Defense come together on a 

number of merchant mariners that are in the pool—in the work 

pool, basically? 

Captain MARCUS. Well, we have had—— 

Mr. HUNTER. Do you agree on that? 

Captain MARCUS. We have had discussions and sent numbers to 

USTRANSCOM and MarAd regarding how many deep-sea mariners there are in the industry. So, yes, we have an understanding 

of the approximate number that are available. And 

13 

USTRANSCOM, of course, in terms of number of ships, has been 

very outspoken on the need for the 60-ship maritime security fleet. 

Mr. HUNTER. Thank you. 

Mr. Tabbutt, one last question here. We hear about Jones Act 

waivers all the time and whether or not the waivers are actually— 

whether they are needed, whether there aren’t American ships— 

American-flag vessels available. 

We have heard that sometimes there are—and we actually know 

this to be the case sometimes—and still U.S. Government agencies 

go with foreign flag. 

So, in your opinion, why is this happening? And do you think 

that there is an organized effort to basically water down the Jones 

Act simply by waiving it all the time? 

Mr. TABBUTT. First of all, the American Maritime Partnership 

works with anybody requesting a waiver of the Jones Act and, 

when there is no capacity, it does not exist, the American Maritime 

Partnership position is it will not object to a waiver. 

The—today the biggest voice that you have just expressed is on 

the—on domestic movement of crude and the—and the shipyards 

are building at record pace the number of tankers. 

The industry is responding, and there is a backlog of orders to 

get—to meet the demand that has come up. And if—if there is a 

demand for a vessel that—in the Jones Act that doesn’t exist, there 

are dozens and dozens of companies that stand ready to make that 

investment. And we have ourselves. 

Mr. HUNTER. OK. So who do you think is motivating the effort 

to get more Jones Act waivers? And do you think that that exists? 

And anybody else, feel free to answer. 

Mr. TABBUTT. It seems that—it seems to go from time to time to 

different very targeted, very specific tonnage, and I don’t—I don’t 

think it is an organized effort between all those. I think they are 

disconnected. 

Mr. HUNTER. Sir. 

Captain MARCUS. Yes, sir. I would like to say that there are 

some instances when waivers are appropriate. For example, if 

there are U.S.-built ships that were built for international trade in 

years gone by, there is no reason why those ships couldn’t be 

brought back in to serve sectors of the industry that are not currently served. 

For example, there were three LNG ships several years ago that 

were U.S.-built, built in Quincy, Massachusetts. A waiver was approved in Congress for those ships to come back into the domestic 

Jones Act LNG trade if there is a shipper that needs those vessels. 

Similarly, there are a couple small pocket drugstore chemical tankers available that waiver is being sought. 

So, in some cases, the waivers make sense. In other cases, for example, the strategic oil movement of a couple of years ago, it made 

no sense. So I think it is a case-by-case situation. 

Thank you. 

Mr. HUNTER. Thank you. 

Mr. Garamendi. 

Mr. GARAMENDI. Mr. Chairman, thank you very much for your 

leadership in promoting the maritime industry. It is exceedingly 

important. 

14 

I want to go to a series of questions dealing with the export of 

LNG. But before I do those questions, I want to enter into the 

record a series of news articles that have recently come to light. 

This one is August 5th, ‘‘China Pushes to Build Its Own Ships 

to Deliver Gas.’’ This one, August 18th, ‘‘South Korea to Support 

Shipbuilding Industry.’’ 

And this one, a July 30th article, GAIL, which is the national— 

which is the Indian Government’s gas utility program, they want 

to build nine ships to ferry liquefied natural gas from U.S. producers to India, and they are going to require that three of those 

nine ships be built in India. 

And, also, a memo from my staff entitled ‘‘The global LNG fleet 

needs to grow by 225 vessels by the end of 2020. How are foreign 

governments supporting their shipbuilding industries?’’ and another article on the modernization of the—‘‘China to Modernize 

Shipping Industry,’’ basically the support that the Chinese Government is giving to the shipbuilding industry; and a series of maps 

on the LNG facilities that have been suggested for the United 

States. 

So, with your permission, Mr. Chairman, I would like to enter 

those into the record. 

Mr. HUNTER. Without objection. 

[The information appears on pages 72–79.] 

Mr. GARAMENDI. And now a series of questions. 

As I mentioned at the close of my opening statement, Mr. 

Hunter, you and I have introduced legislation, H.R. 5270, the 

Growing American Shipping Act, to promote the use of Americanflag vessels for the looming export of liquefied natural gas. 

So the questions I have to solicit the view of our witnesses, first 

and foremost, for the record, do each of your organizations—you 

and your organizations support the bill as introduced? 

And then at the same time you might answer. Are there any 

changes that you recommend to the bill to improve it? And are 

there amendments that you would like to see in the legislation? 

Let’s start from Mr. Paxton, and then we will go down the aisle. 

Mr. PAXTON. Congressman Garamendi, yes. The Shipbuilders 

Council of America does support the Growing American Shipping 

Act. Sorry. We do support that. 

I probably wouldn’t suggest at this point we have amendments 

that we would offer to you. We understand how technical this legislation can be, especially when you start requiring shipbuilding construction as element, which this legislation does not do. 

So we would just want to work with you on continuing to see 

how this evolves. We obviously support our—our—the maritime industry international trades. We want to see that grow. 

Mr. GARAMENDI. Very good. 

Captain. 

Captain MARCUS. Thank you, Mr. Garamendi and Mr. Chairman, 

for bringing forward this legislation. 

Of course, we fully support it. We think that it could be more expansive. We would love to see an encouragement of, for example, 

bilateral trade agreements. 

15 

We would love to see the provision of reflagging foreign-flag LNG 

carriers into the U.S. flag be eased so, if they meet international 

standards, they could export American cargoes. 

We have numerous things in mind. But, in my mind, when you 

look at the vast fortunes being made in this industry, there is no 

reason why some sort of bilateral trade agreement couldn’t be part 

of any kind of export strategy. 

Thank you. 

Mr. GARAMENDI. Mr. Johnsen. 

Mr. JOHNSEN. USA Maritime is still reviewing the bill. But 

speaking on behalf of our companies, we always support anything 

that increases the utilization of U.S.-flag vessels. 

Mr. GARAMENDI. Thank you. 

Mr. Tabbutt. 

Mr. TABBUTT. Thank you. 

We are also very supportive of all efforts to promote our industry. And specifically to our narrow focus of the domestic operation, 

we would be very interested in building Jones Act LNG tankers 

and have had discussions with both Puerto Rico and Hawaii in that 

effort. 

Mr. GARAMENDI. Thank you. 

The next question is—the emergence of the LNG export market 

is an economic phenomena that virtually no one anticipated as recently as 3 to 4 years ago. 

The bill, 5270, intends to utilize the emerging trade to revitalize 

the U.S.-flag fleet because analysis of the global LNG market indicate favorable conditions for the development of a long-term sustainable LNG export trade and trade that could sustain a resurgence of the U.S.-flag fleet. 

In general—my question: In general, does each of you agree 

that—with the analysis projections finding that a U.S. LNG export 

trade will be sustainable and a viable export market that could 

provide a future new trade for the U.S. foreign trade fleet? 

And, secondly, what initiatives has the maritime community 

made to reach out to the LNG energy industry to identify opportunities to take advantage of this emerging LNG export market to 

the benefit of the maritime operators? 

I think you have answered this, in part, Mr. Tabbutt. If you 

would like to expand and just take it from there. 

Mr. TABBUTT. It makes sense for any place that is off the grid 

to participate in the LNG to go from heavy oil to burning LNG, and 

we stand ready. And if we find the right customer, then that—we 

will build and be part of that. 

And we are working very closely with industry and supply of our 

vessels for liquid natural gas both in the Pacific Northwest for the 

Alaska operation and the supply down in Florida for our Puerto 

Rican operation. 

Mr. GARAMENDI. Thank you. 

Any comments from the flag ship—Captain? 

Captain MARCUS. Yes, Mr. Garamendi. With Masters, Mates and 

Pilots and I think every other union in this room, we have all made 

various efforts to reach out and place some of our members aboard 

LNGs. 

16 

I know there are a handful of American officers working aboard 

foreign-flag LNGs, and certainly it is the interest of the U.S. Merchant marine to build a pool of American mariners working on 

U.S.-flag vessels. We believe that it is sustainable. 

In the case of Masters, Mates and Pilots, we have worked closely 

with the marine engineers on some projects, and we know the 

other unions have as well. So we are enthusiastic about it. We see 

a future for it. And we hope to continue to get the support of this 

subcommittee. 

Thank you. 

Mr. GARAMENDI. Mr. Paxton. 

Mr. PAXTON. Yes, sir. The SCA participated in the American Gas 

Association Policy Summit where we were really highlighting the 

growing use of LNG as a marine fuel. And so we have been talking 

to the—to a lot of the industry that is going to be producing this 

and the fact that we are—we will be a sector that will be using it. 

And that is for domestic use, of course. 

But per your legislation, any—any signals of the Government 

that Congress can send to industry that they are serious about this 

new energy being a national security imperative, being something 

that is so crucial to our industry that they are going to require 

some level of U.S. manning or U.S. building, those signals are absolutely wonderful for purposes of establishing the market and the 

cargoes. So we appreciate that. 

Mr. GARAMENDI. Mr. Chairman, I am significantly over my time. 

I have two other questions, one of which I will just ask for the 

record and written response from the witnesses. 

But one, I would, with your acquiescence, put before the witnesses. 

Mr. HUNTER. Sure. 

Mr. GARAMENDI. Thank you. 

Mr. HUNTER. We will probably have time, if you want, to go to 

Ms. Hahn and then back to you again. 

Mr. GARAMENDI. Let’s do that. 

Mr. HUNTER. OK. Ms. Hahn, you are recognized. 

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

Garamendi. 

I have really enjoyed listening to all of our witnesses this morning sharing their expertise as it relates to our merchant marines. 

I am a big supporter of our merchant mariners. 

Every May 22nd, National Maritime Day, if I am not here, I am 

attending the memorial service in San Pedro, where we are one of 

the few communities that has a merchant marine veterans memorial right along Harbor Boulevard. So I am a big supporter. 

Unfortunately, it’s still true that our merchant mariners who 

served this country in World War II were not considered veterans 

and, therefore, have never received veteran benefits. 

Last year I introduced H.R. 1936, the Honoring Our World War 

II Merchant Mariners Act of 2013. This bill, which has been introduced a couple of times, would provide a modest $1,000 monthly 

benefit to the nearly 10,000 surviving World War II mariners. 

I know that this bill is not in the jurisdiction of this committee, 

but the Committee on Veterans’ Affairs is currently not considering 

it. And I would like to see our subcommittee encourage them to 

17 

take this bill up. We don’t have much time left in Congress, and 

we don’t have much time left with our merchant mariners. Many 

of them are in their 80s. We are losing them every single day. 

I think it would be fitting and proper and an honor for this country to finally honor the World War II merchant mariners. More 

merchant mariners were lost in World War II than any other 

branch of the military. 

So I think it is time at that we honor them. I think it is a meager 

amount, and I would hope this Congress or maybe next Congress 

would finally honor them. So I appreciate this hearing. 

I think, just listening to you, we have already, I think, realized 

more and more how important our merchant mariners are to this 

country and what they mean to the fabric of industry and commerce as well as internationally through the help that we give 

through Food for Peace. 

Mr. Paxton, I appreciate you bringing up General Dynamics. I 

was able to tour General Dynamics in San Diego, and I learned a 

lot about the shipbuilding industry in southern California. And 

much more needs to be done, I think, in this industry. 

And you are absolutely right. Shipbuilding, that is a great career. 

I mean, those are great skills; ironworkers and electricians have 

great skills. These are skills to pay bills that a lot of our young 

people could really benefit from. And I would love to see this start 

in our high schools and our community colleges. These are the kind 

of vocational classes that are so important. What a great career, to 

be building ships in this country. 

Captain Marcus, you talked, as well as Mr. Johnsen, about Food 

for Peace, and I would like to focus on that a little bit. 

This great program, since 1954, has played such a critical role 

in times of crisis by providing emergency food assistance as well as 

money. It is critical to supporting employment among our U.S. 

farmers and our merchant mariners. 

After the typhoon in the Philippines in 2013, Food for Peace was right there. It was able to provide $20 million in food aid, such as 

rice, emergency food bars to the devastated region, and helped to 

connect both our U.N. and private aid to the devastated islands. 

I worked hard to support this program. I wrote a letter to the 

House appropriators, requesting that they fully fund Food for 

Peace by adding $800 million to the program. 

In addition, last year, I worked really hard on the House floor 

to defeat an amendment that was on the floor that would reduce 

its funding. Unfortunately, this year the President proposed reducing the budget for Food for Peace by cutting 26 percent from the 

2015 budget. 

Can you talk again to us on what you think the impact of reducing funding for this program or changing how it operates would be 

on your industry. How would such a cut affect the amount of food 

that would be able to be transported in times of emergency? 

Mr. JOHNSEN. Just a brief comment first. The action that was 

taken in reducing the percentage participation that I mentioned in 

my remarks has already resulted in a cargo loss that exceeds the 

25-percent reduction, and it just shows you, if that continues to 

happen, the cargo base will go away for a very important constituency of the U.S.-flag fleet. So it has to be maintained. Otherwise, 

18 

we lose more vessels and, as Captain Marcus was talking about, we 

lose—we lose jobs for—for the mariners. 

Captain MARCUS. Yes, Ms. Hahn. I would just reiterate that, in 

order for companies like Waterman/Central Gulf and the major carriers—the American carriers to have faith in maintaining their 

ships in U.S. flag, they need to have a reliable stream of cargo, and 

this provides a reliable stream of cargo and—not only on bulk carriers, but also aboard containerized vessels. 

And it is critical that, in times when we have a drawdown such 

as now where the military cargo is less because of the withdrawals 

in Afghanistan and Iraq, we have got a reliable stream of cargo to 

help keep our ships afloat. 

If they are not carrying cargo, they are not making money and 

the carriers will lay up ships or they will reflag ships to foreign 

flag. It is as simple as that. 

So thank you. 

Ms. HAHN. Thank you. 

I know my time is up, but I want to point out that there is a 

thought process out there that asserts we would do better to give 

our money, our foreign aid, directly to the country and help support 

their agriculture and their farmers. 

And, yet, when you look at the Philippines typhoon, the place 

was destroyed and it wouldn’t have made any sense to try to give 

money to use their own agriculture and their farms. The place was 

destroyed. And if it had not been for Food for Peace bringing that 

emergency money and agriculture in, many more lives would have 

been lost. 

Captain MARCUS. If I might just add one thing, I mean, on that 

particular point, in our belief, there has been a lot of cynicism and 

mistruth spread around. 

There was something put out by USAID that the cost differential was some $78 million when, in fact, it is closer to about $7 million, 

and the differential—in our view, this—this debate has taken on a 

life of its own and there is more mistruth than fact in it. 

But the baseline is, it seems, if you want a constituency that supports foreign aid, you need to have some kind of secondary benefit 

for American workers and American agriculture and you need a 

transparent system where the food is actually delivered. 

Having been aboard a ship that delivered 25,000 tons of grain to 

India, you physically see it there. You see bags with the U.S. flag 

on it, you see the handshake cargo, and you know it is there. It 

is not just some invisible cash that has changed hands. 

And, of course, it is somewhat absurd to think that you would 

be buying local produce. If that was the case, people wouldn’t be 

starving in the first place. So there seems to be kind of a logical 

and a factual disconnect in this whole argument. 

Thank you. 

Ms. HAHN. Thank you very much. 

Mr. Chairman, I yield back. 

Mr. HUNTER. I thank the gentlelady. 

A quick question about Coast Guard. 

Mr. Johnsen, you talked—you mentioned a few times that the 

Coast Guard is increasing your cost, as an operator, through different rules and regulations and that MSP vessels have different 

19 

standards—the Coast Guard has different standards for MSP vessels than they have for similarly—for similar foreign-flag vessels. 

Could you just give us some examples—some specific examples? 

Mr. JOHNSEN. When we first started reflagging some vessels 

from international flag to U.S. flag back in the mid-1980s, the 

Coast Guard had a series of regulations in place that required us 

to replace equipment on board those vessels, which were perfectly 

suitable for their purposes, which were approved by the Safety of 

Life at Sea, SOLAS, regulations, and it was—in my mind, it was 

a ridiculous waste of money. 

And I remember on those first reflags we spent millions of dollars to reflag the vessels. We subsequently continued an initiative 

to talk to the Coast Guard and see if there was some way to resolve 

this disconnect between what the Coast Guard wanted and what 

was internationally acceptable. 

And we came up with a program, working together with the 

Coast Guard, which we called a gap analysis, and we analyzed, for 

example, the piping systems. We analyzed the life rafts that were 

on board, and the different components of the vessel. 

And I hasten to say that—and our friends in labor know this— 

our culture is all about safety. So we never do anything that would 

jeopardize the safety of the mariners on our vessels. So we have 

been very, very studious about that in working with the Coast 

Guard. 

Going through this process eventually produced a situation 

where we could bring a ship under U.S. flag, do some modifications 

to the ship, approximately $400,000 or $500,000, rather than millions of dollars, to complete a reflag. And that was simply because 

we weren’t throwing away perfectly good equipment. 

What we are concerned about with this new NVIC is that it is 

regressing back, and our sense is, as we review it—and there is a 

lot of technicalities in it relating to the life rafts, relating to the 

firefighting systems, relating to the controls between the bridge 

and the engine room, that are perfectly OK, but we need to get 

back to this cooperative attitude of doing a gap analysis. 

So I hope that the Coast Guard is going to come around and understand that that is what ought to be done because all they are 

doing is layering on expense—hundreds of thousands of dollars of 

expense that is totally unnecessary. 

Mr. HUNTER. Thank you. 

Does anybody else have any specific examples? 

Captain MARCUS. Well, this is less a specific example than just 

sort of an observation. 

Having a delegation from labor that participates in IMO proceedings and knowing full well that the U.S. Coast Guard has full 

voice with the U.S. delegation at all of these IMO Maritime Safety 

Committee meetings and setting the standards—the international 

standards, the whole purpose of these international conventions is 

to have some kind of uniformity and to be part of the rulemaking 

process internationally. 

And then to come back when we had the understanding that the 

international requirements would be what is necessary to reflag a 

vessel and then those international agreements and impose your 

20 

own agreements that do not enhance safety, but increase cost, in 

our view, it just doesn’t make sense. 

Thank you. 

Mr. HUNTER. Thank you. 

Mr. Garamendi is recognized again. 

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

Let me find my place here. I was anxiously listening to what was 

being said about the Coast Guard and the rulemaking and the like. 

The next questions really deal with the capacity of the American 

shipbuilding industry to produce LNG tankers. We have heard that 

a lot of things are going on. There is a resurgence in—there is a 

boom in the industry. State-of-the-art vessels are being made. 

I know, Mr. Tabbutt, you and I were talking about the vessels 

that you currently are having made in San Diego at the NASSCO 

yard. 

So this question arises, ‘‘Well, we can’t build them here.’’ I would 

just note one of the things I put in the record, but didn’t mention, 

is that India requires that the LNG ships be built and available 

within 2.5 years; however, 6 years for the ships built in India. So 

there is a waiver. 

My question really goes to this issue of the ability of the American shipyards to build LNG tankers. So for the record, does the 

U.S. shipbuilding industry retain the technology and industrial capacity to build LNG tankers should the U.S. LNG export trade take 

off and we require that at least some, if not all, of those tankers 

be American-built and American-flagged? 

Mr. Paxton, if you would like to get at this, and then we will go 

down the line. 

Mr. PAXTON. Thank you, Congressman Garamendi. 

The answer is yes. The U.S. shipyard industry built LNG carriers for a long time. Unfortunately, we stopped building those carriers in the 1980s. So the answer is yes. If this market was there, 

we would be building for it. 

I am sure Mark will have some comments about the domestic 

moves of LNG if we moved it around the United States. We can 

do that, too. That is a different size of an LNG carrier. If we are 

talking international trade, that is a larger LNG vessel. But the 

fact of the matter is we built them. 

The other fact is we have three of them that just got waived back 

in—or would be waived back into the Jones Act if there was actually the infrastructure there to start moving LNG around domestically. We can do that, too. We built those ships also in the 1980s. 

So the answer is yes. 

As you know—because we have had many meetings on this—if 

we had that market right now, it would probably be a 5-year process to get that LNG carrier built and ready to go. I have been told 

that by our shipyards to that effect. But we do have the capability 

and we have the capacity. Our shipyards are seeing red. 

And the other example of that is, when this new market came 

up to move petroleum and crude around domestically, we are building for that market and we are answering that demand. So our 

shipyards stand by to do that, sir. 

And, also, a last point on this, our shipyards also work with 

international partners, NASSCO with Daewoo. We don’t stand idly 

21 

by just looking inward. We look outward. We want to see what best 

practices are, benchmark ourselves against those, and build as 

competitively as we can. 

So I think some aspect of this would probably look at, ‘‘Hey, what 

are the best things internationally that are being done? And can 

we partner with those guys and get it done right?’’ 

Mr. GARAMENDI. Thank you. 

Mr. Tabbutt, I know that you and I discussed this, if you would 

like to comment. 

Mr. TABBUTT. Sure. 

Through NASSCO, General Dynamics, we have actually engaged 

in conversations with them about building domestic LNG carriers. 

They have supplied us several different models that would be different capacities that are being made internationally. 

And we would have all the confidence in the world to sign with 

them and to build them. We don’t see any issue about our domestic 

capability—or the yard’s domestic capability to build them. 

Mr. GARAMENDI. Mr. Johnsen, Captain, if you would like to comment on this or if it is in your territory or out of your territory. 

Good. 

I think that, as I understand this—this is my comment; the expert I am not—but, in discussions, is that there is a phase-in, we 

can’t build these things this year or next year. 

But if there is a market out there, that is, if the United States 

policy drives towards the development of a market, it can be done, 

but it would be phased in over a period of time. 

India is giving its shipbuilding industry 6 years to build the 

ships. Mr. Paxton, if we gave the American shipbuilding industry 

6 years to build ships for the trade, could we do it? 

Mr. PAXTON. And just to be clear, we are talking international 

trade, not just domestic trade? 

Mr. GARAMENDI. Correct. 

Mr. PAXTON. And, with that, as we discussed in the past, any 

international requirements would have to just make sure we get by 

any treaty obligations we have, GATT implications, and we would 

be very careful of that because we don’t want to take down the 

build requirement that is exempt in the—under GATT. 

But if that was all done through some type of national security 

imperative, my shipbuilders have told me it would be a 5-year process by which they could—from contract to delivery to do it. But 

there is many steps in that process to make sure we do it legally 

and we do it under our trade obligations, sir. 

Mr. GARAMENDI. A very, very good point. 

The final comment that I will make on this is that India is going 

to buy American gas, LNG. India is requiring that that gas be 

shipped—at least one-third of the ships be Indian-built. 

It seems to me that we could have a trade agreement with India 

that would say, ‘‘Terrific. How about the second third being American ships?’’ Now we have an agreement. We are not violating any 

trade agreement. We are not writing any law. We are simply good 

negotiators. I think we can get at that issue in this way without 

the trade laws. 

The second point is the Trans-Pacific Partnership trade agreement is in discussion. We need to be very, very careful and very 

22 

watchful that we are not giving away—negotiating away a strategic 

American asset, LNG, and the shipbuilding that could go with that. 

I think we have covered my issues, Mr. Chairman. I have two 

questions that I would present to the witnesses in writing. And 

that will complete my time, with a final comment, since I don’t see 

another round coming down. 

I appreciate the testimony of the witnesses and particularly the 

opportunity that presents all of America to rebuild our manufacturing base one ship at a time or maybe 100 ships at a time. 

It is imperative that this sector of the American economy rally 

around the potential that exists, maintenance of the Jones Act, 

Food for Peace, all of the things that have been discussed here. 

Each one of these are pieces of a large puzzle of economic development, and we need to be mindful of each piece of that puzzle as 

we promote this extraordinary opportunity, in this case, the Jones 

Act, but it is also Food for Peace, and it is the other elements, the 

military cargo and the like. 

One thing I would ask all of the participants—the witnesses and 

anybody else that is participating in this hearing is that we may 

not know where the next waiver is. 

But if we knew where the next waiver of the Jones Act occurs, 

we might be able to do something about it. So let us know if you 

hear something or are aware of something. Assume that we don’t 

know. 

But I know that the chairman and I are more than willing—at 

least I and the chairman, from his past record on this—more than 

willing to jump on one of our administrative agencies that is 

waivering the Jones Act unnecessarily. So help us understand that. 

Final point. We have a new employment training law in place. 

It is a rewrite of the old law and it is done in such a way as to 

encourage the Labor Department, Education Department, and 

other Federal agencies that are involved in employment training to 

work with the industries in developing training programs. 

And so the money flows in a different way rather than to the— 

rather than for the benefit of the organizations that are doing the 

training, rather to the benefit of the employers that need trained 

workers. 

And so for this industry, wherever you happen to be, keep that 

in mind. And it should help address some of the concerns that were 

expressed here in the committee hearing. 

Mr. Chairman, thank you very, very much for conducting this 

hearing. 

Mr. HUNTER. I thank the ranking member for his points and discussion here. 

And thanks to all of you, too. 

This is a great industry, and I think we are doing God’s work in 

this committee by, like Mr. Garamendi said, strengthening our industrial base, our ability to build ships, our ability to work with 

steel, and not become one of these bygone countries that used to 

rule the oceans 50 years ago and that can’t even build an aircraft 

carrier anymore. I think we know what country we are talking 

about. 

Mr. GARAMENDI. Name names. Go ahead. Name names. 

23 

Mr. HUNTER. For Great Britain, it is not going to be so great 

anymore. It is going to be ‘‘Little Britain’’ if the Scots get their way. 

But this is important. This is as important as anything else that 

this whole committee does, the Committee on Transportation and 

Infrastructure. And we will keep working. We will keep growing. 

And we need to make sure that we have these seats filled with 

other Members that need to, at least—at the least, learn about 

your industry, about what you do, about what is important, and 

how we can make it grow and make you stronger, not just for yourselves, but for the American people, and our strength. 

Oh. We have—I almost gavelled. 

Does this mean I can’t go now? 

Mr. CUMMINGS. Sorry. 

Mr. HUNTER. The gentleman is recognized. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I apologize. I was in a full committee hearing. 

Mr. Johnsen, you wrote in your testimony that, ‘‘In order to 

achieve a robust U.S.-flagged merchant marine sufficient in size 

and capabilities to support our national and economic security, the 

Federal Government must act quickly and decisively to preserve 

the long-term health and viability of this industry. Absent aggressive action to develop and implement a comprehensive national 

maritime strategy, we fear that the decline of our industry will 

only accelerate.’’ That was your testimony. 

Do you believe that vessels in the U.S. flag—would that include 

any vessels participating in the MSP program?—are currently 

poised to leave the flag? And, if so, do you have a sense of how 

many that might be? 

Mr. JOHNSEN. My sense is that, if we do not aggressively pursue 

a reorganization and a reevaluation of the current MSP stipend, 

that we will force vessels to leave. 

I cannot put a number on that, but I can assure you that it will 

happen, because that, combined with the cargo—military cargo 

base dwindling and the pressure that we talked about on the food 

aid programs, it is just sucking business away from U.S.-flag vessels. And vessels need cargoes to pay the bills and they just won’t 

be able to do it. 

Mr. CUMMINGS. Well, what do you believe should be the essential 

components of a national maritime strategy? 

Mr. JOHNSEN. I believe the—as I said in my oral testimony, that 

the—we talk about it as a three-legged stool. We need the MSP 

program, we need a military cargo program, and we need a food 

aid program. 

And the food aid program—I am lumping together with that the 

Ex-Im Bank requirements and the other cargo generation that the 

Maritime Administration should be policing and ensuring compliance. 

And that—that is part of their job, and they have got to continue 

to be aggressive and require U.S. flag when it is required by the 

statutes. 

Mr. CUMMINGS. Well, Mr. Johnsen, you also wrote—and I 

quote—‘‘It is critically important that the level of support for MSP 

vessels be adjusted to achieve commercial viability and a more 

24 

level playing field for MSP vessels when competing against foreignflag vessels.’’ 

And, similarly, Mr. Marcus, you wrote, ‘‘Looking forward, we believe it is critically important that the per vessel support level authorized for the MSP as part of defense authorizations legislation 

enacted in 2012 be reviewed and adjusted as appropriate.’’ 

Let me ask both of you: What level of support do you think needs 

to be provided through MSP to ensure that vessels participating in 

the program remain commercially viable? 

Captain MARCUS. Thank you, Congressman Cummings. 

First—on your first question, I would just like to add that we 

were just informed about 2 weeks ago by one of our employers that 

one ship will be leaving the MSP program. So we have been formally informed that one ship will be going before the end of the 

year. 

With response to the—— 

Mr. CUMMINGS. I guess they don’t come back. 

Captain MARCUS. Well, we expect to meet with that company. 

But as far as we have been signaled, that—they do not intend to 

take this particular slot back. At least that is what they have told 

us at this point. 

Mr. CUMMINGS. All right. Go ahead. 

Captain MARCUS. But we believe that, because of the level of 

support and the cost disadvantage that we have relative to foreignflag and flag-of-convenience vessels, that the authorization level 

called for in 2012, as soon as it is politically practical, that there 

be some kind of an escalation so that, as time goes on, there will 

be appropriate escalation just to keep in tune with the usual inflationary escalation of costs. 

So we don’t have a particular number, but we believe that, at 

some point, that the total number needs to be addressed if we are 

going to be competitive. 

Thank you, sir. 

Mr. CUMMINGS. Mr. Johnsen, you have 12—9 seconds. 

Mr. JOHNSEN. The stipend needs to be increased. There have 

been a number of independent studies done to try to determine the 

differential between international-flag cost and U.S.-flag cost. 

According to the Maritime Administration and these studies, that 

differential, that delta, is something between $5 million and $7 

million. That has to be kept in mind when the MSP stipend is 

being looked at. 

It is important that there be a coordinated approach to the stipend, including discussions—ongoing discussions that we have with 

USTRANSCOM and the Department of Defense and the Maritime 

Administration. But there does need to be an increase to some degree. 

Mr. CUMMINGS. Thank you, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman. 

And, with that, I thank the witnesses for their testimony and 

Members for their participation. 

The subcommittee stands adjourned. 

[Whereupon, at 10:56 a.m., the subcommittee was adjourned.] 

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