U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

29–968 PDF 2018

THE STATE OF THE U.S.-FLAG MARITIME 

INDUSTRY 

(115–32) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JANUARY 17, 2018 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: https://www.govinfo.gov/committee/house-transportation?path=/ 

browsecommittee/chamber/house/committee/transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

GARRET GRAVES, Louisiana 

BARBARA COMSTOCK, Virginia 

DAVID ROUZER, North Carolina 

MIKE BOST, Illinois 

RANDY K. WEBER, SR., Texas 

DOUG LAMALFA, California 

BRUCE WESTERMAN, Arkansas 

LLOYD SMUCKER, Pennsylvania 

PAUL MITCHELL, Michigan 

JOHN J. FASO, New York 

A. DREW FERGUSON IV, Georgia 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

JOHN GARAMENDI, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

ANDRE ́ CARSON, Indiana 

RICHARD M. NOLAN, Minnesota 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut, Vice 

Ranking Member 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

FREDERICA S. WILSON, Florida 

DONALD M. PAYNE, JR., New Jersey 

ALAN S. LOWENTHAL, California 

BRENDA L. LAWRENCE, Michigan 

MARK DESAULNIER, California 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

FRANK A. LOBIONDO, New Jersey 

GARRET GRAVES, Louisiana 

DAVID ROUZER, North Carolina 

RANDY K. WEBER, SR., Texas 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota, Vice Chair 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

JARED HUFFMAN, California 

ALAN S. LOWENTHAL, California 

ELEANOR HOLMES NORTON, District of 

Columbia 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

CONTENTS Page 

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

WITNESSES 

PANEL 1 

Rear Admiral John P. Nadeau, Assistant Commandant for Prevention Policy, 

U.S. Coast Guard: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 42 

Responses to questions for the record from Hon. John Garamendi of 

California ....................................................................................................... 45 

Rear Admiral Mark H. Buzby, U.S. Navy (Ret.), Administrator, Maritime 

Administration: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 51 

Responses to questions for the record from Hon. John Garamendi of 

California ....................................................................................................... 61 

PANEL 2 

Matt Woodruff, Chairman, American Maritime Partnership: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 65 

Eric P. Ebeling, President and Chief Executive Officer, American Roll-On 

Roll-Off Carrier Group, on behalf of USA Maritime: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 72 

Aaron C. Smith, President and Chief Executive Officer, Offshore Marine 

Service Association: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 77 

Responses to questions for the record from Hon. David Rouzer of North 

Carolina ......................................................................................................... 84 

Matthew Paxton, President, Shipbuilders Council of America: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 86 

Bill Van Loo, Secretary Treasurer, Marine Engineers’ Beneficial Association, 

on behalf of American Maritime Officers; Masters, Mates and Pilots; and 

the Seafarers International Union: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 95 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. John Garamendi of California ....................................................................... 39 

SUBMISSIONS FOR THE RECORD 

Rear Admiral John P. Nadeau, Assistant Commandant for Prevention Policy, 

U.S. Coast Guard, responses to requests for information from Hon. John 

Garamendi of California and Hon. Garret Graves of Louisiana ...................... 13 

iv 


Insert offset folio 1 here 29968.001
v 


Insert offset folio 2 here 29968.002
vi 


Insert offset folio 3 here 29968.003
vii 


Insert offset folio 4 here 29968.004
viii 


Insert offset folio 5 here 29968.005
ix 


Insert offset folio 6 here 29968.006
x 


Insert offset folio 7 here 29968.007
(1) 

THE STATE OF THE U.S.-FLAG MARITIME 

INDUSTRY 

WEDNESDAY, JANUARY 17, 2018 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to notice, at 10:06 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 convening today to review the state of the 

U.S.-flag maritime industry, including the U.S. merchant marine. 

The Jones Act was enacted in 1920 as part of the Merchant Marine Act. It encouraged a strong merchant marine to support both 

national defense and economic security. For a vessel to move merchandise or passengers between two points in the United States, 

also called the coastwise trade, a vessel is required to be owned by 

a U.S. citizen, U.S. flagged, built in the United States, and crewed 

with U.S. mariners. 

There are over 41,000 U.S.-flag vessels in the U.S. coastwise 

trade moving 115 million passengers and nearly $300 billion worth 

of goods between U.S. ports on an annual basis. The use of a U.S. 

flagged, built, and crewed vessel in the domestic coastwise trade 

can be waived by the Secretary of Homeland Security in two ways 

under section 501 of title 46, United States Code. 

The first waiver authority, outlined in subsection 501(a), is at the 

request of the Secretary of Defense for the purposes of national defense. The second, outlined in subsection 501(b), is also for the purpose of national defense; however, MARAD is required to make a 

determination that no U.S. vessel is available. The subsection 

501(a) waiver authority was used by the Secretary of Homeland Security for responses to Hurricanes Harvey, Irma, and Maria. U.S 

industry raised concerns regarding the use of the waiver authority, 

as did we. 

Out of the over 41,000 U.S.-flag vessels, there are only 82 vessels 

active in international commerce, down from 850 vessels 35 years 

ago. The United States has cargo preference requirements where a 

percentage of U.S. Government cargo, including international food 

aid, be transported on U.S.-flag vessels. One intention behind the 

requirement is to ensure a merchant marine—both vessels and 

mariners—remain available and capable to provide sealift capacity 

2 

in times of conflict or national emergencies. Out of those 82 vessels, 

60 vessels participate in the Maritime Security Program which provides an annual stipend to military-useful oceangoing vessels to 

support military sealift operations. 

So, without the MSP we would have 20 vessels that can operate 

without a stipend, basically. 

In order to maintain the capabilities necessary to assist military 

operations and continue to conduct coastwise trade operations, the 

U.S.-flagged fleet needs a strong, proficient pool of U.S. merchant 

mariners. Officials in the administration have reported to the committee that the active pool of U.S. merchant mariners is decreasing 

due to retirements and low recruitment rates. 

To work to address any potential gaps, members of this subcommittee support increasing the opportunities for military mariners to transition into civilian mariners. Mariners in the Armed 

Forces have skills that can successfully translate into the civilian 

workforce. Military mariners just need to know about what civilian 

opportunities are available and how they can attain the proper certificates during their military career to successfully transition into 

a civilian career. 

The subcommittee held two listening sessions in 2016 that included military and civilian participants to discuss what needs to 

be done to create a more seamless process for military mariners to 

transition into a civilian mariner career. In addition, the Department of Defense reported that in 2016 and 2017, the Navy, Army 

and Coast Guard participated in MERPAC meetings, conferences, 

and working groups to make further progress on this issue. 

I look forward to discussing where we are now and the importance of ensuring the United States has a strong, stable merchant 

marine. The civilian mariner workforce is facing a potential shortage and military mariners can be a way to bridge any gaps, as well 

as provide an ongoing source of retired, experienced military mariners. 

I thank our witnesses for being here today and I look forward to 

hearing their thoughts on issues regarding the state of the U.S.- 

flag maritime industry. 

And I will now yield to Ranking Member Garamendi. 

You are recognized. 

Mr. GARAMENDI. I thank you, Mr. Chairman, I appreciate your 

testimony and laying out the issues before us. It has been almost 

3 years now since we last convened an oversight hearing, although 

we did have the listening sessions on the status of the U.S. maritime industry. Thank you very much for acting on my suggestion, 

and scheduling this morning’s hearing, as this is a perfect opportunity to assess where the industry stands and gather suggestions 

for issues that this subcommittee can take up in the second session 

of the 115th Congress. 

We already realize several items deserve our dedicated attention. 

But by no means do these items represent the entire universe of 

issues and challenges. 

First and foremost, we cannot become complacent in our defense 

of the Jones Act and our efforts, along with many other organizations, some of whom will be testifying this morning, to raise public 

awareness of the need for and the many benefits that flow from 

3 

this longstanding maritime policy that has stood for nearly a century. 

Second, we need to address the need to find new cargoes for the 

U.S.-flag vessels in both the international and coastwide trades. 

More cargo means more ships, and more ships mean more goodpaying maritime jobs that both directly and indirectly support the 

hundreds of thousands of U.S. workers and bolster national security. And, by the way, I have got some ideas on how we can do 

that. The export of oil and natural gas give us such an opportunity. 

But more about that later. 

To this end, we need better enforcement of the existing cargo 

preference requirements, especially for the food aid shipments. We 

need to utilize new trades, such as the export of crude oil and natural gas. We also need to look creatively at how best to recapitalize 

our Nation’s Ready Reserve, Military Sealift, and Maritime Security Program Fleets. 

In addition, if there is going to be an infrastructure bill this 

year—and I hope there is—we need to make sure that the infrastructure needs of our domestic maritime industries are not left behind at the dock. Moreover, we have to begin shaping a tractable 

plan to recruit and retain a new generation of licensed and unlicensed seafarers. The crew and cadre of mariners, which have 

served commerce and national security of the United States so admirably since the end of the Vietnam War, is quickly aging out, 

along with the ships. 

It is imperative that the Federal Government, along with its 

partners in the State and maritime academies and maritime 

unions, develop a comprehensive plan to ensure that the absence 

of qualified and experienced mariners in the workforce does not become an Achilles heel limiting our military sealift operations and 

our national security. 

I am sure that our witnesses here this morning will offer their 

own suggestions. And with that thought in mind, I welcome the 

witnesses and look forward to engaging in the discussion. 

Thank you, Mr. Chairman. I yield back. 

Mr. HUNTER. I thank the gentleman from California. We will 

have two panels of witnesses today. On the first panel we will hear 

from Rear Admiral John Nadeau. Yes, you like that? Got it right— 

Assistant Commandant for Prevention Policy for the United States 

Coast Guard. 

And Rear Admiral Mark Buzby—Mark ‘‘Buz’’ Buzby—U.S. Navy 

Retired, Administrator, Maritime Administration. 

Admiral Nadeau, you are recognized to give your statement. 

TESTIMONY OF REAR ADMIRAL JOHN P. NADEAU, ASSISTANT 

COMMANDANT FOR PREVENTION POLICY, U.S. COAST 

GUARD; AND REAR ADMIRAL MARK H. BUZBY, U.S. NAVY 

(RET.), ADMINISTRATOR, MARITIME ADMINISTRATION 

Admiral NADEAU. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and distinguished members of the subcommittee. I am honored to be here today to discuss the state of 

the U.S. maritime industry and the Coast Guard’s role serving that 

industry. 

4 

Mr. Chairman, on behalf of all the Coast Guard’s men and 

women, thank you for your leadership and strong support of the 

Coast Guard. 

The Coast Guard offers enduring value to our Nation. It is the 

only branch of the U.S. armed services within DHS. It is uniquely 

positioned to secure our ports, protect the maritime transportation 

system, and safeguard America’s national and economic security. 

As the Commandant said, years of fiscal constraint and increasing mission demands have eroded our ability to fully execute our 

suite of missions and remain ready to effectively respond to all contingencies. We need to make investments to rebuild and sustain 

Coast Guard capability and capacity, including our marine safety 

programs. 

The Nation’s Marine Transportation System includes 25,000 

miles of waterway traveled by several thousand vessels serving 361 

U.S. ports every day. This system supports more than 250,000 

American jobs and over $4.5 trillion of economic activity every 

year. This system connects American consumers, producers, manufacturers, and farmers, domestic and global markets, and provides 

access to our Nation’s vast natural resources. 

The Coast Guard ensures this system remains safe, secure, and 

resilient. A strong U.S. maritime industry enables us to protect 

U.S. interests and project power overseas. Ninety percent of the 

military equipment used by the Nation’s warfighters is loaded in 

U.S. ports and delivered to theater on Coast Guard-inspected U.S.- 

flag vessels that are operated by Coast Guard-licensed, 

credentialed U.S. mariners. 

Our support to the maritime industry is critical to our Nation’s 

military readiness and national security. Our robust population of 

U.S. mariners is needed to maintain an effective military sealift capability. 

Coast Guard and industry are working together to mitigate challenges facing mariners today. Our advisory committees contain experienced merchant mariners, educators to the maritime academies, and industry representatives. They help us identify strategies to address challenges as they emerge. 

Congress clearly recognizes the importance of having a sufficient 

number of qualified mariners. DoD and DHS are working together 

to implement the Military to Mariner program, and make it easier 

for military members to receive credit for experience, training, and 

qualification received while in the military. We have partnered 

with the Navy to establish a credentialing program and improved 

military member awareness of civilian-mariner opportunities. We 

have cut through redtape, and we continue to work closely with our 

fellow armed services to make improvements to this program. 

We know a healthy mariner workforce requires a safe, secure, 

and competitive U.S. maritime fleet. The industry faces a number 

of challenges beyond those of the workforce, including an aging 

population of strategic sealift vessels. At the same time, the complexity and pace of change in the industry have never been greater. 

Industry is integrating new technology into vessels and facilities to 

improve efficiency and effectiveness, to increase capacity, and to reduce the environmental footprint. This activity is making ships, facilities, and ports, and the entire system more complex. 

5 

The use of third parties has helped industry and the Coast 

Guard evolve to keep pace with these changes. Today, like other 

flag states around the globe, the U.S. relies far more on third parties than ever before. The vast majority of vessels in our sealift 

fleet use third parties for many of their compliance activities. The 

third-party programs have gone from an option to a necessity. 

The benefits of third parties are well documented. A study by the 

National Academies of Sciences that was directed by the subcommittee and published in 2016 concluded that our third-party 

programs provide additional technical expertise, promote innovation, and reduce cost for the U.S. Fleet. 

However, third-party programs are not infallible. Third-party 

programs require effective Coast Guard oversight and clear accountability to realize these benefits. The Coast Guard has the authority and competency we need. We will instill better governance, 

we will improve our policy and training, and we will provide increased accountability. We are also supporting a safe, secure, and 

competitive U.S. Fleet. 

In closing, a healthy U.S. maritime industry and a robust pool 

of civilian mariners are vital to our Nation’s economic prosperity 

and national security. The Coast Guard’s regulatory, credentialing, 

and compliance programs are evolving to keep pace with industry 

change. We are focused on ensuring every one of our actions sustains a safe, secure, environmentally sound, and productive operation of the Marine Transportation System without imposing unnecessary costs or burdens. 

Mr. Chairman, we thank you for this subcommittee, for your 

strong leadership and support of the Coast Guard. I ask that my 

written statement be entered into the record. Thank you. 

Mr. HUNTER. Without objection. 

Thank you, Admiral. 

Admiral, you are recognized. 

Admiral BUZBY. Good morning, Chairman Hunter, Ranking 

Member Garamendi, and distinguished members of the subcommittee, thank you for inviting me to discuss the state of the 

U.S. maritime industry and the Maritime Administration’s programs that support it. 

Our country’s military relies on U.S.-flag ships, crewed by volunteer American civilian mariners to move our combat forces’ equipment and sustainment whenever and wherever it needs to go. 

Three-quarters of MARAD’s budget goes to programs that help to 

ensure that America has a viable commercial merchant marine, 

one with enough ships and enough qualified merchant mariners to 

meet our needs in peacetime and, critically, our emergency sealift 

during times of crisis. 

Unfortunately, over the past few decades, the U.S. maritime industry has suffered significant losses, as companies, ships, and jobs 

moved overseas. Cargo is one of the main factors determining the 

number of ships in the U.S.-flag fleet. 

Since 1992, the number of U.S.-flag ships has dropped from 183 

ships to 82 now. This leaves us at the lowest number in the deepsea fleet in recent history. That has, in turn, contributed to a loss 

of jobs available to U.S. citizen mariners and international trade. 

Today, due to the historically low number of ships, MARAD is conVerDate Aug 31 2005 10:35 May 09, 2018 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\1-17-2~1\29968.TXT JEAN
6 

cerned that there might not be enough qualified mariners to sustain a prolonged activation of the sealift fleet. I am working closely 

with USTRANSCOM, the U.S. Navy’s Military Sealift Command, 

the U.S. Coast Guard, and the commercial maritime industry to develop plans to maintain an adequate number of trained mariners. 

This coordinated effort includes advancing the Military to Mariner initiative, making it easier for transitioning veterans to obtain 

their mariner credentials based on their service experience. That is, 

however, only a small part of the solution. To reverse this trajectory, my initial priorities as Maritime Administrator have been to 

leverage the current mainstays of the merchant marine—the Jones 

Act, cargo preference, and the Maritime Security Program—and to 

rethink how we address long-term strategic issues facing the industry. 

The Jones Act ensures the U.S.-flag fleet in domestic trade by requiring American built, owned, and crewed vessels to transport 

passengers and cargo between U.S. ports. 

Cargo preference laws, which require shippers to use U.S.-flag 

vessels for oceanborne transport of certain cargoes purchased with 

Federal funds, help ensure that the U.S.-flag fleet has enough 

cargo to remain viable in international trade. 

The Maritime Security Program, which supports 60 militarily 

useful commercial vessels and their crews, along with a global network of intermodal facilities, provides funding to help offset the 

higher costs operating under the U.S. flag. 

Continuing, strengthening, and adding to these three pillars, the 

Jones Act, cargo preference, and the MSP, is essential for maintaining the economic competitiveness, safety, and productivity of 

the U.S. maritime transportation system. They bolster the U.S.-flag 

fleet’s ability to support the national and economic security needs 

of the Nation. 

MARAD provides funding support for mariner training programs 

at our Nation’s flagship maritime training facility, and my proud 

alma mater, Kings Point, as well as the six State maritime academies across the Nation. Virtually all entry-level officers with unlimited U.S. Coast Guard licenses graduate from these schools. 

These merchant mariners support the peacetime U.S. maritime 

transportation infrastructure and serve our Nation during military 

operations worldwide, in national emergencies, and humanitarian 

crises. 

Part of our assistance to the six State maritime academies comes 

in the form of training ships, two of which are more than 50 years 

old. MARAD also manages and maintains the bulk of our Nation’s 

surge sealift capacity found in the Ready Reserve Fleet. These 46 

ships with an average age of 43 years are well past their design 

service life. MARAD is working with the U.S. Transportation Command and the U.S. Navy to determine how to best recapitalize the 

RRF to ensure the continued readiness of these vessels. 

That is a brief overview of the priority action items that I am involved in at MARAD. I appreciate the subcommittee’s continuing 

support for maritime programs, and will be happy to respond to 

any questions you and the members of the subcommittee may have 

this morning. 

7 

I ask that my written testimony be entered into the record. 

Thank you, sir. 

Mr. HUNTER. Without objection. 

Thank you, Admiral. 

And Admiral, I will start by recognizing myself. Let’s play this 

out and set the scenario. So let’s say that country X goes off, and 

it is a real war, not counterinsurgency, or counterterrorism. And 

you got to bring a bunch of stuff really fast. Lay it out for us right 

now. What would move and what wouldn’t move? What is your 

guess on how many ships out of the RRF we can actually get up 

and going. How would that look? Right now. 

Admiral BUZBY. As we speak, as of this morning, the Ready Reserve Force readiness was at 98 percent, which means that our 

metrics that we use to measure how ready those ships are to—— 

Mr. HUNTER. So let’s break it down into a real scenario. You told 

me you are doing a test right now. 

Admiral BUZBY. Correct. 

Mr. HUNTER. You are doing a callup on one of the biggest Ready 

Reserve ships that you have, they have 5 days—— 

Admiral BUZBY. Four of them, actually. 

Mr. HUNTER. Four of them. 

Admiral BUZBY. Right. 

Mr. HUNTER. And they have 5 days to prep. 

Admiral BUZBY. Correct. 

Mr. HUNTER. Your 98 percent is not coming from that. So if you 

were to just guess and say in your mind, how many of your ships 

could you get underway, loaded to the brim with ammo, food, supplies, and everything that you would need? You could get 98 percent of the Ready Reserve Fleet right now moving? 

Admiral BUZBY. Within the 5-day period, yes, sir. I have good 

confidence that, as I said, 98 percent of those—we would be able, 

within the 5-day period, to light off, crew up, and—— 

Mr. HUNTER. When does that fall off and we start losing that capacity? I mean if we don’t do anything, you have got steam engine 

Ready Reserve ships. 

Admiral BUZBY. Right. 

Mr. HUNTER. You have mariners that don’t know how to work 

steam engines any more, or parts. So you are at 98 percent, which 

is awesome. But at some point I am guessing it goes to 95, 98, 85. 

Admiral BUZBY. Sure. 

Mr. HUNTER. Right? 

Admiral BUZBY. Yes, sir. 

Mr. HUNTER. When does that drop-off happen? 

Admiral BUZBY. Without funding commensurate with the age of 

those ships as they become more difficult to maintain, I would say 

we could start seeing that happen at any time, going forward. You 

know, as I said, these ships are 43 years old; 24 of them will be 

50 years old here by 2020. And each year that an old ship gets 

older, it becomes more challenging to maintain, and we won’t be 

able to guarantee that readiness. 

Mr. HUNTER. How long does it take to figure out whether a ship 

can be fixed up, or whether you just have to build a new one and 

scrap it? 

Admiral BUZBY. We—— 

8 

Mr. HUNTER. That analysis. 

Admiral BUZBY. Actually going on board and doing the site surveys and kicking the steel and that sort of thing, you know, to do 

an entire survey of the fleet? We are constantly doing that. But I 

would say to do a real focus survey, probably several months to 

really get through—— 

Mr. HUNTER. And you are going to be doing that? 

Admiral BUZBY. We are doing it constantly, because that is part 

of our recapitalization effort, is to look and see what ships potentially have—— 

Mr. HUNTER. You will be able to come back to us in 6 months 

or 4 months and say these are how many ships we need to build, 

these are how many ships we can fix up? 

Admiral BUZBY. Conceivably, we could. Yes, sir. 

Mr. HUNTER. OK. 

Admiral BUZBY. Yes, sir. 

Mr. HUNTER. Well, let me switch really quick. I got 2 minutes. 

Let’s talk people. Let’s talk first, Admiral Nadeau, it was Navy 

in the beginning that had the big issue from transferring a mariner’s occupational specialty and certifications over to the civilian 

world, right? The Navy had a lot of issues with that. The Army was 

actually pretty good at it. How is it going with the Coast Guard? 

Admiral NADEAU. Sir, we have made a lot of progress, as well. 

The Coast Guard has—— 

Mr. HUNTER. Do you mind pulling the microphone closer to you? 

I have got artillery ears. 

Admiral NADEAU. Is that better? 

The Coast Guard has two pieces to this. One is providing experienced military members that can apply their skill sets and the 

training to merchant credentials. We also have, of course, the 

credentialing program. We are the ones that issue those credentials. 

Working with MERPAC and others and our partners in DoD and 

in DOT, we have come up with about 88-some-odd recommendations that we have been working to implement. And we have made 

significant progress. 

Around this time we have approved about 200 different courses 

from different services. About 60-some-odd of those are Coast 

Guard courses that allow the members to take again their direct 

training they have had while in uniform and apply that to obtaining a merchant mariner credential. 

Mr. HUNTER. So you are helping the Navy walk through this, 

too? 

Admiral NADEAU. Yes, sir. We have developed a crosswalk that 

allows members to look again at their training and their qualifications in the Service, and how they can apply that directly to merchant mariner credentials. 

Mr. HUNTER. What is MARAD doing on the same line? 

Admiral BUZBY. Mr. Chairman, I cochair a subcommittee of the 

Committee on the Marine Transportation System, along with Commander of Military Sealift Command, which has members of all of 

the sea services—NOAA, Army Corps of Engineers, anybody that 

has mariners, Government mariners—to identify what are the impediments, what are the roadblocks to keeping those folks from 

9 

transitioning cleanly using the Coast Guard certified courses into 

the commercial maritime. 

We have identified a lot of roadblocks and are—that is actually 

a fairly active committee that we are—that is producing some good 

results. 

Mr. HUNTER. Good. I look forward to hearing about it. I have got 

one last question, if the Members will indulge me. 

You have about 40,000 ships that are doing not coastwise trade, 

but inland waterways trade, mostly. 

Admiral BUZBY. Jones Act trade, yes, sir. 

Mr. HUNTER. Admiral Nadeau, you are the head of prevention 

policy, right? 

Admiral NADEAU. Correct. 

Mr. HUNTER. So I would guess that means preventing bad guys 

from doing bad things too on the waters. All 40,000 of those ships 

have been approved by the U.S. Coast Guard, right? I mean they 

have passed their certifications, they are crewed by Americans, and 

they are American-made ships. You got American-crewed, Coast 

Guard-approved crews and ships operating on the rivers throughout all the ports in the entire country. 

In your professional opinion as a military man, both of you, 

would you like to see foreign ships in the inland waterways? Chinese, Pakistani, name it. 

Admiral NADEAU. Sir, I would say that you are absolutely right. 

Right now, in the current laws and regulations, all of those ships 

are U.S.-built, operated by U.S.-licensed, U.S.—— 

Mr. HUNTER. From a homeland security point of view, how important is it to you that you have U.S.-crewed, Coast Guard-certified ships and crews operating where there is no oversight, where 

you are going into middle America with thousands of ships every 

day carrying chemicals, all kinds of cargo? How important is it to 

you and homeland security? 

Admiral NADEAU. Security is very important, sir. And you are 

right, that would be a different paradigm, should that not all be 

U.S. mariners, U.S. citizens on board those ships. 

Admiral BUZBY. Sir, you hit the nail on the head. Those mariners 

are a de facto layer of our national security. If they see something, 

they will say something. They know what is normal on the waterways. 

Mr. HUNTER. And the Jones Act makes that possible, period. 

Admiral NADEAU. Yes, sir. 

Mr. HUNTER. Thank you very much. I yield to the ranking member, Mr. Garamendi. 

Mr. GARAMENDI. Thank you, Mr. Chairman. 

Well, let’s start with Russia. There is legislation passed by the 

Russian Parliament that requires that all ships transiting the 

Northern Sea Route—that is, along the 4,000 miles of the Russian 

Territory—be Russian flagged, with a small exception. Is that a 

Russian Jones Act? Either of the two of you would like to respond? 

And, if so, does this also indicate that our own Northern Sea 

Route should have a similar program? 

Admiral BUZBY. I will take a crack at that first. Like about 44 

other countries around the world that have cabotage-type laws, 

from at least my knowledge of what the Russian proposal is, it 

10 

sounds like a cabotage-type law, which, for all the various same 

reasons why we want to have a Jones Act and think a Jones Act 

is important—— 

Mr. GARAMENDI. Now, the United States is now an exporter of 

LNG and oil. Would it be in the American interest in creating 

cargo to have some percentage of that export of LNG and oil be on 

American-flagged and American-built ships? Would that create a 

cargo opportunity for the American maritime industry? 

Admiral BUZBY. Yes, sir. I think it would. You know, cargo is 

king, as we have said, and as you all have pointed out. What generates cargo generates ships and, therefore, generates jobs. So, you 

know, where we can generate cargo in international trade, that 

would be ultimately likely to the benefit of our industry. 

Mr. GARAMENDI. That now brings me to the issue of cargo preference enforcement, which is a MARAD program—to some extent 

also the Coast Guard. 

The 2008 NDAA [National Defense Authorization Act] directed 

MARAD to promulgate regulations to strengthen its enforcement of 

cargo preference requirements. Since then, MARAD has been unable to clear a proposal through the OMB office. 

Admiral Buzby? 

Admiral BUZBY. Sir? 

Mr. GARAMENDI. You are new at this. Are you going to give it 

another shot? And are you capable of overcoming OMB, with our 

help? 

Admiral BUZBY. That is a good question, sir, which we will have 

to kind of see how that plays out. 

Mr. GARAMENDI. Let the last question go. But the first question, 

are you ready to proceed? 

Admiral BUZBY. Sure. The first part, sir, our cargo preference office actually is very heavily engaged on both sides, both with shippers and with the Government agencies that ship cargo preference 

cargo. And we are working with them actually pretty well to ensure that currently the 50-percent cargo preference requirement is 

being met. 

And where it is not specifically being met for a particular cargo, 

we are doing what I would call a catchup procedure, where if it is 

through the nonavailability of a U.S.-flag ship to carry a particular 

cargo, we can make an exception to allow that cargo to go on a foreign-flagged ship. However, another cargo that is being shipped by 

an agency that may not be required to be cargo preferenced, that 

gets made to be cargo preference, so it catches up and fulfills the 

requirement. 

Mr. GARAMENDI. Well, the cargo preference laws are more than 

just food aid. They are also material goods that have been financed 

by the Federal Government. So it is a very broad array of things. 

Admiral BUZBY. Yes, sir. 

Mr. GARAMENDI. The more active and the more aggressive you 

are in investigating, quantifying, and reporting on these cargo opportunities and missed opportunities, the more likely it is that we 

will develop the cargo. If you are not willing to do that, and if you 

are not active—and I hope you would be very, very aggressive at 

this—it will move us towards more cargo, rather than less. 

11 

So, we will, I hope—and certainly I think the chairman would 

agree with this—we will hold you accountable for your efforts and 

for your activity and investigating, quantifying, and fully developing the information about all cargo that is impelled on American 

ships. 

Admiral BUZBY. Yes, sir. 

Mr. GARAMENDI. You ready for that? 

Admiral BUZBY. Absolutely, sir. 

Mr. GARAMENDI. Good. I want to go to the issue of the Outer 

Continental Shelf. 

Admiral Nadeau, I want to talk to you about your B–1 visas. 

Now, this is going to be a subject from the second panel, but since 

you won’t be around after the second panel, or for it, let’s get into 

it. 

The Coast Guard issues B–1 visas for foreign mariners to operate 

on either American or foreign ships, providing services in the Outer 

Continental Shelf. How many visas have you issued? 

Admiral NADEAU. Sir, I think that the Coast Guard issues a letter of nonavailability to the vessels. We don’t actually issue the 

visas. So we do issue letters of nonavailability to foreign-flagged 

vessels that are majority foreign-owned. Under the Outer Continental Shelf Lands Act, OCSLA, there are provisions in there—— 

Mr. GARAMENDI. The visas start with your letter, don’t they? 

Admiral NADEAU. Yes, sir. That is correct. 

Mr. GARAMENDI. OK. Then how many letters? 

Admiral NADEAU. I would have to take that back and get you 

exact numbers. I wouldn’t want to make an estimate here. We deal 

with those routinely. They come in, they are evaluated, we issue 

them. And then, if there is a change in ownership or change in operations, those operators are supposed to come back to us to have 

them reevaluate it. But I can—— 

Mr. GARAMENDI. When can you get the information for me? 

Admiral NADEAU. I would hope that we have good records, sir, 

but it would be as soon as possible. 

Mr. GARAMENDI. This afternoon? 

Admiral NADEAU. I will do my best. 

Mr. GARAMENDI. Good. You are aware that about half the vessels 

that provide services to the Outer Continental Shelf, or the—and 

inner shelf—are laid up? 

Admiral NADEAU. Yes, sir. That is correct. We met with OMSA 

last week, and they provided us an update. 

Mr. GARAMENDI. And do you have information on the number of 

ships that have foreign mariners, rather than American mariners, 

of those? 

So if half of the fleet is laid up, why? Is it foreign competition? 

Admiral NADEAU. At this time, sir, my understanding is it is 

more because there is not as much activity in the Gulf of Mexico. 

Mr. GARAMENDI. OK. 

Admiral NADEAU. So if we are talking strictly Gulf of Mexico, my 

understanding is that the U.S. Fleet, a lot of those vessels are tied 

up. I wouldn’t have any statistics for the global fleet. 

Mr. GARAMENDI. I notice my colleague down the dais here wants 

to jump in on this. So I guess you are going to be next. And I would 

appreciate you jumping in and carrying on this discussion. It is a 

12 

big issue, because it not only affects the mariners, but it affects the 

entire workforce and the ships. And I think part of the problem is 

created by the Coast Guard, with your letters. We want to get into 

this in detail. 

When you issue a letter, do you also investigate whether the individual that is working on these ships is qualified? 

Admiral NADEAU. Sir, again, we issue a letter to the vessel, and 

then that allows them to go out and find qualified people that meet 

whatever standards you are trying to fulfill. So there is—— 

Mr. GARAMENDI. You then investigate whether the jobs that are 

being made available are filled by qualified foreign nationals? 

Admiral NADEAU. Foreign-flagged vessels are subject to the manning as specified by the flag that they fly. Just like U.S. vessels, 

we determine the manning to the state—we have to make sure 

they meet SCCW, but for a lot of jobs in question, they are back 

deck, where they have specialized skill sets. 

Mr. GARAMENDI. So we may have foreign mariners operating in 

the Outer Continental Shelf and the inner that may or may not be 

qualified under U.S. law. Is that the case? 

Admiral NADEAU. Sir, I would say U.S. law provides us to issue 

those exemptions, which we issue to the vessel. Then it is Department of State that issues the visa to the actual crewmember. And 

then CBP [U.S. Customs and Border Protection] handles the entry 

process as they come into the States. 

Mr. GARAMENDI. But my question goes to the qualifications of the 

mariner. Now, if they are American ships and American mariners, 

they have to meet a certain qualification, correct? 

Admiral NADEAU. That is correct, sir. 

Mr. GARAMENDI. Do these foreign nationals providing these services, do they meet the same qualifications? 

Admiral NADEAU. Probably SCCW, the international convention. 

Mr. GARAMENDI. They do? 

Admiral NADEAU. Yes, sir. For a foreign ship—— 

Mr. GARAMENDI. Who is responsible for checking whether they do 

or do not? 

Admiral NADEAU. The foreign flag? If they are a foreign-flagged 

ship, that nation sets the manning and handles the licensing 

for—— 

Mr. GARAMENDI. So you don’t know whether they are qualified 

or not. 

Admiral NADEAU. As part of our routine port state control 

boardings, we do go on board and we check the licensing certificates and documentation of all members on board—— 

Mr. GARAMENDI. We will go into this in more detail. Unfortunately, you will not be here after we hear from other witnesses. 

I yield back. 

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

Mr. GRAVES OF LOUISIANA. Thank you, Admirals. I appreciate 

you being here today. And I want to start on the line of Mr. 

Garamendi’s line of questioning, which I think is excellent. 

Admiral Nadeau, do you know how many countries you have 

issued letters to under the waiver program, under the B–1? 

Admiral NADEAU. So I think—we issue them to the vessel. 

13 

Mr. GRAVES OF LOUISIANA. Right. I am sorry, yes, the flag of 

those nations. 

Admiral NADEAU. Off the top of my head I do not, sir. We will 

have to try and get—— 

Mr. GRAVES OF LOUISIANA. Do you know if there are any vessels 

that are flagged from nations that would be considered perhaps unfriendly to the United States that are operating in the OCS? 

Admiral NADEAU. Unfriendly? Like North Korea or Venezuela? 

Mr. GRAVES OF LOUISIANA. Take your pick. 

Admiral NADEAU. I really doubt that, but I can provide those 

numbers for you, or do my best to get those answers. 

Mr. GRAVES OF LOUISIANA. If we had a submarine, a Russian sub 

sitting off the coast, a few miles off our coast, would that concern 

you? 

Admiral NADEAU. Absolutely. 

Mr. GRAVES OF LOUISIANA. Do you think it is possible that some 

of these vessels perhaps are out there doing intelligence-collecting 

and other things under the auspices of operating in our OCS? 

Admiral NADEAU. I guess it is possible. 

[The U.S. Coast Guard has submitted the following in response to the preceding 

line of questioning from Congressman John Garamendi and Congressman Garret 

Graves. Congressman Garamendi asked how many Letters of Non-Applicability the 

U.S. Coast Guard has issued:] 

The Coast Guard issues Letters of Non-Applicability (LOAs) to foreign 

owned or controlled foreign-flagged vessels that wish to operate on the 

Outer Continental Shelf. An LOA is evidence of a vessel’s compliance with 

OCSLA and it authorizes the foreign-flagged vessel to engage in OCS activity (i.e., those activities pursuant to OCSLA). The Coast Guard has issued 

459 LOAs since 2006. Of those 459, only 373 remain valid. 

[Congressman Garret Graves asked if the U.S. Coast Guard knows if there are 

any vessels flagged under the flag of nations considered unfriendly to the United 

States operating, based on a LOA on the U.S. Outer Continental Shelf (OCS):] 

The Coast Guard has not issued an LOA for any Venezuelan registered vessel or chartered Venezuelan vessel, nor has the Coast Guard issued an LOA 

for a North Korean registered vessel or chartered North Korean vessel. 

Mr. GRAVES OF LOUISIANA. It is possible. Yes, Admiral, just this 

week I had a meeting with a number of constituents. In fact, probably over 100 of them, expressing concern over the H–2B visa program, a program whereby, if you are unable to get domestic workforce, you can bring in foreign workforce to address surge capacity 

in different industries. It has to be a temporary basis, you have to 

demonstrate there is not American workforce available. 

In this case, it is clear—and I want to follow the question that 

Mr. Garamendi asked—it is clear that there is additional work in 

the OCS that American-crewed, American-built, American-flagged 

ships could be doing. Otherwise, the foreign vessels wouldn’t be 

there, of course. 

So there are numerous vessels tied up at Port Fourchon and a 

number of other ports along the gulf coast that could be doing this 

work. So I want to be very clear that there is a strong sensitivity 

on our part, and I think I speak for many members of this committee, that the perhaps lackadaisical enforcement by our Federal 

Government—and I know there are other agencies involved—is 

having an impact on American workforce, on American investment, 

14 

and, most importantly, just on the families, on families right here 

in the United States. 

I think that every person I know in south Louisiana knows someone or has personally been impacted or laid off or lost their jobs 

in these industries. And so, to watch these foreign vessels come in 

is especially concerning. 

Admiral, the CBP has admitted a lack of enforcement in the 

OCS, has admitted violations and lack of enforcement. What is the 

Coast Guard’s position there? I mean do you think that it is appropriate to have some of these foreign vessels operating just miles off 

our coast, when we have domestic vessels that are capable of doing 

this same work in compliance with the law? 

Admiral NADEAU. Sir, we try to apply the laws and regulations 

as they are given to us, and try to establish a level playing field. 

There is tension between the citizenship and under OCSLA and 

with the U.S. flag and trying to provide a competitive fleet. We are 

in discussions about this with OMSA, we had a discussion about 

it last week. We look forward to working with industry to try and 

resolve some of that. 

We know we have an extremely capable U.S. Fleet. Over the past 

few years there are some amazing vessels that have been built 

down in the Gulf of Mexico that can do amazing things. We are 

committed to work with industry, with Congress, to try to find out 

how we can best employ those vessels to serve the Nation. 

Mr. GRAVES OF LOUISIANA. Well, I want to urge you to do so with 

some urgency. As you know better than I, this isn’t just about employment and economy. This has national security implications, 

when this snowballs, as you well know. And I think it is important 

that we do keep this on the front burner. 

Changing gears, Admiral Buzby, were you consulted whenever 

the administration proposed to waive the Jones Act for some of the 

hurricane response activities? 

Admiral BUZBY. No, sir. 

Mr. GRAVES OF LOUISIANA. You were not. Now, that is not required under the law, as I recall, but I think it—— 

Admiral BUZBY. Not under the 501(a) statute, which was used to 

grant those waivers. There were some other waivers that were discussed earlier in support of Hurricane Harvey that went through 

the 501(b) process that MARAD was consulted in. Our role in that 

process is to provide CBP with a list of U.S.-flag vessels that could 

be available to meet the needs with the waivers being requested 

for—— 

Mr. GRAVES OF LOUISIANA. As I recall, there were one or two vessels perhaps that took advantage of those waivers. And when I 

went down to Puerto Rico with Chairman Shuster, Ranking Member DeFazio, and others, it was clear to me after seeing it myself, 

after talking to folks, that the real challenge was the internal infrastructure, perhaps the distribution system within Puerto Rico 

that was significantly damaged, rather than actually getting the 

cargo there. In fact, the ports were clogged with cargo. Is that a 

fair assessment? 

Admiral BUZBY. That is my understanding of the situation, yes, 

sir. From talking with all of the Jones Act shippers—and I talked 

15 

with all of them—they could not push any more cargo into the 

ports. They literally could not get it outside the gates. 

Mr. GRAVES OF LOUISIANA. So strong concern that we waived a 

law. And again, I think it was a solution searching for a problem. 

And I think that in many hearings that we had in this committee 

and roundtables we had in this committee, that that issue has 

come up. 

And certainly I understand that there are a lot of considerations 

at play when something like that happens. I certainly would request that you weigh in and share your expertise in this area in 

the event that something like this happens in the future. We are 

going to continue to be working to perhaps legislate a little bit better approach, perhaps, to disasters in the future. 

Last question. Admiral Nadeau, if you go back and you look at 

the FRC, the OPC, and other programs that you are running, that 

the Coast Guard is running right now, did you have just one shipyard that bid for some of these boats? 

Admiral NADEAU. I am not on the acquisition profession, but no, 

I believe there were multiple yards that competed for that work. 

Mr. GRAVES OF LOUISIANA. And I understand that it is not your 

program, specifically, but certainly I think these are things that 

most folks—and certainly I think you would have some awareness 

of. The yards that are building some of these boats, do these yards 

only do Government work? 

Admiral NADEAU. The shipyards we are currently using? No, sir. 

They also do private commercial work. 

Mr. GRAVES OF LOUISIANA. Do you appreciate the role that the 

Jones Act plays in terms of ensuring we have an industrial base 

here to ensure that we can build these vessels, that we can build 

the latest technology, that we can build the safest, most modern 

vessels available for our Coasties, that relationship between the 

Jones Act—for example, if you are a pilot and we said, ‘‘Hey, we 

need you to come fly a plane once every 10 years,’’ my guess is you 

are going to say, ‘‘Well, you know what? I really need to have some 

type of gap training’’ apply in this case. Does that make sense? 

Admiral NADEAU. Absolutely. We do rely on the same yards that 

use commercial work. We benefit from that tremendously. 

Mr. GRAVES OF LOUISIANA. Great, thank you. 

Mr. Chairman, I apologize for going over. I yield back. 

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

Mr. LARSEN. Thank you, Mr. Chairman. 

Admiral Buzby, I just have a couple questions. They are both for 

you. 

Admiral BUZBY. Sir. 

Mr. LARSEN. So the President and the administration has ran on 

and announced, and rumors are flying as we sit here today that a 

$1 trillion infrastructure package will find its way up here to the 

Hill, at least principles for a package. And part of infrastructure 

ought to be supporting the U.S. maritime industry. 

So my question is for you and if MARAD itself has been consulted on part of that conversation within the administration on 

what parts of the infrastructure package would best serve maritime. And, if so, what parts? 

16 

Admiral BUZBY. Thank you, sir. The answer to your question, the 

short answer, is yes, we have been involved within the Secretary 

of Transportation’s office. We have been working very closely with 

her staff, who have obviously, then, inputted into the national 

strategy. We have made a very strong point that our ports are our 

gateways to our economy. 

I mean virtually everything in our economy flows through our 

ports. Our key gateway ports and then all of our smaller feeder 

ports really is where the majority of this Nation’s commerce gets 

done. And the importance of those ports and the connections from 

those ports, via highway, via rail, via adjacent airports, and via the 

waterways that we spoke of earlier, using Jones Act vessels to 

move that cargo intercoastal throughout our country are all very, 

very vital and need further investment if we want to keep pace 

with the—our growth to keep the flow moving. 

Mr. LARSEN. So perhaps you can’t share with us, but are there 

specific elements that you at MARAD brought to that discussion? 

Admiral BUZBY. We thought that the maritime highway initiatives was very important. That is, in our opinion, kind of an underutilized mode of transport in our country that could significantly 

impact the highway congestion by removing a lot of containers that 

are moved around this country off of there where it makes sense 

to, where it economically makes sense. 

And we have several operating marine highways in this country 

right now that are doing just that. It cuts down on pollution. Instead of having a whole lot of diesel engines moving things, you 

have one diesel engine moving cargo around. So we think there is 

great benefit there. 

Mr. LARSEN. All right. Let me ask about one particular program. 

It has been around since 2008 or so, the Small Shipyard Grant Program. Do you anticipate this year that you will be tendering grant 

applications for small shipyard grants? And do you know yet how 

much MARAD will have to allocate for that? 

Admiral BUZBY. I haven’t seen any of the final numbers. I expect 

that the program will continue to exist and be utilized. It is a very 

popular program. We get roughly about 10 times the amount of requests for grants, and they are typically small amounts of money, 

but they have big impact across the maritime industry, typically in 

the maintenance and repair area that are very critical to maintaining the Coast Guard’s vessels, the Ready Reserve Force vessels, 

Military Sealift Command vessels. We all benefit from investments 

in these small—— 

Mr. LARSEN. I am glad to hear that. In its early life, once it got 

started, it did have some struggles staying alive. But members of 

this committee have been very strong advocates of the program, of 

the Small Shipyard Grant Program. So I was glad to see the allocation last year, and hope to see continued support from this administration for that. 

Thank you, I yield back. 

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

Mr. WEBER. Thank you. That was a great exchange between Congressman Garamendi about the B–1 visas. And so, Admiral 

Nadeau, my question is—and you may not know the specifics—but 

have there been instances where sailors, foreigners on those vesVerDate Aug 31 2005 10:35 May 09, 2018 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\1-17-2~1\29968.TXT JEAN
17 

sels—I know you said you issue certificates to the vessel, but are 

there any reported incidences where we have discovered sailors 

that were not qualified? 

Admiral NADEAU. Not to my knowledge on the OCS, no. 

Mr. WEBER. OK, fair enough. So I think one of the comments 

that was made earlier is about the Jones Act and vessels up in the 

waterways from the chairman, which I am all about, being sure 

that we keep the Jones Act in place and be sure that we protect 

the integrity of our country. Have there been any incidents, Admiral—still with you—where there has been discovered on the interior waterways—I mean I don’t have what happened, so I am just 

asking you—foreign-flagged vessels or sailors that were not qualified? 

Admiral NADEAU. Again, not to my knowledge. Those vessels— 

and there are thousands of them—are manned, crewed by U.S. citizens. They are credentialed by the Coast Guard. 

Mr. WEBER. How many thousands would you estimate? 

Admiral NADEAU. In the heartland, it is hard to estimate. I can 

tell you, sir, that we are embarking right now on implementing 

subchapter M, which includes about 5,500 different vessels. Then 

you got to add other vessels. Not just towboats, but there are many 

other types of vessels, from pasture ferries—but it has got to be 

more than 5,000, probably closer to 7,000. 

Mr. WEBER. What is your biggest challenge around the country? 

Is it the deep water ports of the West? Is it the Gulf of Mexico? 

Where would you say most of your agency’s time is spent? 

Admiral NADEAU. Well, distributed across the United States— 

and I think that workload is—again, we see it—was a lot of activity 

in the gulf coast. Some of that has shifted. Certainly throughout 

the heartland, throughout the Marine Transportation System, the 

25,000 miles of rivers and those 360 ports, it is distributed across 

the country, sir. So it is hard to say there is one particular area 

that is more important than another. We have people—— 

Mr. WEBER. Well, no. I didn’t say ‘‘important.’’ I said ‘‘activity.’’ 

I chose my words carefully. 

Admiral NADEAU. Yes, sir. I would hesitate to say. It depends on 

the activity, because we are doing many different functions and 

missions. Whether that is vessel inspection, whether that is, again, 

the licensing and manning functions, the investigations piece of 

this, the port security piece, there is a lot of different activity, sir, 

by the Coast Guard across the entire Nation. 

Mr. WEBER. Is there a particular product, whether it is container 

or bulk, or whether it is tank vessels, is there a particular product 

that presents the most problem to you all? 

Admiral NADEAU. I wouldn’t say there is one that presents a 

problem. We established a regulatory regime to address the challenges, and we have a risk-based, performance-based regime in 

place to help make sure that we monitor and address whatever 

challenges those might be. 

Mr. WEBER. Going to the gulf coast, Hurricane Harvey, which— 

you guys did a fabulous job, by the way, the first three coastal 

counties of Texas, starting at Louisiana, that other foreign country, 

and Jefferson County, Galveston County, and the southern half of 

Brazoria County. Were you all well prepared for Hurricane Harvey 

18 

and that kind of response, or is there something we could have 

done better? 

Admiral NADEAU. Sir, again, a little bit outside my wheelhouse, 

but through talking with my peers, I mean, we are always looking 

to improve. I thank you for the compliments to our fabulous crew 

we had down there, I am very proud of them. But we always look 

to improve, so we will be going through an after-action process to 

make sure that we can improve. 

Mr. WEBER. Fair enough. Yes, I appreciate that. 

Admiral Buzby, I am going to jump over to you now, and some 

of the other questions. 

You weren’t consulted by the administration over the waiver of 

the Jones Act you said. 

Admiral BUZBY. It is not required that MARAD be. No, sir. 

Mr. WEBER. Well, I get that. But we would have appreciated 

that, right? 

Is there a way or method or mechanism or a—I don’t know what 

you want to call it—an avenue where, in the future, going forward, 

maybe you could establish that and say, hey, look, you know, guys, 

going forward we would appreciate if maybe you might want to 

check with us. Have you thought about an avenue for that? 

Admiral BUZBY. Well, short of changing the statute, there would 

be no legal precedent for that. 

Mr. WEBER. I get that. 

Admiral BUZBY. However, certainly there is, you know, informal 

liaison that can go on. And we had heard that some of that was 

occurring. 

Mr. WEBER. You didn’t hear it through Twitter, did you? 

Admiral BUZBY. No, sir. 

Mr. WEBER. I am just asking. 

Admiral BUZBY. I don’t tweet. 

Mr. WEBER. OK. Smart man. All right. Getting—what—and Admiral, I will stay with you for just a minute—what is—your opinion, what is the greatest hindrance that we currently faced to keeping the Jones Act in place and making sure that it does well for 

our country? What is the greatest hindrance? 

Admiral BUZBY. I think it is probably a misunderstanding by 

many of exactly the role, the critical role, that the Jones Act plays. 

A lot of people, I think, focus on strictly an economic view of the 

impact of the Jones Act, and fail to recognize the significance to national security. 

Mr. WEBER. Well, I would submit that if we don’t have a good 

economy then our national security is going to lag behind. 

Admiral BUZBY. Right, but by economy, you know, it is—I mean 

the costs—— 

Mr. WEBER. Sure. 

Admiral BUZBY [continuing]. Associated with the Jones Act that 

people allege that adds to the cost of—— 

Mr. WEBER. Let me jump over—I am a little bit out of time—to 

you, Admiral. What is the greatest asset that we have that is helping us with the Jones Act? What is the best thing in place? I am 

going to do the opposite of what I asked him, what is the greatest 

hindrance. Now to you, what is the greatest thing we have making 

sure that we preserve the Jones Act? 

19 

Admiral NADEAU. That is a tough one, sir. Again, the Jones Act 

has been in place for nearly 100 years. And we see many benefits 

and many impacts. Should one look to perhaps unwind some of 

that, we have to be mindful second- and third-order effects. 

But we see tremendous benefits to the Jones Act, in terms of 

safety and equality, the mariners, our industrial base, and we 

would just offer that—— 

Mr. WEBER. I am going to come back full circle, and that is why 

I was questioning earlier about have we caught any sailors that 

weren’t qualified on foreign-flagged vessels, because that would 

serve as a basis for us to say, look, we want to keep the Jones Act 

in place and make sure that we have got American vessels, make 

sure that we are doing our job. It is helping our economy and it 

is helping our national security. So maybe it is education, you guys 

helping educate? 

Admiral NADEAU. Yes, sir. Coming back to your question about 

mariners, I was answering directly for the Gulf of Mexico. But we 

do, as part of our port state control boardings, we go on foreign vessels, we do assess the competency of the foreign crewmembers, and 

we do on occasion find that they are not meeting the international 

standards. 

Mr. WEBER. So what happens with that vessel that you have 

issued a certificate or a letter to when they have someone on board 

that doesn’t qualify? 

Admiral NADEAU. We intervene on the International Convention 

and ensure that appropriate steps are taken to correct the deficiencies, whatever they might be. 

Mr. WEBER. Does that vessel lose its ability to come back into 

our area? 

Admiral NADEAU. They must take corrective action to bring it to 

the proper level of safety before they are allowed to operate. 

Mr. WEBER. And who follows up on that? 

Admiral NADEAU. The Coast Guard. 

Mr. WEBER. OK. Thank you, Mr. Chairman. I yield back. 

Mr. HUNTER. I thank the gentleman. Great, great questions. I 

think that is it for this panel. No further questions. 

Mr. Garamendi is recognized. 

Mr. GARAMENDI. Thank you, Mr. Chairman. I appreciate the opportunity for an additional question. 

We went round and round on this issue of foreign vessels operating in the Outer Continental Shelf. It seems to me that the Outer 

Continental Shelf Lands Act is very, very clear that it is a Jones 

Act region. Is there any doubt about that? 

Admiral NADEAU. We have many foreign vessels with foreign 

mariners that are permitted to work on the Outer Continental 

Shelf, sir. 

Mr. GARAMENDI. So there is doubt as to whether or not the Outer 

Continental Shelf is subject to the Jones Act? 

Admiral NADEAU. It is subject to the Jones Act if it is moving 

cargo that is subject to Jones Act. But a vessel that is just working 

out on the Outer Continental Shelf that is not transferring cargo— 

can go out and work on the shelf. 

Mr. GARAMENDI. And we are going to go into this a little more 

in the second panel, I am sure. But I want to just ask the question 

20 

about the letter of nonavailability. That is issued by the Coast 

Guard? 

Admiral NADEAU. Yes, sir. 

Mr. GARAMENDI. Is there a timeframe in which that letter of nonavailability is applicable, or is it just available and then goes on 

for an unlimited period of time? 

Admiral NADEAU. Unless the circumstances change, it is issued 

to the vessel based on the ownership of the vessel and the flag of 

the vessel. If those conditions don’t change, the letter remains in 

effect. 

Mr. GARAMENDI. OK. So you issue a letter of nonavailability, authorizing a foreign-flagged vessel to operate on the Outer Continental Shelf, correct? 

Admiral NADEAU. Yes, sir. It allows them to use foreign—— 

Mr. GARAMENDI. OK. 

Admiral NADEAU [continuing]. Foreign workers. 

Mr. GARAMENDI. And now we have a situation where some 50 

percent of the American vessels that would provide services in the 

Outer Continental Shelf are laid up. Is there a nonavailability 

today? 

Admiral NADEAU. Is your question are there vessels that are applying for letters of nonavailability today? 

Mr. GARAMENDI. Wouldn’t it be appropriate that, since half of the 

American vessels are laid up, that there is no question of availability, and therefore the letters of nonavailability should terminate? 

Admiral NADEAU. Sir, we are applying OCSLA and the domestic 

law and statutes as they are presented to us, trying to enhance a 

level and fair playing field. But there are some tensions between, 

again, the citizenship, and trying to make sure we recognize that 

in OCSLA, and then trying to keep our fleet competitive. There is 

some tension there. 

Mr. GARAMENDI. OK. 

Admiral NADEAU. I would be happy to come back and get a more 

detailed brief for you, though, sir. 

Mr. GARAMENDI. I would appreciate that. Thank you. 

Admiral NADEAU. Thank you. 

Mr. HUNTER. Just closing here, I think you heard from quite a 

few Members. We have seen the crew lists of some of these ships, 

where you have Moldovans, Chechens, Kazakhs, you got all kinds 

of people on these ships, and you don’t know who they are. 

You don’t know who they are, which means the Department of 

Homeland Security doesn’t know who they are, which means U.S. 

Government and the American people don’t know who they are, either. They could be great guys, they could be bad guys. You don’t 

know, because you issue that letter to the ship and say, you got to 

comply now. And if they are a bad actor, they are not going to comply, but they don’t have to worry about it because you don’t check 

their crews. 

And if you have Americans able to do it right now, and you are 

having Moldovans and Kazakhs and Chechens out there, you don’t 

know who is out there on a Norwegian ship. You got a Norwegian 

captain, a Norwegian first mate or whatever chief, then you could 

have whoever. And we would like to know who is manning those 

21 

ships and, at the same time, we are curious as to why you are allowing them at all, when you have U.S. ships able to do it. 

So at least make it more stringent on them so you have to say, 

hey, you have got a terrorist on your ship that is maybe bad, all 

right? 

So with that, there are no more questions. Rear Admirals, thank 

you very much for your time and your expertise and for being with 

us today. And with that, we are going to move on to the second 

panel. I appreciate it. 

[Pause.] 

Mr. HUNTER. All right, panel two. OK. We are now going to hear 

from Mr. Matt Woodruff, chairman of the board of directors, American Maritime Partnership; Mr. Eric Ebeling, president and chief 

executive officer of American Roll-On Roll-Off Carrier Group on behalf of USA Maritime; Mr. Aaron Smith, president and chief executive officer, Offshore Marine Service Association; Mr. Matthew 

Paxton, president, Shipbuilders Council of America; and Mr. Bill 

Van Loo, secretary treasurer for the Marine Engineers’ Beneficial 

Association and on behalf of American Maritime Officers; Masters, 

Mates and Pilots; and the Seafarers International Union. 

Great to see you all here. Thank you for being here. 

And Mr. Woodruff, you are now recognized to give your statement. 

Mr. WEBER. Turn on your mic. 

Mr. WOODRUFF. Absolutely, sorry. 

TESTIMONY OF MATT WOODRUFF, CHAIRMAN, AMERICAN 

MARITIME PARTNERSHIP; ERIC P. EBELING, PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, AMERICAN ROLL-ON 

ROLL-OFF CARRIER GROUP, ON BEHALF OF USA MARITIME; 

AARON C. SMITH, PRESIDENT AND CHIEF EXECUTIVE OFFICER, OFFSHORE MARINE SERVICE ASSOCIATION; MATTHEW 

PAXTON, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA; AND BILL VAN LOO, SECRETARY TREASURER, MARINE 

ENGINEERS’ BENEFICIAL ASSOCIATION, ON BEHALF OF 

AMERICAN MARITIME OFFICERS; MASTERS, MATES AND PILOTS; AND THE SEAFARERS INTERNATIONAL UNION 

Mr. WOODRUFF. The American Maritime Partnership is the largest maritime trade association in America, representing vessel 

owners and operators, shipbuilders and repair yards, dredging and 

marine construction contractors, trade associations, pro-defense 

groups, and more. 

And I would say that, on balance, the state of our industry is 

good. There are bright spots, yet there are also very significant 

causes for concern. 

There has been a massive recapitalization in our industry of late. 

And in some segments, that process is ongoing. Billions have been 

invested. We have new tank, container, offshore service vessels, 

dredges, towboats and tugboats built at shipyards all around America, sailing all around America. 

Our business tends to run in cycles, and many segments of the 

domestic industry have been in a down cycle for some time. So as 

I talk about the positive aspects of our industry, we shouldn’t forget that, for many of our companies right now, even entire segVerDate Aug 31 2005 10:35 May 09, 2018 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\1-17-2~1\29968.TXT JEAN
22 

ments of our industry, they are having a really hard time right 

now. 

Despite our challenges, our industry continues to serve its customers well with vessels that are purpose-built for the needs of our 

markets. 

The foundation of everything we do is the Jones Act. It exists to 

protect America by enhancing our economic, national, and homeland security. America needs the benefits provided by the Jones 

Act as much today as it ever has. Our industry needs certainty, as 

we invest in long-life assets. And we know we will never get that 

certainty from the marketplace. But we need regulatory certainty 

from our Government. We need the Jones Act to remain the settled 

law of the land. 

Hurricanes were a big issue for us in the past year, and our people rose to the challenge. They implemented their hurricane plans, 

they rode out the storms with remarkably little damage. And when 

the rains stopped falling and the wind stopped blowing, they got 

back to doing what they do best: moving cargo for America, dredging channels impacted by the storm, serving the offshore oil and 

gas industry. 

In many cases, the people of our industry put aside the damage 

to their own homes because they knew that the cargo they carried 

represented a lifeline to the affected communities. 

Florida was a case in point. Florida depends on tank vessels to 

deliver its fuel and storm preparations, and evacuations deplete 

fuel supplies. The ports closed during the storms, but when they 

reopened, in the words of one reporter, a Jones Act armada was 

waiting to resupply the State with petroleum. Dozens of Jones Act 

vessels were streaming into Florida ports to help their fellow Americans. 

Puerto Rico was another example. As you all know, the original 

story was that the Jones Act was impairing the recovery effort. 

That was patently false. Thanks to your hearing last October, 

among other factors, the story quickly changed and the truth came 

out. The Jones Act fleet was steadily delivering containers to the 

island, which were stacking up on the terminals due to infrastructure issues inland. The Jones Act fleet was and continues to be a 

major part of the recovery effort, with almost 80,000 containers delivered to the island so far. Our carriers stepped up to help Puerto 

Rico, and they remain committed to Puerto Rico for the long term. 

I would be remiss if I didn’t finish by mentioning our industry’s 

commitment to hiring veterans. When we have jobs to offer, we 

love for those jobs to be filled with veterans. AMP has run a series 

of programs to encourage hiring of veterans, and we will be doing 

more. AMP has a new Military to Maritime website, 

militarytomaritime.org, which is a central location where applicants can go to receive information on careers in the maritime industry. 

I appreciate the opportunity to represent our industry here 

today. As we face the challenges ahead and work to see our industry return at least to profitability, if not prosperity, we are grateful 

that the members of this subcommittee have taken the time to understand our industry. And never was that understanding more important than during the recent hurricanes. With the airwaves filled 

23 

with so much misinformation, you helped set the record straight 

and we are so grateful for that. Thank you. 

The American Maritime Partnership stands ready to help as you 

address the issues related to our industry. We would be happy to 

answer any questions now or in the future. And I would request 

that my written remarks be entered into the record. 

Mr. HUNTER. Without objection, so ordered. 

And our condolences, too, on your promotion. 

[Laughter.] 

Mr. HUNTER. Mr. Ebeling, you are recognized. 

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

opportunity to appear before you today to discuss the state of the 

U.S.-flag international fleet. My name is Eric Ebeling, and I am 

here today on behalf of USA Maritime, a coalition consisting of 

American vessel owners and operators, trade associations, and 

maritime labor. 

As the president and CEO of American Roll-On Roll-Off Carrier 

Group, a New Jersey-headquartered company, it is my honor to 

lead an incredibly talented team of men and women at the largest 

U.S.-flag RORO operator. We own and operator eight roll-on rolloff vessels in international trade, all of which are enrolled in the 

Maritime Security Program. Our newest ships, MV Patriot and MV 

Liberty, joined the fleet in 2016 and 2017, respectively. All our vessels are crewed by American mariners and fly the American flag. 

The commitment U.S. carriers make to the national security of 

the U.S., through programs like the Maritime Security Program, 

MSP, and ironclad contracts like the Voluntary Intermodal Sealift 

Agreement, VISA, and the global shipping, intermodal, and logistics services U.S. carriers provide to the Department of Defense, 

are a clear best value buy for the taxpayer. 

It is well documented that the U.S. Government does not have 

a sufficient organic fleet, nor the intermodal and logistics capabilities to do the job entirely on its own. Studies have shown that it 

would cost the U.S. Government tens of billions of dollars to organically obtain those same ships and services. We have a great industry-Government-labor partnership with clear and significant advantages, mutual benefit, and we must maintain it or risk losing 

the ability to deploy and sustain such asymmetrical logistics advantages. 

According to MARAD, there are currently 82 non-Jones Act U.S.- 

flag international fleet vessels. Over the last 5 years, the U.S.-flag 

international fleet has decreased by about 25 percent. Not only do 

U.S.-flag carriers in international trade compete in a 

hypercompetitive global marketplace, but we are also uniquely sensitive to the ebb and flow of Government policymaking, which, 

when translated to an economic impact on the U.S.-flag carriers, 

can destabilize or support or even turbocharge investment in the 

U.S.-flag international fleet. 

The two most effective policies that support the U.S.-flag international fleet are MSP and the cargo preference laws. MSP is a 

proven national security program enacted to ensure that the 

United States has the U.S.-flag sealift capability and trained AmerVerDate Aug 31 2005 10:35 May 09, 2018 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\1-17-2~1\29968.TXT JEAN
24 

ican citizen merchant mariners it needs in time of war or other national emergency. 

At the ship-naming ceremony for ARC’s MV Liberty in June 

2017, Department of Transportation Secretary Elaine Chao called 

MSP a model public-private partnership. At a cost of $300 million 

per year, as currently authorized, the program is an exceptional 

value for DoD and the taxpayer. But the program is only authorized until 2025, and it is critical that it is extended beyond 2025 

as soon as possible. 

Participating companies must finance the purchase of replace- ment tonnage, a 30-year asset that may cost up to $80 to $100 million, based on a program that expires in a few years, and is subject 

to the annual appropriations process. This could be considered akin 

to going to your local bank with a proposal to buy a home with a 

30-year mortgage, knowing that you only have 1 year of income. 

Carriers have collectively invested billions of dollars. But for this 

investment to continue or increase, continued stable funding is 

vital. And the program must be extended or simply made permanent. 

Cargoes generated by the cargo preference laws are the key incentive for U.S.-flag operators operating in international trade to 

remain under U.S. registry, and are part of Congress’ long-established intent to support the privately owned and operated U.S.-flag 

fleet and merchant marine. It is a rather simple equation: without 

cargo, carriers will not invest in ships and, without ships, there 

will not be jobs for merchant mariners. 

Without those merchant mariners, the Government-owned Reserve Fleet cannot be crewed. To that end, we offer three suggestions. 

First, as the ranking member noted earlier, Congress passed legislation in 2008 to give MARAD stronger cargo preference enforcement tools. Unfortunately, the previous administration did not implement them. Congress should work with the administration to 

ensure faithful implementation and execution of these laws. 

Second, under America’s cargo preference laws, 100 percent of all 

military cargoes and at least half of all civilian agency cargoes 

must be shipped on U.S.-flag vessels. Why not require 100 percent 

of all Government-owned or financed cargoes to move on U.S.-flag 

ships? 

Lastly, Ex-Im Bank, the national export credit agency of the 

U.S., needs a board quorum that can approve new projects. Without an Ex-Im Bank, America has effectively unilaterally disarmed. 

And while most of the impact has been felt by the American manufacturing base and workforce, there has been an attendant impact 

to national security in the form of a reduced U.S.-flag fleet and reduced manpower pool. 

The U.S.-flag fleet has been at a crossroads in recent years. We 

now have knowledgeable support of leaders at both the Department 

of Transportation in Secretary Elaine Chao, and the Maritime Administration in Administrator Buz Buzby. We also have had steadfast leadership and support from USTRANSCOM and its commander, General Darren McDew. 

As General Darren McDew noted in an October 2017 speech, ‘‘We 

don’t know when, but some day the Nation is going to come calling. 

25 

When she does, she will need us, she will need our ships, she will 

need our mariners...if we do nothing now, the strength of the maritime fleet that brought the Nation to war throughout history...that 

strength will not be here. It is already in decline.’’ 

It is incumbent on all of us as Americans to stay that decline and 

ensure that this crown jewel capability continues to be available to 

USTRANSCOM and the Nation. And you can help by continuing to 

support laws and policies like MSP and cargo preference that enhance the fleet. 

Thank you. I look forward to your questions. 

Mr. HUNTER. Thank you. Thank you, Mr. Ebeling. 

Mr. Aaron Smith is recognized as the president and CEO of Offshore Marine Service Association. 

Mr. SMITH. Thank you, Chairman Hunter, Ranking Member 

Garamendi, members of the subcommittee. Thank you for allowing 

me time to speak this morning. My name again is Aaron Smith. I 

am president and CEO of the Offshore Marine Service Association. 

I ask for my full remarks to be submitted for the record. 

OMSA—— 

Mr. HUNTER. Without objection. 

Mr. SMITH. Thank you, sir. 

OMSA is the association of owners and operators of U.S.-flag vessels engaged in constructing, servicing, and maintaining offshore 

energy assets on our OCS. In total, we represent 170 member companies, U.S. companies, and their 12,000 employees. We are a 

strong Jones Act supporter. 

The first offshore well was drilled 11 miles off the coast of Louisiana in approximately 18 feet of water. Today, instead of 11 

miles, projects are routinely done 100 miles from shore. And instead of 18 feet of water, they are done in 10,000 feet of water. 

This increasingly complex work yields increasingly complex vessels. 

To keep up, OMSA members modernize and recapitalize their fleet 

in U.S. shipyards and invest in thousands of highly skilled and 

compensated U.S. mariners. 

In turn, these mariners participate in the Ready Reserve Force, 

and these shipyards build assets for the Navy and Coast Guard. In 

short, when enforced, the Jones Act works as intended. 

The prolonged downturn in the worldwide energy markets has 

greatly impacted OMSA members. As Ranking Member Garamendi 

alluded to, more than half of OMSA member fleets are currently 

in cold stack or laid up in the mud. Those that are working are 

working at day rates below even OPEX. A recent IHS market survey found that vessels that were commanding a day rate of $40,000 

in 2012 now are working for a day rate of between $9,500 and 

$15,000. 

However, as Matt alluded to, we are in a cyclical industry. We 

understand this. These are forces we understand. We have been 

through downturns before. We understand we will come out on the 

other side. So my members get that, they have been there before. 

The challenges that OMSA members can’t understand is understanding why the Government fails to enforce the Jones Act. 

More than the market downturn, this failure degrades the confidence in our industry and pits U.S. vessels against those that do 

not have to comply with the same tax, labor, or regulatory costs. 

26 

As you know, current law, as represented by the Jones Act in 

combination with OCSLA, is simple. It prohibits foreign vessels 

from picking up cargo at U.S. ports and transporting it to points 

on the U.S. OCS. Unfortunately, Customs and Border Protection 

has confused and degraded that clear standard via their issuing of 

private interpretations of the Jones Act between 1976 and 2009. 

Many of these letter rulings, as they are known, are directly contrary to the statute of the Jones Act. 

In 2009, CBP realized their errors and issued a notice of its intent to revoke many of these flawed letter rulings. That notice was 

very candid in admitting that these letter rulings are ‘‘contrary to 

the legislative intent of the Jones Act.’’ However, after accepting 

public comments on the revocation notice, and at the urging of foreign vessel owners and charters, CBP punted, saying a new issue 

would be issued ‘‘in the near future.’’ 

Spurred by this potential enforcement of the Jones Act, OMSA members invested $2 billion in U.S. shipyards, building dozens of 

state-of-the-art vessels capable of serving the market covered by 

this revocation notice. But we had to wait 8 years for that ‘‘near 

future’’ to arrive. It finally came 364 days ago, when CBP again 

issued a notice of its intent to revoke these flawed letter rulings. 

Again, CBP accepted public comments on their notice. Like in 

2009, OMSA members and thousands of our employees submitted 

comments in support, as did 34 Members of Congress and 10 Senators. 

I would like to note half of this subcommittee signed those letters. Thank you all. 

Despite this acknowledgment, second acknowledgment that CBP 

itself was not following the law, and despite this public and political support, CBP again decided not to enforce the Jones Act on 

May 10th, issuing a notice that they were ending the revocation effort. 

It is clear who benefitted from this decision. A London-based 

trade association for the international competitors of OMSA issued 

a press release saying that everyone should ‘‘celebrate a positive result.’’ OMSA members were not in a celebratory mood. Twelve days 

after CBP stopped their revocation effort, one of my members lost 

a previously secured lucrative contract on the OCS. That vessel 

was provided cover by the same letter rulings that CBP had sought 

to revoke. It leveraged its lack of U.S. tax, labor, and regulatory 

compliance costs to underbid my member. 

The problem continues. In September, CBP reversed a $22 million Jones Act penalty. We believe that that penalty was issued 

under those same letter rulings that they sought to revoke. We believe this to be a strong signal to the international market that the 

U.S. OCS is open to foreign vessels. 

Again, the Jones Act has proven time and again that it can provide for our national, homeland, and economic security. But it can 

only do so when it is properly enforced. 

I welcome any questions you have and thank you all again. 

Mr. HUNTER. Thank you, Mr. Smith. 

Mr. Paxton, you are recognized for 5 minutes. 

Mr. PAXTON. Thank you, Chairman Hunter, Ranking Member 

Garamendi, and members of the subcommittee, for the opportunity 

27 

to provide testimony on the state of the U.S.-flag maritime industry. I ask that my entire testimony be submitted for the record. 

Mr. HUNTER. Without objection. 

Mr. PAXTON. In December 2016, the Navy released a new force 

structure assessment that called for a fleet of 355 ships. To achieve 

this buildup, a substantial and sustained investment is required in 

both procurement and readiness, but our industry stands ready to 

build and repair this fleet of the future. 

Also critical to achieving this goal is strong congressional and administrative support of the Jones Act. The Jones Act ensures a 

commercial shipbuilding industry, supplier chain, and workforce 

that can support building and maintaining these Navy assets, making it a major national security benefit. 

It is for this reason that the U.S. Navy has always and continues 

to support the Jones Act. Long term, there needs to be a workforce 

expansion, and some shipyards will need to reconfigure or expand 

production lines to meet demands for both Government and commercial construction. However, the shipbuilding industry, like so 

many other manufacturing sectors, faces an aging workforce. Attracting and retaining the next generation shipyard worker is critical. Funding, predictability, and sustainability, along with fully 

and consistently enforcing the Jones Act, will allow industry to invest in facilities and more effectively grow its skilled workforce. 

Consistent enforcement of the Jones Act is critical. A recent decision by the Department of Homeland Security to not revoke a series of letter rulings that have allowed foreign-built and foreigncrewed offshore supply vessels to operate in violation of the Jones 

Act has created uncertainty and resulted in numerous new U.S. 

vessel construction contracts to be canceled. I raise this issue as an 

example of how a decision by an agency to not properly enforce the 

Jones Act can adversely impact the entire shipyard industrial base. 

Shipyard capacity is critical to recapitalize the Coast Guard’s 

desperately needed fleet modernization, including inland waterway 

vessels, cutters of all sizes, and icebreakers. Almost all of the shipyards that are building Coast Guard vessels also build Jones Act 

vessels. It is because of this law that the Coast Guard is receiving 

such robust competition to build its various classes of ship, including the polar icebreaker. 

As we look at the current state of the U.S.-flag maritime industry, we need to ask ourselves what is next. Recently, our shipyards 

effectively built for the increased demand in the tanker market, 

due to the oil and gas boom. It is a testament to the Jones Act that 

the commercial shipbuilding sector mobilized rapidly to meet the 

market demand and built state-of-the-art tankers for that market. 

It was a true success for our industry. 

In addition, our shipyards recently delivered numerous large 

oceangoing containerships to recapitalize the noncontiguous fleets. 

Vessel construction for these important shipping routes is ongoing 

at several shipyards, and will be completed in the coming years. A 

common misconception, however, is that without large vessel construction, the U.S. shipyard industry is dormant. 

However, nothing could be further from the truth. In 2015 our 

industry delivered 1,438 Jones Act vessels. And in 2016 we delivered 1,329 vessels. Looking towards the future, we expect there 

28 

will be strong investment in expanded ferry and passenger vessel 

services, hopper dredges, commercial fishing fleet recapitalization, 

and a robust ATB market. We will also need to be ready to build 

training ships to support our maritime academies and recapitalize 

the severely aging Ready Reserve Force. 

As a closing observation, it is important to highlight to this committee that U.S. shipyards do not compete on a level playing field 

in the worldwide market. For example, last year South Korea’s 

Government injected $2.6 billion into one of their most prominent 

shipyards in order to keep the yard from going bankrupt. A September report from an international think tank found evidence that 

shipyard costs in China decreased between 13 and 20 percent between 2006 and 2012, leading to a substantial misallocation of 

global production with no significant consumer gains. 

These are examples of the direct and indirect Government subsidies provided by South Korea, Japan, and China that have resulted in shipyards from those countries building for markets that 

did not exist at rates subsidized by those foreign governments. It 

is, therefore, an extreme misrepresentation to compare foreign subsidized shipyard markets to that of the Jones Act. 

Thank you, Chairman Hunter and Ranking Member Garamendi 

for allowing me to testify along such distinguished witnesses today, 

and I look forward to your questions. 

Mr. HUNTER. Thank you, sir. 

Mr. Van Loo, you are recognized. 

Mr. VAN LOO. Chairman Hunter, Ranking Member Garamendi, 

and distinguished members of the subcommittee, my name is Bill 

Van Loo, secretary treasurer of the Marine Engineers’ Beneficial 

Association and a third-generation marine engineer. I am pleased 

to present testimony on behalf of the MEBA, the American Maritime Officers, the Masters, Mates and Pilots, and the Seafarers 

International Union. 

Combined, our unions represent the men and women who operate U.S.-flag vessels in both the domestic and international trades, 

and we continue the patriotic tradition of supporting the military 

whenever and wherever needed. We are the fourth arm of defense. 

Despite constant warnings from leaders in the Department of Defense, the pool of mariners has shrunk to a critical level. Without 

action, the military will no longer be able to rely on the American 

merchant marine. We appreciate the subcommittee’s commitment 

to ensure the existence of a vibrant maritime industry. 

Since 2011, the U.S.-flag international fleet has shrunk from 106 

to 82. This should be concerning to every American. In order to 

change course and reverse the downward trend, we must protect 

and fully fund existing programs and create new programs and opportunities that will increase the number of U.S.-flag vessels. That 

effort should start with national maritime policy that ensures a 

steady stream of cargo which, in turn, creates employment opportunities for militarily needed U.S. merchant mariners. 

By providing a minimal level of cargo, U.S.-flag preference shipping requirements are an essential to maintaining a strong industry. We strongly urge Congress to restore the U.S.-flag share of 

P.L. 480 Food for Peace cargoes to the 75-percent level that was 

in place since 1985 until 2012, when it was reduced to a mere 50 

29 

percent. It is no coincidence that the size of the U.S.-flag fleet has 

shrunk by more than 26 percent as a result. 

All too often, Federal departments and agencies and Government 

contractors have ignored U.S.-flag shipping requirements for the 

carriage of cargoes paid for by the U.S. American taxpayer. Not 

only are U.S.-flag vessels denied those cargoes, but there is no recourse when it is ultimately determined that the law was violated. 

We implore Congress and the administration to reinforce to all 

Federal agencies and their contracting officers that cargo preference laws must be adhered to. 

In 2008, Congress passed the Duncan Hunter National Defense 

Authorization Act that made it abundantly clear that the Maritime 

Administration was the final enforcer of cargo preference. Unfortunately, the administration has failed to fully adopt that language, 

and we must be concerned that the refusal to implement this law 

indicates an unwillingness to abide by cargo preference laws. Congress required the administration to fully comply with cargo preference laws. 

We also recommend that Congress should receive a detailed 

record of the bills of lading associated with the program. 

It is very simple. Without cargo, our ships do not sail, and our 

mariners will not be standing by in times of need. 

Another key component of American maritime policy is the Maritime Security Program. The MSP is a unique public-private partnership that ensures that the DoD has the sealift capability and 

intermodal network it needs while cutting costs. It would cost the 

Government over $65 billion to replicate the capacity provided by 

the MSP. 

While Government cargoes continue to decline, the MSP allows 

American ship operators to compete for commercial cargo with vessels that do not comply with our more stringent laws and regulations. We are pleased that Congress recently reaffirmed support for 

the program by increasing the authorized funding amount. In order 

to secure the availability of U.S.-flag ships and the American mariners, we ask for your help to secure full appropriations for the program. 

The export of strategic American energy assets presents an opportunity to increase the size of the fleet and associated employment opportunities. We support the efforts of Congressmen Hunter, 

Garamendi, and Duncan, and their legislation to require the exports of strategic energy assets to travel on U.S.-flag vessels. 

I am a third-generation merchant mariner, and it is incredibly 

important to me and the labor organizations that I represent today 

that this industry is viable for generations to come. Not just for the 

important source of reliable middle-class jobs, but for the vital role 

that the U.S. merchant marine serves to safeguard our country’s 

military, economic, and homeland security. 

We are encouraged that the administration and Congress seem 

poised to consider comprehensive infrastructure policy. It is important that renewal of the U.S. merchant marine is considered as a 

part of that discussion. We stand ready to work with you to achieve 

these objectives. Thank you. 

Mr. HUNTER. Thank you, Mr. Van Loo. And thank you to all of 

you. I am going to recognize myself. 

30 

I guess my first question is this. You have all very eloquently 

laid out how important the Jones Act is, the benefits of it, and the 

downside to losing it. What do you think is behind—you might 

even call it a deep state in our own Government with CBP and the 

administration. Why do you think that U.S. officials, or U.S. Government employees that work for the American people, want to get 

rid of the Jones Act? Why? Why do you think that is? 

Mr. WOODRUFF. I will take—— 

Mr. HUNTER. Because it—yes, please. Go ahead, Mr. Woodruff. 

Mr. WOODRUFF. I think they are misguided. I think that they 

have people who are trying to get an undue advantage over a situation who are trying to tell them things that aren’t necessarily true. 

And you know, there are a lot of people out there who are trying 

to make a buck, and they think that they can do so by promoting 

a false narrative about cost associated—— 

Mr. HUNTER. Well, let me make my question more explicit, then, 

so you all have a better way to answer it, maybe. 

Why would an American Government employee, whether it is 

CBP or Department of Energy or anything, want to outsource all 

of the shipping that they do? Meaning why would they not want 

Americans to do it? I mean they are not making money off of energy company X from Great Britain, right? They work for CBP. So 

why would they want to give preferential treatment of foreign 

countries over Americans? 

[Pause.] 

Mr. WOODRUFF. I can’t—— 

Mr. HUNTER. Any of you, please. Help me out here. 

Mr. PAXTON. Chairman Hunter, I think there is some inherent 

belief in free trade that the Jones Act is a protectionist statute, and 

therefore there is a belief that they don’t want to enforce this or 

being guided by an administration that might—— 

Mr. HUNTER. Do any of you know of any maritime nation—I 

mean a nation around the world that is on the ocean or that can 

get to the ocean that does not have cabotage laws? Does one exist? 

[No response.] 

Mr. HUNTER. So every maritime nation in the world has a Jones 

Act, and we are one of them. We are not special. Every single maritime nation that I know of, industrialized nation, has cabotage 

laws. Why do you think people in our Government want to give foreign interests preferential treatment over Americans? 

[No response.] 

Mr. GARAMENDI. I think you stumped them. 

Mr. HUNTER. I mean there has got to be a reason. Any of you? 

Mr. SMITH. Mr. Chairman, if I could—— 

Mr. HUNTER. Well, we have all laid out the—what is going on, 

right? So tell me why. 

Mr. SMITH. For CBP’s part, in many cases, what I think you saw 

from 1976 through 2009 was lack of understanding of our industry. 

Many of these letter rulings had confusing terms in them that 

built one upon each other, that talked about—when we finally got 

into CBP and explained what we were doing, they didn’t understand that these blowout preventers or wellheads or jumpers or 

compressors, things that are one-quarter of the size of this room, 

were left on the sea floor. They thought, from the rulings they were 

31 

given, or from the letter requests they were given, that that was 

‘‘equipment of the vessel,’’ and stayed with the vessel. And it wasn’t 

until we told them that, no, that is left on the OCS for perpetuity, 

that they understood what was going on. And when they did, they 

issued the 2009 notice of revocation. 

And so there is a lack of understanding for some when you receive a request for a ruling to understand what is actually going 

on. 

Mr. HUNTER. Thank you. Anybody else want a try at this one? 

No? OK. I will just finish up by saying the absurdity of trying 

to take away America’s cabotage laws, the reason that Great Britain was able to conquer the world from a little island is because 

they had a great navy. The reason we have been left untouched 

and didn’t have the wars like World War I and II is because we 

got the Pacific and the Atlantic, so people can’t drive tanks across 

our borders here. 

In order for us to maintain the way of life as we know it, as a 

Nation that is secure and is able to project power, be it navy power 

or commercial power, the Jones Act is intrinsic to that. It is the 

cornerstone of all of them. And I think you all very eloquently laid 

out how important it is. 

But the absurdities of some of those in this Congress and in Government, to think that you want Korean or Chinese or name-yourcountry-made ships and taking away the entire American workforce of making ships and driving them and getting something from 

point A to point B in America, it is all—it is stupid, it is absurd. 

And I hope that we just keep educating and educating, because 

that is what it is going to take so that people understand what this 

is and how it is one of the cornerstones of our entire country’s national security apparatus. 

It is the Jones Act, and it is what allows us to project power and 

be the greatest country in the world. It is the Jones Act. That is 

one of the cornerstones. And I firmly believe that. 

Thank you for your testimony. I am going to yield to the ranking 

member. 

Mr. GARAMENDI. Mr. Chairman, I couldn’t agree with you more 

on your point about the Jones Act and a cornerstone. 

Into the details, gentlemen, I want to thank all of you for your 

testimony. And I want to get into a series of questions that we discussed with Admiral Nadeau. And it has to do with the letters of 

nonavailability. 

If half of the offshore marine supply and work vessels are laid 

up, how can there be a nonavailability? Mr. Smith? 

Mr. SMITH. Yes, sir. I believe the term for the letter is non-applicability, as in OCSLA does not apply to that vessel. And what they 

are being utilized for is, in some cases, yes, those letters, the vessels that have those letters, are taking work away from the vessels 

that my members own and operate. 

In other cases, those vessels are doing completely legal activities, 

such as a drill ship or a MODU [mobile offshore drilling unit]. 

Those type of vessels are not transporting merchandise between 

two points on the OCS. And we do not have those vessels. So those 

vessels have letters of non-applicability, I am sure, and it would 

not matter. 

32 

But there are also foreign supply vessels that have letters of nonapplicability that are operating on the OCS—those are the vessels 

that are taking work away from U.S.-built, U.S.-crewed, and U.S.- 

owned vessels. 

Mr. GARAMENDI. You said earlier in your testimony that this 

dates back to 1976, and a series of letters that have come forward 

from the CBP, Customs and Border Patrol. Could you—and in your 

testimony you also discussed efforts that have been made to rectify 

the inaccuracy in those letters. Could you go into that in just a little bit more detail here, and lay out for this committee, and specifically what we might be able to do to rectify the situation? 

Mr. SMITH. Certainly, sir. So, yes, starting in 1976 was the first 

letter ruling that we look at dealing with merchandise on the OCS. 

And that letter dealt with a pipeline barge that was transporting 

merchandise. From that it was declared that the lane of that pipeline was not a Jones Act activity. And that is not a point we are 

challenging right now, I do want to make that clear. But the other 

activities, the ancillary activities, we are looking at. 

Now, the CBP revocation effort also kept that pipeline ability in 

there, but also said you can’t transport pipeline connectors, tools, 

or other materials and leave them on the OCS. 

Additional letter rulings have been issued for items such as de 

minimis activities. Basically, as long as you are not breaking the 

law too much, you can do what you are doing. Or unforeseen repairs was an interesting letter ruling. Someone submitted a letter 

ruling request for preventative maintenance, and CBP responded 

and said no, preventative maintenance is an intrinsically foreseeable activity. Well, the next letter ruling that came in said, well, 

we have an intrinsically unforeseeable activity. Is that allowed? 

CBP said yes. 

We also had some for other similar activities. Hey, we are doing 

a permitted activity. And while we are doing that permitted activity, we would also like to do an unpermitted activity. Would you 

allow that? That was also agreed to. So that was kind of the letter 

rulings that built upon themselves—— 

Mr. GARAMENDI. I understand that you filed a lawsuit to try to 

clear up this situation. Is that correct? 

Mr. SMITH. Yes, we have, sir. 

Mr. GARAMENDI. And that suit is proceeding? 

Mr. SMITH. Yes, it is. 

Mr. GARAMENDI. What can we do, by law or—well, basically, by 

law to make clear that there is a differentiation between reasonable activities and unreasonable activities? Is there a lack of clarification in the current law? Does it need to be clarified? 

Mr. SMITH. As I said in my testimony, sir, I think OCSLA and 

the Jones Act are very clear. If you are transporting merchandise 

from point A to point B, that has to be on a U.S.-built, U.S.-crewed 

vessel. 

Mr. GARAMENDI. So it is really about the enforcement of the law. 

Mr. SMITH. Yes, it is, sir. And I understand that the committee 

is going to be having a hearing later this month on that, and I applaud that effort. Thank you all. 

33 

Mr. GARAMENDI. OK, very good. I want to go into another question area, and I am out of time, so I will wait until we come back 

around. 

Mr. HUNTER. Mr. Weber is recognized. 

Mr. WEBER. Gosh, John, you shocked me there. I thought you 

had 3 or 4 minutes left in you. 

Mr. GARAMENDI. Thank you for yielding, and I will carry on. 

Mr. WEBER. Next time. 

We appreciate you guys being here. I want to go back to something the chairman said—and, Mr. Chairman, you have been at 

this a lot longer than I have. You know, you are asking why was 

that happening, for example, with CBP. And y’all talked about 

some different ideas. 

Well, I would submit this, that sometimes, in the name of free 

trade, maybe our bureaucrats think we need to be fair, we ought 

to be fair in this. There is a world market out there, and somehow 

we have got to, you know, be world-market-oriented and fair about 

it. But there is nothing fair when you are dealing with a lot of 

other countries who subsidize and do all the things that we know 

that they do. 

So Duncan, maybe that is the answer to the question. Somehow 

we have gotten this idea that we need to be fair, we need to be the 

leader in fairness. Well, I submit that we want our economy to be 

the best. We need to be fairly in the lead. We want our national 

security to be best. We need to be fairly in that lead, and that is 

the fairness we ought to be concerned about. 

Let me jump over to LNG. I know that—many of you may not 

know that I represent the gulf coast of Texas—the first three counties from Louisiana. The Sabine-Neches Waterway is currently 

sending out about 95 percent of the LNG from my country. 

So we want to be in the lead, and we want to maintain that as 

long as we can. So the United States has become a leader in regard 

to LNG-powered vessels. How can we maintain that position to the 

benefit of the fleet, overall, as well as the safety and security, national security, and the economy of our Nation? 

I will start with you, Mr. Woodruff. 

Mr. WOODRUFF. You know, LNG propulsion, I think, is what you 

are—— 

Mr. WEBER. You bet. 

Mr. WOODRUFF [continuing]. Speaking of. It is a great opportunity to bring a cleaner, more environmentally friendly way of 

running a lot of our vessels. And I think it is just a matter of building out the infrastructure. 

We have vessels that are LNG-capable now in the domestic fleet. 

The first containership that was capable of running on LNG in the 

world was built in America for the American market. 

Mr. WEBER. How long ago was that, do you—— 

Mr. WOODRUFF. It was about a year and a half ago—— 

Mr. WEBER. Got you. 

Mr. WOODRUFF [continuing]. That that vessel went into service, 

thereabouts. And there are many more coming along behind it. 

Now we are in the process of building out the bunker barges and 

the other infrastructure necessary. And so I think it is just going 

to be a matter of time. You have a bit of a chicken and an egg. You 

34 

need the vessels out there in order to incentivize the building of the 

bunker vessels. They are under construction now. And so I think 

it is something you will see growing over time. 

Mr. WEBER. Anybody else want to weigh in? 

Mr. SMITH. Congressman, I have one of my members has a dualfuel fleet of OSVs that run on both natural gas and diesel. They 

have seen some good success with those. It lets the vessel stay out 

a long time because when you run out of one you just switch to the 

other. I am, of course, oversimplifying it. 

But they have had some good success with those. If you are ever 

down in south Louisiana and it is not snowing in south Louisiana 

I would invite you to come tour that vessel. 

Mr. WEBER. Is it snowing there today? 

Mr. SMITH. It looks like it was. Yes, sir. 

Mr. WEBER. OK. 

Mr. VAN LOO. U.S. mariners do have experience with LNG. And 

as LNG evolves and we get more experience, it will be beneficial 

for the industry. 

Mr. WEBER. Well, we would love to see that coming from our district, because that is very, very important to our district. And on 

the national market, you know, the United States is going to be 

sending a lot of LNG around the world, and we want to continue 

that. So everything we can to push that. 

Let me change gears just a little bit here. A question for each 

of you. Does the strength of the U.S.-flag fleet bolster the credibility of the United States and the International Maritime Organization, or other international maritime organizations? And if you 

think that it does, how so? 

We will start down here on this end, Mr. Van Loo. 

Mr. VAN LOO. Absolutely. Strength in numbers. The more U.S. 

flags we have on the international worldwide, the stronger the U.S. 

will look in the IMO and all the other international organizations. 

Mr. WEBER. And I will let you each go and then I have got a followup question. 

Mr. Paxton? 

Mr. PAXTON. Yes, sir. I think what you look at, if you look at our 

domestic fleet of 40,000 vessels waving the U.S. flag, we are the 

envy of the world. I think that is why you see so many foreign operators trying to—— 

Mr. WEBER. That actually is part of my second question, let me 

interrupt you. How close to other—who is the second country to 

that? We have 40,000. Who is second? 

Mr. PAXTON. Well, because of the Jones Act, we have 40,000 vessels that operate under the U.S. flag in our waterway—— 

Mr. WEBER. I mean would you be privy to the information— 

China, how many vessels they have, or—— 

Mr. PAXTON. I was going to go to my next point, which is you 

will often hear of reports of Australia lamenting the fact that they 

don’t have a similar cabotage law, and they will have foreign operators run aground and hurt Australians and, you know, folks on 

those vessels. We don’t have that problem here. 

And so, I think that is the power of the U.S. flag, and it is also 

the power of the national security asset to have those vessels plying the waters—— 

35 

Mr. WEBER. And we want to maintain that. 

Mr. Smith? 

Mr. SMITH. Yes, Congressman. We have—OMSA has sent delegations to the IMO in most years in recent memory. And I know we 

have individuals going to the IMO within the next month. We look 

forward to that, and I know we are well respected and well received there because of the strength of our maritime industry and 

because of not only its number, but our technological capabilities 

and how, especially in our industry, we have led the world in developing these, these vessel types and capabilities. 

Mr. WEBER. OK. Mr. Ebeling? 

Mr. EBELING. Thank you. Yes, the chairman mentioned actually 

the Jones Act as being one of the cornerstones, and you are—— 

Mr. WEBER. Absolutely. 

Mr. EBELING [continuing]. Mentioning that, as well. I would 

argue that there are actually three cornerstones, or a three-legged 

stool, if you will. It is the Jones Act, which obviously is essential, 

but also MSP, the Maritime Security Program, and the cargo preference laws. All three are essential to national security and economic security. And the strength of each leads us to having a 

stronger representation at the international level, including the 

Coast Guard being able to represent us at the IMO level as strongly as they do. 

So thank you for the question. 

Mr. WEBER. Mr. Woodruff? 

Mr. WOODRUFF. As the domestic fleet, we don’t deal with IMO. 

We answer to you, who answer in turn to the American people. 

And we think that is the way it should stay. We don’t think that 

the IMOs should be telling us how to move cargo within America. 

Mr. WEBER. Sure. But you all would all agree that the fact we 

have got 40,000 flagged vessels is probably a pretty good arrow in 

our quiver when it comes to national/international security. 

Mr. Chairman, I thank you, I yield back. 

Mr. HUNTER. I thank the gentleman. 

Mr. Lowenthal, you are recognized. 

Dr. LOWENTHAL. Thank you, Mr. Chair, and I thank all the panelists for being here. My question is for Mr. Smith. 

As you have pointed out, last spring the CBP reversed its notice 

on the application of the Jones Act to oil field operations on the 

Outer Continental Shelf. That notice would have reversed, as you 

pointed out, a series of misguided rulings, and would clarify that 

subsea construction and other activities do fall under the Jones Act 

requirement. 

And also from your testimony and also from an analysis from 

your association, you have identified over $2 billion in investment 

to construct or retrofit 31 vessels to service these operations with 

Jones Act-compliant ships, and that this shipbuilding activity occurred between CBP’s announcement in 2009 that it would revoke 

the flawed interpretations of the Jones Act regarding undersea operations and the new notice in 2017. 

So with that as a frame, I want to ask you four questions, each 

one separately. 

36 

My first question is after this notice was revoked by the administration, what is the current status of these newly built or retrofitted vessels? And I will ask you the other questions after. 

Mr. SMITH. Certainly. Thank you, sir. For these dozens of vessels 

referred to as multipurpose support vessels, or MPSVs, they are 

doing different things. Some are still on contract and engaged with 

different operators and different charters. They are capable of 

doing this work, they can beat any international vessel in doing 

this work. So they do get employed. Others are on Government contracts, and are doing services for NOAA or MSC or other Government agencies. But the majority of them are currently at the dock. 

Dr. LOWENTHAL. So they are sitting idle. 

Mr. SMITH. They are—yes, sir. They are sitting idle. 

Now, there are vessels that are—last I looked, there are, you 

know, let’s call it circa 5 to 10 foreign MPSVs in the gulf right now, 

taking work away from Jones Act-qualified vessels. So there is 

some of that. That is down from historical averages, because of the 

downturn. But even outside of the downturn, we have, as you mentioned, built enough to cover capacity. 

Dr. LOWENTHAL. So you have—so I want—you have already answered my second question. So some have been shifted to other operations, oil operations or other duties, and some are sitting idle. 

So a question I am asking you is was this a waste of $2 billion? 

What do your members think? Did they waste its money now? 

Mr. SMITH. I certainly would hope they wouldn’t think of it as 

a waste, because we have a Government agency, which has twice 

said that they are not following the law. Sooner or later, that is 

going, I believe, to prove us right, to prove that we have been right. 

So these vessels have a long life span and will be utilized. 

Additionally, and maybe it is a very small victory, but by building these vessels we have recapitalized some of Mr. Paxton’s shipyards here, which have then enabled those shipyards to participate 

in some very big Government projects. And again, I think that in 

itself proves that the Jones Act works as intended. And I am not 

saying that is worth $2 billion, but I do think that that shows 

something. 

Dr. LOWENTHAL. All right. So let’s say, as you say—you know, 

you are assuming that at some point we will do the right thing and 

CBP will change its interpretation and come back to the rightful 

interpretation that the Jones Act does cover this. 

So the question is, if that occurs, what economic benefits do you 

think this proper enforcement of the Jones Act will have for your 

members? How will this impact your members? If what you are 

saying is ultimately the CBP understands and makes the right interpretation, how will this impact your members? 

Mr. SMITH. You know, I think it will definitely provide an economic benefit for our members. 

But more than that, I would look at what it would provide for 

our Nation. And looking at that, my organization hired a domestic 

economist here from within the United States. And that economist 

found that correct interpretation of the Jones Act by CBP would 

create 3,200 new jobs in the United States, would put $700 million 

into the United States economy, and would create wages of $155 

million—increase. That is, of course, in addition to the 500,000 men 

37 

and women in this country that are already employed due to the 

Jones Act. 

Dr. LOWENTHAL. So what you are saying is if there was a correct 

interpretation of the Jones Act by the CBP, we truly would make 

America great again. 

Thank you, and I yield back. 

Mr. HUNTER. Amen. I would like to close here by yielding to the 

ranking member, Mr. Garamendi. 

Mr. GARAMENDI. I will try to do this quickly. Mr. Weber appropriately raised the question of the export of a strategic national 

asset, natural gas and LNG. It is estimated that just 10 years from 

now that it will take about 140 ships to export the potential LNG 

that is available in the United States for foreign trade. If just 5 

percent of that were on American-built ships, we are talking some 

seven ships. Probably four, maybe five, would have to be built in 

the meantime. 

Similarly, on crude oil, by 2028, if just 5 percent of the crude oil 

were to be shipped on American-built ships, we are talking some 

12 ships. So if we were to require, as we once did with the North 

Slope of Alaska, that all of that oil be on American-built ships— 

but let’s not be greedy, let’s just say 5 percent—we could substantially increase the number of ships built in America by a significant 

number. Maybe half a dozen by 2028 in LNG, maybe a little less. 

Crude oil, probably in the range of 12 to 15 ships in just 10 years, 

giving new life to the commercial shipbuilding industry in the 

United States. 

Now, the fact that we are proposing a piece of legislation that 

would do that brings me to the question to Mr. Paxton. 

Can you do it? Is it possible that we could actually build commercial LNG ships for the international trade, as well as crude oil—— 

Mr. PAXTON. Yes. 

Mr. GARAMENDI [continuing]. In that range over the next decade? 

Mr. PAXTON. Well, first, I want to say thank you very much, Congressman—— 

Mr. GARAMENDI. Microphone. 

Mr. PAXTON [continuing]. The work you have been doing on this. 

Your staff has been excellent. I appreciate your time spent with a 

lot of my members, working on really hard legislation. 

But yes, the answer is we can meet that demand. Again, we still 

want to build that 355-ship navy. But, truly, building commercial 

vessels for LNG and crude export is what we did with the North 

Slope. I mean that was part of the deal. 

And so, if we could have some configuration of that again, you 

know, I know you have been working with my trade association for 

a long time on this. We want to get it right, we want it to be defensible, and we want to fight for it along with this committee and 

with you, sir. 

But yes, the answer is yes, we could do that. 

I would say on LNG, as you know, sir, that is a very complex 

vessel. We haven’t built those in a little while now. But based on 

my members and what I have been told, we could gear that up in 

time with timelines that we have seen in some proposals that you 

have been working on. 

Mr. GARAMENDI. I thank you. 

38 

Mr. Van Loo, are the mariners available over that period of time? 

Mr. VAN LOO. That is a concern. Because as the industry continues to decline, we are going to lose more mariners. So hopefully 

we have bottomed out, flat-lined, and we will be able to supply the 

mariners if it stays consistent or we can grow a little bit. It is 

tough to recruit when you are talking to young people about an industry that is not doing very well. 

Mr. GARAMENDI. Well, our goal is to make sure this industry remains strong for the benefit of the committee members here. We 

will soon be bringing to all of our attention a piece of legislation 

that I think will have support from the shipbuilding industry, as 

well as the mariners, and probably not the petroleum industry, but 

5 percent, 10 percent—they can do it, they could live with that. 

With that, Mr. Chairman, you have a hard stop at 12 o’clock, so 

I will yield back my remaining 1 minute. 

Mr. HUNTER. I thank the gentleman. There are no further questions. 

I want to thank all of you, just for all you do, all the time and 

effort you put in, and for doing something that is more important 

than just business. I mean this is, like we talked about, a national 

security cornerstone and an economic cornerstone of this Nation. So 

thank you very much for all that you do. 

And with that, this subcommittee stands adjourned. 

[Whereupon, at 12:02 p.m., the subcommittee was adjourned.] 

39 


Insert offset folio 8 here 29968.008
40 


Insert offset folio 9 here 29968.009
41 


Insert offset folio 10 here 29968.010
42 


Insert offset folio 11 here 29968.011
43 


Insert offset folio 12 here 29968.012
44 


Insert offset folio 13 here 29968.013
45 


Insert offset folio 14 here 29968.014
46 


Insert offset folio 15 here 29968.015
47 


Insert offset folio 16 here 29968.016
48 


Insert offset folio 17 here 29968.017
49 


Insert offset folio 18 here 29968.018
50 


Insert offset folio 19 here 29968.019
51 


Insert offset folio 20 here 29968.020
52 


Insert offset folio 21 here 29968.021
53 


Insert offset folio 22 here 29968.022
54 


Insert offset folio 23 here 29968.023
55 


Insert offset folio 24 here 29968.024
56 


Insert offset folio 25 here 29968.025
57 


Insert offset folio 26 here 29968.026
58 


Insert offset folio 27 here 29968.027
59 


Insert offset folio 28 here 29968.028
60 


Insert offset folio 29 here 29968.029
61 


Insert offset folio 30 here 29968.030
62 


Insert offset folio 31 here 29968.031
63 


Insert offset folio 32 here 29968.032
64 


Insert offset folio 33 here 29968.033
65 


Insert offset folio 34 here 29968.034
66 


Insert offset folio 35 here 29968.035
67 


Insert offset folio 36 here 29968.036
68 


Insert offset folio 37 here 29968.037
69 


Insert offset folio 38 here 29968.038
70 


Insert offset folio 39 here 29968.039
71 


Insert offset folio 40 here 29968.040
72 


Insert offset folio 41 here 29968.041
73 


Insert offset folio 42 here 29968.042
74 


Insert offset folio 43 here 29968.043
75 


Insert offset folio 44 here 29968.044
76 


Insert offset folio 45 here 29968.045
77 


Insert offset folio 46 here 29968.046
78 


Insert offset folio 47 here 29968.047
79 


Insert offset folio 48 here 29968.048
80 


Insert offset folio 49 here 29968.049
81 


Insert offset folio 50 here 29968.050
82 


Insert offset folio 51 here 29968.051
83 


Insert offset folio 52 here 29968.052
84 


Insert offset folio 53 here 29968.053
85 


Insert offset folio 54 here 29968.054
86 


Insert offset folio 55 here 29968.055
87 


Insert offset folio 56 here 29968.056
88 


Insert offset folio 57 here 29968.057
89 


Insert offset folio 58 here 29968.058
90 


Insert offset folio 59 here 29968.059
91 


Insert offset folio 60 here 29968.060
92 


Insert offset folio 61 here 29968.061
93 


Insert offset folio 62 here 29968.062
94 


Insert offset folio 63 here 29968.063
95 


Insert offset folio 64 here 29968.064
96 


Insert offset folio 65 here 29968.065
97 


Insert offset folio 66 here 29968.066
98 


Insert offset folio 67 here 29968.067
99 


Insert offset folio 68 here 29968.068
100 


Insert offset folio 69 here 29968.069
101 


Insert offset folio 70 here 29968.070
102 

Æ 


Insert offset folio 71 here 29968.071