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i 

58–453 2010

[H.A.S.C. No. 111–170] 

FISCAL YEAR 2011 NATIONAL DEFENSE 

AUTHORIZATION BUDGET REQUEST 

FOR OVERSIGHT OF THE ACTIVITIES 

OF THE MARITIME ADMINISTRATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SEAPOWER AND 

EXPEDITIONARY FORCES 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JULY 14, 2010 
(II) 

SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY FORCES 

GENE TAYLOR, Mississippi, Chairman 

SOLOMON P. ORTIZ, Texas 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

BRAD ELLSWORTH, Indiana 

JOE COURTNEY, Connecticut 

JOE SESTAK, Pennsylvania 

GLENN NYE, Virginia 

CHELLIE PINGREE, Maine 

MARK CRITZ, Pennsylvania 

W. TODD AKIN, Missouri 

ROB WITTMAN, Virginia 

ROSCOE G. BARTLETT, Maryland 

J. RANDY FORBES, Virginia 

DUNCAN HUNTER, California 

MIKE COFFMAN, Colorado 

THOMAS J. ROONEY, Florida 

WILL EBBS, Professional Staff Member 

TOM HOLLY, Professional Staff Member 

ELIZABETH DRUMMOND, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2010 

Page 

HEARING: 

Wednesday, July 14, 2010, Fiscal Year 2011 National Defense Authorization 

Budget Request for Oversight of the Activities of the Maritime Administration ........................................................................................................................ 1 

APPENDIX: 

Wednesday, July 14, 2010 ....................................................................................... 23 

WEDNESDAY, JULY 14, 2010 

FISCAL YEAR 2011 NATIONAL DEFENSE AUTHORIZATION BUDGET 

REQUEST FOR OVERSIGHT OF THE ACTIVITIES OF THE MARITIME 

ADMINISTRATION 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Akin, Hon. W. Todd, a Representative from Missouri, Ranking Member, Subcommittee on Seapower and Expeditionary Forces ........................................... 3 

Taylor, Hon. Gene, a Representative from Mississippi, Chairman, Subcommittee on Seapower and Expeditionary Forces ........................................... 1 

WITNESSES 

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

U.S. Department of Transportation .................................................................... 4 

APPENDIX 

PREPARED STATEMENTS: 

Akin, Hon. W. Todd .......................................................................................... 30 

Matsuda, Hon. David ....................................................................................... 31 

Taylor, Hon. Gene ............................................................................................. 27 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

[There were no Questions submitted during the hearing.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

[There were no Questions submitted post hearing.] 

(1) 

FISCAL YEAR 2011 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FOR OVERSIGHT OF THE ACTIVITIES OF THE MARITIME ADMINISTRATION 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY FORCES, Washington, DC, Wednesday, July 14, 2010. 

The subcommittee met, pursuant to call, at 1:53 p.m., in room 

2212, Rayburn House Office Building, Hon. Gene Taylor (chairman 

of the subcommittee) presiding. 

OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, CHAIRMAN, SUBCOMMITTEE ON 

SEAPOWER AND EXPEDITIONARY FORCES 

Mr. TAYLOR. The committee will come to order. Today, the subcommittee meets in open session to receive testimony from the Administrator of the Maritime Administration of the Department of 

Transportation. 

The Maritime Administration, or MARAD, has a variety of functions, but their principal charge is to ensure that the United States 

maintains a robust commercial fleet, along with well-trained mariners capable of domestic and international commerce that could be 

called upon in times of national emergency to provide transportation of equipment and cargo and other maritime services as needed. 

In addition to ensuring an operational U.S. fleet of privately 

owned commercial vessels, the Maritime Administration must also 

ensure effective domestic shipbuilding and ship repair facilities are 

available to build and maintain that fleet. 

Unfortunately, the nation has lost the entire world market share 

in major commercial shipbuilding. We no longer construct any large 

vessels for the international trade. The few medium-sized product 

tankers or container ships that have been built in this country in 

the last few years have been used exclusively in a protective coastwide trade known as the Jones Act, or built with the expectation 

of a long-term charter to the Military Sealift Command, or the 

United States Navy. 

This total elimination of large commercial vessel construction has 

the additional negative effect of increasing the cost of our Navy 

ships. The shipyard overhead charges, instead of being spread 

among commercial and government construction, are all included 

in the Navy construction contracts because there is no commercial 

work in our major shipyards. 

The facts of this loss of ability to build large commercial vessels 

is not well known. I think many people would be shocked to learn 
2 

that this nation, which relies on sea transport for our imports and 

exports, does not have a domestically produced fleet. 

We have a fleet of commercial vessels, some 80, all told, which 

participate in a Maritime Security Program, or MSP. The MSP 

[Maritime Security Program] pays a ship owner a subsidy, which 

this year is $2.9 million per vessel, to register the vessel in the 

United States and operate the vessel with an American crew. They 

engage in international commerce, but they agree to carry cargo for 

the United States government, typically the Department of Defense, when requested. 

Make no mistake, these MSP vessels are all foreign-built ships, 

and there is no current plan that I am aware of for any ship owner 

to source these vessels from domestic yards. 

This nation has a mechanism in place which is not being used 

for helping ship owners with financing of ship construction. The 

formal name of the program is the Guaranteed Maritime Loan Program that is commonly referred to as the Title XI Loan Guarantee 

Program. From its historical roots in the Merchant Marine Act of 

1936, this program supports ship mortgages with the full faith and 

credit of the United States government. MARAD is the executive 

department tasked with overseeing this program. Unfortunately, 

for whatever reason, the previous administration decided to ignore 

this program and failed to request any funding to support new ship 

guarantees. Likewise, the current administration has also failed to 

request any funding to support this program. 

Without strong support from the President and the Department 

of Transportation, this program, which could create hundreds, if 

not thousands, of new jobs throughout the shipbuilding industrial 

base, will perish, and with it any hope this nation has to regain 

any viable market share in large commercial vessel ship construction. 

More than just the oversight of the program, I believe it is 

MARAD’s responsibility to actively encourage current and potential 

ship owners to invest in the domestic maritime industry. I believe 

MARAD should be working with other departments within the Department of Transportation to coordinate efforts to maximize the 

use of domestic shipping, particularly shore-sea shipping. 

Seaborne transportation is the most efficient and most environmentally friendly method of moving cargo that exists. Imagine the 

number of long-haul 18-wheelers that could be taken off our highways if we only had a robust coast-wide container vessel transport 

system. 

I look forward to a discussion with the administrator on these 

issues. We have also asked the administrator to update the subcommittee on the findings and recommendations of the Blue Ribbon Panel which was convened by Secretary LaHood to make recommendations for capital investment and improvement at the 

United States Merchant Marine Academy. 

The Blue Ribbon Panel Report, ‘‘Red Sky in the Morning,’’ recommends significant investment and process and policy changes to 

restore the infrastructure of the academy and, just as important, 

maintain the buildings and grounds once they are restored. I look 

forward to Administrator Matsuda’s comments on all aspects of the 

academy. 
3 

The Administrator has recently been confirmed by the Senate 

but has been serving as acting administrator and deputy administrator for some time. He has extensive experience in maritime 

issues, both on and off Capitol Hill. We are indeed fortunate to be 

able to find time for this hearing, because I believe that these very 

important issues facing our nation, and we should work together, 

both the congress and the administration, to solve them. 

Before I will call on Administrator Matsuda for his opening 

statement, I turn to my colleague from Missouri, the ranking member of this subcommittee, for any comments he would like to make. 

Mr. Akin. 

[The prepared statement of Mr. Taylor can be found in the Appendix on page 27.] 

STATEMENT OF HON. W. TODD AKIN, A REPRESENTATIVE 

FROM MISSOURI, RANKING MEMBER, SUBCOMMITTEE ON 

SEAPOWER AND EXPEDITIONARY FORCES 

Mr. AKIN. Thank you, Chairman Taylor, and good afternoon to 

our witness. That is a good way to start a week after the Fourth 

of July break, ‘‘witness’’ as opposed to ‘‘witnesses.’’ 

And today, we turn our attention to a little-noticed but vitally 

important part of the subcommittee’s jurisdiction and oversight responsibility, the U.S. Maritime Administration. Even though the 

many issues and unmet requirements facing the U.S. Navy and 

Marine Corps consume the bulk of the subcommittee’s time, I am 

glad that the chairman called for this hearing. 

U.S. and global economy are both utterly dependent on a robust 

commercial shipping network, and the U.S. economy is further buttressed by shrinking but resilient U.S. Marine Maritime Fleet. 

With global maritime competition growing ever fiercer and U.S. 

overseas commitments showing no sign of abating, the United 

States must maintain a strong merchant marine fleet as a key 

strategic enabler and economic engine. Unfortunately, most aspects 

of our merchant marine policy are reliant on some form of federal 

subsidies, which we seem to be providing on the cheap in some 

cases. 

I am a big supporter of less federal spending and fewer federal 

subsidies, but believe that we must invest, as necessary, to maintain a strong U.S. flagged merchant marine fleet. Today’s program, 

including the Title XI Loan Guarantees for building new vessels, 

the Maritime Security Program and Voluntary Intermodal Sealift 

Agreement, or VISA; which provides subsidies to U.S. flag carriers 

who guarantee shipping availability for national security needs, 

various cargo preference laws, including 100 percent of defense 

cargo on U.S. flag vessels; and finally, training of ships’ officers in 

a federal merchant marine academy and the six state maritime 

academies. 

While the hand of the federal government touches all of these 

programs, the cost has been relatively modest. Too modest, in fact, 

in the case of the Merchant Marine Academy. And so, echoing the 

same chairman’s comments about the findings, particularly at the 

Kings Point facility, the U.S. Merchant Marine Academy, I likewise 

am interested in hearing about how we should proceed, and I believe that we must. 
4 

Thank you, Mr. Chairman. I yield back. 

[The prepared statement of Mr. Akin can be found in the Appendix on page 31.] 

Mr. TAYLOR. Chair thanks the gentleman. 

The chair now recognizes, with my apologies, Administrator 

Matsuda, for butchering your name. 

STATEMENT OF HON. DAVID MATSUDA, MARITIME ADMINISTRATOR, MARITIME ADMINISTRATION, U.S. DEPARTMENT 

OF TRANSPORTATION 

Mr. MATSUDA. Thank you, Mr. Chairman. 

Good afternoon, Chairman Taylor, Ranking Member Akin, members of the subcommittee. I am honored to appear before you to 

provide a general update on the Maritime Administration’s activities to sustain the U.S. Merchant Marine. With your permission, I 

would like to submit my complete written testimony for the record 

and summarize it for you here. 

Mr. TAYLOR. Without objection, so ordered. 

Mr. MATSUDA. I would also like to introduce those joining me 

here today, Deputy Administrator Orlando Gotay, Congressional 

Affairs Director Julie Hrdlicka, and two interns from the Maritime 

Administration, Mr. James Walsh and Midshipman First Class 

Aaron Cummings, who is fresh off duty on an APL international 

voyage. 

Mr. TAYLOR. Welcome to all of you. 

Mr. MATSUDA. At the subcommittee’s request, today my testimony will focus on national security sealift programs, shipbuilding 

programs, and operation of the U.S. Merchant Marine Academy in 

Kings Point, New York. Our agency’s primary mission is to develop 

and maintain a viable and vital U.S. Merchant Marine. This service includes both commercial and government-owned vessels that 

are crewed by civilian merchant mariners. 

On the commercial side, our Maritime Security Program sustains 

a small, modern U.S. flag fleet of 60 commercial ships that trade 

internationally all with trained crews. Over the years, the Maritime Administration has worked with the commercial industry to 

provide the Department of Defense with access to more types of 

ships they need in this program. 

Together with the agency’s cargo preference program, which ensures federally financed cargo is transported on U.S. vessels, this 

program helps ensure that commercial U.S. flag ships can compete 

on a more level playing field in international trade and will be 

available to our military when called upon. 

The Maritime Administration also owns, administers and operates the Ready Reserve Force, an aging fleet of 49 government 

ships. We are working with our partners at the U.S. Transportation Command, or TRANSCOM, to develop a recapitalization 

plan so this fleet can continue to meet strategic mobility needs in 

the future. 

One option for refreshing part of the fleet involves designing a 

new marine highway vessel to operate in commercial service along 

America’s coasts and waterways, yet be built to be useful to the 

military. Secretary LaHood, as well as some of our military colleagues, have advocated for developing America’s marine highway 
5 

as a potential for introducing these new military-capable commercial ships. 

Mr. Chairman, as you know, a strong shipbuilding industry is 

the backbone of seapower. Our Title XI Loan Guarantee Program 

helps modernize shipyards and provides key financial assistance to 

those looking to build ships in the U.S. Title XI has proven even 

more critical since the credit markets dried up in the current—or 

largely dried up—in the current recession. 

So financing many shipbuilding projects has supported approximately 2,400 direct shipyard jobs and 1,400 indirect jobs through 

Title XI. The Maritime Administration currently has $76.6 million 

in budget authority to cover the subsidy costs for new Title XI 

loans. 

This amount would support approximately $1.1 billion in new 

loan guarantees. And we are processing applications, five applications for new loan guarantees in excess of $1.5 billion. Our agency 

is also exploring avenues to provide federal credit assistance for 

smaller vessel construction projects, as well. 

Finally, let me turn to the operation of the U.S. Merchant Marine Academy in Kings Point, New York. Improving the profile and 

prestige of the academy is one of Secretary LaHood’s top priorities. 

To respond to a recent advisory panel’s recommendations to improve the academy’s capital program, President Obama has requested $100 million for the academy in fiscal year 2011. This 

would double the school’s capital budget. I note the committee has 

acted to authorize this level of funding, which we believe will be 

very helpful in making overdue improvements to facilities and providing new educational opportunities for midshipmen. 

Our agency is also working to address government accountability 

office recommendations concerning financial conditions at the 

school. These improvements in fiscal management and physical 

plant at the academy will help restore it to its place as a preeminent federal academy. Together with the six state maritime 

academies, which we provide funding and support for, these schools 

graduate 700 trained maritime officers each year. 

Mr. Chairman, as a whole, all of these programs support a U.S. 

merchant marine that has responded to two recent major disasters 

in an unparalleled manner. Nearly 1,000 U.S. merchant mariners 

participated in the U.S. response effort to the earthquakes in Haiti 

earlier this year. These skilled crews served on several maritime 

administration ships and at least 25 commercial vessels. 

And the vast majority of the estimated 7,000 vessel flotilla involved in the Deepwater Horizon oil spill response are U.S. flag 

commercial vessels with U.S. citizen crews. America’s men and 

women of the merchant marine continue to deliver, and we are 

proud of their work. 

I appreciate the opportunity to be here and will be happy to respond to any questions you and the members of the subcommittee 

may have. Thank you. 

[The prepared statement of Mr. Matsuda can be found in the Appendix on page 31.] 

Mr. TAYLOR. Thank you, Mr. Administrator. By previous agreement, we agreed to recognize Ms. Pingree first so that she could 

get on to her other duties. 
6 

Ms. Pingree for five minutes. 

Ms. PINGREE. Thank you very much, Mr. Chair. I greatly appreciate that. 

And thank you for your testimony. Appreciate having you here 

before us today. And thank you for the work that you are doing. 

I think particularly when you just mentioned, the work that had 

been done in Haiti and around the oil spill, I think it reminds people again and again of the importance of the maritime industry and 

the well-trained mariners that we have in this country, and the 

role and the impact that they have. 

As you probably know, I am fortunate to represent the state of 

Maine, so our identity is all about the sea, about people who go to 

the sea, about building ships, boats, going fishing. This is, of 

course, a very critical issue to us. 

Then I want to say one thing about the Title XI. I appreciate 

that the chair brought that up earlier and the importance of fully 

funding all the possible options here and making sure that the administration is fully committed to investing in building United 

States-based ships and ships in this country. We are losing our industrial capacity all too fast, and that is just extremely important. 

I have heard a little bit from people in the shipbuilding industry 

about some concerns about shifting the focus into small yards. I am 

fortunate enough to represent one of the bigger yards in this country, Bath Iron Works, as well as many small yards. But we want 

to make sure that the focus continues to fund the bigger ships in 

this country. 

But I have a second issue I want to take up with you and just 

put it on your plate. And I appreciate, again, the increased funding 

request for the Kings Point Academy, and I know the concerns that 

have been raised there. But I also come from one of the states that 

has a state maritime academy, Maine Maritime Academy in 

Castine, Maine. 

I live on Penobscot Bay. Castine actually happens to be on the 

other side of the bay from me, which is in the second congressional 

district, but I know Congressman Michaud and our senators would 

join me in their concern about the level of funding that is received 

by state maritime academies. 

We are proud of our tradition of training young people and people of all ages to go off to sea. I happen to live on an island, so 

I ride a ferry when I get home, and often talk with crewmen who 

have gone to school at the Maritime Academy. It is a great choice 

for young people in our state who have the opportunity to go to sea 

because of that training, but it is often an unfair burden on our 

state legislature and our state budget to fund all of the activities 

there. 

It is my understanding that 70 percent of the new merchant marine officers each year come from state academies, and yet about 

$15 million in funding goes to state academies as opposed to the 

money we spend on federal training of our maritime personnel. 

So I just want to talk a little bit, or at least put that on your 

plate, of the disproportionate share, of the importance of increasing 

the funding to our state maritime academies, of the role that they 

play, and we hope the increasing role. If we can increase shipbuilding, we would love to have more of a maritime highway and 
7 

see more transport going in that direction instead of on our roads 

and bridges, which are already overtaxed. 

So let me just throw those things out there and let you chat. 

Mr. MATSUDA. Thank you. 

First I want to thank you for your interest in the Maine Maritime Academy. Had I known, we had our—they were kind enough 

to host a conference called The Women On The Water Conference 

that the Maritime Administration co-sponsors last fall. And, you 

know, had I known, I would have gladly sent you an invitation to 

participate. It is a great opportunity to bring together a number of 

young women in the industry and others who are experienced and 

have really put their careers into it. 

Ms. PINGREE. Well, thank you for that, and we are glad that you 

came to Maine. Appreciate that. 

Mr. MATSUDA. Well, I understand the concern about the funding 

for the Maine Maritime versus our—we hear that a bit from some 

of the folks outside of Kings Point. Frankly, I hope it does not seem 

like we are playing favorites, but Maritime Administration has 

more of a direct role and responsibility in overseeing and operating 

the U.S. Merchant Marine Academy. 

By law, our relationship with the other schools is simply limited 

to supporting their activities for student incentive payments in 

which we can provide stipends or scholarships to their students 

who apply, and in exchange, we retain them as merchant marine 

reserve officers for a number of years after they graduate. Every 

one of the midshipmen at Kings Point that graduates remains in 

the Naval Reserve for six years following their graduation. 

The other thing that we can do with the state academies is we 

provide them with a training ship and a budget for fuel and maintenance costs. And we continue to do the best we can to work with 

each one of the schools and make sure that these students have an 

opportunity to get out on the water and get actual experience before they graduate and come into the maritime industry. 

But we are happy to—we are more than willing to look at other 

opportunities to help out, given, you know, whatever resources we 

are able to use. 

Ms. PINGREE. Great. Well, I will definitely talk to you further 

about that, but thank you. Thank you for that. 

Mr. TAYLOR. Thank you, ma’am. 

We were going to recognize Mr. Akin. He has been called out of 

the room. So we will get back to the regular order. 

Mr. Ortiz. 

Mr. ORTIZ. Thank you, Mr. Chairman. 

Thank you so much for joining us today and for giving us an insight into MARAD operations. 

What I really want to know is, what is the annual upkeep of— 

cost of the obsolete ships that MARAD has under its control? And 

how does MARAD plan to remove the rest of the obsolete ships in 

its current register? And specifically, what is the release plan for 

the rest of the ships moored in Suisun Bay? So maybe you can give 

us a little insight as to what you are doing to address that problem, 

sir. 

Mr. MATSUDA. I am happy to. MARAD, I am proud to tell you, 

has, once again, a very robust ship disposal program. For a number 
8 

of years, there has been a hiatus due to a pending lawsuit over the 

removal of ships from the Suisun Bay Reserve Fleet. And this is 

our site, our only site on the West Coast that, as of last year, had 

about 57 obsolete vessels that were slated for disposal. 

As of today, there are only 47 left. We have made very good 

progress in meeting our targets and schedules pursuant to agreements we have made with local officials there. 

Suisun Bay contains, I believe, all but one or two of the ships in 

our entire fleet that are slated for disposal. So that is really where 

our focus has been. I can tell you that most of the ships, I believe 

9 of the 10 ships, have all been recycled in yards in Brownsville, 

Texas, and we hope to continue this robust pace so long as we have 

funding available. 

And I can tell you that, due to the lawsuit that, you know, prevented the previous administration from moving a lot of these 

ships, we have a current amount of carryover budget that we have 

been able to utilize and push these ships through. They have been 

cleaned in an environmentally responsible manner, in a shipyard 

in the Bay area, and towed all the way around the Panama Canal 

to the recycling sites in Brownsville. 

Mr. ORTIZ. You know, and specifically now with the budget the 

way it is, when the Navy chose artificial reefing for the disposal of 

the USS Oriskany. The end result was extremely costly by the time 

you had to move—and I know we had a problem with California, 

because they did not want those ships to move because they would 

cause pollution. Well, they were causing pollution right there. 

So I know costs are very expensive, but when these people, especially in Brownsville—I think they paid for the moving of the vessel, and then they do disposal. And it works both ways, because 

you keep a lot of people working. 

And I hope that you can continue to do. You guys are doing a 

good job by, you know, releasing the ships to be disposed of and 

by breaking them up and putting people to work. And let me say 

that we appreciate that. 

So I hope that, by doing what you started to do, that you will 

be able to provide more jobs not only in my district but also in 

other districts. 

Mr. MATSUDA. We do our best. There is a limited supply of recyclers around the country. Of the six certified recycling sites, four 

of them are in Brownsville, one is in Louisiana, and one in Virginia. But there are none on the West Coast, and that makes it difficult and certainly adds cost to the recycling of all the ships that 

we have out there. But we will do our best to make sure that we 

maintain an aggressive pace and a robust disposal program. 

I should also mention, the USS Kittiwake is a ship we have in 

the James River Reserve Fleet in Virginia that is slated for artificial reefing. The reefing costs have been paid for by the Cayman 

Islands government. They wanted to do this. They wanted to pay 

for it. It has provided work in U.S. shipyards to prepare the ship 

for reefing. And we were happy to work with them to be able to 

do that. 

Mr. ORTIZ. Well, thank you so much. 

Thank you, Mr. Chairman. 
9 

Mr. TAYLOR. In the continued absence of Mr. Akin, we are now 

going to recognize Mr. Critz for what I think is his first subcommittee meeting, and remind him that your predecessor, Mr. 

Murtha, was a very, very strong supporter of the Title XI program 

in his many years up here, and we hope you will follow in that tradition. 

Mr. Critz. 

Mr. CRITZ. Thank you, Mr. Chairman. And following in my 

former boss’s footsteps, my question refers to the Title XI program. 

In looking through the documentation and the history of the program, I see that, in the testimony that you supplied, Mr. Administrator, that you have approximately $2.1 billion within your portfolio under the Title XI program and that, over the past I think it 

is 3 years, there has been no request for funding for the loan subsidy portion, just administrative expenses. 

And I know that, over the past 2 fiscal years, Congress has ap- propriated $70 million into the loan guarantee program, which I 

notice in your testimony should cover the six applications for loan 

guarantees that you have right now, which would cover $1.6 billion 

in loans, although there seems to be a half a billion dollars difference in what the amount will cover and what the requests are. 

But going further and following in the footsteps of the chairman 

on the importance of a robust shipbuilding economy here in the 

United States, I just would like to know that, if Congress had not 

put that $70 million into the program, what the implications would 

be if they had not added that funding. And then, you know, what 

would not have occurred if it had not been for that $70 million addition? 

Mr. MATSUDA. Thank you, sir. 

I hate to speculate, but I can tell you that we currently have a 

$79 million available to us in credit subsidy. So I guess without the 

70, we would still have $9 million available to leverage into, you 

know, a certain amount of loan guarantees for shipbuilding 

projects. 

Now, having said that, we do have a number of five applicants 

that are still working on their applications for Title XI assistance. 

These projects, they are massive. They are complex, and they require a bit of scrutiny and time to make sure that they are understood as to what it is that the government is getting into in terms 

of risk, and then we are able to make decisions on that. 

So it is hard to speculate, but I know that having that number out there, that extra $70 million, it signals to the industry that 

there will be continued support for shipbuilding by the federal government. And that is something that the customers can keep in 

mind as they are looking to recapitalize their fleet or build new 

ships. So from that perspective, I think it is important. 

Mr. CRITZ. Well, thank you. And, you know, looking through the 

documentation a little bit more, I noticed that you mentioned about 

the 13 defaults since 1993, and that, as you move forward, you are 

putting in, I guess, rules and regulations that will hopefully prevent further. But if you could, just brief a little bit on that topic 

as well, and then I yield back. 

Mr. MATSUDA. Shipbuilding is a risky business. It is hard when 

you build a 25-, 30-year asset to know what is going to happen, you 
10 

know, 5, 10 years down the road, much less 2 or 3. So some of 

these vessels certainly had—you know, when the market turned or 

the rates went up or down, they have been affected by—many businesses have been affected by, the up-down turns in the economy. 

What we have done is respond to a number of inspector general 

recommendations, dating back as far as 2003, to make sure that 

there is a consolidated process within the administration for considering credit applications where the government is asked to extend credit in the form of either loan guarantees or loans. 

So we are treated no differently than other credit programs at 

the Department of Transportation, where we are—basically we 

present information about each loan application to an internal kind 

of a credit council. This information is also passed along to the Office of Management and Budget. But by and large, there is definitely more focus on the risk to the government when it comes to 

these applications. 

Mr. CRITZ. Thanks. 

Mr. TAYLOR. Chair now recognizes the Ranking Member for 

whatever time he wishes to consume. 

Mr. AKIN. Thank you, Chairman. 

In your testimony, Administrator, you mentioned that we doubled the budget for getting the U.S. Merchant Marine Academy 

back online and taking care of a lot of the things that had to be 

done there. Is that correct? 

Mr. MATSUDA. That is correct. That is what President Obama 

has proposed for 2011. 

Mr. AKIN. Okay, because what I have here in the numbers we 

have, it looks like $100 million, and it looks like before, you had 

$74 million in 2010, so that is about a 30 percent, not a doubling. 

Mr. MATSUDA. I am sorry. To be clear, the doubling is for the 

capital budget, the amount that is going into the facilities to improve—— 

Mr. AKIN. Oh, just the capital part of it. 

Mr. MATSUDA. Right. 

Mr. AKIN. Yes. Okay. 

Is that going to be spent pretty much just to follow the recommendations of that blue ribbon committee, or have you—because 

that didn’t seem like that was going to be enough to do what they 

needed to do. 

Mr. MATSUDA. Well, we believe it is a good start. They have recommended more than just a list of projects. They are really—made 

some great recommendations as to how do we make sure that we 

maintain these facilities on a lifecycle basis so that we have a regular capital maintenance budget and we don’t get into this position 

again. 

Mr. AKIN. Because it seems like the choices are either we are 

going to do the job right or else we just close the place down, one 

or the other. But you don’t want to leave it just an eyesore and a 

mess. 

So, I mean—and it seems like, if you need some money to get the 

thing kicked into shape—what, there is no hot water or something 

like that? I mean, it just has really been let go for a good many 

years, I assume. 
11 

Mr. MATSUDA. Yes, there are many maintenance issues at the 

campus. Sometimes our staff would describe them as daily emergencies or putting Band-Aids on things, and that is taking away 

the focus largely from moving these—— 

Mr. AKIN. But the facility, is that pretty close to West Point? 

Mr. MATSUDA. It is out on Long Island. I guess—— 

Mr. AKIN. What is on Long Island? 

Mr. MATSUDA. As the crow flies maybe but—— 

Mr. AKIN. Oh, no, because it is not up—so it is on Long Island 

somewhere. Okay. All right. 

So your plan is, is to follow, more or less, what the Blue Ribbon 

Panel was saying to do, or along those lines anyway. 

Mr. MATSUDA. Well, we believe they made some very good recommendations. This was a panel of experts comprised of folks from 

around the government who have significant experience in facilities 

maintenance. So we got them together, and the Secretary asked 

them to come up with their recommendations on how do we get 

this facility on the right path. And we are certainly taking their 

recommendations to heart. 

Mr. AKIN. What is your anticipation in terms of what you need 

for maritime officers? Do you see that growing a lot or basically 

kind of holding its own because of the basic laws that we have in 

this country, or how do you see that? 

Mr. MATSUDA. Well, I would say, by and large, we have an aging 

workforce. It is tough to get especially younger generation enthused 

about working in the maritime industry. And that is part of our 

challenge at the Maritime Administration, is making sure that 

there is a future. You know, there has been, I think, any number 

of examples over the years where, when called upon, we have been 

short on experienced mariners and have had to really dip into the 

pool to come up with folks to crew our ships. 

Mr. AKIN. But in answer to my question, do you anticipate an increase in demand, or is it going to kind of stay the same, or is it 

going to go down in terms of—— 

Mr. MATSUDA. Well, a lot depends on the economy. But, you 

know, regardless, we still have military requirements. But, you 

know, even if we have a down economy for a number of years—it 

is tough when you lose a trained mariner and they go do something 

else and find a living—make a living doing something else. Getting 

them back and getting them qualified and certified is very challenging. 

Mr. AKIN. So that is a function of the economy, then, whether or 

not they decide to stay in, etcetera, etcetera. 

Mr. MATSUDA. And we have seen that in terms of the graduates 

from our academies. You know, the ones where they are able to get 

on board a ship and take a shipboard job, they will usually do so. 

And when those opportunities aren’t there, they are forced to take 

other jobs, you know, shore-side jobs. 

Mr. AKIN. And then they may not come back for that point. 

Mr. MATSUDA. Yes. True. 

Mr. AKIN. Thank you, Mr. Chairman. 

Mr. TAYLOR. The chair thanks the ranking member. 

Couple of things, Mr. Matsuda. And again, my apologies for the 

mistake on your name early on. 
12 

The recent hearings in the Transportation Committee on the 

Deepwater Horizon and other committees, was certainly an eyeopener to discover the rig that has just caused so much turmoil for 

so many people along America’s Gulf Coast was made in Korea, 

flagged in the Marshall Islands, and the taxes go to a shell corporation in Switzerland. That rig was operating in the American exclusive economic zone. 

And one of the things that has come out of the bill that just recently passed the Transportation Committee would be for, in the 

future, those vessels to be U.S. flagged, U.S. owned, U.S. crewed, 

made in America. 

I mean, if you think about it, the absurdity of telling a Gulf 

Coast shipbuilder that not only can you not go fishing this summer, 

not only can you not take your kid to the beach to go swimming 

because of what has happened, but your mom or dad didn’t even 

get the privilege of building that ship, that the United States Coast 

Guard did not inspect it, that a third party, hired by the Marshall 

Islands, did the inspection. 

And quite frankly, when that rig caught on fire and those people 

had to jump in the water, neither the Korean, the Marshall Islands, or the Swiss Coast Guard was anywhere to be found. Our 

nation picked up the initial cost of that disaster. The people who 

profited from building it, from registering it and the taxes from it, 

all went elsewhere. 

So I would hope that your organization would very aggressively 

pursue those requirements: U.S. built, U.S. owned, U.S. crewed. 

And quite frankly, the ownership should be American. We should 

not have to wonder about who is going to pay the bill at the end 

of the day if something goes wrong. 

Secondly—as far as ideas for the Title XI program, it has come 

to my surprise, not pleasantly, that the last four single-hulled 

tankers in America belong to the United States Navy. The last 12 

single-hulled tankers in America belong to the United States Navy. 

And I think we could all imagine the ‘‘60 Minutes’’ episodes, or 

etcetera, if one of those tankers, by some accident, hit a rock, ran 

over its own anchor, or any of the other things that cause singlehulled vessels to start leaking oil. 

I would hope that your organization would very aggressively look 

for someone who would be willing to use the Title XI program to 

replace those vessels sooner rather than later, given our alreadystretched Navy budget. 

And then, lastly, just by way of a request, I would hope that you 

would keep a sharp eye on the Maritime Academy. I don’t think 

that Admiral Joe Stewart was given a fair shake when he was dismissed. I very much support his efforts of himself and other members to have the Global Maritime and Training School on-site to 

help subsidize the cost of that academy, save money for the taxpayers. 

And quite frankly, I thought they were given a raw deal by the 

previous administrator in not recognizing what a good thing that 

they were doing for the nation, and instead being held under a 

dark cloud to that. So I think it is important that those maritime 

assets, we make the most of them. It is important that we find jobs 

for these young mariners. 
13 

And making the best use of our own economic exclusive zone, I 

would hope that you would actively pursue that that being reserved 

for Americans. 

Would you care to comment on any of those things? 

Mr. MATSUDA. Yes, sir. 

First of all, we would be happy to work with this subcommittee 

or the Transportation Infrastructure Committee on any pending 

legislation certainly involving the maritime industry. As you know, 

almost everything impacts whether or not we will have a sufficient 

merchant marine, and we are happy to provide our views and technical assistance. 

Second, on the Title XI program, I believe we actually have a 

number of double-hulled tankers that are part of pending applications or the existing portfolio. Whether or not the Navy decides to 

buy them, use them or charter them is somewhat out of our hands, 

but we are certainly happy to work with our partners in Transportation Command to get them to—at least make them aware of 

these opportunities of our Title XI program. 

And then last, with the GMATS [Global Maritime and Transportation School], this is one of the organizations at the Merchant Marine Academy, what we consider a non-appropriated fund entity. 

And what we are doing is taking an organized look at each one of 

these NAFI [Non-Appropriated Fund Instrumentality] entities and 

making sure that we understand what the relationship is between 

them and the federal government and make sure there is a clear 

defined level of accountability and that they are well run. 

And so, we should be able to make some recommendations this 

summer as to where we go from there with GMATS. 

Mr. TAYLOR. Okay. And again, for those people who don’t live on 

Capitol Hill, NAFIs are Non-Appropriated Funds—— 

Mr. MATSUDA. Right. 

Mr. TAYLOR [continuing]. That, again, were being used to help 

subsidize the academy and keep the costs down to the taxpayer. 

Last thing I would encourage you to do, it has been a while since 

I checked on the number, but the last time I checked, there were 

about 60 vacancies at the Merchant Marine Academy for everything from squad-level officers to plumbers, electricians and teachers. 

I would certainly request that, to the greatest extent possible, 

you work with our Wounded Warrior programs at Walter Reed and 

Bethesda Naval Hospital to try to get some of those people who 

have already paid a terrible price for their service to our nation, 

to try, to the greatest extent possible, encourage them to come 

work or teach or serve at the academies. I think it would be a great 

way for them, too. 

I know that all the services have agreed to keep them within 

their ranks for a significant period of time as they make an orderly 

transition to the private sector. And I think this would be, for those 

who choose to do so, a great way to do that. 

Mr. MATSUDA. Thank you, sir. I believe we have a good relationship with these programs. I will go back and make sure that it 

stands strong and that these folks are given opportunities. 

Mr. TAYLOR. And lastly, in the 20 years that I have been lucky 

enough to do this, I regret to say that I have not really seen an 
14 

aggressive Maritime Administration. I hope that changes on your 

watch. I hope that you will come to us with lots of good ideas and 

challenge this committee to find a way to fund them. And so I will 

leave it with that. 

With that, the chair recognizes the father of a merchant mariner, 

Mr. Wittman. 

Mr. WITTMAN. Thank you, Mr. Chairman. 

Administrator Matsuda, thank you so much for joining us today. 

We appreciate it. 

And as the chairman said, I hail from what I like to call America’s first district there in Virginia. We are the home to a great 

shipbuilding workforce there that builds great Navy ships and commercial ships, and also home to the James River Reserve Fleet, 

which is based out of Ft. Eustis there. So as you can see, we have 

great pride in our ships, and also we are glad to be an important 

element of the ready reserve fleet, making sure we have the ships 

needed whenever they need to be called up. 

There is one issue that I want to bring up that does concern me. 

I have been out to visit the James River Reserve Fleet a number 

of times. And always when I meet with the MARAD administrator 

there to get his thoughts on things, several things come up. One 

is the effort to make sure that we are disposing of those ships that 

are non-retention status as quickly as possible. 

And last November, one of those ships broke loose, broke off anchor, drifted away, caused about a half a million dollars in damage. 

Took some time to find it, believe it or not, a big ship. You would 

think you would be able to find out where it is. But anyway, took 

a little while to find it. 

Obviously caused some concern with folks in the region, caused 

concern with myself to make sure that we are doing all we can not 

just to secure the fleet, but to make sure those non-retention ships 

are getting taken care of. 

Secondly are the environmental issues. Obviously older ships 

there, lots of substances on board. I appreciate what MARAD is 

doing with the new ships that come into that reserve fleet and 

making sure that any hazardous materials on board are taken care 

of. But there are still some older ships there that do cause some 

environmental concerns if there are rust-throughs in the hull or if 

one breaks loose, as it did last year and comes ashore, and we have 

a break in the hull or something along those lines. 

If I understand it correctly, we have 15 non-retention ships, I believe, there in the James River Reserve Fleet. And based on that, 

can you tell me, what do you think the expected timeline is for further disposal of ships within the James River fleet? And has there 

been a risk analysis for any potential environmental impacts for 

the remaining ships there in the fleet, both the ready reserve ships 

and the non-retention ships? 

And can you tell me, if that environmental impact statement has 

been done, what are the potential impacts there, and what is 

MARAD expected to do about planning for those? What mitigation 

plans are maybe there, and where we are with the disposal of the 

15 non-retention ships? 

Mr. MATSUDA. Happy to, sir. 
15 

First, the James River Reserve Fleet is definitely one of our valued sites. The Maritime Administration has made great progress 

over the years in reducing the number of ships. My first visit there 

was in 2002, where there were 80 or—a number of ships that were 

ready to go, and I was surprised to see last fall, in a quick trip 

there, that there were—down to 25 or less total. 

A number of those are—well, let me make this clear: none of 

them there are considered high risk. We use a risk-based process 

to determine nationwide where the highest risks are to the environment and make sure we dispose of those ships first. 

Because of all the great progress we had made in James River, 

there are none that are there currently. But we will continue to 

make sure that we dispose of those, of the non-retention ships, as 

best we can given the funding resources we have available. 

As far as the Monongahela, this is that Navy oiler that broke 

loose. After that happened and we were able to refloat it and put 

it back in the fleet, I had asked our Maritime Administration staff 

to put together a complete incident report, determine how it happened, and how we can take steps to prevent it from ever happening again. 

I believe it was just a week or two ago I was able to send you 

a copy of that report, or to your staff. I am happy to meet with you 

personally and discuss it, or come down to the James River fleet 

site, if you would like. If there are constituents with questions 

about it, we are happy to let folks know exactly what we are doing 

to make sure that doesn’t happen again. 

Mr. WITTMAN. Very good, thank you. I would be interested in 

getting some of that information from you. 

Let me ask this, too. Just looking out in the future for the James 

River Reserve Fleet, tell me, where is the size of the fleet going in 

light of the closing of Suisun Bay? And can we expect more ships 

there, or is there a contingent plan for the closing there? Where do 

you see us managing our ready reserve fleet and non-retention 

ships based on that closing? 

Mr. MATSUDA. Well, let me just make clear, we are not closing 

Suisun Bay. What we are doing is making a concerted effort to address all of the high-risk non-retention ships kept there. 

There are still—we keep these fleet sites up for a number of reasons, not just for the non-disposable ships, but we host a number 

of ships for the Navy and other federal services to make sure that 

there is a low-cost way to maintain these. And we can do that with 

a limited staff and a very expert staff. These folks know what to 

do to make sure they keep them, you know, in whatever status 

they need to be kept. 

So we are, you know, placing a great focus on Suisun Bay right 

now, given our resources. If we had additional resources, I am sure 

we would be able to move some of these other ships that are ready 

to go, as well. 

Mr. WITTMAN. Very good. 

One additional question. In light of what is happening there at 

Suisun Bay and you taking those ships and making sure you are 

managing the high-risk vessels that you have, I think there is also 

a concern, too, in looking at the companies that do the salvage 

work and obviously, having that infrastructure available for that. 
16 

And as we know, there on the James River, as you said, you all 

have done a fantastic job in getting that fleet down to a very manageable size. 

With that, though, as we know in the regions, whether it is 

Texas, Virginia, California, there are folks that are in that business 

that we all know that we want to try to keep that industrial capacity there. Just like we do on the shipbuilding side, we want to 

make sure we have it also on the disposal side. 

Is there anything that you are doing to make sure that, as you 

make decisions about the disposal of those ships, that you keep in 

mind all of those companies that are doing that so we don’t lose 

a company that may, because of a gap in ships available for disposal or may not be given an opportunity to maybe bid on a ship 

that comes from another area, to make sure we look at maintaining 

that industrial base for disposal so, as those ships are needed, we 

have that strategic dispersal, we will call it, of those disposal companies? 

Mr. MATSUDA. Understood, sir, and that is something. When we 

first decided to focus on Suisun Bay, I wrote a letter to each of the 

certified recycling companies and kind of let them know our plan 

for the near future. And we maintain very good contact, I believe, 

with every one of the six recyclers. We want to make sure that they 

are available when we need them. 

But I hear you loud and clear, and we will certainly make sure 

we understand what the needs are to make sure they are able to 

stay available. 

Mr. WITTMAN. That will be great. As long as you stay in touch 

with them and let them know, and give them all ample opportunity 

if they want to bid on any of the ships that are coming out of these 

fleets for disposal, sometimes for those companies, as you know, 

even though it may cost them a little more in transportation costs, 

as long as they can keep people working so they can get to the next 

contract where they can actually have a ship that is closer by, that 

does, I think, everybody good. 

Mr. MATSUDA. We are happy to take bids from anyone who can 

do the work. 

Mr. WITTMAN. That is great. That is great. 

Mr. Chairman, with that, I yield back. 

Mr. TAYLOR. The chair thanks the gentleman. 

Mr. Akin. 

Mr. AKIN. No, thank you, Mr. Chairman. 

Mr. TAYLOR. Okay. Mr. Matsuda, I have noticed in the past couple of weeks a heck of a lot of misinformation being put out on the 

public airwaves, sometimes from people in elected office, but often 

from people just in the media, as far as the Jones Act. You know, 

they made a big deal of saying that vessel skimmers from around 

the world were not being allowed in because of the Jones Act, but 

where there is clearly an exemption in the Oil Pollution Act of 1990 

just for this circumstance. 

And so, just for the record, are you aware of any vessels that 

were kept out of the oil spill recovery in the Gulf of Mexico because 

of the Jones Act? 

Mr. MATSUDA. Absolutely not. We work very closely with the National Incident Command. We have a role in executing the Jones 
17 

Act and understanding whether there are U.S. ships who can do 

the work before a foreign—as part of the process to understand 

whether a foreign flag oil spill response vessel could be used. 

So we certainly are dialed in, and I am not aware of any instance—— 

Mr. TAYLOR. Okay. 

Mr. MATSUDA [continuing]. Where a Jones Act has prevented a 

ship from being used where it is needed. 

Mr. TAYLOR. And so, just for clarification, the law that says that 

the towboats pushing gasoline barges up and down the Mississippi 

River, that Jones Act says it has got to be American made, American crewed, American owned. The repeal of the Jones Act would 

mean it could be Mexican made, Mexican crewed, Mexican owned. 

Is that correct? 

Mr. MATSUDA. That is right. 

Mr. TAYLOR. That you could have crews and tugs from Somalia 

transporting goods from one American port to another. Would that 

be correct if the Jones Act were repealed? 

Mr. MATSUDA. Theoretically, yes, sir. 

Mr. TAYLOR. Okay. Again, for the people on the other side of this 

building who are calling for the repeal, particularly given the immigration attitude of the American public right now, I would hope 

that they would keep that in mind when they try, once again, to 

repeal the Jones Act. 

Mr. Critz. 

Mr. CRITZ. Thank you, Mr. Chairman. 

Just a couple of points came up when we were talking about 

when the chairman noted that there is upwards, or he read that 

there are 60 vacancies at the Merchant Marine Academy. And having worked for Chairman Murtha for so many years, we put a lot 

of stock in promoting all of the academies to students throughout 

our district. 

And the Merchant Marine is one that we promote pretty heavily 

in our district, even though we are in the middle of Pennsylvania 

and we have one inland port. It is a very busy port, the Port of 

Pittsburgh, but, you know, we have really enjoyed sending our 

young men and women there and have really received good reports 

back. 

But, you know, I know that there have been some financial irregularities at the Merchant Marine Academy, and I would be curious 

to know if they have been remediated at this point. 

Mr. MATSUDA. Now, thank you for the opportunity to talk about 

this. 

First of all, with the vacancies, we are extremely concerned. I 

can tell you, we have got a number of vacancies at the Maritime 

Administration as well. I think we are just at a time where a lot 

of folks are retiring, and we have a lot of positions unfilled. So we 

are working on both a staffing strategy as well as a succession 

planning strategy to really make sure that we can continue to function as folks retire. 

As far as the—as far as the need to—I apologize, sir. I did focus 

only on the first part of your question. Could you repeat the second 

part? 

Mr. CRITZ. Financial irregularity. 
18 

Mr. MATSUDA. There are a number of financial irregularities that 

were identified by the Government Accountability Office, 57—I am 

sorry, 47 recommendations they made on how to improve financial 

controls and accountability. We are taking their recommendations 

very seriously. To date, I believe we have implemented 32 of those 

recommendations, and we expect to have all of them addressed by 

the end of this fiscal year. 

Mr. CRITZ. Well, that is good to hear. And one more question 

about the academy would be that, you know, of course such an esteemed academy, leadership plays a very important role. And I 

would be curious to know when a new superintendent will be appointed. 

Mr. MATSUDA. I can tell you, we are using a very thorough process in ensuring that we find the very best candidates and the best 

leader for this important role. I hope to have an announcement 

shortly. You know, the federal hiring process is, as I am learning, 

very complex, so we are getting there. But we are pretty close. I 

hope we should have one before the recess. 

Mr. CRITZ. Well, thank you very much. If I could, just one more 

question. 

And this goes back to the shipbuilding, is that there is no request 

for the program that provides assistance to small shipyards. And, 

you know, the assistance to small shipyard program supplied 

grants and loans to improve infrastructure and efficiencies at small 

shipyards. I would be curious to hear your response as to why 

there are no requests in there and what the plan is, going forward. 

Mr. MATSUDA. Well, we are continuing to monitor our small shipyard grant program. For every dollar that we are given, we are 

putting out the door and into the hands of these small shipyards 

to enable them to purchase the equipment they need or implement 

the worker training programs they need. 

But as you correctly pointed out, the President’s request does not 

contain funding for additional funds for the program. We are still 

continuing to see the impacts of the money provided through the 

American Recovery and Reinvestment programs that we are monitoring those. 

Mr. CRITZ. Thank you. I have no further questions. I yield back. 

Mr. TAYLOR. Mr. Matsuda, my last question would be that my 

observation during the previous administration was that the Credit 

Council existed to deny every loan guarantee request, that it was 

there for no other reason than to say, ‘‘No, no, no.’’ Again, that is 

my observation, but I think it is pretty close to fact. So the question would be, is there something statutorily that needs to be 

changed in order to get this program going again, or is it something administratively that needs to be changed to get this program? 

Because it is an important program. The price of metals has 

dropped approximately in half in the past three years, great time 

to buy steel, great time to buy aluminum. 

We have 10 percent unemployment. We have a number of older 

vessels. I just identified 12 single-hull tankers that this nation 

owns that need to be replaced. So what recommendations would 

you have for us, if need be, or for your own department, if need 

be, to get this program going again? 
19 

Mr. MATSUDA. As far as I can tell, sir, the program is driven by 

the applicants. Somebody has got to have an idea and funding for 

a ship that they want to build before they come to us. As far as 

I could tell, given the current credit situation, Title XI is one of the 

best deals in town if you are trying to build a large vessel or sinking many millions of dollars into building a vessel. 

So the process is also largely driven by the applicant. Sometimes 

I have heard discussion about why it takes so long to get approval 

for one of these things and whether the Credit Council is the holdup, or what is the—is it MARAD. 

I can tell you that, usually in the past several applications that 

we have approved, the largest chunk of time it takes is waiting on 

an applicant to produce additional information about either the design of the ship, the market for which they are going to use it, you 

know, how they intend to do that. 

There is a fairly thorough process that is involved, and we do our 

best to try and make sure that the applicants understand up front, 

they need to get this information in and get it quickly. And we will 

process the application as soon as we can to make sure that it 

keeps moving and gets considered in a timely manner. 

I know usually, with the amount of money we are talking about, 

you know, time is a big difference in terms of what kind of market 

rates you can get on your loans. So we certainly keep that in mind, 

and we do our best to communicate with the applicants to make 

sure they understand what is expected of them. 

But I guess the best thing we could do to stimulate shipbuilding 

is to really make sure this economy turns around and that there 

is a need for more ships in the future to make sure it can carry 

the goods for America’s economy. 

Mr. TAYLOR. How would you rank, in the order of importance, 

the functions of the Maritime Administration? What would you say 

is your most important function, second, and third? 

Mr. MATSUDA. Well, we have got—probably making sure that we 

have a viable merchant marine is our overall goal. As we know, it 

is so critical to both the economy and the military, that that is 

probably singularly one of our largest areas of focus. 

Close second I would have to say is—and many of our programs 

tie into that goal—second I think would be to make sure that we 

have an efficient freight transportation system, of which water 

transport is such a key element of, making sure that folks understand, when they plan for future investments, what it means to 

how goods move through their district or state or through their 

country is important. So many of these freight flows are—they go 

between or over state lines or district lines, and lines between the 

metropolitan planning organizations. 

Really, the federal government’s one of the only entities in the 

right place to understand what is going on at the national level. 

So that is something we take very seriously and been working with 

a number of ports around the country to try and understand what 

we can do to help improve the efficiency of the system. 

These are probably the top two. I would say a number of the programs that we have really do feed into whether we can sustain the 

number of skilled mariners or vessels we need in the U.S. to keep 

the merchant marine. 
20 

Mr. TAYLOR. Okay. Any further questions from the panel? Mr. 

Wittman. 

Mr. WITTMAN. Thank you, Mr. Chairman. 

Administrator Matsuda, one other question. I know that we had 

just traded some conversations here about the Title XI program, 

making sure we look at all the different shipyards. Obviously, there 

is a need to make sure we are looking at our small- and mediumsize shipyards. 

Let me ask this, though. I am hoping that that doesn’t result in 

two different Title XI programs. I think we want to make sure that 

we are looking for opportunities for all of our yards. We want to 

make sure that capacity grows everywhere. But that means also to 

make sure we are not, you know, selecting one or the other. 

Another concern of mine is making sure that the terms and conditions on these loans are significant across all the different sectors, in other words making sure that we aren’t having a different 

set of terms and condition for one size shipbuilder versus another. 

And again, this is to make sure that we are standing up and helping the entire shipbuilding industrial base. 

I just want to get your feedback on that element of the Title XI 

program to make sure that it is—we are doing everything we can 

to help all of our yards, just not picking out a particular segment. 

Mr. MATSUDA. Thank you, sir. 

The Title XI program is really just—we look at it as one tool. It 

is a major tool we have to enable folks to be able to build ships 

in this country. 

Unfortunately, just given the time and expense involved in pursuing one of these applications, it has really been not as useful for 

folks who are building a ship or a barge of, you know, 25 to 5, 10, 

$15 million. And that has been a real challenge, too, because we 

don’t want that market to go away, either. 

Mr. WITTMAN. That is great. And if there are ways that you can 

streamline that process, again not changing the terms and conditions, making sure that we require the same of the fiduciary responsibility for every corporation, but as you said, maybe streamlining the administrative process. So for the smaller companies 

who don’t have the wherewithal, they don’t have to go through, you 

know, the same realm of paperwork that maybe a larger company 

that could do that more easily. 

So if we can look at ways to administratively cut that burden on 

folks, I think that would be great. But again, keeping in mind the 

same time that, you know, we have got to be making sure that we 

stand up all of our yards. And I agree, we need to make things 

easier so people can get through the paperwork and through the 

administrative process easier. 

Mr. MATSUDA. We are happy to work with the committee on that. 

Mr. WITTMAN. Thank you, Mr. Chairman. I yield back. 

Mr. TAYLOR. In the ‘‘No news is good news’’ department, the 

question of piracy was a red-hot topic in this town a year ago right 

now. Like many other things, it has been put on the back burner, 

thank goodness, because of a lack of activity at least directed towards American vessels. 

Were the changes made in the law last year adequate? What are 

the people in the maritime industry saying as far as if there is 
21 

need for additional changes in the law in order to protect American 

flag vessels and their crews? 

Mr. MATSUDA. Thank you, sir. That is a very good question. I am 

not sure that, given that the many number of federal agencies and 

others that have oversight over the security of American ships and 

protection of them that I would be able to speak for everyone. 

But I can tell you that we have noticed, over the past year, an 

increase in piracy activity, but a decrease in activity with respect 

to U.S. ships. We have worked with our partners very closely to 

make sure that we can improve training of U.S. crews for piracy. 

Recently we produced a training video, working with the ship operations cooperative program. It is a short video, just basic training 

for how to avoid piracy situations or what to do in case of attack. 

We are also working with the Naval Criminal Investigative Service to do inspections aboard ships, U.S. ships, just to point out 

what kinds of vulnerabilities we see in the event of a piracy attack. 

And that has been an ongoing successful program—it is voluntary—that U.S. carriers can come to us and we will work with 

them to get them this advice. 

So we are continuing to work also with the rest of the world 

through what is called the—it is a U.N. body that has put a number of countries together to focus on the piracy problem. It is the 

Working Group 3 of the Contact Group on piracy off the coast of 

Somalia. And we have been able to work with industry very quickly 

over the past year to come up with best practices, which the companies can use to try and help prevent pirate attacks. 

And by and large, we have seen—we have encouraged our fellow 

shipping countries to adhere to those best practices. And we are 

making efforts, working with the State Department and others, to 

make sure that we do everything we can to reduce the risk. 

Mr. TAYLOR. Do you know of any additional legislative changes 

that any of your shippers are asking for in order to protect the 

crews? 

Mr. MATSUDA. Legislative changes? I would have to get back to 

you, sir. I am not aware of any off the top of my head. 

Mr. TAYLOR. Okay. 

Are there any additional questions? Again, thank you very much 

for coming by, and the subcommittee stands adjourned. 

[Whereupon, at 2:59 p.m., the subcommittee was adjourned.] 

A P P E N D I X 

JULY 14, 2010 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

JULY 14, 2010 

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