Challenges facing the U.S. Merchant Marine, including the loss of potential food aid cargo because of changes planned by the Obama administration to food aid programs, were highlighted during a hearing by the U.S. House's Subcommittee on Coast Guard and Maritime Transportation Tuesday.
Committee Chairman Duncan Hunter, R-Calif., said “unfortunately, over the last 35 years, the number of U.S.-flagged vessels sailing in the international trade has dropped from 850 to less than 100. In the same period, we have lost over 300 shipyards and thousands of jobs for American mariners.
“To make matters worse, the president has sent Congress a budget that proposes to restructure the highly successful Food for Peace program,” he added, contending the changes would “undermine our national security by cutting the domestic sealift capacity on which our military depends.”
The Obama administration wants to give the U.S. Agency for International Development more flexibility in sourcing food aid, including the ability to buy some food overseas and not use U.S.-flag vessels for transport.
Auggie Tellez, executive vice president of the Seafarers International Union, said in testimony the industry already lost a third of food aid cargo last year because of a change in the MAP-21 transportation law.
"In that law, Congress cut by a third the percentage of foreign food aid cargo reserved for American-flag ships, ostensibly to offset the costs of the overall law. Since 1985, American ships have carried 75 percent of all P.L.-480 Food For Peace program cargoes. That percentage is now 50 percent," Tellez said.
He said the cost savings for reducing the percentage was incorrectly estimated by the Congressional Budget Office, and "our industry lost a third of our cargo with little benefit to anyone, including the American taxpayer."
The new P.L.-480 reform proposal "will have an impact on our ability to man ships and create a manpower pool," he said. Tellez noted this was demonstrated by an internal MarAd study and added "when unencumbered by the administration's contrary view, past commanders of TRANSCOM (U.S. Transportation Command) attest to the value of the P.L.-480 program and its importance."
Rep. John Garamendi, D-Calif., ranking member of the committee, said he agreed with Hunter’s criticism of the proposed changes in the Food for Peace, P.L.-480 program, saying the Obama administration was “dead wrong.”
Rep. Janice Hahn, D-Calif., was also critical of plans to change the P.L.-480 program, saying it would reduce the number of U.S.-flag vessels participating in the program.
Hunter said “the Maritime Administration has faced very valid criticism in recent years over its handling of Jones Act waivers and enforcement of our cargo preference laws.”
He expressed hope that new leadership at the Department of Transportation and MarAd “in the coming months takes seriously their mission to promote and protect the U.S. maritime industry.” Transportation Secretary Ray LaHood and Maritime Administrator David Matsuda have both announced their resignations.
Hunter called for a renewed commitment to the Title XI program that lends money to build new ships and called on MarAd and DOT to reduce Jones Act waivers and “stand up when other federal agencies seek to flaunt our cargo preference laws.”
John D. Porcari, DOT deputy secretary, noted U.S. flag shipping engaged in foreign commerce are experiencing a decline in cargo because of less need for transportation by the U.S. military with the wind down of the wars in Iraq and Afghanistan and a decline in agriculture preference cargo.
He said U.S.-flag ships involved in military sealift are “strongly supported” by the Maritime Security Program, which provides subsidies for 60 U.S. flag ships.
But Porcari said “between the continuing resolution and sequester following it, for the first time we have been unable to honor our current commitments to the vessels in the program.” The reductions amount to $31.1 million.
Rep. Elijah Cummings, D-Md., said U.S. companies will receive a reduced MSP stipend in August and no stipend in September. Asked by Cummings if vessels might leave the program if sequestration continued, Porcari said “it certainly could happen.”
Porcari said the Obama administration supports the Jones Act and the boom in domestic oil and gas production is expected to create demand for 10 to 14 self-propelled Jones Act tankers by 2018. He also noted some Jones Act container carriers are building new ships powered by LNG.
Porcari highlighted DOT's support for ports, saying the department has awarded $350 million in TIGER grants to ports since 2009.
He said an initial assessment of the proposed changes in the P.L.-480 program by the Defense Department “will not impact the maritime industry’s ability to crew the surge fleet and deploy forces and cargo.”
He also said the administration has proposed a $25 million fund that could be used to subsidize militarily-useful ships not in the MSP and retrain workers and help mariners retain their credentials.
But Garamendi was skeptical about the $25 million, saying the proposal amounted to a “welfare program for unemployed mariners” and it would be better just to use the money for food aid.
Hunter complained the food aid program was being changed “flippantly,” because DOT and the military can’t “tell me in 10 years what the impact will be.”
William M. Fraser III, TRANSCOM's commander, said “the vast majority of sealift needed by USTRANSCOM comes from our commercial partners,” including the 60 ships in the MSP program and other ships involved in other programs such as the Volunary Intermodal Sealift Agreement and Voluntary Tanker Agreement programs.
Hunter said the Obama administration has never provided funding to the Title XI program and he wants to increase the program's reserve from about $30 million to $100 million, which he said would allow the government to write over $1 billion in loans for shipbuilding.
Asked about the harm changes in the P.L.-480 program might have to U.S.-flag shipping and mariners, Porcari said “we can’t afford to lose that capacity, whether it is the actual vessels, or more importantly in some ways, the U.S. crews. We know the industry is changing. Food aid is only one component and what we want to focus on is things such as energy transportation, where we believe in the future there are growth opportunities for U.S. flag fleet and U.S. mariners.”
Fred Harris, president of the General Dynamics NASSCO shipyard in San Diego, who testified on behalf of the Shipbuilders Council of America, said continuation of the requirement under the Jones Act that ships in domestic trades be built in U.S. shipyards was vital to both the commercial shipbuilding industry “and thus its naval shipbuilding industry.” NASSCO, he noted, is building two LNG-powered ships for TOTE, Inc.
He said revitalizing the Title XI loan guarantee program is “essential to modernizing the Jones Act fleet and sustaining the shipbuilding industry” and said consistent funding for the program would be helpful to shipbuilders.
Joseph Pyne, chairman and chief executive officer of the Jones Act tanker and barge operator Kirby Corp., said his company has invested over $2.1 billion in fleet replacement, acquisitions and capital improvements to existing vessels in the past five years. He also highlighted investment in new ships by firms such as TOTE, Crowley, and Hornbeck Offshore.
Testifying on behalf of the American Maritime Partnership, a group that represents the domestic maritime industry, Pyne said the vessels and mariners who work on the ships are a “key part of our national defense."
He argued against modifications to the law and waivers.
“Year in and year out, the domestic fleet serves the needs of America. Nobody talks about waiving the Jones Act when the market for our services is soft,” Pyne said. “When the market is tight and owners need to add capacity even discussing waivers or changes to the Jones Act makes matters worse. It sends a chilling message to operators who need to build new vessels to support shipper’s needs. It causes shippers to be less committed to supporting new Jones Act vessels to support their requirements.”
He also called the industry a key part of homeland security and said the vessels carry hazardous material through populated areas.
“We do not want to turn these cargos over to foreign workers on foreign vessels,” he said.
Mike Jewell, president of the Marine Engineers’ Beneficial Association, testifying on behalf of his union and the Masters, Mates & Pilots and American Maritime Officers, said the 1936 Merchant Marine Act calls for a merchant marine “sufficient to carry its domestic water-borne commerce and a substantial portion of the water-born export and import foreign commerce.
“Today U.S.-flag commercial vessels and their American merchant mariners transport are responsible for transporting only two percent of our country’s foreign commerce. Mr. Chairman, that is hardly a substantial portion,” he said.
“We believe that the best way to achieve these goals is for Congress and the administration to support and fund the existing programs and promote forward-thinking policies and laws that encourage new tonnage to operate under the U.S. flag,” Jewell said. - Chris Dupin