Seapower and Expeditionary Forces Subcommittee

Chairman Gene Taylor

Hearing on Oversight of the

Activities of the Maritime Administration

“The committee will come to order.  Good afternoon.  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 principle 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 can 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 its entire world market share in major commercial shipbuilding.  We no longer construct any large vessels for use in international trade.   The few medium size product tankers or container ships that have been built in this country in the last few years have been for use exclusively in the protected coast-wise trade, ships known as the ‘Jones Act fleet’, or built with the expectation of long term charter to the Military Sealift Command of 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 fact of this loss of the ability to build large commercial vessels is not well known.  I think many people would be shocked to learn that this nation, which relies on sea transport for our imports and exports, does not have a domestically produced fleet.  We do have a fleet of commercial vessels, some 80 all told, which participate in what is known as the Maritime Security Program, or MSP. 

“The MSP pays a ship-owner a subsidy, which this year is $2.9 million per vessel, to register their vessel in the United States, and operate the vessel with an American crew.  They engage in international commerce, but agree to carry cargo for the U.S. 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 I am aware of for any ship-owner to source these vessels from domestic yards.

“This nation has a mechanism in place, but not being used, for helping ship-owners with financing for ship construction.  The formal name of the program is the Guaranteed Maritime Loan Program, but is commonly referred to as the ‘Title XI Loan program’ from its historical roots in the Merchant Marine Act of 1936.  This program supports ship mortgagees 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 MARADs responsibility to aggressively encourage current and potential ship-owners to invest in the domestic maritime industry. 

“I believe MARAD should be working with the other departments within the Department of Transportation to coordinate efforts to maximize the use of domestic shipping, particularly short-sea shipping.   Sea borne transportation is the most efficient and the most environmentally friendly method of the movement of 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-wise 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.

                  “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 these are very important issues facing our nation and we should work together, both the Congress and the Administration to solve them.

“Before I 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 may wish to make.  Mr. Akin.”

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