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STATEMENT
OF THE
AMERICAN MARITIME OFFICERS, INTERNATIONAL
ORGANIZATION OF MASTERS, MATES & PILOTS,
MARINE ENGINEERS' BENEFICIAL ASSOCIATION,
AND
SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA
BEFORE
THE
HOUSE ARMED SERVICES COMMITTEE
SPECIAL OVERSIGHT PANEL ON MERCHANT MARINE
JULY 16, 2002
Mr.
Chairman and Members of the Panel:
My
name is Michael Sacco and I am President of the
Seafarers International Union.
I am pleased to submit this statement on
behalf of the American Maritime Officers, the
International Organization of Masters, Mates
& Pilots, the Marine Engineers' Beneficial
Association, and my union, the Seafarers
International Union of North America.
Our Unions represent the American
maritime workers employed aboard United
States-flag commercial vessels, including all
the United States-flag vessels participating
today in the Maritime Security Program.
At
the outset we want to express our appreciation
to you, Mr. Chairman, and the Members of the
Panel, for holding this hearing on the Maritime
Security Program.
This program is critically important to
the American workers we represent, helping to
offset the higher cost of operating commercial
vessels under the United States-flag caused by
the multitude of rules, regulations and tax
obligations mandated by our government for
United States-flag ships but not for their
foreign competitors.
As such, the reauthorization of this
Program is absolutely essential to ensure that
the United States keeps and expands its
privately-owned fleet of United States-flag
commercial vessels.
It is the active, competitive
privately-owned commercial fleet that provides
the shipboard jobs during peacetime that ensures
the United States will continue to have the
trained American citizen merchant mariners
available to crew the more than 150 government
vessels that provide the surge build-up at the
outset of military conflicts, and the American
commercial vessels that provide the reliable,
immediate sealift sustainment capability to
support military operations overseas.
In
fact, it is impossible to over-emphasize the
importance of this Program to the jobs of the
American workers we represent and to our ability
to recruit and retain qualified American
mariners. Without
this Program, and with the resultant flight of
commercial vessels from the United States-flag,
American licensed and unlicensed seafaring
personnel will be forced to seek employment
outside our industry and our country will face
an even more critical shortage of trained
American seafaring personnel than it currently
has, posing a serious security risk for
the United States.
As
we stated, our Unions believe that the best
long-term solution to guaranteeing that the
United States will have the American seafaring
personnel it needs is to develop a larger, more
active and competitive commercial United
States-flag merchant fleet.
It is absolutely critical that our
government and the public understand that unless
merchant mariners have employment in our
industry at decent wages and benefits during
time of peace, mariners will not be available in
times of war or other international emergency.
Without a strong American commercial
merchant marine, the United States will lose the
best and most cost-effective means of
transporting supplies needed by our troops
overseas. Without
reliable commercial sealift, our nation cannot
sustain sizeable military forces in
combat
To
this end, the Maritime Security Act of 1996 was
intended to greatly enhance and increase the
role played by the commercial maritime industry
in national defense planning. The Act requires that the maritime security fleet be
comprised of "active, militarily-useful,
privately-owned vessels to meet national defense
and other security requirements" and that an
Emergency Preparedness Agreement approved by the
Secretary of Defense must cover each vessel.
The Act further mandates that, through
the Voluntary Intermodal Sealift Agreement
(VISA) program, a company participating in the
Maritime Security Program must make its
"intermodal shipping services/systems,
including ships, ship's space, intermodal
equipment and related management services,
available to the Department of Defense as
required to support the emergency deployment and
sustainment of U.S. military forces."
This global, intermodal transportation
network can include not only vessels, but
logistics management services, infrastructure,
terminals and equipment, communications and
cargo tracking networks, professional U.S.
citizen merchant mariners, and shoreside
employees located throughout the world.
Especially
important, because the Maritime Security Program
through the VISA program gives the Department of
Defense access to a commercial worldwide
shipping and logistics network, the United
States government does not have to spend
enormous sums annually to replicate, operate and
maintain a similar government-owned system.
Instead, funds can be used by the
Department of Defense to address other urgent
defense requirements.
As noted during the Congressional debate
on the maritime security legislation in 1996,
the Maritime Security Program "will provide a
fleet of militarily-useful U.S.-flag commercial
vessels and their American citizen crews for our
Nation's defense sealift, as well as
guaranteed access to modern intermodal
transportation networks and management that can
deliver cargo from Kansas to Kuwait and track it
every step of the way.
The
Maritime Security Program has met all its
expectations as a benefit to our nation, and
then some.
We cannot emphasize too strongly how cost
effective this program is.
In August, 2001, the Commander in Chief
of the United States Transportation Command, our
Armed Forces most senior transportation
commander, stated that it would cost the Defense
Department more than $9 billion to replace the
current commercial sealift capacity in the
Maritime Security Program and an additional $1
billion annually for operations and maintenance
of these vessels, excluding the cost of
providing and replicating the private sector
intermodal infrastructure available to the
Department of Defense through the Maritime
Security Program.
As
the members of this Panel are aware, the
authorization for the Maritime Security Program
expires on September 30, 2005.
Consequently, over the past year, our
Unions have participated in a number of meetings
with American vessel owners and operators to
discuss the reauthorization of the Maritime
Security Program and the changes that are
necessary to adapt this Program to today's
domestic and international shipping environment. We have approached these meetings with a firm and absolute
commitment to ensure that whatever changes are
made to the Maritime Security Program, the
Program will continue to be, as it is today, a
Program comprised exclusively of privately-owned
United States-flag commercial vessels that are
crewed by American maritime personnel and which
operate in compliance with all applicable United
States requirements and tax obligations.
We do not and will not support a program
that opens the Maritime Security Program to
foreign-flag vessels and foreign crews.
When we talk about our national security,
there is simply no substitute for the operation
and availability of United States-flag vessels
and their American-citizen crews.
The
Maritime Security Program today has become one
of the most important components of America's
national maritime policy, and has helped to
strengthen the economic and military security of
our Nation in a cost-effective and efficient
manner. It
has created and maintained a nucleus fleet of
47-militarily-useful United States-flag
commercial vessels, comprised of containerships
and Roll-on/Roll-off vessels.
The establishment of this fleet largely
halted the wholesale exodus of United
States-flag ships to foreign flags, thereby
retaining for our country's economic and
military security interests not only this
minimum number of vessels but also their U.S.
citizen crews.
We are convinced, however, that this
program could, with appropriate and practical
changes, serve as an even greater source of
employment for American mariners, support to an
even greater degree American military operations
overseas, and better protect U.S. economic
interests from total domination by foreign-flag
vessels and crews.
To this end, and as a result of the
meetings we have participated in with industry,
we believe a consensus has been reached among a
significant number of the labor and management
participants in the Maritime Security Program as
to the changes that should be made.
For example, we believe:
·
The Maritime Security Program
should be extended beyond its present expiration
date of September 30, 2005.
We believe Congress and the
Administration should demonstrate their
commitment to a strong national maritime policy
and recognize the important contributions that a
strong United States-flag commercial fleet makes
to our country's sealift capability by
statutorily extending the Maritime Security
Program for an additional period of at least 20
years. This
change would help create great stability within
the American maritime industry, providing an
enormous boost to our ongoing efforts to recruit
and retain American men and women for service in
the United States-flag merchant marine.
Equally important, because the maritime
industry is a very capital intensive industry,
an extension and expression of support for
the Maritime Security Program as we suggest should
give investors and lending institutions more
confidence to provide the funds necessary for
the replacement of vessels and the expansion of
the United States-flag fleet;
·
Congress and the Administration
should build on the initial successes of
the Maritime Security Program by expanding the
size of the Maritime Security fleet to at least
60 vessels (from the present 47).
Not only will a larger militarily-useful
United States-flag maritime security fleet
ensure that the Department of Defense will have
an even greater commercial sealift capability at
its disposal to meet the sealift manpower and
sustainment needs of our Armed Forces, but it
will provide a greater, much needed base of
peacetime commercial employment for American
merchant mariners;
·
Congress and the Administration
should recognize that the authorized annual
maritime security payment must more accurately
reflect the realities of shipping economics
under the United States-flag.
The current annual per ship payment of
$2.1 million, which has not been adjusted or
subject to an annual escalation clause but
rather has remained constant since the
Program's inception, does not reflect this
reality. American flag vessels and their U.S.-citizen crews, for
example, do not operate in a tax-free and
regulation-free environment, as do many of their
competitors.
Increasing the per vessel annual payment
under the Maritime Security Program will not
only help retain and attract vessels for the
United States-flag, but will also give investors
and lending institutions the confidence
necessary to provide sufficient funds for the
expansion, growth and modernization of the
United States-flag fleet.
We believe the per-vessel annual payment
should be increased to $3.5 million and be
subject to annual adjustment to reflect future
inflation.
We
understand, Mr. Chairman, that the primary focus
of today's hearing relates to the U.S.
citizenship ownership and control of vessels
participating in the Maritime Security Program.
Under the existing Program, Congress
created a "priority system" for awarding
operating agreements for vessels to participate.
This system stipulates that, with one
exception, the first priority for awarding
operating agreements is to section 2 United
States-citizen companies and, to the degree
operating agreements remain available, then
offered to documentation citizen companies.
A section 2 United States citizen, as
defined in section 2 of the Shipping Act of
1916, is a corporation that is organized under
the laws of the United States and in which the
controlling interest is owned by United States
citizens, has a chief executive officer and
chairman of the board who are citizens of the
United States, and in which no more than a
minority of the directors necessary to
constitute a quorum are non-U.S. citizens.
A documentation citizen is a corporation
that is organized under the laws of the United
States, which has a chief executive officer and
chairman of the board who are citizens of the
United States, and in which no more than a
minority of the directors necessary to
constitute a quorum are non-U.S. citizens.
The exemption to the priority system
contained in the existing law created a first
priority for up to five vessels for any
documentation citizen that is affiliated with a
corporation operating or managing United
States-flag vessels for the Department of
Defense.
In
other words, Mr. Chairman, while the existing
program almost exclusively involves section 2
citizen companies, it is important to understand
that the statute itself already and specifically
authorizes section 2 and documentation-citizen
companies to enter into operating agreements
under the Maritime Security Program directly
with the Maritime Administration.
There is not an absolute requirement that
only section 2 citizen companies be allowed to
enter into operating agreements or participate
in the Maritime Security Program; nor is there
an absolute prohibition against documentation
citizen-companies entering into operating
agreements or participating in the Maritime
Security Program.
Due
largely to the ever-growing disparity between
the tax treatment of American-flag vessels and
American crews by our government, and the tax
treatment of foreign vessels and crews by other
governments, it became necessary in a number of
instances for foreign owned shipping companies
to purchase United States owned shipping
companies. While it is unfortunate that American tax laws had not been
changed to further level the playing field
between United States-flag and foreign-flag
vessels and to mitigate against such purchases,
this action nonetheless helped save these
vessels for the American flag, and their jobs
for American-citizen mariners.
We believe that the Maritime Security
Program should be amended to reflect the current
ownership of United States-flag vessels,
consistent with, to the fullest extent
practical, the existing priority system for
awarding operating agreements and the overall
interests of the Department of Defense.
Specifically,
with respect to the U.S. citizenship ownership
and control of vessels participating in the
Maritime Security Program, we believe:
·
For purposes of vessels presently
operating in the Maritime Security Program, a
section 2 U.S. citizen company and a
documentation-citizen U.S. company which has
entered into a Special Security Agreement with
the Department of Defense
be treated the same.
In other words, for these existing
vessels, both would have an equal and same
priority for participating directly in the
Program;
·
For purposes of awarding operating
agreements for all additional vessels as
authorized through an expansion of the maritime
security fleet, and for any other operating
agreement which may have reverted to the
Maritime Administration for any reason, the
existing statutory priority system which gives
section 2 U.S.-citizen companies a first
priority should be retained.
To the extent there are such operating
agreements available after awards to section 2
citizens, they should be offered to
documentation-citizen U.S. companies which have
a Special Security Agreement with the Department
of Defense.
·
A documentation citizen company
that does not have a Special Security Agreement
with the Department of Defense should not be
eligible to participate in the Maritime Security
Program. We
oppose the existing system that allows any and
all documentation citizens to participate in the
Maritime Security Program.
Rather, we believe the existing system
should be amended and tightened.
We
want to emphasize, Mr. Chairman, that under the
proposed changes in the citizenship ownership
rules that we suggest, the maritime security
fleet will continue to be comprised entirely of
American-flag ships with American crews,
operated by companies controlled by Americans
and contractually bound to provide national
defense sealift shipping for the United States
military worldwide.
These proposed changes would, in our
opinion, strengthen the Maritime Security
Program and help ensure its long-term viability.
We
would further note that representatives of the
Department of Defense have repeatedly indicated
their support for such changes.
In fact, they too have indicated that not
only are they necessary to the future of the
Program but that these arrangements have been
and are used by the military to provide for the
operation of vessels performing a wide range of
defense missions.
In
conclusion, we believe that a strong,
competitive, privately-owned United States-flag
merchant marine is an efficient, cost-effective
means to provide the commercial sealift
necessary to meet national defense and economic
security needs, not only because history has
repeatedly proven the importance of our industry
to our nation's security but because the
alternatives are unaffordable and unacceptable.
Without a sufficient number of
militarily-useful privately-owned ships
operating under the United States-flag, and
without a sufficient cadre of trained, loyal
American citizen merchant mariners, our country
will be at the mercy of those whose economic,
political and military interest are contrary to
our own.
Two
years ago, General Hugh Shelton,
Chairman of the Joint Chiefs of Staff, summed up
the attitude of the defense establishment
towards the commercial United States-flag
merchant marine in his remarks to the U.S.
Merchant Marine Academy, 12th Battle
Standard Dinner: "Ask any officer from any of
the Services who has had the opportunity to
serve on a Joint Task Force in the myriad of hot
spots around the globe - just ask any of them if
the U.S. merchant marine is important to their
operations.
You will not only get a 'yes', but a
resounding 'yes-and-can-I-have-more'!
As has long been said, 'The Merchant
Marine is our Nation's fourth arm of
defense.'
Quite simply stated, our National
Security Strategy depends on a vital Merchant
Marine. . ."
We
look forward to working with you to develop an
expanded and updated maritime security program
that will create a more competitive and
cost-effective United States-flag commercial
fleet.
Thank
you.
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