Copyright 2002 FDCHeMedia, Inc. All Rights Reserved. Federal Document Clearing House Congressional
Testimony
July 16, 2002 Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3121 words
COMMITTEE:HOUSE ARMED SERVICES
HEADLINE: MARITIME
SECURITY PROGRAM
TESTIMONY-BY: MR. MICHAEL
SACCO, PRESIDENT
AFFILIATION: SEAFARERS
INTERNATIONAL UNION
BODY: Joint
Statement by
Mr. Michael Sacco, President, Seafarers
International Union
Mr. Ron Davis, President, Marine
Engineers Beneficial Association.
Mr. Michael R. McKay,
National President, American Maritime Officers
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.
Document 5 of 39. 