FMC AND MARAD AUTHORIZATIONS nSCAL YEAR 1995 -^ /Dl I HEARING BEFORE THE SUBCOMMITTEE OX MERCHANT MARINE 2^ OF THE COMMITTEE ON ^||Ul MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATIVES 0^*- ONE HUNDRED THIRD CONGRESS SECOND SESSION ON AUTHORIZING APPROPRIATIONS FOR THE FEDERAL MARITIME COMMISSION AND THE MARITIME ADMIN- ISTRATION FOR FISCAL YEAR 1995 MARCH 9, 1994 ptPOSfTORy Serial No. 103|90 SfP | 1 3 7994 M Printed for the use of the Committee on ow>hnnt M-irinp gnH Vighpf RECEIVED STON PUBLIC LIBRARY cRNMENT DOCUMENTS DEPART^MENT """ U.S. GOVERNMENT PRINTING OFFICE ^ 4CC WASHINGTON 1994 : 7 ^ Forsalebythe U.S. GovernmentPrintingOffice n.f\r^ SuperintendentofDocuments, Congressional SalesOffice, Washington, DC 20402 ISBN 0-16-044723-2 6VV^^-^ 7 l^N FMC AND MARAD AUTHORIZATIONS nSCAL YEAR 1995 HEARING BEFORE THE SUBCOMMITTEE ON MERCHANT MARINE 2^ OF THE COMMITTEE ON ml MERCHANT AND FISHERIES IVIAEINE HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS SECOND SESSION ON AUTHORIZING APPROPRIATIONS FOR THE FEDERAL MARITIME COMMISSION AND THE MARITIME ADMIN- ISTRATION FOR FISCAL YEAR 1995 MARCH 9, 1994 Serial No. 103|90 SEP y^ I 1 3 Printed for the use of the Committee on l^Trrrhnnt Murinr ^r\A Vighpi RECEIVED ! BOSTON PUBLIC LIBRARY f j^.^'^-'^'^MENT DOCUMENTS DEPARTMENT ~" ~~" U.S. GOVERNMENT PRINTING OFFICE F 4CC WASHINGTON 1994 : 7 4 Forsaleby the U.S. GovernmentPrintingOffice 03C SuperintendentofDocuments,Congressional SalesOffice. Washington, DC 20402 ISBN 0-16-044723-2 COMMITTEE ON MERCHANT MARINE AND FISHERIES GERRY E. STUDDS, Massachusetts, Chairman WILLIAM J. HUGHES, New Jersey JACK FIELDS, Texas EARL HUTTO, Florida DON YOUNG, Alaska W.J. (BILLY) TAUZIN, Louisiana HERBERT H. BATEMAN, Virginia WILLIAM O. LIPINSKI, IlUnois JIM SAXTON, New Jersey SOLOMON P. ORTIZ, Texas HOWARD COBLE, North Carolina THOMAS J. MANTON, New York CURT WELDON, Pennsylvania OWEN B. PICKETT, Virginia JAMES M. INHOFE, Oklahoma GEORGE J. HOCHBRUECKNER, New York ARTHUR PAVENEL, Jr., South CaroUna FRANK PALLONE, Jr., New Jersey WAYNE T. GILCHREST, Maryland GREG LAUGHLIN, Texas RANDY "DUKE" CUNNINGHAM, CaUfornia JOLENE UNSOELD, Washington JACK KINGSTON, Georgia GENE TAYLOR, Mississippi TILLIE K. FOWLER, Florida JACK REED, Rhode Island MICHAEL N. CASTLE, Delaware H. MARTIN LANCASTER, North CaroUna PETER T. KING, New York THOMAS H. ANDREWS, Maine LINCOLN DIAZ-BALART, Florida ELIZABETH FURSE, Oregon RICHARD W. POMBO, CaUfornia LYNN SCHENK, California HELEN DELICH BENTLEY, Maryland GENE GREEN, Texas CHARLES H. TAYLOR, North CaroUna ALCEE L. HASTINGS, Florida PETER G. TORKILDSEN, Massachusetts DAN HAMBURG, CaUfornia BLANCHE M. LAMBERT, Arkansas ANNA G. ESHOO, CaUfornia THOMAS J. BARLOW, III, Kentucky BART STUPAK, Michigan BENNIE G. THOMPSON, Mississippi MARIA CANTWELL, Washington PETER DEUTSCH, Florida GARY L. ACKERMAN, New York Jeffrey R. Pike, ChiefofStaff Thomas R. Kitsos, Chief Counsel Mary J. Fusco Kitsos, Chief Clerk Harry F. Burroughs, Minority StaffDirector Subcommittee on Merchant Marine WILLLVM O. LIPINSKI, IlUnois, Chairman OWEN B. PICKETT, Virginia HERBERT H. BATEMAN, Virginia GENE TAYLOR, Mississippi JAMES M. INHOFE, Oklahoma THOMAS H. ANDREWS, Maine RANDY "DUKE" CUNNINGHAM, California LYNN SCHENK, California JACK KINGSTON, Georgia GENE GREEN, Texas TILLIE K. FOWLER, Florida ALCEE L. HASTINGS, Florida PETER T. KING, New York JACK REED, Rhode Island LINCOLN DIAZ-BALART, Florida ELIZABETH FURSE, Oregon HELEN DELICH BENTLEY, Maryland BART STUPAK, Michigan JACK FIELDS, Texas (ExOfficio) THOMAS J. MANTON, New York GARY L. ACKERMAN, New York BENNIE G. THOMPSON, Mississippi GERRY E. STUDDS, Massachusetts (ExOfficio) Keith Lesnick, StaffDirector Natalie Hidalgo Stuber, Professional Staff Hugh N. Johnston, Minority Counsel (ID T CONTENTS Page Hearing held March 9, 1994 1 Statement of: Ackerman, Hon. Gary L., a U.S. Representative from New York 14 AFL-CIO Executive Council (prepared statement) 94 Bateman, Hon. Hebert H., a U.S. Representative from Virginia, and Ranking Minority Member, Subcommittee on Merchant Marine 13 Bentley, Hon. Helen Delich, a U.S. Representative from Maryland 16 Brauner, Harold, President, National Customs Brokers and Forwarders Association (prepared statement) 84 Fields, Hon. Jack, a U.S. Representative from Texas, and Ranking Minor- ity Member, Committee on Merchant Marine and Fisheries 27 Fogleman, Gen. Ronald R., USAF, Commander in Chief, U.S. Transpor- tation Command, DOD 11 Prepared statement 57 Hathaway, William D., Chairman, Federal Maritime Commission 2 Prepared statement 43 Herberger, Albert J., Maritime Administrator, Maritime Administration .. 9 Pl'GDSrGQ StfltGITlGnt 4 Miller, R.Adm. Floyd H.,USN (Ret.), President, State University of New York Maritime College 36 Passenger Vessel Association, American Waterways Shipyard Conference (prepared statement) 91 Manton, Hon. Thomas J., a U.S. Representative from New York, and Chairman, Subcommittee on Fisheries Management 15 Pickett, Hon. Owen B., a U.S. Representative from Virginia, Ranking Majority Member, Subcommittee on Merchant Marine (Acting Chair- man) 1 Presidents/Superintendents of the State Maritime Academies/Colleges of California, Maine, Massachusetts, New York, Texas, and the Great Lakes Region (prepared statement) 69 Sherman, Fred S., President, Project ACTA, Inc. (prepared statement) 37 Prepared statement 86 Additional material supplied: American Legion, IndianapoUs, Indiana: Resolution No. 9 on full funding for the Merchant Marine Academy 96 FMC: Answers to questions ofMr. Lipinski 157 Appropriation data 171 Information requested by Mr. Pickett 162 Fogleman, Gen. Ronald F.: Answers to questions ofthe Committee 105 Answers to questions ofMr. Lipinski 99 Cargo Preference information 110 Naval Sea Systems Command contracts 20 Maritime Administration: Answers to questions ofMr. Lipinski 115 Report to Congress on the repair and disposition of the Nuclear Ship Savannah 134 Maritime Law Association: Resolution on funding for Kings Point 97 Maritime schools: Additional questions submitted for the record 122, 181 Questions submitted for the record 141 Statistics on students and graduates 74 (III) IV Page — Additional material supplied Continued Maritime Trades Department, AFL-CIO: Maritime education and train- ing 95 Merchant Marine Academy: Biography ofFred S. Sherman 98 Midshipmen's commitments ofservice to the nation 82 Training for leadership 83 Sansbury, Tim: Article entitled, "Lawmaker to Study Military Shipment For Adherence to Cargo-Preference Law" 85 Communications submitted: Hathaway, William D. (FMC): Letter ofMarch 24, 1994, to Hon. William O. Lipinski 156 Letter ofMarch 24, 1994, to Hon. Owen B. Pickett with attachments 162 Herberger, A.J. (MarAd): Letter of May 3, 1994, to Hon. WiUiam O. Lipinski 114 FMC AND MARAD AUTHORIZATIONS FISCAL YEAR 1995 WEDNESDAY, MARCH 9, 1994 House of Representatives, Subcommittee on Merchant Marine, Committee on Merchant Marine and Fisheries, Washington, DC. The Subcommittee met, pursuant to call, at 10:00 a.m., in room 1334, Longworth House Office Building, Hon. Owen B. Pickett (Act- ing Chairman of the Subcommittee) presiding. Present: Representatives Pickett, Taylor, Stupak, Manton, Acker- man, Fields, Bateman, Kingston, Bentley. Staff Present: Subcommittee on Merchant Marine: Keith Lesnick, Staff Director; Randy Morris, Clerk; Fred Zeytoonjian, Counsel; Natalie Hidalgo, Professional Staff; David Honness, Professional Staff; Hugh N. Johnston, Minority Counsel. Committee on Mer- chant Marine and Fisheries: John Cullather, Professional Staff; Carl W. Bentzel, Counsel; Sue Waldron, Press Assistant; Harry F. Burroughs, Minority Staff Director; Cynthia M. Wilkinson, Minor- ity Chief Counsel; Kip Robinson, Minority Counsel; Margherita Woods, Staff Assistant. STATEMENT OF HON. OWEN B. PICKETT, A U.S. REPRESENTA- TIVE FROM VIRGINIA, AND RANKING MAJORITY MEMBER, SUBCOMMITTEE ON MERCHANT MARINE Mr. Pickett. Good morning, ladies and gentlemen. I am filling in for our Chairman, Mr. Lipinski, this morning who is planning to be here a little later on for the meeting. I have the pleasure of welcoming our distinguished group of panelists who will testify today on the annual authorizations for two important Federal agencies, the Federal Maritime Commission and the Maritime Ad- ministration. Both of these agencies have worked hard to preserve a strong and viable U.S. Merchant Marine. Although there are still issues to be resolved, we were encour- aged to see that President Clinton's budget request for the Mari- time Administration includes funding for a Maritime Security Pro- gram. The Subcommittee will next week and again at a later date to discuss the Administration's proposal and funding for the pro- gram. We eagerly await the President's bill and look forward to working together to forge a bright future for the United States maritime industry. Today, we will begin with Chairman Hathaway to discuss fund- ing for the Federal Maritime Commission. Chairman Hathaway, welcome. Your written statement will be made a part of the record (1) so you can feel free just to summarize what you have submitted for the record. We would be very pleased to hear from you now. STATEMENT OF THE HONORABLE WILLIAM D. HATHAWAY, CHAIRMAN, FEDERAL MARITIME COMMISSION Mr. Hathaway. Thank you very much, Mr. Chairman, and Mem- bers of the Subcommittee. Accompanying me this morning is Com- missioner Ming Hsu. Unfortunately, Mr. Ivancie, the other commis- sioner on board, was not able to make it. And seated with me at the table are Managing Director Ed Walsh on my left and our Gen- eral Counsel, Bob Bourgoin, on my right. I thank you very much, Mr. Chairman. I shall just summarize the statement. I hope the statement will be made a part of the record. Our budget for fiscal year 1995, as recommended by the President, is $18,700,000. This is $200,000 less than what we re- ceived as an appropriation for fiscal year 1994, so it is going to be extremely difficult, I think, for us to get by and to carry out the programs that are expected of us under the legislation within our jurisdiction. As the Chairman and Members of the Committee know, we have strictly an operating budget. We don't have any grants to make or R&D. Ours is strictly an operating budget, and soRa&nyDcutback affects us much more than it would if we had some money that we could cut back on, or grants that we could cut back on. With this budget, we will have no promotions, no awards; and as for furniture—and purchases for ADP equipment, we will have to freeze those have none whatsoever; and we will also have to cut back considerably on our travel and our training. Let me just go over some of the high points of what we do with the money that we get. Our foreign operations program, which we have been carrying on principally under Section 19 of the 1920 Act, has been extremely successful. In the recent past, we have had ac- tions against Japan, Taiwan, the People's Republic of China, and Korea, and today I can say that all of those have been successfully resolved, that is, to the satisfaction of the carriers who brought these violations to our attention. And I would be glad to supply for the record, Mr. Chairman, the details of each and every one of those actions that we had taken against each of those countries. Mr. Pickett. I think that would be very helpful, and the Com- mittee would appreciate that. Thank you. Mr. Hathaway. Our ATFI program, the Automated Tariff Filing and Information System, is well off the ground. By the final filing date at the end of the year about 3,000 tariffs had been filed. We anticipate that maybe there will be another 300 or 400 coming in. We have sent out some show-cause orders to carriers which have not filed in ATFI, one of which indicated that several of the non- filing carriers and non-vessel-operating common carriers were no We longer in business. have others pending which, if they aren't answered satisfactorily within 45 days, will result in tariff suspen- sions. We suspect that, within the 45-day period, the named car- riers will file their tariffs, and so we will have all the tariffs on file that are existent at the present time. Under the direction of Mrs. Hsu, a fact-finding investigation was carried on this past year in which the complaints by NVOCCs and shippers' associations that they were not given fair treatment by carriers and conferences with respect to granting them service con- tracts were examined in great detail. The hearings were held in four different cities throughout the United States. The final report indicated that there was no need for the Com- mission to take immediate action. However, the Commission did decide that eight carriers and conferences would have to respond under Section 15 to various questions with respect to how many service contracts were negotiated, how many "me-too" requests they had, how many were denied, how many were granted, and what the reasons were for their denial, among other questions. There were three reporting dates, one of which has expired. The next one is next July and the other one next January. We are carrying on what we consider to be the best enforcement programs that we can carry on within the budgetary limits that we have. As the Chairman and the Members of the Committee know, we have had an extensive enforcement efforts in both the Atlantic trades and the Pacific trades in the recent past, gaining for the Now United States Treasury in excess of $50 million. that those ef- forts are substantially completed, we can't expect that we are going to collect as much in the way of fines either there, or as we proceed with enforcement efforts in the Mediterranean, the Caribbean, and South America. However, we shall be just as active as we have been before in trying to catch offenders in those trades. As you know, all agreements are submitted to the Federal Mari- time Commission, and the one agreement in particular is which has been the subject of a great deal of controversy in the recent past is the Trans-Atlantic Agreement. We monitor that agreement on an almost daily basis to make sure that the Trans-Atlantic Agreement is not violating Section 6(g) of the Act. So far, we have not received sufficient evidence to go to Court to request an injunc- tion against the Trans-Atlantic Agreement. As the Chairman and Members of the Committee know, the Eu- TAA ropean Commission is actively engaged with the at the present time. They held hearings on the matter last year but did not grant an injunction. Now, they have submitted another state- ment of objections which the TAA has not as yet answered but will answer very shortly. Then, I believe, that it will go to a hearing, and at sometime, either at the beginning of the summer or late next fall, the EC will make a decision. In the meantime, the EC is carrying on negotiations with the TAA to see if it can't come up with some compromise. We have sent out notices of proposed rulemaking with respect to regulations on Section 6(g) and on co-loading, and later this month we are going to have meetings with respect to a TAA case brought by Danish shippers and also the revisions in our rate-of-return sys- tem that we employ for determining the reasonableness of rates-of- return for domestic offshore carriers. With that, Mr. Chairman, I would be happy to answer whatever questions you or the Subcommittee may have. [Statement of Mr. Hathaway may be found at end of hearing.] Mr. Pickett. Does either Mr. Bourgoin or Mr. Walsh wish to make a statement? Mr. Bourgoin. No, sir. Mr. Pickett. All right. We will begin our Committee questioning this morning with Mr. Taylor, and then he will be followed by Mr. Kingston. Mr. Taylor. Mr. Taylor. Thank you, Mr. Chairman. And I want to open this up to the panel. I have had a couple of years now to watch the work of the Maritime Administration, and I continue to be con- cerned that we seem to be spending more and more of our re- sources on fewer and fewer ships with an emphasis on 4,000 mer- chant mariner jobs and a complete lack of emphasis on 120,000 shipbuilding jobs. I think this was particularly brought to light in a measure that came before the Congress last year where we just tried to do something as simple as mandate that if we are going to subsidize the operation of vessels, at least we want those vessels built here. I continue to be frustrated by the lack of aggressiveness on the part of the Maritime Administration with regard to Title XI. As you know. Congressman Pickett, Congressman Bateman, and sev- eral of us worked to get some money out of the defense budget for the shipbuilding initiative last year, and I was wondering what the Maritime Administration has done to follow up on that. I will open it up to the panel. I want to start by saying that we have been told repeatedly that the Maritime Administration is offering loan guarantees at a much lower rate than Congress authorized and has offered loan time- tables on a much shorter frame than Congress has authorized, both of which have made the marketing of this program very difficult. Mr. Hathaway. Congressman, let me say this, I am the Chair- man of the Federal Maritime Commission. The Administrator of the Maritime Administration will testify after I am finished, and he is in a much better position to answer your question than I am. am I sympathetic to the views that you have on the maritime pro- gram that the Government is trying to enact to return the operat- ing-differential subsidy for the American-flag carriers so that we can keep them under the U.S. flag. I think they are necessary for the furtherance of the '84 Act, but I am sure that Admiral Herberger can answer your questions much better than I can. Mr. Taylor. Thank you, Mr. Chairman. Mr. Pickett. Anything else, Mr. Taylor? Mr. Taylor. No. That will be it. Mr. Pickett. All right. Mr. Kingston. Mr. Kingston. Thank you, Mr. Chairman. First of all, I want to thank the work that you are doing to work within the budget con- straints, and we certainly appreciate your sensitivity because ev- erybody is under the gun these days. One of the questions that I have deals with H.R. 56 introduced by Helen Bentley. I believe you are familiar with that? Mr. Hathaway. Yes, am. I Mr. Kingston. Has FMC developed a position on this? Mr. Hathaway. Yes. We support the Bentley bill. Mr. Kingston. Are you aware of any opposition to it? Mr. Hathaway. No, we are not aware of any opposition to it. Congressman. Mr. Kingston. So if it is incorporated in your legislation, you don't have a problem with it?