Segment 2 Of 2     Previous Hearing Segment(1)

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THE U.S. COAST GUARD AND FEDERAL MARITIME COMMISSION FISCAL YEAR 2001 BUDGET REQUESTS

Tuesday, February 29, 2000
House of Representatives, Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, Washington, D.C.

    The subcommittee met, pursuant to call, at 10:20 a.m., in room 2253, Rayburn House Office Building, Hon. Wayne T. Gilchrest [chairman of the subcommittee] presiding.
    Mr. GILCHREST. The hearing on Coast Guard and Maritime Commission will come to order. I appreciate everybody's patience and tolerance in the tardiness of some of the members' attendance here this morning. I was passing out McCain signs in Annapolis at 7:00 a.m. (Laughter) so I was a little busy. Actually I got a lot of positive comments. We are here for an important, serious issue. And I will ask unanimous consent that my statement be submitted into the record.
    There are a lot of issues that we want to cover this morning with the Coast Guard. Issues that concern the Nation as a whole, including drug interdiction, Coast Guard ability to respond to distress calls, problems with illegal immigrants, fisheries, retirement pay, the amount of monies that are available for health care for our young men and women in the Coast Guard, and Coast Guard recruitment.
    The Federal Maritime Commission, we want to make sure that the U.S. is treated the same way in foreign ports as we treat incoming ships. There has been a question for a long time about raising money for the Coast Guard via user fees. Are they real user fees or are they, in fact, taxes? Should it be a statutory initiative? Is it something that regulators can impose upon the maritime community? So there is a lot of issues here that we want to get under our belt and absorbed here this morning.
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    My last comment this morning to the Federal Maritime Commission, the Coast Guard, and the maritime community in general, is that we are concerned not in a bad way, but I think in a way that is positive about the maritime transportation system here in the United States, and is it enough—is it taking advantage of the vitality of new technology, new global maritime trends? Are we the most powerful Nation in the world leading the world in this particular endeavor, or are we followers to the nations that are building the bigger ships?
    I think the U.S. needs to stand strong with a U.S. policy regarding every conceivable maritime issue. So we will take this hearing today very seriously as to the amount of monies that is being allocated in all the different aspects of our maritime industry, especially the Coast Guard, and we want to be a strong partner in new and innovative ways to achieve that end.
    I will yield to the gentleman from Oregon, Mr. DeFazio.
    Mr. DEFAZIO. Thank you, Mr. Chairman. Unlike the Chairman, I was engaged in official activities and that was the reason for my delay. I was meeting with the Oregon delegation and my governor. It seems like everyone from Oregon decided they wanted to see the sun and has come east to do that. I want to welcome the Coast Guard here, and my opening remarks will be quite brief. I recently had the opportunity to travel with the commandant and other members of the Coast Guard to Antarctica, and I was just amazed at the difficult nature of the logistics to supply and maintain and keep our science going down there at the south pole, and the Coast Guard plays an absolute crucial role in those activities.
    I had an opportunity to get on board the POLAR STAR, even though a few days late because it was on a mission to escort in a disabled cargo ship, but was very impressed with the crew, and I made some commitments to the crew there about some issues that go to paying benefits that I would work on, and I will work on those. And I also want to say some of the discussions that the commandant and I were able to have in the 27-hour plane trip getting there, besides getting to know each other personally, were also very important to further discuss concerns that I have had, and that the admiral shares with commitments that might come from the deep water, future obligations of the Coast Guard, and I believe that this committee needs to work and search hard with our colleagues on other committees to find some supplemental appropriations for those commitments.
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    They can't come out of the Coast Guard base and find a way to continue the vital operations that our constituents expect, which are the day-to-day activities of the Coast Guard in vital search, rescue, and law enforcement. I also spent a fair amount of time on C–130's. They weren't Coast Guard -C–130's, but that brought up the discussion of -C–130's and the Coast Guard is at a really critical point with those aircraft in terms of capabilities and availability because the age of the aircraft and the shortage of spare parts. I believe the committee also needs to be looking closely at those issues.
    So with that as an introduction, I look forward to hearing the Coast Guard testimony on the fiscal 2001 budget.
    Mr. GILCHREST. I thank the gentleman from Oregon. Are there any other members that wish to have an opening statement? The gentleman from New Jersey.
    Mr. LOBIONDO. Mr. Chairman, just very briefly, thank you for the hearing, and Admiral, I welcome you and want to congratulate you and the Coast Guard on the article that appeared in The Washington Post today on the government performance project, where there are 20 agencies that are rated, and the Coast Guard is straight -A's across the top, so great job. We all know that but now the rest of the world will, too.
    Admiral LOY. Thank you.
    Mr. GILCHREST. Thank you.
    Mr. Coble?
    Mr. COBLE. Very briefly, Mr. Chairman. I appreciate that. Admiral, good to have you and the master chief here. I don't mean this to sound like a lecture, Jim, but a lot of folks on this Hill do not appreciate the Coast Guard. They are indifferent about it. These other outfits, they are up here waving the flag letting everybody know how good they are. I think we are too modest. So I say to the Commandant and Master Chief, as the late Dizzy Dean used to say, if you can do it, it ain't bragging. You should tell these folks who may be uninformed about the good job that this service does. And I don't mean it to be a lecture, but you all convey that to your shipmates. I don't mean that in any way critical, but I just think the other services puff their wares probably more prominently than we do, and I think we have every right to puff our wares.
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    Thank you, Mr. Chairman.
    Mr. GILCHREST. Any other members?
    Mr. Vitter?
    Mr. VITTER. Very briefly. Thank you, Mr. Chairman. I look forward to this hearing too, and I hope we will get to spend a little bit of time focusing on the Deepwater project. That is really, in my mind, the key, large future challenge to assure the proper role and responsibility and authority of the Coast Guard, and that is probably the biggest need for exactly what Howard is talking about to make sure we move forward with that project in the right way, even in this year while there is significant authority in the President's budget, as I understand it, there is not as much as would be needed to really move forward, full speed ahead with the initial phase of that project.
    And so I hope we can get to focus a little bit on that project and those numbers. I think the Coast Guard has done a great job in coming forward with the very innovative way to move forward with such a massive building program. It has gotten very high marks from everyone in that regard, including the administration and the Budget Office. So I look forward to that discussion. Thank you.
    Mr. COBLE. Mr. Chairman, I want to say to the Commandant and master chief, today is one of these days that I have to be at five places simultaneously. Perhaps some other colleagues may have to be. So if I have to abruptly pull out of here, please don't think I am being discourteous to you.
    Mr. GILCHREST. Thank you, Mr. Vitter, Mr. Coble.
    Mr. Baird.
    Mr. BAIRD. Just briefly, I hope today we can comment a little bit about the deep water mission, particularly on the Pacific northwest coast as pertains to fisheries monitoring. We have concerns there may be some deep water drift net fisheries taking place by foreign vessels that are impacting our salmon recovery efforts. It is already a tremendous expensive effort, and if we are losing those fish to foreign vessels, it is adding insult to injury.
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    I would also, at some point, would like to chat with you folks about lighthouses that we hope to be transferred over to the state of Washington, which we think is a win/win situation for the Coast Guard and for the local folks, and I don't know that we will be able to get into it today, but I just met with some of the Coast Guard folks up at Columbia River Station and they expressed concern which I have heard before about the TRICARE program, not necessarily germane to the appropriations process, but I know there is ongoing issues with that. At some point we can discuss that as well. Thank you, Mr. Chairman.
    Mr. GILCHREST. You are welcome, Mr. Baird. Thank you, gentlemen. Admiral, we look forward to your testimony and you may begin, sir.
TESTIMONY OF ADMIRAL JAMES M. LOY, COMMANDANT, UNITED STATES COAST GUARD; AND MASTER CHIEF PETTY OFFICER OF THE COAST GUARD VINCENT PATTON, III

    Admiral LOY. Thank you very much, Mr. Chairman, distinguished members of the Committee. It is good to be back for another year of discussion about our service and your terrific support for it in the past, and what I would hope to be the continuation of that into the future.
    Just to comment very briefly and touch on a couple of the thoughts that were expressed in the opening statements by the members. We, too, are very proud of The Washington Post upper left-hand corner in the Federal page this morning, but I would offer to you that it was as a result of an awful lot of work, and I guess sort of anything in life is when that kind of a grade is reached and reported on. We have been very studiously reworking our planning, programming, and budgeting system over the course of the last 4 years. This is sort of the culmination, if you will, of that, and I would ask you to get a copy of this terrific magazine and read the whole article, because in it it says a lot about the underpinnings behind the grades in the paper, and that is a sound byte and a very important one, and I am appreciative that there is a reflection of the efforts that had gone into that in the article as a whole.
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    With respect to the MTS system, Mr. Chairman, I couldn't agree with you more. As you know, we submitted our report from the Secretary's office to the Hill back in July of last year. If it is in the Committee's interest to consider a hearing, for example, on specific elements of the report or the report as a whole, I would look forward to that more public exchange of concerns from the Congress as well as what the Administration has expressed in that report when it came up. I certainly look forward to that.
    Mr. Coble's concern about modesty has been mine as well. One of three or four things I kept right smack in the middle of my desk since the beginning of having this job was to tell our story better, wider, further, to a wider variety of audiences. We are working hard on doing that and I am delighted that the encouragement to continue here on Capitol Hill is there as well.
    Deepwater: we certainly will get into it in my opening comments as well as in Q and A; I will defer my thoughts to that. As a sidebar request, sir, I know the House has passed our authorization bill that was sent to the Hill last year. It still pends action in the Senate. We look forward, however, by the end of the session, hopefully, to have a Coast Guard Authorization Act passed. There are important things in that for us as you know. We worked with your staff all the way through, and we hope that would be completed by the end of the session.
    Sir, as you know, and as many of you have mentioned already, this terrific organization makes America safer, cleaner, more mobile, and more secure virtually every day of every week. That is our charge, that is our challenge, both in terms of mandates from the Executive Branch and from the Congress over 210 years. Our strategic goals will always, I think, remain American priorities. There are maritime safety, maritime security, the protection of our natural resources, maritime mobility, and national defense. Last year was an enormously successful year, thanks in great part to the support of this committee as you worked on our behalf up here to provide the resources to do good things. Hundreds of victims of Hurricane Floyd's passage through North Carolina literally owe their lives to the Coast Guard's response, not on the second or third day but on the first minute after the people were in trouble.
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    The NEW CARISSA, of course, remains a monument to a number of things. I am sure Mr. DeFazio and I will have an opportunity to chat about that through the course of the balance of the morning. One of the things it's a monument to is the aversion of what could have been a far, far more difficult ecological disaster. Leading Y2K preparations for the maritime industry, not only in terms of our own systems, but around the world is something I look back on with great pride. Seizing a record of 70 tons of narcotics that were enroute to this country. Being designated as a 'Best Practices' partner for performance management by the NPR. Lauded for risk management practices and restructuring management by the GAO, and, of course, the Federal page article this morning sort of culminates that management expertise that we think we have worked very hard to incorporate into our institutional fabric as an organization.
    Just last week I was fortunate enough to have an opportunity at the National Press Club to roll out the results of the roles and missions study that we were all very attuned to, concerned about, with, perhaps, even some anxiety levels as we took that project on a year and a half ago but the results speak for themselves, and I would be glad to speak further about the results of the interagency task force on our roles and missions in Q and A at your request, sir.
    In a nutshell, our report validated the national value of what we do today, further validated that those needs will be very much enduring into the future, and most importantly, emphatically supported the Deepwater Capability Replacement Project as a near-term priority for the Nation. And furthermore, as Mr. Vitter has already commented on, suggested that its design and architecture were creative, innovative, state of the art, and something that we should be proud of, and, in fact, clearly says it is the way to replace that capability.
    There are three themes, sir, from our 2001 budget, and they are readiness, being concerned about people, and hardware issues, so as to reverse the readiness shortfalls that we clearly see too many red flags about in our organization today. In the operations mode, to enhance our capability to meet what are revolving threats in our maritime environmental, and with respect to modernization, recapitalize hardware inventory that we have to meet tomorrow's challenges. A word on each.
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    With respect to readiness, we need to continue to rebuild and sustain the Coast Guard's work force. It needs to be on par with DOD, such that the kinds of things that are being provided to the Department of Defense to help their issues of recruiting and retention are available to the Coast Guard as well, to rebuild aircraft availability, to provide the training and equipment necessary to restore the readiness of our organization.
    With respect to operations, there are modest improvements and enhancements in our ability to do our job. There are initiatives with respect to MTS; commercial fishing vessel safety; risk-based decision-making; surface end-game capability in the transit zone; aircraft use of force; OCEAN GUARDIAN, which is the name for our fishing enforcement efforts; and intelligence exchanges that we are finding more and more critical to the ability for our people to do their jobs in most of our major law enforcement business lines.
    With respect to modernization, sir, I call your attention to four key projects: Deepwater; the National Distress and Response System Modernization Project; the third, WLBR because this is the last option year to acquire that; and the Great Lakes Icebreaker.
    In conclusion, Mr. Chairman, thank you for your past support and that of the members of the Committee. Again, I would ask for thoughts with respect to the passage of the Authorization Bill, and let me be very clear. 2000 is a painful year for us. I have actually had to direct my field commanders to pull back on the throttles operationally a bit so as to stop the readiness bleeding that I saw going on in our organization. I would like very much to see 2001 as the turnaround year. I need every penny in the President's budget to make that happen. It is a good budget as is on the table before you. It will begin to restore our readiness completely with people and modestly with parts and maintenance, and it will enable us to begin this process of shaping our future. Those are my challenges. I would ask you to make them your challenges as well for this next year. Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Admiral. The Master Chief.
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    Master Chief PATTON. Mr. Chairman, members of the Committee, ladies and gentlemen, good morning to you. I appreciate the opportunity to sort of give you a brief overview of the state of the Coast Guard work force. As the Admiral pointed out, one of the most important things in order for us to carry out the kinds of missions that we do all relies on the people. I am going to recite you four names, and the reason I am going to recite them kind of ties into what our particular issues are today.
    Chief Boatswain's Mate Joseph Habel from Station Cape Charles, Virginia. You probably may not know the name, but you may recognize the situation. Just a month or so ago when we had a very violent snowstorm up in this area, Chief Habel took control of a 41-footer along with his crew and went out to rescue the crew of a tugboat. Included in that crew was a 300-pound man.
    Chief Boatswain's Mate Dawn Smith from Station New Haven, Connecticut. When Mr. Coble made mention of the fact that we need to beat on our chest a little bit to say just how good we are, Chief Smith has taken complete control on the job as Officer in Charge of the station, and has outreached throughout into the community, particularly in communities to where minorities and so forth, and is working very closely with helping in our recruiting effort.     Petty Officer Matthew Bailey from Station Atlantic City, another extraordinary individual, who I will say to you that a 23-year-old man that we put in charge of a rigid-hull inflatable boat that went out and took in his own control to rescue and try to save the life of a woman and a child.
    And Seaman Melissa Padilla, I just met her yesterday at Station Point Allerton outside of Boston. Seaman Padilla is a third-generation Coast Guard member. She told me she joined to make it a career.
    The reason why I gave you those names is because these very same names, and just mentioning some of the extraordinary things that they have done, they all say that the major topics that impact them are housing, family health care, pay, and retention issues. Our housing, of course, is one of the most significant problems because of the nature of where we are assigned, unlike members of the other military services, who have a good infrastructure nearby to where they live, either on base or off.
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    Stations like Point Allerton or Brant Point or Atlantic City or New Haven or Cape Charles, where we have these extraordinary people that do the extraordinary kinds of missions that we do in the Coast Guard, still have to rely on the needs of taking care of their families as well as themselves.
    This leads in to our family health care issue, TRICARE, as we call it. This is probably one of the most frustrating areas that I have encountered over the past year, and I know in your conversations some of you have had with our people, have recognized the fact that this has been a very trying issue.
    I have a letter that was addressed to Congressman LoBiondo a few months ago from a frustrated spouse concerning a son who needed special needs and attention and because of living in the Cape May area, they are under what is called a TRICARE standard plan, which means there is a standard cost involved based on what the government has assessed. It does not necessarily meet the cost of what happens in that particular area. Her husband is a first class petty officer who makes somewhere in the neighborhood of about $27,000 a year. They also have one other child. They are in dire straits financially.
    That in itself kind of sums up some of the problems that we have with our TRICARE. I also mention in my statement of a situation that shows that TRICARE problems have no boundaries. Just a month ago, I spoke at a conference for the spouses of Commanders-in-chief, where the spouse of a four-star admiral spouse told me about her TRICARE problems to where they are continually getting bills in the mail that have not been paid. So these are some of the problems that are existing as far as family health care problems that are actually contributing to some of our retention efforts.
    Pay, well, we have actually done quite well in what has come out in the fiscal year 2000 budget in our pay. We are going to see another increase that occurs in July for many folks, and it is a step in the right direction. I think from a morale standpoint that our people have welcomed that very well, seeing that the folks on Capitol Hill are paying attention, but we are not quite there yet. We are still existing with a gap in pay between both what happens to folks on active duty as well as in the private sector. The private sector is still stealing a lot of folks, great folks, and our people aren't just leaving because of the money. They are leaving because of the many things that contribute to taking care of themselves and their families. Those four names that I gave you, particularly Chief Habel and Chief Smith, they're careerists, and they are going to be around for 20 years, but I don't want to lose Petty Officer Bailey, and I don't want to lose Seaman Padilla. These are the people that when they come to the point in their career and say is it worth staying around and recognizing that the outside may be the other possibility, but they love the Coast Guard and that is what this is all about.
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    In my conclusion, one thing I would like to do which the crew at Station Point Allerton had asked me to do at this hearing, was to publicly thank our Commandant, the fact that when the question is asked of just how are people out in the Coast Guard doing, well, I say it is fine, but I say it is fine because of who we have in charge. Our Commandant here is definitely an individual that people like Seaman Padilla, and people like Chief Habel look up to. And I certainly want to say thank you, sir, for your support and leadership to our organization. Thank you.
    Mr. GILCHREST. Thank you, Master Chief Patton.
    And all of us here, if there is any way to communicate to the Coast Guard that this committee and many, many Members of Congress have a strong, positive feeling toward the Coast Guard. We have faith in your work.
    Admiral, I was just curious, just briefly, if you would, you made a comment that how do we put the Coast Guard on par with DOD? Do you have any suggestions?
    Admiral LOY. Yes, sir, we are working that issue very, very hard. The challenge is this. When the President's budget is put together, as we all know, there is the national defense spending side and the domestic spending side. Obviously, the Coast Guard falls on the domestic spending side. There is just a very different procedure taken as the President's budget goes together. On the national defense side, because of the extraordinary expenses involved and the dollar values involved, there is a, I think, very robust participatory process back and forth between the Office of Management and Budget speaking for the President and Secretary Cohen and his people.
    Mr. GILCHREST. When OMB discusses the national defense side, recognition of the Coast Guard contribution to that never comes up?
    Admiral LOY. Absolutely, sir. That is the bottom line. But there is a participatory process that I think we can find a way to engage in better than we ever have in the past, and I have talked with my own senior directors in OMB to encourage that to happen and make myself available. Further, when the process is being worked on the national defense side, we need to have our voice at the table when it is evolving, especially people-related compensation issues that as decisions are taken there, we get to be the tail that is wagged by the dog, so to speak, on the other side of that firewall.
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    So an appreciation for the impact on our modest budget when those huge dollars are being addressed is I think something—.
    Mr. GILCHREST. The committee would like to support you on that line of thinking so that we can create a structure to allow that to happen.
    Admiral LOY. Yes, sir.
    Mr. GILCHREST. Admiral, the Coast Guard Authorization Act of 1998, prohibited user fees per se till the end of the year 2001, but in your budget there is a new maritime user fee proposed. Could you say why that is in the budget if for most of fiscal year 2001 it wouldn't be able to be collected? Is this in anticipation of 2002?
    Admiral LOY. Mr. Chairman, I am obviously aware of the prohibition that is in the '98 Authorization Act. This continues to be an effort on the part of the Administration to offer user fee frameworks as a potential revenue source for not only our organization, but many others. It is a structure that is being offered in this case to attempt the connection between the legitimacy of service rendered to an identifiable population.
    Mr. GILCHREST. Has OMB given some estimate as to the amount of money that would be collected for this user fee 2001?
    Admiral LOY. Yes, sir, it would be around $212 million.
    Mr. GILCHREST. If this doesn't come in, then we will have to find money to offset that $200 million?
    Admiral LOY. That is the reality. From the Coast Guard's perspective, our goal was to attempt to find a 'hold harmless' provision, if you will, through the course of that, because the budgeted levels clearly are required for us to get our jobs done.
    Mr. GILCHREST. Could you just give me a figure as to the amount of money that you need in fiscal year 2001 to further the Deepwater project?
    Admiral LOY. Sir, the President's budget contains the specific dollar value that we requested at the beginning of the building of the budget this year. So the $42 million that is in the President's budget for Deepwater will sustain the project through 2001, which is the balance of the concept and functional design phase of the Deepwater project.
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    Mr. GILCHREST. I see. I have a number of other questions, but I'm going to ask two more questions quickly before we will go to the members.
    Admiral Loy, in response to the National Distress and Response System, some months ago we had a hearing about the MORNING DEW incident, which was a tragedy. And I don't bring that up to take anything away from Coast Guard, because I think your people do excellent work. There is no question about it, about as best as any human institution can do. Does the Coast Guard plan to take 5 years to implement a new system and what can be done to deploy a new system as soon as possible?
    Admiral LOY. I think there is a quick three parts, and I will be very brief, sir, as an answer to that question. First of all, in the immediate aftermath of MORNING DEW and as we testified at the hearing you cited, we have taken steps to supplement watchkeeping at Charleston, we are examining very carefully the watchstanding requirements around the rest of the service with a view in mind of going on budget for what is necessary to make them whole.
    Secondly, with respect to direction-finding specifically, and the ability to play back recorded conversations, we have already taken steps to augment the capability of our communications and operations centers in the interim until NDRSMP becomes the ultimate answer.
    About the project itself, sir, I too have even some personal reservations about the time it is taking us to get to closure with respect to that project going completely on-line. As I examine it carefully, it will be difficult for us to press through the design phase of the project much more quickly than is already on the table. However, when we have the product ready to implement in all of our stations, then it is only a matter of how many dollars are in the pocket before we can accelerate the process of installation around the Coast Guard. If there are to be, for example, 50 groups and communication centers that are outfitted with the new NDRSMP project, whether we do them one per year or 25 per year, we will have a lot to say with the manner in which it comes on-line and is therefore complete.
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    So we will be ready to have the prototype being tested at a station in 2002, the current project calls for until 2005 until it is around the rest of the nation. There is a potential to accelerate that latter timeline, sir.
    Mr. GILCHREST. Thank you very much, Admiral.
    Mr. DeFazio.
    Mr. DEFAZIO. Thank you, Mr. Chairman.
    Admiral, although you didn't touch on this specifically in your testimony, I think it is something perhaps the Committee should look at. I would just like your view as to whether the problem is large enough and great enough that the Committee should focus on. It is the issue of human smuggling. It has died out in the press, but I assume it is an ongoing threat and/or problem?
    Admiral LOY. Absolutely it is, sir. First of all, there are four major source countries that we are very concerned about, three in the Caribbean basin—Haiti, the Dominican Republic, and Cuba—and the PRC migrant challenge across the Pacific, which has become a dominant issue for us. One of the reasons it comes and goes with respect to press attention, as you just cited, sir, is it is essentially a demand issue. We need to deal with it when, in fact, we have it. It is the difference between the summer and fall of '94 when we had a mass migration crisis in the straits of Florida with both Cuba and Haiti, and everybody's attention was driven to that such that we literally exhausted the Coast Guard wherewithal to be able to deal with it, engaged the Navy, engaged many other agencies in the assistance that was required to pull off that particular saving of 65,000 lives off as we as we did.
    The challenge with respect to the PRC issue in the Pacific is a growing and enormously challenging one. We are now estimating somewhere in the 30- to 40,000 a year routine. There are two elements to it that are much more of concern to us in the past. One is a connection with organized crime. We see more and more evidence that it is not just 50 people that get together and hire out, so to speak, on an old freighter trying to find a way to Guam. Remember, it is organized with, as we call them, snakeheads aboard, the organizers that are truly the enforcers to boat the unfortunate passengers, if you will, that have now paid as much as $30,000 for that voyage.
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    So the organized crime nature of it is one aspect that is of great concern, and the increasing level of violence is the second dimension of that particular mission that is of great concern. We are having to go back and rethink very carefully and redesign our training programs for our boarding officers to have force protection, their personal protection, and their ability with skills and capabilities and equipment to control a situation on a freighter with upwards of 150 or 200 Chinese migrants, and many of them rising to the level of being willing to engage in a much more violent confrontational pattern of behavior on board.
    On the Caribbean side, sir, the numerous issues with respect to Cuba and Cuban migrants have an awful lot to do with the feet-wet/feet-dry nature of America's policy with respect to immigrants from Cuba. Again, as we just saw yesterday, or the day before yesterday, we encountered the classic rafters, six Cuban males off Miami. We were advised by a good Samaritan phone call into our operations center, sent a 110-foot patrol boat out there and encountered six males who had been at sea for nine days on an open raft in terrible medical condition; two of them deceased, four of them still alive but barely. The issue then became do we bring them to the United States for the medical attention that they required, and the answer to that question was ultimately yes. But in doing so, their feet became dry and they were not, in fact, repatriated as they would have been had they been held at sea. Those instances also have a rising level of individual violence on the part of the rafter who sees the lights of Miami literally a couple hundred yards to the beach, which makes it a very different proposition than perhaps it was just a couple of years ago.
    So it is a significant and growing national issue for the United States and for other maritime services to deal with around the world. As long as we are in a world of haves and have nots, the have nots will make an effort to get to where the haves are and this illegal immigrant issue will be with us.
    Mr. DEFAZIO. I hope the Committee can find time in the schedule to perhaps do a hearing on this issue. I think it is something that merits—.
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    Mr. GILCHREST. I would be happy to work with Mr. DeFazio and the Admiral on that.
    Mr. DEFAZIO. Just a couple other quick questions because I think I am going over my time too. The Master Chief mentioned the pay and the members of the service did get a well-deserved pay increase in line with the other services, but there was one crucial difference. I believe the Chairman, asked he didn't go to this specifically, but he asked about the treatment versus the treatment at DOD. My understanding is the pay, unlike the other services which receive money in the supplemental for the pay, the Coast Guard did not get fully reimbursed for the pay increase supplemental; is that correct?
    Admiral LOY. There has always been that issue associated with that tail on the other side of the wall, both in the construction of the budget when things like that can be anticipated and the proper amounts are installed in the President's budget on the way to the Hill, and then in the dealings with the structure on the Hill. Most of the those issues are dealt within HASC and SASC with respect to the four DOD services rightfully in the sense that those are where the big dollars are, but when it impacts our budget as well, those things need to be appreciated, both in the allocation process to the Appropriations Committees, and then, of course, constructively one would hope within those committees.
    So an adequate amount of money is provided there. In the 2001 budget, I am thankful to say because we have been very, very intensive with respect to our negotiations on this, the 2001 budget affords all the known--and I emphasize K -N -O -W -N underlined--monies that we will need for personnel pay and allowances in 2001 are covered in the President's budget as it comes to the Hill. What happens in the Committee if BAH is adjusted, if there is a significant dollar value in terms of making progress with respect to health care, TRICARE, we would want very much to see those reflections on the Coast Guard side of the appropriations process as well as the DOD side.
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    Mr. DEFAZIO. Just one other quick question. There are a number of things I would like to ask, but for the Master Chief, I have heard complaints in my district from members of the service, not complaints, but shall we say ''concerns,'' about the new computations for the housing allowance, finding that this magic formula that they are using, however it is established, does not exactly seem to be working in some of our more difficult areas, Seattle, for the folks on the ice breaker, even in the small city Coos Bay in my district. Have you been hearing some of the same—.
    Master Chief PATTON. Yes, sir. If you haven't kept up with the continuing saga with the Basic Allowance for Housing, DOD had done what is called a rollback because of some of the problems that existed when the DOD rates came off for fiscal 00, and it turned out that there was a mixmatch of where rates that typically were getting X dollars got a significant drop. San Antonio is one example. But there were other areas.
    My concern with BAH, as it relates to our Coast Guard specifically, is that because we are located in high-cost remote areas or resort areas, the problem exists with availability of housing. I'll use an example in your district. Quite often you can't find rental units within a reasonable 20, 25-minute commute from the particular unit. You have to go a little bit further than that, as well as in Mr. LoBiondo's district, which is another such area where our people live quite a ways away in order to get to their particular area. So this has been a continuing problem to where it does not address within our BAH rates, and who knows how the magic formula really starts settling itself out, but it does not hit anywhere close to what the value should be.
    Mr. DEFAZIO. Thank you, Master Chief. Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. DeFazio.
    Mr. LoBiondo.
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    Mr. LOBIONDO. No questions.
    Mr. GILCHREST. Mr. Taylor.
    Mr. TAYLOR. Commandant, there is, I am sure you are very much aware of this, going to be in the very near future a supplemental bill for Colombia, low ball figure of about $1.6 billion, high ball figure is anyone's guess. A couple of questions. Number one is since this is ostensibly on the war on drugs, what involvement would the Coast Guard have in this; and number two, since we are ostensibly getting ready to send pilots and mechanics down to Colombia to train them on the additional 60 plus helicopters could you give me your thoughts of how drug testing of personnel affected your force when it was implemented in the 1970's, and whether or not you think that since—whether or not demand reduction on things like drug testing for Federal employees would augment your efforts in interdiction on the high seas and on the rivers of our Nation.
    Admiral LOY. Yes, sir. Two quick thoughts. One, I have been working in the supply side of that issue probably now for 20 years or more, sir. I have always known if there were to be a solution to the so-called drug war, it will come from the demand side. It will come when we have a generation of young people who choose to say something other than yes when offered the opportunity to introduce those poisons into their bodies. However, in the 20 years of effort, I am absolutely convinced that a balance between the supply efforts and the demand efforts remains in place until the so-called solution ever finds its way to us. So the legitimacy of our efforts on the supply side are, in my mind, the classic cop-on-the-street-corner kind of deterrence value, let alone the real operational value. I mean, 70 tons of the stuff that we took out of the transit zone last year is not on the streets and playgrounds of America. That is, in and of itself, a valuable and positive thing.
    You asked me about drug testing, sir. I came out of Vietnam. I know the nature of our services and what we were experiencing. I was an executive officer on a Coast Guard cutter in 1974 and 1975. I know what kind of experiences we were going through as the five military services at the time.
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    Mr. TAYLOR. For the benefit of those who weren't on that cutter, why don't you give the folks in this room, and for the record, some idea of what you perceived the percentages of drug users to be. Chief, I hope since you were also serving then—.
    Admiral LOY. I think we have all watched either the Hollywood portrayals or some very good and well-written books on the Vietnam aftermath, but the drug-laden nature of the services after the experience in Vietnam was a reality. I as an XO on a Coast Guard cutter dealt at least a half a dozen times a week with someone in the crew who had been caught doing one thing or another that was clearly not part of what they should have been doing, and it had to do with drugs. I remember phone calls in the middle of the night from police officers, from mothers, from whomever saying how come you are not taking care of my child as the XO.
    So the nature of the job simply included, in those days, having to deal with a much higher percentage of users in the Coast Guard population. Now, do I know exactly what that percentage was? I don't know that any of us ever will, but I am sure that it was in the 15, 18, 28 percent kind of a range, and I may be naive in even using those numbers. What I can tell you, sir, without a shadow of a doubt, is the imposition of drug testing on our organization dropped out to 1 percent and lower, and it has been sustained at a half of a percent as a result of drug testing ever since. So I do believe in the tool to keep those elements of the organization, in our case, the entire organization, drug-free. It is why in the transportation business it is all about operators and those are the people that are drug tested who have the potential to do unfortunately great harm. We just unfortunately saw here in the Baltimore accident of the transit system two weeks ago, that that operator in the aftermath of the accident properly drug tested turned up positive for cocaine.
    Mr. TAYLOR. As the head of one of the agencies of the United States Government, would you recommend that policy for all the other agencies of the United States Government?
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    Admiral LOY. Certainly to those who have the potential to with negative behavior impact other people, I think that is a smart thing for us to be about. You asked this question originally premised on activities that will be forthcoming in Colombia.
    Mr. TAYLOR. Of course because there is going to be a vote and also an opportunity, in my opinion, to maybe address that .
    Admiral LOY. Yes. All I can say is knowing how critical and crucial it became as a tool to take us from where we didn't want to be as an organization and take to us where we wanted to be as an organization, I think its use has been proven time and time again as being positive.
    Mr. TAYLOR. Master Chief, as someone who enlisted in 1972, would you like to give us your thoughts on this?
    Master Chief PATTON. Yes, sir. In fact probably one of the best ways I can describe from the time when we started drug testing, which I think was the late 70's, in fact, that is a good time because that ties exactly with right about the time when all of a sudden we had an increased reenlistment rate. So it was pretty prevalent, and we were quite frustrated when I came in in '72 with the drug use as it was and the fact that there was no regulatory efforts done beyond that, that once the drug testing occurred, the reenlistment rates skyrocketed. In fact, in my statement, I made mention of the fact that we are now coming up on the ten-year mark over a period from 1978 to about 1984, '85 where our highest enlistment and reenlistment rates occurred. Now, I won't say that drug testing may have been the predominant reason why the reenlistment rates went up, but clearly when the drug testing policy was implemented, there was a feeling from naysayers that we were going to lose a lot of people because no one wanted to have their rights violated, but in turn, what happened was it turned the other way around. So I will tell you just from being there, seeing it, witnessing it, being frustrated about it and so forth and then seeing how it made a complete turnaround certainly it has had a very positive impact within our work force over the past 20 plus years.
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    Admiral LOY. It created an environment in which people wanted to stay and work.
    Mr. TAYLOR. I thank both of you. We are lucky to have both of you all working for us.
    Mr. GILCHREST. Thank you, Mr. Taylor.
    Mr. Baird?
    Mr. BAIRD. I want to begin by echoing the thanks and gratitude for the tremendous work to save the lives of Americans every day, many a times, actually, in my district and on the coast near our district.
    Could you comment a little bit in the Pacific northwest as we work for salmon recovery, there is discussion of removal of dams, fairly significant imposition of regulatory structures, and yet there is belief among many of the fishermen that we are losing a fair amount of fish to the high seas drift nets I alluded to earlier. Would you comment on budgetary considerations, either now or you might anticipate in the future, to address this and perhaps increase patrols out within a 200-mile limit?
    Admiral LOY. Yes, sir. You go directly to the heart of Deepwater, in my mind, because I am of the mind that all of the missions that we are performing at the moment, that one which will be sustained most likely into the long future is fisheries enforcement. Here we have the protein source for a growing global population, renewable if managed well, potentially destroyable if we are not very smart about what we do. The Exclusive Economic Zone of this Nation, of course, adds a 200-mile barrier around every little rock in the Pacific that has a U.S. flag on it. All of that represents an enormous enforcement challenge for fisheries enforcement alone in the future. Add, if you will, then, counternarcotics; add, if you will, immigrants; add, if you will, search and rescue. And the national defense responsibilities, of course, where we are tip-fitted to the contingency plans of most of all, as a matter of fact, of the major CINCs. That is the mission profile that will be dependent on the Deepwater project coming to a good conclusion at the other end of the day. The Interagency Task Force that just met over the course of the last year and a half chaired by Secretary Downey, the Deputy Secretary of Transportation, has found six fundamental overarching conclusions that they reached after their very thorough review. They went around the world. They had hundreds and hundreds of testimonials sent into their work from some people that we solicited, and others that we did not. But the bottom line at the other end of the day comes down to these six overarching conclusions: One, that the portfolio of missions that is done for this Nation by the Coast Guard today is enormously important and will endure into the foreseeable future well past the 2025 window that they were looking at; two, that the Coast Guard is the right agency to do those things; third, that we should invest thoughtfully in technology associated with maximizing the good stewardship of the taxpayers' dollars as we consider what it is we buy into the future; fourth, that this organization has proven over 210 years that investments in adaptability, flexibility, and agility, if you will, are very important and we'd better keep those things in mind as we invest in the future; and lastly and perhaps most importantly, because this is what got this study started to begin with, that number 5, the deepwater capability of this organization needs to be recapitalized as a near-term high priority for America; and sixth, that the IDS, the integrated Deepwater System project that is currently on the table that Mr. Vitter commented on, is a good one, it is creative, it is innovative, and it is, in fact, the right way for us to recapitalize that effort.
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    All of that, sir, goes directly to such things as straddling stocks to such things as those that you mentioned a moment ago. Last year we had more intrusions across the maritime boundary line with Russia than we have ever had in the past, ten times more than in 1998. We are now seeing advertised an intention on the part of Spain to send 12 factory ships into the Pacific northwest and on into the Bering Sea this next season. All of those will require on-scene enforcement capability. That is, at the moment, being stretched very, very thin in the Pacific.
    Mr. BAIRD. Do you have a sense of a time frame by which we might anticipate greater enforcement capabilities off the Pacific northwest coast?
    Admiral LOY. Sir, we hope the Deepwater project actually has the monies in it in 2002. Our intentions are to award, if we can hold to the structured timeline. There is no reason we can't. We intend to make an award of that contract in January of 2002. Thereafter, it is simply a matter of the shipbuilder getting his act together and putting those assets in place to gradually replace the inadequate deepwater resources we have today.
    Mr. BAIRD. I sure we can expedite that and appreciate your work on that but as we look at the tremendous impact this is having on us to be able to interdict those violations, it would be helpful.
    Thank you Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. Baird.
    Mr. Vitter.
    Mr. VITTER. Thank you, Mr. Chairman. I want to go back to the maritime user fee issue. Do I understand it correctly that if we pass what is presented in the president's budget, those fees, in fact, will be introduced, that will essentially trump the Prohibition and Authorization Act for this next fiscal year?
    Admiral LOY. There are probably people on the dais that have a better mechanical ability to answer that question, but my suspicion is that that is the case, sir. Mr. Chairman, I defer to you if there is a better answer in the room.
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    Mr. VITTER. As presented from the White House, it is part of the budget proposal for this year.
    Admiral LOY. Yes, sir, it is.
    Mr. VITTER. Regardless of the fact that the Authorization Act prohibits it until next year.
    Admiral LOY. That's my understanding, yes, sir, an appropriation would do that.
    Mr. GILCHREST. I'm not sure that Mr. Vitter has to worry about a user fee in the fiscal 2001, but we would have to have a statute to repeal the authorization of 1998. There is a little bit of a gray area toward the end of fiscal 2001, I don't know what that means, and I haven't looked at it closely enough to know what that means, but first of all, we would have to actually repeal that authorization. There is plenty of room ahead during the remainder of this Congress to discuss that issue, find some other way. I am not going to sit here and say we are not going—although, it doesn't seem likely we are going to pass a user fee in this Congress for fiscal 2001. That just doesn't seem like it is in the cards. The President is looking for revenue to help support the Coast Guard which we are as well, so we will work through that issue. That is a good question, Mr. Vitter.
    Mr. VITTER. Again, just so I am clear, the President's budget assumes that we will do what we are not likely to do, so therefore, without that action, there is something like a $212 million gap.
    Mr. GILCHREST. We are going to have to make up.
    Mr. VITTER. On the deep water project, I believe you indicated that what is there in the President's budget for this next fiscal year is basically what you asked for?
    Admiral LOY. It is precisely what we asked for. It was supported very strongly by the Department of Transportation and supported very strongly by OMB.
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    Mr. VITTER. If there were any plus up in that category without affecting, harming other Coast Guard accounts, would you support it and how would that usefully be used in advancing the project?
    Admiral LOY. Sir, the next dollars will be construction dollars essentially, so in my mind what is perfectly supported by the $42 million is the balance of our financial design work in the Deepwater project, which will get us up to the point of going to phase II and on to actual construction at the other end of the day. So serious money, if you will, we have a holding pattern in the 2002 budget. As we are designing it, $350 million will be appropriate—will be necessary for us to press on with the project in 2002, and then on into the outyears.
    But if we got more money in 2001, it would not be to address the requirements associated with getting us to the contract award, so it would essentially be, you know, long-year money that would be the front end of any construction dollars that might be used after 2002.
    Mr. VITTER. And for 2002, what would be the figure you would cite today as the ballpark appropriate figure to move forward on the right timeline?
    Admiral LOY. My guess is we are going to be asking for $350 million in 2002.
    Mr. VITTER. When the—.
    Admiral LOY. If I may, sir, I will clarify one thing there. Almost any numbers that are being used in that regard sort of presuppose that we know more than we know at the moment about what the three consortia are going to actually put on the table for their proposals, including the sequence of events associated with the acquisition of those assets and whatever we might be doing to the legacy asset inventory as part of that transition. All of those deliverables, all of those plans, if you will, the things like configuration management plans, the concept of operation plan, all of those kind of implementation arrays are deliverables under the current monies that are being spent in 2000 and asked for in 2001, and we really won't have a lock on what it will be that we go into 2002 for a bit longer until we begin to see these cards become face up on the table.
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    Mr. VITTER. When the contract is awarded, would you expect it to go to one team or would you expect to be choosing elements from the three different teams?
    Admiral LOY. I think many of you have seen this little design, which sort of is the timeline for the project overall. I would refer to that as our planning architecture. Clearly, there will be a contracting and budgeting architecture that comes into view, so to speak, as we design it, again, key to the ongoing exchange of information between the three consortia and the Coast Guard over the course of the functional design phase.
    Could you ask your question one more time?
    Mr. VITTER. Would you expect the contract to basically be awarded to one team or would you expect to be pulling the best elements from more than one team?
    Admiral LOY. The RFP that is on the street at the moment keeps the flexibility on our side of the coin, and that is exactly where we want to keep it as long as possible. I should also say, however, is that we have all of the best industrial minds of the Nation pulled together into three consortia, each out there designing an Integrated Deepwater System, so the projectivity of being able to take one from column A and one from column B and one from column C at the other end of the day, to me, at least, flies in the face a little bit of this effort that they are each undertaking to build their own integrated system of systems. Take a puzzle piece out of this one and think it will fit neatly into this one is a bit of a stretch. So my inclination would be to go down the path of understanding that, although we reserve the opportunity to select what is best for the Nation, the integrated effort that they are undergoing suggests that there will be three relatively unique freestanding options on the table, and we will select one of them. I don't want to prejudge anything because it is most important that we reserve the flexibility that we have all the way to the end of the project.
    Mr. VITTER. Thank you, Admiral.
    Mr. GILCHREST. Thank you, Mr. Vitter. I just have a couple of follow-up questions and we can have a second round if anybody else has any further questions.
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    Admiral, just a couple of years ago, many of us up here pushed hard for an increased amount of money to the Coast Guard for what we thought was a pretty dynamic innovative approach to drug interdiction. And I guess you are about a year into that now or so. Could you give us some words on the progress of that effort and how successful your interdiction efforts have been.
    Admiral LOY. And particularly the aircraft use of force.
    Mr. GILCHREST. The aircraft use of force and the problems we used to have with catching fast boats and how has this impacted that mode of transportation of drugs?
    Admiral LOY. With this committee and the Appropriations Committee's support and supplemental dollars that were made available to us in 1999, we did take and are enormously proud of the fact from concept to deployed reality in about 9 months, which is almost unheard of, the idea the aircraft use of force. STEEL WEB, sir, is a generic term for our overall effort with respect to counternarcotics.
    Again, when I took this job, one of the gaping holes in our effort was end-game capability. We were doing a great job detecting and monitoring and tracking, and then at the very end, the 60-knot fast boat full of dope was laughing on its way past the 20-knot Coast Guard cutter in the middle of the Caribbean. End-game capability became the issue to me to have a complete set and we have talked about that at great length. The aircraft use of force program deployed in a day-only environment about 6 months ago, and it was enormously successful. The four go-fast cases that it became aware of, it seized all four. There was an enormous amount of contraband seized. All four vessels were seized. I forget how many people were aboard, 12, 15, however many smugglers were aboard the four vessels were all seized. It was enormously positive in its initial deployment.
    We brought it back and refined it over the course of the last 4 or 5 months to go to the night as I remember suggesting to you that that was the next step that we had to do. Those were leased air frames that we used for the initial deployment. We returned those to Boeing, got more capable aircraft, including all the electronics that would be necessary for nighttime—.
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    Mr. GILCHREST. I know it is a little early, but is there any sense of a diversion of tactics by the drug smugglers as a result of the new aircraft use of force program?
    Admiral LOY. I think it is probably a little early that you can purely cause and effect the fact that we deployed that, but we are seeing a significant shift to the eastern Pacific corridor as it relates to major fishing vessel-size loads.
    Mr. GILCHREST. Does that then make it easier for you to interdict drug smugglers?
    Admiral LOY. No, sir, it doesn't. It is a very different dynamic in the Pacific. In the Pacific, just because of its sheer breadth and open area, we are very intelligence-based as it relates to successes in the Pacific, and we have been very successful. Over 1999, we had five different seizures of atleast five tons, one of which was 11–1/2 tons in the Pacific corridor. Terrific success there but keyed to intelligence enhancements. We got JIATF West in Alameda and JIATF East in Key West to put together an intelligence node in Key West that would serve both of them well and that has proven to be a leveraging agent of great value.
    Mr. GILCHREST. In the President's budget, is there sufficient funds to continue the interdiction policy you created in the Caribbean?
    Admiral LOY. We make the enhancement by going to what we think will be the full scope of deployment of aircraft use of force by the monies that are present in the President's budget.
    Mr. GILCHREST. Let me ask you a couple of questions closer to home. The Chesapeake Bay and YTLs were there this past winter. We had a few weeks of really hard ice. There was some discussion of sort of retiring those 65-footers on the east coast. If they had been retired, was there some alternative that could have been used up the tributaries into the bay that were frozen pretty solid?
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    Admiral LOY. The answer is, sir, we would have had great difficulty I think as a nation delivering home heating oil on time to the people that needed it, and not just the Chesapeake Bay, the Hudson River, the rivers up in Maine, all of whom who have been, in fact, suffering from this, particularly harsh winter and that cold snap. So I am delighted that we did not retire the WYTLs. As you know, in 2000 they are being operated on monies that we literally had to reprogram from maintenance accounts in order to make their operational reality real. We are going to need to restore those accounts.
    Mr. GILCHREST. We are going to get together with Olympia Snowe on the Senate side and make sure the dollars are there to provide for that service. Two very quick questions. One is Coast Guard Yard, fiscal year 2001, is there anything that we need to do here or otherwise to ensure the viability and the current workload levels for the next fiscal year?
    Admiral LOY. Not for 2000 and 2001. I think we are home free. Since our meeting over in Baltimore or Curtis Bay, I am sorry, we have directed some work from the Coast Guard to the Yard and the Yard has been able to, because of its excellent marketing efforts, find what is necessary to make the Yard solid for 2000 and 2001. I reserve for us the challenge of 2002 and the outyears, and that remains something that I am very concerned about.
    Mr. GILCHREST. Thank you very much. The last question, the very, very—at least in my area, extremely controversial issue of immersion suits that are actually a compromise that the Coast Guard has given to a number of areas around the country, especially in the Chesapeake Bay area for watermen that don't have the kind of income to buy those more expensive life rafts. But in that—in the Coast Guard policy, it talks about a low-risk area in terms of fishing vessel accidents where they wouldn't be required to wear immersion suits. I bring it up in the hearing not to ask you to eliminate the requirement of immersion suits in the Chesapeake Bay, but it is an issue that I would like to continue to discuss with the policymakers at the Coast Guard.
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    On the one hand, I realize that immersion suits, especially this past winter, or any winter, actually, if the water is 50 degrees and you are out there several hours you are going to have a problem. Some immersion suits provide you with an enormous amount of protection. However, immersion suits cost somewhere between $300 and $400. Some watermen say immersion suits are not necessary because they are always within a quarter mile, maybe half mile of the shore, and they can walk the shore in many areas.
    Of course, I know that is not true if they are in the middle of the Chesapeake Bay. So it is an issue that we would like to focus on over this next year. And I told Captain Miller from Baltimore that before the warm weather comes, hopefully sometime during the month of March, I want to get out in the bay, put on an immersion suit, jump overboard and see how fast I can get into the thing and how well I float.
    Admiral LOY. Sir, I look forward to working with you on that. The point that I would make, sir, is that the regulation actually calls for the inflatable raft. What gets us into even the discussion of the immersion suits is a Fifth District Commander decision to waive that requirement when immersion suits are, in fact, aboard to be used in place of the inflatable raft that would take survivors of a sinking fishing vessel. And even then it is under certain conditions. So we need to scrub that hard, sir. I look forward to doing that with you.
    Mr. GILCHREST. Thank you very much, Admiral. Master Chief, since you talked about TRICARE problems with a number of Coasties around the country and not being able to pay the bill and so on, I would like you to give us the names of those Coast Guard members that have had specific payment problems with TRICARE. Perhaps, this committee can look directly into those to problems see if we can solve them.
    Master Chief PATTON. Yes, sir, I would be more than happy to. Very one right here.
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    [The information follows:]

    [insert here]

    Mr. GILCHREST. We will take that one today. Thank you very much, Master Chief. Any other questions?
    Admiral LOY. Mr. Chairman, I would probably be remiss if I didn't mention when I came back from Alaska with this TRICARE Remote issue, the folks that own that program over in the Department of Defense have been enormously open to our engagement such that they understand that there are lots of people outside the so-called catchment areas that define the TRICARE Prime program, and we are working well with that and, in fact, the 2001 budget does contain monies for TRICARE Prime Remote that will be enormously helpful to people in Coast Guard families in the remote areas of Alaska and many other places.
    Mr. GILCHREST. Thank you, Admiral. Mr. DeFazio.
    Mr. DEFAZIO. Thank you, Mr. Chairman. Admiral, since the budget, as I recall your language was in terms of—I am trying to remember what exact word you used, you used two different adjectives. You used one for personnel and then you used another for the maintenance budget. It doesn't sound like a wildly enthusiastic sort of adjective. I am curious, we are deeming that the budget will be necessary to bring it up to an adequate level. I guess perhaps that isn't the word you used. I can't remember. I thought I had written it down but those funds won't become available until October 1. How are you going to plug the holes between now and October 1 if we get the full allocation in there?
    Admiral LOY. It is with great regret, sir, that I have had to actually direct my field commanders to back off the throttles of the operational Coast Guard to keep the hemorrhaging from going any further than if we had maintained the tempo that 2000 would normally have had. That will allow us to enter 2001 with the prospects of, first of all, the people end of things being dealt with very constructively in the President's 2001 budget— retention, recruiting, pay, health care, BAH—all those as I said before, K -N -O -W -N, underlined, the ones that we know about are covered in the budget for the Coast Guard. And a modest step towards recovery vis-a-vis C–130 parts, other aviation shortfalls and maintenance accounts, et cetera. But through 2000, unless there would have been some sustaining readiness effort undertaken by the Congress, we would not be able to keep our throttles where we want them in terms of delivering services to the American public.
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    Mr. DEFAZIO. If Congress was doing a supplemental and if they wanted to reinstate those levels, what would it cost for the remainder of the year? Do you have a ballpark number?
    Admiral LOY. Yes, sir. Let me give you a for instance, sir. I will give you a real number in a moment. Last year there were a number of people on both sides, Senate and House, who attempted to produce $200 million supplemental for the Coast Guard for readiness issues in 1999. 160 million of that was, as you may know, rolled into the normal appropriations process for 2000. So of the 40, 23 or so was used to pay bills, medical bills and other bills, and the balance was a very modest effort to replenish some parts lockers. So it gets to us 2000 in essentially the same kind of circumstance, only one year worse than we were in 1999. If there is a real number out there associated with Coast Guard readiness, my sense is it is probably close to 90 or $100 million.
    Mr. DEFAZIO. One other question about boating safety and education, prevention sorts of programs, the state recreational boating safety program. I understand the pressures on your budget. So let me just ask you to comment more generally on that. Given the division of funds between wetlands acquisitions and boating safety, given the increased revenue flowing into the fund with increased usage and more boats on the water, do you think that it would be wise investment and prudent for Congress to look at that apportionment and would it ultimately perhaps not only save lives, but perhaps even save money in addition to saving lives if we could invest more in the prevention and recreational safety boating programs?
    Admiral LOY. To the degree that it doesn't get to be a scoring issue that penalizes the Coast Guard's ability to administer that work, obviously I think the explosion in recreational boating deserves attention, —especially those monies that they themselves as you point out paying into the trust fund. TEA-21, as you know, sir, made a considerable dent in that process for state boating law administrators to be able to get voting grants to a much greater degree. I think it was the difference between about 57-, 58 million a year in TEA-21 compared to somewhere in the 30's that might have been the case prior to that.
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    So they got a significant boost with respect to that issue that you are describing in TEA-21. The balance, if you will, would take them, I think, to 70 million remains the issue with them, and I understand the issue with and for them. However, for the moment, if we, in fact, went in that direction, it would be at the expense that it would be scored against the Coast Guard's Operating Expenses budget, and there is an issue there that I can't abide, so I am sort of content that they just got a big raise for the moment, but I am also willing to sit down as I have already with the state boating administrators and the folks that are working that issue to see if there is something more constructive that we can do.
    Mr. DEFAZIO. Thank you, Admiral. Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. DeFazio. Anybody else?
    Mr. Taylor?
    Mr. TAYLOR. Master Chief, I want to thank you for bringing it to the attention of this committee the health care challenges and serving on armed services, I am because of that very much aware of confidentialities as a result of BRAC, promises recruiters made that were never backed up in law but as far as I am concerned, we have a moral obligation to fulfill. Our request of you is, to the greatest extent possible, between you and the commandant if you could supply to me the number of Coast Guards, both in active duty and retired that feel that promise is not being fulfilled, as far as active duty is concerned, how many, because of where they are stationed actually have to dig into their pocket to drive, fly, whatever, rent a hotel room to have their health care taken care of for their spouse or dependent because there are some efforts out there to try to close these loopholes.
    [The information received from Admiral Loy follows:]

    [insert here]

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    Mr. TAYLOR. I am also going to send, if you don't mind, a piece of legislation cosponsored by Congressman Abercrombie, Skelton and myself, that is trying to address this. And I am going to ask for your legal experts to take a look at it and see upfront to make sure the Coast Guard is included in this, and the fact you are under the Secretary of Transportation during times of peace, that somehow you are not excluded, should we be able to get this to become the law of the land.
    Again, shame on me for not thinking this and thank you for bringing it to my attention.
     I have served with a number of commandants and they have all been great ones, but you have been extraordinary. Master Chief, I have served with a number of senior master chiefs. Again, I think we have put together the best team the Coast Guard has had certainly that I can remember. Let me brag a little bit. I do want to compliment you people in the Eighth Coast Guard District 6, seven years ago was receiving, on a regular basis, very negative remarks, particularly from our commercial fishermen, felt like the Coast Guard was being heavy-handed with them. Some steps were taken by the then Eighth Coast Guard District Commander to work on a voluntary basis to inspect the boats at the dock as opposed to under way. It is a lot easier for everyone involved. And quite frankly, I can't remember in the past 5 years even one complaint along those lines, and so that is a tremendous improvement. I really want to compliment the caliber of people that you have. Again, in the past 5 years, I cannot think of one complaint along the lines of a search and rescue case or any other case. I think that is remarkable. Having said that, I have to mention one pet peeve.
    Admiral LOY. I thought there was a shoe coming.
    Mr. TAYLOR. Yes, sir. I am not ashamed to say I am a made-in-America nut. Those are the folks that pay your salary, the Master Chief's salary, my salary and probably the salaries of most of the people in this room. I want to compliment you that several American domestic manufacturers take great pride in saying we make the boats that the United States Coast Guard uses for such-and-such a purpose. And I would think it is an incredible endorsement for the layperson to look out there and say, well, if that boat is good enough for the United States Coast Guard, it ought to be good enough for my family. I recently saw a display at a boat show of a foreign manufacturer saying we make the engines for this particular type of Coast Guard vessel. And I really hate to see it. Those folks don't pay our salaries. Those folks' kids will never serve in the United States Coast Guard. So I really want to encourage, since we do every year, pass made-in-America language on every appropriations bill, every authorization bill, I would really encourage you to take a look at this situation that I brought to your attention because again, I think, to the greatest extent possible, we have an obligation just like that moral obligation on health care to look out for our folks. I think in that instance with just a little bit of work, that that could have been purchased domestically instead of overseas. I did want to bring that to your attention and hope it can be resolved before it goes into full production.
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    Admiral LOY. Thank you for the observation. As you know, you mentioned this to me once before, so I actually have been looking into it without appearing to be institutional in the sense that the Buy America Act was, in fact, adhered to in the due course of the procurement of the vessels that ended up having as a piece of equipment the engine on board, the RHI that was other-than-America produced. We will be attentive to your thoughts, sir.
    Mr. TAYLOR. Thank you. I hope you will accept the 99 percent compliments that were first.
    Admiral LOY. I do. Thank you very much.
    Mr. GILCHREST. Thank you. Mr. Vitter, any more questions? Mr. DeFazio?
    Mr. DEFAZIO. I thank you, Mr. Chairman. I forgot one other question I had regarding the budget for the Commandant. Commandant, I am sure you are familiar that the Coast Guard has pioneered a program for the indelible marking of aircraft parts. That is the extraordinary worldwide problem that we are not capable really of tracking life-limited parts, tracking parts that may not have been properly refurbished, make certain that parts have been retired that are critical, and the Coast Guard really has pioneered technology in this area. I am wondering if provisions could be made to continue or enhance that program in the coming year's budget?
    Admiral LOY. We are working very hard on that, sir, and as you say, it is unique. There are unfortunately some real issues associated with the barcodes being burned into metal and some other issues associated with the trackability of them over the life of the part as you are describing. But absolutely we are pressing down the road of being able to manage inventory, understand lifetime use of parts and optimize that as the support, if you will, end of the overall aviation program for the organization. So I wish I could tell you today that our initial foray into that has been easy, successful, piece of cake, and we are moving on.
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    That is not the case, sir, but it has not deterred us from continuing to understand the value of that at the other end of the day and finding where the problems are and fixing them along the way. So I would rather come back and give you a better answer, sir, when we have got a time line with some specific deliverables on it that goes directly to your inquiry, because I, too, agree with you. Not only are we wanting to do that in our aviation business, but that is what our FOS program is all about with respect to the navigation side as well. So the idea remains as sound as it was when you were enamored with it as was I. We have found problems along the way, and I need to let you know what they are. But we will press on.
    [The information received follows:]

    [insert here]

    Mr. DEFAZIO. Thank you.
    Mr. GILCHREST. Thank you, Mr. DeFazio. We have an oversight hearing on open ocean fishing reform on May 3 which we can deal with some of those issues, I guess. Two quick things in closing. One, in case anybody is interested, there is a 90-year-old woman that walked here from California who will be at the House steps between 12:30 and 1:00 advocating campaign finance reform. Just a public service announcement. Has nothing to do with anybody's campaign, I don't think. The other thing, I want to welcome—my nephew is here and he is been standing up for a long time, so we'll try to wrap some of this up. But Admiral Loy and Master Chief, we appreciate the information you have given us today and we look forward over the next year to working closely with you.
    Admiral LOY. If I may leave one thought on your mind, sir, I brought a piece of evidence of deferred maintenance that I wanted you to see. This transverse support member was cropped out of the Coast Guard Cutter DURABLE during one of her maintenance availabilities after it was deferred twice from going into that particular availability. I use it only as a graphic representation of not wanting to put my Coast Guard people that you just so eloquently applauded on board that cutter with that as its main support beam in the starboard quarter. The idea of deferring maintenance, whether it is as a result of the people end of it with pay, health care, BAH and such things, or the hardware end of it like overusing parts and maintenance used to keep an operational profile high, is a step in the wrong direction, and that is exactly why, sir, I have chosen to back off on the throttles this year and keep these kind of things ever from endangering my people.
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    Mr. GILCHREST. So noted, Admiral. Thank you very much. Master Chief.
    Our next panel is the Honorable Harold Creel, Jr., chairman, Federal Maritime Commission. He is accompanied by Thomas Panebianco, general counsel, and Bruce Dombrowski, executive director.
TESTIMONY OF THE HON. HAROLD J. CREEL, JR., CHAIRMAN, FEDERAL MARITIME COMMISSION, ACCOMPANIED BY THOMAS PANEBIANCO, GENERAL COUNSEL, AND BRUCE A. DOMBROWSKI, EXECUTIVE DIRECTOR

    Mr. GILCHREST. Mr. Creel, we appreciate the time you have taken to come over here and brief us on some of the issues that are important to you, and we want to express our support for your agency and look forward in this next coming year to working closely with you to resolve some of the mutual problems that we have with the Nation's maritime industry.

    Mr. CREEL. Thank you very much, Mr. Chairman, and Members of the committee. It is a pleasure to be before you again today and to present the President's fiscal year 2001 budget for the Federal Maritime Commission. With me today are my colleagues, Commissioners Del Won and John Moran, and our newest member, Tony Merck from South Carolina, a fellow South Carolinian. We are pleased to have him on board. Our fifth commissioner, Joe Brennan, couldn't be with us here today because unfortunately he had a funeral to attend in Maine.
    In addition, I am joined by Thomas Panebianco, our General Counsel, and Bruce Dombrowski, the new Executive Director of the Commission.
    The President's budget for the Commission provides $16,222,000 for fiscal year 2001. This represents an increase of $2,125,000 over our FY 2000 appropriation. However, I would like to point out that this amount is only $537,000 more than the amount authorized by the House for fiscal year 2000 in H.R. 819, and actually it is $90,000 less than what you authorized for FY 2001. This budget provides for 144 work years of employment.
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    The budget contains $12,463,000 for salaries and benefits to support the Commission's programs. This includes all salaries for FY 2001, promotions within-grade increases and an anticipated cost of living adjustment. It also contains funding for 12 additional positions, including full staffing for all five commissioners. Official travel has been increased only $18,000 over the FY 2000 level. This increase should help us provide better service to the ocean transportation industry, and more effectively accomplish our oversight duties.
    Lastly, administrative expenses have increased $286,000 over FY 2000. As we have noted in previous years, the commission's budget contains almost exclusively non-discretionary spending representing the basic expenses any organization faces in order to conduct its day-to-day operations and are crucial to allow us to effectively meet the responsibilities that Congress has entrusted to us.
    The majority of the increase over our FY 2000 appropriation is in staffing. The additional positions represent the recovery of lost ground in terms of the commission's staff and attrition in important areas which previously had to be absorbed due to budget restrictions.
    As you know, Mr. Chairman, the Ocean Shipping Reform Act of 1998, or OSRA as we call it, was enacted in October 1998 and went into effect on May 1, 1999. This statute significantly altered the Shipping Act of 1984, the primary statute relied upon by the Commission to oversee the ocean transportation industry. It has produced dramatic changes in the way business is conducted in this essential industry, and in turn, we have revised our mission to be consistent with our new direction.
    The Commission faced an extremely short time frame for promulgating new rules governing the industry. Working with the industry, we were able to effectuate as smooth a transition as possible to the new regulatory regime under OSRA. We adopted final rules in eight areas and will continue to assess our rules and discuss with the industry areas where they might be refined to eliminate unintended burdens. Consistent with the Commission's mandate to implement the policy objectives expressed by Congress in OSRA, on February 9, 2000, I advised this Committee and the other relevant committees in Congress of my proposal to restructure the agency. I am pleased to report that the FMC's reorganization became effective just two days ago.
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    We are allocating our resources as much as possible towards assisting consumers, resolving complaints, and helping those subject to our regulation achieve compliance. I believe it is consistent with OSRA's intention to foster an environment in which the government facilitates statutory compliance and reserves enforcement action for market distorting or otherwise egregious malpractices. There is still a Bureau of Enforcement and we intend for that Bureau to remain active and aggressive in responding to evidence of wrongdoing.
    Even as amended by OSRA, our statutory responsibilities include prosecuting certain proscribed acts, but our primary objective is to attain compliance, to bring entities into conformity with the law and not to penalize the unwary. The reorganization should assist us to better perform our other essential functions as well. For example, pursuant to our authority to address restrictive or unfair foreign shipping practices, we will continue to aggressively ensure that our trading partners not engage in restrictive, unfair, or non-reciprocal practices or policies that impede the United States' ocean commerce, either with respect to the carriers serving our trades, the shippers using those carriers, or the intermediaries and others whose services contribute to our ocean commerce.
    I am creating a permanent task force on restrictive foreign practices within the agency across several offices and bureaus so we can even more promptly and effectively respond to instances in which our authority to address such practices must be exercised. I am confident that this new structure will enhance the Commission's ability to meet its statutory obligations, and I look forward to reporting back to you on our success in this regard.
    Also, the commission has initiated a project to assess the long-term impact of the Ocean Shipping Reform Act on the ocean transportation industry based on its first 2 years in effect. We plan to examine whether OSRA is yielding the benefits envisioned and whether it has had any detrimental impacts on the industry as a whole or on a discrete segment of the industry. In particular, the OSRA Impact Study will explore changes in the shipper/carrier relationships stemming from the new service contract provisions, the role of pricing agreements and their relationship to capacity in this new environment, whether ocean transportation intermediaries have suffered any significant competitive disadvantages and the accessibility and accuracy of common carrier published tariffs. The study will also address the impact on the Commission's responsibilities and programs. We will, of course, share the results of this study with you on the Hill.
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    Mr. Chairman, I hope that my comments have served to give you a clear indication of the important work accomplished by the FMC. I respectfully request favorable consideration of the President's budget for the FMC so we may continue to perform our vital functions in fiscal year 2001. Thank you very much.
    Mr. GILCHREST. Thank you, Mr. Creel. The study is under way now?
    Mr. CREEL. We are just starting the preliminary work for that. I distributed an outline to the other Commissioners and they are taking a look at it and we should be underway very soon.
    Mr. GILCHREST. Who was putting together the study?
    Mr. CREEL. We will be doing it in-house across all the different bureaus in the Commission.
    Mr. GILCHREST. So they are giving you the input to create the model to determine the kinds of things you will be looking for?
    Mr. CREEL. Actually what the staff will do initially will be to go out to the industry and ask them as to what they think the issues may be. We have some ideas of what most of the issues probably are, but we want to get industry input as well. One of the issues that we are trying to determine now is how exactly to get input from the industry, whether to go through a procedure known as a notice of inquiry or go through some sort of polling of the industry.
    Mr. GILCHREST. You are then going to interview the industry to determine the kind of study that should be conducted?
    Mr. CREEL. To determine some of the issues. We know most of the issues, but we just want to make sure that we cover all of our bases and cover everything in the study.
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    Mr. GILCHREST. When you say ''the industry,'' what does that entail?
    Mr. CREEL. That includes carriers, the shipping companies, shippers, importers, and exporters.
    Mr. GILCHREST. Freight forwarders?
    Mr. CREEL. Right.
    Mr. GILCHREST. The whole gamut?
    Mr. CREEL. That is right, the whole gamut.
    Mr. GILCHREST. Did you say how long this study—.
    Mr. CREEL. What I hope to do is get it started right away and have an interim status report out by the first part of the summer and the final two-year report would be out in July or August of 2001.
    Mr. GILCHREST. I guess in a two-year time frame that will make—the Ocean Shipping Reform Act would have been in effect for about 4 years. You will have a good assessment of its success or failures or however we need to fine-tune it. Do you feel up to this point—I know it is fairly early—is ocean shipping more competitive now, would you say?
    Mr. CREEL. First of all, the 2-year study would end just after the Act had been in effect for 2 years. To answer the second part of the question, the Act went into effect May of 1999. In the first year of the Act's operation, what we found was that the carriers and shippers were negotiating service contracts somewhat like they had before. There wasn't a whole lot of innovation because we started with a new Act basically at the beginning of the contract cycle, so everyone was trying to tie up their contracts as early as possible. What we are seeing now is more interest in some innovation in contracting. I think as we go on, there will be more trust between the shippers and carriers with these confidential contracts—more innovation. And to answer your question, frankly, I have been surprised at how well it has worked. It was a long time in coming but at the end when everything was put together into legislation, I had some questions as to whether it would actually work as well as it has and I think, quite frankly, even the carriers were surprised at how well the confidential contracts worked.
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    Mr. GILCHREST. So there is a certain amount of confidence out there ?
    Mr. CREEL. There is. A surprising amount, actually. There are some parties that are still upset. The intermediaries are still upset because they felt like they didn't get what they wanted in the legislation, mainly contracting authority for confidential contracts.
    Mr. GILCHREST. Would you care to make a comment about Mr. Hyde's international ocean carrier antitrust immunity and how—that will probably come up again, and my feeling is that amendment to the Act would not pass, but if you could comment on that particular provision and if it were to pass, what do you think, if any, the ramifications would be?
    Mr. CREEL. On March 22 we will have a hearing at which I will testify before with Mr. Hyde. What I intend to say is that I think we need to give the Act a chance to work. As I explained to you, the first year I think is not a true picture of how contracting will work under the Act. I believe there is going to be more and more confidence and trust between the carrier and shipper, as a true consumer or a true business partnership, if you will, between the two seems to be developing. I am concerned that if we do away with the antitrust immunity now, a couple of things could happen. First, it could increase the pace of consolidations and mergers, thereby reducing the number of carriers.
    In that sort of situation, what you have is carriers that are controlled by their governments such as the Chinese carriers, or those that receive tremendous subsidies from their governments. They would be the winners, and those that don't have the advantages would certainly be the ones trying to catch up.
    So I have a serious concern about that. I think that we need to give the Act a couple of years to operate and antitrust immunity is only one piece of the puzzle. I should mention as well there are other issues that were part of the compromise as drafted, retention of antitrust immunity was one of the three basic pieces of the puzzle. Another was continued oversight by the Federal Maritime Commission, and we continue to do that, and antitrust immunity and confidential contracts are the others. If you pull out one piece of the puzzle, you have to look at the whole mix again.
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    Mr. GILCHREST. Thank you. That was an interesting answer.
    I guess you answered my next question. If the bill were to repeal international ocean carrier antitrust immunity law, then the carriers that are controlled by a government, for example, China would have an advantage and a three-legged stool would only have two legs.
    Mr. CREEL. That is my feeling, sir.
    Mr. GILCHREST. Thank you.
    Could you give us an update—.
    Mr. CREEL. May I just add one other thing as well? Also, outside the antitrust immunity for the purpose of setting rates, the shipping companies also have antitrust immunity to coordinate their services and they have created alliances where you have one ship coming across that has boxes on it from several different carriers that are actually competing, but the boxes are on the same ship. What this has led to is a more efficient operation, more efficiency means lower cost. And so it actually benefits not only the carriers but also the consumers, the shippers that import and export these goods.
    Mr. GILCHREST. Do you see any disadvantage? Has any big disadvantage arisen to freight forwarders?
    Mr. CREEL. I will be quite honest with you. Talking to folks out in the field when I have been around the country, the intermediaries, the freight forwarders and the NVOs have been more concerned with doing their business and getting their contracts signed than anything else. I can't speak for them as a group, but just the individuals that I have met with—I know there was an article recently in the Journal of Commerce to the same effect.
    Mr. GILCHREST. These people when talking to you, it is not their biggest priority?
    Mr. CREEL. That is right.
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    Mr. GILCHREST. Could you give us some update on your work and your efforts to open up China's maritime trading practices and to reform the Japanese port structure?
    Mr. CREEL. Yes, sir. First, on China, it is very timely that we are meeting and talking about this today because as we speak, there is a meeting going on in Beijing with the Maritime Administrator and his counterpart in China on these very issues.
    Mr. GILCHREST. Clyde Hart is there?
    Mr. CREEL. Yes, and Secretary Slater is there as well. Just last week it was reported in the press that he was getting favorable reactions from the Chinese on reform, but I must tell you that good words only go so far, and we need to see some concrete reform here. I am concerned their carriers are growing. The Chinese claim they are a developing country. Well, anyone that knows the Chinese fleet knows that they are beating the pants off of us in shipping and they are not a developing country when it comes to shipping. There is a brand new carrier, a Chinese carrier that listed itself with us on day one as a controlled carrier, China Shipping Container Lines. The press reports that it intends to grow its fleet to be in the top five within the next 5 years, in the top 5 companies in the world in the next 5 years, and that is a government-owned company. That has caused a great deal of concern.
    Mr. GILCHREST. Could you give us some specifics as to what Secretary Slater and Mr. Hart are trying to change in China?
    Mr. CREEL. Sure. What we are asking for is basically for our carriers to have the same sort of access in China as their carriers have here. We are not even going quite that far.
    Mr. GILCHREST. What is the difference between the access we give them and the lack of access they give us?
    Mr. CREEL. Particularly on branch offices, the branch offices that we are permitted to have there have to be within a certain range of a port they serve. You can't have them in the middle of the country. Of course, nothing like that restricts Chinese carriers here. Trucking, intermodal operations, port changes, all of those sorts of things are very restrictive and costly to our carriers, and their carriers are not required to abide by the same sort of restrictions here. And one possible sanction, if it were to come to that and I would certainly hope we wouldn't have to sanction their carriers because of the action of the Chinese Government, but we could impose the same sort of restriction on their carriers doing business here and let them see what it feels like, particularly when you have a new carrier coming into our trade, China Shipping Container Lines.
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    Mr. GILCHREST. Would it be real difficult for us to do that because of the two different government systems?
    Mr. CREEL. We could certainly do it. It wouldn't be an easy thing to do.
    Mr. GILCHREST. What would bring us to do that?
    Mr. CREEL. Well, if there is no agreement on some of these issues that Mr. Hart is trying to negotiate, at least some movement, and we haven't seen the movement yet.
    Mr. GILCHREST. How close are we to doing something like that or are we just sort of standing out there waiting to see what happens?
    Mr. CREEL. I hope we are not going to have to be close to doing anything. I would much prefer a diplomatic resolution as I told my Chinese counterpart, that at the end of the day—we can impose sanctions and if they can impose sanctions on our carriers. But eventually we have to get together and talk this thing out.
    Mr. GILCHREST. How would that work? Would you have the authority to do that?
    Mr. CREEL. Yes, unilaterally. Being an independent agency, we don't have to have the approval of the administration, as we did not with Japan. We imposed sanctions on Japanese vessels.
    Mr. GILCHREST. If Mr. Slater and Mr. Hart come back with virtually no change from the Government of China, do you have a next step?
    Mr. CREEL. Well, the Commission would have to vote on what our next step would be. We are going to have a briefing next week on what happened in Beijing and go from there, but as a Commission, we would have to look at it and decide where we would go.
    Mr. GILCHREST. What are the disadvantages economically to us now?
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    Mr. CREEL. Of going forward on sanctions?
    Mr. GILCHREST. No, not—the disadvantage with the present system. They have open access with us and we have very restricted access in China. Can you put a monetary amount on that?
    Mr. CREEL. I don't know a monetary amount. The carriers may be able to give you a better idea of that. I think it depends on the particular project. I know that SeaLand finally worked out a deal on a project in Tianjin on a port terminal project, a joint venture. It was costing them in lost revenue, I am sure, millions of dollars and whatever the lost revenue would be from not being able to do the things that they are able to do here with trucking or intermodal operations.
    Mr. PANEBIANCO. We would also be soliciting the information from the carriers themselves. In fact, we have information requests right now to Maersk/SeaLand, which is the new Danish company, which recently took over SeaLand's operations. We want to solicit their views on what we might do and what the problems are there: are they experiencing the same problems that SeaLand was experiencing when it was by itself. We also solicited information from the new Chinese shipping company and those responses—.
    Mr. GILCHREST. So you have got information from Maersk/SeaLand and Chinese shipping company.
    Mr. PANEBIANCO. We have information coming in by the end of this month.
    Mr. GILCHREST. I am interested to see the two different perspectives.
    Mr. PANEBIANCO. It will be enormously different. Part of the formula that goes into the decision as to what the Commission might do brings into account what the carriers themselves are experiencing and that will also help us fashion a potential remedy.
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    Mr. GILCHREST. Does the Chinese shipping company consider themselves a private entity or a government entity?
    Mr. CREEL. Depends who you are talking to. If they talk to us, they say they are a private entity. They have a minority interest owned by the government. If you talk to a government official, I don't know that they would say that.
    Mr. PANEBIANCO. They pretty much admit to being completely government owned, but they contend that they are not government controlled. That is a distinction that seems to escape us here but they are—their argument is although we are owned by our government, that is the nature of our economy here in China, but we are governed by market principles and we are competing just like any other carrier in the trade. But the fact is that they have the infusion of money and they are supported by their government, and it really isn't an analogy that can be fairly made, and that is the reason why the Commission treats them as what is called a controlled carrier, and we subject them to greater regulation as a result of that.
    Mr. GILCHREST. In regard to—the last comment you just made, so there is a distinction between a regulatory or statutory distinction between the Federal Maritime Commission's dealings with a government-owned shipping concern and then a privately-owned shipping concern?
    Mr. CREEL. That's right.
    Mr. GILCHREST. And they, I assume, are appealing to the Federal Maritime Commission to consider them private because then you would deal with them differently.
    Mr. PANEBIANCO. They are basically admitting they are government controlled and that—I am sorry, that they are government owned and that they are subject to these heightened regulations—our statutes. It is called the Controlled Carrier Act, and pursuant to that statute, we take special care to look at their rates to make sure that their rates are not predatory, to make sure their rates are not so low that they are driving other carriers out of the trades. And as a result, they have to under the current laws, under the current regulatory laws, they have to give us more notice before they lower rates so that they are not predatory on other carriers. So they don't like that, but they recognize that they are subject to that, and it is a matter of protest with them at the moment.
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    Mr. GILCHREST. If the rates are low, if you consider the rates too low, what do you do?
    Mr. PANEBIANCO. We have the authority to yank their tariffs and prevent them from operating eventually. We also have the authority to order them not to lower their rates that low.
    Mr. CREEL. That is a distinction between a government-owned entity and a private entity. We would not regulate rates.
    Mr. GILCHREST. I would assume Evergreen is private.
    Mr. CREEL. They are. We don't have rate regulation for privately owned—.
    Mr. GILCHREST. I see. Who else is government owned besides the Chinese?
    Mr. PANEBIANCO. The two Chinese shipping companies are really the only two major shipping companies that we have that are large and there is probably—and I don't have a list with me. I can supplement the record with our current controlled carrier list.
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    Mr. PANEBIANCO. There are maybe a dozen or 20 more that are smaller operations and sometimes they are in our trades or out of our trades at any given moment. When the Controlled Carrier Act was enacted, it was basically aimed at the Russians, at FESCO. They are no longer operating in our trades to the best of my knowledge.
    Mr. GILCHREST. Is FESCO still around?
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    Mr. PANEBIANCO. I believe that they are still around. I am not sure they are in our U.S. trades.
    Mr. GILCHREST. Were they in our trade? What did they bring here from Russia before?
    Mr. PANEBIANCO. They were carrying not just from Russia but from wherever, we were part of their loop.
    Mr. CREEL. They had a large fleet at one time.
    Mr. GILCHREST. Has that collapsed because of the collapse of Russia?
    Mr. PANEBIANCO. Yes. It was because FESCO was perceived to be having such low rates that the other carriers competing with FESCO weren't being able to fairly compete and it was because of that that Congress enacted the Controlled Carrier Act to make sure that they weren't injuring others. There were other Eastern European carriers, I believe. I am not comfortable giving you a list off the top of my head.
    Mr. GILCHREST. That is OK. Thank you.
    You talked about restructuring the agency. You have gotten somewhat less money so could you give us some idea of if you restructured your agency, was that due in part because of the continuing strain on the amount of—on your budget and how are you different now and can you still operate and do the job that we want you to do?
    Mr. CREEL. Yes, sir. Regarding the first part of that question, the reorganization was, in part, due to the funding restrictions, budget restrictions, but also because of the new Ocean Shipping Reform Act, and we wanted to make the agency reflect more the new mission that Congress had set out for us. We are able—due to, in fact, reorganization of the agency the cost itself will be minuscule, around $7,000 will do it inhouse. It is not costing much of anything to do that, but we just feel it better reflects our new mission. We are able to carry out our functions. But FY 2000 is going to be a tough year for us. Our appropriation was $1.2 million less than the President's request, $1.6 million less than authorized by this Committee. We made certain changes, cut administrative costs by 400-some-odd thousand dollars. We are still about a half million dollars short. We have a supplemental appropriations request up here for $490,000, which hopefully will get approved. Without that we may have to have days where we shut down at the agency and have furlough days.
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    Mr. GILCHREST. There will be days you are going to shut down in the next fiscal year?
    Mr. CREEL. In this fiscal year.
    Mr. GILCHREST. The year 2000?
    Mr. CREEL. Yes, sir.
    Mr. GILCHREST. Do you have any estimate of how many days that might be ?
    Mr. CREEL. Current estimate is 12 to 15, based on current expenses.
    Mr. GILCHREST. 12 to 15 in which no one in your employ will be working?
    Mr. CREEL. Either that stagger or the days that we are open, but everybody is not there on the particular days.
    Mr. GILCHREST. Well, we will get to work on that.
    Mr. CREEL. Thank you. I appreciate that.
    Mr. GILCHREST. Is there anything else that you want to bring to us, any need that the agency has with the new Ocean Shipping Reform Act? Are you stretched to the limits where you can't be effective with what you do? And how do you coordinate—Mr. Slater and Mr. Hart are in China right now. Is there an ongoing collaborative relationship between Mr. Slater, Mr. Hart, and yourself? I know there is somewhat different lines of responsibility there but can the three—can you three gentlemen and your staffs work together on these issues?
    Mr. CREEL. Certainly. And that is the idea. Because we are independent, we are not bound by their recommendations to us, but certainly the idea is for them to try to resolve the issues diplomatically and if that doesn't work, then we can step in. We do work with them closely. They advise us on what they're finding out, what the negotiations are with Japan, China, wherever, and if they aren't able to reach any sort of resolution, then we step in if the Commission decides to do that. I was just going to say I didn't answer you on Japan. With Japan, as you know, we took a very strong stance and came to blows over the Japanese port practices. I would like to say that by doing that, that Japan has rolled over on its back and that everything is hunky-dory, but it is not. They made certain commitments to the State Department. They haven't lived up to their commitments. On the other hand, we haven't heard the complaints that we had heard before from the carriers.
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    Mr. GILCHREST. Is that might be because they have just given up?
    Mr. CREEL. I think there are a couple of things going on. There were some issues pertaining to labor, shoreside labor, and also with the companies themselves not moving the cargo on land. Frankly, the Japanese financial situation had something to do with it as well, and I think the carriers have accommodated their needs in other ways—they have gone elsewhere. What the Japanese situation actually did was increase costs of doing business in Japan. If there is an alternative, then the carriers have taken advantage of that. It might not always be an alternative to Japan, but if Korea is an alternative they will go to Korea. We do rely on complaints of the affected parties to a large degree on these things. If we don't hear from them, we are not inclined to go forward.
    Mr. PANEBIANCO. Also, the Japanese have been moving in the right direction, just not quickly enough. Some of the means that they have to effect, to bring into effect, the commitments to improve the port situation there require legislation in their Diet, their legislature; the last we have heard is that they are expecting the legislation to become enacted during this calendar year. It is taking a very long time. The Japanese Diet does not act with the speed and efficiency of the U.S. Congress, Mr. Chairman. We can't fish you out of the Chesapeake, so we have to flatter you. It is a question of them moving in that direction not quickly enough and probably not as extensively as they should to honor all of their commitments.
    Mr. GILCHREST. Mr. Panebianco, you have an enormous sense of humor and it is well appreciated too.
    Mr. CREEL. Mr. Chairman, I would just like to add that we appreciate your support and the support of this committee not only this year but in previous years and you did a tremendous job on the Ocean Shipping Reform Act. I have to say I was very impressed, and as we gain experience under the Act, I am surprised and pleased that it has worked this well. I think most of the industry is pleased it has worked as well as it has, so I thank you for that. If we can get funding at the level that we have requested, the President's request, I think we can be much more effective in implementing the Act and doing what you expect of us. OMB has been very helpful to us this year. I think if we can get the appropriators on board, as you folks have been, then we can go forward and be very effective in implementing the Act.
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    Mr. GILCHREST. We will do our best to explain the complexity of the maritime industry to members who don't have that within their district, or doesn't fall within their frame of reference, but it is an important issue for this country. I will say that Helen Bentley, if she were here, would say hi and would wish all of you well. I will tell her if she is talking to me this week that we met with all of you. Mr. Creel, gentlemen, thank you very much for spending the time with us.
    Mr. CREEL. Thank you to all your staff as well.
    Mr. GILCHREST. Your testimony is very valuable. The hearing is adjourned.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]

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