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OVERSIGHT OF THE PROGRAMS OF THE U.S. MARITIME ADMINISTRATION
THURSDAY, SEPTEMBER 24, 1998
U.S. House of Representatives,
Subcommittee on Coast Guard and Maritime Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:10 p.m., in Room 2167, Rayburn House Office Building, Hon. Wayne T. Gilchrest (chairman of the subcommittee) presiding.
Mr. GILCHREST. The subcommittee on Coast Guard and Maritime Transportation will come to order. We're here to welcome Mr. Clyde Hart this morning, or I guess it's this afternoon, as the Maritime Administrator, to discuss various issues of concern to the subcommittee. We want to welcome and congratulate Mr. Hart on his appointment. And we look forward to working with you, Mr. Hart, for a number of years to come.
We welcome everyone to this oversight hearing today to discuss the various programs and other responsibilities of the Maritime Administration. And we especially, once again, welcome the Honorable Clyde Hart in his first appearance before this subcommittee, and his willingness to be with us today is greatly appreciated.
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During this Congress, our subcommittee has held two hearings on the administration's policies on scrapping vessels owned by the Navy, the Coast Guard, and the Maritime Administration. I personally visited the ship scrapping site of the U.S.S. Coral Sea in Baltimore, and talked with Government and private individuals involved with that operation.
At our last hearing in June, we discussed the recommendation of the administration's Ship Scrapping Panel, which included representatives from the Coast Guard and the Maritime Administration. Although I think the administration's Ship Scrapping Review Panel came up with some good recommendations, we will closely follow the implementation process to ensure that the policy addresses environmental and worker safety concerns. I'm committed to working with my colleagues in the Congress and the administration to develop a responsible approach to the ship scrapping needs of the Federal Government.
I am glad that Mr. Hart is available to bring us up to date on the administration's latest actions in this area, which I become aware of this morning. I understand that there is a 1-year moratorium on all exporting of ships to be scrapped.
Mr. HART. That's correct, Mr. Chairman.
Mr. GILCHREST. We're actually happy with that decision. I think it gives us a positive window of opportunity to take a very clear look at this whole issue, and find some positive solution.
Last July, our subcommittee held another hearing on the needs of the U.S. maritime transportation system, including the needs of U.S. waterways and their intermodal connections. At that hearing, we heard testimony that if current trends continue, our maritime transportation system may not be adequate to handle the surge in international trade into the next century. The Maritime Administration's recent report to Congress on U.S. maritime policy states that, ''Waterborne commerce, foreign commerce, valued at over $620 billion in 1996, has grown roughly one-tenth the size of America's $7 trillion plus gross domestic product.''
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This situation is critical, and I'm looking forward to participating in November in the national conference sponsored by the Department of Transportation. And so Mr. Hart, if you have any information on that, we would really appreciate it.
Mr. HART. Mr. Chairman, we'll make sure that we make every effort to get you there.
Mr. GILCHREST. Thank you very much.
Mr. HART. We'd like to have you there.
Mr. GILCHREST. I also await the administration's proposal to fund port and harbor improvements, and we'll discuss this issue today.
Finally, I'm aware that the FBI is currently investigating allegations of illegalities in the Maritime Administration's reserve fleet program. I understand that Mr. Hart cannot discuss this matter today, but I encourage the Department of Transportation to cooperate fully in the investigation so it can be concluded as soon as possible. There were a series of newspaper articles concerning this FBI investigation recently, and one of the CIS employees, Scott Jacobs, said that this was a shot across the bow to all those who may be involved in this kind of activity in the future. I hope it's more than a shot across the bow. This is a shot into the bow of the ship of greed, to paraphrase a statement made by Mr. Jacobs of the Criminal Investigative Services. This is an issue that this subcommittee will look at very, very closely and follow up to ensure that the integrity of the U.S. Government stays in tact.
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I now recognize, if he has time to catch his breath, the ranking member of the subcommittee, Mr. Clement, for any statement he may have.
Mr. CLEMENT. Thank you, Mr. Chairman. Good to have all of you here today. Thank you for scheduling today's hearing on the maritime programs of the U.S. Maritime Administration.
On July the 29th, this subcommittee held a hearing on the U.S. waterways needs. I believe that the Maritime Administration is ideally suited to help us and other modal agencies at the Department of Transportation coordinate an international transportation system to help speed exports and imports through our port system.
I look forward to hearing from MARAD's new administrator, Clyde Hart, on his vision for the future of Maritime Administration. While MARAD has primarily been focused on sea-going vessels, over 1,000 tons, I believe that we must look at our entire maritime industry, including ferries, small passenger vessels, coastwise theater services, and coastal bulk transportation to help see what can be done to increase the number of vessels and amounts of cargo and passengers transported.
This subcommittee has worked closely with the Coast Guard on many programs. They have a vast database of vessels operating in the United States. I believe that the Coast Guard database can help MARAD examine trends in the various U.S. flag markets. It's time for a new vision for MARAD. While providing for the vital sealift necessary to support U.S. military operations overseas is important, it's not the only mission that MARAD should be focused on. MARAD is responsible for promoting all U.S.-flag vessels regardless of size and military usefulness. I believe that the Maritime Administration can help promote the growth of new jobs in the U.S. maritime industry, not simply helping slow down the rate of decline of the larger U.S. flag ships.
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I look forward to hearing Mr. Hart's personal vision and goals for the Maritime Administration, and how he's going to guide MARAD into the next century.
Thank you.
Mr. GILCHREST. Thank you, Mr. Clement. Now, I'd like to recognize the distinguished chairman of the full committee, Mr. Shuster, for any remarks he may have.
Mr. SHUSTER. Thank you very much, Mr. Chairman. First, I'd like to congratulate you, Mr. Hart, assuming your responsibility. We're very pleased you're there, and we look forward to working very closely with you.
Mr. HART. Thank you, Mr. Chairman.
Mr. SHUSTER. Maritime issues are relatively new to this committee since we've had our jurisdiction expanded, and we really want to focus on it. In fact, I have said, and I emphasize today, that in the next Congress there are two modes of transportation in which I think we have to give special emphasis. One is aviation and the other is ocean shipping. And I think the issue of making sure that we have a first class ability to ship American products around the world is becoming more and more vital. I saw a statistic just a month or so ago that I think tells a lot of the story, which is that if you have a plant in America and you want to ship a product overseas out of a sea port, on average you have to ship that product 1,500 miles to get to the sea port. In Germany, they only have to ship their products 300 miles; and in Japan they only have to ship their products 30 miles, which shows the absolute importance of having highly efficient intermodal systems getting to the ports, and then getting out of the ports, and getting the product shipped overseas.
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So I am very much dedicated to our giving very substantial attention and focus to the whole issue of ocean shipping. Part of this, of course, relates very much to the question of how we're going to fund our ports and harbors. We're looking forward to the administration's recommendations. It's an issue that the Congress must deal with. We've got to make our ports more efficient, our harbors, our waterways. And I want you to know that this is going to be a very high priority of this committee in the next Congress.
And I thank you again for appearing here today.
Mr. HART. Thank you.
Mr. GILCHREST. Thank you, Mr. Shuster. Finally, we'd like to welcome the ranking minority member of the full committee, Mr. Oberstar.
Mr. OBERSTAR. Thank you, Mr. Chairman, both for recognizing me and for calling this hearing, which is extremely important. And I think Chairman Shuster sized it up very well, and we concur completely in the objectives he has set forth. As this Congress has been the Congress of surface transportation, the biggest bill ever in the history of the Congress, which will be to Chairman Shuster's everlasting credit, we must in the next Congress do as well, perhaps not in dollars, but certainly in policy for aviation and for maritime affairs.
I served for 18 years on the Merchant Marine and Fisheries Committee, and gave a great deal of time and energy and thought to these issues that now are under your jurisdiction, and which have rightly come to the Committee on Transportation and Infrastructure so that we now combine all modes of transportation, as we properly should.
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I've followed with great interest the oversight hearings, held over a period of many, many months by the then chairman of the Merchant Marine Committee, the distinguished gentleman from Virginia, Tom Downing, which I would recommend any member of this committee reading because those hearings are a compendium of knowledge about policy and operation of our maritime programs of which construction differential subsidy was a very important one and no longer in existence. The operating differential subsidy program is being phased out, and I think to our detriment.
As other countries recognized maritime as a vital underpinning of their national security and of their national economy and subsidized and supported those, but recognizing that it's very difficult for such capital intensive sectors to be self-sustaining, they put enormous amounts of capital into modernizing their fleets, and making them competitive in the world marketplace.
At the end of World War II, we had 16 million deadweight tons of shipping in the United States. We had 2,480 vessels in the U.S. Merchant Fleet, but 20 years later, we were ranked not first any longer but eighth in the world and that was dead last. By the time I concluded my service on the Merchant Marine and Fisheries Committee to serve on Foreign Affairs, we had only 320 merchant ships. Nineteen of our shipyards were in bankruptcy. That's not acceptable for a Nation that was founded by seafarers. We have to recognize that our major cities were ports before they were cities, and that 75 percent of our population lives along the waterways, whether the inland, the rivers and lakes or on the coastal regions, salt water coast of this country.
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And the Maritime Administration is the focal point for national maritime policy. It has to recognize that role and, Mr. Administrator, we remember your service on the Senate Commerce Committee, and the splendid work you did there, and your fine background. I think Secretary Slater made a splendid choice in bringing you here.
I hope you'll come visit the Great Lakes. It was 200 years of maritime activity before an Administrator of MARAD actually discovered the Great Lakes, that was Bob Blackwell. We didn't even have a maritime office on the Great Lakes until Administrator Blackwell's regime. It was a great step forward. We on the Great Lakes appreciate having the support of MARAD. We are the fourth sea coast of the United States. I hope you come visit those ports and see some of the 130 million tons of diverse cargo that are shipped, more than goes through the Panama Canal on the Great Lakes.
And I just want to emphasize our strong support, my strong support, for the Jones Act, and to assure that we will look carefully over any raids or assaults upon cabotage, certainly by countries who do not accord us comparable opportunities.
Those are issues of great importance to maritime labor, and to sea ports of the United States, to shippers in this country, and as we look to the future to reform, or modernization of, or an adaption of laws at whatever viewpoint various interests have in this country, and to remember one thing: If we don't protect our maritime fleet, we will become a second-rate nation. I welcome you to your new challenge.
Thank you, Mr. Chairman, for scheduling this hearing.
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Mr. GILCHREST. Thank you very much, Mr. Oberstar. Without objection, any opening statements or questions by members will be made a part of the record.
Mr. Hart, welcome. We have a vote. We'll be back in about 15 minutes. We're now in recess.
[Recess.]
Mr. GILCHREST. The subcommittee will come to order.
Once again, Mr. Hart, welcome. I understand—did I understand correctly from somebody, you're from New Jersey?
TESTIMONY OF CLYDE J. HART, JR., ADMINISTRATOR, MARITIME ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION
Mr. HART. Yes, that's correct.
Mr. GILCHREST. Where are you from in New Jersey?
Mr. HART. Well, we always say Exit 14C, but it's Jersey City.
[Laughter.]
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Mr. GILCHREST. Well, I was born at Exit 12.
[Laughter.]
Mr. GILCHREST. We were probably born though, perhaps, before there was a turnpike.
Mr. HART. Well, I won't speak for you, but I think that's true with respect to me, yes.
Mr. GILCHREST. I know I remember when they built it, people were talking about it. Jersey City, I was in the Marine Corps with some people from Jersey City.
Mr. HART. Oh, really?
Mr. GILCHREST. One was a—I can't remember his first name. His last name was Carter. And the other fellow's name was I think it was Bogorski.
Mr. HART. I'm aware of a Chris Carter who was in the Marine Corps about the same time you were.
Mr. GILCHREST. In the 1960's?
Mr. HART. Yes, about 1964.
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Mr. GILCHREST. I was there 1964 to 1968.
Mr. HART. Yes, actually the same years my brother was in, but I do know a Chris Carter who was in one of my brother's outfits.
Mr. GILCHREST. In Vietnam or?
Mr. HART. In Vietnam.
Mr. GILCHREST. I was with Carter in—do you mind, this will only take another 45 minutes? Family reunion here.
[Laughter.]
Mr. GILCHREST. We'll have to talk about that, Mr. Hart.
Mr. HART. Yes, thank you.
Mr. GILCHREST. And we welcome you, and we look forward to your testimony, sir.
Mr. HART. Thank you, Mr. Chairman and members of the committee. I'm very pleased to be here. This is my first testimony on the House side.
First of all, Mr. Chairman, let me say that while I cannot speak about the ongoing investigation into the Military Sealift Command, please be aware that we are cooperating with the investigative authorities, including the FBI. We will continue to do so. No one wants this investigation closed successfully more than I do, and MARAD has pledged to the Office of the Inspector General at DOT, as well as the FBI, and the Justice Department that we will give them every cooperation for as long as they require it of us.
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Second of all, I'd like to thank the members of the committee for their kind words about the Maritime Administration and the job that MARAD has been tasked to do. We take great pride in what we're being asked to do, and we are aware of how important we can be and maritime is to the Nation.
First, to tell you a little bit about myself, and I will be brief so we can get to the important things. It's safe to say that I have long had an interest in the areas of transportation and public service. Most recently, prior to my appointment as Maritime Administrator, I served as Democratic senior counsel to the U.S. Senate Commerce Committee. In that position, I advised committee members on legislative issues and oversight matters, and assisted in the development of policy positions and legislative initiatives on a broad range of issues in transportation, such as the reform of the trucking industry, pipeline safety, reform of Amtrak, the sunset of the old Interstate Commerce Commission, and the Maritime Security Act of 1996.
Prior to working at the Commerce Committee, I served in a number of positions with the Interstate Commerce Commission, and had the opportunity to serve as the ICC's agency management counsel, trial attorney in the Office of the General Counsel, and as special counsel for the Office of Compliance and Consumer Assistance. I also practiced law in Washington specializing in the areas of antitrust, banking, EEO law, labor, and transportation. I began my legal career in Washington as law clerk to the Honorable United States District Judge Aubrey E. Robinson, Jr.
I believe that these many years of varied experience allow me to approach the challenges I will face as Maritime Administrator with a fresh outlook, an open mind, and a commitment to ONE DOT. I am very excited about the opportunities that await me as Maritime Administrator. As I stated during my confirmation hearing, there is no more important industry issue than the continued existence and well-being of a U.S.-flag fleet. The United States is a sea power and must remain so. We, as a Nation, must find ways to increase the U.S.-flag fleet because what we don't own as a Nation, we cannot really control. I never want to see the day that we cannot meet our sealift needs in an emergency using American ships and crews.
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We must also ensure that the Nation's ports are able to compete in the global economy. Every day, millions of tons of cargo move through American ports carried on ships. A primary issue for many of our ports is, of course, the need to stay competitive in the 21st Century.
Mr. Chairman, as you know, Secretary Slater has established the overall priorities for the Department of Transportation. They are: ensuring the safety and security of our Nation's transportation system; continuing strategic investments and initiatives to improve America's transportation infrastructure; and bringing common sense to Government to provide a DOT that works better and costs less. And we intend to meet our greatest challenge, to build a transportation system that is international in reach, intermodal in form, intelligent in character, and integrated and inclusive in nature.
MARAD's own strategic goals are an outgrowth of DOT's. They are: to assure an intermodal sealift capability to support national security interests; to enhance the competitiveness of the U.S. shipyard industry, including repair and related industries; to improve intermodal transportation system performance through advanced technology and innovation; and to increase the U.S. maritime industry's participation in foreign trade and cargo and passenger movement in the domestic trades.
In my written testimony, I discuss agency programs in the context of these goals, but I would be remiss today if I did not underscore once again the Administration's strong support for the Jones Act. The Jones Act is an essential element of our Nation's maritime policy. Just as I stated at a hearing held in the Senate Commerce Committee on this issue last week, I can repeat before you that our need to maintain domestic shipping and an industrial shipbuilding base for national defense purposes and economic security must be a priority. Cabotage, or the reservation of a nation's coastwise trade exclusively for that nation's own vehicles, is common among maritime nations of the world. Over 40 maritime nations maintain cabotage in some form, such as domestic ownership and crewing requirements. Those countries that do not have a domestic build requirement, generally have some form of domestic fleet subsidies or shipbuilding subsidies. The Jones Act fleet receives no direct subsidies.
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The importance of the Jones Act, including its U.S.-build requirements, has been consistently supported by those who are most familiar with its implications for national security. Most recently, Assistant Secretary of the Navy John Douglas stated in a letter to the Honorable Kay Bailey Hutchison, Chairman of the Subcommittee on Surface Transportation in the Senate Commerce Committee, that the Navy strongly supports the Jones Act and opposes any changes in the law. In addition, the former Commander-in-Chief of the United States Transportation Command, and the current Deputy Commander-in-Chief, have made it clear that they support the Jones Act for providing the root structure to the strategic trans-oceanic sealift capabilities.
During a military conflict, domestic carriers are part of the pipeline moving sealift cargoes from inland points to coastal ports for shipment to the theater of operations. In addition, domestic carriers continue to support the civilian economy and move the raw material necessary to supply wartime production in the U.S. industrial base. I would like to provide you with a copy of Assistant Secretary Douglas' letter for the record.
The requirement that U.S.-flag vessels operating in the domestic trade be U.S.-built, U.S.-crewed, and U.S. citizen-owned ensures the continuation of a domestic merchant marine and shipbuilding industry, important goals for the United States and MARAD.
Mr. Chairman, if the Jones Act is weakened or eliminated, the underpinnings of our ship construction industry will be weakened and eventually collapse. This law is necessary to the well-being of our economy and national security.
Before I conclude, I would like to also briefly mention two subjects that I believe are important to our maritime industry and to the continued efficient operation of the Maritime Administration: the merchant marine academies and ship scrapping. The U.S. Merchant Marine Academy and the State maritime academies train the finest and most highly skilled mariners and transportation specialists in the world. The Maritime Administration is committed to continuing its role as leader in providing the skilled transportation specialists necessary to meet our national security and economic needs now and in the future. This includes developing graduates with expertise in intermodal transportation management, and ensuring that our mariners meet international maritime training and education standards. We are also committed to ensure that adequate licensed mariners are available to meet the Nation's sealift crewing needs in the event of a national emergency.
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Mr. Chairman, I know of your interest and concern about issues pertaining to the proper disposal of obsolete Government-owned vessels, most of which reside in the MARAD and U.S. Navy fleets, and which have gained prominence and visibility in the last year. I am aware that this subcommittee held two hearings just this year seeking to identify the problems of ship scrapping and pursue possible solutions. The sale of obsolete vessels has historically been a positive source of funds to offset the need for Federal appropriations for the improvement of our NDRF, for State maritime academies, and a national maritime heritage grants program. We are working within the administration to move forward with our ship scrapping program.
This need has been underscored by a recent release of oil from the vessel, EXPORT CHALLENGER, located in our James River Reserve Fleet site. Although the release was relatively minor, the costs of addressing the spill and pumping the oil out of the tanks as required by the Coast Guard is expected to cost in excess of $1,000,000. Although the vessel had already been sold for $14,000 to a scrapper in Texas at the time of the spill, the title had not been transferred, hence MARAD was liable.
Mr. Chairman, I fear a recurrence of costly incidents, like the EXPORT CHALLENGER, and I am eager to work with you on this important issue. MARAD and the Navy continue to update their respective ship disposal programs, and to implement the recommendations of the Interagency Panel on Ship Scrapping. For example, MARAD has revised its invitation for bid to include a safety and health plan to specifically address worker health and safety issues; and we are currently limiting sales to the domestic market.
As you know, just yesterday, Vice President Gore issued a memorandum to Secretary Cohen and Secretary Slater placing a further interim moratorium on efforts to award contracts or transfer vessels for the scrapping of vessels overseas through October 1, 1999. However, the memorandum, recognizing the statutory deadlines applicable to MARAD, provides for an exception to the moratorium by the Council on Environmental Quality. Exemptions would be based on factors such as exigent threats to the environment resulting from deteriorating ships; the lack of a domestic ship scrapping industry capacity sufficient to meet MARAD's needs to remove vessels from the fleets quickly; or the environmental and worker safety safeguards presented in the particular proposal for overseas scrapping. However, no such exemption can be presented prior to January 1, 1999.
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I will be pleased to provide a copy of the Vice President's memo for the record.
That concludes my testimony, Mr. Chairman. I would be happy to take any questions that you or any of the members of the committee might have.
Mr. GILCHREST. Thank you very much, Mr. Hart. Can you give us some idea about the Vice President's Executive Order to place a year moratorium on exporting ships to be scrapped——
Mr. HART. Overseas.
Mr. GILCHREST. ——overseas. Can you determine how and where the worst ships in the fleet will be scrapped? I know you've put out this bid, and I guess the bid is due at the end of the month?
Mr. HART. November 18, I believe the bids are due back.
Mr. GILCHREST. November 18th. Are there sufficient facilities in the United States right now to accommodate the ship scrapping needs of our fleet?
Mr. HART. Well, one of the things we hope to find out, Mr. Chairman, with this latest Invitation For Bid (IFB) is exactly that. We don't know how many ship scrapping organizations there are, or how many would be induced to begin ship scrapping operations. We just don't know. We're hoping that this IFB will shake the trees, and if people think it's economically feasible, they'll start such operations. We're worried about that, as you know, because even the ones we've identified can only take so many ships at a time. If they only have the facilities to take one or two, that leaves 23 others backed up in the pipeline which can present an environmental danger until they are finally scrapped.
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Mr. GILCHREST. Now, Senator Mikulski had a bill, I understand she withdrew it, on the Senate side, at least in part talking about a pilot program to scrap U.S. ships. It was fundamentally based on the fact that if we spend money to build the ships, we ought to spend money to scrap the ships. Is the administration pursuing anything in that area?
Mr. HART. Well, we have always, MARAD has always used the money from scrapping and divided it among the State maritime academies, the Merchant Marine Academy and other programs such as aquiring newer ships for the NDRF. The problem that arose with the ship scrapping program is that in the past, we would get an average of $108 a ton for those ships. The last successful bid we received was $1.85 a ton domestically, so that leaves a hole in quite a few budgets. So we're always looking for ways to try to maximize the revenues. We're under a mandate to get the most we can from ship scrapping consistent with all other U.S. laws.
Mr. BATEMAN. Would the chairman yield on that subject for a moment?
Mr. GILCHREST. Sure, I'll yield to the gentleman from Virginia.
Mr. BATEMAN. Thank you. I especially appreciate it in view of the fact that I have someone that I must leave to meet in my office, but this business of ship scrapping, Mr. Hart, and I welcome you to this committee and look forward to welcoming you before the merchant marine panel of the National Security Committee, which I chair.
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Mr. HART. Thank you, Mr. Chairman.
Mr. BATEMAN. I am, frankly, still shaking my head in amazement that the article in the newspaper announcing that the Vice President has issued Executive Orders that this or that be done or not done. I am amazed that the executive power of the United States of America is now reposed in the Vice President. But, be that as it may, I'm glad that you're putting some focus on the fact that it costs a great deal of money to scrap vessels of the United States, a very great deal. Navy estimates for scrapping of vessels which must be scrapped run to something like $600 million, which no one is providing the money to do. What it will cost your administration to scrap vessels that are in the idle fleets, one of which is moored in the James River in my district, no one is addressing that question, nor has anyone really addressed for too long the very substantial question that you have ships in that fleet that are going to have to be scrapped or otherwise they're going to sink in the James River. And if the Vice President is so concerned about environmental concern in Bangladesh or somewhere, I wish he'd wake up and get concerned about the environmental detriment to these ships sinking into our rivers and off our coasts.
If I seem a little excised about this matter, excuse me, but I am.
Mr. HART. I understand, Mr. Bateman, and I don't want to leave the impression that it's not of interest to us. We at MARAD have been aware and are aware of the problem of the deterioration of the ships. We know that if we don't resolve this problem quickly, it may cost us as much as $800,000 to drydock ships while they're waiting to be scrapped. We understand that problem and we are hoping, as I mentioned to the chairman before, we're hoping that the new IFB will give us some idea of who's out there, who wants to take on this job of scrapping these ships so that we can do it in consonance with all U.S. health and safety laws.
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Mr. BATEMAN. Well, I appreciate the somewhat delicate position this new order places you in, and I'm also very aware that your administration knows of this problem, and its significance, and its depth. I just wish those who went around issuing Executive Orders, or purporting to be Executive Orders, understood the dimensions of this problem, and that they'd come forth and give you the money and give the Navy the money to be able to scrap these ships because the one thing that's immutable is they've got to be scrapped.
Thank you, Mr. Chairman. I appreciate your indulgence.
Mr. GILCHREST. Your welcome. I would follow-up by saying that there is flexibility within this Executive Order that ships where there's an urgency, where there's a potential danger that the ship will sink and there is a place in India or Bangladesh or some place else that can take that ship, that ship will be sent to that area.
I also want to make a comment that I think this is a rather large issue that hasn't received enough attention, the kind of attention that it needed to have. But with this Executive Order, it draws a lot of people's attention to this issue and we can find some solutions to the problem. If we don't have the facilities in the United States to deal with these several hundred ships that need to be scrapped, then we can make arrangements. I would assume proper arrangements to have these ships scrapped in a foreign port in an appropriate manner so we don't export toxic problems to some other country?
Mr. HART. Well, that's my understanding about the Executive Order and let me make one reference to one other thing and that is in the National Defense Authorization bill in the Senate right now. The Navy has a provision for a pilot project in which they would pay ship scrappers to take the obsolete vessels and scrap them. If the pilot project is approved, between that and the IFB, we might have an industry to scrap the ships or at least put some more visibility behind finding a permanent solution to the problem.
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Mr. BATEMAN. Mr. Chairman.
Mr. GILCHREST. Mr. Bateman.
Mr. BATEMAN. I wish that the time and circumstances were such that I could explain to you, Mr. Hart, how that pilot program came to be in the Defense authorization bill, and what I think is a distinct peculiarity, I'll say, that underlines it. But thanks very much. And if the staff has a copy of this new ''Executive Order,'' I would certainly like to have it. And I hope we'll inquire as to the legal justification.
Mr. GILCHREST. Thank you, Mr. Bateman. I can assure you that in the next session of Congress that we will hold specific hearings dealing with ship scrapping. I think my five minutes are up. I have a number of other questions, but I'll now yield to Mr. Clement.
Mr. CLEMENT. Thank you, Mr. Chairman. Mr. Hart, I also want to congratulate you on your new position, looking forward to working with you very closely.
Mr. HART. Thank you very much, Congressman.
Mr. CLEMENT. I agree with your statement that we must find ways to increase the size of the U.S.-flag fleet. What market areas is MARAD researching for possible expansion of U.S.-flag vessels, and what is MARAD going to do to help U.S. flag owners enter these markets?
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Mr. HART. Well, there are a couple of bright spots, as it were. One is the work in TEA 21, ISTEA, on fast ferries. There is now a program to try and grow that industry. There are several States that are very interested in ferries with respect to relieving urban congestion. Hawaii is a case in point. There are parts of Hawaii where you just can't go over 35 miles an hour in a car. They are exploring the idea of ferries, both inter-island and intra-island on Oahu.
The domestic offshore oil industry is doing well right now. Drill rigs are being built, and the ships to supply drill rigs are being built. That's another area that's doing well, but, of course, that always depends on the price of oil worldwide.
We also have some Title XI funding and we've been glad to see that there are those interested in both shipbuilding and the associated industries. Those are some bright spots we've identified. What we will try to do is ensure that there's a level playing field for those that want to enter the industry, and try and promote these solutions as part of a problem.
And may I add, this is consistent with our ''ONE DOT'' concept because the ferries that I have been talking about will certainly be of interest to the Federal Highway Administration in trying to relieve urban congestion. We've been trying to work with them to get this program off the ground.
Mr. CLEMENT. As you state, the funding of dredging projects is vital to our commerce. However, bulk commodities may not be competitive in the international market if they have to pay for their share of a dredging project. Should a user fee for dredging be imposed if it will make U.S. commodities uncompetitive in the international market?
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Mr. HART. We're keenly aware of the economic impact of a user fee. I was in Seattle not more than a week ago, and frankly, I heard from both the port of Seattle and the port of Tacoma with regard to a user fee. And then when they were done, there were two American carriers—or one American carrier and K-Line which also gave me the same message that any sort of user fee would not be welcomed by a significant number of the maritime industry. We are aware of the problem that is occasioned by a user fee, and the Administration is also keenly aware we must have have dredging done. That is crucial.
Mr. CLEMENT. A number of agricultural interests have complained about their perceptions concerning the impact of the Jones Act on their businesses. What can be done to try to promote the entry of bulk carriers into our coastal markets for these groups? And does MARAD have a role in solving this problem, or should it be left to the private sector?
Mr. HART. Well, let me say this that the marketplace will determine, with a fair amount of certainty, what's economically viable for any industry. And while it may be that bulk carriers are not the answer to that particular problem, I would note that the tug and barge industry has really stepped up in providing service to the agricultural growers and the agricultural shippers. They have a lot of tonnage moving by barge, and that seems to be alleviating the problem.
Mr. Clement, I'm the first to admit that there is a problem with regard to the agricultural shippers. I've heard it in a dozen different forums over the last couple of months. We are trying very hard to solve the issue. Secretary Slater and Secretary Glickman of the Department of Agriculture have met, and issued a Memorandum of Agreement to try and work together to come up with solutions, but it may not be that the bulk carriers are the solution. It may be that the barges are, or at least a part of it.
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Mr. CLEMENT. Well, following up on that, how important is the tug and barge sector to the domestic maritime industry? And don't these type of vessels provide low cost reliable transportation services to the agricultural community?
Mr. HART. I couldn't have said it better. I think that's correct. I think it's one of the fastest, if not the fastest growing segment in the maritime community. And I think they are providing excellent service at a reasonable cost, and all the information I have leads to that conclusion.
Mr. CLEMENT. Mr. Hart, the House and Senate Coast Guard authorization bills have provisions prohibiting foreign flag ships that have been detained by the Coast Guard from carrying U.S. Government preference cargo. Does the administration support these proposals?
Mr. HART. Congressman, I'm not aware of those specific proposals. If I could get back to you and provide that information on the record—but, frankly, rather than to lead you astray, I'd just like to provide that for the record.
Mr. CLEMENT. That'll be fine for the record. Thank you, Mr. Chairman.
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Mr. GILCHREST. Thank you, Mr. Clement. Mr. Johnson.
Mr. JOHNSON OF WISCONSIN. Thank you, Mr. Chairman. Mr. Hart, you said one of your goals was to increase the intermodal nature of the
transportation system, and I wanted to know if you had some specifics on that?
Mr. HART. Oh, I have several ideas, Congressman Johnson. I'm not sure that they're fleshed out, but let me tell you what I see as the problem. You can have all of your ports dredged to 55 feet, and you could take the largest ships known to man and put them in the harbors, but it's not going to do any good if I don't have land-side access to those harbors and ports. If I can't get rail and truck off the docks and into the counties where the products are wanted, we're all wasting our time. I think that's a really important job. I think we've just begun to scratch the surface on that. Any port you talk to, I don't care where it is and I don't care how much land it says it has, in 20 years, is going to be pressed for land. We need to determine what we need to provide that kind of access. That's what I mean by trying to increase the intermodal. It's just not a ship issue. It's also a train issue. It's also a truck issue.
Mr. JOHNSON OF WISCONSIN. Will this be addressed—I think Secretary Slater is having a conference on water navigation coming up in November?
Mr. HART. November.
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Mr. JOHNSON OF WISCONSIN. Will this be addressed?
Mr. HART. This is one of the five focus groups that will look into various aspects of waterways management.
Mr. JOHNSON OF WISCONSIN. One of the other things that you talked about, the Maritime Security Program, it provided assistance for 47 U.S.-flag ships in foreign trade. And that program is a success. But what do you think we can do in other ways or more to significantly increase the size of the U.S.-flag fleet?
Mr. HART. Well, I think we can look at what other countries do with regard their fleets. There are things that have been brought up before. There are tax incentives for building within the country. There are tax reductions for mariners. Some countries manage to do that. These proposals have come up before, and I understand that they're enormously complicated and require the jurisdiction of several committees. But those are at least two things that other countries have found somewhat successful.
Mr. JOHNSON OF WISCONSIN. Earlier, when Mr. Oberstar was here, he talked about inviting you to see the ports in the Great Lakes. The other great inland seas that we think are important, for instance, in my district, considered small ports, Green Bay and a little one in Marinette. But Green Bay, for instance, that port has a $60 million impact on the region economy; and to us it's a figure important—if I tell you that it's the equal importance of the economic impact of the Green Bay Packers, everybody knows that economic impact, but they don't realize the port's impact. What do you see as the Great Lakes' ports role in your job and what are you finding to help expand that role?
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Mr. HART. MARAD has an associate administrator responsible for the area of inland waterways. It's enormously important. It's going to be even more so as trade increases, and we move to the 21st Century. The inland waterways will provide even more percentage of the traffic than it does now. And, again, as I said, the Port of Green Bay, it's another port. We should not pick winners and losers, but discuss with the ports and find out what they need to be successful, what they need to increase the cargo and the goods that goes through them, and what helps economic development of the entire area.
Mr. JOHNSON OF WISCONSIN. Thank you. That's all I have for now, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Johnson. I have just a couple of more questions with the indulgence of the members of the committee. And if you think of any more while we're going through this, we can have another round.
Mr. Hart, in the report to Congress of the U.S. Maritime Policy, May, 1998, there's an interesting statement in here dealing with the dredging issue that I'd like to read in part: ''MARAD is actively working with other members of the National Dredging Team to resolve differences among participating Federal agencies concerning dredging, and to assist ports in regional dredging teams in resolving dredging and dredge material management problems.'' Could you tell us who is on the National Dredging Team now, and what other Federal agencies that you work with or will continue to work with? I'd really like to either have a hearing, or certainly get the members of the subcommittee hooked in, not only with the National Dredging Team to see what proposals they have, some solutions to where to put the dredge materials, how to manage the dredge disposal sites that are out there right now that are causing problems. But I'd like to get all the Federal agencies together who are working with that team to see what some of the issues that we are now faced with.
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And we talked just before the hearing, and you mentioned 20 years, and that's about the time frame, at least in my mind, that we have before we are literally on the cutting edge of running out of places, upland sites for dredge material. So I don't know if you know who the National Dredging Team is now?
Mr. HART. Well, I think you would benefit from having some members of the dredging team before you. Of course, the team includes it's the EPA, the Environmental Protection Agency, the Council on Environmental Equality; and, the Army Corps of Engineers the primary dredger. They should all come before you along with the port authorities from any number of States. That's a good start. Probably, the U.S. Coast Guard also, and probably the U.S. Navy. That would be my beginning list, and I'm sure we could expand it as we went along.
Mr. GILCHREST. Thank you. There's also a number of times in this report that MARAD mentions a ''national policy,'' a national policy on many of the maritime issues, but in particular what I'd like to focus in on, at least in the next session of Congress, is a national policy as far as the depth of U.S. channels or channels in State waters to U.S. ports. It seems fairly clear to me that the international steamship owners benefit from the U.S. taxpayer dredging approach channels to U.S. ports. And while ships are getting bigger and bigger, and the competitive nature of the U.S. ports to each other, to continue to dredge. And then Members of Congress needing to appropriate those funds for those dredging activities. I really would like to spend some time looking at the U.S. policy as far as dredging is concerned. Where we put the disposal sites? What are the costs? Where the State enters the picture, where the private sector enters the picture? We may not have the biggest maritime fleet, but we are, without a doubt, the biggest customer for the maritime global industry. And I think that we need to use a little intelligence and maybe even flex a little bit of our muscle, our position, to ensure that dredging is done with the proper understanding of the economic engines that the ports supply in those particular areas around the country, but also the cumulative impact on the marine ecology, and where all that plays out. So that will be a pretty keen interest of the subcommittee.
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A couple of other very quick questions. Can you give us some idea of the progress? Changing the subject now. The progress of Quincey and Philadelphia shipyard facilities?
Mr. HART. I'd be glad to. With regard to Quincy, as you know, that is a Title XI commitment, and the first interest payment was made on time in June in the amount of $1.7 million on the MARAD guaranteed commitment. They are looking for a ship construction contract, as I understand it.
With regard to Philadelphia, Kvaerner shipyard of Norway, I believe, has reached an agreement with the State and City of Philadelphia to take over the shipyard. There is no Federal money involved in that. But Kvaerner has agreed to put some money into it and to build ships there to see if we can jump start the Philadelphia shipyards again. As I understand it, they're both on track, but we get our information about Philadelphia second-hand since we don't have any commitment with them. But, again, the Quincy yard is on schedule.
Mr. GILCHREST. Thank you. Those two facilities seem to have some very aggressive, competent people to accomplish that rather extraordinary task.
Last question, Mr. Hart, the Merchant Marine Academy. Can you tell us how we can help with some of the backlog of maintenance problems that they're experiencing there?
Mr. HART. Well, we know that there's a backlog, we're trying to work through what needs to be done in terms of priority and how we can best address that. I will keep the committee informed with regard to that. It may be, frankly, a matter of money. And then again, it may not. We're going to try to make some determinations, and I'd be pleased to come and address the committee or meet with any of the members of the committee to go over that.
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Mr. GILCHREST. We'd like to help you in that area. I serve on the Board of Visitors for the Naval Academy, and while it looks like it's a stunning bit of architecture on the outside, there's a lot of problems on the inside. So we don't want that to occur for too long.
Are there any other—Mr. Clement?
Mr. CLEMENT. Mr. Hart, I realize you've recently traveled to the Far East to examine some of the trade barriers to U.S. shipping. How serious are these trade barriers, and what steps do you plan to take to address these problems?
Mr. HART. I think the barriers are serious. I think that U.S.-flag carriers face difficult problems in both China and Japan. With regard to China, we thought we had an agreement with the Chinese government that we would support COSCO, which is the Chinese carrier, for an exemption to allow them to match competitor's rates on 24 hours notice. We supported them. And in return, they were going to routinize the line of call applications process. In other words, there's a process by which our U.S.-flag carriers call in their ports, and the application process we think is longer and more involved than it has to be. The Chinese promised to address that. They promised to address an issue of a port facility in Tianjin in northern China. They have not done what they promised they would do. We had a treaty with them with regard to our ships operating and their ships operating within United States' waters. We have not renewed or extended that agreement. So the next move, in how to deal with this frankly, is up to the Chinese.
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With regard to Japan, there is an issue about their port practices. I think stranglehold is not too soft a word to put on the JHTA, the Japan Harbor Transport Association which basically runs stevedoring for any carrier in Japan. We have had difficulties, our ships have had difficulties dealing with the JHTA. The Japanese Government says that that is largely a private matter between the U.S. company and the JHTA into which the Japanese government is unwilling, we think, to lend the proper hand. Again, this is serious. We have told them we would like them to use their best efforts to try to break this log jam. That's where that is. But I do note that the State Department is sending Assistant Secretary of State Larson, to Asia, for further discussions with those governments on these issues.
Mr. CLEMENT. Well, I wanted to ask you about the Japanese. I know we imposed that, what $100,000 fine per Japanese ship that came into U.S. waters?
Mr. HART. Correct.
Mr. CLEMENT. Did we collect any money or was it set aside before?
Mr. HART. No, we collected. As a matter of fact, the Japanese Government complains to this day that those sanctions are still outstanding, and they've had to collect this money and pay us this money. They would like them lifted.
Mr. CLEMENT. So it hasn't been lifted?
Mr. HART. No, they haven't been.
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Mr. CLEMENT. Okay. Thank you.
Mr. HART. My pleasure.
Mr. GILCHREST. Thank you, Mr. Clement. Mr. Hart, thank you very much.
Mr. HART. Thank you.
Mr. GILCHREST. We enjoyed your testimony. You did a great job. We look forward to seeing you hopefully, if we're all still here, in the next session of Congress.
Mr. HART. Thank you very much, Mr. Chairman.
Mr. GILCHREST. Yes, sir. The subcommittee is adjourned.
[Whereupon, at 3:35 p.m., the subcommittee adjourned subject to the call of the Chair.]
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