House subcommittee hearing focuses on enforcement of U.S.-flag cargo preference laws
Following the release of a new Government Accountability Office report recommending annual public reporting on and greater oversight of U.S. government compliance with U.S.-flag cargo preference laws, the Subcommittee on Coast Guard and Maritime Transportation in the House of Representatives on September 14 held a hearing on the issue - "Cargo Preference: Compliance with and Enforcement of Maritime's Buy American Laws."
The hearing addressed key aspects of U.S. cargo preference laws, including Department of Transportation oversight and enforcement of the laws' requirements, non-compliance and maneuvering by some federal agencies to avoid using U.S.-flagged ships, and the vital role of cargo preference in ensuring the availability of cargo for U.S. merchant vessels.
U.S. cargo preference laws require that certain portions of certain U.S. government-impelled cargoes be transported on U.S.-flagged vessels. A topic during the hearing was the devastating impact to the U.S. merchant fleet caused by the reduction in the statutory U.S.-flag share of PL-480 Food for Peace exports, which was cut from 75 percent to 50 percent as part of a surface transportation bill approved by a House-Senate conference committee and then signed into law in July 2012. Discussion during the hearing included the prospects of restoring or increasing the statutory requirement for Food for Peace cargoes. Full coverage of the hearing will be published in the October edition of American Maritime Officer.
U.S. cargo preference laws, if properly enforced, supply cargoes for U.S. merchant vessels. The active U.S. merchant fleet supports a job base for thousands of American merchant mariners. With steady work in the U.S.-flag fleet, American mariners maintain and build the required skills and credentials in their specialized trades, which require years of training and experience to attain. In turn, U.S. mariners are available to crew U.S. defense sealift vessels during military and government mobilizations in times of war, conflict, national emergency and humanitarian crisis.
Without active and qualified U.S. merchant mariners, the military would be left to rely upon foreign mariners on chartered foreign vessels for defense sealift operations. It is worth noting the vast majority of all military cargoes and vehicles transported for a mobilization abroad, both during the initial surge and the longer-term sustainment, are shipped by sea.
The significance of this can be found in perhaps lesser-known lessons learned during Operations Desert Shield and Desert Storm in 1990 and 1991. The U.S. merchant fleet had experienced a steep decline during the two decades preceding the first Gulf War, particularly in the 1980s. As noted by Gen. Hansford Johnson, Commander of U.S. Transportation Command at the time, availability and timeliness of unit-equipment-capable ships from both U.S. and worldwide commercial fleets were not adequate to meet the Commander in Chief's surge requirements.
Although no U.S.-flagged sealift ship that was activated for Desert Shield and Desert Storm failed to sail because of crew shortages, the numbers presented a serious problem. Then-Secretary of Transportation Samuel Skinner warned that the Defense Department activated less than half of the emergency sealift force and it nearly exhausted the nation's supply of merchant mariners.
As a result, from late December 1990 to the end of the war, chartered foreign-flagged vessels carried nearly 40 percent of U.S. unit cargo. For a variety of reasons - political, religious, pay disputes and, most commonly, fear of entering a combat zone - crews on at least 13 foreign ships carrying U.S. cargo hesitated or refused to enter the area of operations. The military cargoes from the balking ships had to be transferred to other vessels willing to deliver. The balkers caused delivery delays during U.S. operational buildup and active deployment.
This situation underscored the problem with dependence on foreign shipping in future conflicts, especially if the United States needs to act without the worldwide support it experienced during Desert Shield and Desert Storm. However, the precipitous decline in the U.S. merchant fleet in recent years, driven in part poor enforcement of cargo preference laws, threatens to place U.S. Transportation Command in a position similar to that faced during Desert Shield and Desert Storm.
In his opening remarks, Chairman of the Transportation and Infrastructure Committee Congressman Peter DeFazio (D-OR) welcomed U.S. Maritime Administrator Rear Adm. Ann Phillips as a witness at the hearing and remarked on the state of the U.S. merchant fleet as it related to U.S. cargo preference.
"I'd like to acknowledge Rear Admiral Phillips' first appearance before this subcommittee in her new role as maritime administrator. It is great to see you again and I look forward to hearing how the Maritime Administration (MARAD) plans to better enforce cargo preference compliance," Rep. DeFazio said.
"The U.S. depends on a robust merchant fleet not only for economic purposes but also for national security," he said. "This past year, we've seen the negative effects of an industry dominated by foreign companies and interests wreaking havoc on our supply chain. It is counter to U.S. interests to increase reliance on foreign-flagged vessels. For decades we've seen the U.S.-flag fleet shrink, dropping from 199 vessels in 1990 to 84 presently. The flag-of-convenience system has exacerbated this issue, allowing companies to flag their vessels under countries that lack labor, safety, and environmental standards.
"Cargo preference provides a backbone to support the dwindling internationally sailing U.S.-flag fleet, especially when coupled with other incentive programs like the Maritime Security Program. Cargo preference refers to the various laws requiring government-impelled cargo to be carried on U.S.-flagged vessels. Without it, the U.S. would not have the means to carry defense cargo overseas in times of war and would instead rely on foreign-flagged vessels."
In his opening remarks, Chairman of the Subcommittee on Coast Guard and Maritime Transportation Congressman Salud Carbajal (D-CA) introduced other witnesses who would be testifying at the hearing, including Director of the Physical Infrastructure Team at the Government Accountability Office Andrew Von Ah.
"Two days ago, the GAO publicly released his team's report on 'Actions needed to enhance cargo preference oversight.' After months of interviews, research and discussion with federal agencies, maritime labor, and cargo carriers among others, the GAO has found evidence of a lack of oversight, inconsistent application, and non-compliance among government agencies and contractors," Rep. Carbajal said. "As a result, GAO has recommended that cargo preference be reported to the public on an annual basis, and that the DOT take steps to fully enforce cargo preference requirements.
"I'd like to emphasize the fact that we will be discussing a long-standing public law that has never been adequately enforced - not a new proposal," he said.
"As I expect our witnesses will make clear, compliance with cargo preference laws is closely tied to the sustainment of American jobs and national security. It requires that government-impelled cargo be shipped overseas using U.S. flagged vessels - in other words, vessels crewed by U.S. mariners, owned by Americans, and abiding by U.S. laws. Guaranteeing a steady supply of cargo through cargo preference programs equates to job security for these hardworking citizens. Along with the Maritime Security Program and the Jones Act, cargo preference ensures that the U.S. seagoing maritime industry does not disappear completely."
Ranking Member on the subcommittee, Congressman Bob Gibbs (R-OH), addressed the thwarting of cargo preference enforcement and its impact on the U.S. merchant fleet and defense sealift capabilities.
"Today we are going to look at the implementation of U.S. cargo reservation, or cargo preference, programs. And especially at the failure to write, much less implement, the cargo preference enforcement regulations Congress mandated in 2009," Rep. Gibbs said.
A provision of the National Defense Authorization Act for fiscal year 2009 known as the 'Inouye amendment' provides MARAD with enforcement authority regarding cargo preference requirements - specifically the abilities to:
- Direct government agencies and organizations to utilize U.S.-flagged vessels to transport cargo not otherwise subject to cargo preference in equivalent amounts to cargo shipped on foreign vessels in violation of cargo preference laws, and
- Impose a fine of up to $25,000 on any person who knowingly violates the Cargo Preference Act or a MARAD implementing regulation pertaining to the law, with each day of continued violation of the law considered a new and separate violation subject to a fine
"All Department of Defense generated cargoes, and 50% of other Federal agency generated cargoes, must be carried on U.S-flag vessels with U.S. crews," Rep. Gibbs said. "In conjunction with the Maritime Security Program, this provides the U.S. with an international commercial fleet of 84 vessels. These vessels and the U.S. mariners that crew them provide the crucial capacity to meet future U.S. national defense sealift needs.
"Unfortunately, the agencies which generate cargo shipments take a short-sighted view and have tangled up MARAD efforts to write cargo preference enforcement regulations in the interagency regulatory review process. In essence killing those regs before they are even implemented," he said.
"I look forward to hearing witness testimony today, and especially how they believe the regulatory hurdles that have prevented MARAD from writing and implementing cargo preference enforcement regulations can be overcome."