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OCTOBER 8, 2002


Mr. ALLEN. I wanted to ask whether DOD has any separate security agreements (SSAs) with other U.S. flag carriers, independent of the MSP program?

General HANDY. No, DOD does not have any Special Security Agreements (SSAs) with other U.S. flag carriers independent of the MSP program. Currently, there are two shipping companies possessing Special Security Agreements (SSA) granted by the Defense Security Service (DSS): American Automar, Inc. and Maersk Line Limited. American Automar, Inc. has a SECRET clearance and Maersk Line Limited has a TOP SECRET clearance in conjunction with Department of Defense sealift operating agreements executed by the Military Sealift Command.


Mr. TAYLOR. General, I am one of the ones who has some hesitation about the idea of a foreign entity owning the ships that our nation is relying upon. I think it leads to a lot of unintended consequences. And I think part of that is the declining mariner pool to foreign owners that are more inclined to hire folks from other countries where they will work for less money. It is just the way of the world.

There is a related situation going on that I was wondering if you were aware of. And that is, one of the things that we can count on for our mariner pool has been the coast-wide trade, even though they are working on offshore supply boats and oceangoing tugboats, some of these vessels are very large. An unlimited master's license is an unlimited master's license, whether he is practicing on an offshore supply boat or a supertanker.

Something that is going on-in fact, the comment period, I believe, ends today or tomorrow is there was recently an outfit. And I believe the name was Neighbors Drilling Company. And they, like some other corporations-Stanley Tool comes to mind-have decided that they sure like all the benefits of being Americans, but they do not like paying American taxes.

So they have gone through what I believe is called an inversion. Using the 1996 Coast Guard Authorization Act, which was intended to allow people to be able to finance their vessels anywhere in the world to get the lowest rate, they are now chartering themselves as a Bahama corporation and saying, "No, that is just the company that is loaning us money." But they want to turn around and participate in the Jones Act, which is for U.S.-flagged, U.S.-owned, U.S.-made, U.S.-crewed.

Since I would think that part of the labor pool that you are going to depend upon if there is ever a real national mobilization would include inland towing, would include offshore supply boats, would include coastal tugs of that nature, for your immediate ramp-up, and since if this is allowed to continue and become the norm, I see this as turning, in effect, the end of the Jones Act, where we can, in effect, be having Mexican tugboats going up and down the Mississippi River, where we could be having Bahamian coastal freighters going from port to port in the United States. I was wondering if your agency has weighed in at all on this comment period? Because I do know the Coast Guard is making comments. I do know the vice commandant is coming to see me sometime today, as I am going to weigh in on this. But since I think it effects very much so your ramp-up labor pool, I was wondering if you were a) aware of it and b) had taken the time to say anything?

General HANDY. One provision of the Coast Guard Authorization Act of 1996 promoted lease financing for vessels engaged in the coastwise trade by eliminating citizenship requirements for leasing companies and removing other obstacles to securing financing. However, the Conference report makes it clear that this lease financing provision should not undermine long-standing principles for the coastwise trade, including the principle that vessels operated in the coastwise trade should be U.S. built and operated and controlled by American citizens.

Proposed Coast Guard regulations to implement the Act provoked lots of comments. As you might expect, the comments of companies that are participants of the Voluntary Intermodal Sealift Agreement (VISA) and doing business with DOD in peacetime varied considerably and came from differing points of view.

From a readiness perspective, it is my understanding that the proposed regulations generally would still require the use of U.S. built, U.S. flagged, U.S. crewed vessels in the coastwise trade. If the final regulations end up this way, U.S. mariners still would be employed on these vessels and these vessels would still be subject to requisitioning.


Mrs. DAVIS OF VIRGINIA. Have we increased our pool or maintained our pool? It was my understanding it is dwindled.

General HANDY. The merchant mariner pool has declined. As we look out into the future, the most current analysis suggests that we will be more than 1,000 mariners short of our requirement by the 2005 timeframe, which is literally right around the corner. And, I would add, that current estimates lack the clarity we would like. It's possible that the actual shortfall could indeed be even higher and that concerns me. That is one reason USTRANSCOM is assisting MARAD in their ongoing study which should provide better resolution on the extent of the mariner shortfall. And so, every endeavor that we can take to sustain and increase where possible that U.S. mariner pool, we're certainly in favor of and endorse.


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