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This is the first of what I hope will be several additional hearings

relating to the maritime security program. The next hearing will address

issues relating to commercial shipbuilding and the MSP program. I hope

that hearing will also address additional incentive programs—such as needed changes to our tax laws. We may also need to hear from other

components such as the bulk operators.

Before we proceed to markup, I believe the panel will need to hear

from those within the government who set the requirements for commercial reserve sealift capability. Accordingly, I will invite the head of the Transportation Command, General Handy, to testify. We all know that if we do not get his support for the key elements that reauthorization of MSP will be very difficult. Quite frankly, I think these two gentlemen recognize that we are not just getting access to ships in the Maritime Security Program but also the infrastructure that goes with them. We need to hear the importance of that part of the package.

Finally, after we build the record, I want to get the Administration before this panel to hear their view, get their support and most

importantly-receive a commitment to include funding for a new program in

their budget.

I want to thank Mr. Allen, the ranking member for his support and

guidance, and I would now like to recognize the gentlemen from Maine for any comments he might wish to make.

Statement of

Mr. Robert J. Alario


Offshore Marine Service Association

Before the

House Armed Services Committee

Merchant Marine Panel

July 16, 2002

C:\Documents and Settings\alasselle\Local Settings\Temporary Internet Files\OLK8\Statement of Robert Alario July 02.doc

Good morning Mr. Chairman, ladies and gentlemen. My name is Robert J. Alario. I am privileged to serve as President of the Offshore Marine Service Association, based in New Orleans, La. My association represents 250 companies engaged directly or in general support of offshore oil and gas exploration, drilling or production, worldwide. A list of our members is attached, for the record. Our members and crews operate in excess of twelve hundred vessels worldwide.

We wish to thank you, Mr. Chairman, distinguished members of the Panel, for this opportunity, first and foremost, to express our fundamental support for an effective reauthorization of the U.S. Maritime Security Program. At the same time, however, we are compelled to express our opposition to the repeal or relaxation of the Section 2 U.S. Citizenship provisions of law governing companies that would own and operate ships under the Maritime Security Program.

While OMSA companies do not operate ships in the Maritime Security Program, we are concerned that the proposed change to U.S. maritime law governing U.S. Citizenship requirements (Section 2 requirements) for vessels operating under the U.S.-flag poses, in our opinion, a more fundamental, potentially corrosive threat to the citizenship requirements for operation of U.S.-flag vessels. We feel that the proposed change would, inexorably and inevitably, erode our ability to truly control the ownership, loyalty and reliability of access to vessels operating in our nation's domestic and offshore maritime sectors that presently fall within the Jones Act, as well as within the MSP. We have been assured that the proposals to modify ownership requirements from Sec. 2 to documentation citizens to qualify for operation of U.S. flag vessels within the Maritime Security Program will not translate into an erosion of citizenship standards relative to Jones Act operations. We want to believe, but our experience does not support this thesis, unfortunately.

If Congress is urged today, by parties supporting the premise that documentation citizenship is equivalent to Sec. 2 citizenship, and Congress is persuaded by them that it is acceptable for U.S.-flag ships to be operated, as a matter of course, in our U.S. to foreign trades by foreign companies holding a Special Security Agreement with the Department of Defense,

why would we not expect that Congress would eventually be urged by these or other parties to accept legislation which would allow that the same standard would also be sufficient for companies operating vessels in our domestic and offshore trades. We contend that, in fact, this aggressive strategy by foreign owned companies is currently in play. Foreign companies have recently succeeded, because of loosely drafted legislation, in penetrating U.S. ownership protections previously afforded by the Jones Act. We are concerned that the proposals that are expected here would add another portal through which foreign interests will be able to circumvent, directly or indirectly, U.S. ownership requirements affecting the Jones Act.

I would like to call your attention to the Declaration of Policy of the United States, embodied in the Merchant Marine Act of 1936 (46 App. USC 1101). Section 101 of the Act states:

"It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine




sufficient to carry its domestic water-borne commerce and a substantial portion of the
water-borne export and import foreign commerce of the United States and to provide
shipping service essential for maintaining the flow of such domestic and foreign
water-borne commerce at all times,

capable of serving as a naval and military auxiliary in time of war or national

owned and operated under the United States flag by citizens of the United Sates
insofar as may be practicable,

composed of the best equipped, safest, and most suitable types of vessels, constructed
in the United States and manned with a trained and efficient citizen personnel, and
supplemented by efficient facilities for shipbuilding and ship repair.

It is hereby declared to be the policy of the United States to foster the development and encourage the maintenance for such a merchant marine."

It is here that we believe the crux of the problem, and the solution, resides. And we believe that this panel and, ultimately, the full committee can play a crucial role in reversing the trend of acute decline in U.S. maritime assets.

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