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To sum up: APL fully supports the reauthorization of MSP, and hopes to continue to be actively involved in the program. However, we feel it important to emphasize that APL can do so only on terms that make its participation, and continued service under the U.S. flag, economically and commercially feasible.


Testimony of

John P. Clancey

Before The

House Committee on Armed Services

Merchant Marine Panel

JULY 16, 2002

Mr. Chairman and members of the Subcommittee, it is a pleasure for me to appear before you today to speak about the Maritime Security Program (MSP). We share the view that the MSP is of extreme importance both to our national defense and to the economic viability of U.S.-flag carriers.

Background Concerning Our Company

By way of background, most of you are familiar with the Maersk name and logo because you see our equipment and personnel in United States ports and on America's highways. In 1928, under the name of Maersk Line, cargo liner service linking the United States and the Far East was begun. Today, these activities continue under the name Maersk Sealand, now one of the largest liner shipping companies in the world. Maersk Sealand is a subsidiary of the A.P. Moller Group, a company that employs more than 60,000 people in a multitude of activities in over 100 countries. Here in the United States, we generate employment for approximately 11,500 Americans, which includes payroll and contractual employees. Our commercial fleet includes more than 250 vessels with a total deadweight of approximately 12 million tons, and more than 800,000 containers. In addition to the above, I am very proud of the fact that 53 ships fly the American flag and are crewed with United States citizens, and that our United States corporate affiliate operating these ships (Maersk Line, Limited) has a top-secret clearance from the Department of Defense. We also own or operate a large number of

terminals-on five different continents. Maersk Sealand's feeder vessels, as well as our trucks and dedicated trains, allow us to provide a global intermodal, door-to-door

service to our customers-which includes, most importantly, the Department of Defense. We have both the resources and experience needed to meet their demands.

Goals and Objectives of the MSP

Maersk is a proud participant in the MSP. As you know, the Maritime Security Act of 1996 creating the MSP was signed into law on October 8, 1996. The Act had multiple objectives. Under the MSP, the government contracts with the owners of U.S.-flag commercial ships to make those vessels available when needed in times of national emergency or war. This means ensuring that the ships and ship crews, and the global intermodal transportation and communication networks of ship operators, are available for sealift to the Department of Defense (DOD) during a contingency. This network includes vessels, infrastructure, logistics management services, terminals and

equipment, cargo-tracking and other communications networks, providing professional seafarers, and making use of the thousands of shoreside employees located throughout

the world.

Another key objective of the MSP is to assure a continuing presence of U.S.-flag ships in international trade, and to assure that an adequate number of trained and experienced ship crews are available at DOD's request. This is an important component to the program that we strongly endorse.

The MSP provided $2.3 million per ship for the first year of the program, and currently provides $2.1 million per ship for each fiscal year through 2005, when the MSP's current authority expires. The Maritime Security Act is authorized appropriations of $100 million each year through 2005, which is enough to fund 47 ships per year. Funding is subject to annual appropriations, and contracts with ship operators run for one year and are automatically renewed, presuming sufficient funding.

By any measure, the first objective - the national security goal of the MSP has been a

tremendous success. The Department of Defense United States Transportation Command has estimated that it would require minimum investment of $9 billion to construct--and annual expenses of more than $1 billion to operate and maintain (not including crewing)--a fleet and intermodal infrastructure comparable to that provided by VISA operators. The Voluntary Intermodal Sealift Agreement (VISA) is a contract between MSP carriers and the Department of Defense. The ocean carrier provides services during a contingency that may arise in any part of the world. This obligation includes operators guaranteeing vessel capacity, providing corresponding intermodal services, and infrastructure supporting capacity commitments to DOD contingency operations.

MSP vessels provide invaluable assistance to DOD. By way of further example, I am pleased to note that Maersk Line, Limited operated Maritime Preposition Ships were the first ships to arrive in Operation Desert Storm and off-load critically needed Marine

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