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Thank you, Mr. Chairman, Members of the Panel, for this

opportunity in my capacity as Chairman of the American Shipbuilding

Association (ASA) to present our industry's recommendation to

strengthen America's national security, our merchant marine, and the

maritime industry.

ASA represents the six largest shipbuilders in the United States. We build large oceangoing commercial ships, as well as all of the capital ships for the U.S. Navy. ASA also represents 22 major companies engaged in the manufacture of ship systems and components.

Unfortunately, as you heard last week, the United States is at

serious risk of not having a merchant marine engaged in international commerce in the future. Our merchant marine, and the maritime industry in the United States is dying. This death is analogous to a patient afflicted with cancer where each segment of the industry grows weaker over time, until gradually, we are no more. It is past the time for all segments of the maritime industry to come together to rebuild our

merchant marine and the industry that supports our merchant marine.

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This cannot be accomplished, however, without the help of the United

States Government.

While I strongly believe that it is in the national security interest of

our Government to have a strong merchant marine and maritime

industry, it is not what I believe that matters. It is what you in Congress, and what the Administration think and believe that matters.

Should you determine that it is in our national security interest to

have a commercial fleet of militarily useful ships -- owned, built, crewed, and controlled by Americans -- to serve as a military auxiliary in times of war and national emergency, a financial investment will be required. A simple band-aid, like the extension of the existing Maritime Security Program or the changes MSP shipowners recommend, will

neither save nor foster an American merchant marine to meet our

nation's sovereign military requirements in time of war and national

emergency.

As this chart demonstrates, in 1980, the U.S. merchant marine fleet engaged in international commerce numbered 165 American owned,

American built, and American controlled ships, employing 13,313

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American merchant mariners. Today, the active fleet numbers 45 ships, employing 2,600 mariners. Similarly, in 1980 there were 22 shipyards engaged in the construction of oceangoing commercial and naval ships

employing 140,000 people. Today, there are just eight shipyards

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Today, ninety-nine percent of the ships in the MSP fleet are

foreign-built, and 87 percent are foreign owned. It is just a matter of

time until there will be only two- and quite possibly - just one company

left in this fleet. These companies are Neptune Orient Lines of

Singapore and Maersk of Denmark.

The current MSP program has not achieved the intended

objectives. By all measurement, the U.S. merchant marine is worse off

today than 10-20 years ago.

If Congress reauthorizes the existing MSP program, the Department of Defense will have no say in the types of ships these companies enroll in the MSP program. They may have little or no military utility, and there will be no assurance that when the going gets tough that these ships will be available to the Department of Defense. To address these serious deficiencies in the Maritime Security

Program, we propose that the Department of Defense pay for the design and construction of ships over a multi-year construction period. The

general types, tonnage, and numbers of each ship type would be

identified by the Transportation Command, in consultation with the

Maritime Administration, to meet DOD sustainment lift requirements.

Under this program, DOD would request proposals annually from

U.S. citizen ship operators for commercial ships meeting the general

description and functionality required by DOD. The U.S. citizen

operator would enter into a contractual agreement with DOD, based on the design selected by the operator, to lease the commercial vessel over a twenty-year period. DOD would then pay for the construction of that ship in a U.S. shipyard. Lease payments by the operator to DOD would commence on the date of delivery of the vessel.

The lease payments to DOD would be based on the international bareboat charter rate for a comparable vessel. Lease payments to DOD could be made on a monthly basis. While the contractual length of the lease would be for 20-years, the contract could either be at a fixed rate for 20 years, or alternatively, provide for an annual adjustment of the

lease payment to reflect any increase or decrease in international charter

rates.

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