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In today's environment, the ongoing acts of omission by previous administrations with respect to addressing the need to rebuild a healthy U.S. merchant marine cannot be repeated. We must "see" this old problem in a new, different light.

The times call for bold action in this regard. Serious, initiatives must be taken. For example, why could not the Dept of Defense build the necessary vessels in the U.S., according to their need and specifications, and lease back the vessels to U.S. Sec. 2 operators, who would crew them with U.S. mariners. This would be more consistent with U.S. policy and common sense, under the circumstances.

The underlying pillars, or principles, of our maritime laws are, clearly, to foster American ownership/operation, construction, and crewing. These principles are embodied in our maritime laws to ensure that the United States has the industrial capability to build a fleet of vessels controlled by American companies and crewed by American citizens to meet our national security requirements. A section 2 U.S. citizen, if not protected in the implementation of the MSP program would be placed in an unfair, uncompetitive position. As compared with a documentation citizen, the section 2 company is subject to U.S. corporate taxes, significantly more stringent regulation and liability exposure. To expand the program to include non-citizen participants would force the American companies to go "foreign" in order to compete, or relinquish the field entirely to foreign companies. We believe that a change to any one of these three underlying pillars, or principles of historical U.S. maritime policy, in our opinion, will have a direct impact on the others. We perceive that changes to maritime laws governing the ownership of vessels operating in the U.S. to foreign trade will, prospectively, also probably impact the fleet serving our domestic trade, arguments notwithstanding. If we are right, it will be too late to correct the problems that are created by the liberalization of the citizenship requirements.

Congress enacted the Maritime Security Act in 1996. Ostensibly, it retained the U.S. Citizen operator requirement to ensure that an American company, independent of a foreign owner, would retain ultimate and effective control and management of ships in the Maritime Security Program. This requirement was designed to ensure that if a Maritime Security Program

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OMSA, though it does not participate in the Military Security Program is extremely sensitive to and supportive of the objective that U.S. crews and their jobs in this program be protected. But we do not believe that the promotion and retention of section 2 U.S. citizenship requirements would adversely impact that objective. To the contrary, we believe that this approach, in the long-term, is more consistent with U.S. interests.

If the attempts to achieve reauthorization of the program - which we do support wholeheartedly - comes at the expense of compromising the Sec. 2 citizenship requirements currently in U.S. law, we respectfully maintain that this proposed compromise, offered to obtain a short term, quick fix will serve, inevitably, to undermine the Jones Act and, ultimately, although unintentionally, this proposal will have, we believe, an opposite, adverse impact, in the long run, on jobs for U.S. mariners, the economic viability of U.S. vessel owners and marine operators and upon reliable U.S. control of marine assets engaged in routine commercial Jones Act trades, as well as more sensitive operations critical to our national security. Reauthorization must be obtained by other means, if at all possible.

In the final analysis, the Proposal to give documentation citizen companies the right to operate vessels directly in the program concern us greatly. While we are anxious to expedite congressional reauthorization of this program, we are opposed to sacrificing the concept of Section 2 citizenship, and the broader problem it prospectively creates for U.S. vessel owners, operators and mariners.

We believe, and respectfully request that this committee does favorably receive and advocate those positions and actions, instead, as proposed by industry and the maritime unions that would, as all of us would want to see and that we can agree upon, enhance the economic and national security benefits of the United States, expand the program to authorize additional privately owned (under the provisions of Sec. 2 citizenship) militarily useful United States flag commercial vessels, establish an MSP payment that better reflects the cost of doing business under the U.S. flag operations by extending the term and increasing the level of payments under charters and enact provisions that would provide reasonable flexibility in the administration of the program. In all of these respects, we can and do support our counterparts and other

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witnessing the same thing with respect to vessels engaged in support of offshore oil exploration and drilling on the U.S. OCS. These foreign companies typically might establish virtual "shell" companies in the United States to serve a leasing company or as their U.S. citizen operating company in order to qualify, artificially, in our view, to operate in the Jones Act trades by virtue of technical rather than substantive fulfillment of legislative criteria. To add insult to injury, the U.S. will lose significant tax revenue and, ironically, unwittingly participate in promoting, for all practical purposes, the eventual disintegration of the Jones Act.

If the citizenship requirement is relaxed for the MSP fleet, we are convinced that foreign interests will ultimately succeed in further undermining the Sec. 2 U.S. citizenship requirement for operating Jones Act ships in other sectors currently protected by the Jones Act, as well.

We therefore urge Congress to move quickly but cautiously to reauthorize MSP but to reject, in this process, any effort or proposal that would weaken U.S. Maritime Law, and the Jones Act, specifically, by diminishing U.S. section 2 citizenship requirements for vessels engaged in the Military Security Program. We are concerned that advocates of the documentation citizen accommodation may attempt to attach and effect a repeal of the section 22 citizenship requirement for the MSP to active legislation other than the defense appropriation bill. This would not allow a fair hearing and debate of the issues. Hopefully, the rumor and our concerns in that regard are without basis.

Our nation, at this time and in the current circumstances, needs a U.S. merchant marine that is truly, effectively controlled by section 2 American citizens, dedicated to serve our domestic and international commerce. A U.S. merchant marine under the control of documented citizen corporations is absolutely not equivalent, or acceptable, if it can be avoided. This is particularly important with respect to operations that involve extraordinary strategic and national security facets, and with respect to a body of vessels that must be relied upon as a naval and military auxiliary in time of war or national emergency.

In conclusion, we wish to acknowledge the complexity of this matter. We feel compelled to reiterate that, while we strongly disagree with the proposition to repeal the requirement for

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