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TESTIMONY OF

Jordan M. Truchan

Before The

House Armed Services Special Oversight Panel

on the Merchant Marine

on the Maritime Security Program

July 16, 2002

Mr. Chairman and Members of the Panel, my name is Jordan Truchan I am President and C90 of Patriot Holdings, American Ship Management (ASM) and Parrior Contract Services: POS, al based in Walnut Creek, California. I appear before you today an speak about the Marnime Security Program (MSP) and the role that United States Section Zanzens Subfl in that program MSP is absolutely essential to the continuing BESENCE IÀ DE AMmerican Merchant Marine and therefore, the maromal defense and secarty of our nanun

American Ship Masement, LLC

Acercan Ship Management, LLC is a United States Section 2 citizen as defined by the Wereham Warmers vacily owned by miser in my two funding wathes al of whom are US Cens. ASM welds time MSP agreements with MARAD oc 8 1 member and ar acre paticipant of Voluntary Intermodal Sealift Agreement VS. Our affinate Paria Camat Services LLC sa mayor contractor for the US Governmen, holding the contrac ir renation and mererance for eleven large Rectum speet RO-RO% DVST enmoved in the USN Minary Sealift Command SC surge program. Addionals PCS was free caracts for the operation and maintenance of a ra of so shus the MARAD Ready Reserve Fleet RRP: ASM 8 erinc to the American Bureau of Showing es zuirming a de 30 9002, 1994 Stand for the "The Management at Shenton of Car Vesses and also is certified are in compliance with the Imenationa Sarien Vangement Code for the “Operation of Cher Corp Vesses

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November 12, ASM affiliate PCS purchased the MARAD RRF contracts previously held by APL with the approval of MARAD.

ASM controls these nine US Flag vessels through a bareboat charter agreement with Wilmington Trust Company, a US Citizen Trust and is considered the "desponent owner" under the law. As part of our responsibilities, ASM provides officers and crew including assignment and payroll, places all insurances for the vessels and their cargo, outfits and provisions the vessels, maintains the vessels in a seaworthy condition at all times, ensures regulatory and statutory compliance for the operation of the vessels, manages all hull, machinery, personnel & indemnity insurance claims, enforces crew discipline and compliance with collective bargaining agreements, provides emergency response and contingency planning for the vessels operations, performs all purchasing functions and provides and/or contracts for husbanding (agency services) in all US ports. ASM then time charters the nine vessels to APL for commercial operation in the US trades with Asia. ASM assumed five of these MSP vessels under the US flag at the time of delivery and within one month "flagged in" to the US Flag the additional four MSP enrolled vessels at minimal cost and without service disruption.

In 1998, ASM “flagged in" to the US Flag three additional containerships to be used by APL in US Flag service. This exercise again was accomplished by ASM personnel at minimal cost and with out service interruption. Two of these vessels currently remain under the US Flag. Although these ships are not enrolled in MSP they are enrolled in VISA.

ASM is based in Walnut Creek, California. Much of the original shore side staff of approximately 35 were ex-APL employees made redundant by the sale of APL to Singapore based NOL as their jobs were focused on US Flag ship management for APL. ASM would now provide these management and operational functions for APL through their own experienced US employees. Over the last five years, the number of APL veterans has significantly diminished through attrition and retirement. These positions have been filled and expanded by qualified US citizens as the Company has grown. Today ASM and its affiliate PCS employ over 50 highly qualified and motivated shore based staff trained in the unique discipline of US Flag ship management. We are headquartered in Walnut Creek, Ca, with additional branch offices in New Orleans, La and Newport News, Va.

ASM maintains collective bargaining agreements with six maritime unions with which it has strong, close and lasting collective bargaining relationships. ASM is represented on all its contracted unions Taft-Hartley Benefit Plans, actively providing leadership and oversight to these key collective bargaining compensation components. ASM has worked aggressively with its contracted labor unions to expand job opportunities for American seafarers, pursuing successfully the LMSR operating contract with the Military Sealift Command and the successor MARAD RRF contract, effectively doubling ASM seafarer employment opportunities from November 1997 levels over a five year period. In addition, ASM has been a driving force in developing advanced training for American

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seafarers working with is contracted mons in implementing Standards for Tra Centication and Watch-coing STM Taking to meet international regulatory requirements and 9 Government Coerations raining to meet the requirements of the CS Goverment smp management contracts it has been awarded and the others ASM continues to pursue

As a concerned "S citizen Company ASM has worked diligently to develop
opportunities for American seatarers and recruit new seafarers to augment and rentace
the aging and diminishing American seafarer workforce. ASM participates in vanous
industry forums and initiatives such as the MARAD sponsored Ship Operations
Cooperative Program SCCP and the Marmer Recruitment and Retention initiative o
address this critical issue ASM s especially roud of our involvement as a founding
Trustee of the Maritime Technologies Training Program at Mar Vista High School in San
Che Calfornia. This innovative plot program trains high school students as apprentice
cars who will be qualified to serve in killed positions aboard US flag vessers upon
zanton The program has been enthusiastically received by 1. the community.
she government and the student participants. There are plans to expand the
mother California high schools in the near future.

American Ship Management, MSP Present and Future

Ssiness model is the prototype for the current MSP Section Citizen operator to
Thetare "S Flag ships on behalf of non-US citizen carriers in the She mave. This
rosiness arrangement provides the carner with the ability to carry 3 Covernment
incerlies carenes ville.roviding strategic sealift capacity to the 3 government and
as a 3 caces cad snore based workers. It was ASM win cereoped and
inclemented and who has expanded upon his moon successfully to the
anime industry maritime labor and the US Government ASM is
going participation in the current MSP and ASM say committed
parties to accomplish reauthorization and expansion or MSP We
pticipation in the current program and our steady growth over the ast
s an excellent opportunity for us to participate in the reauthorized
g Section 2 citizen ship management and operation effectiveiv and
is new program, it has become apparent to us over the last five years.
gent need to attract additional and alternative vessels to the US lagin
mercial, government and military seal.ft requirements. ASM strongly
accomplish these goals, a reauthorized long-term program with enhanced
at escalator linked to the CPI is needed and warranted.

an expanded and enhanced MSP post 2005, ASM is developing additional non-US citizen owners to enter the US Flag with alternative vessel tonnage, such as roll on roll off (RO-RC), float on float off (FLO se and break bulk vessels. US citizen Section 2 ship manager/operators Sring alternative and innovative US Flag business solutions from a the auspices of an expanded and enhanced MSP

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PREPARED TESTIMONY OF

JOSEPH T. "JAY” KEEGAN, PRESIDENT

AND CHIEF EXECUTIVE OFFICER OF U.S. SHIP MANAGEMENT INC.
BEFORE THE SPECIAL OVERSIGHT PANEL ON MERCHANT MARINE
COMMITTEE ON ARMED SERVICES

U.S. HOUSE OF REPRESENTATIVES
JULY 16, 2002

Mr. Chairman and Members of the Panel:

My name is Joseph T. "Jay" Keegan. I am President and Chief Executive Officer of U.S. Ship Management, Inc. (USSM), and pleased to be here today to provide brief testimony concerning the importance of maintaining the Section 2 citizenship policy of the Maritime Security Program. Congress may decide in the future to expand the number of ships that participate in the MSP. Congress may decide in the future to change the amount to be paid for each of these ships for their guaranteed readiness in the event of a national defense emergency. However, Congress should not now or in the future modify a well entrenched policy which limits eligibility in the MSP to American-flagged vessels, with American crews, and which, most importantly, are controlled by Americans citizens. Whatever limited exceptions that are provided in the law regarding priorities should, if they are to continue, certainly not be expanded.

In 1999, A.P. Moller/Maersk of Denmark purchased the international business of Sea-Land Service, Inc. which had 19 U.S. flag vessels, 15 of which were enrolled in the MSP. Since Maersk could not qualify as a Section 2 citizen - Maersk entered into time charter contracts with my company for these vessels. My company has 42 dedicated and talented shoreside employees and 380 seagoing positions. We are headquartered in Charlotte, North Carolina and have offices in Edison, New Jersey and Long Beach, California. We are ISM certified by the American Bureau of Shipping for all nineteen vessels which we operate and for our shoreside operations. As an operator our company is in actual and legal control of the vessels. Simply put, we operate the vessels. This is consistent with traditional maritime law and practice. In fact, I understand that approximately half of A.P. Moller/Maersk's fleet is time-chartered and therefore operated by other foreign companies.

A.P. Moller/Maersk is a $35 billion conglomerate headquartered in Copenhagen, Denmark, which is equivalent to 20% of Denmark's GDP.

We understand that legislation is being advocated by companies like Maersk which demeans companies like mine as “unjustified middle men" which increase Maersk's costs and add little value to the MSP. Simply because they have existing relationships with the Department of Defense, Maersk believes it is entitled to an exception or a change in the law which would eliminate or substantially modify the Section 2 citizenship policy. Their existing defense contracts required Maersk to sign Special Security Agreements (SSA's) which essentially provide that classified material

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