Equating foreign controlled “documentation citizens" with Section 2 citizens could be the first step in undermining the Jones Act.

The Merchant Marine Act of 1936 states that “it is necessary for the national defense and deve ment of its foreign and domestic commerce that the United States have a merchant marine owned and operated under the United States flag by citizens of the United States". The Section 2 citizenship policy of the MSP is based on that foundation. It is a policy that has served our country well, and I would respectfully submit that it should not be modified.

Thank you for this opportunity to testify and I look forward to answering any questions which you or any other Panel Member may have.

STATEMENT OF

ERIK F. JOHNSEN
PRESIDENT, INTERNATIONAL SHIPHOLDING CORPORATION

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BEFORE THE HOUSE ARMED SERVICES COMMITTEE
SPECIAL OVERSIGHT PANEL ON THE MERCHANT MARINE

REAUTHORIZATION OF THE MARITIME SECURITY PROGRAM (MSP)

July 16, 2002

Mr. Chairman and Members of the Panel:

As a United States owner and operator under section 2 of the Shipping Act 1916, of commercial cargo vessels in the United States-flag fleet, I am particularly pleased to appear before you today to address the vital need for the reauthorization of the Maritime Security Program (MSP) to ensure the continued viability and survival of the U.S.-flag fleet.

I am Erik Johnsen, the President of International Shipholding Corporation (ISC). Through its principal U.S.-flag subsidiaries Central Gulf Lines, Inc. (Central Gulf) and Waterman Steamship Corporation (Waterman), ISC provides a wide range of oceangoing freight transportation through pure car/truck carrier services, roll-on roll-off, breakbulk, and domestic coastwise services. Central Gulf and Waterman collectively are among the largest participants in the current MSP program, having operated seven “active, militarily useful, privately-owned” U.S.-flag vessels under MSP operating agreements with the U.S. Maritime Administration (MarAd). Of particular importance to the Department of Defense and its critical military sealift needs, Central Gulf and Waterman operate several of the newest and largest roll-on/roll-off vessels in the U.S.-flag fleet under the MSP program. As a result of ramp capabilities and variable spacing of movable interior decks, these “RORO” vessels can accommodate a significant number of large military vehicles, including military trucks, HUMVEEs, military supply vehicles and many of the most modem tanks in the military's inventory, and can quickly transport large quantities of such equipment and other materiel where needed by U.S. armed forces around the world. Without the MSP program, Central Gulf and Waterman would not have been able to acquire such modern tonnage to significantly enhance the military sealift capacity of the U.S.-flag fleet.

Mr. Chairman, there is clearly a need for a strong U.S.-flag fleet to support our nation's armed forces in times of war or national emergencies. To that end, the MSP program has been a tremendous success. It has ensured the availability of at least 47 militarily-useful U.S.-flag cargo vessels to the U.S. Transportation Command (TRANSCOM) of the Department of Defense for sustained sealift capability to all points around the globe. Central Gulf, Waterman and other U.S.flag vessel operators, U.S. seafaring labor unions, MarAd, and TRANSCOM have all worked closely

and cooperatively together to ensure, under the MSP program and the associated Voluntary Intermodal Sealift Agreement (VISA) program, that U.S.-flag cargo vessels are fully staffed and ready should they be called on a moment's notice to transport equipment and supplies to support the U.S. armed forces. Because this Maritime Security Fleet is readily available to the U.S. military, the Department of Defense has not been forced to duplicate this sealift capacity through the prohibitively expensive construction and operation of its own vessels.

Mr. Chairman, in a statement on the House floor last year, you expressed your own strong views on the importance of the MSP program "to the national security and the maritime capability of the United States”. As you so correctly noted:

Without the MSP program, U.S.-flag vessel owners would have been forced to shift
their operations to foreign flags with foreign crews in order to remain internationally
competitive. This would have been detrimental to our national security interests. .....
Without the MSP the cost to the Department of Defense) would be substantial
approximately $800 million annually would be required by DOD to provide similar
sealift and related system capacity on its own for the rapid and sustained deployment
of military vehicles, ammunition and other equipment and material.

Shortly before his departure last year as TRANSCOM's Commander-in-Chief, General Tony Robertson then the highest ranking military officer responsible for sea and air transportation of U.S. troops, equipment and supplies around the world-- reflected on the importance of the MSP program in his testimony before the Seapower Subcommittee of the Senate Armed Services Committee. In that testimony, he also shared your views by stating the following:

I am a strong supporter of the MSP... I will tell you if you ask me, I will sing out in
support of anything that increases the health and vita of the U.S. flag fleet and
men and women who crew that flag fleet. So MSP has been a valuable, valuable
contributor to the health of that fleet.

Adding to this chorus of support, Maritime Administrator William Schubert stated the following in his testimony before your Panel just last month:

[T]he best way to protect our homeland and national security interests across the
globe is a strong U.S.-flag fleet manned by U.S. citizen mariners. If we did not have
the Jones Act, cargo preference, and the MSP and VISA programs, I can assure you
it is unlikely that ships would remain under the U.S.-flag, and the U.S.-citizen
mariner pool needed by the Department of Defense in times of national emergency
or war would disappear.

Mr. Chairman, I can assure you that Administrator Schubert is absolutely correct in his assessment of the state of the U.S.-flag fleet. Without the MSP and other federal maritime programs, our companies would be unable to compete against foreign-flag operators who benefit from

A P P E N D I X

JULY 16, 2002