1 Section 2 citizenship to operate vessels within the Military Security Program, we are committed to keeping dialogue open, and look forward to working with you and all concerned to find common ground from which to constructively advance the broad interests of the U.S. maritime industry. Above all, we are committed to the proposition that this nation must be persuaded that its security and welfare is at risk and that our country will be exceptionally vulnerable, until Congress acts to rebuild a healthy and versatile U.S. Merchant Marine, based on U.S. built bottoms, owned and operated by U.S. Sec. 2 citizens and crewed by well trained, loyal U.S. Citizens. Thank you again, Mr. Chairman. We are grateful to you and the panel for your thoughtful attention to our views, and for your kind attention to our comments. 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 CEO of Patriot Holdings, American Ship Management (ASM) and Patriot Contract Services (PCS), all based in Walnut Creek, California. I appear before you today to speak about the Maritime Security Program (MSP) and the role that United States Section 2 citizens fulfill in that program. MSP is absolutely essential to the continuing existence of the American Merchant Marine and therefore, the national defense and security of our nation. American Ship Management, LLC American Ship Management, LLC is a United States Section 2 citizen as defined by the Merchant Marine Act of 1916. It is wholly owned by myself and my two founding partners, all of whom are US Citizens. ASM holds nine MSP agreements with MARAD and is a member and an active participant of Voluntary Intermodal Sealift Agreement (VISA). Our affiliate, Patriot Contract Services, LLC is a major contractor for the US Government, holding the contract for operation and maintenance for eleven large medium speed RO-RO's (LMSR) employed in the USN Military Sealift Command (MSC) surge program. Additionally, PCS holds three contracts for the operation and maintenance of a total of six ships in the MARAD Ready Reserve Fleet (RRF). ASM is certified by the American Bureau of Shipping as conforming to the ISO 9002, 1994 Standard for the "The Management and Operation of Cargo Vessels" and also is certified as being in compliance with the International Safety Management Code for the "Operation of Other Cargo Vessels". ASM currently manages twenty-six US Flag commercial and US government vessels. ASM employs over 1500 US citizen seafarers domiciled all over the United States, covering over 500 seagoing billets. In addition we have 150 shore-based positions also filled by the maritime unions. We also employ over 50 shore based management personnel working in offices in the states of California, Louisiana, and Virginia. Personally I am a graduate of California Maritime Academy and have served as Chief Engineer aboard US flag vessels. My partner is a graduate of the New York State Maritime College and has served as Master aboard US Flag vessels. My partner and myself have both been employed and involved in the US merchant marine for over thirty years each. In 1997, ASM was formed by the three principals, all former American President Lines (APL) executives, to be a completely independent US Citizen entity. This entity would operate US Flag vessels enrolled in MSP, in accordance with US law. ASM submitted applications with MARAD for nine MSP agreements to cover the nine containerships APL had committed to the US government for participation in MSP. Through out a 7 month period, ASM underwent intense scrutiny by MARAD to confirm its' independent status before finally being awarded these Agreements in November of 1997. ASM assumed operational control of the APL US Flag fleet on November 12, 1997 concurrent with the sale of all APL stock to Singapore based Neptune Orient Lines. In addition, on 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 seafarers working with its contracted Unions in implementing Standards for Training, Certification and Watch-keeping (STCW) training to meet international regulatory requirements and US Government Operations training to meet the requirements of the US Government ship management contracts it has been awarded and the others ASM continues to pursue. As a concerned US citizen Company, ASM has worked diligently to develop opportunities for American seafarers and recruit new seafarers to augment and replace the aging and diminishing American seafarer workforce. ASM participates in various industry forums and initiatives such as the MARAD sponsored Ship Operations Cooperative Program (SOCP) and the Mariner Recruitment and Retention initiative to address this critical issue. ASM is especially proud of our involvement as a Founding Trustee of the Maritime Technologies Training Program at Mar Vista High School in San Diego, California. This innovative pilot program trains high school students as apprentice seafarers who will be qualified to serve in skilled positions aboard US flag vessels upon graduation. The program has been enthusiastically received by 1, the community, industry, the government and the student participants. There are plans to expand the program to other California high schools in the near future. American Ship Management, MSP Present and Future ASM's business model is the prototype for the current MSP Section 2 citizen operator to operate US Flag ships on behalf of non-US citizen carriers in the US Flag trade. This business arrangement provides the carrier with the ability to carry US Government impelled cargoes while providing strategic sealift capacity to the US government and jobs for US seafarers and shore based workers. It was ASM who developed and implemented the initial model and who has expanded upon this model successfully to the benefit of the US maritime industry, maritime labor and the US Government. ASM is committed to its ongoing participation in the current MSP and ASM is equally committed to working with all parties to accomplish reauthorization and expansion of MSP. We believe that our participation in the current program and our steady growth over the last five years provides an excellent opportunity for us to participate in the reauthorized program providing Section 2 citizen ship management and operation effectively and efficiently. For this new program, it has become apparent to us over the last five years, that there is an urgent need to attract additional and alternative vessels to the US flag in order to meet commercial, government and military sealift requirements. ASM strongly believes that to accomplish these goals, a reauthorized long-term program with enhanced payment with an escalator linked to the CPI is needed and warranted. In anticipation of an expanded and enhanced MSP post 2005, ASM is developing business plans for additional non-US citizen owners to enter the US Flag with alternative militarily useful vessel tonnage, such as roll on roll off (RO-RO), float on float off (FLO FLO), multipurpose and break bulk vessels. US citizen Section 2 ship manager/operators are ideally suited to bring alternative and innovative US Flag business solutions from a varied clientele under the auspices of an expanded and enhanced MSP |