April 29th 2016

The shrinking of the U.S.-flag fleet threatens to undercut the commercial maritime industry’s ability to satisfy the needs of the Department of Defense (DOD), MM&P Chief of Staff Klaus Luhta told members of the Senate Commerce Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety and Security.

Luhta presented testimony on behalf of the maritime unions during an April 20 hearing on “The State of the U.S. Maritime Industry: Stakeholder Perspectives.”

“Our organizations proudly represent the seafaring men and women who continue the tradition of American mariners since the founding of our Nation to sail into harm’s way whenever and wherever needed by our country in order to support and supply our military overseas,” Luhta testified.

“It is these same American mariners who ensure that America’s foreign and domestic seaborne trade, upon which our economy is based, is not exclusively dependent upon foreign nationals.”

Subcommittee Chair Sen. Deb Fischer (R-Neb.) and Ranking Member Cory Booker (D-N.J.) called the hearing to gather information on how federal policy and programs could strengthen the U.S.-flag maritime industry.

In the unions’ testimony, Luhta quoted top DOD officials on the importance of the U.S.-flag fleet.

“The merchant marine has always been there beside us,” Major Gen. Kathleen Gainey, commander, Military Surface Deployment and Distribution Command, said in 2008.

“There is no amount of thanks that I could give you, because I am here to tell you, having deployed twice, I know how critical it is that equipment and those supplies are delivered on time… You are the fourth arm of defense and you are critical to this nation.”

Yet “despite the repeated expressions from DOD leaders that our Nation needs a U.S.-flag merchant marine, the privately owned U.S.-flag merchant marine has, in recent years, declined, threatening the ability of our Nation to provide the commercial sealift capability and U.S. citizen mariners that DOD requires,” Luhta testified.

As recently as March 2016, for example, the subcommittee heard testimony from Maritime Administrator Paul Jaenichen, who pointed out that the number of vessels in the U.S.-flag foreign trade fleet had declined from 106 in 2011 to 78 at the end of February 2016.

The reduction in vessels and the loss of the associated seafaring billets for American mariners result in a reduction in the pool of mariners available to meet DOD requirements, he testified.

Jaenichen said that at that time there were approximately 11,230 qualified American mariners available to crew commercial or government-owned sealift ships. He cautioned that in the event of a prolonged activation of Maritime Administration and MSC surge vessels, an additional 3,200 mariners would be needed.

Luhta pointed out that it takes many years of experience to become a credentialed U.S. professional mariner. “Young people will not be encouraged to enter an industry that is ignored or abandoned by policy-makers and that promises no realistic future for employment,” he added.

Among the worrying trends: declining DOD cargo due to the drawdown of operations in Iraq and Afghanistan and a more than 80 percent reduction in personnel and military bases overseas, two factors in the decision taken by numerous vessel owners to flag out their ships.

Luhta said the Maritime Security Program (MSP) must be fully funded to counter “significant reductions in the amounts of defense and other government cargoes available to U.S.-flag vessels; the proliferation of tax and other economic incentives available to foreign-flag vessels and crews but not to U.S.-flag vessels and crews; the regulatory compliance requirements imposed only on U.S.-flag vessels by the U.S. government; and the growing competition for cargoes from foreign flag-of-convenience vessel operations which fail to meet the standards applicable to U.S.-flag vessels.”

Congress increased funding for MSP for fiscal year 2016 and recognized that further adjustments in funding will be needed. Luhta said the industry is now working to ensure that Congress appropriates the authorized $299,997,000 million for MSP for Fiscal Year 2017.

During his testimony, he urged Congress to restore the U.S.-flag share of PL 480 Food for Peace and other humanitarian food aid cargoes to the 75 percent level that was in place beginning in 1985 until it was reduced to 50 percent in 2012.

He also urged: more oversight to ensure that all U.S. government agencies covered under cargo preference laws use U.S.-flag ships when legally mandated to do so and; that Congress extend the provisions of section 911 of the Internal Revenue Code (the foreign source income exclusion) to American mariners working aboard liquefied natural gas (LNG) vessels engaged in the carriage of LNG exports from the United States.

He said the government, U.S.-flag shipping companies and America’s maritime labor organizations should continue to work together to modify and enhance existing programs and to create new programs and opportunities that will increase the number of vessels operating under the U.S. flag, the amount of cargo carried aboard U.S.-flag vessels and shipboard employment opportunities for American licensed and unlicensed merchant mariners.

To be available when needed in time of war or other international emergency, Luhta said, the U.S.-flag merchant marine must be supported during time of peace.

He presented the statement on behalf of MM&P, the American Maritime Officers, the Marine Engineers’ Beneficial Association, the Marine Firemen’s Union, the Sailors’ Union of the Pacific and the Seafarers International Union.