MarAd questioned about cargo preference laws

MarAd questioned about cargo preference laws    U.S. Maritime Administrator David T. Matsuda was questioned sharply at a hearing Wednesday over whether cargo preference laws apply to shipments financed with load guarantees created by the Energy Policy Act and administered by the Department of Energy.
   “It makes zero sense for U.S. loan guarantees to support purchases from foreign countries that would then be carried on foreign-flagged ships,' said Elijah E. Cummings, D-Md., chairman of the subcommittee on the Coast Guard and Maritime Transportation, at the hearing. 'That is not a scenario that would stimulate our economy in any way. For that reason, the DOT (Department of Transportation) must take strong and decisive steps to ensure that the cargo preference requirements set forth in Title 46 of the U.S. Code are vigorously enforced.

Cummings

   “In our view, Congress was quite clear when we passed the National Defense Authorization Act of 2009 that the DOT is to be the sole 'decider' — to use President Bush's word — on questions relating to the application of cargo preference laws. We are concerned that DOT not relinquish that authority to any other entity,” Cummings said.
   Matsuda said the Maritime Administration does believe the cargo preference laws apply, and was working with the general counsel of the Transportation and Energy departments “to formulate the administration’s position on this.” He added the Energy Department has changed its position and noted that the issue is “unsettled.”
   “This is very frustrating for me,” Cummings said. “I feel like a first-year law student ought to be able to figure this one out.”

Matsuda

   Matsuda said the two agencies were trying to resolve this issue without involving the Justice Department, and that he expected the issue to be resolved by the end of the year.
   Cummings said the share of U.S. commercial cargo carried in U.S.-flag vessels fell from 10 percent in 1959 to 4 percent in 1979 and has “only continued to fall” since then.
   When Cummings asked the outlook for cargo being carried by U.S.-flag vessels in foreign trade, Matsuda replied it varied by trade.
   “If there is ability to participate in, for instance, wind energy components and projects, that might help bolster those movements. I know that for the carriage of defense cargoes, the drawdown in Iraq will lead to a downturn in the amount of cargo there and that has been keeping our fleet busy for some time. The food aid transportation is something we are keeping a close watch on and depends on money made available to U.S. AID and Department of Agriculture for those programs,” Matsuda said.
   The U.S.-flag fleet had been declining in size since World War II, Cummings noted, and he asked if MarAd had objectives to increase the fleet or the amount of cargo carried on U.S.-flag fleets.
   “The cost differential between the U.S.-flag and foreign-flag ships means that we have to have an economic incentive to bring ships under the U.S. flag,” Matsuda said. “Without that, ships are going to go elsewhere, they are going to go to these open registries. Any kind of incentive we can offer them. Right now, the biggest incentives are these two programs we feature — the Maritime Security Program and cargo preference. If we can offer them cargo financed by the federal government, for example, that is one way we can help them compete under the U.S. flag.”
   Matsuda said, “we know that it costs more to operate a U.S.-flag ship versus registering it under a foreign flag including so-called open registries. This difference can be almost three times as much depending on the trade, the type of ship and the company.”
   Wages — including benefits and training, ship maintenance and repair and insurance — all result in higher costs for U.S. vessels, he said.
   Matsuda, who has held his job for less than 100 days, said he, like Cummings, was surprised MarAd did not have statistics that quantified the difference in cost of operating ships under the U.S. flag and under flags of convenience. He said MarAd was planning to commission a study of those costs from consultants that would be returned in six months. He said he expected to hire those consultants Thursday.
   Cummings said he would call Matsuda at 5 p.m. to see if the contract had been signed. ' Chris Dupin