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OCT. 4, 2018


Good morning and thank you for that introduction Eric.   It was gracious of you to invite me back to Tradewinds again this year; I will take that to mean that I didn’t screw up too badly last year – or like many folks you find the potential for a train wreck entertaining to watch!

At any rate, it’s good to see so many familiar faces and good friends from across the industry.  That includes my predecessor at MARAD, the honorable chip Jaenichen.

My boss, Secretary Elaine L. Chao, sends her regards. And I can tell she remains hugely supportive of our industry. Without going into details – which I can’t – she was very supportive of our 2020 budget initiatives.

Since last year’s conference dealt largely with a myriad of issues surrounding the jones act, I thought I’d begin my remarks with a brief look back at the past 12 months since I last spoke to you.

That stretch was a bit of a stress-test for the whole foundation of the Jones Act –more so than I think most of us have seen in recent memory.

As we all recall, the 2017 Atlantic hurricane season was hyperactive and deadly.

We saw hurricanes Harvey, Irma, and Maria causing massive destruction and significant loss of life across the U.S.  gulf coast and the Caribbean Sea.

Our office of ship operations worked round-the-clock for over 50 straight days staffing the dot’s crisis management center and MARAD’s command center.

During that time, we activated four vessels — training ships Kennedy, Empire State and General Rudder, and Aviation Support Vessel Wright from our Ready Reserve Force.

In brief, we sent training ships General Rudder and Kennedy to respond to the damage left by Hurricane Harvey here in this area, where these ships provided berthing and meals to first responders.

TS Empire State responded to Irma in key west, and then both the Kennedy and Empire State – and Aviation Support Vessel Wright – docked in San Juan to support FEMA’s massive recovery efforts underway there.

All told, those MARAD ships provided 23,526 berthing nights and 53,306 meals supporting FEMA’s efforts to restore basic services, health care, food and water to those devastated communities.

As always, our commercial U.S.-flag fleet manned the front-lines as well, bringing food, fuel, water, emergency and recovery supplies to stricken areas. In Puerto Rico, which as we know absorbed a catastrophic hit from Maria, they were a constant, critical lifeline – and really the first maritime responders.

Those of you who heard me speak last year recall that I said that I had to “tear up my remarks” because of the temporary 10-day waiver of the Jones Act that was authorized the night before covering all commodities being shipped to Puerto Rico from the U.S.

no doubt, Maria challenged our maritime transportation system to its limits. But that doesn’t negate the fact that the U.S.  coastwise fleet stepped up to the challenge in a big way.

U.S.  Jones Act carriers made sure that a reliable, regularly-scheduled flow of commerce was restored to the island as quickly as humanly possible.

Carriers like Crowley and Tote, – along with Trailerbridge and North American – not only stayed on schedule with their regular shipments to Puerto Rico, but as demand increased, these U.S.-flag carriers added nine vessels to their regular trade.

That brought the total servicing Puerto Rico to 25.  If we had needed more, those Jones Act carriers were prepared to provide more capacity.

So, let me confirm very clearly:
there was never a lack of capacity from the U.S.-flag commercial fleet in responding to the crisis in Puerto Rico.
The challenges were in shore side distribution, as has now been well documented.
Damage to San Juan’s primary and secondary ports complicated every effort to move critical supplies inland to people most in need.

I still vividly recall the reporting and pictures of rows of containers and loaded trailers waiting to move out of the terminal. What those reports didn’t convey is that damage to inland infrastructure bottlenecked the flow of supplies and commodities.

That storm highlighted some other misconceptions about the U.S.-flag Jones Act trade — among them a mistaken belief that only goods from the U.S. can be sent to Puerto Rico. Of course, this group knows that’s just not the case.

Yet articles I see still being written by “experts”’ – just this week – claim that this is the case. In anticipating future hurricanes, MARAD is looking to prep vulnerable locations before a hurricane hits.

As such, we’re encouraging Jones Act carriers to stage critical capabilities in target locations prior to a storm — to help ensure that when the ships arrive, there exists capacity to quickly deliver relief supplies where they are needed in a crisis.

This year has already seen some bad hurricane activity. Just before hurricane lane made its run toward Hawaii, I let the U.S. customs and border patrol commissioner know in advance that there were approximately 9 ships scheduled into Hawaii during that window — and 5 to 8 other Jones Act qualified vessels on the west coast if needed.

Luckily the storm turned and spared Oahu from a direct hit. The bottom line here is that U.S.  vessels were available – and remain available to provide focused and reliable services to their communities.

Hurricane Florence was a different matter, inflicting widespread flooding damage throughout the Carolina’s.  But again, there was no shortage of capacity from U.S. -flag Jones Act carriers, and MARAD made sure that it was known.  And I need to compliment the American Maritime Partnership for getting daily updates out on the state and capacity of Jones Act vessels ready to respond.

But I’ve got to tell you:  I read an op-ed piece earlier this week from a young economics professor who claimed that the Jones Act was the cause for the slow response to help the people of North Carolina.

His claim: quote — “the recovery effort in Wilmington is effectively handcuffed by a century-old law, as Wilmington residents can do nothing but wait for roads to open, or a Jones Act eligible boat to show up.”

So, in spite of its role ensuring that U.S.-flag ships and crews are available to serve our country’s economic and national security needs at sea, especially during these big events, the Jones Act will continue to be will be criticized and scrutinized.

I just saw this morning that the CATO Institute is hosting a day-long symposium on Dec. 6, entitled, “The Jones Act: Charting a New Course After a Century of Failure.”

So, it’s important to remind ourselves, first, that U.S. cabotage laws are not an anomaly. Requiring national flag vessels for domestic service is common.

In fact, a recent study entitled “Cabotage Laws of the World” revealed that cabotage exists along the coastlines of about 80% of the world.

91 international “states,” of 140 united nations’ member states, in fact, have laws governing access to their domestic seaborne trade.

That includes our chief economic competitors in Asia, Europe, and Africa. So why would we weaken our own cabotage requirements and cede even more of an advantage to our competitors? It doesn’t make sense for our homeland security or our citizens to have to rely on out-sourced foreign capacity.

Enough said – we remain solidly behind the Jones Act.

Let me tack over to some other priorities we’re working —

Cargo Preference: we’ve had much discussion with the White House staff regarding the program and how it fits into our maritime policy going forward. We’ve heard loud and clear how critical it is to you.
Related to that is the MSP program and what it should look like in the future…

— like the adequacy of the stipend
— like the types of ships in the program
— number of ships in program
— TRANSCOM’s study on MSP  next generation in review
we’re also doing some initial work on a Tanker Security Program, in which (ship owners) will compete for a stipend up to a certain amount. We also need to address an 80-ship shortfall in our plans.

I mentioned the national maritime transportation policy earlier. It’s out of the department and has been submitted to OMB to coordinate interagency input.

I expect to get that feedback shortly to adjudicate comments.

In the spring, I testified before congress on several occasions that our mariner shortage of 1800 people was of great concern because of its impact on our ability to man the active fleet plus a fully activated 61-ship government sealift fleet (46 + 15).

That remains a concern today. The solution in my view is a larger U.S.-flag fleet (+45) to support the required employment base. Getting those additional ships will come down to getting the playing field more level for U.S. carriers to compete with foreign carriers who operate their ships at an average cost of $6.7 million  less annually.
Some options being proposed take advantage of our long-term energy export situation and maybe other cargos like new vehicles.

We are looking at all those angles, and of course there are winners and losers in each case. We’re staying engaged.

There’s lots more I could talk about: short sea shipping; our new National Security Multi-Mission Vessel that we’re going to be building soon; autonomous vessels, etc.

But let me cut it off there and say thanks to all of you who love this business and recognize its importance to our nation’s economic well-being and national security. Hang in there and sail through the often-turbulent waters. God bless you!

Updated: Monday, November 19, 2018