When Eastern Shipbuilding struck a deal with a company in Brazil more than two years ago that would bring in millions of dollars in new business, the Panama City, Fla., shipyard applied to the U.S. Maritime Administration under the agency’s Title XI for a $240 million loan guarantee that would get the project rolling and trigger the hiring of 300 workers.
Two years later, with the shipyard fearing its customer would seek a new supplier, Florida’s congressional delegation intervened and the loan was approved just as Eastern Shipbuilding’s application was set to expire.
To Marad and Administrator David T. Matsuda, the process is part of the tougher scrutiny his agency is giving spending in an increasingly budget-constrained federal government. But a growing field of critics in the maritime world claim the agency’s actions — or inactions, to be more precise — raise questions about Matsuda’s leadership and the agency’s role at the center of federal oversight of domestic maritime transport.
That discontent, until recently largely behind the scenes, is coming into greater public view as the impatience in the industry spreads and questions about Marad grow in Congress.
“Marad’s mission to promote the domestic maritime industry and support military sealift capacity is critical to our economic vitality and national defense,” Rep. Frank LoBiondo, R-N.J., chairman of the House Transportation and Infrastructure subcommittee on the Coast Guard and maritime transportation, said in a recent statement that was measured but reflected the spreading industry concerns. “It is clear that there is significant room for improving operations to meet these goals. I will continue to explore options to ensure Marad meets the expectations and goals of Congress and the maritime industry.”
Matsuda, however, believes he has shaken and awakened the Maritime Administration in the 16 months since the Senate confirmed him. He has pushed it to be a more aggressive advocate for the maritime industry.
“Overall, I’m pretty proud of what we’ve been able to accomplish,” he said in an interview, “and I fully realize that there’s going to be the occasional disgruntled lobbyist or disgruntled employee.”
Those accomplishments have come at a price, however, even within the agency. Marad employees complain of harsh treatment by Matsuda, his deputy Orlando Gotay, and General Counsel Denise Krepp. Matsuda also has alienated a portion of the industry that Marad is supposed to support.
The Department of Transportation and the White House “seem to have forgotten that maritime is a transportation sector,” said one maritime industry union official, speaking on condition of anonymity.
“The sense I get is that Matsuda … figures the safest thing to do is to make no decision, or avoid a decision at all costs,” a trade association executive said. “The whole agency is managed close to the vest, and when you have so much business going on, and you don’t delegate, things slow down or get paralyzed.”
Most of Marad’s critics spoke on the condition of anonymity. They still have to deal with Marad; when it comes to maritime programs and policy, Marad essentially is the only game in town.
The Maritime Administration is a tiny agency within the DOT, with limited resources and even more limited authority. Its $356 million annual budget is the smallest of the DOT’s mode-specific administrations.
And Marad is one of two out of nine mode-specific agencies that don’t have regulatory authority. Regulation of maritime safety and security falls primarily to the Coast Guard. The Federal Maritime Commission, Army Corps of Engineers, the Environmental Protection Agency and Customs and Border Protection hold other pieces of the maritime industry. What’s left is Marad’s mission to promote and protect the U.S. merchant marine.
“Our challenge is to get Marad to be a more effective advocate for the maritime industry,” Matsuda said. “I think this agency has always sat in the back, a ‘little brother’ to the Coast Guard in this department. It’s still trying to step up and make people realize we’re the primary maritime agency in the department now and we’ve got to fill those responsibilities.”
The Coast Guard moved out of the DOT and into the new Department of Homeland Security in 2003.
The question is whether there’s enough left of Marad worth keeping. The industry’s answer is an unequivocal yes. The agency protects the jobs of more than 70,000 mariners and some 100,000 shipyard workers. Marad shields U.S. shipping and shipbuilders from fierce competition in the global market, and upholds laws that move U.S. carriers to the head of the line when there is cargo paid with taxpayers’ money.
It’s blatantly protectionist policy, but Marad sustains an industry that has never weaned itself from the dependency the government created 75 years ago. The Merchant Marine Act of 1936 is still the basis for Marad’s operations today. It was a New Deal measure to create jobs at sea and in shipyards through cargo set-asides and loan guarantees for new construction. The law touched off a building boom that gave the U.S. a head start in building its merchant fleet before World War II.
The construction and operating subsidies expired long ago, but Marad still oversees their successors. The Title XI loan guarantee program mitigates a lender’s risk when financing new vessel construction. The Maritime Security Program gives U.S.-flag carriers an annual subsidy on the promise that their ships will be available on demand by the Defense Department for military sealift. In 2011, the Pentagon provided Marad $176 million for the MSP. From 2012 to 2014, the subsidy rises to $186 million.
That puts the agency at the center of a program that most public policy officials believe is highly important to U.S. national defense. Of the 190 vessels in the U.S. deep-water fleet, 50 are in the MSP program. Many are foreign-owned but U.S.-registered to comply with MSP requirements. To add to Marad’s concern, the U.S. fleet is growing older. Marad reported that in 2009, 33 percent of the vessels were more than 25 years old. Among Jones Act-qualified ships, 52 percent are 25 years or older.
“Who is there if Marad isn’t? Who’s going to do something for the U.S. merchant marine? When the president talks about transportation, nobody thinks about water,” said H. Clayton Cook, an attorney who specializes in vessel financing and is a former Marad general counsel.
Matsuda, 39, came to the agency with long experience in Washington but no direct background in the maritime world, either in industry or in regulation. He worked at the Federal Railroad Administration between 1998 and 2002 and worked on Capitol Hill, first as a staffer on the Senate Committee on Commerce, Science and Transportation and then as senior counsel and transportation adviser to Sen. Frank Lautenberg, D-N.J. He was an acting assistant secretary of transportation when President Obama nominated him to be maritime administrator in December 2009.
It would seem Matsuda would need all the friends he can get, which makes the current dissatisfaction with the agency so critical. The union official said a small agency with a little-understood job could be vulnerable in an environment where Congress is hunting for places to cut the budget, and the core of Marad’s support among lawmakers is growing smaller.
Matsuda dismisses the questions about his leadership as predictable barbs from those unhappy with the status quo.
“Any time that you want to do things differently, you’re going to have people who are uncomfortable,” Matsuda said. “Not every employee enjoys the kind of attention they’ve received from this administration.”
Rather than working with industry groups, Matsuda is taking his case directly to companies. “I’m focusing on the actual business leaders here. I’m not sure if that means that some of the lobbyists in town are pleased with it. I talk regularly with the CEOs in this industry. If they see something they don’t like, they’ll let me know, and we work to correct it immediately.”
That’s true, said Robert Johnston, senior vice president with OSG Ship Management in Tampa, Fla. “When we have an issue, I drop David an e-mail or call him, and shortly thereafter, he gets back to me.”
Matsuda also worked with the Environmental Protection Agency to streamline the permitting process companies need to scrap old ships. He also has advanced the marine highways program, helping secure $215 million for ports and short-sea shipping from the $2.1 billion Congress gave the DOT for the TIGER I and II competitive grant programs.
Related: Keeping Up With the Jones Act
But employees and industry officials say the agency grinds to a halt in its day-to-day activities, with decisions left dangling, demands for information from the industry growing and agency employees receiving little direction to advance projects.
Matsuda said maritime policy must be better coordinated with the other modes, but when asked for specific policies, he offers only generalizations: Marad’s job is to assure the viability of the merchant marine so it will be available to provide military sealift in the event of a foreign war. The policy pushes aside the economics of the marketplace in favor of national security.
“My goal is to find cargo wherever we can. I’m trying to get our agency to focus on every opportunity we have to put cargo on U.S.-flag ships,” Matsuda said. “These are taxpayer-funded cargoes, and if our policy is that we use our tax dollars to fund foreign operations when we have U.S. flags available, we’re not going to survive.”
Matsuda admits the U.S. fleet can’t match the rates of foreign competitors. The agency commissioned a study to find ways to make U.S. shipping more competitive. The study was due out last spring. Matsuda promised members of Congress to release it in mid-September. Now it will be out “soon.”
Making sure federal agencies comply with cargo preference laws is a Marad priority, but the agencies chafe at the requirement. Groups that purchase food aid from the U.S. Department of Agriculture, for instance, say they could buy more if they were able to pay lower rates to a foreign carrier. The Export-Import Bank of the U.S. may seek a cargo preference waiver as part of its charter renewal.
But the Department of Energy lost a showdown with the DOT over cargo preference. It announced that imported wind turbines purchased with guaranteed loans were not subject to the law. The DOT overruled the assertion.
As the wars in Afghanistan and Iraq wind down, Matsuda said Marad will step up its effort to get other agencies to comply with the laws. “We’ve been working with every agency that ships over the ocean to make sure they’re coming into compliance with the cargo preference program.
“We have tried to make sure this capability exists, to avoid the huge consequences we’d have to pay later on,” if an emergency arises and there’s no reliable American sealift capability, Matsuda said. “Overall, there’s a very good case for why every dollar that we put in to the U.S. merchant marine is going to have a huge payback. They’ll be there when you need them. It’s like an insurance policy.”
-- Contact R.G. Edmonson at firstname.lastname@example.org.