Mr. TAYLOR [presiding]. Mr. Rogers, I apologize for the delay. It appears we have about 20 to 25 minutes before the next vote. If you could keep that in mind we won't have to delay you. I welcome you and please continue. Mr. ROGERS. Thank you, Mr. Taylor. I had mentioned, and, of course, the papers I have submitted adequately cover the characteristics of this Phoenix World City stap, which will really be the first of the next generation of cruise shije, we feel. And the other important element of our present project, as bummarized by the second brochure attached to our papers, which reads 50 good reasons to build Phoenix World City in the USA. I won't read all 50 reasons, but the first one is Alabama and the last one Wyoming in alphabetical order. When we talk $800 million or something on that order for the construction of this ship, we are talking about probably 70 percent of it going outside of what one usually associates with the ship building industry, to electronic and air conditioning and steel and outfitting firms across the country. We have, as part of our ongoing plans to build in the United States and flag it here, entered into a contract with Avondale. We believe that they are competent technologically and will be competitive cost-wise to build this ship. Right now there are no United States-flag ships competing in the international cruise market, that is, competing against foreign-flag ships. If any American-flag cruise ship is ever to hire American crew, put on an American flag and compete in this business with the monopoly of foreign-flag interests, it can only happen if certain adjustments are made and principally the ability to compete on an even playing field with the passage of the bill H.R. 5534, which you sponsored, Mr. Chairman. The data in my statement shows that every foreign-flag ship offers a casino, and what they offer is not a principal gambling activity, to comment on the points raised by Justice. What they offer is a form of entertainment. They offer an entertainment amenity. The average revenue derived by the ship owner from this activity is $4 per day per passenger on these foreign-flag ships. This is not a principal source of revenue. It is an amenity which they must offer to attract the American and foreign cruise passengers to their ship to pay for everything else. So that is why this is critical. It is not so that these international cruise ships can engage in gambling as a principal or even significant activity. The question of controis-as a prospective United States ship owner-and the argument of Justice over controls we just can only shrug our shoulders and ask why we should be precluded from the activity, as you have pointed out, Mr. Taylor, that every other nation and every other ship owner can engage in. These are operating for United States passengers out of United States ports and they will walk across the pier, will not get on our ship and our financiers know that and will not pay for an American-flag cruise ship to carry an American crew if the kind of disincentive contin ues to exist. wont go further with the positive advantages that your bill, ver. vil bring to the American people and the American -conomy They are listed in my statement. It is the manning, evwing com manning, taxpaying, it is a United States owner aving taxes. to strategic significance, to the reserve fleet. The ship could carry an entire division. It is a 9,000-bed hospital. Te ire n the business to build it here. We would like to change is painting behind me some day to show Phoenix World City with american dag on it. I will be happy to entertain any questions. The crepared statement of Mr. Rogers can be found at the end ir TAYLOR. According to Chairman Jones, your proposal is the Ws hat he has heard in a long time. His question is, would rect be viable if your vessel is not permitted to offer gamActivity as your current competitors do? SOGERS. I could take a "never say die" attitude, but this oogie any effort to build a major flag cruise ship and this reiggest thing in the U.S. merchant marine in 40 years, SS. Guted States. It would be a significant competitive vere a banker sitting here and talking to you, I would say ng to study World City's market surveys and projecn going to find that casinos are something as an enevice that passengers want, and they are not going to sag, so I am not going to lend them the money that Suswer, not that we are going to throw in the towel e a significant impediment. save you any reaction to a suggestion that a passes of government regulations of the gambling accandy decrease the profitability of shipboard ceney sat here today and talked about concu d ́ook at and I think I heard him say extensive og is not a major revenue source. These n the statutory definition, "principally" at is an amenity. sine; you can gamble, but having given o take away with the other by socking Xensive controls, which my competition csit still take American passengers out the, I would say I wouldn't not go hat is a commercial disincentive of kerens depending on what the cost is. y with an American-flag ship is an ven you asked Mr. Keeney why aren't Peit obs enforcing the tax laws-it - they are talking about skimwe are paying tax dollars. Of the Can pockets into the internagoing abroad and nothing is Maid for us a cruise ship that eversing that process. I don't see why we should pay taxes which support government cais and on top of that pay for their ability to inspect us. That ! submit. what we are paying for with our taxes. So I think I would be inequitable to have a flow-through device such as 77 tescribe. Mr. TAYLOR. I appreciate your testifying before the Committee. [ think Mr. Keeney got off light this morning because the mighest inquisitor on the panel had not arrived yet, but she has yet now, Mrs. Bentley from Maryland. Mrs. BENTLEY, Mr. Chairman, my hat is off to you for taking ans issue and just pushing it until you got your bill introduced, unci you have had this hearing. Mr. Rogers, thank God we have you and that you are interested. My understanding of the whole thing is that what you want is a level playing field for Americans. Mr. ROGERS. That is right, Mrs. Bentley. Mrs. BENTLEY. I have a statement that I ask unanimous consent. Mr. Chairman, to have included. I will just ask you a couple of questions, Mr. Rogers. If the Department of Justice as you know they said that they are kind of concerned that we might have organized criminal eiements taking over-has there been any real sign of organized criminal elements involved in the gambling on the foreign-flag ships that you are aware of? Mr. ROGERS. To my knowledge- Mrs. BENTLEY. Operating out of American ports? Mr. ROGERS. Not to my knowledge, and I speak with some degree of knowledge. The Chairman of our company is Knut Utstein Kloster, who was really the pioneer of Caribbean cruise operations back in the 1960's. He converted the France to Norway, a major step on the path to where we are now with Phoenix, casinos have been an entertainment activity on all those ships. He called me yesterday and said to emphasize that point. This is entertainment and people enjoy being there even if they don't gamble. But they like the excitement. It is part of the dynamics of the ship. Mrs. BENTLEY. Do you believe it would be possible to allow gambling on United States cruise ships and keep illegal or criminal elements from taking over the operations? Mr. ROGERS. I should imagine that it would be the answer is A, yes, and, B, that it would be easier to keep them off because you are dealing with a shipboard operation which comes within United States jurisdiction, not just Coast Guard, but also the IRS, which is primarily where the problems arise. It is a closed envelope, if you will. It is a closed society on a ship such as this. You know what is going on, who is onboard. It is much easier to control and under U.S. jurisdiction and with the cooperation of Justice, rather than the opposition, and we are eager to cooperate with them on a number of levels. It should be easier to eliminate any risk. Mrs. BENTLEY. Mr. Chairman, I grew up in the State of Nevada, so I know a little bit about gambling and I would agree that it would be much easier to control on a ship than it is out in the public sector. I also agree with him that this would provide an inducement for people to take American-flag ships for their vacations and for travel. I think the other point that he mentioned earlier is equally extremely vital, and that is they would be paying taxes-they would be paying taxes to Uncle Sam. The one thing that we have been hearing about in all of our budget crises is about the foreign companies that are not paying taxes in the United States, and that is the reason the Americans are getting hit daily. When you consider the fact that over $5 billion a year is spent by Americans on foreign-flag ships and not a penny of that comes back here in taxes, I really think we have to do everything we can on the part of this Committee to try and return some of that money back to our system. Again, I want to commend you and thank Mr. Rogers and all of those who have been working on this project. Mr. ROGERS. Thank you very much. Mr. TAYLOR. Congressman Lipinski. Mr. TAYLOR. Mrs. Bentley, thank you for co-authoring the measure and for your comments. I want to thank Mr. Rogers for his comments. Mr. McAlear. STATEMENT OF RONALD J. MCALEAR Mr. McALEAR. Mr. Chairman, and Members of the Subcommittee, my name is Ronald J. McAlear. I am Director of Ship Marketing for Avondale Industries, Inc., of New Orleans, and Project Manager of Avondale's contract bid package on the Phoenix World City project. I wish to request that my written testimony be included for the record. Avondale supports H.R. 5534. America can build cruise ships which are competitive on the international market. Speaking for Avondale in particular, our labor rate and our productivity gains through modular construction techniques have put us in an internationally competitive position on a head to head base for ships such as the Phoenix World City. A ship of this magnitude and complexity will mean the opportunity for tens of millions of labor hours, including the supply of products and services from throughout the 50 United States. The desagt, which includes three separate and distinct hotel tower, will require labor and material greater in extent than any commercial ship under construction today. The supply of hotel furniture and outfilling material can offer a gulcam opportunity for many companies, especially in North Cicoma, Vugima and Mississippi, to become a part of this show The exsang prohibition of gambling on United States-flag vesola opoviqitia a mor impediment to the creation of a competitive I nova 24 40 dag cruise industry. The Phoenix World City project neval toward a construction contract. The chances for United States construction and operation of this ship will be greatly enhanced if H.R. 5534 is enacted into law. We support the passage of HR. 5534. Thank you for your time and consideration in hearing my state ment. The prepared statement of Mr. McAlear can be found at the end of the bearing Mr. TATLOR. Thank you Is it your opinion that the legislation would level the play THIẾ field for the constraction of United States-fag cruise stupe and could lead to the constraction of passenger st.ps like yours in United States shipyards Mr. MOASTAR is our opinion that the passage of this legisiation is only one step the process of leveling the playing fieit for constraction of Ted States-Lag cruise ships Additional the passage of ELR 6504, the elimination of foreigr subsidies & important to allow Cited States stipyards it compete directly. We support the efs of Me Cara Elf in tier attempt ic eliminate all foreign subsidies for sap construction. I think the DLX one step in the proceBE. Mr. TAYLOR. I am curious as it your opinion if she trade talks that are going to take place in December fal with regart 10 the foreign subsidies. If at that time Avonaie WOLIC DE wing 10 endorse ER. BIBL. winch will gram Unnet Staner vessels exclusivity out to the territoria BE Mr. MOSTRAR At the time we have ut opinion or EF 5581 What we are asking for a leve peyng fer. We want it play with the same rules Mr. TAYLOR The Phoenix Cry project in particular-row many jobs at you feel that would create ant for now long would they be created at Avondale Mr. MOSTAR Right now we have a team at the stupyart working or an estimate for the number of people. There save beet previous estimates of somevinere of the order of 12 mot mab-tours available for the project Those would be tour that will be elpended within Avondale, in the Louisiana and Mississipp ates alt some other areas such as Florida where we would puff other VVILponents of the vesse. This does not include the amount of tale hours that will be spent by the number of subcontractors of equip ment for the snu is significant Mr. TAYLOR What would that translate to in people rougnir Mr. TAYLOR. Yes in the construction of the ship Mr. MCALEAR. We would be taiking about 8.00 people or 8.50 people at Avondale snipyards over the perivc of Inree to four years Mr. TAYLOR Thank you. Sank you. Our next witness is Mr. Stocker. STATEMENT OF JOHN J. STOCKER Mr STOCKER Thank you Mr Chairman.. I am John Stocker President of the Shipbuliders Council of America I appreciate the opportunity to testify this morning or |