[Senate Hearing 115-155]
[From the U.S. Government Publishing Office]
S. Hrg. 115-155
MARITIME TRANSPORTATION:
OPPORTUNITIES AND CHALLENGES FOR
THE MARITIME ADMINISTRATION
AND FEDERAL MARITIME COMMISSION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SURFACE TRANSPORTATION
AND MERCHANT MARINE INFRASTRUCTURE,
SAFETY AND SECURITY
of the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
MAY 9, 2017
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma TOM UDALL, New Mexico
MIKE LEE, Utah GARY PETERS, Michigan
RON JOHNSON, Wisconsin TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana CATHERINE CORTEZ MASTO, Nevada
Nick Rossi, Staff Director
Adrian Arnakis, Deputy Staff Director
Jason Van Beek, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
------
SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
INFRASTRUCTURE, SAFETY AND SECURITY
DEB FISCHER, Nebraska, Chairman CORY BOOKER, New Jersey, Ranking
ROGER F. WICKER, Mississippi MARIA CANTWELL, Washington
ROY BLUNT, Missouri AMY KLOBUCHAR, Minnesota
DEAN HELLER, Nevada RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma TOM UDALL, New Mexico
RON JOHNSON, Wisconsin TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana
C O N T E N T S
----------
Page
Hearing held on May 9, 2017...................................... 1
Statement of Senator Fischer..................................... 1
Statement of Senator Booker...................................... 3
Prepared statement........................................... 3
Statement of Senator Wicker...................................... 30
Letter dated May 8, 2017 to Hon. Deb Fischer and Hon. Cory
Booker from Paul Doell, National President, American
Maritime Officers.......................................... 30
Statement of Senator Young....................................... 34
Statement of Senator Baldwin..................................... 40
Statement of Senator Blumenthal.................................. 42
Witnesses
Hon. Michael A. Khouri, Acting Chairman, Federal Maritime
Commission..................................................... 4
Prepared statement........................................... 5
Hon. Rebecca Dye, Commissioner, Federal Maritime Commission
Supply Chain Innovation Teams.................................. 9
Prepared statement........................................... 10
Joel Szabat, Executive Director, Maritime Administration, U.S.
Department of Transportation................................... 12
Prepared statement........................................... 13
Rear Admiral James Helis, U.S. Maritime Service Superintendent,
United States Merchant Marine Academy.......................... 17
Prepared statement........................................... 19
Hon. Mario Cordero, Commissioner, Federal Maritime Commission.... 22
Prepared statement........................................... 25
Appendix
Response to written questions submitted to Joel Szabat by:
Hon. Todd Young.............................................. 45
Hon. Tammy Baldwin........................................... 45
MARITIME TRANSPORTATION:
OPPORTUNITIES AND CHALLENGES FOR
THE MARITIME ADMINISTRATION
AND FEDERAL MARITIME COMMISSION
----------
TUESDAY, MAY 9, 2017
U.S. Senate,
Subcommittee on Surface Transportation and
Merchant Marine Infrastructure, Safety and Security,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:33 p.m. in
room SR-253, Russell Senate Office Building, Hon. Deb Fischer,
Chairman of the Subcommittee, presiding.
Present: Senators Fischer [presiding], Booker, Wicker,
Young, Baldwin, Blumenthal, Cantwell, Klobuchar, Gardner.
OPENING STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
The Chairman. The hearing will come to order. Welcome.
Thank you all for being here today for our fourth hearing of
the Surface Transportation and Merchant Marine Infrastructure,
Safety and Security Subcommittee. Today's hearing is entitled,
``Maritime Transportation: Opportunities and Challenges for the
Maritime Administration and Federal Maritime Commission.''
As I mentioned before in this Subcommittee, the United
States has a rich maritime heritage. In fact, shipbuilding is
one of our country's oldest industries, dating back to the
early colonial period. From the beginning, America's coastal
and inland waterways were used for exploration, commerce,
transportation, defense, and recreation.
Today, ocean transportation and seaports remain critical to
the economy and our Nation's transportation system. According
to the International Maritime Organization, over 90 percent of
global trade is transported by ocean carriers.
The Bureau of Transportation Statistics has found that
freight tonnage on our Nation's transportation network will
grow by 40 percent over the next 30 years. As our freight flows
grow, seaports will serve as a key connection point for all
modes of transportation.
In Nebraska, our agriculture producers work hard to feed a
hungry world, but in order for these producers to compete
internationally and meet customer needs, they rely on efficient
ports and access to maritime carrier services.
Today, our Subcommittee will examine the activities of the
U.S. Maritime Administration, U.S. Merchant Marine Academy, and
Federal Maritime Commission. The Maritime Administration plays
an important role in our national security. MARAD manages the
Department of Defense Ready Reserve Force, which serves to
transport combat support, resupply, and unit equipment to the
Army and Marine Corps.
Senator Booker and I have authored and passed significant
reforms to strengthen MARAD over the past 2 years. In addition
to reauthorizing MARAD's national security vessel programs, we
included measures recommended by the DOT Inspector General to
improve workforce management at the agency. Our 2016 MARAD
legislation, which was included in the annual National Defense
Authorization Act, also provided greater flexibility for joint
DOT and DOD vessel management programs.
Importantly, we also included significant measures to help
address instances of sexual assault and harassment at the U.S.
Merchant Marine Academy. The Academy's 2015 anonymous survey of
midshipmen found that as many as 28 women and 24 men had been
sexually assaulted on campus. However, the Academy noted there
was only one officially reported case of sexual assault.
Because of our legislative efforts, midshipmen will have
greater access to victim advocates and a 24/7 hotline.
Moreover, the Academy is now required to employ sexual assault
response professionals and provide preventative training to
midshipmen.
As one of our five service academies, the USMMA plays a
vital role in developing future leaders in the maritime
industry, including many who will go on to serve in our
nation's armed forces. I am thankful for their service to our
country. Moving forward, we must continue to work toward
ensuring a safe environment on campus and during the Sea Year
program.
We are also going to hear testimony from three
Commissioners of the Federal Maritime Commission. The FMC is an
independent Federal agency tasked with fostering a fair,
efficient, and reliable international ocean transportation
system for U.S. exporters, importers, and consumers. The FMC is
responsible for regulating ocean carrier activities, approving
ocean carrier alliances, and monitoring ocean transportation,
operation, and rates. The FMC also has an important role in
overseeing freight activities at our Nation's port terminals.
As many here are aware, the 2015 West Coast ports slowdown
caused massive congestion and gridlock. According to a study by
the National Retail Federation and National Association of
Manufacturers, a 5-day West Coast ports stoppage would reduce
U.S. GDP by $9.4 billion and disrupt 73,000 jobs. Greater
information is essential to improving the efficiency of our
ports.
I want to commend Commissioner Rebecca Dye, who has led in
this area by establishing the Supply Chain Innovation Teams
initiative. Better communication between stakeholders and real-
time data sharing will go a long way toward addressing
bottlenecks and enhancing the flow of goods through our ports.
I look forward to learning more about how the FMC is
working to strengthen ocean transportation. Thank you again to
our witnesses for being here today.
And I would now turn to my colleague and Ranking Member
Senator Cory Booker for his opening remarks.
Senator Booker.
STATEMENT OF HON. CORY BOOKER,
U.S. SENATOR FROM NEW JERSEY
Senator Booker. Chairman Fischer, this is going to
disappoint my colleagues, but I'm just going to submit my
testimony for the record. They can get it from me if they would
like. And we have a big panel, we should probably get to it.
[The prepared statement of Senator Booker follows:]
Prepared Statement of Hon. Cory Booker, U.S. Senator from New Jersey
Thank you, Chairman Fischer for holding this important hearing on
the opportunities and challenges facing the Maritime Administration and
the Federal Maritime Commission.
The country's ports, vessels, and mariners are critical to our
Nation's economic growth, military preparedness, and disaster relief
efforts.
Our nation's ports and marine terminals, as well as the rail and
road networks that support them, are essential for getting American
products to overseas markets and generating U.S. jobs.
Residents of my home state of New Jersey know this as well as
anyone.
New Jersey is home to the Port of New York and New Jersey, which
has moved more than 120 million tons of cargo annually in recent years,
and is the busiest port in the East Coast.
Overall, New Jersey's ports and the trade industries that rely on
them, employed 285,000 people in New Jersey in 2014, and generated $60
billion in family incomes and business revenues for New Jersey's
economy.
In the past few years, the public and private sectors have helped
fund more than $2 billion in infrastructure improvements at the Port of
New York and New Jersey to expand the region's economic capacity.
And this is in addition to the more than $1 billion invested by the
Port Authority to raise the roadway of the Bayonne Bridge to allow
larger and taller ``post-Panamax'' ships to serve the region.
While investments like these are essential, and offer long-term
benefits to our regional economy, they cannot--by themselves--reduce
the congestion caused by our Nation's outdated infrastructure.
That's why I'm proud of the work this Committee did last Congress
to pass the FAST Act and establish the Nation's first multimodal
freight grant program.
Last year, the FASTLANE multimodal freight grant program, when
combined with the important TIGER grant program, invested more than
$850 million in our Nation's port infrastructure.
While the FAST Act was a substantial achievement, there is more
that we must do.
For many decades, the United States has relied upon the U.S.
Merchant Marine, with its fleet of commercial vessels and crew of U.S.
mariners, to assist the military during times of war or national
emergency.
But as the U.S. international fleet has diminished, U.S. Mariners
lose employment and the opportunity to remain certified to crew large
ocean-going vessels.
And as we lose U.S. mariners, we lose sealift capacity to support
the U.S. military during times of war or in national disasters.
We must also address challenges that could prevent students from
wanting to enter the field in the first place.
I know the U.S. Merchant Marine Academy has been focused on
preventing sexual assault and harassment at the Academy and during Sea
Year.
I appreciate the changes that have occurred at the Academy under
Admiral Helis' leadership.
However, there is more work to be done. Each year I nominate
promising young women and men from New Jersey to attend this academy,
and we must ensure that every cadet has an environment of respect,
safety, and dignity.
Last but not least, delays in the freight network remain a serious
concern.
The maritime industry is experiencing significant changes that
impact how and where goods are moved.
Unfortunately, when one part of the network experiences a problem,
it can have ripple effects that spread through every part of the
network.
That's why it is important that we aren't looking at changes in a
vacuum.
Whether it's changes that impact ports, shipping, rail or
trucking--these changes must be viewed by how they impact the whole
system.
I look forward to hearing from each of our witnesses about these
and other issues that the Committee should consider as we work to
improve our Nation's maritime transportation system.
The Chairman. Thank you, Senator Booker.
Next I would ask our witnesses to please give their opening
statements. We will begin with the Acting Chairman, Michael
Khouri--did I pronounce that correctly?--with the Federal
Maritime Commission. Chairman Khouri has served as an FMC
Commissioner since 2009 and as Acting Chairman since January
2017.
Welcome.
STATEMENT OF HON. MICHAEL A. KHOURI, ACTING CHAIRMAN, FEDERAL
MARITIME COMMISSION
Chairman Khouri. Chairman Fischer, Ranking Member Booker,
Senators, thank you for the opportunity to appear today on
behalf of Federal Maritime Commission.
First, I am pleased to be joined by my colleague,
Commissioner Rebecca Dye.
And we want to especially recognize our friend,
Commissioner and former Chairman Mario Cordero, and thank him
for his commendable service and leadership of the FMC. This is
his last week with us, and he moves on to become the Executive
Director of the Port of Long Beach, California. We look forward
to his comments today. We wish him well as he takes the helm of
a major seaport that is a critical part of our Nation's
maritime supply chain.
I would like to address a number of matters about the
Commission and the Shipping Act that are of current interest to
the Subcommittee. The FMC is a specialized competition agency
charged by Congress to prevent anticompetitive behavior by
competitor collaborations in the international ocean liner
industry. Since 1916, Congress has recognized that special
factors affecting this international industry, which transports
65 percent of our Nation's waterborne international exports and
imports, and requires a dedicated agency of specialized
expertise to ensure certain national objectives are met. The
Shipping Act of 1984 provides the Commission with authority to
address the issues under our jurisdiction and protect a
competitive marketplace.
2016 was a financially challenging year for international
open shipping with ongoing consolidation and a major carrier
bankruptcy. By mid-2018, there will be 10 companies arranged
into three major operating joint ventures called ``alliances,''
that, combined, will carry 82 percent of containerized cargo
across all U.S. ocean trade lanes.
Even with these developments, however, the liner industry
is still relatively unconcentrated by traditional antitrust
standards. It is important to note that these alliances are not
permanent mergers. Alliances provide the carriers with
flexibility, cost savings, and efficiencies. There is vigorous
price and capacity competition within alliances, and
participants can and do change quickly in response to market
forces, as we have seen in the last year. As long as they do
not exercise market power, alliances are widely recognized as
potentially beneficial and pro-competitive and ultimately
benefiting U.S. shippers and consumers. And as noted by the
Supreme Court, these carrier joint ventures can help prevent
outright mergers, thus preserving competition.
Concerns about these trends, however, have been expressed
by U.S. cargo interests as well as other participants in the
ocean cargo supply chain. As larger alliance agreements have
been filed at the Commission, we have strengthened our economic
and competition review process and require tighter limits on
the scope of each agreement's authority. We will continue to
review and monitor these agreements carefully for
anticompetitive behavior to safeguard against harm to shippers
and consumers.
As Congress directed the Commission in both the 1984 Act
and the 1998 amendments, the FMC remains committed to finding
additional ways to reduce unnecessary regulatory costs and
burdens, and obtaining greater efficiencies for the regulated
community.
Most recent, March 6, the Commission unanimously approved a
new rule to reduce the complexity, burden, and cost of contract
filings for the 165 ocean carriers and the 6,200 ocean
transportation intermediaries who submit 53,000 service
contracts and over 730,000 contract amendments with the agency
each year.
I intend for this deregulatory effort to continue as we
take up other pending and proposed issues. After consulting my
fellow Commissioners, I designated the FMC's Managing Director,
Karen Gregory, as the Regulatory Reform Officer. She is now
standing up a task force to execute on the regulation review
process.
Commissioner Dye will address her commendable efforts to
help the industry develop information-sharing protocols that
should prove extremely beneficial in integrating the global
supply chain and providing a boost to the American economy.
To close, the Federal Maritime Commission, with its
industry expertise and experience, is well positioned to
understand the unique dynamics of the shipping industry and all
of its stakeholders, to apply the competition laws fairly in
this area, and to prevent anticompetitive behavior in these
carrier agreements, all to ensure maximum benefit for the U.S.
shipping public.
Thank you for your attention. And I respectfully ask that
my full written remarks be accepted into the record. I'll be
pleased to answer any questions you may have.
[The prepared statement of Chairman Khouri follows:]
Prepared Statement of Hon. Michael A. Khouri, Acting Chairman,
Federal Maritime Commission
Chairman Fischer, Ranking Member Booker, Senators, thank you for
the opportunity today to discuss issues related to the Federal Maritime
Commission.
I am pleased to be joined at the table by my colleague,
Commissioner Rebecca Dye. And I want to especially recognize our
friend, Commissioner and former Chairman Mario Cordero and thank him
for his exemplary service and leadership of the FMC. This will be his
last week with us as he moves on to become the Executive Director of
the Port of Long Beach, California. We look forward to his comments
today and wish him well as he takes the helm of a seaport that is such
a critical part of our Nation's maritime supply chain.
The United States has always been a nation that has engaged in
trade, even from the earliest days of our existence as a group of
colonies. Transporting goods of all descriptions by ocean, coastal and
inland ships is an integral part of American commerce. There is simply
no more efficient or economical way to move large volumes of
commodities than aboard vessels, and the sectors of our economy tied to
international trade depend on an efficient global intermodal
transportation system. As the Acting Chairman of the Federal Maritime
Commission, I am proud of the dedicated men and women of our agency and
the work they do every day to safeguard competition in ocean
transportation for the benefit of the America's exporters, importers
and ultimately, our Nation's consumers.
One of the most positive ways to benefit our American consumers is
by helping to keep the end cost paid for goods as low as possible.
Identifying and addressing regulations in the ocean transportation
sector that are out of date with current commercial practices and
technology or have become unreasonably burdensome will always increase
consumer choices and lower costs. At the Federal Maritime Commission,
we view a commitment to deregulation in the ocean container supply
chain as an essential and critical factor in expanding America's
economic competitiveness.
As such, we are working to be a more efficient organization by
making a concerted and focused effort to reduce regulatory burdens on
our constituents. The Commission is aggressively looking for ways to
make compliance with its statutory and regulatory requirements easier
and more cost effective for shippers, carriers, and ocean
transportation intermediaries. An example of the sort of common sense
deregulatory action the Commission can take was exhibited on March 6
when we approved key changes to regulatory requirements for ocean
carrier service contract filings and non-vessel-operating common
carrier (NVOCC) service arrangement filings. The Commission will make
it easier and more efficient for shippers and carriers to do business.
Further toward the goal of eliminating or reforming regulations, we
have designated Ms. Karen V. Gregory, the Managing Director of the
Commission, as our Regulatory Reform Officer. Ms. Gregory is now
leading an internal team that is identifying those regulations that
have become less relevant in today's fast moving commerce, are more
burdensome than current business needs require, and otherwise need
updating and revision. They will then establish a definitive timeline
within the agency to move those items to a vote before the Commission.
This initiative is consistent with the January 30 ``Presidential
Executive Order on Reducing Regulations and Controlling Regulatory
Costs.'' While the Commission may not be technically required as an
independent agency to take this step, I believe that it is the right
action to take and is consistent with the broader deregulatory history
and scope of the Shipping Act.
Over the past two to three years, there have been tremendous
changes to the ocean transportation services marketplace. This period
has been marked by considerable merger and acquisition activity among
shipping lines, as well as the bankruptcy of a ``top ten'' carrier late
last summer. As a result of these events, the number of major shipping
lines operating in the international trades has dropped from 20 in 2015
to what will be 13 by next year when the three Japan-based carriers
create a new, consolidated container line. Of equal consequence,
consolidation among the liner carriers has led to a reordering of the
carrier alliance system and the creation of two new organizations--
``THE Alliance'' and ``The OCEAN Alliance''--that will join the already
existing ``2M Alliance.''
Some stakeholders have expressed concern about these changes,
especially developments related to alliances. It is important to note
that the evidence shows that carrier and marine terminal alliances can
be very beneficial for U.S. exporters, importers, and consumers.
Alliances are not permanent mergers like those reviewed by DOJ, but are
much more dynamic arrangements that--number one--preserve price and
service competition between and among participants. The ocean common
carrier members of the alliance do obtain efficiencies and cost-savings
that have historically been passed on to domestic consumers especially
when healthy competition exists among vessel operators. The benefits of
alliances and other forms of joint commercial arrangements are
recognized and addressed in the Shipping Act of 1984, as amended, and
the contemporaneous Congressional record.
A reassuring data trend that we receive through our alliance
monitoring programs shows us that the individual ocean carriers within
each alliance continue to independently and vigorously compete on
pricing. Further, individual ocean carriers within the alliances
continue to add and withdraw vessels from trades both inside and
outside the alliances in which they participate, demonstrating that
competition remains in both vessel capacity decisions and pricing
decisions within the alliances. Finally, these joint ventures provide
ocean carriers with flexibility and may facilitate the survival of
independent companies, preserving competition and averting further
industry concentration. The interests of the American shipping public
and the American consumer will not be well served if carrier
consolidations ultimately result in only a handful of mega-carriers
remaining to transporting the Nation's cargo.
Clearly, the industry is entering a new era and it is not
surprising that some question whether ocean carriers will move into a
position to exert some level of market power on freight rates. In fact,
by all economic benchmarks used by the Department of Justice (DOJ), the
Federal Trade Commission (FTC), and the FMC, the ocean liner
marketplace is not concentrated. Concentration is assessed using the
Herfindahl-Herschman Index (HHI). The greater the degree of market
concentration by virtue of fewer competitors, then the HHI rises. In
DOJ's merger guidelines, their Antitrust Division regards markets as
not concentrated if the HHI is below 1,500. Following the last ocean
common carrier merger, the HHI for the container shipping industry in
the international U.S. trades today is 752, far down into the ``safe
harbor'' area.
The reduced number and increased size of the major alliances (2M,
THE Alliance, and OCEAN Alliance) has indeed changed the way in which
the Commission approaches these joint ventures. The Commission
carefully and thoroughly reviews filed agreements and engages in
extensive consultations with filing parties to assure that an agreement
that ultimately goes into effect is narrowly crafted and only permits
specific authorities that provide specific operational benefits. Broad
agreements with imprecise authority language will not go unchallenged.
Since these are ongoing cooperative agreements rather than mergers,
the Commission is further charged by Congress with continuous
monitoring after the initial review and following the effective date of
the agreements. The Commission checks for anticompetitive behavior that
would violate the Shipping Act. The Commission may challenge an
agreement at any time after the effective date. Just as the marketplace
has changed, so has how the Commission monitors agreements. Over the
past five years, the FMC has been steadily refining reporting
requirements mandated of agreement parties both in terms of the
information our economic analysis team wants to review, as well as how
often data must be provided to the Commission. Additionally, we are
working to reinforce our already very capable team of economists and
analysts in order to increase our capacity to review and monitor
agreements and the marketplace. Finally, I would note that in recent
months, the Commission has twice rejected agreement filings, one on
jurisdictional grounds and the second for failing to meet the clear and
definite disclosure standard required by law, demonstrating that we are
far from being a rubberstamp agency.
The current circumstances in the international container industry
perfectly illustrate why the Federal Maritime Commission was created,
what its job is, and how the agency provides a benefit to American
shippers, to our citizen consumers, and to our economy more broadly.
The FMC is an independent agency of specialized expertise that
administers an antitrust regulatory regime tailored to the special
factors affecting the international ocean liner trade. The Shipping Act
of 1984, and the Federal Maritime Commission that administers the Act,
are related to, but separate from Department of Justice and the Federal
Trade Commission and the competition and antitrust statutes they
administer.
Under the Shipping Act, cooperative or collaborative agreements
between or among competitor international ocean liner carriers are
filed with the Commission and reviewed under the Shipping Act's
competition standard to prevent anticompetitive behavior in these
agreements. This standard the Commission uses to review carrier
agreements, 46 U.S.C. Sec. 41307(B)(1)--``Anticompetitive Agreements,''
commonly referred to as 6(g), is analogous to the standard employed by
DOJ and the FTC to review mergers, acquisitions, and competitor
collaborations. Under 6(g), an agreement filed with the Commission goes
into effect UNLESS the Commission determines (and convinces a judge to
agree) that the agreement is likely, by a reduction in competition, to
produce an unreasonable reduction in transportation service or an
unreasonable increase in transportation cost. In the event of such
determination, the Commission then must go to a Federal District Judge
as discussed below.
The Commission's process for agreement review under 6(g) is modeled
on the Hart-Scott-Rodino Act of 1976 governing premerger clearance of
proposed acquisitions and mergers. Congress adapted this process for
the Commission as part of the Shipping Act of 1984. Prior to 1984, the
Commission reviewed and approved agreements under a broad ``public
interest'' standard. Because approval became a lengthy process
sometimes stretching into years, Congress put a Hart-Scott-Rodino type
framework in place for Commission review of carrier agreements under
the Shipping Act to ensure that that potential efficiencies and cost-
savings would not be lost by consumers because of delay in agreement
effective dates. Agreements filed with the Commission go into effect
automatically in 45 days unless the Commission determines (and a judge
agrees) that the agreement is anticompetitive under the 6(g) standard
referred to above. Under certain circumstances, the Commission may ask
for additional information necessary to make a determination under
6(g), extending for an additional 45 days after receiving that
information the time before the agreement becomes effective. In order
to prevent the agreement from going into effect, the Commission must
bring a civil action in the United States District Court for the
District of Columbia and successfully obtain an injunction to halt the
operation of the agreement. The burden of proof is on the Commission.
If parties agree to undertake activities that are governed by the
Shipping Act, but do not comply with the Commission's process of
review, they risk not only Shipping Act sanctions, but also Federal
criminal sanctions prosecuted by DOJ under the Sherman Act.
Some claim that section 6(g) is ineffective because it presents too
high a bar to a successful court challenge of an anticompetitive
agreement by the Commission. On the contrary, the paucity of 6(g) cases
and the historical absence of the Commission's need to challenge
agreements in court is testament to the Commission's successful efforts
to mitigate or eliminate potentially anticompetitive provisions in
pending agreements through detailed discussions with filing parties
during the review process. One need only look at the THE Alliance and
the OCEAN Alliance to see recent examples of cases where the major
carrier alliance agreements, as originally filed, requested authority
to jointly negotiate for goods and services. Following Commission
review, however, the agreements lacked these joint purchasing
authorities when they went into effect. By its terms, the Shipping Act
provides an opportunity for the public to express its concerns about
filed agreements. The Commission takes these comments seriously, and
uses them together with its own economic analysis under 6(g) during the
review process to consider and address anticompetitive concerns.
In addition to the review of carrier agreements for potentially
anticompetitive effects under 6(g), the Commission may use section 10,
the ``Prohibited Acts'' provisions in the Shipping Act, to preserve
competition. This section of the Act includes prohibitions on a number
of business practices on concerted carrier conduct acting outside of
approved authority (such as price fixing or market allocation),
unreasonable practices, discrimination in price or accommodations,
refusal to deal, retaliation, boycotts, predatory practices, and
discrimination based on shipper affiliation., 46 U.S. Code
Sec. 41105(4), prohibits carriers from jointly negotiating with non-
ocean carriers if doing so would violate antitrust laws (emphasis
added).
These prohibited practices mirror remedies found in other
competition statutes, such as the Robinson-Patman Act of 1936. The
Commission, of course, may enforce section 10; but private litigants
may bring actions under these Shipping Act provisions to protect their
interests.
Since 1916, Congress has recognized that the international ocean
liner industry, which transports a large percentage of the
international exports and imports so essential to this Nation's
economy, requires special consideration because of the industry's
critical role in our international commerce, its international
dimension, and the competing and potentially conflicting regulatory
regimes and interests of our international trading partners. The FMC
reviews and monitors international ocean liner carrier joint
collaborations or agreements under the Shipping Act to ensure that
procompetitive efficiencies and cost savings are obtained for the
benefit U.S. consumers and anticompetitive effects are prevented or
properly mitigated.
The global supply chain that has been built around the ocean
container is essential to the modern American economy and the
competitiveness of the Nation. The Federal Maritime Commission plays a
vital role in assuring a fair, efficient, and reliable international
ocean transportation system. Thank you for your attention and interest
in the work of the Commission, I am happy to answer any questions you
might have.
The Chairman. Thank you, sir.
Next we have Rebecca Dye, Commissioner with the Federal
Maritime Commission. Ms. Dye has served on the FMC since 2002.
She previously served as a law instructor at the U.S. Coast
Guard Academy and an attorney at MARAD.
Welcome.
STATEMENT OF HON. REBECCA DYE, COMMISSIONER,
FEDERAL MARITIME COMMISSION SUPPLY CHAIN INNOVATION TEAMS
Ms. Dye. Thank you, Chairman Fischer, Ranking Member
Booker, and members of the Subcommittee. I appreciate the
opportunity to appear before you today on behalf of the members
of the Federal Maritime Commission Supply Chain Innovation
Teams. And on their behalf, I thank you for the kind
recognition, Chairman Fischer.
To accompany my statement, I submitted a list of the
companies represented on our Innovation Teams, and the port
directors, business, and academic advisors, and trade
association consultants who supported the initiative.
I would like to take the opportunity to publicly thank the
talented individuals and their companies who volunteered their
time and resources to advance this project.
After issuing a report in 2015 on the results of the port
congestion and supply chain forums the Commission held at ports
around the country, we asked ourselves: Should the Commission
become more involved in international supply chain challenges?
And if so, how could we add value?
As you know, the Commission has broad statutory authority
over international ocean carriers, ports, marine terminal
operators, and ocean transportation intermediaries. As a result
of our work with them, we understand the commercial realities
that our stakeholders face. The overall goal of the
Commission's competition enforcement program under the Shipping
Act of 1984 is to provide competitive ocean transportation
rates and service for American exporters and importers,
ultimately to the benefit of American consumers.
Our programmatic responsibilities give us a vital
perspective on the international supply chain challenges of
American exporters and importers.
We concluded that the Commission could add value and help
address the challenges of America's international supply chain,
but rejected the idea that performance of the commercial supply
chain would be improved by additional government regulation.
The approach we adopted for this initiative is built on two
concepts: small teams and process innovation. We heard from
industry groups that many business leaders were anxious to roll
up their sleeves and actively engage across the table to
address end-to-end global supply chain issues. To respond to
this desire for active engagement, we organized small teams of
industry leaders representing key supply chain industries:
ocean carriers, U.S. ports, marine terminal operators,
warehouse operators, chassis providers, longshore labor,
trucking, railroads, intermediaries, and American exporters and
importers.
Second, we directed our teams to focus on actionable
process innovation. We asked them to step out of their business
silos and identify one key process innovation that they
believed and agreed would improve overall international supply
chain reliability and resilience.
At our launch of our Supply Chain Innovation Teams last
May, our three teams quickly identified supply chain visibility
as one of the most effective ways to increase supply chain
performance. Integrated information systems provide visibility
that encourages businesses to act in a more coordinated and
effective way.
Our Innovation Teams identified the development of a
national seaport information portal as the one process
innovation that could be adapted for use by ports around the
United States. Our import teams developed standardized
information for each actor in the chain, and determined when
that information should be made available to them. In July, our
export teams will begin developing standardized information for
the export supply chain.
The collateral benefits of our initiative include the
insights that team members have gained into the business
reality of other actors in the supply chain teams--in the
supply chain system. There were plenty of aha moments, and,
``Do you really do it like that?''
We've also gained great insights into the strengths of U.S.
ports from interviews we have organized with ten directors of
major container ports on the East Coast, the West Coast, and
the Gulf. Their professionalism, dedication, and commitment is
impressive.
Chairman Fischer, we believe that information
infrastructure that will increase the performance of the
country's international supply chain is key to America's
economic competitiveness.
We have suggested to you legislative authority for the
Commission to develop a demonstration project for a national
information portal.
We do not recommend that the Federal Government build or
maintain an information system. However, while our teams are
intact and available for consultation, we believe the time is
right to take the next step and test the concept of a national
seaport information portal.
Thank you so much, Chairman Fischer and members of the
Subcommittee. I'm pleased to answer your questions. Thank you.
[The prepared statement of Ms. Dye follows:]
Prepared Statement of Hon. Rebecca Dye, Commissioner,
Federal Maritime Commission Supply Chain Innovation Teams
Chairman Fischer, Ranking Member Booker, and Members of the
Subcommittee, thank you for the opportunity to appear before you today
on behalf of the members of the Federal Maritime Commission Innovation
Teams.
To accompany my statement, I submitted a list of the companies
represented on our Innovation Teams, and the port directors, business,
and academic advisors and trade association consultants who have
supported the initiative.
How to Add Value to Supply Chain Debate
After issuing a report in 2015 on the results of the port
congestion and supply chain forums the Commission held at ports around
the country, we asked ourselves: Should the Commission become more
involved in international supply chain challenges? And if so, how could
we add value?
Why the Federal Maritime Commission
As you know, the Commission has broad statutory authority over
international ocean carriers, ports, marine terminals, and ocean
transportation intermediaries. As a result of our work with them, we
understand the commercial realities our stakeholders face.
The overall goal of the Commission's competition enforcement
program under the Shipping Act of 1984 is to provide competitive ocean
transportation rates and service for American exporters and importers,
ultimately to the benefit of American consumers.
Our programmatic responsibilities give us a vital perspective on
the international supply chain challenges of American exporters and
importers.
No Additional Government Regulation
We concluded that the Commission could ``add value'' and help
address the challenges of America's international supply chain, but
rejected the idea that the performance of the commercial supply chain
would be improved by additional government regulation.
Nor should we look over the shoulders of port officials and attempt
to duplicate or second-guess the tough decisions they are making to
combat supply chain problems.
Team Work and Process Innovation
The approach we adopted for this initiative is built on two
concepts: team work and process innovation.
We heard from industry groups that many business leaders were
anxious to ``roll up their sleeves'' and actively engage ``across the
table'' to address end-to-end global supply chain issues together.
To respond to this desire for active engagement, we organized teams
of industry leaders representing key supply chain industries: ocean
carriers, U.S. ports, marine terminal operators, warehouse operators,
chassis providers, longshore labor, trucking, railroads,
intermediaries, and American exporters and importers.
Second, we directed our teams to focus on ``actionable'' process
innovation. We asked them to ``step out of their business silos'' and
identify one key process innovation that would improve overall
international supply chain reliability and resilience.
Innovation Teams Recommendation
At the launch of our Supply Chain Innovation Teams initiative last
May, our three teams quickly identified supply chain visibility as one
of the most effective ways to increase supply chain performance.
Integrated information systems provide supply chain visibility that
encourages businesses to act in a more coordinated and effective way.
National Seaport Information Portal
Our Innovation Teams identified the development of a national
seaport information portal as the one process innovation that could be
adapted for use by ports around the United States.
Our import teams developed standardized information for each actor
in the international import supply chain and determined when that
information must be available.
In July, our export teams will begin developing standardized
information for our export supply chain.
Port Director Interviews
Collateral benefits of our initiative include the insights team
members have gained into the business realities of other actors in the
supply chain system.
We have also gained a great insights into the strengths of and
opportunities for U.S. ports. We have organized interviews with many of
our American port directors and are impressed by their professionalism
and dedication.
Information Infrastructure Key to American Economic Competitiveness
Chairman Fischer, we believe that information infrastructure that
will increase the performance of our country's international supply
chain is key to America's economic competitiveness.
We have suggested to you legislative authority for the Commission
to develop a demonstration project for a national seaport information
portal.
We do not recommend that the Federal government build or maintain a
national seaport information system. However, while our teams are
intact and available for consultation, we believe that the time is
right to take the next step and test the concept of a national seaport
information portal.
Thank you, Chairman Fischer and members of the Subcommittee. I'm
pleased to answer your questions.
The Chairman. Thank you, Commissioner.
Next we have Mr. Szabat, who is the Executive Director of
the Maritime Administration.
And previously you served as Chief of Staff for the Small
Business Administration and Transportation Counselor to the
U.S. Ambassador to Iraq. Welcome.
STATEMENT OF JOEL SZABAT, EXECUTIVE DIRECTOR,
MARITIME ADMINISTRATION,
U.S. DEPARTMENT OF TRANSPORTATION
Mr. Szabat. Good afternoon, Chairwoman Fischer, Ranking
Member Booker, and members of the Subcommittee. Thank you for
the invitation to testify.
The Department of Defense relies on U.S.-flag ships, crewed
by volunteer American civilian mariners to move our
warfighters' equipment and supplies whenever and wherever they
need to go. This U.S.-flag fleet of privately owned,
commercially operated vessels, along with government-owned
vessels, provide the sealift for the armed forces during times
of conflict and also responds to humanitarian crises and
natural disasters.
MARAD is responsible for ensuring that enough U.S.-flag
ships are available to meet these Department of Defense sealift
requirements and that there are enough qualified merchant
mariners to crew the entire sealift fleet of commercial and
government-owned vessels.
Three programs are essential to our sealift mission and to
the commercial success of the U.S.-flag fleet: the Jones Act,
which ensures the U.S.-flag fleet domestic trade; and Cargo
Preference and the Maritime Security Program, which together
provide an international U.S.-flag fleet supporting the U.S.
military.
As of today, the U.S.-flag commercial fleet is adequate to
meet immediate military contingencies, but as the commercial
fleet has declined in size in recent years, it no longer
employs enough qualified American mariners to sustain an
extended military sealift.
To begin to address this shortfall, the most recent
National Defense Authorization Act established a Maritime
Workforce Working Group. This group has already begun to assess
and define the pool of U.S. citizen mariners necessary to
support the U.S.-flag fleet in times of national emergency.
Nearly all of our merchant mariner officers qualified to
crew commercial and government sealift ships graduate from the
State Maritime Academies or from the Federal United States
Merchant Marine Academy. Following incidents of sexual
harassment and sexual assault at the U.S. Merchant Marine
Academy, both on campus and at sea, the Department of
Transportation and MARAD leadership suspended the USMMA's
critical commercial Sea Year training component. In the
Maritime Administration, we look after our people. Any sexual
violence or coercion against any of our people, especially
including midshipmen at Kings Point, is unacceptable.
During the suspension, a cultural audit of the Academy was
conducted by the Department of Transportation to study the
reasons for sexual harassment, sexual assault, and coercive
behaviors. From that audit came recommendations for
establishing strict criteria that commercial shipping companies
must meet to participate in Sea Year. Superintendent Helis will
discuss actions taken on campus in greater detail.
Shortly after the Sea Year stand-down, a consortium of 14
leading maritime companies came together with MARAD and
proposed ways to ensure that Sea Year training is conducted in
a safe and respectful environment. Those proposals have been
developed into strict requirements for companies to meet and
apply in to participate in Sea Year. To date, eight companies,
representing 82 percent of the commercial Sea Year training
prior to stand-down, have met these requirements and resumed
hosting midshipmen on their vessels.
Going forward, MARAD will continue to work with industry
through the Ship Operations Cooperative Program, made up of
maritime industry professionals focused on safety. The SOCP
will develop computer-based sexual assault prevention and
response training that companies can use to educate and equip
their vessel crews. This summer, we will review these measures
and make changes or improvements as needed.
The NDAA also required MARAD to establish a Sexual Assault
Prevention and Response Working Group to examine methods of
improving the shipboard climate during Sea Year. The SAPR
Working Group had its first meeting on January 31, with over 50
members from industry, labor, the Merchant Marine Academy, the
State Maritime Academies, and Federal Government
representatives also participating.
Finally, the Fiscal Year 2017 NDAA set deadlines for
completing actions identified by the Department of
Transportation's Inspector General in a December 2015
management control audit. DOT and MARAD have completed 13 of
the 16 recommendations, and we are committed to meeting the
remainder.
A final note, with me today, in pink, is my better half,
best friend, and wife, who has two Commerce connections.
Chiling Tong is a former Deputy Assistant Secretary in the
Department of Commerce, and she is now President of the
National AAPI Chamber of Commerce and Entrepreneurship.
Thank you for your interest. I ask that my written
statements be submitted into the record. And I'm happy to
answer any questions you may have.
[The prepared statement of Mr. Szabat follows:]
Prepared Statement of Joel Szabat, Executive Director,
Maritime Administration, U.S. Department of Transportation
Good afternoon, Chairwoman Fischer, Ranking Member Booker and
members of the Subcommittee. Thank you for the invitation to testify on
issues under the jurisdiction of the Maritime Administration, with an
emphasis on the implementation of recent statutory requirements and the
examination of topics relevant to upcoming reauthorization bills. This
testimony will cover the current state of the U.S.-flag fleet and
mariner workforce and implementation of the recent MARAD
reauthorization bill, including measures affecting the U.S. Merchant
Marine Academy (USMMA or Academy).
The U.S.-Flag Fleet and Mariner Workforce
MARAD is responsible for ensuring that U.S.-flag ships and merchant
mariners are available to meet Department of Defense (DOD) sealift
requirements. The U.S.-flag fleet of privately-owned, commercially-
operated vessels, along with government-owned vessels, provide a
critical public-private sealift surge and sustainment capacity to move
equipment and materials for the Armed Forces and Federal agencies when
needed, and where needed, during times of conflict, humanitarian
crises, and natural disasters.
Three programs ensure that there are enough U.S.-flag vessels
available to provide this capacity: the Jones Act, which ensures a role
for the U.S.-flag fleet in domestic trade; and Cargo Preference and the
Maritime Security Program (MSP) which, together, support a militarily
useful, U.S.-flag fleet sailing internationally.
MARAD and DOD also rely on the commercial fleet to employ enough
qualified mariners to crew all the commercial ships tasked with
supporting military operations, as well as enough additional mariners
to crew the ``surge fleet'' of Federally-owned cargo ships. As of
today, the size and composition of the U.S.-flag commercial fleet is
adequate to meet immediate military contingencies. However, due to the
decline in size in recent years of both the domestic U.S.-flag fleet
with unlimited horsepower and unlimited tonnage and the international
U.S. flag commercial fleet, both the U.S. Transportation Command
(USTRANCOM) and MARAD are concerned that there are not enough qualified
mariners to sustain an activation of the entire sealift fleet, though
there has never been a full activation of the entire sealift fleet.
The National Defense Authorization Act for Fiscal Year 2017 (FY
2017 NDAA) required the establishment of a Maritime Workforce Working
Group (MWWG) to examine and assess the size of the pool of U.S. citizen
mariners necessary to support the U.S.-flag fleet in times of national
emergency. The MWWG has been established and has begun meeting. The
MWWG is comprised of more than 50 members that include representatives
from industry, labor, the USMMA, State Maritime Academies, and Federal
Government representatives, as well as subject matter experts from
USTRANSCOM, DOD, and the Army. In addition to member meetings, a
Federal Register Notice will be published to collect input from the
public, as the MWWG prepares a report to Congress due in December 2017.
Maritime Training
Another MARAD responsibility is to provide funding and oversight
for mariner training programs to produce highly skilled U.S. Coast
Guard (USCG) credentialed officers for the U.S. Merchant Marine.
Maintaining an adequate pool of American merchant mariners is vital to
both the commercial success of the U.S.-flag fleet and to maintaining
the capacity needed to project American sea power. The USMMA and the
State Maritime Academies (SMAs) graduate nearly all USCG-credentialed
officers. These are merchant marine officers who hold an unlimited
tonnage or horsepower endorsement available to crew U.S.-flag ships.
These graduates support our Nation as a cadre of well-educated and
trained merchant mariners capable of serving in support of military
emergency, national emergency, and humanitarian missions.
Addressing Sexual Harassment and Sexual Assault at the U.S. Merchant
Marine Academy
The Academy is America's flagship school for educating licensed
merchant mariners capable of serving our Nation in peace and war. DOT,
MARAD, and the USMMA take sexual assault and sexual harassment at sea
and on campus very seriously. We adopted an approach to this problem
similar to that used at the other Federal service academies. As best
and as fast as we can, we are introducing policies to change the
behavior and culture at the Academy to combat all kinds of abusive or
coercive behaviors. This testimony discusses the actions MARAD has
taken in conjunction with maritime industry, while testimony from
Superintendent Helis will discuss actions taken to combat sexual
assault and harassment on the USMMA campus.
Criteria For Vessel Operators to Participate In Sea Year
The USMMA's shipboard training program, or ``Sea Year,'' gives
Midshipmen experience of life at sea on board commercial and military
vessels and provides cost-effective hands-on seamanship and engineering
sea time that meets the requirements to secure USCG mariner
credentials. Midshipmen are required to have 360 days of sea service
during their four-year maritime education to obtain their USCG merchant
mariner credentials. Shipping companies and the U.S. Navy are part of a
cooperative effort to ensure that a Midshipman's shore based education
is enhanced by the required on-the-job training at sea.
Sea Year is critical to the education and training of Midshipmen at
the USMMA, and all training must be conducted in a safe and respectful
environment. In the wake of a series of studies and surveys that
indicated problems with sexual misconduct and other coercive behaviors,
both on campus and at sea, DOT and MARAD leadership suspended
commercial Sea Year so we could develop a better understanding of the
problem and a strategy to ensure the safety of the Midshipmen. An
independent external consultant assessed the organization and made
recommendations in December 2016.\1\
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\1\ Logistics Management Institute (LMI). December 2016.
``Department of Transportation U.S. Merchant Marine Academy Culture
Audit.'' Available at: https://www.usmma.edu/sites/usmma.edu/files/
docs/USMMAReport%20508.pdf
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Last year, Secretary Foxx's decision to stand down commercial Sea
Year over concerns about Midshipmen being subjected to sexual
misconduct stirred vocal disagreement from industry leaders. Those same
leaders, including many USMMA alumni, worked with MARAD through an
extended stand down of Sea Year while the cultural audit was conducted.
A consortium of 14 leading maritime companies came together with MARAD
to examine ways to ensure that Sea Year training is conducted in a safe
and respectful environment. Just two weeks after the stand down, the
consortium brought forth a proposal to address sexual assault and
harassment prevention and response. MARAD and DOT subsequently created
the Shipboard Climate Compliance Team (SCCT) to establish standards and
collaborate with industry, labor and the consortium, and lay out
workable criteria for the companies to achieve those standards. The
SCCT is led by a MARAD Senior Executive Service leader, who is a USMMA
graduate. The team is made up of 10 experienced mariners and sexual
harassment and sexual assault prevention experts and civil rights
professionals. The SCCT has established stringent new requirements that
companies must meet to be eligible to participate in Sea Year training.
This strong working relationship between MARAD and these maritime
leaders resulted in six companies, representing 75 percent of the
commercial Sea Year training provided prior to the stand down, being
reinstated to accept Midshipmen as of today. The SCCT standards meet
the requirement in Section 3514 of the FY 2017 NDAA for MARAD to
establish, in consultation with operators of U.S.-flag vessels,
criteria that vessel operators must meet to participate in Sea Year and
a process for verifying compliance with the criteria.
MARAD's ``Sea Year Eligibility'' criteria include the following:
Company-Wide Zero Tolerance Message--Shipping company CEOs will
issue an annual company-wide message outlining specific rules
for the workplace, strongly stating that sexual assault and
sexual harassment, including any retaliation based on a
complaint, are unacceptable, and committing the company to
eradicate such behavior and enforcing a zero-tolerance policy.
Annual Sexual Assault and Sexual Harassment Prevention Training
Requirement for Crew--Annual sexual assault and harassment
prevention training will ensure that crewmembers clearly
understand what constitutes sexual assault and sexual
harassment, its negative impact, the importance of prevention,
and the penalties for engaging in prohibited behavior.
Mentors with Enhanced Selection Criteria and Duties--Mentors
for each ship play a crucial role in the success and
development of cadets. Per enhanced mentor qualifications, a
mentor must certify that he/she does not have any pending
complaints or history of violations of any other company's
Sexual Assault Sexual Harassment policies. The mentor must be
of good character, and know, support, and advocate for the
company's sexual assault sexual harassment prevention and
response policies.
Verify Annual Sexual Assault and Sexual Assault Prevention and
Response Training--Each company will provide MARAD documents
describing company-specific training protocols; the company's
anti-discrimination, harassment, retaliation and sexual
misconduct policies, including complaint reporting policies and
procedures; a description of the company's investigation
process and enforcement procedures; and, a mechanism for
verifying their understanding of the issue.
Zero-Tolerance Policy Regarding Romantic or Sexual
Relationships--Companies will actively support the USMMA Sea
Year Conduct policy for Midshipmen, which prohibits romantic or
sexual relationships between Midshipmen and crewmembers, and
the consumption of alcohol by Midshipmen under 21 years old.
Companies will immediately report known Midshipmen violations
to the USMMA. A violation of the USMMA Sea Year policy may
result in counseling or punishment pursuant to the Midshipmen
Regulations.
MARAD Will Maintain a Record of all Relevant Company Policies--
Companies will submit all relevant policies and documentation
to MARAD, and MARAD will verify compliance annually. Required
documentation includes, but is not limited to, sexual assault
and harassment prevention and response policies; a description
of company's complaint reporting process and procedures;
policies related to confidentiality, enforcement, and
retaliation and investigation procedures; and, the location of
sexual misconduct prevention policies onboard the vessel.
Company Debrief--Currently, both Midshipmen and the Vessel
Masters evaluating them provide a report to the USMMA upon
completion of an individual's Sea Year training. In addition to
these reports, the new criteria require the company to provide
the Academy a sexual assault and sexual harassment debrief at
the completion of the Midshipmen's Sea Year time with the
company.
The requirements outlined above will be reviewed in September this
year, and annually thereafter. The SCCT has implemented a company-by-
company review process to recommend eligibility for carrying USMMA
Midshipmen aboard their commercial ship. The SCCT will review documents
provided by carriers to ensure compliance with the criteria. Once that
process is complete, the USMMA Superintendent may issue an eligibility
letter. MARAD Headquarters will coordinate with USMMA to board vessels
and visit companies to conduct Shipboard Climate Compliance Team (SCCT)
audits. The audit priority will be driven by review of company
documentation that pertain to sexual misconduct. Additional feedback
from the companies will be provided in accordance with the SCCT
requirements. This is in addition to current reporting from the
Midshipmen to the USMMA Department of Shipboard Training Academy
Training Representative Midshipman Assignment Report, which provides
feedback from the cadet about the company and Sea Year experience. Each
of these reports and opportunities for feedback will specifically
addresses sexual harassment and sexual assault.
At present, six companies have met compliance requirements and
resumed hosting Midshipmen on their vessels. MARAD is also reviewing
the packages of several other companies which have applied to meet the
Sea Year requirements. Collectively, the companies that have been
approved, or are applying, represent 84 percent of the commercial Sea
Year training provided before the suspension.
Sexual Assault Prevention and Response Working Group
Section 3517 of the FY 2017 NDAA required MARAD to establish a
Sexual Assault Prevention and Response Working Group (SAPR WG) to
examine methods to improve the shipboard climate during Sea Year,
including prevention and response to sexual assault, sexual harassment,
and other inappropriate conduct. The SAPR WG had its first formal
meeting on January 31, 2017. With over 50 members, the WG includes
members from industry, labor, the USMMA, SMAs, and Federal Government
representatives in accordance with the FY 2017 NDAA requirements. In
addition to member meetings, public input is being sought through a
Federal Register Notice which was published May 1, 2017. The WG will
report its findings to Congress by September 25, 2017 as required by
the FY 2017 NDAA.
In an additional effort to work with industry to address the
problems of Sexual Harassment and Sexual Assault, MARAD has entered a
cooperative agreement with the Ship Operations Cooperative Program
(SOCP) to develop computer-based sexual assault prevention and response
training that will be made available for companies to train their
vessel crews. SOCP is a trade association made up of maritime industry
professionals focused on safety. MARAD is also working with SOCP to
roll out management `best practices' this summer. These efforts will
especially benefit smaller companies without the resources to develop
robust programs of their own.
School Ships
In addition to providing oversight of the USMMA, MARAD provides
funding assistance to six State Maritime Academies (SMAs), which
collectively graduate more than two-thirds of the entry-level Merchant
Marine officers annually.\2\ Approximately 972 Cadets are expected to
graduate from the SMAs in 2017. Assistance provided to the SMAs also
includes funding for maintenance and repair costs for training ships on
loan from MARAD. Unlike the USMMA Midshipmen, the SMA Cadets receive
most of their sea time on these training ships, under the instruction
of each school's faculty.
---------------------------------------------------------------------------
\2\ The six SMAs are: California Maritime Academy in Vallejo,
California; Great Lakes Maritime Academy in Traverse City, Michigan;
Texas A&M Maritime Academy in Galveston, Texas; Maine Maritime Academy
in Castine, Maine; Massachusetts Maritime Academy in Buzzards Bay,
Massachusetts; and State University of New York (SUNY) Maritime College
in the Bronx, New York.
---------------------------------------------------------------------------
The maintenance and repair projects are particularly important as
the training ships age and approach or exceed their designed service
life. Two training ships have been in service over 50 years, which is
twice the standard service life. Accordingly, MARAD is using the funds
to address priority maintenance across all the training vessels, with
emphasis on the Training Ship EMPIRE STATE, to ensure that they all
meet safety and functional requirements and remain in service as long
as necessary.
Other FY 2017 NDAA Requirements
Ship Disposal Program
MARAD is responsible for the disposal of obsolete Federal
Government, merchant-type vessels that are 1,500 gross tons or greater.
A portion of the funds generated by the sale of these vessels is
dedicated for maritime heritage preservation, including funding the
National Park Service's National Maritime Heritage Grant Program.
Section 3507 of the FY 2017 NDAA established a new formula for
distributing these sales proceeds to increase the amount of funds
available for the NPS grant program. MARAD is prepared distribute any
new funds received from ship recycling sales pursuant to this
allocation. In addition, MARAD will provide a report to Congress on the
management of MARAD's ship disposal program as required under Section
3507.
Workforce Plans and Onboarding
In a December 2015 audit,\3\ the DOT OIG made recommendations for
improvements in MARAD's management controls related to workforce
development and uniform policy. Sections 3519, 3520, and 3521 of the FY
2017 NDAA set deadlines for completing the actions recommended in this
audit. MARAD is committed to meeting these deadlines. The MARAD
Workforce Analysis, Leadership Succession Plan, and Strategic Human
Capital Plan are currently being updated. MARAD expects completion of
this requirement by the deadline set in the FY 2017 NDAA. MARAD has
performed the review related to new hire orientation, training, and
misconduct, and the OIG recommendation regarding onboarding policies
and procedures was closed on January 10, 2017.
---------------------------------------------------------------------------
\3\ Office of Inspector General. 2015. Report Number ST-2016-011.
Audit report: Weaknesses in MARAD's management controls for risk
mitigation, workforce development, and program implementation hinder
the agency's ability to meet its mission.
---------------------------------------------------------------------------
Drug and Alcohol Policy
In compliance with Section 3520 of the FY 2017 NDAA, MARAD has
reviewed its drug and alcohol policies, developed training, and
established a system to track training sessions. The OIG recommendation
to address these issues was closed on August 1, 2016.
Vessel Transfers
As recommended by the OIG, MARAD conducted a review and revised its
Vessel Transfer Office (VTO) procedures to reflect the current range of
VTO responsibilities and processes. This recommendation was closed on
May 10, 2016. In accordance with Section 3521 of the FY 2107 NDAA,
MARAD will submit a report to Congress in September 2017 detailing the
updated VTO procedures to process vessel transfer applications.
DOT and MARAD are committed to implementing the changes outlined in
the NDAA and we intend to build upon the improvements that have been
made in recent years. We appreciate the support this Subcommittee has
provided and look forward to working with you to ensure the Maritime
Administration's progress.
Thank you for your interest, and I am happy to answer any questions
you may have.
The Chairman. Thank you, sir.
Next we have Rear Admiral James Helis, Superintendent, the
United States Merchant Marine Academy.
Welcome, Admiral.
STATEMENT OF REAR ADMIRAL JAMES HELIS, U.S. MARITIME SERVICE
SUPERINTENDENT, UNITED STATES MERCHANT MARINE ACADEMY
Admiral Helis. Thank you, Senator. And good afternoon,
Chairman Fischer, Ranking Member Booker, and members of the
Subcommittee. Thank you for the opportunity to testify on the
implementation of the recent Maritime Administration
reauthorization bill's measures affecting the United States
Merchant Marine Academy.
The Academy's mission is to educate and graduate licensed
merchant mariners and leaders of exemplary character to serve
our Nation's marine transportation and national security needs.
The Academy attracts quality young men and women who meet
rigorous admission standards. They demonstrate superior
character and leadership qualities to complement a strong
academic record.
In compliance with the Fiscal Year 2017 NDAA, I will post a
public profile of each class's demographics by state, country,
gender, race, and ethnicity, and prior military service this
August. I'm glad to say that in recent years, the quality and
diversity of our incoming classes have improved considerably,
which feeds into our efforts to build a healthy, respectful
campus culture.
This culture is an important dynamic that supports my top
priority, of ensuring the Academy is a safe learning
environment for all students. This committee has also made this
a priority, and several requirements of the Fiscal Year 2017
NDAA addressed the prevention of sexual assault, sexual
harassment, and other coercive behaviors on campus and during
Sea Year training.
Sexual assault and sexual harassment are unacceptable
behaviors at any institution of higher education, especially
one committed to developing our Nation's future leaders. To
that end, we have taken a number of aggressive steps since 2012
to address the problem.
In Fiscal Year 2012, the Merchant Marine Academy hired its
first Sexual Assault Response Coordinator, or SARC, and
established a 24/7 victim hotline. The Academy also works
closely with a local victim advocacy agency to provide another
confidential reporting option.
We have beefed up mandatory training for our faculty,
staff, and midshipmen on sexual assault, sexual harassment,
dating violence, stalking, and bystander intervention. We also
have implemented recommendations made by the Department of
Transportation's Inspector General in Fiscal Years 2013 and
2014 after a thorough evaluation of the Academy's Sexual
Assault Prevention and Response program.
In addition, a campus cultural study commissioned by the
Department of Transportation in 2016 generated more valuable
recommendations that are also being implemented.
The Defense Manpower Data Center continues to administer a
Gender Relations Survey and conduct focus groups across our
campus. While we've made progress in increasing midshipmen
awareness and understanding of sexual assault and sexual
harassment, we are extremely disappointed that the surveys show
we are not seeing a decrease in the number of incidents.
In 2016, we redoubled our efforts by recognizing that the
core issue is the culture of the Academy and providing a safe
learning environment which values and respects every midshipman
and allows them to develop into exemplary leaders.
Additionally, this past fall, we created a Sexual Assault
Prevention Response Office, or SAPRO, and we are hiring two
victim advocate educators and a Sea Year coordinator to plan
and execute training for victim services and prevention.
A special team of staff, faculty, and midshipmen
participated in a cultural change conference in February 2017
and are now drafting a comprehensive campaign to transform the
Academy's culture. Another committee is working to overhaul all
Sea Year policies and training.
Other actions this past year include vetting maritime
companies through a MARAD Shipboard Climate Compliance Team to
enact standards preventing sexual assault and harassment from
happening at sea.
All of our efforts are focused on building a community with
zero tolerance for sexual assault, sexual harassment,
retaliation, bullying, hazing, coercion, victim blaming, and
alcohol misuse and abuse. We know that our leadership, staff,
faculty, and midshipmen must work together to eliminate these
behaviors and hold those who violate Academy standards
accountable.
I have a very personal stake in solving this problem, as my
own experience in assisting victims of sexual assault dates
back to the 1990s when I served in the Army as a battalion
commander. I know firsthand from working with victims the
lifelong harm these crimes inflict. It undermines unit
readiness and cohesion and hurts our ability to accomplish our
mission. As a Federal service academy, the U.S. Merchant Marine
Academy should be setting an example for eliminating sexual
assault and sexual harassment. Anything less is a failure on
our part.
The work we've done to improve sexual assault prevention
and response also addresses one requirement the Academy must
meet for reaccreditation. In June 2016, the Middle States
Commission on Higher Education placed the Academy in a warning
status for not meeting 5 of their 14 standards of
accreditation. As detailed in my written testimony, the Academy
is taking actions to correct the deficiencies identified by
Middle States, and we submitted a required report on our
progress to them on March 1. The Academy remains fully
accredited as we work to address the recommendations made by
Middle States, and we anticipate their next final report in
July.
Thank you for inviting me to testify today. I ask that my
written statement be entered into the record. I appreciate your
interest and continued support for the Academy and will be
happy to answer any questions you may have. Thank you.
[The prepared statement of Admiral Helis follows:]
Prepared Statement of Rear Admiral James Helis, U.S. Maritime Service
Superintendent, United States Merchant Marine Academy
Good afternoon, Chairwoman Fischer, Ranking Member Booker
and members of the Subcommittee. Thank you for the invitation
to testify on issues under the jurisdiction of the Maritime
Administration, with an emphasis on the implementation of
recent statutory requirements and the examination of topics
relevant to upcoming reauthorization bills. This testimony will
cover the implementation of the recent MARAD reauthorization
bill's measures affecting the U.S. Merchant Marine Academy
(USMMA or Academy).
The mission of the Academy is to educate and graduate
licensed merchant mariners and leaders of exemplary character
who will serve America's marine transportation and defense
needs in peace and war. Each year the Academy graduates highly-
qualified U.S. Coast Guard (USCG) credentialed mariners
committed to serving the Nation as officers in the Armed Forces
and the Merchant Marine.
The Academy provides a comprehensive four-year leadership
development experience. All graduating Midshipmen will receive
a Bachelor of Science degree, a USCG-issued Merchant Marine
officer's license, and a commission in an Active or Reserve
Component of one of the Armed Forces. They can meet their
service obligation in one of two ways: twenty to twenty-five
percent will choose to serve five years on Active Duty as an
officer in any branch of the Armed Forces, while the remaining
majority of the class will sail for five years as a Merchant
Marine officer on US-flagged commercial ships or with a Federal
agency, which can include the Military Sealift Command or the
National Oceanographic and Atmospheric Administration.
The Academy's mission begins with the men and women who
pass through its gates in late June to begin their four-year
journey. The Academy has a highly competitive and selective
admissions process. Candidates must have a strong academic
record and demonstrate superior character and leadership
potential through their participation in co-curricular
activities, athletics, and community service. They must meet
rigorous medical and physical fitness qualifications for
military service. And they must receive a nomination from a
Member of Congress or qualify for one of fifty direct
appointments by the Secretary of Transportation by
demonstrating qualities deemed to be of special value to the
Academy.
My top strategic priorities for the Academy are preventing
sexual assault and sexual harassment and other coercive
behaviors, reaccreditation by the Middle States Commission on
Higher Education (MSCHE), continuing our work to modernize and
renovate campus infrastructure and facilities, and
strengthening Midshipmen leadership development. I will focus
my testimony today on the actions which the Academy has taken
on meeting the requirements of the National Defense
Authorization Act for Fiscal Year 2017, P.L. 114-328, (FY 2017
NDAA) to address sexual assault and harassment.
The FY 2017 NDAA requires that the superintendent post a
public profile of each class' demographics by state, country,
gender, race and ethnicity, and prior military service. The
USMMA will post this report on the Academy's website by August.
I believe that enhancing the diversity of the Regiment of
Midshipmen will strengthen our efforts to improving the campus
culture, which in turn is critical to eliminating sexual
assault, sexual harassment, and other coercive and unacceptable
behaviors. Over the past six years the quality and diversity of
the incoming classes has improved considerably. Comparing the
classes of 2014 and 2020, the most recently admitted, we saw
the mean score on the Scholastic Aptitude Test improve from
1215 to 1280. The percentage of women admitted rose from 12.9
percent to 19.7 percent. Admission of individuals who represent
racial minorities similarly rose from 15.2 percent to 24
percent. Other indicators of the quality of our incoming
candidates include class rank and grade point average, as well
as candidates who have held key leadership positions in student
government, athletics, and co-curricular and community
activities. We are pleased with the progress we are making and
expect to see continued improvements in the quality and
diversity of future classes.
Sexual assault and sexual harassment are unacceptable
behaviors that have no place at any institution of higher
education, especially one committed to developing our Nation's
future leaders. I am committed to the elimination of sexual
assault and harassment on our campus and improving the
environment at the Academy so that victims are comfortable
reporting all incidents and they are confident that Academy
personnel will respond appropriately to reported incidents. The
steps we have taken since 2012 to address sexual assault and
harassment are included in our annual reports to Congress. We
welcomed an evaluation of our programs by the Department of
Transportation's (DOT) Inspector General in FY 2013 and FY
2014, which provided another set of eyes on our programs and
useful recommendations which we have implemented. In addition,
the FY 2017 NDAA requires the DOT Inspector General to report,
by March 31, 2018, on the effectiveness of the sexual assault
and sexual harassment prevention and response program (SAPR) at
the Academy. As required in the NDAA, the Defense Manpower Data
Center continues to administer the Service Academy Gender
Relations Survey in even numbered years, and conducts focus
groups with Midshipmen, staff and faculty in odd-numbered years
as they do for the other four Federal Service Academies. The
next focus group study will be conducted in 2017. Additionally,
the results of the study commissioned by the Department of
Transportation in October 2016 on the Academy culture have been
reviewed, and we are incorporating the suggestions across
campus.
I am personally committed to solving this problem. My
experience in assisting victims of sexual assault dates to the
1990s when I served in the Army as a battalion commander. I
know from working firsthand with victims the immeasurable,
lifelong harm these crimes inflict, and how they undermine unit
readiness and cohesion. Sexual assault and harassment are
fundamentally at odds with our values as a Nation--values that
we are obligated as leaders to live by, model, and expand on.
They undermine our ability to accomplish our mission. The
USMMA, a Federal service academy, should be setting the example
for the Nation in eliminating sexual assault and sexual
harassment. Anything less is a failure on our part.
At the Academy, we established a multi-disciplinary Sexual
Assault Review Board (SARB), which meets monthly, to provide
executive oversight and procedural guidance for the SAPR
program by reviewing ways to improve processes, system
accountability and victim access to quality services. The SARB
has implemented standard operating procedures entitled
``Investigating an Unrestricted Report of Sexual Assault;
Processing a Restricted (confidential) Report of Sexual
Assault; and, Maintenance of Restricted and Unrestricted
Reports.''
In FY 2012, USMMA hired its first Sexual Assault Response
Coordinator (SARC). The SARC resides at the Academy, and is
available to Midshipmen 24/7 through a victim hotline. Victims
are provided with information and referrals, and assistance in
obtaining any necessary medical or mental health treatment at
the Academy or at an appropriate facility in the local
community and/or victim advocacy agency. Victims have access to
confidential (also known as restricted) reporting through the
SARC, Health Clinic counseling staff, the Chaplain and a small
number of specially trained staff and faculty victim advocates.
The Academy works closely with the local victim advocacy agency
to provide an additional confidential reporting option. A
victim may also make an unrestricted report, which will result
in the initiation of a criminal and administrative
investigation.
The SARC, working with the Superintendent, Commandant and
Dean of Academics, has significantly improved training across
the Academy aimed at the prevention of sexual assault and
sexual harassment. Faculty and staff receive mandatory training
annually. Incoming Midshipmen receive mandatory training in the
first three weeks in small group settings (20-25 midshipmen per
training) covering the topics of sexual assault, sexual
harassment, dating violence, stalking, and bystander
intervention. Beginning with the Class of 2019, we increased
training to three hours from the one hour that previous classes
received. The SARC and Commandant continue to provide quarterly
training throughout each Midshipman's academic career in both
small and large group settings. To meet the NDAA's requirements
for awareness training programs, the SARC and the Department of
Professional Development and Career Services provide special
training sessions prior to departure for Sea Year (sophomores
spend four months at sea and juniors spend eight months at
sea). Training focuses on where to seek help or assistance
(captain, designated person ashore, SARC's 24/7 hotline),
situational awareness, risk reduction, and bystander
intervention. In 2016, the Academy adopted the Green Dot
Bystander Intervention Program, which teaches students to
identify volatile situations in which there could be the
possibility of sexual violence and to defuse those situations
through diversion or distraction. In addition, the SARB
recently decided to increase our training on sexual assault and
proper conduct for Midshipmen prior to their departure for sea
training this summer.
Our survey results since 2012 indicate that Midshipmen have
much better awareness and understanding of sexual assault and
sexual harassment, and appreciate the commitment of everyone
from the Secretary of Transportation through MARAD, the
Academy's senior leadership, and Midshipmen Regimental officers
to eliminate this scourge from the Academy. We are extremely
disappointed that we are not seeing a decrease in incidents in
the survey results. In 2016, we redoubled our efforts to
address this problem.
As a first step, we analyzed the available data and
feedback from the Advisory Board and our own conversations with
Midshipmen. It became clear to me that we needed to more
closely examine the Sea Year and its potential effects, as that
is the component of our program that sets USMMA apart from the
other Federal service academies. MSCHE affirmed this concern in
their report last year, highlighting a need for the USMMA to
address the issues of sexual assault and harassment at sea and
on campus. After further analysis and discussion among the
senior leadership at USMMA, MARAD, and DOT, as MARAD Executive
Director Joel Szabat discussed in his testimony, former
Secretary Foxx decided to stand down Sea Year training until
procedures were in place to better assure a safe climate for
our Midshipmen. The combined efforts of USMMA, MARAD, DOT, and
industry and labor resulted in the certification process
described by Mr. Szabat, which we have now implemented.
In addition to the Sea Year stand down, Secretary Foxx
directed a deep dive into USMMA culture to identify other
factors that could be contributing to our challenges with
sexual assault and harassment and other unacceptable behaviors.
The study has provided useful analysis that will inform our way
forward.
We have implemented policies and programs based on best
practices adopted in the military and higher education,
including procedures for disciplinary action. However, we have
not seen the results we desire or expect. The core issue we
must address--that we are now addressing--is the very culture
of USMMA. We must take actions to transform the USMMA culture
such that every Midshipman is respected, valued, and can
develop to her or his fullest potential to serve the Nation as
a leader of exemplary character. The entire USMMA community
must have zero tolerance for sexual assault and sexual
harassment, retaliation, bullying, hazing, coercion, victim
blaming, and alcohol misuse/abuse. Leadership, staff, faculty,
and Midshipmen must all unite to eliminate this behavior and
support victims, and hold those who violate Academy core values
and standards accountable for their actions, when incidents
take place.
In the fall of 2016, we determined that the work related to
managing USMMA's sexual assault prevention and response program
had become more than one individual could reasonably handle.
Accordingly, we created a Sexual Assault Prevention and
Response Office (SAPRO) and are converting the SARC position,
which became vacant in December 2016, to a SAPRO director. We
are hiring two Victim Advocate-Educators who will assist the
SAPRO director in planning and executing training and providing
victim services. We have also added a Sea Year coordinator to
the SAPRO.
Additional steps we have taken over the past six months
include a reintegration program for Midshipmen when they return
from sea and the addition of mandatory online interactive
sexual assault and alcohol abuse prevention training. A special
team made up of staff, faculty, and Midshipmen participated in
a cultural change conference at the United States Air Force
Academy in February 2017 and are now drafting a comprehensive
campaign plan to transform USMMA culture. The Deputy
Superintendent led an effort which has produced a comprehensive
and integrated Sexual Assault Prevention and Response
Framework. A committee also has begun work to overhaul Sea Year
policies and all training in preparation for Sea Year.
In addition to the efforts to improve the Sea Year training
experience, the USMMA has developed a comprehensive plan to
reduce sexual assault and sexual harassment on campus. The
USMMA SAPR Program has significantly improved training across
the Academy aimed at the prevention of sexual assault and
sexual harassment, including online prevention training, case
studies, videos, social media, professional speakers and small
groups. Actions taken by the USMMA have included installation
of new emergency call boxes and security cameras, improvement
of the security guard force, implementation of a 24/7 hotline
for reporting inappropriate behaviors, and victim assistance in
obtaining medical or mental health treatment. Efforts will
continue to improve upon the SAPR Program as the USMMA
implements recommendations from the cultural audit and responds
to feedback from Midshipmen.
The Academy's work to improve sexual assault and sexual
harassment prevention and response addresses one of the
recommendations made by MSCHE, which accredits the Academy's
academic degrees. In June 2016, MSCHE placed USMMA in a warning
status because USMMA was not meeting five of MSCHE's fourteen
standards of accreditation. We are presently taking action to
meet the requirements identified by MSCHE to be granted full
accreditation. Actions taken over the past year include MARAD's
establishment of the Maritime Education and Training Executive
Review Board, which serves as a formal governing and oversight
body for USMMA; requesting and receiving relief from
Congressional legislation constraining the Academy's budget
during the interim Continuing Resolution period; developing
templates for budget development and tools for linking
resources with the Strategic Plan.
Thank you for inviting me to testify today. I appreciate
your interest and continued support for the Academy and will be
happy to answer any questions you may have.
The Chairman. Thank you, Admiral.
Next we have Mario Cordero, the Commissioner, Federal
Maritime Commission. Mr. Cordero has been a Commissioner on the
FMC since 2011 and served as Chairman from April 2013 till
January 2017.
Welcome, sir.
STATEMENT OF HON. MARIO CORDERO, COMMISSIONER, FEDERAL MARITIME
COMMISSION
Mr. Cordero. Chairman Fischer, thank you, Ranking Member
Booker, and members of the Subcommittee. Thank you for
providing me this opportunity to appear before you today.
As noted, President Obama designated me to serve as
Chairman of the Commission on April 1, 2013, and I had the
honor to serve in that role for nearly 4 years. I wish to
congratulate my colleague, Michael Khouri, on his recent
appointment as Acting Chairman of the Federal Maritime
Commission earlier this year.
During my time as Chairman, the FMC navigated the Hanjin
bankruptcy, the implementation of the VGM container weight
issue, and aggressively advocated for the maritime industry on
high-level trade talks, and engaged in rulemaking that
protected the American shipping consumer and streamlined rules
to promote competition. Importantly, we also investigated and/
or monitored port congestion, demurrage and detention, and
carrier alliances and consolidation. I thank you for your
support throughout my tenure.
I will touch upon four topics today: the current state of
the industry, the alliance agreements, the supply chain, and
other issues of relevance to U.S. exporters and importers, and
the American shipping consumer.
First, the industry. The international shipping community
has experienced some dramatic challenges in the last decade.
These challenges have been twofold. First, in 2008, the
economic global recession and its severe impact on the
international maritime transportation carriers, who continue to
struggle with unsustainable transportation rates.
Second, what many today regard as a geopolitical recession
as a result of the global dialogue on protectionism and
isolationism. Today, international trade is an integral part
and a critical part of the U.S. economy. More than one-third of
our Nation's GDP is tied to global commerce, and this figure is
only predicted to become more significant in the coming years.
Ocean transportation of goods and commodities is the
backbone of our trading system. Indeed, 90 percent of world
trade is transported by shipping lines. Each of us, as
consumers or investors, benefit from the competitive
marketplace the Commission works to maintain.
In the last decade, we have seen the rise of very large
container vessels, that is, vessels that exceed 10,000 TEUs, to
more than 398 in the current worldwide fleet as of April 2017,
which includes 20,000 TEU vessels. Our investments in maritime
infrastructure have slowly tried to match that growth. We must
invest in ports to remain competitive, plain and simple.
Although we acknowledge the importance of trade in the
American economy, and the obvious imbalance of the export-
import question, we still need to realize that our export
growth is dependent on the global consumer.
For example, recent reports indicate that U.S. exports of
beef, pork, oil, gas, and LNG have grown consistently in the
last few years. Within the next 3 years, the U.S. may be the
largest exporter of LNG. Overall, containerized exports grew,
and the value of exports transported by vessel in 2016 was in
excess of $475 billion.
Perhaps the most significant development in the
international shipping industry is carrier consolidation. In
2011, the year I commenced my service here at the FMC, there
were approximately 21 major global water transportation
carriers. Today, essentially we have 13, and next year, 2018,
this may be down to 10, which will account for 70 percent of
the containerized global capacity, each belonging to one of the
three alliances that commenced in April of this year: the 2M,
the OCEAN, and THE ALLIANCE. Frankly, I am not sure we have
seen the end of carrier consolidation.
An alliance agreement between carriers, which requires a
filing with the Federal Maritime Commission, essentially is a
vessel-sharing agreement. Motivated by economies of scale, the
carriers focus on achieving cost savings given the challenge of
securing sustainable transportation rates. The vessel-sharing
alliance concept is not a new concept. However, the current
level of debate and scrutiny within the industry commenced when
the three largest carriers--Maersk, Mediterranean Shipping
Company, and CMA-CGM--filed the P3 agreement back in October
2013. That filing began what I term as the second generation of
alliances.
The P3 agreement was eventually withdrawn by the parties.
However, the two largest carriers, Maersk and MSC, subsequently
filed and moved forward as the 2M alliance and thus commenced
the rush to achieve economies of scale by the major water
transportation carriers.
A question for the maritime shipping community and the
supply chain is, what will be the impact of these second-
generation alliance? I believe it will be in cost savings and
efficiencies. For the carriers, cost savings is a paramount
concern, especially given the need for investment in cutting-
edge technology.
To be clear, I am a supporter of the alliance model.
However, legitimate concerns by stakeholders do remain. These
second-generation alliances have introduced us to the concept
of operation centers, information sharing, and joint
contracting. The last two concepts have been raised as serious
concerns by some stakeholders in the shipping community because
of the potential of anticompetitive behavior.
In addition to the formation of new alliances, we have
witnessed generational changes in the shipping industry,
including carrier acquisition, consolidations, bankruptcies,
and joint ventures. The international shipping industry will
continue to evolve, whether as to structure, service delivery,
or cost-saving efficiencies.
Finally, I want to discuss industry progress on the
incorporation of technology, another way in which our industry
partners have tried to save costs. Both Amazon and Alibaba are
starting to establish themselves as movers of cross-border
freight. Indeed, earlier this year, Amazon announced its
intention of becoming an NVOCC. This is not to say that they
are going to own or operate vessels, but, rather, they will aim
to increase buying power with the ocean common carriers. I note
that many ocean common carriers are maintaining close links to
cloud-based supply chain specialists like INTTRA, GT Nexus, and
CargoSmart, who were all early adapters of e-commerce.
Currently, much of the focus on technology in containerized
trade is in tracking logistics, such as real-time information
on container movements. I believe this year will see an
escalation in the number of digital and e-commerce applications
designed to provide more visibility and transparency in the
movement of containerized freight and implementing cost-
effective solutions in the supply chain.
Earlier this year, the Journal of Commerce reported that
Maersk and IBM are teaming up to digitize the global container
supply chain using blockchain technology to improve efficiency
and cost. This technology will result in enhancing visibility
in container transport. In addition, both Maersk and CMA-CGM
have moved to partner with e-commerce entity Alibaba to
integrate transportation and logistics. Actions such as these
can reduce cost and improve the reliability of supply chain
systems. In sum, many believe we are on the course of the
fourth industrial revolution, which essentially is the
acceleration of the implementation of technology and
digitalization in a rapidly changing industry.
The supply chain has been a central focus for the Federal
Maritime Commission for several years now. More efficient
supply chains increase not only the volume of trade by lowering
the cost of goods, but it also increases the distances over
which these goods can be transported. We noted in our----
The Chairman. Commissioner, I would ask you to wrap it up,
please.
Mr. Cordero. Yes, Madam Chairman.
So in summation, as we noted in our congestion study in
2015, this industry is rapidly evolving, and there are
certainly concerns with regard to congestion and mitigating
congestion. And in that regard, I'll be happy to answer any
questions that the Committee may have. So thank you so much for
your time.
[The prepared statement of Mr. Cordero follows:]
Prepared Statement of Hon. Mario Cordero, Commissioner,
Federal Maritime Commission
Chairman Fischer, Ranking Member Booker, and Members of the
Subcommittee, thank you for providing me with this opportunity to
appear before you today.
President Obama designated me to serve as Chairman of the
Commission on April 1, 2013. I had the honor to serve in that role for
nearly four years. I congratulate my colleague, Michael Khouri, on his
appointment as Acting Chairman of the FMC earlier this year. During my
time as Chairman, the FMC navigated the Hanjin bankruptcy, the
implementation of VGM (the container weight rule), aggressively
advocated for the maritime industry in high-level trade talks, and
engaged in rule-makings that protected the American shipping consumer
and streamlined rules to promote competition. Importantly, we also
investigated and/or monitored port congestion, demurrage and detention,
and carrier alliances and consolidation. I thank you for your support
throughout my tenure.
I will touch upon four topics today: the current state of the
industry, alliance agreements, the supply chain, and other issues of
relevance to the U.S. exporters, importers, and the American shipping
consumer.
First, the industry. The international shipping community has
experienced some dramatic challenges in the last decade. These
challenges are twofold: first, the 2008 economic global recession and
its severe impact on the international maritime transportation carriers
who continue to struggle with unsustainable transportation rates; and
second, what many today regard as a geopolitical recession, as a result
of the global dialogue on protectionism and isolationism. Today,
international trade is an integral and critical part of the U.S.
economy. More than one-third of our Nation's GDP is tied to global
commerce and this figure is only predicted to become more significant
in the coming years. Ocean transportation of goods and commodities is
the backbone of our trading system. Indeed, 90 percent of world trade
is transported by shipping lines. Each of us, as consumers or
investors, benefit from the competitive marketplace the Commission
works to maintain. In the last decade, we have seen the rise of Very
Large Container Ships (VLCS)--vessels of 10,000 TEUs or more--to more
than 398 in the current worldwide fleet as of April 2017, which
includes 20,000 TEU vessels. Our investments in maritime infrastructure
have slowly tried to match that growth. We must invest in ports to
remain competitive--plain and simple.
Although we acknowledge the importance of trade to the American
economy, and the obvious imbalance on the export-import equation, we
still need to realize that our export growth is dependent on a global
consumer. For example, recent reports indicate that U.S. exports of
beef, pork, oil, gas, and LNG have grown consistently in the last few
years. Within the next three years the U.S. may be the third largest
exporter of LNG. Overall, containerized exports grew, and the value of
exports transported by vessel in 2016 was in excess of $475 billion.
Perhaps the most significant development in the international
shipping industry is carrier consolidation. In 2011, the year I
commenced my service at the FMC, there were 21 major global water
transportation carriers. Today, we essentially have 13 carriers
accounting for 70 percent of containerized global capacity with each
belonging to one of three alliances that commenced in April of this
year: 2M, OCEAN, or THE ALLIANCE. Frankly, I am not sure we have seen
the end of carrier consolidation.
An alliance agreement between carriers, which requires a filing
with the FMC, essentially is a vessel sharing agreement. Motivated by
economies of scale, the carriers focus on achieving cost savings given
the challenge in securing sustainable transportation rates. The vessel
sharing alliance concept is not new. However, the current level of
debate and scrutiny within the industry commenced when the three
largest carriers--Maersk, Mediterranean Shipping Company (MSC), and
CMA-CGM--filed the P3 vessel sharing agreement with the Commission in
October 2013. That filing began what I term as the second generation of
alliance agreements. The P3 agreement was eventually withdrawn by the
parties. However, the two largest carriers, Maersk and MSC,
subsequently filed and moved forward as the 2M Alliance and thus
commenced the rush to achieve economies of scale by the major global
water transportation carriers.
A question for the maritime shipping community and the supply chain
is what will be the impact of the second generation of alliances? I
believe it will be in cost savings and efficiencies. For the carriers,
cost saving is a paramount concern, especially given the need for
investment in cutting-edge technology. To be clear, I am supportive of
the alliance model. However, legitimate concerns by stakeholders do
remain. These second-generation alliances have introduced us to the
concepts of operations centers, information sharing, and joint
contracting. The last two concepts have been raised as serious concerns
by stakeholders in the shipping community because of the potential for
anticompetitive behavior.
In addition to the formation of new alliances, we have witnessed
generational changes in the shipping industry, including carrier
acquisitions, consolidations, bankruptcies, and joint ventures. The
international shipping industry will continue to evolve, whether as to
structure, service delivery, or cost-saving efficiencies.
Finally, I want to discuss industry progress on the incorporation
of technology, another way in which our industry partners have tried to
save costs.
Both Amazon and Alibaba are starting to establish themselves as
movers of cross-border freight. Indeed, earlier this year, Amazon
announced its intention of becoming an NVOCC. That is not to say that
they will own or operate vessels, but rather that they will aim to
increase buying power with ocean common carriers. I note that many
ocean carriers are maintaining close links to cloud-based supply chain
specialists like INTTRA, GT Nexus and CargoSmart who were all early
adapters to e-commerce.
Currently, much of the focus on technology in containerized trade
is in tracking logistics, such as real time information on container
movements. I believe this year will see an escalation in the number of
digital and e-commerce applications designed to provide more visibility
and transparency in the movement of containerized freight and
implementing cost-effective solutions in the supply chain. Earlier this
year, the JOC reported that Maersk and IBM are teaming up to digitalize
the global container supply chain--using block chain technology to
improve efficiency and cost. This technology will result in enhancing
visibility in container transport. In addition, both Maersk and CMA-CGM
have moved to partner with e-commerce entity Alibaba to integrate
transportation and logistics. Actions such as these can reduce cost and
improve the reliability of supply chain systems. In sum, many believe
we are on course to the fourth industrial revolution--the acceleration
of the implementation of technology and digitalization in a rapidly-
changing industry.
The supply chain has been a central focus of the FMC for several
years now. More efficient supply chains increase not only the volume of
trade by lowering the cost of goods, but it also increases the
distances over which those goods can be transported. We noted in our
congestion study in 2015 that in many ways, ``the elimination of
congestion is today's most critical and relevant trade-related issue.''
As Chairman, I launched an initiative to address congestion in three
phases. The first phase, beginning in September 2014, was the port
forums which were held on the U.S. West Coast, the mid- and north
Atlantic coast, the south Atlantic ports, and the Gulf Coast ports.
These one-day listening sessions were each led by at least one
Commissioner, and served as an opportunity for the FMC to hear
firsthand the problems that ports, their customers, and other partners
in the U.S. intermodal system were facing that were related to port
congestion, including detention and demurrage issues. Our takeaway from
those forums was that we need to look beyond the docks, at the entire
supply chain, and find common ground amongst the various players in the
chain. Our second phase was the detention and demurrage study issued in
April 2015, and the congestion study issued in July 2015. Finally, with
the issue of port metrics on the minds of legislators, we launched the
last phase in February 2016: our Supply Chain Innovation Team
initiative, led by Commissioner Dye. During that phase, we brought
together industry leaders to work on teams to develop process
innovations that will improve the reliability, resilience, and
competitiveness of America's global supply chain. The teams announced
in December 2016 that critical information delivered to supply chain
actors via a national portal will improve port performance and increase
American economic competitiveness. This national portal will further
the goal of collecting data on port metrics.
Finally, more than a year ago, I testified before your House
counterpart on the paramount concern of having a well-funded and
resourced FMC. I explained then that the Commission's statutory mandate
to regulate the international ocean transportation system for the
benefit of domestic exporters and importers is ever more important in
the second decade of the 21st century. I stand by that testimony today.
Further, I believe that the Commission's authorities need to be
improved and updated to match the current state of the industry. Our
monitoring responsibilities under the Shipping Act are crucial today,
and I appreciate that the Committee has taken an interest in the FMC in
that regard. I look forward to seeing what is included in the
authorization bill, and would be happy to provide you with further
insight.
Thank you, again, for inviting me to testify. It has been a
pleasure to work with you on matters of mutual concern over these many
years, and I want to thank you again for your support. It has been an
honor to serve the people of the United States, to advance the stature
of the Commission, and to protect the American shipping public. I am
grateful for my time at the FMC.
The Chairman. Thank you very much, sir. Appreciate that.
Chairman Khouri, in your written testimony, you mentioned
that the FMC is expanding its team of economic analysis to
increase capacity to review and monitor the three major ocean
carrier alliances. Can you elaborate on some of the ways that
the FMC conducts that continuous monitoring of the agreements?
Chairman Khouri. Yes, Chairman. In several different ways.
First, when the newer agreements are coming in, we have been
much more strict, much more aggressive, in tightening the terms
of the agreements' various authorities, meaning that if they
want to come back and do something different, they have to come
back with an amendment. So the terms themselves have become
much tighter.
The monitoring is where we would be looking at things like
once every 45 days or 3 months, and with a period of time
following, that they would report on TEU--or excuse me--
container boxes along trade lanes, volumes, rates that have
been charged, a number of different operational pieces. It has
been brought down to they have to report every 30 days,
promptly afterwards so that we can keep a very tight watch on
what other exogenous events may be happening in the world
economy, what's happening to the rates within each member of
each alliance.
We're also very much interested in the decisionmaking as to
capacity. So the alliances, there's a part of an alliance
operation that has to have some capacity rationalization. In
other words, if they're operating at 70 percent load rate,
something is going to have to give, they're going to take a
ship out. But do you also have each member of the alliance
making independent decisions about bringing equipment in
outside of the alliance operation or taking it back out outside
of the alliance operation? And is pricing continuing to be
clearly independent? These are the type of things that we're
monitoring on a very close basis to make sure----
The Chairman. And as you monitor, what do you do then with
all the data you're collecting? Because it's continuous. So do
you issue orders? Do you react to it? What do you do with it
all then?
Chairman Khouri. Well, as long as we continue to see every
indicia of an open, free, and competitive marketplace, then
there is nothing for us to do. It is if we start seeing--for
instance, right now, there is overcapacity in all of the
trades. If we started seeing a rise in rates that didn't make
any sense as to the larger capacity overhang, then we would say
something is not right here, we would go in and do more strict
investigation----
The Chairman. You could investigate and ask questions. OK.
Chairman Khouri. And let me emphasize, we have not seen
that.
The Chairman. Great. Thank you.
Chairman Khouri. So thank you.
The Chairman. Commissioner Dye, with few exceptions, the
United States has been, I think, pretty slow to adopt
autonomous technologies at our port terminals. And this is in
contrast to ports such as Rotterdam and also Sydney's Patrick
Terminal, which I was fortunate to visit last year. Given your
work to enhance supply chain efficiency, do you think that the
autonomous infrastructure technologies at our nation's ports
would contribute to faster freight flows and have less
bottlenecks?
Ms. Dye. Yes. Thank you, Chairman Fischer. Businesses all
over the world are moving to digitize their businesses. I just
finished a book called ``Data-ism,'' which describes this move.
Suddenly technology has caught up with the ability for us to
aggregate data. And I was fortunate enough to get a briefing of
the new Maersk system using IBM blockchain, and that's just one
of the moves by our ocean carriers to move forward in
digitizing their supply chain business.
More and more of our ports are moving, as you know, to
appointment systems to try to control the supply chain
obstacles at the gates. It's expensive. And so, company-by-
company, they're making their decisions based upon their
ability to invest.
We see our project as being able to hook up to each port's
information infrastructure. We wouldn't compete with their
technologies, and they would continue to offer those sorts of
systems on their own, and compete on those for business. So I
think all of this has moved to the maritime industry finally,
and it's a very good sign. Thank you.
The Chairman. Thank you very much.
Senator Booker.
Senator Booker. Thank you very much. Appreciate that. I
literally just went on my Amazon and pulled up that book. Thank
you for the recommendation.
And, Mr. Cordero, just in case I forget, I want to just say
publicly how much we appreciate your service to our country. I
know this is going to be your last Senate hearing, or at least
in this capacity, and I'm very grateful for your service.
Mr. Cordero. Thank you, Senator.
Senator Booker. And Rear Admiral Helis, I'm really--your
testimony was very thorough, both written and--so I would like
to drill down a little bit deeper obviously on the issues of
sexual harassment. I'm grateful for your commitment to dealing
with this issue.
Let's just jump right to the issue of culture change that
you talked about, which I think is one of the challenges that
we have. We still have a problem, not only with the data that
you're collecting about the existence of sexual harassment, but
even the issue of people feeling comfortable enough to report
that. And you've implemented a lot of changes to try to address
reporting.
I want to know, what kind of sort of responses are you
getting from students? What are the changes that you think that
are creating a more open environment? And then ultimately that
2017 report that you mentioned in your testimony, do we need to
do anything as a Congress to support the resources you might
need for any report issues that need to be implemented?
Admiral Helis. Senator Booker, thank you for the question.
To the last, we're appreciative of the support that the
Congress is providing us in dealing with this very important
issue.
In terms of the culture change and how people are taking to
it, I mentioned we sent a team to the Air Force Academy in
February for an all academy conference on culture change to
address the problem. That was a staff and faculty event. When
they returned, they began organizing into a committee for
developing a culture change plan. They received many midshipmen
volunteering to step into it. So we have some senior--rising
senior midshipmen who are involved. They are involved in
socializing the plan and the ideas amongst the regiment, and
we're getting good feedback, good participation, from the
midshipmen.
The focus of the culture plan I would put into two areas.
One is institutional pride and the second is treating everyone
with dignity and respect, which would go along with being an
institution in which we have pride. The challenge is that the
behaviors are in a way tolerated, and that's why you don't see
the reporting, you see instances of shunning or ostracism of
reporters, of victims who report. The evidence so far, early
it's anecdotal, but this year, this academic year, we've seen
an uptick in restricted reports, which are the confidential
reports, and so that we're able to provide the victims better
services and have a better handle on some description of what
the events are. We have also had two unrestricted reports this
year, which have allowed us to investigate, and I've
administered appropriate discipline based upon those reports.
And those are the first unrestricted or open reports we've
received since 2014.
So I think in terms of reporting, again, early, but the
early evidence is in the last several months, the attention
we've given to the issue, the attention we've addressed to
culture, and about taking care of your classmates, your
teammates, your shipmates, when they become victims seems to be
taking hold. And, again, two unrestricted reports where the
victims felt confident that they could come forward and report
and be treated fairly and that we deal with the incident. And I
can say from speaking with both of the victims, there are folks
around them who are providing them support----
Senator Booker. I'm going to have to cut you off there.
Admiral Helis.--classmates, teammates, coaches, members of
their chain of command. So I think, again, early and anecdotal,
but positive.
Senator Booker. OK. And I obviously look forward to hearing
more as it develops. Just real quick on the accreditation
challenges that you've had. I know you have a final report
coming out in July. Do you anticipate needing more resources
from Congress to deal with the accreditation issues?
Admiral Helis. Senator, at this point, I would say the
biggest--and again appreciation to Congress--is the progressive
lifting of the financial restrictions that were imposed on the
Academy about 10 years ago in lifting some of the continuing
resolution, some in the full Fiscal Year 2017 budget, that has
restored most of our--the normal financial operations to the
Academy, the Federal agencies, and all. And that has been very
critical in our dealings with Middle States because one of
their concerns was the Academy having sufficient responsibility
and control over processes.
I can't say what the official report is going to say. I can
say that the Commissioner's visiting team told us that they
found significant and substantial progress in all areas for
which we were found falling short a year ago, and that those
appear sustainable, we're moving in the right direction. So I
was confident a year ago that we would meet the full
reaccreditation requirements within time, and after the initial
visit and the progress that our team at the Academy, working
also with the Maritime Administration, DOT, and the support
from the Congress, I am extremely confident now that we will
make the reaccreditation.
Senator Booker. Thank you, sir. I just want to be
respectful of Senator Wicker.
Admiral Helis. Right. I understand, sir.
The Chairman. Thank you, Senator.
Senator Wicker.
STATEMENT OF HON. ROGER F. WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. Superintendent Helis, I have a letter here
from Paul Doell, National President of the American Maritime
Officers, dated May 8, 2017. I ask unanimous consent that it be
admitted into the record at this point.
The Chairman. Without objection.
[The information referred to follows:]
American Maritime Officers
Dania Beach, FL, May 8, 2017
Hon. Deb Fischer,
Chairman,
Subcommittee on Surface Transportation, Merchant Marine,
Infrastructure, Safety and Security,
Washington, DC.
Hon. Cory Booker,
Ranking Member,
Subcommittee on Surface Transportation, Merchant Marine,
Infrastructure, Safety and Security,
Washington, DC.
Dear Senators Fisher and Booker:
On behalf of the private sector U.S. merchant marine officers I am
privileged to represent, I welcome this opportunity to comment on the
prevention of sexual abuse and sexual harassment at the venerable U.S.
Merchant Marine Academy at Kings Point, N.Y. This is an increasingly
important issue with extensive implications--U.S. national security
among them--and I am pleased to provide relevant perspective.
Since June 2016, the Maritime Administration has on several public
and private occasions discussed its strategy to curb sexual assault,
harassment and abuse on the USMMA campus. MARAD has focused heavily on
an ongoing reform strategy to assist victims, deter offenses and
improve a USMMA ``culture'' said to encourage inappropriate or even
illegal behavior.
We appreciate the intent, and we support completely. We do not
abide such conduct within our membership ranks, and we support
constructive measures to create safe, comfortable living and learning
environments for USMMA cadets.
However, we are troubled by the persistent underlying premise
driving this effort. MARAD has for nearly asserted that sexual assault,
abuse and harassment are routine at sea in the commercial U.S. merchant
fleet, that USMMA Midshipmen are influenced and corrupted by the
alleged actions of the career mariners they work with while training
aboard ship, and that these students return to USMMA believing that
sexual misconduct is accepted and even expected on campus.
This dubious, deficient argument was used by the Department of
Transportation in June 2016 to justify suspension of hands-on ``Sea
Year'' training of USMMA Midshipmen in their sophomore and junior
years.
In a senseless twist just weeks later, DOT exempted government
ships from Sea Year suspension--USMMA Midshipmen were placed in the
MARAD, Military Sealift Command and National Oceanic and Atmospheric
Administration vessel fleets.
It is difficult to reconcile the official rationale behind Sea Year
suspension with the lack of conclusive evidence supporting it.
It is also difficult to align MARAD's position with our direct
experience representing seagoing professionals licensed and vetted by
the U.S. Coast Guard, including many USMMA alumni serving on both
commercial and government vessels. In American Maritime Officers, there
were no known cases of sexual assault and only one documented case of
sexual harassment in at least the last 20 years--and, in the latter
example, the proven offender was expelled from our union.
Moreover, U.S. shipping companies have strict, longstanding ``zero
tolerance'' sexual assault and harassment policies, which are supported
fully by the seagoing unions these companies employ. What makes this
specific point especially noteworthy in this context is an industry
consensus that the need to invoke these policies is rare.
Nor can the Sea Year suspension exemption carved out for government
vessels be squared logically with the fact that many of the mariners
employed on these vessels had worked previously in the commercial fleet
said by MARAD to provide safe harbor for sexual predators. If a
merchant mariner is inclined to sexual misconduct aboard a ship
operating in domestic or international trade, is this mariner also
inclined to restrain harmful impulse and check personal proclivity at
the gangway when he boards a government vessel.
Ironically, the only known current or at least recent case of
sexual assault at sea under the U.S. flag involved civil service
Military Sealift Command employees on an MSC ship assigned to the Diego
Garcia outpost in the Indian Ocean.
Today's commercial U.S. merchant mariner workforce is comprised
typically of decent, hones, responsible, well-trained and hard-working
men and women of strong character. Because they live where they work
during long rotations at sea, they are essentially ``family,'' and they
treat each other accordingly.
These merchant mariners have no patience for anyone among them
whose behavior compromises morale or threatens the safe and efficient
operation of the vessel. Each of these mariners is aware that
professional misconduct of any kind can cost them not only their
credentials and careers, but also their families and friendships.
Despite these qualities and the values they reflect, mariners must now
endure having been stigmatized unjustly as morally unfit for work at
sea.
These merchant mariners are also the first to ``turn to'' for
strategic sealift and other military support services in defense
emergencies, both for surge shipping and longer term delivery of combat
equipment and day-to-day supplies to U.S. Armed Forces overseas. But
their numbers are falling quickly in direct proportion to the unabated
decline of the privately owned and operated commercial U.S. merchant
fleet, which delivered 95 percent of defense cargoes to the war zones
during Operations Enduring Freedom in Afghanistan and Operation Iraqi
Freedom under the Maritime Security Program.
USMMA--the only Federal service academy with its own battle
standard--is a reliable source of qualified, reliable mariners, and any
interruption of training on campus or at sea would seal off this
pipeline and aggravate the mariner shortage that jeopardizes U.S.
mobilization capabilities.
In our view, the scandal here is not widespread sexual misconduct
at sea in the commercial U.S. merchant fleet, but the unfair,
fabricated perception of it. Just as there is no specific, verifiable
data from within the commercial U.S. merchant fleet to support MARAD's
assertions, there is no evidence to support the official argument that
government vessels are safer physically and emotionally for USMMA
midshipmen. Under thee circumstances, we cannot help but be skeptical
of official motives.
Nevertheless, we are relieved to know that Sea Year at USMMA has
been reinstated at a gradual rate as it applies to the private sector
American merchant fleet. But we remain frustrated by the approach taken
by MARAD, and by the casual way in which the collective reputation of
American merchant mariners was tarnished. Our hope now is that USMMA
commencements will not be delayed and that enrollment at the Academy
will not decline.
I ask respectfully that you include this letter in the official
record of your hearing on Maritime Transportation: Opportunities and
Challenges for the Maritime Administration and Federal Maritime
Commission.
Thank you for your time and attention.
Sincerely,
Paul Doell,
National President,
American Maritime Officers.
Senator Wicker. Mr. Superintendent, following up on the
line of questioning about sexual assault and the Sea Year
stand-down last year, in this letter here, the officers aboard
the commercial vessels object to the suggestion that the stand-
down was somehow because a major portion of the sexual assault
problem stemmed from the Sea Year program aboard commercial
vessels. So I want to point out what they tell us in the
letter.
In the commercial vessels, according to this letter, there
were no known cases of sexual assault and only one documented
case of sexual harassment in at least the last 20 years, and in
that case, the proven offender was expelled from the union.
The letter also points out that the only known case of
sexual harassment at sea was aboard a government-owned vessel.
And so I would like for you to comment about that. And did you
mean to suggest last year when you announced the stand-down
that the problem in sexual assault was aboard the commercial
vessels? Because I have data here that only 4 percent of
midshipmen at the Academy indicated they had experienced
unwanted sexual contact, and of that 4 percent, 73 percent
indicated that the location of that was on Academy grounds.
So what is your response to that, Admiral?
Admiral Helis. Senator, thank you for the question. My
response to that was the intention was not at all to signal in
any way that the majority of seafarers and mariners engage in
sexual harassment or sexual assault. That was not the message.
That never has been the message.
Senator Wicker. Well, that wasn't the allegation. The
question is that the majority of the assault was taking place
during the Sea Year, and I think the facts are to the contrary.
Admiral Helis. Senator, I think I would say that whether or
not the majority of the assaults occur at sea, one is too many,
one is too many. And we say zero tolerance, we mean zero. And
what our data told us was that a disproportionate--midshipmen
spend a quarter of their time at sea, and our data told us and
continues to tell us that a disproportionate number of the
events occurs during the Sea Year during maritime duty.
Senator Wicker. So you dispute the preliminary 2015 and
2016 Service Academy Gender Relations Survey, which says that
73 percent occurred on Academy grounds. You dispute that, sir?
Admiral Helis. Senator, I say that that's accurate, but
that still puts over a quarter of the incidents off campus.
Senator Wicker. But isn't that contrary to what you just
testified?
Admiral Helis. Senator, I can also say that the 2016 final
data results show that over a third of the incidents were
reported by midshipmen to have occurred during maritime duty,
and that will be in our final report to Congress, which right
now is in the staffing process. But--go ahead, Senator.
Senator Wicker. Well, it seems to me that the facts are
coming out at this hearing that most of the problem occurred on
Academy grounds, and yet your response was to stop the Sea
Year, and that seems disproportionate to me. And so I would
associate myself with the comments of these American Maritime
Officers. And perhaps you would like to expand further on the
record.
But let me, in the 20 seconds I have left, we are told that
midshipmen are being threatened with disenrollment because they
haven't been able, because of your policies, to do the Sea
Year. And so can you guarantee that no midshipmen will be
prevented from graduating or be disenrolled or be otherwise
negatively affected by their inability to acquire days at sea
or complete their Sea Year?
Admiral Helis. Senator, that's a great question, and it has
been of great concern to us. And right now, we are
extraordinarily confident that none of our midshipmen in the
two class years, the classes of 2018 and 2019, who were
affected by the stand-down, will be delayed from graduation due
to a lack of sea days.
As far as the projects go, there have been no cases of
midshipmen who have been disenrolled or disciplined in any way
for failure to complete Sea Year projects due to either
shortage of days or the vessels that they were on, for example,
not having the equipment they could have to do the project. If
there was a case where they were unable to perform the projects
due to either days or, again, equipment on the vessel is a
common occurrence that occurred before the stand-down, those
projects are simply delayed, deferred, until their next
sailing.
Senator Wicker. I hope that's correct. Let me ask you just
briefly--and I'm imposing on the time--did the accreditation
problem catch you by surprise?
Admiral Helis. Senator, the points that the accreditation
team pointed out were not a surprise to us, that we were
laboring under restrictions that were imposed on our financial
management, on human resources, on procurement, was not a
secret to anybody. It was just----
Senator Wicker. You know, I'm on your Board, and I just
hadn't heard that. It is interesting to me that this would not
have been mentioned to the Board, that we could expect this
coming down the pike.
Admiral Helis. Senator, I think we were surprised that we
were found in noncompliance on as many of the standards we
were, that was a surprise, but we were not surprised when we
looked at the reasons, the factual justification, a lack of
controls and governance being a key part of it. That was not a
surprise. We knew we had difficulties with that. That was in
our self-study. It had been in advisory board reports in
previous years. So that components of it that they highlighted,
you know, that we did not have the normal authorities expected
of an institution of higher education, did not surprise us.
Senator Wicker. Thank you, Madam Chair.
The Chairman. Thank you, Senator Wicker.
Senator Young.
STATEMENT OF HON. TODD YOUNG,
U.S. SENATOR FROM INDIANA
Senator Young. Thank you, Madam Chair.
As a graduate of one of one our Nation's service academies,
I take the issue of sexual assault at the academies quite
seriously. And it's clear we have to strive to eradicate
instances of sexual assault and harassment from the academies.
Admiral Helis, Director Szabat, I'm pleased you both
recognize the gravity of this situation. I'm also thankful to
my colleagues, who have given due attention in this hearing,
and it's clear they also take this matter very seriously.
In prior years, in the National Defense Authorization Act,
Congress worked to enact certain sexual assault provisions. As
this committee works on reauthorization bills, I would urge you
both to dialogue with us to communicate further authorities you
believe necessary to rectify this issue.
Director Szabat, in your testimony, you referenced the
independent cultural audit that DOT completed in December of
last year proposing six key action steps for the Academy to
take. And I would like you to just give us an update on
implementation of those recommendations, please.
Mr. Szabat. Thank you, Senator. With your permission, I'll
touch on the recommendation that focused mostly on the Maritime
Administration. Admiral Helis will talk about the
recommendations that focused on what the Academy's actions have
to be.
Senator Young. Certainly. Proceed.
Mr. Szabat. The single most important recommendation, the
overwhelming recommendation, that the LMI made, the
department's study, was for the Maritime Administration to
create standards for eligibility for commercial companies to be
able to participate to employ and to train our midshipmen. This
had been a policy that the Maritime Administration had actually
proposed before LMI's--the study had started. So we were in a
position after the study was finished in December.
In January, then Secretary Foxx told the Maritime
Administration to go ahead and implement that recommendation.
By February, we had those standards developed, and those
standards are actually in my written testimony. I'm happy to
talk about any of those in more detail that you would like to
talk about.
And since then, so from February until the present, we've
now had eight different companies, both some Jones Act
companies, some sailing international, representing over 82
percent of our pre-stand-down capacity, have met those
standards.
And I think also from my oral testimony, what I have found
most impressive is, to Senator Wicker's point, that there were
people in the industry, in fact, I would say a unanimous
reaction in the industry, that they did not agree with the
decision that Secretary Foxx made, that Secretary Foxx
announced, for a Sea Year stand-down. But they all took the
opportunity to say, as Superintendent Helis has said, that even
one incident is one too many.
And rather than walking away from providing training for
our cadets, which was our fear, 14 companies came back to us
within 2 weeks and said, ``We want to find a way to work
together.'' And that has been the spirit that the companies and
the labor unions have adopted in working with us going forward,
which is why we've been able to get so much of the industry to
be Sea Year eligible so quickly. And we look forward to
additional companies that are applying to being accepted in the
program as well.
Senator Young. Thank you. In my remaining 2 minutes, Rear
Admiral, could you speak to action on those recommendations,
please?
Admiral Helis. Yes, Senator, I'd be happy to. Just taking
down some, we published in January an action plan with a
substantial number of requirements. I'm not going to go through
all of those for the sake of time. I would say broadly,
building and aligning a leadership team. We're expanding the
SAPRO office. We've brought on a new director of civil rights
diversity to focus on those issues on campus.
As I described earlier in my testimony and in my written
testimony, that we are working to develop an integrated, long-
term cultural change campaign for the Academy that will enhance
dignity and respect on the campus. We have, as Mr. Szabat has
said, developed a credentialing process for companies for Sea
Year for the safety of going out.
And, again, I say we are making--without belaboring and
going through the entire list, that we are making progress on
all items on the action plan to implement the recommendations
from the LMI study.
Senator Young. Well, thank you, Admiral and Mr. Szabat. I
would only ask that you keep this committee duly informed of
progress moving forward. I have no doubt that you will do so. I
know the Chairman and Ranking Member are attentive to this
issue as well.
So with that, I yield back.
The Chairman. Thank you, Senator Young.
We're waiting for a couple members to join us, and I'm
going to take advantage of the wait by asking a couple other
questions.
Mr. Szabat, in your written testimony, you mentioned that
MARAD and TRANSCOM have concerns that there are not enough
qualified mariners to sustain the activation of the entire
sealift fleet. You also mentioned that MARAD has convened the
Maritime Workforce Working Group. How does MARAD hope to
address this concern? And do you expect the working group to
provide some meaningful solutions?
Mr. Szabat. Thank you for that vitally important question,
Senator Fischer. Your question gets to kind of the reason for
the existence of the Maritime Administration, is to ensure that
our commercial U.S. merchant marine is large enough, is vibrant
enough, to meet all of our national needs, for economic
security, for military security.
As you've indicated, both we and our colleagues at the U.S.
Transportation Command, one of the component commands of the
Department of Defense, are concerned that we no longer have
enough mariners to meet those surge sealift needs. In order to
activate all of the vessels in the sealift fleet, of which the
core sealift is about 147 ships, commercial and military, we
estimate a need of a little over 11,000 commercial mariners
because commercial mariners crew all those vessels, both
military and civilian--I'm sorry, and commercial. And then we
need 14,000 mariners if, in fact, we're going to--strike that--
13,000 mariners if we're going to sustain an activation and
rotate some crews over time.
Currently, we have just over 11,000 mariners, but one of my
colleagues in the Transportation Command called, we are at the
ragged edge of the ability to activate the fleet, let alone
keep the fleet going for a long period of time.
So we have two approaches going forward on this. One is the
working that the NDAA required us to do, which frankly we thank
you for. One of the issues that we have is a definition of,
what is a mariner? What is an available mariner? That working
group will provide valuable resource to us because it's pulling
all of the involved Federal agencies together so that we can
show the walk-down from what the Coast Guard calls 200,000
mariners to what the GAO Report had identified at one point as
57,000 potentially available mariners to meet sealift
requirements to the 11,000 mariners who we know currently have
unlimited tonnage and unlimited horsepower credentials and are
eligible to serve in our fleet.
So that will be important to be able to do that walkthrough
so we can identify exactly if, in fact, we're missing any pools
of mariners, although I don't think that we are, but it will
allow all of the Federal Government agencies to work together
and be speaking off the same sheet.
Second, we are also putting together what we're calling
``courses of action,'' which are, what are the options that we
have for addressing the mariner shortage? And I'll cut off at
this point in case anybody wants to ask that as a subsequent
question.
The Chairman. Why don't you answer it?
[Laughter.]
Mr. Szabat. I'll take that as a question, Senator. Yes, I
will answer it. Thank you for the question.
Broadly speaking, there are three different courses of
action that we can take. Currently, both by law and by national
security directive, the U.S. Government, the U.S. military, has
to rely on the U.S. commercial fleet, both for the vessels and
for the mariners it needs for sealift. So if we continue to
rely on that, obviously, the solution that we have to employ
enough mariners is to increase the size of the U.S.-flag fleet
through steps like--so, for example, in the Jones Act, Customs
and Border Protection is looking at a letter, a rule through
letter, that they've done before, which, if they change, would
add, we estimate, about 14 ships under the U.S. flag to the
Jones Act.
You look at cargo preference, we used to have a 75 percent
requirement for domestic cargos, not military cargos, to go--of
civilian cargos, not military cargos, to go on U.S.-flag. That
was dropped in 2012 to 50 percent. If that would go back up to
75 or to 100 percent for civilian agencies, we're talking about
adding another 10 or 15 vessels to the U.S.-flag fleet.
And then the most blunt force but expensive way of doing
it, of course, would be to expand something like the Maritime
Security Program, which currently provides stipends to 60
vessels specifically for their military value, that you could
expand the number of ships in a program like that and offer
stipends to sail under the U.S. flag because of the mariners
that they employ and the value of those mariners for our
sealift experience.
So that's the way that we can continue to meet what the law
requires now and get to what we estimate to be about 45 extra
vessels we would need to have sailing under the U.S. flag to
meet our sealift requirements.
The Chairman. Thank you very much.
Ranking Member Booker, do you have questions?
Senator Booker. I do. Thank you for the opportunity,
Chairperson.
Just again, Honorable Cordero, you're almost done, so I'm
going to grill you a little bit if you don't mind, especially
because I'm very jealous of your hair, sir.
[Laughter.]
Senator Booker. So this consolidation issue, clearly you
mentioned it, and I would like to just ask you very bluntly,
how do these consolidation alliances impact portions of our
freight network? Is this something that you think we should be
greatly concerned about? And particularly for me in a port
state, what impact does this specifically have on ports and
port shippers?
Mr. Cordero. Well, I think at this point, as I indicated in
my testimony, Senator, I support the alliance model. In terms
of what impacts down the line they may have that are positive
or negative, I think my answer at this point, and has been, the
jury is still out. And for that matter, that's why I believe
that it's extremely--it's of paramount importance to have a
well-funded FMC, as Chairman Khouri has indicated, and
Commissioner Dye. Our primary responsibility is to monitor
these agreements and these alliances, and I think part of that
monitoring is going to have those answers down the line.
So I think my answer is we don't know. I do believe that,
again, eventually they will create cost inefficiencies, and I
think ports will adjust with regard to what's coming down the
line in terms of these three alliances. And I think the major
ports that we have, the containerized ports, at this point,
part of what we've done as a country is to continue investment
in infrastructure in these ports, and we're going to continue
to do so.
Senator Booker. So on that note, you would say, and I guess
the other two commissioners, TIGER grants are urgently
important in terms of the quality of our ports?
Mr. Cordero. In my view, absolutely, absolutely, because
TIGER grants not only go in terms of the importance of
infrastructure, but, you know, there has been some commentary
on security. I think our port gateways, you're never going to
have a safe, a failsafe system. Security is of utmost
importance. And in the past, TIGER grants have been relied on
by port authorities.
And last, I think the rail system, the rail connectivity,
intermodal connectivity, whether you're on the East Coast or on
the West Coast, is very important, and a TIGER grant can go a
long way to help mitigate the expense of what that may be
incurred by the marine terminal operators and our port
authorities.
Senator Booker. My last question then would be just on,
sort of, the issues of just improving efficiencies. In the last
Congress, we gave a lot of attention to congestions at our
ports on the labor issues, and I thought that that was a--talk
about proportionality, that was a way disproportionate sort of
focus. In fact, it could be said to be a lot of, sort of,
unintended consequences, let's say, of those proposals that I
saw during that time. But you guys have spent a lot of time,
the Commission as a whole, looking at relieving this
congestion.
My final question would be then, what are some of the
challenges? But more importantly, as was said already by Ms.
Dye about the data, are there any specific, Mr. Cordero,
parting words that you would say about this idea of relieving
the congestion, the most important areas that we can focus on?
Archimedes said, ``Give me the right lever, I can change the
world.'' What's the right lever there in our ports?
Mr. Cordero. Well, I think the parting words for me would
be for people to review our congestion study that we released
back in 2015, and I think that outlines the various factors
that cause congestion and what we should do to mitigate
congestion.
So I think, again, it takes stakeholders to, as
Commissioner Dye has indicated in her supply chain innovation
project, to get out of their silos, but it also is very
important, extremely important, to remember that the more
investment in infrastructure is of paramount importance to
relieve congestion because, again, infrastructure at the end of
the day is going to be what's key to every gateway.
And I think one last thing, we have to also look into, as
our congestion study referenced, very specific operational
issues. One that I, Senator, think you are familiar with,
whether it's New York-New Jersey, or better said, New Jersey-
New York----
Senator Booker. Thank you, sir.
[Laughter.]
Mr. Cordero.--or whether it's Long Beach, LA, we have
issues with regard to making efficiencies in terms of the
equipment. You know, here I'm specifically making reference to
chassis. That is one aspect of the congestion that was, outside
the industry, little talked about, but it's a major. Within the
industry, everybody understands it's a major problem. The good
news is I think the FMC has done well to facilitate to some
solution in our gateways, again whether you're in the Gulf, in
the East, or in the West, I mean, the parties, the
stakeholders, are taking this serious, and I see good news
ahead in terms of bringing solutions to these equipment
problems.
Senator Booker. Mr. Cordero, thank you very much.
Madam Chairman, I'm done, but I do want to--just my
horrible admission that I did not ask a question to the person
with the best name, Mr. Khouri.
[Laughter.]
The Chairman. You are shameless.
[Laughter.]
The Chairman. Senator Wicker.
Senator Wicker. Back to education, Mr. Szabat. MARAD funds
six ships that are on loan to the State Maritime Academies as
training platforms for their students. Five of the six State
Maritime Academies have stated that their ships are aging and
are in dire need of repair. Is this true? And can you describe
the current state of these ships? Do they need to be replaced
with a more modern training vessel?
Mr. Szabat. Senator Wicker, thank you for that question.
It's an existential question from in the State Maritime
Academies. Frankly, I'm surprised that only five of the six
Academies indicated to you that they have a need--that they
have an aging training ship. All of the ships that we provide
to the State Maritime Academies are ships that we have in the
past, the Maritime Administration has pulled out of our
national defense reserve fleet and retrofitted for training.
They were old when they began, and they were converted for a
purpose that they were not originally intended to do. Several
of them are already long past their original useful life. The
oldest of the vessels and the largest of the vessels,
Maritime's Empire State, is now past its 55th birthday.
So these are old ships. They're good ships. But it is time,
and through both direction of the Congress, but also through
common sense, we in the Maritime Administration, working with
the State Maritime Academies, have been looking at, what are
the options to replace these training ships going forward? If
no action is taken, three of the six State Maritime Academies
will need replacement training ships by 2024. I mentioned the
SUNY Maritime ship, she ages out in 2019. Mass Maritime loses a
ship in 2024. And Texas Maritime is currently borrowing the
training spots on the large ships of the other Merchant
Marine--of the other Maritime Academies.
Our own Department of Transportation's own Beyond Traffic
Study says going forward, there will be a shortage of mariners.
And we've also identified that the bottleneck for having more
mariner training is not the school size themselves, but the
availability of the training ships.
Senator Wicker. When do the ships go out of service?
Mr. Szabat. The first ship is scheduled to go out of
service, if no action is taken, her licensing would expire in
December 2019.
Senator Wicker. Might it be unscheduled?
Mr. Szabat. Yes. It's----
Senator Wicker. Might something occur that would cause it--
--
Mr. Szabat. It could happen with any ship of any age, but,
yes, the older a ship gets, the more likely it is that an
incident would occur that would take her out of service.
Senator Wicker. Thank you.
The Chairman. Thank you, Senator Wicker.
Senator Baldwin.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you. I wanted to start by
highlighting the Small Shipyard Grant program. I am glad to
report that the omnibus spending bill doubled funding available
for assistance to small shipyards and maritime communities in
the Fiscal Year 2017 thanks to bipartisan support for the
program. And in the next week or two, I plan to introduce a
bipartisan bill to reauthorize the program, and I hope that we
can move the legislation through this committee.
Across the nation, small shipyards build and maintain
commercial workboats, government ships, and ferries in the
U.S.-flag fleet. In this way, our small shipyards are essential
in maintaining commerce in the U.S. and throughout the world.
To support the shipyards, their workers, and their communities,
the Small Shipyard Grant program provides incentives for
infrastructure improvements, equipment upgrades, and worker
training programs.
Mr. Szabat, could you describe the benefit small shipyard
assistance provides for workers and communities whose economies
are tied to the maritime industry?
Mr. Szabat. Senator Baldwin, thank you very much for that
question, and thank you and the Members of Congress for your
efforts for the support for the Small Shipyard Grant program.
As you say, the communities that are dependent, that have the
small shipyards, and the communities that do work that support
the small shipyards are very much dependent on this. It's a
very small but vital program.
The Federal Government has very limited roles to do with
shipbuilding, and for small shipyards, really this is the only
opportunity that they have. The Small Shipyard Grants are
normally only $5 million or $10 million each year when they are
appropriated, and generally they are awarded in buckets of
close to $1 million. So we're only talk about 5 to 10 people--5
to 10 companies will get these each year.
It's a fairly young program. It started in 2008, 2009, and
with the Recovery Act. So we've only had roughly little over
200 yards nationwide that are eligible for this program. We've
given out 170 grants to 145 different shipyards. And these are
competitive grants. People have to earn them.
And one of the key components of them, which we believe
makes them useful, is the matching requirement. By law, by the
law that you've required, is they have to bring at least a 25
percent match, but the reality is, in order to be competitive,
most of them are providing a 50 percent or more match, so
bringing in local private funds to meet these needs.
And so these benefits go not just to the workers in these
individual shipyards, but as I mentioned also, to other
companies that receive the work that goes in these shipyards.
So, for example, two companies in Wisconsin that have benefited
strongly from this work all over the country: Marine Travel
Lift in Sturgeon Bay provides many of the travel lifts for
small boats and small shipyards across the country; and
Manitowoc Cranes--and I hope I'm pronouncing that correctly--
which has manufacturing facilities both there and Shady Grove,
Pennsylvania. So places that are off the water are also
benefiting from these programs as well.
Senator Baldwin. Sticking with you, Mr. Szabat, I want to
focus on the Maritime Administration role addressing the need
for more skilled workers to support and grow our Nation's
domestic maritime industry. It's a critical issue in Wisconsin,
where our shipbuilding and Great Lakes shipping interests can
make significant contributions to the economy and the security
of our state and the entire nation.
Historically, the focus of the Merchant Marine Academy and
federally-designated State Maritime Academies has been on
training individuals to support international shipping and
ocean-going vessels, but not our domestic shipping needs. Our
nation's community and technical colleges, like Northeastern
Wisconsin Technical College, for example, have stepped in to
provide that training, but I think they need greater support
from the administration in order to meet the needs of the
industry.
So last Congress, I introduced bipartisan legislation that
would designate and support centers of excellence for domestic
maritime workforce training, and I plan to reintroduce the bill
again soon. I wonder if you could describe the value that
legislation to support developing our domestic maritime
workforce would provide.
Mr. Szabat. Senator, thank you again both for the question,
but also for taking action to address what is a vital concern.
I've spoken mostly in my testimony about the military
requirements, about the reason for the Federal academy, for
having our licensed programs, is to ensure that we have
unlimited credentialed-licensed mariners because these are the
ones who are available to serve in our military sealift needs.
But there's an economic security component that goes along with
that, one of the reasons we have the Jones Act and one of the
reasons we have programs along the lines of what you are
describing here.
I would like to think that we at the Maritime
Administration got a jump on this, it was just a couple of
years ago. We established out of hide, unfunded, but an Office
of Maritime Education and Training, which has the unfortunate
but memorable acronym of MEAT, but it is specifically to
address the kind of issues that you're talking about.
As always, if you're a Federal program and you're not
funded to get grants or other support, so what we can do,
though, is we can give guidance, expertise, provide--be a
clearinghouse for information and national training
requirements, and also help people work with industry to find
opportunities for internships and career opportunities. This is
something that we found that has actually been, from the work
that we've been doing on sexual assault and sexual harassment
with the industry's SOCP, which is their training experts, this
has been something that kind of fell out as an extra benefit,
as we've required that working through them, we also have
opportunities to identify these kind of training opportunities
for workforce development elsewhere.
The other thing that I would mention is that we have also
reached out to many Historically Black Colleges and
Universities, but other minority institutions, about ways of
recruiting more people into a future maritime workforce and
providing this kind of economic--this kind of workforce
training to them. So I think foremost among them, San Jacinto
College in Houston, the Southeast Maritime and Transportation
Center at Tidewater College in Norfolk.
And then the last thing I would say finally is on a small
scale, as we have surplus equipment that comes out of our
national defense reserve fleet from our own schools, we can
provide, as we did to the--we provided firefighting equipment
to Owens Community College in Toledo, Ohio, as well as the
Northwest Regional Fire Training Center in Michigan.
And it would be remiss of me if I didn't give a shout-out
to one of our six State Maritime Academies, but the Great Lakes
Maritime Academy, which does provide many of the pilots up in
the Great Lakes.
Senator Baldwin. Thank you.
The Chairman. Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thanks, Madam Chairman, and thanks to
you and Senator Booker for having this hearing. Connecticut has
three significant ports--New London, New Haven, and
Bridgeport--and I have been committed to improving them and
also to improving the kind of service that we see in those
ports. And I also want to mention right at the outset that I
know you've been asked about the Sea Year, and that the summer
program is being restored, correct, Admiral Helis?
Admiral Helis. Yes, Senator. Starting we established a
credentialing program with the Maritime Administration. The
first companies were credentialed in late February. We're now
up to eight companies and about 82 percent of the pre-stand-
down capacity. So midshipmen are now--the majority of
midshipmen are now sailing commercial, and we're beginning to,
as we transition back into the commercial vessels by this
summer, we should be back to pre-stand-down operations.
Senator Blumenthal. Will any of the midshipmen be in any
way set back or in effect penalized because of the delay or the
stand-down?
Admiral Helis. No, Senator. We've been carefully monitoring
their training records and using all of the platforms we have
available, and we're confident that none of the midshipmen
affected in the classes of 2018 and 2019 will be delayed from
licensing or graduation because of a shortage of sea days. If
for some reason, either due to the equipment on the ships or
just number of days they have been unable to complete some of
their sea projects, we have deferred those until a subsequent
sailing period.
Senator Blumenthal. I ask because I have been approached by
some of the midshipmen and their families to ask about the
consequences to their careers from this issue. And I understand
what was done as a result of the reports of sexual harassment
and appreciate the steps that you're taking to eliminate sexual
harassment at the Academy.
Let me ask you, what--speaking generally, putting aside the
major ports of New York and Newark, at ports the size of New
London and Bridgeport and New Haven, what do you think are the
major steps that need to be taken? Because these are immense
resources for our nation, and they're underutilized, in my
view, and I would be interested to give you the platform to
just talk about what our nation should be doing.
Mr. Szabat. Senator, who is the question directed to?
Senator Blumenthal. Any of you who care to answer it.
[Laughter.]
Mr. Szabat. I'm going to violate my own edict, which is
never volunteer to answer a question at a hearing that you
don't have to.
Senator Blumenthal. Well, this is directed to you, so----
[Laughter.]
Senator Blumenthal.--you don't have to violate your edict.
Mr. Szabat. OK. Well, I still stepped into it, but thank
you, Senator.
It's a great question, and it's one that we wrestle with.
The Maritime Administration, unlike, say, our brother in the
Federal Highway Administration, where in the past they had
direct control over the roads that were built, and now they
have a great involvement in funding the vast majority of the
projects, and a great say in how these projects are done,
ports, like freight railroads, are primarily privately run,
privately operated, and primarily make their own decisions. And
yet when you have some seminal incidents, like we just had with
the widening, almost simultaneous widening of the Suez Canal
and the Panama Canal, that affects the operations of all of the
ports.
And the question is, how do they change? Not every port is
going to become a recipient of Panamax vessels. Every port
would like to. And so they have to work together. And what
we've discovered is that first, through our own offices within
the Maritime Administration, but also through the actions of
Congress, where you were kind enough that since 2009, a couple
of key changes in the law have not only allowed, but required
us to coordinate together and develop a national freight
strategic plan, develop a national multimodal freight highway,
that we find ourselves working together in concert with the
other agencies within the Department of Transportation and our
sister agencies, the Coast Guard, the Army Corps of Engineers.
And we give information flows back to the ports about this is
where the freight is going, this is what's happening, and this
is information that they can use to help inform their own
decisions. So information is a key point.
I think the second key point that we have, of course, as
always, people like to come to the Federal Government for
sources of funding. Before 2009, the Maritime Administration
had nothing to offer to ports when it came to funding. But
first through the TIGER grant program and then through
FASTLANE, we now have ports that will come to us in consortiums
of ports, local communities, or consortiums of ports, and say,
``Here is what we propose to do. Will you give us the funding
to make this work?'' And like any competitive grant program,
the better proposals tend to be the ones that get funded and
move forward.
Senator Blumenthal. And they are likely to be better if
they are the result of consortiums, that is, coming together
rather than singly or solely.
Mr. Szabat. Senator, that has been my experience. I was the
designated Federal official responsible for the TIGER grant
program when that was first established in the Recovery Act.
And certainly if you look at the first several years of the
TIGER grant program and the FASTLANE program now, if you wanted
to look at indicators for success, it was how big the
consortium was, and, as importantly, how much matching money
were they willing to bring to the project?
It's the old line about ``put your money where your mouth
is.'' That has certainly been the point, been shown to be the
point, where we've talked about port projects, and especially
when we talk about partnerships. When you have private sector
operators or railroads or states and local governments who are
willing to put their money in as well as the ports, that shows
a strong signal for local commitment to the success of the
project.
Senator Blumenthal. Thank you.
Thank you very much to the entire panel for your service.
And, Mr. Cordero, good luck in the future. I understand you're
nearing the end of your service, and a special thank you to
you. Thank you.
Mr. Cordero. Yes, thank you, Senator. And thank you for the
Committee for all your support for the maritime community.
Senator Blumenthal. Thank you.
The Chairman. Thank you, Senator.
I also would like to thank the panel today, and best wishes
to you, Commissioner.
The hearing record will remain open for 2 weeks, and during
this time, Senators are asked to submit any questions for the
record. Upon receipt, the witnesses are requested to submit
their written answers to the Committee as soon as possible.
And with that, we are adjourned.
[Whereupon, at 4 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Question Submitted by Hon. Todd Young to
Joel Szabat
Question. Mr. Szabat, in your written testimony you state, ``both
the U.S. Transportation Command and MARAD are concerned that there are
not enough qualified mariners to sustain an activation of the entire
sealift fleet.'' I understand from your written testimony that the
Maritime Workforce Working Group will release a report on this issue in
December 2017. In advance of this report, can you please provide
specific recommendations for how MARAD and the Department of Defense
can improve collaboration to address the issues confronting our
national sealift program?
Answer. MARAD is consulting with the U.S. Transportation Command
(USTRANSCOM) in analyzing the mariner shortage and developing options
to address it. USTRANSCOM has taken the following steps to better
integrate MARAD into their strategic plan:
One of the USTRANSCOM component commands is Military Sealift
Command (MSC). MARAD and MSC will coordinate in matters of
common concerns--training, contracting, adequacy of supply,
etc.
MARAD and USTRANSCOM co-chair the Voluntary Intermodal
Sealift Agreement Executive Working Group that works with
senior representatives from industry (both domestic and
international ocean carriers) and maritime labor to understand
carriers' challenges and work to find common solutions that can
be proposed by either department to strengthen sealift for
national security. This body meets three times a year.
USTRANSCOM, Navy, and MARAD have been working extensively to
develop a sealift recapitalization plan for the Nation's aging
sealift forces.
MARAD, with USTRANSCOM support, has been taking steps to
improve mariner resilience. Such efforts have included the
Military-to-Mariner initiative to assist departing/retiring
armed service members to earn their U.S. Coast Guard mariner
credential to allow a transition to civilian life as a merchant
mariner. MARAD has also employed steam engineers during Ready
Reserve Force ship activations to increase the available pool
of mariners with these specialized skills.
MARAD will continue to look for other opportunities while awaiting
the results of the Maritime Workforce Working Group Report; which
includes participation by senior USTRANSCOM (Flag-officer level)
leadership.
______
Response to Written Questions Submitted by Hon. Tammy Baldwin to
Joel Szabat
Since 2012, the number of foreign trading vessels has been
dramatically reduced and 60 ships currently fill all Maritime Security
Program operating agreements. This diminished pool of well-trained
civilian mariners necessary to deploy and sustain sealift during a
military conflict poses a threat to national security.
MARAD has testified in recent years about the ability to meet
sustained needs. Further, MARAD has testified that cargoes are key to
maintain and grow a modern U.S.-flag fleet.
Question 1. What impact has the 2012 reduction in cargo preference
requirements had on the U.S.-flag fleet? Further, please describe
proposals that could result in realistic mechanisms to grow the fleet.
Answer. Since 2012, the number of foreign trading vessels has been
dramatically reduced and 60 ships currently fill all Maritime Security
Program operating agreements. This diminished pool of well-trained
civilian mariners necessary to deploy and sustain sealift during a
military conflict poses a threat to national security. MARAD has
testified in recent years about the ability to meet sustained needs.
Further, MARAD has testified that cargoes are key to maintain and grow
a modern U.S.-flag fleet.
Further study would be required before any recommendations could be
made. The Administration has not yet taken any position.
Question 2. Please describe MARAD's enforcement of U.S.-flag fleet
requirements.
Answer. The responsibility for compliance with requirements to use
U.S.-flag vessels (i.e., cargo preference) rests with the Federal
programs seeking transportation of preference cargo. The Duncan Hunter
National Defense Authorization Act for FY 2009, P.L. 110-417 authorized
MARAD to impose remedies for non-compliance by allowing for civil
penalties of up to $25,000 per violation/per day on violators and
authorizing MARAD to direct agencies to provide ``make up cargoes.''
MARAD also seeks to educate program managers on the basics of ocean
freight--when and how it is used--and also has developed computer-based
training to assist various civilian and military agencies' contracting
officers with these compliance requirements and what specifically they
should require in their prime and subcontracting clauses to improve
reporting by their contractors regarding compliance.
MARAD determines compliance based on the regulatory requirement
that programs subject to cargo preference provide MARAD with receipt of
both U.S. and foreign-flag bills of lading evidencing that the at-
least-50-percent threshold has been satisfied. Information derived from
these bills of lading forms the basis of the performance metric, which
in turn may lead to dialogue with agencies should the subject program
be at risk of failing to meet cargo preference requirements.
Question 3. As the Nation's highways and other transportation
systems become increasingly congested, ports and waterways provide an
alternative for the efficient movement of freight. MARAD's Marine
Highway Program is meant to stimulate the development of new regional
shipping services. Congress provided $5 million in FY16 and FY17
appropriations for Marine Highway Program Grants. Is this an adequate
level of funding to accomplish the program's goals? If not--what amount
can be justified?
Answer. At the current funding level, the Marine Highway Program
Grants can alleviate some of the start-up capital risk associated with
any new marine highway service venture, including new transportation
services such as marine highway services for freight movement. By
funding planning efforts, demonstration projects, and infrastructure
and equipment to support new services or expand existing services, the
Marine Highway Program can attract private marine highway service
operators to enter this market who otherwise would not be willing to
shoulder the full risk of this unknown market. Through the injection of
existing grant funding, we can build new services, which in turn are
offering our manufacturing base and distribution new competitive
transportation options while at the same time, providing public
benefits in the form of reduced congestion and highway maintenance
costs. The funds appropriated in FY 2016 have been awarded to six
projects that will support new service development in the following
areas:
Virginia, Maryland and the District of Columbia,
New York and New Jersey;
Illinois and Missouri; and
within the State of Louisiana.
MARAD is developing the Notice of Funding Opportunity for FY 2017.
[all]
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