[Senate Hearing 115-774]
[From the U.S. Government Publishing Office]
S. Hrg. 115-774
MARITIME TRANSPORTATION:
OPPORTUNITIES AND CHALLENGES
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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
SECOND SESSION
__________
APRIL 24, 2018
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
39-951 PDF WASHINGTON : 2020
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FIFTEENTH CONGRESS
SECOND 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 TOM UDALL, New Mexico
JAMES INHOFE, Oklahoma GARY PETERS, Michigan
MIKE LEE, Utah TAMMY BALDWIN, Wisconsin
RON JOHNSON, Wisconsin TAMMY DUCKWORTH, Illinois
SHELLEY MOORE CAPITO, West Virginia MAGGIE HASSAN, New Hampshire
CORY GARDNER, Colorado CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana JON TESTER, Montana
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
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SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
INFRASTRUCTURE, SAFETY AND SECURITY
DEB FISCHER, Nebraska, Chairman GARY PETERS, Michigan, 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
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Page
Hearing held on April 24, 2018................................... 1
Statement of Senator Fischer..................................... 1
Statement of Senator Peters...................................... 3
Statement of Senator Wicker...................................... 33
Prepared statement from the Coalition for More Efficient
Ports...................................................... 34
Statement of Senator Hassan...................................... 37
Statement of Senator Capito...................................... 41
Witnesses
Hon. Michael A. Khouri, Acting Chairman, Federal Maritime
Commission..................................................... 4
Prepared statement........................................... 5
Hon. Mark H. Buzby, Administrator, Maritime Administration, U.S.
Department of Transportation................................... 15
Prepared statement........................................... 17
Rear Admiral James Helis, U.S. Maritime Service, Superintendent,
U.S. Merchant Marine Academy................................... 20
Prepared statement........................................... 22
Craig H. Middlebrook, Deputy Administrator, Saint Lawrence Seaway
Development Corporation, U.S. Department of Transportation..... 24
Prepared statement........................................... 26
Appendix
Response to written questions submitted by Hon. John Thune to:
Hon. Michael A. Khouri....................................... 47
Response to written questions submitted to Hon. Mark H. Buzby by:
Hon. James Inhofe............................................ 53
Hon. Bill Nelson............................................. 55
MARITIME TRANSPORTATION: OPPORTUNITIES AND CHALLENGES
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TUESDAY, APRIL 24, 2018
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 2:30 p.m. in
room SR-253, Russell Senate Office Building, Hon. Deb Fischer,
Chairman of the Subcommittee, presiding.
Present: Senators Fischer [presiding], Wicker, Blunt,
Capito, Young, Peters, Cantwell, Blumenthal, and Hassan.
OPENING STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. The hearing will come to order. Thank you
all for being here today for this Surface Transportation and
Merchant Marine Infrastructure, Safety, and Security
Subcommittee hearing titled ``Maritime Transportation:
Opportunities and Challenges.''
Maritime transportation and the Merchant Marine are
essential to the United States for both commercial and defense
purposes. The United States Bureau of Transportation statistics
found that in 2016, the value of exports and imports shipped by
water was worth nearly $1.5 trillion. As the world becomes more
connected through trade, even a triple landlocked state like
Nebraska relies on maritime transportation and the Merchant
Marine to get our products to their final destination.
The Merchant Marine is also vital for the defense of our
country. The Ready Reserve Force Program has been activated for
defense and emergency purposes over 600 times since it was
created in 1976. Understanding and addressing the needs of the
Merchant Marine is crucial, and it's a crucial part of our
national security.
Today, we will be examining the current state of the
maritime sector, including the maritime workforce, U.S. Sealift
capability, and developments within freight transportation. Our
witnesses from the Maritime Administration, the U.S. Merchant
Marine Academy, the Federal Maritime Commission, and the Saint
Lawrence Seaway Development Corporation will share the
administration's perspective on these topics. This hearing is
particularly relevant as the Senate Commerce Committee
considers the Fiscal Year 2019 reauthorization of the Maritime
Administration, which Senator Peters and I introduced.
The Maritime Administration, or MARAD, plays an important
role in both our national defense and the promotion of maritime
industry in the United States. MARAD, through an agreement with
the Department of Defense, manages the Ready Reserve Force,
which serves to transport combat support, resupply, and unit
equipment to the Army and the Marine Corps.
Domestically, the Ready Reserve Force played a critical
part in the Federal response efforts following the devastating
hurricanes last year. MARAD also oversees important maritime
requirements that ensure the United States maintains its port
and shipbuilding infrastructure. As one of our five service
academies, the U.S. Merchant Marine Academy is necessary for
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.
I remain concerned about the incidents of sexual assault
and sexual harassment at the Academy, particularly the
September 2016 alleged incident involving the men's soccer
team. This committee has included a number of important
provisions in recent MARAD reauthorizations to reform the
Academy and address instances of sexual assault and harassment.
Midshipmen must be confident in their leadership and trust that
the Academy will respond to reports of this terrible behavior.
Following the recent report released by the Department of
Transportation's Inspector General's Office, I expect to learn
how the Academy will address the gaps in its sexual assault and
sexual harassment response and prevention efforts.
I also expect to hear about the efforts of MARAD and the
Academy to encourage more ocean carriers to accept midshipmen
as part of their Sea Year training. We will hear from the
Acting Chairman of the Federal Maritime Commission, which
oversees freight activities and our international ocean
transportation system. 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. It is responsible for regulating
ocean carrier activities, reviewing ocean carrier and marine
terminal operator agreements, and monitoring ocean
transportation operations and rates.
Ocean shipping has experienced several challenges and
changes in recent years, including the 2015 West Coast ports
slowdown, the bankruptcy of a major international ocean
carrier, the formation of new ocean carrier alliances, and the
dramatic growth in container shipping vessels, which has
altered how our ports and intermodal connections manage the
increase in freight. The FMC has a role relevant to each of
these challenges, most recently by examining policies
surrounding demurrage and detention rates. I look forward to
hearing from the Acting Chairman about the current state of the
maritime freight industry and how the Commission has been
addressing these challenges.
I also want to take this opportunity to commend
Commissioner Rebecca Dye for her work leading the supply chain
innovation teams. Her recent report spotlights key challenges
in the supply chain and offers potential solutions to better
analyze the movement of freight across the port system.
Finally, we will hear from the Saint Lawrence Seaway
Development Corporation, which maintains the United States'
role in waterborne trade along the Saint Lawrence Seaway and in
the Great Lakes. The Saint Lawrence Seaway Development
Corporation faces many of the same challenges that the U.S.
Port Authorities are facing, such as larger vessels and aging
infrastructure, but also faces unique challenges such as the
waterway freezing over in the winter. I look forward to hearing
about these unique challenges and how the Development
Corporation intends to meet them.
Thank you again to our witnesses for being here today, and
I would now turn to my colleague and Ranking Member, Senator
Peters, for his opening remarks.
STATEMENT OF HON. GARY PETERS,
U.S. SENATOR FROM MICHIGAN
Senator Peters. Well, thank you, Chair Fischer.
Good morning to our witnesses. I look forward to hearing
your testimony here today.
The U.S. Maritime Transportation System sustains and
empowers our national economy. Over 90 percent of the volume of
overseas trade enters or leaves the United States by ship, and
waterborne cargo contributes nearly $650 billion annually to
the U.S. GDP and sustains more than 13 million jobs.
My home state of Michigan is not just a regional but an
international hub for trade, transportation, and logistics.
Many of the largest heartland industries, from grain to iron
ore, are highly dependent on the maritime industry to move
their products to market. Michigan has 38 deep water ports and
ranks first in the Great Lake states in maritime tonnage with
more than 61 billion tons of cargo moving annually into and out
of the state. A recent study estimates that the total economic
impact of commercial maritime industry in Michigan equates to
over 91,000 jobs, $19 billion in business revenue, and $4.4
billion in personal income impacts.
While the Great Lakes Maritime Transportation System is a
major regional and national transportation asset,
unfortunately, a lack of funding has contributed to the
deterioration of port conditions and capacity, not just in
Michigan, but all across the United States. I look forward to
hearing today what more we can do to rehabilitate and sustain
our aging infrastructure.
In addition to investing in our infrastructure, we must
also invest in our maritime industry, whether it's through
increased shipbuilding, training for future mariners, or
maintaining a fleet of vessels capable of supporting the
military's needs during armed conflict or national emergencies.
There has been a long-term decline in the number of U.S. flag
ships and mariners. Many of our Jones Act and oceangoing
vessels are aging and in urgent need of repair or upgrade.
These are challenges that we must address. Our economy and
our military rely on the work of the men and women of the
Merchant Marine, and I look forward to finding ways to grow the
maritime industry and working to find sustainable, stable jobs
for mariners in the future.
My state of Michigan is directly invested in the training
of our future mariners as the home to the Great Lakes Maritime
Academy, one of the six state maritime academies across the
Nation. I am also honored to serve on the Board of the Merchant
Marine Academy, where I have seen firsthand the importance of
preparing our student mariners for the future.
For students to learn and grow, it is essential that we
provide a safe learning environment, one that is free from
harassment and sexual assault. I know this is an issue that we
will cover today and I know that MARAD and the Academy are
working to address.
That said, there is more that we can do to get this right,
and Senator Fischer and I are glad to partner with you in this
year's MARAD reauthorization bill to further build upon these
efforts. I look forward to hearing our panel's suggestions on
how we address these and other challenges and how we can work
together to bolster our nation's infrastructure.
Thank you.
Senator Fischer. Thank you, Senator Peters.
Now I would ask the panel to please give their opening
statements, and we'll begin with you, Mr. Khouri.
STATEMENT OF HON. MICHAEL A. KHOURI, ACTING CHAIRMAN, FEDERAL
MARITIME COMMISSION
Mr. Khouri. Thank you, Chairman Fischer, Ranking Member
Peters, and Senators. Thank you for the opportunity to appear
before you today, and, with permission, I will summarize my
written remarks and request the written testimony with a copy
of our Fiscal Year 2017 Annual Report be included in the
record.
The FMC's mission is to ensure a competitive and reliable
international ocean transportation supply system that supports
the U.S. economy and protects the public from unfair and
deceptive practices. As the Commission monitors international
ocean trades and regulates key sectors of the container
shipping industry, the Commission is meeting its mission, and
our U.S. exporters, importers, and consumers are the ultimate
beneficiaries.
As the first item, I'd like to address an issue of interest
that Chairman Thune raised last fall. The Coalition for Fair
Port Practices filed a petition in December 2016 asking the FMC
to begin a new rulemaking proceeding to regulate practices by
marine terminals and ocean carriers relating to demurrage,
detention, and related fees. We received numerous written
comments and then held two days of public hearings in January.
The Commission recently voted to begin a formal
investigation to develop a full factual record. Following her
experience and leadership last year with the Supply Chain
Innovation Teams initiative, Commissioner Dye agreed to serve
as the fact-finding officer. An interim investigation report is
scheduled for September, and a final report is due in December
of this year. We will keep you and the Committee updated on
those initiatives.
Next, an overview. As you suggested, Chairman, the ocean
transportation system has changed significantly over the last
few years. The number of major global shipping companies
decreased from 21 to 12. With new construction, global fleet
capacity has increased to 5,200 container ships and 21 million
TEUs of capacity. This capacity increase outran global cargo
demand, resulting in overcapacity in nearly all trade lanes.
Nine of the 12 major ocean carriers are members of three
global vessel operational alliances. A reassuring data trend
shows us that even with the mergers and new carrier alliances,
the individual ocean carriers continued to independently and
vigorously compete on pricing and overall capacity decisions,
providing evidence that healthy competition continues. Industry
analysts and shipper interests recognize that the alternative
to well regulated vessel alliances would be further mergers and
consolidations in the industry, resulting in fewer ocean
carriers and less service options.
Another positive development: ocean carrier agreements that
contain authority to discuss freight rates have experienced a
steady decline. Five such agreements terminated in the last few
months. The Commission has responded to these structural
developments with new agreement negotiation practice that
narrows agreement authority, restricts language scope, and with
enhanced monitoring programs. For all agreements, our staff
maintains a careful watch on industry trends, being vigilant
for indications of anticompetitive behavior.
Marine terminals and port authorities have shown new
interest in using alliance type agreements. Terminals are
cooperating in new ways as they address the challenges
presented by larger vessels unloading more containers at each
port call and the need for enhanced port infrastructure and
developing collective solutions to mitigate cargo bottlenecks.
On the regulatory front, following the direction of
Executive Order 13777, the Commission continues our process to
identify and address outdated, unnecessary, or unduly
burdensome regulations. Global supply chain operations benefit
from less regulation through lower costs that pass through to
our U.S. exporters, importers, and consumers.
Regarding our budget, our requested level of funding for
Fiscal Year 2019 is $27,490,000. The FMC is a small agency
charged with a focused competition and commercial mission and a
need for specialized staff, including a high percentage of
economists and attorneys, career fields that tend to fall in
the upper GS pay scales. The bulk of the Commission's budget,
approximately 86 percent, is dedicated to these salaries and
rent.
Thank you for your attention. I'd be pleased to answer any
questions you may have.
[The prepared statement of Mr. Khouri follows:]
Prepared Statement of Hon. Michael A. Khouri, Acting Chairman,
Federal Maritime Commission
Chairman Fischer, Ranking Member Peters, Senators, thank you for
the opportunity to appear before you today to discuss issues related to
the Federal Maritime Commission and to share with you how the
Commission works to ensure a competitive and reliable international
ocean transportation supply system that supports the U.S. economy and
protects the public from unfair and deceptive practices.
The Federal Maritime Commission
The FMC is an independent agency with specialized expertise that
administers a focused antitrust legislative and regulatory regime
tailored to the particular factors affecting the international ocean
liner trade. The Shipping Act of 1984 contains several major sections
that are comparable to the competition and antitrust statutes
administered by the Department of Justice and the Federal Trade
Commission. Since passage of the original Shipping Act in 1916,
Congress has recognized that the international ocean liner industry
requires special legislative and regulatory consideration and
oversight. This is due to the substantial amount of our Nation's
international exports and imports being delivered via ocean carriage,
the resulting critical role the industry plays in our international
commerce, and the many competing, and potentially conflicting, maritime
regulatory regimes and interests of our international trading partners.
Based on economic and non-economic conditions affecting the
international ocean liner trade, Congress determined in 1916 to allow
certain types of ocean carrier collaboration not permitted under other
antitrust statutes, to ensure certain U.S. national objectives would be
met. This included the availability of ocean transportation and
stability of the shipping infrastructure upon which a material
proportion of our international commerce depends. The antitrust laws,
including the Shipping Act of 1984, are designed to protect
competition, not individual competitors. Collaborative joint venture
agreements among competitor ocean carriers, as long as they are not
found to be anticompetitive, are recognized as beneficial, finding
efficiencies and reducing cost that ultimately benefits U.S. exporters
and saves the U.S. consumer money.
Congress entrusted competition oversight and antitrust enforcement
for this industry to a specialized agency with particular expertise in
this legal area, close familiarity with the commercial and operational
issues involved in the ocean liner industry, and sensitivity to the
interests of U.S. stakeholders and our many 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 of U.S. consumers and anticompetitive effects are
prevented or properly mitigated.
Congress noted the role they envisioned for the FMC in their Joint
Explanatory Statement of the Committee of Conference--House Report No.
98-600, during consideration of the Shipping Act of 1984:
[a]s new and evolving forms of cooperative conduct develop, the
conferees believe that the Commission, rather than the
antitrust agencies or the courts in the first instance, is in
the best position to assess an agreement's benefits and
detriments in light of the objectives of this Act.\1\
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\1\ The Conference Report for the Shipping Act of 1984, H. Rept.
600 at pg. 32.
Given the significant growth in international commerce over the
past three decades and the importance of this international trade to
the U.S. economy, what was true in 1984 is even more valid today.
Our Annual Report was submitted on April 1, 2018, and provides a
comprehensive summary of the Commission's activities and industry
developments in Fiscal Year 2017 (FY 2017). I will address matters of
interest to the Committee, discuss what we foresee as potential
developments and trends in the coming year, and review our significant
activities of the past year.
Petition P4-16/Fact Finding 28
First, I would like to address an issue of interest to the
Committee that Chairman Thune raised in a letter to the Commission last
September. On December 7, 2016, the Coalition for Fair Port Practices,
an organization of trade associations representing shippers, ocean
transportation intermediaries, and domestic transportation companies,
filed a Petition (P4-16) asking the Commission to begin a new
rulemaking proceeding to address practices by marine terminal operators
(MTOs) and vessel-operating common carriers (VOCCs) related to
demurrage, detention, and related fees. Demurrage, detention, and
related fees are charged by VOCCs and MTOs to compensate for the use of
containers and terminal space and encourage the efficient movement of
cargo through the terminals and the expeditious return of equipment.
The petitioners claimed that there were no standards as to what
constitutes unreasonable demurrage and detention practices under the
Shipping Act of 1984 which thereby lead to unfair practices that
undermine the integrity and efficiency of the U.S. ocean transportation
system. The petitioners asked the Commission to issue a rule, or
alternatively, a policy statement interpreting unreasonable demurrage
and detention practices and provide the industry with the tools it
needs to more efficiently resolve demurrage and detention disputes.
The Commission received over one hundred comments on the Petition,
and in January of this year, held a two-day public hearing that
explored issues raised in the Petition by soliciting testimony from
shippers, ocean transportation intermediaries, ocean carriers,
truckers, and marine terminal operators.
Based on the testimony received in the public hearing and post-
hearing comments filed by the parties and the public, the Commission
voted last month to launch a formal investigation to examine practices
of VOCCs and MTOs related to detention, demurrage, and per diem charges
with Commissioner Rebecca F. Dye as the Investigative Officer. The
investigation will focus on how demurrage and detention practices can
optimize, not diminish, the performance of the American international
freight delivery system. Commissioner Dye has broad authority to
conduct the investigation, including the power to issue subpoenas, to
hold public and non-public sessions, and to require reports. Under the
Commission Order, she is charged with making recommendations for
Commission action including investigations of prohibited acts;
enforcement priorities; policies; rulemaking proceedings; or other
actions warranted by the record developed in the proceeding. An interim
investigation report is scheduled for September 2, 2018 and the final
report of Commissioner Dye's findings and recommendations is due to the
Commission for consideration, discussion, and vote no later than
December 2, 2018.
Changes from 2016 to 2017 and Industry Oversight
The container shipping industry plays an integral role in America's
international trade and commerce. There is 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. In
2017, approximately 34 million TEUs \2\ moved through our Nation's
ports, a 4 percent increase from 2016. U.S. imports surged during the
year and accounted for most of this increase. The U.S. imported over 22
million TEUs last year valued at $754 billion. This was an increase of
over 6 percent by volume from 2016. Meanwhile, the U.S. exported 12
million TEUs in 2017 with a value of $266 billion, a 1 percent increase
over 2016 by volume.
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\2\ A Twenty-Foot Equivalent Unit (TEU) can be used to measure a
ship's cargo carrying capacity. The dimensions of one TEU are equal to
that of a standard 20 foot shipping container--20 feet long and 8 feet
tall. Two TEUs are equal to one forty-foot-equivalent unit (FEU).
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In 2016, there were significant changes to the ocean transportation
services marketplace, marked by merger and acquisition activity among
shipping lines and the bankruptcy of a top ten ocean carrier. As a
result of these events, the number of major multi-trade lane shipping
lines operating in the international trades has dropped from 21 in 2011
to 12 global carriers following the merger of the three Japanese
carriers into Ocean Network Express (ONE) and COSCO's acquisition of
Orient Overseas Carrier Line (OOCL). The table below lists the ocean
carriers that serve the major east-west trade lanes. On a broader
scale, thirty-six ocean container carriers serve the U.S. trades.\3\
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\3\ Ocean common carriers that transport at least 0.1 percent
market share or higher with a minimum of 18,000 containers per year in
U.S. trades.
Notwithstanding the reduction in the number of major shipping lines
serving the international trades, the container industry remains very
competitive. Using traditional antitrust analysis measures, the major
transpacific and transatlantic trade lanes remain unconcentrated and
competitive. These trade lanes have a Herfindahl-Hirschman Index (HHI)
of 835 and 1,354, respectively.\4\ This also holds true when one
further breaks out the transpacific trade by West Coast and East Coast,
as well as the transatlantic Northern European trade. The other
transatlantic trade lane, the Mediterranean, is moderately concentrated
according to the index, although it is by far the smallest by volume of
the noted trade lanes. None of the major trade lanes are highly
concentrated using this measure.
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\4\ Concentration is assessed using the HHI. Theoretically, the
greater the degree of market concentration and the fewer the
competitors, the higher the HHI. In its merger guidelines, the
Department of Justice's (DOJ) Antitrust Division regards markets as not
concentrated if the HHI is below 1,500. Under DOJ guidelines, mergers,
and other less problematical forms of horizontal collaborations, that
do not result in concentrated markets are unlikely to produce adverse
competitive effects and, ordinarily, do not require further government
regulatory analysis.
The global fleet has increased in size in recent years. At the
beginning of 2018, ocean carriers deployed 21.1 million TEUs of ship
capacity globally, a 70 percent increase from 2009. Looking back over
the past few decades, shipper demand for container ocean transportation
was growing seven percent or more year after year. VOCCs were ordering
more ships and bigger ships. Then the global recession began in 2008.
There were three plus years of vessel construction commitments at all
of the world's shipyards and shipper cargo demand was retreating. A
perfect formula for overcapacity and depressed ocean freight rates. The
backlog of new shipbuilding has now eased-in fact some shipyards in
South Korea and China are now offering incentives in efforts to avoid
large worker layoffs and yard closures. Global cargo demand has
returned to modest to normal growth levels in major trade lanes. As
consumer confidence and spending has grown, and the demand for ocean
transportation services has increased, carriers have been able to fill
their ships relatively close to capacity in the past year, despite
having increased the total capacity on the major trade lanes.
Ocean carrier monitoring data confidentially filed at the FMC
indicates that ocean carriers regularly experienced capacity
utilization of over 90 percent on the inbound major transpacific trade
throughout 2017 and about 90 percent on the transatlantic. Each of
these trade lanes saw capacity utilization rise toward the end of 2017
compared to earlier in the year. However, vessel utilization on the
backhaul route from the U.S. to Asia is only about 50 percent, with
only slightly higher levels from the U.S. to Europe. Although ships are
sailing relatively full, rates have remained comparatively low and are
22 percent below their peak in 2010. When adjusted for inflation, real
rates are down 31 percent since 2010. According to FMC monitoring data,
rates have remained steady on the major transatlantic trades.
There are some signs that the industry is moving towards a recovery
from overcapacity and low freight rates. The percentage of the idled
fleet has decreased. Many carriers have recently reported positive
operating profits (i.e., EBIT or earnings before interest and taxes).
However, charter rates for vessels of all sizes remain substantially
lower than their peaks prior to the recession. Additionally, there does
not appear to be any indication that typical sailing speeds are
increasing. Other factors that can affect moving to a recovery are
continued economic import and export growth in the United States.
However, an economic downturn would have an adverse effect on demand
for shipping and would slow down any recovery, thereby having a
dampening effect on rates.
Nine of the remaining twelve major multi-trade lane ocean carriers
are currently members of three global alliances--2M, OCEAN, and
Transportation High Efficiency (THE). These alliances are joint
operating agreements of ocean carriers where they are allowed to
discuss and agree on the supply of vessel capacity through the
deployment of a specific service string or strings of vessels in
various trade routes. Each alliance operates multiple services in the
major transpacific (Asia-U.S. and Canada), transatlantic (Europe--U.S.
and Canada), and Asia-Europe trades and supply over 90 percent of the
vessel capacity in each of these trade lanes. These three major
alliances are not the only vessel sharing agreements in which these and
other ocean carriers participate, as carriers can and do participate in
multiple agreements filed at the FMC. These include various space
charter agreements, vessel sharing agreements, vessel sharing
alliances, joint service agreements, and cooperative working
agreements. In addition to the three global vessel sharing alliances
referenced above, ocean carriers participate in more than 325 other
agreements filed at the Commission.
Alliances can be very beneficial for U.S. exporters, importers, and
consumers. Such alliances allow participants to obtain efficiencies and
cost-savings that can be passed on to domestic consumers especially
when healthy competition exists among vessel operators. Of note, the
benefits of alliances and other forms of joint commercial vessel
operating arrangements are recognized by Congress and addressed in the
Shipping Act of 1984, as amended, and the contemporaneous Congressional
record:
Another important potential benefit to be considered is any
efficiency-created aspects of an agreement. Agreements
involving significant carrier integration are, if properly
limited to achieve such important benefits, to be favorably
considered by the Commission and the courts. Joint ventures and
other cooperative agreements can enable carriers to raise
necessary capital, attain economies of scale, and rationalize
their services. Pooling arrangements can also offer significant
benefits in reducing excess capacity and promoting
efficiency.\5\
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\5\ The Conference Report for the Shipping Act of 1984, H. Rept.
600 at pg. 36.
A reassuring data trend shows that even with the wave of mergers
and acquisitions and new carrier alliance groupings, 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. And over the last
decade, the global vessel fleet has increased. The increase in capacity
came from an increase in the number of vessels and an increase in the
size of new vessels entering the global fleet. The increase in capacity
occurred without a corresponding increase in cargo demand. Industry
stakeholders have noted that the alternative to carrier alliances is
further consolidation in the industry with fewer ocean carriers and
less competition.
The Commission responded to the recent and ongoing structural
changes in the international liner shipping industry with aggressive
negotiations on proposed agreements and enhanced monitoring programs.
With the increased size and market share of carrier alliances over the
last four years, the FMC has insisted on narrower agreement
authorities, more clear and specific agreement language, and enhanced
monitoring requirements. Monitoring for these large alliances,
entailing more details and timely filing of monitor reports has
increased.
As alliances are ongoing cooperative agreements rather than
mergers, the Commission is charged by Congress with continuous
monitoring after the initial review and following the effective date of
the agreements. The Commission examines both the structural market and
actual carrier behavior under filed agreements to detect
anticompetitive activity that would violate the Shipping Act.
Our transportation analysts, economists, and attorneys maintain a
careful watch on industry trends, being vigilant for any indications of
anticompetitive behavior by the participants operating within the filed
agreements. The Commission is diligent in monitoring economic
conditions and carrier agreement activities to identify potential anti-
competitive concerns and the possible need for Commission action. The
Commission may challenge an agreement in Federal District Court at any
time after the effective date. The FMC will continue to monitor
industry trends to identify when the industry enters a full recovery
and vessel supply/cargo demand equilibrium. Such monitoring and
analysis will be important for determining the extent to which rate
increases at that time are attributable to an economic recovery or to
coordinated action by carriers.
The FMC prioritizes all filed agreements \6\ on a red-yellow-green
scale, with red being higher profile agreements with the highest
probability of potentially adverse market effects based on the
agreement's authority in combination with the underlying market. All
global alliances are categorized as red agreements. For these
alliances, FMC staff prepares scheduled briefings for management and
conducts more detailed quarterly reviews. The FMC monitors these red
agreements for any exercise of market power that could allow alliance
members to raise and maintain prices above competitive levels.
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\6\ At the end of FY 2017, there were 484 agreements on file
covering vessel operators and marine terminal operators.
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The FMC conducts a four-tiered analytical approach. The first tier
is an immediate review of advance notifications of cancelled alliance
sailings or other changes in vessel capacity that affect the supply of
vessels of any individual alliance service by more than five percent of
average prior weekly vessel capacity. The second tier consists of a
careful review of submitted minutes of the most senior agreement
committees that make vessel deployment decisions to assess the medium-
to long-term outlook for capacity levels and how that could impact
freight rates. Under the third tier, changes in individual alliance
members' vessel capacity, capacity projections, and how that relates to
changes in freight rates are analyzed. The final tier consists of
reviewing and analyzing confidentially filed carrier data submitted by
the alliances \7\ for completeness and accuracy to determine if this
data reveals any potential red flags.
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\7\ To prevent an alliance carrier from viewing another carriers'
data, each alliance carrier submits its data individually to alliance
counsel, who then prepares a collective submission on behalf of the
alliance to the FMC.
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The Commission also monitors trends in other carrier and marine
terminal operator agreement filings. It is important to note that
carrier agreements containing rate discussion authority have
experienced a steady decline in membership and a number have been
terminated. More specifically, of the sixteen rate discussion
agreements, five have been terminated entirely in the past few months,
including the Transpacific Stabilization Agreement, which has served as
the primary price discussion forum for the ocean trade from Asia to the
United States since 1989. Carriers appear to be ending their
participation in rate discussion agreements for a number of reasons.
Overcapacity continues to define the major east-west container shipping
markets, keeping downward pressure on rates and limiting the
effectiveness of these agreements. We also note carrier concerns over
potential changes in the regulatory environment in the U.S. and abroad.
Further, the Commission monitors and analyzes commercial contracts
confidentially filed in the FMC's SERVCON System between vessel-
operating common carriers (VOCCs) and shippers for the transport of
U.S. exports and imports. SERVCON is the Commission's repository for
all filed service contracts, excluding exempt commodities, in the U.S.
waterborne foreign commerce. Service contracts contain the rates,
terms, and other service requirements agreed upon by VOCCs and shippers
for the carriage of cargo. Commission staff conducts focused research
and analysis on service contract terms and conditions, such as chassis
usage/fees, demurrage terms/fees, etc., in order to investigate or
clarify industry reports, gain better insight into emerging industry
issues, and better inform policy decisions.
Review and analysis of confidentially filed commercial contracts
between VOCCs and shippers provide a valuable tool to evaluate the
competitive dynamics at play between shippers seeking to leverage cargo
volumes in the pursuit of lower freight rates and/or special service
terms and VOCCs competing to obtain that cargo. FMC staff also
systematically monitors a sampling of service contracts for a number of
beneficial cargo owner and non-vessel-operating common carrier (NVOCC)
shippers on an ongoing basis to track overall competitive conditions in
various trades. These reviews are designed to protect the shipping
public from unfair and deceptive carrier practices by identifying and
addressing potential concerted carrier activity under filed agreements
found to have resulted in discriminatory practices involving rates or
charges applied to any locality, port, or persons due to those persons'
status as shippers' association or ocean transportation intermediary.
As noted earlier, although there has been a contraction in the
number of lines operating in the international ocean trades,
competition between companies remains vibrant and shippers continue to
benefit from low rates. Overall market share of even the largest
oceangoing carriers remain diffused. In the U.S. export and import
trades combined, CMA CGM and Mediterranean Shipping Company (MSC) hold
a 12.7 percent market share followed closely by Maersk in third
position with 12.3 percent market share. These are far from
``dominant'' market positions as recognized by established economic
standards. We will continue to look for any potential impact the
carriers operating in the new alliances have on market dynamics, rates,
and services.
While the United States' international trade depends on the liner
trade, unfortunately there is no substantial U.S.-flag presence in the
major transpacific and transatlantic trade lanes. The three largest
carriers in the U.S. trades are CMA CGM, MSC, and Maersk Line. The
invisible hand is not the only force that guides the global shipping
industry, and nations throughout the world go to great lengths to
support national companies, including indirect subsidies and direct
capital infusion to maintain the national company's solvency. Some
carriers are owned in part or whole by governments. The People's
Republic of China (PRC) is the United States' largest trading partner
in terms of cargo volume. The PRC actively invests in logistics,
transportation, and infrastructure through initiatives such as Silk
Road to advance strategic goals. The PRC-owned COSCO Shipping and Hong
Kong-based OOCL will become the largest carrier of U.S. imports when
the two companies' complete their merger this year. For the moment,
such links between governments and national carriers can provide lower
freight costs and greater service choices for imports and exports.
The ocean liner industry has been in a state of vessel oversupply
for several years. The low freight rate structure in U.S. trade lanes
is a direct reflection of that capacity supply/demand imbalance and
American exporters and importers have been the beneficiary of those low
freight rates. Such supply imbalances will not last forever. The
Commission does not favor one competitor, sector, or industry
stakeholder over another. We will continue to be attentive as we look
for indications of rate increases that are products of market
distorting, or collusive carrier business practices. However, it is
important to remember that rate increases, in and of themselves, are
not proof of an uncompetitive marketplace. At some point in the future,
higher freight rates will be a normal result of a more equalized and
healthy supply/demand marketplace.
The Commission continues to see marine terminal operators and port
authorities' increased interest in how to use cooperative agreements
filed with and reviewed by the Commission to their benefit. The nature
and complexity of marine terminal operator agreements have increased
considerably in recent years and marine terminal operators are
cooperating in novel ways in an attempt to address the demands of
significantly larger vessels unloading substantially larger numbers of
containers at each port call. As a result, marine terminal operators
have filed agreements to combine aspects of their operations, finance
necessary infrastructure improvements, increase terminal velocity,
develop collective solutions to mitigate cargo bottlenecks, and a host
of other activities, all aimed at enhancing their ability to compete
against other ports for cargo. There is a realization among these
parties that seeking an alternate antitrust enforcement regime
available to them through an agreement filed at the FMC can lead to
increased efficiencies and lower costs.
We would review with interest the application of any parties from
the port and terminal sector who want to use agreements to achieve
goals that ultimately benefit the American shipper and consumer. Due to
the unique nature of these types of agreements, monitoring of terminal
agreements is specifically tailored to the agreement's scope,
authority, and potential competitive impact of the agreement.
Regulatory Reform and Agency Actions
Regulatory Reform
Throughout FY 2017 and into FY 2018, the Commission has been
actively taking steps to identify and address outdated, unnecessary, or
unduly burdensome regulations. Further, the Commission aggressively
looks for ways to make compliance with Commission requirements easier
and more cost effective for shippers, carriers, and ocean
transportation intermediaries (OTIs).\8\
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\8\ OTIs includes non-vessel-operating common carriers and ocean
freight forwarders.
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Though they do not apply to the Commission, the FMC voluntarily
initiated a regulatory reform effort in the spirit of Executive Order
13771, Reducing Regulations and Controlling Regulatory Costs and
Executive Order 13777, Enforcing the Regulatory Agenda. The Acting
Chairman designated a Regulatory Reform Officer and a Regulatory Reform
Task Force (RRTF) was established consistent with the Executive Orders.
The RRTF issued a Notice of Inquiry for public participation in the
regulatory reform process and is working expeditiously to review
existing regulations and provide regulatory relief, while maintaining
the Commission's ability to complete its statutory mandate to protect
competition and integrity in America's ocean supply system.
Flowing from the work of the RRTF, the FMC publicly issued a Plan
for Regulatory Reform of Existing FMC Rules (Regulatory Reform Plan).
The Regulatory Reform Plan identifies regulations for future review.
The work on this Plan is projected to be completed in FY 2019. In
addition to the Plan, the FMC established a Regulatory Reform web page
and has pledged to provide additional information to the public on the
Commission's website as the Regulatory Reform Plan progresses.
While the work of the RRTF is ongoing, the Commission has already
taken steps to amend regulations related to Service Contracts,
Negotiated Rate Agreements (NRAs), and NVOCC Service Arrangements
(NSAs) to eliminate or reduce unnecessary filing obligations. On March
29, 2017, the Commission issued a deregulatory final rule updating and
modernizing the FMC's regulations governing Service Contracts and NSAs,
reducing the regulatory burden and costs of compliance with the
agency's regulations. On November 29, 2017, the Commission issued a
Notice of Proposed Rulemaking (NPRM) to simplify and streamline its NSA
and NRA rules and procedures. The NPRM sought public feedback on three
proposals: ending the requirement for NSAs to be filed with the
Commission; expanding the ability of NVOCCs and shippers to amend NRAs;
and allowing the act of tendering cargo to be considered acceptance of
a rate under the terms of the NRA. The Commission is reviewing filed
comments and moving forward with review of proposed deregulatory
actions on this item. These changes will make it easier and more
efficient for shippers and carriers to do business. Global supply chain
operations will benefit through lower costs, which should result in
savings realized by our U.S. exporters and importers.
Tariff publication requirements is a statutory obligation that the
Commission will consider for review and possible modification under its
Regulatory Reform Plan. Currently, OTIs and VOCCs are required to
publish both rates and applicable terms, conditions, and rules in their
tariffs, even though the overwhelming majority (92 percent plus) of
cargo moving in most U.S. trade lanes does so under the terms of
service contracts. In other words, current law and Commission
regulations require vessel operating companies to publish ``shelf''
freight rates that have nothing to do with the actual day-to-day market
prices being charged to shippers. This statutory requirement for tariff
filings could be relieved under the exemption authority that Congress
provided to the Commission in the 1984 Act and the 1998 OSRA
amendments.\9\
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\9\ 46 U.S.C. Sec. 40103 (a)
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Supply Chain Innovation Team Initiative
The Shipping Act contemplates a regulatory process for the foreign
commerce of the United States with a minimum of regulatory costs. The
Supply Chain Innovation Team Initiative (SCITI) was led by my
colleague, Commissioner Rebecca F. Dye. The FMC initiative made a
meaningful contribution towards enhancing supply chain efficiency for
America's exporters and importers. Whenever possible, the Commission
seeks to facilitate the cooperation of stakeholders to develop non-
regulatory commercial solutions to address bottlenecks in the
international supply chain.
The SCITI was an outgrowth of the Commission's previous work on
port congestion issues in the fall of 2014. Launched in May of 2016 and
focused on challenges faced by America's international maritime supply
chains, Commissioner Dye, with her volunteer teams of industry leaders
composed of shippers, marine terminal operators, trucking companies,
ocean carriers, port officials, labor representatives, logistics
companies, and other stakeholders, worked to develop actionable
commercial solutions--including in particular--the key content for a
national seaport information portal that could provide the necessary
critical information sought by all parties involved in moving
containers to/from vessels, through seaports, and onward to a final
destination.
SCITI created two teams--one focused on import supply chains and
the second focused on export supply chains. The work of both the import
and export teams was summarized in a Final Report prepared by
Commissioner Dye and presented to the Commission on December 5, 2017.
Supply Chain Innovation Teams Initiative: Final Report presents the
teams' view that greater visibility across the American freight
delivery system was the one operational innovation likely to most
increase U.S. international supply chain performance. The report also
highlights the concept of a common National Seaport Information Portal
for critical shipment information, possibly organized by business
dashboards tailored to the needs of each supply chain actor.
Protecting the Public
The Commission licenses and regulates ocean freight forwarders and
NVOCCs. There are currently 6,417 OTIs that are licensed/registered
with the FMC. In furthering our mission to protect the public from
unfair and deceptive practices, the Commission crossed an important
milestone in FY 2017 with the successful launch of the OTI triennial
renewal process. An important program with which the Federal Maritime
Commission fulfills our mission of protecting the public is by
investigating, conducting background examinations, and approving the
Qualified Individual, i.e., the person who is the senior employee in
charge of service in the daily operations of the OTI.
Several years ago, the Commission reviewed a survey of OTIs and
discovered that a significant number had moved to new addresses without
informing the FMC; that, too frequently, the Qualified Individual,
whose qualifications were reviewed as the basis of granting the
original FMC license, was no longer an employee of the company; and
other filing discrepancies. A simple matter of not having the correct
address of an OTI on file hampers the ability to have proper service in
a legal matter and is an important issue. Failing to maintain an
approved Qualified Individual is a serious matter. During the first
year of our Triennial OTI License Renewal program over 1,350 license
renewals were received, reviewed, and accepted by the Commission
representing nearly 30 percent of the 4,870 active U.S.-based OTI
licenses. Of the 1,350 reviewed, 77 percent provided updates regarding
changes to the owners or officers, with 10 percent reporting changes to
their physical or e-mail address. Importantly, the renewal program
revealed 94 incorrect Qualified Individuals. Therefore, bringing and
maintaining our records up to date is an important ongoing initiative.
Given advances in information technology, the Commission determined
that there was an opportunity to improve the quality and accuracy of
information the agency has on file concerning OTIs, while doing so in a
manner that was making the process easy to complete and with minimal
industry burden. The renewal process is online and in most cases takes
only five minutes to complete--facilitated by prepopulating the
outgoing FMC inquiry with the OTI's information already on file with
the FMC, such as company ownership, corporate officers, business
locations, changes in affiliation or branch office. Moving to a web-
based update system not only aids the Commission in meeting its mandate
to safeguard the public, it significantly reduces the compliance
burdens and costs upon the regulated entities.
FY 2019 Budget Request, Strategic Plan, Management Reforms
Fiscal Year 2019 Budget
The FMC is a small agency with a very technical mission and a need
for a very specialized workforce. Our requested level of funding for FY
2019 is $27,490,000. Overall, the bulk of the Commission's budget,
approximately 86 percent, is consumed by rent, salaries and benefits,
and communications. Our staff includes a high percentage of
transportation economists and attorneys--career fields that tend to
command more compensation in order to successfully recruit and retain
qualified candidates and is the heart of the agency's mission. Overhead
costs such as interagency services, commercial services, travel and
transportation, supplies, and equipment account for most of the
remaining budget dollars. The Commission has very little, if any,
control over many of these costs. Year in and year out, the rent we are
charged rises, the supplies and resources we purchase to support our
economists and attorneys' competitive analysis and legal research cost
more, and information technology (IT) costs--including IT security and
telecommunications bills--rise. We constantly work to find a balance
between our resources and our workload; however, if there is a surge of
agreement filings, if a class of plaintiffs choose to seek relief at
the FMC, or if our building security requirements increase, then we
work to prioritize our mission-critical activity and reallocate
resources to the extent possible.
Finding ways to conduct the Commission's business more efficiently
is an important goal we share, Chairman Fischer. As such, the
Commission works to find ways to make every dollar appropriated to us
go as far as it can. A recent example of innovative cost-sharing is our
agreement with another small, independent agency, the Surface
Transportation Board, to share the services and costs of a single Equal
Employment Opportunity (EEO) Officer to ensure both agencies'
responsibilities while maintaining solid support of our EEO principles.
As I mentioned earlier in this testimony, the Federal Maritime
Commission continues to faithfully implement the purposes and mission
of the Shipping Act. I am proud of the work the Commission's staff does
each day to ensure a competitive and reliable international ocean
transportation supply system that supports the U.S. economy and
protects the public from unfair and deceptive practices.
Strategic Plan for 2018-2022
A proven method of achieving strong performance at an
organizational level is through focused and meaningful strategic
planning. Strategic planning is a driving force in an organization's
success. Government agencies benefit from strategic planning that is
focused, and designed to unite all agency team members to find ways to
achieve our mission more effectively while delivering value to the
taxpayer. Earlier this year, the Commission finalized a new Strategic
Plan for FY 2018-2022. This document will guide our work into the
future.
Agency Reform and Long-Term Workforce Plan
The President has made reshaping the Federal Government one of the
key initiatives of his Administration. Through an Executive Order
issued in March and a memorandum issued in April 2017 by the Director
of the Office of Management and Budget (OMB), the Administration
instructed departments and agencies throughout the Federal Government
to include an Agency Reform and Long-Term Workforce Plan (Workforce
Plan) as part of their FY 2019 budget submissions. A prime directive in
the Executive Order and OMB memorandum was for Federal agencies to
explore, develop and implement plans to streamline, consolidate and
flatten their organizational operations and structure.
Over the last year, the Commission developed a Workforce Plan as
directed by OMB. In broad terms, our 5-year Workforce Plan will (i)
flatten the organization and reduce the number of supervisory
positions; (ii) reduce the number of SES positions; (iii) establish a
new two-tier SES structure to realign and control SES salary costs;
(iv) realign and combine functions within the Commission (some subject
to Congressional approval); and (v) continue our emphasis on achieving
operational efficiencies and improving customer service through
automation projects.
Our goal is to find ways to do more while controlling costs.
Delayered work groups with broader spans of control and less hierarchy
have been proven to improve efficiency, employee engagement and
accountability. We are working to reshape the FMC and improve
operational effectiveness as required by the Administration while
minimizing the impact to the 116 committed and vital employees of the
FMC.
Conclusion
Thank you for this opportunity to discuss the mission of the
Federal Maritime Commission, current state and future challenges of the
ocean shipping industry, as well as highlight some of the Commission's
recent achievements and future priorities. Thank you, I am always ready
to be of assistance to the Committee and I will be pleased to answer
any questions you may have.
Senator Fischer. Thank you, Chairman Khouri.
Next I would like to welcome Admiral Buzby. Thank you for
being here today, and it's good to see you again.
STATEMENT OF HON. MARK H. BUZBY,
ADMINISTRATOR, MARITIME ADMINISTRATION,
U.S. DEPARTMENT OF TRANSPORTATION
Mr. Buzby. Thank you very much. Chairwoman Fischer, Ranking
Member Peters, and members of the Subcommittee, thank you for
this opportunity to testify about the challenges facing the
U.S. maritime sector and the need to ensure long-term viability
of this important industry.
The mission of the Maritime Administration is to foster,
promote, and develop the U.S. maritime industry to meet this
Nation's economic and security needs. A key challenge MARAD
faces is to ensure the availability of sufficient Sealift
capabilities to meet Department of Defense requirements to
effectively deploy military forces, respond to national
emergencies, and provide humanitarian assistance at home and
abroad.
Our strategic Sealift transports 90 percent of the
equipment and supplies that move and sustain our military
forces around the globe. It consists of government-owned
vessels, privately owned U.S. flag commercial vessels and the
mariners who operate them, and the intermodal systems upon
which the government relies.
The 61-ship surge Sealift fleet, which includes MARAD's 46-
ship Ready Reserve Force and 15 military Sealift Command
vessels, is in urgent need of recapitalization. This fleet
delivers equipment and supplies during major contingencies.
These ships average 43 years of age and require longer shipyard
time for more expensive maintenance and repairs to ensure
mission readiness. Our nation's Sealift capacity also relies on
privately owned commercial vessels operating under the U.S.
flag.
As this Subcommittee is well aware, the U.S. commercial
presence in international trade is at the lowest levels in its
history, with only 81 vessels operating exclusively in
international trade. This decline compromises MARAD's ability
to meet national security requirements.
While we continually seek innovative ways to make the U.S.-
flag commercial fleet more viable, MARAD's primary means of
support are through three programs: the Maritime Security
Program, or MSP; cargo preference laws; and the Jones Act.
MSP helps maintain an active, privately owned U.S. flagged
and crewed fleet of 60 militarily useful commercial ships in
international trade. Cargo preference laws keep U.S. flag
operators economically competitive by requiring shippers to use
U.S.-flag vessels to transport government-owned or impelled
cargo. The Jones Act, which requires cargos going between U.S.
ports to be transported on U.S. vessels, supports U.S.
shipyards and repair facilities, ensuring that production and
repair of American built ships are available to our military
and by requiring such vessels to have U.S. documentation and
crews.
Jones Act vessels provide employment for the majority of
U.S. mariners, which helps meet the challenge of ensuring the
Nation has enough qualified mariners to crew our surge fleet of
vessels when needed. We currently estimate a shortfall of 1,800
qualified mariners, which is a best case scenario, assuming
that all qualified mariners will voluntarily report when called
upon and that there will be no ship losses or personal
casualties. I'm working closely with USTRANSCOM, MSC, the Coast
Guard, and the commercial maritime industry to ensure that we
maintain an adequate number of mariners with proper training to
operate in contested waters.
One opportunity to ensure that qualified U.S. mariners are
available is continued support for the United States Merchant
Marine Academy and the six state maritime academies. These
institutions graduate most of the U.S. Coast Guard credentialed
officers qualified to crew these U.S.-flag oceangoing ships.
I will let Admiral Helis speak to the accomplishments of
the Merchant Marine Academy, but I want to thank this committee
for its continued support for this institution and its
midshipmen. Ensuring its long-term success is a high priority
for me as a proud graduate of the great Class of 1979.
I also want to thank you for the support you have given to
the state maritime academies by providing $300 million in the
Fiscal Year 2018 appropriations bill to fund the construction
of a new common school ship, the National Security Multi-
mission Vessel. This vessel is not only important to training
mariners, but will also be used to respond to national
disasters and humanitarian relief efforts.
There are many additional challenges facing the U.S.
Merchant Marine, but these are the top priorities my colleagues
and I at MARAD are working to address to meet the nation's
economic and security needs. I appreciate this subcommittee's
support for the United States Merchant Marine and look forward
to working with you on the challenges and opportunities
confronting the U.S. maritime industry.
I'm happy to respond to any questions you may have, and I
respectfully request that my written statement be entered into
the record.
Thank you very much.
[The prepared statement of Mr. Buzby follows:]
Prepared Statement of Hon. Mark H. Buzby, Administrator, Maritime
Administration, U.S. Department of Transportation
Good afternoon Chairwoman Fischer, Ranking Member Peters, and
members of the Subcommittee. Thank you for this opportunity to testify
about the challenges facing the U.S. maritime sector and opportunities
to ensure the long-term viability of this important industry.
The Maritime Administration's (MARAD) mission is to foster, promote
and develop the U.S. maritime industry to meet the Nation's economic
and security needs. A key challenge MARAD faces in carrying out this
mission, is meeting Department of Defense (DOD) sealift requirements.
The United States relies on strategic sealift capabilities, which
include ships and the necessary mariners to crew those ships to
efficiently and effectively deploy military forces around the world.
Strategic sealift consists of Government-owned vessels, privately-owned
vessels engaged in commerce under the U.S.-flag and the mariners who
operate them, and intermodal systems upon which the Government relies.
These vessels, mariners, and supporting infrastructure transport 90
percent of equipment and supplies that move and sustain our military
forces around the globe.
Government Fleet Readiness
Vessels in MARAD's 46-ship Ready Reserve Force (RRF), along with 15
Military Sealift Command (MSC) vessels, form the 61-ship surge sealift
fleet to rapidly deliver equipment and supplies during major
contingencies. Readiness of the RRF is a constant challenge given that
the average age of the vessels is 43 years. Repairs to older equipment
and aging systems require shipyard periods lasting longer and costing
more each year. In addition, MARAD and DOD must make investments to
meet new regulatory requirements, such as installing modern enclosed
lifeboats on RRF vessels. MARAD and the U.S. Transportation Command
(USTRANSCOM) are working with the U.S. Navy to address the challenges
of recapitalizing the sealift fleet to ensure mission readiness.
U.S.-Flag Commercial Fleet Viability
Our Nation relies on privately-owned commercial vessels operating
under the U.S. flag to augment the capabilities of the Government's
fleet. The U.S.-flag commercial fleet delivers supplies and equipment
to deployed forces and to service members and their families stationed
overseas during steady-state operations and essential sustainment
during long military deployments. Unfortunately, the U.S. commercial
presence in the international maritime domain has declined and is
currently at the lowest level in its history. Of some 41,000 deep-draft
self-propelled oceangoing commercial vessels in the world today, just
181 sail under the U.S. flag, including 81 vessels operating
exclusively in international trade, while the total capacity of U.S.-
flag containership and roll-on/roll-off vessels is roughly the same as
25 years ago. The other 100 consist of the oceangoing ships in our
Jones Act fleet. Further decline of the actively-trading U.S.-flag
fleet reduces our Nation's ability to unilaterally project and sustain
our forces during war..\1\
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\1\ See February 13, 2018 Statement of General Darren W. McDew,
Commander, U.S. Transportation command, before the Senate Armed
Services Committee: ``If the fleet continues to lose ships, when the
Nation goes to war, the DoD risks protracted deployment timelines or a
scenario in which it must deploy U.S. Forces on foreign-flag ships.
Moreover, further reduction in the fleet mean waning access to the
global commons, contracting our competitive space and threatening the
U.S. strategic advantage in this domain.''
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The Maritime Security Program (MSP), cargo preference laws, and the
Jones Act are used to maintain a baseline U.S.-flag fleet. The MSP
helps maintain an active, privately-owned, U.S.-flag and U.S.-crewed
fleet of 60 militarily useful commercial ships operating in
international trade. MARAD provides MSP participants an annual stipend,
and their ships and logistics networks are available ``on-call'' to
support DOD's global transportation needs. The MSP facilitates
employment for 2,400 U.S. merchant mariners qualified to sail on
oceangoing vessels who we can rely upon to crew RRF vessels when
activated, and assures DOD access to the critical multibillion-dollar
global network of intermodal facilities and transport systems
maintained by MSP participants.
Cargo is essential to sustain the vessels and jobs in the U.S.-flag
fleet. Cargo preference laws require shippers to use U.S.-flag vessels
for the ocean-borne transport of a significant portion of certain
cargoes purchased or guaranteed with Federal funds. Specifically, 100
percent of military cargo, and at least 50 percent of most non-military
Government owned or impelled cargo transported by ocean, must be
carried on U.S.-flag vessels subject to vessel availability. Absent
other measures, a strong cargo preference mandate supports the
sustainment of a U.S.-flagged, privately-owned commercial fleet and to
the continued availability of the associated American merchant
mariners.
In addition to cargo preference laws, U.S. coastwise trade laws,
commonly referred to as the Jones Act, contribute to a baseline of
sealift capability and capacity help sustain the U.S.-flag fleet and
supports the U.S. shipping industry.\2\ Jones Act requirements support
U.S. shipyards and repair facilities. They also keep current the supply
chains moving that produce and repair American-built ships (including
Navy and Coast Guard vessels). Finally, the Jones Act ensures that
vessels navigating daily among and between U.S. coastal ports and
inland waterways operate with U.S. documentation and a majority
American crew, rather than under a foreign flag with foreign crew, as
is the case for 98.5 percent of our Nation's waterborne international
trade. The American mariners of the Jones Act fleet are our ``eyes and
ears'' in domestic ports and waters and add an important layer of
security to our Nation.
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\2\ The Jones Act requires the use of qualified U.S.-flag vessels
to carry goods in domestic commerce, which includes transportation
between and among the U.S. mainland, Hawaii, Alaska, and Puerto Rico.
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Availability of Mariners
Another challenge to meeting DOD sealift requirements is ensuring
enough qualified U.S. merchant mariners are available to operate the
surge fleet of 61 Government-owned cargo ships in times of need. The
mariners required to operate these vessels are civilians regularly
employed on board U.S.-flag, oceangoing commercial ships. I am
concerned about the availability of a sufficient number of qualified
mariners with the necessary endorsements to operate large ships
(unlimited horsepower and unlimited tonnage) and to sustain a prolonged
sealift mobilization beyond the first four to six months. While the
entire RRF has not been fully activated at one time, there have been
more than 600 activations since 1990, over half of which were for
reasons other than readiness testing. We seek to ensure there are
enough qualified U.S. mariners to safely crew our Government vessels
when the need arise.
The FY 2017 National Defense Authorization Act (FY 2017 NDAA)
directed MARAD to convene a working group consisting of agency and
maritime industry representatives to assess the size of the pool of
qualified U.S.-citizen mariners necessary to crew the U.S.-flag fleet
in times of national emergency, and recommend actions to enhance the
availability and quality of mariner data. MARAD provided the working
group's conclusions to Congress in January 2018. In it, the working
group estimated a shortfall of 1,800 qualified mariners in the event of
a full, prolonged mobilization, but this estimate assumed a ``best
case'' that all qualified mariners would voluntarily report when called
upon, and that there will be no ship losses or personnel casualties.
Given this assessment, I am working closely with USTRANSCOM, MSC, the
USCG, and the commercial maritime industry to develop actions to
identify and maintain an adequate number of trained mariners, and
ensure they receive training unique to operating in contested waters.
Additionally, we are working to better track credentialed mariners who
are not sailing, but could serve if needed, and to develop tools to
count and understand the characteristics of fully qualified mariners
available to meet the Nation's commercial and sealift requirements at
any given time.
One opportunity to ensure qualified U.S. mariners are available is
continued support for the United States Merchant Marine Academy
(USMMA), and the state maritime academies (SMAs). MARAD provides
funding and oversight to Kings Point and the SMAs to produce highly
skilled and licensed officers for the U.S. Merchant Marine. These
institutions graduate most of the USCG-credentialed officers who hold
an unlimited tonnage or horsepower endorsement qualified to crew these
U.S.-flag ocean-going ships.
I will leave it to Rear Admiral Helis to discuss the Academy's
accomplishments and challenges, but I must say that I am proud of what
they have done. I have been particularly encouraged during my visits to
the Academy by the Midshipmen-driven, on-campus culture change program,
``Be KP (Kings Point).'' The Midshipmen have taken ownership of efforts
to change the climate at the Academy and are now leading this effort.
Progress is being made, but more work needs to be done as noted in the
recent DOT Office of Inspector General report on the USMMA's Sexual
Assault Prevention and Response Program. We appreciate the insight from
this report and are addressing the recommendations to continue
improving the Academy as a whole.
In addition to providing oversight of the USMMA, MARAD provides
funding to six SMAs \3\, which collectively graduate more than three-
fourths of the entry-level merchant marine officers annually. As part
of this support, MARAD loans training ships to SMAs and covers a
portion of those ships' maintenance and repair costs. In addition to
being used to train mariners, these vessels, which are part of the
National Defense Reserve Fleet (NDRF), are used to respond to national
disasters when requested by other Federal agencies. Most recently,
MARAD activated RRF and NDRF ships to support Federal relief activities
following Hurricanes Harvey, Irma, and Maria. During these deployments
MARAD vessels supplied citizens and first responders with housing,
meals, logistical support, and relief supplies, including delivering
critical Federal Aviation Administration replacement air navigation
equipment to the Virgin Islands. These vessels are aging and nearing
the end of their life cycles, with two of the vessels more than 50
years old. Ensuring the continued availability of these ships is a high
priority for MARAD. Congress recognized this need and provided $300
million in the FY 2018 Appropriations Act to fund the design and
construction of a new common school ship--the National Security Multi-
Mission Vessel.
---------------------------------------------------------------------------
\3\ The six SMAs are: California Maritime Academy in Vallejo, CA;
Great Lakes Maritime Academy in Traverse City, MI; Texas A&M Maritime
Academy in Galveston, TX; Maine Maritime Academy in Castine, ME;
Massachusetts Maritime Academy in Buzzards Bay, MA; and State
University of New York (SUNY) Maritime College in the Bronx, NY.
---------------------------------------------------------------------------
Port Infrastructure
Another challenge we face is the state of Our Nation's port
infrastructure. The ability of our ports to increase capacity and
handle cargo more efficiently is vital to the health of many domestic
industries. Freight volumes are projected to increase by 31 percent and
U.S. foreign trade will more than double between 2015 and
2045.[1] Without major improvements to multimodal
transportation infrastructure and technologies, congestion resulting
from greater volumes of freight could lead to growing delays and
failures in the supply chain that would reduce our quality of life.
There is great potential to improve the efficiency of this system by
increasing the efficiency of our ports, which are the interfaces
between water and land-based
---------------------------------------------------------------------------
\[1]\ DOT Bureau of Transportation Statistics, Freight Facts and
Figures 2017, Table 2-1.
---------------------------------------------------------------------------
MARAD is engaged with port communities to leverage existing DOT
financing programs such as TIFIA and RRIF, and grant programs such as
BUILD and INFRA, to increase Federal and non-Federal investment in port
infrastructure and first/last mile intermodal connectivity. MARAD is
also exploring ways to use our existing authorities to attract more
non-federal investment in port infrastructure. We are also leading the
way in identifying the critical challenges in port operations that
could be met by increased use of intelligent transportation system
technologies to interface more seamlessly between global and domestic
transportation systems. We do this work in partnerships with the
Federal Highways Administration's Intelligent Transportation System
Joint Program Office and the American Association of Port Authorities.
Finally, we are working to attract new investment in technologies to
more efficiently and safely integrate maritime cargo movement into the
overall transportation system.
Other MARAD Programs
In addition to meeting DOD sealift requirements, MARAD programs
support the environmentally sound disposal of obsolete Government-owned
vessels, innovation to address maritime energy and environmental
issues, activities to address infrastructure challenges at our ports
and on our inland rivers and waterways, and ship repair. Funding in the
FY 2018 Appropriations Act allows MARAD to capitalize on opportunities
in each of these areas as highlighted below.
MARAD is the ship disposal agent for Federal Government-owned
merchant-type vessels of 1,500 gross tons or greater. Currently, MARAD
has 11 obsolete vessels not yet under contract for disposal, which is a
historic low. The FY 2018 Appropriations Act provides $6 million for
the disposal of these vessels. MARAD is also responsible for continuing
the required protective storage activities for the Nuclear Ship (NS)
SAVANNAH until decommissioning and license termination are complete.
The FY 2018 Appropriations Act provides $110 million for the storage,
maintenance, and final decommissioning of the NS SAVANNAH.
The FY 2018 Appropriations Act provides $3 million for MARAD's
Maritime Environmental and Technical Assistance (META) program. This
program supports applied research and development to facilitate
environmental compliance and enhance sustainability in the marine
industry. Leveraging resources with the private sector and other
government agencies, META's goal is to identify economically
sustainable solutions to emerging maritime environmental challenges.
MARAD received $5 million in funding in FY 2017 for the America's
Marine Highway Program. The goal of this program is to develop and
expand services to move freight along our waterways and coastlines and
to relieve land-side congestion. Given the immense economic and
environmental benefits of increased waterborne transportation, serious
implementation of this program represents an opportunity to
significantly enhance American supply-chain competitiveness. MARAD is
currently reviewing project applications and expects to announce the FY
2017 grant awards later this Spring. In addition, the FY 2018
Appropriations Act included $7 million in grant funding for the
program. We expect to issue a Notice of Funding Opportunity for those
grant funds soon.
The Small Shipyard Grant program provides funds to support capital
improvements and training at small U.S. shipyards. Small shipyards play
a significant role in our shipbuilding and repair activity. The grants
support modernization that allow U.S. shipyards to compete more
effectively in the global market place. The FY 2018 Appropriations Act
provides $20 million in funding for the grant program. MARAD published
a Notice of Funding Opportunity on April 14, 2018, and DOT will award
grants by July 23, 2018.
Lastly, the Maritime Administration is an active member of the U.S.
Committee on the Marine Transportation System (CMTS). In August 2017, I
was appointed by the Secretary to Chair the subcabinet Coordinating
Board for one year. The CMTS is an interagency forum through which 25-
plus Federal agencies and offices collectively address challenges of
the marine transportation system. In October 2017, Secretary Chao
approved the National Strategy on the Marine Transportation System:
Channeling the Maritime Advantage. The interagency members, which also
includes the Saint Lawrence Seaway Development Corporation, U.S. Coast
Guard, U.S. Army Corps of Engineers, the National Oceanic and
Atmospheric Administration, and Federal Maritime Commission, to name a
few, is addressing five areas of focus in the Strategy for system
performance, navigation safety, maritime security, energy innovation,
and infrastructure investment.
In addition to managing the programs discussed above, MARAD is
reviewing recommendations made in a November 2017 National Academy of
Public Administration (NAPA) report on the agency. MARAD requested this
assessment from NAPA to provide a review of the agency's programs and
offer recommendations for improving the alignment of activities to
enhance performance and meet MARAD's mission to foster, promote, and
develop the maritime industry of the United States. In response to
recommendations, MARAD is conducting an internal business process
review to ensure MARAD's mission is clear and supports the
Administration's policy goals.
I appreciate this Subcommittee's continued support for the U.S.
Merchant Marine and look forward to working with you to address the
challenges facing the U.S. maritime industry and take advantage of
opportunities to enhance and improve the U.S. maritime transportation
system. I am happy to respond to any questions you may have.
Senator Fischer. Thank you, Admiral.
Next we have Admiral Helis, the Superintendent at the
Merchant Marine Academy.
Welcome, sir.
STATEMENT OF REAR ADMIRAL JAMES HELIS,
U.S. MARITIME SERVICE, SUPERINTENDENT,
U.S. MERCHANT MARINE ACADEMY
Mr. Helis. Thank you, Senator. Good afternoon, Chairwoman
Fischer, Ranking Member Peters, and members of the
Subcommittee. I appreciate the opportunity to provide an update
on the U.S. Merchant Marine Academy and the progress we've made
since I testified last year.
First, I'm pleased to say that the Middle States Commission
on Higher Education fully reaccredited the Academy in November
2017. I am proud of the commitment and efforts shown by our
faculty, staff, and midshipmen in achieving this goal in a
short period of time. It speaks to the dedication of the
Academy community that so many worked so hard to address the
Middle States Commission's concerns.
We are building on this progress as we develop the
Academy's 2018 to 2023 strategic plan. Beginning in September
2017, we received input from over 700 individuals, including
midshipmen, faculty, staff, and other stakeholders. In March,
we hosted over 160 midshipmen, faculty, staff, and
representatives of the maritime industry, the Department of
Defense, alumni, and parents at a planning summit. We expect to
finalize and publish the plan before our June graduation.
I'm also pleased to report that as of April 5, the Maritime
Administration has certified 17 eligible commercial operators
to host midshipmen for Sea Year training. Sea days available to
midshipmen on commercial vessels have returned to pre-stand-
down levels.
We are implementing requirements set forth in the Fiscal
Year 2018 National Defense Authorization Act, including
successfully testing global satellite communication devices for
midshipmen at sea. We are now in the process of procuring
sufficient devices to equip all midshipmen by the end of 2018,
giving them the ability to report any incidents during Sea
Year.
We also worked with the Ship Operations Cooperative Program
and Trade Association to develop industry standard sexual
assault and sexual harassment prevention and response training,
training which is now also required for all midshipmen before
they start Sea Year and is available to all commercial
operators to train crew members. Our staff has also begun
visiting midshipmen who are training on commercial vessels. We
continue to survey the midshipmen when they return to campus
and assess their responses to see how we can improve.
I want to reassert that I am fully committed to eliminating
all incidents of sexual assault and harassment on our campus.
We are doing this with a focus on midshipmen safety and
improving the Academy's culture and climate to ensure that
victims are comfortable and confident in reporting all
incidents. The past year has seen an increase in reports of
sexual assault. While that could reflect an increase in
incidents, we think it more accurately reflects a greater
confidence by victims to file reports and expect that they will
be treated with dignity and respect and the Academy will
swiftly and appropriately respond to their reports.
We've continued to build on our Sexual Assault Prevention
and Response Program, expanding training for our midshipmen,
faculty, and staff and updating procedures for handling
reports. The program office now has a sexual assault response
coordinator, a Sea Year coordinator, and a victim advocate
prevention educator. A second victim advocate prevention
educator has been identified and should begin work this summer.
A new contract with the Rape Assault Incest National Network,
RAINN, will provide a worldwide, 24/7 hotline that midshipmen
can call and access a host of resources. This service comes
online in May.
As the Department of Transportation Inspector General's
report shows, there is still more work to be done. We're
working to implement new procedures mandated by DOT for
validating reports and improving the communication of policies
to stakeholders.
Sexual assault is a symptom of a culture that tolerates it
and doesn't want to accept it as a problem. We're working to
reverse that by creating a culture of zero tolerance with
respect for differences, inclusiveness, and empathy for victims
of all forms of harassment. The Academy's Be KP campaign, for
instance, is a campus-wide effort led by midshipmen and with
full support of faculty and staff to instill the Academy's core
values of respect, honor, and service.
These are just some of the ways we intend to continue to
build a campus where everyone is safe, valued, and respected
and has the opportunity to reach their full potential.
Thank you for inviting me today to testify. I appreciate
your interest and continued support for the Academy, and I'm
happy to answer any questions you may have.
[The prepared statement of Mr. Helis follows:]
Prepared Statement of Rear Admiral James Helis, U.S. Maritime Service,
Superintendent, U.S. Merchant Marine Academy
Good afternoon, Chairwoman Fischer, Ranking Member Peters and
members of the Subcommittee. Thank you for the opportunity to update
you on the U.S. Merchant Marine Academy (USMMA or Academy) and
highlight accomplishments made since I appeared before you last year.
First, I am pleased to say that the Middle States Commission on
Higher Education (MSCHE) fully reaccredited the Academy in November
2017. I am proud of the commitment and effort shown by our faculty,
staff, and Midshipmen in achieving this goal in a short period of time.
It speaks to the dedication of the Academy community that so many
worked so hard to address MSCHE's concerns.
We are building on this progress as we develop the Academy's 2018-
2023 Strategic Plan. This March, we invited 161 representatives of the
maritime industry, the Department of Defense, alumni, parents,
Midshipmen, faculty, and staff to provide input on the plan. In
addition, Academy staff solicited input from more than 700 stakeholders
over the past few months. Our planning discussions are ongoing and we
plan to have a final plan by graduation in June.
In June 2016, the Department paused Sea Yea training on commercial
vessels. Over the past year, the Academy restored Sea Year training on
commercial vessels, and reestablished the mix of Midshipmen who
completed Sea Year on commercial and Government vessels to pre-stand
down levels. As of April 5, 2018, the Maritime Administration (MARAD)
certified 17 commercial operators as eligible to host Midshipmen for
Sea Year training.
We have been working hard to implement requirements established in
the Fiscal Year 2018 National Defense Authorization Act (FY 2018 NDAA),
P.L. 115-91, including testing global satellite communication devices
for Midshipmen at sea. Those tests were successful and we are beginning
to procure sufficient devices to equip all Midshipmen. MARAD and the
Academy also worked with the Ship Operations Cooperative Program
(SOCP), an organization with members from across the maritime industry,
to develop industry-standard sexual assault and sexual harassment
prevention and response training. This training is required for all
Midshipmen prior to starting Sea Year and is available to all
commercial operators. As required by the FY 2018 NDAA, Academy staff
has begun visiting commercial vessels hosting Midshipmen during Sea
Year to ensure compliance MARAD Sea Year eligibility requirements. We
have also surveyed Midshipmen returning from Sea Year in November 2017
and March 2018 and are analyzing these results to determine where
further improvements can be made.
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. Over the past year, we have seen an increase in reports of
sexual assault, with a total of 12 reports made. While this increase
could reflect an increase in the number of sexual assaults taking
place, it is more likely that it indicates greater confidence by
victims that reports will be responded to appropriately and therefore
more willingness by victims to make reports. The Office of People
Analytics (formerly the Defense Manpower Data Center) began the bi-
annual survey of Midshipmen in April 2018, which will be the basis for
the next annual report to Congress.
The Academy has continued to build on its Sexual Assault Prevention
and Response (SAPR) Program, established in 2012, by implementing
provisions of the FY 2018 NDAA, including expanding and improving
training requirements for Midshipmen, faculty, and staff; updating
procedures for handling reports of sexual harassment, dating violence,
domestic violence, sexual assault, or stalking; and refining a plan to
combat retaliation against Midshipmen who make reports. We have also
increased staffing of the SAPR Office, which now includes a SAPR
program manager/Sexual Assault Response Coordinator (SARC); a Sea Year
coordinator, who is an activated U.S. Navy Reserve Strategic Sealift
Officer and an Academy alumnus with commercial sailing experience; and
one Victim Advocate/Prevention Educator, with a second in the process
of being hired. The Academy also expects to hire an attorney shortly
who will be available to provide sexual assault and harassment legal
advice to victims. In addition, the Academy has five volunteer Victim
Advocates from the faculty trained and certified to receive restricted
and unrestricted reports of sexual assault. The Academy has also
completed a contract with the Rape Assault Incest National Network
(RAINN) to establish and operate a 24/7 worldwide hotline with access
to worldwide resources, similar to the Department of Defense Safe
Helpline. We expect Midshipmen to have phone, text, and internet-based
access to RAINN in May 2018.
While the Academy has made progress in developing its SAPR Program,
we know there is more work to be done. The recent Department of
Transportation Office of Inspector General (DOT IG) report on the
Academy's SAPR Program highlights gaps in prevention sexual assault and
sexual harassment, as well as processes for evaluating the
effectiveness of the program. The Academy has concurred with the ten
recommendations made by the DOT IG to improve the program and is acting
to address the recommendations. For example, the Academy is
implementing a procedure for validating the Academy's data on reported
sexual assault and sexual harassment incidents, which we expect to have
finalized very soon. In addition, the Academy is working to improve
communication of policies and procedures to all Academy stakeholders.
The Academy has also been focused on addressing the culture at the
Academy regarding sexual assault and harassment. The LMI study
completed in 2016 identified challenges in Academy culture in terms of
inclusiveness, respect for differences, and empathy for victims of
sexual assault and all forms of harassment. Sexual assault is a symptom
of a culture that tolerates it and does not want to acknowledge or
accept it as a problem. Tolerance can arise from peer pressure not to
``get someone in trouble'' and an absence of inclusiveness that signals
a tolerance of these behaviors. This is a core issue that we must
address. The entire USMMA community must have zero tolerance for sexual
assault and sexual harassment, retaliation, bullying, hazing, coercion,
victim blaming, and alcohol misuse/abuse. To begin, we have launched
the ``Be KP'' campaign, which is a campus-wide effort led by
Midshipmen, with support from faculty and staff, to focus on Academy
values, enhance pride, and build a campus climate in which each
individual is valued and has the opportunity to reach their fullest
potential. Our approach is to re-emphasize the Academy's core values--
Respect, Honor, Service--with the goal of eliminating signals of
intolerance that are enablers for those who commit sexual assault and
barriers to reporting for victims.
As we look to the future, there are positive trends at the Academy
that we intend to build upon. Over the past few years, the quality and
diversity of incoming classes has improved and we expect to see
continued progress in this area. We are also making great strides in
improving campus facilities. We have completed construction and
outfitting of Zero Deck of the Midshipmen barracks to include
additional fitness rooms, baggage storage for Midshipmen during Sea
Year, a recreation center, and club storage and meeting places. The
Academy's Wi-Fi network has been expanded to the barracks and new
furniture has been installed in two of them. Additional surveillance
cameras have been installed primarily in the barracks, the security
command center has been upgraded, and improvements have been made
across campus on drainage and paving. Thanks to a generous gift from
the Academy Alumni Foundation, the gym floor has been refurbished. We
have also replaced equipment in one of the gym's weight rooms. Looking
ahead, funding provided in the recently passed FY 2018 Consolidated
Appropriations Act, P.L. 115-141 will allow facilities improvements to
continue, with $45 million in funding for capital improvements and $7
million for facilities maintenance, repair, and equipment. These
increases will enable us among other things to accelerate the timeline
to renovate and upgrade our Midshipmen health service and athletic
facilities, enhance campus lighting and vehicle access control, and
continue work to repair the sea wall, roads, and parking areas on
campus.
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.
Senator Fischer. Thank you, Admiral.
Next we have Craig Middlebrook, who is the Deputy
Administrator of Saint Lawrence Seaway Development Corporation.
Welcome, sir.
STATEMENT OF CRAIG H. MIDDLEBROOK, DEPUTY
ADMINISTRATOR, SAINT LAWRENCE SEAWAY DEVELOPMENT
CORPORATION, U.S. DEPARTMENT OF TRANSPORTATION
Mr. Middlebrook. Thank you. Chairwoman Fischer, Ranking
Member Peters, members of the Subcommittee, thank you for the
opportunity to testify today on the activities of the Saint
Lawrence Seaway Development Corporation. It is an honor to
represent the corporation and to appear today before the
Subcommittee, and I would ask that my written statement be
admitted into the record.
The SLSDC is a wholly owned government corporation within
the U.S. Department of Transportation. It has an enacted Fiscal
Year 2018 budget of $40 million, which is appropriated
primarily from the user fee-based Harbor Maintenance Trust
Fund. Our mission is to operate and maintain the U.S.
infrastructure and waters of the Saint Lawrence Seaway while
performing trade and economic development activities to
increase the utilization of the Great Lakes Saint Lawrence
Seaway system.
The SLSDC operates and maintains the two U.S. locks in
Massena, New York, and controls commercial vessel traffic in
U.S. waters of the Saint Lawrence River and Lake Ontario. Since
the Seaway opened in 1959, the SLSDC has partnered with Canada
and the Saint Lawrence Seaway Management Corporation to
accomplish its mission.
Since 1959, nearly 2.9 billion tons of cargo has transited
the Seaway, including grain, iron ore, project cargos, and
other bulk commodities. During the 2017 navigation season, the
Seaway saw a 9 percent increase in overall commercial traffic,
including a 25 percent increase in U.S. exports to foreign
markets.
A ship transiting the Seaway crosses the international
border 27 times. Because of this geographic fact, the U.S. and
Canada created a bi-national approach to governing the Seaway.
It was and remains a bold, optimistic, unique, and successful
partnership. The Saint Lawrence Seaway directly serves an
eight-state, two-province region that accounts for one-quarter
of the U.S. gross domestic product, one-half of North America's
manufacturing and services industries, and is home to nearly
one-quarter of the continent's population.
The Great Lakes region is the world's third largest economy
if the eight states and two provinces were considered as one
economy, with an annual economic output of nearly $6 trillion.
Virtually every type of bulk and general cargo commodity moves
through the Great Lakes Seaway system. A 2011 economic impact
study of the system concluded that maritime commerce sustains
annually 227,000 U.S. and Canadian jobs, $35 billion in
transportation related business revenue, $14 billion in
personal income, and $5 billion in Federal, state, provincial,
and local taxes. An updated economic impact study is currently
being completed, and new data are expected to be released early
this summer, and we will provide the Committee and subcommittee
with that information.
The Saint Lawrence Seaway is one of the world's safest
waterways, and that safety record continues to improve. The
SLSDC has consistently maintained a 99 percent or better
reliability rate for its locks. Our global customers rely on
the Seaway and its exceptional record of safety, efficiency,
and reliability.
Along with the U.S. Coast Guard, Transport Canada, and the
Canadian Seaway, the SLSDC ensures strict ballast water
management efforts to prevent any new introductions of aquatic
invasive species via commercial vessels entering the Seaway.
Since 2009, 100 percent of international vessels entering the
Seaway have received a ballast water management exam. The
Seaway's ballast water inspection program is recognized as a
key factor in preventing the establishment of any new invasive
species through ballast water in the Great Lakes since 2006,
the longest such period of non-detection on record.
Congress authorized and began funding the Seaway's Asset
Renewal Program, or, as we call it, ARP, in fiscal year 2009,
and we provide Congress with an annual ARP progress report
every year. Under the ARP program, the SLSDC has obligated $139
million on 48 separate projects. In Fiscal Year 2017, the SLSDC
obligated $27.9 million on 11 ARP projects, including $18.1
million to replace the SLSDC's 60-year-old tug and $8.1 million
for construction work on the new cutting-edge, hands-free
mooring technology.
The Seaway's list of cutting-edge technologies implemented
over the years is impressive. Currently, we and the Canadians
are studying how to enhance our vessel traffic management
system for the age of big data and algorithms. This technology
could significantly enhance voyage planning and traffic
management throughout the Great Lakes.
The SLSDC's enabling statute also provided general
authority to undertake trade and economic development
activities, and, to that end, we work to increase commercial
trade through the Seaway and increase maritime-related jobs in
the eight Great Lake states.
SLSDC activities in the budget request support the
Secretary's priorities of safety, infrastructure, innovation,
and mission efficiency. The Fiscal Year 2019 request level
supports the SLSDC's core mission of serving the U.S.
intermodal and international transportation system by operating
and maintaining a safe, reliable, efficient, and competitive
deep-draft waterway.
The Fiscal Year 2019 budget request also highlighted an
administration proposal to examine the feasibility of
privatizing or commercializing U.S. Seaway operations currently
managed by the SLSDC. The Canadian Federal Government
commercialized Canadian Seaway operations in 1998.
Next year, 2019, will mark the Seaway's 60th anniversary.
For 59 years, the Seaway has been a model of bi-national
partnership and one of the safest, most innovative, and
reliable transportation routes in the world. With the
investments being made in the Seaway by the U.S. and Canada
today, it will remain so for many years to come.
Thank you again for this opportunity to appear before you
today, and I am glad to answer any questions that the members
of the Subcommittee may have.
Thank you.
[The prepared statement of Mr. Middlebrook follows:]
Prepared Statement of Craig H. Middlebrook, Deputy Administrator,
Saint Lawrence Seaway Development Corporation, U.S. Department of
Transportation
Chairman Fischer, Ranking Member Peters, Members of the
Subcommittee, thank you for the opportunity to testify on the
activities of the Saint Lawrence Seaway Development Corporation
(SLSDC). It is an honor to represent the Corporation and to appear
today before the Subcommittee.
The SLSDC is a wholly owned government corporation within the U.S.
Department of Transportation with an enacted FY 2018 budget of $40
million. The SLSDC's annual funding is appropriated primarily from the
user fee-based Harbor Maintenance Trust Fund, not from charging Seaway
tolls to commercial vessels. The SLSDC's mission is to operate and
maintain the U.S. infrastructure and waters of the St. Lawrence Seaway,
while performing trade and economic development activities designed to
enhance the utilization of the Great Lakes St. Lawrence Seaway System.
The SLSDC is primarily responsible for maintaining and operating the
two U.S. Seaway locks located in Massena, New York, and controlling
commercial vessel traffic in areas of the St. Lawrence River and Lake
Ontario. Since the opening of the St. Lawrence Seaway in 1959, the
SLSDC has directly served the marine transportation industries by
providing a safe, reliable, and efficient deep-draft international
waterway, in cooperation with our Canadian counterpart, the St.
Lawrence Seaway Management Corporation (SLSMC).
Over the last 59 navigation seasons, nearly 2.9 billion tons of
cargo has transited the St. Lawrence Seaway, including grain, iron ore,
iron and steel, project cargoes, and other raw and bulk commodities.
During the 2017 navigation season, the Seaway enjoyed a 9 percent
increase in commercial traffic, including a 25 percent increase in U.S.
exports to foreign markets.
A ship entering the St. Lawrence Seaway at Montreal, Canada, and
transiting to Lake Erie crosses the international border 27 times while
passing through the St. Lawrence Seaway's 15 locks (2 U.S. and 13
Canadian). As a consequence of this geographic fact, when constructing
the Seaway in 1954, the U.S. and Canada created a binational governance
approach for the Seaway through an exchange of diplomatic notes,
constituting a binding international agreement between the countries.
It was and remains a bold, optimistic, and unique governance approach;
all other U.S. inland waterways are operated and maintained directly
either by the U.S. Army Corps of Engineers or the U.S. Coast Guard. Due
to the geography of the St. Lawrence River and the importance of the
sovereignty issues involved, the U.S. and Canadian Governments
established a binational framework of civilian Federal oversight and
control of this international waterway, which today is administered by
the SLSDC and the Canadian SLSMC.
To carry out its mission, the SLSDC possesses legal authorities
that distinguish it from other operating modes at the Department of
Transportation and from most other Executive Branch agencies. The
Wiley-Dondero Act of 1954 (Seaway Act), which created, and permanently
authorized the SLSDC, incorporated authorities that were first put into
law through the Government Corporation Control Act of 1945. The SLSDC
was created as a corporation to manage this public infrastructure asset
and provide a direct service to customers--moving ships safely and
efficiently through a binational waterway. The succinct and efficient
nature of the Corporation's enabling statute allows sufficient
flexibility to manage its operations like a business. Some of the
distinguishing attributes include the ability to make and carry out
contracts or agreements (MOUs) as necessary to conduct business as well
as the ability to acquire real and personal property and sell, lease,
or dispose of such property. Together with its mission of providing 24/
7 transportation services, these legal authorities help promote a
culture within the SLSDC of accountability and customer service.
The deep degree of trust and operational cross-border interaction
that has developed between the U.S. and Canadian Seaway entities over
the past 60 years helps maintain a transit experience for Seaway users
that is essentially seamless from a ship captain's perspective. It is a
remarkable achievement given the operational complexities and multiple
jurisdictions that impact that transit. This close binational
partnership is built on institutional and personal relationships, and
everyone at the SLSDC works hard to maintain and enhance these
relationships. The SLSDC's ability to achieve its mission is directly
dependent on its success in sustaining and improving stakeholder
interactions.
The St. Lawrence Seaway directly serves an eight-state, two-
province region that accounts for one-quarter of the U.S. gross
domestic product (GDP), one-half of North America's manufacturing and
services industries, and is home to nearly one-quarter of the
continent's population. The Great Lakes region is the world's third
largest economy with annual economic output of nearly $6 trillion.\1\
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\1\ BMO (Bank of Montreal) Capital Markets Economic Research, Great
Lakes-St. Lawrence Region Special Report, Spring 2017, page 1. Author,
Robert Kavcic, Senior Economist.
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Annual commerce on the Great Lakes Seaway System typically exceeds
180 million metric tons and serves U.S. miners, farmers, factory
workers, and commercial interests from the Great Lakes region.
Virtually every type of bulk and general cargo commodity moves on the
Great Lakes Seaway System, including iron ore for the U.S. steel
industry; limestone for construction and steel industries; coal for
power generation and steel production; grain exports from U.S. farms;
general cargo such as iron and steel products and heavy machinery; and
cement, salt, and stone aggregates for agriculture and industry.
Maritime commerce on the Great Lakes Seaway System provides
shippers with nearly $4 billion in annual cost savings compared to the
next least expensive mode of transportation.\2\ The waterway also
produces significant economic benefits to the Great Lakes region. An
economic impact study completed in 2011 concluded that maritime
commerce on the Great Lakes Seaway System sustains 227,000 U.S. and
Canadian jobs, $35 billion in transportation-related business revenue,
$14 billion in personal income, and $5 billion in federal, state,
provincial, and local taxes each year. An updated economic impact study
is currently being completed and new data is expected to be released by
early summer. The 2011 study significantly raised awareness about the
importance of the Great Lakes Seaway System and this updated report
will likely be equally impactful.
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\2\ U.S. Army Corps of Engineers, Great Lakes Navigation System:
Economic Strength to the Nation, January, 2009
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Safety/Reliability/Accountability
The continued safety and reliability of our waterway is the
foundation upon which we can promote and accommodate increases in
maritime cargo. The St. Lawrence Seaway is already one of the world's
safest waterways and that safety record continues to improve. Over the
last 20 years, the average number of vessel incidents in the Seaway has
decreased significantly. An incident is defined as a situation that
triggers an on-board inspection by one of the Seaway inspectors. It
could include on board injuries and vessel damage. From 1996-2006, the
average number of incidents was 19 per year. Over the next 11 years,
from 2007 through 2017, the average number of incidents declined to
only 6 per year. Despite the harsh weather conditions during this past
year's closing period, 2017 was one of the safest Seaway navigation
seasons on record with just 4 vessel incidents in the U.S. sector
during the 298-day season. This positive development can be attributed
to several factors including the implementation of a consolidated U.S.-
Canadian Enhanced Ship Inspection (ESI) Program in Montreal in 1997,
the development of the Seaway's Automatic Identification System (AIS)
vessel traffic management technology, exceptionally skilled SLSDC lock
operations and maintenance staff as well as professionals, including
pilots and vessel officers and crews, and a major fleet renewal program
implemented by many of the Seaway's customers.
In addition, since the Seaway's opening in 1959, the SLSDC has
consistently maintained a 99 percent reliability rate for its locks and
the U.S. sector of the waterway. The SLSDC calculates the reliability
rate by subtracting delays (weather, vessel, and lock-related) from the
total hours/minutes during the navigation season. The SLSDC manages the
tabulation of this rate in-house and is not dependent on contractor
data. This high mark of success is due primarily to the SLSDC's
efficient management and operations of the locks and control of vessel
traffic. Global customers from nearly 70 countries return each year to
use the Seaway because of the waterway's strong safety record,
efficient operations, and near-perfect reliability rate.
The Seaway also ensures strict ballast water management efforts to
prevent any new introductions of aquatic invasive species via
commercial vessels entering Seaway waters. In 2008, the SLSDC and
Canadian SLSMC implemented regulations jointly requiring all ships with
no ballast in their tanks to conduct saltwater flushing of the empty
ballast water tanks before arriving in the Seaway. The SLSDC, along
with the U.S. Coast Guard, Transport Canada, and the SLSMC, formed the
Ballast Water Working Group (BWWG) to enforce ballast water inspections
of all vessels to ensure these regulations are carried out. The BWWG's
inspection efforts are an SLSDC operational performance measurement and
an annual summary report documents the group's inspections and
findings. The report measures both the performance of the binational
inspection team in inspecting the ballast tanks of incoming ocean
vessels and the compliance by the oceangoing trade in meeting U.S. and
Canadian ballast water management requirements.
In both cases, the results of this year's report are outstanding.
In 2017, every ballast tank of every ocean vessel entering the Seaway
was assessed. Of these 8,350 tanks, only 68 registered low salinity,
which equates to a ship compliance rate of 99.2 percent. In those rare
instances where salinity levels do not meet the standard, the ballast
tanks are sealed and then re-inspected on the vessel's outbound journey
to ensure that the tank was not used on its voyage in the Great Lakes.
Since 2009, 100 percent of international vessels entering the Seaway
have received a ballast water management exam. The Great Lakes Seaway
System has one of the most stringent inspection regimes in world. The
effectiveness of the Seaway's ballast water inspection program has been
publicly credited as a key factor in preventing the discovery of
establishment of any new invasive species through ballast water in the
Great Lakes since 2006--the longest such period of non-detection on
record.
Infrastructure Modernization
The locks, channels, and accompanying infrastructure of the St.
Lawrence Seaway owned and maintained by the SLSDC are ``perpetual''
transportation assets that require periodic and regular capital
reinvestment in order to continue to operate safely, reliably, and
efficiently. In 2007, the U.S. Army Corps of Engineers completed a
binational assessment of the infrastructure needs of the Great Lakes
St. Lawrence Seaway System. That study laid foundational groundwork by
identifying the specific infrastructure rehabilitation and
modernization projects that were needed throughout the system. After 50
years of continuous operation with only minimal capital reinvestment,
Congress approved the authorization and funding for the Seaway's Asset
Renewal Program (ARP) beginning in FY 2009. Every penny of the ARP
program is accounted for and we provide Congress with an annual ARP
progress report. This program will enable the SLSDC to effectively
manage the Seaway's assets for the next 50 years.
The projects and equipment included in the ARP address various
needs for the two U.S. Seaway locks, the Seaway International Bridge,
maintenance dredging, operational systems, and Corporation facilities
and equipment. The start of the program marked the first time in the
Seaway's 50-year history that a coordinated effort to repair and
modernize the U.S. Seaway infrastructure had taken place.
During the ARP's first nine years (FY 2009-FY 2017), the SLSDC
obligated $139 million on 48 separate projects. Several ARP projects
involve implementation of new innovations and improved technologies for
the operation of the Seaway infrastructure, resulting in reduced
maintenance needs and operating costs to Seaway users. In FY 2017, the
SLSDC obligated $27.9 million on 11 ARP projects, including $18.1
million for the start of the SLSDC's tugboat replacement project and
$8.1 million for construction work for the Hands-Free-Mooring (HFM)
system installation at Snell Lock. These are two of our largest planned
capital and infrastructure projects, on which work continues in FY
2018.
The SLSDC's tugboat, the Robinson Bay, is 60 years old and is the
SLSDC's primary watercraft for emergency response, ice breaking
operations, navigation aid (buoy) placement/removal, and other
operational activities, including moving the SLSDC's 300-ton capacity
gatelifter crane barge. It is the only icebreaking asset stationed
full-time in the region, and the replacement tug will have even greater
icebreaking capabilities. Expenses incurred in maintaining the existing
tugboat have increased significantly in recent years. We anticipate
delivery of the new tug in the summer of 2019 and look forward to the
greater operational and cost saving efficiencies it will bring.
The Seaway's HFM project is the first use of this technology for an
inland waterway to safely transit commercial vessels through a lock
system. The innovative technology allows commercial ships to transit
safely and efficiently, while also enhancing workplace and operational
safety conditions. It is estimated that HFM technology will reduce lock
transit times by approximately seven minutes per lockage for each
vessel, which equates to 3-4 hours of potential time savings on a
roundtrip transit. HFM will be operational at all Seaway locks by the
end of next year (2019).
Innovation
The SLSDC is always looking to leverage technology to improve
system utilization. The list of cutting-edge technologies implemented,
or soon to be introduced by the Seaway is impressive. It includes the
Automatic Identification System (AIS), the Draft Information System
(DIS), and the Hands-Free-Mooring technology. Mandatory Global
Positioning System-based (GPS) Automatic Identification System (AIS)
carriage became effective on the St. Lawrence Seaway on March 31, 2003.
The Seaway became the first inland waterway in the western hemisphere
to implement an operational AIS vessel traffic services system. All
commercial vessels transiting in Seaway waters from Montreal to mid-
Lake Erie are capable of ship-to-ship, ship-to-shore, and shore-to-ship
communication under all weather conditions on a 24/7 basis.
A major enhancement to the AIS system occurred in July 2012 with
implementation of the Draft Information System (DIS). DIS is an onboard
technology, providing Seaway mariners with real-time information on
current and projected distances between a vessel's keel and the river
bottom using real-time, three-dimensional displays. The Seaway is the
first inland waterway in the world to implement this technology.
Vessels with DIS technology are permitted to sail at a draft of up to
three inches above the published maximum, which could allow for
transport of as much as 360 additional metric tons of cargo per voyage.
In addition to increasing the productivity and economic competitiveness
of the Seaway, AIS and DIS have greatly enhanced the safety and
efficiency of the waterway and have improved Great Lakes Seaway System
maritime security. By pairing these navigation technologies, precise
vessel traffic management has been enhanced more than ever, and ships
equipped with these technologies can travel the Seaway more safely and
with more cargo.
The SLSDC and Canadian SLSMC are currently assessing how to improve
and enhance our joint vessel traffic management system. We are studying
how to enhance our existing AIS real-time data to generate precise
arrival time calculations between a vessel's current location and
waypoints critical to the safety and efficiency of the Great Lakes
Seaway System. Ultimately, this technology could form the foundation of
a more comprehensive traffic management system that could enable
enhanced voyage planning and traffic management not only in the Seaway,
but throughout the entire Great Lakes. Although still in the `concept'
stage, this technology innovation has exciting possibilities for Great
Lakes Seaway System shipping.
Economic Development
The statute that created the SLSDC provided general authority for
the Corporation to undertake trade and economic development activities
and this is an important aspect of our mission. The SLSDC devotes
resources to trade and economic development activities aimed at
increasing commercial trade through the St. Lawrence Seaway and
improving economic conditions in the eight Great Lakes states. The
primary benefit is the stimulation of U.S. and Canadian port city
economies through increased maritime industry activity, including
services and employment to support maritime commerce. In 2015, the
SLSDC designated a Great Lakes Regional Representative who leads this
value-added service for the broad stakeholder community.
Initiative activities include facilitating new trade for Great
Lakes Seaway System ports, conducting trade research and analysis to
assist Great Lakes Seaway System stakeholders in identifying cargo
trends and new business, participating in joint marketing efforts with
our Canadian counterparts, promoting the Seaway System to prospective
customers, and assessing the economic impact of Great Lakes Seaway
shipping.
The SLSDC's trade and economic development activities were
instrumental in the launch of the first regularly scheduled
international liner service to a U.S. port on the Great Lakes since the
1970s. In 2014, the SLSDC joined the Port of Cleveland and the Dutch
carrier company, the Spliethoff Group, in announcing and promoting the
launch of the new Cleveland-Europe Express monthly liner service. It is
significant in that these vessels carry containers as well as high-
value cargoes into and out of the Lakes. The new service runs between
the Port of Cleveland and Antwerp, Belgium, via the St. Lawrence
Seaway. In 2015, the Spliethoff Group added a second monthly vessel to
the program. This year marks the fifth year of operations for this
service, and the Spliethoff fleet of vessels is making additional calls
at ports throughout the Great Lakes Seaway System while sustaining its
dedicated sailing schedule into Cleveland.
Working directly with Great Lakes ports, the SLSDC helps identify
ways to increase tonnage traffic in traditional Seaway cargoes as well
as in diversifying the types of cargo moving through their port. One
example is the Seaway's initiative on increasing U.S. grain exports
through the St. Lawrence Seaway system, which led to a 21 percent
increase in U.S. grain transiting the locks in the 2016 shipping
season. Overall, during the 2017 navigation season, U.S. exports moving
through the St. Lawrence Seaway to foreign markets increased 25
percent, as compared to 2016. In 2017, many U.S. Great Lakes ports
identified, developed, secured and promoted new initiatives within
their communities, providing new business opportunities that are
benefiting their local and regional economies. The Port of Milwaukee,
Wisconsin, is a prime example. Over the last several years, the Port,
in coordination with the SLSDC, has developed a close working
relationship with one of its private tenants, COFCO (formerly Nidera)
to find ways to increase Seaway-related grain exports. From 2008 to
2013, only 8 total vessels shipped export U.S. grain from the Port of
Milwaukee via the Seaway. Over the last four shipping seasons, however,
that number has increased to 40 total vessels, averaging 10 Seaway
vessels per year. As a result of these efforts, the Port of Milwaukee
and the SLSDC have been able to better utilize the Great Lakes as a
reliable maritime artery for commerce of Wisconsin agribusiness.
Likewise, the Port of Monroe, Michigan, is diversifying its cargo
traffic and more than doubled its international cargo tonnage in 2017.
Last year, the Port of Monroe handled the majority of components of
Michigan's largest construction project in 2017, the Arauco Fiberboard
Plant in Grayling, Michigan. The Port also constructed a new riverfront
dock in 2017. The new dock capabilities, together with its partnership
with Spliethoff to move project cargo, should provide for Seaway-
related tonnage increases this year.
Additionally, international cruising activity is increasing in the
Great Lakes. Two additional ships have been added to the inventory for
a total of eight cruise vessels that have itineraries in the Lakes, in
what will be the busiest cruise season since 2004. The increase in
inventory will offer no less than 85 separate cruises between May and
early November this year. The SLSDC continues to work with U.S. Customs
and Border Protection to find ways to streamline passenger processing
and bring more cruise vessels to more ports in the Great Lakes. Seaway
stakeholders and customers alike are realizing the benefits from a
modernizing vision of the Great Lakes and the added value the SLSDC and
Great Lakes ports are providing to their communities and to the region.
Challenges
Water Levels--Water flows and levels can significantly impact the
safe and efficient operation of navigation in the Seaway. In December
2016, the International Joint Commission (IJC), after concurrence by
the U.S. and Canadian Governments, adopted a new water level plan for
Lake Ontario and the St. Lawrence River, Plan 2014, which replaced the
plan in place since 1958. This plan is the successful result of many
years of extensive collaboration between and among the U.S. and
Canadian governments, the IJC, and other stakeholders who depend on the
economic as well as environmental health of Lake Ontario and the St.
Lawrence River. The SLSDC was an active participant in the process that
led to the adoption of Plan 2014. A part of the discussions that led to
Plan 2014, it was recommended that a seat on the Board of the
International Lake Ontario-St. Lawrence River Board be provided for
DOT/SLSDC. The Board manages water flows and levels on the St. Lawrence
River, and the ability for the SLSDC to participate as a Board member
would be extremely helpful to our operations. However, this has not yet
occurred. As we approach another season of anticipated high water
levels similar to last year, there could be significant impacts on
commercial shipping, as well as other stakeholders.
Pilotage--All international vessels entering the Great Lakes and
St. Lawrence Seaway System (GLSLS) are required by U.S. and Canadian
regulations to have a certified vessel pilot on board to assist the
vessel's captain in navigating the vessel while transiting the GLSLS.
The oversight of pilotage services is a state-regulated activity
everywhere in the U.S., except for the Great Lakes, where pilotage is
regulated by the U.S. Coast Guard Office of Great Lakes Pilotage
pursuant to the Great Lakes Pilotage Act of 1960. In addition to
overseeing the three U.S. pilot districts in the GLSLS, the U.S. Coast
Guard also establishes the rates that the U.S. pilots may charge for
the provision of their services to vessel owners. Changes in the rate
adjustment methodology have been controversial and have been met with
criticism, and litigation, from various U.S. and Canadian commercial
navigation stakeholders. The availability and cost of U.S. pilotage
services in the Great Lakes St. Lawrence Seaway System are crucial
components of the overall safety and economic competitiveness of the
System. It is essential that the availability of Great Lakes Seaway
System pilots be maintained in a manner that ensures safety while
promoting the competitiveness of the System.
FY 2019 Budget Request
For FY 2019, the President's Budget request includes an
appropriation from the Harbor Maintenance Trust Fund of $28.84 million
to fund the operations and maintenance of the U.S. portion of the St.
Lawrence Seaway as well as infrastructure-related projects included in
the Seaway's Asset Renewal Program (ARP). The request for the SLSDC's
Agency Operations program of $19.11 million will fund all non-ARP
activities and expenses, including all Corporation personnel
compensation and benefits for 144 FTEs. For the ARP program, the
request is for $9.73 million for 19 projects, including $5 million for
the completion of the ongoing tugboat replacement project and $2.5
million for the continuation of maintenance dredging in the U.S.
sections of the St. Lawrence River. SLSDC activities in the budget
request support the Secretary's priorities of safety, infrastructure,
innovation, and mission efficiency. At the FY 2019 request level, the
SLSDC will continue to perform its core mission of serving the U.S.
intermodal and international transportation system through the
operation and maintenance of a safe, reliable, efficient, and
competitive deep-draft waterway. The FY 2019 budget request also
highlighted an Administration proposal to examine the feasibility of
privatizing or commercializing U.S. Seaway operations currently managed
by the SLSDC. The Canadian Federal Government commercialized Canadian
Seaway operations in 1998, resulting in greater operational
efficiencies and enhanced customer service focus.
The SLSDC remains dedicated to safely and efficiently operating the
U.S. portion of the St. Lawrence Seaway, while also promoting the
economic benefits of the marine mode, attracting new cargoes to the
Seaway, and leveraging technology and innovation to enhance the
system's performance and safety. Next year, 2019, will mark the
Seaway's 60th Anniversary. For the past 59 years, the Seaway has been a
model of binational partnership, ensuring that this international
waterway is one of the safest, innovative, and reliable transportation
routes in the world. With the investments being made in the Seaway by
the U.S. and Canada, it will remain so for many years to come.
Thank you again for the opportunity to appear before you today. I
am glad to answer any questions from Members of the Subcommittee.
Senator Fischer. Thank you, Mr. Middlebrook.
Admiral Buzby, an important part of MARAD's work is
understanding the pool of credentialed and available mariners
for Sea Lift in times of war or national emergency. A recent
report by the Maritime Workforce Working Group recommended
replacing the U.S. Coast Guard's merchant mariner licensing and
documentation system with a modern database capable of
supporting high analytics so MARAD has a better understanding
of the mariners available.
Do you concur in that recommendation, and can you provide
any additional insight on how MARAD is working to improve its
understanding of mariner availability?
Mr. Buzby. Senator, thank you for the question, and the
short answer is yes. I do concur with that. When we were
researching to produce that report for Congress, we had a very
challenging time interfacing with the Coast Guard database. The
Coast Guard database does its mission extremely well, and
that's to keep track of merchant mariner documents.
But it's an older program, and it makes it extremely
difficult to try and mine useful information out of that in
terms of not so much how many documents there are but how many
people are attached to those documents. That information is
very difficult to ascertain as it's currently situated. So a
means to upgrade that program or at least have it interface
with our programs more easily would be a great assist going
forward.
Senator Fischer. Thank you. This next question is for both
Admiral Buzby and Admiral Helis.
Do you think that there are currently enough Federal and
commercial vessels eligible and available for Sea Year training
at the Academy? And is there an adequate variety of vessels
available for Sea Year training, such as tanker or ferry
operations?
Mr. Helis. Thank you, Senator. I'll start with that. I
would say in terms of sheer volume of vessels, first, we do not
have the number of vessels or companies that we did prior to
the stand-down, and we're continuing to work with the
commercial companies primarily through the MARAD Shipboard
Climate Compliance Team to encourage companies to apply so we
can increase the number of companies and the number of vessels
available. So we're continuing to work to increase the numbers.
But right now, today, we have an adequate number of vessels to
provide training for our midshipmen, and we are at about the
same ratio of time on commercial versus Federal vessels as we
were prior to the stand-down.
We have improved recently the diversity of training
platforms by adding tanker companies. We've brought in a cable
laying company, which adds to that. Ferries are still an issue
that we don't have, and I think the administrator can address
efforts that MARAD is having to bring ferry companies aboard.
Some other platforms, like ocean-going tugs, were from the
smaller companies. But, broadly, we do have enough vessels to
get the training. We have an array of platforms to cover most
of the major functions. But, again, we need to continue to
increase the pool of vessels available for midshipmen.
Mr. Buzby. I would concur. I believe that we have enough
vessels right now to execute our mission. We're giving our
midshipmen quality Sea Year experiences on U.S.-flag ships.
Would we like more? Absolutely, we'd like more, and we're
dedicated to working with the Maritime Ministry to bring more
companies onboard.
We've modified the criteria slightly to reduce the
administrative burden on becoming qualified. That immediately
opened up several companies who came onboard. It's just a
challenging time for them. Most of them are operating with
small staffs themselves. So getting through this process is a
bit of a challenge for some.
To the Admiral's point, we are sending members of my team
out to Washington state and Alaska state next week to qualify
those two ferry systems to bring midshipmen back onboard. So
we'll have a large number of new ships, ferries, to bring
midshipmen on board.
Senator Fischer. Thank you.
Chairman Khouri, the last 10 years have seen major
disruptions in the ocean carrier industry, such as the West
Coast ports dispute in 2014 and 2015 and the bankruptcy of
Hanjin Shipping in 2016. Can you talk about some of the lessons
learned from these events and trends? Is the ocean
transportation industry and the FMC prepared to address any
future disruptions, and, if so, how?
Mr. Khouri. Thank you. I don't want to try to say that the
prolonged labor dispute that went on in L.A. and Long Beach
starting in roughly late July-August 2014 and on into 2015 is a
unique situation. Labor unrest pops up on occasion. I would
say, in general, from my observations that labor harmony has
come to be more the norm rather than the stress right now.
The Hanjin--I'll come back to the labor piece in a minute.
The Hanjin bankruptcy--it's interesting. When a company goes
into bankruptcy, the ships don't go away. And over the last
year and a half or 2 years, a company from Korea that was
already in the bulk industry carrying business bought the
Hanjin ships out of bankruptcy--it's SM Lines--and just
announced last week that they are initiating new service with
that equipment that will be connecting China, Korea, Japan, and
the Pacific Northwest. If Senator Cantwell and her staff are
still here--they'll be calling on Seattle. So from an anti-
trust regulator's perspective, it's what's called a ``new
entrant,'' which makes us smile. So the business shows itself
to be resilient in that regard.
On one hand, Congress, when they did the 1984 Shipping Act,
labor issues and labor contracts, et cetera, are specifically
excluded by the Shipping Act from our jurisdiction. So it's
hard for me to really make too much of a comment in that regard
when it comes to labor.
In terms of congestion, in general, we did a survey with
all of our regional representatives. We do not have any port
congestion as we speak. But we recognize that it could come
back and raise its head again.
Where we're having problems right now, Chairman, is not at
the seaports, but we're finding problems in the inland legs of
container shipping. We just had complaints in Dallas, Chicago,
Detroit, where at the railhead end of shipments, there's a
shortage of truck drivers and there's a shortage of chassis,
and that American cargo owners are saying their equipment is
getting stuck--or their cargo is getting stuck in these inland
places in congestion.
So just last week, we issued letters of inquiry to a number
of the carriers to say, you know, ``What are you doing to solve
these things?'' And we're going to ask for a prompt response
from that. Those are the tools that we have to work with, so we
address it as promptly as we can when those things do arise.
Senator Fischer. Thank you, sir.
Senator Peters.
Senator Peters [presiding]. I think I'll defer to Senator
Wicker--you have not voted--so that you'll have a chance to ask
your questions, because I've already voted, so I can let you go
forward, and then I'll follow up.
STATEMENT OF HON. ROGER F. WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. That's very kind of you, and I do very much
appreciate that.
Mr. Chairman, I have a statement here to the Committee
signed by Christopher DeLacy on behalf of the Coalition For
More Efficient Ports dated today, and I'd like to ask that it
be admitted into the record at this point.
Senator Peters. No objection. It'll be entered.
Senator Wicker. Thank you so much.
[The information referred to follows:]
Prepared Statement from the Coalition for More Efficient Ports
Dear Chairman Fischer and Ranking Member Peters:
Thank you for holding this important hearing on the opportunities
and challenges facing maritime transportation. As you are aware, both
the Maritime Administration (MARAD) and the Federal Maritime Commission
(FMC) play a crucial role in ensuring our Nation's port infrastructure
is modernized to provide the United States with the opportunity to
compete in international trade. However, challenges exist that too
often prevent the types of infrastructure investment the United States
desperately needs and we believe MARAD and the FMC need additional
tools from Congress in order to fulfil their missions.
For MARAD, we believe a port specific infrastructure program at the
Department of Transportation (DOT) is essential. Although port
infrastructure is technically eligible under existing DOT programs such
as INFRA, TIGER, and TIFIA, no port specific infrastructure program
currently exists. One option the Subcommittee should consider is to
fund the Port Infrastructure Development Program, which was created in
the Fiscal Year 2010 National Defense Authorization (P.L. 111-84). This
legislation tasked the Secretary of Transportation, through the MARAD
Administrator, to establish a port infrastructure development program
for the improvement of port facilities. Accordingly, we urge the
Subcommittee to work with the Secretary and the MARAD Administrator on
developing a port specific infrastructure program.
For the FMC, we believe U.S. infrastructure needs must be a key
factor as the Commission works to ensure a competitive and reliable
international ocean transportation supply system that supports the U.S.
economy. It is no secret that ocean vessels continue to increase in
size in a way that accelerates the need for U.S. port infrastructure
upgrades. Accordingly, we urge the Subcommittee to work with the
Commission to ensure it has all the tools it needs to facilitate
infrastructure upgrades at U.S. ports.
Beyond today's hearing, as the Subcommittee works to help develop a
national strategy to make crucial investments in America's national
infrastructure, we urge the Subcommittee to be an advocate for
America's ports. Outdated infrastructure at our Nation's ports
threatens to interrupt the supply chain and ultimately the American
economy. This critical infrastructure challenge must be met by
increased public and private investment in U.S. ports.
As you are aware, ports play a vital role for our economy, serving
as the gateway to over 90 percent of America's trade. According to the
American Association of Port Authorities, during 2015, U.S. ports
supported 23 million jobs and generated more than $321 billion in tax
revenue. According to the Business Roundtable, underinvestment in ports
results in increased prices and lost economic opportunity--as much as
tens of billions of dollars every year.
In addition to their economic impact, U.S. ports play a strategic
role in our national defense and emergency preparedness. From Operation
Enduring Freedom to recovery operations after Hurricanes Harvey, Irma,
and Maria, America's ports help ensure the success of America's
military and emergency responders.
Unfortunately, traditional Federal infrastructure funding programs
are generally not comprehensive enough to support the size and scale of
the investments needed at U.S. ports. Most port infrastructure
investment is now made by private, state, and local sources--which
means that investments often lack the necessary strategic and targeted
approach that only the Federal Government can provide. This
Subcommittee has an opportunity to recalibrate U.S. infrastructure
policy to ensure the future success of U.S. ports in a way that is
commensurate with their economic and strategic importance.
Our industry has a long track record of leveraging public
investment with significant private dollars, and we stand ready to work
with the Subcommittee, MARAD, and the FMC to address America's
infrastructure needs.
Thank you for your leadership on maritime issues.
Sincerely,
Christopher DeLacy,
on behalf of the Coalition for More Efficient Ports.
Senator Wicker. Admiral Buzby, let me just quote a few
sentences from this letter from the Coalition For More
Efficient Ports. ``For MARAD, we believe a port-specific
infrastructure program at the Department of Transportation is
essential. We urge the Subcommittee to work with the Secretary
and the MARAD administrator on developing a port-specific
infrastructure program.'' They conclude on the second page of
this letter, ``Unfortunately, traditional Federal
infrastructure funding programs are generally not comprehensive
enough to support the size and scale of the investments needed
at U.S. ports.''
I'm told there's a backlog in current port infrastructure
projects. Is that true? And, clearly, you haven't had a chance
to look at this letter. But what do you think of it at first
blush, Admiral Buzby?
Mr. Buzby. Thank you, Senator, for the comment. We have no
shortage of good projects that come in every year to take
advantage of TIGER grants and INFRA grants that my office
handles from the port side, so we have to turn away many more
than we get to fund. So I would say in answer to that part of
the question there probably is a fairly large backlog of port
projects.
Obviously, our ports are our entryways to our economy. They
are critical to our economy functioning correctly, and they
have to function efficiently and effectively to do that. That
would suggest that we have increased emphasis in that area
going forward, especially as many of our larger ports are aging
and our infrastructure is aging, and we need to keep that
efficient, especially with the larger ships coming in. We need
to kind of keep a very close focus on that.
Senator Wicker. Are they making a good point about the
traditional Federal infrastructure programs not being
comprehensive enough in size and scale?
Mr. Buzby. I can't say that that is specifically true or
specifically false. You know, just last year in TIGER IX that I
participated in, we granted, I want to say, three fairly large
projects, putting one in Baltimore just up the road that's
going to be quite extensive to expand--take the old Sparrows
Point site. So it's difficult to say conclusively. We still
have avenues that we provide funding to ports with. But, of
course, any time you have a specific program for a specific
purpose----
Senator Wicker. You wouldn't object to a port-specific
program, would you?
Mr. Buzby. I would not.
Senator Wicker. All right. Let me also just ask you with
regard to the Maritime Security Program--I think you agree this
program is important to our Nation's strategic Sea Lift
capability. Explain how the stipends received through the MSP
work. And if participating companies were to leave the MSP,
what negative effects could that have on the U.S. merchant
mariner workforce?
Mr. Buzby. Thank you, sir. The current program is
authorized for 60 vessels, with the programs authorized and
funded at $300 million. So that equates to about $5 million per
ship, per stipend, per year. That is to help offset the
differential, operating differential, of U.S. flag ships. In
comparison to a similar size on a similar run international
ship, it's between $5 million to $7 million per year.
Senator Wicker. Is that adequate?
Mr. Buzby. Right now, our operators say that that plus
cargo preference keeps them operational. If you were to take
away one or the other, our carriers tell us that they would not
be able to continue forward.
Senator Wicker. Thank you very much.
And, Mr. Chairman, thank you for your indulgence.
Senator Peters. Thank you, Senator.
Mr. Middlebrook, the Saint Lawrence Seaway directly serves
eight states, including my own in Michigan. But it's an asset,
certainly for the entire nation. Maritime commerce on the
Seaway system provides shippers with nearly $4 billion in
annual cost savings compared to the next least expensive mode
of transportation, and it sustains about $35 billion in
transportation-related business revenue.
Despite the Seaway's value and importance, many of the
locks and dams, as you are well aware, on the Seaway are in
need of major repairs, and I'd like to better understand the
Corporation's use of the Asset Renewable Program to help
identify and fund these needed improvements. So my question is:
Is it correct that the projects identified through the Asset
Renewable Program, which began in Fiscal Year 2009, were the
first efforts to repair and modernize the Seaway in its 50-year
history?
Mr. Middlebrook. Generally speaking, Senator, that is
correct. I think up until 2009, the Saint Lawrence Seaway
Development Corporation and its Canadian counterparts on their
side did basically as good a program as possible without major
funding to maintain the locks to the extent they could.
The Seaway locks and channels are renewable assets.
Traditionally, infrastructure of that nature has a working life
of about 50 years, and with the implementation and approval by
Congress of the Asset Renewable Program in 2009, we have been
able to invest almost $140 million, I think, or $139 million
over the last 9 years. This is the tenth year of the program.
And you're correct to identify that it's not only about
rehabilitation, so it's not only about repairing or bringing
back up to a current state of repairs of existing
infrastructure. It also includes modernization--and I can go
into some of those projects--but beginning with, in the early
part of the program, converting the mechanisms from mechanical
to hydraulic on the lock doors right up to our current
implementation of what really is cutting edge technology called
hands-free mooring, a new way to more safely and efficiently
lock vessels into the locks.
I would point out as well it's a bi-national system, and
the Canadians are doing their part as well, and they have been
for the last 10 years. They have invested well over half a
billion, over $500 million, in their locks. So when you add up
the collective investments by the U.S. and Canadian
governments, it's well over $700 million in that regard.
Senator Peters. Well, so that's what you've done since the
program began in 2009.
Mr. Middlebrook. Yes.
Senator Peters. What more needs to be done? What sort of
costs are we looking at? What are some of the major projects
that you're focused on?
Mr. Middlebrook. As I mentioned, right now, we're
implementing a new technology, hands-free mooring technology.
All the Canadian locks are now equipped with it, or 11 of their
13 locks are equipped. They're not going to equip the other two
for various reasons. We are in the process of completing that
project. We'll be finished by the end of this year at
Eisenhower Lock with the full installation of that technology,
and we'll be finished next year at our other lock, at Snell
Lock. That technology, very briefly, will radically change the
way that we can more efficiently and more safely lock vessels
through our locks.
We have floating plant--we have a 60-year-old tug which
installs the--aids the navigation at the beginning and at the
end of each season. We're currently in the process with this
funding to construct a new tug, down in Louisiana, to do that.
We also have responsibility for an international bridge
crossing, the Seaway International Bridge between Canada and
the United States, and we have used ARP funding in that project
as well. We're using it to completely rebuild our miter gate
lock doors, our maintenance dredging of our channels, and renew
our waterborne fleet, among other things.
Senator Peters. Great. Thank you. I'll have more questions
for you in the second round.
Senator Hassan.
STATEMENT OF HON. MAGGIE HASSAN,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Hassan. Thank you very much, Senator Peters.
Welcome and thank you to our panelists for being here this
afternoon, and for the work you do for our country.
Admiral Helis, I wanted to start with a question to you
about the Academy. Obviously, our Merchant Marine Academy
represents one of the most specialized educational institutions
in the country, and you've talked a little bit today about the
steps you've been taking to make it a safer place for all
students there. But the Academy's mission is to educate and
graduate licensed merchant mariners and leaders to serve in
America's marine transportation and defense roles. I believe
that you all should be doing everything you can to recruit
students from a broader and more representative pool of
applicants.
So I just wanted to start with getting some baseline
information. What percentage of the Merchant Marine Academy
students are women, and what percentage of the student body are
people of color?
Mr. Helis. Thank you for the question, Senator. Right now,
we're at about 16 percent women, and we're at about 24 percent
of other minorities. For this year's class coming in, as of
yesterday--and, again, the close date for accepting admissions
is 1 May--we've had 199 acceptances. We have 108 offers
remaining out. Of the 199 acceptances, 56 are women. That would
be a record number for women coming into a class in the
Academy. We expect that number to go up over the next week,
because of the 108 offers still out, a number of them are
women.
So we're expecting that this year, we should set a record
number for women. We did that in 2014, 2015, and 2016, 3 years
consecutively. In 2017, we saw a dip in the number of women.
We've seen it rebound to a higher level than we had before. So
we've made some very deliberate efforts to recruit a more
diverse student body.
One of the tools we have used are the Secretary of
Transportation's discretionary appointments, which are, by
statute, designed to increase the--to improve the demographic
balance at the Academy. We appreciate the Congress increasing
that number from 40 to 50 a year ago. That has enabled us to,
again, continue to recruit amongst women.
On the side of minorities, we are a little bit down from
last year. We have seen a dip this year, at least to date, in
the number of Hispanic applicants. We've seen an increase in
the number of Pacific Islander. We're about remaining level
with African American, Asian, and others. I don't have an
explanation for why we've dipped in Hispanics this year. It's
something that we're going to have to dig into as we go forth
in recruiting.
But, again, to roll back to five or 6 years ago, we were at
about 20 percent to 21 percent minorities. So we have--again,
2014, 2015, and 2016 were very good years for diversity in the
classes. Last year, we also saw a dip, but we're seeing
recovery this year. And it is something that we do put an
emphasis on--is that we have to have a more diverse regiment of
midshipmen, and we have to create a culture that is more
inclusive and more welcoming.
Senator Hassan. Well, I agree, and I also think, obviously,
when a whole subset of a potential workforce don't feel welcome
at a place or aren't recruited and encouraged, we're leaving
some great talent on the sidelines. So I thank you for your
efforts and would look forward to continuing to work with you
on the issue of more diversity at the Academy.
I had one other question for the panel, this one about the
Jones Act. For almost 100 years, since the Jones Act was passed
in 1920, ships that are owned and crewed by U.S. citizens have
transported the Nation's domestic cargo between U.S. ports to
U.S. island territories. What have been the primary benefits of
the Jones Act for U.S. workers in the maritime economy, and for
our national economy? And then I'd also like you just to
address what would happen to the industry, to mariners, and to
the U.S. maritime sector if Jones Act protections were removed
and foreign flag ships entered the domestic maritime trade?
We could just maybe start with you, Mr. Khouri, and move
down.
Mr. Khouri. Thank you. My relationship with Jones Act trade
comes very early in my career when I served on Jones Act ships.
From the Federal Maritime Commission's perspective, which I
represent today, we have no jurisdiction in that area, so it
would be difficult for me to really add or detract.
Senator Hassan. OK. Well, then, Mr. Buzby?
Mr. Buzby. Ma'am, I'm happy to speak to that. Words such as
vital, critical come immediately to mind. The 100 large Jones
Act ships that are sailing today form the basis for the
majority of U.S. mariners that we have under U.S. flag, so it's
absolutely critical not only to the ships themselves, which we
need, and to the mariner workforce, but to the ship repair and
construction industry that also supports our government ship
construction and repair. It's vital across the board. We've got
to have it.
Senator Hassan. Thank you. Admiral?
Mr. Helis. Senator, mine would go back to Senator Fischer's
earlier question. We extensively use Jones Act ships. We train
our midshipmen on U.S.-flag vessels. Were those to go out and
foreign flag--the number of training platforms we'd have
available would drop dramatically very quickly.
And, second, to the Administrator's point, one reason we
are able to attract high-quality students is because of the
opportunities they have for service as merchant marine
officers, service in the armed forces. If those jobs went away
in the Jones Act, it would be much more difficult to recruit
students because, frankly, the jobs for them would not be
there. Right now, the opportunities are a big attractor. So it
would have a definite impact on our ability to accomplish our
mission.
Senator Hassan. Thank you.
I know I'm a little over, Senator Peters, but could we ask
Mr. Middlebrook if he wants to chime in?
[Nonverbal response.]
Mr. Middlebrook. I would just say, Senator, that for the
Great Lakes Seaway system, the maritime industry is a three-
legged stool there, the three different fleets. It's the U.S.-
flag fleet, Canadian flag fleet, and international, and the
U.S.-flag fleet is a vital component of the economic benefits
that accrue to our country as well as to Canada.
Senator Hassan. Thank you very much.
And thank you for your indulgence, Senator Peters.
Senator Peters. Thank you.
Senator Fischer [presiding]. Thank you, gentlemen.
For the second round of questions, I'd like to ask this
question for Admiral Buzby and also Chairman Khouri. Port
congestion continues to affect many stakeholders utilizing our
ports, including ocean carriers, truckers, and shippers. Can
both of you talk about the work that MARAD and FMC are doing to
increase efficiencies at our ports?
Mr. Khouri. Thank you for the question. We are currently
working on a--let me go back. You mentioned it in your opening
statement, Chairman--Commissioner Dye's Port Efficiency Teams,
and I think that report was delivered in December of last year,
if I remember. And the observations that came out of that--I
mean, many, many stakeholders from every aspect of the maritime
industry participated in those teams, and the findings were
that--Admiral Buzby talked about the infrastructure and capital
issues there.
But his written testimony, I noticed, also includes
technology, and this was the findings in Commissioner Dye's
teams, is that technology is going to be the key to finding
more efficiencies through our ports, where when a ship is
loaded in Hong Kong or Shanghai, that information is
transferred over to the terminal where it's going to berth in
either L.A. or Long Beach, and they know where every single box
is on that ship of 12,000 boxes and the order it's going to
come off, and that the truckers can be queued in--it's this
kind of efficiencies that are going to have to be brought into
the system.
There's only so much money you can put into a fixed
footprint of acreage, and we're going to have to find ways to
get more efficiency out of the acreage that we have in these
ports. So we are currently working, as I mentioned in my
testimony, on a congestion effort. Commissioner Dye is, as we
speak today, is in China on a bilateral treaty mission. But
she's coming back directly to Los Angeles, where she's going to
be having meetings on these new congestion initiatives.
So those are the things that we're doing right now.
Obviously, we don't have grant-making authority. So with that,
I'll turn it over to the Admiral. Thank you.
Mr. Buzby. Madam Chairman, as we look at ports in the
Maritime Administration, the big thing we're really focusing on
going forth is, much as Chairman Khouri said, efficiencies.
Because of the age of a lot of our ports and the way they were
kind of kluged together over the years, the connectors from
those ports are wanting in many cases, and, by this, I mean the
rail connections, highway connections out of the ports, and,
more importantly, the waterway connections.
You know, the waterways--the barge traffic out of these
ports--is the only real area where we have more capacity left
to develop. We're getting kind of limited on our rail side and
the highway side. But to maximize all of those connectors out
of that port and, obviously, the access through channel depths,
that sort of thing, into the ports making that flow more
efficient is critical.
I was just down in Savannah not too long ago. They just
inaugurated an entirely new rail project down there to help
that flow in the future. It's a very large, growing port, and
it's an example of how they're looking forward.
Senator Fischer. Thank you.
Admiral Helis, I continue to be concerned about the
Academy's ability to respond to and also prevent sexual assault
and sexual harassment. I was particularly troubled by the
September 2016 alleged incident involving the Academy's soccer
team. As you know, this March, the Department of Transportation
Office of the Inspector General recently released a report
showing that of the 138 recommendations made to the Academy to
improve its efforts to respond and prevent sexual assault and
sexual harassment, only 62 of those recommendations have been
closed.
Could you please outline for the Committee how the Academy
will prioritize the implementation of these recommendations?
Mr. Helis. Thank you, Senator, for the question. I would go
back to my opening statement that we are fully committed to
eliminating sexual assault on the campus. We're continuing to
put more resources toward the issue in terms of increasing the
number of staff, increasing the focus that we're placing on the
issue.
As we look at the Office of the Inspector General's report,
at their recommendations, they're very broad in some ways, and
we are at this point going through a complete review of all of
our policies and procedures for sexual assault, both prevention
and response. Our intent there as we go through this review of
policies is to do a better job synchronizing them, making sure
that they're better aligned, and identifying any gaps in the
policies, as the OIG recommended, and to plug those as we do
the policy. So that is the first piece, is to make sure that
all of our policies are thoroughly aligned.
Among the recommendations, some of these, honestly, are
long-term recommendations, you know, making--a number of them
that are not closed out relate to changing the culture, and
that, candidly, is going to take years. But we have to put a
priority of effort to those, because that is going to be core
to addressing the problem, is changing the institutional
culture. So that has moved to the top of our list in terms of
priority, but it is one that's going to take a very long time
to implement.
Senator Fischer. Thank you, Admiral. We will continue to
monitor this situation and, hopefully, look for improvements to
happen that don't take years. Thank you.
Senator Peters.
[Nonverbal Response.]
Senator Fischer. Senator Peters is going to yield to
Senator Capito.
STATEMENT OF HON. SHELLEY MOORE CAPITO,
U.S. SENATOR FROM WEST VIRGINIA
Senator Capito. Thank you, Senator Peters and Senator
Fischer, for yielding to me. I'll take it.
I want to build on Senator Fischer's question to you,
Admiral Helis. You testified before the Committee about
preventing sexual assault and harassment. You mentioned in your
opening statement and also in your response that you're working
to make improvements and adhere to the recommendations.
I believe one of the recommendations was a position called
Sexual Assault Prevention and Response Program. That position
obviously would be charged with overseeing the responses, and
it also notes that you have an expected hiring of an attorney
for this. I would like to know what has taken so long? My
understanding is you haven't filled this position. Is there a
problem? Is it lack of applicants? Is it lack of interest? Or
is it--have you just sort of been dragging your feet on this?
Mr. Helis. Senator, for the second Victim Advocate
Prevention Educator for that--of the four positions in the
Sexual Assault Program Office, one is vacant, the second Victim
Advocate Prevention Educator. We had a failed search for that.
We did not get a successful applicant. We had to re-advertise,
and so that's been the cause for the delay. But we do have
someone identified that we expect to be on board this summer.
So that would fill----
Senator Capito. Will that make a full contingent?
Mr. Helis. That would make a full contingent of four in the
office. For the Victim Advocate Attorney, or the Special Victim
Advocate Attorney, this was a new position. There is no
analogous position within the Department of Transportation, and
so there was a time that we had to spend carefully crafting
what the position requirements would be, what the skill sets
would be, and we couldn't perfectly model it off of the
Department of Defense, because the special victim counsels in
DOD operate--because DOD operates under UCMJ, a different legal
structure. So it would have to be a slightly different
position.
The position is now advertised. I believe the ad closed
yesterday, so we should begin moving into the interview and
selection process shortly.
Senator Capito. Well, that's good news. You know, I think,
obviously, being made aware of the issue with the soccer team
and some of your actions in reaction to that, I think having
proper staff in place obviously--and if you're ever going to
get a full contingent or at least a partial contingent of
women--but understanding that these sexual assaults are gender
neutral--that it happens on both males and females--it is
extremely important.
You also have an opening for your new Academic Dean at the
Academy. Could you speak to us about that and what kind of
progress you're having there?
Mr. Buzby. Ma'am, if I could take on that one----
Senator Capito. Yes. Thank you.
Mr. Buzby. We are in the final throes of interviewing the
last three or four people. The next level of interview will
come to me. I will make that selection, and we expect to do
that within the next week or so.
Senator Capito. Is that a replacement of a long-term
Academic Dean or--I don't know the history behind that.
Mr. Buzby. We have currently, right now, a GS-15 Dean who's
been there. For the last several years, there has been a
rotational dean through there out of faculty. We're reinstating
this as an SES position, who will be a Dean and Provost. So
we're upping the stature of that position to have a more
focused set of responsibilities with faculty and the
curriculum.
Senator Capito. OK. Good.
My last question is on the Sea Year Program. I understand
it has been reinstated and that you have a number of companies
that have partnered on this. Can you elaborate on the progress
and the challenges in restoring that Sea Year Program?
Mr. Helis. Yes, Senator. Thank you for the question.
Currently, we have 17 companies that are certified as eligible
to host midshipmen during their Sea Year training. We have
restored the balance of days that midshipmen spend on
commercial vessels versus Federal vessels to that which we had
prior to the stand-down. So that has been normalized.
Lately, we have added companies to the program that have
brought tankers in, that have brought in cable-laying ships.
Within a few weeks, we hope to have a couple of ferries from
the West Coast aboard. So we are increasing the array of
different training platforms available to midshipmen.
We are not at the number of companies and vessels we had
prior to the stand-down. We're continuing to work to bring in
more companies, make more vessels available, but as of today,
we have an adequate number of vessels and diversity of vessels
to accomplish the mission of preparing our midshipmen to
present for their licensing exams.
Senator Capito. Thank you.
And thank you again for the time. Thank you.
Senator Fischer. Thank you, Senator Capito.
Senator Peters.
Senator Peters. Thank you, Madam Chair.
Mr. Middlebrook, in your testimony, you touched on pilotage
rates, an issue that I've heard from a number of constituents
about. The oversight of pilotage rates is a state regulated
activity everywhere in the United States except in the Great
Lakes, where for the last several years, the Coast Guard has
set rates. As you know, the Coast Guard's methodology has been
contentious and has also led to increased rates across the
Great Lakes.
Could you explain for the Committee how the availability
and cost of U.S. pilotage services affect the overall safety as
well as the economic competitiveness of the system?
Mr. Middlebrook. Certainly, Senator. Thank you for that
question. There are a few stakeholders who are involved with
maritime commerce on the Great Lakes Seaway System,
particularly as it deals with international commerce, that are
more important than pilots. As you know, every international
vessel that enters the Seaway, both the U.S. and Canadian
pilots board those vessels. They have the local knowledge of
the different waters to pilot them through. So, first and
foremost, they have a direct impact on the safety of the
system, and when you look historically at the excellent safety
record of the Great Lakes Seaway System, they play a very vital
role in maintaining that track record.
The system is also primarily a bulk commodity system, and
low value bulk commodities that move on that. So it doesn't
take much to impact economic decisions on how cargo will move,
whether it will move by mode or whether it will move
geographically. Balancing those two issues, availability of
pilots and the cost of pilots, is the balance that the Office
of Great Lakes Pilotage at the U.S. Coast Guard works to
maintain, and we rely on the U.S. Coast Guard to do that.
Several years ago, as you mentioned, they did modify their
existing methodology, rate-making methodology, and I think it
has taken a number of years for all parties concerned--the
Office of Great Lakes Pilotage, international carriers, the
industry, as well as the pilots--to work through that. Part of
the aim, as I understand it, of the methodology was to increase
the availability of pilots.
However, traffic through the Seaway, chronologically, over
the course of the year, is not uniform. There are times when
there are peak times, and there are times when there are
troughs. So, again, that is a very unique and difficult balance
that they have to maintain.
I think what's interesting in the approach, just to add to
that, is that there are different models out there about how
different entities oversee pilotage, and I would just--I would
provide--the Canadian example is it allows for more direct
negotiations between the service providers, the pilots, and the
service users, the commercial entities, to negotiate,
ultimately, the rates on that. The current system on our side--
parties provide the information to the Coast Guard, and the
Coast Guard acts as the rate-making regulator on that.
But, yes, you are correct. They have a vital impact on both
safety and on the competitiveness.
Senator Peters. Mr. Middlebrook, your testimony also noted
that the Corporation's annual funding comes primarily from the
Harbor Maintenance Trust Fund and not from charging tolls to
commercial vessels, yet the Administration's 2019 budget
indicates that, and it seems to be the case with most of the
Nation's infrastructure that the Administration is studying the
option of commercializing portions of the Seaway, presumably,
than charging tolls on the Seaway.
The budget doesn't define commercialization. But do you
believe tolls are under consideration at this time? Is that
something you're actively looking at?
Mr. Middlebrook. Well, the study hasn't gotten underway
yet, Senator, and the Administration's budget proposes a study
to include questions just like that that you pose, what would
be the best way to generate revenue to support the Seaway,
whether that's--one area of inquiry is privatization, where the
public assets would be sold or long-term leased to a private
entity or, in the commercialization case, the assets would
remain owned by the U.S. Government, but they would contract
with an entity to maintain those.
You're right. One of the very key questions is how to
effectively--and not to adversely affect the competitiveness of
the system--generate sufficient revenue for a new model to
operate and maintain the system. We are currently user fee-
based. It comes from an ad valorem tax, as you point out, on
the Harbor Maintenance Trust Fund, the Harbor Maintenance Tax.
We do charge some tolls on certain types of commercial traffic,
but, uniformly, it is based on the ad valorem tax of the Harbor
Maintenance Trust Fund.
That will certainly, I would imagine, be a very key
question on any study once it gets underway, is how do you
preserve the efficiency and the effectiveness of the current
wholly owned government corporation approach if you go down the
commercialization or privatization approach without damaging
the competitiveness of the system.
Senator Peters. My understanding is the study does not have
any congressional authorization. It's being paid for with
existing agency funding. Is that correct?
Mr. Middlebrook. Well, actually, in the Fiscal Year 2018
omnibus report, there was language that prevents the
expenditure of any Fiscal Year 2018 funds from undertaking a
new study such as this one. So right now, no funds are being
expended in that regard.
Senator Peters. So the study is not going forward, though?
Mr. Middlebrook. At this time, right now, it is not.
Senator Peters. In terms of the question of tolls, right
now, the Port of Norfolk or Long Beach--you don't pay a toll to
use those port facilities. Why should a vessel calling on
Detroit be put into a different economic position and probably
an economic disadvantage with tolls?
Mr. Middlebrook. Again, a very key question, because right
now, they do--the Harbor Maintenance Tax is a tax that's paid
by the shipper, not the carrier. In the case of tolls, that
would be the carrier that would pay that tax. There is a fee
associated with commerce, U.S. directed commerce in the Great
Lakes Seaway System. It just doesn't happen to be primarily
toll-based. The Canadians, on their part, still charge regular
tolls on the carriers that come through.
So the policy question becomes: How do you impose the
necessary costs to maintain that system? The last time that
there was a consideration of re-imposing tolls on the Seaway,
that very question that you pose came up: How do you find a way
between the Harbor Maintenance Trust Fund and potentially any
new tolls to make that work? And there were different
discussions, both in the discussion of the bill with the
Congress and the Administration, of waiving Harbor Maintenance
Tax proposal, or the tax on cargo, at that time. That,
ultimately, was not successful. Tolls were not re-imposed on
the U.S. Seaway. But you put your finger on a very important
question, not to have double costs imposed.
Senator Peters. Well, I hope a key part of your position is
to make sure that the Seaway is competitive and that we can
increase trade into the heartland of America through the Great
Lakes, particularly at a time when our coastal ports are at
capacity and require substantial investments. To be able to
move cargo right into the heartland of the United States using
the Seaway seems to me a very cost-effective way of increasing
maritime trade. Would you agree, and is that a principal focus
of your work?
Mr. Middlebrook. Thank you for saying so. I would agree,
absolutely. I mentioned earlier that the Canadian and U.S.
governments have invested over $700 million in the
infrastructure, on the respective infrastructures. I would also
add--and it's in my written testimony--that the private sector
on both sides of the border has invested upwards of $6 billion
in various forms, so almost $7 billion of investment that has
gone into the system.
For us, that the private sector as well as the public
sector is expending real money, significant money, shows that
they believe in the need for the system, the competitiveness of
the system, and the viability of the system. We are operating
at only about 50 percent capacity, so there is room to grow
there and to work cooperatively with other modes and other
waterways to better align the nation's transportation system.
Senator Peters. Great. Thank you.
Thank you, Madam Chair.
Senator Fischer. Thank you, Senator Peters.
I would like to thank our witnesses today for being on the
panel. Your information has been very helpful to us, and I
would remind you that the hearing record will remain open for
two weeks. If Senators have questions, they will be submitted
to you in writing, and we ask that you respond promptly.
Thank you very much for the testimony today, and with that,
the hearing is adjourned.
[Whereupon, at 3:50 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. John Thune to
Hon. Michael A. Khouri
Question. In April, the members of the West Coast Marine Terminal
Operators Agreement (WCMTOA) at the Ports of Los Angeles and Long Beach
submitted their amendment outlining changes to the PierPass program on
file at the Federal Maritime Commission. The proposal includes moving
from the original model that charged fees for daytime terminal access
to a fee system with mandatory appointments and charges to all cargo,
regardless of the time of day.
a. In the course of its preliminary review of the agreement, does
the Commission believe the proposed changes would still meet the
original congestion mitigation goals of the PierPass program?
Answer. Agreements filed with the Commission for review under the
Shipping Act of 1984 include a wide variety of authorities for
collective activity designed to allow agreement parties to achieve
different objectives in various ways. In the instant case, the proposed
changes to the PierPass program would (1) change the current traffic
mitigation fee (TMF) to a flat fee, and (2) implement an agreement-wide
truck appointment system. According to the agreement parties, these
changes are targeted at continuing the West Coast Marine Terminal
Operator Agreement's (WCMTOA) goal of combating truck congestion in the
San Pedro Bay (Port of Los Angeles and Port of Long Beach) area.
While the filing party's objectives vary from agreement to
agreement and the means employed to achieve such objectives likewise
vary; in its review of any filed agreement, the Commission is
statutorily limited to a primary issue--the effect of the agreement on
competition in the ocean freight context. The Commission evaluates
filed agreements based on the standard set forth in the Shipping Act of
1984. This standard--the ``6(g) standard''--allows the Commission to
take action against agreements that ``are likely, by a reduction in
competition, to produce an unreasonable reduction in transportation
service or an unreasonable increase in transportation cost.''
Agreements filed with the Commission go into effect automatically
in 45 days unless the Commission determines that the agreement is
anticompetitive under the 6(g) standard. 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
to enjoin the operation of the agreement. The burden of proof is on the
Commission.
This focused multi-step analysis and review by the Commission
requires sufficient information for the Commission to make a
determination of the agreement's impact on competition. Because the
Commission determined that it needed additional information to fully
and appropriately analyze the competitive impact of the changes to
PierPass requested by WCMTOA, the Commission requested additional
information from the agreement parties necessary to conclude its
competition analysis under the 6(g) standard. This action postponed the
effective date of the proposed agreement amendment until 45 days after
the agreement parties submit the requested information.
Based on the above discussion, the Commission has not developed an
opinion on whether the proposed changes to the agreement will meet the
original traffic congestion mitigation goals of the PierPass program.
PierPass management has published third party consultant reports that
conclude that the proposed appointment system will continue to spread
truck traffic across all terminal gate operating hours, thereby
mitigating congestion. Further, please see our response to question 2,
below.
b. Has the Commission previously undertaken a review to determine
if the current PierPass program has substantially reduced congestion?
If so, what were the findings of the report?
Answer. As noted above, in its review of any filed agreement the
Commission is statutorily mandated to focus on a single question--the
effect of the agreement on ocean transportation competition. The
Commission may only take action against agreements that ``are likely,
by a reduction in competition, to produce an unreasonable reduction in
transportation service or an unreasonable increase in transportation
cost''--the ``6(g) standard.'' The Commission monitors the activities
of WCMTOA and the PierPass Program and reviews data about the TMF to
determine any effect on transportation cost and services.
PierPass senior managers have provided the Commission with annual
updates on various San Pedro Bay port performance measurements,
including gate utilization statistics for the day, night and weekend
shifts. Based on those PierPass reports, approximately 42 percent of
former day traffic now uses the night/weekend gate shifts.
The Commission is concerned generally with supply chain issues,
including overall port congestion, that undermine supply chain
efficiencies in our international oceanborne commerce. In 2014, as a
response to reports of problems with port congestion, the Commission
held four separate one-day listening sessions in different regions of
the country--New York/Mid Atlantic area, Hampton Roads through South
Atlantic area, Gulf Coast area, and West Coast ports--to investigate
and hear firsthand the problems that ports, their customers, and other
partners in the U.S. intermodal system were facing as a result of
problems brought on by contemporary developments in container liner
shipping.
Following those listening sessions, the Commission's Bureau of
Trade Analysis (BTA) issued a comprehensive eighty-three-page summary
report of the proceedings at these FMC port forums--``U.S. Container
Port Congestion & Related International Supply Chain Issues: Causes,
Consequences & Challenges.'' Though not exclusively focused on PierPass
or the TMF, a section of the BTA overview titled ``Extended Hours,
PierPass, and Congestion Pricing'' highlighted the efforts of the San
Pedro Bay ports to address and mitigate congestion--both truck issues
outside of the port gates, and container/truck/chassis issues inside of
the terminals. The report reflects the stakeholder discussion at the
listening sessions about this subject and outlines stakeholder
suggestion and proposed fixes. A copy of the relevant portion of the
2015 summary report is attached.
______
Attachment
Extended Hours, PierPASS, and Congestion Pricing
Framing the issues
Extending the hours that terminal gates are open to truck traffic
is one method by which truckers could conceivably increase the number
of turns they are able to make in a shift. However, except in unusual
circumstances, there are few examples of permanently extended gate
operations at terminals in U.S. ports.\94\ Marine terminals do not
typically accommodate cargo pick-up and delivery outside of daytime
weekday hours primarily because of longshore labor costs. Longshore
labor contracts provide for differential shift pay, overtime pay,
minimum hour guarantees, and minimum size of labor work units. Terminal
operators strive to keep cargo pick-up and delivery activities to a
single day shift because to do otherwise would raise their operating
costs significantly.
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\94\ Transportation Research Board, National Cooperative Freight
Research Program (NCFRP) Report 23. Synthesis of Freight Research in
Urban Transportation Planning, p. 52. Washington, D.C. (2013).
---------------------------------------------------------------------------
In most places outside of the SPB ports, evening and weekend
operating hours are typically limited to special arrangements with an
ocean carrier or preferred customers moving large numbers of
containers. Another reason for the widespread absence of extended gates
is said to be resistance from drayage drivers and some customers.\95\
Off-peak work, for example, means an extended work day for the truck
driver or a shift in the driver's schedule to a less family friendly
night shift. Warehouses, distribution centers, manufacturers, and
steamship line help desks, also must be available to help process cargo
during off-peak hours and, in some locations, zoning ordinances
prohibit night or weekend deliveries.
---------------------------------------------------------------------------
\95\ Ibid.
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The first large scale, permanent extended-hours program was
implemented ten years ago at the ports of Los Angeles and Long Beach.
However, several precursor schemes preceded the eventual launch of
permanent extended gates at the SPB ports. Between 2000 and 2004, the
two SPB ports experienced rapid growth with container volumes expanding
by 32 percent.
Numerous groups in the local community benefited by this surge in
growth, but other groups were negatively affected. Motor carriers
encountered longer queue times to pick up or drop off containers.
Likewise, large retail importers incurred significant problems moving
their import containers from the terminals to their warehouses and
distribution centers. Furthermore, local residents complained of severe
traffic congestion and poor air quality as local highways became
congested with more and more drayage trucks. The idea of extending the
ports' operating hours as a solution to these growing problems gained
local impetus and influence.
Frustrated by the slow progress to extend terminal operating hours,
the California Truckers' Association (CTA) lobbied state officials to
legislate efficiencies at the SPB ports. Then State Senator Alan
Lowenthal (now a member of the U.S. House of Representatives) drafted
legislation (AB 2650) that passed by an overwhelming majority in the
California Assembly and was signed into law in August 2002.\96\ To
encourage off-peak operations, this bill imposed a penalty of $250 on
terminal operators for each truck that idled more than 30 minutes
waiting to enter the gates at the SPB ports and the Port of Oakland.
Exemptions were provided for those terminals that either operated gates
for at least 70 hours per week or provided an appointment system.\97\
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\96\ The historical and legislative events leading to
implementation of a permanent extended hours program at the ports of
Los Angeles and Long Beach (called PierPASS) were spelled out by (now)
U.S. Congressman Lowenthal at the FMC port forum conducted at the Port
of Los Angeles. A city council member at the time, U.S. Congresswoman
Janice Hahn provided additional background at the forum on historical
events leading to the creation of PierPASS.
\97\ Op. cit., NCFRP Report 23, p. 51.
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The legislation had limited impact according to a study by Giuliano
and O'Brien which pointed out that no terminal at the SPB ports
extended its hours of operation because of AB 2650.\98\ At terminals
that implemented appointment systems, the authors found no record of
improved operating efficiency. Likely this was because such systems
provide appointments only to enter the terminal gates, rather than
appointments for the actual loading or unloading of the container. In
other words, terminals did not use appointments to pre-stage containers
in advance for the advantage of truckers. Instead, they were used for
the advantage of the terminal to obtain an advance indication of
workload. Moreover, the 30-minute limit on truck idling time outside
the gate probably also produced the unintended effect of transferring
congestion from outside the gate to inside the terminal, with terminals
admitting trucks in order to avoid fines. However, once inside the
terminals, drivers found themselves having to wait for containers to be
removed from the stacks before loading onto chassis, and vice versa.
---------------------------------------------------------------------------
\98\ Giuliano, G and O'Brien, T. Evaluation of the Gate Appointment
System at Los Angeles and Long Beach Ports. METRANS Transportation
Center, 2008.
---------------------------------------------------------------------------
PierPASS, an extended hours of operation program, was implemented
in July 2005. In close consultation with the Waterfront Coalition, this
program was developed collectively by 13 container terminal operators
at the SPB ports in response to proposed action by State Senator
Lowenthal that would have legislatively mandated off-peak hours.\99\
However, he agreed to withdraw his proposed legislation when the
private sector terminals themselves developed an extended gate program
to achieve the same goal of mitigating peak period road congestion and
reducing air pollution caused by port drayage operations. The PierPASS
off-peak program was developed and implemented under the authorities of
the West Coast Marine Terminal Operators' Agreement (FMC Agreement No.
201143).
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\99\ The Waterfront Coalition is a group of shippers,
transportation providers, and other businesses in the International
supply chain that is concerned with promoting efficient and
technologically advanced ports.
---------------------------------------------------------------------------
The West Coast Marine Terminal Operator Agreement's (WCMTOA)
members decided to impose a traffic mitigation fee (TMF) for at least
two reasons. First, terminals incur considerable costs when providing
off-peak gates. Compared to labor rates for the regular daytime shifts,
labor rates are one-third to one-half higher during the night and
weekend shifts. Second, the terminals wanted to make sure the off-peak
shifts were well used by encouraging a portion of the daytime traffic
to move to the off-peak gates as a result of imposing a fee on daytime
moves. Consequently, PierPASS charges a TMF on certain loaded
containers that move in or out of the SPB gates between 8 am and 5 pm.
The fees collected on gate moves during the daytime help defray the
cost of providing extended off-peak gate operations. Usually, each
terminal provides four off-peak gates Monday through Friday between 6
pm and 3 am and a weekend gate, usually on Saturday, from 8 am to 5 pm.
Use of the off-peak gates has far exceeded the program's initial
expectations.
Under the program, terminals initially agreed to provide complete
off-peak services; that is to say the aim was to duplicate the daytime
truck handling capacity of the terminals at night and during the
weekend off-peak shift. Anecdotal reports indicate this aim has not
been achieved. For example, trouble tickets are more challenging to
resolve at the off-peak gates because steamship line customer service
centers are less available. Other services, such as container flips,
are sometimes not available during off-peak hours. Additionally, the
reduction in volumes following the Great Recession caused some terminal
operators to reduce the number of off peak gates provided, some of
which have not been fully restored.
The PierPASS program has shifted about SO percent of all truck
traffic to nights and weekends. In this respect, it has been successful
in reducing the number of truck trips made in the morning rush hours,
and to a lesser extent in the evening, but has not reduced the
aggregate number of trips. As a result, the program has not eliminated
the environmental and social impacts associated with drayage truck
trips. Nevertheless, in the last decade PierPASS has diverted more than
30 million containers from peak to off-peak gate shifts. Additionally,
the PierPASS program has more or less doubled access to the gates. For
example, the SPB ports handled almost 800,000 TEU in June 2004, just
prior to PierPASS being implemented, compared to just over 900,000 TEU
in June 2014. Without extended gate hours, congestion at SPB terminals
would be worse than it is now.
Currently, the TMF is set at $66.50 per TEU (twenty-foot equivalent
unit) or $133 per FEU (forty-foot equivalent unit). The fee is imposed
on loaded container movements through the gates during peak hours from
8 am to 5 pm. Certain container transactions are exempt, including
containers arriving or leaving the ports through the Alameda rail
corridor, containers leaving for or arriving from the near-dock and
downtown rail facilities, and trucks carrying empties, bobtailing or
bringing in or taking out a bare chassis. As a result of the
exemptions, less than 20 percent of all containers handled by the SPB
terminals in 2012 incurred the TMF. Between 2005 and 2006 the TMF
remained at $40 per TEU or $80 per FEU. It was then adjusted to $50 per
TEU or $100 per FEU. Since 2011, subsequent increases have been linked
to ILWU labor cost increases. A potentially unsustainable tension
exists in the program between the level of fees and the proportion of
non-exempt container movements that still use the peak hour gates. The
more the fee increases, the more likely users will divert to using the
off-peak gates. Any such shifts, however, mean that the cost of
sustaining the off-peak gates will be borne by proportionally fewer
non-exempt movements during peak hours and the terminals in the off-
peak hours will become more congested, not less. Ostensibly, the fee is
for the account of the beneficial cargo owner (BCO). However, some BCOs
may negotiate different arrangements with their motor carrier or cargo
intermediary.
Cross-section of stakeholder viewpoints
Comments on the operation of the PierPASS program and its initial
and current contribution to congestion mitigation efforts in and around
the SPB ports were provided by several participants at the port forum
in Southern California. As stated earlier, PierPASS was created in 2005
as a response to Assembly Member Alan Lowenthal's traffic and
congestion mitigation bill AB 2650 which aimed to expedite truck
traffic throughput in the ports' complex. MTOs responded to the traffic
mitigation challenge by opening up nighttime and some weekend
operations at the ports that historically had operated during the
daytime Monday through Friday. One participant at the Southern
California forum suggested that previous attempts to open night gates
had been unsuccessful due to poor and unreliable staffing of the gates
and container yards. According to another participant, the original
draft design of the program, developed with input provided by the
Waterfront Coalition, called for sun-setting the fee after three years
or when night gate moves had reached 30 to 35 percent of total gate
moves. However, somewhere in the development process the sunset
provision disappeared by the time the program was finally adopted by
the WCMTOA. Although the traffic mitigation fee is charged to the BCO,
the shipper may dictate to the trucker to only pull containers after 6
pm when the fee is not applicable.
One of the biggest problems with the night gates is that they
reportedly are unpredictable and not uniform. For example, there are
times at some terminals when off-peak gates may be unavailable for up
to five consecutive days.\100\ This interferes with a shipper's or
motor carrier's ability to ship containers exclusively through the off-
peak gates. Staffing hours are said to be somewhat irregular. Gates are
supposed to operate from 6 pm to 3 am, but truckers report there are
times when a terminal will cease operations at midnight or 1 am. Among
a segment of the port community in Southern California, there is a
belief that if PierPASS went away truckers would shift back to using
only the day shifts. However, one participant argued that, in the
current climate of congestion, as long as gates are open, accessible,
and productive truckers will utilize them no matter the time of day.
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\100\ Each month a Thursday night shift is cancelled because of
union meetings. If no weekend shift has been arranged at the terminal,
then no access to off-peak gates Is possible from Wednesday night
through the following Monday night, despite the fact that ship arrivals
at the SPB ports tend to bunch late in the week.
---------------------------------------------------------------------------
A prominent, high-volume shipper of refrigerated protein products
submitted a written statement that focused in part on the operational
difficulties PierPASS has caused that company. While acknowledging that
the program's initial goals had been accomplished, this shipper
asserted BCOs had to pay extra fees to cross-dock operators to hire
truckers willing to work nights (as much as $30 per load) and were
dealt several other inequities, such as, night gates having been
reduced. With respect to the Port of Oakland and the consolidation of
terminals that had taken place at that port, according to this shipper,
with carriers no longer providing chassis what was previously a one-
stop move has grown to 2-3 stops within the same terminal or multiple
terminals. These added steps, lengthen truck turn times. Special tri-
axle chassis are often required for heavy reefer containers which
require a ``flip'' in order to obtain an empty container for the return
leg, yet In some cases the night or weekend shifts do not provide flip
service which forces the company's motor carrier to work the high-
volume day gates that are subject to the TMF. This shipper provided a
set of specific PierPASS fixes, including:
Moving the International Longshore and Warehouse Union's
(ILWU) monthly Thursday ``stop work'' meeting to Wednesday to
help manage weekend volumes or, instead, to always have a
Saturday gate to recover off-peak capacity lost to the monthly
Thursday stop work meeting.
Saturday gates to provide full service
Longer advance notice given to warehouse operators and
draymen of any shift closings to allow them to re-work their
schedules
Establish designated lines for (high-value) reefer cargo
deliveries that are often delayed behind less time sensitive,
low-value, high-volume cargo, such as waste paper and scrap
metal export containers
Have reefer containers and ``gensets'' in the same area of a
terminal to minimize unproductive truck trips
A senior PierPASS official pointed out that a less tangible
contributor to congestion is the delivery container process--a process
of complete and total random access to a specific container number at
any time of the day or night that results in a predictably slow rate of
eight to ten container mountings per transtainer per hour. He argued
that if the industry wants to change the truck turn-time outcome, it
needs to seriously consider changing this process: ``Doing the same
things incrementally faster will not solve the periodic periods of
congestion.''
Participants from different segments of the industry expressed a
variety of viewpoints on 24/7 gate operations as a way to deal with
congestion. According to an ocean carrier, there are too many terminals
at which gate hours are not sufficient to cope with current container
volumes and expected growth. This ocean carrier emphasized that ports
and terminals need to look at extending gate hours whenever possible
and examine what is needed to accomplish that. This sentiment was
echoed by several motor carriers who said that terminals should at
least be kept open longer if a second shift is not economically
feasible. A West Coast terminal operator said it currently operates two
shifts most days, but probably gets the equivalent of only 1 percent
shifts worth of throughput. Recently, this terminal had begun offering
more gates on Friday night and Sunday, as well as flex-gates, but
reportedly they were not being used very heavily.
The representative of a large terminal operating company that
manages seven terminals on the West Coast that account for 25 percent
of all longshore man hours used along that coast said he was
sympathetic about lengthy turn-times but was not sure about what could
be done. He did not believe, for example, that 24/7 gate operations was
the answer even at a complex as large and as busy as the SPB
ports.\101\ He stressed that gate shifts are expensive to provide--
around $100,000 to $130,000 per day in labor alone.\102\ He
acknowledged that truckers were not getting in and out of terminals in
the time they need, but placed the blame foremost on chassis shortages.
Much of the congestion problem would go away, in his view, if there
were sufficient chassis. The second problem he described concerned the
typical work pattern of many drayage drivers which splits the day
across two shifts at the terminals, coming on duty in late morning and
ending their duties well before midnight.\103\ As a consequence, the
terminals are comparatively empty early in the day (e.g., from 8am to
10 am) and after the night shift lunch break which ends at 11 pm. In
the meantime, however, the terminals are paying for two full shift s.
He wanted to see a more even flow of trucks coming in the gates across
the two shifts.
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\101\ It was reported by a participant at the port forum in
Southern California that 1,000 registered motor carriers and 11,000
registered drayage trucks use the San Pedro Bay ports complex and
transact 35,000 gate moves per day.
\102\ This MTO representative indicated that a well-running
terminal would hire 100 to 130 longshore personnel per shift each
costing $900 to $1,300 per shift, who may handle sometimes as many as
400-500 trucks an hour.
\103\ Late starts in Southern California allow drayage drivers
access to the free PierPASS off-peak night gates for some portion of
their shift.
---------------------------------------------------------------------------
In response to comments about the desirability of 24/7 operations,
a PierPASS representative drew attention to the fact that the SPB
terminals already provide 35 extra off-peak gate hours per week in
addition to 40 hours of regular daytime access--more hours of gate
access than any modern terminal complex in the U.S. or in most other
countries. And, within these hours there are some hours that register
little or no truck activity. He argued that extending hours to provide
for 24/7 operations would not necessarily increase the number of
containers processed (as available truck capacity is relatively fixed),
but would significantly increase the cost of operating a marine
terminal. According to the PierPASS official, the off-peak gates
program costs $188 million annually and extending gate access to
encompass 24/7 operations would add another $167 million and, without a
commensurate increase in the number of containers processed, the added
expense of providing 24/7 operations would inflate supply chain costs.
Another participant cautioned that the demand for 24/7 gates is
emanating from next generation mega ships which cause terminal capacity
issues and argued that it does not make sense to have vessels being
worked around the clock while restricting container delivery and
receiving operations to 8 hours on some days and 16 hours on other
days.
There were several calls among participants for a ``PierPASS
Version 2.0'' that they hoped would take the program to the next level
to better address the SPB ports' current problems. In this context,
U.S. Representative Lowenthal suggested, ``It is time to raise the bar
again'' and wondered, ``How do we move the ball forward?'' One of the
port directors believes information technology needs to be a
substantial component of any PierPASS Version 2.0. In his view,
integrating information flows into operations could go a long way
toward facilitating the efficient flow of trucks, trains, and cargo
movements in and around the ports. A Joint Powers Authority (JPA)
similar to the governance structure for the Alameda Corridor was a
topic of discussion. Under this proposed Idea (presently dubbed GATES
for Gate Appointment and Terminal Efficiency System) the JPA could also
run an appointment system to enable marine terminals to more accurately
predict yard labor demand and develop real-time intelligence software
to better share information among port users. Opponents of 24/7
operations--primarily the terminal operators and steamship lines--point
to the added cost of running operations around the clock. Proponents,
on the other hand, counter with the question: ``What is the cost of
doing nothing?''
Stakeholder suggestions and proposed fixes
WCMTOA which owns and operates the PierPASS program has made
relatively few changes to the program since its inception ten years
ago. Other members of the port community, on the other hand, including
BCOs, truckers, and the Port Authorities, have not been reticent in
pointing out areas of the program that need attention. The suggestions
listed below were made at the FMC port forums or in other
communications with the Commission:
Ongoing dialog is needed. There seems to be increasing
recognition that an ongoing dialogue among all port
stakeholders is needed regarding how best to improve the number
of turns per day truckers are able to make in the SPB complex.
Queue and dwell times at the terminals have been increasing,
making it more difficult for truckers to cover the cost of
operating the more expensive clean trucks now required to enter
the terminals. Such dialogues could take place through the
recently amended Los Angeles and Long Beach Port Infrastructure
and Environmental Programs Cooperative Working Agreement (FMC
Agreement No. 201219).
Measures could be taken to ensure that the off-peak gate
shifts provided by the 13 terminals occur on the same
weeknights and weekend days. Currently, most terminals offer
four week-night shifts and one weekend shift, but the specific
days offered by each MTO tends to vary. Additionally, off-peak
shifts are sometimes cancelled or changed on short notice.
These practices unduly disrupt a motor carrier's ability to
dispatch trucks efficiently.
Off-peak gates should have all the same services made
available during daytime shifts. For example, a service that
allows heavy reefer containers to be flipped from tri-axle
chassis so as to allow the return of an empty reefer container
reportedly is unavailable during off-peak shifts at some
terminals. Similarly, the resolution of trouble tickets during
off-peak shifts reportedly is difficult because steamship line
customer service staff are less available at these times.\104\
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\104\ Trouble tickets are caused by the truck driver lacking
information or having misinformation contained in documents. At the
Southern California port forum, PierPASS reported that five to seven
percent of all truck transactions experience trouble tickets which
takes the driver out of the container delivery process until the issue
is resolved.
WCMTOA could be more transparent about what it costs to
operate the PierPASS program. A segment of the port user
community is unconvinced that the program is not covering its
---------------------------------------------------------------------------
costs.
The costs of the program perhaps could be shared more
equitably. Almost everyone benefits from reduced congestion,
yet only a small fraction of containers passing through the
ports are assessed the TMF to help defray the cost of providing
the congestion-reducing off-peak shifts.
Consider 24/7 gate access. With so much cargo being diverted
to the off-peak shifts, PierPASS should consider cost effective
ways to expand those shifts, perhaps ultimately leading to 24/7
gate access.
Share performance metrics. As a result of the mechanism
PierPASS has established to collect the TMF, the program
possesses an extensive set of data. WCMTOA could share metrics
about truck queue and dwell times to further encourage dialogue
and explore ways to improve cargo flow through the terminals.
Find ways to deal with known congested periods. Ways should
be found to ease queue times during known periods of
congestion. For example, Individual terminals probably could
provide more flex gates during lunch breaks and the periods
between shift changeovers. Similarly, the TMF could be
differentiated by time, for example, by having a lower fee in
the run-up to the opening of the off-peak shifts at 6 pm in
order to avoid the early formation of long lines waiting to
gain access to the off-peak gates.
Find ways to incentivize terminals to provide optimum levels
of service. The current program returns TMF revenue to the
terminals (after deduction of administrative expenses) based on
each terminal's total container throughput regardless of the
amount of service provided or volumes handled in the peak or
off-peak hours. WCMTOA could explore ways to distribute the TMF
revenue back to the terminals In ways that incentivize
providing higher levels of service. For example, they could use
the TMF revenue distribution process to reward terminals that
have shorter truck queue and dwell times or return those
revenues in proportion to the resources each terminal devotes
to off-peak gates (I.e., in proportion to off-peak
expenditures).
______
Response to Written Questions Submitted by Hon. James Inhofe to
Hon. Mark H. Buzby
Question 1. The Maritime Administration (MARAD) is charged with
promoting the use of waterborne transportation and maintaining the
health of intermodal facilities such as ports. In Oklahoma, we have the
McClellan-Kerr Arkansas River Navigation (MKARNS) which provides inland
water navigation from the Mississippi River to the Ports of Catoosa and
Muskogee.
While I know that the Army Corps of Engineers is the core agency
that develops and constructs our water resources, I am interested in
ways all Department of Transportation modes, along with the Army Corps
can work together to better leverage resources to ensure that inland
waterway projects are moving forward.
a. Do you see the role for MARAD if the Department of
Transportation were to implement a new program or expand existing
freight programs to help fund maritime freight projects?
Answer. MARAD personnel and existing programs could bring critical
skills and experience to any effort to improve the delivery of maritime
freight projects across the maritime industry. Ports and the U.S.
marine transportation system are critical to our economy and our
maritime and freight systems needed for current and future challenges.
We work with public and private sponsors to improve intermodal port-
based facilitates on the Great Lakes, and on our inland and coastal
waterway systems. Given the need to meet current and anticipated
freight network requirements and the growing demands placed on ports
and related infrastructure, MARAD and the Department are working to
help meet the infrastructure needs of our Nation's freight and port
infrastructure through several programs, including:
The Port Infrastructure Development Program (PIDP)--MARAD's
primary program to help improve port facilities. MARAD calls
the PIDP ``StrongPorts'' to reflect the need for keeping our
Nation's ports in a state of good repair. ``StrongPorts'' is
designed to deliver tools, such as the Port Planning and
Investment Toolkit, and technical assistance to ports to
encourage full integration of ports and maritime transportation
into the larger U.S. surface transportation system. The program
provides a planning and investment framework that brings
together all stakeholders, including private companies and
local, state, and Federal agencies.
The Better Utilizing Investments to Leverage Development, or
``BUILD'' Transportation Discretionary Grant program, which
replaced the Transportation Investment Generating Economic
Recovery (TIGER) program provides opportunities for the
Department to invest in road, rail, transit and port projects
aimed at achieving national objectives. Congress has dedicated
nearly $5.6 billion for nine rounds of national infrastructure
investments to fund projects that have a significant local or
regional impact. This included a $6.4 million grant, as part of
a $12 million project, to the Tulsa Port of Catoosa to renovate
its main dock area. The project was completed in May 2016.
Under the BUILD/TIGER programs, 51 ports grants have been
awarded totaling more than $680 million.
The Fixing America's Surface Transportation (FAST) Act, which
Congress passed in 2015, includes significant opportunities for ports,
including freight system planning and development and funding. Funding
is set-aside for projects of national or regional significance that
will affect the movement of freight and people, and for freight
infrastructure, including multi-modal projects. There have been seven
port projects totaling $130 million awarded under this program.
b. How do you believe MARAD could be further involved in the
development of inland waterway projects?
Answer. The StrongPorts infrastructure development program will
continue to support inland ports. Additionally, MARAD operates a short
sea shipping program, known as the America's Marine Highways Program,
which encourages the use of maritime transportation as an extension of
the surface transportation system to relieve landside congestion along
coastal corridors. The America's Marine Highway Program has assisted
several ports and marine highway providers to start or expand the use
of Marine Highway services. The FY 2018 Consolidated Appropriations
Act, P.L. 115-114, provided $7 million in funding for the program.
MARAD uses the funds to encourage shippers around the country to choose
the use of waterborne transportation for freight.
We continuously look for innovative ways that MARAD might help
further develop the entire marine transportation system, including our
critical inland waterways. A key issue that we have seen across the
country is the need for greater integration of maritime issues into
state and local transportation planning. MARAD will continue to focus
our resources on removing this and other critical barriers to inland
waterway development.
Question 2. The Maritime Administration is responsible for
administering the Maritime Security Program (MSP). MSP exists to ensure
the United States has the military sealift capacity in time of war and
national emergency. As Chairman of the Readiness Subcommittee of the
Senate Armed Services Committee, I know that our military was gutted
under President Obama. Under sequestration, Defense accounted for 50
percent of the cuts, but only 16 percent of spending. As a result, our
military equipment is aging and our base infrastructure requires
critical maintenance and upgrades. We have seen impacts on personnel;
pilots are leaving the military because they are not getting flight
hours to maintain their skills. Today, we have an Administration that
will support the necessary funding to rebuild our military--and
Congress went above and beyond the President's request in the Omnibus
bill to give our men and women in uniform the resources required to
answer the call quickly and effectively.
a. How would you characterize the state of readiness for the
Maritime Security Program today?
Answer. The MSP is fully subscribed up to the 60 vessel Congress
authorized. The readiness of the vessels in the MSP fleet is excellent.
The program has consistently achieved more than 96 percent availability
of both ships and mariners over the past several years. In addition,
the MSP fleet's militarily useful capacity is now at the highest level
in the program's history, including more than 3.1 million square feet
of roll-on roll-off (RO/RO) and heavy-lift vessel capacity, and more
than 114,000 TEU container capacity available to meet U.S. Department
of Defense (DOD) requirements.
The MSP is a vital component of U.S. sustainment. The program
provides DOD with assured access to a fleet of 60 privately-owned,
militarily useful, U.S. flag commercial ships operating in
international trade, as well as the multibillion-dollar global network
of intermodal facilities and transport links maintained by MSP
participants.
b. I know that participation in MSP is voluntary; how can Congress
encourage more participation in this important program?
Answer. As stated above, MSP is fully subscribed. In addition,
almost all MSP carriers are participants in the Voluntary Intermodal
Sealift Agreement (VISA), the DOT/DOD emergency preparedness program
created to ensure that both sealift and intermodal capacity are
available to meet DOD requirements in time of war or other national
emergency. Carriers enrolled in VISA must provide DOD with assured
access to these assets during contingencies, and in return for their
VISA commitment, receive priority consideration for peacetime DOD and
civilian agency cargoes. Unlike other VISA participants, MSP carriers
also receive the annual retainer or ``stipend'' payment to provide
assured access to ships and intermodal resource.
c. How do you believe MARAD could be further involved in the
development of inland waterway projects?
Answer. See MARAD's response to this question above.
d. To what extent is the ability of the United States Merchant
Marine Academy to train future United States Coast Guard licensed
mariners and U.S. Navy Strategic Sealift Officers still being impacted
by previous sequestration policies?
Answer. The United States Merchant Marine Academy's ability to
educate and graduate leaders of exemplary character who are inspired to
serve the national security, marine transportation, and economic needs
of the United States as licensed merchant marine officers and
commissioned officers in the Armed Forces is not adversely affected
today by past sequestrations.
______
Response to Written Questions Submitted by Hon. Bill Nelson to
Hon. Mark H. Buzby
Foster Growth in Maritime Industry. Florida is a major maritime
state that relies on a robust maritime industry to support its shipping
and shipyard construction and repair activities. This requires a strong
U.S. merchant marine.
Question 1. In your view, what can be done to further bolster this
important industry?
Answer. As Maritime Administrator, my focus is to work with
Congress and maritime stakeholders to identify ways to make the U.S.
maritime industry more competitive, and foster policies that result in
more U.S. jobs in the maritime sector. Part of this focus includes
supporting shipyards and related industries that are part of the
Nation's shipbuilding and repair industrial base through MARAD
administered programs. Properly designed programs and training to
support our shipyards and a skilled American shipbuilding and repair
workforce can contribute to strengthening, maintaining and moving
towards growth in this critical industry. One existing program is the
Maritime Administration's (MARAD) Small Shipyard Grant Program, which
fosters efficiency and competitiveness in shipbuilding and ship repair.
Grants provided through this program are targeted at modernizing
shipyard facilities and closing the technology and productivity gap
with foreign competitors.
Another possible avenue for bolstering the American maritime
industry would be to continue our efforts through the America's Marine
Highway Program to promote the expansion of domestic short sea
shipping, particularly along our Nation's coasts. The United States is
well behind competing economies in its employment of this highly
effective mode of freight transportation, and the benefits to the
broader economy could be profound. Enhancing domestic supply chain
logistics for American producers, expanding the domestic market for
American LNG, optimizing port utilization, and alleviating congestion
and unnecessary wear and tear from our highways are just a few of the
possible benefits. Promoting this alternative to terrestrial freight
transportation modes could deliver significant growth for our Nation's
coastwise trade fleet, the associated merchant mariner pool, and the
Nation's shipyard construction and repair industrial base. A future
that includes more vessels built by Americans at a competitive price
would promote industry growth and a stronger, sustainable employment
base for the U.S. merchant marine. This would enhance our defense
readiness and begin to deliver on the immense latent potential of
American maritime commerce.
El Faro. The sinking of the El Faro cargo ship was a tragedy--over
thirty mariners were lost. Both the National Transportation Safety
Board and the Coast Guard have identified ways to prevent this kind of
catastrophe from happening again, including better preparing mariners.
Question 2. How is MARAD, through its funding and oversight of the
Maritime Academy and training programs, ensuring that mariner training
has improved so that such tragedies could be avoided in the future?
Answer. Through oversight of the U.S. Merchant Marine Academy
(USMMA) and regular communication with the State Maritime Academies
(SMAs), MARAD emphasizes continuous curriculum improvement, including
improvements in response to real-world incidents. The U.S. Coast Guard
(USCG) establishes training requirements that maritime academies must
meet and has sole authority to modify training protocols required for
students to be issued officers' credentials. The USMMA and the SMAs
modify their curricula as the USCG dictates. In addition, MARAD
encourages the academies to incorporate lessons learned from real world
incidents, like the loss of the EL FARO, into their curricula.
The incident is already used as a case study to improve training at
U.S. maritime institutions. For example, the USMMA has used reports
regarding the EL FARO incident provided by TOTE Inc. (the company that
owned the ship) and the Committee on the Marine Transportation System
to integrate best practices into its curriculum for courses focused on
meteorology and seamanship.
Below are examples of training designed to prepare mariners to
respond to varying at-sea conditions. The EL FARO incident can be used
during this training to give cadets the opportunity to learn from a
real-world situation.
At the USMMA and SMAs, deck cadets and midshipmen must
complete the required U.S. Coast Guard (USCG) training and
assessments to obtain a Standards of Training, Certification
and Watchkeeping (STCW) endorsement as Officer in Charge of a
Navigation Watch (OICNW) on vessels of 500 gross tons or more.
This training and assessment is accomplished and reinforced
throughout the academies' four-year curricula. In addition to
classroom and practical training ashore, cadets and midshipmen
receive shipboard training on commercial vessels, the
academies' training vessels, or a combination of both. This
experience at sea provides an invaluable opportunity to learn
and experience the actual shipboard environment.
NOAA's Vessel Observing System (VOS) Port Meteorological
Officers (PMOs) provide meteorological training and support to
the maritime academies. The PMO serves as a ``Sea Term''
instructor. At sea, the PMO provides formal classroom
instruction designed to enhance the cadet's ability to
determine expected weather conditions, and to make, record, and
transmit accurate weather observations.
At the USMMA, midshipmen are taught to appreciate the forces
impacting a vessel by factoring in varying sea states,
including heavy weather operations. Mariner ``rules-of-thumb''
are taught to aid comprehension and memory. Emphasis is placed
on operational considerations for navigating near tropical
cyclones. Midshipmen are taught to understand and appreciate
the difference between the forecasted ``significant wave
height'' and the highest wave heights that might be expected;
significant wave height represents the average of the highest
one-third of waves, whereas larger waves could very well be
encountered at sea. Class discussions incorporate recent
scientific analyses of extreme occasional wave heights (rogue
waves) and vessel operational limitations.
Response to Hurricane Maria. Hurricane Maria devastated Puerto Rico
and left the island without power for months on end. One of the most
important issues was how to get supplies, food and water to the island.
Question 3. What role does the maritime industry play in providing
support?
Answer. The primary role of the maritime industry is to deliver
cargo. U.S. Jones Act carriers played a central role in responding to
the effects of Hurricane Maria by ensuring that the flow of commerce
was restored as quickly as possible via reliable, regularly-scheduled
services. Jones Act carriers provided not only regular commercial
goods, but also supported the delivery of relief supplies for the
response and recovery effort. To meet the increased demand for shipping
services, these carriers added nine vessels to the regular trade,
bringing the total number of U.S.-flag vessels servicing Puerto Rico to
25. If required, Jones Act carriers were prepared to provide additional
vessels.
One vessel from MARAD's Ready Reserve Force was used to carry
emergency relief supplies to Puerto Rico. In addition, SMA training
vessels provided support, including living space for first responders.
Although U.S.-flag vessels transported many of the necessary goods
from U.S. ports, the significant hurricane-related damage to port
facilities in Puerto Rico constrained the flow of key merchandise and
commodities over land. Seaports play a critical role in the response
and recovery efforts and are necessary for the flow of commerce. Absent
reliable port infrastructure and the efficient transfer of freight
among ships, barges, and trucks, rapid recovery is hampered
significantly. Many of the secondary ports in Puerto Rico were also
substantially damaged by Hurricane Maria, further constraining recovery
efforts.
Anticipating future hurricanes, MARAD is encouraging the use of
Jones Act carriers to stage critical supplies in target locations.
Before the storm, carriers can coordinate with customers and partners
to ensure the ships are able to deliver the most critical relief
supplies, including generators, oversized power and electrical poles,
bucket trucks, and petroleum products.
Question 4. What were some of the challenges and successes of
getting aid to Puerto Rico?
Answer. After Hurricane Maria, roads and bridges were damaged or
blocked by structure debris, utility lines and poles, and other
detritus. Thus, truck drivers could neither access nor depart the
ports. Widespread power outages and damage meant that warehouses
outside of the port could not receive refrigerated cargo delivered to
the port. Shore-side labor was displaced or otherwise unavailable,
including truckers, warehouse workers, and terminal operators. Cellular
phone service was largely out of order making transport coordination
extremely difficult. Because of these infrastructure challenges, import
cargo began to back-up in the ports. For weeks, the ports received more
cargo by water than could be delivered overland resulting in an ever-
increasing backlog.
In anticipation of Hurricane Maria making landfall, Jones Act
carriers staged critical supplies in San Juan, Puerto Rico, and
acquired additional 53-foot containers and more trucks to support
increased deliveries to the island. Some carriers increased vessel
speeds to reduce transit times between the mainland and Puerto Rico,
while simultaneously adding more voyages to their schedules. Carriers
extended their terminal operations to seven days a week to ensure a
steady flow of supplies. As noted above, carriers also added additional
vessels the regular trade.
Jones Act carriers also delivered specialized cargoes to the
island. In addition to the regular deliveries of commercial and relief
cargo, the island needed atypical cargoes such as utility trucks,
tanker trucks, large generators, and communication equipment. For
example, Jones Act carriers reconfigured vessels to accommodate the
delivery of thousands of utility poles needed to rebuild the island's
electrical grid. The industry further increased transport capacity to
the island by adding a vessel into service to deliver 7,000 twenty-foot
equivalent unit (TEU) containers of water to Puerto Rico in one week,
and even moved charitable donations to the island free of charge.
Immediately after the storm, U.S.-owned and U.S.-chartered vessels were
used as floating hotels to provide temporary housing and meals for
first responders. Finally, Jones Act carriers partnered with government
agencies to help manage ``final mile'' delivery, including using their
own truck distribution network on the island to deliver supplies.
The National Defense Reserve Fleet (NDRF) and Ready Reserve Force
(RRF) vessels of the Maritime Administration, which received mission
assignments from FEMA, were tasked with providing support to relief
workers and first responders. In Puerto Rico, the Training Ships (TS)
KENNEDY and EMPIRE STATE provided over 18,000 berths \1\ and nearly
40,000 meals to workers. During the 2017 hurricane season, these two
vessels, plus the TS GENERAL RUDDER and the aviation maintenance ship
WRIGHT, provided more than 23,000 personnel berths and over 53,000
meals. These efforts helped free-up living space for displaced
residents and provided centralized support for relief workers in Texas,
Florida, Puerto Rico, and the U.S. Virgin Islands.
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\1\ MARAD counts each person staying on the ship overnight as one
berth. For example, if one person stays on a ship for a week, it is
counted as seven berths. During the Puerto Rico response, some people
stayed on a ship for one night and some stayed there for the entire
time the ship was available.
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These activated vessels delivered water, food, and WRIGHT loaded
FEMA support vehicles, mission cargo, and Federal Aviation
Administration Very High Frequency Omni Directional Range (VOR)
equipment that was critical for restoring air service to the U.S.
Virgin Islands. Additionally, one of MARAD's contracted Ready Reserve
Force Ship Managers supported FEMA operations through their shore side
logistics network both on the Eastern seaboard and within the Caribbean
Sea region, using service assets already in place. Leveraging this
capability increased the amount of response assets and the timeliness
of delivery.
[all]
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