[Senate Hearing 114-385]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-385




                               	BEFORE THE

                          SAFETY AND SECURITY

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE


                             SECOND SESSION


                             APRIL 20, 2016


    Printed for the use of the Committee on Commerce, Science, and 
                          U.S. GOVERNMENT PUBLISHING OFFICE
22-129 PDF                      WASHINGTON : 2016
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                             SECOND SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
MARCO RUBIO, Florida                 CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska                BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas                  EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin               TOM UDALL, New Mexico
DEAN HELLER, Nevada                  JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               GARY PETERS, Michigan
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Rebecca Seidel, General Counsel
                 Jason Van Beek, Deputy General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
       Clint Odom, Democratic General Counsel and Policy Director


DEB FISCHER, Nebraska, Chairman      CORY BOOKER, New Jersey, Ranking
ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
JERRY MORAN, Kansas                  RICHARD BLUMENTHAL, Connecticut
DAN SULLIVAN, Alaska                 BRIAN SCHATZ, Hawaii
RON JOHNSON, Wisconsin               EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  TOM UDALL, New Mexico
                           C O N T E N T S

Hearing held on April 20, 2016...................................     1
Statement of Senator Fischer.....................................     1
Statement of Senator Booker......................................     3
Statement of Senator Wicker......................................     4
Statement of Senator Klobuchar...................................    32
Statement of Senator Blumenthal..................................    33
Statement of Senator Thune.......................................    36


Mark McAndrews, Port Director, Port of Pascagoula and Chairman 
  Elect, American Association of Port Authorities (AAPA).........     5
    Prepared statement...........................................     7
Perry M. Bourne, Director, International Transportation and Rail 
  Operations, Tyson Foods, Inc. on behalf of the Agriculture 
  Transportation Coalition.......................................     9
    Prepared statement...........................................    11
Michael G. Roberts, Senior Vice President and General Counsel, 
  Crowley Maritime Corporation...................................    14
    Prepared statement...........................................    16
Klaus Luhta, Chief of Staff, International Organization, Masters, 
  Mates & Pilots.................................................    23
    Prepared statement...........................................    24


Comments dated May 3, 2016 from the Global Consolidators Working 
  Group: Caro Trans International, Inc., Ecu-Line N.V., Shipco 
  Transport Inc. and Vanguard Logistics Services (USA), Inc......    39
Letter dated May 4, 2016 from Robyn M. Boerstling, Vice 
  President, Infrastructure, Innovation & Human Resources Policy, 
  National Association of Manufacturers to Chairman Thune, 
  Ranking Member Nelson, Chairman Fischer and Ranking Member 
  Booker.........................................................    43



                       WEDNESDAY, APRIL 20, 2016

                               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 10:20 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Deb Fischer, 
Chairman of the Subcommittee, presiding.
    Present: Senators Fischer [presiding], Ayotte, Sullivan, 
Thune, Wicker, Booker, Klobuchar, Schatz, and Blumenthal.

                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. The hearing will come to order.
    Good morning, everyone. I am very pleased to convene the 
Senate Subcommittee on Surface Transportation and Merchant 
Marine Infrastructure, Safety, and Security for today's hearing 
entitled ``The State of the U.S. Maritime Industry: Stakeholder 
    This is the second in a series of hearings examining the 
maritime industry as we prepare legislation to reauthorize the 
Maritime Administration at the Department of Transportation.
    America's maritime transportation system plays a crucial 
role in our economy. After all, time is money in today's global 
market. Productive shipping is key to reducing costs for 
manufacturers, consumers, workers, and businesses of all sizes.
    As a global leader, the United States needs an efficient 
and reliable intermodal freight transportation network to help 
our economy grow and create new jobs. As freight flows continue 
to increase, the United States maritime fleet and our ports are 
critical to keeping America competitive in this global market.
    According to the American Association of Port Authorities, 
domestic and foreign freight volumes passing through our ports 
rose to a high of 2.4 billion tons in 2014. The Bureau of 
Transportation Statistics notes that freight tonnage on our 
Nation's transportation network will grow by 40 percent over 
the next 30 years.
    Meanwhile, deepwater seaports represent a key element of 
our logistics network. In fact, America's seaports often serve 
as the key connection points for all modes of transportation.
    Last year, I convened a hearing to examine our West Coast 
ports, which at the time were mired in gridlock. According to 
annual averages, these ports are responsible for 12.5 percent 
of U.S. gross domestic product.
    Congress must continue to prioritize our Nation's ports and 
avoid massive congestion like we saw last year. Disruptions at 
our Nation's ports can be felt all across this country.
    In fact, last year, several major manufacturers in 
Nebraska, in the middle of the country, had to reduce or halt 
operations due to interruptions at our ports. We need an all-
of-above solution to keep freight flowing and update our 
Nation's ports infrastructure.
    Data is key to ensuring our ports retain their place as 
global leaders. That is why I worked with Chairman Thune to 
incorporate provisions in the recently passed highway bill, 
which will secure greater information on the performance of our 
    It is also important to take advantage of rapidly 
accelerating technology. Recently, I led a congressional 
delegation on a visit to Australia. There, we turned an 
automated privately run terminal at Port Botany in Sydney, 
Australia. Botany is home to Australia's largest port, which 
utilizes technology to create more efficient supply chains for 
    In the spring of 2015, the loading and unloading of ships 
at Port Botany became fully automated. This was accomplished by 
using radar-based navigation, which allowed robotic carriers to 
maneuver containers across the port terminal.
    Similarly, the Port of Rotterdam, the largest seaport in 
Europe, has adopted automated operations in collaboration with 
Maersk, which is a private shipping company.
    Around the world, ports are working with stakeholders from 
the private sector to take advantage of the innovative 
technologies. This is allowing these ports to better manage 
wait times and move cargo.
    Looking ahead, the Panama Canal expansion is likely to be 
completed in the coming months. The canal's expansion will 
allow it to facilitate container ships with almost triple the 
current capacity. America must ensure that its ports are ready 
for this massive expansion of container vessels.
    Last month, Senator Booker and I convened a hearing with 
our government stakeholders to gather more information about 
our maritime network. We heard from the U.S. Merchant Marine 
Academy on how we can strengthen sexual assault prevention 
programs within that academy. We hope to keep our midshipmen 
safe by including meaningful reforms to address this challenge 
in the MARAD reauthorization bill.
    The Department of Transportation's Office of Inspector 
General discussed ways that Congress can strengthen the 
management of important programs and resources at MARAD. We are 
currently working on legislation to help address MARAD's at 
management gaps and ensure it can focus on the important 
mission of facilitating our critical maritime shipping 
transportation system.
    Today, we will hear from a knowledgeable panel of witnesses 
with diverse and informative views on the state of the maritime 
industry. Today's hearing will focus on the current trends, 
opportunities, and challenges. This will help us to understand 
how Federal policy can enhance the performance of our maritime 
transportation system.
    We are fortunate to have shipping carriers, maritime 
laborers, port representatives, and agriculture producers 
represented on our panel this morning. And I thank each of you 
for joining us today, and I look forward to a very good 
discussion on these critical transportation matters.
    With that, I would now invite Senator Booker to offer his 
opening comments.

                  U.S. SENATOR FROM NEW JERSEY

    Senator Booker. Thank you very much, Chairman Fischer.
    I want to begin, as I always do, with thanking her for her 
leadership and for holding this hearing on this critical role 
in maritime industry in our Nation and, frankly, to deal with 
our Nation's economy.
    This hearing is timely. As folks know, Senator Fischer and 
I are preparing to introduce our second maritime 
reauthorization bill. I am pleased to see another truly 
bipartisan piece of legislation that is moving forward in this 
committee, and I am proud to work with Senator Fischer on 
leading on what I think is a good model, not just for the 
urgency within the Commerce Committee, but finding bipartisan 
solutions in the Senate as a whole.
    This country's ports, vessels, and Merchant Marine forces 
are absolutely critical to our Nation's economic growth and 
military preparedness and disaster relief efforts. These are 
things I know personally.
    Our Nation's ports and maritime terminals, as well as the 
rail and road networks that support them, are essential for 
getting American products to overseas markets and generating 
U.S. jobs and driving economic growth.
    Residents of my state of New Jersey know this well. New 
Jersey is home to the Port of New York and New Jersey, which 
has moved more than 120 million tons of cargo every year in 
recent years and is the busiest port on the East Coast. 
Overall, New Jersey ports and trade industries that rely on 
them employed 285,000 people in New Jersey in 2014 and 
generated $60 billion in family incomes and business revenues 
in the New Jersey economy.
    Over the past 5 years, the public and private sector have 
helped to fund more than $2 billion in infrastructure 
improvements as the Port of New York and New Jersey is 
expanding its capacity in the region. This is in addition to 
the $1.3 billion invested by the port to raise the roadway of 
the Bayonne Bridge to allow the larger and taller ships that 
serve our region.
    While investments like these are essential and offer long-
term benefits to our regional economy, they cannot by 
themselves reduce the congestion caused by our Nation's 
outdated infrastructure. That is why I am proud to work with 
this committee and proud of the work that this committee did 
last year to pass the FAST Act and establish the Nation's first 
multimodal freight grant program. While this was a substantial 
achievement, and, again, a bipartisan effort by this committee, 
more work remains to be done.
    For many decades, the United States has relied upon the 
U.S. Merchant Marine, with its fleet of commercial vessels and 
crew of U.S. mariners to assist the military during times of 
war or national emergency. But as the U.S. international fleet 
has diminished, U.S. mariners lose employment and the 
opportunities to remain certified to crew large ocean-going 
vessels. As we lose U.S. mariners, we lose sealift capacity to 
support the U.S. military during times of war or national 
    However, there are ways for us to combat this decline, 
practical ideas such as continuing to support and increase 
funding of MARAD's maritime security program, which ensures 
that 60 military U.S. vessels are readily available to carry 
military cargos.
    We also need long-term strategies that bolster and support 
all sectors of the U.S. maritime industry, including protecting 
the Jones Act, which provides our country with a skilled 
domestic maritime workforce, aids shipbuilding throughout the 
country, and ensures a domestic fleet to support our country in 
times of need.
    I look forward to hearing from each of our witnesses today 
about these and other issues that the Committee should consider 
as we work to improve our Nation's maritime transportation 
system. This is something that all Senators are concerned 
about, and I am glad that we are holding this forum now.
    Senator Fischer. Thank you, Senator Booker. I would now ask 
my friend and colleague from Mississippi, Senator Wicker, to 
introduce one of his constituents, who is a member of our panel 


    Senator Wicker. Thank you, Madam Chair.
    It is an honor to actually be here and introduce Mark 
    But before I do that, I want to say we are all busy with 
hearings today. This is the first time in 8 years in the Senate 
that my staff has actually made me a chart, ``R.W. Hearing 
Locations for April 20'' to help me get from one hearing to the 
other in the most efficient manner.
    Senator Wicker. So needless to say, I will not be able to 
stay here for the entire hearing today, but I have a chart to 
get me around.
    I am pleased to introduce Mark McAndrews. Our witness sheet 
says that he is Port Director of the Port of Pascagoula, 
Pascagoula, Mississippi, and that he has been for the past 15 
    But I want you to also know that he has done such a good 
job, and he is held in such high esteem among his peers, that 
earlier this month he was elected Chairman of the Board for the 
American Association of Port Authorities, AAPA. With more than 
3 decades of maritime service, Mark McAndrews is an excellent 
choice for this role.
    He is a graduate of the Merchant Marine Academy. He is a 
U.S. Coast Guard-licensed Merchant Marine officer and a retired 
Captain from the Navy Reserve.
    Mark's success at port administration has benefited from 
his work in both the public and private sector. This will no 
doubt be true for his AAPA leadership as he works with members 
to address port challenges.
    Mark is also active in a number of professional 
organizations. He serves as Chairman of the Gulfport 
Association of the Americas, Chairman of the AAPA Gulf Caucus. 
He is a Member of the Executive Committee of the Mississippi 
Coast Foreign Trade Zone, and is on the Board of Directors for 
the Mississippi Water Resources Association and the Mississippi 
Intermodal Council.
    So, Madam Chair, thank you very much for allowing me to 
recognize and introduce a friend and Mississippian who makes us 
all proud, Mark McAndrews.
    Senator Fischer. Thank you very much, Senator Wicker.
    With that, Mr. McAndrews, welcome. If you would like to 
give us your opening comments?




    Mr. McAndrews. Thank you very much. Chairman Fischer, 
Ranking Member Booker, members of the Committee, thank you for 
the opportunity to speak at this hearing.
    As the Senator stated, I am Mark McAndrews. I am the Port 
Director in Pascagoula, Mississippi, and I am the Chairman 
Elect of the American Association of Port Authorities 
representing our U.S. ports today.
    U.S. seaports represent a vital economic engine of our 
national economy, responsible for over 23 million U.S. jobs and 
$321 billion in Federal, State, and local tax revenue. U.S. 
deepwater ports generate $4.6 trillion in total economic 
activity, 26 percent of the Nation's economy.
    ``Port congestion'' is a term that we have all become 
familiar with. However, it is important to remember that it 
means different things to different stakeholders. Discussions 
regarding congestion have been very worthwhile, but the reality 
is that the industry is changing rapidly.
    At the same time, trade demands and population growth in 
our country are also changing. In the middle of these massive 
changes are ports and their governing authorities.
    Business decisions made by the shipping industry have 
directly impacted how ports operate and are having a rippling 
effect throughout our freight network. Ships using our ports 
are now bigger and getting even bigger still. Ships are as long 
as a skyscraper and as wide as a 10-lane freeway.
    In addition to larger vessels, the four largest ocean 
carrier alliances move approximately 90 percent of ocean 
freight shipping cargo, which puts multiple company shipments 
on a single vessel and can include up to seven terminals when a 
vessel docks.
    Our ports are facilitators in the supply chain. Larger 
ships and these mega-alliances have a cascading effect when 
they arrive in our ports, such as needing larger cranes to 
offload containers, more chassis to move the containers out, 
and adjusting gate times to address the changing workload.
    Last year, container traffic at U.S. ports hit a record 
high of nearly 47.7 million containers, a 14 percent increase 
over the last 10 years. However, containers are only one aspect 
of a bigger picture. Millions of tons of noncontainerized cargo 
are shipped annually through the U.S. ports, commodities such 
as steel, coal, iron ore, cement, grain, soybeans, fertilizers, 
the raw and semi-processed inputs so vital to the functioning 
and health of our national economy.
    Energy commodities such as petroleum and coal are the 
dominant commodities by weight, accounting for 54.2 percent of 
the 1.4 billion tons of foreign trade cargo handled at U.S. 
    Additionally, Ranking Member Nelson's Florida seaports have 
seen historic growth in cruise passengers, with almost a 20 
percent increase in 6 years, reaching more than 15 million 
passengers, including the world's top three ports.
    Rising freight volumes on all coasts mean we must upgrade 
our waterside and landside infrastructure. Some investments are 
already occurring.
    Earlier this month, AAPA released its port plan 
infrastructure investment survey, which revealed ports and 
private sector partners will invest $155 billion over the next 
5 years. This is over three times the amount from the $49 
billion reported in its 2011 survey.
    Waterside funding and policy, while not under this 
committee's jurisdiction, is likewise important and should be 
approached systematically with landside funding and policy 
issues. A great start has been made with the FAST Act, which 
provided $11 billion of dedicated funding to freight, and we 
thank Senator Cantwell and this committee for their work on 
multimodal funding.
    However, of the $11 billion, only $500 million is 
multimodal-eligible, and up to 10 percent of the freight 
formula funding. To put multimodal needs into perspective, last 
year's AAPA state of freight survey identified $29 billion in 
port-supported projects and 46 multimodal projects. Long-term 
multimodal funding is critical, and we encourage you to start 
looking at funding solutions.
    AAPA has endorsed the concept of a 1 percent waybill fee as 
an equitable approach to provide immediate and long-term 
funding for multimodal freight infrastructure challenges.
    In order for our ports to perform efficiently, Customs and 
Border Protection must be adequately funded and staffed. In 
2015, the last time CBP was funded to hire additional staff, 
only 10 of 2,000 authorized staff were assigned to seaports. 
While this may sound like an appropriations or homeland 
security issue, it is ultimately a supply chain issue.
    AAPA has been supportive of both U.S. DOT's TIGER program 
and MARAD's Strong Ports program, which is helping ports plan, 
finance, and coordinate projects, including shortsea shipping 
and the marine highway.
    The Build America Transportation Investment Center, or 
BATIC, which was codified in the FAST Act, can be a tool for 
ports to explore ways to access private capital and public-
private partnerships.
    Additionally, cybersecurity continues to be one of our top 
issues. Within our membership, 97 percent of our ports meet 
regularly with the Coast Guard on cybersecurity, and 67 percent 
of our ports have formed a cybersecurity working group in their 
area maritime security committee.
    I appreciate this opportunity to appear before you, and I 
would be happy to answer any questions.
    [The prepared statement of Mr. McAndrews follows:]

Prepared Statement of Mark McAndrews, Port Director, Port of Pascagoula 
           and Chairman Elect, American Association of Port 
                           Authorities (AAPA)
    Chairman Fischer and Ranking Member Booker and members of the 
Committee, thank you for holding this important hearing. I am Mark 
McAndrews, the Port Director of the Port of Pascagoula and also the 
Chairman Elect of the American Association of Port Authorities (AAPA).
    AAPA is the unified and collective voice of the seaport industry in 
the Americas. AAPA empowers port authorities, maritime industry 
partners and service providers to serve their global customers and 
create economic and social value for their communities. Our activities, 
resources and partnerships connect, inform and unify seaport leaders 
and maritime professionals in all segments of the industry around the 
western hemisphere. This testimony is on behalf of our U.S. members.
    U.S. Seaports represent a vital economic engine of our national 
economy; responsible for over 23 million U.S. jobs and $321 billion in 
federal, state and local tax revenue. U.S. deep-water ports also 
generate $4.6 trillion in total economic activity, or 26 percent of the 
Nation's economy.
    First, I'd like to talk about some of the national trends through 
the lens of AAPA. Port congestion is a term that we have all become 
familiar with, however it means different things to different 
stakeholders, Congress, the Administration and most importantly to the 
communities in which ports are a part of.
    Last year, the Federal Maritime Commission (FMC), under the 
leadership of Chairman Cordero, led a series of diverse regional 
roundtables on port congestion, which started the national 
conversation. Recently, the Administration, led by the Commerce, Labor 
and Transportation Departments have sought to replicate those regional 
roundtables in Baltimore last month and in Los Angeles last week. This 
Committee, last year, also attempted to examine port congestion.
    These discussions have been worthwhile, but the reality is that the 
industry is changing rapidly. At the same time, the demands and 
population growth in our country are also changing--and in the middle 
of these massive changes are port authorities.
    Business decisions made by the shipping industry, have directly 
impacted how ports operate and are having a rippling effect throughout 
our freight network.
    Ships using our ports are now bigger--and getting bigger. Now ships 
are as long as a skyscraper and as wide as a 10-lane freeway.
    In addition to larger vessels, the four largest ocean alliances 
move approximately 90 percent of ocean freight shipping cargo, which 
puts multiple company shipments on a single vessel and can include up 
to seven terminals when a vessel docks.
    And if you are following the industry news, the makeup of these 
mega alliances could further change by the end of this week--this is 
how fast our industry is changing.
    Our ports are facilitators of the supply chain. Larger ships and 
these mega-alliances have a cascading effect when they arrive at our 
ports, such as needing larger cranes to off load containers, more 
chassis to move the containers out and adjusting gate times to address 
the changing work load.
    Last year, container traffic at U.S. ports hit a record high of 
nearly 47.7 million containers, a 14 percent increase over the last ten 
    However, containers are only one important aspect of a much bigger 
    Millions of tons of non-containerized cargo are shipped annually 
through U.S. ports--commodities such as steel, coal, iron ore, cement, 
grain, soybeans, fertilizers--the raw and semi-processed inputs so 
vital to the functioning and health of our national economy.
    Energy commodities such as petroleum and coal are the dominate 
commodities by weight, accounting for 54.2 percent in 2014 of the 1.4 
billion short tons of foreign trade cargo handled at U.S. ports.
    Additionally, in Ranking Member Nelson's state, Florida seaports 
are home to the three top cruise ports in the world and have seen 
historic growth in cruise passengers with almost a 20 percent increase 
in six years--reaching more than 15 million passengers.
    But rising freight volumes on all coasts and the Great Lakes, means 
we must upgrade our waterside and landside infrastructure in order to 
accommodate these larger ships and freight surges.
    Some of the investments are already occurring. Earlier this month, 
AAPA released its Port Planned Infrastructure Investment Survey, which 
revealed ports and private sector partners will invest $155 billion 
over the next five years. This is over triple the amount from the $49 
billion reported in the 2011 survey.
    To put this into a broader perspective; over the next five years, 
Federal investments in the freight network for BOTH landside and 
waterside could be only $24.825 billion.
    And this is a best case scenario.
    While waterside funding and policy is not under this Committee's 
jurisdiction, it cannot be ignored. We must take a freight system 
    A great start has been made with the FAST Act, which provided $11 
billion of dedicated funding to freight.
    We thank Senator Cantwell and this committee for their work on 
multimodal funding. However, of the $11 billion, only $500 million is 
multimodal eligible--and up to 10 percent of the freight formula 
    To put multimodal needs into perspective, last year's AAPA State of 
Freight survey, identified $29 billion in port supported projects and 
46 multimodal projects. We hope to see a healthy portion of the 
Fastlane grants and 25 percent of the TIGER grants be devoted to 
maritime related projects.
    Additionally, many of these port projects have an on-dock rail 
component. 73 percent of our ports have on dock rail, but of these 
systems are out-of-date and need to be significantly enhanced and 
reinforced, as well as integrated with new technology to accommodate 
rising shipping volumes.
    Long term multimodal funding is critical and we encourage you to 
start looking at solutions. AAPA has endorsed the concept of a 1 
percent waybill fee as an equitable approach to provide immediate and 
long-term funding for multimodal freight infrastructure challenges. 
This was based on legislation, H.R. 1308 Economy in Motion: The 
National Multimodal and Sustainable Freight Infrastructure Act, 
introduced by Representatives Alan Lowenthal (D-CA). The FAST Act 
provides a great start to fund freight, but we need a more sustainable 
funding source to build out our multimodal freight network.
    On the operational front, the Federal Government has a vital role 
to play with freight flow performance.
    In order for our ports to perform efficiently CBP must be 
adequately funded and staffed. In 2015, the last time CBP was funded to 
hire additional staff only 10 of 2000 staff were assigned to seaports.
    This may sound like an appropriations or Homeland Security issue, 
but it is a supply chain problem.
    All of these issues and the gap in Federal investment needs 
collectively contribute to port congestion. It is not a single issue 
and there is not a single solution.
    As the Port Director of Pascagoula I see how these trends make an 
impact on people who live in my region. Our two harbors include a 
combination of public and private terminals handling in excess of 32 
million tons of cargo through the channel annually. The Port is the 
largest seaport in Mississippi, and ranks nationally in the top 20 
ports in foreign cargo volume.
    Ports, such as port Pascagoula, are adjusting to the surge in 
energy commodities. Even before Congress lifted the ban on crude oil 
exports, Gulf Coast ports and their private sector partners were 
planning massive investments in energy infrastructure.
    Some examples of the type of investments being made at my port and 
in the Gulf region are Chevron Pascagoula Refinery's $1.4 Billion 
Pascagoula Base oil plant constructed in 2014 that produces 25,000 
barrels per day of premium base oils.
    Also, the Gulf LNG Energy, LLC, has as filed an application (with 
FERC) to add liquefaction and export capabilities to the Gulf LNG 
terminal in the Port of Pascagoula which is an $8 Billion investment.
    Finally, at the Port of Pascagoula Public Terminals we, the port 
and our private sector partners are developing a $30 Million biomass 
export facility.
    AAPA has been supportive of both USDOT's TIGER program and MARAD's 
Strong Ports program which is helping ports plan, finance and 
coordinate projects, including short sea shipping and the marine 
    MARAD's focus on infrastructure started with the TIGER grants. 
Since its inception in 2009, TIGER maritime projects have received over 
$500 million in Federal funding while leveraging $700 million in 
additional funding. The TIGER program has awarded $1.1 billion in grant 
funding to 66 freight projects across the country. Other TIGER funded 
freight projects have also supported and enhanced the freight network 
that carries rail, truck and maritime cargo.
    My port received a rail TIGER grant which results in the relocation 
of the Mississippi Export Rail Line, which winds through the cities of 
Moss Point and Pascagoula, to a more efficient rail route into the 
port. The project will also net closure of 16 rail crossings through 
the two cities.
    But the TIGER program has been more than just a discretionary 
program to the port industry. It is the first program that ports are 
eligible and is multimodal. It also brought ports into the surface 
transportation fold, which meant that whether you received a TIGER 
grant or not you were encouraged to coordinate a project with your 
state and local MPO before submitting the project. It meant that ports 
were becoming part of the planning process and freight was beginning to 
get a seat at the table.
    Also, the Build America Transportation Investment Center or BATIC 
which was codified in the FAST Act can be a tool for ports to explore 
ways to access private capital in public private partnership.
    Finally, cybersecurity continues to be one of the top issues. 
Within our membership. 97 percent of our ports meet regularly with the 
Coast Guard on cybersecurity and 67 percent of our ports have formed a 
cyber security working groups with their Area Maritime Security 
    I appreciate this opportunity to appear before you and I am happy 
to answer any questions.

    Senator Fischer. Thank you.
    Next, we have Mr. Perry Bourne, Director of International 
Transportation and Rail Operations of Tyson Fresh Meats.
    Thank you, sir, for being here today. If you would like to 
give your opening statement?




    Mr. Bourne. Good morning, Chairman Thune and Chairwoman 
Fischer. Thank you for this opportunity to share my thoughts 
this morning with regard to the amendment of SOLAS regulations 
that will become effective shortly, July 1, 2016.
    I am here representing the Agriculture Transportation 
Coalition and all of its members. My name is Perry Bourne. I am 
the Director of International Transportation and Rail 
Operations for Tyson Foods. Tyson is a major U.S. exporter of 
meat protein worldwide with 110,000 team members operating in 
26 states and 11 countries.
    Today, I want to address the SOLAS, Safety of Life at Sea, 
amended regulation and its impact on U.S. exporters. This 
regulation was instituted by the International Maritime 
Organization with the intent to improve safety and life at sea.
    Carriers are of the opinion that some shippers worldwide 
are overloading containers and underdeclaring loads that they 
are putting on ships. The Coast Guard denies this and is saying 
that it is not a problem for the U.S. outbound trade.
    The biggest concern with the new SOLAS is it shifts weight 
notification of the combined container assets and the gross 
cargo weight solely to the exporter to create a verified gross 
mass or what is referred to as VGM. Although the Coast Guard 
tells exporters we have been and still are compliant with the 
new SOLAS regulations, ocean carriers take a more rigid 
    If implemented under a strict interpretation, the amended 
SOLAS regs can and will cause major congestion problems at the 
    Here's the problem. Despite the Coast Guard's position that 
U.S. exporters are compliant with the new SOLAS regulation, 
there are only two pathways to compliance identified by OCEMA, 
which stands for the Ocean Carriers Equipment group.
    Both are problematic. One, weighing all containers is 
impossible with current port infrastructure. And two, requiring 
exporters to be responsible for empty container weights under 
strict timelines doesn't reflect current port realities.
    Let me explain why. Exporters know and have provided the 
gross weight of their cargo for years. In addition, the SOLAS 
amendment calls for exporters to identify the empty weight of 
the carrier's container asset, which we don't own or operate or 
lease. This weight has previously always been provided by the 
ocean carrier under the original SOLAS regulation in 1994, as 
they already have that information in their data systems.
    The real issue is twofold, timing of when the empty 
container weight information is made available by the ocean 
container carrier, and deadlines when ocean carriers and 
terminals require this weight information in order to have the 
cargo loaded on the vessel that it was booked for.
    If terminals haven't received weight details, many 
terminals on the U.S. East Coast and West Coast have stated 
they will turn truckers away, preventing delivery of the cargo 
and creating bottlenecks at the terminal gates.
    I want to give you an example of chilled meat shipments 
that we make from numerous plants, including Lexington, 
Nebraska, and Dakota City, Nebraska. This cargo is all 
transload. On the chilled, it has a shelf life sensitivity, 
ships weekly from states like Nebraska and Kansas Wednesday, 
Thursday, and Friday each week for delivery Sunday and Monday 
at the U.S. West Coast ports. Exporters are trying to get this 
just-in-time cargo delivered to vessels which have cutoffs 
Monday at 4 p.m. for sailings Tuesday.
    According to the OCEMA carrier group, who has established 
the operating rules best practices, exporters must deliver the 
combined gross weight and empty container weight by noon the 
day of cutoff. This information in most cases is known late in 
the process.
    Every week, we have 10 percent-plus of our chilled cargo 
that requires late gates on Tuesday morning. As a result, this 
cargo would now be rolled to the next week's ships under the 
``no VGM, no load'' policy.
    On chilled, if the exporter misses the required sailings, 
the customers won't accept it the following week on the next 
sailing, again, because of shelf life issues. This would cause 
lost sales of highly valued meat that would either have to be 
airfreighted to destination or freeze the cargo and sell it as 
frozen at much reduced values.
    The bottom line is the customer doesn't get what they want, 
and they are forced to replace the missing chilled cargo on the 
open market at a loss to them.
    As you can see, this amended SOLAS process adds no value 
and costs exporters more to deliver. Thus, the exporters 
experience lost sales, as we did during the 2014-2015 port 
congestion issue that was mentioned by Senator Fischer earlier.
    Commodity products like the various AgTC members sell and 
distribute overseas can all be sourced from other countries--
that is a very critical point--like Australia, Brazil, the EU, 
and other countries.
    I have a couple solutions that I would recommend that the 
Committee look at and consider seriously.
    We need carriers to sit down and work with exporters to 
develop a deliverable solution and the Committee's support for 
that dialogue. Barring no success with this effort, we would 
need this committee to request the Coast Guard to go back to 
the IMO and clarify there are multiple ways to satisfy the 
SOLAS regulation, as we have been repeatedly told by the U.S. 
Coast Guard.
    Thank you.
    [The prepared statement of Mr. Bourne follows:]

    Prepared Statement of Perry M. Bourne, Director, International 
Transportation and Rail Operations, Tyson Foods, Inc. on behalf of the 
                  Agriculture Transportation Coalition
Background on the Agriculture Transportation Coalition (Ag-TC)
    The AgTC is the voice for the U.S. exporter--from small farmers to 
the largest agriculture merchants across the country. The AgTC's 
primary objective is assuring transportation service that allows U.S. 
agricultural exporters to be competitive in the international market.
Background on Tyson Foods, Inc.
    Tyson Foods, Inc. is one of the world's largest food companies and 
a major producer of protein for the U.S and global meat markets with 
sales in FY 2015 exceeding $40 Billion. We produce poultry, beef, pork 
and value-added branded protein items for retail and foodservice 
markets within the U.S. and approximately 130 countries. We have 45 
poultry plants, as well as 12 beef, nine pork, one turkey and 38 
prepared food facilities. Tyson Foods has operations or sales offices 
in 26 states as well as four international facilities in China and 
India. Tyson was the second largest U.S export reefer commodity protein 
shipper in 2015, with shipments in excess of 40,600 TEU's of reefer and 
another 11,400 TEU's of animal hides, skins and leather.
Issues impacting the U.S Maritime Industry
    My name is Perry Bourne and I am the Director of International 
Transportation for Tyson Foods, Inc., one of the Nation's largest food 
exporters. I am also pleased to be testifying on behalf of the 
Agriculture Transportation Coalition (Ag-TC), which represents a wide 
range of U.S. agricultural exporters. My testimony today will cover 
three issues regarding maritime shipping that AgTC and Tyson Foods 
believes are most important to U.S. exporters at the present time:

  1.  Safety Of Life At Sea (SOLAS) amended shipper weight 

  2.  Continued congestion at our U.S. West Coast Ports

  3.  Mega-Carrier Alliances
SOLAS Amended Shipper Weight Certification
    By far the most urgent issue facing shippers today is the impending 
SOLAS amendment. As this Committee is aware, the International Maritime 
Organization (IMO), the maritime arm of the United Nations, has been 
involved for decades with issues related to the safety of vessels and 
personnel while at sea. A consistent focus for the IMO has been 
ensuring the accurate reporting by shippers of their loaded cargo 
weight. This led to the original SOLAS regulation in 1994, which 
required shippers to provide accurate gross cargo mass on all 
containers. This process of reporting weights has been acceptable for 
all U.S. shippers, and shippers worldwide, for over two decades.
    In 2014, the IMO updated the SOLAS convention with a new amendment 
that is scheduled to take effect on July 1, 2016. Under the new 
amendment, shippers will not only be responsible for reporting the 
normal gross cargo weight (what shippers like Tyson Foods add to the 
containers owned by the carriers), but also for certifying the ``VGM'' 
or verified gross mass of each container (which includes the weight of 
the specific container provided by a carrier) prior to the cargo being 
loaded on the ship. Plus, a designated member of the shipper's staff 
must provide a written certification as to the validity of the reported 
    As you might expect, shippers like Tyson Foods and other members of 
the AgTC have serious concerns with being responsible for verifying the 
weight of shipping containers that we do not own, lease or operate. 
Fortunately, the U.S. Coast Guard, which has responsibility for 
ensuring U.S. compliance with SOLAS, has made clear on a number of 
occasions, including in testimony last week before the House Committee 
on Transportation and Infrastructure, that there are several ways for 
the ``VGM'' weight to be reported.
    It is our understanding that among the options the Coast Guard 
deems compliant is the ``Rational Approach'' that has been proposed by 
AgTC. Put simply, this would call for the shippers to continue 
providing the gross cargo mass added to a carrier's container and the 
carrier would provide the weight of their owned or leased container 
asset. This would represent the most efficient, and most accurate, 
method of determining the total ``VGM'' weight. The carriers knows 
their assets better than anyone and it is my understanding that many 
carriers already have this data in their system.
    The goal of the new SOLAS amendment is to promote more accurate VGM 
reporting and increase safety, a goal all shippers share. It is 
important to note that our current weight reporting is already held to 
strict requirements for accuracy under The Intermodal Safety Act and 
timely filing of export data to Customs and Border Protection. We 
adhere to the requirements developed by the SOLAS Convention of 1994. 
We are not aware of contentions that U.S. shippers have been 
responsible for any problems for the ocean carriers that would 
compromise safety at sea. With this record of compliance and safety in 
mind, we firmly believe the best way to assure safety in this area is 
to have the parties report on the assets under their control.
    Unfortunately, the ocean carriers, as represented by the World 
Shipping Council (WSC) and The Ocean Carrier Equipment Management 
Association (OCEMA) are insisting that the ``Rational Approach'' 
proposed by the AgTC, and acknowledged by the Coast Guard as compliant 
with SOLAS, is not an acceptable method of determining the ``VGM'' 
weight. They contend that the shipper must be responsible for verifying 
the weight of the containers owned or leased by their own members. I 
will not speculate on why the carriers have adopted such an inflexible 
position. But we can certainly predict the possible impacts at the 
ports if the carriers do not change their position and agree to a 
reasonable resolution of this issue.
    To illustrate the potential impacts, I will talk specifically about 
my company. Today, approximately 75-85 percent of Tyson Foods' protein 
products bound for export markets are shipped to the U.S. ports by 
domestic rail or truck. These products are then trans-loaded from the 
domestic conveyance to the ocean carrier's container. Tyson's plants 
and freezer facilities are located anywhere between 1100 and 2200 miles 
from the U.S. West Coast ports. When we book an export load for 
shipping, although the ocean carrier has the weight information of all 
their container assets in its database, the actual weight of the 
specific container assigned to Tyson's booking is not known at the time 
of loading.
    As a logistics professional, I appreciate and understand this fact. 
However, if the rules are going to be changed that require shippers to 
find a way of obtaining the specific weight information on a container, 
we will have to develop some method of obtaining this information in a 
timely manner from the carrier or from the trans-loader. The 
alternative, as I will discuss more below, is trying to obtain the 
actual container weight at the port, which risks missed sailings. In my 
view, it makes no sense to force the shipper to try and obtain 
information for a carrier that the carrier already has in its database. 
This builds unnecessary inefficiency into a system with existing 
    The cost of this inefficiency, and even more delays at the ports, 
is not theoretical. It will mean lost revenue for Tyson Foods and other 
shippers, particularly those of us who ship time sensitive products. To 
be specific, my company moves between 70-80 loads of chilled meat on a 
weekly basis. These loads are shipped Wednesday through Friday from our 
facilities and arrive by truck at the West Coast ports on Sunday and 
Monday. The cut-offs for delivery to the ocean carriers are Monday for 
a Tuesday sailing. Under the SOLAS ``Best Practices'' put forward by 
the ocean carriers, it states that vessels cutting off each night for a 
next day sailing must have the ``VGM'' weight reported by noon on that 
day. The reality of the export business is that each week shippers like 
Tyson are up against the carrier deadlines due to various transit 
problems and often require late gates from the carriers to deliver 
cargo to the ship early on Tuesday mornings, while the ship is still 
    However, if the SOLAS approach favored by the carriers is adopted, 
and Tyson Foods is unable to obtain the specific container weight for 
the ``VGM'' until the time of trans-loading, under the carriers' own 
rules any cargo trans-loaded late would have to be delayed for the 
following week's sailing and we would be required to air freight the 
cargo or forced to convert a chilled fresh product to a frozen product. 
All of these alternatives mean lost sales, and potential lost market 
share, in valuable export markets such as Asia. U.S. agricultural 
exporters are comprised of some of our most successful and globally 
competitive companies and commodity sectors. However, we cannot 
continue to grow our exports if we are faced with additional delays and 
increased costs at our ports.
    Fortunately, this does not need to be the case. The AgTC has put 
forward a common sense solution to comply with the new SOLAS amendment 
and the Coast Guard supports our position. We simply need the ocean 
carriers to sit down with us and agree to a sensible arrangement so 
that our ports run as efficiently and safely as possible. We need to be 
talking about ways to grow our exports, to the benefit of shippers, the 
ports and its workers, as well as the ocean carriers. We ask for this 
Committee's support in insisting on a solution to SOLAS that is both 
compliant and supportive of U.S. export growth.
Continued Congestion at our U.S. West Coast Ports
    Although the situation is much improved from last year's severe 
problems, port congestion continues at some of the U.S West Coast 
terminals. For a variety of reasons, we are still experiencing delays 
on a regular basis a full year after the resolution of the contract 
disputes. As a shipper, it is not my responsibility to resolve the 
problems within the ports caused by infrastructure, trucking or labor 
issues. I have food products to move, and as we have discussed, some of 
it is very time sensitive. If we don't deliver what our customers want 
on time, we develop a reputation, both as suppliers and as a source 
country, of being unreliable. Our customers can and do buy similar 
protein products from Australia, Brazil and the European Union 
countries. The United States is not the only game in town.
    The issues that lead to consistent problems and congestion at the 
ports must be examined and addressed from a big-picture perspective. 
There needs to be accountability across the board from carriers, 
terminals, labor, port authorities and others in the overall supply 
chain to improve efficiencies and solve problems. I applaud the efforts 
of FMC Commissioner Rebecca Dye for her initiative to bring together 
industry working groups of stakeholders in an effort to identify the 
key drivers causing the persistent delays at the U.S ports and to 
propose meaningful solutions that will make our ports the most 
productive and efficient in the world. I am also encouraged by the 
Congressional proposals to establish meaningful efficiency metrics on 
port performance and the handling of cargo. We need data and metrics to 
identify key issues and the systemic problems that must be addressed. 
Again, our goal should be the best port infrastructure in the world. I 
urge this Committee to focus on ways that we can better understand the 
problems at our ports and help us with long-term solutions.
Mega-Carrier Alliances
    From our perspective, many of the issues that have beset the U.S. 
West Coast ports in particular have arisen from the consolidation of 
carriers into these foreign flagged mega-alliances. As an example, for 
a given Tyson Foods shipment from the Oakland's port to Japan we may 
have booked our cargo with Carrier A, but as part of an alliance that 
carrier will not be providing the actual vessel the alliance will use 
for that week's sailing. In fact, it is another member of the alliance, 
Carrier B, which will be providing the vessel located at a different 
terminal. Regardless, Tyson Foods must still have a port trucker 
retrieve the empty containers from Carrier A's terminal, because we 
still must use the containers of the carrier we booked with, then those 
containers must rendezvous with our cargo to be trans-loaded at the 
port. Finally, our trans-loaded cargo has to be transported over to 
Carrier B's terminal, where the actual ship is located.
    Now, think about this process being repeated over and over at a 
port in a given day for much of the cargo that is coming in. Suddenly 
you have much more congestion at the port than in the past. Increased 
congestion at ports, which is already a recurring problem, can mean 
delays, added costs and even missed sailings. This hampers U.S. export 
growth. We would like to see more thorough review of these foreign 
carrier alliances by the FMC to ensure that their actions do not result 
in a logistics network within the ports that adds more truck trips and 
congestion to an already overloaded port infrastructure. From our 
perspective, this is exactly what is happening. In recent years, we 
have already seen fewer ships and sailings with the advent of 
supersized vessels of up to 20,000 TEU's and reduced infrastructure as 
the carriers have eliminated their own of chassis operations. Now the 
addition of the alliances and shared sailings has added even more to 
the shore-side costs of shippers trying to deliver cargo to the ships.
    I urge this Committee to increase its oversight of the impacts of 
carrier alliances on U.S. exporters and to encourage the FMC to 
undertake a full review of these alliance activities.
    As my testimony has made clear, we have significant challenges 
facing us that can further disrupt U.S. exports and hurt the American 
economy. However, this is also a time of great opportunity. We are 
adding millions of customers for U.S. agriculture and food products 
around the world each year and we are well positioned to serve these 
customers if our export infrastructure is up to the job. I look forward 
to working with this Committee and all stakeholders to reach solutions 
so that we can serve our global customers. I thank the Committee for 
this opportunity and welcome any questions.

    Senator Fischer. Thank you very much.
    Next, we have Mr. Michael Roberts, Senior Vice President 
and General Counsel of Crowley Maritime Corporation.
    Welcome, sir.




    Mr. Roberts. Thank you, Chairwoman Fischer, Senator Booker, 
members of the Committee. Thank you for convening this hearing 
on this industry. We appreciate it, and thank you for inviting 
me to testify.
    The American maritime industry is a substantial and vital 
component of the American and global economy. It is very large 
and diverse. In domestic shipping alone, U.S. shipyards, U.S. 
vessels, and mariners contribute $100 billion in economic 
activity and a half million jobs.
    I would like to discuss this morning three issues that are 
included in my written statement: Puerto Rico, the domestic 
petroleum shipping industry, and U.S. participation in 
international shipping, if I have time.
    First, Puerto Rico. My company has participated in the 
Puerto Rico trade for 60 years. I have personally been involved 
for 25 years.
    It is a spectacularly beautiful part of the United States. 
It has jaw-dropping scenery, amazing restaurants, and a 
wonderful culture.
    It is also an economic train wreck after 10 years of a 
recession. As many as 5,000 Puerto Ricans per month are leaving 
the island as a result by one-way plane tickets and relocating 
to the mainland.
    One of the indicators we see in our business is the number 
of used cars being shipped northbound from Puerto Rico to the 
mainland. In years past, we would carry about an average of two 
automobiles a day, usually for retirees and for students coming 
to the mainland for study.
    In the last couple years, we have handled on average about 
22 cars per day. These are typically families with children and 
their luggage dropping the car off at the terminal in San Juan, 
taking a taxi to the airport, and leaving the island for good. 
It can be a heart-wrenching scene and a sad commentary on the 
position of the island, as it is today.
    The Puerto Rican government did what governments do. They 
borrowed money to pay the bills in the hopes that something 
would change and hard decisions could be avoided. Each year, 
the bills got larger to pay back the debt. And as the needs of 
the Puerto Ricans grew, we have reached a breaking point.
    What is striking here, and what makes congressional action 
on Puerto Rico essential, is that unlike any other part of the 
United States, there is not a mechanism in place to work out 
Puerto Rico's debt in an orderly manner. We support some kind 
of restructuring mechanism as well as a board to help 
reestablish financial accountability and other measures that 
are under consideration.
    A handful of House Members have advocated a Jones Act 
exemption in connection with this legislation, something we 
vigorously oppose for reasons outlined in my written statement. 
Such a measure would not help Puerto Rico and, in fact, do 
serious harm to Puerto Rico, and it would absolutely destroy 
commercial shipbuilding in this country. It would cut the legs 
out from under two companies, Crowley being one, that have 
shown leadership in investing in this market, building two 
vessels in Pascagoula for that market, LNG-powered vessels.
    It bears emphasizing that these are unique ships, 
prototypes for the world as a transition to LNG power.
    Puerto Rico faces serious problems and needs serious 
solutions, not some token provision that is ideologically 
driven and has nothing to do with the situation on the ground 
in Puerto Rico.
    The second issue is the domestic tanker industry. The shale 
oil boom created a shipbuilding renaissance in America with 
dozens of new vessels delivered or on order, nearly all of them 
intended to handle crude oil. This is great news. For the first 
time in my career going back to 1984, the maritime workforce 
has seen a sustained expansion both in shipbuilding and in the 
American mariners needed to operate the vessel.
    It has created some challenges in finding qualified people. 
But frankly, those are nice problems to have.
    Two relatively recent events have moderated or reversed 
this trend. One is the drop in crude oil prices, which has 
brought further exploration and production work to a crawl. A 
very large segment of the American maritime industry that 
provides services in support of offshore development has been 
in a tailspin, as a result. While the government shouldn't try 
to control the price of oil, regulations should promote 
responsible development of offshore resources.
    Second is the change in law to allow crude oil exports. As 
noted, these vessels have been ordered and contracts have made 
under a legal framework that did not allow crude oil exports. 
We don't know what will happen as a result of this change.
    There are reasons to believe the impacts may be manageable, 
but there is also the possibility of very serious disruption in 
trading patterns. It is almost certain that any change in the 
markets would not be favorable to U.S. flag operations. So we 
are keeping a very close eye on this, and we will keep you 
informed as it moves forward.
    Thank you again for your interest in our industry, and I 
look forward to your questions.
    [The prepared statement of Mr. Roberts follows:]

  Prepared Statement of Michael G. Roberts, Senior Vice President and 
                General Counsel, Crowley Maritime Corp.
    Chairwoman Fischer, Ranking Member Booker and Members of the 

    Thank you for the opportunity to appear today to offer the 
perspective of American shipping companies on the state of the U.S. 
maritime industry. Attached to this Statement is a summary of Crowley 
Maritime Corp. and its current operations, as well as a brief 
biography. Crowley is one of the leading American maritime companies, 
operating more than 300 vessels in diversified services. It has about 
5,300 employees, including 2,100 U.S. merchant mariners. These mariners 
work on U.S. flag vessels domestically and around the world. They live 
in 46 of the 50 states (including one in Nebraska and 31 in New 
Jersey), Puerto Rico, Guam, and the U.S. Virgin Islands. These are the 
men and women America relies upon to operate the vessels that supply 
our military personnel overseas. Crowley also leads in deploying new 
American-made vessels, with about $2 billion invested in recent years 
in modern tank vessels, container/ro-ro ships, high-powered tugs and 
heavy deck barges.
    This Statement provides updates on selected issues involving the 
American domestic and international maritime industry, and a brief 
review of key policy issues. It focuses on segments of the industry in 
which Crowley is substantially involved, including domestic tanker and 
liner businesses (Crowley is a market leader), international container 
shipping (strong regional carrier), and offshore development 
(substantial operations). It does not address other important segments 
in which we are not involved (e.g., passenger, dry bulk, international 
tanker, etc.).
    A brief contextual note--domestic and international maritime 
markets are discussed separately because very different legal and 
regulatory systems govern domestic and international shipping. This is 
important in understanding why those markets may have different 
economic conditions, and in considering policy choices in this area. 
``Normal'' regulatory principles apply to domestic shipping in the 
sense that those who operate in American domestic trades must obey 
American laws. Ships must be registered under the U.S. flag, which 
means that in a legal sense, the vessels are considered a part of 
American sovereign territory. The ship owner and all involved must 
comply not only with rules that apply particularly to the maritime 
industry, but also to rules applicable to American businesses 
generally. This includes immigration (officers and crew of a U.S. flag 
ship must be American citizens), employment, environmental, safety, 
tax, and other laws.
    Because ships in international trade do not operate within any 
single national jurisdiction, ship owners can simply pick the 
jurisdictional home of every element of their business, including most 
importantly, where their ships are registered.\1\ This is not permitted 
in any domestic service business. For example, a restaurant or factory 
owner cannot plant the flag of another country at his/her facility in 
Lincoln and declare it to be no longer part of America, so that they 
can reduce costs, replace American workers with foreign workers, 
eliminate U.S. tax liability, etc. Because of the Jones Act and other 
``cabotage'' laws in the U.S. and other countries, domestic shipping, 
aviation, and other service industries are governed by ``normal'' 
regulatory principles, i.e., the laws of the country in which they 
    \1\ Ship owners usually choose jurisdictions that minimize tax and 
regulatory burdens. According to a 2010 UN report, the top five 
registries for international shipping are: Panama, Liberia, Marshall 
Islands, Hong Kong, and Greece. These jurisdictions, which account for 
.4 percent of world population, register more than 50 percent of the 
world's tonnage. U.S. flag vessels (including domestic and 
international) accounted for 1 percent of world tonnage, while U.S. 
population accounts for about 4.5 percent of the world total.
Domestic Shipping Markets
    America has a large and diverse fleet of vessels serving its 
domestic commerce--about 40,000 vessels, providing employment to nearly 
500,000 Americans, and about $100 billion in economic activity. This 
includes some 5,000 towing vessels, and 27,000 barges in river and 
coastal trades; thousands of vessels supporting offshore development; 
about one hundred ocean going self-propelled vessels, and dozens of 
large tug-barge units (ATBs); and other specialty vessels. The 
contribution of the domestic maritime industry to national and homeland 
security is well-recognized, and includes providing manpower to support 
sealift operations; helping to sustain America's shipbuilding 
industrial base; and helping secure America's river system and coastal 
waterways from possible terrorist attack.\2\
    \2\ See, e.g., Dr. Daniel Goure, Lexington Institute, Venerable 
Jones Act Provides an Important Barrier to Terrorist Infiltration of 
the Homeland, March 24, 2016; Gen. Darren McDew, Commander, U.S. 
Transportation Command (2016); Gen. Paul Selva, current Vice Chairman 
of the Joint Chiefs of Staff (2015); Adm. Paul Zukunft, Commandant, 
U.S. Coast Guard (2014); and many others.
Domestic Tanker Market
    The domestic tank vessel industry has changed dramatically over the 
past several years. It has historically been a relatively discrete 
market, consisting primarily of moving crude oil from Alaska to U.S. 
West Coast refineries, and moving gasoline, jet fuel, heating oil and 
other refined products from refineries to markets around the coast. 
Vessels in these trades have been replaced over time due to the 
requirements of the Oil Pollution Act of 1990, which phased out single-
hull vessels on a schedule that ended in 2015. Vessel owners deploy a 
variety of vessel types in these trades, including small, medium and 
large ATBs and self-propelled tankers.
    Dramatic growth in the domestic petroleum industry over the past 
few years has led to corresponding growth in the domestic petroleum 
shipping industry, with an incremental increase in the fleet of 20-25 
vessels including those recently delivered and those on order. Five 
years ago, less than 10 percent of the fleet was dedicated to moving 
crude oil compared to about one-third of the fleet today. American 
shipbuilding order books are full well into 2018. One of the challenges 
in gearing up this fleet has been in finding highly qualified officers 
and crew, particularly engineers, to man the vessels. This may be 
ameliorated to some extent by the reduced offshore development 
activity, with corresponding lay-offs of hundreds of mariners. It is 
not clear, however, the extent to which these mariners have skills and 
certifications coming out of their work on tugs and supply vessels that 
will readily transfer to operating petroleum tankers.
    The industry is also actively engaged in the ``Military 2 
Maritime'' veteran recruiting effort. The basic concept is to find 
opportunities in the American commercial maritime industry for military 
service veterans who have maritime experience in their service 
background. Such veterans can be ideal candidates to fill open 
positions in that they not only have technical and licensing 
qualifications, but also are acclimated to the culture and environment 
of maritime operations. Many such veterans have found, however, that 
obtaining the necessary Coast Guard licensing has been more difficult 
than expected. This is not due to a lack of skills or practical 
training in many cases, but because credit for sea time experience and 
course work earned while in the military are not aligned with Coast 
Guard licensing requirements. As an example, more than thirty courses 
provided by the U.S. Army have been accredited by the Coast Guard, as 
compared to one course offered by the Navy. Several industry 
representatives are working with the Maritime Administration and 
military services to correct this situation.
    A change in law included in the Omnibus Appropriations bill 
approved in December has created uncertainty in the domestic tanker 
industry. Under law dating to the 1970s, crude oil could not be 
exported from the United States, with limited exceptions. This 
limitation contributed significantly to basic expectations for the 
exploration, production and transportation of domestic crude oil. 
Contracts were signed and trading patterns developed accordingly. As 
noted, for example, crude oil's share of domestic tanker transportation 
volumes jumped from less than 10 percent five years ago to more than 30 
percent today. Because of the change in law, crude oil exports are now 
permitted. An important question in the maritime industry is the extent 
to which this change will cause a reduction in domestic trading 
volumes, and thereby adversely impact the investments in new tonnage, 
some of which has yet to come on line.
    Safety and environmental performance are the most important 
operational considerations for the American maritime industry. Lost-
Time Incidents (LTIs) is a standard measure of worker safety 
performance used in the maritime industry and in other industrial 
activities. ``Spills to water'' is another key metric, for 
environmental performance. Management, mariners and our customers 
maintain a constantly renewed focus on safety and environmental 
performance. This has led to greater awareness, better measures, and 
more sophisticated training programs throughout the industry. Crowley's 
company-wide LTI rate, for example, has declined by more than 80 
percent over the past four years. Another domestic maritime company, 
Alaska Tankers, has achieved a remarkable record of only one LTI 
(broken finger) since 2001.\3\ Crowley's tanker business recently 
passed the one billion barrel mark in petroleum transfers over a period 
of about ten years. During that time, accumulated spills to water 
totaled about 6.2 gallons. This kind of performance puts the American 
maritime industry in the elite class of operators worldwide. It is, 
however, not the end game, as the ultimate goal for Crowley and other 
American maritime companies is zero--zero harm to persons, property and 
the environment.
    \3\ See, Alaska Tanker Company presentation, ``Mindfulness and 
Total Worker Health,'' Oregon Health and Science University, Fall 2015.
    I will briefly mention the domestic maritime offshore development 
industry, which has been an important source of jobs and growth in 
recent years, but has seen radical changes in the direction of its 
markets. Based primarily in states around the Gulf of Mexico and 
Alaska, this industry is comprised of those who build, operate and crew 
the vessels needed to develop offshore energy installations. The 
industry boomed when oil prices were relatively high, with dozens of 
technically advanced vessels being built in U.S. shipyards to support 
exploration and development activities. This contributed to a boom in 
employment opportunities for mariners having the technical knowhow to 
operate these vessels. The tragic loss in 2010 of the Deepwater Horizon 
drill rig and the ensuing environmental disaster brought offshore 
development to a near standstill, which had a profound impact on 
maritime and other related industries. While the industry was able to 
begin recovering once development resumed, the radical drop in oil 
prices has once again brought offshore exploration and production to a 
crawl, with many major projects being canceled in the Gulf and in 
Alaska.\4\ Hundreds of vessels are laid up, and the number of active 
crew is down dramatically.
    \4\ See, e.g., Alixpartners, ``Oil Price Drop Sinks Offshore Supply 
Vessel Market,'' January 2016.
Domestic Liner Industry
    The domestic liner industry refers to the container shipping 
business primarily in the non-contiguous domestic trades between the 
U.S. Mainland and Puerto Rico, Hawaii, Alaska and Guam. Carriers in 
these markets move most of the consumer products and other goods 
shipped from the Mainland to these locations, as well as moving goods 
produced in these locations back to the Mainland.\5\ These markets have 
been impacted by the exit of Horizon Lines last year. Horizon 
terminated service to Puerto Rico, and sold its business in the other 
trades to the Pasha Group (Hawaii) and Matson Navigation (Alaska).
    \5\ Note that U.S. flag vessels are not required for shipment of 
goods in non-domestic purchase/sale transactions, i.e., from or to 
vendors/customers outside the United States. For example, about one-
third of Puerto Rican consumer goods, and most of its energy resources, 
are sourced from foreign sellers and shipped into Puerto Rico directly 
on foreign flag vessels, which account for the majority of all ship 
calls in San Juan.
    Of critical importance is the ability of carriers in domestic liner 
markets to reinvest in their fleets. In the Puerto Rico trade, TOTE 
Maritime has now deployed two new ships that are the first LNG-powered 
containerships in the world. Crowley also is renewing its fleet with 
two LNG-powered container/RoRo ships, to be delivered in 2017-18. Both 
carriers are investing in terminal facilities in Puerto Rico, with 
Crowley's $100 million investment one of the larger capital projects on 
the Island. Further, both fleets call in Jacksonville, Florida, which 
has triggered investment there in terminals, liquefaction plants, and 
other infrastructure needed to supply LNG fuel to these fleets. Major 
regulatory and public education efforts are underway in tandem with 
these investments.
    The significance of this investment cannot be overstated. American 
carriers have triggered the construction in U.S. shipyards, and 
deployment in U.S. domestic service, of vessels that may prove to be 
prototypes of the world shipping fleet as it begins to transition to 
extremely low-emissions propulsion. These vessels bring significant 
environmental benefits to Puerto Rico, where air quality is a major 
concern. They also establish a substantial demand platform that enables 
the full development of American natural gas for use in transportation 
and other businesses in the Southeast and throughout the country. It is 
a game changer.
    Before turning to the other trades, two additional points should be 
noted as to Puerto Rico. Carriers in the trade have supported efforts 
by political leaders on the Island and on Capitol Hill to develop a 
legislative package that will help stabilize the economy. In general, 
the carriers and other Mainland businesses interested in Puerto Rico 
have supported a package that includes an appropriate mechanism to 
restructure bond debt, to create a control board with limited powers 
help the Puerto Rican government work through its financial challenges, 
and other measures. In Crowley's case, we took this unusual step based 
on our sixty years of commitment to the Island, recognition that the 
Puerto Rican economy is in rough shape, and our belief that Congress 
has a critical role to play in righting the ship.
    A few have taken this legislative activity as an opportunity to 
urge that a Jones Act exemption for Puerto Rico be included in the 
package. They have offered no credible proof that such a change would 
help Puerto Rico, and we are confident it would do more harm than good 
both for Puerto Rico and for the country generally. Such a change would 
put at risk the reliable, efficient service the Island currently 
receives, as well as hundreds of private sector jobs on the island, 
with no offsetting gains. It would also send a chilling message that 
would bring further investment in vessels built in U.S. shipyards to a 
    A second and related point concerns the supply of LNG to the 
Island. One of the primary issues in Puerto Rico (as in other offshore 
locations) is the high cost of electricity. This results in part from 
its island location and limited market size, and also from concerns 
with the government-owned utility, PREPA. The high electricity cost not 
only hits consumers on the island, but also key employers on the 
Island--manufacturers and other industrial facilities that have high 
energy usage. To help such employers reduce the cost and improve the 
reliability of their electrical service, Crowley subsidiary Carib 
Energy began a small-scale LNG supply business to customers on the 
Island. Carib provides LNG using 40-ft. ISO tanks, which are filled up 
at a natural gas plant on the Mainland, and shipped to the customers' 
facility in Puerto Rico.
    This is offered as an example of the private sector helping to find 
solutions to the Island's problems. It is not suggested to be a 
suitable method for supplying LNG to PREPA, which currently purchases 
bulk LNG primarily under contract with a supplier in nearby Trinidad. 
If and when PREPA seeks new bulk LNG supply contracts, it can ask for 
bids from U.S. suppliers knowing that American bulk LNG vessels will be 
available to provide an efficient and cost-effective service when 
needed. Allegations that shipping costs would materially increase the 
cost of U.S.-sourced LNG to the Island are unfounded.
    As to the other non-contiguous trades, as noted, Horizon Lines sold 
its Hawaii business last year to the Pasha Group, and its Alaska 
business to Matson Navigation. Also last year, Pasha took delivery of 
its second new vessel in the Hawaii trade, and is continuing to deploy 
the existing ex-Horizon vessels to meet the needs of shippers in the 
trade. Similarly, Matson has orders pending for two new ships under 
construction at Philly Shipyard. Like Pasha, it will also continue to 
operate the vessels it acquired from Horizon Lines in the Alaska trade. 
While there are other carriers in all three noncontiguous trades, none 
has announced their fleet renewal plans.
    Lastly, we are mindful of the tragic loss of the El Faro last 
October, which was sailing in the Puerto Rico trade. We have a duty as 
members of the maritime community to remember the officers and crew, 
and learn from this tragedy. Because the government's investigation of 
the root cause of the sinking remains active, however, it would not be 
appropriate to comment on any particular aspect of this matter.
International Shipping Markets--Foreign Flag
    Crowley participates in the international shipping market in two 
ways. First, it provides a comprehensive suite of liner and logistics 
services to customers in the regional trades involving the Caribbean 
islands, Central America and parts of South America. The vessels used 
to serve these markets are a mix of owned and chartered in tonnage. 
They are sized and specially configured for customers in these trades. 
Crowley has developed the expertise and deployed the full range of 
systems necessary to handle all aspects of the business--to book, 
track, document, and insure the cargo, coordinate trucking, manage 
marine terminals, stow vessels, arrange delivery at destination, manage 
invoicing, etc. Additional logistics services include Customs 
brokerage, warehousing and consolidation, among others.
    The international liner business is generally subject to the 
strength or weakness of the overall economy. Strong global economic 
growth usually leads to more international trade and stronger liner 
shipping companies. Conversely, relatively flat economic performance 
such as we are currently seeing leads to poor financial performance, 
which can be magnified by the tendency of the industry to build more 
vessel capacity than the market can absorb. This is partly a result of 
carriers seeking lower unit costs by building and deploying larger 
ships.\6\ Excess capacity also results from shipyards building more 
vessels than the market requires based on the desire (frequently fed by 
government incentives) to continue employment of the shipyard, instead 
of any market need for the capacity.
    \6\ For example, the MSC Zoe was delivered last year and has a 
reported capacity of more than 19,000 twenty foot equivalent units. The 
units carried on this single vessel, placed end-to-end, would stretch 
more than seventy miles.
    Another factor currently impacting the international liner industry 
is the slowdown in the growth rate of global trade. For decades the 
average annual rate of growth in U.S. foreign trade was more than 10 
percent. In more recent years it has been less than 5 percent. While 
still growing, the change in the rate of growth can have an unfavorable 
effect if planning and investment has assumed more substantial trade 
and economic activity.
    The result is an international liner industry today that is under 
serious economic pressure. Like most businesses in these circumstances, 
the liner carriers are looking for ways to survive primarily by cutting 
costs. This includes not only reductions in personnel and other 
traditional measures, but also actions more unique to the 
transportation industry. For example, like airlines, liner shipping 
companies may skip port calls or entire voyages for economic reasons, 
i.e., where there is not enough cargo to cover the costs. Carriers may 
also seek ways to save cost by rationalizing capacity in a given 
market. Rather than two carriers sailing two vessels half full between 
the same two ports, the market may be better off if the carriers sail 
one vessel in that trade, and continue to compete with each other to 
sell space on that vessel. That is the basic logic behind vessel 
sharing agreements (VSAs), which are widely adopted today throughout 
the industry. Customers benefit from such arrangements because they 
take cost out of the system, yet retain the same number of competitors 
seeking to provide the service.
    The regulatory system that facilitates the formation of VSAs and 
similar cooperative working arrangements is the Shipping Act of 1984 as 
administered by the Federal Maritime Commission. VSAs are filed with 
the FMC and become automatically effective--are presumptively lawful--
unless the agency raises concerns within 45 days. The parties to the 
agreement can then implement it with regulatory confidence once the 
waiting period expires. The alternatives to this system are either to 
go ahead with the agreement and risk antitrust prosecution, or to 
submit the agreements for antitrust review by the Justice Department, 
with no specific procedures or deadline for action. The Shipping Act/
FMC process is clearly preferred by most in the industry.
    As may be expected in times of financial stress, the industry is 
also seeing more merger and acquisition activity by carriers. The FMC 
does not have jurisdiction over these types of transactions. They must 
be reviewed under normal antitrust guidelines. It should be noted that 
for both cooperative working agreements and M&A transactions, 
regulatory approval from multiple jurisdictions may be required. 
Indeed, competition authorities in the EU and China have rejected or 
placed conditions on carrier agreements that did not appear to trigger 
comparable concerns from U.S. authorities.\7\
    \7\ See, e.g., ``Maersk, Partners Surprised by Chinese Regulator,'' 
Wall Street Journal, updated June 17, 2014; ``CMA CGM Compromising to 
Get EU's Nod on NOL Takeover,'' World Maritime News, April 2016.
International Shipping Markets--U.S. Flag
    As noted, Crowley participates in two ways in the international 
shipping market. In addition to owning and operating its own liner and 
logistics service in the Central America and Caribbean trades, Crowley 
also provides technical ship management for other vessel owners 
operating ships worldwide. Crowley does not market or sell the 
transportation services provided by these vessels. It instead provides 
the officers and crew needed to sail them, as well as a range of other 
services (vessel maintenance, insurance, port services, etc.) as agreed 
by the parties. Most of the vessels operated by Crowley on behalf of 
third parties fly the U.S. flag.
    It is widely known that the U.S. flag fleet operating in 
international trade has been in decline. The reasons behind this are 
noted at the beginning of this statement. It is not enough that the tax 
and regulatory burdens of ships operated under the U.S flag have been 
reduced from time to time, and American carriers have been among the 
most innovative in the industry. Even so, U.S. flag costs are among the 
highest in the world, reflecting the fact that, compared to most other 
shipping registries, U.S. flag ships are a part of the first-world 
economy, and operate under a relatively mature tax and regulatory 
system. Those who would simply say, ``Let the market decide'' should 
understand that there will be no U.S. flag ships operated in 
international commerce if that sentiment prevails entirely.
    Virtually no one involved in the industry desires that outcome, and 
more importantly, U.S. military leaders have very clearly stated that 
it would not be an acceptable one.\8\ American national security and 
readiness require an ability to station and resupply our armed forces 
anywhere in the world. This means not only having access to modern 
vessels and equipment, but also to American seafarers who know how to 
operate these vessels and systems because they do so on a regular basis 
to ports all over the world. Sealift remains a core function of our 
national security infrastructure, even in times of air, space and cyber 
warfare. Overseas deployment of U.S military forces is a continuing 
fact of life, and it would not be possible to transport and sustain a 
large force and accompanying equipment from the U.S. via any other mode 
of transportation. Similarly, it would be exponentially more expensive 
to American taxpayers for the U.S. military itself to replicate the 
vessels, equipment, logistics networks, and manpower needed to provide 
a credible and comparable sealift capability.
    \8\ See, e.g., ``Statement of Lieutenant General Stephen R. Lyons, 
United States Army Deputy Commander, United States Transportation 
Command,'' before the Subcommittee on Seapower and Projection Forces, 
House Armed Services Committee, March 22, 2016.
    Accordingly, two long-standing government programs have enabled a 
number of U.S. flag vessels to continue operating commercially in 
international trades. The Maritime Security Program provides a flat-
rate stipend to the owners of contracted U.S. flag vessels to offset 
the extra cost of operating under the U.S. flag. The contracts also 
require the owners to participate in the Voluntary Intermodal Sealift 
Agreement, a readiness program covering the use and potential 
requisition of U.S. flag vessels entered into MSP. The second program, 
Cargo Preference, generally requires that government shipments move on 
U.S. flag vessels. It was intended that the combination of the two 
programs would provide enough of an incentive for carriers to 
participate. MSP by itself would not be enough.
    The drawdown of military activity in the Middle East, coupled with 
the loss of EXIM Bank and other civilian cargoes, has led to the 
withdrawal of several vessels from the U.S. flag, with the risk that 
more will follow. According to the Maritime Administration, less than 
80 U.S. flag commercial vessels now operate in international trade, vs. 
some 9,000 foreign flag vessels that call at U.S. ports. To stem the 
tide, Congress agreed to increase the stipend payable to MSP carriers, 
so that there would remain a modest financial incentive to remain under 
the U.S. flag built directly into the MSP. It is essential that this 
increase be fully funded in FY 2017.
    Thank you for your attention and I look forward to your questions.
        Summary of Crowley Maritime Corp. Businesses--April 2016
    Crowley Maritime Corporation is a U.S.-owned and operated marine 
solutions, energy and logistics services company organized into six 
business units: Domestic liner services in the Puerto Rico trade; 
International liner services in Caribbean and Central America markets; 
Logistics; Marine contract solutions; Petroleum transportation; and 
Petroleum distribution and marine services in Alaska.
    The primary services offered by these six business lines include:

   Shipping and Logistics
   Freight Forwarding and Global Project Logistics

   Alaska Fuel Sales and Distribution

   Petroleum and Chemical Transportation

   Harbor Ship Assist and Tanker Escort

   Global Ship Management

   Marine Salvage, Wreck Removal and Emergency Response 
        (through a 50 percent ownership position in Ardent Global)

   Marine Solutions (including Naval Architecture, Engineering 
        and Project Management)

   Offshore Services (including Heavy Lift Barge Transportation 
        and Ocean Towing)

   Liquefied Natural Gas (specialized services include 
        transportation, sales and logistics; vessel design; 
        engineering; storage supply and management)

    The company was founded in 1892, when founder Thomas Crowley--the 
grandfather of current chairman and CEO Thomas B. Crowley Jr.--
purchased an 18-foot Whitehall boat to provide transportation of 
personnel and supplies to ships anchored on San Francisco Bay. The 
present structure, in which Crowley Maritime Corporation serves as a 
holding company for business lines and all subsidiaries, was put in 
place in 1992. The company is wholly and privately owned by the Crowley 
family and Crowley employees. Crowley-owned subsidiaries include: 
Jensen Maritime Consultants and Customized Brokers
    Today, Tom Crowley Jr. and his leadership team direct a company 
with approximately $2.2 billion in annual revenues and approximately 
5,300 employees. Crowley maintains a fleet of more than 200 vessels, 
consisting of RO/RO (roll-on-roll-off) vessels, LO/LO (lift-on-lift-
off) vessels, articulated tug-barges (ATBs), tugs and barges. Land-
based facilities and equipment include terminals, warehouses, tank 
farms, office buildings, trucks, trailers, containers, chassis, cranes 
and other specialized vehicles.
Crowley's Support to the U.S. Government
    From raising the coal barge City of Panama during World War I, to 
providing emergency logistics support to the Defense Department for 
rapid deployment of Ebola treatment units in West Africa in 2014, 
Crowley has consistently been a responsive partner of the United States 
Selected Past Performance Highlights
   Over 60 years ago, Crowley helped the U.S. Government secure 
        the DEW Line radar installations (Distant Early Warning) on the 
        perimeter of Alaska.

   Vessel management for United States Maritime Administration, 
        Military Sealift Command, and other agencies including ROCON 
        ships, BOBO class ships, T-AGOS/T-AGM ships and others.

   Navy Superintendent of Salvage (SUPSALV) contract holder 
        since 1976 to supplement the Navy's salvage, diving, and search 
        and recovery capabilities. Projects have included: Air Alaska 
        wreck recovery; Ehime Maru recovery and relocation; ship 
        salvage engineering; wreck removal; oil spill contingency plans 
        and development and modification of salvage firefighting 

   First responder and the largest marine contractor during the 
        M/T Exxon Valdez oil spill response.

   Logistics, warehousing and transportation support for 
        various military relief cargoes (USAID) at the request of the 
        U.S. Government to Haiti, Dominican Republic, Cuba and Central 

   Helped clear Johnston Island of human habitation for its 
        return to a bird sanctuary as it was originally deemed by 
        President Coolidge.

   Involvement in various military tows/assists including the: 
        USS Missouri, USS Oriskany, Everett, Lincoln, USS Iowa, 
        Oklahoma, USS New Jersey, USS Belleau Wood.

   Crowley carries the US Postal service deliveries between the 
        U.S. and the Virgin Islands.

   Assistance with clean up following the first Desert Storm.

   Delivery of 12,000 tons of aggregate and sand to Kwajalein 
        Atoll from Masan, South Korea for the U.S. Army Corp of 
        Engineers to construct a motor pool facility on the military 
        installation at Kwajalein.

   Participation in various hurricane disaster relief responses 
        providing vessel support and relief aid most notably during--
        Hurricanes Katrina and Sandy.

   Emergency humanitarian aid shipping and logistics, marine 
        salvage and temporary port infrastructure solutions following 
        the Haiti Earthquake.

   Completed the largest, most technically challenging marine 
        salvage job in history, Costa Concordia.

   Ship management and logistics support for the Syrian 
        chemical weapons destruction project.

   Logistics, personnel and transportation support for medicine 
        and other emergency supplies in Liberia during the 2014 Ebola 
 Michael G. Roberts--Sr. VP and General Counsel, Crowley Maritime Corp.

    Legal and executive responsibilities with Crowley since 1991. Was 
based in Washington, DC prior to relocating to Jacksonville in 2008 to 
become a member of the company's senior leadership team. Overall 
responsibility for strategic government business, government relations, 
regulatory, legal, risk management and insurance functions of the 
    Actively involved since 1994 in the development of the Maritime 
Security Program and VISA, Jones Act matters, Ocean Shipping Reform 
Act, and various maritime initiatives. Member/coordinate company 
participation in industry trade groups, including NDTA, Navy League, 
American Maritime Partnership, American Waterways Operators, Chamber of 
Shipping of America, and others.
    Earned Bachelor of Arts degree with high honors from Michigan State 
University; JD degree cum laude from American University, Washington 
College of Law.
    Crowley is a leading American maritime company. Founded in 1892 in 
San Francisco Bay, the company today has more than 5,000 employees and 
$2B in annual revenue. It is one of the top private sector employers of 
the U.S. Merchant Marine. Over the past few years, it has invested or 
committed about $2B in new US-built vessels. Lines of business include 
domestic and international liner shipping (primarily in Caribbean/
Central America markets); logistics (including trucking, warehousing, 
customs brokerage, insurance and other services); domestic petroleum 
transportation (owned fleet of 17 to 21 vessels); technical services 
(including third party ship management, naval architecture & 
engineering, project management, marine salvage and wreck removal); and 
petroleum distribution (tank farms and road terminals in Alaska), ship 
assist/escort, and oil spill prevention and response in Valdez, AK. 
Crowley is a privately-held company.

    Senator Fischer. Thank you.
    Next, we have Mr. Klaus Luhta, Chief of Staff of the 
International Organization of Masters, Mates and Pilots.
    Welcome, sir.


    Mr. Luhta. Chairwoman Fischer, Ranking Member Booker, and 
members of the Subcommittee, good morning. Thank you for 
holding this very important hearing on these meaningful issues.
    And thank you to your staffs, who work tirelessly and 
diligently in putting these things on. It is much appreciated.
    I am Klaus Luhta, Chief of Staff to the President of the 
International Organization of Masters, Mates & Pilots and a 
licensed professional mariner.
    I am pleased to appear today to submit this statement on 
behalf of Masters, Mates & Pilots, the American Maritime 
Officers, the Marine Engineers' Beneficial Association, the 
Marine Firemen's Union, the Sailors' Union of the Pacific, and 
the Seafarers International Union. Our organizations proudly 
represent the seafaring men and women who continue the 
tradition of American mariners since the founding of our great 
Nation to sail into harm's way whenever and wherever needed by 
our country in order to support and supply our military 
    It is these same American mariners who ensure that 
America's foreign and domestic seaborne trade, upon which our 
economy is based, is not exclusively dependent upon foreign 
    We are at a defining juncture in determining the maritime 
future of the United States. The critical need for our industry 
has been recognized during every international crisis in our 
Nation's history. Its need and importance cannot be questioned.
    In May 2015, Rear Admiral Thomas Shannon, Commander of the 
Military Sealift Command, made clear the continued need for 
U.S. flag Merchant Marine and its American crews to ensure the 
military's security of our Nation. As stated by Admiral 
Shannon, ``It is our U.S.-flag merchant fleet and our mariners 
that ensure that our soldiers, sailors, airmen and marines are 
supplied. From Inchon to Iraq, our mariners and our maritime 
industry delivered. . . . Let us not as a Nation sign away our 
remaining sealift capacity to non-U.S. flag fleets sailed by 
non-U.S. mariners.''
    Paramount to ensuring that a viable U.S. flag Merchant 
Marine exists when the call goes out and that those ships are 
sufficiently manned with properly trained U.S. licensed and 
unlicensed mariners is the Maritime Security Program more 
commonly referred to as MSP.
    My written testimony provides in-depth detail on the 
importance of MSP to sustaining a viable American merchant 
fleet. But in short, MSP allows for a level playing field for 
American carriers and ensures a pipeline of highly trained U.S. 
mariners to man those vessels.
    The second way of maintaining the fleet--now keep in mind 
this isn't growth; this is just maintaining what we currently 
have--is carriage of U.S. Government-generated cargo aboard 
U.S. flag vessels. All too often in the past, Federal agencies 
and departments have ignored U.S. flag shipping requirements 
for the carriage of cargos financed in whole or in part by the 
American taxpayer and the Federal Government.
    Not only are U.S. flag vessels denied cargos that by law 
should be transported by U.S. flag vessels when available at 
fair and reasonable rates, but there is no recourse in the law 
when it is ultimately determined that the law was violated. We 
would encourage Congress and the administration to make clear 
to all Federal shipper agencies that privately owned U.S. flag 
commercial vessels must be used for the carriage of U.S. 
Government-generated cargos, as required by law.
    When we consider the potential for maritime industry 
growth, export of liquefied natural gas from the United States 
creates a tremendous opportunity to increase the size of the 
U.S. flag commercial fleet and to provide much needed 
employment opportunities for American mariners. But this can 
only be accomplished through intentional effort.
    My written statement details means that would accomplish 
facilitation of economic growth in LNG shipping for U.S. flag 
LNG carriers and the mariners that safely operate those 
    The U.S. flag Merchant Marine continues to answer the call 
whenever and wherever needed around the world. As the fourth 
arm of defense, the American Merchant Marine is honorable and 
fundamental to American industry and American security and 
defense interests around the globe.
    Madam Chair, we stand ready to work with you to achieve 
these objectives, and we sincerely appreciate your interest in 
this matter. I yield the remainder of my time and welcome your 
    [The prepared statement of Mr. Luhta follows:]

          Prepared Statement of Klaus Luhta, Chief of Staff, 
          International Organization, Masters, Mates & Pilots
    Chairwoman Fischer, Ranking Member Booker and Members of the 

    Good morning.
    I am Klaus Luhta, Chief of Staff to the President of the 
International Organization of Masters, Mates & Pilots and a licensed 
professional mariner. I am pleased to appear today and to submit this 
statement on behalf of Masters Mates & Pilots, the American Maritime 
Officers, the Marine Engineers' Beneficial Association, the Marine 
Firemen's Union, the Sailors' Union of the Pacific, and the Seafarers 
International Union.
    Our organizations proudly represent the seafaring men and women who 
continue the tradition of American mariners since the founding of our 
Nation to sail into harm's way whenever and wherever needed by our 
country in order to support and supply our military overseas. It is 
these same American mariners who ensure that America's foreign and 
domestic seaborne trade, upon which our economy is based, is not 
exclusively dependent upon foreign nationals.
    The continued operation of the U.S.-flag foreign trade fleet, and 
the development, implementation and funding of the programs that 
support our fleet, enhance its economic viability, increase its ability 
to compete for a larger share of America's foreign trade and ensure its 
ability to continue to serve as our Nation's fourth arm of defense are 
extremely important to the jobs of the men and women our labor 
organizations represent. Consequently, we are extremely pleased that 
this hearing is being held and we thank you, Madam Chairman, Ranking 
Member Booker and your Subcommittee for the opportunity to participate 
in this hearing and to express our views on how Federal policy and 
programs can further strengthen and enhance the performance of the 
U.S.-flag maritime industry.
    ``In Peace and War'' is the motto of the U.S. Merchant Marine. The 
critical need for our industry has been recognized during every 
international crisis in our Nation's history. In 1992, General Colin 
Powell, then-Chairman of the Joint Chiefs of Staff stated: ``Fifty 
years ago, U.S. merchant vessels . . . were battling the frigid seas of 
the North Atlantic to provide the lifeline to our allies in Europe. The 
sacrifice of those mariners was essential to keeping us in the war 
until we could go on the offensive . . . In World War II, enemy attacks 
sank more than 700 U.S.-flag vessels and claimed the lives of more than 
6,000 civilian seafarers . . .''
    More recently, in 2008, Major General Kathleen Gainey, Commander, 
Military Surface Deployment and Distribution Command, stated that ``The 
merchant marine has always been there beside us . . . There is no 
amount of thanks that I could give you, because I am here to tell you, 
having deployed twice, I know how critical it is that equipment and 
those supplies are delivered on time . . . You are the fourth arm of 
defense and you are critical to this Nation.''
    Finally, in May 2015, Rear Admiral Thomas Shannon, Commander, 
Military Sealift Command, made clear the continued need for a U.S.-flag 
merchant marine and its American crews to ensure the military security 
of our Nation. As stated by Admiral Shannon: ``It is our U.S.-flag 
merchant fleet and our mariners that ensure that our Soldiers, Sailors, 
Airmen and marines are supplied. From Inchon to Iraq, our mariners and 
our maritime industry delivered . . . Let us not as a nation sign away 
our remaining sealift capacity to non-U.S.-flagged fleets sailed by 
non-U.S. mariners.''
    Nevertheless, despite the repeated expressions from leaders in the 
Department of Defense (DOD) that our Nation needs a U.S.-flag merchant 
marine, the privately-owned U.S.-flag merchant marine has, in recent 
years, declined, threatening the ability of our Nation to provide the 
commercial sealift capability and U.S. citizen mariners that DOD 
requires. In March 2016, this Subcommittee received testimony from 
Maritime Administrator Paul Jaenichen on the state of our industry. He 
pointed out that the number of vessels in the U.S.-flag foreign trade 
fleet declined from 106 vessels in 2011 to 78 vessels at the end of 
February 2016. The reduction in vessels and the loss of the associated 
seafaring billets for American mariners result in a reduction in the 
pool of available mariners to meet DOD requirements. As further stated 
by Administrator Jaenichen, there are approximately 11,230 qualified 
American mariners available to crew commercial or government-owned 
sealift ships. He cautioned that in the event of a prolonged activation 
of Maritime Administration and Military Sealift Command surge vessels, 
an additional 3,200 mariners would be needed.
    It must be emphasized that it takes many years for an individual to 
gain the experience and sea-time necessary to obtain U.S. Coast Guard-
issued licenses and credentials. Our country and our industry will not 
be able to recover overnight from the continued downsizing of our fleet 
and the outsourcing of American maritime jobs when the call goes out 
for mariners to once again respond to our Nation's need. Young people 
will not be encouraged to enter an industry that is ignored or 
abandoned by policy-makers and that promises no realistic future for 
    Rather, the government, U.S.-flag shipping companies and America's 
maritime labor organizations should continue to work together, as we 
did last year to address issues surrounding the Maritime Security 
Program, to modify and enhance existing programs and to create new 
programs and opportunities that will increase the number of vessels 
operating under the U.S.-flag, the amount of cargo carried aboard U.S.-
flag vessels, and the shipboard employment opportunities for American 
licensed and unlicensed merchant mariners. To be available when needed 
in time of war or other international emergency, the U.S.-flag merchant 
marine must be supported during time of peace. To ensure that the 
Department of Defense has the commercial sealift capability and 
American mariners it needs whenever and wherever needed, U.S.-flag 
vessels and their U.S. citizen crews must be actively engaged in the 
carriage of government and commercial cargoes.
    The development of meaningful, realistic maritime policies and 
programs must be accompanied by a reaffirmation from both Congress and 
the Administration that our country must have a strong, viable and 
competitive U.S.-flag merchant marine owned and operated by American 
citizens and crewed by American licensed and unlicensed merchant 
mariners in order to meet the economic, military and homeland security 
requirements of our Nation. Without this reaffirmation, and without a 
clear commitment that the government will work diligently to achieve 
this objective, we will continue to lack the coordinated approach to a 
national maritime policy our industry needs. Consequently, we again 
offer our appreciation to you, Madam Chairman, to Ranking Member Booker 
and the Members of your Subcommittee for taking the initiative to 
schedule this series of hearings and your willingness to examine ways 
in which Federal programs and policies can enhance the performance of 
the U.S.-flag merchant marine.
Maritime Security Program
    One of the key components of American maritime policy is the 
Maritime Security Program. This program authorizes a maritime security 
fleet of 60 privately-owned, militarily-useful U.S.-flag commercial 
vessels that is supported by an annual stipend intended to help offset 
the cost of operating under the United States-flag.
    The Maritime Security Program (MSP) is a unique government--private 
shipping industry partnership that gives the Department of Defense 
(DOD) the commercial sealift capability it needs while saving the 
American taxpayer the billions of dollars it would take for DOD to 
develop and maintain this capability itself. Developed under President 
George H.W. Bush, and first implemented under President Bill Clinton, 
full funding for MSP has been supported by each President and Congress 
since 1996.
    Since 2009, privately-owned U.S.-flag commercial vessels and their 
civilian U.S. citizen crews have transported more than 90 percent of 
the sustainment cargo needed to support U.S. military operations and 
rebuilding programs in Iraq and Afghanistan. Significantly, vessels 
enrolled in MSP carried 99 percent of these cargoes. Without the 
assured U.S.-flag commercial sealift capability provided by MSP, U.S. 
troops stationed overseas could find themselves dependent on foreign 
vessels and foreign crews to deliver the supplies and equipment they 
need to do their job on our behalf.
    Last year, Maritime Administrator Paul Jaenichen told the House 
Coast Guard and Maritime Transportation Subcommittee that ``The most 
significant challenge facing the MSP is the declining Department of 
Defense cargo due to the drawdown of operations in Iraq and Afghanistan 
coupled with the over 80 percent reduction in personnel and military 
bases overseas.''
    Echoing the concern that current developments are threatening the 
continued availability of the U.S.-flag vessels, U.S. crews and global 
logistics systems provided by MSP to DOD, General Paul Selva, 
Commander, United States Transportation Command, told the Senate 
Committee on Armed Services in March 2015, ``The reduction in 
government impelled cargoes due to the drawdown in Afghanistan and 
reductions in food aid. . .are driving vessel owners to reflag to non-
U.S.-flag out of economic necessity. . .With the recent vessel 
reductions, the mariner base is at the point where future reductions in 
U.S.-flag capacity puts our ability to fully activate, deploy and 
sustain forces at increased risk.''
    These factors affect the ability of U.S.-flag vessel operators to 
keep their vessels under the U.S.-flag and to reinvest in new U.S.-flag 
ships. New ships are long term assets, eligible under existing law to 
participate in MSP for 25 years. MSP funding must be sufficient to 
maintain a robust U.S.-flag fleet and provide the long term stability 
to justify continued commercial investment in ships that cost more than 
$100 million each. Adding to this is the ongoing need for continued 
upgrading and investment in the commercial global intermodal networks 
that the MSP carriers bring to DOD.
    Consequently, significant reductions in the amounts of defense and 
other government cargoes available to U.S.-flag vessels; the 
proliferation of tax and other economic incentives available to foreign 
flag vessels and crews but not to U.S.-flag vessels and crews; the 
regulatory compliance requirements imposed only on U.S.-flag vessels by 
the U.S. Government; and the growing competition for cargoes from 
foreign flag of convenience vessel operations which fail to meet the 
standards applicable to U.S.-flag vessels necessitate full funding for 
the MSP.
    We are extremely pleased that Congress, due in no small measure to 
your assistance Madam Chairman and the support of this Subcommittee, 
increased funding for the Maritime Security Program for Fiscal Year 
2016. This increase, which provided each vessel participating in the 
MSP with $3.5 million rather than the previously authorized $3.1 
million for FY 2016, represented an important first step in ensuring 
that the funding levels provided by the Maritime Security Program more 
realistically reflect the reductions in the amount of cargo available 
to U.S.-flag vessels.
    In addition, and especially important, we are pleased that Congress 
recognized that further adjustments in funding for the Maritime 
Security Program are needed. Language was included in Public Law 114-
113, the Consolidated Appropriations Act of 2016 signed into law by 
President Obama that includes $299,997,000 for MSP for FY'17. As 
authorized by PL 114-113, each vessel participating in the MSP would 
receive $4,999,950 million in FY 2017.
    We believe it is absolutely essential to the continued operation of 
the 60-ship maritime security fleet that Congress appropriate the 
authorized $299,997,000 million for the Maritime Security Program for 
FY 2017. As noted by Senators Booker and Wicker and fourteen of their 
colleagues in a March 17, 2016 letter to the Senate Transportation 
Appropriations Subcommittee, ``The Program utilizes existing U.S. 
maritime private sector capabilities at a fraction of the cost of what 
it would take if the Federal Government were to replicate the vessel 
capacity and global intermodal systems made available to the Department 
of Defense by MSP contractors who continuously develop and maintain 
modern logistics systems for commercial and defense purposes. The cost 
to the government of replicating the vessels and intermodal system is 
estimated at least $65 billion.''
    In January 2016, General Darren McDew, Commander, United States 
Transportation Command, stated: ``As a military professional and senior 
leader, I think about and plan for what the future may hold and I would 
tell you we must prepare for the real possibility we will not enjoy the 
uncontested seas and international support experienced in 1991. If 
either of those possibilities becomes a reality, and if we remain 
committed to responding to security incidents around the globe, the 
only way of guaranteeing we decisively meet our national objectives is 
with U.S. ships operated by U.S. mariners.''
    Therefore, to ensure that the privately-owned militarily-useful 
U.S.-flag vessels enrolled in the MSP, the MSP vessel operators' 
worldwide logistics systems, and their U.S. citizen crews remain 
available to DOD to advance America's security interests and to support 
and supply American troops overseas, we ask your help to secure full FY 
2017 funding for the Maritime Security Program at the level authorized 
by PL 114-113.
Carriage of U.S. Government Generated Cargoes
    U.S.-flag cargo preference shipping requirements are an essential 
means to help ensure the continued availability of the privately-owned 
U.S.-flag commercial fleet which, along with its associated American 
maritime manpower, is a critical national defense asset. Without a 
fully and appropriately funded Maritime Security Program and without 
full compliance with cargo preference requirements, the U.S. Government 
and the American taxpayer would necessarily spend far in excess of the 
cost of these programs to replicate the national security capabilities 
of the privately-owned U.S.-flag commercial fleet.
    All too often in the past, Federal agencies and departments have 
ignored U.S.-flag shipping requirements for the carriage of cargoes 
financed in whole or part by the American taxpayer and Federal 
Government. Not only are U.S.-flag vessels denied cargoes that by law 
should be transported by U.S.-flag vessels when available at fair and 
reasonable rates, but there is no recourse in the law when it is 
ultimately determined that the law was violated. We would encourage 
Congress and the Administration to make clear to all Federal shipper 
agencies that privately-owned U.S.-flag commercial vessels must be used 
for the carriage of U.S. Government generated cargoes as required by 
    Along these same lines, we continue to support legislation that 
would make clear that the Maritime Administration has ultimate 
responsibility to determine if a Federal program is in fact subject to 
U.S.-flag cargo preference shipping requirements.
    It is equally important that the Maritime Administration regularly 
exercise this responsibility, and that Congress ensure that this is in 
fact done. To this end, Congress should require that the Maritime 
Administration report to Congress on a regular basis and to document 
its actions and efforts, specifying the programs, departments and 
agencies it has reviewed as well as the actions taken to ensure full 
compliance with cargo preference requirements.
    We further reaffirm our position that Congress should restore the 
U.S.-flag share of PL 480 Food for Peace and other humanitarian food 
aid cargoes to the 75 percent level that was in place beginning in 1985 
until reduced to 50 percent in 2012. Food aid cargoes are the single 
greatest source of preference cargoes. It has provided more than half 
of the dry preference cargo tonnage available since 2002 and the 
availability of food aid cargoes will continue to become even more 
important as Department of Defense cargoes further decline with the 
drawdown of operations in Iraq and Afghanistan and the broad reduction 
in overseas and bases. It is no coincidence that the size of the U.S.-
flag fleet has shrunk by more than 26 percent since the 2012 reduction 
of the U.S.-flag share of food aid cargoes.
    It is important to note that the GAO has reported that when the 
statutory share of food aid cargoes to be carried by U.S.-flag vessels 
was reduced from 75 percent to 50 percent, USDA shipping costs were not 
affecting at all and USAID shipping costs fell by less than 9 percent. 
The cost of increasing cargo preference requirements for food aid 
cargoes back to 75 percent has in the past been scored at only $11 
million per year.
    In May 2011, General Duncan McNabb, Commander, United States 
Transportation Command, stated ``The movement of U.S. international 
food aid has been a major contributor to the cargo we have moved under 
the cargo preference law that our U.S.-flag commercial sealift industry 
depends upon.'' Similarly, in July 2015, Jeff Marootian, Assistant 
Secretary for Administration, United States Department of 
Transportation, stated ``Cargo preference is a pillar that ensures 
America can activate and sustain a sealift fleet adequate to deploy and 
support the United States Armed Forces anywhere in the world . . . This 
program, which benefits both the public and private sectors, is less a 
burden on the taxpayer than the other options to provide the same 
    In addition, we would encourage the Department of Defense (DOD) to 
ensure that its policies fully encourage and promote the utilization of 
U.S.-flag commercial vessels. More specifically, DOD should give first 
priority to U.S.-flag carriers for the full end-to-end movement of 
defense shipments that include an ocean leg, thereby making use of the 
carrier's entire network as committed to under Voluntary Intermodal 
Sealift Agreement (VISA) contracts.
    We would urge that U.S.-flag vessels carrying U.S. Government 
cargoes be given priority loading and discharging rights in order to 
minimize or eliminate the costs to the U.S. Government associated with 
delays while U.S.-flag vessels wait to load and discharge taxpayer-
financed cargoes.
Encouraging the Use of U.S.-Flag Vessels for Energy Exports
    The export of liquefied natural gas from the United States creates 
a tremendous opportunity to increase the size of the U.S.-flag 
commercial fleet and to provide much-needed new employment 
opportunities for American mariners.
    To realize this opportunity, we believe that the Secretary of 
Transportation should be required to report to the Congress on the 
steps taken to develop and implement a program to promote the carriage 
of LNG exports on U.S.-flag LNG vessels.
    Secondly, in order to address one of the major competitive 
impediments to operating a U.S.-flag rather than a foreign flag LNG 
vessel, Congress should extend the provisions of section 911 of the 
Internal Revenue Code (the foreign source income exclusion) to American 
mariners working aboard LNG vessels engaged in the carriage of LNG 
exports from the United States. In the short term, extending section 
911 to Americans working aboard vessels carrying LNG exports and 
thereby treating American mariners in the same fashion that foreign 
mariners are treated by their flag nations, we would be eliminating a 
significant economic disincentive to the employment of American 
mariners aboard foreign flag LNG ships. Without this opportunity for 
employment, Americans would not attain the seatime requirements and 
training needed to operate vessels in this trade, preventing the 
operation of LNG vessels under the U.S.-flag.
    Finally, Congress should allow foreign built, foreign flag LNG 
vessels to document under the U.S.-flag to engage in the carriage of 
LNG exports in international trade without the need for any vessel 
construction-related changes provided they meet commonly accepted 
international standards. In other words, foreign flag LNG vessels 
meeting International Maritime Organization (IMO) requirements and 
holding a valid United States Coast Guard Certificate of Compliance for 
foreign flag LNG vessels entering U.S. waters would be deemed in 
compliance with all U.S. standards required for documentation under the 
U.S. flag.
    Those of us who make our living going to sea in this honorable and 
fundamental American industry want our daughters and sons to have the 
same opportunities. A healthy U.S. Merchant Marine will safeguard our 
country's military, economic and homeland security. We stand ready to 
work with you to achieve these objectives.
    Thank you.

    Senator Fischer. Thank you very much. We will start with 
the first round of questions.
    Mr. Bourne, you mentioned in your opening comments I guess 
a lot of solutions to questions I had for you, but I would just 
like to give you the opportunity, if you would like to 
elaborate on them. When you talk about the just-in-time 
shipping environment and the increased costs, I know you 
mentioned some of them, and I would welcome if you have 
additional information you would like to share on that.
    Then also, as you look at the challenges that a company 
like Tyson is facing as it relates to markets abroad, you 
mentioned some of the issues on losing markets. As you faced 
with the West Coast port shutdown, those markets when they are 
lost, they are harder to pick up again, and we lose them to 
Brazil and Argentina and Australia on the meats.
    Just briefly, did you have anything else you wanted to add 
on those points?
    Mr. Bourne. Surely. Thank you, Madam Fischer.
    As it relates to, I guess the West Coast, I will start with 
that, that was a tremendous problem for all U.S. exporters. The 
sad part about it is that none of us had a dog in the hunt. It 
was something that was brought upon us for a variety of reasons 
that we don't need to go into here, but it certainly cost many 
millions of dollars for our company at Tyson as well as others.
    Probably one of the most negative things that came out of 
that is that we deal in a commodity product that farmers and 
ranchers from Nebraska, from South Dakota, all through the 
Midwest, their livelihoods were put at risk, and their 
profitability was put at risk, because of this interruption.
    As a result of shipping commodities, we are not shipping 
Sony TVs. So they can get commodities of beef and pork and 
poultry. They can get it anywhere the world.
    Certainly, some of our biggest competitors for the Japan 
market are from Australia and from Brazil. And once you lose a 
customer, it's very difficult to get them back.
    Our concern is, with these added issues brought forth by 
SOLAS, that we are going to have situations where we are going 
to have interruptions again, specifically on chilled, as I 
detailed my remarks. There is just no way, based on the just-
in-time nature of this product, for it to be produced, shipped 
the same week that it is produced, received on the coast on 
Sunday, Monday. The cargo has to be transloaded to the 
containers, the steal boxes that go onto the ships that we 
don't own, don't maintain. It's just a very costly process.
    Senator Fischer. Thank you for some of the solutions you 
offered for us to look at. Thank you.
    Mr. Roberts, in your testimony, you noted that Crowley's 
tanker business has recently passed the $1 billion mark in 
petroleum transfers onto tanker vessels. I think you have a 
remarkable record of a total of only 6.2 gallons spilled over 
the last 10 years.
    So what are some of the ways that Crowley is working to 
ensure the efficient operation of your tanker vessels on our 
Nation's waters, especially as energy shipping I hope continues 
to grow?
    Mr. Roberts. Thank you.
    We have put a tremendous amount of focus on safety. It is 
the top priority of the company. It is a cultural issue with 
us. We start every meeting with a safety moment, a little 
prayer in advance of the discussion, and it is focused on 
safety. It may be changing your wiper blades or it may be 
something very relevant to working on a terminal or on the 
vessels themselves. So it is part of the culture of the company 
that starts right at the very top and is supported all the way 
    It is something that our customers in the oil business 
require. They expect it. They understand that it costs money to 
do that, and they are willing to fund that activity.
    But it is a remarkable change. I think if you look at where 
the industry was 10 or 15 years ago, and the progress has been 
made, it is a very good story.
    Senator Fischer. As you look ahead to hopefully our 
increased oil and potentially LNG exports, what does your 
company plan to do to take advantage of that? Do you have more 
investments for us and some jobs?
    Mr. Roberts. We are looking at LNG. We have a dedicated 
team looking at LNG opportunities in the marketplace. The first 
activity we have is in Puerto Rico, where we have small-scale 
LNG solutions for facilities there. We are very excited about 
that. It makes a lot of sense in markets where they don't have 
the scale to produce electricity at a cost that is quite as 
    So that's a very good opportunity for us on a larger scale. 
It really depends on where the price of oil is quite honestly. 
That is a factor in this.
    But Mr. Luhta mentioned the idea of exports on U.S. LNG 
vessels, something that makes a lot of sense to promote the 
maritime industry and shipbuilding in this country. So we think 
there is a lot of opportunity there.
    Senator Fischer. Great. Thank you very much.
    Senator Booker?
    Senator Booker. Thank you very much, Madam Chairman.
    I am really curious about the challenges we are having in 
our country and some of your views in terms of infrastructure 
    We have an aging infrastructure decaying in every element. 
We used to keep the top Nation in the globe. We inherited from 
our parents and grandparents the number one best infrastructure 
for any country on planet Earth. We have trashed that 
infrastructure, allowed it to decline dramatically, and we are 
suffering as a result of that. We know that every dollar 
invested in improving infrastructure produces at least 100 
percent return, in some regions, like mine, even more than 
that, saving taxpayer money, expanding economic growth, 
creating more jobs.
    Interestingly, though, when we talk about infrastructure, 
in my opinion, being a mayor of a port city, we forget about 
the infrastructure for our ports and for multimodal. That is 
why I was so proud of the FAST Act, as was mentioned already, 
that we put in some very important grants for freight projects.
    However, the country's maritime structure overall, ports, 
harbors, waterways, is still too much of an afterthought, and I 
think declining.
    I would really like to know, maybe I can start with you, 
Mr. Roberts, who probably has experience with multimodal port 
investments globally, what your perspective is on our country, 
our competitiveness.
    I was with the Secretary of Transportation, Secretary Foxx. 
He was saying in the Northeast, there are some companies that 
prefer to use the Canadian ports because they are more 
efficient and more effective than the ports in the Northeast.
    So as someone who really relies on this maritime 
infrastructure as you are moving goods across this country, 
what is your overall view of this? And what are some areas that 
we really need to make investments?
    Mr. Roberts. Thank you.
    There is a lot that needs to be done. You are absolutely 
right. There is a lot of money. There is a lot of opportunity 
to make a difference in this country, in infrastructure 
    As we have gone through a long recession, it is exactly the 
time to make those kinds of investments. The cost of doing it 
is relatively low, and the benefits in terms of building 
confidence in our economy grows because the government has the 
confidence to make----
    Senator Booker. Just the economics of it all, the more we 
wait, the more expensive it gets, not just because when you are 
trying to fix your roof, the longer you wait, the worse the 
damage gets, but also because the cost of capital right now is 
as low as it is going to be for a very long time.
    Mr. Roberts. Absolutely right.
    Senator Booker. So if we were running this like America, 
Inc., as opposed to whatever the mishegas is that we are 
calling this, the way we are running Congress, if we were the 
board of directors, we would invest now so we can save a lot of 
money later, right?
    Mr. Roberts. Absolutely. In fact, that is one of the things 
we are doing in Puerto Rico.
    We have teamed with the Puerto Rico Ports Authorities to 
spend $100 million there on the terminal to completely redo 
that terminal, bring it up to a very efficient standard and 
able to handle the new vessels that are coming online there.
    It is the right time to do this. It can make a huge 
difference in the overall economy. And yes, we are falling 
behind our foreign----
    Senator Booker. Tell me about that really quick. What are 
the opportunity costs? What happens when we can't handle the 
growing demands of industry in our ports?
    Mr. Roberts. The pace of cargo movement through the port 
slows down. The cost of moving cargo through the ports, there 
has been a lot of conversation about ships getting larger and 
the economics around that are pretty simple. It is to reduce 
the unit costs. You have 19,000 TEU ships now coming online.
    The port infrastructure needed to handle those kinds of 
vessels requires enormous investment, both under the water in 
dredging and on the shore side also. And to sort of keep the 
efficiencies and freight flowing on an efficient basis, those 
investments need to be made.
    Senator Booker. Mr. Luhta, I'm really worried about the 
decline of the U.S. Merchant Marine in general, and the effect 
it is having on our preparedness, on our economy. Just really 
quick, in the 30 seconds I have left, what effects did the 2012 
reduction of cargo preference from 75 percent to 50 percent 
have on the U.S. flag international fleet? What impact would 
further reductions have?
    Mr. Luhta. Initially, it put extreme pressure on the 
carriers to continue operating their vessels in a tighter 
budgetary environment. What that means is fewer ships overseas 
over time, and further cuts would decimate the American fleet. 
It would reduce the number of ships available, which in turn 
reduces the number of billets available for the highly trained 
mariners, both licensed and unlicensed, to gain experience 
necessary to advance in the pipeline.
    So you're going to disincentivize people from coming into 
the industry new, and you are not going to have jobs available 
for people to train and work and be qualified to work on these 
    Senator Booker. Thank you very much for your time, 
    Senator Fischer. Thank you, Senator Booker.
    Senator Klobuchar?

                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Madam Chairwoman 
and Senator Booker.
    And thank all of you. As you know, we have a big port in 
Duluth, so I care about this very much, and the Great Lakes.
    As we struggle with highway and rail congestion, which we 
have a lot of in our State, shortsea shipping provides an 
opportunity to better utilize our waterways to ship freight and 
millions of tons of cargo moved by ship every year in our 
region. I get there is little intermodal freight that moves by 
    Mr. Roberts and Mr. McAndrews, how can our coastal and 
Great Lakes waterways play a bigger role in relieving surface 
transportation congestion and facilitating commerce? One of you 
or both can take that.
    And what are the impediments, by the way, to doing that?
    Mr. Roberts. Shortsea shipping and coastal container 
shipping is sort of what the conversation has been about over 
the last 10 or 15 years on this subject. It is a terrific idea. 
There are many impediments to making it a reality, one of which 
is the harbor maintenance tax and the potential to have double 
taxation for moves that go by vessel instead of by highway or 
by rail.
    There are other things that need to be done to make it an 
efficient system. I think it is inherently challenged because 
we have a very, very efficient highway system and rail system 
to compete with a shortsea coast-wide system, but it is 
something that is important to continue developing.
    Senator Klobuchar. I have been working to crack down on the 
dumping of foreign steel on our shores and to even the playing 
field. We have iron ore up in Minnesota. We lost 2,000 jobs up 
there, or at least the plants are idle.
    Denis McDonough, the Chief of Staff of the President, came 
up to see it. As you know, we're having problems with steel 
dumping from China and Australia and other countries, but it 
has affected the steel industry all over America.
    Mr. Luhta and Mr. Roberts, can you speak to the foreign 
dumping of commodities, how they impact your industry, what you 
know about it? One of the things the administration has pledged 
to do is put 38 more inspectors on, because we know there is 
illegal steel that should not be coming in. We think that is 
one way we can do this.
    Mr. Luhta, do you want to start?
    Mr. Luhta. Well, I think the commodity dumping for a long 
time has put us at a disadvantage, so any steps that we can 
take to mitigate that to any degree is going to support the 
companies that manufacture those products, but down the line 
also support the jobs that go into building those products.
    So from a comprehensive look at the overall economy, the 
impact is great and absolutely something should be done.
    Senator Klobuchar. Mr. Roberts?
    Mr. Roberts. I would just say the steel industry is 
critical to the United States. We need to maintain it. We need 
to make sure that unfair methods of competition are addressed 
and we align, as the maritime industry also being a critical 
American industry, with the steel industry. I think we support 
antidumping provisions.
    Senator Klobuchar. OK. Very good.
    Just back to the harbor maintenance fund, we know that 
collects about $700 million more each year than it spends on 
dredging and maintenance. That was really frustrating, so the 
water bill that we passed increased the level of funding that 
the fund can spend.
    Do you think this change will help? And what else would you 
do to address the backlog? Anyone can take that.
    Mr. McAndrews. I guess I'll take that one. The last water 
bill was very, very much in line with AAPA's goals. We have 
five governing precepts for the use of the harbor maintenance 
tax. One is full use for its intended purpose. Two is increased 
equity for donor and energy transfer ports, and other precepts 
to develop a consensus among our industry.
    I would say that the best thing that can be done at this 
juncture is to continue to progress in hitting the HMT target, 
which is a phased increase over the next few years until full 
use is achieved.
    Senator Klobuchar. OK. Anyone else?
    All right, thank you very much.
    Senator Fischer. Thank you, Senator Klobuchar.
    Senator Blumenthal?


    Senator Blumenthal. Thanks, Madam Chairman. Thank you for 
having this hearing.
    Mr. Roberts, I was interested in your comments on the 
situation in Puerto Rico and the potential for LNG to lower the 
cost of electricity, which is vital to the economic health, 
long term, of the island.
    Is that something that is possible in the near term, so as 
to alleviate some of the financial straits that now afflict the 
    Mr. Roberts. I think the situation, as I understand it, 
with the Puerto Rico Electric Power Authority, PREPA, which is 
the electric government-owned utility there, they do burn some 
LNG. They burn a lot of other heavier fuels.
    I think over the long term, there is a potential for 
converting, and they certainly are interested in doing that. I 
think in the near term, I don't believe there is a whole lot 
that can be done at the sort of utility level.
    We do see opportunity, as I say, in our small-scale LNG 
business, and we are continuing to push that.
    Senator Blumenthal. Do you have any other thoughts as to 
having an interest as you do in the economic health of the 
island, because it is a place where you do business, what can 
be done to both reform the finances and address the short-term 
crisis? And is that a very dire crisis literally weeks away?
    Mr. Roberts. It is. Our position as a company has been to 
support, as I say, a restructuring mechanism. We were 
supportive of a Chapter 9 inclusion. That is not the only 
approach to restructuring that can be taken. The House bill has 
a different approach, but it is I think directed at the same 
goal, which is to avoid throwing the situation into chaotic 
litigation, which is not going to serve anyone's interests.
    I think the control board concept, as I understand, has a 
lot of support on the island, and it does depend on exactly 
what authorities it has and so on, but there is a need for an 
accountability there that has been not as solid as it should've 
been in the past.
    There are also other Federal benefits that have been 
discussed in terms of Medicaid, I believe, and other things 
that should absolutely be considered as this moves forward.
    Senator Blumenthal. I want to turn to the comments that you 
made about the need for maritime workers, for the skilled 
engineers and navigators and so forth. I am extrapolating a 
little bit from your testimony, but essentially your reference 
to the opportunities for military service veterans in this area 
and others.
    Maybe you can give us a little more in terms of the 
numbers. You say that, and I'm quoting, ``One of the challenges 
in gearing up this fleet,'' meaning the 20 to 25 additional 
vessels that are on track, is ``finding highly qualified 
officers and crew, particularly engineers, to man the 
vessels.'' Can you give us some numbers?
    Mr. Roberts. The number I heard most recently was 74,000 
mariner shortfall over the next 10 years. Now that covers all 
positions in licensed, unlicensed, on the rivers and so on. On 
the deep-sea side, it is a much smaller number.
    But what we have really focused on is to take military 
service veterans who have sea service, who have training, 
particularly in the Navy--and I think it is because this 
industry hasn't seen growth in employment for a long, long 
time, there hasn't been attention paid to making sure that the 
training they get and the experience they get in the military 
is aligned with the licensing that is required by the Coast 
Guard. So there is just that misalignment there the nobody paid 
a whole lot of attention to, because there wasn't a real need. 
Now there is a need for those people.
    In fact, this morning, there is a meeting in the Office of 
the Secretary of Defense to tackle that issue. There is a lot 
of attention being paid to it.
    I don't think there's any competing interests at stake 
here. I think it is a function of finding a way to help 
veterans find jobs, fill the need in the commercial side, and 
get mariners who are needed for our national security sealift 
purposes. It can be done.
    Senator Blumenthal. I would like very much to follow up. My 
time has expired, but as I understand it, what you're saying is 
that these veterans have skills but the licensing requirements 
are a burden for them unnecessarily in filling jobs that 
otherwise they would have. Is that roughly it?
    Mr. Roberts. There are examples of ship captains in the 
Navy who have more than a decade of seagoing experience, lots 
of training on systems and so on, who, when they step in to 
look at their licensing opportunities, would be a third mate 
under the commercial terms.
    So there is a lot of potential to do some good there.
    Senator Blumenthal. I will have someone in my office follow 
up with you. I really appreciate you being here today, as I do 
all the witnesses who are here.
    Thank you very much.
    Mr. Roberts. Thank you.
    Senator Fischer. Thank you, Senator Blumenthal.
    We are waiting for Chairman Thune to come. I understand he 
is on his way. So if I could, I will ask a couple questions 
while we wait for the Chairman to come.
    Mr. Bourne and Mr. McAndrews, can you elaborate on your 
experiences with highway and rail connection points at our 
ports? When we look at the increase in freight movements, what 
type of projects do you think are the most effective in 
addressing that congestion? And how are public and private 
stakeholders assisting in financing these types of intermodal 
    Mr. Bourne. I will take a shot at that, Madam Fischer.
    I think one of the biggest things that we see on the export 
side on the West Coast is a lack of infrastructure on the piers 
as it relates to being able to have portside rail service where 
intermodal train cars can be switched right to the port.
    One of the biggest problems that we experience as shippers 
on the West Coast, and I'm sure it's probably that way at a lot 
of the ports, is the congestion or bottleneck getting through 
the gate and all of the rigmarole that the truckers have to go 
through to get through the gate and get the containers 
delivered to the right spot and so forth. So that is a 
    You can eliminate a lot of that completely, to the extent 
you can get more intermodal delivered right to shipside, 
because you don't have truckers involved, you don't have that 
delay of getting through gates. It is cleared right to the 
port. Longshoremen can lift them off the railcars and onto the 
    I think there needs to be a lot more infrastructure 
available for that kind of activity.
    Senator Fischer. Mr. McAndrews, did you have any comments?
    Mr. McAndrews. I would. I would like to add, Madam Chair, 
that a lot of the TIGER grants, and I would expect a lot of the 
FAST Act dollars, are going to go into ``last mile in, first 
mile out'' infrastructure. Our TIGER grants certainly did. It 
relocated some rail lines coming into the port that not only 
made for a more efficient interchange and enabled the handling 
of unit trains, but it closed 16 at-grade crossings and 
shortened the amount of time that the train spends in the 
downtown areas in Pascagoula and Moss Point.
    That is just an example of many of the TIGER grant-funded 
projects that ports have gotten that have been put to use to 
address that need.
    Senator Fischer. Thank you very much.
    I see our Chairman has arrived, and I would recognize 
Chairman Thune, if he has any comments or questions for the 

                 STATEMENT OF HON. JOHN THUNE, 

    The Chairman. Thank you, Chairman Fischer and Senator 
Booker. Thank you for holding this hearing in, actually, what 
has become a series of hearings on the state of the U.S. 
maritime industry.
    A safe and efficient maritime transportation system plays a 
crucial role in supporting and growing the U.S. economy. It is 
especially true for U.S. agriculture producers, including many 
in my home state of South Dakota that ship approximately 20 
percent of their products to oversee markets. In fact, during 
the year 2015, U.S. agriculture export totaled nearly $140 
    So I want to thank all the witnesses for being here today, 
especially Mr. Perry Bourne of Tyson Fresh Meats.
    Tyson Fresh Meats, of course, is headquartered in Dakota 
Dunes, South Dakota, employing about 41,000 people across the 
country. I'm very proud to say that Tyson Fresh Meats is the 
largest beef and chicken producer in the United States and one 
of the largest pork producers.
    A strong and efficient supply chain is critical to the 
company's success, and that includes a reliable maritime 
transportation network.
    So what I would like to do is just ask a couple questions 
and direct those to Mr. Bourne.
    One has to do with the Federal role as it pertains to 
container weight. What action, in your view, if any, could 
Federal agencies take to avoid any unnecessary delays or costs 
come July 1?
    Mr. Bourne. Thank you, Chairman Thune, for asking that 
    I think number one, I would say simply that shippers are 
very interested in the whole issue of safety. That is one of 
the primary goals of this SOLAS regulation and the amendments.
    As I heard Mr. Roberts mention, in his company, safety is a 
crucial factor. They start each meeting. The same thing with 
    But I think the issue that we need is we really need to be 
able to sit down and have some meaningful conversation between 
shipper exporters and carriers to get this thing done. I don't 
think it is beyond us. I think that that is doable. It just 
really has not happened so far. There has been a lot of 
pushback to fall on the OCEMA guidelines, the Ocean Carrier 
Equipment Management group, to really limit the only two 
solutions to that.
    If we are not able to come to a conclusion with that, which 
I hope we can, then I would ask that this committee consider 
going back to the U.S. Coast Guard and asking them as a member 
with the IMO to ask for further clarification of that position 
that IMO has that there are many ways to achieve the reporting 
of the verified gross mass, which is really what surrounds this 
whole SOLAS issue.
    I think it is in the best interests of the country to get 
something done without delay.
    The Chairman. My understanding is that the container weight 
verification rule may necessitate updates to electronic data 
interface fields and processes. From a shipper perspective, are 
electronic data interface providers ready for the July 1 
deadline? And are they implementing changes consistently across 
the industry?
    Mr. Bourne. The only thing that I can tell you about that 
from a personal standpoint is we have had our folks in our 
company check. There are two organizations that I am aware of, 
INTTRA, I believe it is called, and GT Nexus.
    These are third-party providers that support electronic 
interchange of information between shippers and carriers today.
    But as I understand it, when we have checked with the 
companies directly to find out, ``Do you have a way to handle 
the transmission of this information to the carriers to meet 
the timing deadlines that they have established for receiving 
this information?'' we are told on transload-type shipments, 
like most of ours are, they do not have that in place right 
now, and July 1 is around the corner.
    The Chairman. When did you first learn of the container 
weight rule put forth by the IMO?
    Mr. Bourne. The first time I heard about it was in 
periodicals. The JOC, Journal of Commerce, has had some stories 
early on, like in October and November 2015.
    You may not be aware of this, but the IMO ruling, the 
amended ruling, came about in 2014. It was, frankly, very hush-
hush, so to speak. It was not high on the docket of 
communication to shippers like ourselves. There was really no 
outreach to shippers like ourselves, to kind of act as a 
sounding board on these various changes that were being 
considered, how we would deal with them, would it interrupt 
    Frankly, I'm convinced that it will interrupt the movement 
of chilled cargo, which is crucial to our company's business, 
and that of many agricultural shippers throughout the U.S.
    The Chairman. So it sounds like, as a stakeholder, the 
shippers didn't have representation during this development?
    Mr. Bourne. That is correct.
    The Chairman. Let me just close--my time has expired--by 
saying that, again, I appreciate all the witnesses being here 
today and offering a potential solution to prevent unnecessary 
delays and costs for our supply chain.
    I think there's going to be a great need for carriers to 
sit down with shippers and for both parties to come to a 
mutually agreeable path forward.
    This committee will stay engaged on this issue to ensure 
that we keep our goods moving safely and efficiently. Clearly, 
that is an identifiable issue that needs to be addressed.
    Mr. Bourne. Thank you. If I could add one last comment, I 
think the most important thing that we as U.S. exporters 
experience is there has not been a lot of activity that has 
taken place in recent years to really foster the export growth 
that is crucial to building our economy back.
    Certainly, the SOLAS amendment doesn't do anything to 
improve efficiencies or to spur export shipments. To the 
contrary, I think it is going to hurt them.
    The Chairman. Thank you.
    Thank you, Madam Chair.
    Senator Fischer. Thank you, Chairman Thune.
    Senator Booker, did you have any comments?
    Senator Booker. No.
    Senator Fischer. Thank you.
    With that, the hearing record will remain open for 2 weeks. 
During this time, Senators are asked to submit any questions 
for the record.
    Upon receipt, the witnesses are requested to submit their 
written answers to the Committee as soon as possible.
    With that, I would like to thank our witnesses for being 
here today. Great hearing.
    We are adjourned.
    [Whereupon, at 11:29 a.m., the hearing was adjourned.]

                            A P P E N D I X

          Comments of the Global Consolidators Working Group 
   (a working group of the of major consolidators in the U.S. Trades)

    The following comments are submitted by the Global Consolidators 
Working Group (GCWG) for consideration by the Surface Transportation 
and Merchant Marine Infrastructure, Safety and Security Subcommittee, 
United States Senate. We appreciate this opportunity to discuss the 
state of the U.S. maritime industry and emphasize on the most pressing 
issue of the International Maritime Organization (IMO)'s recent 
amendments to the International Convention for the Safety of Life at 
Sea (SOLAS).\1\ The SOLAS amendments will require (as of July 1, 2016) 
that a shipper verify the gross mass (VGM) of a container's cargo/
contents to the underlying carrier and a terminal operator. Failure to 
provide such a VGM verification will result in a carrier refusing to 
load the container.
    \1\ International Convention for the Safety of Life at Sea, as 
    The GCWG is a working group of the leading consolidator non-vessel-
operating common carriers (``NVOCCs'') \2\ in the foreign commerce of 
the United States.\3\ The GCWG includes: CaroTrans International, Inc., 
Ecu-Line N.V., Shipco Transport Inc. and Vanguard Logistics Services 
(USA), Inc. Each of the GCWG companies engages in co-loading activities 
(i.e. consolidation of Less-than Container Load or LCL shipments), as 
well as Full-Container Loads (FCL). For LCL shipments, the individual 
GCWG companies act as the ``Masterloader'' or the consolidator of the 
LCL shipments and then tender the consolidated container to the 
underlying ocean carrier for transport.
    \2\ Non-vessel-operating common carrier is defined as ``. . . a 
common carrier that--(A) does not operate the vessels by which the 
ocean transportation is provided; and (B) is a shipper in its 
relationship with an ocean common carrier.'' See 46 U.S.C. 
Sec. 40102(16).
    \3\ Foreign Commerce of the United States a referenced herein 
includes all the major North-South and East-West trades and sub-trades, 
such as the Trans-Atlantic Eastbound/Westbound trades, Trans-Pacific 
Eastbound/Westbound trades, etc.
I. Background on Consolidation Sector
    The LCL or consolidation market is unique from other sectors of the 
ocean transport industry. In particular, the GCWG companies specialize 
in providing ocean and related multimodal transportation services for 
small and medium-sized companies (typically other freight forwarders or 
NVOCC's), thus leveraging combined freight volumes, cost-savings for 
smaller companies and increased efficiencies across the supply chain--
including benefits to ocean carriers who accept the consolidated 
shipments from the Masterloader NVOCC.
    It is important to understand how a consolidation shipment 
functions, both operationally and commercially. In terms of a chain of 
custody for LCL shipments, a variety of parties are involved in each 
transaction: actual shippers/consignees (that look to the co-loading 
forwarder or NVOCC for services); the co-loading forwarder or NVOCC 
(that looks to the Masterloader for service); the Masterloader (that 
provides consolidation services to the down-stream parties); third-
party truckers (that may receive the consolidated container from the 
Masterloader for transport/dray carriage to the terminal); the ocean 
carrier (that provides the ocean transport); and terminal operators 
(both at origin and destination). At times, third-party Container 
Freight Stations (CFS) may be utilized as part of the overall 
consolidation process. The consolidation market has become embedded in 
today's global shipping environment.
    For each consolidated/LCL shipment, multiple bills of lading are 
issued--by the co-loader NVOCCs, the Masterloader, and, ultimately, the 
ocean carrier. By way of background, the Masterloader accepts the LCL 
shipments from other NVOCCs and issues a House Bill of Lading (HBL) or 
receipt to each of the individual NVOCCs that tender freight for 
consolidation; there could be dozens of such HBLs issued by the 
Masterloader. The shipper and/or consignee party on the Masterloader 
HBL will reflect the tendering co-loader NVOCC, as well as its overseas 
agent, affiliate or branch offices. When the tendering co-loader acts 
as an NVOCC (in contrast to when it acts only as a forwarder), it will 
issue its own HBL to its shipper-client (often the actual, underlying 
shipper); depending on the number of co-loader NVOCCs in a consolidated 
container, these HBLs may be in the dozens. Once the consolidated 
shipment is tendered to the ocean carrier, a Master Bill of Lading is 
issued by the ocean carrier, reflecting the Masterloader as the 
shipper/consignee and the Masterloader's overseas agent, affiliate or 
branch office.
    For purposes of the SOLAS amendments and VGM requirements, an 
understanding of the above is critical, since securing weight 
verifications will depend on each of the above actors--a disruption or 
misunderstanding by even one of the parties in the chain of custody may 
result in a weight miscalculation.
II. SOLAS Amendments: GCWG Position
    The GCWG appreciates the work of the IMO on this important subject, 
but cautions implementation as currently envisioned may lead to 
unintended consequences, such as delay of shipments, additional costs 
for shippers and U.S. exporters, congestion at the ports, and, 
potentially, a reduction in U.S. exports, which will affect almost all 
sectors of the international trade community, including the countless 
small and medium-sized customers serviced by each of our companies. 
Accordingly, the GCWG submits the following for further consideration 
by the Subcommittee and other stakeholders, including the United States 
Coast Guard (USCG) as the Competent Authority under the IMO SOLAS 
Convention, as the shipping industry approaches the July 1 effective 
date for the SOLAS amendments.
    In sum, the GCWG supports the following:

  1.  Reasonable delay of the effective date for the SOLAS amendments 
        of twelve (12) months (thus, the new effective date would be 
        July 1, 2017)

  2.  Consideration by USCG (and other Competent Authorities) of 
        requiring the terminal operator act as the verifier of a 
        container's Gross Mass;

  3.  Further outreach to the shipping community--all sectors--by USCG 
        during the additional 12 months under a delay; and

  4.  Increased transparency on behalf of the IMO regarding the global 
        implementation status of the VGM rule.

    Our companies believe the above positions are practical, balanced 
and will enable the entire global supply chain community to work 
constructively as the eventual SOLAS VGM effective date approaches. Our 
companies acknowledge implementation of the VGM amendments is a near-
certainty. We support further awareness of the importance of the 
amendments to all members of the international shipping community--but 
believe additional time and further consideration of how best to 
achieve VGM certification are required to ensure the true objective of 
the IMO's work is realized.
III. Request for Delay
    We understand that under the terms of the SOLAS convention and, 
specifically, the VGM amendments a Member State, such as the United 
States, has the authority to delay the effective date of up to twelve 
(12) months. While all Member States must in principle comply with 
amendments to the Annex of the SOLAS Convention other than Chapter I by 
the time they enter into force, individual Member States may 
nonetheless delay implementation of such amendments for a period not 
longer than one year from the date of entry into force.\4\ Member 
States may do so by notifying the Secretary-General of the IMO before 
the date set for entry into force.\5\ In the instant case, the VGM 
amendments amend Chapter VI (Carriage of Cargos) of the Annex to the 
SOLAS Convention, therefore, a 12-month delay would be permitted per 
the provisions of the Convention, and could be requested by June 30, 
    \4\ SOLAS Convention, Article VIII(b)(vii)(2).
    \5\ Id.
    The GCWG respectfully submits that a 12-month delay would not only 
be permitted but also warranted here. Pursuant to Resolution 
MSC.380(94),\6\ the industry is readying the necessary arrangements in 
order to comply with the VGM amendments. However, the GCWG submits that 
additional time is justified to negotiate commercial arrangements for 
the allocation of responsibility and additional costs among shippers, 
carriers, and terminal operators in the event containers are weighed 
in-terminal. Additionally, it is unclear whether the existing weighing 
equipment, certified and calibrated at a state level, is sufficient in 
number to allow for the smooth flow of container traffic into 
    \6\ MSC.380(94).
    Accordingly, a 12-month delay would be appropriate as it would 
allow the industry to make the legal and operational arrangements 
necessary for the proper implementation of the VGM amendments. Further, 
this delay would not compromise the policy objectives intended by the 
VGM amendments. Rather, it would contribute to their proper 
implementation and help prevent unnecessary delays in the supply chain 
as a result of a swift and improper implementation due to lack of time.
    Alternatively, the GCWG respectfully requests USCG consider an 
exemption for an additional 12 months from the VGM requirements 
specifically for the consolidation market. As noted, the LCL sector is 
unique from FCL shipments, involves potentially dozens of individual 
shippers in relation to the Masterloader in one, consolidated container 
and holds the possibility of creating significant disruption and 
confusion for the industry, if the July 1, 2016 effective date remains.
IV. Terminal Operators Should Provide VGM Certification
    Based on our understanding of global supply chain operations, the 
flow of container traffic and the realities of port operations, the 
GCWG maintains a terminal operator is best positioned to weigh each 
container and provide the VGM certification to the underlying ocean 
carrier. In fact, we understand from discussions with various US-based 
terminal operators that most containers, if not all, are already 
weighed upon entry to a port.\7\ We support equipping terminals, if 
they are not already equipped, with the necessary scales to determine 
the actual weight of each container, prior to lading. The SOLAS 
amendments require a shipper to provide the VGM certification to the 
carrier prior to a carrier loading the container. Ideally, our 
companies maintain that the weighing of a container should be the 
responsibility of the terminal operators or the underlying carrier, as 
they are the parties that are best positioned to undertake this 
exercise, given that a stow plan is the responsibility of the master 
operating the vessel that provides the ocean transport service on a 
particular voyage. As a comparison, in the air transport sector, it is 
the air carrier that is responsible for determining the weight of each 
airfreight container, also called Unit Load Devices (ULD). The same is 
true in the surface transport sector, where each motor carrier is 
responsible for verifying the weight of the cargo/truck load.
    \7\ We acknowledge that the weight taken at entry to the port 
includes the weight of the cargo and container plus the weight of the 
chassis, truck and fuel; however, we understand that this is already 
taken into account to determine the container weight for stow plan 
purposes, so it should not be difficult to account for the additional 
weight and determine the actual container weight.
    By having a terminal operator provide the physical weighing of the 
container (as instructed by a shipper), the purpose of the SOLAS 
amendments is achieved, while minimizing unintended disruptions or 
consequences further up the supply chain. This option makes practical 
sense, given the proximity of the terminal to the vessel and the 
critical role that the terminal operator plays in the lading and 
unlading of a vessel. Should this option be practically achievable 
prior to July 1, 2016, there would be no need to impose the 12-month 
    We further note that under current Occupational Health and Safety 
Administration (OSHA) regulations all outbound containers must be 
weighed at the terminal to determine the weight prior to being hoisted/
loaded.\8\ If scales are available at the terminals, containers must be 
weighed at the terminals. Requiring shippers to also weigh and certify 
the weight of the container appears to be duplicative and unnecessary 
given the current regulations and requirements already in place in the 
United States. These existing regulations underscore that the terminal 
operator is the most appropriate party to weigh outbound containers.
    \8\ 29 C.F.R. 1917.71(b)(3) and (4) (``(3) Every outbound loaded 
container which is received at a marine terminal ready to load aboard a 
vessel without further consolidation or loading shall be weighed to 
obtain the actual gross weight, either at the terminal or elsewhere, 
before being hoisted. (4)(i) When container weighing scales are located 
at a marine terminal, any outbound container with a load consolidated 
at that terminal shall be weighed to obtain an actual weight before 
being hoisted. (ii) If the terminal has no scales, the actual gross 
weight may be calculated on the basis of the container's contents and 
the container's empty weight. The weights used in the calculation shall 
be posted conspicuously on the container, with the name of the person 
making the calculation and the date.'')
V. Further USCG Outreach
    We applaud the USCG for its engagement on the subject of VGM, for 
continuing discussions with members of the international ocean 
transport community and for its willingness to listen. We further 
applaud the USCG for taking the position that shippers may comply with 
the SOLAS amendments by simply providing the cargo mass weight--as is 
the case currently. Yet, GCWG companies believe that an additional 12 
months for outreach and preparation prior to the effectiveness of the 
SOLAS amendments can only provide additional benefits to the USCG (as 
the enforcer) and both users and providers of containerized ocean 
transport in the U.S. trades. While we understand that the subject has 
been pending before the IMO for several years, we fail to see why an 
additional year could be viewed in any other way other than being 
reasonable, given the amount of attention that VGM is now receiving 
from all sectors of the shipping industry and public. As noted above, 
our companies understand that the SOLAS amendments' effective date is 
inevitable--it becomes in our view a question of whether we rush 
towards July 1, 2016 with a litany of questions unanswered or use an 
additional year to ensure that all such issues are resolved and the 
entire ocean shipping community--users and providers alike--are 
prepared properly for implementation. As has been noted (including by 
the World Shipping Council, OCEMA, TT Club and others), failure to 
provide the VGM certification could result in sanctions and/or delays, 
as well as commercial complications for many parties involved in the 
supply chain.\9\ While we understand that the USCG does not intend to 
penalize shippers for failure to verifiably provide the cargo gross 
mass, the GCWG submits that without careful consideration of the SOLAS 
amendment's impact on all parties of the trade, the possibility for 
operational and commercial disruptions remain real.
    \9\ See generally ``Verified Gross Mass Industry FAQs: 
Implementation of the SOLAS amendments effective from July 1, 2016,'' 
Dec. 2016. http://www.ttclub.com/fileadmin/uploads/tt-club/
VI. Increased Transparency on the IMO's Behalf
    The SOLAS amendment requires that shippers in all IMO Member States 
provide the VGM. Uniform and consistent implementation across the globe 
is necessary to successfully implement IMO's latest initiative. This 
will allow all parties to operate on a level playing field by abiding 
by the same standards--enforced in a similar way by all Member States. 
As a global industry, global clarity and standardization are needed.
    To date, less than 10 IMO Members appear to have provided some sort 
of meaningful guidance on the implementation details of the VGM rule. 
Consequently, our companies--and many others which maintain global 
operations--are currently unaware as to how IMO Member States will 
implement the new rule. This lack of information, guidance and 
transparency makes it nearly impossible for shippers to implement 
necessary arrangements to comply with the SOLAS amendment at the Member 
State level. To this end, the GCWG took the initiative to address this 
issue in an open letter, asking the IMO--as the globally competent 
authority--to gather and publish a series of vital information 
regarding the VGM's implementation status. Unfortunately, the IMO has 
remained silent thus far, thereby exacerbating the challenges that 
shippers face in complying with the VGM rule on a global scale. With 
this in mind, the GCWG respectfully calls on the U.S. Government to 
request from the IMO to enhance transparency on the matter by 
collecting and publishing the requested information.
VII. Conclusion
    The GCWG companies thank the Subcommittee for consideration of this 
testimony. We have drafted it with careful consideration given to the 
IMO's work on container weight verification, the ocean carriers' 
commitment to improving safety and how shippers will need to comply 
with the new requirements. We maintain that a delay of 12 months, 
consideration of the terminal operators providing the weighing of the 
container, and increased transparency, coupled with further discussions 
with the trade community will yield the most practical implementation 
of the SOLAS amendments.
            Respectfully submitted,
                              CaroTrans International, Inc.
                                              Ecu-Line N.V.
                                      Shipco Transport Inc.
                    Vanguard Logistics Services (USA), Inc.
Washington, DC
May 3, 2016
                      National Association of Manufacturers
                                        Washington, DC, May 4, 2016

United States Senate,
Commerce, Science, and Transportation Committee,
Subcommittee on Surface Transportation and Merchant Marine 
            Infrastructure, Safety and Security,
Washington, DC.

Dear Chairman Thune, Ranking Member Nelson, Chairman Fischer, and 
            Ranking Member Booker:

    The National Association of Manufacturers (NAM) appreciates the 
bipartisan effort you have undertaken to review the implementation of 
the International Maritime Organization's (IMO) International 
Convention for the Safety of Life at Sea (SOLAS) Container Weight 
Amendment by the United States Coast Guard (USCG).
    Manufacturers have been extremely concerned about possible delays 
of shipments, new burdensome requirements and additional costs borne by 
this new international regulation. The lack of clarity, transparency 
and formal guidance from the USCG on implementation and enforcement 
were critical themes addressed in your recent hearing. Manufacturers 
are committed to complying with these new requirements to ensure global 
vessel safety and appreciate your Committee's commitment to addressing 
shipper concerns.
    Efficiency at our Nation's ports is a necessity to meet 
manufacturers' contractual obligations, serve global markets, grow 
manufacturing, create jobs and keep pace with our global competitors. 
The adoption of this IMO amendment to SOLAS took place in 2014 without 
full participation from a broad range of stakeholders and left 
manufacturers facing practical implementation issues that had not been 
taken into account when this issue was first presented by the ocean 
carrier industry. As the July 1, 2016 implementation deadline 
approaches, manufacturers had received limited, informal information 
from the USCG on the implementation and enforcement of this amendment. 
Manufacturers have focused efforts on requesting greater clarity as to 
how this requirement will be enforced. To that end we thank the 
Committee's assistance in seeking answers for shippers. Within eight 
days of your hearing, the USCG released the April 28 Marine Safety 
Information Bulletin. This document provides shippers an important 
written answer to the USCG interpretation of the container weight 
amendment and its enforcement.
    In light of this very recent release, shippers may now find some 
relief concerning the practical issues with implementation. However, in 
order to ensure the efficient movement of cargo and prevent unintended 
delays, manufacturers strongly recommend the USCG go further to address 
all concerns, as global harmonization and implementation still remain 
unknown, and possible changes to cut-off times at ports may continue to 
be an issue. Modern manufacturing relies on just-in-time inventories, 
which makes the on schedule arrival of imported feedstocks and inputs 
critical to business operations. And any changes made to the cut-off 
time for a verified weight, as referenced in the Ocean Carrier 
Equipment Management Association (OCEMA) ``no docs--no load'' policy, 
could cause shipment delays and would be detrimental to manufacturers' 
ability to meet contractual obligations and remain competitive in a 
global marketplace.
    Manufacturers appreciate the commitment to safety embodied by the 
IMO, but request consistency and clarity to properly implement this 
rule in coordination with our global trading partners. As these issues 
are worked through in a transparent setting, a phased approach to 
implementation or delay should not be discounted.
    Thank you for your attention to this critical issue.
                                       Robyn M. Boerstling,
                                                    Vice President,
               Infrastructure, Innovation & Human Resources Policy.