[Senate Hearing 115-774]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 115-774

                       MARITIME TRANSPORTATION: 
                      OPPORTUNITIES AND CHALLENGES

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON SURFACE TRANSPORTATION
                  AND MERCHANT MARINE INFRASTRUCTURE,
                          SAFETY AND SECURITY

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 24, 2018

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Available online: http://www.govinfo.gov
                
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
39-951 PDF                  WASHINGTON : 2020                     
          
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  TOM UDALL, New Mexico
JAMES INHOFE, Oklahoma               GARY PETERS, Michigan
MIKE LEE, Utah                       TAMMY BALDWIN, Wisconsin
RON JOHNSON, Wisconsin               TAMMY DUCKWORTH, Illinois
SHELLEY MOORE CAPITO, West Virginia  MAGGIE HASSAN, New Hampshire
CORY GARDNER, Colorado               CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana                  JON TESTER, Montana
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

      SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE 
                  INFRASTRUCTURE, SAFETY AND SECURITY

DEB FISCHER, Nebraska, Chairman      GARY PETERS, Michigan, Ranking
ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  AMY KLOBUCHAR, Minnesota
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 24, 2018...................................     1
Statement of Senator Fischer.....................................     1
Statement of Senator Peters......................................     3
Statement of Senator Wicker......................................    33
    Prepared statement from the Coalition for More Efficient 
      Ports......................................................    34
Statement of Senator Hassan......................................    37
Statement of Senator Capito......................................    41

                               Witnesses

Hon. Michael A. Khouri, Acting Chairman, Federal Maritime 
  Commission.....................................................     4
    Prepared statement...........................................     5
Hon. Mark H. Buzby, Administrator, Maritime Administration, U.S. 
  Department of Transportation...................................    15
    Prepared statement...........................................    17
Rear Admiral James Helis, U.S. Maritime Service, Superintendent, 
  U.S. Merchant Marine Academy...................................    20
    Prepared statement...........................................    22
Craig H. Middlebrook, Deputy Administrator, Saint Lawrence Seaway 
  Development Corporation, U.S. Department of Transportation.....    24
    Prepared statement...........................................    26

                                Appendix

Response to written questions submitted by Hon. John Thune to:
    Hon. Michael A. Khouri.......................................    47
Response to written questions submitted to Hon. Mark H. Buzby by:
    Hon. James Inhofe............................................    53
    Hon. Bill Nelson.............................................    55

 
         MARITIME TRANSPORTATION: OPPORTUNITIES AND CHALLENGES

                              ----------                              


                        TUESDAY, APRIL 24, 2018

                               U.S. Senate,
         Subcommittee on Surface Transportation and
           Merchant Marine Infrastructure, Safety, and Security,   
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Deb Fischer, 
Chairman of the Subcommittee, presiding.
    Present: Senators Fischer [presiding], Wicker, Blunt, 
Capito, Young, Peters, Cantwell, Blumenthal, and Hassan.

            OPENING STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. The hearing will come to order. Thank you 
all for being here today for this Surface Transportation and 
Merchant Marine Infrastructure, Safety, and Security 
Subcommittee hearing titled ``Maritime Transportation: 
Opportunities and Challenges.''
    Maritime transportation and the Merchant Marine are 
essential to the United States for both commercial and defense 
purposes. The United States Bureau of Transportation statistics 
found that in 2016, the value of exports and imports shipped by 
water was worth nearly $1.5 trillion. As the world becomes more 
connected through trade, even a triple landlocked state like 
Nebraska relies on maritime transportation and the Merchant 
Marine to get our products to their final destination.
    The Merchant Marine is also vital for the defense of our 
country. The Ready Reserve Force Program has been activated for 
defense and emergency purposes over 600 times since it was 
created in 1976. Understanding and addressing the needs of the 
Merchant Marine is crucial, and it's a crucial part of our 
national security.
    Today, we will be examining the current state of the 
maritime sector, including the maritime workforce, U.S. Sealift 
capability, and developments within freight transportation. Our 
witnesses from the Maritime Administration, the U.S. Merchant 
Marine Academy, the Federal Maritime Commission, and the Saint 
Lawrence Seaway Development Corporation will share the 
administration's perspective on these topics. This hearing is 
particularly relevant as the Senate Commerce Committee 
considers the Fiscal Year 2019 reauthorization of the Maritime 
Administration, which Senator Peters and I introduced.
    The Maritime Administration, or MARAD, plays an important 
role in both our national defense and the promotion of maritime 
industry in the United States. MARAD, through an agreement with 
the Department of Defense, manages the Ready Reserve Force, 
which serves to transport combat support, resupply, and unit 
equipment to the Army and the Marine Corps.
    Domestically, the Ready Reserve Force played a critical 
part in the Federal response efforts following the devastating 
hurricanes last year. MARAD also oversees important maritime 
requirements that ensure the United States maintains its port 
and shipbuilding infrastructure. As one of our five service 
academies, the U.S. Merchant Marine Academy is necessary for 
developing future leaders in the maritime industry, including 
many who will go on to serve in our Nation's armed forces. I am 
thankful for their service to our country.
    I remain concerned about the incidents of sexual assault 
and sexual harassment at the Academy, particularly the 
September 2016 alleged incident involving the men's soccer 
team. This committee has included a number of important 
provisions in recent MARAD reauthorizations to reform the 
Academy and address instances of sexual assault and harassment. 
Midshipmen must be confident in their leadership and trust that 
the Academy will respond to reports of this terrible behavior. 
Following the recent report released by the Department of 
Transportation's Inspector General's Office, I expect to learn 
how the Academy will address the gaps in its sexual assault and 
sexual harassment response and prevention efforts.
    I also expect to hear about the efforts of MARAD and the 
Academy to encourage more ocean carriers to accept midshipmen 
as part of their Sea Year training. We will hear from the 
Acting Chairman of the Federal Maritime Commission, which 
oversees freight activities and our international ocean 
transportation system. The FMC is an independent Federal agency 
tasked with fostering a fair, efficient, and reliable 
international ocean transportation system for U.S. exporters, 
importers, and consumers. It is responsible for regulating 
ocean carrier activities, reviewing ocean carrier and marine 
terminal operator agreements, and monitoring ocean 
transportation operations and rates.
    Ocean shipping has experienced several challenges and 
changes in recent years, including the 2015 West Coast ports 
slowdown, the bankruptcy of a major international ocean 
carrier, the formation of new ocean carrier alliances, and the 
dramatic growth in container shipping vessels, which has 
altered how our ports and intermodal connections manage the 
increase in freight. The FMC has a role relevant to each of 
these challenges, most recently by examining policies 
surrounding demurrage and detention rates. I look forward to 
hearing from the Acting Chairman about the current state of the 
maritime freight industry and how the Commission has been 
addressing these challenges.
    I also want to take this opportunity to commend 
Commissioner Rebecca Dye for her work leading the supply chain 
innovation teams. Her recent report spotlights key challenges 
in the supply chain and offers potential solutions to better 
analyze the movement of freight across the port system.
    Finally, we will hear from the Saint Lawrence Seaway 
Development Corporation, which maintains the United States' 
role in waterborne trade along the Saint Lawrence Seaway and in 
the Great Lakes. The Saint Lawrence Seaway Development 
Corporation faces many of the same challenges that the U.S. 
Port Authorities are facing, such as larger vessels and aging 
infrastructure, but also faces unique challenges such as the 
waterway freezing over in the winter. I look forward to hearing 
about these unique challenges and how the Development 
Corporation intends to meet them.
    Thank you again to our witnesses for being here today, and 
I would now turn to my colleague and Ranking Member, Senator 
Peters, for his opening remarks.

                STATEMENT OF HON. GARY PETERS, 
                   U.S. SENATOR FROM MICHIGAN

    Senator Peters. Well, thank you, Chair Fischer.
    Good morning to our witnesses. I look forward to hearing 
your testimony here today.
    The U.S. Maritime Transportation System sustains and 
empowers our national economy. Over 90 percent of the volume of 
overseas trade enters or leaves the United States by ship, and 
waterborne cargo contributes nearly $650 billion annually to 
the U.S. GDP and sustains more than 13 million jobs.
    My home state of Michigan is not just a regional but an 
international hub for trade, transportation, and logistics. 
Many of the largest heartland industries, from grain to iron 
ore, are highly dependent on the maritime industry to move 
their products to market. Michigan has 38 deep water ports and 
ranks first in the Great Lake states in maritime tonnage with 
more than 61 billion tons of cargo moving annually into and out 
of the state. A recent study estimates that the total economic 
impact of commercial maritime industry in Michigan equates to 
over 91,000 jobs, $19 billion in business revenue, and $4.4 
billion in personal income impacts.
    While the Great Lakes Maritime Transportation System is a 
major regional and national transportation asset, 
unfortunately, a lack of funding has contributed to the 
deterioration of port conditions and capacity, not just in 
Michigan, but all across the United States. I look forward to 
hearing today what more we can do to rehabilitate and sustain 
our aging infrastructure.
    In addition to investing in our infrastructure, we must 
also invest in our maritime industry, whether it's through 
increased shipbuilding, training for future mariners, or 
maintaining a fleet of vessels capable of supporting the 
military's needs during armed conflict or national emergencies. 
There has been a long-term decline in the number of U.S. flag 
ships and mariners. Many of our Jones Act and oceangoing 
vessels are aging and in urgent need of repair or upgrade.
    These are challenges that we must address. Our economy and 
our military rely on the work of the men and women of the 
Merchant Marine, and I look forward to finding ways to grow the 
maritime industry and working to find sustainable, stable jobs 
for mariners in the future.
    My state of Michigan is directly invested in the training 
of our future mariners as the home to the Great Lakes Maritime 
Academy, one of the six state maritime academies across the 
Nation. I am also honored to serve on the Board of the Merchant 
Marine Academy, where I have seen firsthand the importance of 
preparing our student mariners for the future.
    For students to learn and grow, it is essential that we 
provide a safe learning environment, one that is free from 
harassment and sexual assault. I know this is an issue that we 
will cover today and I know that MARAD and the Academy are 
working to address.
    That said, there is more that we can do to get this right, 
and Senator Fischer and I are glad to partner with you in this 
year's MARAD reauthorization bill to further build upon these 
efforts. I look forward to hearing our panel's suggestions on 
how we address these and other challenges and how we can work 
together to bolster our nation's infrastructure.
    Thank you.
    Senator Fischer. Thank you, Senator Peters.
    Now I would ask the panel to please give their opening 
statements, and we'll begin with you, Mr. Khouri.

 STATEMENT OF HON. MICHAEL A. KHOURI, ACTING CHAIRMAN, FEDERAL 
                      MARITIME COMMISSION

    Mr. Khouri. Thank you, Chairman Fischer, Ranking Member 
Peters, and Senators. Thank you for the opportunity to appear 
before you today, and, with permission, I will summarize my 
written remarks and request the written testimony with a copy 
of our Fiscal Year 2017 Annual Report be included in the 
record.
    The FMC's mission is to ensure a competitive and reliable 
international ocean transportation supply system that supports 
the U.S. economy and protects the public from unfair and 
deceptive practices. As the Commission monitors international 
ocean trades and regulates key sectors of the container 
shipping industry, the Commission is meeting its mission, and 
our U.S. exporters, importers, and consumers are the ultimate 
beneficiaries.
    As the first item, I'd like to address an issue of interest 
that Chairman Thune raised last fall. The Coalition for Fair 
Port Practices filed a petition in December 2016 asking the FMC 
to begin a new rulemaking proceeding to regulate practices by 
marine terminals and ocean carriers relating to demurrage, 
detention, and related fees. We received numerous written 
comments and then held two days of public hearings in January.
    The Commission recently voted to begin a formal 
investigation to develop a full factual record. Following her 
experience and leadership last year with the Supply Chain 
Innovation Teams initiative, Commissioner Dye agreed to serve 
as the fact-finding officer. An interim investigation report is 
scheduled for September, and a final report is due in December 
of this year. We will keep you and the Committee updated on 
those initiatives.
    Next, an overview. As you suggested, Chairman, the ocean 
transportation system has changed significantly over the last 
few years. The number of major global shipping companies 
decreased from 21 to 12. With new construction, global fleet 
capacity has increased to 5,200 container ships and 21 million 
TEUs of capacity. This capacity increase outran global cargo 
demand, resulting in overcapacity in nearly all trade lanes.
    Nine of the 12 major ocean carriers are members of three 
global vessel operational alliances. A reassuring data trend 
shows us that even with the mergers and new carrier alliances, 
the individual ocean carriers continued to independently and 
vigorously compete on pricing and overall capacity decisions, 
providing evidence that healthy competition continues. Industry 
analysts and shipper interests recognize that the alternative 
to well regulated vessel alliances would be further mergers and 
consolidations in the industry, resulting in fewer ocean 
carriers and less service options.
    Another positive development: ocean carrier agreements that 
contain authority to discuss freight rates have experienced a 
steady decline. Five such agreements terminated in the last few 
months. The Commission has responded to these structural 
developments with new agreement negotiation practice that 
narrows agreement authority, restricts language scope, and with 
enhanced monitoring programs. For all agreements, our staff 
maintains a careful watch on industry trends, being vigilant 
for indications of anticompetitive behavior.
    Marine terminals and port authorities have shown new 
interest in using alliance type agreements. Terminals are 
cooperating in new ways as they address the challenges 
presented by larger vessels unloading more containers at each 
port call and the need for enhanced port infrastructure and 
developing collective solutions to mitigate cargo bottlenecks.
    On the regulatory front, following the direction of 
Executive Order 13777, the Commission continues our process to 
identify and address outdated, unnecessary, or unduly 
burdensome regulations. Global supply chain operations benefit 
from less regulation through lower costs that pass through to 
our U.S. exporters, importers, and consumers.
    Regarding our budget, our requested level of funding for 
Fiscal Year 2019 is $27,490,000. The FMC is a small agency 
charged with a focused competition and commercial mission and a 
need for specialized staff, including a high percentage of 
economists and attorneys, career fields that tend to fall in 
the upper GS pay scales. The bulk of the Commission's budget, 
approximately 86 percent, is dedicated to these salaries and 
rent.
    Thank you for your attention. I'd be pleased to answer any 
questions you may have.
    [The prepared statement of Mr. Khouri follows:]

    Prepared Statement of Hon. Michael A. Khouri, Acting Chairman, 
                      Federal Maritime Commission
    Chairman Fischer, Ranking Member Peters, Senators, thank you for 
the opportunity to appear before you today to discuss issues related to 
the Federal Maritime Commission and to share with you how the 
Commission works to ensure a competitive and reliable international 
ocean transportation supply system that supports the U.S. economy and 
protects the public from unfair and deceptive practices.
The Federal Maritime Commission
    The FMC is an independent agency with specialized expertise that 
administers a focused antitrust legislative and regulatory regime 
tailored to the particular factors affecting the international ocean 
liner trade. The Shipping Act of 1984 contains several major sections 
that are comparable to the competition and antitrust statutes 
administered by the Department of Justice and the Federal Trade 
Commission. Since passage of the original Shipping Act in 1916, 
Congress has recognized that the international ocean liner industry 
requires special legislative and regulatory consideration and 
oversight. This is due to the substantial amount of our Nation's 
international exports and imports being delivered via ocean carriage, 
the resulting critical role the industry plays in our international 
commerce, and the many competing, and potentially conflicting, maritime 
regulatory regimes and interests of our international trading partners.
    Based on economic and non-economic conditions affecting the 
international ocean liner trade, Congress determined in 1916 to allow 
certain types of ocean carrier collaboration not permitted under other 
antitrust statutes, to ensure certain U.S. national objectives would be 
met. This included the availability of ocean transportation and 
stability of the shipping infrastructure upon which a material 
proportion of our international commerce depends. The antitrust laws, 
including the Shipping Act of 1984, are designed to protect 
competition, not individual competitors. Collaborative joint venture 
agreements among competitor ocean carriers, as long as they are not 
found to be anticompetitive, are recognized as beneficial, finding 
efficiencies and reducing cost that ultimately benefits U.S. exporters 
and saves the U.S. consumer money.
    Congress entrusted competition oversight and antitrust enforcement 
for this industry to a specialized agency with particular expertise in 
this legal area, close familiarity with the commercial and operational 
issues involved in the ocean liner industry, and sensitivity to the 
interests of U.S. stakeholders and our many international trading 
partners. The FMC reviews and monitors international ocean liner 
carrier joint collaborations or agreements under the Shipping Act to 
ensure that procompetitive efficiencies and cost savings are obtained 
for the benefit of U.S. consumers and anticompetitive effects are 
prevented or properly mitigated.
    Congress noted the role they envisioned for the FMC in their Joint 
Explanatory Statement of the Committee of Conference--House Report No. 
98-600, during consideration of the Shipping Act of 1984:

        [a]s new and evolving forms of cooperative conduct develop, the 
        conferees believe that the Commission, rather than the 
        antitrust agencies or the courts in the first instance, is in 
        the best position to assess an agreement's benefits and 
        detriments in light of the objectives of this Act.\1\
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    \1\ The Conference Report for the Shipping Act of 1984, H. Rept. 
600 at pg. 32.

    Given the significant growth in international commerce over the 
past three decades and the importance of this international trade to 
the U.S. economy, what was true in 1984 is even more valid today.
    Our Annual Report was submitted on April 1, 2018, and provides a 
comprehensive summary of the Commission's activities and industry 
developments in Fiscal Year 2017 (FY 2017). I will address matters of 
interest to the Committee, discuss what we foresee as potential 
developments and trends in the coming year, and review our significant 
activities of the past year.
Petition P4-16/Fact Finding 28
    First, I would like to address an issue of interest to the 
Committee that Chairman Thune raised in a letter to the Commission last 
September. On December 7, 2016, the Coalition for Fair Port Practices, 
an organization of trade associations representing shippers, ocean 
transportation intermediaries, and domestic transportation companies, 
filed a Petition (P4-16) asking the Commission to begin a new 
rulemaking proceeding to address practices by marine terminal operators 
(MTOs) and vessel-operating common carriers (VOCCs) related to 
demurrage, detention, and related fees. Demurrage, detention, and 
related fees are charged by VOCCs and MTOs to compensate for the use of 
containers and terminal space and encourage the efficient movement of 
cargo through the terminals and the expeditious return of equipment.
    The petitioners claimed that there were no standards as to what 
constitutes unreasonable demurrage and detention practices under the 
Shipping Act of 1984 which thereby lead to unfair practices that 
undermine the integrity and efficiency of the U.S. ocean transportation 
system. The petitioners asked the Commission to issue a rule, or 
alternatively, a policy statement interpreting unreasonable demurrage 
and detention practices and provide the industry with the tools it 
needs to more efficiently resolve demurrage and detention disputes.
    The Commission received over one hundred comments on the Petition, 
and in January of this year, held a two-day public hearing that 
explored issues raised in the Petition by soliciting testimony from 
shippers, ocean transportation intermediaries, ocean carriers, 
truckers, and marine terminal operators.
    Based on the testimony received in the public hearing and post-
hearing comments filed by the parties and the public, the Commission 
voted last month to launch a formal investigation to examine practices 
of VOCCs and MTOs related to detention, demurrage, and per diem charges 
with Commissioner Rebecca F. Dye as the Investigative Officer. The 
investigation will focus on how demurrage and detention practices can 
optimize, not diminish, the performance of the American international 
freight delivery system. Commissioner Dye has broad authority to 
conduct the investigation, including the power to issue subpoenas, to 
hold public and non-public sessions, and to require reports. Under the 
Commission Order, she is charged with making recommendations for 
Commission action including investigations of prohibited acts; 
enforcement priorities; policies; rulemaking proceedings; or other 
actions warranted by the record developed in the proceeding. An interim 
investigation report is scheduled for September 2, 2018 and the final 
report of Commissioner Dye's findings and recommendations is due to the 
Commission for consideration, discussion, and vote no later than 
December 2, 2018.
Changes from 2016 to 2017 and Industry Oversight
    The container shipping industry plays an integral role in America's 
international trade and commerce. There is no more efficient or 
economical way to move large volumes of commodities than aboard 
vessels, and the sectors of our economy tied to international trade 
depend on an efficient global intermodal transportation system. In 
2017, approximately 34 million TEUs \2\ moved through our Nation's 
ports, a 4 percent increase from 2016. U.S. imports surged during the 
year and accounted for most of this increase. The U.S. imported over 22 
million TEUs last year valued at $754 billion. This was an increase of 
over 6 percent by volume from 2016. Meanwhile, the U.S. exported 12 
million TEUs in 2017 with a value of $266 billion, a 1 percent increase 
over 2016 by volume.
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    \2\ A Twenty-Foot Equivalent Unit (TEU) can be used to measure a 
ship's cargo carrying capacity. The dimensions of one TEU are equal to 
that of a standard 20 foot shipping container--20 feet long and 8 feet 
tall. Two TEUs are equal to one forty-foot-equivalent unit (FEU).
---------------------------------------------------------------------------
    In 2016, there were significant changes to the ocean transportation 
services marketplace, marked by merger and acquisition activity among 
shipping lines and the bankruptcy of a top ten ocean carrier. As a 
result of these events, the number of major multi-trade lane shipping 
lines operating in the international trades has dropped from 21 in 2011 
to 12 global carriers following the merger of the three Japanese 
carriers into Ocean Network Express (ONE) and COSCO's acquisition of 
Orient Overseas Carrier Line (OOCL). The table below lists the ocean 
carriers that serve the major east-west trade lanes. On a broader 
scale, thirty-six ocean container carriers serve the U.S. trades.\3\
---------------------------------------------------------------------------
    \3\ Ocean common carriers that transport at least 0.1 percent 
market share or higher with a minimum of 18,000 containers per year in 
U.S. trades.


    Notwithstanding the reduction in the number of major shipping lines 
serving the international trades, the container industry remains very 
competitive. Using traditional antitrust analysis measures, the major 
transpacific and transatlantic trade lanes remain unconcentrated and 
competitive. These trade lanes have a Herfindahl-Hirschman Index (HHI) 
of 835 and 1,354, respectively.\4\ This also holds true when one 
further breaks out the transpacific trade by West Coast and East Coast, 
as well as the transatlantic Northern European trade. The other 
transatlantic trade lane, the Mediterranean, is moderately concentrated 
according to the index, although it is by far the smallest by volume of 
the noted trade lanes. None of the major trade lanes are highly 
concentrated using this measure.
---------------------------------------------------------------------------
    \4\ Concentration is assessed using the HHI. Theoretically, the 
greater the degree of market concentration and the fewer the 
competitors, the higher the HHI. In its merger guidelines, the 
Department of Justice's (DOJ) Antitrust Division regards markets as not 
concentrated if the HHI is below 1,500. Under DOJ guidelines, mergers, 
and other less problematical forms of horizontal collaborations, that 
do not result in concentrated markets are unlikely to produce adverse 
competitive effects and, ordinarily, do not require further government 
regulatory analysis.


    The global fleet has increased in size in recent years. At the 
beginning of 2018, ocean carriers deployed 21.1 million TEUs of ship 
capacity globally, a 70 percent increase from 2009. Looking back over 
the past few decades, shipper demand for container ocean transportation 
was growing seven percent or more year after year. VOCCs were ordering 
more ships and bigger ships. Then the global recession began in 2008. 
There were three plus years of vessel construction commitments at all 
of the world's shipyards and shipper cargo demand was retreating. A 
perfect formula for overcapacity and depressed ocean freight rates. The 
backlog of new shipbuilding has now eased-in fact some shipyards in 
South Korea and China are now offering incentives in efforts to avoid 
large worker layoffs and yard closures. Global cargo demand has 
returned to modest to normal growth levels in major trade lanes. As 
consumer confidence and spending has grown, and the demand for ocean 
transportation services has increased, carriers have been able to fill 
their ships relatively close to capacity in the past year, despite 
having increased the total capacity on the major trade lanes.
    Ocean carrier monitoring data confidentially filed at the FMC 
indicates that ocean carriers regularly experienced capacity 
utilization of over 90 percent on the inbound major transpacific trade 
throughout 2017 and about 90 percent on the transatlantic. Each of 
these trade lanes saw capacity utilization rise toward the end of 2017 
compared to earlier in the year. However, vessel utilization on the 
backhaul route from the U.S. to Asia is only about 50 percent, with 
only slightly higher levels from the U.S. to Europe. Although ships are 
sailing relatively full, rates have remained comparatively low and are 
22 percent below their peak in 2010. When adjusted for inflation, real 
rates are down 31 percent since 2010. According to FMC monitoring data, 
rates have remained steady on the major transatlantic trades.
    There are some signs that the industry is moving towards a recovery 
from overcapacity and low freight rates. The percentage of the idled 
fleet has decreased. Many carriers have recently reported positive 
operating profits (i.e., EBIT or earnings before interest and taxes). 
However, charter rates for vessels of all sizes remain substantially 
lower than their peaks prior to the recession. Additionally, there does 
not appear to be any indication that typical sailing speeds are 
increasing. Other factors that can affect moving to a recovery are 
continued economic import and export growth in the United States. 
However, an economic downturn would have an adverse effect on demand 
for shipping and would slow down any recovery, thereby having a 
dampening effect on rates.
    Nine of the remaining twelve major multi-trade lane ocean carriers 
are currently members of three global alliances--2M, OCEAN, and 
Transportation High Efficiency (THE). These alliances are joint 
operating agreements of ocean carriers where they are allowed to 
discuss and agree on the supply of vessel capacity through the 
deployment of a specific service string or strings of vessels in 
various trade routes. Each alliance operates multiple services in the 
major transpacific (Asia-U.S. and Canada), transatlantic (Europe--U.S. 
and Canada), and Asia-Europe trades and supply over 90 percent of the 
vessel capacity in each of these trade lanes. These three major 
alliances are not the only vessel sharing agreements in which these and 
other ocean carriers participate, as carriers can and do participate in 
multiple agreements filed at the FMC. These include various space 
charter agreements, vessel sharing agreements, vessel sharing 
alliances, joint service agreements, and cooperative working 
agreements. In addition to the three global vessel sharing alliances 
referenced above, ocean carriers participate in more than 325 other 
agreements filed at the Commission.
    Alliances can be very beneficial for U.S. exporters, importers, and 
consumers. Such alliances allow participants to obtain efficiencies and 
cost-savings that can be passed on to domestic consumers especially 
when healthy competition exists among vessel operators. Of note, the 
benefits of alliances and other forms of joint commercial vessel 
operating arrangements are recognized by Congress and addressed in the 
Shipping Act of 1984, as amended, and the contemporaneous Congressional 
record:

        Another important potential benefit to be considered is any 
        efficiency-created aspects of an agreement. Agreements 
        involving significant carrier integration are, if properly 
        limited to achieve such important benefits, to be favorably 
        considered by the Commission and the courts. Joint ventures and 
        other cooperative agreements can enable carriers to raise 
        necessary capital, attain economies of scale, and rationalize 
        their services. Pooling arrangements can also offer significant 
        benefits in reducing excess capacity and promoting 
        efficiency.\5\
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    \5\ The Conference Report for the Shipping Act of 1984, H. Rept. 
600 at pg. 36.

    A reassuring data trend shows that even with the wave of mergers 
and acquisitions and new carrier alliance groupings, the individual 
ocean carriers within each alliance continue to independently and 
vigorously compete on pricing. Further, individual ocean carriers 
within the alliances continue to add and withdraw vessels from trades 
both inside and outside the alliances in which they participate, 
demonstrating that competition remains in both vessel capacity 
decisions and pricing decisions within the alliances. And over the last 
decade, the global vessel fleet has increased. The increase in capacity 
came from an increase in the number of vessels and an increase in the 
size of new vessels entering the global fleet. The increase in capacity 
occurred without a corresponding increase in cargo demand. Industry 
stakeholders have noted that the alternative to carrier alliances is 
further consolidation in the industry with fewer ocean carriers and 
less competition.
    The Commission responded to the recent and ongoing structural 
changes in the international liner shipping industry with aggressive 
negotiations on proposed agreements and enhanced monitoring programs. 
With the increased size and market share of carrier alliances over the 
last four years, the FMC has insisted on narrower agreement 
authorities, more clear and specific agreement language, and enhanced 
monitoring requirements. Monitoring for these large alliances, 
entailing more details and timely filing of monitor reports has 
increased.
    As alliances are ongoing cooperative agreements rather than 
mergers, the Commission is charged by Congress with continuous 
monitoring after the initial review and following the effective date of 
the agreements. The Commission examines both the structural market and 
actual carrier behavior under filed agreements to detect 
anticompetitive activity that would violate the Shipping Act.
    Our transportation analysts, economists, and attorneys maintain a 
careful watch on industry trends, being vigilant for any indications of 
anticompetitive behavior by the participants operating within the filed 
agreements. The Commission is diligent in monitoring economic 
conditions and carrier agreement activities to identify potential anti-
competitive concerns and the possible need for Commission action. The 
Commission may challenge an agreement in Federal District Court at any 
time after the effective date. The FMC will continue to monitor 
industry trends to identify when the industry enters a full recovery 
and vessel supply/cargo demand equilibrium. Such monitoring and 
analysis will be important for determining the extent to which rate 
increases at that time are attributable to an economic recovery or to 
coordinated action by carriers.
    The FMC prioritizes all filed agreements \6\ on a red-yellow-green 
scale, with red being higher profile agreements with the highest 
probability of potentially adverse market effects based on the 
agreement's authority in combination with the underlying market. All 
global alliances are categorized as red agreements. For these 
alliances, FMC staff prepares scheduled briefings for management and 
conducts more detailed quarterly reviews. The FMC monitors these red 
agreements for any exercise of market power that could allow alliance 
members to raise and maintain prices above competitive levels.
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    \6\ At the end of FY 2017, there were 484 agreements on file 
covering vessel operators and marine terminal operators.
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    The FMC conducts a four-tiered analytical approach. The first tier 
is an immediate review of advance notifications of cancelled alliance 
sailings or other changes in vessel capacity that affect the supply of 
vessels of any individual alliance service by more than five percent of 
average prior weekly vessel capacity. The second tier consists of a 
careful review of submitted minutes of the most senior agreement 
committees that make vessel deployment decisions to assess the medium-
to long-term outlook for capacity levels and how that could impact 
freight rates. Under the third tier, changes in individual alliance 
members' vessel capacity, capacity projections, and how that relates to 
changes in freight rates are analyzed. The final tier consists of 
reviewing and analyzing confidentially filed carrier data submitted by 
the alliances \7\ for completeness and accuracy to determine if this 
data reveals any potential red flags.
---------------------------------------------------------------------------
    \7\ To prevent an alliance carrier from viewing another carriers' 
data, each alliance carrier submits its data individually to alliance 
counsel, who then prepares a collective submission on behalf of the 
alliance to the FMC.
---------------------------------------------------------------------------
    The Commission also monitors trends in other carrier and marine 
terminal operator agreement filings. It is important to note that 
carrier agreements containing rate discussion authority have 
experienced a steady decline in membership and a number have been 
terminated. More specifically, of the sixteen rate discussion 
agreements, five have been terminated entirely in the past few months, 
including the Transpacific Stabilization Agreement, which has served as 
the primary price discussion forum for the ocean trade from Asia to the 
United States since 1989. Carriers appear to be ending their 
participation in rate discussion agreements for a number of reasons. 
Overcapacity continues to define the major east-west container shipping 
markets, keeping downward pressure on rates and limiting the 
effectiveness of these agreements. We also note carrier concerns over 
potential changes in the regulatory environment in the U.S. and abroad.
    Further, the Commission monitors and analyzes commercial contracts 
confidentially filed in the FMC's SERVCON System between vessel-
operating common carriers (VOCCs) and shippers for the transport of 
U.S. exports and imports. SERVCON is the Commission's repository for 
all filed service contracts, excluding exempt commodities, in the U.S. 
waterborne foreign commerce. Service contracts contain the rates, 
terms, and other service requirements agreed upon by VOCCs and shippers 
for the carriage of cargo. Commission staff conducts focused research 
and analysis on service contract terms and conditions, such as chassis 
usage/fees, demurrage terms/fees, etc., in order to investigate or 
clarify industry reports, gain better insight into emerging industry 
issues, and better inform policy decisions.
    Review and analysis of confidentially filed commercial contracts 
between VOCCs and shippers provide a valuable tool to evaluate the 
competitive dynamics at play between shippers seeking to leverage cargo 
volumes in the pursuit of lower freight rates and/or special service 
terms and VOCCs competing to obtain that cargo. FMC staff also 
systematically monitors a sampling of service contracts for a number of 
beneficial cargo owner and non-vessel-operating common carrier (NVOCC) 
shippers on an ongoing basis to track overall competitive conditions in 
various trades. These reviews are designed to protect the shipping 
public from unfair and deceptive carrier practices by identifying and 
addressing potential concerted carrier activity under filed agreements 
found to have resulted in discriminatory practices involving rates or 
charges applied to any locality, port, or persons due to those persons' 
status as shippers' association or ocean transportation intermediary.
    As noted earlier, although there has been a contraction in the 
number of lines operating in the international ocean trades, 
competition between companies remains vibrant and shippers continue to 
benefit from low rates. Overall market share of even the largest 
oceangoing carriers remain diffused. In the U.S. export and import 
trades combined, CMA CGM and Mediterranean Shipping Company (MSC) hold 
a 12.7 percent market share followed closely by Maersk in third 
position with 12.3 percent market share. These are far from 
``dominant'' market positions as recognized by established economic 
standards. We will continue to look for any potential impact the 
carriers operating in the new alliances have on market dynamics, rates, 
and services.
    While the United States' international trade depends on the liner 
trade, unfortunately there is no substantial U.S.-flag presence in the 
major transpacific and transatlantic trade lanes. The three largest 
carriers in the U.S. trades are CMA CGM, MSC, and Maersk Line. The 
invisible hand is not the only force that guides the global shipping 
industry, and nations throughout the world go to great lengths to 
support national companies, including indirect subsidies and direct 
capital infusion to maintain the national company's solvency. Some 
carriers are owned in part or whole by governments. The People's 
Republic of China (PRC) is the United States' largest trading partner 
in terms of cargo volume. The PRC actively invests in logistics, 
transportation, and infrastructure through initiatives such as Silk 
Road to advance strategic goals. The PRC-owned COSCO Shipping and Hong 
Kong-based OOCL will become the largest carrier of U.S. imports when 
the two companies' complete their merger this year. For the moment, 
such links between governments and national carriers can provide lower 
freight costs and greater service choices for imports and exports.
    The ocean liner industry has been in a state of vessel oversupply 
for several years. The low freight rate structure in U.S. trade lanes 
is a direct reflection of that capacity supply/demand imbalance and 
American exporters and importers have been the beneficiary of those low 
freight rates. Such supply imbalances will not last forever. The 
Commission does not favor one competitor, sector, or industry 
stakeholder over another. We will continue to be attentive as we look 
for indications of rate increases that are products of market 
distorting, or collusive carrier business practices. However, it is 
important to remember that rate increases, in and of themselves, are 
not proof of an uncompetitive marketplace. At some point in the future, 
higher freight rates will be a normal result of a more equalized and 
healthy supply/demand marketplace.
    The Commission continues to see marine terminal operators and port 
authorities' increased interest in how to use cooperative agreements 
filed with and reviewed by the Commission to their benefit. The nature 
and complexity of marine terminal operator agreements have increased 
considerably in recent years and marine terminal operators are 
cooperating in novel ways in an attempt to address the demands of 
significantly larger vessels unloading substantially larger numbers of 
containers at each port call. As a result, marine terminal operators 
have filed agreements to combine aspects of their operations, finance 
necessary infrastructure improvements, increase terminal velocity, 
develop collective solutions to mitigate cargo bottlenecks, and a host 
of other activities, all aimed at enhancing their ability to compete 
against other ports for cargo. There is a realization among these 
parties that seeking an alternate antitrust enforcement regime 
available to them through an agreement filed at the FMC can lead to 
increased efficiencies and lower costs.
    We would review with interest the application of any parties from 
the port and terminal sector who want to use agreements to achieve 
goals that ultimately benefit the American shipper and consumer. Due to 
the unique nature of these types of agreements, monitoring of terminal 
agreements is specifically tailored to the agreement's scope, 
authority, and potential competitive impact of the agreement.
Regulatory Reform and Agency Actions
Regulatory Reform
    Throughout FY 2017 and into FY 2018, the Commission has been 
actively taking steps to identify and address outdated, unnecessary, or 
unduly burdensome regulations. Further, the Commission aggressively 
looks for ways to make compliance with Commission requirements easier 
and more cost effective for shippers, carriers, and ocean 
transportation intermediaries (OTIs).\8\
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    \8\ OTIs includes non-vessel-operating common carriers and ocean 
freight forwarders.
---------------------------------------------------------------------------
    Though they do not apply to the Commission, the FMC voluntarily 
initiated a regulatory reform effort in the spirit of Executive Order 
13771, Reducing Regulations and Controlling Regulatory Costs and 
Executive Order 13777, Enforcing the Regulatory Agenda. The Acting 
Chairman designated a Regulatory Reform Officer and a Regulatory Reform 
Task Force (RRTF) was established consistent with the Executive Orders. 
The RRTF issued a Notice of Inquiry for public participation in the 
regulatory reform process and is working expeditiously to review 
existing regulations and provide regulatory relief, while maintaining 
the Commission's ability to complete its statutory mandate to protect 
competition and integrity in America's ocean supply system.
    Flowing from the work of the RRTF, the FMC publicly issued a Plan 
for Regulatory Reform of Existing FMC Rules (Regulatory Reform Plan). 
The Regulatory Reform Plan identifies regulations for future review. 
The work on this Plan is projected to be completed in FY 2019. In 
addition to the Plan, the FMC established a Regulatory Reform web page 
and has pledged to provide additional information to the public on the 
Commission's website as the Regulatory Reform Plan progresses.
    While the work of the RRTF is ongoing, the Commission has already 
taken steps to amend regulations related to Service Contracts, 
Negotiated Rate Agreements (NRAs), and NVOCC Service Arrangements 
(NSAs) to eliminate or reduce unnecessary filing obligations. On March 
29, 2017, the Commission issued a deregulatory final rule updating and 
modernizing the FMC's regulations governing Service Contracts and NSAs, 
reducing the regulatory burden and costs of compliance with the 
agency's regulations. On November 29, 2017, the Commission issued a 
Notice of Proposed Rulemaking (NPRM) to simplify and streamline its NSA 
and NRA rules and procedures. The NPRM sought public feedback on three 
proposals: ending the requirement for NSAs to be filed with the 
Commission; expanding the ability of NVOCCs and shippers to amend NRAs; 
and allowing the act of tendering cargo to be considered acceptance of 
a rate under the terms of the NRA. The Commission is reviewing filed 
comments and moving forward with review of proposed deregulatory 
actions on this item. These changes will make it easier and more 
efficient for shippers and carriers to do business. Global supply chain 
operations will benefit through lower costs, which should result in 
savings realized by our U.S. exporters and importers.
    Tariff publication requirements is a statutory obligation that the 
Commission will consider for review and possible modification under its 
Regulatory Reform Plan. Currently, OTIs and VOCCs are required to 
publish both rates and applicable terms, conditions, and rules in their 
tariffs, even though the overwhelming majority (92 percent plus) of 
cargo moving in most U.S. trade lanes does so under the terms of 
service contracts. In other words, current law and Commission 
regulations require vessel operating companies to publish ``shelf'' 
freight rates that have nothing to do with the actual day-to-day market 
prices being charged to shippers. This statutory requirement for tariff 
filings could be relieved under the exemption authority that Congress 
provided to the Commission in the 1984 Act and the 1998 OSRA 
amendments.\9\
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    \9\ 46 U.S.C. Sec. 40103 (a)
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Supply Chain Innovation Team Initiative
    The Shipping Act contemplates a regulatory process for the foreign 
commerce of the United States with a minimum of regulatory costs. The 
Supply Chain Innovation Team Initiative (SCITI) was led by my 
colleague, Commissioner Rebecca F. Dye. The FMC initiative made a 
meaningful contribution towards enhancing supply chain efficiency for 
America's exporters and importers. Whenever possible, the Commission 
seeks to facilitate the cooperation of stakeholders to develop non-
regulatory commercial solutions to address bottlenecks in the 
international supply chain.
    The SCITI was an outgrowth of the Commission's previous work on 
port congestion issues in the fall of 2014. Launched in May of 2016 and 
focused on challenges faced by America's international maritime supply 
chains, Commissioner Dye, with her volunteer teams of industry leaders 
composed of shippers, marine terminal operators, trucking companies, 
ocean carriers, port officials, labor representatives, logistics 
companies, and other stakeholders, worked to develop actionable 
commercial solutions--including in particular--the key content for a 
national seaport information portal that could provide the necessary 
critical information sought by all parties involved in moving 
containers to/from vessels, through seaports, and onward to a final 
destination.
    SCITI created two teams--one focused on import supply chains and 
the second focused on export supply chains. The work of both the import 
and export teams was summarized in a Final Report prepared by 
Commissioner Dye and presented to the Commission on December 5, 2017. 
Supply Chain Innovation Teams Initiative: Final Report presents the 
teams' view that greater visibility across the American freight 
delivery system was the one operational innovation likely to most 
increase U.S. international supply chain performance. The report also 
highlights the concept of a common National Seaport Information Portal 
for critical shipment information, possibly organized by business 
dashboards tailored to the needs of each supply chain actor.
Protecting the Public
    The Commission licenses and regulates ocean freight forwarders and 
NVOCCs. There are currently 6,417 OTIs that are licensed/registered 
with the FMC. In furthering our mission to protect the public from 
unfair and deceptive practices, the Commission crossed an important 
milestone in FY 2017 with the successful launch of the OTI triennial 
renewal process. An important program with which the Federal Maritime 
Commission fulfills our mission of protecting the public is by 
investigating, conducting background examinations, and approving the 
Qualified Individual, i.e., the person who is the senior employee in 
charge of service in the daily operations of the OTI.
    Several years ago, the Commission reviewed a survey of OTIs and 
discovered that a significant number had moved to new addresses without 
informing the FMC; that, too frequently, the Qualified Individual, 
whose qualifications were reviewed as the basis of granting the 
original FMC license, was no longer an employee of the company; and 
other filing discrepancies. A simple matter of not having the correct 
address of an OTI on file hampers the ability to have proper service in 
a legal matter and is an important issue. Failing to maintain an 
approved Qualified Individual is a serious matter. During the first 
year of our Triennial OTI License Renewal program over 1,350 license 
renewals were received, reviewed, and accepted by the Commission 
representing nearly 30 percent of the 4,870 active U.S.-based OTI 
licenses. Of the 1,350 reviewed, 77 percent provided updates regarding 
changes to the owners or officers, with 10 percent reporting changes to 
their physical or e-mail address. Importantly, the renewal program 
revealed 94 incorrect Qualified Individuals. Therefore, bringing and 
maintaining our records up to date is an important ongoing initiative.
    Given advances in information technology, the Commission determined 
that there was an opportunity to improve the quality and accuracy of 
information the agency has on file concerning OTIs, while doing so in a 
manner that was making the process easy to complete and with minimal 
industry burden. The renewal process is online and in most cases takes 
only five minutes to complete--facilitated by prepopulating the 
outgoing FMC inquiry with the OTI's information already on file with 
the FMC, such as company ownership, corporate officers, business 
locations, changes in affiliation or branch office. Moving to a web-
based update system not only aids the Commission in meeting its mandate 
to safeguard the public, it significantly reduces the compliance 
burdens and costs upon the regulated entities.
FY 2019 Budget Request, Strategic Plan, Management Reforms
Fiscal Year 2019 Budget
    The FMC is a small agency with a very technical mission and a need 
for a very specialized workforce. Our requested level of funding for FY 
2019 is $27,490,000. Overall, the bulk of the Commission's budget, 
approximately 86 percent, is consumed by rent, salaries and benefits, 
and communications. Our staff includes a high percentage of 
transportation economists and attorneys--career fields that tend to 
command more compensation in order to successfully recruit and retain 
qualified candidates and is the heart of the agency's mission. Overhead 
costs such as interagency services, commercial services, travel and 
transportation, supplies, and equipment account for most of the 
remaining budget dollars. The Commission has very little, if any, 
control over many of these costs. Year in and year out, the rent we are 
charged rises, the supplies and resources we purchase to support our 
economists and attorneys' competitive analysis and legal research cost 
more, and information technology (IT) costs--including IT security and 
telecommunications bills--rise. We constantly work to find a balance 
between our resources and our workload; however, if there is a surge of 
agreement filings, if a class of plaintiffs choose to seek relief at 
the FMC, or if our building security requirements increase, then we 
work to prioritize our mission-critical activity and reallocate 
resources to the extent possible.
    Finding ways to conduct the Commission's business more efficiently 
is an important goal we share, Chairman Fischer. As such, the 
Commission works to find ways to make every dollar appropriated to us 
go as far as it can. A recent example of innovative cost-sharing is our 
agreement with another small, independent agency, the Surface 
Transportation Board, to share the services and costs of a single Equal 
Employment Opportunity (EEO) Officer to ensure both agencies' 
responsibilities while maintaining solid support of our EEO principles.
    As I mentioned earlier in this testimony, the Federal Maritime 
Commission continues to faithfully implement the purposes and mission 
of the Shipping Act. I am proud of the work the Commission's staff does 
each day to ensure a competitive and reliable international ocean 
transportation supply system that supports the U.S. economy and 
protects the public from unfair and deceptive practices.
Strategic Plan for 2018-2022
    A proven method of achieving strong performance at an 
organizational level is through focused and meaningful strategic 
planning. Strategic planning is a driving force in an organization's 
success. Government agencies benefit from strategic planning that is 
focused, and designed to unite all agency team members to find ways to 
achieve our mission more effectively while delivering value to the 
taxpayer. Earlier this year, the Commission finalized a new Strategic 
Plan for FY 2018-2022. This document will guide our work into the 
future.
Agency Reform and Long-Term Workforce Plan
    The President has made reshaping the Federal Government one of the 
key initiatives of his Administration. Through an Executive Order 
issued in March and a memorandum issued in April 2017 by the Director 
of the Office of Management and Budget (OMB), the Administration 
instructed departments and agencies throughout the Federal Government 
to include an Agency Reform and Long-Term Workforce Plan (Workforce 
Plan) as part of their FY 2019 budget submissions. A prime directive in 
the Executive Order and OMB memorandum was for Federal agencies to 
explore, develop and implement plans to streamline, consolidate and 
flatten their organizational operations and structure.
    Over the last year, the Commission developed a Workforce Plan as 
directed by OMB. In broad terms, our 5-year Workforce Plan will (i) 
flatten the organization and reduce the number of supervisory 
positions; (ii) reduce the number of SES positions; (iii) establish a 
new two-tier SES structure to realign and control SES salary costs; 
(iv) realign and combine functions within the Commission (some subject 
to Congressional approval); and (v) continue our emphasis on achieving 
operational efficiencies and improving customer service through 
automation projects.
    Our goal is to find ways to do more while controlling costs. 
Delayered work groups with broader spans of control and less hierarchy 
have been proven to improve efficiency, employee engagement and 
accountability. We are working to reshape the FMC and improve 
operational effectiveness as required by the Administration while 
minimizing the impact to the 116 committed and vital employees of the 
FMC.
Conclusion
    Thank you for this opportunity to discuss the mission of the 
Federal Maritime Commission, current state and future challenges of the 
ocean shipping industry, as well as highlight some of the Commission's 
recent achievements and future priorities. Thank you, I am always ready 
to be of assistance to the Committee and I will be pleased to answer 
any questions you may have.

    Senator Fischer. Thank you, Chairman Khouri.
    Next I would like to welcome Admiral Buzby. Thank you for 
being here today, and it's good to see you again.

                STATEMENT OF HON. MARK H. BUZBY,

            ADMINISTRATOR, MARITIME ADMINISTRATION,

               U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Buzby. Thank you very much. Chairwoman Fischer, Ranking 
Member Peters, and members of the Subcommittee, thank you for 
this opportunity to testify about the challenges facing the 
U.S. maritime sector and the need to ensure long-term viability 
of this important industry.
    The mission of the Maritime Administration is to foster, 
promote, and develop the U.S. maritime industry to meet this 
Nation's economic and security needs. A key challenge MARAD 
faces is to ensure the availability of sufficient Sealift 
capabilities to meet Department of Defense requirements to 
effectively deploy military forces, respond to national 
emergencies, and provide humanitarian assistance at home and 
abroad.
    Our strategic Sealift transports 90 percent of the 
equipment and supplies that move and sustain our military 
forces around the globe. It consists of government-owned 
vessels, privately owned U.S. flag commercial vessels and the 
mariners who operate them, and the intermodal systems upon 
which the government relies.
    The 61-ship surge Sealift fleet, which includes MARAD's 46-
ship Ready Reserve Force and 15 military Sealift Command 
vessels, is in urgent need of recapitalization. This fleet 
delivers equipment and supplies during major contingencies. 
These ships average 43 years of age and require longer shipyard 
time for more expensive maintenance and repairs to ensure 
mission readiness. Our nation's Sealift capacity also relies on 
privately owned commercial vessels operating under the U.S. 
flag.
    As this Subcommittee is well aware, the U.S. commercial 
presence in international trade is at the lowest levels in its 
history, with only 81 vessels operating exclusively in 
international trade. This decline compromises MARAD's ability 
to meet national security requirements.
    While we continually seek innovative ways to make the U.S.-
flag commercial fleet more viable, MARAD's primary means of 
support are through three programs: the Maritime Security 
Program, or MSP; cargo preference laws; and the Jones Act.
    MSP helps maintain an active, privately owned U.S. flagged 
and crewed fleet of 60 militarily useful commercial ships in 
international trade. Cargo preference laws keep U.S. flag 
operators economically competitive by requiring shippers to use 
U.S.-flag vessels to transport government-owned or impelled 
cargo. The Jones Act, which requires cargos going between U.S. 
ports to be transported on U.S. vessels, supports U.S. 
shipyards and repair facilities, ensuring that production and 
repair of American built ships are available to our military 
and by requiring such vessels to have U.S. documentation and 
crews.
    Jones Act vessels provide employment for the majority of 
U.S. mariners, which helps meet the challenge of ensuring the 
Nation has enough qualified mariners to crew our surge fleet of 
vessels when needed. We currently estimate a shortfall of 1,800 
qualified mariners, which is a best case scenario, assuming 
that all qualified mariners will voluntarily report when called 
upon and that there will be no ship losses or personal 
casualties. I'm working closely with USTRANSCOM, MSC, the Coast 
Guard, and the commercial maritime industry to ensure that we 
maintain an adequate number of mariners with proper training to 
operate in contested waters.
    One opportunity to ensure that qualified U.S. mariners are 
available is continued support for the United States Merchant 
Marine Academy and the six state maritime academies. These 
institutions graduate most of the U.S. Coast Guard credentialed 
officers qualified to crew these U.S.-flag oceangoing ships.
    I will let Admiral Helis speak to the accomplishments of 
the Merchant Marine Academy, but I want to thank this committee 
for its continued support for this institution and its 
midshipmen. Ensuring its long-term success is a high priority 
for me as a proud graduate of the great Class of 1979.
    I also want to thank you for the support you have given to 
the state maritime academies by providing $300 million in the 
Fiscal Year 2018 appropriations bill to fund the construction 
of a new common school ship, the National Security Multi-
mission Vessel. This vessel is not only important to training 
mariners, but will also be used to respond to national 
disasters and humanitarian relief efforts.
    There are many additional challenges facing the U.S. 
Merchant Marine, but these are the top priorities my colleagues 
and I at MARAD are working to address to meet the nation's 
economic and security needs. I appreciate this subcommittee's 
support for the United States Merchant Marine and look forward 
to working with you on the challenges and opportunities 
confronting the U.S. maritime industry.
    I'm happy to respond to any questions you may have, and I 
respectfully request that my written statement be entered into 
the record.
    Thank you very much.
    [The prepared statement of Mr. Buzby follows:]

   Prepared Statement of Hon. Mark H. Buzby, Administrator, Maritime 
           Administration, U.S. Department of Transportation
    Good afternoon Chairwoman Fischer, Ranking Member Peters, and 
members of the Subcommittee. Thank you for this opportunity to testify 
about the challenges facing the U.S. maritime sector and opportunities 
to ensure the long-term viability of this important industry.
    The Maritime Administration's (MARAD) mission is to foster, promote 
and develop the U.S. maritime industry to meet the Nation's economic 
and security needs. A key challenge MARAD faces in carrying out this 
mission, is meeting Department of Defense (DOD) sealift requirements. 
The United States relies on strategic sealift capabilities, which 
include ships and the necessary mariners to crew those ships to 
efficiently and effectively deploy military forces around the world. 
Strategic sealift consists of Government-owned vessels, privately-owned 
vessels engaged in commerce under the U.S.-flag and the mariners who 
operate them, and intermodal systems upon which the Government relies. 
These vessels, mariners, and supporting infrastructure transport 90 
percent of equipment and supplies that move and sustain our military 
forces around the globe.
Government Fleet Readiness
    Vessels in MARAD's 46-ship Ready Reserve Force (RRF), along with 15 
Military Sealift Command (MSC) vessels, form the 61-ship surge sealift 
fleet to rapidly deliver equipment and supplies during major 
contingencies. Readiness of the RRF is a constant challenge given that 
the average age of the vessels is 43 years. Repairs to older equipment 
and aging systems require shipyard periods lasting longer and costing 
more each year. In addition, MARAD and DOD must make investments to 
meet new regulatory requirements, such as installing modern enclosed 
lifeboats on RRF vessels. MARAD and the U.S. Transportation Command 
(USTRANSCOM) are working with the U.S. Navy to address the challenges 
of recapitalizing the sealift fleet to ensure mission readiness.
U.S.-Flag Commercial Fleet Viability
    Our Nation relies on privately-owned commercial vessels operating 
under the U.S. flag to augment the capabilities of the Government's 
fleet. The U.S.-flag commercial fleet delivers supplies and equipment 
to deployed forces and to service members and their families stationed 
overseas during steady-state operations and essential sustainment 
during long military deployments. Unfortunately, the U.S. commercial 
presence in the international maritime domain has declined and is 
currently at the lowest level in its history. Of some 41,000 deep-draft 
self-propelled oceangoing commercial vessels in the world today, just 
181 sail under the U.S. flag, including 81 vessels operating 
exclusively in international trade, while the total capacity of U.S.-
flag containership and roll-on/roll-off vessels is roughly the same as 
25 years ago. The other 100 consist of the oceangoing ships in our 
Jones Act fleet. Further decline of the actively-trading U.S.-flag 
fleet reduces our Nation's ability to unilaterally project and sustain 
our forces during war..\1\
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    \1\ See February 13, 2018 Statement of General Darren W. McDew, 
Commander, U.S. Transportation command, before the Senate Armed 
Services Committee: ``If the fleet continues to lose ships, when the 
Nation goes to war, the DoD risks protracted deployment timelines or a 
scenario in which it must deploy U.S. Forces on foreign-flag ships. 
Moreover, further reduction in the fleet mean waning access to the 
global commons, contracting our competitive space and threatening the 
U.S. strategic advantage in this domain.''
---------------------------------------------------------------------------
    The Maritime Security Program (MSP), cargo preference laws, and the 
Jones Act are used to maintain a baseline U.S.-flag fleet. The MSP 
helps maintain an active, privately-owned, U.S.-flag and U.S.-crewed 
fleet of 60 militarily useful commercial ships operating in 
international trade. MARAD provides MSP participants an annual stipend, 
and their ships and logistics networks are available ``on-call'' to 
support DOD's global transportation needs. The MSP facilitates 
employment for 2,400 U.S. merchant mariners qualified to sail on 
oceangoing vessels who we can rely upon to crew RRF vessels when 
activated, and assures DOD access to the critical multibillion-dollar 
global network of intermodal facilities and transport systems 
maintained by MSP participants.
    Cargo is essential to sustain the vessels and jobs in the U.S.-flag 
fleet. Cargo preference laws require shippers to use U.S.-flag vessels 
for the ocean-borne transport of a significant portion of certain 
cargoes purchased or guaranteed with Federal funds. Specifically, 100 
percent of military cargo, and at least 50 percent of most non-military 
Government owned or impelled cargo transported by ocean, must be 
carried on U.S.-flag vessels subject to vessel availability. Absent 
other measures, a strong cargo preference mandate supports the 
sustainment of a U.S.-flagged, privately-owned commercial fleet and to 
the continued availability of the associated American merchant 
mariners.
    In addition to cargo preference laws, U.S. coastwise trade laws, 
commonly referred to as the Jones Act, contribute to a baseline of 
sealift capability and capacity help sustain the U.S.-flag fleet and 
supports the U.S. shipping industry.\2\ Jones Act requirements support 
U.S. shipyards and repair facilities. They also keep current the supply 
chains moving that produce and repair American-built ships (including 
Navy and Coast Guard vessels). Finally, the Jones Act ensures that 
vessels navigating daily among and between U.S. coastal ports and 
inland waterways operate with U.S. documentation and a majority 
American crew, rather than under a foreign flag with foreign crew, as 
is the case for 98.5 percent of our Nation's waterborne international 
trade. The American mariners of the Jones Act fleet are our ``eyes and 
ears'' in domestic ports and waters and add an important layer of 
security to our Nation.
---------------------------------------------------------------------------
    \2\ The Jones Act requires the use of qualified U.S.-flag vessels 
to carry goods in domestic commerce, which includes transportation 
between and among the U.S. mainland, Hawaii, Alaska, and Puerto Rico.
---------------------------------------------------------------------------
Availability of Mariners
    Another challenge to meeting DOD sealift requirements is ensuring 
enough qualified U.S. merchant mariners are available to operate the 
surge fleet of 61 Government-owned cargo ships in times of need. The 
mariners required to operate these vessels are civilians regularly 
employed on board U.S.-flag, oceangoing commercial ships. I am 
concerned about the availability of a sufficient number of qualified 
mariners with the necessary endorsements to operate large ships 
(unlimited horsepower and unlimited tonnage) and to sustain a prolonged 
sealift mobilization beyond the first four to six months. While the 
entire RRF has not been fully activated at one time, there have been 
more than 600 activations since 1990, over half of which were for 
reasons other than readiness testing. We seek to ensure there are 
enough qualified U.S. mariners to safely crew our Government vessels 
when the need arise.
    The FY 2017 National Defense Authorization Act (FY 2017 NDAA) 
directed MARAD to convene a working group consisting of agency and 
maritime industry representatives to assess the size of the pool of 
qualified U.S.-citizen mariners necessary to crew the U.S.-flag fleet 
in times of national emergency, and recommend actions to enhance the 
availability and quality of mariner data. MARAD provided the working 
group's conclusions to Congress in January 2018. In it, the working 
group estimated a shortfall of 1,800 qualified mariners in the event of 
a full, prolonged mobilization, but this estimate assumed a ``best 
case'' that all qualified mariners would voluntarily report when called 
upon, and that there will be no ship losses or personnel casualties. 
Given this assessment, I am working closely with USTRANSCOM, MSC, the 
USCG, and the commercial maritime industry to develop actions to 
identify and maintain an adequate number of trained mariners, and 
ensure they receive training unique to operating in contested waters. 
Additionally, we are working to better track credentialed mariners who 
are not sailing, but could serve if needed, and to develop tools to 
count and understand the characteristics of fully qualified mariners 
available to meet the Nation's commercial and sealift requirements at 
any given time.
    One opportunity to ensure qualified U.S. mariners are available is 
continued support for the United States Merchant Marine Academy 
(USMMA), and the state maritime academies (SMAs). MARAD provides 
funding and oversight to Kings Point and the SMAs to produce highly 
skilled and licensed officers for the U.S. Merchant Marine. These 
institutions graduate most of the USCG-credentialed officers who hold 
an unlimited tonnage or horsepower endorsement qualified to crew these 
U.S.-flag ocean-going ships.
    I will leave it to Rear Admiral Helis to discuss the Academy's 
accomplishments and challenges, but I must say that I am proud of what 
they have done. I have been particularly encouraged during my visits to 
the Academy by the Midshipmen-driven, on-campus culture change program, 
``Be KP (Kings Point).'' The Midshipmen have taken ownership of efforts 
to change the climate at the Academy and are now leading this effort. 
Progress is being made, but more work needs to be done as noted in the 
recent DOT Office of Inspector General report on the USMMA's Sexual 
Assault Prevention and Response Program. We appreciate the insight from 
this report and are addressing the recommendations to continue 
improving the Academy as a whole.
    In addition to providing oversight of the USMMA, MARAD provides 
funding to six SMAs \3\, which collectively graduate more than three-
fourths of the entry-level merchant marine officers annually. As part 
of this support, MARAD loans training ships to SMAs and covers a 
portion of those ships' maintenance and repair costs. In addition to 
being used to train mariners, these vessels, which are part of the 
National Defense Reserve Fleet (NDRF), are used to respond to national 
disasters when requested by other Federal agencies. Most recently, 
MARAD activated RRF and NDRF ships to support Federal relief activities 
following Hurricanes Harvey, Irma, and Maria. During these deployments 
MARAD vessels supplied citizens and first responders with housing, 
meals, logistical support, and relief supplies, including delivering 
critical Federal Aviation Administration replacement air navigation 
equipment to the Virgin Islands. These vessels are aging and nearing 
the end of their life cycles, with two of the vessels more than 50 
years old. Ensuring the continued availability of these ships is a high 
priority for MARAD. Congress recognized this need and provided $300 
million in the FY 2018 Appropriations Act to fund the design and 
construction of a new common school ship--the National Security Multi-
Mission Vessel.
---------------------------------------------------------------------------
    \3\ The six SMAs are: California Maritime Academy in Vallejo, CA; 
Great Lakes Maritime Academy in Traverse City, MI; Texas A&M Maritime 
Academy in Galveston, TX; Maine Maritime Academy in Castine, ME; 
Massachusetts Maritime Academy in Buzzards Bay, MA; and State 
University of New York (SUNY) Maritime College in the Bronx, NY.
---------------------------------------------------------------------------
Port Infrastructure
    Another challenge we face is the state of Our Nation's port 
infrastructure. The ability of our ports to increase capacity and 
handle cargo more efficiently is vital to the health of many domestic 
industries. Freight volumes are projected to increase by 31 percent and 
U.S. foreign trade will more than double between 2015 and 
2045.[1] Without major improvements to multimodal 
transportation infrastructure and technologies, congestion resulting 
from greater volumes of freight could lead to growing delays and 
failures in the supply chain that would reduce our quality of life. 
There is great potential to improve the efficiency of this system by 
increasing the efficiency of our ports, which are the interfaces 
between water and land-based
---------------------------------------------------------------------------
    \[1]\ DOT Bureau of Transportation Statistics, Freight Facts and 
Figures 2017, Table 2-1.
---------------------------------------------------------------------------
    MARAD is engaged with port communities to leverage existing DOT 
financing programs such as TIFIA and RRIF, and grant programs such as 
BUILD and INFRA, to increase Federal and non-Federal investment in port 
infrastructure and first/last mile intermodal connectivity. MARAD is 
also exploring ways to use our existing authorities to attract more 
non-federal investment in port infrastructure. We are also leading the 
way in identifying the critical challenges in port operations that 
could be met by increased use of intelligent transportation system 
technologies to interface more seamlessly between global and domestic 
transportation systems. We do this work in partnerships with the 
Federal Highways Administration's Intelligent Transportation System 
Joint Program Office and the American Association of Port Authorities. 
Finally, we are working to attract new investment in technologies to 
more efficiently and safely integrate maritime cargo movement into the 
overall transportation system.
Other MARAD Programs
    In addition to meeting DOD sealift requirements, MARAD programs 
support the environmentally sound disposal of obsolete Government-owned 
vessels, innovation to address maritime energy and environmental 
issues, activities to address infrastructure challenges at our ports 
and on our inland rivers and waterways, and ship repair. Funding in the 
FY 2018 Appropriations Act allows MARAD to capitalize on opportunities 
in each of these areas as highlighted below.
    MARAD is the ship disposal agent for Federal Government-owned 
merchant-type vessels of 1,500 gross tons or greater. Currently, MARAD 
has 11 obsolete vessels not yet under contract for disposal, which is a 
historic low. The FY 2018 Appropriations Act provides $6 million for 
the disposal of these vessels. MARAD is also responsible for continuing 
the required protective storage activities for the Nuclear Ship (NS) 
SAVANNAH until decommissioning and license termination are complete. 
The FY 2018 Appropriations Act provides $110 million for the storage, 
maintenance, and final decommissioning of the NS SAVANNAH.
    The FY 2018 Appropriations Act provides $3 million for MARAD's 
Maritime Environmental and Technical Assistance (META) program. This 
program supports applied research and development to facilitate 
environmental compliance and enhance sustainability in the marine 
industry. Leveraging resources with the private sector and other 
government agencies, META's goal is to identify economically 
sustainable solutions to emerging maritime environmental challenges.
    MARAD received $5 million in funding in FY 2017 for the America's 
Marine Highway Program. The goal of this program is to develop and 
expand services to move freight along our waterways and coastlines and 
to relieve land-side congestion. Given the immense economic and 
environmental benefits of increased waterborne transportation, serious 
implementation of this program represents an opportunity to 
significantly enhance American supply-chain competitiveness. MARAD is 
currently reviewing project applications and expects to announce the FY 
2017 grant awards later this Spring. In addition, the FY 2018 
Appropriations Act included $7 million in grant funding for the 
program. We expect to issue a Notice of Funding Opportunity for those 
grant funds soon.
    The Small Shipyard Grant program provides funds to support capital 
improvements and training at small U.S. shipyards. Small shipyards play 
a significant role in our shipbuilding and repair activity. The grants 
support modernization that allow U.S. shipyards to compete more 
effectively in the global market place. The FY 2018 Appropriations Act 
provides $20 million in funding for the grant program. MARAD published 
a Notice of Funding Opportunity on April 14, 2018, and DOT will award 
grants by July 23, 2018.
    Lastly, the Maritime Administration is an active member of the U.S. 
Committee on the Marine Transportation System (CMTS). In August 2017, I 
was appointed by the Secretary to Chair the subcabinet Coordinating 
Board for one year. The CMTS is an interagency forum through which 25-
plus Federal agencies and offices collectively address challenges of 
the marine transportation system. In October 2017, Secretary Chao 
approved the National Strategy on the Marine Transportation System: 
Channeling the Maritime Advantage. The interagency members, which also 
includes the Saint Lawrence Seaway Development Corporation, U.S. Coast 
Guard, U.S. Army Corps of Engineers, the National Oceanic and 
Atmospheric Administration, and Federal Maritime Commission, to name a 
few, is addressing five areas of focus in the Strategy for system 
performance, navigation safety, maritime security, energy innovation, 
and infrastructure investment.
    In addition to managing the programs discussed above, MARAD is 
reviewing recommendations made in a November 2017 National Academy of 
Public Administration (NAPA) report on the agency. MARAD requested this 
assessment from NAPA to provide a review of the agency's programs and 
offer recommendations for improving the alignment of activities to 
enhance performance and meet MARAD's mission to foster, promote, and 
develop the maritime industry of the United States. In response to 
recommendations, MARAD is conducting an internal business process 
review to ensure MARAD's mission is clear and supports the 
Administration's policy goals.
    I appreciate this Subcommittee's continued support for the U.S. 
Merchant Marine and look forward to working with you to address the 
challenges facing the U.S. maritime industry and take advantage of 
opportunities to enhance and improve the U.S. maritime transportation 
system. I am happy to respond to any questions you may have.

    Senator Fischer. Thank you, Admiral.
    Next we have Admiral Helis, the Superintendent at the 
Merchant Marine Academy.
    Welcome, sir.

             STATEMENT OF REAR ADMIRAL JAMES HELIS,

             U.S. MARITIME SERVICE, SUPERINTENDENT,

                  U.S. MERCHANT MARINE ACADEMY

    Mr. Helis. Thank you, Senator. Good afternoon, Chairwoman 
Fischer, Ranking Member Peters, and members of the 
Subcommittee. I appreciate the opportunity to provide an update 
on the U.S. Merchant Marine Academy and the progress we've made 
since I testified last year.
    First, I'm pleased to say that the Middle States Commission 
on Higher Education fully reaccredited the Academy in November 
2017. I am proud of the commitment and efforts shown by our 
faculty, staff, and midshipmen in achieving this goal in a 
short period of time. It speaks to the dedication of the 
Academy community that so many worked so hard to address the 
Middle States Commission's concerns.
    We are building on this progress as we develop the 
Academy's 2018 to 2023 strategic plan. Beginning in September 
2017, we received input from over 700 individuals, including 
midshipmen, faculty, staff, and other stakeholders. In March, 
we hosted over 160 midshipmen, faculty, staff, and 
representatives of the maritime industry, the Department of 
Defense, alumni, and parents at a planning summit. We expect to 
finalize and publish the plan before our June graduation.
    I'm also pleased to report that as of April 5, the Maritime 
Administration has certified 17 eligible commercial operators 
to host midshipmen for Sea Year training. Sea days available to 
midshipmen on commercial vessels have returned to pre-stand-
down levels.
    We are implementing requirements set forth in the Fiscal 
Year 2018 National Defense Authorization Act, including 
successfully testing global satellite communication devices for 
midshipmen at sea. We are now in the process of procuring 
sufficient devices to equip all midshipmen by the end of 2018, 
giving them the ability to report any incidents during Sea 
Year.
    We also worked with the Ship Operations Cooperative Program 
and Trade Association to develop industry standard sexual 
assault and sexual harassment prevention and response training, 
training which is now also required for all midshipmen before 
they start Sea Year and is available to all commercial 
operators to train crew members. Our staff has also begun 
visiting midshipmen who are training on commercial vessels. We 
continue to survey the midshipmen when they return to campus 
and assess their responses to see how we can improve.
    I want to reassert that I am fully committed to eliminating 
all incidents of sexual assault and harassment on our campus. 
We are doing this with a focus on midshipmen safety and 
improving the Academy's culture and climate to ensure that 
victims are comfortable and confident in reporting all 
incidents. The past year has seen an increase in reports of 
sexual assault. While that could reflect an increase in 
incidents, we think it more accurately reflects a greater 
confidence by victims to file reports and expect that they will 
be treated with dignity and respect and the Academy will 
swiftly and appropriately respond to their reports.
    We've continued to build on our Sexual Assault Prevention 
and Response Program, expanding training for our midshipmen, 
faculty, and staff and updating procedures for handling 
reports. The program office now has a sexual assault response 
coordinator, a Sea Year coordinator, and a victim advocate 
prevention educator. A second victim advocate prevention 
educator has been identified and should begin work this summer. 
A new contract with the Rape Assault Incest National Network, 
RAINN, will provide a worldwide, 24/7 hotline that midshipmen 
can call and access a host of resources. This service comes 
online in May.
    As the Department of Transportation Inspector General's 
report shows, there is still more work to be done. We're 
working to implement new procedures mandated by DOT for 
validating reports and improving the communication of policies 
to stakeholders.
    Sexual assault is a symptom of a culture that tolerates it 
and doesn't want to accept it as a problem. We're working to 
reverse that by creating a culture of zero tolerance with 
respect for differences, inclusiveness, and empathy for victims 
of all forms of harassment. The Academy's Be KP campaign, for 
instance, is a campus-wide effort led by midshipmen and with 
full support of faculty and staff to instill the Academy's core 
values of respect, honor, and service.
    These are just some of the ways we intend to continue to 
build a campus where everyone is safe, valued, and respected 
and has the opportunity to reach their full potential.
    Thank you for inviting me today to testify. I appreciate 
your interest and continued support for the Academy, and I'm 
happy to answer any questions you may have.
    [The prepared statement of Mr. Helis follows:]

Prepared Statement of Rear Admiral James Helis, U.S. Maritime Service, 
              Superintendent, U.S. Merchant Marine Academy
    Good afternoon, Chairwoman Fischer, Ranking Member Peters and 
members of the Subcommittee. Thank you for the opportunity to update 
you on the U.S. Merchant Marine Academy (USMMA or Academy) and 
highlight accomplishments made since I appeared before you last year.
    First, I am pleased to say that the Middle States Commission on 
Higher Education (MSCHE) fully reaccredited the Academy in November 
2017. I am proud of the commitment and effort shown by our faculty, 
staff, and Midshipmen in achieving this goal in a short period of time. 
It speaks to the dedication of the Academy community that so many 
worked so hard to address MSCHE's concerns.
    We are building on this progress as we develop the Academy's 2018-
2023 Strategic Plan. This March, we invited 161 representatives of the 
maritime industry, the Department of Defense, alumni, parents, 
Midshipmen, faculty, and staff to provide input on the plan. In 
addition, Academy staff solicited input from more than 700 stakeholders 
over the past few months. Our planning discussions are ongoing and we 
plan to have a final plan by graduation in June.
    In June 2016, the Department paused Sea Yea training on commercial 
vessels. Over the past year, the Academy restored Sea Year training on 
commercial vessels, and reestablished the mix of Midshipmen who 
completed Sea Year on commercial and Government vessels to pre-stand 
down levels. As of April 5, 2018, the Maritime Administration (MARAD) 
certified 17 commercial operators as eligible to host Midshipmen for 
Sea Year training.
    We have been working hard to implement requirements established in 
the Fiscal Year 2018 National Defense Authorization Act (FY 2018 NDAA), 
P.L. 115-91, including testing global satellite communication devices 
for Midshipmen at sea. Those tests were successful and we are beginning 
to procure sufficient devices to equip all Midshipmen. MARAD and the 
Academy also worked with the Ship Operations Cooperative Program 
(SOCP), an organization with members from across the maritime industry, 
to develop industry-standard sexual assault and sexual harassment 
prevention and response training. This training is required for all 
Midshipmen prior to starting Sea Year and is available to all 
commercial operators. As required by the FY 2018 NDAA, Academy staff 
has begun visiting commercial vessels hosting Midshipmen during Sea 
Year to ensure compliance MARAD Sea Year eligibility requirements. We 
have also surveyed Midshipmen returning from Sea Year in November 2017 
and March 2018 and are analyzing these results to determine where 
further improvements can be made.
    I am committed to the elimination of sexual assault and harassment 
on our campus and improving the environment at the Academy so that 
victims are comfortable reporting all incidents and they are confident 
that Academy personnel will respond appropriately to reported 
incidents. Over the past year, we have seen an increase in reports of 
sexual assault, with a total of 12 reports made. While this increase 
could reflect an increase in the number of sexual assaults taking 
place, it is more likely that it indicates greater confidence by 
victims that reports will be responded to appropriately and therefore 
more willingness by victims to make reports. The Office of People 
Analytics (formerly the Defense Manpower Data Center) began the bi-
annual survey of Midshipmen in April 2018, which will be the basis for 
the next annual report to Congress.
    The Academy has continued to build on its Sexual Assault Prevention 
and Response (SAPR) Program, established in 2012, by implementing 
provisions of the FY 2018 NDAA, including expanding and improving 
training requirements for Midshipmen, faculty, and staff; updating 
procedures for handling reports of sexual harassment, dating violence, 
domestic violence, sexual assault, or stalking; and refining a plan to 
combat retaliation against Midshipmen who make reports. We have also 
increased staffing of the SAPR Office, which now includes a SAPR 
program manager/Sexual Assault Response Coordinator (SARC); a Sea Year 
coordinator, who is an activated U.S. Navy Reserve Strategic Sealift 
Officer and an Academy alumnus with commercial sailing experience; and 
one Victim Advocate/Prevention Educator, with a second in the process 
of being hired. The Academy also expects to hire an attorney shortly 
who will be available to provide sexual assault and harassment legal 
advice to victims. In addition, the Academy has five volunteer Victim 
Advocates from the faculty trained and certified to receive restricted 
and unrestricted reports of sexual assault. The Academy has also 
completed a contract with the Rape Assault Incest National Network 
(RAINN) to establish and operate a 24/7 worldwide hotline with access 
to worldwide resources, similar to the Department of Defense Safe 
Helpline. We expect Midshipmen to have phone, text, and internet-based 
access to RAINN in May 2018.
    While the Academy has made progress in developing its SAPR Program, 
we know there is more work to be done. The recent Department of 
Transportation Office of Inspector General (DOT IG) report on the 
Academy's SAPR Program highlights gaps in prevention sexual assault and 
sexual harassment, as well as processes for evaluating the 
effectiveness of the program. The Academy has concurred with the ten 
recommendations made by the DOT IG to improve the program and is acting 
to address the recommendations. For example, the Academy is 
implementing a procedure for validating the Academy's data on reported 
sexual assault and sexual harassment incidents, which we expect to have 
finalized very soon. In addition, the Academy is working to improve 
communication of policies and procedures to all Academy stakeholders.
    The Academy has also been focused on addressing the culture at the 
Academy regarding sexual assault and harassment. The LMI study 
completed in 2016 identified challenges in Academy culture in terms of 
inclusiveness, respect for differences, and empathy for victims of 
sexual assault and all forms of harassment. Sexual assault is a symptom 
of a culture that tolerates it and does not want to acknowledge or 
accept it as a problem. Tolerance can arise from peer pressure not to 
``get someone in trouble'' and an absence of inclusiveness that signals 
a tolerance of these behaviors. This is a core issue that we must 
address. The entire USMMA community must have zero tolerance for sexual 
assault and sexual harassment, retaliation, bullying, hazing, coercion, 
victim blaming, and alcohol misuse/abuse. To begin, we have launched 
the ``Be KP'' campaign, which is a campus-wide effort led by 
Midshipmen, with support from faculty and staff, to focus on Academy 
values, enhance pride, and build a campus climate in which each 
individual is valued and has the opportunity to reach their fullest 
potential. Our approach is to re-emphasize the Academy's core values--
Respect, Honor, Service--with the goal of eliminating signals of 
intolerance that are enablers for those who commit sexual assault and 
barriers to reporting for victims.
    As we look to the future, there are positive trends at the Academy 
that we intend to build upon. Over the past few years, the quality and 
diversity of incoming classes has improved and we expect to see 
continued progress in this area. We are also making great strides in 
improving campus facilities. We have completed construction and 
outfitting of Zero Deck of the Midshipmen barracks to include 
additional fitness rooms, baggage storage for Midshipmen during Sea 
Year, a recreation center, and club storage and meeting places. The 
Academy's Wi-Fi network has been expanded to the barracks and new 
furniture has been installed in two of them. Additional surveillance 
cameras have been installed primarily in the barracks, the security 
command center has been upgraded, and improvements have been made 
across campus on drainage and paving. Thanks to a generous gift from 
the Academy Alumni Foundation, the gym floor has been refurbished. We 
have also replaced equipment in one of the gym's weight rooms. Looking 
ahead, funding provided in the recently passed FY 2018 Consolidated 
Appropriations Act, P.L. 115-141 will allow facilities improvements to 
continue, with $45 million in funding for capital improvements and $7 
million for facilities maintenance, repair, and equipment. These 
increases will enable us among other things to accelerate the timeline 
to renovate and upgrade our Midshipmen health service and athletic 
facilities, enhance campus lighting and vehicle access control, and 
continue work to repair the sea wall, roads, and parking areas on 
campus.
    Thank you for inviting me to testify today. I appreciate your 
interest and continued support for the Academy and will be happy to 
answer any questions you may have.

    Senator Fischer. Thank you, Admiral.
    Next we have Craig Middlebrook, who is the Deputy 
Administrator of Saint Lawrence Seaway Development Corporation.
    Welcome, sir.

           STATEMENT OF CRAIG H. MIDDLEBROOK, DEPUTY

        ADMINISTRATOR, SAINT LAWRENCE SEAWAY DEVELOPMENT

         CORPORATION, U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Middlebrook. Thank you. Chairwoman Fischer, Ranking 
Member Peters, members of the Subcommittee, thank you for the 
opportunity to testify today on the activities of the Saint 
Lawrence Seaway Development Corporation. It is an honor to 
represent the corporation and to appear today before the 
Subcommittee, and I would ask that my written statement be 
admitted into the record.
    The SLSDC is a wholly owned government corporation within 
the U.S. Department of Transportation. It has an enacted Fiscal 
Year 2018 budget of $40 million, which is appropriated 
primarily from the user fee-based Harbor Maintenance Trust 
Fund. Our mission is to operate and maintain the U.S. 
infrastructure and waters of the Saint Lawrence Seaway while 
performing trade and economic development activities to 
increase the utilization of the Great Lakes Saint Lawrence 
Seaway system.
    The SLSDC operates and maintains the two U.S. locks in 
Massena, New York, and controls commercial vessel traffic in 
U.S. waters of the Saint Lawrence River and Lake Ontario. Since 
the Seaway opened in 1959, the SLSDC has partnered with Canada 
and the Saint Lawrence Seaway Management Corporation to 
accomplish its mission.
    Since 1959, nearly 2.9 billion tons of cargo has transited 
the Seaway, including grain, iron ore, project cargos, and 
other bulk commodities. During the 2017 navigation season, the 
Seaway saw a 9 percent increase in overall commercial traffic, 
including a 25 percent increase in U.S. exports to foreign 
markets.
    A ship transiting the Seaway crosses the international 
border 27 times. Because of this geographic fact, the U.S. and 
Canada created a bi-national approach to governing the Seaway. 
It was and remains a bold, optimistic, unique, and successful 
partnership. The Saint Lawrence Seaway directly serves an 
eight-state, two-province region that accounts for one-quarter 
of the U.S. gross domestic product, one-half of North America's 
manufacturing and services industries, and is home to nearly 
one-quarter of the continent's population.
    The Great Lakes region is the world's third largest economy 
if the eight states and two provinces were considered as one 
economy, with an annual economic output of nearly $6 trillion. 
Virtually every type of bulk and general cargo commodity moves 
through the Great Lakes Seaway system. A 2011 economic impact 
study of the system concluded that maritime commerce sustains 
annually 227,000 U.S. and Canadian jobs, $35 billion in 
transportation related business revenue, $14 billion in 
personal income, and $5 billion in Federal, state, provincial, 
and local taxes. An updated economic impact study is currently 
being completed, and new data are expected to be released early 
this summer, and we will provide the Committee and subcommittee 
with that information.
    The Saint Lawrence Seaway is one of the world's safest 
waterways, and that safety record continues to improve. The 
SLSDC has consistently maintained a 99 percent or better 
reliability rate for its locks. Our global customers rely on 
the Seaway and its exceptional record of safety, efficiency, 
and reliability.
    Along with the U.S. Coast Guard, Transport Canada, and the 
Canadian Seaway, the SLSDC ensures strict ballast water 
management efforts to prevent any new introductions of aquatic 
invasive species via commercial vessels entering the Seaway. 
Since 2009, 100 percent of international vessels entering the 
Seaway have received a ballast water management exam. The 
Seaway's ballast water inspection program is recognized as a 
key factor in preventing the establishment of any new invasive 
species through ballast water in the Great Lakes since 2006, 
the longest such period of non-detection on record.
    Congress authorized and began funding the Seaway's Asset 
Renewal Program, or, as we call it, ARP, in fiscal year 2009, 
and we provide Congress with an annual ARP progress report 
every year. Under the ARP program, the SLSDC has obligated $139 
million on 48 separate projects. In Fiscal Year 2017, the SLSDC 
obligated $27.9 million on 11 ARP projects, including $18.1 
million to replace the SLSDC's 60-year-old tug and $8.1 million 
for construction work on the new cutting-edge, hands-free 
mooring technology.
    The Seaway's list of cutting-edge technologies implemented 
over the years is impressive. Currently, we and the Canadians 
are studying how to enhance our vessel traffic management 
system for the age of big data and algorithms. This technology 
could significantly enhance voyage planning and traffic 
management throughout the Great Lakes.
    The SLSDC's enabling statute also provided general 
authority to undertake trade and economic development 
activities, and, to that end, we work to increase commercial 
trade through the Seaway and increase maritime-related jobs in 
the eight Great Lake states.
    SLSDC activities in the budget request support the 
Secretary's priorities of safety, infrastructure, innovation, 
and mission efficiency. The Fiscal Year 2019 request level 
supports the SLSDC's core mission of serving the U.S. 
intermodal and international transportation system by operating 
and maintaining a safe, reliable, efficient, and competitive 
deep-draft waterway.
    The Fiscal Year 2019 budget request also highlighted an 
administration proposal to examine the feasibility of 
privatizing or commercializing U.S. Seaway operations currently 
managed by the SLSDC. The Canadian Federal Government 
commercialized Canadian Seaway operations in 1998.
    Next year, 2019, will mark the Seaway's 60th anniversary. 
For 59 years, the Seaway has been a model of bi-national 
partnership and one of the safest, most innovative, and 
reliable transportation routes in the world. With the 
investments being made in the Seaway by the U.S. and Canada 
today, it will remain so for many years to come.
    Thank you again for this opportunity to appear before you 
today, and I am glad to answer any questions that the members 
of the Subcommittee may have.
    Thank you.
    [The prepared statement of Mr. Middlebrook follows:]

   Prepared Statement of Craig H. Middlebrook, Deputy Administrator, 
   Saint Lawrence Seaway Development Corporation, U.S. Department of 
                             Transportation
    Chairman Fischer, Ranking Member Peters, Members of the 
Subcommittee, thank you for the opportunity to testify on the 
activities of the Saint Lawrence Seaway Development Corporation 
(SLSDC). It is an honor to represent the Corporation and to appear 
today before the Subcommittee.
    The SLSDC is a wholly owned government corporation within the U.S. 
Department of Transportation with an enacted FY 2018 budget of $40 
million. The SLSDC's annual funding is appropriated primarily from the 
user fee-based Harbor Maintenance Trust Fund, not from charging Seaway 
tolls to commercial vessels. The SLSDC's mission is to operate and 
maintain the U.S. infrastructure and waters of the St. Lawrence Seaway, 
while performing trade and economic development activities designed to 
enhance the utilization of the Great Lakes St. Lawrence Seaway System. 
The SLSDC is primarily responsible for maintaining and operating the 
two U.S. Seaway locks located in Massena, New York, and controlling 
commercial vessel traffic in areas of the St. Lawrence River and Lake 
Ontario. Since the opening of the St. Lawrence Seaway in 1959, the 
SLSDC has directly served the marine transportation industries by 
providing a safe, reliable, and efficient deep-draft international 
waterway, in cooperation with our Canadian counterpart, the St. 
Lawrence Seaway Management Corporation (SLSMC).
    Over the last 59 navigation seasons, nearly 2.9 billion tons of 
cargo has transited the St. Lawrence Seaway, including grain, iron ore, 
iron and steel, project cargoes, and other raw and bulk commodities. 
During the 2017 navigation season, the Seaway enjoyed a 9 percent 
increase in commercial traffic, including a 25 percent increase in U.S. 
exports to foreign markets.
    A ship entering the St. Lawrence Seaway at Montreal, Canada, and 
transiting to Lake Erie crosses the international border 27 times while 
passing through the St. Lawrence Seaway's 15 locks (2 U.S. and 13 
Canadian). As a consequence of this geographic fact, when constructing 
the Seaway in 1954, the U.S. and Canada created a binational governance 
approach for the Seaway through an exchange of diplomatic notes, 
constituting a binding international agreement between the countries. 
It was and remains a bold, optimistic, and unique governance approach; 
all other U.S. inland waterways are operated and maintained directly 
either by the U.S. Army Corps of Engineers or the U.S. Coast Guard. Due 
to the geography of the St. Lawrence River and the importance of the 
sovereignty issues involved, the U.S. and Canadian Governments 
established a binational framework of civilian Federal oversight and 
control of this international waterway, which today is administered by 
the SLSDC and the Canadian SLSMC.
    To carry out its mission, the SLSDC possesses legal authorities 
that distinguish it from other operating modes at the Department of 
Transportation and from most other Executive Branch agencies. The 
Wiley-Dondero Act of 1954 (Seaway Act), which created, and permanently 
authorized the SLSDC, incorporated authorities that were first put into 
law through the Government Corporation Control Act of 1945. The SLSDC 
was created as a corporation to manage this public infrastructure asset 
and provide a direct service to customers--moving ships safely and 
efficiently through a binational waterway. The succinct and efficient 
nature of the Corporation's enabling statute allows sufficient 
flexibility to manage its operations like a business. Some of the 
distinguishing attributes include the ability to make and carry out 
contracts or agreements (MOUs) as necessary to conduct business as well 
as the ability to acquire real and personal property and sell, lease, 
or dispose of such property. Together with its mission of providing 24/
7 transportation services, these legal authorities help promote a 
culture within the SLSDC of accountability and customer service.
    The deep degree of trust and operational cross-border interaction 
that has developed between the U.S. and Canadian Seaway entities over 
the past 60 years helps maintain a transit experience for Seaway users 
that is essentially seamless from a ship captain's perspective. It is a 
remarkable achievement given the operational complexities and multiple 
jurisdictions that impact that transit. This close binational 
partnership is built on institutional and personal relationships, and 
everyone at the SLSDC works hard to maintain and enhance these 
relationships. The SLSDC's ability to achieve its mission is directly 
dependent on its success in sustaining and improving stakeholder 
interactions.
    The St. Lawrence Seaway directly serves an eight-state, two-
province region that accounts for one-quarter of the U.S. gross 
domestic product (GDP), one-half of North America's manufacturing and 
services industries, and is home to nearly one-quarter of the 
continent's population. The Great Lakes region is the world's third 
largest economy with annual economic output of nearly $6 trillion.\1\
---------------------------------------------------------------------------
    \1\ BMO (Bank of Montreal) Capital Markets Economic Research, Great 
Lakes-St. Lawrence Region Special Report, Spring 2017, page 1. Author, 
Robert Kavcic, Senior Economist.
---------------------------------------------------------------------------
    Annual commerce on the Great Lakes Seaway System typically exceeds 
180 million metric tons and serves U.S. miners, farmers, factory 
workers, and commercial interests from the Great Lakes region. 
Virtually every type of bulk and general cargo commodity moves on the 
Great Lakes Seaway System, including iron ore for the U.S. steel 
industry; limestone for construction and steel industries; coal for 
power generation and steel production; grain exports from U.S. farms; 
general cargo such as iron and steel products and heavy machinery; and 
cement, salt, and stone aggregates for agriculture and industry.
    Maritime commerce on the Great Lakes Seaway System provides 
shippers with nearly $4 billion in annual cost savings compared to the 
next least expensive mode of transportation.\2\ The waterway also 
produces significant economic benefits to the Great Lakes region. An 
economic impact study completed in 2011 concluded that maritime 
commerce on the Great Lakes Seaway System sustains 227,000 U.S. and 
Canadian jobs, $35 billion in transportation-related business revenue, 
$14 billion in personal income, and $5 billion in federal, state, 
provincial, and local taxes each year. An updated economic impact study 
is currently being completed and new data is expected to be released by 
early summer. The 2011 study significantly raised awareness about the 
importance of the Great Lakes Seaway System and this updated report 
will likely be equally impactful.
---------------------------------------------------------------------------
    \2\ U.S. Army Corps of Engineers, Great Lakes Navigation System: 
Economic Strength to the Nation, January, 2009
---------------------------------------------------------------------------
Safety/Reliability/Accountability
    The continued safety and reliability of our waterway is the 
foundation upon which we can promote and accommodate increases in 
maritime cargo. The St. Lawrence Seaway is already one of the world's 
safest waterways and that safety record continues to improve. Over the 
last 20 years, the average number of vessel incidents in the Seaway has 
decreased significantly. An incident is defined as a situation that 
triggers an on-board inspection by one of the Seaway inspectors. It 
could include on board injuries and vessel damage. From 1996-2006, the 
average number of incidents was 19 per year. Over the next 11 years, 
from 2007 through 2017, the average number of incidents declined to 
only 6 per year. Despite the harsh weather conditions during this past 
year's closing period, 2017 was one of the safest Seaway navigation 
seasons on record with just 4 vessel incidents in the U.S. sector 
during the 298-day season. This positive development can be attributed 
to several factors including the implementation of a consolidated U.S.-
Canadian Enhanced Ship Inspection (ESI) Program in Montreal in 1997, 
the development of the Seaway's Automatic Identification System (AIS) 
vessel traffic management technology, exceptionally skilled SLSDC lock 
operations and maintenance staff as well as professionals, including 
pilots and vessel officers and crews, and a major fleet renewal program 
implemented by many of the Seaway's customers.
    In addition, since the Seaway's opening in 1959, the SLSDC has 
consistently maintained a 99 percent reliability rate for its locks and 
the U.S. sector of the waterway. The SLSDC calculates the reliability 
rate by subtracting delays (weather, vessel, and lock-related) from the 
total hours/minutes during the navigation season. The SLSDC manages the 
tabulation of this rate in-house and is not dependent on contractor 
data. This high mark of success is due primarily to the SLSDC's 
efficient management and operations of the locks and control of vessel 
traffic. Global customers from nearly 70 countries return each year to 
use the Seaway because of the waterway's strong safety record, 
efficient operations, and near-perfect reliability rate.
    The Seaway also ensures strict ballast water management efforts to 
prevent any new introductions of aquatic invasive species via 
commercial vessels entering Seaway waters. In 2008, the SLSDC and 
Canadian SLSMC implemented regulations jointly requiring all ships with 
no ballast in their tanks to conduct saltwater flushing of the empty 
ballast water tanks before arriving in the Seaway. The SLSDC, along 
with the U.S. Coast Guard, Transport Canada, and the SLSMC, formed the 
Ballast Water Working Group (BWWG) to enforce ballast water inspections 
of all vessels to ensure these regulations are carried out. The BWWG's 
inspection efforts are an SLSDC operational performance measurement and 
an annual summary report documents the group's inspections and 
findings. The report measures both the performance of the binational 
inspection team in inspecting the ballast tanks of incoming ocean 
vessels and the compliance by the oceangoing trade in meeting U.S. and 
Canadian ballast water management requirements.
    In both cases, the results of this year's report are outstanding. 
In 2017, every ballast tank of every ocean vessel entering the Seaway 
was assessed. Of these 8,350 tanks, only 68 registered low salinity, 
which equates to a ship compliance rate of 99.2 percent. In those rare 
instances where salinity levels do not meet the standard, the ballast 
tanks are sealed and then re-inspected on the vessel's outbound journey 
to ensure that the tank was not used on its voyage in the Great Lakes. 
Since 2009, 100 percent of international vessels entering the Seaway 
have received a ballast water management exam. The Great Lakes Seaway 
System has one of the most stringent inspection regimes in world. The 
effectiveness of the Seaway's ballast water inspection program has been 
publicly credited as a key factor in preventing the discovery of 
establishment of any new invasive species through ballast water in the 
Great Lakes since 2006--the longest such period of non-detection on 
record.
Infrastructure Modernization
    The locks, channels, and accompanying infrastructure of the St. 
Lawrence Seaway owned and maintained by the SLSDC are ``perpetual'' 
transportation assets that require periodic and regular capital 
reinvestment in order to continue to operate safely, reliably, and 
efficiently. In 2007, the U.S. Army Corps of Engineers completed a 
binational assessment of the infrastructure needs of the Great Lakes 
St. Lawrence Seaway System. That study laid foundational groundwork by 
identifying the specific infrastructure rehabilitation and 
modernization projects that were needed throughout the system. After 50 
years of continuous operation with only minimal capital reinvestment, 
Congress approved the authorization and funding for the Seaway's Asset 
Renewal Program (ARP) beginning in FY 2009. Every penny of the ARP 
program is accounted for and we provide Congress with an annual ARP 
progress report. This program will enable the SLSDC to effectively 
manage the Seaway's assets for the next 50 years.
    The projects and equipment included in the ARP address various 
needs for the two U.S. Seaway locks, the Seaway International Bridge, 
maintenance dredging, operational systems, and Corporation facilities 
and equipment. The start of the program marked the first time in the 
Seaway's 50-year history that a coordinated effort to repair and 
modernize the U.S. Seaway infrastructure had taken place.
    During the ARP's first nine years (FY 2009-FY 2017), the SLSDC 
obligated $139 million on 48 separate projects. Several ARP projects 
involve implementation of new innovations and improved technologies for 
the operation of the Seaway infrastructure, resulting in reduced 
maintenance needs and operating costs to Seaway users. In FY 2017, the 
SLSDC obligated $27.9 million on 11 ARP projects, including $18.1 
million for the start of the SLSDC's tugboat replacement project and 
$8.1 million for construction work for the Hands-Free-Mooring (HFM) 
system installation at Snell Lock. These are two of our largest planned 
capital and infrastructure projects, on which work continues in FY 
2018.
    The SLSDC's tugboat, the Robinson Bay, is 60 years old and is the 
SLSDC's primary watercraft for emergency response, ice breaking 
operations, navigation aid (buoy) placement/removal, and other 
operational activities, including moving the SLSDC's 300-ton capacity 
gatelifter crane barge. It is the only icebreaking asset stationed 
full-time in the region, and the replacement tug will have even greater 
icebreaking capabilities. Expenses incurred in maintaining the existing 
tugboat have increased significantly in recent years. We anticipate 
delivery of the new tug in the summer of 2019 and look forward to the 
greater operational and cost saving efficiencies it will bring.
    The Seaway's HFM project is the first use of this technology for an 
inland waterway to safely transit commercial vessels through a lock 
system. The innovative technology allows commercial ships to transit 
safely and efficiently, while also enhancing workplace and operational 
safety conditions. It is estimated that HFM technology will reduce lock 
transit times by approximately seven minutes per lockage for each 
vessel, which equates to 3-4 hours of potential time savings on a 
roundtrip transit. HFM will be operational at all Seaway locks by the 
end of next year (2019).
Innovation
    The SLSDC is always looking to leverage technology to improve 
system utilization. The list of cutting-edge technologies implemented, 
or soon to be introduced by the Seaway is impressive. It includes the 
Automatic Identification System (AIS), the Draft Information System 
(DIS), and the Hands-Free-Mooring technology. Mandatory Global 
Positioning System-based (GPS) Automatic Identification System (AIS) 
carriage became effective on the St. Lawrence Seaway on March 31, 2003. 
The Seaway became the first inland waterway in the western hemisphere 
to implement an operational AIS vessel traffic services system. All 
commercial vessels transiting in Seaway waters from Montreal to mid-
Lake Erie are capable of ship-to-ship, ship-to-shore, and shore-to-ship 
communication under all weather conditions on a 24/7 basis.
    A major enhancement to the AIS system occurred in July 2012 with 
implementation of the Draft Information System (DIS). DIS is an onboard 
technology, providing Seaway mariners with real-time information on 
current and projected distances between a vessel's keel and the river 
bottom using real-time, three-dimensional displays. The Seaway is the 
first inland waterway in the world to implement this technology. 
Vessels with DIS technology are permitted to sail at a draft of up to 
three inches above the published maximum, which could allow for 
transport of as much as 360 additional metric tons of cargo per voyage. 
In addition to increasing the productivity and economic competitiveness 
of the Seaway, AIS and DIS have greatly enhanced the safety and 
efficiency of the waterway and have improved Great Lakes Seaway System 
maritime security. By pairing these navigation technologies, precise 
vessel traffic management has been enhanced more than ever, and ships 
equipped with these technologies can travel the Seaway more safely and 
with more cargo.
    The SLSDC and Canadian SLSMC are currently assessing how to improve 
and enhance our joint vessel traffic management system. We are studying 
how to enhance our existing AIS real-time data to generate precise 
arrival time calculations between a vessel's current location and 
waypoints critical to the safety and efficiency of the Great Lakes 
Seaway System. Ultimately, this technology could form the foundation of 
a more comprehensive traffic management system that could enable 
enhanced voyage planning and traffic management not only in the Seaway, 
but throughout the entire Great Lakes. Although still in the `concept' 
stage, this technology innovation has exciting possibilities for Great 
Lakes Seaway System shipping.
Economic Development
    The statute that created the SLSDC provided general authority for 
the Corporation to undertake trade and economic development activities 
and this is an important aspect of our mission. The SLSDC devotes 
resources to trade and economic development activities aimed at 
increasing commercial trade through the St. Lawrence Seaway and 
improving economic conditions in the eight Great Lakes states. The 
primary benefit is the stimulation of U.S. and Canadian port city 
economies through increased maritime industry activity, including 
services and employment to support maritime commerce. In 2015, the 
SLSDC designated a Great Lakes Regional Representative who leads this 
value-added service for the broad stakeholder community.
    Initiative activities include facilitating new trade for Great 
Lakes Seaway System ports, conducting trade research and analysis to 
assist Great Lakes Seaway System stakeholders in identifying cargo 
trends and new business, participating in joint marketing efforts with 
our Canadian counterparts, promoting the Seaway System to prospective 
customers, and assessing the economic impact of Great Lakes Seaway 
shipping.
    The SLSDC's trade and economic development activities were 
instrumental in the launch of the first regularly scheduled 
international liner service to a U.S. port on the Great Lakes since the 
1970s. In 2014, the SLSDC joined the Port of Cleveland and the Dutch 
carrier company, the Spliethoff Group, in announcing and promoting the 
launch of the new Cleveland-Europe Express monthly liner service. It is 
significant in that these vessels carry containers as well as high-
value cargoes into and out of the Lakes. The new service runs between 
the Port of Cleveland and Antwerp, Belgium, via the St. Lawrence 
Seaway. In 2015, the Spliethoff Group added a second monthly vessel to 
the program. This year marks the fifth year of operations for this 
service, and the Spliethoff fleet of vessels is making additional calls 
at ports throughout the Great Lakes Seaway System while sustaining its 
dedicated sailing schedule into Cleveland.
    Working directly with Great Lakes ports, the SLSDC helps identify 
ways to increase tonnage traffic in traditional Seaway cargoes as well 
as in diversifying the types of cargo moving through their port. One 
example is the Seaway's initiative on increasing U.S. grain exports 
through the St. Lawrence Seaway system, which led to a 21 percent 
increase in U.S. grain transiting the locks in the 2016 shipping 
season. Overall, during the 2017 navigation season, U.S. exports moving 
through the St. Lawrence Seaway to foreign markets increased 25 
percent, as compared to 2016. In 2017, many U.S. Great Lakes ports 
identified, developed, secured and promoted new initiatives within 
their communities, providing new business opportunities that are 
benefiting their local and regional economies. The Port of Milwaukee, 
Wisconsin, is a prime example. Over the last several years, the Port, 
in coordination with the SLSDC, has developed a close working 
relationship with one of its private tenants, COFCO (formerly Nidera) 
to find ways to increase Seaway-related grain exports. From 2008 to 
2013, only 8 total vessels shipped export U.S. grain from the Port of 
Milwaukee via the Seaway. Over the last four shipping seasons, however, 
that number has increased to 40 total vessels, averaging 10 Seaway 
vessels per year. As a result of these efforts, the Port of Milwaukee 
and the SLSDC have been able to better utilize the Great Lakes as a 
reliable maritime artery for commerce of Wisconsin agribusiness.
    Likewise, the Port of Monroe, Michigan, is diversifying its cargo 
traffic and more than doubled its international cargo tonnage in 2017. 
Last year, the Port of Monroe handled the majority of components of 
Michigan's largest construction project in 2017, the Arauco Fiberboard 
Plant in Grayling, Michigan. The Port also constructed a new riverfront 
dock in 2017. The new dock capabilities, together with its partnership 
with Spliethoff to move project cargo, should provide for Seaway-
related tonnage increases this year.
    Additionally, international cruising activity is increasing in the 
Great Lakes. Two additional ships have been added to the inventory for 
a total of eight cruise vessels that have itineraries in the Lakes, in 
what will be the busiest cruise season since 2004. The increase in 
inventory will offer no less than 85 separate cruises between May and 
early November this year. The SLSDC continues to work with U.S. Customs 
and Border Protection to find ways to streamline passenger processing 
and bring more cruise vessels to more ports in the Great Lakes. Seaway 
stakeholders and customers alike are realizing the benefits from a 
modernizing vision of the Great Lakes and the added value the SLSDC and 
Great Lakes ports are providing to their communities and to the region.
Challenges
    Water Levels--Water flows and levels can significantly impact the 
safe and efficient operation of navigation in the Seaway. In December 
2016, the International Joint Commission (IJC), after concurrence by 
the U.S. and Canadian Governments, adopted a new water level plan for 
Lake Ontario and the St. Lawrence River, Plan 2014, which replaced the 
plan in place since 1958. This plan is the successful result of many 
years of extensive collaboration between and among the U.S. and 
Canadian governments, the IJC, and other stakeholders who depend on the 
economic as well as environmental health of Lake Ontario and the St. 
Lawrence River. The SLSDC was an active participant in the process that 
led to the adoption of Plan 2014. A part of the discussions that led to 
Plan 2014, it was recommended that a seat on the Board of the 
International Lake Ontario-St. Lawrence River Board be provided for 
DOT/SLSDC. The Board manages water flows and levels on the St. Lawrence 
River, and the ability for the SLSDC to participate as a Board member 
would be extremely helpful to our operations. However, this has not yet 
occurred. As we approach another season of anticipated high water 
levels similar to last year, there could be significant impacts on 
commercial shipping, as well as other stakeholders.
    Pilotage--All international vessels entering the Great Lakes and 
St. Lawrence Seaway System (GLSLS) are required by U.S. and Canadian 
regulations to have a certified vessel pilot on board to assist the 
vessel's captain in navigating the vessel while transiting the GLSLS. 
The oversight of pilotage services is a state-regulated activity 
everywhere in the U.S., except for the Great Lakes, where pilotage is 
regulated by the U.S. Coast Guard Office of Great Lakes Pilotage 
pursuant to the Great Lakes Pilotage Act of 1960. In addition to 
overseeing the three U.S. pilot districts in the GLSLS, the U.S. Coast 
Guard also establishes the rates that the U.S. pilots may charge for 
the provision of their services to vessel owners. Changes in the rate 
adjustment methodology have been controversial and have been met with 
criticism, and litigation, from various U.S. and Canadian commercial 
navigation stakeholders. The availability and cost of U.S. pilotage 
services in the Great Lakes St. Lawrence Seaway System are crucial 
components of the overall safety and economic competitiveness of the 
System. It is essential that the availability of Great Lakes Seaway 
System pilots be maintained in a manner that ensures safety while 
promoting the competitiveness of the System.
FY 2019 Budget Request
    For FY 2019, the President's Budget request includes an 
appropriation from the Harbor Maintenance Trust Fund of $28.84 million 
to fund the operations and maintenance of the U.S. portion of the St. 
Lawrence Seaway as well as infrastructure-related projects included in 
the Seaway's Asset Renewal Program (ARP). The request for the SLSDC's 
Agency Operations program of $19.11 million will fund all non-ARP 
activities and expenses, including all Corporation personnel 
compensation and benefits for 144 FTEs. For the ARP program, the 
request is for $9.73 million for 19 projects, including $5 million for 
the completion of the ongoing tugboat replacement project and $2.5 
million for the continuation of maintenance dredging in the U.S. 
sections of the St. Lawrence River. SLSDC activities in the budget 
request support the Secretary's priorities of safety, infrastructure, 
innovation, and mission efficiency. At the FY 2019 request level, the 
SLSDC will continue to perform its core mission of serving the U.S. 
intermodal and international transportation system through the 
operation and maintenance of a safe, reliable, efficient, and 
competitive deep-draft waterway. The FY 2019 budget request also 
highlighted an Administration proposal to examine the feasibility of 
privatizing or commercializing U.S. Seaway operations currently managed 
by the SLSDC. The Canadian Federal Government commercialized Canadian 
Seaway operations in 1998, resulting in greater operational 
efficiencies and enhanced customer service focus.
    The SLSDC remains dedicated to safely and efficiently operating the 
U.S. portion of the St. Lawrence Seaway, while also promoting the 
economic benefits of the marine mode, attracting new cargoes to the 
Seaway, and leveraging technology and innovation to enhance the 
system's performance and safety. Next year, 2019, will mark the 
Seaway's 60th Anniversary. For the past 59 years, the Seaway has been a 
model of binational partnership, ensuring that this international 
waterway is one of the safest, innovative, and reliable transportation 
routes in the world. With the investments being made in the Seaway by 
the U.S. and Canada, it will remain so for many years to come.
    Thank you again for the opportunity to appear before you today. I 
am glad to answer any questions from Members of the Subcommittee.

    Senator Fischer. Thank you, Mr. Middlebrook.
    Admiral Buzby, an important part of MARAD's work is 
understanding the pool of credentialed and available mariners 
for Sea Lift in times of war or national emergency. A recent 
report by the Maritime Workforce Working Group recommended 
replacing the U.S. Coast Guard's merchant mariner licensing and 
documentation system with a modern database capable of 
supporting high analytics so MARAD has a better understanding 
of the mariners available.
    Do you concur in that recommendation, and can you provide 
any additional insight on how MARAD is working to improve its 
understanding of mariner availability?
    Mr. Buzby. Senator, thank you for the question, and the 
short answer is yes. I do concur with that. When we were 
researching to produce that report for Congress, we had a very 
challenging time interfacing with the Coast Guard database. The 
Coast Guard database does its mission extremely well, and 
that's to keep track of merchant mariner documents.
    But it's an older program, and it makes it extremely 
difficult to try and mine useful information out of that in 
terms of not so much how many documents there are but how many 
people are attached to those documents. That information is 
very difficult to ascertain as it's currently situated. So a 
means to upgrade that program or at least have it interface 
with our programs more easily would be a great assist going 
forward.
    Senator Fischer. Thank you. This next question is for both 
Admiral Buzby and Admiral Helis.
    Do you think that there are currently enough Federal and 
commercial vessels eligible and available for Sea Year training 
at the Academy? And is there an adequate variety of vessels 
available for Sea Year training, such as tanker or ferry 
operations?
    Mr. Helis. Thank you, Senator. I'll start with that. I 
would say in terms of sheer volume of vessels, first, we do not 
have the number of vessels or companies that we did prior to 
the stand-down, and we're continuing to work with the 
commercial companies primarily through the MARAD Shipboard 
Climate Compliance Team to encourage companies to apply so we 
can increase the number of companies and the number of vessels 
available. So we're continuing to work to increase the numbers. 
But right now, today, we have an adequate number of vessels to 
provide training for our midshipmen, and we are at about the 
same ratio of time on commercial versus Federal vessels as we 
were prior to the stand-down.
    We have improved recently the diversity of training 
platforms by adding tanker companies. We've brought in a cable 
laying company, which adds to that. Ferries are still an issue 
that we don't have, and I think the administrator can address 
efforts that MARAD is having to bring ferry companies aboard. 
Some other platforms, like ocean-going tugs, were from the 
smaller companies. But, broadly, we do have enough vessels to 
get the training. We have an array of platforms to cover most 
of the major functions. But, again, we need to continue to 
increase the pool of vessels available for midshipmen.
    Mr. Buzby. I would concur. I believe that we have enough 
vessels right now to execute our mission. We're giving our 
midshipmen quality Sea Year experiences on U.S.-flag ships. 
Would we like more? Absolutely, we'd like more, and we're 
dedicated to working with the Maritime Ministry to bring more 
companies onboard.
    We've modified the criteria slightly to reduce the 
administrative burden on becoming qualified. That immediately 
opened up several companies who came onboard. It's just a 
challenging time for them. Most of them are operating with 
small staffs themselves. So getting through this process is a 
bit of a challenge for some.
    To the Admiral's point, we are sending members of my team 
out to Washington state and Alaska state next week to qualify 
those two ferry systems to bring midshipmen back onboard. So 
we'll have a large number of new ships, ferries, to bring 
midshipmen on board.
    Senator Fischer. Thank you.
    Chairman Khouri, the last 10 years have seen major 
disruptions in the ocean carrier industry, such as the West 
Coast ports dispute in 2014 and 2015 and the bankruptcy of 
Hanjin Shipping in 2016. Can you talk about some of the lessons 
learned from these events and trends? Is the ocean 
transportation industry and the FMC prepared to address any 
future disruptions, and, if so, how?
    Mr. Khouri. Thank you. I don't want to try to say that the 
prolonged labor dispute that went on in L.A. and Long Beach 
starting in roughly late July-August 2014 and on into 2015 is a 
unique situation. Labor unrest pops up on occasion. I would 
say, in general, from my observations that labor harmony has 
come to be more the norm rather than the stress right now.
    The Hanjin--I'll come back to the labor piece in a minute. 
The Hanjin bankruptcy--it's interesting. When a company goes 
into bankruptcy, the ships don't go away. And over the last 
year and a half or 2 years, a company from Korea that was 
already in the bulk industry carrying business bought the 
Hanjin ships out of bankruptcy--it's SM Lines--and just 
announced last week that they are initiating new service with 
that equipment that will be connecting China, Korea, Japan, and 
the Pacific Northwest. If Senator Cantwell and her staff are 
still here--they'll be calling on Seattle. So from an anti-
trust regulator's perspective, it's what's called a ``new 
entrant,'' which makes us smile. So the business shows itself 
to be resilient in that regard.
    On one hand, Congress, when they did the 1984 Shipping Act, 
labor issues and labor contracts, et cetera, are specifically 
excluded by the Shipping Act from our jurisdiction. So it's 
hard for me to really make too much of a comment in that regard 
when it comes to labor.
    In terms of congestion, in general, we did a survey with 
all of our regional representatives. We do not have any port 
congestion as we speak. But we recognize that it could come 
back and raise its head again.
    Where we're having problems right now, Chairman, is not at 
the seaports, but we're finding problems in the inland legs of 
container shipping. We just had complaints in Dallas, Chicago, 
Detroit, where at the railhead end of shipments, there's a 
shortage of truck drivers and there's a shortage of chassis, 
and that American cargo owners are saying their equipment is 
getting stuck--or their cargo is getting stuck in these inland 
places in congestion.
    So just last week, we issued letters of inquiry to a number 
of the carriers to say, you know, ``What are you doing to solve 
these things?'' And we're going to ask for a prompt response 
from that. Those are the tools that we have to work with, so we 
address it as promptly as we can when those things do arise.
    Senator Fischer. Thank you, sir.
    Senator Peters.
    Senator Peters [presiding]. I think I'll defer to Senator 
Wicker--you have not voted--so that you'll have a chance to ask 
your questions, because I've already voted, so I can let you go 
forward, and then I'll follow up.

              STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. That's very kind of you, and I do very much 
appreciate that.
    Mr. Chairman, I have a statement here to the Committee 
signed by Christopher DeLacy on behalf of the Coalition For 
More Efficient Ports dated today, and I'd like to ask that it 
be admitted into the record at this point.
    Senator Peters. No objection. It'll be entered.
    Senator Wicker. Thank you so much.
    [The information referred to follows:]

     Prepared Statement from the Coalition for More Efficient Ports
Dear Chairman Fischer and Ranking Member Peters:

    Thank you for holding this important hearing on the opportunities 
and challenges facing maritime transportation. As you are aware, both 
the Maritime Administration (MARAD) and the Federal Maritime Commission 
(FMC) play a crucial role in ensuring our Nation's port infrastructure 
is modernized to provide the United States with the opportunity to 
compete in international trade. However, challenges exist that too 
often prevent the types of infrastructure investment the United States 
desperately needs and we believe MARAD and the FMC need additional 
tools from Congress in order to fulfil their missions.
    For MARAD, we believe a port specific infrastructure program at the 
Department of Transportation (DOT) is essential. Although port 
infrastructure is technically eligible under existing DOT programs such 
as INFRA, TIGER, and TIFIA, no port specific infrastructure program 
currently exists. One option the Subcommittee should consider is to 
fund the Port Infrastructure Development Program, which was created in 
the Fiscal Year 2010 National Defense Authorization (P.L. 111-84). This 
legislation tasked the Secretary of Transportation, through the MARAD 
Administrator, to establish a port infrastructure development program 
for the improvement of port facilities. Accordingly, we urge the 
Subcommittee to work with the Secretary and the MARAD Administrator on 
developing a port specific infrastructure program.
    For the FMC, we believe U.S. infrastructure needs must be a key 
factor as the Commission works to ensure a competitive and reliable 
international ocean transportation supply system that supports the U.S. 
economy. It is no secret that ocean vessels continue to increase in 
size in a way that accelerates the need for U.S. port infrastructure 
upgrades. Accordingly, we urge the Subcommittee to work with the 
Commission to ensure it has all the tools it needs to facilitate 
infrastructure upgrades at U.S. ports.
    Beyond today's hearing, as the Subcommittee works to help develop a 
national strategy to make crucial investments in America's national 
infrastructure, we urge the Subcommittee to be an advocate for 
America's ports. Outdated infrastructure at our Nation's ports 
threatens to interrupt the supply chain and ultimately the American 
economy. This critical infrastructure challenge must be met by 
increased public and private investment in U.S. ports.
    As you are aware, ports play a vital role for our economy, serving 
as the gateway to over 90 percent of America's trade. According to the 
American Association of Port Authorities, during 2015, U.S. ports 
supported 23 million jobs and generated more than $321 billion in tax 
revenue. According to the Business Roundtable, underinvestment in ports 
results in increased prices and lost economic opportunity--as much as 
tens of billions of dollars every year.
    In addition to their economic impact, U.S. ports play a strategic 
role in our national defense and emergency preparedness. From Operation 
Enduring Freedom to recovery operations after Hurricanes Harvey, Irma, 
and Maria, America's ports help ensure the success of America's 
military and emergency responders.
    Unfortunately, traditional Federal infrastructure funding programs 
are generally not comprehensive enough to support the size and scale of 
the investments needed at U.S. ports. Most port infrastructure 
investment is now made by private, state, and local sources--which 
means that investments often lack the necessary strategic and targeted 
approach that only the Federal Government can provide. This 
Subcommittee has an opportunity to recalibrate U.S. infrastructure 
policy to ensure the future success of U.S. ports in a way that is 
commensurate with their economic and strategic importance.
    Our industry has a long track record of leveraging public 
investment with significant private dollars, and we stand ready to work 
with the Subcommittee, MARAD, and the FMC to address America's 
infrastructure needs.
    Thank you for your leadership on maritime issues.
            Sincerely,
                                        Christopher DeLacy,
                   on behalf of the Coalition for More Efficient Ports.

    Senator Wicker. Admiral Buzby, let me just quote a few 
sentences from this letter from the Coalition For More 
Efficient Ports. ``For MARAD, we believe a port-specific 
infrastructure program at the Department of Transportation is 
essential. We urge the Subcommittee to work with the Secretary 
and the MARAD administrator on developing a port-specific 
infrastructure program.'' They conclude on the second page of 
this letter, ``Unfortunately, traditional Federal 
infrastructure funding programs are generally not comprehensive 
enough to support the size and scale of the investments needed 
at U.S. ports.''
    I'm told there's a backlog in current port infrastructure 
projects. Is that true? And, clearly, you haven't had a chance 
to look at this letter. But what do you think of it at first 
blush, Admiral Buzby?
    Mr. Buzby. Thank you, Senator, for the comment. We have no 
shortage of good projects that come in every year to take 
advantage of TIGER grants and INFRA grants that my office 
handles from the port side, so we have to turn away many more 
than we get to fund. So I would say in answer to that part of 
the question there probably is a fairly large backlog of port 
projects.
    Obviously, our ports are our entryways to our economy. They 
are critical to our economy functioning correctly, and they 
have to function efficiently and effectively to do that. That 
would suggest that we have increased emphasis in that area 
going forward, especially as many of our larger ports are aging 
and our infrastructure is aging, and we need to keep that 
efficient, especially with the larger ships coming in. We need 
to kind of keep a very close focus on that.
    Senator Wicker. Are they making a good point about the 
traditional Federal infrastructure programs not being 
comprehensive enough in size and scale?
    Mr. Buzby. I can't say that that is specifically true or 
specifically false. You know, just last year in TIGER IX that I 
participated in, we granted, I want to say, three fairly large 
projects, putting one in Baltimore just up the road that's 
going to be quite extensive to expand--take the old Sparrows 
Point site. So it's difficult to say conclusively. We still 
have avenues that we provide funding to ports with. But, of 
course, any time you have a specific program for a specific 
purpose----
    Senator Wicker. You wouldn't object to a port-specific 
program, would you?
    Mr. Buzby. I would not.
    Senator Wicker. All right. Let me also just ask you with 
regard to the Maritime Security Program--I think you agree this 
program is important to our Nation's strategic Sea Lift 
capability. Explain how the stipends received through the MSP 
work. And if participating companies were to leave the MSP, 
what negative effects could that have on the U.S. merchant 
mariner workforce?
    Mr. Buzby. Thank you, sir. The current program is 
authorized for 60 vessels, with the programs authorized and 
funded at $300 million. So that equates to about $5 million per 
ship, per stipend, per year. That is to help offset the 
differential, operating differential, of U.S. flag ships. In 
comparison to a similar size on a similar run international 
ship, it's between $5 million to $7 million per year.
    Senator Wicker. Is that adequate?
    Mr. Buzby. Right now, our operators say that that plus 
cargo preference keeps them operational. If you were to take 
away one or the other, our carriers tell us that they would not 
be able to continue forward.
    Senator Wicker. Thank you very much.
    And, Mr. Chairman, thank you for your indulgence.
    Senator Peters. Thank you, Senator.
    Mr. Middlebrook, the Saint Lawrence Seaway directly serves 
eight states, including my own in Michigan. But it's an asset, 
certainly for the entire nation. Maritime commerce on the 
Seaway system provides shippers with nearly $4 billion in 
annual cost savings compared to the next least expensive mode 
of transportation, and it sustains about $35 billion in 
transportation-related business revenue.
    Despite the Seaway's value and importance, many of the 
locks and dams, as you are well aware, on the Seaway are in 
need of major repairs, and I'd like to better understand the 
Corporation's use of the Asset Renewable Program to help 
identify and fund these needed improvements. So my question is: 
Is it correct that the projects identified through the Asset 
Renewable Program, which began in Fiscal Year 2009, were the 
first efforts to repair and modernize the Seaway in its 50-year 
history?
    Mr. Middlebrook. Generally speaking, Senator, that is 
correct. I think up until 2009, the Saint Lawrence Seaway 
Development Corporation and its Canadian counterparts on their 
side did basically as good a program as possible without major 
funding to maintain the locks to the extent they could.
    The Seaway locks and channels are renewable assets. 
Traditionally, infrastructure of that nature has a working life 
of about 50 years, and with the implementation and approval by 
Congress of the Asset Renewable Program in 2009, we have been 
able to invest almost $140 million, I think, or $139 million 
over the last 9 years. This is the tenth year of the program.
    And you're correct to identify that it's not only about 
rehabilitation, so it's not only about repairing or bringing 
back up to a current state of repairs of existing 
infrastructure. It also includes modernization--and I can go 
into some of those projects--but beginning with, in the early 
part of the program, converting the mechanisms from mechanical 
to hydraulic on the lock doors right up to our current 
implementation of what really is cutting edge technology called 
hands-free mooring, a new way to more safely and efficiently 
lock vessels into the locks.
    I would point out as well it's a bi-national system, and 
the Canadians are doing their part as well, and they have been 
for the last 10 years. They have invested well over half a 
billion, over $500 million, in their locks. So when you add up 
the collective investments by the U.S. and Canadian 
governments, it's well over $700 million in that regard.
    Senator Peters. Well, so that's what you've done since the 
program began in 2009.
    Mr. Middlebrook. Yes.
    Senator Peters. What more needs to be done? What sort of 
costs are we looking at? What are some of the major projects 
that you're focused on?
    Mr. Middlebrook. As I mentioned, right now, we're 
implementing a new technology, hands-free mooring technology. 
All the Canadian locks are now equipped with it, or 11 of their 
13 locks are equipped. They're not going to equip the other two 
for various reasons. We are in the process of completing that 
project. We'll be finished by the end of this year at 
Eisenhower Lock with the full installation of that technology, 
and we'll be finished next year at our other lock, at Snell 
Lock. That technology, very briefly, will radically change the 
way that we can more efficiently and more safely lock vessels 
through our locks.
    We have floating plant--we have a 60-year-old tug which 
installs the--aids the navigation at the beginning and at the 
end of each season. We're currently in the process with this 
funding to construct a new tug, down in Louisiana, to do that.
    We also have responsibility for an international bridge 
crossing, the Seaway International Bridge between Canada and 
the United States, and we have used ARP funding in that project 
as well. We're using it to completely rebuild our miter gate 
lock doors, our maintenance dredging of our channels, and renew 
our waterborne fleet, among other things.
    Senator Peters. Great. Thank you. I'll have more questions 
for you in the second round.
    Senator Hassan.

               STATEMENT OF HON. MAGGIE HASSAN, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Hassan. Thank you very much, Senator Peters.
    Welcome and thank you to our panelists for being here this 
afternoon, and for the work you do for our country.
    Admiral Helis, I wanted to start with a question to you 
about the Academy. Obviously, our Merchant Marine Academy 
represents one of the most specialized educational institutions 
in the country, and you've talked a little bit today about the 
steps you've been taking to make it a safer place for all 
students there. But the Academy's mission is to educate and 
graduate licensed merchant mariners and leaders to serve in 
America's marine transportation and defense roles. I believe 
that you all should be doing everything you can to recruit 
students from a broader and more representative pool of 
applicants.
    So I just wanted to start with getting some baseline 
information. What percentage of the Merchant Marine Academy 
students are women, and what percentage of the student body are 
people of color?
    Mr. Helis. Thank you for the question, Senator. Right now, 
we're at about 16 percent women, and we're at about 24 percent 
of other minorities. For this year's class coming in, as of 
yesterday--and, again, the close date for accepting admissions 
is 1 May--we've had 199 acceptances. We have 108 offers 
remaining out. Of the 199 acceptances, 56 are women. That would 
be a record number for women coming into a class in the 
Academy. We expect that number to go up over the next week, 
because of the 108 offers still out, a number of them are 
women.
    So we're expecting that this year, we should set a record 
number for women. We did that in 2014, 2015, and 2016, 3 years 
consecutively. In 2017, we saw a dip in the number of women. 
We've seen it rebound to a higher level than we had before. So 
we've made some very deliberate efforts to recruit a more 
diverse student body.
    One of the tools we have used are the Secretary of 
Transportation's discretionary appointments, which are, by 
statute, designed to increase the--to improve the demographic 
balance at the Academy. We appreciate the Congress increasing 
that number from 40 to 50 a year ago. That has enabled us to, 
again, continue to recruit amongst women.
    On the side of minorities, we are a little bit down from 
last year. We have seen a dip this year, at least to date, in 
the number of Hispanic applicants. We've seen an increase in 
the number of Pacific Islander. We're about remaining level 
with African American, Asian, and others. I don't have an 
explanation for why we've dipped in Hispanics this year. It's 
something that we're going to have to dig into as we go forth 
in recruiting.
    But, again, to roll back to five or 6 years ago, we were at 
about 20 percent to 21 percent minorities. So we have--again, 
2014, 2015, and 2016 were very good years for diversity in the 
classes. Last year, we also saw a dip, but we're seeing 
recovery this year. And it is something that we do put an 
emphasis on--is that we have to have a more diverse regiment of 
midshipmen, and we have to create a culture that is more 
inclusive and more welcoming.
    Senator Hassan. Well, I agree, and I also think, obviously, 
when a whole subset of a potential workforce don't feel welcome 
at a place or aren't recruited and encouraged, we're leaving 
some great talent on the sidelines. So I thank you for your 
efforts and would look forward to continuing to work with you 
on the issue of more diversity at the Academy.
    I had one other question for the panel, this one about the 
Jones Act. For almost 100 years, since the Jones Act was passed 
in 1920, ships that are owned and crewed by U.S. citizens have 
transported the Nation's domestic cargo between U.S. ports to 
U.S. island territories. What have been the primary benefits of 
the Jones Act for U.S. workers in the maritime economy, and for 
our national economy? And then I'd also like you just to 
address what would happen to the industry, to mariners, and to 
the U.S. maritime sector if Jones Act protections were removed 
and foreign flag ships entered the domestic maritime trade?
    We could just maybe start with you, Mr. Khouri, and move 
down.
    Mr. Khouri. Thank you. My relationship with Jones Act trade 
comes very early in my career when I served on Jones Act ships. 
From the Federal Maritime Commission's perspective, which I 
represent today, we have no jurisdiction in that area, so it 
would be difficult for me to really add or detract.
    Senator Hassan. OK. Well, then, Mr. Buzby?
    Mr. Buzby. Ma'am, I'm happy to speak to that. Words such as 
vital, critical come immediately to mind. The 100 large Jones 
Act ships that are sailing today form the basis for the 
majority of U.S. mariners that we have under U.S. flag, so it's 
absolutely critical not only to the ships themselves, which we 
need, and to the mariner workforce, but to the ship repair and 
construction industry that also supports our government ship 
construction and repair. It's vital across the board. We've got 
to have it.
    Senator Hassan. Thank you. Admiral?
    Mr. Helis. Senator, mine would go back to Senator Fischer's 
earlier question. We extensively use Jones Act ships. We train 
our midshipmen on U.S.-flag vessels. Were those to go out and 
foreign flag--the number of training platforms we'd have 
available would drop dramatically very quickly.
    And, second, to the Administrator's point, one reason we 
are able to attract high-quality students is because of the 
opportunities they have for service as merchant marine 
officers, service in the armed forces. If those jobs went away 
in the Jones Act, it would be much more difficult to recruit 
students because, frankly, the jobs for them would not be 
there. Right now, the opportunities are a big attractor. So it 
would have a definite impact on our ability to accomplish our 
mission.
    Senator Hassan. Thank you.
    I know I'm a little over, Senator Peters, but could we ask 
Mr. Middlebrook if he wants to chime in?
    [Nonverbal response.]
    Mr. Middlebrook. I would just say, Senator, that for the 
Great Lakes Seaway system, the maritime industry is a three-
legged stool there, the three different fleets. It's the U.S.-
flag fleet, Canadian flag fleet, and international, and the 
U.S.-flag fleet is a vital component of the economic benefits 
that accrue to our country as well as to Canada.
    Senator Hassan. Thank you very much.
    And thank you for your indulgence, Senator Peters.
    Senator Peters. Thank you.
    Senator Fischer [presiding]. Thank you, gentlemen.
    For the second round of questions, I'd like to ask this 
question for Admiral Buzby and also Chairman Khouri. Port 
congestion continues to affect many stakeholders utilizing our 
ports, including ocean carriers, truckers, and shippers. Can 
both of you talk about the work that MARAD and FMC are doing to 
increase efficiencies at our ports?
    Mr. Khouri. Thank you for the question. We are currently 
working on a--let me go back. You mentioned it in your opening 
statement, Chairman--Commissioner Dye's Port Efficiency Teams, 
and I think that report was delivered in December of last year, 
if I remember. And the observations that came out of that--I 
mean, many, many stakeholders from every aspect of the maritime 
industry participated in those teams, and the findings were 
that--Admiral Buzby talked about the infrastructure and capital 
issues there.
    But his written testimony, I noticed, also includes 
technology, and this was the findings in Commissioner Dye's 
teams, is that technology is going to be the key to finding 
more efficiencies through our ports, where when a ship is 
loaded in Hong Kong or Shanghai, that information is 
transferred over to the terminal where it's going to berth in 
either L.A. or Long Beach, and they know where every single box 
is on that ship of 12,000 boxes and the order it's going to 
come off, and that the truckers can be queued in--it's this 
kind of efficiencies that are going to have to be brought into 
the system.
    There's only so much money you can put into a fixed 
footprint of acreage, and we're going to have to find ways to 
get more efficiency out of the acreage that we have in these 
ports. So we are currently working, as I mentioned in my 
testimony, on a congestion effort. Commissioner Dye is, as we 
speak today, is in China on a bilateral treaty mission. But 
she's coming back directly to Los Angeles, where she's going to 
be having meetings on these new congestion initiatives.
    So those are the things that we're doing right now. 
Obviously, we don't have grant-making authority. So with that, 
I'll turn it over to the Admiral. Thank you.
    Mr. Buzby. Madam Chairman, as we look at ports in the 
Maritime Administration, the big thing we're really focusing on 
going forth is, much as Chairman Khouri said, efficiencies. 
Because of the age of a lot of our ports and the way they were 
kind of kluged together over the years, the connectors from 
those ports are wanting in many cases, and, by this, I mean the 
rail connections, highway connections out of the ports, and, 
more importantly, the waterway connections.
    You know, the waterways--the barge traffic out of these 
ports--is the only real area where we have more capacity left 
to develop. We're getting kind of limited on our rail side and 
the highway side. But to maximize all of those connectors out 
of that port and, obviously, the access through channel depths, 
that sort of thing, into the ports making that flow more 
efficient is critical.
    I was just down in Savannah not too long ago. They just 
inaugurated an entirely new rail project down there to help 
that flow in the future. It's a very large, growing port, and 
it's an example of how they're looking forward.
    Senator Fischer. Thank you.
    Admiral Helis, I continue to be concerned about the 
Academy's ability to respond to and also prevent sexual assault 
and sexual harassment. I was particularly troubled by the 
September 2016 alleged incident involving the Academy's soccer 
team. As you know, this March, the Department of Transportation 
Office of the Inspector General recently released a report 
showing that of the 138 recommendations made to the Academy to 
improve its efforts to respond and prevent sexual assault and 
sexual harassment, only 62 of those recommendations have been 
closed.
    Could you please outline for the Committee how the Academy 
will prioritize the implementation of these recommendations?
    Mr. Helis. Thank you, Senator, for the question. I would go 
back to my opening statement that we are fully committed to 
eliminating sexual assault on the campus. We're continuing to 
put more resources toward the issue in terms of increasing the 
number of staff, increasing the focus that we're placing on the 
issue.
    As we look at the Office of the Inspector General's report, 
at their recommendations, they're very broad in some ways, and 
we are at this point going through a complete review of all of 
our policies and procedures for sexual assault, both prevention 
and response. Our intent there as we go through this review of 
policies is to do a better job synchronizing them, making sure 
that they're better aligned, and identifying any gaps in the 
policies, as the OIG recommended, and to plug those as we do 
the policy. So that is the first piece, is to make sure that 
all of our policies are thoroughly aligned.
    Among the recommendations, some of these, honestly, are 
long-term recommendations, you know, making--a number of them 
that are not closed out relate to changing the culture, and 
that, candidly, is going to take years. But we have to put a 
priority of effort to those, because that is going to be core 
to addressing the problem, is changing the institutional 
culture. So that has moved to the top of our list in terms of 
priority, but it is one that's going to take a very long time 
to implement.
    Senator Fischer. Thank you, Admiral. We will continue to 
monitor this situation and, hopefully, look for improvements to 
happen that don't take years. Thank you.
    Senator Peters.
    [Nonverbal Response.]
    Senator Fischer. Senator Peters is going to yield to 
Senator Capito.

            STATEMENT OF HON. SHELLEY MOORE CAPITO, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Capito. Thank you, Senator Peters and Senator 
Fischer, for yielding to me. I'll take it.
    I want to build on Senator Fischer's question to you, 
Admiral Helis. You testified before the Committee about 
preventing sexual assault and harassment. You mentioned in your 
opening statement and also in your response that you're working 
to make improvements and adhere to the recommendations.
    I believe one of the recommendations was a position called 
Sexual Assault Prevention and Response Program. That position 
obviously would be charged with overseeing the responses, and 
it also notes that you have an expected hiring of an attorney 
for this. I would like to know what has taken so long? My 
understanding is you haven't filled this position. Is there a 
problem? Is it lack of applicants? Is it lack of interest? Or 
is it--have you just sort of been dragging your feet on this?
    Mr. Helis. Senator, for the second Victim Advocate 
Prevention Educator for that--of the four positions in the 
Sexual Assault Program Office, one is vacant, the second Victim 
Advocate Prevention Educator. We had a failed search for that. 
We did not get a successful applicant. We had to re-advertise, 
and so that's been the cause for the delay. But we do have 
someone identified that we expect to be on board this summer. 
So that would fill----
    Senator Capito. Will that make a full contingent?
    Mr. Helis. That would make a full contingent of four in the 
office. For the Victim Advocate Attorney, or the Special Victim 
Advocate Attorney, this was a new position. There is no 
analogous position within the Department of Transportation, and 
so there was a time that we had to spend carefully crafting 
what the position requirements would be, what the skill sets 
would be, and we couldn't perfectly model it off of the 
Department of Defense, because the special victim counsels in 
DOD operate--because DOD operates under UCMJ, a different legal 
structure. So it would have to be a slightly different 
position.
    The position is now advertised. I believe the ad closed 
yesterday, so we should begin moving into the interview and 
selection process shortly.
    Senator Capito. Well, that's good news. You know, I think, 
obviously, being made aware of the issue with the soccer team 
and some of your actions in reaction to that, I think having 
proper staff in place obviously--and if you're ever going to 
get a full contingent or at least a partial contingent of 
women--but understanding that these sexual assaults are gender 
neutral--that it happens on both males and females--it is 
extremely important.
    You also have an opening for your new Academic Dean at the 
Academy. Could you speak to us about that and what kind of 
progress you're having there?
    Mr. Buzby. Ma'am, if I could take on that one----
    Senator Capito. Yes. Thank you.
    Mr. Buzby. We are in the final throes of interviewing the 
last three or four people. The next level of interview will 
come to me. I will make that selection, and we expect to do 
that within the next week or so.
    Senator Capito. Is that a replacement of a long-term 
Academic Dean or--I don't know the history behind that.
    Mr. Buzby. We have currently, right now, a GS-15 Dean who's 
been there. For the last several years, there has been a 
rotational dean through there out of faculty. We're reinstating 
this as an SES position, who will be a Dean and Provost. So 
we're upping the stature of that position to have a more 
focused set of responsibilities with faculty and the 
curriculum.
    Senator Capito. OK. Good.
    My last question is on the Sea Year Program. I understand 
it has been reinstated and that you have a number of companies 
that have partnered on this. Can you elaborate on the progress 
and the challenges in restoring that Sea Year Program?
    Mr. Helis. Yes, Senator. Thank you for the question. 
Currently, we have 17 companies that are certified as eligible 
to host midshipmen during their Sea Year training. We have 
restored the balance of days that midshipmen spend on 
commercial vessels versus Federal vessels to that which we had 
prior to the stand-down. So that has been normalized.
    Lately, we have added companies to the program that have 
brought tankers in, that have brought in cable-laying ships. 
Within a few weeks, we hope to have a couple of ferries from 
the West Coast aboard. So we are increasing the array of 
different training platforms available to midshipmen.
    We are not at the number of companies and vessels we had 
prior to the stand-down. We're continuing to work to bring in 
more companies, make more vessels available, but as of today, 
we have an adequate number of vessels and diversity of vessels 
to accomplish the mission of preparing our midshipmen to 
present for their licensing exams.
    Senator Capito. Thank you.
    And thank you again for the time. Thank you.
    Senator Fischer. Thank you, Senator Capito.
    Senator Peters.
    Senator Peters. Thank you, Madam Chair.
    Mr. Middlebrook, in your testimony, you touched on pilotage 
rates, an issue that I've heard from a number of constituents 
about. The oversight of pilotage rates is a state regulated 
activity everywhere in the United States except in the Great 
Lakes, where for the last several years, the Coast Guard has 
set rates. As you know, the Coast Guard's methodology has been 
contentious and has also led to increased rates across the 
Great Lakes.
    Could you explain for the Committee how the availability 
and cost of U.S. pilotage services affect the overall safety as 
well as the economic competitiveness of the system?
    Mr. Middlebrook. Certainly, Senator. Thank you for that 
question. There are a few stakeholders who are involved with 
maritime commerce on the Great Lakes Seaway System, 
particularly as it deals with international commerce, that are 
more important than pilots. As you know, every international 
vessel that enters the Seaway, both the U.S. and Canadian 
pilots board those vessels. They have the local knowledge of 
the different waters to pilot them through. So, first and 
foremost, they have a direct impact on the safety of the 
system, and when you look historically at the excellent safety 
record of the Great Lakes Seaway System, they play a very vital 
role in maintaining that track record.
    The system is also primarily a bulk commodity system, and 
low value bulk commodities that move on that. So it doesn't 
take much to impact economic decisions on how cargo will move, 
whether it will move by mode or whether it will move 
geographically. Balancing those two issues, availability of 
pilots and the cost of pilots, is the balance that the Office 
of Great Lakes Pilotage at the U.S. Coast Guard works to 
maintain, and we rely on the U.S. Coast Guard to do that.
    Several years ago, as you mentioned, they did modify their 
existing methodology, rate-making methodology, and I think it 
has taken a number of years for all parties concerned--the 
Office of Great Lakes Pilotage, international carriers, the 
industry, as well as the pilots--to work through that. Part of 
the aim, as I understand it, of the methodology was to increase 
the availability of pilots.
    However, traffic through the Seaway, chronologically, over 
the course of the year, is not uniform. There are times when 
there are peak times, and there are times when there are 
troughs. So, again, that is a very unique and difficult balance 
that they have to maintain.
    I think what's interesting in the approach, just to add to 
that, is that there are different models out there about how 
different entities oversee pilotage, and I would just--I would 
provide--the Canadian example is it allows for more direct 
negotiations between the service providers, the pilots, and the 
service users, the commercial entities, to negotiate, 
ultimately, the rates on that. The current system on our side--
parties provide the information to the Coast Guard, and the 
Coast Guard acts as the rate-making regulator on that.
    But, yes, you are correct. They have a vital impact on both 
safety and on the competitiveness.
    Senator Peters. Mr. Middlebrook, your testimony also noted 
that the Corporation's annual funding comes primarily from the 
Harbor Maintenance Trust Fund and not from charging tolls to 
commercial vessels, yet the Administration's 2019 budget 
indicates that, and it seems to be the case with most of the 
Nation's infrastructure that the Administration is studying the 
option of commercializing portions of the Seaway, presumably, 
than charging tolls on the Seaway.
    The budget doesn't define commercialization. But do you 
believe tolls are under consideration at this time? Is that 
something you're actively looking at?
    Mr. Middlebrook. Well, the study hasn't gotten underway 
yet, Senator, and the Administration's budget proposes a study 
to include questions just like that that you pose, what would 
be the best way to generate revenue to support the Seaway, 
whether that's--one area of inquiry is privatization, where the 
public assets would be sold or long-term leased to a private 
entity or, in the commercialization case, the assets would 
remain owned by the U.S. Government, but they would contract 
with an entity to maintain those.
    You're right. One of the very key questions is how to 
effectively--and not to adversely affect the competitiveness of 
the system--generate sufficient revenue for a new model to 
operate and maintain the system. We are currently user fee-
based. It comes from an ad valorem tax, as you point out, on 
the Harbor Maintenance Trust Fund, the Harbor Maintenance Tax. 
We do charge some tolls on certain types of commercial traffic, 
but, uniformly, it is based on the ad valorem tax of the Harbor 
Maintenance Trust Fund.
    That will certainly, I would imagine, be a very key 
question on any study once it gets underway, is how do you 
preserve the efficiency and the effectiveness of the current 
wholly owned government corporation approach if you go down the 
commercialization or privatization approach without damaging 
the competitiveness of the system.
    Senator Peters. My understanding is the study does not have 
any congressional authorization. It's being paid for with 
existing agency funding. Is that correct?
    Mr. Middlebrook. Well, actually, in the Fiscal Year 2018 
omnibus report, there was language that prevents the 
expenditure of any Fiscal Year 2018 funds from undertaking a 
new study such as this one. So right now, no funds are being 
expended in that regard.
    Senator Peters. So the study is not going forward, though?
    Mr. Middlebrook. At this time, right now, it is not.
    Senator Peters. In terms of the question of tolls, right 
now, the Port of Norfolk or Long Beach--you don't pay a toll to 
use those port facilities. Why should a vessel calling on 
Detroit be put into a different economic position and probably 
an economic disadvantage with tolls?
    Mr. Middlebrook. Again, a very key question, because right 
now, they do--the Harbor Maintenance Tax is a tax that's paid 
by the shipper, not the carrier. In the case of tolls, that 
would be the carrier that would pay that tax. There is a fee 
associated with commerce, U.S. directed commerce in the Great 
Lakes Seaway System. It just doesn't happen to be primarily 
toll-based. The Canadians, on their part, still charge regular 
tolls on the carriers that come through.
    So the policy question becomes: How do you impose the 
necessary costs to maintain that system? The last time that 
there was a consideration of re-imposing tolls on the Seaway, 
that very question that you pose came up: How do you find a way 
between the Harbor Maintenance Trust Fund and potentially any 
new tolls to make that work? And there were different 
discussions, both in the discussion of the bill with the 
Congress and the Administration, of waiving Harbor Maintenance 
Tax proposal, or the tax on cargo, at that time. That, 
ultimately, was not successful. Tolls were not re-imposed on 
the U.S. Seaway. But you put your finger on a very important 
question, not to have double costs imposed.
    Senator Peters. Well, I hope a key part of your position is 
to make sure that the Seaway is competitive and that we can 
increase trade into the heartland of America through the Great 
Lakes, particularly at a time when our coastal ports are at 
capacity and require substantial investments. To be able to 
move cargo right into the heartland of the United States using 
the Seaway seems to me a very cost-effective way of increasing 
maritime trade. Would you agree, and is that a principal focus 
of your work?
    Mr. Middlebrook. Thank you for saying so. I would agree, 
absolutely. I mentioned earlier that the Canadian and U.S. 
governments have invested over $700 million in the 
infrastructure, on the respective infrastructures. I would also 
add--and it's in my written testimony--that the private sector 
on both sides of the border has invested upwards of $6 billion 
in various forms, so almost $7 billion of investment that has 
gone into the system.
    For us, that the private sector as well as the public 
sector is expending real money, significant money, shows that 
they believe in the need for the system, the competitiveness of 
the system, and the viability of the system. We are operating 
at only about 50 percent capacity, so there is room to grow 
there and to work cooperatively with other modes and other 
waterways to better align the nation's transportation system.
    Senator Peters. Great. Thank you.
    Thank you, Madam Chair.
    Senator Fischer. Thank you, Senator Peters.
    I would like to thank our witnesses today for being on the 
panel. Your information has been very helpful to us, and I 
would remind you that the hearing record will remain open for 
two weeks. If Senators have questions, they will be submitted 
to you in writing, and we ask that you respond promptly.
    Thank you very much for the testimony today, and with that, 
the hearing is adjourned.
    [Whereupon, at 3:50 p.m., the hearing was adjourned.]

                            A P P E N D I X

     Response to Written Questions Submitted by Hon. John Thune to 
                         Hon. Michael A. Khouri
    Question. In April, the members of the West Coast Marine Terminal 
Operators Agreement (WCMTOA) at the Ports of Los Angeles and Long Beach 
submitted their amendment outlining changes to the PierPass program on 
file at the Federal Maritime Commission. The proposal includes moving 
from the original model that charged fees for daytime terminal access 
to a fee system with mandatory appointments and charges to all cargo, 
regardless of the time of day.
    a. In the course of its preliminary review of the agreement, does 
the Commission believe the proposed changes would still meet the 
original congestion mitigation goals of the PierPass program?
    Answer. Agreements filed with the Commission for review under the 
Shipping Act of 1984 include a wide variety of authorities for 
collective activity designed to allow agreement parties to achieve 
different objectives in various ways. In the instant case, the proposed 
changes to the PierPass program would (1) change the current traffic 
mitigation fee (TMF) to a flat fee, and (2) implement an agreement-wide 
truck appointment system. According to the agreement parties, these 
changes are targeted at continuing the West Coast Marine Terminal 
Operator Agreement's (WCMTOA) goal of combating truck congestion in the 
San Pedro Bay (Port of Los Angeles and Port of Long Beach) area.
    While the filing party's objectives vary from agreement to 
agreement and the means employed to achieve such objectives likewise 
vary; in its review of any filed agreement, the Commission is 
statutorily limited to a primary issue--the effect of the agreement on 
competition in the ocean freight context. The Commission evaluates 
filed agreements based on the standard set forth in the Shipping Act of 
1984. This standard--the ``6(g) standard''--allows the Commission to 
take action against agreements that ``are likely, by a reduction in 
competition, to produce an unreasonable reduction in transportation 
service or an unreasonable increase in transportation cost.''
    Agreements filed with the Commission go into effect automatically 
in 45 days unless the Commission determines that the agreement is 
anticompetitive under the 6(g) standard. In order to prevent the 
agreement from going into effect, the Commission must bring a civil 
action in the United States District Court for the District of Columbia 
to enjoin the operation of the agreement. The burden of proof is on the 
Commission.
    This focused multi-step analysis and review by the Commission 
requires sufficient information for the Commission to make a 
determination of the agreement's impact on competition. Because the 
Commission determined that it needed additional information to fully 
and appropriately analyze the competitive impact of the changes to 
PierPass requested by WCMTOA, the Commission requested additional 
information from the agreement parties necessary to conclude its 
competition analysis under the 6(g) standard. This action postponed the 
effective date of the proposed agreement amendment until 45 days after 
the agreement parties submit the requested information.
    Based on the above discussion, the Commission has not developed an 
opinion on whether the proposed changes to the agreement will meet the 
original traffic congestion mitigation goals of the PierPass program. 
PierPass management has published third party consultant reports that 
conclude that the proposed appointment system will continue to spread 
truck traffic across all terminal gate operating hours, thereby 
mitigating congestion. Further, please see our response to question 2, 
below.

    b. Has the Commission previously undertaken a review to determine 
if the current PierPass program has substantially reduced congestion? 
If so, what were the findings of the report?
    Answer. As noted above, in its review of any filed agreement the 
Commission is statutorily mandated to focus on a single question--the 
effect of the agreement on ocean transportation competition. The 
Commission may only take action against agreements that ``are likely, 
by a reduction in competition, to produce an unreasonable reduction in 
transportation service or an unreasonable increase in transportation 
cost''--the ``6(g) standard.'' The Commission monitors the activities 
of WCMTOA and the PierPass Program and reviews data about the TMF to 
determine any effect on transportation cost and services.
    PierPass senior managers have provided the Commission with annual 
updates on various San Pedro Bay port performance measurements, 
including gate utilization statistics for the day, night and weekend 
shifts. Based on those PierPass reports, approximately 42 percent of 
former day traffic now uses the night/weekend gate shifts.
    The Commission is concerned generally with supply chain issues, 
including overall port congestion, that undermine supply chain 
efficiencies in our international oceanborne commerce. In 2014, as a 
response to reports of problems with port congestion, the Commission 
held four separate one-day listening sessions in different regions of 
the country--New York/Mid Atlantic area, Hampton Roads through South 
Atlantic area, Gulf Coast area, and West Coast ports--to investigate 
and hear firsthand the problems that ports, their customers, and other 
partners in the U.S. intermodal system were facing as a result of 
problems brought on by contemporary developments in container liner 
shipping.
    Following those listening sessions, the Commission's Bureau of 
Trade Analysis (BTA) issued a comprehensive eighty-three-page summary 
report of the proceedings at these FMC port forums--``U.S. Container 
Port Congestion & Related International Supply Chain Issues: Causes, 
Consequences & Challenges.'' Though not exclusively focused on PierPass 
or the TMF, a section of the BTA overview titled ``Extended Hours, 
PierPass, and Congestion Pricing'' highlighted the efforts of the San 
Pedro Bay ports to address and mitigate congestion--both truck issues 
outside of the port gates, and container/truck/chassis issues inside of 
the terminals. The report reflects the stakeholder discussion at the 
listening sessions about this subject and outlines stakeholder 
suggestion and proposed fixes. A copy of the relevant portion of the 
2015 summary report is attached.
                                 ______
                                 
                               Attachment
            Extended Hours, PierPASS, and Congestion Pricing
Framing the issues
    Extending the hours that terminal gates are open to truck traffic 
is one method by which truckers could conceivably increase the number 
of turns they are able to make in a shift. However, except in unusual 
circumstances, there are few examples of permanently extended gate 
operations at terminals in U.S. ports.\94\ Marine terminals do not 
typically accommodate cargo pick-up and delivery outside of daytime 
weekday hours primarily because of longshore labor costs. Longshore 
labor contracts provide for differential shift pay, overtime pay, 
minimum hour guarantees, and minimum size of labor work units. Terminal 
operators strive to keep cargo pick-up and delivery activities to a 
single day shift because to do otherwise would raise their operating 
costs significantly.
---------------------------------------------------------------------------
    \94\ Transportation Research Board, National Cooperative Freight 
Research Program (NCFRP) Report 23. Synthesis of Freight Research in 
Urban Transportation Planning, p. 52. Washington, D.C. (2013).
---------------------------------------------------------------------------
    In most places outside of the SPB ports, evening and weekend 
operating hours are typically limited to special arrangements with an 
ocean carrier or preferred customers moving large numbers of 
containers. Another reason for the widespread absence of extended gates 
is said to be resistance from drayage drivers and some customers.\95\ 
Off-peak work, for example, means an extended work day for the truck 
driver or a shift in the driver's schedule to a less family friendly 
night shift. Warehouses, distribution centers, manufacturers, and 
steamship line help desks, also must be available to help process cargo 
during off-peak hours and, in some locations, zoning ordinances 
prohibit night or weekend deliveries.
---------------------------------------------------------------------------
    \95\ Ibid.
---------------------------------------------------------------------------
    The first large scale, permanent extended-hours program was 
implemented ten years ago at the ports of Los Angeles and Long Beach. 
However, several precursor schemes preceded the eventual launch of 
permanent extended gates at the SPB ports. Between 2000 and 2004, the 
two SPB ports experienced rapid growth with container volumes expanding 
by 32 percent.
    Numerous groups in the local community benefited by this surge in 
growth, but other groups were negatively affected. Motor carriers 
encountered longer queue times to pick up or drop off containers. 
Likewise, large retail importers incurred significant problems moving 
their import containers from the terminals to their warehouses and 
distribution centers. Furthermore, local residents complained of severe 
traffic congestion and poor air quality as local highways became 
congested with more and more drayage trucks. The idea of extending the 
ports' operating hours as a solution to these growing problems gained 
local impetus and influence.
    Frustrated by the slow progress to extend terminal operating hours, 
the California Truckers' Association (CTA) lobbied state officials to 
legislate efficiencies at the SPB ports. Then State Senator Alan 
Lowenthal (now a member of the U.S. House of Representatives) drafted 
legislation (AB 2650) that passed by an overwhelming majority in the 
California Assembly and was signed into law in August 2002.\96\ To 
encourage off-peak operations, this bill imposed a penalty of $250 on 
terminal operators for each truck that idled more than 30 minutes 
waiting to enter the gates at the SPB ports and the Port of Oakland. 
Exemptions were provided for those terminals that either operated gates 
for at least 70 hours per week or provided an appointment system.\97\
---------------------------------------------------------------------------
    \96\ The historical and legislative events leading to 
implementation of a permanent extended hours program at the ports of 
Los Angeles and Long Beach (called PierPASS) were spelled out by (now) 
U.S. Congressman Lowenthal at the FMC port forum conducted at the Port 
of Los Angeles. A city council member at the time, U.S. Congresswoman 
Janice Hahn provided additional background at the forum on historical 
events leading to the creation of PierPASS.
    \97\ Op. cit., NCFRP Report 23, p. 51.
---------------------------------------------------------------------------
    The legislation had limited impact according to a study by Giuliano 
and O'Brien which pointed out that no terminal at the SPB ports 
extended its hours of operation because of AB 2650.\98\ At terminals 
that implemented appointment systems, the authors found no record of 
improved operating efficiency. Likely this was because such systems 
provide appointments only to enter the terminal gates, rather than 
appointments for the actual loading or unloading of the container. In 
other words, terminals did not use appointments to pre-stage containers 
in advance for the advantage of truckers. Instead, they were used for 
the advantage of the terminal to obtain an advance indication of 
workload. Moreover, the 30-minute limit on truck idling time outside 
the gate probably also produced the unintended effect of transferring 
congestion from outside the gate to inside the terminal, with terminals 
admitting trucks in order to avoid fines. However, once inside the 
terminals, drivers found themselves having to wait for containers to be 
removed from the stacks before loading onto chassis, and vice versa.
---------------------------------------------------------------------------
    \98\ Giuliano, G and O'Brien, T. Evaluation of the Gate Appointment 
System at Los Angeles and Long Beach Ports. METRANS Transportation 
Center, 2008.
---------------------------------------------------------------------------
    PierPASS, an extended hours of operation program, was implemented 
in July 2005. In close consultation with the Waterfront Coalition, this 
program was developed collectively by 13 container terminal operators 
at the SPB ports in response to proposed action by State Senator 
Lowenthal that would have legislatively mandated off-peak hours.\99\ 
However, he agreed to withdraw his proposed legislation when the 
private sector terminals themselves developed an extended gate program 
to achieve the same goal of mitigating peak period road congestion and 
reducing air pollution caused by port drayage operations. The PierPASS 
off-peak program was developed and implemented under the authorities of 
the West Coast Marine Terminal Operators' Agreement (FMC Agreement No. 
201143).
---------------------------------------------------------------------------
    \99\ The Waterfront Coalition is a group of shippers, 
transportation providers, and other businesses in the International 
supply chain that is concerned with promoting efficient and 
technologically advanced ports.
---------------------------------------------------------------------------
    The West Coast Marine Terminal Operator Agreement's (WCMTOA) 
members decided to impose a traffic mitigation fee (TMF) for at least 
two reasons. First, terminals incur considerable costs when providing 
off-peak gates. Compared to labor rates for the regular daytime shifts, 
labor rates are one-third to one-half higher during the night and 
weekend shifts. Second, the terminals wanted to make sure the off-peak 
shifts were well used by encouraging a portion of the daytime traffic 
to move to the off-peak gates as a result of imposing a fee on daytime 
moves. Consequently, PierPASS charges a TMF on certain loaded 
containers that move in or out of the SPB gates between 8 am and 5 pm. 
The fees collected on gate moves during the daytime help defray the 
cost of providing extended off-peak gate operations. Usually, each 
terminal provides four off-peak gates Monday through Friday between 6 
pm and 3 am and a weekend gate, usually on Saturday, from 8 am to 5 pm. 
Use of the off-peak gates has far exceeded the program's initial 
expectations.
    Under the program, terminals initially agreed to provide complete 
off-peak services; that is to say the aim was to duplicate the daytime 
truck handling capacity of the terminals at night and during the 
weekend off-peak shift. Anecdotal reports indicate this aim has not 
been achieved. For example, trouble tickets are more challenging to 
resolve at the off-peak gates because steamship line customer service 
centers are less available. Other services, such as container flips, 
are sometimes not available during off-peak hours. Additionally, the 
reduction in volumes following the Great Recession caused some terminal 
operators to reduce the number of off peak gates provided, some of 
which have not been fully restored.
    The PierPASS program has shifted about SO percent of all truck 
traffic to nights and weekends. In this respect, it has been successful 
in reducing the number of truck trips made in the morning rush hours, 
and to a lesser extent in the evening, but has not reduced the 
aggregate number of trips. As a result, the program has not eliminated 
the environmental and social impacts associated with drayage truck 
trips. Nevertheless, in the last decade PierPASS has diverted more than 
30 million containers from peak to off-peak gate shifts. Additionally, 
the PierPASS program has more or less doubled access to the gates. For 
example, the SPB ports handled almost 800,000 TEU in June 2004, just 
prior to PierPASS being implemented, compared to just over 900,000 TEU 
in June 2014. Without extended gate hours, congestion at SPB terminals 
would be worse than it is now.
    Currently, the TMF is set at $66.50 per TEU (twenty-foot equivalent 
unit) or $133 per FEU (forty-foot equivalent unit). The fee is imposed 
on loaded container movements through the gates during peak hours from 
8 am to 5 pm. Certain container transactions are exempt, including 
containers arriving or leaving the ports through the Alameda rail 
corridor, containers leaving for or arriving from the near-dock and 
downtown rail facilities, and trucks carrying empties, bobtailing or 
bringing in or taking out a bare chassis. As a result of the 
exemptions, less than 20 percent of all containers handled by the SPB 
terminals in 2012 incurred the TMF. Between 2005 and 2006 the TMF 
remained at $40 per TEU or $80 per FEU. It was then adjusted to $50 per 
TEU or $100 per FEU. Since 2011, subsequent increases have been linked 
to ILWU labor cost increases. A potentially unsustainable tension 
exists in the program between the level of fees and the proportion of 
non-exempt container movements that still use the peak hour gates. The 
more the fee increases, the more likely users will divert to using the 
off-peak gates. Any such shifts, however, mean that the cost of 
sustaining the off-peak gates will be borne by proportionally fewer 
non-exempt movements during peak hours and the terminals in the off-
peak hours will become more congested, not less. Ostensibly, the fee is 
for the account of the beneficial cargo owner (BCO). However, some BCOs 
may negotiate different arrangements with their motor carrier or cargo 
intermediary.
Cross-section of stakeholder viewpoints
    Comments on the operation of the PierPASS program and its initial 
and current contribution to congestion mitigation efforts in and around 
the SPB ports were provided by several participants at the port forum 
in Southern California. As stated earlier, PierPASS was created in 2005 
as a response to Assembly Member Alan Lowenthal's traffic and 
congestion mitigation bill AB 2650 which aimed to expedite truck 
traffic throughput in the ports' complex. MTOs responded to the traffic 
mitigation challenge by opening up nighttime and some weekend 
operations at the ports that historically had operated during the 
daytime Monday through Friday. One participant at the Southern 
California forum suggested that previous attempts to open night gates 
had been unsuccessful due to poor and unreliable staffing of the gates 
and container yards. According to another participant, the original 
draft design of the program, developed with input provided by the 
Waterfront Coalition, called for sun-setting the fee after three years 
or when night gate moves had reached 30 to 35 percent of total gate 
moves. However, somewhere in the development process the sunset 
provision disappeared by the time the program was finally adopted by 
the WCMTOA. Although the traffic mitigation fee is charged to the BCO, 
the shipper may dictate to the trucker to only pull containers after 6 
pm when the fee is not applicable.
    One of the biggest problems with the night gates is that they 
reportedly are unpredictable and not uniform. For example, there are 
times at some terminals when off-peak gates may be unavailable for up 
to five consecutive days.\100\ This interferes with a shipper's or 
motor carrier's ability to ship containers exclusively through the off-
peak gates. Staffing hours are said to be somewhat irregular. Gates are 
supposed to operate from 6 pm to 3 am, but truckers report there are 
times when a terminal will cease operations at midnight or 1 am. Among 
a segment of the port community in Southern California, there is a 
belief that if PierPASS went away truckers would shift back to using 
only the day shifts. However, one participant argued that, in the 
current climate of congestion, as long as gates are open, accessible, 
and productive truckers will utilize them no matter the time of day.
---------------------------------------------------------------------------
    \100\ Each month a Thursday night shift is cancelled because of 
union meetings. If no weekend shift has been arranged at the terminal, 
then no access to off-peak gates Is possible from Wednesday night 
through the following Monday night, despite the fact that ship arrivals 
at the SPB ports tend to bunch late in the week.
---------------------------------------------------------------------------
    A prominent, high-volume shipper of refrigerated protein products 
submitted a written statement that focused in part on the operational 
difficulties PierPASS has caused that company. While acknowledging that 
the program's initial goals had been accomplished, this shipper 
asserted BCOs had to pay extra fees to cross-dock operators to hire 
truckers willing to work nights (as much as $30 per load) and were 
dealt several other inequities, such as, night gates having been 
reduced. With respect to the Port of Oakland and the consolidation of 
terminals that had taken place at that port, according to this shipper, 
with carriers no longer providing chassis what was previously a one-
stop move has grown to 2-3 stops within the same terminal or multiple 
terminals. These added steps, lengthen truck turn times. Special tri-
axle chassis are often required for heavy reefer containers which 
require a ``flip'' in order to obtain an empty container for the return 
leg, yet In some cases the night or weekend shifts do not provide flip 
service which forces the company's motor carrier to work the high-
volume day gates that are subject to the TMF. This shipper provided a 
set of specific PierPASS fixes, including:

   Moving the International Longshore and Warehouse Union's 
        (ILWU) monthly Thursday ``stop work'' meeting to Wednesday to 
        help manage weekend volumes or, instead, to always have a 
        Saturday gate to recover off-peak capacity lost to the monthly 
        Thursday stop work meeting.

   Saturday gates to provide full service

   Longer advance notice given to warehouse operators and 
        draymen of any shift closings to allow them to re-work their 
        schedules

   Establish designated lines for (high-value) reefer cargo 
        deliveries that are often delayed behind less time sensitive, 
        low-value, high-volume cargo, such as waste paper and scrap 
        metal export containers

   Have reefer containers and ``gensets'' in the same area of a 
        terminal to minimize unproductive truck trips

    A senior PierPASS official pointed out that a less tangible 
contributor to congestion is the delivery container process--a process 
of complete and total random access to a specific container number at 
any time of the day or night that results in a predictably slow rate of 
eight to ten container mountings per transtainer per hour. He argued 
that if the industry wants to change the truck turn-time outcome, it 
needs to seriously consider changing this process: ``Doing the same 
things incrementally faster will not solve the periodic periods of 
congestion.''
    Participants from different segments of the industry expressed a 
variety of viewpoints on 24/7 gate operations as a way to deal with 
congestion. According to an ocean carrier, there are too many terminals 
at which gate hours are not sufficient to cope with current container 
volumes and expected growth. This ocean carrier emphasized that ports 
and terminals need to look at extending gate hours whenever possible 
and examine what is needed to accomplish that. This sentiment was 
echoed by several motor carriers who said that terminals should at 
least be kept open longer if a second shift is not economically 
feasible. A West Coast terminal operator said it currently operates two 
shifts most days, but probably gets the equivalent of only 1 percent 
shifts worth of throughput. Recently, this terminal had begun offering 
more gates on Friday night and Sunday, as well as flex-gates, but 
reportedly they were not being used very heavily.
    The representative of a large terminal operating company that 
manages seven terminals on the West Coast that account for 25 percent 
of all longshore man hours used along that coast said he was 
sympathetic about lengthy turn-times but was not sure about what could 
be done. He did not believe, for example, that 24/7 gate operations was 
the answer even at a complex as large and as busy as the SPB 
ports.\101\ He stressed that gate shifts are expensive to provide--
around $100,000 to $130,000 per day in labor alone.\102\ He 
acknowledged that truckers were not getting in and out of terminals in 
the time they need, but placed the blame foremost on chassis shortages. 
Much of the congestion problem would go away, in his view, if there 
were sufficient chassis. The second problem he described concerned the 
typical work pattern of many drayage drivers which splits the day 
across two shifts at the terminals, coming on duty in late morning and 
ending their duties well before midnight.\103\ As a consequence, the 
terminals are comparatively empty early in the day (e.g., from 8am to 
10 am) and after the night shift lunch break which ends at 11 pm. In 
the meantime, however, the terminals are paying for two full shift s. 
He wanted to see a more even flow of trucks coming in the gates across 
the two shifts.
---------------------------------------------------------------------------
    \101\ It was reported by a participant at the port forum in 
Southern California that 1,000 registered motor carriers and 11,000 
registered drayage trucks use the San Pedro Bay ports complex and 
transact 35,000 gate moves per day.
    \102\ This MTO representative indicated that a well-running 
terminal would hire 100 to 130 longshore personnel per shift each 
costing $900 to $1,300 per shift, who may handle sometimes as many as 
400-500 trucks an hour.
    \103\ Late starts in Southern California allow drayage drivers 
access to the free PierPASS off-peak night gates for some portion of 
their shift.
---------------------------------------------------------------------------
    In response to comments about the desirability of 24/7 operations, 
a PierPASS representative drew attention to the fact that the SPB 
terminals already provide 35 extra off-peak gate hours per week in 
addition to 40 hours of regular daytime access--more hours of gate 
access than any modern terminal complex in the U.S. or in most other 
countries. And, within these hours there are some hours that register 
little or no truck activity. He argued that extending hours to provide 
for 24/7 operations would not necessarily increase the number of 
containers processed (as available truck capacity is relatively fixed), 
but would significantly increase the cost of operating a marine 
terminal. According to the PierPASS official, the off-peak gates 
program costs $188 million annually and extending gate access to 
encompass 24/7 operations would add another $167 million and, without a 
commensurate increase in the number of containers processed, the added 
expense of providing 24/7 operations would inflate supply chain costs. 
Another participant cautioned that the demand for 24/7 gates is 
emanating from next generation mega ships which cause terminal capacity 
issues and argued that it does not make sense to have vessels being 
worked around the clock while restricting container delivery and 
receiving operations to 8 hours on some days and 16 hours on other 
days.
    There were several calls among participants for a ``PierPASS 
Version 2.0'' that they hoped would take the program to the next level 
to better address the SPB ports' current problems. In this context, 
U.S. Representative Lowenthal suggested, ``It is time to raise the bar 
again'' and wondered, ``How do we move the ball forward?'' One of the 
port directors believes information technology needs to be a 
substantial component of any PierPASS Version 2.0. In his view, 
integrating information flows into operations could go a long way 
toward facilitating the efficient flow of trucks, trains, and cargo 
movements in and around the ports. A Joint Powers Authority (JPA) 
similar to the governance structure for the Alameda Corridor was a 
topic of discussion. Under this proposed Idea (presently dubbed GATES 
for Gate Appointment and Terminal Efficiency System) the JPA could also 
run an appointment system to enable marine terminals to more accurately 
predict yard labor demand and develop real-time intelligence software 
to better share information among port users. Opponents of 24/7 
operations--primarily the terminal operators and steamship lines--point 
to the added cost of running operations around the clock. Proponents, 
on the other hand, counter with the question: ``What is the cost of 
doing nothing?''
Stakeholder suggestions and proposed fixes
    WCMTOA which owns and operates the PierPASS program has made 
relatively few changes to the program since its inception ten years 
ago. Other members of the port community, on the other hand, including 
BCOs, truckers, and the Port Authorities, have not been reticent in 
pointing out areas of the program that need attention. The suggestions 
listed below were made at the FMC port forums or in other 
communications with the Commission:

   Ongoing dialog is needed. There seems to be increasing 
        recognition that an ongoing dialogue among all port 
        stakeholders is needed regarding how best to improve the number 
        of turns per day truckers are able to make in the SPB complex. 
        Queue and dwell times at the terminals have been increasing, 
        making it more difficult for truckers to cover the cost of 
        operating the more expensive clean trucks now required to enter 
        the terminals. Such dialogues could take place through the 
        recently amended Los Angeles and Long Beach Port Infrastructure 
        and Environmental Programs Cooperative Working Agreement (FMC 
        Agreement No. 201219).

   Measures could be taken to ensure that the off-peak gate 
        shifts provided by the 13 terminals occur on the same 
        weeknights and weekend days. Currently, most terminals offer 
        four week-night shifts and one weekend shift, but the specific 
        days offered by each MTO tends to vary. Additionally, off-peak 
        shifts are sometimes cancelled or changed on short notice. 
        These practices unduly disrupt a motor carrier's ability to 
        dispatch trucks efficiently.

   Off-peak gates should have all the same services made 
        available during daytime shifts. For example, a service that 
        allows heavy reefer containers to be flipped from tri-axle 
        chassis so as to allow the return of an empty reefer container 
        reportedly is unavailable during off-peak shifts at some 
        terminals. Similarly, the resolution of trouble tickets during 
        off-peak shifts reportedly is difficult because steamship line 
        customer service staff are less available at these times.\104\
---------------------------------------------------------------------------
    \104\ Trouble tickets are caused by the truck driver lacking 
information or having misinformation contained in documents. At the 
Southern California port forum, PierPASS reported that five to seven 
percent of all truck transactions experience trouble tickets which 
takes the driver out of the container delivery process until the issue 
is resolved.

   WCMTOA could be more transparent about what it costs to 
        operate the PierPASS program. A segment of the port user 
        community is unconvinced that the program is not covering its 
---------------------------------------------------------------------------
        costs.

   The costs of the program perhaps could be shared more 
        equitably. Almost everyone benefits from reduced congestion, 
        yet only a small fraction of containers passing through the 
        ports are assessed the TMF to help defray the cost of providing 
        the congestion-reducing off-peak shifts.

   Consider 24/7 gate access. With so much cargo being diverted 
        to the off-peak shifts, PierPASS should consider cost effective 
        ways to expand those shifts, perhaps ultimately leading to 24/7 
        gate access.

   Share performance metrics. As a result of the mechanism 
        PierPASS has established to collect the TMF, the program 
        possesses an extensive set of data. WCMTOA could share metrics 
        about truck queue and dwell times to further encourage dialogue 
        and explore ways to improve cargo flow through the terminals.

   Find ways to deal with known congested periods. Ways should 
        be found to ease queue times during known periods of 
        congestion. For example, Individual terminals probably could 
        provide more flex gates during lunch breaks and the periods 
        between shift changeovers. Similarly, the TMF could be 
        differentiated by time, for example, by having a lower fee in 
        the run-up to the opening of the off-peak shifts at 6 pm in 
        order to avoid the early formation of long lines waiting to 
        gain access to the off-peak gates.

   Find ways to incentivize terminals to provide optimum levels 
        of service. The current program returns TMF revenue to the 
        terminals (after deduction of administrative expenses) based on 
        each terminal's total container throughput regardless of the 
        amount of service provided or volumes handled in the peak or 
        off-peak hours. WCMTOA could explore ways to distribute the TMF 
        revenue back to the terminals In ways that incentivize 
        providing higher levels of service. For example, they could use 
        the TMF revenue distribution process to reward terminals that 
        have shorter truck queue and dwell times or return those 
        revenues in proportion to the resources each terminal devotes 
        to off-peak gates (I.e., in proportion to off-peak 
        expenditures).
                                 ______
                                 
    Response to Written Questions Submitted by Hon. James Inhofe to 
                           Hon. Mark H. Buzby
    Question 1. The Maritime Administration (MARAD) is charged with 
promoting the use of waterborne transportation and maintaining the 
health of intermodal facilities such as ports. In Oklahoma, we have the 
McClellan-Kerr Arkansas River Navigation (MKARNS) which provides inland 
water navigation from the Mississippi River to the Ports of Catoosa and 
Muskogee.
    While I know that the Army Corps of Engineers is the core agency 
that develops and constructs our water resources, I am interested in 
ways all Department of Transportation modes, along with the Army Corps 
can work together to better leverage resources to ensure that inland 
waterway projects are moving forward.
    a. Do you see the role for MARAD if the Department of 
Transportation were to implement a new program or expand existing 
freight programs to help fund maritime freight projects?
    Answer. MARAD personnel and existing programs could bring critical 
skills and experience to any effort to improve the delivery of maritime 
freight projects across the maritime industry. Ports and the U.S. 
marine transportation system are critical to our economy and our 
maritime and freight systems needed for current and future challenges. 
We work with public and private sponsors to improve intermodal port-
based facilitates on the Great Lakes, and on our inland and coastal 
waterway systems. Given the need to meet current and anticipated 
freight network requirements and the growing demands placed on ports 
and related infrastructure, MARAD and the Department are working to 
help meet the infrastructure needs of our Nation's freight and port 
infrastructure through several programs, including:

   The Port Infrastructure Development Program (PIDP)--MARAD's 
        primary program to help improve port facilities. MARAD calls 
        the PIDP ``StrongPorts'' to reflect the need for keeping our 
        Nation's ports in a state of good repair. ``StrongPorts'' is 
        designed to deliver tools, such as the Port Planning and 
        Investment Toolkit, and technical assistance to ports to 
        encourage full integration of ports and maritime transportation 
        into the larger U.S. surface transportation system. The program 
        provides a planning and investment framework that brings 
        together all stakeholders, including private companies and 
        local, state, and Federal agencies.

   The Better Utilizing Investments to Leverage Development, or 
        ``BUILD'' Transportation Discretionary Grant program, which 
        replaced the Transportation Investment Generating Economic 
        Recovery (TIGER) program provides opportunities for the 
        Department to invest in road, rail, transit and port projects 
        aimed at achieving national objectives. Congress has dedicated 
        nearly $5.6 billion for nine rounds of national infrastructure 
        investments to fund projects that have a significant local or 
        regional impact. This included a $6.4 million grant, as part of 
        a $12 million project, to the Tulsa Port of Catoosa to renovate 
        its main dock area. The project was completed in May 2016. 
        Under the BUILD/TIGER programs, 51 ports grants have been 
        awarded totaling more than $680 million.

    The Fixing America's Surface Transportation (FAST) Act, which 
Congress passed in 2015, includes significant opportunities for ports, 
including freight system planning and development and funding. Funding 
is set-aside for projects of national or regional significance that 
will affect the movement of freight and people, and for freight 
infrastructure, including multi-modal projects. There have been seven 
port projects totaling $130 million awarded under this program.

    b. How do you believe MARAD could be further involved in the 
development of inland waterway projects?
    Answer. The StrongPorts infrastructure development program will 
continue to support inland ports. Additionally, MARAD operates a short 
sea shipping program, known as the America's Marine Highways Program, 
which encourages the use of maritime transportation as an extension of 
the surface transportation system to relieve landside congestion along 
coastal corridors. The America's Marine Highway Program has assisted 
several ports and marine highway providers to start or expand the use 
of Marine Highway services. The FY 2018 Consolidated Appropriations 
Act, P.L. 115-114, provided $7 million in funding for the program. 
MARAD uses the funds to encourage shippers around the country to choose 
the use of waterborne transportation for freight.
    We continuously look for innovative ways that MARAD might help 
further develop the entire marine transportation system, including our 
critical inland waterways. A key issue that we have seen across the 
country is the need for greater integration of maritime issues into 
state and local transportation planning. MARAD will continue to focus 
our resources on removing this and other critical barriers to inland 
waterway development.

    Question 2. The Maritime Administration is responsible for 
administering the Maritime Security Program (MSP). MSP exists to ensure 
the United States has the military sealift capacity in time of war and 
national emergency. As Chairman of the Readiness Subcommittee of the 
Senate Armed Services Committee, I know that our military was gutted 
under President Obama. Under sequestration, Defense accounted for 50 
percent of the cuts, but only 16 percent of spending. As a result, our 
military equipment is aging and our base infrastructure requires 
critical maintenance and upgrades. We have seen impacts on personnel; 
pilots are leaving the military because they are not getting flight 
hours to maintain their skills. Today, we have an Administration that 
will support the necessary funding to rebuild our military--and 
Congress went above and beyond the President's request in the Omnibus 
bill to give our men and women in uniform the resources required to 
answer the call quickly and effectively.
    a. How would you characterize the state of readiness for the 
Maritime Security Program today?
    Answer. The MSP is fully subscribed up to the 60 vessel Congress 
authorized. The readiness of the vessels in the MSP fleet is excellent. 
The program has consistently achieved more than 96 percent availability 
of both ships and mariners over the past several years. In addition, 
the MSP fleet's militarily useful capacity is now at the highest level 
in the program's history, including more than 3.1 million square feet 
of roll-on roll-off (RO/RO) and heavy-lift vessel capacity, and more 
than 114,000 TEU container capacity available to meet U.S. Department 
of Defense (DOD) requirements.
    The MSP is a vital component of U.S. sustainment. The program 
provides DOD with assured access to a fleet of 60 privately-owned, 
militarily useful, U.S. flag commercial ships operating in 
international trade, as well as the multibillion-dollar global network 
of intermodal facilities and transport links maintained by MSP 
participants.

    b. I know that participation in MSP is voluntary; how can Congress 
encourage more participation in this important program?
    Answer. As stated above, MSP is fully subscribed. In addition, 
almost all MSP carriers are participants in the Voluntary Intermodal 
Sealift Agreement (VISA), the DOT/DOD emergency preparedness program 
created to ensure that both sealift and intermodal capacity are 
available to meet DOD requirements in time of war or other national 
emergency. Carriers enrolled in VISA must provide DOD with assured 
access to these assets during contingencies, and in return for their 
VISA commitment, receive priority consideration for peacetime DOD and 
civilian agency cargoes. Unlike other VISA participants, MSP carriers 
also receive the annual retainer or ``stipend'' payment to provide 
assured access to ships and intermodal resource.

    c. How do you believe MARAD could be further involved in the 
development of inland waterway projects?
    Answer. See MARAD's response to this question above.

    d. To what extent is the ability of the United States Merchant 
Marine Academy to train future United States Coast Guard licensed 
mariners and U.S. Navy Strategic Sealift Officers still being impacted 
by previous sequestration policies?
    Answer. The United States Merchant Marine Academy's ability to 
educate and graduate leaders of exemplary character who are inspired to 
serve the national security, marine transportation, and economic needs 
of the United States as licensed merchant marine officers and 
commissioned officers in the Armed Forces is not adversely affected 
today by past sequestrations.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                           Hon. Mark H. Buzby
    Foster Growth in Maritime Industry. Florida is a major maritime 
state that relies on a robust maritime industry to support its shipping 
and shipyard construction and repair activities. This requires a strong 
U.S. merchant marine.
    Question 1. In your view, what can be done to further bolster this 
important industry?
    Answer. As Maritime Administrator, my focus is to work with 
Congress and maritime stakeholders to identify ways to make the U.S. 
maritime industry more competitive, and foster policies that result in 
more U.S. jobs in the maritime sector. Part of this focus includes 
supporting shipyards and related industries that are part of the 
Nation's shipbuilding and repair industrial base through MARAD 
administered programs. Properly designed programs and training to 
support our shipyards and a skilled American shipbuilding and repair 
workforce can contribute to strengthening, maintaining and moving 
towards growth in this critical industry. One existing program is the 
Maritime Administration's (MARAD) Small Shipyard Grant Program, which 
fosters efficiency and competitiveness in shipbuilding and ship repair. 
Grants provided through this program are targeted at modernizing 
shipyard facilities and closing the technology and productivity gap 
with foreign competitors.
    Another possible avenue for bolstering the American maritime 
industry would be to continue our efforts through the America's Marine 
Highway Program to promote the expansion of domestic short sea 
shipping, particularly along our Nation's coasts. The United States is 
well behind competing economies in its employment of this highly 
effective mode of freight transportation, and the benefits to the 
broader economy could be profound. Enhancing domestic supply chain 
logistics for American producers, expanding the domestic market for 
American LNG, optimizing port utilization, and alleviating congestion 
and unnecessary wear and tear from our highways are just a few of the 
possible benefits. Promoting this alternative to terrestrial freight 
transportation modes could deliver significant growth for our Nation's 
coastwise trade fleet, the associated merchant mariner pool, and the 
Nation's shipyard construction and repair industrial base. A future 
that includes more vessels built by Americans at a competitive price 
would promote industry growth and a stronger, sustainable employment 
base for the U.S. merchant marine. This would enhance our defense 
readiness and begin to deliver on the immense latent potential of 
American maritime commerce.

    El Faro. The sinking of the El Faro cargo ship was a tragedy--over 
thirty mariners were lost. Both the National Transportation Safety 
Board and the Coast Guard have identified ways to prevent this kind of 
catastrophe from happening again, including better preparing mariners.

    Question 2. How is MARAD, through its funding and oversight of the 
Maritime Academy and training programs, ensuring that mariner training 
has improved so that such tragedies could be avoided in the future?
    Answer. Through oversight of the U.S. Merchant Marine Academy 
(USMMA) and regular communication with the State Maritime Academies 
(SMAs), MARAD emphasizes continuous curriculum improvement, including 
improvements in response to real-world incidents. The U.S. Coast Guard 
(USCG) establishes training requirements that maritime academies must 
meet and has sole authority to modify training protocols required for 
students to be issued officers' credentials. The USMMA and the SMAs 
modify their curricula as the USCG dictates. In addition, MARAD 
encourages the academies to incorporate lessons learned from real world 
incidents, like the loss of the EL FARO, into their curricula.
    The incident is already used as a case study to improve training at 
U.S. maritime institutions. For example, the USMMA has used reports 
regarding the EL FARO incident provided by TOTE Inc. (the company that 
owned the ship) and the Committee on the Marine Transportation System 
to integrate best practices into its curriculum for courses focused on 
meteorology and seamanship.
    Below are examples of training designed to prepare mariners to 
respond to varying at-sea conditions. The EL FARO incident can be used 
during this training to give cadets the opportunity to learn from a 
real-world situation.

   At the USMMA and SMAs, deck cadets and midshipmen must 
        complete the required U.S. Coast Guard (USCG) training and 
        assessments to obtain a Standards of Training, Certification 
        and Watchkeeping (STCW) endorsement as Officer in Charge of a 
        Navigation Watch (OICNW) on vessels of 500 gross tons or more. 
        This training and assessment is accomplished and reinforced 
        throughout the academies' four-year curricula. In addition to 
        classroom and practical training ashore, cadets and midshipmen 
        receive shipboard training on commercial vessels, the 
        academies' training vessels, or a combination of both. This 
        experience at sea provides an invaluable opportunity to learn 
        and experience the actual shipboard environment.

   NOAA's Vessel Observing System (VOS) Port Meteorological 
        Officers (PMOs) provide meteorological training and support to 
        the maritime academies. The PMO serves as a ``Sea Term'' 
        instructor. At sea, the PMO provides formal classroom 
        instruction designed to enhance the cadet's ability to 
        determine expected weather conditions, and to make, record, and 
        transmit accurate weather observations.

   At the USMMA, midshipmen are taught to appreciate the forces 
        impacting a vessel by factoring in varying sea states, 
        including heavy weather operations. Mariner ``rules-of-thumb'' 
        are taught to aid comprehension and memory. Emphasis is placed 
        on operational considerations for navigating near tropical 
        cyclones. Midshipmen are taught to understand and appreciate 
        the difference between the forecasted ``significant wave 
        height'' and the highest wave heights that might be expected; 
        significant wave height represents the average of the highest 
        one-third of waves, whereas larger waves could very well be 
        encountered at sea. Class discussions incorporate recent 
        scientific analyses of extreme occasional wave heights (rogue 
        waves) and vessel operational limitations.

    Response to Hurricane Maria. Hurricane Maria devastated Puerto Rico 
and left the island without power for months on end. One of the most 
important issues was how to get supplies, food and water to the island.

    Question 3. What role does the maritime industry play in providing 
support?
    Answer. The primary role of the maritime industry is to deliver 
cargo. U.S. Jones Act carriers played a central role in responding to 
the effects of Hurricane Maria by ensuring that the flow of commerce 
was restored as quickly as possible via reliable, regularly-scheduled 
services. Jones Act carriers provided not only regular commercial 
goods, but also supported the delivery of relief supplies for the 
response and recovery effort. To meet the increased demand for shipping 
services, these carriers added nine vessels to the regular trade, 
bringing the total number of U.S.-flag vessels servicing Puerto Rico to 
25. If required, Jones Act carriers were prepared to provide additional 
vessels.
    One vessel from MARAD's Ready Reserve Force was used to carry 
emergency relief supplies to Puerto Rico. In addition, SMA training 
vessels provided support, including living space for first responders.
    Although U.S.-flag vessels transported many of the necessary goods 
from U.S. ports, the significant hurricane-related damage to port 
facilities in Puerto Rico constrained the flow of key merchandise and 
commodities over land. Seaports play a critical role in the response 
and recovery efforts and are necessary for the flow of commerce. Absent 
reliable port infrastructure and the efficient transfer of freight 
among ships, barges, and trucks, rapid recovery is hampered 
significantly. Many of the secondary ports in Puerto Rico were also 
substantially damaged by Hurricane Maria, further constraining recovery 
efforts.
    Anticipating future hurricanes, MARAD is encouraging the use of 
Jones Act carriers to stage critical supplies in target locations. 
Before the storm, carriers can coordinate with customers and partners 
to ensure the ships are able to deliver the most critical relief 
supplies, including generators, oversized power and electrical poles, 
bucket trucks, and petroleum products.

    Question 4. What were some of the challenges and successes of 
getting aid to Puerto Rico?
    Answer. After Hurricane Maria, roads and bridges were damaged or 
blocked by structure debris, utility lines and poles, and other 
detritus. Thus, truck drivers could neither access nor depart the 
ports. Widespread power outages and damage meant that warehouses 
outside of the port could not receive refrigerated cargo delivered to 
the port. Shore-side labor was displaced or otherwise unavailable, 
including truckers, warehouse workers, and terminal operators. Cellular 
phone service was largely out of order making transport coordination 
extremely difficult. Because of these infrastructure challenges, import 
cargo began to back-up in the ports. For weeks, the ports received more 
cargo by water than could be delivered overland resulting in an ever-
increasing backlog.
    In anticipation of Hurricane Maria making landfall, Jones Act 
carriers staged critical supplies in San Juan, Puerto Rico, and 
acquired additional 53-foot containers and more trucks to support 
increased deliveries to the island. Some carriers increased vessel 
speeds to reduce transit times between the mainland and Puerto Rico, 
while simultaneously adding more voyages to their schedules. Carriers 
extended their terminal operations to seven days a week to ensure a 
steady flow of supplies. As noted above, carriers also added additional 
vessels the regular trade.
    Jones Act carriers also delivered specialized cargoes to the 
island. In addition to the regular deliveries of commercial and relief 
cargo, the island needed atypical cargoes such as utility trucks, 
tanker trucks, large generators, and communication equipment. For 
example, Jones Act carriers reconfigured vessels to accommodate the 
delivery of thousands of utility poles needed to rebuild the island's 
electrical grid. The industry further increased transport capacity to 
the island by adding a vessel into service to deliver 7,000 twenty-foot 
equivalent unit (TEU) containers of water to Puerto Rico in one week, 
and even moved charitable donations to the island free of charge. 
Immediately after the storm, U.S.-owned and U.S.-chartered vessels were 
used as floating hotels to provide temporary housing and meals for 
first responders. Finally, Jones Act carriers partnered with government 
agencies to help manage ``final mile'' delivery, including using their 
own truck distribution network on the island to deliver supplies.
    The National Defense Reserve Fleet (NDRF) and Ready Reserve Force 
(RRF) vessels of the Maritime Administration, which received mission 
assignments from FEMA, were tasked with providing support to relief 
workers and first responders. In Puerto Rico, the Training Ships (TS) 
KENNEDY and EMPIRE STATE provided over 18,000 berths \1\ and nearly 
40,000 meals to workers. During the 2017 hurricane season, these two 
vessels, plus the TS GENERAL RUDDER and the aviation maintenance ship 
WRIGHT, provided more than 23,000 personnel berths and over 53,000 
meals. These efforts helped free-up living space for displaced 
residents and provided centralized support for relief workers in Texas, 
Florida, Puerto Rico, and the U.S. Virgin Islands.
---------------------------------------------------------------------------
    \1\ MARAD counts each person staying on the ship overnight as one 
berth. For example, if one person stays on a ship for a week, it is 
counted as seven berths. During the Puerto Rico response, some people 
stayed on a ship for one night and some stayed there for the entire 
time the ship was available.
---------------------------------------------------------------------------
    These activated vessels delivered water, food, and WRIGHT loaded 
FEMA support vehicles, mission cargo, and Federal Aviation 
Administration Very High Frequency Omni Directional Range (VOR) 
equipment that was critical for restoring air service to the U.S. 
Virgin Islands. Additionally, one of MARAD's contracted Ready Reserve 
Force Ship Managers supported FEMA operations through their shore side 
logistics network both on the Eastern seaboard and within the Caribbean 
Sea region, using service assets already in place. Leveraging this 
capability increased the amount of response assets and the timeliness 
of delivery.

                                  [all]

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