[Senate Hearing 116-567]
[From the U.S. Government Publishing Office]
S. Hrg. 116-567
FEDERAL MARITIME AGENCIES: ENSURING A SAFE, SECURE, AND COMPETITIVE
FUTURE
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HEARING
BEFORE THE
SUBCOMMITTEE ON SECURITY
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
APRIL 4, 2019
__________
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
52-569 PDF WASHINGTON : 2023
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota MARIA CANTWELL, Washington,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin JON TESTER, Montana
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
John Keast, Staff Director
Crystal Tully, Deputy Staff Director
Steven Wall, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
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SUBCOMMITTEE ON SECURITY
DAN SULLIVAN, Alaska, Chairman EDWARD MARKEY, Massachusetts,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas, AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
MARSHA BLACKBURN, Tennessee BRIAN SCHATZ, Hawaii
MIKE LEE, Utah TOM UDALL, New Mexico
RON JOHNSON, Wisconsin TAMMY DUCKWORTH, Illinois
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
C O N T E N T S
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Page
Hearing held on April 4, 2019.................................... 1
Statement of Senator Sullivan.................................... 1
Statement of Senator Markey...................................... 3
Statement of Senator Wicker...................................... 4
Statement of Senator Cantwell.................................... 4
Prepared statement........................................... 5
Statement of Senator Fischer..................................... 32
Statement of Senator Blumenthal.................................. 36
Witnesses
Admiral Karl L. Schultz, Commandant, United States Coast Guard... 6
Prepared statement........................................... 8
Hon. Mark H. Buzby, Administrator, Maritime Administration, U.S.
Department of Transportation................................... 14
Prepared statement........................................... 15
Hon. Michael A. Khouri, Chairman, Federal Maritime Commission.... 18
Prepared statement........................................... 20
Appendix
Response to written questions submitted by Hon. Roger Wicker to:
Admiral Karl L. Schultz...................................... 51
Response to written questions submitted to Hon. Mark H. Buzby by:
Hon. Ted Cruz................................................ 51
Hon. Roger Wicker............................................ 54
Response to written question submitted to Hon. Michael A. Khouri
by:
Hon. Roger Wicker............................................ 55
Hon. Ron Johnson............................................. 55
FEDERAL MARITIME AGENCIES: ENSURING A SAFE, SECURE, AND COMPETITIVE
FUTURE
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THURSDAY, APRIL 4, 2019
U.S. Senate,
Subcommittee on Security,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:19 a.m. in
room SD-562, Dirksen Senate Office Building, Hon. Dan Sullivan,
Chairman of the Subcommittee, presiding.
Present: Senators Sullivan [presiding], Markey, Wicker,
Cantwell, Fischer, and Blumenthal.
OPENING STATEMENT OF HON. DAN SULLIVAN,
U.S. SENATOR FROM ALASKA
Senator Sullivan. Good morning. The Subcommittee on
Security will now come to order.
I am pleased to welcome our distinguished panel of
witnesses today to discuss with the Committee the future of the
U.S. maritime industry.
The United States is a maritime state with over 95,000
miles of shoreline, over half of which come from my home state,
the state of Alaska. America's ports, waterways, and river
systems support over $4.6 trillion in annual economic activity
and almost 650,000 American jobs.
It is a hugely important part of our economy and very
important that, as the global maritime industry evolves and
grows, that Federal regulations and oversight evolve in
lockstep with that growth.
Today, we hear from Admiral Karl Schultz, the Commandant of
the Coast Guard, Admiral Mark Buzby, the Maritime
Administration Administrator, and the Honorable Michael Khouri,
Chairman of the Federal Maritime Commission, on how to support
this change in growth.
The very missions of each agency contribute to the safety,
national security, and economic growth of our Nation.
Congress has given the Coast Guard a wide range of
missions, very wide, as the Admiral certainly knows, from
search and rescue, icebreaking, maritime environmental
protections, to port security, drug interdiction, international
crisis response, and readiness to support Department of Defense
operations.
Admiral, as I mentioned to you yesterday, I happened to
catch an episode of the Deadliest Catch on the Discovery
Channel a couple nights ago and it was all about our Coast
Guard heroes who do incredible work not just in Alaska but all
over America and the world.
Increasing human activity in the Arctic, violence,
terrorism, and drug trafficking in the Caribbean Basin, Central
America, Mexico, and overseas contingency operations demand an
increased Coast Guard presence at home and increasingly around
the globe. These pressures push the limit of the Service's
fleet as well as its personnel.
The extended lapse in appropriations earlier this year only
served to exacerbate that pressure. It was unacceptable to me
and many members of the Senate that the women and men of the
U.S. Coast Guard, a branch of the U.S. military, were left
unpaid for the dangerous work they do securing our country
while all the other service members were being paid.
I, along with a number of our colleagues, am working on
legislation that would protect the Coast Guard should another
such lapse occur and, Admiral, we want to work with your team
on that.
Although not a branch of the military, the Maritime
Administration, MARAD, plays a key role in securing our
national security. The Maritime Security Program, for example,
provides a stipend for 60 U.S. flag vessels which operate
commercially during peacetime but are in standby to support
U.S. military operations during war or national emergency.
Ensuring that the Maritime Security Program is
appropriately managed and funded is critical to sustaining both
the health of the U.S. domestic maritime industry and to
securing the logistic supply line for global military
operations.
In addition to the MSP, MARAD runs a number of other
national security level programs, such as the Voluntary
Intermodal Sealift Agreement (VISA) and the National Defense
Reserve Fleet, which includes the Ready Reserve Fleet, just to
name a few.
These programs and ships they support provide the critical
unsung infrastructure that our Nation relies upon to sustain
both security operations and economic development.
Of course, the lifeblood behind those programs are the
American merchant mariners that crew U.S. flag fleets. This
group of highly trained and specialized seamen are not growing
as fast as the previous generation is retiring, which poses a
national security challenge to policymakers and the industry.
The Federal Maritime Commission established in 1961 is an
independent Federal agency responsible for the regulation of
ocean-borne international transportation of the United States.
The bipartisan committee of five commissioners administers
U.S. maritime law, monitors the activities of ocean carriers,
terminal operators, ports, and others. Since its inception, the
FMC has worked to ensure that neither the activities of liner
shipping groups nor foreign government laws or regulations
impose unfair costs on American exporters or American consumers
of imported goods.
This subcommittee is committed to work to ensure the
success of the missions of each of these important agencies and
adequate resources are needed to ensure that this occurs.
With that, I want to thank our witnesses for being here
today.
I now recognize Senator Markey for any opening statement he
may have.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Thank you, Mr. Chairman, very much, and
thank you for this great hearing today, very timely, very
important.
Thank you, Chairman Wicker, for your leadership on these
issues, and our Ranking Member of the Full Committee, Senator
Cantwell.
A vibrant, safe maritime industry is essential for
maintaining America's economic excellence and military might
for decades to come and here's why. America's domestic maritime
industry supports a $154 billion in total economic output and
$16 billion in tax revenues every year. It supports nearly
650,000 high-wage secure jobs, ensures America maintains the
capability to mobilize the U.S. military overseas. Deployments
can build military vessels on American shores.
It's a very simple formula. A great domestic maritime
industry equals a better prepared, more capable military and a
more competitive dynamic economy.
Massachusetts, the Bay State, has always known this and we
thank each of you who are testifying today for your roles in
ensuring that we are today as strong as we have ever been, but
maintaining our maritime does not come without challenges.
I'm just going to refer to what Chairman Sullivan just
spoke of. During the government shutdown earlier this year,
over 55,000 Coast Guard members, faithful military members,
dedicating their lives to protect their homeland, were forced
to work without pay, and according to the Coast Guard, only 31
percent of Active Duty Coast Guard personnel had enough
emergency savings to cover 1 month's worth of expenses. That is
not acceptable. That is not sustainable.
These funding disruptions harm recruitment, retention, and
the Coast Guard's ability to fulfill their mission to ensure
our Nation's maritime safety, security, and stewardship and
that is something that Senator Sullivan and I agree on and I
support 100 percent his sentiments that we pass legislation to
make sure that it never happens again that the Coast Guard does
not receive their pay when there is a government shutdown. So
we have to work together to ensure that that does happen this
year.
A key part of the mission that you have is interdicting
drugs on the high seas. Maritime drug trafficking remains an
epidemic with thousands of metric tons of cocaine and other
drugs pouring into our country every single year.
While the Coast Guard has become increasingly successful at
interdicting these drugs in recent years, they did not meet
their performance targets for drug removal last year.
Fishermen safety is another critical challenge we must
address as fishing is still the most deadly profession in
America. While Congress has empowered the Coast Guard to
provide training and research funding for fishermen safety, the
actual distribution of this Federal assistance has been
problematic, potentially harming the program's life-saving
goals.
And, further, the Nation's maritime academies and research
harbors support and protect federally owned training vessels
but the harbors may not have the resources needed to modernize
their docks to protect and support these floating maritime
classrooms which are essential for preparing the next
generation of mariners.
So as we hear from the agencies charged to promote the
strength of our maritime industry, I look forward to exploring
opportunities to ensure members of the Coast Guard are granted
the same privileges as the other members of our military,
enhance the Coast Guard's drug enforcement efforts, address
challenges with allocating Federal resources for fishermen,
safety training and research and provide targeted assistance
toward the modernization of harbor infrastructure to protect
and support federally owned vessels at maritime academies and
research harbors.
Again, thank you, Mr. Chairman, for this very important
hearing.
Senator Sullivan. Thank you, Senator Markey.
And as he mentioned, we are honored to actually have the
Chairman of the Full Commerce Committee and the Ranking Member
of that committee. So I want to offer both of them an
opportunity to make opening statements at this hearing, as
well.
Chairman Wicker.
STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. And I'll speak very briefly because we're
here to hear the witnesses, but thank you, Senator Sullivan and
Senator Markey.
As the Subcommittee Chairman says, Senator Cantwell and I
held a hearing last month with the Full Committee and then it
was industry stakeholders. Today, it is Federal agencies who
are supporting maritime safety, security, and competitiveness.
So this is a great opportunity for us to expand on our
tasks ahead, to discuss agency budget priorities,
implementation of provisions enacted in last year's Coast
Guard, Maritime Administration, and Federal Maritime Commission
Reauthorizations, as well as legislative proposals for
forthcoming reauthorizations of these agencies.
I'm struck by how much consensus there is between the
opening statement of the Chair and the Ranking Member and I
will take half a moment to echo what they've said about the
Coast Guard and the fact that they absolutely should be treated
as other Uniform Services are.
One would hope we would never have another shutdown, that
we've learned our lesson finally, but you never know. Clearly,
we are in unison in feeling strongly that it's unacceptable not
to treat our Coast Guard service members the same way as we do
the other services.
So, Admiral Schultz, Admiral Buzby, and Mr. Khouri, we're
glad to see you and we welcome you and look forward to your
testimony.
Senator Sullivan. Senator Cantwell.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Mr. Chairman, I so appreciate that we
have 17 different Coast Guard units across the state of
Washington, so definitely want to hear from our witnesses.
I'm going to submit my statement for the record.
[The prepared statement of Senator Cantwell follows:]
Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
Thank you, Mr. Chairman.
The Coast Guard, the Maritime Administration, and the Federal
Maritime Commission play important roles in supporting public safety
and the growth of our maritime economy.
Maritime Economy
The maritime industry contributes $21 billion dollars to Washington
state's economy, with the Ports of Tacoma and Seattle ranked as the 4th
largest container gateway in the United States.
The Port of Seattle is also home to the North Pacific fishing
fleet, with more than 35,000 Washington state jobs supported by Alaska
fisheries.
These maritime jobs are vital to the economy. With the growth in
the maritime sector, the industry faces a serious workforce shortage.
We must do more to provide education and training to produce the next
generation of mariners.
Coast Guard in Washington
Another part of the maritime industry in Washington is the U.S.
Coast Guard.
Washington state is the proud home to thousands of Coast Guard men
and women and their families.
The Coast Guard has units in 17 locations across Washington state
working to keep our mariners safe, our waterways secure, and our
natural resources protected.
Coast Guard Policy
I have worked across the aisle in this committee to:
expand benefits for Coast Guard veterans;
double paid maternity leave; AND
we have FINALLY fully funded our first heavy icebreaker in
decades.
Moving Forward
I look forward to working to rebuild the Coast Guard's aging ships,
aircraft, and shore-side infrastructure.
In Washington, we are looking to Offshore Patrol Cutters and Fast
Response Cutters to close operational gaps.
I am surprised, and concerned, that the Administration's Budget
Request does not continue the needed funding to produce the second
heavy icebreaker. We must keep growing our icebreaker program to ensure
that the United States is competitive in the Arctic.
Looking to personnel, we need better support programs for Coasties
and their families in remote locations, from Neah Bay to Kodiak.
And, we must improve support services for families across the
nation, including access to mental health services and support.
Women Retention Study
We must also increase investments in childcare and healthcare for
the Coast Guard workforce. These are issues facing all Coasties, but
are especially important to women in uniform.
Just last week, the Coast Guard published a report evaluating
retention challenges facing Coast Guard women.
In addition to paid family leave, the report found that the Coast
Guard must improve support programs for women when they come back to
work.
That means finding creative solutions to evaluations, and ensuring
family support services like childcare and healthcare are readily
available.
The report also indicated a perceived cultural barrier facing women
in the Coast Guard.
Admiral, I want to work with you to improve training, starting on
day one at the Academy and Cape May, to help members grow their
leadership potential and foster a supportive and diverse workforce.
I look forward to hearing your perspective on how we can better
support the men and women of the Coast Guard.
Conclusion
Again, I want to thank our witnesses and I look forward to hearing
from them on how this Committee can further support safety, security,
and the growth of our maritime economy.
Senator Sullivan. Great. Thank you.
Well, we have, as I mentioned, three distinguished
witnesses for this hearing today.
Admiral Schultz, Commandant of the Coast Guard; Admiral
Mark Buzby, the Administrator of the Maritime Administration;
and the Honorable Michael Khouri, Chairman of the Federal
Maritime Commission.
You will each have 5 minutes to deliver an opening
statement and a longer written statement will be included in
the record, if you so desire.
Admiral Schultz, we'll begin with you, sir.
STATEMENT OF ADMIRAL KARL L. SCHULTZ, COMMANDANT, UNITED STATES
COAST GUARD
Admiral Schultz. Well, good morning, Chairman Sullivan,
Ranking Member Markey, Chairman Wicker, and Ranking Member
Cantwell from the Full Committee, Members of the Committee.
It is a privilege and honor to have the opportunity to
testify before you today and I do ask that my written statement
be submitted for the record.
Senator Sullivan. Without objection.
Admiral Schultz. First, on behalf of the men and women of
the United States Coast Guard, please accept my profound thanks
for your unwavering support here on the Committee and the
Subcommittee, including the recently enacted Fiscal Year 2019
Appropriation and the funding that came with the 2018 Hurricane
Supplemental Funds.
These were meaningful steps toward delivering the ready,
relevant, and responsive Coast Guard the Nation and the public
deserve and expect. Yet our work is not done.
If you take just one thing from my testimony this morning,
I ask that you remember readiness. We, the United States Coast
Guard, must be ready, ready to push our maritime border 1,500
miles away from our shores, ready to preserve the $5.4 trillion
in economic activity that flows across our maritime marine
transportation system on an annual basis, ready to support the
geographic combatant commanders needs across the globe, ready
for the next hurricane season, which is right around the
corner, ready to put our cyber authorities to use as we adapt
to 21st Century threats.
Without question, building a sustaining readiness is my
absolute top priority. I would say we're at a critical
juncture, a tipping point of sorts, on that front.
After almost a decade of near flat-line operations and
support funding, Coast Guard readiness is eroding, just like
the other Armed Services. Yet unlike the Department of Defense,
the Coast Guard funding is categorized as non-Defense
discretionary spending, which means we were excluded from the
focused effort to rebuild our military and we continue to find
ourselves on the outside looking in when it comes to material
operations and support plus-ups.
In 2017, the Department of Defense received about a 12
percent boost in operations and support funds while the Coast
Guard received a 4-percent increase. Yet the Coast Guard's
military contributions are in fact immutable.
Every year, we probably expend over $1 billion on Defense-
related activities in direct support of the combatant
commanders but the 340 million of Defense readiness dollars
that we receive has not changed in more than 18 years.
As an example of our growing Defense portfolio, National
Security Cutter Bertholf is supporting the IndoPacific
geographic combatant commander today in the South China Sea,
enforcing U.S. sanctions against North Korea and protecting
advancing U.S. interests throughout the Western Pacific Region.
Though we strive for relentless resilience to execute
Homeland Security and Defense operations, our purchasing power
has in fact declined. If we continue to neglect our growing
backlog of deferred repairs on our capital assets, including
shore infrastructure, we will lose ground in the fight to
defend our homeland from evolving threats challenging our
Nation.
Despite these challenges, I am in fact extremely proud of
the Coast Guard's contributions. In 2018, as part of the
department's layered security strategy in support of Joint
Interagency Task Force South, our surface and aviation assets
interdicted 209 metric tons, that's 460,000 pounds of cocaine,
more than all other Federal agencies combined, and we
apprehended more than 600 suspected smugglers.
Disrupting transnational criminal organizations at sea
where they are most vulnerable helps reduce the push actors
that are responsible for driving human migration to our
Southwest land border.
As I speak today, National Security Cutter Waesche is
patrolling the Eastern Pacific. Our national security cutters
have exceeded performance expectations by every metric and now
we must focus on transition from outdated and costly medium
endurance cutters to our planned fleet of 25 highly capable
offshore patrol cutters. That will in fact be the backbone of
our offshore maritime fleet.
In the Polar Region, your Coast Guard's the sole surface
presence to protect our rights and protect our sovereignty. As
access to the region expands and interests from China and
Russia grows, it's in our national interests to be there, to
enhance maritime domain awareness and build governance in this
economically and geostrategically competitive area.
That is why the Coast Guard's poised to release our Arctic
Strategy Outlook, a refresh of our Arctic Strategy from 2013,
later this month. But in the high latitudes, presence equals
influence.
Two weeks ago, our sole Heavy Operational Icebreaker, the
POLAR STAR, returned from its 105-day trip to Antarctica to
replenish McMurdo Sound. On that trip, the crew did amazing
things to keep that ship operational, from putting divers in
the icy waters to put a patch on the shaft to fighting a fire
in the incinerator space.
I am proud of the crew, but I am concerned that we are one
major casualty away from having zero heavy icebreakers in the
United States inventory. New icebreakers cannot come fast
enough.
Thank you for the $675 million appropriated in the 2019
Appropriation for the first Polar Security Cutter.
Finally, I appreciate the Administration's support for a
number of initiatives that invest in our greatest strength, our
people. While modest, they represent tangible investments
toward a mission-ready total work force.
For instance, critical investments in our Marine
Inspections Workforce and to our Cyber Operations build on
capabilities that facilitate the $5.4 trillion economic
activity on our Nation's waterways.
A dollar invested in the Coast Guard is a dollar well spent
and with your continued support, the Coast Guard will live up
to our motto, Semper Paratus, Always Ready.
Thank you, and I look forward to your questions.
[The prepared statement of Admiral Schultz follows:]
Prepared Statement of Admiral Karl L. Schultz, Commandant,
United States Coast Guard
Introduction
Chairman Sullivan and distinguished members of the Committee, I
appreciate the opportunity to testify today. Thank you for your
enduring support of the United States Coast Guard, particularly the
significant investments provided in the Fiscal Year (FY) 2019
Consolidated Appropriations Act.
Your Coast Guard is on the front lines of our Nation's effort to
protect the American people, our homeland, and our way of life. As
threats and challenges to our national security and global influence
grow more complex, the need for a Ready, Relevant, and Responsive Coast
Guard has never been greater.
Appropriately positioned within the U.S. Department of Homeland
Security (DHS), the Coast Guard is a Federal law enforcement agency, a
regulatory body, a first responder, a member of the U.S. Intelligence
Community, and a military service and a branch of the Armed Forces of
the United States at all times \1\--The Coast Guard offers specialized
and unique capabilities across the full spectrum of maritime
activities, from security cooperation up to armed conflict.
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\1\ 14 U.S.C. Sec. 1; 10 U.S.C. Sec. 101
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The Coast Guard has matured and evolved over the course of our 228-
year history, adapting our people, assets, and capabilities in response
to emerging national demands and international challenges. We are
locally based, nationally responsive, and globally impactful.
To outline my vision for the Service, I recently released the U.S.
Coast Guard Strategic Plan 2018-2022. To that end, my highest priority
is to ``Maximize Readiness Today and Tomorrow,'' and readiness starts
with our people, who are our greatest strength. In the competitive
marketplace the Armed Forces find ourselves, now is a critical time to
invest in our mission-ready total workforce.
My second top priority is continuing to ``Address the Nation's
Complex Maritime Challenges'' through international and domestic
leadership in the maritime domain. A unique instrument of national
power, the Coast Guard offers the ability to secure the maritime
border, combat Transnational Criminal Organizations (TCOs), and
facilitate $4.6 trillion of annual economic activity on our Nation's
waterways.
Finally, in a competitive budget environment, your Coast Guard is
acutely focused on my third priority, ``Delivering Mission Excellence
Anytime, Anywhere,'' by continuously challenging ourselves to innovate
and drive increased efficiency for better organizational performance in
response to both manmade crises and natural disasters.
Strategic Effects
The Coast Guard plays a critical role in a comprehensive approach
to securing our borders--from disrupting drug trafficking and illegal
immigration in the southern transit zones, to projecting sovereignty
across the globe. Our Nation's maritime borders are vast, and include
one of the largest systems of ports, waterways, and critical maritime
infrastructure in the world, including 95,000 miles of coastline.
As part of the DHS layered security strategy, the Coast Guard
pushes out our Nation's border, and serves as the ``offense'' in a
comprehensive approach to layered border security strategy. Through the
interdiction of illicit drugs and the detention of suspected drug
smugglers, the Coast Guard disrupts TCO networks at sea, over a
thousand miles from our shore, where they are most vulnerable. Coast
Guard maritime interdictions weaken the TCOs who destabilize our
immediate neighbor Mexico, the Central American land corridor, and
South American countries. Our interdiction efforts minimize corruption
and create space for effective governance to exist. Coast Guard
interdiction efforts reduce the ``push factors'' that are responsible
for driving migration to our Southwest land border.
Working with interagency partners, the Coast Guard seized 209
metric tons of cocaine and detained over 600 suspected smugglers in FY
2018, which is more than all other Federal agencies combined.
Highlighting the capabilities of one of our modern assets, in November
2018, the National Security Cutter (NSC) CGC JAMES, in support of Joint
Interagency Task Force South (JIATF-S), seized nearly nine tons of
cocaine and detained over 40 suspected drug smugglers from various drug
conveyances, including low-profile go-fast vessels and fishing vessels.
In addition to stopping these drugs from getting to our streets, the
information we gather and share with our partners in the Intelligence
Community facilitates deeper understanding of TCOs and ultimately helps
our unified efforts to dismantle them.
As an important part of the modern military's Joint Force,\2\ we
currently have forces assigned to each of the six geographic Combatant
Commanders (COCOMs), as well as Cyber Command, Transportation Command,
and Special Operations Command. The Coast Guard deploys world-wide to
execute our statutory Defense Operations mission in support of national
security priorities. Typically, on any given day, 11 cutters, 2
maritime patrol aircraft, 5 helicopters, 2 specialized boarding teams,
and an entire Port Security Unit are supporting Department of Defense
(DoD) COCOMs on all seven continents. In the Middle East, our squadron
of six patrol boats continues to conduct maritime security operations
on the waters of the Arabian Gulf in close cooperation with the U.S.
Navy, promoting regional peace and stability.
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\2\ In addition to the Coast Guard's status as an Armed Force (10
U.S.C. Sec. 101), see also Memorandum of Agreement Between DoD and DHS
on the Use of Coast Guard Capabilities and Resources in Support of the
National Military Strategy, 02 May 2008, as amended 18 May 2010.
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Likewise, as one of the principal Federal agencies performing
Detection and Monitoring (D&M) in the southern maritime transit zone,
the Coast Guard provides more than 4,000 hours of maritime patrol
aircraft support and 2,000 major cutter days to DoD's Southern Command
(SOUTHCOM) each year.
Coast Guard authorities and capabilities bridge national security
needs between DoD war fighters abroad and DHS agencies protecting our
homeland. In addition to COCOM support, the Coast Guard partners with
federal, state, local, territorial, tribal, private, and international
stakeholders to address problems across an increasingly complex
maritime domain. Our leadership on global maritime governing bodies and
our collaborative approach to operationalize international agreements
drives stability, legitimacy, and order. We shape how countries conduct
maritime law enforcement and establish governance.
Looking forward, the performance capabilities and expected capacity
of our future Offshore Patrol Cutter (OPC) fleet will provide the tools
to more effectively enforce Federal laws, secure our maritime borders,
disrupt TCOs, and respond to 21st century threats. Continued progress
on this acquisition is vital to recapitalizing our aging fleet of
Medium Endurance Cutters (MECs), some of which will be over 55 years
old when the first OPC is delivered in 2021. In concert with the
extended range and capability of the NSC and the enhanced coastal
patrol capability of the Fast Response Cutter (FRC), our planned
program of record for 25 OPCs will be the backbone of the Coast Guard's
strategy to project and maintain offshore presence.
In the Arctic region, the Coast Guard remains steadfastly committed
to our role as the lead Federal agency for homeland security, safety,
and environmental stewardship. There, we enhance maritime domain
awareness, facilitate governance and promote partnerships to meet
security and safety needs in this geo-strategically and economically
vital area. As access to the region continues to expand, strategic
competition drives more nations to look to the Arctic for economic and
geopolitical advantages, and the Coast Guard stands ready to provide
the leadership and sustained surface presence necessary to protect our
rights and sovereignty as an Arctic Nation.
Looking to the Antarctic, the 43-year old CGC POLAR STAR, the
Nation's only operational heavy icebreaker, just returned home after
successfully completing Operation DEEP FREEZE (DF-19), the annual
McMurdo Station breakout, though not without overcoming several high-
risk casualties to the ship's engineering systems. The ship's crew had
to battle a fire that left lasting damage to electrical systems; ship-
wide power outages occurred during ice breaking operations. And in the
same transit, divers were sent into the icy waters to investigate and
repair a propeller shaft seal leak. Events like these reinforce the
reality that we are only one major casualty away from leaving the
Nation without any heavy icebreaking capability.
With increased activity in the maritime reaches and growing
competition for resources, we cannot wait any longer for increased
access and a more persistent presence in the Polar Regions. Our
sustained presence there is imperative to ensuring our Nation's
security, asserting our sovereign rights, and protecting our long-term
economic interests.
Last year, we released a request for proposal (RFP) and later this
spring we plan to award a detail design and construction (DD&C)
contract for the construction of three heavy Polar Security Cutters
(PSCs). I am thankful for your support for the $675 million in the FY
2019 appropriation. This funding, coupled with the $300 million in
Shipbuilding and Conversion, Navy (SCN) funding in FY 2017 and 2018, is
sufficient to fund construction of the first PSC as well as initial
long lead time material for a second PSC.
Our value to the Nation is observed on the farthest shores around
the globe as well as closer to home where we continue to be ``Always
Ready'' to answer the call for help. The 2018 hurricane season led to
yet another historic Coast Guard response effort. The Coast Guard
mobilized over 8,600 active duty members, reservists, and civilians for
hurricane response across the United States for hurricanes Florence and
Michael in the mid-Atlantic states and Gulf Coast respectively, as well
as typhoon Mangkhut in Guam.
In support of, and in coordination with the Federal Emergency
Management Agency (FEMA) and other federal, state, local, and
territorial agencies, the Coast Guard saved nearly 1,000 lives using
helicopters and shallow water craft, provided logistical support to
first responders, and oversaw the safe and effective resumption of
commerce at over 20 impacted sea ports.
While such a level of professionalism and distinction is what the
American people have come to expect from your Coast Guard, that
response comes at a cost. We continue to do our very best to stand
ready to respond to all maritime disasters, both natural and manmade;
however, these efforts consume future readiness. Our aging assets and
infrastructure require increased maintenance and repairs, all of which
is compounded by the on-going recovery and restoration operations of
the historic hurricane season of 2017.
In 2017 alone, the Coast Guard lost the equivalent of two major
cutters (e.g., over 300 operational days) due to unplanned repairs.
Expanding that to the last two years, we have lost three years' worth
of major cutter patrol days. In 2017 and again in 2018, shortages in
parts and supplies cost the Coast Guard over 4,500 flight hours each
year, or the equivalent of programmed operating hours for seven MH-65
helicopters. Each hour lost in the transit zones keeps us further from
reaching our interdiction targets and helps the TCOs deliver their
illicit cargoes.
Service readiness starts with our most valuable asset--our people.
We must continue to recruit, train, support, and retain a mission ready
total workforce that not only positions the Service to excel across the
full spectrum of Coast Guard missions, but is representative of the
diverse Nation we serve. Our workforce end strength was reduced by over
1,250 personnel during a three-year period from FY 2012 to FY 2015. And
compared to the workforce of FY 2012, the Coast Guard has nearly 1,000
fewer personnel to accomplish an ever increasing mission set. Adequate
increases to depot maintenance funding, coupled with strategic human
capital investments, are critical to addressing these readiness
challenges.
Conclusion
The Coast Guard offers a capability unmatched in the Federal
government. Whether combating TCOs to help stabilize to the Western
Hemisphere, responding to mariners in distress in the Bering Sea, or
supporting U.S. Central Command (CENTCOM) on the Arabian Gulf, the
Coast Guard stands ready to execute a suite of law enforcement,
military, and regulatory authorities and capabilities to achieve
mission success anytime, anywhere. We cannot do this on the backs of
our people--now is the time to address the erosion of readiness
experienced in our Service over the past decade due to near flat line
funding for operations and support.
While the demand for Coast Guard services has never been higher, we
must address our lost purchasing power, the growing backlogs of
deferred maintenance on our capital assets, and the degraded
habitability of our infrastructure.
Our 48,000 active duty and reserve members, 8,500 civilians, and
over 25,000 volunteer members of the Coast Guard Auxiliary need your
support to maintain a Ready, Relevant, and Responsive Coast Guard.
With the continued support of the Administration and Congress, your
Coast Guard will live up to our motto--Semper Paratus--Always Ready.
Thank you for your support of the men and women of the Coast Guard.
FY 2020 BUDGET REQUEST
The Coast Guard's FY 2020 Budget request is focused on three main
priorities:
1. Maximize Readiness Today and Tomorrow
2. Address the Nation's Complex Maritime Challenges
3. Deliver Mission Excellence Anytime, Anywhere
Maximize Readiness Today and Tomorrow
The Coast Guard's top priority is Service readiness. The FY 2020
President's Budget request begins to address the erosion of readiness
that resulted from years under the Budget Control Act. Critical
investments in the workforce as well as depot maintenance for the fleet
will put the Service on the path to recovery to sustain critical
frontline operations.
Additionally, investments in asset modernization sustain
recapitalization momentum while advancing other critical programs. The
FY 2020 Budget request supports the Service's highest priority
acquisition, the OPC, and continues recapitalization efforts for
cutters, boats, aircraft, IT systems, and infrastructure.
Address the Nation's Complex Maritime Challenges
As one of the Nation's most unique instruments of national
authority across the full spectrum of maritime operations, the Coast
Guard cooperates and builds capacity to detect, deter, and counter
maritime threats.
While nefarious activities destabilize and threaten vulnerable
regions, the Coast Guard offers capabilities, authorities, and
established partnerships that lead to a more secure maritime border.
The FY 2020 Budget invests in a holistic approach to combat TCOs
through targeted detection and interdiction of suspected drug
smugglers, at-sea biometrics, and increased partnerships with allied
law enforcement nations in Central and South America, to quell illegal
migration.
As the Marine Transportation System (MTS) grows increasingly
complex, the Coast Guard's marine safety workforce must adapt to
continue to facilitate commerce. The FY 2020 Budget increases the
marine inspection workforce while addressing key findings from the
report on the tragic sinking of the freight vessel EL FARO and the loss
of 33 crewmembers.
Deliver Mission Excellence Anytime, Anywhere
The Coast Guard is an agile and adaptive force whose greatest value
to the Nation is an ability to rapidly shift among its many missions to
meet national priorities during steady state and crisis operations.
As new threats in the cyber domain emerge, the Coast Guard's cyber
workforce serves as the critical link between DoD, DHS, and the
Intelligence Community. The FY 2020 Budget increases the cyber
workforce to promote cyber risk management and protect maritime
critical infrastructure from attacks, accidents, and disasters.
The Coast Guard seeks to continually improve organizational
effectiveness and the FY 2020 Budget eliminates redundant and outdated
IT services to reinforce the culture of continuous innovation and
enhance information-sharing across the Service.
FY 2020 BUDGET HIGHLIGHTS
Procurement, Construction, & Improvements (PC&I)
Surface Assets: The budget provides $792 million for the following
surface asset recapitalization and sustainment initiatives:
National Security Cutter (NSC)--Provides funding for post-
delivery activities for the seventh through eleventh NSCs, and
other program-wide activities. The acquisition of the NSC is
vital to performing DHS missions in the far offshore regions
around the world. The NSC also provides a robust command and
control platform for homeland security and contingency
operations.
Offshore Patrol Cutter (OPC)--Provides funding for
construction of the third ship and long lead time materials
(LLTM) for the fourth and fifth OPC. The OPC will replace the
Medium Endurance Cutters, now well beyond their service lives,
which conduct multi-mission operations on the high seas and
coastal approaches.
Fast Response Cutter (FRC)--Funds procurement of two FRCs,
totaling 54 of the 58 vessels needed for the domestic program
of record. These assets provide coastal capability to conduct
Search and Rescue operations, enforce border security,
interdict drugs, uphold immigration laws, prevent terrorism,
and enhance resiliency to disasters.
Polar Security Cutter (PSC)--Provides funding to support
detail design and construction activities of the joint Coast
Guard-Navy Integrated Program Office (IPO) and program
management associated with construction of the lead PSC. PSCs
will provide the Nation with assured surface access to the
Polar Regions for decades to come.
Polar Sustainment--Supports a multi-year Service Life
Extension Project (SLEP) for CGC POLAR STAR, including program
management activities, materials purchases, and production
work.
Waterways Commerce Cutter (WCC)--Provides funding for
acquisition planning activities, including continued evaluation
of options to replace the capabilities provided by the current
fleet of inland tenders and barges commissioned between 1944
and 1990. These multi-mission platforms are integral to the
protection of maritime commerce on the inland rivers.
Cutter Boats--Continues funding for the production of multi-
mission cutter boats fielded on the Coast Guard's major cutter
fleet, including the NSC, OPC, and PSC.
In-Service Vessel Sustainment--Continues funding for
sustainment projects on 270-foot Medium Endurance Cutters, 225-
foot seagoing Buoy Tenders, and 47-foot Motor Lifeboats.
Survey and Design--Continues funding for multi-year
engineering and design work for multiple cutter classes in
support of future sustainment projects. Funds are included to
plan Mid-Life Maintenance Availabilities (MMA) on the CGC
HEALY, CGC MACKINAW, and the fleet of 175-foot Coastal Buoy
Tenders.
Air Assets: The budget provides $200 million for the following air
asset recapitalization or enhancement initiatives:
HC-144--Continues Minotaur mission system retrofits and
provides high-definition electro-optical infrared cameras to
meet DHS Joint Operational Requirements.
HC-27--Continues missionization activities, including
funding for spare parts, logistics, training, and mission
system development.
HH-65--Continues modernization and sustainment of the Coast
Guard's fleet of H-65 short range recovery helicopters,
converting them to MH-65E variants. The modernization effort
includes reliability and sustainability improvements, where
obsolete components are replaced with modernized sub-systems,
including an integrated cockpit and sensor suite. Funding is
also included to extend aircraft service life for an additional
10,000 hours.
MH-60--Includes funding to support a service life extension
for the fleet of medium range recovery helicopters to better
align recapitalization with DOD's future vertical lift program.
sUAS--Continues program funding to deploy sUAS onboard the
NSC allowing increased interdiction through greater
Intelligence, Surveillance, and Reconnaissance (ISR).
Shore Units and Aids to Navigation (ATON): The budget provides $174
million to recapitalize shore infrastructure that supports Coast Guard
assets and personnel, as well as construction and improvements to
ensure public safety on waterways. Examples include:
Replacement of covered boat moorings at Station Siuslaw
River, Oregon; recapitalization of failed aviation pavement at
Sector Columbia River, Oregon; construction in Boston,
Massachusetts to support arriving FRCs; and construction in
Sitka, Alaska to support arriving FRCs.
Other (Asset Recapitalization): The budget provides $69 million for
other initiatives funded under the Procurement, Construction, and
Improvements account, including the following equipment and services:
Command, Control, Communications, Computers, Intelligence,
Surveillance, and Reconnaissance (C4ISR)--Provides design,
development, upgrades, and assistance on C4ISR hardware and
software for new and in-service assets.
Program Oversight and Management--Funds administrative and
technical support for acquisition programs and personnel.
CG-Logistics Information Management System--Continues
development and deployment of this system to Coast Guard
operational assets.
Cyber and Enterprise Mission Platform--Provides funding for
emerging Command and Control, Communications, Computer, Cyber,
and Intelligence (C5I) capabilities.
Other Equipment and Systems--Funds end-use items costing
more than $250,000 used to support Coast Guard missions,
including equipment to support operation and maintenance of
vessels, aircraft, and infrastructure.
Operations and Support (O&S)
Operation and Maintenance of New Assets: The budget provides $59
million and 297 FTE to operate and maintain shore facilities and
sustain new cutters, boats, aircraft, and associated C4ISR subsystems
delivered through acquisition efforts:
Shore Facilities--Funds operation and maintenance of shore
facility projects scheduled for completion prior to FY 2020.
Projects include: Coast Guard Yard dry dock facilities in
Baltimore, Maryland; FRC Homeport Facilities in Galveston,
Texas; Electrical Utilities for Air Station Barbers Point,
Hawaii; and Housing for Station Jonesport, Maine.
FRC--Funds operation and maintenance and personnel for five
FRCs and shore-side support for FRCs in Galveston, Texas; Key
West, Florida; and Apra Harbor, Guam.
NSC--Funds crew of NSC #9, as well as personnel for
sensitive compartmented information facility (SCIF) crews and
analytical support, and shore-side support personnel in
Charleston, South Carolina.
OPC--Funds a portion of the crew for OPC #1, as well as
shore-side personnel to develop operational doctrine for the
new class of cutter to be homeported in Los Angeles/Long Beach,
California.
HC-130J Aircraft--Funds operations, maintenance, air crews,
and pilots for HC-130J airframe #12.
Pay & Allowances: The budget provides $118 million to maintain
parity with DoD for military pay, allowances, and health care, and for
civilian benefits and retirement contributions, including a 3.1 percent
military pay raise in 2020. As a branch of the Armed Forces of the
United States, the Coast Guard is subject to the provisions of the
National Defense Authorization Act, which include pay and personnel
benefits for the military workforce.
Asset Decommissionings: The budget saves $12 million and 119 FTE
associated with the planned decommissioning of one High Endurance
Cutter (WHEC) and three 110-foot Patrol Boats (WPBs). As the Coast
Guard recapitalizes its cutter and aircraft fleets and brings new
assets into service, the older assets that are being replaced will be
decommissioned:
High Endurance Cutter (WHEC)--The budget decommissions one
WHEC. These assets are being replaced with modernized and more
capable NSCs.
110-foot Patrol Boats (WPBs)--The budget decommissions three
WPBs. These assets are being replaced with modernized and more
capable FRCs.
Operational Adjustments: In FY 2020, the Coast Guard will make
investments that begin to address the erosion of readiness of the
Service while investing in new workforce initiatives:
Aircraft Federal Aviation Administration (FAA) Compliance--
The budget provides $22 million to replace obsolete aircraft
equipment and systems necessary to comply with FAA 2020
airspace requirements.
Cyber and IT Infrastructure--The budget provides $16 million
and 38 FTE to mature the cybersecurity defense program. The
budget also provides funding for an information technology
framework and platform to establish a consolidated user
interface primarily for Command Centers.
Restoring Depot Readiness--The budget provides $10 million
to begin to restore eroded vessel and aircraft readiness and
address critical information technology maintenance and
inventory backlogs.
Human Capital and Support Infrastructure--The budget
provides $17 million and 22 FTE to improve enterprise-wide
support for the workforce, including the transition to
electronic health records and training and support for the
Coast Guard Reserve.
Counter Transnational Criminal Organizations (TCO)--The
budget provides $7 million and 26 FTE to expand the Coast
Guard's capacity to execute a multi-layered approach in the
Western Hemisphere maritime transit zone, dismantle TCOs, and
secure our Nation's borders from illicit smuggling of all
kinds.
Maritime Safety, Security, and Commerce--The budget provides
$6 million and 20 FTE to strengthen the Coast Guard's marine
safety program through improved marine inspector training,
establishment of a third party oversight and auditing program,
expansion of the marine inspector workforce, and improved
accession opportunities for marine inspectors.
Senator Sullivan. Thank you, Admiral, and I think there's
strong bipartisan agreement on your point, on a number of your
points, but particularly as it relates to the icebreakers. So
we're focused on that.
Admiral Buzby.
STATEMENT OF HON. MARK H. BUZBY,
ADMINISTRATOR, MARITIME ADMINISTRATION,
U.S. DEPARTMENT OF TRANSPORTATION
Admiral Buzby. Good morning, Chairman Sullivan, Ranking
Member Markey, Ranking Member Cantwell, ladies and gentlemen of
the Subcommittee.
Good morning, and thank you for inviting me to testify
today on the Maritime Administration's contributions to
ensuring the safety, security, and competitiveness of our
Nation.
Congress recognized long ago that a robust U.S. Merchant
Marine is critical to national defense and domestic and foreign
commerce. Yet, today, our Nation relies on an aging fleet of
U.S. Government-owned ships to provide surge sealift capacity
in times of conflict or crisis and a shrinking pool of U.S.
flag vessels and qualified American mariners which are critical
to our long-term national and economic security.
Specifically, the average age of the government-owned
vessels of the Ready Reserve Force or RRF which provides our
military's initial sealift capacity is more than 44 years old.
For the past year, we have struggled to maintain readiness
levels across that fleet.
To address these needs, the President's Fiscal Year 2020
Budget for the Department of Defense requests $352 million to
maintain the RRF. Long term, MARAD supports the Navy's Surge
Sealift Recapitalization Strategy which includes a combination
of targeted service life extensions, acquiring and converting
used vessels, and building new vessels in U.S. shipyards.
Along with the RRF, the Defense Department relies on
privately owned U.S. flag ships to deploy and sustain U.S.
forces in times of crisis and to carry DoD cargoes in
peacetime, as well.
However, of the approximately 50,000 large ocean-going
commercial vessels operating around the world today, only 180
fly the U.S. flag. Of those, only 81 vessels operate
exclusively in international trade.
This is one reason why the Maritime Security Program, which
provides stipends to 60 militarily useful ships we would need
in a long-term deployment, is so critical. The President's
Fiscal Year 2020 Budget requests the fully authorized amount of
$300 million for the Maritime Security Program.
Congress also wisely adopted cargo preference and the Jones
Act to ensure access to U.S. flag vessels and American
mariners. In the case of the Jones Act, it provides an
important layer of security by ensuring that vessels navigating
U.S. coastal and inland waters operate with U.S. documentation
and an American crew.
Additionally, it supports the majority of our Nation's
critical shipbuilding, maintenance, and industrial repair
capacity.
To supply the ranks of licensed American mariners, we rely
on the U.S. Merchant Marine Academy at Kings Point and our six
state Maritime Academies or SMAs.
Each year, Kings Point graduates approximately 225 new
highly skilled, entry-level merchant marine officers who, with
their unlimited licenses and service commitments, are qualified
to crew large ocean-going vessels.
The President's Fiscal Year 2020 Budget requests $81.9
million for the Academy to maintain the highest standards of
mariner education and training.
The state academies collectively graduate approximately 900
entry-level merchant marine officers annually. Unlike the
USMMA, which trains on commercial carriers, state maritime
academy cadets receive most of their sea time while sailing
aboard MARAD-provided training ships, several of which are at
the end of their service lives.
We appreciate Congress' recent funding of our training ship
replacement program. The President's Fiscal Year 2020 Budget
requests $242.3 million for the state academies and includes
funding for a third new training vessel and maintenance of the
existing training ships.
Finally, port infrastructure grants will help our ports
meet projected growth in freight volumes and U.S. foreign
trade. The nearly $293 million provided for these grants in the
Fiscal Year 2019 Consolidated Appropriations Act will help
improve the safety, efficiency, and reliability of coastal
seaports.
In addition, the $20 million enacted for Small Shipyard
Grant program and the seven million for the America's Maritime
Highway Projects are essential to sustaining and growing our
maritime industry.
Thank you for the opportunity to highlight MARAD's programs
that support the safety, security, and competitiveness of our
Nation.
I appreciate this subcommittee's continued support for the
U.S. maritime industry, and I look forward to your questions,
and I respectfully request that my written testimony be entered
into the record, sir.
[The prepared statement of Admiral Buzby follows:]
Prepared Statement of Hon. Mark H. Buzby, Administrator, Maritime
Administration, U.S. Department of Transportation
Good morning, Chairman Sullivan, Ranking Member Markey, and members
of the Subcommittee. Thank you for inviting me to testify today on the
Maritime Administration's (MARAD) contribution to ensuring the safety,
security, and competitiveness of our Nation.
Congress recognized long ago that a U.S. merchant marine composed
of the best-equipped, safest, and most suitable types of vessels,
constructed in the United States, and crewed by trained and efficient
citizen mariners is critical to national defense and robust domestic
and foreign commerce.\1\ MARAD's mission is to foster, promote, and
develop our maritime industry to meet the Nation's economic and
security needs.
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\1\ 46 U.S.C. 50101
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The U.S. merchant marine is a fundamental component of our national
defense strategy. Our strategic sealift relies on a Government-owned
fleet and assured access to commercially operated U.S.-flag vessels,
and the intermodal networks that these vessel operators maintain, to
transport equipment and supplies to deploy and sustain our military
forces anywhere in the world. Critical to both Government-owned and
commercial U.S.-flag vessels is an adequate supply of qualified U.S.
mariners to crew them. Currently, we face readiness challenges because
of aging Government-owned vessels, historically low numbers of U.S.-
flag vessels operating in international trade, and ensuring we have a
sufficient number of qualified U.S. mariners that would be needed in
the event of a long-term national emergency.
Government-Owned Vessels
MARAD maintains vessels under agreement with the Department of
Defense in the Ready Reserve Force (RRF) on-call in a state of surge
sealift readiness. In the event of a major contingency, our Nation
relies on the 46 RRF vessels, along with 15 Military Sealift Command
vessels, to provide the initial surge of sealift capacity. After the
initial period, commercial U.S.-flag vessels join the effort to provide
sustainment shipping capacity.
The average age of RRF vessels is more than 44 years, and for the
past year we have struggled to maintain readiness levels across the
fleet. Older, increasingly obsolete equipment and systems require more
time and money to repair or replace, if replacement parts, equipment
and systems are even available. As a result, the escalating cost of
service life extensions is an ongoing concern. In addition, resources
are needed to complete necessary repairs to comply with new regulatory
requirements, such as upgrading and installing covered lifeboats,
addressing exhaust emissions, and treating ballast water. To address
these needs, the President's FY 2020 Budget for the Department of
Defense requests $352 million to maintain the RRF. Long-term, MARAD
supports the Navy's surge sealift recapitalization strategy, which
includes a combination of targeted service life extensions, acquiring
and converting used vessels, and building new vessels in U.S.
shipyards.
U.S.-Flag Commercial Fleet
As this committee is aware, the number of U.S.-flag vessels engaged
in international trade has declined over the past several decades and
remains near its lowest level in history. Of approximately 50,000
large, oceangoing commercial vessels operating around the world today,
only 180 fly the U.S. flag. Of those, 81 vessels operate exclusively in
international trade. The remaining 99 operate almost exclusively in
domestic (``Jones Act'') trades. These types of vessels are critical to
the employment base for mariners with the credentials and training
required to crew Government ships necessary to deliver supplies and
equipment to deployed forces and overseas installations around the
world.
Congress established the Maritime Security Program (MSP), cargo
preference laws, and the Jones Act to foster the development and
encourage the maintenance of a robust merchant marine; however, these
programs now merely support a limited number of oceangoing ships in the
U.S.-flag fleet. The MSP helps maintain an active, privately-owned,
U.S.-flag fleet of 60 militarily useful commercial ships operating in
international trade and employing U.S. mariners fully qualified for
sealift operations. MARAD provides MSP participants an annual stipend
to facilitate the financial viability of operating under the U.S.-flag,
and in return, their ships and logistics networks are available through
pre-negotiated contingency contracts. The MSP facilitates employment
for 2,400 U.S. merchant mariners qualified to sail on oceangoing
vessels who we may call upon to crew the RRF vessels when those ships
are activated. The MSP also assures DOD access to the critical
multibillion-dollar global networks of intermodal facilities and
transport systems maintained by MSP participants. A continued
commitment to this program is reflected in the President's FY 2020
Budget, which requests $300 million for the Maritime Security Program.
The number one concern for any commercial vessel operator is access
to cargo. Government and commercial demand for U.S.-flag cargo
transportation is the lifeblood for these operators and the mariners
they employ in the U.S.-flag fleet. Cargo preference laws require
shippers of Government-impelled cargo 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 to the extent those vessels are available.
Absent other measures, the cargo preference mandates Congress
established support the sustainment and readiness of a U.S.-flagged,
privately-owned, international trading commercial fleet, and the
continued employment of American private sector merchant mariners.
In addition to cargo preference laws, U.S. coastwise trade laws,
commonly referred to as the Jones Act, help sustain the U.S.-flag
domestic trading fleet. Jones Act vessels employ U.S. mariners and
ensure 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. 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 for our Nation. In addition, Jones Act requirements support
U.S. shipyards and repair facilities, and sustain supply chains that
produce and repair American-built ships (including Navy and Coast Guard
vessels). Maintaining a domestic base of shipbuilding and repair
facilities is critical to ensuring the readiness of our strategic
sealift fleet.
U.S. Merchant Mariners
As I stated earlier, the number of vessels in the U.S.-flag,
oceangoing fleet has reached a low point. I am concerned that the
current fleet size could impact our ability to quickly assemble an
adequate number of qualified mariners with the proficiency to operate
large ships (unlimited horsepower and unlimited tonnage) needed for
surge and sustainment sealift operations during a mobilization that
lasts more than six months. We may be short of the number of mariners
needed to meet crewing requirements beyond those first six months.
While, historically, the men and women of the U.S. merchant marine have
voluntarily shipped out in times of need, and even extended their time
at sea beyond normal tours when called upon to do so, it is important
to note that commercial mariners are under no legal obligation to do
so. MARAD is conducting a survey of mariners to ascertain with more
certainty their potential availability and willingness to ``answer the
call.'' The results will help clarify the size of the pool of qualified
mariners upon which our Nation could potentially rely in times of need.
Additionally, we are working to better track licensed mariners who may
no longer be sailing, but could serve if needed, and project mariner
availability to meet the Nation's commercial and sealift requirements.
Mariner Training
To ensure that qualified mariners remain available to satisfy DOD
sealift requirements, the Department of Transportation (DOT) and MARAD
are firmly committed to mariner officer development at the U.S.
Merchant Marine Academy (USMMA or Academy) and six State Maritime
Academies (SMAs).\2\ Each year, the USMMA graduates approximately 225
new highly skilled, entry-level Merchant Marine officers who are
qualified to crew large, ocean-going vessels. Our Midshipmen must have
360 days of sea service in order to qualify for their U.S. Coast Guard
credentialing exams. This shipboard training program exposes Midshipmen
to life at sea aboard commercial and military vessels. USMMA graduates
must accept active-duty or reserve officer commissions in an Armed
Service or other uniformed service of the United States. The graduates
who do not pursue the active duty option (the majority of graduates)
become guaranteed source of mariners who will crew Government owned
surge sealift vessels. The President's FY 2020 Budget requests $81.9
million for the USMMA to maintain the highest standards of mariner
education and training.
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\2\ The six State Maritime Academies (SMA's): California Maritime
Academy, Maine Maritime Academy, Massachusetts Maritime Academy, Great
Lakes Maritime Academy, Texas A&M Maritime Academy, and the State
University of New York Maritime College.
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The Academy, MARAD, and DOT are committed to ensuring the safety of
Midshipmen both on campus and during their sea year. Since I became
Maritime Administrator, we have improved Academy programs and
procedures related to sexual harassment and sexual assault, and are
making progress to instill a culture of zero-tolerance for such
behavior. I am pleased with the direction and momentum of change at the
Academy under the leadership of our new Superintendent, RADM Jack
Buono, but am also cognizant that eliminating sexual assault and sexual
harassment is an issue that requires consistent attention. As such,
addressing sexual harassment and sexual assault at the Academy remains
a top priority for me and DOT leadership.
The SMAs collectively graduate approximately 900 entry-level
merchant marine officers annually. Unlike the USMMA, SMA cadets receive
most of their sea time while sailing on board MARAD-provided training
ships, rather than on commercial or military vessels. The SMA training
ships are very old and need to be replaced. We appreciate the support
Congress has provided for the School Ship recapitalization program, by
appropriating funding for one vessel each in FY 2018 and FY 2019. Since
that first appropriation in March 2018, MARAD has developed and
implemented an acquisition strategy, incorporated industry feedback
into the ship design, and is well along in evaluating proposals to
select a Vessel Construction Manager. The President's FY 2020 Budget
requests $242.3 million for the SMAs, which includes funding for a
third training vessel, and maintaining the existing training ships.
Competitiveness
Moving freight efficiently--both domestically and globally--is
critical to U.S. competitiveness. Freight volumes in the U.S. are
projected to increase by 41 percent, and U.S. foreign trade is forecast
to more than double from 2015 to 2045.\3\ The ability of our ports to
increase capacity and handle cargo more efficiently is vital to the
health of many domestic industries and our Nation's economy. The newest
tool available to DOT in this regard are Port Infrastructure
Development grants. The FY 2019 Consolidated Appropriations Act, P.L.
116-6, provided $292.7 million for the Port Infrastructure Development
Program, which is authorized under 46 U.S.C. Sec. 50302. Through this
program, DOT will provide grants to coastal seaports for infrastructure
improvement projects that are directly related to port operations, or
intermodal connections to ports that improve the safety, efficiency, or
reliability of the movement of goods into, out of, or around coastal
seaports.
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\3\ DOT Bureau of Transportation Statistics, Freight Facts and
Figures 2017, Table 2-1. https://www.bts.gov/sites/bts.dot.gov/files/
docs/FFF_2017_Full_June2018revision.pdf.
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The FY 2019 Consolidated Appropriations Act also provided funding
for other MARAD programs we will use to help increase the
competitiveness of the U.S. maritime industry. The Act provided $20
million for the Small Shipyard Grant program for shipyard modernization
projects, $7 million for America's Marine Highway projects to develop
and expand services to move freight along our waterways and coastlines
to relieve land-side congestion, and $3 million for the Maritime
Environmental and Technical Assistance program to support research and
development to facilitate environmental compliance and enhance
sustainability across the maritime industry.
Conclusion
Thank you for the opportunity to highlight MARAD's programs that
support the safety, security, and competitiveness of our Nation. I
appreciate this Subcommittee's continued support for the U.S. maritime
industry and I am happy to respond to any questions you may have.
Senator Sullivan. Without objection, and thank you,
Admiral.
Chairman Khouri.
STATEMENT OF HON. MICHAEL A. KHOURI, CHAIRMAN, FEDERAL MARITIME
COMMISSION
Mr. Khouri. Good morning, Chairman Sullivan, Ranking Member
Markey, Ranking Member Cantwell, and Senators.
Thank you for the opportunity to discuss the Federal
Maritime Commission's Fiscal Year 2020 Funding Request.
I'm accompanied by two of my colleagues today,
Commissioners Louis Sola and Daniel Maffei. They joined us in
January following their Senate confirmation and we're glad to
have them aboard.
Senator Sullivan. We welcome all the Commissioners here.
Thank you.
Mr. Khouri. Commissioner Rebecca Dye is meeting today with
industry stakeholders on our port demurrage and detention
investigation that I will touch on in a moment.
Last year, the Committee on Commerce was instrumental in
passing the Frank LoBiondo Coast Guard Act of 2018. This Act
broadened the Commission's authority to carry out its mission
to protect the shipping public and we are working to implement
the various parts of that legislation.
While Congress did not assign to the Commission a national
security role, America's economic security does rely on a
competitive and efficient ocean transportation system.
To carry out that directive, the Commission administers a
focused antitrust regime tailored to the ocean liner industry.
We continuously monitor cooperative operational agreements
filed at the Commission by ocean carriers and marine terminal
operators. These collaborative business agreements allow the
ocean carriers or the marine terminals to achieve operating
efficiencies and cost savings.
We closely monitor the agreement parties' business
activities together with the broader international ocean
shipping marketplace for signs of improper, collusive or
anticompetitive behaviors.
We have a comprehensive and ongoing monitoring and
compliance system that is constantly evolving to respond to
changes in agreements, the industry, and the marketplace.
Compared to prior years that witnessed significant changes
to the ocean transportation services market, 2018 was a more
stable period for the industry. There have not been further
consolidations among the top tier of ocean carriers.
There remains a surplus of ocean vessel capacity and the
marketplace is highly competitive, suggesting that cargo
shippers will continue to benefit from lower freight rates
offered by the ocean carriers.
One area of uncertainty in the coming year is the
International Maritime Organization's mandate for vessels to
either burn low sulfur fuel or to install exhaust stack
scrubbers to remove the sulfur from higher sulfur bunker fuels.
The mandate begins in January 2020 and estimated implementation
and industry-wide compliance costs run as high as $15 billion a
year.
Now normally, ocean carriers will try to pass these added
direct costs on to shippers. The Commission is monitoring this
issue to ensure that carrier cost recovery efforts do not
violate the Shipping Act and harm U.S. exporters and consumers.
Commissioner Rebecca Dye is leading an investigation to
examine carrier and marine terminal practices assessing
detention and demurrage charges. These are fees cargo shippers
pay when a container sits on a terminal beyond allowed free
time or a container is not returned to an ocean carrier within
an agreed period.
Commissioner Dye is in the final phase of this effort and
will present her recommendations to the Commission by
September.
Regarding our budget, the Commission is an agency with a
specialized mission requiring a small but highly skilled work
force. We are requesting $28 million to support 128 full-time
equivalent personnel in the Fiscal Year 2020. Slightly more
than $24 million of this request goes to salaries and office
rent. All other expenses associated with operating the agency,
such as information technology, consulting, and outsource
services, travel and supplies, are funded from the remaining
roughly $4 million.
I am proud of the work that our dedicated FMC staff
performs every day and the contribution our agency makes toward
ensuring competition and integrity for America's ocean supply
chain.
We are grateful for the support of this committee and its
members, and I look forward to working with each of you. I'm
happy to answer any questions you might have about the FMC and
its work, and I respectfully request that the written testimony
be submitted to the record.
Thank you.
[The prepared statement of Mr. Khouri follows:]
Prepared Statement of Hon. Michael A. Khouri, Chairman,
Federal Maritime Commission
Chairman Sullivan, Ranking Member Markey, Senators, thank you for
this opportunity to appear before you today to testify in support of
the Fiscal Year 2020 budget request of the Federal Maritime Commission
and to discuss the work of the agency as well as developments in the
international ocean transportation industry we monitor.
I am joined today by two of my colleagues, Commissioner Louis E.
Sola and Commissioner Daniel B. Maffei. Commissioners Sola and Maffei
joined the FMC in January after being confirmed by the Senate. We are
pleased to have them aboard. Commissioner Rebecca F. Dye is working
with Innovation Teams at the FMC who are meeting today on port
demurrage, detention, and free time practices.
The Federal Maritime Commission
As a first matter, allow me a moment to introduce the FMC and its
role, which is best summarized by our prime meridian: ensuring
competition and integrity for America's ocean supply chain.
The FMC is an independent agency with specialized experience in the
international ocean transportation industry. We administer a focused
antitrust regulatory regime tailored to the particular factors
affecting the ocean liner trade. The Shipping Act of 1984 contains
several major sections that are comparable to the 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 oversight. This is due to
the substantial amount of our Nation's international exports and
imports being delivered via ocean liner 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 that would not normally be
permitted under other antitrust statutes, in order to ensure that
certain U.S. national objectives would be met. This included the
availability of ocean transportation and stability of the shipping
infrastructure upon which 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 materially anticompetitive, are recognized as
beneficial, finding efficiencies, and reducing costs that ultimately
benefit 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 and agreements under the Shipping Act to
ensure that procompetitive efficiencies and cost savings are obtained
for the benefit of U.S. consumers, and that anticompetitive effects are
prevented or properly mitigated.
Our Annual Report was submitted on April 1, 2019 and provides a
comprehensive summary of the Commission's activities and industry
developments in Fiscal Year 2018. Our Fiscal Year FY 2020 Budget
Justification was submitted on March 18, 2019 and provides detailed
support for our budget request. I will address matters of interest to
the Committee, discuss what we foresee as potential developments and
trends in the coming year, review our significant activities of the
past year, and recap our budget request for FY 2020.
LoBiondo Legislation
On December 4, 2018, the ``Frank LoBiondo Coast Guard Authorization
Act of 2018'' was enacted as Public Law No. 115-282 (LoBiondo Act). The
LoBiondo Act represents the first substantive changes to the statutes
administered by the Commission since 1998.
Most of the changes are aimed at broadening the Commission's
authority and increasing the tools at the Commission's disposal to
carry out its mission. It makes several changes and places further
restrictions on cooperation between or among ocean carriers and marine
terminal operators (MTOs). These changes include: removing antitrust
immunity for certain activities; prohibiting certain joint procurement
activities; restricting overlapping agreement participation; and
modifying the legal standard for enjoining agreements to jointly
procure certain services. The LoBiondo Act also expands and clarifies
the Commission's authority to seek information from MTOs, and, during
agreement review, to seek information from interested parties other
than the filing parties. The legislative history reveals that many of
these provisions were intended to address concerns regarding carriers'
ability to form alliances and collectively negotiate, and the potential
impacts on shippers and port service providers. H.R. Rep. No. 115-1017
at 5--6 (2018).\1\
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\1\ H.R. Rep. No. 115-1017 accompanied H.R. 2593, an earlier
authorization bill that contained several of the provisions later
incorporated in the Authorization Act.
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The Commission applauds the Committee's work on this important
legislation. We are diligently working on the LoBiondo Act's
implementation and I assure the Committee that the additional
authorities provided in the legislation will be implemented and
enforced by the Commission as intended by Congress.
The FMC and Security
While the Federal Maritime Commission is not charged with a
national security role in the same sense as the U.S. Coast Guard or the
U.S. Maritime Administration, America's economic security very much
depends on a competitive and efficient ocean transportation system.
That is the Commission's mission.
What economists call the ``invisible hand'' is not the only force
that guides the global shipping industry. Many nations throughout the
world go to great lengths to support national ocean transportation
companies, including use of indirect subsidies and direct capital
infusion to maintain the national company's solvency. Some carriers are
owned in whole, or in part, by foreign governments.\2\ This
governmental ownership must be examined in the context of America's
long-term national and economic security interests. The People's
Republic of China (PRC) is the United States' largest trading partner
in terms of cargo volume.\3\ The PRC actively invests in logistics,
transportation, and infrastructure through initiatives such its ``One
Belt, One Road Initiative'' to advance their strategic goals. Last year
PRC-owned COSCO Shipping completed its acquisition of a controlling
interest in Hong Kong-based OOCL. The combined volumes of COSCO
Shipping and OOCL now represent the largest market share in the U.S.-
China import trade at 19 percent of the total.
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\2\ Foreign owned and/or controlled carriers that are registered
pursuant to Section 9 of the Shipping Act of 1984 (46 U.S.C.
Sec. 40701-40706) include: COSCO Shipping Lines Co., Ltd. (PRC), COSCO
Shipping Lines (Europe) GmbH (PRC), Orient Overseas Container Line
Limited (PRC), Orient Overseas Container Line (Europe) Limited (PRC),
CNAN Nord SPA (PDR Algeria). Note that this Act defines control at
50.01 percent of equity. State direct investment and support in ocean
shipping lines is a common practice with several foreign countries.
Chile, France, Germany, Korea, Qatar, Saudi Arabia, and Taiwan have
provided market and non-market support to ocean carriers or related
marine industries.
\3\ During CY 2018, 13 million loaded twenty-foot equivalent
container units (TEUs) moved between the U.S. and China. Our #2 Trans-
Pacific trading partner is South Korea with 1.4 million TEUs of
combined exports and imports.
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For the moment, such links between governments and national
carriers hold the potential to provide lower freight costs and greater
service choices for imports and exports. Some economists argue that
such foreign state support tends to distort otherwise competitive
markets.
The FMC is active in Federal security initiatives related to U.S.
ocean commerce. We work with other agencies engaged in homeland
security to improve identification of entities providing and utilizing
maritime transportation services and to coordinate the use of available
database systems. The FMC partners with various agencies, such as the
U.S. Customs and Border Protection, supporting efforts to address
international criminal activity that would undermine the Nation's
security.
Industry Developments 2018
The container shipping industry plays an integral role in America's
international trade and commerce. There is no more efficient,
economical, or environmentally-friendly way to move goods and
components from origin to destination than in a container transported
on a ship. Since the first container ship, the Ideal X, made her maiden
voyage from Newark, New Jersey to Houston, Texas in 1956, intermodal
transportation has transformed international ocean trade, facilitating
and enabling dramatic growth in the global economy. American importers
and exporters rely on container shipping to meet domestic retail
demand, to provide the inputs manufacturers require, and to allow our
companies and farmers to reach markets overseas. Ocean shipping is
interwoven into every aspect of our lives and our economy.
In FY 2018, approximately 35 million TEUs (twenty-foot equivalent
units) moved through our Nation's ports, a 5 percent increase from FY
2017. The U.S. imported over 23 million TEUs last Fiscal Year valued at
$803 billion. This was an increase of over 6.3 percent by volume from
FY 2017. Meanwhile, the U.S. exported approximately 12 million TEUs in
FY 2018 with a value of $290 billion, a 2.7 percent increase over FY
2017 by volume. The U.S. share of the world's container trades was 16
percent, down slightly from FY 2017. Primarily as a result of continued
growth in U.S. imports, the U.S. container trade imbalance worsened in
FY 2018. Such imbalance is measured by the number of imported loaded
containers versus exported loaded containers. For every 100 loaded
export containers shipped from the U.S., 195 loaded containers were
imported into the U.S. For FY 2017, that metric was 190 loaded import
containers.\4\
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\4\ Source: PIERS Interactive.
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The last decade has seen significant changes to the ocean
transportation services marketplace, with mergers and acquisition
activity among shipping lines reducing the number of major ocean
carriers serving the international trade, the bankruptcy of a top-ten
ocean carrier, and the formation of three global alliances--2M,\5\
OCEAN,\6\ and THE.\7\
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\5\ The 2M Alliance carriers are Maersk Line and Mediterranean
Shipping Company.
\6\ The Ocean Alliance carriers are CMA CGM, COSCO Shipping Line,
Evergreen, and Orient Overseas Container Line.
\7\ THE Alliance carriers are Hapag Lloyd, ONE, and Yang Ming.
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Compared with prior years that experienced significant changes to
the ocean transportation services marketplace, 2018 was a more stable
period for the container shipping industry. The notable transactions
were COSCO Shipping's acquisition of a majority interest in Orient
Overseas Container Line and the completion of the merger of three
Japanese container lines (K Line, MOL, and NYK) into one company, Ocean
Network Express (commonly referred to as ``ONE'').
At year end, for U.S. combined import and export trades, the market
share for all container operators were as follows: Maersk (13.2
percent), CMA CGM (12.8 percent), MSC (12.6 percent), COSCO/OOCL (12.0
percent), Ocean Network Express (10.8 percent), Hapag Lloyd (8.5
percent), Evergreen (7.7 percent), Yang Ming (3.9 percent), HMM (3.8
percent), Zim (2.6 percent), and all other combined carriers such as
Crowley, Seaboard, PIL, SM Lines, Wan Hai, Matson, and ACL (12.1
percent).\8\
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\8\ Source: PIERS Interactive.
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2019 Industry Challenges
The calm of 2018 suggests the ocean carriers are in a settling
period, assimilating companies they have acquired or merged with while
adjusting to the new marketplace structure. Nevertheless, the industry
faces business and operational issues that may challenge their revenues
and financial health.
Excess Capacity
There continues to be a surplus of carrier vessel capacity compared
to global trade volumes. Shipping lines traditionally address this
imbalance by offering lower freight rates in order to fill vessels or
maintain an individual carrier's market share. Ocean freight rates have
been relatively flat over the past decade, 2009-2018. Average revenue
from China to the U.S. West Coast declined by nearly 17 percent in
nominal terms. However, adjusted for inflation, real rates are 29
percent lower. This decline does not reflect seasonal fluctuations,
such as, during peak pre-holiday shipping season \9\ in the east-bound
Trans-Pacific trade lane or freight rates that include value added
services. Nevertheless, it does provide an insight into the competitive
pressure ocean carriers face as well as the real value ocean
transportation has provided to American companies through consistently
low pricing.
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\9\ ``Peak Season'' includes the pre-holiday retail shipping period
from August 15th to October 15th. A second, short peak season is
associated with the Chinese New Year in January/February.
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IMO 2020 Low Sulphur Rule Requirement
An International Maritime Organization (IMO) Rule, commonly
referred to as ``IMO 2020'', requires ocean carriers, beginning in
January 2020, to burn low sulfur fuel that has a 0.5 percent sulfur
content or install exhaust scrubbers in order to continue to run their
vessels with heavy bunker fuel that contains 3.5 percent sulfur
content. The low-sulphur requirements could boost ship fuel costs by as
much as one third, and estimates run between $10 to $15 billion dollars
a year in additional costs for ocean carriers. There is uncertainty
about how some ocean carriers will comply with the IMO requirements,
whether adequate supplies of low-sulphur fuel will be available,
whether adequate supply of scrubber equipment will be available, and
how individual ocean carriers will try to pass on part or all of these
additional costs to cargo shippers, especially if economic growth slows
and container demand falls.
The Commission is monitoring this issue because of our interest in
an efficient marketplace and to ensure that carrier efforts to recover
costs associated with the new standards do not violate the Shipping
Act. A primary concern to the Commission under the Shipping Act is
whether ocean carrier bunker charge adjustment formulas are clear and
definite.
Review of Ocean Carrier and Marine Terminal Operator Agreements
Ocean Carrier Agreements
As noted above, nine of the major ocean carriers serving the U.S.
trades have organized themselves under the Shipping Act into three
major global alliances--2M, OCEAN, and THE. These alliances are joint
operating agreements of ocean carriers where they are allowed to
discuss and agree on the deployment of specific service strings of
vessels in various trade routes. Each alliance operates multiple
services in the major Trans-Pacific (Asia-U.S. and Canada), and Trans-
Atlantic (Europe-U.S. and Canada) trades. These three alliances supply
80 percent of the vessel capacity in each of these trade lanes.\10\
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\10\ Source: PIERS Interactive.
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The alliance agreements allow the parties to discuss trade-specific
economic conditions and adjust the number of vessels deployed in the
relevant trade routes. These three major alliances are not the only
vessel sharing agreements in which these and other ocean carriers
participate. Ocean carriers can and do participate in multiple
agreements filed at the FMC. These include various space charter
agreements, two party vessel sharing agreements having limited
geographic scope, 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
cooperative business agreements filed at the Commission.
Carrier 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 addressed in the
contemporaneous joint Congressional report:
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.\11\
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\11\ The Conference Report for the Shipping Act of 1984, H. Rept.
600 at pg. 36.
An alliance is not an integrated business organization. The
individual members of an alliance remain business competitors in every
sense in terms of sales/marketing, freight pricing, strategic planning,
finance, and related back office operations. Individual companies
compete with the other members of their own alliance and they compete
with each other across alliances. There is a finite number of
containers to be transported and each of the nine alliance carriers, as
well as four other major ocean carriers not in alliance but offering
global service outside of an alliance, vie fiercely to win that
business. By all accounts, the marketplace for containerized ocean
transportation services remains open and highly competitive. Smaller
companies in specialized trades continue to exist and there are even
new market entrants. No one company, even among the top carriers, has a
dominant position in trade volumes to or from the United States.
In terms of growth, the vessel capacity of the ocean lines
continues to expand through new vessel building at a rate that exceeds
the growth in global trade volumes. The Herfindahl-Hirschman Index
values for the Trans-Pacific and North-Atlantic trade lanes reveal that
the marketplace remains unconcentrated. As discussed below, a critical
function of the Federal Maritime Commission is to ensure that these
carrier agreements do not violate the Shipping Act's competition
standard.
Marine Terminal Operator (MTO) Agreements
The Commission oversees 99 ports and MTO agreements covering the
U.S. East, Gulf, and Pacific coasts. To facilitate operations, some
U.S. marine terminals enter into agreements on rates and/or terminal
charges, or to cooperate in their daily terminal operations and related
practices.
The demands of significantly bigger vessels unloading larger
numbers of containers at each port call demands more of marine
terminals in terms of productivity and infrastructure. As a result,
ports and 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 business activities,
all aimed at enhancing their ability to compete against other ports for
cargo.
In recent years, it has become increasingly important for ports and
marine terminal operators to address and mitigate air quality and
traffic congestion impacts on their local communities. Ports use
agreements filed at the Commission to address environmental and
community impact issues that require coordination within a port or
region.
Ports and MTOs use agreements filed at the Commission to address
concerns that require a collective solution. For example, the supply of
chassis in ports is critical to moving containers into and out of the
ports. FMC-filed agreements have been used to help ports and MTOs in an
area or region to manage chassis availability.
Competition and Integrity for America's Ocean Supply Chain
Ensuring Competition
At the heart of the mission of the Federal Maritime Commission is
ensuring a competitive and reliable international ocean transportation
system that supports the U.S. economy and protects the public from
unfair and deceptive practices. We achieve these objectives through
constant oversight of the marketplace in general and the specific
monitoring of ocean carrier and/or marine terminal operator behavior
under agreements filed at the Commission.
The Commission's transportation analysts, economists, and attorneys
are diligent and 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 may
challenge an agreement in Federal District Court during the 45-day
initial agreement filing period or any time after the effective date if
we find evidence that service levels, freight rates, or charges by and
among a group of ocean carriers or MTOs operating within an agreement
are not reflective of the overall prevailing market conditions.
The FMC prioritizes all filed agreements on a red-yellow-green
scale, with red signifying higher profile agreements. These agreements
have the highest potential to cause or facilitate adverse market
effects based on the agreement's authority in combination with
underlying market conditions. On an ongoing basis, the FMC monitors key
economic indicators and changes to underlying market conditions for all
red agreements to detect any exercise of market power that could allow
agreement members to raise and maintain freight rates above competitive
levels. All global carrier alliances are categorized as red agreements.
For these agreements, FMC staff conducts more detailed quarterly
reviews, and periodically presents their findings and recommendations
to the Commission.
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 for completeness and accuracy to determine if this data
reveals any potential red flags.
The Commission also monitors trends in other carrier and marine
terminal operator agreement filings. 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 effective
insight into emerging industry issues, and appropriately 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 monitor a sampling of service contracts for a number of
beneficial cargo owners 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 a shipper association or ocean transportation intermediary.
The Commission is aware of the ever-increasing pressure of industry
consolidation and port congestion and its impact on U.S. exporters and
their need for efficient ocean transportation in reaching foreign
markets. The reporting requirements mandated by the Commission for the
purposes of marketplace and agreement monitoring are not static. Just
as container shipping business evolves and changes, so does the way in
which we do oversight in order to ensure the integrity of the
marketplace. Our Bureau of Trade Analysis continuously considers what
is the best information to require of regulated entities to disclose to
our staff and how often it must be provided to the agency. The
Commission staff refines procedures and requirements to help us better
monitor and interpret developments in the shipping industry.
The FMC continues its focus on monitoring agreements, service
contracts, and tariffs in key trades as barometers of market cycles and
shifts in the balance of supply and demand. The FMC will continue to
expand and promote its compliance-focused program to monitor and audit
ocean common carrier, NVOCC, and ocean freight forwarder operations.
The Commission's Bureau of Enforcement, through the Commission's
statutory and regulatory mandate, protects the shipping public and
ensures industry adherence to U.S. shipping laws.
Ensuring Integrity
The FMC engages in a variety of activities to protect the public
from financial harm, including licensing and registering of ocean
transportation intermediaries (OTI, includes NVOCCs and ocean freight
forwarders, OFFs); helping resolve disputes about the shipment of goods
or the carriage of passengers; investigating and prosecuting
unreasonable or unjust practices, and ruling on private party
complaints alleging Shipping Act violations. These activities
contribute to competitiveness, integrity, fairness, and efficiency of
the Nation's import and export supply chains and ocean transportation
system. In addition, the FMC ensures that passenger vessel operators
maintain proper financial coverage to reimburse cruise passengers in
the event their cruise is cancelled or to cover liability in the event
of death or injury at sea.
All NVOCCs and OFFs located in the U.S. must be licensed by the
Commission and must establish financial responsibility for the
protection of the public. In FY 2018, licensed NVOCCs and OFFs had
financial responsibility in the form of surety bonds on file with the
FMC in excess of $443 million. NVOCCs doing business in the U.S.-
foreign trades, but located outside the U.S. (foreign NVOCCs), may
choose to become FMC-licensed, but are not required to do so. Foreign-
based NVOCCs must register with the Commission and establish financial
responsibility if not licensed under the FMC's program. Foreign NVOCCs
(registered and licensed) had approximately $245 million in surety
bonds on file with the FMC in FY 2018.
The Commission's renewal programs for foreign registered NVOCCs and
FMC-licensed OTIs were instituted to better support Commission and
shipping public decision making, by ensuring accurate and updated
information. Since the programs began in FY 2016 and FY 2017
respectively, approximately 3,800 of the nearly 6,500 current foreign
registered NVOCCs and FMC-licensed OTIs have completed the renewal
process. The renewal procedure prepopulates the OTI's renewal form with
information from the FMC's files providing a streamlined and user-
friendly experience. The online renewal programs have improved the
accuracy of foreign registered NVOCCs and OTI records and the
timeliness of reporting material changes in ownership and operations--
benefiting OTI sureties, ocean carriers, and the shipping public.
Removing Regulatory Burdens, Clarifying the Shipping Act, and Removing
Obstacles in the Ocean Supply Chain
During last month's hearing on ``The State of the American Maritime
Industry,'' Chairman Wicker's opening remarks expressed his hope that
witnesses would discuss ``[t]he laws and regulations affecting the
operation and competitiveness of industry.'' Please be assured that the
Commission is systematically reviewing its regulatory requirements,
interpretations of the Shipping Act, and processes for efficiency and
effectiveness. A valuable and important role for the Commission is its
ability to bring stakeholders together and facilitate workable
solutions to problems.
Regulatory Reform Initiatives
The Commission established a Regulatory Reform Task Force in March
2017 with Managing Director Karen V. Gregory assigned as the Task Force
leader. The group was charged with identifying burdensome, unnecessary,
and outdated regulations and directives and recommending how they
should be remedied. Since its establishment, the Task Force has
undertaken a comprehensive examination of Commission rules and
regulations, published notices and solicited the views of the public as
part of the process, and released a strategy and time schedule for
achieving those priorities.
Effective August 22, 2018, the Commission issued a final rule in
Docket 17-10, Amendments to Regulations Governing NVOCC Negotiated Rate
Agreements and NVOCC Service Arrangements, offering deregulatory
flexibilities for Non-Vessel Operating Common Carrier Negotiated Rate
Arrangements (NRAs) and NVOCC Service Arrangements (NSAs). The rule
allows NRAs to be amended at any time, allows the inclusion of non-rate
economic terms, and allows an NVOCC to provide for shipper's acceptance
of the NRA by booking a shipment. NSAs also were made easier and more
attractive to use by removing filing and essential terms requirements.
A number of favorable public comments were received, applauding the
Commission's action to revise its regulations affecting these
commercial pricing tools used by NVOCCs which will provide welcome
regulatory relief to the 6,500 small businesses in the OTI community.
41102(c) Interpretive Rule
Effective December 17, 2018, following full notice and public
comment procedures, a new Commission interpretive rule clarified for
the industry and shippers the FMC's jurisdictional and evidentiary
requirements when alleging conduct that would violate the Shipping
Act's prohibition on unjust or unreasonable practices under 46 U.S.C.
41102(c). Pursuant to this rule, a common carrier, OTI, or MTO must
engage in a practice or regulation in a normal, customary, and
continuous basis and such practice or regulation must be found to be
unjust or unreasonable in order to constitute a violation of the
Shipping Act. This interpretation restores the standard of what
constitutes a violation under section 41102(c) of the Shipping Act to
its traditional and proper definition under the Shipping Act of 1984,
reflects longstanding Commission case law and related legal precedent,
and reflects the clear intent of Congress.
Fact Finding 28
On March 5, 2018, the Federal Maritime Commission initiated Fact
Finding Investigation No. 28, a non-adjudicatory investigation into the
practices of vessel operating common carriers and MTOs relating to U.S.
demurrage, detention, and per diem charges. Demurrage is the charge per
container for the use of ground space at the marine terminal. Detention
is the charge by the ocean carrier for use of the container equipment.
Per Diem relates to assessorial charges beyond demurrage and detention.
All charges are subject to a set number of free days.
The Commission designated Commissioner Rebecca F. Dye as the Fact-
Finding Officer and directed her to develop a record through public or
nonpublic sessions, and issue interim and final reports and
recommendations. In April 2018, Commissioner Dye issued an Information
Demand on ocean carriers and marine terminal operators that provided
the informational foundation for her investigation. The second phase of
her work consisted of field interviews that took place at the Ports of
Los Angeles and Long Beach, the Port of Miami, and the Port of New York
and New Jersey. As a part of that phase of her investigation, she also
conducted interviews in Washington, D.C.
The Fact-Finding Officer conducted the investigation in two phases
and issued an Interim Report on September 4, 2018, suggesting
consideration of the benefits of: (a) standardized language; (b) clear,
simplified, and accessible billing and dispute resolution practices;
(c) guidance on evidence relevant to dispute resolution; and (d)
consistent notice to cargo interests of container availability. The
Interim Report also considered organization of Innovation Teams of
industry leaders to meet on a limited, short-term basis to refine
commercially viable demurrage and detention approaches. On December 3,
2018, the Fact-Finding Officer issued a Final Report. The Commission
approved the Fact-Finding Officer's Final Report on December 7, 2018.
The work of Innovation Teams consisting of industry experts who are
part of the ocean freight transportation system and global supply
chains commences the next phase of Fact Finding 28. The Teams are
meeting with Commissioner Dye at the Commission this week. The
Innovation Teams will consider the four areas listed in the Fact
Finding 28 Final Report identified as offering the best opportunities
to refine commercially viable demurrage and detention approaches:
Transparent and standardized language for detention and
demurrage practices;
Clear, simple, and accessible billing and dispute resolution
processes for detention and demurrage charges;
Evidence that would be relevant to resolving demurrage and
detention billing disputes; and
Consistent notice to cargo interests of container
availability.
A report to the Commission reporting on the Innovation Teams,
Commissioner Dye's findings, and any possible recommendations she may
make, is scheduled to be filed by September 3, 2019.
Fiscal Year 2020 Budget Request
The FMC's Fiscal Year (FY) 2020 Budget Request is $28,000,000 to
support 128 full-time equivalents (FTEs). This funding level builds on
the Commission's FY 2019 budget request of $27,490,000 and reflects
primarily necessary increases in operating costs and information
technology modernization.
The FMC is a small agency with a technical, commercial, and
competition focused mission requiring a specialized workforce. The
great majority of our budget, $24,057,000, goes to Personnel
($20,638,000) and Rent ($3,419,000). All other costs associated with
operating the agency such as interagency expenses, utilities,
information technology, travel, supplies, equipment, miscellaneous
purchases, and consulting services are funded from the remaining
$3,943,000.
The FMC staff includes a high percentage of economists and
attorneys--career fields that tend to command higher compensation in
order to successfully recruit and retain qualified candidates. The
agency must continue to invest in our workforce, particularly in
attracting and retaining the economists and transportation analysts who
perform the critical economic analysis and oversight of the
marketplace. Overhead costs such as interagency services, commercial
services, travel and transportation, supplies, and equipment account
for most of the remaining budget dollars. We constantly work to find a
balance between our resources and our workload, working to prioritize
our mission-critical activity and reallocate resources to the extent
possible.
Consistent with its past budgets, the Commission's FY 2020 Budget
Request is fiscally responsible, carefully balancing workforce
requirements to meet strategic performance goals, while developing and
deploying necessary IT security capabilities and modernizing its IT
services delivered to the American taxpayer. Workload and staffing
needs are balanced and reconciled against supplemental contract support
and information system development designed to manage FTEs and improve
the quality and timeliness of FMC decision-making.
The FMC remains committed to continuous enhancement of its IT
systems, which will make it faster and easier for individuals and
businesses to find information and complete required filings with the
FMC. The FMC's Information Technology Strategic Plan FY 2018-2022,
identifies plans for efforts including: consolidation and upgrade of
legacy applications and infrastructure with newer technologies;
implementation of IT automation to streamline workflow processes and
improve efficiency; and integrating security standards and frameworks
to protect from cybersecurity risks, agency-owned/issued assets and
commercially sensitive data collected from the shipping public.
When fully implemented by FY 2022, these investments will automate,
streamline, and improve the Commission's internal business processes;
expand research and analysis capabilities; provide better transparency
and public access to information; and eliminate paper-based systems in
favor of web-based, automated systems. The shipping public uses these
web-based systems to file license applications, carrier and MTO
agreements, and commercially-sensitive operational data which is
analyzed and reported to the Commission by expert economists in their
competition analyses.
Conclusion
I am proud of the contribution our agency makes toward ensuring
competition and integrity for America's ocean supply chain. The
Commission is grateful for the support of this Committee and its
members. I look forward to working with each of you. I am happy to
answer any questions you may have about the jurisdiction, work, or
budget request of the Federal Maritime Commission. Thank you.
Senator Sullivan. Without objection. Thank you, Chairman
Khouri.
Well, I will begin the questioning by talking a little bit
about the issue of shipbuilding.
Admiral Buzby, small shipyards, in addition to the big ones
throughout the country, like the Catalyst Marine Engineering in
Seward, Alaska, or Vigor Alaska's shipyard in Ketchikan, are a
vital part of local communities but also play an important part
for our overall economic and national security.
Can you speak about the impact that increased funding has
had on the ability of the Small Shipyards Grant Program to meet
some of these needs?
Admiral Buzby. Yes, sir. Thank you, Mr. Chairman, for your
question.
That's a great program. It helps many shipyards every year.
Last year, I think we had $20 million to disperse and we were
able to help 29 different small shipyards.
Senator Sullivan. Is that enough? Do you look at trying to
increase that or is that the number that you think is
appropriate?
Admiral Buzby. Well, we're grateful for whatever the
Congress passes to us. I would tell you that----
Senator Sullivan. That's usually an easy question.
Admiral Buzby.--we have a lot more applications for those
grants than we're able to actually support.
Senator Sullivan. OK. Admiral Schultz, I know that you and
I--I appreciate the great work you're doing for the Coast Guard
and I commend you for it. I think you're doing a fantastic job.
I appreciate your visits to Alaska and I think our state has
benefited from those.
You know, I know you visited the shipyard in Ketchikan and
seen firsthand the great work that's being done up there. We
had a provision in the last year's Coast Guard bill that tried
to address this issue that you and I have been working on for
quite awhile, which is it's a pretty good-size shipyard that
has a huge impact on Southeast Alaska, actually makes financial
sense for the Coast Guard to do a lot of its maintenance up
there as opposed to sending ships all the way back down to
California.
There's this regulation, as you know, that we've been
looking at that has unintended consequence on that shipyard. We
had language in the Coast Guard bill last year that we thought
addressed this.
Evidently, I was just recently informed that some of the
DHS bureaucrats or whatever didn't see it that way, which is an
enormous frustration. Mind, you get language put in that
Members of Congress agree to and pass and now we have the
bureaucracies coming back and saying, well, maybe it doesn't
work.
Can I get a commitment from you, and I know I'm going to
get it because you've already committed to work with my staff
and DHS, I will be hauling into my office whoever's making
these decisions, saying really, we changed the law and you're
still not good to go with it, to once again put this issue to
rest which makes strategic sense for the Coast Guard, for the
cost of maintenance for your biggest district, District 17, and
yet somehow the bureaucracy here in D.C. wants to continue to
drag its feet on that? Can I get your commitment on that,
Admiral?
Admiral Schultz. Chairman, absolutely. I believe, you know,
you're right, we did recently get guidance from the department
that says that language did not get us there. You have my
commitment to work with your staff on the language.
Staying consistent with the small set-aside rules that
exist today, I anticipate we will have some work with
geographic restriction in this Calendar Year 2019 that the
Alaska shipyards should be able to be very competitive, compete
for, if they solicit, but you have my absolute commitment to
continue to work on language that accomplishes the Committee's
objectives there.
Senator Sullivan. Thank you. It's just a huge frustration
of mine and more importantly my constituents.
I want to talk about icebreakers and the polar security
cutter. You know, I got reports and I'd like you to please
provide more details, that when the POLAR STAR was out and I've
been there, I've been on that ship, the men and women on that
ship do a great job, but, holy cow, that is a really, really
old ship. I think it was commissioned in the early 1970s,
analog technology.
Was that fire that was on the ship when it was deployed
risky and how long did that take to put out and, you know, my
view is nobody wearing a uniform of the United States military
should be deploying on a ship that's that old and that risky
and yet here we are, men and women of the Coast Guard are doing
a great job in that regard, but can you talk a little bit about
that and the urgent, urgent need and the risk to life and limb
of the members of the Coast Guard who deploy on that ship?
Can you talk about that and how dangerous was that fire
that, you know, we had on that ship? I mean, fire on a ship is
normally a very, very scary thing.
Admiral Schultz. Chairman, I appreciate the question and
absolutely.
First off, the funding that comes in the 2019 Appropriation
to get after procurement of the first polar security cutter is
absolutely an exciting time for the Coast Guard. We have had
this for a decade.
Senator Sullivan. Yes, and you remember the MDAA has
authorization for six Polar Class.
Admiral Schultz. And based on the high-latitude studies, I
talked about a six-three-one strategy, a minimum of six
icebreakers, three that are what we call polar security or the
heavy breakers, and the one, and the one is imminent. I
anticipate an award in the next 30 days, a detailed design and
construction for that first polar security cutter, sir. So that
is exciting time and we intend to build the great ship,
hopefully put that in the water here in the 2023 timeline.
That initial ship would essentially be enough capacity to
replace the POLAR STAR. The POLAR STAR has been in a cycle
where essentially she has a 100-130 days down range deployment
to replenish McMurdo Station, as I mentioned in my oral
statement.
McMurdo's at a critical recapitalization point under the
AIMS Initiative. It's the Arctic Infrastructure Modernization
System. They're really relying on the STAR being there to break
in the OCEAN GIANT to deliver materials so they can take the
ice station to the next level of sophistication and capacity.
The POLAR STAR had some challenges, sir. You know, we're
going to invest $15 million as proposed in this budget. We're
trying to do a 4-year multiyear contract here to keep STAR and
bridge the gap.
I'm confident we can fill that gap. I have to obviously
make the decision as the service chief, the senior operational
commander. Can I send men and women safely on the POLAR STAR to
Antarctica every year?
So we do all the puts and takes, sir. The fire on any ship,
I'm a sailor, you know, that is one of your biggest concerns,
one of your highest risks. We fought a fire in the incinerator
space for about 90 minutes. The crew donned what we call the
self-contained breathing apparatus. This was a serious
situation.
We had Navy and Coast Guard divers onboard with an embarked
dive chamber. We put them in water, arctic water off the ice
edge to put patch on the shaft while shipmates inside the ship
crafted tools in their own machine shops, climbed into 30
degree bilge water and fixed the shaft packing.
So it is increasingly a challenge and as I stated, you
know, the risk is if that one breaker goes down, the Nation's
left with zero heavy breakers.
So we're in an exciting time on this first polar security.
We're going to get off to the races here. We're going to award
here soon and hopefully ships follow here to build out a United
States capability and capacity for the Arctic Region, the
Antarctic Region.
Senator Sullivan. Well, tell the men and women who did that
heroic work that we thank them----
Admiral Schultz. Thank you.
Senator Sullivan.--and we're trying to make it so they
don't have to deploy on a ship that's that risky.
Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
In Massachusetts, we had 2,300 Coast Guard members who were
forced to work without pay, that's a lot of people in our
state, and their fellow service men and women were continuing
to receive compensation across the planet and from my
perspective, it had to have an impact on morale and on
recruitment, and I just don't think it's right.
Again, I'm going to come back to the subject that the Coast
Guard is treated any differently than the Army, the Air Force,
or the Navy, or the Marines, and again I look forward to
working with Chairman Sullivan on making sure that that never
happens again.
My question to you, sir, is, did the shutdown affect morale
and knowing that many of your personnel were actually overseas
at the same time serving with the Army, the Air Force, the
Marines, the other branches? What was the impact of having the
Coast Guard be left behind in terms of being compensated?
Admiral Schultz. Well, Ranking Member Markey, for the
question. Thank you for the opportunity during the shutdown to
come in and speak with you and have a frank conversation about
those impacts, sir.
I would say, you know, where we are today, kind of working
backward here, we're about 75-80 percent reconstituted in terms
of our ability. You know, one of the big kind of hallmark dates
for us, this comes up in the beginning of hurricane season of 1
June, we've had a couple years of high activity. So you'll have
a ready Coast Guard to respond to storms.
There are some things that are very difficult to recover.
You know, we delayed periods where we do maintenance on small
boats, sort of depot-level maintenance, cutter schedule
dockside and dry-dock availability. Some of that moved to the
right. You know, you play catch up but you lose time.
In an organization that's struggling on the readiness front
that is not helpful. In terms of our people, I would say a
couple things. A, I'm very proud of the men and women of the
Coast Guard that stood the watch throughout the shutdown. They
stayed focused along with the DHS colleagues at the border and
Secret Service and other places the department writ large. I
think the men and women stood the watch and did what they
signed up to do for the Nation. Our men and women take an oath
and they honored that oath.
In terms of, you know, the morale, I think we saw a couple
things. It was tough, but the folks did stay mission-focused.
Our leadership tried to keep their heads in the game. They knew
folks were working on their behalf, members of the Committee,
Senator Sullivan, taking the Coast Guard issue to the Floor,
very appreciative of that.
They do want to see parity. We are an Armed Force. I think
that's indisputable. It's written in the law. We saw the
Chairman of the Joint Chiefs of Staff weigh in about the Coast
Guard issue and the other service chiefs.
In terms of impact on morale, we saw some tremendous
outpouring of support from the Nation. There are some parts of
the Nation that didn't understand their Coast Guard. I think it
raised our visibility.
If there's any silver lining in a very difficult situation,
it may be the fact that people across the country, people in
your state were doing remarkable things to support the men and
women in uniform from food pantries. I went, you know, I guess
on the offensive with my messaging about the unacceptability of
Coast Guard men and women standing in food lines and food
pantries, but the tremendous outpouring was absolutely
heartwarming and our families that got in front of cameras, not
seeking cameras but had cameras put in front of them. Our
families stayed on message, their message that they just want
their spouse to be paid for the job. They're proud Coast Guard
men and women, proud families that signed up to serve the
nation, and we try to stay out of politics. We try to stay on
task.
Senator Markey. And I agree with you. There shouldn't be
any politics in this issue. Your personnel should be fully paid
the same as every other branch of the service.
Again, you're right there right with the USS Constitution.
Our oldest ship is right there in Boston Harbor and we're very
proud of our maritime history, but we also understand the
incredible sacrifice all of the people who have served our
country and protecting our coastlines have provided over the
years.
Let me move to you, if I could, Admiral Buzby. I would love
to get to the issue of the Maritime Vessel Funding issue. The
TS KENNEDY was launched in 1967, over 50 years ago.
Can you tell us how important it is for us to fully fund a
program that ensures that you have the best facilities to train
the next generation of personnel?
Admiral Buzby. Thank you for that question, Senator.
We are laser focused on ensuring that we provide the best
possible training facilities for all of our midshipmen at all
the state maritime academies and at Kings Point. The
replacement of the KENNEDY, the 53-year-old KENNEDY, and the
57-year-old EMPIRE STATE at New York Maritime, those are two
top priorities, and in fact the $600 million that had been
appropriated for the NSMV Program will go to replace those two
ships straightaway and our acquisition strategy is set.
We're well along in the process. We expect to actually be
awarding a contract for the vessel construction manager
probably within the next four or 5 weeks.
Senator Markey. Thanks. That's great news, and I thank you
again for your service.
Thank you, Mr. Chairman.
Senator Sullivan. Senator Fischer.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Mr. Chairman.
Admiral Schultz, as you know, the recent flooding in
Nebraska has had a devastating impact on my state. On March 15,
2019, the Coast Guard issued a waterway closure to all vessel
traffic on the Missouri River between St. Joe and Omaha.
Can you provide an update on the impact of flooding in the
Missouri River on vessel traffic and also do you have a sense
of how long a waterway closure may be necessary along the
river?
Admiral Schultz. Senator, thank you for the question.
First and foremost, our 8th District commander, working
through our sector commanders in the Upper Ohio Valley, Upper
and Lower Miss, they have a very key role working with other
waterway stakeholders, the Army Corps, the commercial
interests, and those are generally negotiated conversations
about what are the water levels, what are the currents, and to
give you an update, ma'am, I'll have to come back to give you a
real snapshot today. I don't have a current snapshot today.
The flood levels are unprecedented and we're watching that
closely. I think we're looking at weeks yet before we see the
waters receding here to normal levels. So that order will
remain a very dynamic situation and our men and women that
stand the watch there in the heartland are absolutely focused
on balancing, you know, the competing interests of economics
and industry with safety and we obviously walk a fine line
there but we want to err on the safety side and keep commerce
flowing. That's absolutely two sides of the same coin for us,
ma'am.
Senator Fischer. OK. Thank you. If you could get that
information to me,----
Admiral Schultz. Yes, ma'am. We'll get you that snapshot as
of today here.
Senator Fischer.--I'm sure that will be--thank you.
And then, Administrator Buzby, you've spoken on several
occasions about the need for the Jones Act and I agree that the
Jones Act is critical for the United States' defensive needs.
Can you describe for the Committee what impact the
elimination of the Jones Act would have on MARAD's ability to
activate a sealift if called upon by the Department of Defense?
Admiral Buzby. Thank you for the question, Senator.
I would say it would have a devastating effect not just on
MARAD but on our Nation's ability to deploy our forces and then
sustain them overseas. Our Armed Forces move via the Merchant
Marine, plain and simple. Without the Jones Act, not just the
vessels but primarily the mariners that operate Jones Act
vessels, we would be dead in the water. We would not be able to
take this Nation to war.
Senator Fischer. Thank you very much.
Chairman Khouri, I continue to hear from shippers that
ports, particularly on the West Coast, are experiencing
congestion that results in delays in delivering or picking up
containers from terminal facilities.
These delays frequently result in charges being assessed on
the shippers by the ocean carriers or by the terminals that
increase the shipping costs.
Can you tell me what, if anything, the Commission is doing
or looking at doing to address these concerns?
Mr. Khouri. Yes, thank you, Senator.
Well, first, port congestion resulting in container cargo
delivery delays are indeed a continuing issue. Congestion
delays further result in the demurrage charges that you
mentioned to shippers for the containers use of ground space at
the marine terminal and then detention charges by the ocean
carrier to the shipper for extra use of the container.
There are multiple causes for port congestion that we are
seeing today. Recall back for just a minute the fall of 2014
and 2015 and West Coast port congestion. If I may, there was
little to hide the fact that labor and management were in the
middle of contract discussions and to be diplomatic, port labor
productivity had dropped off substantially. That is not the
cause of today's container port congestion.
Without trying to rank or prioritize the contributing
factors, the list includes: (1) cargo surges as shippers try to
anticipate and move cargo in front of announced tariff increase
deadlines, (2) most recently, accelerated shipments in front of
the annual Chinese New Year holiday and then their factory
closures, (3) larger ships are moving into the U.S.
TransPacific routes resulting in surges of containers arriving
at the terminals in L.A., Long Beach, Oakland, Seattle, Tacoma.
Next, we have a continued problem with chassis
availability. In particular, chassis shortages at one terminal,
while there may be excess containers in another and then
further disruption when, as an example, an ocean carrier
requires its containers to be placed on a particular branded
chassis.
And last, growing reports and complaints that the
appointment systems that were introduced in L.A. and Long Beach
last year are simply not working as advertised.
A shipper asked me this week, can the FMC just mandate a
master gray chassis pool for all chassis in L.A., Long Beach,
San Pedro Bay. Well, the answer is no, and I do not mean to
suggest that Congress should give us such overarching and
overreaching authority.
Senator Fischer. I'm sorry to interrupt. I'm running out of
time. So what are you doing about it?
Mr. Khouri. So all of these issues are being sorted through
and addressed by Commissioner Dye's fact-finding investigation.
That process has brought together the industry stakeholders
from across the spectrum. They're meeting today, but this is
one of a multiple number of meetings.
Four areas have been identified as opportunity for
development. One is standard and transparent language for
detention demurrage. Two is clear, simple, and accessible
billing and dispute resolution processes. Three, standard
evidence that would be relevant to resolving these disputes,
the billing disputes, and consistent notice to the cargo
interests of container availability to pick up at the marine
terminals.
Senator Fischer. Thank you.
Mr. Khouri. Her report will be due September of this year
and we will provide you and the Committee that report as soon
as it's available.
Senator Fischer. OK. Thank you. Thank you, Mr. Chairman.
Senator Sullivan. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman, and I thank you
and the Ranking Member, Senator Markey, for holding this
hearing.
I feel like the Subcommittee is in good hands with two
stewards of very broad maritime state interests, and I thank my
colleague from Nebraska for bringing up this very important
freight issue because I think in the ever-evolving Asian market
and the Panamax developments that we cannot be at a standstill
when it comes to moving freight and the challenges that we face
in moving it cost effectively is something that we just
continue to put time and energy into to get those products
throughout the United States into Asian markets.
So I'm going to focus my attention, if I could, on Admiral
Schultz, and thank you for the Coast Guard. The mission that
the Coast Guard must meet is, I think, 11 different areas and
obviously you do it with the most minimal budget. So we
appreciate the service of the Coast Guard and you.
I could ask about--I like the fact of the Coast Guard is
modernizing its workforce which you mentioned in your opening
testimony. Thank you for that. You're on the cutting edge of
family leave policy, would love to talk to you about what we
need to do for daycare and housing, and I know that in the
Pacific Northwest, we have some creosote issues.
So I just want to make sure we pay attention to the
infrastructure needs on running the Coast Guard, as well, but
I'm going to focus my attention on two questions, no surprise,
Arctic and icebreakers.
As we continue--and I hear your commitment this morning to
upgrading in the budget proposals more resources for an
icebreaker fleet, but I still don't know what we need to do,
and this is my question.
Do we need to do more here in the Nation's Capital to
document the major transformation that the Arctic Passage is
going to provide for shippers, and do we have everything we
need from the IMO to make that route, you know, accessible and
a coordinated function with what other nations are doing?
Since there are many Alaskan Natives that live in
Washington State, I've had the chance to visit with many of the
Alaska Native corporations and it's amazing to me to find that
they are being called on by the Russians and the Chinese and
they're making major infrastructure investments in Alaska.
I think that's good for Alaska and that's good for the
United States, but it does raise the question where is the
United States in making this infrastructure investment for a
North Pole Passage of cargo container that is going to be a new
opportunity for us in the United States?
So do we have all the information necessary to successfully
convince our Nation of the scale of this investment that's
needed, and on the IMO level, do we have that level of
investment and understanding with other nations about that
route?
Admiral Schultz. Ranking Member Cantwell, thank you for the
question.
I believe we're in sort of a different paradigm today. I
mentioned we're going to roll out an update to our Arctic
Strategy, our Arctic Outlook here at the end of the month.
There is a national strategy, Arctic Strategy coming out of the
White House in the near future, Department of Defense and Navy
Strategies.
I think we are having the conversations much more so today
than in previous years. I think we have influenced the space.
What has changed in the Arctic? We talk about a peaceful
Arctic, safety, security-type focus. We're not having that
conversation about a competitive Arctic, you know.
China has been up in the Arctic here, you know, 70 percent
of the last seven-eight years with their research vessel, Xue
Long Number 1 here, and they're up there, you know, obviously
potentially doing some research and they have other interests
there. They're paying attention to what we do as a nation here
as we field through the Department of Defense fifth generation
fighters in places like Elmendorf. So I think it is a
competitive space.
I talked in my opening statement about, you know, presence
equals influence and we have to project sovereignty. Today,
we're up there with the HEALY on a sporadic basis. HEALY is our
medium or research vessel. You know, she was up there in the
fall supporting NOAA, National Science Foundation, Naval
Reconnaissance, NRO, but that's science-type work.
We really just need a more continued presence up there.
This first polar security cutter starts the conversation but,
as I mentioned, most of that capacity will go to the Antarctic.
So the conversation would be on----
Senator Cantwell. Well, we're going to look with very
vigilant eyes on that competitiveness report because we feel
like, I personally feel like we should be doing more.
Quickly, and maybe for the record, you know, the 2010 bill
required vessel operators to complete a safety and stability
training course, and I know that the Coast Guard--I want to
know when you're going to begin that rulemaking process.
Obviously the heartbreaking sinking of the Destination is--
at least it looks like the incident is--requirements for safety
may have helped in that situation. So when will we get this
rulemaking?
Admiral Schultz. Senator, if I could get back to you with
the specific date? I don't have that here. Obviously maritime
safety is a primary constant, you know, 228-year mission for
the United States Coast Guard.
I'd like to get back to you with a firm date on that. I
don't have that here with me.
Senator Cantwell. OK. I may submit some further questions--
--
Admiral Schultz. Yes, ma'am.
Senator Cantwell.--on the Destination and that issue.
So thank you, Mr. Chairman.
Admiral Schultz. Thank you, ma'am.
Senator Sullivan. Thank you, Senator Cantwell.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thanks, Mr. Chairman, and thank you for
holding this hearing.
Thank you all for being here. Commandant, I'm particularly
pleased to welcome a Connecticut native and a graduate of two
of our best schools, the Coast Guard Academy and the University
of Connecticut, and thank you to the men and women who serve
with you in the Coast Guard.
I wonder if you could update us as to efforts which we have
discussed in the past involving possible discrimination based
on either gender or race at the Coast Guard Academy.
I know that you have sought to counter and address that
problem and I'd like you for the record to update us because I
think that those kinds of failings could have an impact on our
national security.
The Coast Guard is essential to our national security and I
think you'll agree with me that any kind of discrimination
ought to be addressed, thwarted, stopped.
Admiral Schultz. Senator, absolutely. First and foremost,
across the United States Coast Guard, including the Academy, we
strive to have an environment where it is supportive of people
of both genders, of all cultural backgrounds, all experiential
backgrounds. We are a better United States Coast Guard when
we're a more diverse Coast Guard. That is all about
inclusivity.
You will hear me talk incessantly about being a more
inclusive Coast Guard, a Coast Guard more representative of the
Nation we serve.
We've had some challenges up there in New London. We had a
whistleblower case here recently. We protect whistleblowers in
the Coast Guard. The DHS Inspector General sent a report to
Secretary Nielsen who forwarded that to me.
We have acted on each and every recommendation in that
report. We still have a little bit of ground to close on some
training updates to make sure our supervisors are better
trained on bullying and harassment-type policies and that will
be wrapped up here in the next month or so, but we take that
very seriously.
The superintendent is fully committed. We have an Eclipse
Weekend coming up. It's going on this week. Some of your House
colleagues, I believe, Congressman Courtney will be attending
some of those events up there, sir. We're looking at our
equity. We have an Equity Mindset at New London to make sure if
you're a female cadet, if you're an African American cadet,
Hispanic, Asian Pacific Islander, you have the same
opportunities to excel academically, athletically, through
other interests. The environment is embracing all, and, sir,
that has the enterprise, Coast Guard Headquarters commitment,
my personal commitment, the superintendent's commitment, and I
look forward to changing the narrative around that.
I'd like the Academy to be the most inclusive. It is a
tremendous institution. We've got to make sure we're working
inside the fence line and we have to work on the narrative and
the national perception outside the fence line, sir, but we're
40 percent female in the Cadet Corps. That is fantastic. If you
go up there, female cadets are in leadership. The regimental
commander is currently a female cadet doing great things
leading the corps, sir.
So you have my full commitment to this situation.
Senator Blumenthal. Thank you, and I think you suggested
and committed that there would be some kind of town halls or
public events that would give you or others in the Coast Guard
an opportunity to voice some of the positions that you've just
taken.
Admiral Schultz. Senator, we're working with the local
chapters of the NAACP. We have expanded the local relationship
here, inviting them in to meetings. I sent the Vice Commandant
up here a couple weeks ago to meet with the Faculty Senate
individually. He met with a wide cross-section of the faculty.
I was up there for the Cadet Annual Leadership Address. So
we're taking these issues head-on.
The difficult conversations are the absolute necessary
conversations we have and we will not shy away from those, sir,
and we will do this, you know, in as open and transparent a
fashion as possible.
Senator Blumenthal. Thank you. I noticed in your testimony
you said that the Coast Guard is, in your words,
``appropriately positioned in the Department of Homeland
Security.''
We've had some discussion. I don't know whether it has been
raised here--I apologize that I had a couple other committee
hearings--about the positioning of the Coast Guard, most
especially after the issue with payment of the Coast Guard,
which I found absolutely abhorrent. It was a disgrace, utterly
shameful to deprive the courageous and dedicated men and women
of the Coast Guard of pay for a single day, let alone 35 days.
So I take it at your word that you think that the Coast
Guard is appropriately positioned but I wonder whether there's
any value to considering somehow changing the statute so that
that absence of pay never happens again and so that at least
for pay purposes and maybe in terms of some other
organizational issues, the Coast Guard is deemed to be branch
of our Armed Services, which, as you also note in your
testimony, it certainly is.
Admiral Schultz. Senator, thank you for that question.
Thank you for your words of support to the men and women of the
Coast Guard.
The shutdown was tough. I would say this, sir. You know,
we, as the fifth Armed Service, only Armed Service located
outside the Department of Defense, do find ourselves in a
different position in the Federal budget. We are in the
discretionary non-Defense part of the budget.
You know, for the department writ large, speaking as one of
22 components within the department, I would like to see a
broadening of the conversation, maybe a security and non-
security conversation about the Federal budget because I think
that would roll DHS up into the same conversation with DoD
because we are absolutely an essential contributor to national
security and homeland security, but those are politics above my
head.
In terms of our proper placement, I do believe we're
appropriately positioned within the Department of Homeland
Security. Our mission is from border security, drug
interdiction. We are a law enforcement agency. So Posse
Comitatus creates some unique challenges were we to sit in DoD.
So we're appropriately positioned.
The House T&I Committee passed out H.R. 367, I think it is,
Pay our Coast Guard Parity Act, Senator. The Chairman spoke
earlier about efforts afoot here in the Senate. I think some
safety measure here, legislative safety measure, something in
the Defense Authorization Act, Coast Guard Authorization Act
that linked us to the other Armed Services might be the artful
way to make sure the fifth and smallest of the Armed Services
is not left on the sidelines in some type of--obviously none of
us want another Federal shutdown, but were that to happen and
were there to be a decision that, you know, the Coast Guard and
DHS was outside of a conversation about the other services,
there's a linkage there, you know. I'd like to not see this
happen to the men and women of the fifth Armed Service in the
future, sir.
Senator Blumenthal. Well, I appreciate that you are
approaching this issue so thoughtfully. You happen to have
before you right now two members of the Armed Services
Committee and I think we can consult with you on some of your
ideas in greater depth.
But I really feel there is a difference between the Defense
function that you perform and a lot of the other law
enforcement functions that are the work of the Department of
Homeland Security, which may be unrelated to Defense or even
security, and so I think we need to resolve some of these
issues not only for the sake of the Coast Guard, you may be, as
you say, the fifth, the smallest, I don't know whether you're
the fifth, you are one of them, but no less important than any
of the other Armed Services.
So I think this is an anomalous situation that we need to
address.
Thank you, Mr. Chairman.
Admiral Schultz. And, Senator, just if I could, I mentioned
in my opening statement, there's a portion of the Coast Guard
operating funds that come through Defense Readiness out of
Defense. We're trying to have a conversation within our
department and across the river. That number has been static
since Senator Stevens upped that back in 2001. For 18 years, no
cost of living adjustment.
You're absolutely correct. Our contributions in support of
the geographic combatant commanders of Defense readiness-type
missions has swelled from that 340 number of yesteryear, 18
years ago, to almost a billion dollars today. So I think there
is a righteous conversation that we would welcome the
opportunity to inform.
Senator Blumenthal. Thank you.
Senator Sullivan. Thank you, Senator Blumenthal.
Admiral, I think that you certainly see the commitment and
the interest in a bipartisan way to address this issue and I
think working closely with you and your team, you have our
commitment to continue to work that both on the Commerce
Committee and the Armed Services Committee, which a number of
us actually sit on both of those, as Senator Blumenthal
mentioned.
I want to ask a bit more of a specific question, Admiral
Schultz. Of course, on the issue of safety with regard to our
maritime and fishing industry, it's critical. It's one of your
most important missions certainly.
There was a Regulatory Review Task Force that was set up by
the Coast Guard in response to the Presidential Executive Order
13777, and as you know, a large, actually majority portion of
America's fishing fleet resides in the Northwest Arctic area
off the coast of Alaska and our fishing industry actually met
with the wonderful men and women of the United Fishermen of
Alaska, UFAs as we call them. I know you have met with them
before, as well.
They sent a list of unnecessary and obsolete regulations to
the Coast Guard in 2017, again not to cut corners on safety but
things that they thought being on the front lines that we could
work on to streamline regulations, and they are still waiting a
response from the Coast Guard as it relates to this regulatory
reform initiative.
Can I get your commitment to have a high-level member of
the Coast Guard meet with the UFA to discuss these regulatory
streamlining requests that they had put forward about 2 years
ago?
Admiral Schultz. Chairman, yes, you can.
Senator Sullivan. Thank you. Look forward to following up
with you on that.
There was an earlier question by Senator Fischer that I
want to just throw out to all three of you on the importance of
the Jones Act not only with regard to our economy and national
security but securing our borders, protecting the homeland.
I just want to open it up to the witnesses on your views on
that. Occasionally, and like we have good debates in the
Congress, of course, there are attempts to get rid of the Jones
Act.
One thing that I'd like to note that a lot of people
forget, a lot of other countries, I think certainly China,
Korea, have their own version of the Jones Act, I mean a much
more stringent version. So that's something else I'd like you
to consider, just all three of the witnesses, if you can give
your sense from your perspective of the wisdom of getting rid
of that, particularly as, you know, the Korean shipbuilding
industry's not going to say, oh, sure, we'll have this, no
problem, anyone can come in, compete. Chinese, don't even think
about it, right. They run an authoritarian regime and they're
all about taking care of their own shipbuilding industry and
their maritime.
So what would be the wisdom, national security, economic
security, competition globally, of getting rid of the Jones Act
which rears its head on occasion here? You're the experts in
our industry and you cover different areas of it. I'd just like
to open it up to any and all of our witnesses.
Maybe, Admiral Buzby, we'll start with you.
Admiral Buzby. Certainly. Thank you, sir.
So this is a topic that I love to speak passionately about
because I believe it's so important to our country.
Senator Sullivan. Misunderstood here, though, a lot of the
times because there are----
Admiral Buzby. It is.
Senator Sullivan. And again if you can comment on this
international component. It's not like other countries, the
Japanese, don't have their own version of this.
Admiral Buzby. There are 98 other countries that have a
form of cabotage law similar to our Jones Act.
Senator Sullivan. Ninety-eight?
Admiral Buzby. Ninety-eight, yes, sir.
Senator Sullivan. Wow. I didn't know it was that high.
Admiral Buzby. A recent study revealed that. I would say
just that there are so many aspects of where the Jones Act
impacts both economic security and national security. One
example is the operators of our Jones Act fleet that ply the
waters every single day of this nation, inland waters, coastal
waters--they are invested in our country; they are our
countrymen.
They know what normal looks like. They know when something
doesn't look quite right when it's out of sorts. They will say
something if they see something. You cannot say that about a
foreign operator in our waters. They have no equity. They have
no reason to want to report.
Our people ply those waters every day. They make their
living there. They're members of our community. If they see
something, they will say something. That is a bona fide layer
of our national security.
Senator Sullivan. It's a great point. Anyone else? Chairman
Khouri.
Mr. Khouri. Thank you. Number one, thank you for the
question.
Two, I grew up in the U.S. flag fleet inland. As the
Admiral knows, I had the opportunity after law school to work
in this precise area, worked on trying to put together cabotage
trades in--I was trying to remember--France, Germany,
Venezuela, throughout the Paraguay river system, Indonesia, and
last, one of the most interesting to move coal on the Grand
Canal in China, and so I have some hands-on experience in
dealing with those cabotage rules with various countries, as
mentioned, and they are tough.
They are not receptive to foreigners coming in to their
area and so I agree with everything that----
Senator Sullivan. Wouldn't that be a bit of a unilateral
disarmament if we got rid of our Jones Act----
Mr. Khouri. Well,----
Senator Sullivan.--relative to China or anyone else, the 98
other countries?
Mr. Khouri.--you anticipated my next point, is I never have
understood just the simplest fundamental point that, with the
thousands of miles of U.S. coastline and all of the business
that we have here why would we unilaterally disarm ourselves to
all of these--I'm not trying to make any comment about their
seamanship or anything else, but that----
Senator Sullivan. Go ahead.
Mr. Khouri.--doesn't make any sense to me.
Senator Sullivan. OK. Commandant, any thoughts?
Admiral Schultz. Chairman, I would simply add for nearly a
century, the Jones Act has been the law of the Nation. We're
obviously held to that.
I think clearly there are implications for national
security for U.S. shipbuilding capacity and expertise. I think
any conversation about revisiting the Jones Act really should
look at the national equity, should look at the stakeholders.
It needs to be a very considered conversation. It has in
fact been in place a long time and I think the current
Administrator and the Maritime Commissioner spoke to the other
points, sir.
Senator Sullivan. Great. Thank you.
Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
Only about 10 percent of New England fishermen have been
through safety training. Yet the Fishing Safety Training
Program will increase the number of safety training, save
lives, save the Coast Guard millions of dollars in search and
rescue costs. These programs were first authorized in 2010 and
were appropriated money in 2017. The grants are only being
allocated for the first time this year. That's the first
problem.
And last year's Coast Guard Authorization Act decreased the
Federal share from 75 percent to 50 percent and grant
applicants were only notified of this change midway through the
grant process this past February.
These long delays, sudden changes, loss of Federal funding
shakes the faith of the grant applicants in the program.
Senator Sullivan and I are looking into a legislative fix that
needs help in implementing the solution.
Would you commit to working with Senator Sullivan and me on
fixing this problem and renewing trust in the program?
Admiral Schultz. Ranking Member Markey, absolutely. We have
a shared interest obviously in safety on the water,
particularly in our fishing communities. That's a competitive
place for men and women to make a living and you have my
commitment in that.
Senator Markey. OK. Great. Thank you.
Admiral Buzby, I'm working on legislation to create a MARAD
program providing Federal assistance to harbors for
infrastructure improvement.
Do you think, Admiral, that direct Federal assistance to
improve harbor infrastructure of our research and education
harbors could help protect these Federal vessels and help
support the education of our mariners?
Admiral Buzby. Are you speaking to upgrading facilities at
the maritime academy?
Senator Markey. Yes. Upgrading the academies and where the
training ships are, yes.
Admiral Buzby. Certainly, as the owners of those vessels,
especially these new national security multi-mission vessels
that we're going to soon be sending to the academies, we're
certainly highly interested in making sure they have secure
berths for these national assets. So, yes, sir, to the extent
that we can ensure that's a good berth, it's very important to
us.
Senator Markey. Yes. So and if I can come back to you,
Admiral Schultz, on the lock zone and drug addiction and the
training that we need to make sure that there is in fact a
rapid distribution of naloxone and then a knowledge as to how
to use it, could you talk about how that impacts your force
that you are protecting?
Admiral Schultz. Yes, sir, Ranking Member Markey.
We have fielded NARCAN out at our operational units. So if
we encounter someone--see, it's sort of twofold. A, we want to
protect the men and women out there, you know, that the
fentanyl--these derivatives of fentanyl are very dangerous,
even if we're walking through a ship, you open up a space, the
dust can come up and pose a risk to our men and women that are
doing front-line law enforcement or rescue work and, B, if we
encounter a fishermen or recreational boater in distress, we
have the ability to offer some assistance.
So we are continually looking at where we should position
ourselves as an organization dealing with this national crisis
here with the opioids and fentanyl.
Senator Markey. Do you think that the Coast Guard should
expand the practice of training personnel in terms of the use
of this technology?
Admiral Schultz. Sir, we're training our folks that are
carrying it currently, but if there's more of that, certainly
we're willing to work with your staff to understand what your
intent would be there, sir.
Senator Markey. OK. And I'd love to talk about drug
interdiction in general coming into our country. We know that
fentanyl largely comes in through Mexico from China. They use
our mail system to send it into our country, but we also know
that there are huge flows of cocaine that come up from South
America, other places, that just are exacerbating our epidemic
of drug addiction in our country.
So, Admiral, can you step back a little bit, give us your
overview of this drug problem and the interdiction strategies
which you want to implement, and any other resources that you
might think that you need because it is imperative that we just
have all hands on deck, so to speak, to fight it?
Admiral Schultz. Ranking Member Markey, thank you for the
question.
Our work in thwarting illicit drugs that are coming to the
United States is predominantly against the cocaine threat. 95
percent of the cocaine that departs from the Indian Ridge where
all the coke in the world is produced, Bolivia, Peru, Colombia,
95 percent heading north comes out of Colombia, and if you kind
of look in the last decade, Colombia was on a track to
eradicate more hectares of cocaine every year for many years.
As President Santos, President Duque's predecessor, was
marching Colombia out of a 52 year insurgency with the FARC,
they made decisions, political decisions. They stopped aerial
eradicating spraying coca plants throughout Colombia, coca
cultivation. The FARC derivatives were planting coke
everywhere. So there's more coca than there's been ever before
grown in Colombia.
President Duque, the new Administration, is keenly focused
on that. I think they've tripled their manual eradication from
previous years as a clear testament that they are stepping into
this. They will not manually eradicate on this. Interdiction is
a key part of that.
We, the United States Coast Guard, are partnering with the
U.S. Southern Command. I'm a force provider to the U.S.
Southern Command. When you look at the cocaine threat, 85
percent of the drugs in the transit, so that's that region,
once it leaves the source country, their territorial waters,
where it transits through the oceans until it arrives here, the
cocaine is not generally coming directly to the United States.
85 percent in the Eastern Pacific Ocean, you know, on the
left side of the Central American Corridor, 15 percent spread
across the Caribbean, from the Western Caribbean to the Eastern
Caribbean Island Chain.
The majority of our Coast Guard efforts are in that Eastern
Pacific Transit Zone. I mentioned--I'll roll it up into sort of
a 3-year statistic. In the last 3 years, we've removed 1.4
million pounds of cocaine and brought 1,800 smugglers to the
U.S. criminal justice system for prosecution.
We have the cycle of success. When we bring those drug
smugglers here to the Department of Justice for prosecution,
you know, they're getting stiff sentences, but there's some
give and take. You know, a 20-year sentence might be reduced to
a 13-year sentence. They give some intelligence. It completes
the cycle.
Sir, we have visibility on about 80 to 85 percent of those
drug movements in the Eastern Pacific. We have capacity----
Senator Markey. What do you mean by you have visibility of?
Admiral Schultz. So we have intelligence derived from
multisource, human, all different types of intelligence that
tells us knowledge on about 85 percent of those vessel
movements. Typically, it's mostly non-commercial, so it's
fishing vessels. It's these low-profile vessels. It's new
smuggling that comes out of the--it's, you know, the go fast.
It's a multi-engine smaller-type Panga open-type boat.
We have visibility on those. So we have resources to action
about 25 or 30 percent of that. In those----
Senator Markey. So you're saying you can see----
Admiral Schultz. It's a capacity conversation.
Senator Markey.--95 percent of what's trying to get into
our country that ultimately winds up addicting and killing
Americans?
Admiral Schultz. I would say this, Senator. We see about 85
percent of it from its point of departure.
Senator Markey. OK.
Admiral Schultz. It's not directly coming to the United
States. Those drugs make their first stop in the Central
American Corridor, Mexico. Mexico is increasingly the first
stop country.
We interdict the drugs at sea in large bulk quantities.
It's most vulnerable to our interception. We remove the most
from the system. My opening statement said we remove more drugs
than all other agencies, Federal, state, local, combined, on an
annual basis. That's the place to get it.
There is a conversation about capacity. There's capable
ships, national security cutters, offshore patrol cutters we're
building. The Congress and the Administration have been very
supportive. We need to keep our foot on the gas on the offshore
patrol cutter recapitalization effort.
Maritime patrol aircraft, Congress continues to support us
with additional C-130J aircraft. That's a long-range aircraft
that we had funding in both the last couple years budgets to
field small UAS. We're fielding Scan Eagle, two to four Scan
Eagle units on national security cutters. That's a gap-filler
and----
Senator Markey. Do you have more--even with that, what
would your capacity be to be able to----
Admiral Schultz. Sir, there's some studies that say you
could have 15 to 17 major cutters or combatants with a law
enforcement detachment to really take a bigger bite out of it.
Senator Markey. And how many do you have
Admiral Schultz. Sir, I commit to the U.S. South Com
commander and his subordinate commander, I commit four ships on
a daily basis.
Senator Markey. Four.
Admiral Schultz. I'm generally staffing somewhere between
six and eight. So we are going beyond our commitment. We are
committed to this Western Hemisphere problem set. I commit
multiple airplanes, airborne use of force helicopters. The 2020
budget actually allows us to add a fifth airborne use of
helicopter to a steady persistent presence, sir.
So we throw just about everything I can at that within
other competing demands.
Senator Markey. No. I appreciate that. I just--in this
modern era, as we fully understand the drug epidemic in our
country, the number of people who die every single year. For
example, I'm going to go to fentanyl, but 2,000 people, almost
2,000 died last year in Massachusetts. We're 2 percent of
America's----
Admiral Schultz. Cocaine first-time use is up in the last
year for the first time in many years. That's unfortunate.
Cocaine laced with fentanyl is up. It's an epidemic. More
people are dying from drug-related violence and overdose than
vehicle accidents in the Nation. It is a clarion call as a
nation.
Senator Markey. So we have moved on in Massachusetts from
cocaine and heroin and prescription drugs to fentanyl, which is
coming in from China----
Admiral Schultz. It's coming in, as you said, mail order.
Senator Markey.--through Mexico.
Admiral Schultz. Yes. One individual at a computer is a
cartel.
Senator Markey. So if people are dying across the whole
country at the same rate they are dying in Massachusetts, it
would be 100,000 people a year. That would be two Vietnam Wars
every year would be the rate at which they're dying in
Massachusetts. That'd be a million people over 10 years and
that's just coming through fentanyl aperture.
And again cocaine is a feeder that gets people set up for
ultimately the cocaine being laced with fentanyl, which from
the drug dealers' perspective is a much more economical source
of revenue for them because they can make so much more because
fentanyl is so inexpensive.
So what you're doing is really from my perspective, from a
security perspective, this subcommittee's name, it goes right
to the protection of the people in our country, and we
appreciate what you do on a daily basis with the Coast Guard,
but you're telling us you need more resources if this is the
mission and you're saying that the military itself has to
dedicate more resources to this mission to be able to provide
an interdiction of these drugs that ultimately then are all
intended toward making their way up into the United States of
America.
So I want to learn more about kind of the resource gap, you
know, that exists, given the fact that you're able to see it as
it's beginning its trip up to our country, but ultimately with
unfortunately limited resources to be able to deal with the
actual problem in terms of how it can elude the dragnet that we
set up and ultimately make it to our borders.
So for me, it's our top issue from a security perspective.
Just too many funerals, too many people dying, and if I could
just--and I apologize to you, Mr. Chairman.
Senator Sullivan. It's fine.
Senator Markey. If you could just go to your perspective in
terms of whether or not the Chinese might start to use our
shipping lanes to bring fentanyl into our country, as well. The
profit is just so high.
Admiral Schultz. Yes, Senator, Ranking Member Markey, that
is a good question.
I mean, what we've seen, I've been at this, you know,
counternarcotics business for 36 years as a Coast Guardsman and
it's a very adaptive adversary. When you squeeze in one part of
the supply chain, they morph their behaviors to another.
Right now, they're still working through the mail system.
My Customs and Border Protection counterparts in DHS are
working with the U.S. Mail Service and looking at new
technologies and how you can define that. We have a flag
officer at JITA for West, Joint Interagency Task Force, West,
that looks at precursor chemicals and how those chemicals are
shipped across the oceans, many to Mexico. Some of those
chemicals are dual use. So they're used in commercial
applications.
It's difficult to cull them out. We try to get those large
bulk loads of chemicals. There's an international partnership
component that goes with this and our efforts with the cocaine
you asked about.
Two-thirds of the activities in the Eastern Caribbean are
enabled with some partner nation contribution. About a third of
them, 30-40 percent, are actually partner nation end game. We
have intelligence. We don't have the capacity. We can put
information----
Senator Markey. Yes. We don't have the capacity.
Admiral Schultz. Yes, sir.
Senator Markey. It's a very important sentence for us to
hear----
Admiral Schultz. Yes, sir.
Senator Markey.--because how many more Americans are going
to die from that than any threat from Kim Jong-un or from--I
won't go down the whole litany, but all the stories that are on
the front page above the fold, you know, talking about security
risks to us pale in comparison to this as a threat to people on
the streets of the United States and what we're putting into
that fight to try to reduce the jeopardy to those families.
So we thank each and every one of you for your service, and
thank you, Mr. Chairman.
Senator Sullivan. Thank you, Senator Markey.
I'm going to end with just two additional questions, if
that's OK, to our witnesses.
Admiral Buzby, this is kind of a broader question. You
know, we're working on reauthorizing the FAST Act here. There
has been some interest in a maritime supply chain title in the
next reauthorization bill that would enhance some of MARAD's
current authorized programs, like the Port Development Program,
the Marine Highway Program, and I'd like your views on that.
Additionally, there hasn't been enough attention, and again
this is more kind of Commerce-Armed Services Committee, on this
issue of the strategic ports and how important they are not
just on the military side but from the perspective of meeting
the needs of the military.
I'm sure you're quite familiar with the one strategic port
we have in Alaska, which is the Port of Anchorage, which is
very strategic not just for the supplies and economic vitality
of the state but also our very large military footprint in
Alaska which is growing. We're going to have over a hundred
fifth generation fighters based in Alaska, F-22s, F-35s, in the
next couple years because of our strategic location.
So can you comment on that, as well? I know there's ongoing
litigation. We need to--my view, I haven't been involved in it.
We need to resolve that relatively soon here because of the
importance of that port to the entire state and to the
country's national defense.
But can you comment on both of those issues that fall under
your purview, first on the FAST Act and then on the strategic
ports and their importance?
Admiral Buzby. Thank you, Mr. Chairman.
You know, we at the Maritime Administration and at the
department, you know, view the shore-side part of the Merchant
Marine equation obviously with equal interest and importance
because all the ships sailing around carrying whatever goods
they're carrying have to land those goods at some point.
That's where the true intermodalism occurs in our country,
is when the ships transfer to rail, to trucks, to maritime
highways, and all of that needs to function together not only
in that local area in that port but how it plugs into the
larger national supply chain.
So as was pointed out earlier, you know, with the larger
ships coming in, with the uptick in maritime traffic that we
fully expect to see, our ports need to be modernized, they need
to become more efficient, and those connectors are not
optimized for the large loads that are starting to come in.
When a 22,000 TEU container ship rolls into port and, all
of a sudden, discharges a very large number of containers that
quickly can clog a road network, even a rail network.
So, to the extent that we can focus on those here going
down the road and programs that help maritime ports and
terminals get more efficient, I think that's, you know, an
important thing to keep track of.
In terms of strategic ports, obviously we pay particular
attention to those because they have that military aspect. 17
strategic ports, Anchorage, of course, being one of them. You
know, we have to rely on those to move our Armed Forces.
So again it gets back to that notion that, you know,
there's a very distinct commercial aspect to our Nation being
able to go to war and it flows through those ports on
commercial merchant ships to the front. So that whole part of
the equation has to be there and has to be working correctly,
as well.
Senator Sullivan. Well, thank you, and again you have a lot
of members on this committee that straddle both Armed Services
and the Commerce Committee, which I think is important for the
Coast Guard but also for MARAD, and like I also mentioned,
we're building up the military in Alaska.
That port is about 90 percent of all the imports and
supplies for the whole state come through that port. So I know
there's ongoing litigation. I'm hopeful that we're going to be
able to get to a spot where we can resolve that and then
buildup that port in a way that secures it not just on the
economic side for my state but, importantly, from MARAD and the
Armed Services perspective, the military component with
increasing buildup of our military forces, missile defense, F-
35s, expeditionary troops, the Coast Guard. We're building up
in Alaska in a significant way.
My final question, Commandant. I just wanted to mention,
and again you guys do such a great job, your men and women do
heroic work on the search and rescue coverage, but it's a lot
to cover, as you know.
District 17, I think, is bigger than the rest of the
country combined. That's some enormous area of coverage. We're
working together on the recapitalization program to get more
assets to Alaska in terms of ships and aircraft. The C-130Js
are en route to Kodiak, which is a great addition.
But I was informed recently that major cutter hours as well
as aircraft hours are down when compared to previous years with
regard to coverage of the Bering Sea and the Aleutian Islands.
I don't know if that's true. Maybe you have a view on that.
Is that a maintenance challenge that's predicating that if
it is true or is there something else contributing to the
reduction of hours in that really important area, particularly
as it relates to fisheries and coverage for safety?
Admiral Schultz. Chairman, first and foremost, thanks for
your support in the question.
We strive from a planning factor to have 1-0 coverage, a
ship every calendar day covering down in the Bering Sea, and
last year, we fell short on that on 2 days. Six months into
this year, as we start, you know, the first month of this last
6 months of the year here, we lost about 2 weeks of major
cutter coverage when the MUNRO went down, the 370 high
endurance cutter. That's, you know, approaching half century in
service. We had the unexpected casualty that left her out of
service for an extended period of time.
What we try to do is we try to bring a ship from another
part of the year. I think we sent the STRATTON up from a
thousand miles away to try to cover that gap. So we are
absolutely committed to that 1-0 coverage factor, sir, when
we----
Senator Sullivan. And that has been the tradition?
Admiral Schultz. That's been the tradition, sir, in the
past recent years.
When we have a gap, we also try to mitigate that with
aviation assets to make sure we still have situational
awareness. We can respond, you know. We forward deploy to Cold
Bay for seasonal-type work around the crab season stuff, sir.
What we're seeing as we're fielding these fast response
cutters, you know, they have the ability where 110 didn't to
cross the Gulf of Alaska. So these new ships we're fielding,
they will bring--it's six fast response cutters that we worked
about the 2-1-1-2 plan for that stretch in Kodiak----
Senator Sullivan. Yes.
Admiral Schultz.--and Seward and Sitka with your support
and, sir, you've been carrying the water on that, you and
Senator Murkowski. We're appreciative. We're going to put the
287s there. We'll actually have a significant increase in
capacity.
The 110s program for 1800 hours, we're probably getting
1300 hours. Each FRC is 2500 hours. Sophisticated command and
control, better capability in terms of small boats, stern
launch, significantly more tonnage, much more reach, as I
alluded to, sir.
So I think you're going to see a hundred additional bodies
that are maintainers, supporters, plus additional crew sizes,
eight extra sailors. There's a lot of good in this in terms of
capacity, sir, that's going to work at fisheries that are
important to you and safety in Alaska with the Coast Guard.
Then the third and fourth will be the offshore patrol
cutters will be destined to the Kodiak and the Alaska
waterfront. Those are going to be 360-foot ships, high tonnage,
tremendous ability to, you know, sea base with helicopters. We
intend to put Scan Eagle-type capabilities, small UAFs on
there.
So you're going to see a real uptick in Coast Guard
capacity in Alaska, sir.
Senator Sullivan. Great. I appreciate it and look forward
to continuing to work on the increase in capacity, and, sir, so
some of that lack of coverage this year was due to the--and
again----
Admiral Schultz. It was the MUNRO breakdown.
Senator Sullivan.--the MUNRO breakdown and then the tragedy
that you----
Admiral Schultz. That ship is increasingly difficult to
maintain, sir, just from availability of parts, but we're
committed. You know, we have the fleet we have until we have
the replacement fleet.
Senator Sullivan. You certainly have my commitment as the
Chairman of this Committee to not only fully, fully support,
but help to accelerate the recapitalization of the Coast Guard
fleet. So whatever you need, just let us know.
Admiral Schultz. Thank you, Chairman.
Senator Sullivan. Well, listen, I want to thank everybody
again. It has been a very informative hearing, very important
positions all three of you gentlemen have. I think everybody's
working hard and doing a good job.
These are important oversight hearings for our ability to
work with the agencies to understand what your priorities are,
what some of our concerns are, and then work together to move
forward to address both.
So the hearing record will remain open for two weeks.
During this time, Senators may submit additional questions for
the record. Upon receipt, the witnesses are respectfully
requested to submit their answers to the Committee as soon as
they can.
I want to thank the witnesses again for appearing today.
This hearing is now adjourned.
[Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. Roger Wicker to
Admiral Karl L. Schultz
Question 1. The Coast Guard needs to better understand the benefits
of operating unmanned systems to meet operational needs. What studies
or assessments is the Coast Guard currently undertaking to determine
the impact of unmanned systems on the fleet to help carry out core
missions?
Answer. The U.S. Coast Guard is continually seeking opportunities
to leverage emerging technology to enhance mission performance. As part
of this effort, the Coast Guard explores the potential use of unmanned
systems to support operations. For example, the Coast Guard is
currently engaged in the following research:
1. Low-Cost Maritime Domain Awareness Pilot: Using funds provided to
the Coast Guard for this purpose in the Fiscal Year (FY) 2019
appropriations act, the Coast Guard is examining the potential
use of unmanned systems to detect illegal, unreported, and
unregulated fishing in the central Pacific.
2. Assessment of Unmanned Technologies for Maritime Domain Awareness
(MDA): As directed in the Coast Guard Authorization Act of
2018, the Coast Guard is collaborating with the National
Academy of Sciences to examine emerging autonomous and remotely
controlled technologies for use in enhancing MDA.
3. Small Unmanned Aircraft System (sUAS) for NSC: The Coast Guard is
currently acquiring sUAS capability for the NSC fleet. This
Medium Range UAS capability has been employed on the CGC
STRATTON during four prototype deployments and will initiate
its first operational deployment this summer. Experience gained
during the prototype deployments was used to inform the sUAS
contract requirements. The Coast Guard awarded a contract for
this capability in June 2018 and it is projected that four NSCs
will be outfitted with sUAS by the end of December 2019, and an
additional four NSCs are scheduled to receive the new UAS
equipment in FY 2020.
Question 2. Could the Coast Guard request increased funding for
unmanned systems research and development as a result of the outcomes
of these studies?
Answer. The Coast Guard follows U.S. Department of Homeland
Security processes for requirements development. The outcomes of these
research and development efforts may inform the development of
requirements for unmanned systems.
Question 3. The President's FY 2020 budget request included $9.4
million for the small unmanned aircraft systems (sUAS) program. The
Coast Guard has stated it would like to double the delivery of these
systems from two to four systems per year. Does the FY2020 budget
request support the goal of doubling delivery of sUAS from two to four
systems per year?
Answer. The President's FY 2020 Budget supports the accelerated
installation plan. The Coast Guard currently has one cutter outfitted
with the sUAS system (STRATTON) and has installations ongoing for three
additional cutters (JAMES, MUNRO, and KIMBALL). The next installation
is planned to start in the fourth quarter of FY 2019 (WAESCHE). The FY
2020 President's Budget request supports installations on the three
remaining operational NSCs. NSC #9, #10, and #11 will be outfitted with
sUAS systems once the cutters have been delivered to the Coast Guard.
______
Response to Written Questions Submitted by Hon. Ted Cruz to
Hon. Mark H. Buzby
Question 1. Admiral Buzby, in your testimony you noted ``The U.S.
merchant marine is a fundamental component of our national defense
strategy'' and the challenges we face in ``ensuring we have a
sufficient number of qualified U.S. mariners.'' Can you elaborate on
some of those challenges, particularly as it relates to the six state
maritime academies located throughout the nation?
Answer. The state maritime academies (SMA) graduate nearly 75
percent of new sealift-qualified mariners that earn U.S. Coast Guard
(USCG) credentials each year. It is a significant challenge to continue
providing the necessary sea-time for these individuals because of the
aging fleet of training vessels available to SMAs. Without adequate
training vessels and modern capabilities, SMAs would have difficulty
providing opportunities for cadets to earn their hands-on sea-time to
qualify for entry-level merchant mariner officer credentials. Recent
Congressional appropriations to begin recapitalizing these training
vessels is a welcome start to addressing this challenge.
Another challenge is the decreasing U.S.-flag fleet size, which
limits career opportunities for SMA cadets upon graduation. A lack of
job opportunities is likely to negatively impact students' enthusiasm
for a maritime career, and given their high employability, it is
relatively easy for these students to pursue other career options that
require similar skill sets. A tangential consequence of declining
career opportunities for newly credentialed SMA graduates is the
potential impact on student recruitment and enrollment at those
institutions. Students are more likely to stay away from careers they
see as declining in scope.
Finally, the high cost of maritime education is a serious challenge
to all SMAs, which is reflected by their academic diversification
strategies. The cost of procuring and maintaining waterfront
facilities, watercrafts, labs, and simulators that need regular
updating and maintenance are far higher compared to the costs of a
typical STEM-based baccalaureate degree program. In addition,
increasing international requirements have resulted in SMA maritime
credentialing programs to carry as much as 50 percent more academic
credit-load than a traditional liberal arts baccalaureate degree. The
academies find it difficult to package such a program within the
typical four-year degree program structure, and any attempt to lengthen
their program is likely to adversely impact the competitiveness of
their academic offerings versus more traditional academic majors.
Question 2. As you know, Texas A&M Maritime Academy, located at
Texas A&M University at Galveston, is one of the six maritime academies
in the U.S. and the only one located in the Gulf of Mexico region.
Unfortunately, the training vessel at Texas A&M Maritime Academy, TS
General Rudder, is insufficient to meet the at-sea and alongside
education and training needs of their 400 cadets. It is also inadequate
to meet the national emergency or urgent humanitarian aid requirements
in the Gulf Region.
That's why I worked last year to successfully include a provision
in the Maritime Authorization and Enhancement Act for Fiscal Year 2019
that requires vessel sharing among state maritime academies to ensure
that all cadets receive proper training at sea so they are qualified to
support U.S. waterborne commerce and our national security. In fact,
when I included this provision during the April 2018 markup that was
held by this Committee I stated that it was my expectation that you
would work directly with my office to swiftly resolve this issue in a
manner that solves the unique needs of the Gulf region without
compromising the National Security Multi-Mission Vessel Program.
What is that status of the implementation of the vessel sharing
program?
Answer. In spring/summer 2018, MARAD enabled Texas A&M Maritime
Academy (TAMMA) to utilize the Training Ship (TS) Kennedy, normally on
loan to Massachusetts Maritime Academy, for the TAMMA cadets to get
their needed sea time. At the direction of Congress, MARAD drafted a
vessel sharing plan in consultation with all of the SMAs in November
2018 and has begun implementing the plan. For the current academic
year, TAMMA will train cadets on the TS Golden Bear, which is normally
operated by California Maritime Academy (CMA), during July and August
2019. TAMMA staff have made several trips to the TS Golden Bear to gain
familiarization and are currently onboard the vessel during CMA's
training cruise. The turnover to TAMMA will occur on July 1 in
Galveston, TX. In addition to the TAMMA/CMA ship sharing arrangement, a
plan is in place to address training of cadets at the State University
of New York (SUNY) Maritime College, should it be necessary. If the
material condition of the TS Empire State, currently on loan to SUNY
Maritime College, degrades to a point where its operation becomes
unsafe or cost-prohibitive, SUNY Maritime College will share use of the
TS Kennedy, the training vessel normally operated by Massachusetts
Maritime Academy. TAMMA has also offered, with the endorsement of
MARAD, to allow all other SMAs the opportunity for their students to
sail on the TS Golden Bear as needed to ensure they receive required
sea time.
Question 3. How are you working with the state maritime academies
to ensure an equitable vessel training program is in place until the
new training ships go online?
Answer. MARAD stands ready to facilitate all SMA cadets in earning
their sea time on an appropriate training vessel. As noted above, a
ship sharing plan was drafted in consultation with all of the SMAs, due
to capacity shortfalls, and that plan is being implemented now. In
addition, the ship sharing plan will be evaluated annually and
modifications made if necessary.
Question 4. How are you working with the state maritime academies
who are sharing ships to distribute the $8 million in vessel sharing
funds?
Answer. Cost estimates are currently being refined, but based on
previous year expenses, MARAD estimates up to $4 million will be needed
for the TAMMA training cruise, scheduled to begin on July 1, 2019. The
remaining funds will be used for a second sea-term of ship sharing, if
required, as well as to accommodate cadets from other SMAs when needed.
Funding will support transportation for students, vessel validation
inventories, crew familiarization with the borrowed ship, and other
appropriate expenses within the statutory limits for both affected
schools.
Question 5. While I know A&M Maritime is glad to have this
temporary relief, do you believe this is a sustainable, long-term
solution?
Answer. Ship sharing is not an ideal solution long-term because of
the challenges SMAs encounter when trying to accommodate each school's
academic schedule with at-sea training and year-round onboard training
at campuses. For example, under the current arrangement with TAMMA and
CMA, the TS Golden Bear is not available to CMA cadets during freshman
orientation because TAMMA cadets will be using the vessel during July
and August of this year. MARAD is pursuing the school ship
recapitalization plan as a long-term solution; however, in the
meantime, ship sharing will ensure cadets get the minimum at-sea
training they need.
Question 6. Other than through sharing training vessels, how is
MARAD working to address this issue?
Answer. As noted above, MARAD is pursuing a school ship
recapitalization plan as long-term solution to meeting SMA training
needs. In FY 2018 and FY 2019, Congress appropriated funding for two of
the five needed school ships, and the President's FY 2020 Budget
request includes funding for a third training vessel. In addition to
vessel sharing among schools, MARAD is promoting ship capacity
sharing--allowing students from one SMA to sail on another school's
assigned ship when needed. MARAD has used ship capacity sharing in the
past to ensure cadets get their required at-sea training.
Question 7. What is the status of MARAD's efforts to begin the
design and construction of the NSMVs, and how are you working toward
providing an NSMV for Texas and the Gulf Region?
Answer. On May 21, 2019, MARAD awarded a contract to Tote Services,
Inc. (Tote) to serve as a vessel construction manager to oversee the
construction of the training vessels. Tote will select, on a
competitive and commercial basis, a shipyard to build the training
vessels. MARAD expects Tote to award the contract to the shipyard in
October 2019. The first ship is currently scheduled to be delivered in
August 2022. Funding has been appropriated for construction of two
ships. Those two ships will replace the oldest training vessels--the TS
Empire State and the TS Kennedy, on loan to SUNY Maritime College and
Massachusetts Maritime Academy, respectively. Construction of training
ships for the remaining SMAs depends on the availability of funding.
The President's FY 2020 Budget request includes funding for a third
vessel.
Question 8. Are there efficiencies and savings that can be gained
from constructing multiple NSMVs at once? If so, what are they and how
are you taking advantage of them?
Answer. Yes, significant cost savings could occur if multiple
vessels are constructed at the same time or in a series as this allows
vessels to be produced in an assembly line fashion. Savings could be
achieved because the shipyard could order large quantities of
components at one time, which is more economical. In addition, this
process would allow the shipyard to reduce the time needed for workers
to familiarize themselves with the construction process, thereby
improving construction efficiencies. Further, there are savings over
the life of the vessel that can be gained. MARAD is seeking to take
advantage of these costs savings by having the vessel construction
manager develop the contract to allow for executing options to build
subsequent vessels. The base contract will allow for the construction
of two ships with options for building a third, fourth, and fifth ship,
should funding be appropriated.
In 2015, the Department of Transportation completed the ``MARAD
Training Ship Recapitalization Study Business Case Analysis''. The
report detailed several different options for moving forward with
recapitalizing training ships.
Question 9. What efficiencies and savings did that report highlight
that could be gained from constructing multiple NSMVs at once?
Answer. The report examined different options for recapitalizing
the training ship fleet, including constructing new vessels using
various designs and converting existing ships. The report concluded
that the most cost-effective long-term approach to recapitalizing the
vessels would be to construct new vessels of an identical design in a
series. As noted above, savings are achieved when a shipyard can buy
components in bulk and maximize construction efficiencies by building
several of the same type of vessel.
______
Response to Written Questions Submitted by Hon. Roger Wicker to
Hon. Mark H. Buzby
Question 1. Does MARAD plan to deliver the first NSMV delivered in
time for sea year 2022. If so, does that timeline require vessel
delivery by May 2022?
Answer. In accordance with the terms of the contract, the first
school ship is expected to be delivered in late 2022 and, therefore,
will not be delivered in time for sea year 2022. In addition,
installing training equipment and outfitting the vessel to meet the
school's unique training needs will not be completely done in the
shipyard, but will occur after delivery of the vessel.
Question 2. The first NSMV is scheduled to replace the Empire State
VI for SUNY Maritime Academy in New York. How much would it cost to
keep the Empire State VI operating for an additional sea year beyond
2022?
Answer. It is estimated to cost approximately $8 million to extend
the Empire State VI through 2023. The driving cost is an additional
drydocking that will be required to ensure compliance with USCG safety
standards.
Question 3. Administrator Buzby, increasing amounts of freight has
put additional stress on the Nation's port infrastructure. Last
Congress, I introduced the Port Operations, Research, and Technology
(PORT) Act to develop a framework for awarding grants to critical port
and intermodal projects. MARAD administers the Marine Highways grant
program to support development of our vast waterway transportation
system. What is the state of port infrastructure and where are the most
important areas to invest?
Answer. The state of port infrastructure and intermodal connectors
varies from region to region. Based upon the requests we receive for
Federal assistance, we are seeing the following trends:
Ports based on the U.S. West Coast desire better intermodal
connectivity and innovative technological solutions that will
improve freight throughput performance.
Ports based in the U.S. Gulf are in the midst of a
development boom in energy related facilities. Dock and road
improvements and channel widening and deepening are key issues
there.
Ports based on the U.S. East Coast seek improvements to
existing facilities that are at the end of their lifecycle.
Requests include modernization of docks, terminal facilities,
upgrading equipment, removing old warehouses from waterside
locations, and constructing modern warehouses at near-port or
inland port sites.
Ports based in the Great Lakes are seeking improved
intermodal connectors, updating of rail infrastructure, and
improvements to warehouse and terminal facilities to
accommodate cargoes that are heavier and larger than existing
facilities can support.
Last, but certainly not least, are the ports based on our
inland waterways. We are seeing a renewal of attention paid to
ports and maritime transportation options by communities along
the rivers, with local, regional, and State planners addressing
how ports can contribute to regional economic security. They
are requesting help in improving antiquated infrastructure to
support today's agricultural and manufacturing export needs,
improving rail connectivity, accessing nearby interstate
highways, and creating new ports that can more economically
support regional farming communities. We are also seeing a
growth in interest by barge and terminal operators to support
the movement of containerized, trailerized, and unitized
traffic on the river systems. In addition, operators who move
bulk commodities on the rivers are requesting assistance in
modernizing transportation related facilities.
Question 4. Administrator Buzby, the Mississippi River is one of
the most important marine highways in the country, connecting many of
the America's exports to the ocean and international trade. It is my
understanding that the MARAD Marine Highways grant program receives
about three times as many applications as it can fund. Can you please
update the committee on Marine Highways? Is there anything in addition
to more funding that Congress should consider to improve this program?
Answer. The Marine Highway program was originally designed to
expand or create new marine services for containerized and trailerized
freight. The legislation was amended in 2012 to expand authorization to
assist unitized freight. This is the only program within MARAD that
works extensively with inland waterway based communities, ports and
vessel operators. We are receiving many requests to assist in improving
the transportation of bulk commodities on the inland system, however
this is not permitted to be addressed due to the limitations in the
legislation. If the program were made available to all freight types,
we could facilitate planning assistance and other non-funding related
support to those who move bulk freight.
______
Response to Written Question Submitted by Hon. Roger Wicker to
Hon. Michael A. Khouri
Question. The FMC issued a report in December that recommended the
establishment of a Shipper Advisory Board for U.S. industry to advise
the FMC on emerging maritime issues. Does the FMC plan to establish a
Shipper Advisory Board, and what kind of benefits would FMC gain from
such a board? Are there other areas where advisory boards could be
beneficial to the FMC moving forward?
Answer. The Federal Maritime Commission is exploring the
establishment of a Shipper Advisory Board as recommended by
Commissioner Dye in her final report on Fact Finding 28, submitted to
the Commission in December 2018.
The Commission already emphasizes maintaining open and frequent
communications with regulated entities and interested stakeholders.
Nevertheless, a Shipper Advisory Board would provide a forum for the
FMC to engage one of its most important constituent communities on an
ongoing and regular basis. Such regularized interactions would likely
lead to increased opportunities to learn about industry trends, supply
chain issues, and matters of priority to shippers.
We are assessing what must be done to establish an advisory board.
This research includes what legal and administrative steps must be
taken before creating an advisory board, identifying and estimating
resources required, and determining the potential costs of establishing
and maintaining a Shipper Advisory Board. The Commission may determine
it requires new authorities and authorizations to establish an advisory
board.
The Commission is willing to consider other advisory committees on
other topics if their establishment will assist the FMC in maintaining
competition and integrity for the ocean supply chain.
______
Response to Written Question Submitted by Hon. Ron Johnson to
Hon. Michael A. Khouri
The Federal Maritime Commission (FMC) is tasked with reviewing the
impact of foreign shipping practices and regulations on the U.S.
shipping industry. In my understanding, the Canadian government plans
to propose new ballast water treatment regulations for the Great Lakes.
Question. Is the FMC currently conducting, or planning to conduct,
a review of Canada's latest ballast water proposal? If so, what are the
FMC's initial findings? If findings cannot yet be shared, when is the
release of such findings anticipated?
Answer. Through the Foreign Shipping Practices Act and Section 19
of the Merchant Marine Act of 1920, the Federal Maritime Commission
does have the authority to investigate and address discriminatory
conditions caused by rules, regulations, or laws of a foreign
government.
Given its emphasis on being accessible to stakeholders and our
commitment to following developments in industry, the Commission is
aware of the Canadian Ballast Water Control and Management Regulations.
Individual Commissioners, and relevant Commission staff, have met on
several occasions with representatives of the U.S. flag Great Lakes
shipping industry on this matter. When appropriate, Commissioners and
staff have raised this matter in meetings with Canadian officials as
well as with officials at the United States Coast Guard (USCG).
The Canadian regulations have not been finalized, there is not a
rule, regulation, law, policy, or practice currently in force that
would be applicable to the Foreign Shipping Practices Act, or Section
19 of the Merchant Marine Act of 1920. As such, the Commission has not
reached any definitive conclusions regarding the Ballast Water Control
and Management Regulations.
It is important to note that the Canadian Ballast Water Control and
Management Regulations are part of a broader, multilateral endeavor
initiated through the International Convention for the Control and
Management of Ships' Ballast Water and Sediments adopted at the
International Maritime Organization (IMO) in 2004. The IMO is a
specialized agency of the United Nations responsible for ship operation
regulation. The USCG is the designated United States representative at
the IMO. The USCG together with the Environmental Protection Agency are
the Executive Branch agencies responsible for regulating ballast water
issues. Given their jurisdiction and competencies, they are better
positioned to address the status of discussions and developments
between Transport Canada, USCG, EPA, and U.S. flag shipping interests.
[all]