[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

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

                                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
                                 ------                                

                        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

                              ----------                              
                                                                   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

                              ----------                              


                        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.
---------------------------------------------------------------------------
    \1\ 14 U.S.C. Sec. 1; 10 U.S.C. Sec. 101
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.

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