[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]




               MENACE ON THE RED SEA: SECURING SHIPPING 
                    AGAINST THREATS IN THE RED SEA

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



                                (118-44) 
                                

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                           TRANSPORTATION AND  
                             INFRASTRUCTURE 
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 30, 2024

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure 
             
                      
                          
             
                        
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 





Available online at: https://www.govinfo.gov/committee/house-transportation
      ?path=/browsecommittee/chamber/house/committee/transportation
                               
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                  U.S. GOVERNMENT PUBLISHING OFFICE 
                  
55-435 PDF                WASHINGTON : 2024 
















             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    Sam Graves, Missouri, Chairman 
                Rick Larsen, Washington, Ranking Member    
Eric A. ``Rick'' Crawford, Arkansas  Eleanor Holmes Norton,
Daniel Webster, Florida                District of Columbia
Thomas Massie, Kentucky              Grace F. Napolitano, California      
Scott Perry, Pennsylvania            Steve Cohen, Tennessee               
Brian Babin, Texas                     John Garamendi, California 
Garret Graves, Louisiana             Henry C. ``Hank'' Johnson, Jr., Georgia
David Rouzer, North Carolina         Andre Carson, Indiana
Mike Bost, Illinois                  Dina Titus, Nevada 
Doug LaMalfa, California             Jared Huffman, California
Bruce Westerman, Arkansas            Julia Brownley, California 
Brian J. Mast, Florida               Frederica S. Wilson, Florida
Jenniffer Gonzalez-Colon,            Donald M. Payne, Jr., New Jersey
  Puerto Rico                        Mark DeSaulnier, California
Pete Stauber, Minnesota              Salud O. Carbajal, California
Tim Burchett, Tennessee              Greg Stanton, Arizona,
Dusty Johnson, South Dakota            Vice Ranking Member
Jefferson Van Drew, New Jersey,      Colin Z. Allred, Texas
  Vice Chairman                      Sharice Davids, Kansas
Troy E. Nehls, Texas                 Jesus G. ``Chuy'' Garcia, Illinois
Tracey Mann, Kansas                  Chris Pappas, New Hampshire
Burgess Owens, Utah                  Seth Moulton, Massachusetts
Rudy Yakym III, Indiana              Jake Auchincloss, Massachusetts 
Lori Chavez-DeRemer, Oregon          Marilyn Strickland, Washington
Thomas H. Kean, Jr., New Jersey      Troy A. Carter, Louisiana 
Anthony D'Esposito, New York         Patrick Ryan, New York    
Eric Burlison, Missouri              Mary Sattler Peltola, Alaska
John James, Michigan                 Robert Menendez, New Jersey        
Derrick Van Orden, Wisconsin         Val T. Hoyle, Oregon 
Brandon Williams, New York           Emilia Strong Sykes, Ohio
Marcus J. Molinaro, New York         Hillary J. Scholten, Michigan 
Mike Collins, Georgia                Valerie P. Foushee, North Carolina
Mike Ezell, Mississippi
John S. Duarte, California
Aaron Bean, Florida
Celeste Maloy, Utah
Vacancy  
                                     
                                ------                                

        Subcommittee on Coast Guard and Maritime Transportation

                   Daniel Webster, Florida, Chairman
             Salud O. Carbajal, California, Ranking Member
Brian Babin, Texas                   John Garamendi, California
Brian J. Mast, Florida               Chris Pappas, New Hampshire
Jenniffer Gonzalez-Colon,            Jake Auchincloss, Massachusetts
  Puerto Rico                        Mary Sattler Peltola, Alaska
Jefferson Van Drew, New Jersey       Hillary J. Scholten, Michigan,
Mike Ezell, Mississippi, Vice          Vice Ranking Member
    Chairman                         Rick Larsen, Washington (Ex 
Aaron Bean, Florida                      Officio)
Sam Graves, Missouri (Ex Officio)













                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................     v

                 STATEMENTS OF MEMBERS OF THE COMMITTEE

Hon. Daniel Webster, a Representative in Congress from the State 
  of Florida, and Chairman, Subcommittee on Coast Guard and 
  Maritime Transportation, opening statement.....................     1
    Prepared statement...........................................     2
Hon. Rick Larsen, a Representative in Congress from the State of 
  Washington, and Ranking Member, Committee on Transportation and 
  Infrastructure, opening statement..............................     3
    Prepared statement...........................................     4
Hon. Salud O. Carbajal, a Representative in Congress from the 
  State of California, and Ranking Member, Subcommittee on Coast 
  Guard and Maritime Transportation, opening statement...........     6
    Prepared statement...........................................     7

                               WITNESSES

Charles ``Bud'' Darr, Executive Vice President of Maritime Policy 
  and Government Affairs, Mediterranean Shipping Company (MSC), 
  oral statement.................................................     8
    Prepared statement...........................................    10
Ian M. Ralby, J.D., Ph.D., Founder and Chief Executive Officer, 
  I.R. Consilium, LLC, oral statement............................    15
    Prepared statement...........................................    16
Jonathan Gold, Vice President of Supply Chain and Customs Policy, 
  National Retail Federation, oral statement.....................    20
    Prepared statement...........................................    22
David W. Heindel, President, Seafarers International Union, oral 
  statement......................................................    25
    Prepared statement...........................................    26



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                            January 26, 2024

    SUMMARY OF SUBJECT MATTER

    TO:      LMembers, Subcommittee on Coast Guard and Maritime 
Transportation
    FROM:  LStaff, Subcommittee on Coast Guard and Maritime 
Transportation
    RE:      LSubcommittee Hearing on ``Menace on the Red Sea: 
Securing Shipping Against Threats in the Red Sea''
_______________________________________________________________________


                               I. PURPOSE

    The Subcommittee on Coast Guard and Maritime Transportation 
of the Committee on Transportation and Infrastructure will meet 
on January 30, 2024, at 10:00 a.m. ET in 2167 of the Rayburn 
House Office Building to receive testimony at a hearing 
entitled, ``Menace on the Red Sea: Securing Shipping Against 
Threats in the Red Sea.'' Members will receive testimony on the 
emerging challenges to United States and global shipping 
efforts associated with increased geopolitical threats in and 
around the vital Red Sea shipping corridor. At the hearing, 
Members will receive testimony from the MSC Group, I.R. 
Consilium, the National Retail Federation, and Seafarers 
International Union.

                             II. BACKGROUND

    The Red Sea is a vital shipping corridor for global 
maritime shipping, facilitating the movement of an estimated 12 
percent of global trade per year.\1\ The primary transit route 
is through the Suez Canal, which is a manmade waterway 
connecting the Mediterranean to the Red Sea and the shortest 
maritime route to Asia from Europe. As one of the world's most 
heavily used shipping lanes, approximately 20 percent of all 
container shipping, nearly 10 percent of seaborne oil, and 
eight percent of Liquefied Natural Gas (LNG) pass through the 
Suez Canal.\2\ While attacks by state and non-state actors have 
been a reality for ships transiting the Red Sea for several 
decades, the region has seen a dramatic increase in attacks 
since October 2023. Houthi forces based in Yemen, and supported 
by Iran, have systematically targeted numerous civilian and 
military vessels. As the crisis continues to escalate, numerous 
shipping companies have ceased transits through the Red Sea and 
are instead opting to take longer routes around the Cape of 
Good Hope.\3\ Increases in risk, insurance premiums, transit 
time, and fuel costs have caused a rise in container prices, 
and threaten to severely disrupt global supply chains.\4\ In 
response, the United States has announced Operation Prosperity 
Guardian, an international coalition aimed at defending ships 
transiting the Red Sea.\5\
---------------------------------------------------------------------------
    \1\ Alex Mills, The Long Shadow of the Red Sea Shipping Disruption, 
Atlantic Council, (Jan. 8, 2024) available at https://
www.atlanticcouncil.org/blogs/econographics/the-long-shadow-of-the-red-
sea-shipping-disruption/
    \2\ Id.
    \3\ Meghann Myers, Houthis have attacked ships in the Red Sea 25 
Times Since November, Military Times, (Jan. 4, 2024), available at 
https://www.militarytimes.com/news/your-military/2024/01/04/houthis-
have-attacked-ships-in-the-red-sea-25-times-since-november/.
    \4\ See Lisa Baertlein, Ocean Cargo Rates Climb After New Red Sea 
Ship Attacks, Reuters, (Jan. 4, 2024), available at https://
www.reuters.com/markets/commodities/ocean-cargo-rates-climb-after-new-
red-sea-ship-attacks-2024-01-03/.
    \5\ Press Release, Dep't of Defense, Statement from Secretary of 
Defense Lloyd J. Austin III on Ensuring Freedom of Navigation in the 
Red Sea, (Dec. 18, 2023), available at https://www.defense.gov/News/
Releases/Release/Article/3621110/statement-from-secretary-of-defense-
lloyd-j-austin-iii-on-ensuring-freedom-of-n/ [hereinafter Secretary of 
Defense Statement].
---------------------------------------------------------------------------

                III. HOUTHIS AND ATTACKS IN THE RED SEA

    Ansar Allah, more commonly referred to as the Houthi 
Movement or simply ``the Houthi'', is a Shia Islamist political 
and military organization based in Yemen and believed to be 
supported by Iran.\6\ The Houthi movement has been operating in 
the region since the mid-1990's, and most recently was engaged 
in a military operation against the Republic of Yemen 
Government from 2015 until a peace was brokered in April 
2022.\7\ The Houthi movement has a long history of using the 
Red Sea to advance its interests, from using the waterway to 
smuggle weapons from Iran to conducting attacks against global 
shipping to pressure governments.\8\ In response, the United 
States established an international coalition, referred to as 
the Combined Maritime Force (CMF) and Task Force 153, in 2022, 
to monitor activity and assert presence in the Red Sea.\9\
---------------------------------------------------------------------------
    \6\ Jeremy M. Sharp, Cong. Rsch. Serv., R43960, Yemen: Civil War 
and Regional Intervention, (Nov. 23, 2021), available at https://
crsreports.congress.gov/product/pdf/R/R43960.
    \7\ Carla E. Humud, Cong. Rsch. Serv., IN11917, Political 
Transition in Yemen, (Apr. 25, 2022) available at https://
crsreports.congress.gov/product/pdf/IN/IN11917.
    \8\ Cameron Glenn and Mattison Rowan, Who are Yemen's Houthis, 
Wilson Center, (July 7, 2022), available at https://
www.wilsoncenter.org/article/who-are-yemens-houthis.
    \9\ CTF 153: Red Sea Maritime Security, Combined Maritime Forces 
(CMF), (2024), available at https://combinedmaritimeforces.com/ctf-153-
red-sea-maritime-security/.
---------------------------------------------------------------------------
    Capitalizing on regional instability, in October 2023, the 
Houthi movement increased its attacks against international 
shipping in the Red Sea. Houthi leadership justified its 
attacks as a desire to punish Israel for its actions in 
Gaza.\10\ Throughout October, United States Navy (USN) 
destroyers intercepted numerous missiles fired by Houthi forces 
over the Red Sea.\11\ Houthi air defense also shot down an 
American MQ-9 Reaper operating in or near Yemeni' territorial 
waters.
---------------------------------------------------------------------------
    \10\ Yemen's Houthis `Will Not Stop' Red Sea Attacks Until Israel 
Ends Gaza War, Aljazeera, (Dec. 19, 2023), available at https://
www.aljazeera.com/news/2023/12/19/yemens-houthis-will-not-stop-red-sea-
attacks-until-israel-stops-gaza-war.
    \11\ Paul McLeary, Houthis Launch More Attacks in Red Sea as US 
Warships Head to Region, Politico, (Dec. 16, 2023), available at 
https://www.politico.com/news/2023/12/16/houthi-attacks-red-sea-u-s-
warships-00132146.
---------------------------------------------------------------------------
    On November 19, 2023, Houthi Forces forcefully boarded and 
seized control of the Galaxy Leader, a British-owned and 
Japanese flagged vessel with 25 individuals on board that was 
operating in international waters at the time.\12\ The vessel 
and its crew are still being held by the Houthi. Since then, 
there have been an additional 24 attacks against vessels 
transiting the region, either through hijacking, attempted 
hijacking, or missile and drone attacks.\13\ Furthermore, 
United States naval vessels and personnel have been targeted 
directly by Houthi missiles and drones. On December 31, 2023, 
Houthi fighters fired on USN helicopters with small arms while 
responding to a distress call from a Maersk cargo vessel 
already under attack.\14\ The Houthi have pledged to continue 
attacks in the Red Sea until Israel ceases its campaign in 
Gaza.
---------------------------------------------------------------------------
    \12\ Isabel Debre and Jon Gambrell, Yemen's Houthi Rebels Hijack an 
Israeli-Linked Ship in the Red Sea and Take 25 Crew Members Hostage, 
AP, (Nov. 20, 2023), available at https://apnews.com/article/israel-
houthi-rebels-hijacked-ship-red-sea-dc9b6448690bcf5c70a0baf
7c7c34b09.
    \13\ Joseph Clark, U.S., Partners Committed to Defensive Operations 
in Red Sea, DoD News, (Jan. 4, 2024), available at https://
www.defense.gov/News/News-Stories/Article/Article/3631623/us-partners-
committed-to-defensive-operations-in-red-sea/.
    \14\ @CENTCOM, X, (Dec. 31, 2023, 3:53 AM), available at https://
twitter.com/CENTCOM/status/1741381969936834951.
---------------------------------------------------------------------------

                     IV. IMPACT ON GLOBAL SHIPPING

    There has been a profound impact on shipping through the 
Red Sea due to the Houthi attacks. In response to increased 
risk, several of the largest shipping companies have halted or 
limited transits through the Red Sea and Suez Canal.\15\ As of 
January 6, 2024, 389 container vessels, accounting for over a 
fifth of global container capacity, have altered their routes 
to avoid the Suez Canal and Red Sea.\16\ As an alternative, 
ships have shifted to sailing around the Cape of Good Hope. 
This, however, adds significant time to transits between Europe 
and Asia, and can cost upwards of $1,000,000 in additional 
fuel.\17\ Furthermore, ships need to make increased port calls 
along the African coast to refuel and resupply, increasing 
their vulnerability to piracy attacks by other non-state 
actors.\18\ Shipping companies still transiting the Red Sea and 
Suez Canal are subject to increased operational costs. As of 
January 2024, insurance premiums for container ships transiting 
the Red Sea have increased 10-fold, amounting to tens of 
thousands of dollars increase in insurance premiums.\19\ Major 
insurers are also seeking to exclude United States, United 
Kingdom, and Israeli ships from coverage on Red Sea 
voyages.\20\
---------------------------------------------------------------------------
    \15\ Peter Eavis and Keith Bradsher, Red Sea Attacks Leave Shipping 
Companies with Difficult Choices, N.Y. Times, (Jan. 6, 2024), available 
at https://www.nytimes.com/2024/01/06/business/red-sea-shipping-
houthi.html.
    \16\ Id.
    \17\ Noah Berman, How Houthi Attacks in the Red Sea Threaten Global 
Shipping, Council on Foreign Relations, (Jan. 5, 2024) available at 
https://www.cfr.org/in-brief/how-houthi-attacks-red-sea-threaten-
global-shipping.
    \18\ Jonathan Saul, London Marine Insurers Widen High Risk Zone in 
Red Sea as Attacks Surge, Reuters, (Dec. 18, 2023), available at 
https://www.reuters.com/markets/commodities/london-marine-insurers-
widen-high-risk-zone-red-sea-attacks-surge-2023-12-18/.
    \19\ Id.
    \20\ Alex Longley and Aine Quinn, Ship Insurers Seeking Exclusions 
for US and UK Vessels from Red Sea Coverage, Bloomberg, (Jan. 16, 
2024), available at https://www.bloomberg.com/news/articles/2024-01-16/
insurers-seek-to-exclude-us-uk-ships-from-red-sea-cover.
---------------------------------------------------------------------------
    As of January 10, 2024, container freight rates have spiked 
to a 15-month high, costing roughly $6000-$7000 per forty-foot 
equivalent (FEU) on transits between Europe and Asia.\21\ In 
September of 2023, similar transportation cost below $1800 per 
FEU.\22\ Increased shipping times due to the use of alternative 
routes have also constrained space availability on ships, 
forcing shippers to pay premium rates to secure spots.\23\ The 
rise in insurance premiums, travel times, and fuel costs have 
holistically increased the cost of global shipping, negatively 
impacting shippers, manufacturers, and consumers.
---------------------------------------------------------------------------
    \21\ Mohammed Al-ansare, Container Freight Rates to Europe Spike to 
15-Month High as Red Sea Attacks Continue, S&P Global Commodity 
Insights, (Jan. 10, 2024), available at https://www.spglobal.com/
commodityinsights/en/market-insights/latest-news/shipping/011024-
container-freight-rates-to-europe-spike-to-15-month-high-as-red-sea-
attacks-continue.
    \22\ Id.
    \23\ Id.
---------------------------------------------------------------------------
    Notably, the impact of the crisis on global shipping has 
been amplified by a simultaneous drought that has caused water 
levels in the Panama Canal, which facilitates five percent of 
the world's seaborne trade, to hit historic lows.\24\ As 
several of the lakes and rivers feeding the canal dry up, the 
locks are close to being too shallow for the passage of 
container ships.\25\ The lower water level has forced 
authorities to restrict access and limit the number of ships 
using the canal, and in some cases, ships are required to carry 
less cargo to minimize draft.\26\ Only 18 ships will be 
permitted to transit the canal per day in February, down from a 
usual operation capacity of about 36 ships per day.\27\ 
Consequently, carriers will have to decide between paying 
increased premiums for priority access through the canal, 
waiting, or rerouting.\28\ Regardless of which option is 
selected, the limited ability of container ships to transit the 
Panama Canal amplifies the economic impact of the current 
crisis in the Red Sea.
---------------------------------------------------------------------------
    \24\ Mie Hoehris Dahl, The Panama Canal is Running Dry, Foreign 
Policy, (Jan. 15, 2024), available at https://foreignpolicy.com/2024/
01/15/panama-suez-canal-global-shipping-crisis-climate-change-drought/ 
[hereinafter Panama Canal Running Dry].
    \25\ The Dwindling of the Panama Canal Boosts Rival Trade Routes, 
The Economist, (Jan. 9, 2024), available at https://www.economist.com/
the-americas/2024/01/09/the-dwindling-of-the-panama-canal-boosts-rival-
trade-routes.
    \26\ Panama Canal Running Dry, supra note 24.
    \27\ Id.
    \28\ Id.
---------------------------------------------------------------------------

                       V. UNITED STATES RESPONSE

    Since the beginning of the crisis, the USN has maintained a 
continuous and active presence in the region to enforce freedom 
of navigation and maintain security as part of its CMF 
responsibilities. However, as Houthi attacks increased 
additional resources were needed. Subsequently on December 18, 
2023, the United States announced the establishment of 
Operation Prosperity Guardian, a multinational security 
initiative under the purview of the CMF and the leadership of 
Task Force 153.\29\ Currently, Operation Prosperity Guardian 
includes contributions from the United Kingdom, Bahrain, 
Canada, France, Italy, Netherlands, Norway, Seychelles, and 
Spain.\30\
---------------------------------------------------------------------------
    \29\ Secretary of Defense Statement, supra note 5.
    \30\ Id.
---------------------------------------------------------------------------
    On January 10, 2024, the United Nations Security Council 
passed Resolution 2722, which demanded Yemen's Houthis 
immediately end attacks on ships in the Red Sea, cautioned 
against escalating tensions, demanded the release of the Galaxy 
Leader, and implicitly endorsed Operation Prosperity 
Guardian.\31\ The provision was sponsored by the United States 
and Japan.\32\ No members voted against the provision, while 11 
members voted for it and four members (including veto wielding 
China and Russia) abstained.\33\
---------------------------------------------------------------------------
    \31\ Jonathan Landay and Arshad Mohammed, UN Security Council 
Demands Houthis Stop Red Sea Attacks, Reuters, (Jan. 10, 2024), 
available at https://www.reuters.com/world/middle-east/un-security-
council-demands-houthis-stop-red-sea-attacks-2024-01-10/.
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------
    On January 12, 2024, the USN, in conjunction with British 
forces, engaged in a limited air campaign against Houthi weapon 
sites and support infrastructure in Yemen. The attacks involved 
60 targets in 16 locations and were aimed at degrading the 
Houthi' capability to target seaborne shipping.\34\
---------------------------------------------------------------------------
    \34\ See e.g. Joseph Clark, U.S. Partners' Forces Strike Houthi 
Military Targets in Yemen, Dep't of Defense News, (Jan. 12, 2024), 
available at https://defense.gov/News/News-Stories/Article/Article/
3644027/us-partners-forces-strike-houthi-military-targets-in-yemen/; 
Phil Stewart, Idress Ali, & Mohammed Ghobari, US and Britain strike 
Yemen in reprisal for Houthi attacks on Shipping, Reuters, (Jan. 12, 
2024), available at https://www.reuters.com/world/us-britain-carry-out-
strikes-against-houthis-yemen-officials-2024-01-11/.
---------------------------------------------------------------------------
    Shippers have also expressed an increased concern that 
carriers will leverage the ongoing crisis as a means to 
maintain inflated profits.\35\ As the crisis continues, the 
Federal Maritime Commission will be pivotal in insuring that 
fair market practices and regulations are being adhered to, in 
order to prevent high prices.
---------------------------------------------------------------------------
    \35\ The State of Transportation: Hearing before the H. Comm. on 
Transp. and Infrastructure, 118th Cong., (Jan. 17, 2024) (Chairman 
Rouzer Question to panel, 38:30).
---------------------------------------------------------------------------

                             VI. WITNESSES

     LBud Darr, Executive Vice President of Maritime 
Policy and Government Affairs, Mediterranean Shipping Company 
(MSC)
     LDr. Ian Ralby, Chief Executive Officer, I.R. 
Consilium
     LJonathan Gold, Vice President of Supply Chain and 
Customs Policy, National Retail Federation
     David Heindel, President, Seafarers International 
Union 


 
                MENACE ON THE RED SEA: SECURING SHIPPING  
                     AGAINST THREATS IN THE RED SEA

                              ----------                              


                       TUESDAY, JANUARY 30, 2024

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:06 a.m. in 
room 2167 Rayburn House Office Building, Hon. Daniel Webster 
(Chairman of the subcommittee) presiding.
    Mr. Webster of Florida. The Subcommittee on Coast Guard and 
Maritime Transportation will come to order.
    I ask that the chair be authorized to declare a recess 
during today's hearing.
    Without objection, show that ordered.
    I also ask unanimous consent that Members who do not sit on 
the subcommittee be permitted to sit here and ask questions.
    Without objection, show that ordered.
    As a reminder, if Members wish to insert documents in the 
record, please email them to [email protected].
    Now I recognize myself for the purpose of an opening 
statement for 5 minutes.

OPENING STATEMENT OF HON. DANIEL WEBSTER OF FLORIDA, CHAIRMAN, 
    SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

    Mr. Webster of Florida. We meet here today to examine 
threats and emerging challenges to maritime commerce in and 
around the Red Sea shipping corridor.
    I would like to welcome our witnesses today, I appreciate 
them: Bud Darr, executive vice president of maritime policy and 
government affairs at MSC Group; Ian Ralby, CEO of I.R. 
Consilium; Jonathan Gold, vice president of supply chain and 
customs policy at the National Retail Federation; and David 
Heindel, president of the Seafarers International Union.
    Thank you all for being here, we really appreciate it and 
look forward to your testimony and what you have got to say.
    The Red Sea is critical as a shipping corridor for global 
maritime commerce, connecting Europe and Asia through the Suez 
Canal, representing nearly 20 percent of container traffic and 
a significant portion of oil and liquefied natural gas 
shipments.
    Since October, Houthis, an Iranian-backed separatist group 
based in Yemen, have sought to disrupt global commerce by 
significantly increasing attacks against military and civilian 
vessels transiting the Red Sea. To date, dozens of vessels have 
been targeted either through hijacking, attempted hijacking, or 
missile or drone strikes, putting ships and their crews at 
risk.
    Sadly, we learned last week that two Navy SEALs were lost 
at sea during a mission to disrupt Iranian arms shipments to 
the Houthis. Our prayers go out to the families of the fallen 
SEALs and all servicemembers still in the region.
    In response to these threats, we have seen carriers reroute 
ships around Africa and insurance costs skyrocketing, leading 
to increased container rates and longer transit times for goods 
to arrive at their destinations.
    On December 18, the United States announced the 
establishment of Operation Prosperity Guardian, a multinational 
security initiative to support maritime commerce transiting 
through the Red Sea. On January 12, the United States Navy, in 
conjunction with coalition partners, began air strikes in an 
effort to degrade the Houthis' ability to strike maritime 
targets.
    At the same time these disruptions are occurring in the Red 
Sea, the Panama Canal is also facing bottlenecks as low water 
levels are forcing canal authorities to reduce transits by 
half, compounding uncertainty for ocean carriers and shippers.
    We saw firsthand during the pandemic what a significant 
supply chain crisis can do to global economy, and we must not 
let that happen again.
    And so, I thank our witnesses for joining us today and look 
forward to hearing what they have done to address these 
challenges.
    [Mr. Webster of Florida's prepared statement follows:]

                                 
    Prepared Statement of Hon. Daniel Webster of Florida, Chairman, 
        Subcommittee on Coast Guard and Maritime Transportation
    We meet today to examine threats and emerging challenges to 
maritime commerce in and around the Red Sea shipping corridor. I'd like 
to welcome our witnesses joining us today--Bud Darr, Executive Vice 
President, Maritime Policy and Government Affairs at MSC Group; Ian 
Ralby, CEO of I.R. Consilium; Jonathan Gold, Vice President of Supply 
Chain and Customs Policy, National Retail Federation; and David 
Heindel, President of the Seafarers International Union.
    The Red Sea is a critical shipping corridor for global maritime 
commerce--connecting Europe and Asia through the Suez Canal, 
representing nearly twenty percent of container traffic and a 
significant portion of oil and liquefied natural gas shipments.
    Since October, the Houthis, an Iranian-backed separatist group 
based in Yemen, have sought to disrupt global commerce by significantly 
increasing attacks against military and civilian vessels transiting the 
Red Sea. To date, dozens of vessels have been targeted, either through 
hijacking, attempted hijacking, or missile and drone strikes--putting 
ships and their crews at risk.
    Sadly, we learned last week that two Navy SEALS were lost at sea 
during a mission to disrupt Iranian arms shipments to the Houthis. Our 
prayers go to the families of those fallen SEALS and to all the service 
members still in the region.
    In response to these threats, we have seen carriers reroute ships 
around Africa and insurance costs skyrocket, leading to increased 
container rates and longer transit times for goods to arrive at their 
destinations.
    On December 18th, the United States announced the establishment of 
Operation Prosperity Guardian, a multinational security initiative to 
support maritime commerce transiting through the Red Sea, and on 
January 12th, the United States Navy, in conjunction with coalition 
partners, began air strikes in an effort to degrade the Houthi's 
ability to strike maritime targets.
    At the same time these disruptions are occurring in the Red Sea, 
the Panama Canal is also facing bottlenecks as low water levels are 
forcing canal authorities to reduce transits by half--compounding 
uncertainty for ocean carriers and shippers.
    We saw firsthand during the pandemic what a significant supply 
chain crisis can do to the global economy, and we must not let it 
happen again. And so, I thank our witnesses for joining us today and 
look forward to hearing what can be done to address these challenges.

    Mr. Webster of Florida. So, now I recognize the ranking 
member to give an opening statement.

 OPENING STATEMENT OF HON. RICK LARSEN OF WASHINGTON, RANKING 
     MEMBER, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

    Mr. Larsen of Washington. Thank you, Chair Webster and 
Ranking Member Carbajal, for holding this hearing on the 
ongoing Houthi attacks on commercial shipping. I look forward 
to learning about the status of the domestic and international 
supply chains, as well as the U.S. and the international 
response.
    Ninety percent of goods moved worldwide spend time on a 
ship. As a country that depends on maritime trade, the U.S. has 
to do what it needs to do to ensure resilient supply chains. 
For its part, the U.S. Navy continues to do an exceptional job 
to ensure free and open maritime trade around the world.
    I was on this committee when, in 2009, pirates captured the 
U.S.-flagged Maersk Alabama off the coast of Somalia, and the 
Navy ensured the safe return of the vessel and every mariner on 
board.
    Unfortunately, a new threat exists: a continuous and 
unpredictable Houthi attack on commercial vessels transiting 
the Suez Canal and the Red Sea.
    I do want to take a moment to formally recognize the work 
of the Navy, which is playing a leading role in Operation 
Prosperity Guardian and, with partner nations, is regularly 
thwarting Houthi attacks. As a result, ships continue to 
transit the region daily.
    I am saddened, though, by the death of two Navy SEALs who 
perished during an operation to seize Iranian weapons bound for 
Yemen's Houthi rebels.
    Special Warfare Operator First Class Christopher J. 
Chambers and Special Warfare Operator Second Class Nathan Gage 
Ingram died protecting American sovereignty, and their 
sacrifice kept deadly weapons out of the hands of terrorists.
    However, the threat posed by Houthi rebels persists. To 
avoid this challenge, some operators have diverted their 
vessels around the Horn of Africa, adding 10 to 12 days to the 
trip, increasing carbon emissions and $1 million in operating 
costs to their voyages.
    Those who do transit the Red Sea face significant increases 
in their insurance premiums or risk being dropped altogether. 
In either case, the end result is higher prices for U.S. 
consumers.
    And over the past 4 years, the global supply chain has been 
tested in ways previously unimaginable. From the Houthi attacks 
in the Red Sea to historic drought conditions at the Panama 
Canal to COVID-19-related backlogs, one thing is clear: smooth 
sailing on the high seas should not be taken for granted.
    Congress responded to the COVID-19 supply chain crisis in 
several ways. As an example, Congress passed the Bipartisan 
Infrastructure Law, which, among other things, invests $2.25 
billion in the Port Infrastructure Development Program. That 
investment will help ensure that ports are prepared for 
inevitable fluctuations in cargo that jeopardize the seamless 
movement of goods.
    Congress passed the Ocean Shipping Reform Act, a bipartisan 
bill which ensures fair and transparent policies and practices 
associated with international shipping.
    And in 2009, in the wake of the piracy attack on the Maersk 
Alabama, this subcommittee took immediate action by holding 
hearings and coordinating a comprehensive Federal response to 
ensure the protection of U.S. ships and U.S. mariners. That 
response involved the Department of Transportation, Department 
of Defense, Department of State, Department of Commerce, and 
the U.S. Coast Guard. The result was the immediate protection 
of U.S.-flagged ships, as well as a coordinated international 
effort to apprehend and prosecute pirates and associated 
criminal organizations.
    This time, even more is needed. The Houthi threat requires 
an international response that goes beyond a justified response 
in attacking Houthi aggression.
    Today, we are going to hear from Dr. Ralby about the need 
to empower Yemen to combat the threat internally. Just as the 
U.S. should continue to stand by Ukraine, we have to support 
our friends around the world. Their security and sovereignty is 
our security and sovereignty.
    And while we can't control the rain in Panama immediately, 
Congress can ensure that infrastructure here at home works. 
That means continued investments in roads, rail, airports, 
ports, vessels, and the women and men that make our 
transportation system work.
    It's not too soon to start considering what that next 
investment in infrastructure will look like, as well as the 
investment in the U.S. maritime industry. So, I look forward to 
working with my colleagues to ensure the investments that 
started in the BIL are continued.
    I would just note, as well, that we have the responsibility 
in this committee, as the Subcommittee on Coast Guard and 
Maritime Transportation, to look at the supply chain issues 
with regards to shipping around the world and shipping in the 
U.S. And that's the focus of this hearing, and I do want to 
thank the chair and the ranking member for calling it.
    And with that, I look forward to hearing our witnesses and 
yield back.
    [Mr. Larsen of Washington's prepared statement follows:]

                                 
 Prepared Statement of Hon. Rick Larsen of Washington, Ranking Member, 
             Committee on Transportation and Infrastructure
    Thank you, Chairman Webster and Ranking Member Carbajal, for 
holding this hearing on the ongoing Houthi attacks on commercial 
shipping.
    I look forward to learning about the status of domestic and 
international supply chains as well as the U.S. and international 
response.
    Ninety percent of goods moved worldwide spend time on a ship. As a 
country that depends on maritime trade, the United States must do 
everything to ensure resilient supply chains.
    For its part, the United States Navy continues to do an exceptional 
job to ensure free and open maritime trade around the world.
    I was on this Committee when, in 2009, pirates captured the U.S.-
flagged Maersk ALABAMA off the coast of Somalia, the Navy ensured the 
safe return of the vessel and every mariner on board.
    Unfortunately, a new threat exists--continuous and unpredictable 
Houthi attacks on commercial vessels transiting the Suez Canal and the 
Red Sea.
    I would like to take a moment to formally recognize the work of the 
U.S. Navy, which is playing a leading role in Operation Prosperity 
Guardian and--with partner nations--is regularly thwarting Houthi 
attacks. As a result, ships continue to transit the region daily.
    I am saddened though by the death of two Navy SEALs who perished 
during an operation last week to seize Iranian weapons bound for 
Yemen's Houthi rebels.
    Special Warfare Operator 1st Class Christopher J. Chambers and 
Special Warfare Operator 2nd Class Nathan Gage Ingram died protecting 
America's sovereignty, and their sacrifice kept deadly weapons out of 
the hands of terrorists.
    However, the threat posed by Houthi rebels persists. To avoid this 
challenge, some operators have diverted their vessels around the Horn 
of Africa, adding 10 to 12 days, increased carbon emissions and $1 
million in operating costs to their voyages.
    Those who do transit the Red Sea face significant increases in 
their insurance premiums or risk being dropped altogether. In either 
case, the result is higher prices for U.S. consumers.
    Over the past 4 years, the global supply chain has been tested in 
ways previously unimaginable.
    From these Houthi attacks in the Red Sea to historic drought 
conditions at the Panama Canal to COVID-19-related backlogs, one thing 
is clear--smooth sailing on the high seas should not be taken for 
granted.
    Congress responded to the COVID-19 supply chain crisis in several 
ways.
    First, Congress passed the Bipartisan Infrastructure Law. Among 
other things, the BIL invests $2.25 billion in the Port Infrastructure 
Development Program.
    That investment will help ensure that ports are prepared for 
inevitable fluctuations in cargo that jeopardize the seamless movement 
of goods.
    Second, Congress passed the Ocean Shipping Reform Act, which 
ensures fair and transparent policies and practices associated with 
international shipping.
    In 2009, in the wake of the piracy attack on the Maersk ALABAMA, 
this Subcommittee took immediate action by holding hearings and 
coordinating a comprehensive federal response to ensure the protection 
of U.S. ships and U.S. mariners.
    That response involved the Department of Transportation, Department 
of Defense, Department of State, Department of Commerce and the Coast 
Guard.
    The result was the immediate protection of U.S. flagged ships as 
well as a coordinated international effort to apprehend and prosecute 
pirates and associated criminal organizations.
    This time, even more is needed. The Houthi threat requires an 
international response that goes beyond a justified response in 
attacking Houthi aggression.
    Today, we will hear from Dr. Ralby about the need to empower Yemen 
to combat the threat internally.
    Just as the U.S. should continue to stand by Ukraine, we must 
support our friends around the world--their security and sovereignty is 
our security and sovereignty.
    While we cannot control the rain in Panama, Congress can ensure 
that our infrastructure here at home works.
    That means continued investment in roads, rail, airports, ports, 
vessels and the women and men that make transportation work.
    It's not too soon to start considering what that next investment in 
infrastructure and the U.S. maritime industry will look like.
    I look forward to working with my colleagues to ensure that the 
investments started in the Bipartisan Infrastructure Law are continued. 
I would note as well that we have the responsibility on this Committee, 
and this Subcommittee on Coast Guard and Maritime Transportation, to 
look at supply chain issues with regards to shipping around the world 
and shipping in the U.S.--and that's the focus of this hearing.
    Thank you, Chairman Webster, and I look forward to hearing from our 
witnesses.

    Mr. Webster of Florida. Thank you, Ranking Member Larsen. 
Now I recognize the ranking member of the subcommittee.
    Mr. Carbajal, you are recognized for 5 minutes.

  OPENING STATEMENT OF HON. SALUD O. CARBAJAL OF CALIFORNIA, 
   RANKING MEMBER, SUBCOMMITTEE ON COAST GUARD AND MARITIME 
                         TRANSPORTATION

    Mr. Carbajal. Thank you, Chairman Webster. Today's hearing 
is timely so we can better understand the ongoing situation in 
the Red Sea and the effect it has on the global economy.
    About 12 percent or $1 trillion of global trade passes 
through the Red Sea every year. Ship operators have scrambled 
to account for the increased risk by taking extreme measures 
such as diverting vessels, paying increased insurance costs, 
hiring private security, and relying on the United States Navy-
led Operation Prosperity Guardian for protection in the region.
    The U.S. and global economy will be affected by this crisis 
in the Red Sea. The only question is how much.
    I look forward to learning more about the commercial and 
economic impacts, but I would like to use the rest of my time 
to focus on the human factor.
    Life on a ship is not glamorous. Mariners are typically at 
sea for several months at a time. They have limited access to 
internet and their families, and they are on-call 24 hours a 
day, 7 days a week.
    For foreign mariners on foreign ships, it's worse. They are 
often required to work a year or more at a time, are paid 
unfair wages, and are often subjected to subpar health 
conditions and legal systems. Unfortunately, that's the result 
of the flag of convenience system where shipowners can register 
their vessels in low-tax--let me repeat that, low-tax--low-
regulation countries, and find mariners from anywhere in the 
world as long as they will tolerate the wages.
    For all mariners, though, the Houthi threat in the Red Sea 
is real. The U.S. Navy is doing incredible work protecting 
lives and commerce, but living, sleeping, and working under 
constant threat of deadly attack is unacceptable and 
unsustainable.
    Unfortunately, this is business as usual for American 
mariners. Through every emergency, conflict, and war, the 
United States merchant marine has shown up. They bravely sailed 
during World War II when ships were being sunk daily by 
torpedoes. Many lives were lost. They delivered military 
supplies to our troops during the Gulf War when foreign 
mariners and foreign companies refused. They routinely sail 
hospital ships to disaster-stricken regions.
    Currently, American mariners are showing their bravery and 
dedication by sailing through the Red Sea to deliver military 
cargo and humanitarian aid to the region.
    Congress must find new and innovative ways to bolster the 
U.S. merchant marine.
    I will close by expressing my appreciation for the U.S. 
Navy. Without them, vessel traffic in the Red Sea would have 
come to a halt in November.
    I would also like to remember the two Navy SEALs who died 
during an operation in the Arabian Sea to intercept the 
delivery of Iranian weapons to Houthi terrorists. They are 
heroes, and their sacrifice protected countless military and 
civilian lives.
    Thank you, Chair, and I look forward to hearing from our 
witnesses.
    [Mr. Carbajal's prepared statement follows:]

                                 
  Prepared Statement of Hon. Salud O. Carbajal of California, Ranking 
    Member, Subcommittee on Coast Guard and Maritime Transportation
    Thank you, Chair Webster. Today's hearing is timely so we can 
better understand the ongoing situation in the Red Sea and the effect 
it has on the global economy.
    About 12 percent or $1 trillion of global trade passes through the 
Red Sea every year. Ship operators have scrambled to account for the 
increased risk by taking extreme measures such as diverting vessels, 
paying increased insurance costs, hiring private security, and relying 
on the U.S. Navy led Operation Prosperity Guardian for protection in 
the region.
    The U.S. and global economy will be affected by the crises in the 
Red Sea--the only question is how much.
    I look forward learning more about the commercial and economic 
impacts, but I would like to use the rest of my time to focus on the 
human factor.
    Life on a ship is not glamorous. Mariners are typically at sea for 
several months at a time, they have limited access to internet and 
their families, and they are on-call 24 hours a day, 7 days a week.
    For foreign mariners on foreign ships, it's worse. They're often 
required to work a year or more at a time, are paid unfair wages, and 
are often subjected to subpar health conditions and legal systems. 
Unfortunately, that's the result of the ``flag of convenience'' system 
where ship owners can register their vessels in low-tax/low-regulation 
countries and find mariners from anywhere in the world--so long as 
they'll tolerate the wages.
    For all mariners though, the Houthi threat in the Red Sea is real. 
The U.S. Navy is doing incredible work protecting lives and commerce 
but living, sleeping, and working under constant threat of deadly 
attack is unacceptable and unsustainable.
    Unfortunately, this is business as usual for American mariners. 
Through every emergency, conflict, and war, the U.S. merchant marine 
has shown up. They bravely sailed during World War II when ships were 
being sunk daily by torpedoes. They delivered military supplies to our 
troops during the Gulf war when foreign mariners and foreign companies 
refused. They routinely sail hospital ships to disaster-stricken 
regions.
    Currently, American mariners are showing their bravery and 
dedication by sailing through the Red Sea to deliver military cargo and 
humanitarian aid to the region.
    Congress must find new and innovative ways to bolster the U.S. 
merchant marine.
    I'll close by expressing my appreciation for the U.S. Navy. Without 
them, vessel traffic in the Red Sea would have come to a halt in 
November.
    I'd also like to remember the two Navy Seals who died during an 
operation in the Arabian Sea to intercept the delivery of Iranian 
weapons to Houthi terrorists. They are heroes and their sacrifice 
protected countless military and civilian lives.
    Thank you, Chair, and I look forward to hearing from our witnesses.

    Mr. Webster of Florida. I would like to again welcome our 
witnesses.
    I appreciate you being here. Thank you for being here 
today.
    I would like to take a moment to explain our lighting 
system to the witnesses. There are three lights in front of 
you. Green means go, yellow means time to slow down, and red 
means conclude your remarks.
    I also ask unanimous consent that the witnesses' full 
statements be included in the record.
    Without objection, show that ordered.
    And I ask unanimous consent that the record of today's 
hearing remain open until such time as the witnesses have 
provided answers to any questions that may be submitted to them 
in writing.
    Without objection, show that ordered.
    I ask unanimous consent that the record remain open for 15 
days for any additional comments and information submitted by 
Members or witnesses to be included in the record of today's 
hearing.
    Without objection, show that ordered.
    As your written testimony has been made part of the record, 
the committee asks that you limit your oral remarks to 5 
minutes.
    With that, Mr. Darr, you are recognized for 5 minutes.

TESTIMONY OF CHARLES ``BUD'' DARR, EXECUTIVE VICE PRESIDENT OF 
MARITIME POLICY AND GOVERNMENT AFFAIRS, MEDITERRANEAN SHIPPING 
  COMPANY (MSC); IAN M. RALBY, J.D., Ph.D., FOUNDER AND CHIEF 
  EXECUTIVE OFFICER, I.R. CONSILIUM, LLC; JONATHAN GOLD, VICE 
 PRESIDENT OF SUPPLY CHAIN AND CUSTOMS POLICY, NATIONAL RETAIL 
    FEDERATION; AND DAVID W. HEINDEL, PRESIDENT, SEAFARERS 
                      INTERNATIONAL UNION

TESTIMONY OF CHARLES ``BUD'' DARR, EXECUTIVE VICE PRESIDENT OF 
MARITIME POLICY AND GOVERNMENT AFFAIRS, MEDITERRANEAN SHIPPING 
                         COMPANY (MSC)

    Mr. Darr. Thank you, Chairman Webster. Thank you, Ranking 
Members Larsen and Carbajal, and Members, for the opportunity 
to be here today and help describe what our experience has been 
to date and perhaps shed a little light on what the future may 
look like with this situation.
    I have provided a written statement, I provided my CV. I 
will not bore you with too much detail on that, other than to 
say I am a graduate of the United States Merchant Marine 
Academy, proudly. I served in the U.S. Navy and the U.S. Coast 
Guard until retirement, and I am an American citizen, and I 
feel very strongly about the interests that the United States 
has in these issues, whether it involves U.S.-flagged ships, 
U.S. mariners, or other seafarers just trying to do their jobs 
every day.
    I would like to offer up some comments on four points that 
I would like to ask your attention to.
    One is that this is an unprecedented series of attacks by 
nonstate actors upon commercial shipping. There have certainly 
been attacks in the past, either by states that were well 
organized, and there have been attacks by nonstate actors such 
as Somali piracy some time ago, which seems, unfortunately, to 
be reemerging now at this moment. But as nonstate actors go, 
the level of sophistication of the targeting, the weaponry, and 
the boldness is absolutely unprecedented. And they have, in 
fact, taken control of a vital sealane, which is essential not 
only for U.S. economic interests, but for trade to flow more 
broadly throughout the world.
    I will point out what we do in our industry is we are a 
conduit for trade. We don't operate ships just to operate them, 
although we love them very much, and we love the people that 
operate them. We go where the trade requires us to go, and we 
will adapt accordingly.
    I would also like to offer my express thanks not only to 
the U.S. Navy, who not only has fought so bravely, sometimes 
paying the ultimate cost during this particular conflict, but 
also for keeping the watch over the holidays. I remember many 
conference calls with CENTCOM where we were at home with our 
families, and they were not, and we are grateful for the 
contributions that are being made, even if today we are not 
seeing a genuine improvement on the water to the point where we 
feel that it is safe.
    So, my second point is, we are making this work. It is an 
extraordinary, unprecedented situation. It is extremely 
complicated, particularly to adapt global networks quickly, but 
we are making it work. Commerce is flowing.
    The third point is, these are interconnected systems when 
you look at any one carrier or you look at a sector, such as 
the containerized sector, which is the part of our business I 
am here to speak to you about today. You can't look at one 
particular port or one particular service loop, which would be 
a series of ports served by a series of vessels. But you have 
to look at how it fits in with the broader system, particularly 
where it interfaces with ports and interfaces with the 
shoreside component of what it takes to keep supply chains 
moving.
    And one major difference between the situation we face 
during the pandemic, which was also quite difficult, and what 
we face today is that those shoreside components are not 
showing the incredible stress that they were under during the 
pandemic, where it became painfully obvious to us that we could 
still operate ships quite well, we hadn't forgotten how to do 
that, but the shoreside component of what we would do once we 
got to port in the U.S. was not capable of handling that sort 
of a surge. And that is where I think these investments in the 
future are critically important, so that we have a more capable 
and more resilient series of supply chain components for the 
future in the interest of the United States.
    I will also say there are substantial costs that come with 
these alterations. Some of the comments in the opening 
statement, I think, made recognition of that. And we are still 
trying to assess the full scope of those costs. At this moment, 
quite honestly, you have to make the best educated guess that 
you can, because it's not the same from company to company, 
it's not the same from service to service, it's not the same 
from loop to loop, and it's even not exactly the same from ship 
to ship. But keep in mind, if we need additional ships of a 
certain type or other equipment to fulfill the surge need, that 
has to come probably from other service areas, so, it causes 
disruption throughout the whole interconnected network.
    I believe that situation will normalize. I believe we are 
in this for a while, at least it feels like that way. And as 
that happens, I think the market will take over again and 
pricing will reflect equity from carrier to carrier or customer 
to customer over time, as the market normally can do.
    And the last point I will make, sir, is about seafarers. At 
the end of the day, the controlling consideration here and the 
controlling point of what the discussion should be, in my 
humble opinion, has to be about the human aspect of this. I 
work for a family-owned company. We have almost 200,000 
employees, and I can tell you, our chairman views them all as 
family members. It is unique for us, but it shouldn't be. These 
seafarers are keeping commerce moving, they are serving global 
society's needs, and they are just trying to do their job every 
day. And for them to be shot at, as they were three different 
times on our fleet, one of which was an hour-long firefight--an 
hour-long firefight--that they were directly in the middle of, 
is just unacceptable. We have got to find a way to make the 
shooting stop.
    And for all the other considerations we have here, I would 
urge let's keep in mind there are real human lives hanging in 
the balance of the decisions that we make, and they cannot just 
be commercial decisions because we can insure a ship, we can 
insure a cargo or our customers can, but you can never properly 
insure the impact of a loss of human life. Thank you.
    [Mr. Darr's prepared statement follows:]

                                 
Prepared Statement of Charles ``Bud'' Darr, Executive Vice President of 
Maritime Policy and Government Affairs, Mediterranean Shipping Company 
                                 (MSC)
1. Introduction: Mediterranean Shipping Company and the Liner Shipping 
                               Industry.
    Chairman Webster, Ranking Member Carbajal, and Members of the 
Subcommittee, thank you for the invitation to testify today. My name is 
Bud Darr. I am Executive Vice President of Mediterranean Shipping 
Company Group (MSC).
    MSC is a global leader in transportation and logistics. As one of 
the world's leading container shipping lines, and having by far the 
largest fleet, MSC has 675 offices across 155 countries worldwide, with 
the MSC Group employing almost 200,000 people. With access to an 
integrated network of road, rail, air, and sea transport resources 
which stretches across the globe, the company prides itself on 
delivering global services with local knowledge. MSC's shipping line 
sails on more than 300 trade routes, calling at 520 ports, and is 
targeting net-zero decarbonization by 2050.
    MSC is also a member of the World Shipping Council (WSC). The World 
Shipping Council (WSC) is a non-profit trade association that 
represents the liner shipping industry, which is comprised of operators 
of containerships and roll-on/roll-off (ro-ro) vessels (including 
vehicle carriers). Together, WSC's members operate approximately 90 
percent of the world's liner vessel services including more than 5,000 
ocean-going vessels of which approximately 1,500 vessels make more than 
27,000 calls at ports in the United States each year.\1\
---------------------------------------------------------------------------
    \1\ A full description of the Council and a list of its members are 
available at www.worldshipping.org.
---------------------------------------------------------------------------
    The liner shipping industry provides American importers and 
exporters with delivery service for almost any goods or commodities to 
and from roughly 190 countries. Approximately 35 million TEU of 
containerized cargo are currently imported into or exported from the 
United States each year. The container shipping industry is one of the 
most important facilitators of the nation's growth and ongoing economic 
activity.\2\ Ocean shipping is also--by far--the most fuel-efficient 
form of transportation at scale on the planet.
---------------------------------------------------------------------------
    \2\ Twenty-foot equivalent (TEU) is a general unit of cargo 
capacity based on size of a 20-foot-long intermodal container, which is 
a standard size box that can be easily transported by vessels, rail and 
trucks. In practice most containers are 40 feet in length.
---------------------------------------------------------------------------
    2. The Red Sea and Gulf of Aden Security Situation Remains Dire.
    Since mid-November, Yemeni-based Houthi rebels have launched 
attacks on numerous commercial vessels in the Red Sea. These attacks 
employ powerful long-range sophisticated weapons--typically only 
possessed by nation States--including ballistic and anti-ship cruise 
missiles and one-way attack drones. The world has never seen attacks 
like these by non-State actors on commercial shipping.
    The Houthis started their attacks on November 19, with a brazen 
attack and seizure by helicopter, dropping heavily armed militants onto 
the deck of the car carrier M/V GALAXY LEADER, where they proceeded to 
hijack the vessel and take it to Yemeni internal waters, where its 25-
member crew remains kidnapped today, and we should not in any way 
forget about them. On December 26, 2023, our vessel, the M/V MSC UNITED 
VIII, was transiting from King Abdullah Port, Saudi Arabia to Karachi, 
Pakistan, when the master was contacted on the radio by Houthi forces 
claiming to be the Yemeni Navy and ordering the vessel to head towards 
Yemeni waters. After the master refused, the Houthis became 
increasingly threatening, resulting in the master reaching out to 
coalition naval forces for assistance. The Houthis fired missiles at 
the vessel, in a series of attacks that lasted over an hour, with 
missiles exploding in close proximity to the vessel, which was 
terrifying for our crew. By sheer luck, there were no physical injuries 
to the crew or damage to the vessel. This was one of three ships in our 
network that were targeted by the Houthis, with one of these attacks 
resulting in direct damage but fortunately without causing casualties 
or a major onboard fire.
    On December 31, 2023, Houthis in armed small boats attacked and 
attempted to board the M/V MAERSK HANGZHOU--getting as close as 20 
meters as a contract security team aboard the HANGZHOU deterred their 
advancement. The militants were only stopped when U.S. Navy helicopters 
responding to the HANGZHOU's distress calls were fired on by the Houthi 
small boats using crew served and small arms weapons, causing the U.S. 
Navy helicopters to respond in self-defense and destroy three of the 
four attack boats, and killing the militants. This attack represented 
the first counterattack by coalition forces against the Houthis 
resulting in loss of life. It is important to note that this particular 
attack occurred in morning following an aerial attack on the same 
vessel during the prior evening.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 Note: Attacks involving commercial vessels are attacks where at least 
   one commercial ship is struck or targeted usually with drones or 
  missiles. Data as of Jan. 20. Source: United States Central Command

    In\\ the initial wave of attacks, the Houthis appeared to be 
targeting vessels that had an identifiable Israeli ownership interest. 
For instance, the M/V GALAXY LEADER was flying the Bermuda flag and 
chartered by the Japanese shipping corporation NYK--but was listed in 
public databases as being associated with an Israeli firm. Many vessels 
with Israeli ownership interests reacted by avoiding the Southern Red 
Sea, likely causing the Houthis to expand their targeting to all 
vessels calling on Israeli ports. At present, the Houthi's targeting 
has become so attenuated from Israeli interests that it is 
indiscriminate, placing all commercial vessels transiting the Southern 
Red Sea and Gulf of Aden in the vicinity of Yemen at risk of being 
attacked.
---------------------------------------------------------------------------
    \3\ How Houthi Attacks Have Upended Global Shipping, New York 
Times, Jan. 21, 2024, available at How Houthi Attacks in the Red Sea 
Upended Global Shipping--The New York Times (nytimes.com) [https://
www.nytimes.com/interactive/2024/01/20/world/middleeast/houthi-red-sea-
shipping.html]
---------------------------------------------------------------------------
    On December 18, 2023, the United States and its coalition partners 
announced the stand-up of Operation Prosperity Guardian (OPG), a 
defensive operation with the mission of providing naval presence to 
achieve deterrence. We applaud and appreciate the men and women from 
U.S. and coalition forces serving in OPG for standing the watch, and 
especially for the significant efforts they have made to protect 
seafarers and preserve the freedom of navigation. Unfortunately, the 
Houthi's continuing barrage of attacks show they are not yet deterred.
    On January 10, 2024, the United Nations Security Council adopted 
Resolution 2722 condemning the Houthi attacks and demanding the Houthis 
immediately cease all attacks.\4\ On January 12, after a series of 
high-level U.S. and coalition nation warnings to cease attacks on 
commercial shipping in the Red Sea went unheeded, the U.S. and U.K. 
launched defensive attacks on Houthi land-based positions, to suppress 
their capabilities to attack commercial vessels in the Red Sea. The 
Houthis responded by expanding their targeting to include U.S. and U.K. 
vessels, and on January 22, they claimed to have attempted to attack 
the U.S.-flagged M/V OCEAN JAZZ. On January 23, the U.S. and U.K. 
responded with another series of attacks, resulting in the Houthis 
firing ballistic missiles at two U.S.-flagged Maersk Limited Line, Ltd. 
vessels on January 24, 2024 that were under direct U.S. Navy escort in 
the Gulf of Aden near Bab El-Mandeb.
---------------------------------------------------------------------------
    \4\ United Nations security Council Resolution 2722, Jan. 10, 2024, 
available at N2400928.pdf (un.org) [https://documents-dds-ny.un.org/
doc/UNDOC/GEN/N24/009/28/PDF/N2400928.pdf?
OpenElement]
---------------------------------------------------------------------------
    MSC has assessed that the security situation in the Red Sea and 
Gulf of Aden is not safe enough to protect our most vital asset--our 
seafarers--nor our customers' cargo or our vessels which are of course 
of great value, but genuinely insurable value as materiel assets. We 
are diverting services that would typically transit the Red Sea and the 
Suez Canal around the Cape of Good Hope (CGH), until we are confident 
the security situation is safe enough to have our seafarers return to 
the Red Sea. We are also aware that many other major ocean carriers and 
other shipping interests have made similar decisions, as depicted in 
the graph below prepared by the World Shipping Council, which depicts 
container vessels above 7,500 TEU diverting voyages from the Red Sea 
and Suez Canal to go around the CGH. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                3. Red Sea Impacts on the Supply Chain.
    The Suez Canal is a vital trade route for liner shipping and 
supports 10 to 15 percent of world trade and 30 percent of global 
shipping volumes. Thus, the decision to avoid the Red Sea and Suez 
Canal is a significant one. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Diverting around the CGH extends the voyage length from 8,500 
nautical miles to 11,800 nautical miles--approximately 40 percent 
farther--and typically adds an additional 5 to 16 days of transit time, 
depending on the route, the ship's particulars, and the destination.\\
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    \5\ Sea Intelligence, Dec. 17, 2023, Issue 645. 
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    MSC, like most liner companies, typically seeks to provide a 
consistent service at ports of call within our network. Diverting 
around the CGH requires significant adjustments to our global network 
to, among other things, add additional vessel capacity, make schedule 
changes, connect with transshipment points, and reposition equipment. 
These adjustments result in increased costs, and they have knock-on 
effects beyond the services that would typically transit through the 
Red Sea.
    The Red Sea security situation has required MSC to re-wire its 
entire global network. Transits will take more time and involve 
additional costs, but we will keep global trade running and shipping 
costs continue to be a very small percentage of the overall cost of 
goods. As the chart below depicts, additional freight costs resulting 
from the Houthi attacks are rising from very low rates that were below 
or consistent with pre-pandemic rates. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        4. Panama Canal Low Water exacerbating Red Sea Impacts.
    Like the Red Sea, the Panama Canal is a critical route for liner 
shipping. Severe drought in Panama has resulted in a 36 percent 
reduction in Panama Canal transits. The Panama Canal authority recently 
announced it is cutting daily ship crossings to 22 per day, down from 
38 per day last year, as well as reducing the maximum draft of vessels 
from 14.9 to 13.4 meters, which requires liner shipping using the canal 
to carry smaller numbers of containers. Prior to the Red Sea attacks, 
many shipping companies diverting from the Panama Canal to avoid delays 
or reduced cargo loads were relying on the Suez Canal and Red Sea as an 
alternative route for their vessels. The Red Sea security situation has 
severely limited this option, which puts further pressure on liner 
shipping companies, and requires diversions to longer routes to keep 
maritime commerce flowing.
    5. Ocean Carriers are flexible, resilient and continue to move 
                           customers' cargo.
    MSC prides itself on providing reliable and cost-efficient global 
liner service to its customers to carry their cargo across the world's 
oceans and deliver it to where they direct it. It is important to point 
out to the Subcommittee, however, that the present situation is unique 
and distinct from the situation we faced during the pandemic where the 
congestion was caused by U.S. land-based logistics being overwhelmed by 
unprecedented import demand. The land-based congestion in U.S. ports 
and supporting logistics infrastructure caused, at its height in 
November of 2021, more than 100 loaded container vessels to back up off 
of Southern California ports (there were similar backups off of other 
U.S. ports) because while there was plenty of container vessel 
capacity, the land-based logistics capacity could not efficiently 
process all the import cargo that was arriving.
    We are hopeful that the Congress's subsequent investments in U.S. 
port and landside infrastructure will at some point provide additional 
capacity and resiliency to handle similar future supply and demand 
surges caused by geopolitical and other unanticipated major events. MSC 
has made substantial and unprecedented investments in new vessel 
capacity--many of which are dual fuel vessels to support our efforts to 
advance to net-zero greenhouse gas emissions--and MSC now features the 
largest fleet in the world with some 800 container ships, with a 
capacity exceeding 4 million TEU. We assess that if we can continue to 
access U.S. ports uninterrupted, we have sufficient assets and capacity 
for the foreseeable future to ensure U.S. importers and exporters 
access to global markets.
                             6. Conclusion.
    MSC is committed to serving the international trade of the United 
States, and our adaptability and resiliency to continue to move 
maritime commerce for importers and exporters across the world's oceans 
despite the current geopolitical challenges are evidence of our 
commitment.

    Mr. Webster of Florida. Dr. Ralby, you are recognized for 5 
minutes.

   TESTIMONY OF IAN M. RALBY, J.D., Ph.D., FOUNDER AND CHIEF 
             EXECUTIVE OFFICER, I.R. CONSILIUM, LLC

    Mr. Ralby. Chairman Webster, Ranking Member Larsen, Ranking 
Member Carbajal, Members, I am Ian Ralby, and I appreciate this 
opportunity to share with you some of the maritime security 
aspects of this menace in the Red Sea, and it is indeed a 
menace. Based on my analysis and that of my team at I.R. 
Consilium, I want to make three points.
    First, even if the Israel-Gaza situation ended today with a 
complete resolution that was mutually agreeable to all parties 
involved, the Houthis would continue to attack shipping.
    Second, 100 percent of the ballistic missile capabilities 
of the Houthis could be taken out, and the Houthis would still 
attack shipping.
    And number three, if the U.S. continues to be the face of 
the counter-Houthi narrative and the counter-Houthi operations, 
others will continue to be inspired to join the Houthis, and 
potentially could join them in attacking shipping, as well.
    Since the 19th of November, the Houthis have seized on a 
convenient narrative that played into something that they 
wanted. They have opportunistically taken advantage of the 
Palestinian situation, and made it a cause that aligned with 
their own interests, albeit hypocritically so. If we look at 
that hypocrisy, the Houthis have, over the last 10 years, 
killed more Muslim Arabs than Israel has in 75 years of its 
existence. The Houthis do not care about the Palestinian cause 
except insofar as it furthers them.
    Furthermore, they are protesting that situation by 
targeting innocent civilians, and that hypocrisy needs to be 
pointed out. By not having divorced the narrative between what 
is happening in Israel and Gaza and what is happening on the 
Red Sea, we have allowed the Houthis to gain momentum, gain new 
members, and to inspire others as being a party that is doing 
something it really isn't. They are looking out for their own 
interests, and they are loving the situation for the momentum 
it has given them.
    Unfortunately, they are also loving the fact that we have 
bombed them now. For 10 years, they have been spouting the 
narrative that they were at war with the U.S. and the U.K., and 
that was one of the ways that they motivated people and 
particularly brainwashed some of the youth in Yemen to join 
their cause. Now the whole world's media is telling them that 
they are actually at war with the U.S. and the U.K., and so, we 
have given them, inadvertently, credibility. And that 
credibility has given them relevance, it has given them 
visibility, and they love the taste of the significance that 
they now seem to have. So, they are going to continue looking 
for ways to attack.
    And so, even if we take out 100 percent of their 
capabilities on the ballistic front and on the drone front, 
they will find other ways to be continually attacking shipping. 
As we have learned from other piracy incidents in other parts 
of the world, from Somalia to the Singapore Strait to the Gulf 
of Guinea and beyond, it doesn't take very much to be able to 
disrupt maritime commerce, and they have certainly the will to 
do so, and have in the past tested the use of remote-controlled 
bomb boats, and even found unmanned underwater systems that 
have been capable of potentially attacking shipping, as well.
    So, now the world is watching and the Houthis are enjoying 
it. But we have to be very careful because, if we do not change 
how we are approaching the Houthis, we are going to continue to 
inadvertently embolden them.
    They have an incredibly low regard for human life. They 
have shown that over and over. They have weaponized food for 
their own people. They have killed, as I said, more people over 
the course of the conflict than died in the entire conflict in 
Afghanistan over 20 years. They are not to be treated as a 
rational party in the way we see rational thinking, and so, we 
must suspend our own approach for what we think would be the 
right way forward to look at how to deal with the enemy that we 
actually face, not the one that we want.
    We have to pull their attention away from shipping, and in 
order to do that, we have to also embolden the Government of 
Yemen. The Government of Yemen holds the keys to this 
situation. Without them taking up and fighting to regain their 
own sovereignty, we are setting ourselves up for a long-term 
problem. At the moment, the Houthis are a threat to the people 
of Yemen, they are a threat to the region, they are a threat to 
global shipping, they are a threat to the entire global 
commerce. And as a result, they are a threat to the United 
States public. Thank you very much.
    [Mr. Ralby's prepared statement follows:]

                                 
  Prepared Statement of Ian M. Ralby, J.D., Ph.D., Founder and Chief 
                 Executive Officer, I.R. Consilium, LLC
    Since the 19th of November 2023, the Houthi Movement within Yemen 
has launched a sustained assault on global maritime commerce. While the 
initial rationale for these attacks was to show support for Gaza, the 
Houthis have quickly moved to re-enliven their own ambitions. If the 
war between Israel and Hamas ended today, it is highly unlikely that 
the Houthis would cease their attacks on vessels transiting the Red 
Sea. After years of fighting in Yemen and claiming to be at war with 
the United States and the United Kingdom, the Houthis are thrilled to 
have finally achieved widespread visibility, and global relevance. The 
recent strikes by the US and the UK have not only failed to deter the 
Houthis, but have actually legitimized their domestic narrative, 
leading to a major upsurge in both popularity and recruitment. That 
popularity is also growing outside of Yemen, raising serious concerns 
for Houthi-inspired attacks. At the same time, Iran, which had promised 
to stop arming the Houthis in the Chinese-brokered agreement with the 
Saudis last March, has also renewed its overt support to them, and 
launched several attacks of its own on ships in the Indian Ocean and 
Arabian Sea. The Houthis are stronger today than they were three months 
ago and shipping in the Red Sea is a life-threatening prospect to the 
seafarers who carry the 90% of world trade that moves through the 
maritime domain. Unless the United States changes its approach, global 
shipping will remain impeded, the region will descend further into 
intractable conflict and the US economy will suffer.
                    The Houthis Before November 2023
    Before the world watched them board and commandeer the GALAXY 
LEADER on 19 November 2023, the Houthis were relatively unknown and 
invisible on the international stage. Sadly, Yemen has long been the 
forgotten corner of the Middle East. Even after ten years of fighting 
against the Government of Yemen and a Saudi-led Coalition, the Houthis 
had gained little attention, even in foreign policy and international 
security communities. That does not mean, however, that they were an 
insignificant group. Over the course of the civil war, the UN estimates 
that more than 150,000 people have been killed in fighting and an 
additional 227,000 have died from famine and the related humanitarian 
crisis. In context, that means that more Yemenis have died in their 
civil war than the total number of deaths--on all sides--in the twenty 
years of War in Afghanistan. Though many are coming to know the Houthis 
for the first time, they actually have a long track-record that 
provides insights into how they are likely to operate and respond to 
different forms of intervention.
                    How the Houthis Enjoy Operating
    The Houthis love to make the West and what they perceive to be 
Western institutions--like the United Nations--look bad. They have a 
long history of getting close to an agreement, or even agreeing to 
something, just long enough for the UN or others to expend funds or 
make bold statements, only to renege at the last minute. For years, the 
UN repeated the same cycle over and over again with regard to the FSO 
SAFER--a dilapidated tanker attached to the Marib-Ras Isa pipeline and 
used, before the war, as the main export terminal for Marib Light 
Crude. The vessel was laden with 1.14 million barrels of oil, and, had 
it spilled, would have not only caused an environmental disaster more 
than four times the size of the 1989 Exxon Valdez spill, but damage the 
desalination plants that provide drinking water for tens of millions of 
people along the Red Sea Coast. The Houthis consistently agreed to 
allow the UN to get onboard and assess the vessel, then delayed the 
mission once the assessment team was in place across the sea in 
Djibouti, and then backed out of the agreement altogether. While the UN 
kept thinking that the Houthis would be motivated to protect their own 
coast and the people who live by it, it became clear that the Houthis 
found far greater motivation in toying with the UN and trying to make 
it look foolish. Given that the Houthis consider the US to be an even 
bigger enemy than the UN, they will go to lengths to try to make the US 
look bad in the eyes of their target constituents.
                    Houthi Narrative versus Reality
    Despite claiming to be at war with foreign powers, it is worth 
highlighting that the Houthis have killed several times more Muslim 
Arabs in the last decade than Israel has in the entire 75 years of its 
existence. That said, the majority of the deaths in Yemen have not been 
from bullets or missiles but from a humanitarian crisis that put 
roughly six million people on the brink of famine. During the 
negotiations over the FSO SAFER, Mohammed Al Houthi, a member of the 
``Supreme Council'' tweeted that the international community cared more 
about the ``shrimps'' than the Yemeni people. Meanwhile, the Houthis 
were limiting the movement of food to their own people in order to 
advance the narrative that they were being starved by Western Powers. 
At the same time, even when the money was available, they were failing 
to pay the salaries of Yemenis, further exacerbating the crisis in 
order to further their narrative. Their propaganda capacity is well-
calibrated to appeal to their target audiences and they will 
unnecessarily cause Yemenis to suffer and die just to advance their 
talking points.
                           The Gaza Narrative
    At present, the main Houthi narrative is that these attacks on 
maritime commerce are a form of protest against Israel's campaign in 
Gaza. Unfortunately, Western media have continued to link the situation 
in Gaza to the situation in the Red Sea, giving further credence to 
that contention. Many in the region and even beyond who sympathize with 
the plight of the Palestinians now see the Houthis as one of the only 
elements that have taken meaningful action to back up their thoughts 
and prayers. The Houthis are opportunistically using the suffering of 
the Palestinian people to be able to reenergize their fighters, recruit 
new ones and boost both their funding and their popularity. And it is 
working. With the advent of US and UK strikes, Houthi recruitment is 
rapidly accelerating, and other groups in the region, including the Al 
Shabab in Somalia, are seeing a similar upsurge in energy and 
motivation to fight. With the advent of the US and UK strikes, the Gaza 
narrative is no longer necessary; a complete resolution of the 
situation for the Palestinians would still leave the Houthis with 
plenty of reasons to attack shipping in their own minds and in the eyes 
of their fighters and supporters. Divorcing the narrative from Gaza, 
however, would have helped to potentially motivate other states who are 
suffering from the Houthi attacks--like Egypt--to play a bigger, more 
visible role. While it would still potentially diminish some of the 
Houthi momentum if the Gaza crisis ended, that momentum may now have 
taken on a life of its own.
                          Iranian Inspiration
    For most of the last decade, the Houthis were primarily focused on 
taking over sovereign control of Yemen. In the past, their leaders have 
shown a profound lack of understanding of the maritime domain. For 
example, at one point they proposed that in order to fix the FSO SAFER, 
they would simply repaint the exterior hull of the vessel while it was 
still at sea. Iran, by contrast, has shown remarkable ability to use 
maritime attacks to send targeted messages to specific interlocutors. 
In 2019, 2021 and 2023 in particular, Iran engaged in a series of 
attacks on vessels and facilities that had a noticeable impact in 
changing different states' or individuals' posture toward Iran. 
Throughout those attacks, Iran did not cause a major maritime 
environmental spill (despite hitting tankers), and, with one 
exception--the MERCER STREET in July 2021--did not take human life. The 
Houthis, by contrast, have shown reckless disregard for the marine 
environment and human life in almost equal measure. In the past, Iran 
has admitted that they have directed the Houthis to attack particular 
vessels, and have helped build the Houthi capacity to conduct maritime 
strikes. The recent haphazard attacks on vessels with no clear ties or 
very tenuous ties to their professed target shows that they are not 
concerned about getting it wrong. And given how they have viewed and 
treated the lives of Yemenis over the years, it is safe to say that 
they do not regard the sanctity of human life in a manner consistent 
with international norms. The Houthis are imitating Iranian aggression, 
without understanding or replicating Iranian precision. This puts 
seafarers at immense risk.
                            Iranian Support
    Iran has long provided material support to the Houthis, arming them 
with a range of both small arms and light weapons and more 
sophisticated drones and ballistic weapons. Without Iran, the current 
aerial assault on shipping would not have been possible. Benefitting 
from the chaos that the Houthis have created over the last two months, 
Iran has resumed its overt support for the Houthis and this creates 
increased concern for ships in the region. Iran has provided 
intelligence and targeting to the Houthis, particularly in the recent 
attacks on US-linked vessels. Two vessels--the MV SAVIZ and the MV 
BEHSHAD--are ostensibly Iranian owned commercial vessels that operate 
in the southern Red Sea. They have, however, long been used to support 
the Houthis and both collect and provide intelligence. Iran's more 
sophisticated maritime capacity is a major factor in increasing the 
threat that the Houthis pose. At the same time, recent Iranian attacks 
on ships as far away as 200 miles off the coast of India and 
longstanding Iranian aggression against ships in the Strait of Hormuz 
should serve as a reminder that as much as the world can sanction Iran, 
Iran can still cripple the flow of international maritime commerce. In 
combination with the more erratic Houthis, and potentially others--like 
pirates based out of Somalia--this could create long-term hardship for 
the world's economy and those responsible for the physical movement of 
international trade.
                         Maritime Significance
    The nature of global commerce makes this situation a major threat 
to the world's economic stability as well as critical supply chains and 
desperately needed humanitarian assistance. According to data from 
Lloyds List, the Bab al Mandeb--the southern entrance to the Red Sea--
has seen a 47% year on year decrease between the third week of January 
2023 and the third week of January 2024. That level of decline remained 
consistent in the fourth week of January. The Suez Canal--a major 
factor in Egypt's economy--saw a 36% decline in the third week and a 
45% decline in the fourth week. Meanwhile, the Cape of Good Hope--the 
southernmost point of Africa--has seen an 80% increase in year on year 
traffic this January. This is already affecting insurance rates, which 
have increased as much as 40 times what they were, and, as a result, 
the cost of shipping. According to the accounting firm Ernst and Young, 
the six days during which the EVER GIVEN was famously stuck in the Suez 
canal in March 2021 cost the shipping industry $416 million per hour. 
The costs of the Houthi attacks, however, will be far greater and will, 
as a result, be passed on to consumers throughout the world. The cost 
of everything is likely to increase, given the integrated nature of 
supply chains. While much attention has been paid to energy supplies, 
oil and gas are fungible commodities that can be rerouted more easily. 
By contrast, specific goods in specific containers have to get to 
specific destinations. Disrupting the 30% of global container traffic 
that traverses the Red Sea will therefore have a greater impact on the 
economy than the 10% of oil that traverses the same passage.
                           Knock-on Concerns
    Diverting ships around Africa comes with other concerns, as well, 
particularly for larger containerized vessels. African ports are too 
shallow to host those larger vessels, meaning that there is no safe 
harbor for such vessels in the event of a storm, an emergency, or even 
a need for resupply. And the weather is a concern--both in terms of the 
strong storm systems that have already been battering the Western 
Indian Ocean, and in terms of the traditional challenges associated 
with navigating around the Cape of Good Hope, the southern tip of 
Africa. Furthermore, the major increase in traffic around Africa means 
that the African ports are now overrun and do not have the capacity to 
resupply and service the vessels that are able to call. Finally African 
maritime security concerns, while recently calmer, could reemerge as 
major spoilers, with the combination of inspiration from the Houthis 
and opportunity from the heavy increase in vessel traffic. Piracy off 
Somalia and Nigeria, and terrorist attacks in various places remain 
serious threats to the safety of shipping and the free flow of maritime 
commerce.
                           Houthi Escalation
    In addition to the threats that ships face in diverting around 
Africa, there are added concerns that could emanate from Yemen. Thus 
far, the attacks have manifested in three primary forms: capturing a 
vessel, aerial attacks on vessels, and at least one surface attack on a 
vessel. After capturing the GALAXY LEADER, the Houthis likely have 
satisfied their appetite for demonstrating that capacity. Taking a 
vessel comes with all sorts of challenges, and since they have not been 
after ransom money, it is unlikely that they will attempt to take more 
vessels in that manner. That said, taking ships for ransom could become 
an interest in the future. The aerial assault, however, is likely to 
continue as long as the weaponry exists to launch it. With longstanding 
arms smuggling routes to provide the Houthis with weaponry, it is 
unlikely the US and UK will be able to eradicate that capacity any time 
soon. Even taking out 100% of that aerial assault capacity, however, 
the Houthis can still attack ships. During the last decade, they have 
piloted the use of remote controlled ``bomb boats'' to attack ships in 
a manner similar to the USS COLE bombing in 2000, without having to 
commit suicide in the process. Furthermore, piracy has showed that with 
sufficient will, minimally armed individuals can cause significant 
hardship to maritime commerce. Surface attacks and even unmanned 
underwater system-based attacks could become a problem in the near 
future.
                            Further Concerns
    Having managed to get the oil off the FSO SAFER onto a more 
seaworthy vessel, the YEMEN, the UN has now paused the completion of 
the effort to protect Yemen and the Red Sea from the threat posed by 
that situation. The Houthis, therefore, could target that vessel, 
causing a catastrophic spill out of spite, further hampering access 
through the Red Sea. They could also attack and cause a similar spill 
on another tanker, producing the same effect. It would be consistent 
with the Houthis mindset to do so, blame the West, and seek to profit 
off the clean-up process. This could cause multi-generational harm to 
the other Red Sea states, not least of all Egypt. Additionally, the 
Houthis have publicly warned that they have the capacity to cut the 
submarine cables that traverse the Red Sea and account for one third of 
the world's internet. They have cut cables in the past and doing so now 
would cause significant global economic hardship. With their amplified 
will over the last few months, the Houthis can continue to find ways to 
be disruptive for months and years to come.
                            Yemeni Stability
    Yemen has benefitted from a ceasefire since 1 April 2022, and the 
Houthis were close to accepting a peace deal with the war weary Saudis 
before this situation erupted. The reenergized Houthi movement, 
however, may not only reject peace, but renew efforts to take Marib--
seen by the Houthis as their economic future in light of its oil 
production capacity--and other parts of Yemen's territory. With the 
momentum behind them, the Houthis could easily restart the fight to 
take over Yemen's sovereignty. It is thus absolutely critical to 
support and empower the Government of Yemen--not just militarily--to be 
able to stand on its sovereignty and defend itself. The West 
effectively stopped the Government of Yemen from retaking the Port of 
Hodeidah on the Red Sea and other coastal areas in 2018 in favor of a 
deal--known as the Stockholm Agreement--that sought to deescalate 
tensions. The Houthis have never abided by that deal and Yemen has 
suffered from leaving the Houthis in control of the coast. Now global 
shipping is suffering from that as well. Yemen's sovereignty needs to 
be a serious consideration in how to shift the dynamics of this 
currently spiraling situation.
                               Conclusion
    The Houthis are merchants of chaos, and can play a disruptive role 
in the Red Sea for months and years to come. As long as they are 
motivated to fight, they will continue to do so. The more they are 
perceived to be standing up to the US, UK and other Western governments 
and institutions, the more support they will garner. With that support, 
they will be able to continue to replenish arsenals and recruit new 
members, as well as inspire others to fight. The US needs to change its 
approach, empower the Government of Yemen, help inspire others who are 
suffering the consequence of these attacks to step up, and work to 
divert the Houthi attention away from the maritime domain. The Houthis 
claim to be standing up for the innocent Palestinians who have been 
harmed by the war between Israel and Hamas. Their form of protest is to 
attack and threaten the lives of innocent seafarers, and harm the 
innocent people around the globe who rely on maritime shipping for 
survival. They cannot be allowed to maintain their false narrative and 
every effort must be made to restore the freedom of navigation and the 
safety of global maritime commerce.

    Mr. Webster of Florida. Mr. Gold, you are recognized for 5 
minutes.

TESTIMONY OF JONATHAN GOLD, VICE PRESIDENT OF SUPPLY CHAIN AND 
           CUSTOMS POLICY, NATIONAL RETAIL FEDERATION

    Mr. Gold. Thank you, Chairman Webster, Ranking Member 
Larsen, and Ranking Member Carbajal, for the invitation to 
testify today on behalf of the National Retail Federation on 
the impacts of Red Sea shipping disruptions.
    Retail is the Nation's largest private-sector employer, 
contributing $3.9 trillion to the annual GDP and supporting one 
in four U.S. jobs. That's 52 million working Americans. Having 
a safe, efficient, predictable, and timely supply chain is 
critical to the success of any retailer to ensure that products 
are available to the consumer, whether they shop online or in-
store.
    We all saw firsthand the disruption caused when supply 
chains were completely overwhelmed during the pandemic. Through 
significant efforts, supply chains were returning to normal and 
congestion issues were resolved. We are now faced with another 
significant supply chain disruption because of the attacks in 
the Red Sea--this on top of the restrictions impacting the 
Panama Canal, as was mentioned by the Members.
    While the volume of U.S. trade through the Suez Canal is 
small, the disruption impacts are being felt far and wide. The 
biggest challenges for retailers are the additional volatility, 
cost, uncertainty, and overall risks to the supply chain. 
Retailers are being forced to readjust their supply chains to 
ensure product delivery.
    Our members are seeing increased time--an additional 10 to 
14 days or longer--to the supply chains to compensate for 
longer vessel sailing times around the Cape of Good Hope. Our 
members are also seeing an increase in shipping costs. This 
meant a significant increase in freight rates on the spot 
market. While not as high as during the pandemic, there are 
concerns about what this means for future contract rates.
    Carriers are also seeking a number of different surcharges 
and fees, including war risk surcharges, emergency contingency 
surcharges, and others. We understand that longer vessel times 
impact fuel, labor costs, and insurance costs. Our members want 
to make sure these fees and surcharges cover real costs and are 
not intended for profit.
    One member has told me that they have had carriers ask for 
an increase of $1,500 to $3,000 per container, which represents 
a 38-percent to 73-percent cost increase for directly affected 
cargo.
    We are also hearing that the rates and surcharges are not 
just being applied to directly impacted cargo, but to other 
routes such as the EU-to-U.S. route because of equipment 
availability.
    Some members are also noting that their overseas vendors 
are starting to see some challenges with their ability to 
source raw materials in a timely manner, as well as increased 
costs for those components.
    Retailers are working closely with their supply chain 
partners to address the disruptions and to implement mitigation 
strategies. It is important to note that retailers are making 
decisions now regarding back-to-school and holiday shipments. 
Some of these strategies include transiting the Cape of Good 
Hope, as talked about. For cargo and vessels waiting to transit 
the Red Sea, the carriers have made the decision to shift 
around the Cape of Good Hope. NRF members have to rely on the 
decision of the carrier, but then address the delayed 
transportation issues once the cargo arrives in the U.S.
    Our members are also indicating that they are shifting 
supply chains back to utilizing west coast ports, and then 
using intermodal rail to get the cargo back to the east coast. 
Unfortunately, the Panama Canal is not a viable option right 
now. Some retailers are shifting to air cargo for more timely 
and sensitive shipments. In addition, retailers are working 
with their overseas vendors to encourage early shipments to 
avoid disruptions.
    While many are focusing on the current situation, more 
challenges will be created the longer these disruptions 
continue. The Federal Government needs to start paying 
attention to these issues now to help avoid significant 
congestion in the coming months.
    We are now entering the new cycle for new ocean contract 
negotiations. Retailers are concerned about what the impact the 
long-term disruptions will have on this next contract. We do 
not want to see rates similar to the pandemic, which could 
impact inflation.
    Shippers are also looking to shift back to the west coast 
ports. We know a significant amount of cargo had shifted away 
because of the pandemic and the most recent labor negotiations. 
We need to make sure that our ports, terminals, railroads, 
harbor drayage providers, and warehouses are ready for the 
increased cargo volumes that will shift back.
    Railcar imbalances and increased demand could result in 
more congestion and increases in dwell. We are already hearing 
that the dwell time is starting to tick up on the rail side. We 
need to make sure we have an available fleet of chassis and 
readily available terminal appointments to be able to move 
containers out of the terminals as quickly as possible. Some 
believe this congestion could begin within the next 4 to 6 
weeks, so, we need to convene stakeholders now to plan.
    There are also concerns that vessels and equipment will be 
out of position, including empty containers, because of the 
longer sailing times. Vessel space is becoming increasingly 
constrained, which may impact replenishment for spring and 
summer merchandise. Some carriers are canceling certain 
services, which will create additional capacity constraints in 
the market.
    While the focus of today's hearing is on the Red Sea 
disruptions, it is important to note that other supply chain 
challenges will further complicate the global supply chain. The 
ripple effects will impact other issues. I already noted the 
Panama Canal restrictions. As retailers are looking to address 
these issues, they are also planning for potential labor 
disruptions at east coast and gulf coast ports because of the 
current labor negotiations between the ILA and USMX. The 
contract expires at the end of September, during the peak 
shipping season, when retailers are bringing in their holiday 
merchandise. Retailers are making their shipping decisions now 
to avoid any potential issues.
    In conclusion, the challenges from the ongoing attacks in 
the Red Sea are significant and will get worse the longer they 
occur. We appreciate the attention and actions of the 
administration with Operation Prosperity Guardian and building 
an international coalition. More work, though, needs to go into 
efforts to ensure safe passage for vessels and mariners through 
the Red Sea. Their safety is of the utmost importance. While we 
are addressing the immediate issues, we need to make sure that 
we are preparing for the potential congestion issues that will 
impact U.S. ports in the coming months.
    Thank you again for the opportunity to testify today.
    [Mr. Gold's prepared statement follows:]

                                 
Prepared Statement of Jonathan Gold, Vice President of Supply Chain and 
               Customs Policy, National Retail Federation
    Thank you, Chairman Webster, Ranking Member Carbajal, and Members 
of the Subcommittee for inviting me to testify on behalf of the 
National Retail Federation (NRF) and the retail industry on the impacts 
of the supply chain disruptions impacting the Red Sea and Suez Canal.
    NRF passionately advocates for the people, brands, policies and 
ideas that help retail succeed. From its headquarters in Washington, 
D.C., NRF empowers the industry that powers the economy. Retail is the 
nation's largest private-sector employer, contributing $3.9 trillion to 
annual GDP and supporting one in four U.S. jobs--52 million working 
Americans. For over a century, NRF has been a voice for every retailer 
and every retail job, educating, inspiring and communicating the 
powerful impact retail has on local communities and global economies.
    Having a safe, efficient, predictable and timely supply chain is 
critical to the success of any retailer. The ability to ensure that 
products are available for the consumer, whether they shop in-store or 
online, is key to the retail supply chain. We all saw firsthand the 
disruption caused when supply chains were completely overwhelmed from 
beginning to end during the pandemic. Through significant efforts on 
behalf of the private sector and governments, supply chains were 
returning to normal as trade flows returned to pre-pandemic growth 
levels and congestion issues were resolved. Unfortunately, we are now 
faced with another significant supply chain disruption with the attacks 
impacting commercial shipping through the Red Sea and Suez Canal. This 
is on top of disruptions already impacting the flow of commerce through 
the Panama Canal due to restrictions from low water volumes.
    While the overall volume of U.S. trade that transits the Suez Canal 
is only about 12%, the impacts of the disruptions are being felt far 
and wide. The biggest challenge for retailers posed by the ongoing 
disruptions is the additional volatility, cost, uncertainty and overall 
risk to the supply chain. Once again, retailers and other shippers are 
being forced to readjust their supply chains to ensure product 
delivery.
                    Current Supply Chain Challenges
    To date, our members have experienced the following supply chain 
challenges because of the issues in the Red Sea:
      Increased shipping timelines. As a result of the attacks, 
ocean carriers have decided to shift their sailings away from the Red 
Sea to go around the Cape of Good Hope. Because of this change, NRF 
members have indicated that they have had to add an additional 10-14 
days to their supply chains to compensate for the longer vessel times.

      Increased shipping costs. Tied to the longer transit 
times, retailers are seeing an increase in transportation costs. We 
have seen a significant increase in freight costs on the spot market. 
While rates are not as high as we saw during the pandemic, there are 
concerns about what this means for future rate discussions. In addition 
to the increase in freight rates, ocean carriers are also seeking to 
pass along a number of different surcharges and fees to their 
customers. While we certainly understand that the longer vessel times 
impact fuel, labor costs and insurance costs, NRF members want to make 
sure the new fees and surcharges actually cover real costs and are not 
intended for profit. We also know that maritime insurance rates are 
skyrocketing as well.

       These new surcharges include Peak Season Surcharges, Transit 
Diversion Surcharges, War Risk Surcharges, Contingency Adjustment 
Surcharges, Emergency Contingency Surcharges and others. The Federal 
Maritime Commission recently issued an advisory regarding the 
surcharges and rate increases and will be holding a hearing on Feb. 7 
to further explore this issue.

       I've had one member tell me they have had carriers ask for an 
increase of $1,500-$3,000 per container, which represents a 38%-73% 
cost increase for directly affected cargo. We are hearing that the 
rates and surcharges are not just being applied to directly impacted 
cargo, but to other routes such as Europe to the U.S. because of 
equipment availability.

      Material and Component Availability. We have heard from 
some members that their overseas vendors are starting to see some 
challenges with their ability to source raw materials in a timely 
manner. They are also indicating increased costs for these components 
as well. There have been recent reports of European manufacturers 
shutting down because of their inability to get materials.
                        Risk Mitigation Efforts
    NRF members are working closely with their supply chain partners to 
address the disruptions and are implementing mitigation strategies to 
ensure products arrive in time. It is important to note that retailers 
are making decisions now regarding back-to-school and holiday 
shipments.
    Some of these mitigation strategies include:
      Transit via the Cape of Good Hope. For cargo on vessels 
that have been waiting to transit the Red Sea/Suez Canal, the carriers 
have made the decision to make the shift to take the longer route 
around the Cape of Good Hope. NRF members have to rely on the decision 
of the carrier, but then address the delayed transportation issues when 
the cargo arrives in the U.S.

      Shift cargo to West Coast ports. Many NRF members have 
indicated that they have shifted their supply chains back to utilizing 
West Coast ports to avoid the disruptions and additional time because 
of the Red Sea issues. They have decided to bring cargo into the West 
Coast ports and then use intermodal rail to get the cargo back to the 
East Coast, where it was intended. Unfortunately, because of the 
current restrictions impacting the Panama Canal, that route is not a 
viable option.

      Use air cargo. Some retailers are shifting to using air 
cargo for more sensitive and timely shipments.

      Encourage earlier shipments. Retailers have been working 
with their overseas vendors to encourage them to ship earlier as they 
expect disruptions to increase.
                           Future Challenges
    While many are focusing on the current impacts of the disruptions, 
the longer the attacks and disruptions continue, the more challenges 
that will be created. We believe the federal government needs to start 
paying attention to these issues now to help avoid significant 
congestion in the coming months.
      Freight rates. While many retailers and other shippers 
are still under their yearly ocean contract and are able to work with 
the carriers on rate increases and surcharges, we are now entering the 
cycle for new contract negotiations. Many NRF members are concerned 
about the impact of long-term disruption on the next ocean freight 
contract. We witnessed significant cost increases during the pandemic. 
We certainly hope we do not see those kinds of rates again, which could 
impact inflation, currently trending downward.

      Port congestion. As noted earlier, many shippers are 
looking to shift back to the West Coast ports. Unfortunately, this 
shift may cause congestion at those ports if they are not properly 
planning for the surge in cargo. We know a significant amount of cargo 
shifted away from the West Coast during the most recent labor 
negotiations. That cargo may shift back, so we need to make sure our 
ports, terminals, railroads, drayage providers and warehouses are ready 
for the increased volumes. We are already hearing that rail dwell times 
are starting to tick up. Rail car imbalances and increased demand could 
result in more congestion and increases in dwell. We need to make sure 
there is chassis availability as well. One of the biggest drivers of 
congestion during the pandemic was the lack of available chassis. We 
are also hearing of terminal appointment challenges.

       Efforts need to be made now to convene the right stakeholders to 
plan accordingly to address these issues to ensure we don't see a 
significant congestion challenge in the coming weeks. Some believe this 
congestion could begin within the next 4-6 weeks, after Lunar New Year 
when trade volumes start to pick up again.

      Vessel and Equipment Issues. Because of the longer 
transit times for routing around the Cape of Good Hope, there are 
concerns that vessels and equipment will be out of position. There is 
growing concern about the impact on empty container availability 
overseas. We have heard from some members that vessel space is becoming 
increasingly constrained, which may impact replenishment for spring and 
summer merchandise. We have also seen reports of some carriers 
canceling certain services, which will create additional capacity 
constraints in the market.

    While the focus of today's hearing is on the impacts of the attacks 
and disruptions in the Red Sea, it is important to note that other 
supply chain challenges will further complicate the global supply 
chain. The ripple effects from these disruptions will impact other 
ongoing issues as well. I noted earlier the current restrictions on 
using the Panama Canal. Unfortunately, these restrictions are going to 
continue and further impact the choices that shippers and carriers have 
for an alternate route.
    In addition, as retailers are addressing the Red Sea issues, they 
are also planning for potential labor disruptions at East Coast and 
Gulf Coast ports because of the ongoing labor negotiations between the 
International Longshoremen's Association and the United States Maritime 
Alliance. The contract is set to expire at the end of September, during 
the peak shipping season when retailers are bringing in their holiday 
merchandise. Again, retailers are making their shipping decisions now 
and many are again looking to shift to the West Coast to avoid any 
potential issues. NRF recently called for the ILA and USMX to return to 
the bargaining table in the hopes of reaching a new deal before the 
current one expires.
                               Conclusion
    As we discussed, the challenges stemming from the ongoing attacks 
in the Red Sea are significant and will get worse the longer this goes. 
We appreciate the attention and actions that the administration has 
taken with Operation Prosperity Guardian and building an international 
coalition. We know that more work needs to go into the effort to ensure 
safe passage for vessels and mariners through the Red Sea. Their safety 
is of the utmost importance.
    We know the future impacts that will result from ongoing 
disruptions. While we are addressing the immediate issues impacting 
transit through the Red Sea and Suez Canal, we need to make sure we are 
preparing for the congestion issues that will impact U.S. ports in the 
coming months.
    Thank you again for the opportunity to testify on this important 
issue.

    Mr. Webster of Florida. Mr. Heindel, you are recognized for 
5 minutes.

      TESTIMONY OF DAVID W. HEINDEL, PRESIDENT, SEAFARERS 
                      INTERNATIONAL UNION

    Mr. Heindel. Thank you, Chairman Webster, Ranking Member 
Carbajal, and the members of the committee for letting me 
testify today. I am representing the interest of the seafarers 
unions, not only domestically but internationally, as well, 
with regards to this menace that we are all experiencing. We 
represent the crews here in the States of the U.S.-flagged 
vessels that have been attacked in the Red Sea.
    These attacks in the Bab-el-Mandeb Strait have disrupted 
international commerce and represent the greatest threat to the 
merchant marine since World War II. The men and women of the 
merchant marine are no strangers to armed conflict. Throughout 
our history, we have battled privateers, commerce raiders, 
mines, submarines, pirates, and terrorists. These attacks have 
highlighted what every mariner knows: our jobs are essential, 
they are dangerous, and may require us to sail into harm's way.
    The Red Sea attacks represent the most technologically 
advanced threat we have ever faced. Drones, anti-ship cruise 
missiles, and anti-ship ballistic missiles have all targeted 
American and foreign ships and their crews.
    I want to thank the President, the Secretary of Defense, 
TRANSCOM, CENTCOM, NAVCENT, and the other military components, 
as well as the Maritime Administration, for their efforts on 
our behalf. And it is thanks to them that we have managed to 
avoid casualties so far.
    These attacks have had a major impact on the global supply 
chain. The Red Sea accounts for as much as 25 percent of the 
world's container shipping trade. We have seen a 70-percent 
reduction in ship transits and a 50-percent reduction in cargo 
through the region. Several carriers, both international and 
U.S.-flagged, have chosen to divert their vessels away from the 
Red Sea, and instead make the trip around the Cape of Good Hope 
to avoid this menace. This adds nearly 2 weeks to a typical 
voyage each way. If these attacks continue, the impact will 
have an effect on our economy and potentially add to a rise in 
prices of consumer goods. It is critical for our economic 
interests that this shipping route remain open.
    As of today, we have not had any difficulty in crewing 
ships headed through the warlike area, and no ship has sailed 
late because of crew issues. It is our goal that every American 
ship that has been called upon sails on time with a full 
complement.
    It is important to note that our ships are not combat 
vessels, and they are not capable of defending themselves 
against these kinds of attacks. We are wholly reliant on naval 
support. We have been coordinating with TRANSCOM, MARAD, and 
the MSC at a variety of levels to ensure the safe passage 
through these areas.
    Our biggest need right now is secure communications. 
Whether this is in the form of specialized equipment, naval 
liaisons embedded on board our ships, or additional American 
civilian mariners with proper clearances and certificates on 
board, having direct communications between our ships and 
combat ships in the area is key. We have been informed by the 
Military Sealift Command that they will be sending additional 
personnel to the 5th Fleet NAVCENT Maritime Operations Center, 
and we hope this enhances the flow of information between our 
ships and their defenders in the region.
    I am convinced that our mariners would prefer to only enter 
the region when it is absolutely necessary and any nonessential 
voyages be rerouted.
    Having a reliable, dependable, and loyal maritime 
transportation system is critical to American national 
security. Programs like the Maritime Security Program, Tanker 
Security Program, Cargo Preference, and the Jones Act create 
and maintain jobs in peacetime so that the ships, their crews 
are available when called upon by the Government. Every 
American ship attacked so far has either been enrolled in the 
MSP or is a Government-owned vessel crewed by civilian 
mariners.
    Finally, maritime labor is very concerned about how much 
information is publicly available about these attacks. Thanks 
to social media, we have seen information like ships' 
locations, registration data, vessel schedules, speed, routes, 
and destinations posted on the internet and made available in 
almost real time. The level of detail being provided is far 
beyond that needed to convey the message that American ships 
need protection. This is actionable intelligence for the 
Houthis, should they choose to use it. We have learned the hard 
way in past conflicts that loose lips do sink ships, and we 
need to make sure that this vital seaway is kept open to keep 
commerce moving.
    We merchant mariners are proud of our 250-year history of 
service, and we have delivered the goods in peace and war, and 
we will continue to do so. I would like to thank you for 
holding this hearing, and I am happy to answer any questions 
that you may have. Thank you.
    [Mr. Heindel's prepared statement follows:]

                                 
     Prepared Statement of David W. Heindel, President, Seafarers 
                          International Union
    Thank you Chairman Webster, Ranking Member Carbajal and the members 
of the subcommittee for holding this hearing. My name is David Heindel, 
and I am the President of the Seafarers International Union (SIU) and 
the Maritime Trades Department (AFL-CIO). I went to sea in 1973 after 
graduating from the SIU's entry-level mariners' program and sailed 
aboard deep-sea vessels as a member of the engine department for nearly 
a decade before coming ashore to serve the union in a variety of 
capacities. On behalf of the SIU and the rest of maritime labor, we are 
pleased to offer this testimony to Congress. Collectively, we represent 
the crews of the U.S.-flag vessels that have been attacked, to date, in 
the Red Sea.
    The recent attacks on international and U.S.-flag shipping in the 
Ban el-Mandeb Strait of the Red Sea have disrupted international 
commerce and represent the greatest combat threat to the United States 
Merchant Marine since the Vietnam War.
    The men and women of the United States Merchant Marine are no 
strangers to armed conflict. The Merchant Marine dates its birth to 
1775, when Jeremiah O'Brien took control of the Unity sloop, and 
captured HMS Margaretta in the Battle of Machias. Since then, in every 
major American conflict, the Merchant Marine has played its role as 
America's fourth arm of defense. During World War II, nearly 10,000 
merchant mariners gave their lives to deliver the goods that kept our 
allies and our armed forces in the fight for freedom in Europe. Most 
recently, American commercial ships carried most of the sustainment 
cargo needed during Operations Iraqi Freedom and Enduring Freedom. The 
attacks against shipping in the Red Sea have highlighted what has long 
been a fact of life for the American mariner--these are essential, 
dangerous jobs, that may require sailing into harm's way.
    American merchant mariners have learned many hard lessons over the 
years when it comes to dealing with armed conflict. We have had to 
learn to respond to attacks from armed privateers and commerce raiders. 
We've navigated through mined harbors and rivers. We've braved 
torpedoes fired from invisible submarines. We've dealt with attempted 
hijackings, boarding by pirates and terrorist attacks in port. The 
attacks in the Red Sea represent some of the most technologically 
sophisticated threats we have ever faced. Attack drones armed with 
explosive devices, anti-ship cruise missiles and anti-ship ballistic 
missiles have all been employed against ships transiting the Red Sea.
    We wish to thank the President and Secretary of Defense, the United 
States Transportation Command (TRANSCOM), the United States Central 
Command (CENTCOM), the United States Naval Forces Central Command 
(NAVCENT) and the other relevant components of the United States 
military for their efforts to date, that have successfully protected 
U.S.-flag merchant shipping in the region. Despite the dozens of 
attacks launched by the Houthi rebels, every U.S.-flag ship that has 
transited the Red Sea has done so safely and without loss of life. We 
are also grateful to Maritime Administrator Ann Phillips and the rest 
of the Maritime Administration (MARAD) staff for their strenuous 
support of our mariners during these illegal attacks.
    The impact of these attacks on the global international supply 
chain has been significant. Several international carriers have chosen 
to divert their vessels from the Red Sea and Suez Canal approaches and 
instead send those vessels around the Cape of Good Hope in Africa, 
adding nearly two weeks transit times to vessel voyages as well as 
sometimes sending shipping into areas of known pirate activity. 
Increased transit times, coupled with the increased cost of insurance 
has had a major impact on operations. The Red Sea accounts for 25% of 
the world's container shipping miles. We have seen a 70% reduction in 
ship transits and a 50% reduction in cargo moving through the region. 
Not since the Second World War has there been such prolonged, 
indiscriminate targeting of merchant shipping and as the crisis 
continues, impacts are likely to widen. Given the importance of the Red 
Sea on the Suez Canal route between Asia and Southern Europe--and more 
importantly, the United States--it is paramount that access to these 
critical shipping lanes remain open.
    As noted, thanks to the significant support from the combatant 
commands in the region, no U.S.-flag ship has been hit by a successful 
attack from Yemen, and we have not yet lost a civilian mariner. We, 
along with the rest of America, mourn the loss at sea of two U.S. Navy 
personnel engaged in special operations to interdict weapons deliveries 
to the Houthi rebels in Yemen. To date, we have not seen any 
appreciable impact on mariner willingness to accept jobs on vessels 
heading into the combat zone, and to date we have not had a ship fail 
to sail on time because of a lack of crew due to these attacks. It is 
our goal to ensure that every U.S.-flag ship that is called upon sails 
on-time and with a full complement, as has been our long-standing 
tradition.
    Our ships are not combat vessels, and they are not capable, alone, 
of repelling attacks from drones and anti-ship missiles. We are totally 
reliant on the United States Navy and our allies to protect all U.S-
flag ships transiting the war-like zone. By long-standing practice, we 
have coordinated with TRANSCOM, MARAD and the Military Sealift Command 
(MSC) to provide on-going information, best practices, and critical 
information necessary to ensure safe passage in these areas. Thanks to 
this coordination, the shipping companies and labor organizations 
responsible for the vessels and their crew have access to critical 
situational updates from the relevant sources in the region.
    In a recent letter to General Jacqueline Van Ovost, commander of 
TRANSCOM, maritime labor noted the critical importance of ``continued 
cooperation and information sharing, to ensure that our vessels and 
their crews have all the tools needed to ensure safe transits of the 
area. Especially critical are secure communication links between 
vessels transiting the Red Sea and the naval vessels deployed in the 
area to deter and defend against Houthi attacks,'' and specifically 
asked for continued communication, `` . . . whether this is in the form 
of specialized equipment, U.S. naval officers from the [Naval 
Cooperation and Guidance for Shipping] NCAGS Shipping Control Teams, 
U.S. civilian mariners with the proper security clearance and COMSEC 
certification, or other naval liaisons being embedded on the 
vessels[.]'' In response, TRANSCOM informed us that MSC would be 
sending additional personnel to augment the Naval Cooperation and 
Guidance for Shipping (NCAGS), 5th Fleet/NAVCENT Maritime Operations 
Center, to enhance the flow of information between our ships and the 
combatant commands in the region.
    Traditionally, mariners who have been sent into active combat zones 
have been entitled to hazard pay. We are working with our ship 
operators to ensure that this past practice is implemented across the 
U.S.-flag fleet. So far, we have had a number of good conversations 
with our ship operators and we are confident that our members will 
receive a small premium for the additional risks they are taking while 
these attacks continue. However, I am convinced that every mariner 
sailing in that region would say the small premium they are receiving 
is nowhere near worth the risk of facing indiscriminate missile drone 
and rocket attacks reigning down in their workplace and would prefer to 
reroute around Africa than transit the conflicted region, in the 
absence of a need to deliver an essential cargo to the area in 
question. It is important to note, again, that we have had no issues 
crewing vessels heading into the Red Sea because of these attacks so 
far, but should the existing global conflict continue, non-essential 
transits of a war zone may have a detrimental effect on the maritime 
industry's ability to recruit and retain mariners in the future.
    This fact highlights one of the messages we have been communicating 
to Congress for decades--the continued need for a United States 
Merchant Marine, crewed by American citizens, that can carry a 
significant portion of the waterborne commerce of the United States, as 
well as serve as a naval auxiliary and defense asset in times of 
national emergency or armed conflict. The United States Merchant Marine 
ensures that our nation has a reliable, dependable and loyal maritime 
transportation system, and that is why we continue to advocate for 
programs like the Maritime Security Program (MSP), Tanker Security 
Program (TSP), cargo preference and the Jones Act, all of which ensure 
peacetime jobs and infrastructure so that the ships, mariners, 
intermodal networks and experience we need to safeguard our economic 
security are there when we need them. To our knowledge, the U.S.-flag 
ships that have been attacked in the region have all been either MSP 
enrolled vessels or MSC civilian-mariner crewed vessels. This 
reinforces what we have been telling Congress and the Administration 
for years, namely, that continued support for the United States 
Merchant Marine is critical to American national, economic and homeland 
security.
    Finally, maritime labor is concerned about the level of information 
that has been made available publicly regarding these incidents. Modern 
technology has made a wealth of information available to the public in 
a way that is far more accessible than it ever has been before. This 
includes vital information like ship locations, registration data, and 
even things like transit speed and destinations. Since the start of 
these attacks last November, there have been alarming breeches of 
operational security, including disclosure of vessel schedules, routes 
and other information regarding transits through the Red Sea. This 
information has been released in almost real time. The public 
dissemination of this kind of information, which can easily be rendered 
into actionable intelligence by the rebels in Yemen, is dangerous, and 
we would ask those in the press, whether professional or amateur, those 
on social media and elsewhere to remember one of the axioms of the 
Merchant Marine: ``Loose lips sink ships.''
    The United States Merchant Marine is proud of our record over the 
last quarter of a millennium. We have operated side-by-side with the 
United States military in virtually every conflict in the history of 
the United States. We provide the materiel and supplies to the 
warfighter and they, in turn, have protected our vessels and crews as 
we sail into harm's way. While the current situation involves the 
Houthi rebels in Yemen, we may well face in the future more 
sophisticated adversaries. The experience we are gaining now has 
demonstrated to the U.S. citizen mariners who are in harm's way that 
U.S. naval and other military personnel stand with them and will 
continue to do so. Working together again has strengthened the bond 
between the Merchant Marine and the military, and we hope our success 
will deter our adversaries from taking unwise action against American 
shipping. The efforts taken so far to protect our vessels in the region 
have demonstrated the United States is committed to protecting its 
shipping and keeping the sea lanes open, and we hope this will 
incentivize other carriers to put their vessels under the U.S.-flag and 
use American citizen mariners, as has happened in past conflicts.
    Our members aboard ship and our organizations ashore are committed 
to working with Congress, the Administration, and the Armed Forces to 
continue doing what has been our traditional mission--to deliver the 
goods, in peace and in war, as we have since 1775.
    Thank you for holding this hearing on the vital topic, and I am 
happy to answer any questions you may have.

    Mr. Webster of Florida. Thank you for your testimony, and 
we will now turn to questions from the panel. I will recognize 
myself for 5 minutes for questions.
    Mr. Darr, during the pandemic, we saw a clear impact on the 
supply chain and disruptions of the global economy. Can you 
share if there have been any lessons learned from that that we 
might use now?
    And if so, how would they be implemented to prevent future 
situations this time around?
    Mr. Darr. Thank you, Mr. Chairman. I would be happy to 
answer that question.
    I have to say that the fundamental problems that we saw, 
particularly in the United States, really can be traced back to 
much more of the shoreside component. And I think addressing 
both the infrastructure and operational practices there can 
help insulate us for future crises, whether it be one of this 
scale or one of a different scale like the pandemic was. So, I 
would emphasize a focus on fixing that part, because that was 
essentially what failed us all as consumers, and also companies 
trying to serve the economy.
    When it comes to application to this particular situation, 
I would say it taught us to expect the unexpected and not think 
you really can predict what's coming next, be as nimble as 
possible, and it has forced us to maintain some additional 
capacity at substantial cost to be able to respond. And if we 
did not have that additional capacity at hand right now, as we 
do under the current market conditions, I would argue we 
probably would be in a much, much more difficult situation than 
we are. The reality is, because we have kept that additional 
capacity available, we have been able to deploy it. And 
although it takes longer and although it has some additional 
costs associated with it, we are making it work, and the goods 
are moving.
    Mr. Webster of Florida. Dr. Ralby, simply put, what 
objectives do you think the Houthis' movement is hoping to 
achieve by perpetrating these attacks?
    Mr. Ralby. Thank you, Chairman. Their main objective is to 
advance their own movement. Their movement includes goals to 
not only take over the remainder of Yemen, but to advance on 
both Mecca and, ultimately, Jerusalem. They see this as a 
global movement.
    Theologically, the Houthis began with a certain 
interpretation of how the world should be ordered. They have no 
real interest in governing, they just have an interest in 
advancing that ideology. And interestingly, that ideology is 
actually at odds with Iran. The Iranian and Houthi ideology do 
not line up. So, at some point, they will find themselves at 
odds with each other. But for now, their interests are aligned 
because the Houthis are willing to be as erratic and chaotic as 
they are in pursuing both advancement on Yemen and, ultimately, 
advancement on more of the region.
    So, they're merchants of chaos. They really enjoy being 
chaotic. And so, for right now, that is serving their purpose.
    Mr. Webster of Florida. Can you share with the subcommittee 
some of the risks currently incurred by American owned or 
flagged maritime assets transiting the Red Sea, as well as any 
other potential ones of concern emerging from the Houthis' 
increased aggression?
    Mr. Ralby. Certainly. I think since we began striking 
targets within Yemen, there has been a major increase in the 
direct attempt to target U.S.-affiliated ships because U.S.-
flagged ships are obvious, but there are also different layers 
of ownership and connection to the United States that have led 
to the Houthis targeting them more.
    Interestingly, it appears that some of that targeting is 
being aided and provided by Iran, who are much more capable in 
discerning the overall character of vessels. They have proven 
themselves over the years to be very competent in identifying a 
specific entity attached to a vessel and targeting that entity 
as their interlocutor in using their attacks. The Houthis don't 
care that much, but they are enjoying the fact that they can 
target U.S. ships right now.
    The problem is that they are erratic, as I said, but also 
they don't care if they get it wrong. So, as much as they may 
be targeting one nationality of ship, they are likely 
indifferent as to whether they actually hit it, as long as it 
gets some attention. And they are also indifferent as to 
whether they hit something else or someone else.
    And so, this is a grave threat to all shipping, but 
certainly at the moment, the increase in attention on the U.S. 
and U.K. vessels has been problematic.
    Mr. Webster of Florida. Thank you very much. It looks like 
my time is out.
    So, Mr. Carbajal, you are recognized for 5 minutes.
    Mr. Carbajal. Thank you, Mr. Chair. I will yield to Ranking 
Member Larsen.
    Mr. Larsen of Washington. Thank you, Mr. Carbajal.
    Mr. Heindel, your statement warns that loose lips sink 
ships. Can you underscore a little bit more how concerned 
maritime labor is about the availability of vessel movement 
information, which I can get on my phone right now, right? So, 
can you talk a little bit about that?
    Mr. Heindel. Well, there has been quite a bit. Obviously, 
it is very hot news today. The media is all covering it, and 
specifically, the maritime media is covering it very heavily. 
And if you happen to look at some of the issues--and it's 
practically daily--that are--or I should say coverage that they 
are putting out there, it is showing vessels where they are, 
and they are tracking these vessels, it is almost like, as I 
said, in real time.
    Now, perhaps it may be a few hours old, it may be a day 
old. But the fact is that, if the media is covering it to such 
a degree and putting this information out there, it's not 
healthy. It's not healthy for our mariners, and it's not 
healthy for the vessels that we are sailing on. It's important 
that I think it be said that you don't have to have all of the 
details in the photos that they are putting out there in their 
journals or blogs, if you will.
    Mr. Larsen of Washington. Well, I think the men and women 
in the maritime labor are an important part of this supply 
chain. I didn't check my tags on my clothes this morning, but I 
imagine a few of these were not made in the U.S., and were 
brought in containers on a few ships that traveled around the 
world. I am not sure from where to where, but I am sure if we 
all checked our clothing, we would find that we are connected 
to this problem a little bit more closely ourselves than we all 
realize. But you are all on the front line, and I appreciate 
what you are doing out there to help us out.
    Mr. Darr, while the Navy is doing a good job--a great job, 
actually--in maintaining a minimum level of safety currently in 
the Red Sea, are there other things the U.S. can be doing to 
prepare for supply chain disruptions in the future?
    Keep in mind, as I said in my opening, we are the Coast 
Guard and Maritime Transportation Subcommittee, so, our focus 
is largely on the supply chain side of things, the economic 
side of things. Can you address what we can do to prepare for 
supply chain disruptions in the future?
    Mr. Darr. Thank you, sir, and when it comes to your 
original comment about how closely connected we all are, I 
think that is very true, and I would urge everyone to think 
about that. Because again, we are a conduit for world trade, 
and we work best and we serve our customers' needs the best 
and, ultimately, the consumers best when supply chains are 
functioning in an integrated way.
    So, I would suggest infrastructure investments in the 
physical infrastructure; changing some of the operational 
constraints on maintaining inventory so there is more of a 
surge capacity, including impacts that it may have on 
warehousing and shipping capability and things like that; find 
the right balance between regulating what needs to be 
regulated, say, on the environmental side and the safety side 
against the practical needs of keeping goods moving. It's not 
an easy thing to do, but that pragmatism is required in order 
to keep things functioning.
    From the Navy's standpoint, of course, keeping the sealanes 
open. I think it was my third day in Navy boot camp, when I was 
a very impressionable 18-year-old, when I was taught that that 
was one of our fundamental missions. And I think, worldwide, 
whether it is the Red Sea, Strait of Malacca, doesn't matter, I 
think that is an essential part of it, to keep commerce 
flowing.
    But what's happening today with the kinetic responses to 
the activity there, that's treating a symptom. And I think 
that, ultimately, to keep sealanes peaceful and open requires a 
strong element of diplomacy that maybe we shouldn't expect to 
shoulder on behalf of the United States Navy or other navies, 
but rather the diplomats and Government leaders that support 
that.
    Mr. Larsen of Washington. In your testimony, I just want to 
clarify one thing, as well, that you said during COVID, we had 
the backups at the ports, but things could get there, and this 
is sort of the opposite. Things are having trouble getting to 
the ports because of the attacks, but our ports largely are 
resilient, more resilient than they had been during COVID. Did 
I get that right?
    Mr. Darr. There is extra capacity available. Our operations 
people advise me on the terminals we call, they are operating 
at about 60 percent capacity right now, and a terminal is 
optimized at around 80 percent or so. During the pandemic, we 
saw numbers like 115, 120 percent.
    So, that surge capacity to absorb this is available at the 
moment. But we shouldn't take that for granted, and there will 
be some times because of the modification of the services, 
where we will get large volumes arriving at once, and those 
need to be dealt with. But I think those will be transient 
situations where it was a rather long haul during COVID.
    Mr. Larsen of Washington. Great, thanks.
    I yield back, thanks.
    Mr. Webster of Florida. Mr. Babin, you are recognized for 5 
minutes.
    Dr. Babin. Thank you, Mr. Chairman, I appreciate it, and I 
appreciate you witnesses coming forward in this very, very 
serious development.
    Well, we have heard the numbers: 20 percent of all 
container shipping, 10 percent of seaborne oil, and 8 percent 
of LNG pass through the Suez Canal; a dramatic increase in 
attacks since October of 2023. And quite frankly, I don't know 
if this is sustainable. Many companies have ceased transits 
through the Red Sea, increases in risk, insurance premiums, 
transit times, fuel costs, et cetera.
    We have announced, of course, Operation Prosperity 
Guardian, an international coalition. I certainly like that. 
But throughout October, U.S. Navy destroyers intercepted 
numerous missiles fired by Houthi forces over the Red Sea, and 
Houthi air defense also shot down a MQ-9 Reaper. Probably, that 
Reaper came out of my district outside of Houston.
    And the Houthi forces on November the 19th seized control 
of a British-owned ship, Japanese-flagged, the Galaxy Leader. 
And after 3 months, they are still holding that ship and still 
holding the crew. As a former merchant seaman myself, that 
greatly disturbs me. We have to protect our merchant mariners' 
lives, as well as our allied merchant mariners.
    Over and over, we have seen a number of attacks by Houthi 
fighters firing on U.S. Navy helicopters with small arms, et 
cetera. Now we have lost three U.S. military personnel, dead. 
We had two SEALs lost at sea, over two dozen American military 
personnel wounded. I think it's high time that the United 
States retaliate in a way that will make these folks remember 
and be aware of what they are playing with, and that is playing 
with fire.
    So, I would ask, Mr. Ralby, if you would, in your written 
testimony, you shared some of the downsides of diverting ships 
around Africa, specifically highlighting a lack of safe harbors 
and the increased potential for piracy. Somalia is out there. 
What can carriers do to mitigate some of those risks if our 
administration doesn't strike back? What is the current 
alternative?
    Mr. Ralby. Thank you, sir. I think, first of all, I would 
agree that there needs to be retaliation. But retaliation does 
not necessarily mean giving them exactly what they want, which 
is a direct confrontation, militarily, with the United States. 
So, I think we need to retaliate by finding ways that will 
actually persuade them, and they cannot be persuaded in the 
ways that we would be persuaded. So, we need to look to 
solutions that will draw their attention away from shipping, 
and that is a critical, critical piece of this.
    In order to make shipping more safe, particularly through 
Somalia, we need to be looking at how to resuscitate some of 
the lessons we learned 10, 12 years ago--or even longer now--
when we were dealing with Somali piracy on a day-to-day basis. 
We saw two attacks yesterday, so, this is a real threat. The 
skills for piracy were not lost over the last decade, they were 
transferred. A lot of the attacks were actually by Somali 
pirates against vessels that were engaged in illicit 
trafficking. And so, the skills are still there, the reporting 
just hasn't been there and the attacks on vessels engaged in 
legitimate international maritime commerce haven't been there.
    But we need to be ready for that possibility. To that, I 
think we need to take a new look at Best Management Practices 
5, the guidance that is given to shippers to harden their 
vessels and ensure safest operations for averting piracy 
attacks. We need to ensure that we have a greater familiarity 
with where there are potential safe harbor options. And as the 
United States, we could do a lot to try to support African 
ports in being ready to provide fuel supplies, food supplies, 
fresh water supplies, other husbandry services to the increased 
traffic.
    We have seen an 80-percent, year-on-year increase going 
around the Cape of Good Hope. That is a major increase.
    Dr. Babin. Right.
    Mr. Ralby. And so, that is a critical point.
    Dr. Babin. Yes, sir. I would also remind you that when 
Somali piracy was at its peak, they seized several Russian 
vessels. The Russians did not mess around with them. They did 
not play. And I think that it goes without saying that hitting 
back and hitting back very hard teaches people a lesson.
    I am sure diplomacy is great, but you cannot project 
weakness. And that is what we have seen with all of the attacks 
going on, and the further threats, and trying to tie it in some 
form or fashion to the Israeli war. And I dare say that, even 
if the Israeli war were over, we would probably continue to see 
Houthi attacks in that Red Sea area.
    It looks like I am out of time. So, Mr. Chairman, I will 
yield back. Thank you.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Carbajal, you are recognized for 5 minutes.
    Mr. Carbajal. Thank you, Mr. Chair.
    Mr. Heindel, there is no question the Navy is doing an 
incredible job thwarting the Houthi attacks. How does the 
treatment of U.S.-flagged vessels differ from other ships 
utilizing flags of convenience?
    And should the Navy be prioritizing the protection of 
American-owned, American-flagged, and American-crewed vessels, 
many of which are carrying defense and humanitarian cargoes?
    Mr. Heindel. Thank you for that question, Congressman. In 
simple terms, I believe they should be, but we do have an 
obligation as well to support all commerce going through that 
area. I believe that is the goal. But if there are going to be 
ships that are queuing up to be escorted through the area, I 
believe that U.S.-flagged should be priority.
    Now, first of all, it is the U.S. taxpayer dollar on the 
line here, and I think it is vitally important that we look to 
protect our seafarers, and help the rest of the world when we 
can.
    Mr. Carbajal. Thank you. What is the most important thing 
that can be done to further protect U.S. vessels and American 
mariners?
    Mr. Heindel. Right now, the important thing is 
communications. As I indicated earlier, we need better 
communications between the commercial vessels that are active 
in the Red Sea and being escorted or waiting to be escorted. 
And if we have the communications that the Navy has or the 
Military Sealift Command has, we would be in much better 
position than we are today. Right now, we are using, basically, 
the radio or mobile phones, if we are fortunate enough to have 
the connectivity. But having the communications with the combat 
vessels is vital.
    Certainly, the way things are currently in the Red Sea, I 
believe I have seen a news piece that said there is about 75 
minutes between the time the missile is launched to the time it 
hits its target. So, we need very quick communications with the 
combat vessels.
    Mr. Carbajal. Thank you.
    Mr. Gold, I am glad we were able to work together 
throughout the pandemic to enact meaningful legislation in the 
form of the Ocean Shipping Reform Act. One thing we learned in 
that process, though, is what happens when we are reliant on a 
supply chain dominated by foreign interests.
    What are your members doing to increase the share of cargo 
that goes on U.S.-flagged ships?
    Mr. Gold. Thank you, Congressman, and we definitely 
appreciate all of your support throughout the pandemic to get 
the Ocean Shipping Reform Act put through. I think our members 
are continuously looking at diversifying their supply chains, 
whether it is away from China or elsewhere, but it takes time 
to move their supply chains. And unfortunately, with the 
ongoing challenges that we see, even when you go and look to 
diversify, you are being impacted by something else.
    So, I think, again, retailers are looking to make their 
shifts, but we have got to have open, stable shipping routes to 
be able to make sure we can get product to where it needs to 
go. Unfortunately, we are not able to bring everything back 
here to make. Folks are looking at friendshoring, onshoring, 
ally-shoring, but it takes time to develop those. So, they are 
trying to make sure they are doing what they can to make sure 
products are getting here when they need to be here for the 
consumer.
    Mr. Carbajal. Thank you.
    Mr. Darr, today we are talking about the appropriate U.S. 
response to Houthi attacks in the Red Sea. Given that MSC 
doesn't flag a single ship in the United States, doesn't pay 
United States taxes, and doesn't employ American mariners, how 
should the U.S. Navy prioritize the protection of MSC ships?
    Mr. Darr. Well, first of all, I will say we do have a large 
base of operations in the U.S. We are number one in the U.S. 
market, we do employ a lot of American citizens, including 
myself sitting here today, and we do pay taxes where they are 
due in the United States.
    But that's not what I came here to talk about today. What I 
would like to address is your question straight on, and it 
comes down to we are there to serve the commerce needs of the 
world's trading partners, and what they need, we will provide. 
And what they need right now is a very competitive service with 
other options that are out there. We provide that through a 
variety of flags. We are based in Switzerland, and our 
corporate headquarters is there in Switzerland, physically, as 
it has been continuously since 1978, which, by the way, has 
corporate tax rates that are very close to OECD Pillar Two.
    And taxation is not the real issue here. And what we would 
like to see is the trading partners keep the sealanes open, 
whether that is the United States or whether a larger burden is 
shouldered by other trading partners around the world, which I 
think it should be, including some of the largest that are 
absent from these operations and these risks right now. They 
should all do so because the merchant navies of the world are 
not capable of keeping the sealanes open themselves, but they 
will adapt to whatever the needs are of the customers and the 
countries that are behind them.
    Mr. Carbajal. OK, thank you.
    Mr. Chair, I am out of time.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Mast, you are next.
    Mr. Mast. Thank you, Mr. Chairman.
    Mr. Carbajal, will you engage with me for 1 minute so I can 
understand something?
    Mr. Carbajal. Sure.
    Mr. Mast. Just listening to your line of questioning, are 
you advocating that a non-U.S.-flagged vessel received no 
protection?
    Mr. Carbajal. No. What I am saying is that I appreciate all 
commerce. It's important when you consider the global trade, 
the dependence we have. But I think that taxpayers, the United 
States taxpayers, would want us to prioritize, first and 
foremost, American-taxpaying companies.
    Mr. Mast. Very good. Just thank you for clarifying that. I 
agree with that. I would love to see agreement on that issue as 
it pertains to our southern border and prioritizing Americans 
first. I think that's something that we should take that same 
ideology and apply it there--not to conflate the issues, but I 
think they are similar, and so, I was glad to hear you bring it 
up in that way as it relates to flagged vessels.
    I want to go to a couple of things that were brought up 
here and, Mr. Ralby, I will start with you. You used the term 
``persuade'' as it relates to responses that the U.S. could put 
forward. And just the first question would go to the Biden 
administration's policies towards Yemen, taking them off the 
Foreign Terrorist Organizations list. They have received about 
$3 to $3\1/2\ billion in aid since being taken off it. Has that 
persuaded them not to attack?
    Mr. Ralby. Let me clarify. The Houthis are 100 percent not 
the Government of Yemen. So----
    Mr. Mast [interrupting]. Has it persuaded, though, the 
Houthi--they are Yemeni, correct?
    Mr. Ralby. They do not see themselves as Yemeni, no. They 
are physically occupying territory in Yemen, but the Houthi 
movement sees itself as temporarily occupying Yemen in advance 
of a greater attempt to take over. They currently control 30 
percent of the territory of Yemen and 70 percent of the 
population. Seventy-five percent of that population is under 
the age of 29. So, they are revolutionizing a very young 
population, but they do not see themselves as Yemeni.
    Mr. Mast. And they may not be the Government, but it is 
always an important question to ask whenever you are looking at 
our foreign policy, is does our aid, does our foreign policy 
support what we want out of each individual country?
    Because kind of going to going back to what Mr. Carbajal 
said, it has to represent the American taxpayer, right? And 
does that $3 to $3\1/2\ billion support what we want out of 
Yemen towards the policy towards the United States of America? 
I would say not. Maybe you want to have the argument that way, 
but----
    Mr. Ralby [interrupting]. I would agree that our foreign 
policy towards Yemen is failing at the moment in that we have 
for several administrations consistently failed to bolster the 
Yemen Government. We have focused our attention on the Houthis 
since the outset of the coup in 2015, but we have not provided 
the wherewithal.
    In 2018, the U.S. was part of a major effort to prevent the 
Government of Yemen from retaking the Port of Hudaydah on the 
Red Sea coast. That is now a critical strategic failure on our 
part, because if the Government of Yemen controlled that sea 
access, we would perhaps not be having the same conversation we 
are having today.
    And so, I agree that we need to rethink our foreign policy 
towards Yemen, particularly because Yemen has long been the 
sort of forgotten corner of the Middle East. It is a very sad 
reality. And so, we have not paid enough attention to 
understanding, as well, the Houthi mentality, which is why, to 
the point of Mr. Babin and others, we need to strike back. But 
our way of striking back has to be geared towards providing 
benefit to the U.S. public.
    If we just want to strike back for the sake of striking 
back, we may find ourselves actually making things worse. And 
that is, unfortunately, what seems to be happening right now. 
The Navy is very good at doing its job and fulfilling its 
mission, but that mission right now that it has been set on is, 
unfortunately, backfiring with regard to protecting shipping, 
protecting seafarers, and making commerce free flowing.
    Mr. Mast. I don't agree with liberal mentality like that. I 
mean, we are Americans. If somebody hits us, there's going to 
be a reckoning, and we are going to hit back. And that's just 
the American way, and it should always be the American way, 
flat out.
    I want to go to some different questions at this point. I 
want to talk about range, armaments, reconnaissance, 
maneuverability, quantity, capabilities. This is advanced in 
terms of these drone systems throughout not just conflict 
between United States of America and vessels, but we saw this 
going on with Saudi Arabia and Houthis and the conflicts that 
have taken place there.
    Are we dealing for the vessels with strictly radio or line 
of sight, or do you have another capability with which you are 
able to track the inbound drone strikes?
    Mr. Darr. Generally speaking, what the military operators 
have said is to use some established lines of communication via 
CENTCOM, or through UKMTO secondarily, and that the first 
should come through VHF, which, obviously, has some downside, 
because everyone listens to VHF 16, including the bad guys, but 
also that they offer satellite communication options where, if 
you call them, they will pick it up. But that's not a secure 
line of communication.
    Then, of course, we have some ability to have awareness of 
what is going on to the extent that AIS is being used. That 
sends a signal from other vessels in the area, too. But 
obviously, the bad guys in the region are not going to have AIS 
transponders on if they have them at all.
    Mr. Mast. I have many more questions I would love to ask 
you guys on armaments and reconnaissance and maneuverability, 
but my time has ended.
    I appreciate the increase in time, Mr. Chairman, and I have 
nothing to yield back.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Garamendi is recognized for 5 minutes.
    Mr. Garamendi. Thank you, Mr. Chairman, and gentlemen, 
thank you very much for your testimony. The more this testimony 
has gone on, the more the questions have been asked, the more 
complex the situation is revealed. I am going to go to Mr. 
Ralby.
    You have opined that we are not on the proper path towards 
a solution. Could you define how we might find a solution and 
what it might be?
    Mr. Ralby. Yes. I certainly agree that when the U.S. gets 
hit, we hit back. But what we have to be looking at is what we 
want to accomplish with that. And the way that we hit back has 
to be similar to what we have looked at even with Ukraine.
    Russia posed a real threat to the United States. It always 
has for the last century. And our approach to supporting 
Ukraine has been in empowering the Ukrainians to fight for 
their own sovereignty as they have been attacked. Similarly, we 
need to look at the Yemen people and give them the 
encouragement and the backing to actually fight for their own 
sovereignty.
    And that fight is multifold. Yes, it may be kinetic, but at 
the moment, they also need to be recognized. The fact that 
there is still confusion in critical circles around the world 
as to whether the Houthis are the Government of Yemen or not is 
part of the problem. We do not understand Yemen, and so, a 
starting point needs to be there.
    That then needs to also come with our help in divorcing the 
narrative between what is happening in Israel and Gaza and what 
is now happening in the Red Sea. Otherwise, we are not 
protecting shipping, and we are not protecting U.S. interests 
because they will continue to attack, and we have to provide 
that divorce of the narrative in order to help embolden some of 
the neighbors to be willing to speak up.
    Egypt has been ominously quiet on this subject, though they 
are losing a huge amount. Their canal revenues are dropping 
precipitously. Their economy is going to take a major, major 
hit. And unfortunately, they are not going to eke out even a 
comment unless we divorce that narrative.
    We then also need to get better in the information 
operations space. We have allowed the Houthis to control the 
narrative, and they are very good at it. Their propaganda 
machine is really quite impressive for the target audience that 
they are going to. We are very good at speaking to our people 
about fighting back, about retaliation. Unfortunately, that 
doesn't sit with the people that we need to be targeting right 
now in order to change the situation.
    So, if we want to change that context, we are going to have 
to change our approach to messaging, to visibility. And as I 
said, we may be not the right face for this. We may need to 
find others to carry the water for us, or at least help us.
    Mr. Garamendi. I think it would be very useful if you were 
to repeat all of that at least a few more times, so that we 
might come to a better understanding of what we are faced with. 
Certainly, we already heard just a moment ago that some of us 
do not understand the Yemen Government and the Houthi, quite 
different, or the history of Saudi Arabia and the Houthis.
    So, the question really to all of you is, how do we gain 
the support of the international community in dealing with this 
problem?
    And I will also note that this particular onset of attacks 
coincides with the Israel-Hamas war, and may not end if that 
were to end, but nonetheless, did begin at that point.
    So, the question to all of you in the next minute or so is, 
how can we enhance international support for the protection of 
shipping in the area?
    I do note that Denmark yesterday sent an air defense vessel 
into the Red Sea. Perhaps that's a start.
    So, let's start, Mr. Heindel, and then right on down the 
line. How do we get further or better international support for 
the protection of shipping in the area?
    Mr. Heindel. Well, my first thought is, that's above my pay 
grade, but I think we all have to try to continue to educate 
our allies in the importance of what's going on. In my view, 
there is a bigger dynamic going on that is not on the surface 
today. That's my personal opinion.
    But the fact is that we have to do everything we can to 
convince our allies that it is important that they participate, 
because a strong front, I think, will provide for a certain 
message to go not only to the Houthis, but to the guys across 
the water from----
    Mr. Garamendi [interrupting]. We note quickly that the 
Somali pirates were lessened when the international community 
was strongest.
    Mr. Gold and Mr. Darr, quickly--well, I think I am out of 
time.
    Mr. Gold. I would just say real quick--again, not my area 
of expertise on how to do that, but I think continuing to talk 
to our allies about the situation because, again, we are 
impacting global commerce here, and everybody is being impacted 
by this. So, we need to make sure our allies are fully aware of 
the situation, not just the impact on the U.S., but the impact 
on their own markets, as well, because we are certainly seeing 
a significant impact in the European market right now, where 
they are starting to see some inflationary pressures there.
    Mr. Garamendi. I am pushing my time well beyond, but it 
seems to me that, if we are going to be successful here, we 
need to have a large alliance in place, all that are interested 
in the shipping in the area.
    And the comment about Egypt's lost revenue is instructive. 
Thank you very much.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Bean, you are recognized for 5 minutes.
    Mr. Bean of Florida. Thank you very much, Mr. Chairman. 
Good morning to you; good morning, T&I good morning, 
witnesses, welcome.
    Outside of war, have you all ever seen--it is a toss-up, 
anybody can jump in--outside of war, has it ever been this bad 
in the Red Sea, attacks on merchant vessels?
    Voice [discussion off the record]. Yes.
    Mr. Darr. To my knowledge of the history, no. And it is, in 
part, a sign of the times. The last time there was more 
conflict that threatened the Red Sea in its entirety, the 
weaponry used against commercial shipping directly was not as 
sophisticated.
    Mr. Bean of Florida. For you to say it's an hour, your 
ships, merchant ships, were under attack for a firefight, 
directly an hour, that to me is very scary. What happens if 
this continues? What happens, Mr. Darr? If this continues, 
paint the picture for us.
    Mr. Darr. Well, I will try and go beyond speculation and 
just give you my observations of what's happening now and 
extrapolate it out.
    We will adapt. We will make it work. We will meet the 
world's commerce needs. That's what we do. But it may not look 
like it does today. And what we are learning through the 
initial 6 weeks of adaptation of our networks is maybe we are 
going to call different places than we called before. Maybe we 
are going to shift volumes for transshipment to different hubs 
than we did before. Maybe we are going to avoid transshipment 
hubs we used very closely. Maybe we are going to avoid the Suez 
Canal altogether, and all that may come from that, as far as 
stability in the region goes. All of those things are possible. 
I can't paint exactly the picture----
    Mr. Bean of Florida [interposing]. Got you.
    Mr. Darr [continuing]. But I can assure, you we will meet 
the need, but it will be more expensive. There will be costs 
associated with that.
    Mr. Bean of Florida. Ten-four. Dr. Ralby, is it just 
American and ally ships? Are they attacking Iranian ships? Are 
they attacking Chinese ships?
    Mr. Ralby. They, as I said, are quite erratic. So, they are 
attacking everybody at the moment. They are trying to target 
U.S. and U.K. and Israeli-affiliated ships, but as I said 
before, they don't really care. They nearly hit a Russian 
cargo. They have done a couple of things that show that they 
are just not all that precise.
    They are imitating what has been, to your earlier question, 
a fairly consistent Iranian approach of what we have often 
termed ``hybrid aggression'' when a state actor does it. But 
this is just a nonstate actor engaging in terrorist activity. 
And so, they are using these attacks to send messages, and they 
don't really care who they hit or what vessel might be 
affected----
    Mr. Bean of Florida [interrupting]. Have we seen other 
countries like China--have they responded, or other countries 
saying enough of this, we are not going to put up with it?
    Mr. Ralby. Everybody is hurting, let's put it that way. No 
shipping, no shopping. You do not have free flow of maritime 
commerce, everyone on Earth hurts, whether you are on the coast 
or thousands of miles inland.
    The problem is that a lot of the states are keeping quiet, 
while we have been willing to go out in the front and try 
things out. And so, China has been ominously quiet on this 
front, and my guess is that they are looking for ways to do 
what I was saying before. They have equities in this that are 
really important to understand.
    In 2023, China brokered a rapprochement between Saudi 
Arabia and Iran. Part of that deal was for the Iranians to stop 
arming the Houthis. In the last few weeks, they have overtly 
resumed arming the Houthis, as we have seen----
    Mr. Bean of Florida [interrupting]. So, Iran is the main 
factor behind the Houthis. Are there are other countries? Is 
China involved in Houthi armament, or any other country other 
than Iran?
    Mr. Ralby. The armament flow goes through a number of 
countries, and the illicit traffic of arms has been well 
ingrained, so that they have different directional flows that 
allow them to gain weapons. China has been involved. Iran has 
been involved. I am sure Russia has been involved. There are a 
lot of countries that have been involved in the illicit flow of 
arms for years, and some of that has gone through Somalia, 
through Djibouti, and into Yemen.
    There are two vessels, though, that are really important 
for the U.S. to pay attention to, Iranian-owned commercial 
vessels in the southern Red Sea: the MV Behshad and the MV 
Saviz, both of which take turns operating as both a floating 
armory and as an intel source for Iranian support to the 
Houthis. Those vessels should be very much on our focus of how 
we would want to retaliate, and thus far----
    Mr. Bean of Florida [interrupting]. They're not, they are 
given a hall pass.
    Twenty years ago, whenever it was, I know we had--Somali 
pirates was an issue. That has kind of gone away. Is it true 
because we finally said enough about this, and we started using 
force? Is that what ended Somali pirates, that type of 
interaction?
    Mr. Ralby. There is----
    Mr. Bean of Florida [interrupting]. Mr. Heindel, you say 
yes. You are nodding yes. Jump in, Mr. Heindel. Is that force--
is that our option here?
    Mr. Heindel. Well, if you are trying to equate the two, I 
think there's a--the politics are different, at least from my 
viewpoint. Somali pirates were just a band of thugs that----
    Mr. Bean of Florida [interrupting]. But force, you say 
force--and my time is about to run out--force is what they deal 
with, and that's the language they speak.
    And it bears--Dr. Ralby, this has nothing to do with 
Israel, is that correct? That was your testimony. Nothing to do 
with Israel. They are just using that as the guise. Is that 
correct?
    Mr. Ralby. It was a convenient narrative. And for them, the 
profit margin is not the motivation as it was for Somali 
pirates. So, the risk-reward calculus for them is very, very 
different. That is why they are a much more difficult threat.
    Mr. Bean of Florida. Thank you very much, Mr. Chairman, and 
I yield back. Thank you.
    Mr. Webster of Florida. The gentleman yields back. Ms. 
Scholten, you are recognized for 5 minutes.
    Ms. Scholten. Thank you, Chair Webster. Thank you so much 
to all of our witnesses today. I apologize for the gravelly 
voice. I am not sick, I lost my voice cheering for our beloved 
Detroit Lions.
    We really want to thank you for your testimony. This is an 
incredibly precarious time in our world and in the Red Sea. 
While the humanitarian impacts are deeply felt across the 
globe, constituents back home are also concerned about the deep 
economic impact that this will have, as they are already 
struggling with hyperinflation and putting food on the table.
    I have a series of economic questions about the impacts of 
this war, and also what we can do about it here in Congress. 
So, my first question is for Mr. Gold.
    Our economy is still recovering from supply chain shortages 
that we experienced after the pandemic, with some industries 
still struggling to access essential components. From our 
national GDP, to increased operating costs for maritime 
shipping, do you have an estimated cost to our economy if the 
route through the Red Sea is no longer a viable option?
    Mr. Gold. Thank you for the question. Unfortunately, we do 
not have an estimate at this point in time. I think there are 
so many variables as to what the actual impact would be. I 
think, as Mr. Darr noted, the supply chain will adjust and will 
adapt, and I think you have to figure out what those additional 
costs will be.
    We are seeing some of those costs that are being passed 
along now, especially to small and medium-sized enterprises who 
don't have the ability to negotiate and push those costs off. 
But again, as we are in a new negotiating cycle for new 
contracts, that is going to be an impact; the impact on 
congestion at our ports, if that does materialize, is going to 
have an impact, as well.
    So, I think, again, preparing for what's to come is where 
we need to be giving a lot of focus now. I agree with Mr. Darr 
that the focus on infrastructure, both on kind of the land side 
but also through the gate, is critically important, but also 
looking at kind of the IT systems, as well.
    I think one of the areas where we kind of failed throughout 
the pandemic was that communication aspect which is so critical 
among supply chain partners, the ability to know what is coming 
in, and when, and how it's going to transit through the supply 
chain is incredibly important. And unfortunately, we haven't 
seen that progress yet on that aspect of this to be able to 
plan accordingly.
    Ms. Scholten. Thank you.
    Mr. Darr, you mentioned your hopefulness that Congress' 
investments in port and landside infrastructure included in the 
Bipartisan Infrastructure Law will increase capacity and 
resiliency. Can you talk a little bit more about how some of 
those investments can help us cope?
    Mr. Darr. Yes, ma'am. Those investments, in large part at 
the port level--let me give you an example.
    In the U.S., we are largely constrained by the geography of 
the ports and the terminals that we have. And so, to build a 
new terminal, while not impossible, is very, very difficult. 
And they tend to encroach upon other users of that land space.
    So, the more we can do to densify the operations in the 
terminals and make them more efficient, while also--I should 
point out in our company's model--maintaining the workforce, 
because it can be done, and it can be done effectively because 
the volumes go up, that's a good start. And being as thoughtful 
as possible about those sorts of investments in particular I 
think helps us the most because also some of those investments 
can be done faster than to, say, identify a new site and then 
all that goes with that. And it is a lot that goes with that, 
in building that out.
    Second, I would say the road infrastructure needs huge 
work. And the rail operators also need whatever incentivization 
is there to maintain additional surge capacity to meet the rail 
network needs because whatever we can put on rail is avoided 
going on the roads and overstressing that again.
    Ms. Scholten. It's all a part of the shipping and transport 
larger ecosystem.
    What other suggestions do you have for us in Congress? 
Obviously, containing the conflict, ending the conflict is a 
major path to maintaining this route through the Red Sea. But 
in the interim, this is a daily problem. What can we do here in 
Congress to help make sure that we are supporting the industry?
    Mr. Darr. So, again, I will start with maybe what you 
didn't want me to focus on, but I think it is important. The 
shooting has to stop. It has to be safe enough for us to send 
our sons or daughters or people that have trusted their lives 
to us into that region.
    When it comes to what we can do day to day, we have what we 
have, and we have a substantially altered series of networks 
trying to deliver the cargo. And I would say being as prepared 
as possible, from retail shelving all the way down to the quay 
side, will help us avoid another situation like we had during 
the pandemic.
    Ms. Scholten. Yes.
    Mr. Darr. But I want to be very clear. The scale of this 
disruption comes at a better time when there is additional 
capacity, both at sea and ashore.
    And second, the scale of the cost excursions, the 
underlying expenses to us to operate that have to find their 
way into the market is, to this point, nowhere near what it was 
during the pandemic. It happened very quickly.
    Ms. Scholten. Right.
    Mr. Darr. But if you look at what the analysts are putting 
out there, we may have seen the top in some of the markets. 
It's not for me to speculate on, but you can review that 
yourself.
    And then lastly, on the export trades, they are under a lot 
less stress and price pressure.
    Ms. Scholten. Thank you so much, Mr. Chairman. Thank you 
for the additional time. I yield.
    Mr. Webster of Florida. The gentlelady yields back. Mr. Van 
Drew.
    Dr. Van Drew. Thank you, Chairman. I have a little 
different angle here. I believe President Biden has failed our 
country. He grossly mishandled our Afghanistan withdrawal. It 
was a sign of weakness. He didn't prevent Russia's attack on 
Ukraine when we could have just prevented it. It was a sign of 
weakness. And he has been unable to prevent Iran-backed proxies 
from attacking our ally, Israel, and all of our troops in the 
Mideast. Again, it is a sign of weakness.
    None of these horrendously handled events would have ever 
happened under our previous President Trump. He knew that in 
order to protect America abroad, the Commander in Chief must be 
strong. What we need in this country are those great words, 
``peace through strength,'' because where there is weakness, 
there is always war.
    Just this weekend, 3 of our servicemembers were killed and 
almost 40 others injured in an Iranian-backed drone attack in 
Jordan. You are all aware of it. This, again, is a tragedy that 
President Biden could have prevented, but has failed to do so 
because he has created an era of weakness around the world. And 
it's gravely impacting Americans, and it's impacting our 
American interests.
    The Houthi terrorist organization based in Yemen has been 
launching missile barrages on Israel and has conducted over 30 
different attacks on civilian and military vessels, and these 
are the vessels that transit the Red Sea. Houthi forces are 
also responsible for seizing control of the Galaxy Leader, an 
allied vessel with 25 human beings on board, all of whom are 
being held captive by the Houthi terrorists.
    Dr. Ralby, to your knowledge, what is being done to rescue 
the hostages from the Houthis?
    Mr. Ralby. I am not familiar with any negotiations, and I 
don't think it would be appropriate to share that in an open 
forum if I were. Thank you.
    Dr. Van Drew. OK, so, you have no knowledge of it, and I 
don't think anybody else does, either.
    What can be done to prevent all of these attacks from 
happening again and again? Your thoughts, Dr. Ralby?
    Mr. Ralby. To prevent the attacks, we have to draw the 
Houthi attention away from shipping. That has to be the first 
step. It doesn't mean that they will stop attacking, it doesn't 
mean they will stop fighting, but they need to not be attacking 
global maritime commerce and the seafarers who carry our goods.
    We need to embolden not only the Government of Yemen, but, 
as we said before, the neighborhood, in order to help make that 
happen. So, American strength and diplomacy and American 
strength in its military both require that we help our closest 
friends recognize their own interests, as well.
    At the moment, we have some hope in the immediate horizon 
with the EU naval force mission that is being sent to the 
region on the 19th of February. The EU is not a military 
alliance. The EU is not a sovereign nation state in and of 
itself. And during the piracy days, we learned an important 
lesson from the EU naval force mission. Some of the most 
hostile nations towards each other--so, Russia, China, Iran, 
India, the United States, others who do not necessarily love to 
speak to each other or love to work together--found common 
purpose using the EU as that nameless, faceless economic 
community in combating an economic threat. And so, we may be 
able to work more closely with some of our partners with some 
of the region if we first divorce the narrative.
    Second, find these kinds of avenues for pulling Houthi 
attention away.
    Third, embolden and support the Government of Yemen and the 
Yemeni people to retake their sovereignty and ultimately try to 
keep the focus on the consequences, not necessarily the 
actions----
    Dr. Van Drew [interrupting]. Thank you for your answer.
    Mr. Ralby. Thank you.
    Dr. Van Drew. Thank you. Houthi attacks have also gravely 
affected, as we all know--that's why you are here--our supply 
chain. The Red Sea helps facilitate a massive amount of global 
trade per year. And you all know that, as well. And these 
attacks have forced many of these ships to reroute around the 
Cape of Good Hope, which you also know, and it's making cargo 
more expensive, which you also know, and time-intensive. This 
is directly caused by the very same group that our current 
President declassified as a specially designated global 
terrorist group over 2 years ago. Again, it's a clear example, 
in my opinion, of weakness.
    In that time, this undoubtedly terroristic organization has 
been able to regroup and put themselves in a position where 
they can attack, and they are, and they are attacking America 
and our allies with the help from Iran. Mr. Ralby, do you 
believe it was wise to declassify the Houthis 2 years ago?
    Mr. Ralby. At the time, I did think it was the wise 
decision. The reason was, at that point, there were two major 
equities at stake. Number one, the humanitarian situation in 
Yemen was absolutely dire. Six million people were on the brink 
of famine. And the ability to negotiate the movement of aid 
with a foreign terrorist organization controlling the territory 
was one of the challenges that was being faced----
    Dr. Van Drew [interrupting]. Thank you, and I thank you for 
the answer. I am running out of time. I would respectfully 
disagree with you. We are where we are now. And certainly, look 
how that worked out for us.
    Mr. Chairman, I yield back.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Auchincloss, you are recognized for 5 minutes.
    Mr. Auchincloss. Thank you, Chairman. I appreciate the 
witnesses' time and testimony.
    Dr. Ralby, despite their protestations, do you think the 
Houthi leadership cares about the people of Gaza?
    Mr. Ralby. No, I do not.
    Mr. Auchincloss. And is it true that, in fact, under their 
brutal, incompetent, nefarious governance, that 10 times as 
many people have died in Yemen as have died in Gaza?
    Mr. Ralby. I am terrible at math, but it sounds about 
right.
    Mr. Auchincloss. Yes. And so, I would note for those in the 
United States and elsewhere who are cheering on these Houthi 
pirates who have designed to make them into social media stars 
who are chanting, who are rallying to their flag, that they are 
supporting terrorists who have killed American servicemembers, 
who have been sadistic to their own people, and who seek to 
undermine the very rules of international commerce that have 
allowed peace and prosperity to spread the world over.
    Do you think the Houthi leadership gains or is weakened 
with direct confrontation with the United States?
    Mr. Ralby. One important thing to note is that the Houthi 
leadership is a bit of an amorphous body. It is always 
intentionally decentralized. And so, one of the challenges is 
that, yes, we could maybe look at who the supreme council is, 
and determine them. But there are also other factions in 
different parts of the area that will respond differently. All 
of them, though, all of them, are responding in the same way at 
the moment to the U.S. strikes. It has emboldened all of them 
uniformly.
    Mr. Auchincloss. Yes. So, to be blunt about it, this is 
good politics for them at home, yes.
    And so, while I hear the outrage and the sense of urgency 
from my Republican colleagues, and viscerally I share it any 
time American merchant marine, any time American servicemembers 
are under harm's way, we also have to recognize that we don't 
want to walk in to the game that our enemy wants to play.
    So, let's now unravel what might actually scare Houthi 
leadership. They are reliant on Iran as their patron state, is 
that correct?
    Mr. Ralby. They are.
    Mr. Auchincloss. And Iran itself is reliant on China, as 
the purchaser of its oil exports. Is that right?
    Mr. Ralby. They are.
    Mr. Auchincloss. So, is it safe to say that China could 
exercise significant influence here, if it wanted to, to reduce 
support and funding for the Houthi?
    Mr. Ralby. Very much so.
    Mr. Auchincloss. And yet, as a member of the Select 
Committee on the Strategic Competition Between the United 
States and the Chinese Communist Party, I want to highlight 
that China is not only missing in action as a purported 
upholder of international commerce and rules, but is in fact 
actively undermining the potential for a peaceful resolution to 
this issue.
    The deal that they brokered between--I use the word 
``brokered'' maybe in quotation marks, because really it was a 
performance--but that they claimed to help broker between Saudi 
Arabia and Iran required that those states bring the Houthis 
under control. Obviously, that hasn't happened, and yet China 
has done nothing to curtail or punish Iran for that.
    China has also done nothing to ensure the safety of the Red 
Sea. Is that right?
    Mr. Ralby. That is correct.
    Mr. Auchincloss. What do you think should the response of 
the United States be to the Chinese Communist Party's complete 
unwillingness to be a responsible global citizen in this 
episode?
    Mr. Ralby. Well, first of all, I think it needs to be made 
clear that that is a major factor.
    China has also a signed treaty by Xi Jinping himself with 
Ukraine not to--to stand in if anybody attacked them. They 
didn't do that. They are very good at not fulfilling their 
obligations when things get hot.
    And in this particular situation, they are probably a bit 
frustrated by the equities that they did host, I would say, 
that deal between Iran and Saudi Arabia, which complicated in 
some ways their position because they now have a vested 
interest in maintaining that detente, that rapprochement 
between Iran and Saudi Arabia, and the Saudis have very 
complicated equities with regard to the Houthis. So, they are 
probably quite frustrated right now.
    Mr. Auchincloss. And their economy is the most trade-
dependent of any in the world.
    Mr. Ralby. Absolutely. So, they are hurting, but they are 
actually probably enjoying watching us take the first set of 
hits for this. So, they are a looming question mark, and we 
need to call them out quickly.
    Mr. Auchincloss. Yet another example of the malign and 
malicious attempts at global leadership from the Chinese 
Communist Party.
    I yield back.
    Mr. Webster of Florida. The gentleman yields back.
    Mr. Ezell, you are recognized for 5 minutes.
    Mr. Ezell. Thank you, Mr. Chairman.
    The Houthi attacks that are targeting maritime vessels in 
the Red Sea represent a direct threat to maritime 
transportation and, ultimately, to the world's supply chains. 
The Trump administration recognized the threat posed by this 
group, and took decisive action by designating the Houthi 
rebels as a global terrorist entity, which would allow the 
placement of crippling sanctions on these fighters.
    However, one of the Biden administration's first acts has 
communicated a message of weakness as President Biden removed 
the Houthis from this designation. We are witnessing a clear 
trend. Past actions by President Biden continue to strengthen 
terrorist organizations and encourage global attacks.
    Dr. Ralby, it's clear we must put an end to this Houthi 
aggression. You mentioned in your testimony that the Houthis 
are often untrustworthy negotiators. Can you expand on how 
negotiations have gone in the past, and do you think anything 
has changed?
    Mr. Ralby. The Houthis not only are untrustworthy, they 
enjoy making whoever they are negotiating with look bad in the 
eyes of their people. They have a long history of agreeing to 
things and then reneging. I will give one concrete example.
    The FSO Safer was a critically important issue to address 
off the coast of Yemen. It had 1.14 million barrels, and would 
have not only caused a spill 4 times the size of Exxon Valdez, 
but would have actually taken out the desalination plants on 
which more than several tens of millions of people rely for 
their drinking water along the Red Sea.
    And the Houthis, in negotiating to do something about the 
vessel, continually agreed to an assessment mission, allowed 
for the U.N. to expend funds on placing that assessment team in 
Djibouti, and then reneged on it. And they enjoyed doing the 
same thing over and over again. And unfortunately, a lot of the 
negotiators who have tried to work with the Houthis have found 
themselves falling again afoul of the definition of insanity: 
trying to do the same thing over and over again, expecting a 
different result.
    The Houthis are consistent in one thing: in being 
untrustworthy, in being very quick to renege on any promises 
they make. So, they cannot be trusted, they cannot be 
negotiated with in the same way that we would otherwise.
    Recently, they agreed to not attack vessels that were 
carrying oil coming into the gulf, the Port of Aden. 
Unfortunately, they went ahead and struck them very quickly. 
So, they have a long history of reneging on every promise they 
make.
    Mr. Ezell. Thank you, Doctor.
    Mr. Chairman, I yield back.
    Mr. Webster of Florida. The gentleman yields back.
    Mr. Rouzer, you are next. Welcome to the committee.
    Mr. Rouzer. Thank you, Mr. Chairman. I see my friend and 
colleague, Dusty Johnson, here. Dusty and I serve as cochairs 
of the Supply Chain Caucus here on the House side, and I know I 
have heard from industries all across the board, obviously, 
just how critically important the Red Sea and Suez Canal are to 
an efficient supply chain.
    Dr. Ralby, in your testimony you state that, while oil and 
gas shipments are being impacted, the greater threat is the 
shipment of specific goods with specific delivery times.
    You also mentioned that disrupting the 30 percent of global 
container traffic on the Red Sea will have a greater impact on 
the economy than the 10 percent of oil traffic. Could you speak 
a little bit more to these goods shipped through the Red Sea, 
and what impacts delayed shipments have on the global economy 
and commerce?
    And then, as a followup to that, Mr. Gold, I would be 
curious of your thoughts on the impact to consumer prices.
    Mr. Ralby. I will be very quick. Energy supplies are 
fungible. Oil is oil. Yes, there are different categories of 
oil, but once the products have been refined, they can be 
replicated and supplanted by different shipments from all over 
the world.
    Goods, however, are targeted towards specific purchasers. 
And so, you can't just make up for somebody's race car that is 
due to be at a specific race at a specific time by substituting 
another one. So, there are a different set of equities for the 
container carriers versus the oil and gas industry and the 
wider energy industry.
    In fact, one of the other disparities is that oil and gas 
movements through the Red Sea are actually a much smaller 
percentage of the overall traffic than the container goods, and 
so, that is why I would argue that the container industry, 
which is why it's important to have Mr. Darr here, is more 
affected by this.
    Mr. Rouzer. Yes. As a followup, too, how much--let's just 
assume, hypothetically, that all trade is cut off there. How 
much of the U.S. economy is represented with that? What is that 
figure?
    Mr. Ralby. I do not have that figure. That is not my area 
of expertise. But what I can say is that it is not just the 
U.S. economy, it is global because of the nature of our 
globalized supply chains.
    And the important piece that I would also note that doesn't 
get looked at as much is that it is not just goods for sale, it 
is also humanitarian aid. And so, there are other consequences 
to this that transcend just the marketplace and go as well to 
desperately needed aid, medical supplies, other things that 
need to get to places on time in order to make sure human life 
is protected.
    Mr. Rouzer. Absolutely. Any other thoughts there from the 
panel?
    Mr. Gold, do you want to talk about the inflationary 
impact?
    Mr. Gold. Sure. I mean, obviously we saw what happened 
during the pandemic when supply chains were essentially shut 
down, and the impact we saw on prices and costs and everything 
else. I think right now it's too early to tell what that impact 
is going to be because of what's happening in the Red Sea.
    I think, as we have talked about here, carriers and 
shippers will find a way to make product arrive. It might 
arrive later than you expected. You are going to have an impact 
on not just retailers, but manufacturers who are waiting on 
inputs to production, on ag products. You have already seen the 
impact in Europe with ag products that are having to go around 
the Cape of Good Hope that are having spoilage and having 
impact there. So, I think, for my members, they are trying to 
contain costs as much as possible.
    So, again, for the larger retailers, they are more nimble 
at being able to do that. For small and medium-sized companies, 
that is going to impact them more because they don't have that 
ability to negotiate on whether it's rates, surcharges, what 
have you.
    And again, it's not just on the rates that you are seeing 
in the surcharges, but it's the other impact on the congestion 
issues that we are going to witness if the surge does come and 
starts to clog up our ports once again. You are going to see 
the additional charges from every mode of transportation 
throughout the supply chain, as we have witnessed during the 
pandemic. Hopefully, we won't see the prices rise as much. That 
shouldn't be an issue. But again, it's way too early to tell 
what that economic impact is going to be.
    But we need to start paying attention now and working 
through those issues so we don't have congestion as we 
witnessed during the pandemic.
    Mr. Rouzer. So, what improvements do we need to make at our 
ports? What kind of alternative thinking, additional resources, 
what kind of opportunity does that present to us?
    Mr. Gold. I think the biggest issue right now is, as we 
talked about earlier, we are making investments on the landside 
infrastructure, but we have got to work through some of the 
operational issues that really caused the congestion issues 
during the pandemic. We have got to make sure all of the 
stakeholders--the carriers, terminals, drayage trucks, 
railroads, warehouses, the shippers--are all talking to each 
other to understand what is happening at any point in time so 
that we don't have the congestion issues. Making sure we have 
equipment readily available, the chassis, the railcars are 
there when they need to be there, and not cause further 
congestion.
    Mr. Rouzer. Mr. Darr, it looked like you had something to 
say.
    Mr. Darr. I did, thank you, sir.
    First of all, I would like to say I agree with that 
interconnectivity that Mr. Gold just laid out. I think that is 
spot on.
    And I want to congratulate the Department of Transportation 
for initiating the flow process, which is a pretty good attempt 
to try and open up some more visibility with the hope that we 
can project forward patterns much better based on the past. And 
it is an example of a genuine public-private partnership that I 
think deserves some recognition.
    Also, I want to point out that when it comes to 
containerized goods, they are not all affected equally here. 
And the higher value that the goods are relative to their 
volume that goes into a container, the much less affected they 
are by excursions in price. And as I mentioned earlier, we are 
not seeing anywhere near the sort of price excursions in the 
open market that we did during the pandemic.
    And also keep in mind the baseline of which we might say 
prices are higher or less actually is a baseline which was at a 
very low point in the market, below pandemic levels. And in a 
lot of cases like, for example, in exports of U.S. ag cargoes, 
a lot of those we are carrying below our costs at the time. So, 
it is not painting the full picture just to look at an absolute 
pricing point. Thank you.
    Mr. Rouzer. Thank you very much.
    Sorry, Mr. Chairman, I appreciate your indulgence, though. 
Sorry to go over.
    Mr. Webster of Florida. The gentleman yields back. Mr. 
Johnson, you are recognized for 5 minutes.
    Mr. Johnson of South Dakota. I want to pick up where Mr. 
Rouzer ended. He does a great job helping to lead the Supply 
Chain Caucus.
    And I think we--number one, we all get it. We understand 
that going through the Red Sea is an incredibly dangerous 
proposition these days. I think we all understand that some 
carriers would rightfully make a decision to reroute. I think 
we understand that those reroutes could cause price 
adjustments. Now, Mr. Gold and Mr. Darr, you have both made it 
clear the full effect of those really haven't been felt yet. We 
don't know what next month or the month after that holds.
    Of course, I have talked to some shippers. We are a little 
concerned that these reroutes could create an opportunity for 
not just reasonable fee and rate adjustments, but perhaps 
unreasonable fee and rate adjustments, really with a process 
that doesn't have a tremendous amount of transparency.
    And so, Mr. Darr, what do you say to shippers who raise 
those concerns?
    Mr. Darr. Well, like I say, first of all, get to know us 
better and have the kind of dialogues that we have had 
facilitated by some associations of ag exporters in particular. 
And we understand each other better, we can serve their needs 
better, set up groups to help accommodate that even when times 
are good, rather than the really challenging times like now. 
And I think, if you have prepared and you have built the 
relationships in those times, it's much easier to deal with a 
crisis, and you are speaking the same language.
    I also would encourage those that can to seek the stability 
of longer term service agreements, rather than just to be 
reliant upon the spot market, because those that are, are much 
more subject to market fluctuations. And in the U.S., for 
example, 90 percent, roughly, of our cargoes in and out are 
carried under service agreements. And there is a significant 
advantage as far as stability goes with that.
    Lastly, I will make the point about the need to mutually 
focus on things that could be of benefit. And for example, 
investments in the ports for densification purposes, which 
involves taking advantage of some technology that exists today, 
does not have to be at the expense of any port jobs. And as I 
said, our model, we try not to do that at all, but yet we can 
improve and do much better and reach higher efficiency levels, 
similar to what we see in many overseas ports if we make those 
investments here and do so with the right goals in mind.
    Mr. Johnson of South Dakota. So, with those associations 
that do have an active dialogue with you, you are not hearing 
those kind of concerns about maybe unreasonable rate increases 
to come?
    Mr. Darr. No, sir, I am not. Because if they are 
unreasonable, we are in a very competitive marketplace. And 
even though right now the carriers are having to adapt very 
quickly and to add capacity and add equipment and things into 
it, ultimately the competition in the market is going to be a 
boundary on this.
    And I think as a case in point, Sea-Intelligence, for 
example, just published their latest analysis over the last 
couple of business days, and they have shown that on the export 
side in the U.S. transpacific market, which is where most of 
the ag goes, those rates are actually about flat.
    So, again, we are seeing the import side, or the headhaul, 
carry most of the burden of the extra costs of having to adjust 
the networks. And in normal times, it's not uncommon to see 85 
to 90 percent of the revenue actually generated on the import 
side, and the exporters benefit from that. That seems to be, 
according to the published data, one of the dynamics that's 
happening now. And if it gets too far out of bounds, the market 
will correct it. There will be somebody else that will carry 
the cargo that meets the shipper's needs.
    Mr. Johnson of South Dakota. Certainly a competitive market 
would respond in that way. I mean--and I don't know how you 
would ultimately define a market that's not competitive enough. 
We have seen concentration in the industry in the last couple 
of decades. You'd know the numbers better than I would, but I 
think 70 percent of the cargo held by the largest five or six 
partnerships. But it is good to hear that the rates have been 
flat.
    Mr. Gold, what else would you say in response to Mr. Darr's 
comments?
    Mr. Gold. I think certainly those that are under the yearly 
contract have better ability to negotiate on rate increases and 
surcharges. There certainly are provisions.
    But again, small and medium-sized companies that aren't 
under those yearly contracts that have to rely on the spot 
market don't have the same ability and same flexibility, and 
they certainly are the ones that are being impacted by those 
increases.
    And again, looking to the next contract cycle, concerns 
about what comes next and how those prices are going to go 
forwards. Right now, we would love to see more visibility into 
how some of those numbers are coming about. I think, from what 
I hear from my members, they are working with the carriers and 
negotiating, and figuring out how much of those surcharges they 
are going to take on, but they would love to get the exact 
understanding of where those numbers are actually coming from 
to understand what's being put forward to them.
    Mr. Johnson of South Dakota. So, as we look about problem-
solving and even doing a better job, Mr. Darr, I thought your 
suggestion about, hey, more engagement would be good.
    It sounds like additional transparency would be your 
addendum to that, Mr. Gold, right?
    Mr. Gold. I think so, yes. And we are looking forward to 
the hearing the Federal Maritime Commission will be holding on 
February 7 on this specific issue.
    Mr. Johnson of South Dakota. Yes. Thank you very much, 
gentlemen.
    And with that, I would yield back.
    Mr. Webster of Florida. The gentleman yields back. Seeing 
there is no further testimony, I would like to thank the 
witnesses for being here. They were very good testimonies. I 
thank the Members for being insightful. I thank the audience 
for being respectful.
    The hearing is adjourned.
    [Whereupon, at 11:51 a.m., the subcommittee was adjourned.] 
    
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