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24–911 PDF 2017

AUTHORIZATION OF COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

(115–9) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

APRIL 4, 2017 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

GARRET GRAVES, Louisiana 

BARBARA COMSTOCK, Virginia 

DAVID ROUZER, North Carolina 

MIKE BOST, Illinois 

RANDY K. WEBER, SR., Texas 

DOUG LAMALFA, California 

BRUCE WESTERMAN, Arkansas 

LLOYD SMUCKER, Pennsylvania 

PAUL MITCHELL, Michigan 

JOHN J. FASO, New York 

A. DREW FERGUSON IV, Georgia 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

JOHN GARAMENDI, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

ANDRE ́ CARSON, Indiana 

RICHARD M. NOLAN, Minnesota 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut, Vice 

Ranking Member 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

FREDERICA S. WILSON, Florida 

DONALD M. PAYNE, JR., New Jersey 

ALAN S. LOWENTHAL, California 

BRENDA L. LAWRENCE, Michigan 

MARK DESAULNIER, California 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

FRANK A. LOBIONDO, New Jersey 

GARRET GRAVES, Louisiana 

DAVID ROUZER, North Carolina 

RANDY K. WEBER, SR., Texas 

BRIAN J. MAST, Florida 

JASON LEWIS, Minnesota, Vice Chair 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

JARED HUFFMAN, California 

ALAN S. LOWENTHAL, California 

ELEANOR HOLMES NORTON, District of 

Columbia 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... iv 

WITNESSES 

Admiral Paul F. Zukunft, Commandant, U.S. Coast Guard, accompanied by 

Master Chief Steven W. Cantrell, Master Chief Petty Officer of the Coast 

Guard, U.S. Coast Guard: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 41 

Responses to questions for the record from the following Representatives: 

Hon. Duncan Hunter of California .......................................................... 45 

Hon. Don Young of Alaska ....................................................................... 49 

Hon. Michael A. Khouri, Acting Chairman, Federal Maritime Commission: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 57 

Responses to questions for the record from Hon. Duncan Hunter of California .............................................................................................................. 63 

Joel Szabat, Executive Director, Maritime Administration: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 69 

Responses to questions for the record from Hon. Duncan Hunter of California .............................................................................................................. 77 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. John Garamendi of California ....................................................................... 37 

SUBMISSIONS FOR THE RECORD 

Hon. John Garamendi, a Representative in Congress from the State of California, submission of the following documents: 

Report from Hon. Garamendi’s Maritime Advisory Committee, ‘‘Priorities 

of the Northern California Maritime Industry,’’ April 25, 2016 ............... 78 

Written statement of General Darren W. McDew, U.S. Air Force and 

Commander, U.S. Transportation Command, from the March 30, 2017, 

hearing of the House Armed Services Committee ...................................... 101 

‘‘Federal Maritime Commission 55th Annual Report for Fiscal Year 2016,’’ 

submitted by Hon. Michael A. Khouri, Acting Chairman, Federal Maritime 

Commission 1

1The 59-page ‘‘Federal Maritime Commission 55th Annual Report for Fiscal Year 2016’’ 

can be found online on the Federal Maritime Commission’s website at http://www.fmc.gov/ 

assets/1/Page/55AnnualReport.pdf. 

iv 


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SlJMMARY 01<' SUBJECT MATTER 

TO: 

FROM: 

RE: 

Members, Subcommittee on Coast Guard and Maritime Transportation 

Staff, Subconunittce on Coast Guard and Maritime Transpot1ation 

Hearing on the "Authoiization of Coast Guard and Maritime Transportation 

Programs" 

PURPOSE 

The Subcommittee on Coast Guard and Maritime Transportation will meet on Tuesday, 

April4, 2017, at 2:00p.m., in 2167 Rayburn House Office Building to examine the United States 

Coast Guard (Coast Guard or Service) and maritime transpot1ation programs. The Subcommittee 

will hear from the Coast Guard, the Federal Maritime Commission (FMC), and the Maiitime 

Administration (MARAD). 

BACKGROUND 

Each Congress the Subcommittee on Coast Guard and Maritime Transpot1ation moves an 

authorization bill principally to authorize appropiiatious for the Coast Guard and also the FMC. 

The last reauthorization bill (the Coast Guard Authorization Act of 2016, P.L. 114-120), 

provided a two-year authorization of appropriations for fiscal years (FY) 2016 and 2017, with 

$9.1 billion authorized for each year. This Congress, we will need to move another authorization 

bill. Such bill may include: provisions suggested by the Coast Guard to improve its operations 

and programs; stodies or reports to be conducted by the Government Accountability Office to 

review laws and regulations implemented by the Service; legislative changes to maritime laws; 

land conveyances; and miscellaneous maritime policy items. Historically, the Subcommittee 

works with the House Aln1ed Services Conunittee to authorize appropriations for MARAD in 

the National Defense Authorization bill which is passed each session of Congress. The 

Subcommittee retains jurisdiction over non-national secmily aspects of the merchant marine and 

when appropriate addresses relevant issues in authorization bills. 
v 


Insert offset folio 2 here 24911.002

United States Coast Guard 

The Coast Guard was established on January 28, 1915, through the consolidation of the 

Revenue Cutter Service (established in 1790) and the Lifesaving Service (established in 1848). 

The Coast Guard later assumed the duties of three other agencies: the Lighthouse Service 

(established in 1789), the Steamboat Inspection Service (established in 1838), and the Bureau of 

Navigation (established in 1884). 

Under section 2 of title 14, United States Code, the Coast Guard has primary 

responsibility to enforce or assist in the enforcement of all applicable federa1laws on, under, and 

over the high seas and waters subject to the jurisdiction ofthc United States; to ensure safety of 

life and property at sea; to carry out domestic and international iccbrcaking activities; and, as one 

of the five armed forces of the United States, to maintain defense readiness to operate as a 

specialized service in the Navy upon the declaration of war or when the President directs. 

The Coast Guard is directed by a Connnandant, who is appointed by the President with 

the advice and consent of the Senate to a four-year term. On May 30,2014, President Obama 

appointed Admiral Paul F. Zukunft as Commandant of the Coast Guard. 

The Coast Guard was appropriated $8.4 billion in FY 2015 and $9.2 billion in FY 2016 in 

discretionary funding. The Administration requested $8.4 billion for FY 2017 for the Service's 

discretionary programs. Under the FY 2017 Continuing Resolutions (P.L. 114-223 and P.L. 114-

254), the Service was appropriated a total of$5.23 billion through April28, 2017. 

The Coast Guard is composed of approximately 40,000 active duty military members, 

7,500 reservists, and 8,400 civilian employees. The Coast Guard's personnel operate a diverse 

fleet of surface and air assets. V cssels under 65 feet in lenf,>th are classified as "boats" and 

usually operate near shore and on inland waterways. The Coast Guard operates roughly 1,000 

boats, ranging in size from12 to 64 feet in length. A "cutter" is any Coast Guard vessel65 feet in 

length or greater. The Coast Guard has 247 cutters, including harbor tugs, buoy tenders, 

construction tenders, patrol cutters, and three polar icebreakers (only two of which are 

operational). Additionally, the Coast Guard maintains an inventory of roughly 192 fixed and 

rotary wing aircraft. 

For over two decades, the Coast Guard has been recapitalizing its fleets of offshore 

cutters, a multi-billion-dollar effort to procure eight National Security Cutters, 25 Offshore Patrol 

Cutters, and 58 Fast Response Cutters. These cutters will replace ninety cutters and patrol craft 

of advanced age: 12 high-endurance cutters; 29 medium-endurance cutters; and 49 110-foot 

patrol boats. 

National Security Cutter (NSC): the Service estimates the total acquisition cost for eight 

cutters at $5.559 billion, an average of about $695 million per ship. In FY 2016, the 

Service was appropriated $743 million, including funding for award and production costs 

associated with construction and delivery of a ninth NSC. The Administration requested 

$127 million for FY 2017 forNSC Post Delivery Activities. The FY 2017 Continuing 

Resolutions appropriated a total of $512.1 million for the NSC program. 

2 
vi 


Insert offset folio 3 here 24911.003

Offshore Patrol Cutter (OPC): the Service estimates the total acquisition cost of the 25 

ships at $10.523 billion, averaging about $421 million per ship. FY 2016 appropriations 

included a total of $89 million for the OPC program, with $70.5 million to be used to 

exercise the option for Detail Design and to commence Phase II of the OPC acquisition. 

The Administration's FY 2017 request was $100 million for OPC Detail Design and 

award of Long Lead Time Materials. The Service received $4 million for the OPC in the 

FY 2017 Continuing Resolutions. The Service awarded the OPC contract to Eastern 

Shipbuilding Group on September 15,2016. 

Fast Response Cutter (FRC): the Service estimates the total acquisition cost of the 58 

cutters at $3.764 billion, averaging about $65 million per cutter. A total of 38 FRCs have 

been funded through FY 2016. FY 2016 appropriations included a total of$340 million 

for the acquisition of six additional cutters. The Administration's FRC request for FY 

2017 was $240 million f(Jr four FRCs. The FY 2017 Continuing Resolutions provided to 

the Service a total of $219 million. 

Polar Icebreaker: the Coast Guard has one active heavy icebreaker, Coast Guard Cutter 

(CGC) POLAR STAR, and one active medium icebreaker, CGC HEALY. The Service 

estimates it will cost roughly $1 billion for a new heavy polar class icebreaker. In FY 

2016, the Service was appropriated $6 million. For FY 2017 the Administration's request 

was $147.6 million and the Service received $6 million in the FY 2017 Continuing 

Resolutions. The Service initiated a reprograrruning of S30 million from the OPC account 

in FY 2017 to support six different industry studies to decrease the timeframe for the 

completion of the first heavy polar icebreaker. The awards of these contracts will be 

issued in March, 2017. 

Coast Guard assets are supported by the Service's shores ide infrastructure. In its annual 

budget request, Coast Guard shoreside infrastructure includes both major and minor shore 

projects and survey and design work. Survey and design work includes funding required for 

planning, environmental and engineering studies, and real property and land acquisitions for 

future year shoreside projects. For each FY 2015 and 2016, the Service was appropriated 

$500,000 for survey and design work; the Administration requested that same amount in FY 

2017. 

Minor shore construction projects usually require less advanced planning than major 

projects and generally fall under ( 1) emergency repair projects (with cost estimates of greater 

than 50 percent of the replacement value), or (2) minor facility improvements (costing more than 

$1 million) to adapt to changing or increased Coast Guard missions. For each FY 2015 and 2016, 

the Service was appropriated $5 million tor minor shore projects. The Service requested that 

same amount in its FY 2017 budget. The FY 2017 Continuing Resolutions did not appropriate 

funds for minor shore projects. 

Major Acquisition Systems Infrastructure (MAS!) includes shore facility infrastructure 

modifications, upgrades, and new construction associated with homeporting new or modified 

cullers, boats, and/or aircraft. It also includes logistic, maintenance, and training support for new 

or modified assets. For FY 2015, MAS! received $16 million in appropriations and in FY 2016, 

3 
vii 


Insert offset folio 4 here 24911.004

the Service received $52 million for these activities. The Administration requested $28 million 

for MAS I for FY 2017. 

The FY 2017 Continuing Resolutions include a combined appropriation of$117.5 million 

for Coast Guard's Major Shore, Aids to Navigation (ATONS), and Survey and Design projects. 

The Service's spend plan for this appropriation is incomplete and will remain that way until the 

FY 2017 appropriations arc finalized. The Service must also address repairs needed for damage 

caused along the Georgia and Carolina coasts by Hurricane Matthew, and the estimated cost for 

these 14 projects is $92.3 million. 

In addition, the Coast Guard has a sizable backlog ofunmet shoreside infrastructure 

projects. Its prioritized shore backlog includes 30 projects with a cost of $465 million. Its 

unprioritized shore backlog consists of 68 projects with a preliminary cost estimate of $1.08 

billion. The Coast Guard's total shore infrastructure project backlog cost estimate is $1.55 

billion. 

Federal Maritime Commission(FMC) 

The FMC was established in 1961 as an independent agency responsible for the 

regulation of oceanbome transportation in U.S. foreign commerce. The FMC administers a 

limited antitrust exemption for ocean carriers pursuant to agreements filed with the FMC to 

ensure competition among carriers. The FMC also enforces laws related to cruise vessel financial 

responsibility to ensure cruise vessel operators have suflicient resources to pay judgments to 

passengers for personal injury or death or for nonperformance of a voyage. 

The FMC is composed of five Conunissioners appointed for five-year terms by the 

President with the advice and consent of the Senate. The Commission is led by a Chairman 

designated by the President. The Acting Chainnan is Michael Khouri who was appointed by 

President Trump on January 23, 2017. 

In each FY, 2015 and 2016, the FMC received $25.7 million in appropriations, with 74 

percent covering personnel expenses and 13 percent for rent accounts. The Administration 

requested $27.5 million for FY 2017. Underthe FY 2017 Continuing Resolutions (P.L. 114-223 

and P.L. 114-254), the FMC was appropriated a total of$14.7 million through April28, 2017. 

Maritime Administration (MARAD) 

MARAD was established in 1950. The agency administers financial programs to build, 

promote, and operate the U.S. flag 11eet; manages the disposal of federal government-owned 

vessels; regulates the transfer of U.S. documented vessels to foreign registries; maintains a 

reserve fleet of federal govemment-owned vessels essential for national defense; operates the 

U.S. Merchant Marine Academy; and administers a grant-in-aid program for state operated 

maritime academies. 

4 
viii 


Insert offset folio 5 here 24911.005

MARAD is led by an Administrator appointed by the President with the advice and 

consent of the Senate. The position is currently vacant. The Acting Maritime Administrator is 

MARAD Executive Director Joel Szabat. 

In FY 2015, MARAD was appropriated $341 million and, in FY 2016, MARAD received 

$399 million. The Administration requested $403.1 million for FY 2017 to support MARAD 

programs. Under the FY 2017 Continuing Resolutions (P.L. 114-223 and P.L. 114-254), 

MARAD was appropriated a total of $223 million through April 28, 2017. 

WITNESS LIST 

Admiral Paul F. Zukunft 

Commandant 

United States Coast Guard 

(Accompanied by: Master Chief Steven W. Cantrell 

Master Chief Petty Officer of the Coast Guard, United States Coast Guard) 

Mr. Michael A. Khouri 

Acting Chairman 

Federal Maritime Commission 

Mr. Joel Szabat 

Executive Director, in Lieu of the Administrator 

Maritime Administration 

5 
(1) 

AUTHORIZATION OF COAST GUARD AND 

MARITIME TRANSPORTATION PROGRAMS 

TUESDAY, APRIL 4, 2017 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to call, at 2:38 p.m., in room 

2167, Rayburn House Office Building, Hon. Duncan Hunter (Chairman of the subcommittee) presiding. 

Mr. HUNTER. The subcommittee will come to order. Welcome, everybody. Good afternoon and welcome to our first hearing in the 

115th Congress. We would have had this earlier, but it snowed out 

here. 

Today, we will review Coast Guard and maritime transportation 

programs. As we all know, the United States Coast Guard is a critical component of our Nation’s defense and homeland security. It 

is an armed service; and of the five armed services, it is unique. 

It is the only one with law enforcement abilities. The Coast Guard 

has moved between different Federal departments over its history, 

with some departments being a better fit than others for the Service. 

I have ongoing concerns with the Coast Guard being within the 

Department of Homeland Security. On its face, the Coast Guard 

should fit comfortably within the Department, due to its role in defense and homeland security. However, when it comes to budgetary 

support, it appears the Department—or more likely it is the Office 

of Management and Budget—ignores Coast Guard priorities for Department or other administration priorities. 

The Coast Guard’s budget has been determined to be nondefense 

discretionary, placing it in competition against all nonmilitary discretionary spending, despite the Coast Guard being a military service at its core. No other military service has experienced such a disadvantage and been denied budget clarity and foresight like the 

Coast Guard. This, without question, is a big risk to national security and should compel a more serious budget approach. 

There are a number of us, including the ranking member and 

myself, that are members of both this committee and the Armed 

Services Committee, who understand the requirements of the Service. When the Service is active in a time of conflict, it works as part 

of the Navy, but every day its missions are critical to our national 

defense. I will repeat myself. Every day the Coast Guard’s missions 

are critical to our Nation’s defense. 

2 

We are nowhere near close to the budget numbers being final. 

And I look forward to working with the Coast Guard to provide the 

Service with the funding it needs to do its job. 

We will also hear from the Federal Maritime Commission, the 

FMC. The FMC implements the Shipping Act of 1984 and other 

shipping-related legislation. The FMC administers a limited antitrust exemption for ocean carriers, to ensure fair competition 

among foreign and U.S. shipping interests. 

The contraction of the ocean carrier industry over the last couple 

of years has many carriers operating within shipping alliances to 

reduce operating costs. The FMC oversees agreements that form 

these alliances, to ensure they adhere to the limited antitrust exemption. Recent action by the FMC has U.S. industry concerned 

that the limited exemption is being misused. The industry was also 

rocked by the Hanjin bankruptcy, which created turmoil in the supply chain. The subcommittee is interested in how the FMC assesses 

agreements and works with industry to prevent other supply chain 

disruptions and maintain fair shipping practices. 

MARAD is also with us today. The subcommittee shares jurisdiction over MARAD with the Armed Services Committee, having jurisdiction over the nonnational security aspects of the merchant 

marine. The subcommittee understands the critical role U.S. mariners have in supporting domestic shipping operations as well as defense operations, including the Maritime Security Program and 

sealift. The subcommittee looks forward to working with MARAD 

on these important issues. 

And I now yield to my ranking member, Mr. Garamendi; you are 

recognized. 

Mr. GARAMENDI. I thank you very much, Mr. Chairman. I appreciate your interest in beginning the process of writing a new 2-year 

Coast Guard maritime transportation authorization bill. I look forward to working with you again and with the committee members 

in the same successful—that we have had in the past. 

I would also like to welcome our witnesses, the U.S. Coast 

Guard, the Federal Maritime Commission, and the Maritime Administration. It is my expectation that this hearing will be but only 

the first of several exchanges as we work collaboratively to build 

and shape U.S. maritime policy to meet the many challenges and 

uncertainties in the world today. In fact, we are in a very, very turbulent and challenging time in the maritime world. Foremost, I remain extremely concerned about the reported $1.3 

billion, 14-percent cut to the Coast Guard budget. The new administration has floated it. If they are serious, it is a pretty good example about knowing the cost of everything, but the value of nothing. 

There is little doubt that the administration heard the outcry 

from Members of Congress. Mr. Chairman, you were leading all of 

that. However, if the administration thought the release of its fiscal year 2018 skinny budget would somehow allay our concerns, no, 

it didn’t happen. We remain deeply, deeply concerned about any 

cut to the Coast Guard. 

If there is perhaps one thing we could do to respond to the uncertainties that we confront in the maritime domain, it would be to 

make certain that the Coast Guard is fully funded even at a higher 

level than last year. 

3 

Furthermore, if we are to be sincere in our commitments to protect our maritime borders as well as to ensure the reliability, safety, and security of the U.S. maritime supply chain, we will need to 

work tirelessly to prevent any shortsighted budget policy becoming 

a reality. I believe this is probably our first and foremost task 

ahead of us, but there are many, many others. 

For one, the global oversupply of container ships and the bottoming out of shipping rates have created turmoil in the global container shipping market. Bankruptcies, mergers, acquisitions and on 

and on, and this going on at a dizzying pace. We need to know: how 

will this transformation affect robust competition, fair pricing for 

the maritime transportation services and foreign trade? In addition, what collateral effects on U.S. marine terminal operators, escort tugs, and other marine service providers will result from the 

alliances and all of the shifting that is going on in that sector? 

The status and future of the U.S.-flag fleet in the international 

trade also remains a great concern, especially whether this fleet 

and its credentialed mariners that are on board will remain capable of providing the reliable, secure sealift capacity for our military. 

I bring our attention to last week’s House Committee on Armed 

Services hearing with the U.S. Transportation Command and the 

concerns that they expressed about that. 

In closing, Mr. Chairman, we must begin now to rebuild our merchant marine and the U.S.-flag presence in global shipping. The 

United States has been, remains, or should remain, a maritime nation. Our future, our prosperity, and our security depends upon it. 

I am optimistic that the ‘‘build America, buy America’’ mantra of 

this administration applies equally to the U.S. maritime industry; 

and, assuming so, I extend my hand in cooperation to help that 

come to pass. 

Thank you, Mr. Chairman. 

I would like also to enter into the record a report from my Maritime Advisory Committee that met out in Vallejo, California, at the 

California State University Maritime Academy. If I could put that 

in the record for the edification of not only myself but the staff and 

anybody else that would like to access that. 

Mr. HUNTER. Without objection. 

[The report entitled ‘‘Priorities of the Northern California Maritime Industry’’ can 

be found on pages 78–100.] 

Mr. GARAMENDI. Many different recommendations that they 

made, some of which I am sure will find its way into legislation. 

With that, I yield back. 

Mr. HUNTER. I thank the ranking member. 

And out of sorts here, but we are joined by the ranking member 

of the full committee. And if Mr. DeFazio has anything to say, feel 

free, have an opening statement. 

Mr. DEFAZIO. Thank you, Mr. Chairman. I appreciate you holding this hearing. 

And I would echo the concerns of both the chairman and the 

ranking member as regards the neglect that we have seen of the 

Coast Guard’s needs in the budget proposals. The rumored $1.3 billion cut to build a stupid wall that won’t make our country any 

4 

safer would just be outrageous. You know, the French built the Maginot Line, the Germans went around it. 

You know, even if the so-called beautiful wall is built across 

some very rugged terrain, obviously, they can tunnel under it, they 

can use catapults and send drugs over it. They can use drones to 

send drugs in, et cetera. It is not going to solve any national security problem but it would open up the same route the Germans 

used to invade France to drug smugglers, human smugglers, and 

potentially terrorists trying to get a tactical nuclear weapon into 

the United States, which is we would leave our vast coastal areas, 

95,000 miles, and 28,000 miles of navigable inland waterways, it 

would be open season, because the Coast Guard wouldn’t be able 

to provide the coverage we need. They are struggling now with 

their current budget to provide that coverage. 

So if those cuts are a reality, it would be perhaps the most laughable thing, but serious, unfortunately, about the so-called budget 

proposals and the skinny budget, which doesn’t mention the Coast 

Guard whatsoever. 

And I also want to echo the concerns of Ranking Member 

Garamendi about U.S. flags. He showed tremendous leadership 

there. I mean, we can’t be the greatest nation on earth and a great 

maritime nation without any maritime under our own control. And 

alliances are of tremendous concern. I think we should revisit the 

antitrust immunity that has been granted under law, limited as it 

is. 

Apparently, it may be that the Box Club, you know, was even exceeding, shall we say, the limited antitrust immunity, but as they 

were all handed subpoenas, much to their surprise, the meeting at 

the Four Seasons. And hopefully, we can get to the bottom of what 

they are really up to. 

But in terms of denying ports or marine terminal operators, you 

know, contracts, when you get down to three alliances or two alliances and alliances controlled substantially by foreign interests, I 

believe it presents national security issues, certainly economic 

issues, and it merits more attention by this committee. 

With that, Mr. Chairman, thanks for the hearing and I yield 

back the balance of my time. 

Mr. HUNTER. I thank the gentleman. 

I am going to introduce the witnesses now, starting with the 

Commandant of the Coast Guard, Admiral Paul Zukunft; Master 

Chief Steven Cantrell, Master Chief Petty Officer of the Coast 

Guard; Mr. Michael Khouri, Acting Chairman for the Federal Maritime Commission; and Mr. Joel Szabat, executive director, in lieu 

of the Administrator, for the Maritime Administration. 

Admiral, you are recognized. 

5 

TESTIMONY OF ADMIRAL PAUL F. ZUKUNFT, COMMANDANT, 

U.S. COAST GUARD, ACCOMPANIED BY MASTER CHIEF STEVEN W. CANTRELL, MASTER CHIEF PETTY OFFICER OF THE 

COAST GUARD, U.S. COAST GUARD; HON. MICHAEL A. 

KHOURI, ACTING CHAIRMAN, FEDERAL MARITIME COMMISSION; AND JOEL SZABAT, EXECUTIVE DIRECTOR, MARITIME 

ADMINISTRATION 

Admiral ZUKUNFT. Good afternoon, Chairman Hunter and Ranking Member Garamendi and distinguished members of the subcommittee. Thank you. 

I thank you, Chairman, especially for your unwavering support 

of the United States Coast Guard, and I ask that my written statement be entered into the record. 

The Coast Guard is first and foremost an armed service that advances national security objectives in ways no other armed service 

can. It begins with our broad authorities. Over 60 bilateral agreements to enforce rule of law on the high seas and into the territorial waters of foreign nations, where transnational criminal organizations thrive, and they directly threaten our Nation’s security. 

We are witness to illicit trafficking destined for the United 

States, exploiting vulnerable transit nations in Central America, 

spawning violent crime and bringing corruption and sowing the 

seeds of illegal migration, people fleeing their countries of origin to 

seek safe refuge here in the United States. 

In 2016, we removed a record 201 metric tons of cocaine, and we 

brought 585 smugglers to justice here in the United States, where 

we have a nearly 100-percent prosecution rate as compared to the 

less than 10-percent prosecution rate in their countries of origin. 

Our greatest challenge in this campaign is one of capacity. And 

we must maintain our current pace in recapitalizing the Coast 

Guard fleet while advancing shore-based unmanned aerial systems 

to enhance our surveillance capacity. Also, in 2016, we awarded a 

contract to complete the build-out of our fleet of 58 Fast Response 

Cutters at an affordable price at Bollinger Shipyards, who delivered the most recent 4 ships with zero discrepancies. 

We awarded the acquisition of 9 Offshore Patrol Cutters to Eastern Shipbuilding Group, a downpayment for a program of record of 

25 of these capable platforms that meet requirements and, again, 

at an affordable price. And we are cutting steel at Huntington 

Ingalls Shipyard today on the ninth National Security Cutter. We 

stood up an integrated program office with the Navy and recently 

awarded industry studies to commence the build-out of a fleet of 

three heavy and three medium icebreakers, all meaningful steps to 

keep our Nation on an accelerated path to deliver the first heavy 

icebreaker in 2023. 

And, again, thank you, Chairman and this committee, for your 

leadership and vision in helping us establish this collaborative approach. 

We also received our fourth consecutive clean financial audit 

opinion, and have minimized acquisition growth and also eliminated timeline slippages in our major acquisitions. Yet readiness, 

modernization, and force structure challenges inhibit our ability to 

fully address the asymmetrical threats in our increasingly volatile 

world. 

6 

Like the other four armed services, the Coast Guard faces the 

menacing combination of increased mission demands, years of fiscal 

constraint, and lost purchasing power. The Budget Control Act has 

eroded our ability to simultaneously execute our daily missions, 

maintain our contributions to Combatant Commanders, and preserve our readiness for global contingencies. 

The Coast Guard is the only armed service that has been funded 

below the BCA floor in our annualized operations and maintenance 

appropriation. Our Service Secretary, John Kelly, understands this 

issue and fully supports the President’s call to rebuild all the 

armed services. 

And I am working to rebuild our long overlooked fleet of 35 inland construction tenders with an average age of 52 years. Now, 

this is critical in sustaining our inland river system and overall 

maritime transportation system that generates $4.5 trillion of commerce on an annual basis. This fleet is critical to our economic and 

national security. 

Finally, we need to grow the Coast Guard. We have had 5 consecutive years of funding offsets in our operations and maintenance 

account, and over the next 5 years we need to restore 1,100 Reserve billets and bring another 5,000 Active Duty members into our 

Service, while sustaining our more than 8,500 civil servants. 

I appreciate the unwavering support of this subcommittee to address our most pressing needs. With the continued support of the 

administration and Congress, the Coast Guard will remain Semper 

Paratus—Always Ready. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

Mr. HUNTER. Thank you, Commandant, and thanks for what you 

do for obviously the men and women that you represent right now 

in this room. 

And Master Chief Cantrell, same to you. A happy Coastie is an 

effective Coastie. Thanks for what you do for looking out for the 

men and women and their families and their well-being. As you 

know, when you are on the water or in the air as much as you are, 

it is tough. So thank you. 

Master Chief, you are recognized. 

Master Chief CANTRELL. Thank you, sir. And good afternoon, Mr. 

Chairman and distinguished members of the committee. 

It is a privilege to appear before you today to represent the nearly 41,000 Active Duty and 7,000 Reserve members of your United 

States Coast Guard, who stay on the watch every day protecting 

our Nation. As one of our Nation’s armed services as well as a law 

enforcement agency, they represent the finest force we have ever 

had in our history. 

In this era of record operational demands and uncertain budgets, 

these dedicated men and women are charged with maintaining 

operational excellence around the globe in our own Nation’s ports 

and waterways. Performing our missions in a maritime environment is inherently dangerous. Our people operate in the harshest 

and many times the most unforgiving conditions imaginable, but 

they are proud to do so every day, with a devotion to duty that is 

something to marvel at. 

7 

Recent discussions surrounding proposed cuts to the Coast Guard 

budget have highlighted the importance of a strong relationship 

with our department. I am happy to say Secretary Kelly has shown 

an indepth appreciation for the hard work performed by Coast 

Guard men and women. His dedication to ensuring a predictable, 

supportive Coast Guard budget that reflects commitment to our 

members and their families is greatly appreciated. 

And I want to personally thank all the congressional delegations 

that have visited Coast Guard units, whether within your constituency or elsewhere. Visiting our Coast Guard men and women and 

speaking with them face-to-face gives you the ground truth about 

the impacts your decisions are having on even our most junior personnel. It is also great for our units as members show you the pride 

they feel every day. 

I also want to thank you for your continued support of our recapitalization efforts, which are making a tremendous impact on 

national security. Our new platforms are extremely capable and 

contribute to the efficient execution of our mission and our service 

to the Nation. 

But we mustn’t lose sight of the fact that many of our Coast 

Guard men and women continue to serve in ships and at stations 

that are older than their parents or in some cases their grandparents. 

But the age and deteriorating state of our assets and infrastructure aren’t the only challenges the members of our Service face. We 

continue to face quality of life concerns. With many of our workforce serving at remote units, far from bases or other military installations and in many cases high-cost coastal areas, access to adequate and affordable housing, medical care, and child care will always be a challenge. It is critically important we find ways to ensure access to these services in these remote areas, especially for 

the nearly 70 percent of our members who are married or have dependents. 

Many times, in addition to paying benefits, the support programs 

we provide to members and their families determine how long they 

remain in our Service. I believe we can all attest that we would not 

be successful in our careers without the love and support of our 

families. The sacrifices our members and their families make 

throughout a typical career are tremendous, yet they continue to 

volunteer to serve and reenlist and not just as individuals but as 

a family. 

Life in today’s military presents unique challenges, and our leadership is deeply committed to providing every Coastie and their 

family with unparalleled quality of life as they serve this great 

country. I am pleased to have my wife, Janet, here with me today 

as a representative of our Coast Guard families and as someone 

who spends so much of her time devoted to meeting Coast Guard 

families throughout our Service to ensure their voices and concerns 

are always heard. 

We will continue to work on improving these support programs 

and services to ensure our workforce, both married and single, remain Semper Paratus. We must invest in them. 

It is very easy to look at shiny new ships and aircraft with modern capabilities and assume we have achieved some budget success. 

8 

However, we cannot forget those soft costs that are so critical to 

our people and their families. 

Once again, we are grateful for your support as we address these 

challenges. I promise to remain steadfast in ensuring these and 

other quality of life programs are addressed in our budgets, as our 

current and future workforce depend on us to be their voice. 

Mr. Chairman, members of the committee, on behalf of the men 

and women of your United States Coast Guard and their families, 

I thank you for your continued and very public support, and thank 

you for the opportunity to discuss some of the highlights and challenges Coast Guard women and men face today. Thank you. 

Mr. HUNTER. Thanks, Master Chief. I also want to recognize your 

wife sitting right behind you. Would you like to say a few words? 

No, just kidding. OK. You can really attest to the quality of life 

stuff. She said she wants you gone more, though. That is all right, 

right? 

Thanks, Master Chief. 

Mr. Khouri, I know you have got to roll after your opening statement. You are recognized. 

Mr. KHOURI. Thank you, Chairman Hunter, Ranking Member 

Garamendi and members of the subcommittee. Good afternoon, and 

thank you for the opportunity to present testimony. 

And first I want to recognize my fellow Commissioners here 

today, Commissioner William Doyle and Daniel Maffei. Commissioners Dye and Cordero are traveling today. 

With your permission, I will summarize the prepared remarks 

and I request the written testimony, together with a copy of our fiscal year 2016 annual report submitted today, be included in the 

record. 

[The ‘‘Federal Maritime Commission 55th Annual Report for Fiscal Year 2016’’ 

can be found online at FMC’s website at http://www.fmc.gov/assets/1/Page/ 

55AnnualReport.pdf.] 

Mr. KHOURI. We are now in the 100th year of operation under 

the Shipping Act. The FMC mission is to foster and facilitate open, 

free, and competitive transportation market activity, while protecting the shipping public from unlawful, unfair, and deceptive 

practices, with a minimum of Government intervention and regulatory cost. 

Of recent note, on March 6, the Commission unanimously approved a new rule to reduce the complexity, burden, and cost for 

the 165 ocean carriers and the 6,200 ocean transportation intermediaries who file 53,000 contracts and over 730,000 contract 

amendments with the agency each year. 

I intend for this deregulatory effort to continue as we take up 

other pending and proposed issues. After consulting with my fellow 

Commissioners, I have designated the FMC’s managing director, 

Karen Gregory, as the regulatory reform officer. She is now standing up a task force to execute on the regulation review process. 

Two thousand sixteen was, indeed, a full and challenging year 

for the ocean shipping industry. A series of mergers by vessel operators saw the top 20 carriers consolidated into 17 companies. These 

consolidations further led to a reshuffling of the four carrier alliances serving the U.S. trades. 

9 

By mid-2018, with all announced mergers, there will be 10 companies arranged into 3 operating alliances, as they carry 82 percent 

of containerized cargo across all U.S. trade lanes. Even with these 

developments, the vessel liner industry is still relatively 

unconcentrated. 

The top three carriers in the U.S. trades have market shares of 

12.42 percent, 12.39 percent, and 10.62 percent, respectively. These 

are far from market-dominant positions and, in fact, we are not 

close to a concentrated market in accepted economic regulatory 

terms. 

Individual alliance members do not coordinate on marketing or 

pricing under their operational agreements. The Commission’s ongoing monitoring of all alliance activity serves to ensure that the 

U.S. container trades remain open and competitive. The alliance 

operations do create vessel utilization efficiencies and lower cost 

structures that directly benefit U.S. exporters, importers, and our 

U.S. consumers. 

All that being said, concerns about these trends have been expressed by U.S. cargo interests, our exporters and importers. All 

these new alliances have been filed at the Commission over the last 

year. We have strengthened all of our economic review processes 

and require tighter limits on the scope of each agreement’s authority. 

Seaport efficiency and port congestion received significant attention by the Commission over the last several years. The supply 

chain innovation team, led by Commissioner Rebecca Dye, has been 

developing information-sharing protocols that should prove extremely beneficial, and integrating the global supply chain, and 

provide a boost to the American economy. 

Regarding our budget, the FMC is a small agency with a focused 

mission and a specialized workforce of 127 dedicated employees. 

Eighty-eight percent of our budget is rent and salaries. Much of the 

remainder is fixed overhead. I will focus our resources on the core 

statutory mission of the agency and, when necessary, I will reallocate resources to address mission-critical needs. 

In summary, the maritime container supply chain is commercially and operationally complex. As international imports and exports grow, increased cargo volumes will continue to stretch this 

supply chain. The FMC’s role is to ensure that the market for container shipping services remains open, competitive, free from unlawful, unfair, or deceptive practices, but, again, with a minimum 

of Government intervention and regulatory cost. 

Thank you for your attention, and I will be pleased to answer 

any questions. 

Mr. HUNTER. Thank you, Mr. Khouri. 

Mr. Szabat, you are now recognized. 

Mr. SZABAT. Good afternoon, Chairman Hunter, Ranking Member Garamendi, and distinguished members of the subcommittee. 

Thank you for inviting me to discuss the Maritime Administration’s 

programs to foster and develop the maritime industry in the 

United States. Our military relies on U.S.-flag ships crewed by volunteer American civilian mariners to move our warfighters, equipment, and supplies whenever and wherever they need to go. 

10 

Three-quarters of MARAD’s budget goes to national security and 

ensuring that America has a viable commercial merchant marine, 

one that employs enough qualified merchant mariners through 

three programs: The Jones Act, the Maritime Security Program, 

MSP, and Cargo Preference. 

The Jones Act ensures a U.S.-flag fleet in domestic trade by requiring American-built, American-owned, and American-crewed 

vessels to transport passengers and cargo between U.S. ports. MSP 

and Cargo Preference guarantee a U.S.-flag fleet in international 

commercial trade. Combined, these 3 programs support 97 large 

commercial ships in the domestic trade and 81 large U.S.-flag commercial trade ships trading internationally. 

There is also a federally owned surge fleet, the first cargo ships 

out of port in a mobilization or a crisis. MARAD has three-quarters 

of the ships in this surge fleet. When mobilized, MARAD’s 46 ships 

are crewed by volunteer civilian mariners from the U.S.-flag commercial fleet. As the commercial fleet has shrunk in recent years, 

it no longer employs enough qualified available American mariners 

to sustain a full sealift. 

MARAD is preparing a range of options to address the mariner 

shortfall, as Congress required by the House fiscal year 2017 

Transportation, HUD appropriations report language. We are closely cooperating in this effort with our military partners and the U.S. 

Transportation Command and the Military Sealift Command. 

MARAD holds another 50 ships in the National Defense Reserve 

Fleet. Some are held for spare parts, others are being prepared for 

recycling, and some can be activated if needed. These NDRF vessels include six training ships used by the State maritime academies. MARAD has worked on a common design to replace the old 

training ships as they age out. We are also investigating other potential alternatives. 

The largest and oldest ship, SUNY Maritime’s Empire State, is 

due to age out in 2019. Massachusetts Maritime’s training vessel 

is 2 years behind. Texas Maritime also needs a large training vessel. No decision has been made about the Federal Government’s 

role in replacing or overhauling these training ships. 

The education component, representing 17 percent of our budget, 

is primarily for the U.S. Merchant Marine Academy, the Federal 

flagship of the maritime academies. Over 20 percent of the officers 

in the U.S. merchant marine and over 70 percent of the merchant 

mariners who have a military service obligation come from the 

Academy. In order to graduate, midshipman train for a year on 

American commercial and sometimes Federal ships. This unique 

partnership with industry is a core part of the USMMA training, 

known as Sea Year. 

Last June, former Secretary Foxx made a decision to suspend 

Sea Year as part of an effort to combat sexual assault and sexual 

harassment at the Academy. Working with MARAD, industry and 

labor partners have developed new standards to address sexual assault and sexual harassment. 

Companies representing 60 percent of our Sea Year commercial 

capacity have already met the standards and have resumed training midshipmen. By summer, we will roll out best training practices developed with the industry. 

11 

Last June, the Academy was put on warning for accreditation. 

Seven requirements have to be met to remove the warning. The 

Academy was required to do more to address sexual assault and 

sexual harassment on campus and at sea. The other five requirements are primarily about restoring authorities that were taken 

from the Academy’s leadership after financial and operational 

shortcomings were uncovered in 2008 and 2009. The accreditors 

visited the campus last week. We anticipate that by July, we will 

know if our progress has been satisfactory. 

Finally, MARAD’s transportation programs comprise 8 percent of 

our budget. Since 2009, the DOT’s discretionary grant programs 

have also provided valuable resources. Among these are TIGER 

and FASTLANE grants, helping shippers expand and improve 

ports and intermodal infrastructure. We are also working on programs like Deepwater Port Licensing to export oil and liquefied 

natural gas. 

The Delfin LNG project will be the Nation’s first deepwater port 

export facility to export billions of cubic feet of liquefied natural 

gas to foreign markets. 

Our Marine Highways Program is also helping us to maximize 

our underutilized maritime assets, rivers, lakes and waterways, to 

transport more cargo and to reduce congestion on our roads, highways and rails. 

That is a thumbnail view of MARAD. I ask that my written 

statement be entered into the record. Thank you for your time, and 

I am happy to answer your questions. 

Mr. HUNTER. Thank you, sir. 

We will start with questions. I am going to start with myself. I 

recognize myself here. 

OK. Commandant, here is the opening, I guess my opening that 

kind of overstates and underscores what is happening in this administration and why you are here today. 

Tomorrow, there is a meeting on our other committee, the Armed 

Services Committee. There is a meeting with all the Service Chiefs 

except for you. So every Service Chief will be there of the five military services, of which you said in your opening statement you are 

first and foremost a military service. You are not going to be in 

that hearing. Why is that? Why are you here and not in the Armed 

Services hearing tomorrow with your Service Chief peers? Instead, 

you are here with the FMC and MARAD. It seems incongruent. 

Admiral ZUKUNFT. I will answer the question as frankly as possible. Four percent of my budget is funded by defense discretionary. 

Ninety-six percent of it is nondefense discretionary, which then 

comes under the oversight of these other committees. 

So I typically testify with the other Service Chiefs when it comes 

to matters of personnel. And the last time we had a Commandant 

testify with the other Service Chiefs was with the repeal of ‘‘don’t 

ask, don’t tell.’’ But on budgetary matters, we do not have a seat 

at that table. 

Mr. HUNTER. Well, when it comes to national security, when it 

comes to the national security plus-up right now, which is not 

being called that, it is mostly national defense, meaning the other 

four services, I think which hearings you sit in and which table you 

sit at plays a role in how you are perceived by the military estabVerDate Aug 31 2005 11:24 Sep 08, 2017 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\4-4-20~1\24911.TXT JEAN
12 

lishment, by the Department of Defense, and by the American people. So, I mean, I guess this: Would you want to be at that table 

tomorrow? 

Admiral ZUKUNFT. Yes. 

Mr. HUNTER. So let’s take this to where—you talked about increasing personnel. You said increasing 5,000 personnel. Let me 

see. This NDAA, this Authorization Act, of which you are not included, only a very small part of it, because you are nondefense discretionary instead of defense discretionary. 

Let me see. The bill increases the end strength of the Army. The 

Army was going to go down to 460,000. It keeps it at 476,000. So 

basically, it increases 16,000. The Air Force got an Active Duty increase to 321,000, of about 4,000; and the Marine Corps was authorized to bump up of an increase of 3,000. That is all happening 

now. Like that is happening for the next fiscal year. That is going 

to be included in this National Defense Authorization Act. 

Have you requested to move to expand your numbers? 

Admiral ZUKUNFT. When the original Executive order came out, 

I did send a letter to the chairman of the Joint Chiefs, and provided a list of plus-ups that we would need that meet defense requirements. And part of that is an increase to recapitalize the six 

patrol boats we have over the northern Arabian Gulf. So we have 

submitted a request. I have not received a reply. 

Mr. HUNTER. You asked for six FRCs from CENTCOM? Is that 

what you were referring to? 

Admiral ZUKUNFT. Yes. 

Mr. HUNTER. To be included in OCO funding? 

Admiral ZUKUNFT. Right. And any additional plus-ups, any supplemental funding. 

Mr. HUNTER. And what have you seen to either of them saying 

yes or no to those six FRCs? 

Admiral ZUKUNFT. I have not received a reply. 

Mr. HUNTER. So you don’t know yet whether that is going to be 

included in their OCO request? 

Admiral ZUKUNFT. I do not. 

Mr. HUNTER. OK. Going back to, there was an article a few days 

ago where Admiral Michel, the Vice Commandant, said that ‘‘there 

was only one skinny budget’’—this is a quote—‘‘that was delivered 

to Capitol Hill and when you look at that, that’s a sustainment 

budget for the Coast Guard. That’s something we can work with 

and that’s what we’re marching forward on.’’ 

The other four services are requesting a lot more than you are. 

They don’t want a sustainment budget. And that goes in line with 

the President saying that we are going to build up the U.S. military. Yet your wise Commandant is saying that you are fine with 

a sustainment budget right now, that you are not asking for an increase. I guess my question is, which one is it? 

Admiral ZUKUNFT. Well, a sustainment budget still funds us 

below the Budget Control Act. So I cannot take delight in a budget 

that continues to fall short of our annualized requirements and operations and maintenance, and also the critical need to continue 

the pace with which we are recapitalizing, our current level of service, our old ships, and underfunded and undermanned service. 

13 

Mr. HUNTER. So you say that Admiral Michel was not speaking 

on behalf of the Coast Guard, just his view? 

Admiral ZUKUNFT. I would say part of that is taken out of context. It was looking at the potential of a 14-percent reduction and 

to remove that lodestone from around our neck, but it still leaves 

us stooped over with the other burdens that we have to carry. 

Mr. HUNTER. So you want more than a sustainment budget? 

Admiral ZUKUNFT. I do. 

Mr. HUNTER. My last thing is something we have touched on a 

whole lot. Icebreakers. Let’s talk icebreakers. You only have one 

U.S.-made Jones Act icebreaker in the United States, the Aiviq. And I know we have talked offline and online about this. I think 

Congress is prepared to support trials, longer term trials if Homeland Security is willing to support you by starting this process off 

to build the requirements and do the operational evaluation and 

R&D so you can build the requirements so you know exactly what 

you want in an icebreaker. Where are we in that? 

Admiral ZUKUNFT. So we have written letters. The most recent 

was written on the 21st of February to the owners of the Aiviq. We 

have provided them with criteria of what sea trials would entail. 

And we would really like to sit down, you know, with the owners 

at the bargaining table to look at what all of this would entail. 

More importantly, what are the costs? Because the cost is of 

great concern to me. And if we are going to go any further than 

this, we will need top-line relief to be able to move forward. So this 

is a funding availability as much as anything else, but we are 

ready to roll up our sleeves, work with the offeror, and then walk 

them through. 

We have been in this business for going on 70 years of 

icebreaking. They are new to the business. We know a lot about it, 

and I think a lot of value can be made by us sitting with the owners with our experience in what this platform would need to be 

able to do to support our national security objectives. 

Mr. HUNTER. What is preventing that, by the way? What is preventing the sit-down with the owners? 

Admiral ZUKUNFT. We are waiting. I have written letters. We 

have received a few emails. But we are reaching out to the owners 

to have this discussion, which is really where I would like to have 

this discussion, at the bargaining table. And preferably, we can 

take some of that burden off your shoulders as well. But we have 

already committed ourselves in writing to have these discussions. 

Mr. HUNTER. Have you gotten any reassurances from Homeland 

Security that the big Department is willing to find funding for this 

if it works? 

Admiral ZUKUNFT. No, we have not had that level discussion yet. 

Until, again, we can sit down with the owner and look at—we 

haven’t even talked dollar figures of what all is entailed. So we 

need to do our homework first before I can present a package to 

the department. 

Mr. HUNTER. Very quickly, Mr. Khouri, if you don’t mind, we will 

submit questions to you for the record. Is there anything else you 

want to say besides your opening statement? 

Mr. KHOURI. I just want to say not only for the record, but commit to every member of the committee that I would be happy to 

14 

come and meet personally and answer any and all questions that 

they may have. And I have listened to every one of the opening 

statements. So, please, we will be available to answer every question. Thank you. I just have a hard stop and must leave to catch 

a flight. 

Mr. HUNTER. I got you. And hopefully, for you and Mr. 

Szabat—— 

Mr. DEFAZIO. Is he departing, Mr. Chairman? 

Mr. HUNTER. He is. 

Mr. DEFAZIO. OK. That is unfortunate, because I do have some 

questions and very serious concerns about their actions regarding 

these alliances. So I would appreciate—— 

Mr. HUNTER. I would yield to Mr. DeFazio. 

Mr. DEFAZIO. Do you have a couple of minutes? I can have at it 

fast. 

Mr. HUNTER. He has got to leave at 3:30. 

Mr. DEFAZIO. And you can give brief answers. Thank you. Thank 

you, Mr. Chairman. 

So now we are going to have these foreign alliances controlling 

90 percent of the container market to the Pacific States. You know, 

aren’t you concerned about the potential for antitrust collusion 

here? Yes or no, maybe? 

Mr. KHOURI. There is—we need to understand—— 

Mr. DEFAZIO. No, I understand the limitations of your authority, 

but you could have disapproved and had legal action. 

So the question is, you let it go through, what are you going to 

do to mitigate it? You have told some of our operators—this is another question—that the tug people shouldn’t worry about their inordinate influence, because you are going to review any jointly negotiated contract between the alliance and U.S. tugboat operators. 

The FMC, I am not aware has the authority to do that. Do you 

have the authority to do that? 

Mr. KHOURI. Can I answer the first question first and then second question? 

Mr. DEFAZIO. It has got to be brief, so yeah. 

Mr. KHOURI. One needs to understand the nature of these alliances. They are purely operational. They do not have any price-setting agreement or discussion in any shape, form, or fashion. 

Mr. DEFAZIO. The Box Club who were just all subpoenaed, what 

were they doing? 

Mr. KHOURI. Well, Congressman, with all due respect, you must 

know more about what the Department of Justice is doing than I 

do, because I have no idea what Department of Justice—— 

Mr. DEFAZIO. Well, they have these famously—I mean, there is 

no one in the industry who thinks these people aren’t getting together in the room and colluding over pricing and who is going to 

get—who is going to control what harbors, what marine facilities, 

who they are going to—what they are going to do. I mean, it is 

Pollyannaish to think, oh, these alliances are just to help make the 

industry more efficient. Twenty years ago that might have been 

true. It is not true today, and they are foreign-controlled. 

Mr. KHOURI. If I could just go through a few numbers very quickly for you without going into weeds and not to be argumentative, 

Congressman. And you and I have met earlier and I am more than 

15 

happy to come back to your office and spend as much time with you 

and staff as may be necessary. 

But as we go down, there are 5,000 container vessels in the 

world. There are 2,600 vessels that operate, are owned by the companies in the alliances. The alliance activity itself is only 887 vessels, meaning all the rest of the vessels are not in alliance activities. There are only 578 vessels for all of the alliances together in 

the U.S. trades. That means that you have over 2,000 vessels. 

Now, one of the core antitrust principles is, is the market contestable and is there entry that can come in, in case prices go up 

and become too remunerative. Are vessels going to come in and discipline that price. There are, again, 578 alliance vessels serving 

U.S. trades and there are 2,000 vessels to discipline the U.S. worldwide, there are 4,000 vessels available to come in and discipline the 

trades. 

Mr. DEFAZIO. Can I just for a moment—if you want to keep talking. But can we focus on where these vessels are serving? I believe 

a large number of the alliances happen to be serving China, the alliance vessels, and Japan. 

Doesn’t that create some questions? I mean, when Chinese also 

have—you know, they are going to control who can come in and 

come out. So we now have a Chinese-controlled alliance, and they 

are going to want to favor that, you know, as they do famously. 

And so, you know, I mean, there is this, oh, all these other people can come in, except, well, the Chinese probably aren’t going to 

load their ships or let them into their harbors. You know, I just 

think that this is really going too far. I mean, at what point will 

we think we are too concentrated, when we get to two or one alliances—— 

Mr. KHOURI. Well, sir—— 

Mr. DEFAZIO [continuing]. That controls everything? 

Anyway, Mr. Khouri, I realize you have got to go. We can perhaps have another meeting to discuss this. But I really think that 

we need to revisit the act. We need to revisit the assumptions that 

we are creating efficiency in market forces here. In these modern 

times where we know that, you know, State-owned enterprises and 

governments that are acting in a mercantilist way are not really 

interested in competition, and they are interested in driving down 

their costs and dominating our markets and putting our people at 

disadvantage. That is my opinion. You may have a totally different 

one. 

Thank you, Mr. Chairman. 

Mr. KHOURI. If I could, just one last comment, Mr. Chairman, 

and I will answer all of the questions in writing with much more 

specificity. 

But in terms of concentration, it was in my written statement 

and my oral statement. The transpacific trades, China, all of Asia 

over to the U.S. west coast. The standard initial measurement that 

every regulator uses, the Department of Justice, Federal Trade 

Commission, and the Federal Maritime Commission is what is 

called the Herfindahl-Hirschman Index, and it measures concentrations in markets. 

The transpacific—now, let me—where the standard is, anything 

from zero to 1,500 is deemed safe harbor, sufficiently 

16 

unconcentrated that it does not normally warrant scrutiny. From 

1,500 to 2,500 is mildly concentrated, and then above. 

Our Bureau of Trade Analysis says in 2016, the transpacific HHI 

was 647. Worldwide, the HHI is 849. This is saying that these markets are still unconcentrated. Now, that is only the beginning of a 

long series of questions that have to be answered in an antitrust 

review. 

I would be more than happy to sit down with you. But I am not 

trying to be argumentative. I am just trying to say that there are 

traditional ways that whomever you may ask, Department of Justice, FDA or—excuse me, FTC or us, these are the principles that 

if we are to go now into court in front of a Federal judge and say, 

Your Honor, these are the economic indicators we have, and it is 

the judge, not us, who issues the injunction. 

So I have to have a solid economic argument to go in front of a 

Federal district judge to convince him or her that we have an economic situation. These are the numbers that we are working with. 

Happy to engage in this to your satisfaction, sir. 

Mr. DEFAZIO. Well, I have got to say just the marine terminal 

operators, the tug companies and others who are U.S. residents, 

U.S. citizens, and operating to the benefit of our country really 

don’t share those views and think it is going to be much more of 

an antimarket force. So thank you. 

Mr. KHOURI. Thank you, Mr. Chairman. 

Mr. HUNTER. And it would be maybe strip out the limited antitrust exemption that FMC can grant these consortiums totally, so 

that they aren’t allowed to join together to put pressure on the 

ports, collude on price, which you say they don’t do, et cetera. 

But that is it, Mr. Khouri. Thank you. 

With that, I would like to recognize Mr. Graves. 

Mr. GRAVES OF LOUISIANA. Thank you, Mr. Chairman. I want to 

thank all of you for being here today. 

Admiral, I would love to talk to you a little bit about some of the 

acquisition efforts underway. Obviously, I think all of us up here 

have strong concerns that the men and women of the Coast Guard 

have the vessels and the equipment that they need to properly do 

their job in an increasingly challenging and demanding work environment that many of our Coasties are subjected to. 

One thing I would love to talk to you about a little bit is the 

FRC. I know some folks just recently went down, including the 

ranking member of the subcommittee just went down to take a look 

at that. You mentioned in your testimony in the last four vessels 

that were delivered, there were no discrepancies. Is that correct? 

Admiral ZUKUNFT. That is correct. 

Mr. GRAVES OF LOUISIANA. Is that common? 

Admiral ZUKUNFT. Rare. 

Mr. GRAVES OF LOUISIANA. Cost per copy, how is that looking 

compared to estimates? 

Admiral ZUKUNFT. So we renegotiated phase 2, and this came in 

at a very affordable range. 

Mr. GRAVES OF LOUISIANA. So cost going down, no discrepancies. 

Do you see the—and you recently, as you know, awarded Eastern 

Shipbuilding Group to do the OPCs. Do you see benefits to the 

Jones Act in regard to the quality of vessels that you are getting? 

17 

Meaning because of these companies’ efforts to build domestic vessels and just making sure we have a robust defense industrial 

base, do you see benefits to the Coast Guard, to the Government, 

and the American public as a result of that? 

Admiral ZUKUNFT. Congressman, absolutely. I have been to 

Bollinger Shipyard as well. And even in this job market today, I 

wouldn’t call it jobs, I would call it skills. And there are still certain skills that are lacking in this country if we ever found an opportunity where we need to increase our shipbuilding capacity, but 

it is imperative that we continue to retain these skills and, more 

importantly, continue to build these skills as a maritime nation. 

Mr. GRAVES OF LOUISIANA. Thank you. I will move on a little bit, 

but stay in the shipbuilding realm. The Coast Guard authorization 

bills, the last few of them have included provisions that require 

that smaller fishing vessels now comply with the standards of different classification societies. As a result of that, in Louisiana, the 

second biggest commercial fishing industry in the United States, 

we have not seen new vessels being built, none, because in many 

cases they are telling us it is cost-prohibitive. 

I have got concerns about two different things there: 

One, whether those standards are appropriate for fishing vessels. 

Number two, NIOSH, National Institute for Occupational Safety 

and Health, provides accidents per region for different incidents 

that happen on fishing vessels. However, it is not broken down by 

the type of fishing that is being done. And so I am a little bit concerned that this data is not properly conveying the information 

that we need. For example, you know, is it the ‘‘Deadliest Catch’’ 

folks that are truly running into the most accidents or problems, 

or is it ‘‘Swamp People’’ that actually don’t really use vessels that 

are classified. But in any case, I was looking for another show. 

But does that make sense? I mean, is it shrimp fishing, is it king 

crab fishing, and getting a better understanding of which type of 

vessels or industries are actually having the higher number of accidents where perhaps there should be some intervention or looking 

to try and reduce accident rates. 

Admiral ZUKUNFT. First of all, before there is any intervention, 

we engage with all stakeholders. We have a fishery advisory committee that we consult with as well. And there are proposed regulations, but, you know, those are being held back right now under an 

alternative safety compliance plan and what the impact of that 

would be. 

My only concern in all of this—and I have worked in both 

fleets—is when we have a gulf fleet vessel be reconfigured and now 

is operating up in the Bering Sea. And so that would be the only 

case. But, as you mentioned, the casualty rates speak for themselves. It is a safe fishery in the Gulf of Mexico. At the end of the 

day, you know, we want to not impede their livelihoods. 

Mr. GRAVES OF LOUISIANA. Admiral, I would just appreciate if we 

could get a commitment out of you to work with us on finding the 

right solution there. I am not sure that some of the Coast Guard 

provisions that are in law today are necessarily as prescriptive as 

they should be, based upon the different fishing industries we have 

in different regions of the country. And I would appreciate it if we 

18 

could work together with you to try and take a fresh look at that 

and see if we can find the right solution there. 

Admiral ZUKUNFT. Congressman, you have my commitment that 

we will work with the stakeholders and with the fleet owners as 

well. 

Mr. GRAVES OF LOUISIANA. Thank you. In my last 10 minutes, 

I just wanted to cover the icebreaker. I know that the chairman 

noted icebreaking capabilities. You and I have discussed that as 

well. I think that there is just complete support among the members of this committee about our strong concerns about the lack of 

icebreaking capability in the United States compared to other Arctic nations. 

We have talked at length about the idea of the Coast Guard obviously acquiring additional capabilities, new capabilities. And, 

again, I think everyone here fully supports that. 

The problem that I think most of us see is that there is this interim gap where we simply don’t have capabilities. If there were 

an incident up there, we have already seen Russian aggression up 

in the Arctic area. Their capabilities, if I remember right, are— 

what is it?—40 times more than we have in the United States. Extraordinary difference in capabilities. 

Chairman Hunter noted the need to develop an interim strategy 

while we concurrently work on this long-term strategy for acquisition. And I once again would like to reiterate the chairman’s comments and support for that, but I would like to hear a commitment 

from you that we are going to figure out how to work through this 

and develop an interim strategy. 

And I am not going to dictate any type of a path forward on that, 

but we have got to get interim capabilities, because we simply have 

insufficient capabilities for this interim period while we concurrently work on long-term acquisition of an icebreaker. 

Admiral ZUKUNFT. My reply to that is we are working with one 

and the only U.S. offeror right now that might be able to bridge 

this gap. But what if we can’t meet that requirement, then where 

do we turn to? We may have to look at other sources as well if we 

are, in fact, looking at a lease option. 

But, again, we are fully engaged, ready to sit down with the offeror, and put all the pieces on the table of what it would take to 

make sure that this vessel could meet our requirements in the high 

latitudes. 

Mr. GRAVES OF LOUISIANA. Admiral, I think every time you have 

come before this committee, this issue has come up. There are 

strong concerns on both sides of the aisle here about this interim 

solution. I think all of us are willing to work with you on it. 

But I just want to push again that we need to see some substantial progress on finding a path forward for the interim solution 

here. So thank you. 

Admiral ZUKUNFT. Thank you. 

Mr. HUNTER. I thank the gentleman. 

The ranking member, Mr. Garamendi, is recognized. 

Mr. GARAMENDI. Thank you, Mr. Chairman. 

Mr. Graves, I almost was in your district at the shipyard. 

Mr. GRAVES OF LOUISIANA. No, you were in the district. In between. That is right. 

19 

Mr. GARAMENDI. Your boosterism is appreciated and correct. It 

really was quite an experience. 

Mr. GRAVES OF LOUISIANA. The nice area was ours, just to be 

clear. 

Mr. GARAMENDI. Admiral, thank you. Your team did a great job 

on the codel that we did last weekend, the opportunity to see the 

Fast Response Cutter and then also over at Panama City, both of 

them moving along. 

I would appreciate a report on the progress in both, particularly 

the latter, the Offshore Patrol Cutter, where it stands. I notice 

some of your testimony covered it, but if you could provide some 

detail on that in the days ahead, it would be much appreciated, or 

you can give us a quick rundown now. 

Admiral ZUKUNFT. I would be pleased to provide that report. And 

the date to keep in mind is delivery of the first ship in the year 

2021. 

Mr. GARAMENDI. 2020 for the Offshore Patrol Cutter? 

Admiral ZUKUNFT. 2021 for the first Offshore Patrol Cutter. 

Mr. GARAMENDI. Very good. We would want to watch that closely 

and monitor it along and any hiccups or slowdowns. But it was impressive to see what was going on there. 

Many, many questions. I want to just take a moment on the 

budget cuts, proposed, $1.3 billion. Please give me the top three 

problems that it would create for the Coast Guard. 

Admiral ZUKUNFT. Well, I would begin with the acquisition of our 

ninth National Security Cutter, because that would be removed. 

We have already awarded long lead time materials. 

Steel is already being cut. We would incur a contract penalty and 

probably would face a penalty in the amount of what this offset 

was designed to provide, half a billion dollars. So there is no net 

savings there. 

It would cut our department’s only counterterrorism capability. 

It has taken us the better part of 6 years, using Seal tactics training procedures, recruiting the best talent, to stand up these teams, 

and under this proposal we would lose that capability as well. And 

you don’t lose these immediately. These are people, these are billets, and there are dollar figures assigned to them, and they don’t 

leave overnight even if you do a reduction in force. 

We enjoy the highest retention rate of any armed service, but our 

servicemembers look to me as though I have broken faith as their 

leader. They look to me as their leader, nobody else. That I have 

broken faith with them. And then what does that do, as we heard 

from the Master Chief, to the men and the women of the Coast 

Guard and to their families that their Commandant broke faith? 

And I will not break faith with our people. But it does have an impact. 

Mr. GARAMENDI. I want to dwell on that for just a moment. 

Chief, you in a conversation indicated that it is important to have 

the men and women of the Coast Guard parallel, be equal to the 

benefits, pays, increases in pay, other benefits that the other four 

branches of the military has. Could you comment on that? 

Master Chief CANTRELL. Yes, sir. And we do. We follow suit with 

DOD on all pay and benefits entitlements. We are eligible to go to 

20 

their military treatment facilities and all those benefits of being an 

armed service. 

Where I get concerned is we are in a buildup of the military, and 

we are not included in that discussion. We have a young man or 

young woman that is considering joining the armed service. If they 

look to which service, if you would, is being invested in, and they 

don’t see the United States Coast Guard then they choose not to 

come to our Service. And that is something that as we grow, want 

to grow over the next few years, that talent is out there. 

And we are already in competition with our sister services on 

getting that right talent, and not just recruiting them but keeping 

them in our Service, which is why these other housing and medical 

and child care and those things that some folks just don’t think 

about will make them leave our Service. And we certainly don’t 

want that. But we want to be part of that buildup, sir. 

Mr. GARAMENDI. I want to come back to that. And the chairman 

mentioned the hearing next week with the four other services. Perhaps, Admiral, you need to be invited. So maybe we can do some 

of that. 

Admiral ZUKUNFT. And if I can, Ranking Member, right now our 

icebreaking program, to recapitalize that is being funded by the 

Department of Defense. The Coast Guard is at every COCOM. 

Every geographic Combatant Commander has Coast Guard forces 

chopped to it as well. 

And so yes, we do need to be a part of these discussions if we 

are talking about building the force for the 21st century. 

Mr. GARAMENDI. When Secretary Kelly was the commander of 

SOUTHCOM, he seemed to think that the Coast Guard was really 

important, but yet it is his budget that takes $1.3 billion out of 

your budget. I suspect he—well, let’s hope he still thinks that the 

Coast Guard is important. 

Didn’t he say that the southwest border is not along the—is 

1,500 miles south of the United States border? 

Admiral ZUKUNFT. If we talk all borders, our maritime borders 

begin well south and well beyond and actually east and west as 

well, thousands of miles. 

Mr. GARAMENDI. If you are interdicting drugs off the coast of Colombia, what impact does that have in the Guatemala, Honduras 

area with regard to immigration from those countries into the 

United States? Is there an impact? 

Admiral ZUKUNFT. So it is insidious the way this works. Colombia, the number one producer of cocaine. I met with President 

Santos 3 weeks ago. Can they cut back coca production? Can they 

step up their efforts? It is moved in bulk to Central America. And 

as soon as it lands in bulk in Central America, corruption goes up, 

rule of law goes down, and those who can afford a human trafficker 

will put their young children in a human trafficker to get them into 

the United States, the number one consumer of cocaine. 

So the irony is, it is our consumption that drives the shipment 

that creates this violent situation in Central America, and yet now 

people want to migrate to the United States. So this is a—you 

know, this is much about behavioral health as it is about law enforcement interdiction. It needs to be a campaign, and we need to 

tackle both of these. 

21 

Mr. GARAMENDI. We are going to need to make an argument that 

a wall on the Mexican border isn’t going to stop immigration or the 

drug issue. It is going to have to be a multiple program, including 

the Coast Guard in that. We will make that argument a little later. 

I do want to go to the maritime—excuse me, not the maritime. 

But, Mr. Szabat, last week we had a hearing on the Armed Services Committee with General McDew. I believe you are familiar 

with his testimony in which he spoke to the issue of the pending— 

not the pending, the real problem that exists today in the lack of 

mariners and the lack of ships, both the Ready Reserve as well as 

the MSP. You touched upon that. Is there a solution? 

Mr. SZABAT. Congressman Garamendi, thank you for raising that 

important issue. Short answer is, yes, there is. And I would also 

say that there is no daylight between us and the U.S. Transportation Command on this issue. In many respects, the Maritime Administration serves as a component command of the 

USTRANSCOM in providing, you know, 46 of the 61 vessels that 

they need out of the surge fleet. 

Mr. GARAMENDI. We are aging out both the ships, the Ready Reserve ships as well as the sailors on those ships. What do you suggest we do about that? 

Mr. SZABAT. Well, Congressman, we have a—as I mention in my 

testimony, we are, the Maritime Administration is responsible to 

Congress to come back with a list of options, and we owe it to our 

new political leadership team as they come on board to vet those 

options to determine what the recommendations would be. So I 

cannot speak to our recommendations, but I can speak broadly to 

what the range of options are. 

The policy that we have followed for years in the United States 

that we rely on the commercial U.S. merchant marine to employ 

and train enough mariners to serve in both those commercial vessels, but also to generate a surplus that we use on the Federal vessels to meet our sealift requirements. 

The challenge that we have today is that the U.S. commercial 

fleet is no longer large enough to provide both of those needs. So 

the—one of the two ways forward is, logically, to increase the size 

of the U.S. commercial fleet. From my testimony, just by doing the 

numbers, we estimate we are short about 2,000 of these qualified 

mariners. We need about 40, 45 additional vessels to do that, so 

anything that would add those 45 vessels. 

The two ways that we would do that, one, of course, is the expansion of an MSP or an MSP-like program where we include vessels 

not just for their military capability, but for their ability to serve 

in commerce, but also to employ enough mariners so that that pool 

is large enough to meet our national security needs. 

The second way, which would not involve a direct subsidy or direct stipend to the vessels, would be trade policies. Trade policies 

that would require additional U.S.-flagged vessels, whether they 

are carrying exports, as the bill that you and Chairman Hunter 

have proposed, or bilateral agreements as, for example, with China 

would require a certain number of vessels to sail under the U.S. 

flag. If you take those approaches, you could also either reduce or 

eliminate the shortfall of U.S.-flagged vessels. And then—so that is 

one broad category of increasing the size of the U.S.-flagged fleet. 

22 

The second category would be to divorce the need for mariners 

from the requirement that U.S.-flagged fleet be large enough to employ them. And then the most direct and obvious approach towards 

that would be to have the United States Navy or the Maritime Administration employ the additional mariners that were needed. 

So right now, we rely on the commercial fleet to provide a surplus of 1,300 mariners that we need to draw on within 4 days, 

within 96 hours of a full sealift activation. The way to divorce that 

is to say to the Navy or to MARAD: Here are the funds for you to 

employ 1,300 additional mariners plus the relief crews that you 

would need going forward in the sealift. 

So there were many suboptions and variations within that, but 

broadly speaking, those are the options before us to address the 

mariner shortfall and still rely on the U.S.-flagged fleet and U.S. 

mariners to meet our national security needs. 

Mr. GARAMENDI. Mr. Chairman, I am way over my time, so 

please excuse me. I am just going to wrap it up here very quickly. 

I would request that General McDew’s statement from last week’s 

hearing be entered into our hearing record as it pertains directly 

to this need for American mariners both for the Ready Reserve 

Fleet as well as for the MSP. So that would be helpful to understand it. 

Also, I draw the attention of the committee to one of the solutions that Mr. Szabat spoke to, and that is, to increase the size of 

the American merchant marine fleet. And I have some ideas on 

that, and I have shared that with many of the Members already, 

and that has to do with cargo and it has to do with trade negotiations. And for example, if we are going to exploit a strategic American resource, such as natural gas and oil, it ought to be on American-built ships with American sailors, thus providing a solution to 

the overarching problem at hand here. 

With that, Mr. Chairman, thank you for the additional time. 

[The written statement of General Darren W. McDew, U.S. Air Force and Commander, U.S. Transportation Command, from the March 30, 2017, hearing of the 

House Armed Services Committee, can be found on pages 101–122.] 

Mr. HUNTER. I thank the ranking member. 

Let me throw in there too, what General McDew talked about, 

he said TRANSCOM has never looked at the attrition that would 

take place with a full sealift callup when you actually have ships 

sinking. Their numbers do not account for that, and I don’t think 

yours do either. 

So they are now modeling what would happen with Korea, what 

would happen with China, what would happen with Russia, or 

whoever, if you actually had to call up everybody to deliver gear 

during wartime, and they are finally using a model that brings actual wartime attrition into that. And I hope you guys are tied in 

and in sync with that so that your end numbers would come up the 

same, roughly. 

Mr. SZABAT. Mr. Chairman, yes, we are very much in sync with 

them. 

Mr. HUNTER. And by the way, I don’t want to take—we are going 

to come back around to me. I just wanted to throw that out there 

so that you know what we are looking at. 

23 

With that, I would like to recognize Mr. Mast from Florida. 

Mr. MAST. Thank you. I appreciate that. Hey, as the only enlisted man on this subcommittee, I just figured it was my duty to 

harass you for a little while, Master Chief, so I will let you have 

it here. 

I want to get into a little bit into the minutia of your force. I suspect you feel that you feel the finest possible force out there. 

Master Chief CANTRELL. Yes, sir, without a doubt. 

Mr. MAST. Without a doubt. And as we know, no matter what 

happens with cuts, what is asked of you is not going to change. 

People are still going to expect that you step up and meet the mission. You would consider that to be accurate? 

Master Chief CANTRELL. Yes, sir. We call it the curse of Semper 

Paratus. Our folks will find a way, despite budget issues or anything else that is going on. They will find a way to make mission. 

They know what their job is, and it is something to marvel at. So 

yes. 

Mr. MAST. It is kind of a curse in that respect. You know, many 

that have never been a part of the force, they might take for granted that the mission gets accomplished because fine folks like yourself always do step up and they accomplish that mission. So like 

I said, I want to get into a little bit of the minutia of your force. 

About how many active you have? 

Master Chief CANTRELL. Nearly 41,000 active, enlisted and officer. 

Mr. MAST. How many cutters? 

Master Chief CANTRELL. Oh, gee. Total? 

Mr. MAST. Sure. 

Master Chief CANTRELL. A couple hundred. 

Mr. MAST. A couple hundred. How many boats? 

Master Chief CANTRELL. Overall? 

Mr. MAST. Yeah. 

Master Chief CANTRELL. Several hundred boats. 

Mr. MAST. Aircraft? 

Master Chief CANTRELL. Again, several hundred aircraft, helicopters. 

Mr. MAST. So what does it really look like to that force when you 

get cut? What does that literally look like to the operational ability 

of each one of those cutters, those boats? I suspect most of us can 

agree saltwater is not something that is usually that friendly to the 

equipment that we go out there and field. What actually gets cut? 

What actually happens to your force and your ability to go out 

there and conduct that cursed mission? 

Master Chief CANTRELL. Well, maintenance always suffers when 

budget cuts happen, and personnel costs, I mean, those things are 

easy to cut, and they are very expensive. So when we scale back 

on our personnel and we scale back on the maintenance that they 

have to provide, those ships and airplanes and small boats get tied 

up and aren’t able to go out and make mission. So we make do 

with what we have, and it adds extra burden on the folks that are 

still left around to maintain and do that mission. So they are just— 

it is added workload for them as they will continue to go out and 

do what we ask them to do. 

24 

Mr. MAST. Very good. What happens with your enlist—you know, 

we all know, it doesn’t matter, Army, Navy, Marines, Air Force, 

Coast Guard, you got to balance enlistments and retirements. What 

is going to happen with your force if we get behind the eight ball 

in balancing that and your ability to go out there and meet the 

needs of the future? 

Master Chief CANTRELL. Right now, we really enjoy a high retention rate in the upper 80s, and it is more than any other of our 

services. And I believe it is in large part to just people love our 

Coast Guard mission, they love the way we make effort to take 

care of them and their families, and they want to stick around. 

And I will say personally, I joined the Coast Guard 34 years ago 

for 4 years, and I am still here, and it is because of the mission 

and the people and what we do that keep our people coming back. 

But we have things like blended retirement and things that are on 

the horizon we have got to pay really close attention to as far as 

retention as we move out over the next decade. But I think for 

today, our force is happy to be part of the Coast Guard and will 

remain happy and will continue to reenlist every time they have 

the opportunity to. 

Mr. MAST. All right. Maybe I am just unique, you know, those 

of us, especially we come from the coastal communities, we see it 

in the port infrastructure, the ship traffic, you know, watercraft 

users, you know, we see your work every single day. I appreciate 

it, and I appreciate your comments. 

I yield back. 

Master Chief CANTRELL. Thank you, sir. Thank you for your 

service. 

Mr. HUNTER. Mr. Larsen, you are recognized. 

Mr. LARSEN. Thank you, Mr. Chairman. Thanks all for coming. 

Oh, there you are. Good. I can see now. 

Admiral, can you—I don’t want you to forget that there is a maritime border with Canada as well, especially in my district, and I 

want to emphasize that, and the Coast Guard has never forgotten 

that. I hopefully helped you not forget that as well. 

Recent challenges we are facing there have to do more with Canadian efforts to move oil by pipeline to an expanded pipeline in 

Vancouver, and then it would be put on ships and come down 

through Haro Strait and out to Strait of Juan de Fuca, all on the 

Canadian side. But if something were to occur, result in a spill, obviously, the spill would not be limited to the Canadian side. 

So I want to know—I would like to know how aware you particularly are to this challenge we are facing and what Coast Guard is 

doing about that. 

Admiral ZUKUNFT. Thank you, Congressman. And we have regular engagements. We have been having these now for probably 

close to two decades now with Canada Coast Guard, with Transport Canada, with the RCMP. But to the specific concern that you 

raise, and especially if it involves tar sands and the like, and when 

that enters a maritime environment, as you well know, it sinks. 

And the oil spill technology is nascent, at best, in terms of the ability to remove a product that is heavier than water, and now it is 

spreading throughout the environment. 

25 

So it is a technical challenge for us. It is a technical challenge 

for Canada as well. And an oil spill does not respect any borders, 

and for the very reason that you mention. So it is a concern for me 

because of the technology it is lacking. We are putting a lot of effort into this oil spill technology, working with oil spill response organizations, whether it is Canada, U.S. it is a concern, though, in 

your region. 

Mr. LARSEN. Are you doing this particularly to the proposed 

project in Vancouver and British Columbia? 

Admiral ZUKUNFT. We need to—yeah, there needs to be an oil 

spill response plan. There needs to be a contingency plan that goes 

with that. There needs to be a responsible party. Some of these 

governance structures, we have the Clean Water Act, Canada does 

not. Who is going to pay for that removal? So these are a whole 

list of concerns. And then finally, the ability to remove it, because 

that is the—really, the biggest challenge that we face right now 

with these products. 

Mr. LARSEN. OK. 

Admiral ZUKUNFT. We are not there yet. 

Mr. LARSEN. OK. I would like to do some followup with you and 

your team on that, if I could. I will just note it is April, boating 

season is starting, so your folks will be even busier in the Pacific 

Northwest, and I always appreciate the great work that they do 

both with education of the boating community, the kayaking community as well. But it is coming up, and I look forward to the 

Coast Guard working with the community up there to maintain the 

safety of folks out in the water. 

Admiral ZUKUNFT. Yeah. Thank you, Congressman. I look forward to working with you as well. 

Mr. LARSEN. Great. Thanks. 

Is it—sorry, Szabat? 

Mr. SZABAT. Yes, sir. 

Mr. LARSEN. Great. Thanks. So can you give an update on how 

many outstanding either letters of commitment or loans, title XI 

program has right now? 

Mr. SZABAT. When you say commitments for title XI, we have at 

the moment, there are—we have one loan that is in the approval— 

it has been approved and is in the process of final—of a letter of 

commitment for us to actually put the money out. And then we 

have three other interested parties that are applying for title XI 

loans. 

Mr. LARSEN. OK. Then how about in the outstanding side? 

Mr. SZABAT. I mean, that universe of four is our universe right 

now. 

Mr. LARSEN. OK. OK. Great. Thanks. And then with regard to 

small shipyards, there has been $177 million over the last 8 years, 

6 or 7 years, allocated for small shipyard grants, including some in 

my district, including some around the country. None of the shipyards in my area were able to get—meet the standard last—in the 

last go-round, but I think there was $9 million total, if I am not 

mistaken. Is that right? 

Mr. SZABAT. That is correct, sir. 

Mr. LARSEN. OK. And then the proposed budget proposes zero 

this particular program out. Is that correct? Do I understand that? 

26 

Mr. SZABAT. The administration has not submitted a full fiscal 

year 2018 budget proposal yet, sir. 

Mr. LARSEN. All right. Well, if it is anything like the Obama administration, it will be zeroed out, and then we will have to put 

money back into it. 

I think that if I got my numbers right as well on small shipyards, again, $4.9 million in 2016 funding nine projects. But I understand, was there nearly $100 million or so in requests in 2016? 

Mr. SZABAT. Congressman, in your typical year, we are going to 

get somewhere between 10 and 15 times the request, you know, 

oversubscription. 

Mr. LARSEN. In a dollar amount? 

Mr. SZABAT. Yeah. So in a dollar amount from, you know, if it 

is a $10 million program, we will get $100 million or more in requests. 

Mr. LARSEN. Yeah. 

Mr. SZABAT. And part of that is limited by the fact that the recipients know the program, know that our awards are generally in 

the $1 million range, so that is what they are asking for. You 

know, if we had an unlimited amount, obviously they would be asking for more money. 

Mr. LARSEN. Sure. And I am not going to assume all those requests are perfect or the best request, but certainly some of that— 

it is certainly more than what is usually allocated. I guess the 

point I want to make is that this is a program where there is not 

just a demand. Demand is infinite, as they say. There is a need, 

and it does exist and it continues to exist for smaller shipyards 

around the country and not just where I am from. 

So as we move forward to the budget cycle, I certainly will be 

watching this particular program very closely. 

Mr. SZABAT. Congressman, thank you for drawing attention to 

the program. Your interest is noted, and of course, I will be carrying that back to the Department of Transportation. 

Mr. LARSEN. I am sure they are waiting with bated breath to 

hear. Thank you very much. 

Mr. HUNTER. I thank the gentleman. 

Mr. Weber for 5 minutes. 

Mr. WEBER. Thank you, Mr. Chairman. 

Mr. Szabat, is that how you say that? 

Mr. SZABAT. Yes, sir. 

Mr. WEBER. Pronounce it for me. 

Mr. SZABAT. Szabat. 

Mr. WEBER. Szabat. OK. You may know I represent the gulf 

coast of Texas over Louisiana, that other foreign country, and the 

Texas A&M Maritime Academy is on Galveston Island in my district. We are very proud of that academy and the work going on 

there, but we are challenged by the limits on their shipboard training capacity. I don’t know how familiar you are with the ongoing 

program there. Do you know that program? You know about it? 

Mr. SZABAT. Yes, sir. 

Mr. WEBER. OK. Good. We appreciate the support MARAD gives 

us, provides to the academy. However, our training vessel, General 

Rudder, is just too small. In fact, we are forced to outsource the 

27 

shipboard training portion of our program to other, what I call the 

other lesser State maritime academies. 

And while we appreciate that support that those academies provide to us, the cost to our academy and our cadets is pretty substantial. Our superintendent, new superintendent, Rear Admiral 

Mike Rodriguez, tells me that the cost to the academy of 

outsourcing that shipboard training is more than $2.7 million this 

year, and that doesn’t even include travel cost for the cadets and 

the faculty or the staff. 

So in your view—and I am glad to hear you say you are going 

to carry a message back to the DOT, but we want you to take it 

to the guys that are going to make America great again and see 

how much stroke you have. In your view, what are the next steps 

toward ensuring that—you are making a note of that. I see that, 

‘‘take to Donald Trump.’’ What are the next steps in ensuring that 

each State maritime academy, not just A&M in Texas, but that 

each maritime academy has shipboard training capacity to fill their 

missions? What does that take? 

Mr. SZABAT. Congressman, you raise a very good and a very complicated issue. This is one that both the State maritime academies 

and the Maritime Administration have been wrestling with now for 

some years. I mention in my testimony, past practice has been for 

the Federal Government almost always to surplus vessels in the 

National Defense Reserve Fleet to provide vessels to the State maritime academies for training. 

Nowadays, if we were to pursue that option, it would be very, 

very expensive to take an old T5 tanker, for example, and convert 

her into a vessel that would meet modern safety of life at sea 

standards, would be about as expensive as purchasing a newly 

built vessel in a U.S. shipyard. And both of them are—in a tight 

budget environment, they are both very costly. 

Complicating that factor. So right now we have—putting aside 

Great Lakes Maritime Academy under freshwater, which has 

issues of its own, you have five State maritime academies essentially sharing four large ships, because as you note, the General 

Rudder—— 

Mr. WEBER. Say that last line again. 

Mr. SZABAT. Five State maritime academies essentially sharing 

four large ships. As you note, the General Rudder is not a large 

ship. 

Mr. WEBER. Yeah. 

Mr. SZABAT. And Texas A&M is the fastest growing and will 

have a need for a large ship going forward. 

What complicates this, from my perspective, is the two ships 

with the largest training capacity, the Empire State at SUNY Maritime and the Kennedy at Massachusetts Maritime, are the two oldest ships and the two ships that are slated to age out first, so that 

there is some—there is a time pressure on all of us to identify what 

the solution is, not just for Texas Maritime, but for all of the State 

maritime academies going forward. 

Mr. WEBER. Well, I appreciate that. We want to know, are you— 

do you get to have any input with the Office of Management and 

Budget, OMB, at all? 

28 

Mr. SZABAT. It is correct to say, Congressman, that we have an 

input, but I would go back to Congressman Larsen’s comment and 

say: I am sure they are waiting for my input with bated breath. 

Mr. WEBER. Well, now, I gotcha. 

Let me jump over to you, Admiral, if I may. My District 14 in 

Texas, starting in Louisiana and going down not—to Freeport, has 

five ports, more than any other Member of Congress. Sixty percent 

of the Nation’s jet fuel is produced in our district. It is energy. It 

is just absolutely used. 

The Port of Beaumont, as you may know, moves more military 

personnel and equipment than any other port in the United States, 

and that does not include the use of the ship channel in my five 

ports, by the way. We have the Sabine-Neches Waterway that feeds 

the Port of Port Arthur and Port of Beaumont. Are you familiar 

with that area? 

Admiral ZUKUNFT. Congressman, I am, and in fact, I went out 

to Cheniere LNG 2 years ago—— 

Mr. WEBER. OK. 

Admiral ZUKUNFT [continuing]. Before that facility came online. 

And we are starting to see an increase in shipping traffic at a 

brandnew facility as well. 

Mr. WEBER. Sure. Well, we would love to see—we have got two 

Chiefs Reports, you know, on file, if you will, with the Army Corps. 

We would love to see both the Sabine-Neches Waterway dredged 

out and the Port of Freeport as well. So we have got channel improvements on the board. 

Do those impact the Coast Guard’s ability—when we can’t get 

the Sabine-Neches Waterway dredged to the appropriate depth in 

Freeport, does that impact your ability to carry out your mission? 

You talked about it earlier. 

Admiral ZUKUNFT. Precedent does not—we certainly have a responsibility to maintain aids to navigation in these waterways, 

mark where the good water is, where it isn’t. But if it is dredged, 

then we can anticipate to see increasing shipping traffic. 

Mr. WEBER. Absolutely. 

Admiral ZUKUNFT. And then it becomes a traffic management 

concern for the Coast Guard. 

Mr. WEBER. OK. Before I yield back, Mr. Chairman, I want to 

note that we have two LNG plants in our district. We are the 13th 

largest exporting district in the country out of 435 Members of 

Congress before our 2 LNG plants come online, which is just almost any day now. And we have a third LNG plant that has applied for permit and on the drawing board. 

Mr. Chairman, thank you for the time. I yield back. 

Mr. HUNTER. I thank the gentleman. 

Master Chief, it is back to me now, and then we will go to Mr. 

Garamendi when he gets back. I have got—I just want to run this 

by you, because you are probably the most deeply in tune with the 

men and women of the Coast Guard, what they are doing, how they 

live, how their healthcare is, what they eat, how they go to school, 

so let me ask you this. 

Would you say that the men and women of the Coast Guard, 

when it comes to operational tempo, housing, healthcare, and mission are more aligned, and I am going to use in this instance, the 

29 

Navy, and I am going to read off some comparisons. Do you think 

that your men and women of the Coast Guard are more aligned 

with the Navy or the United States Citizenship and Immigration 

Services? 

Master Chief CANTRELL. Neither. I don’t think we are aligned 

with the Navy or with—— 

Mr. HUNTER. Does the United States Citizenship and Immigration Services have base housing? 

Master Chief CANTRELL. No. 

Mr. HUNTER. Do you have base housing? 

Master Chief CANTRELL. Yes, sir. 

Mr. HUNTER. OK. Do you get BAH? 

Master Chief CANTRELL. Yes, sir. 

Mr. HUNTER. They don’t. The Navy does. The Navy has base 

housing. 

How about are you on TRICARE, or are you on some other kind 

of civil—— 

Master Chief CANTRELL. TRICARE. 

Mr. HUNTER [continuing]. Healthcare? You are on TRICARE, as 

is the Navy. 

How about CBP, Customs and Border Protection? Do you think 

that the way that your bases are set up, your operational tempo, 

your base housing, your healthcare, is it more in line with the military or is it more in line with CBP? 

Master Chief CANTRELL. With the military. 

Mr. HUNTER. So FEMA. Is it more in line with FEMA or the Department of Defense in the military? 

Master Chief CANTRELL. Military. 

Mr. HUNTER. We can go through this. Federal Law Enforcement 

Training Center, United States Immigration and Customs Enforcement, ICE. 

TSA. Are you more in line with TSA or the military? 

Master Chief CANTRELL. Military. 

Mr. HUNTER. OK. I think you see my point here, Commandant, 

and I will switch to you. You—it seems like we are getting—what 

we are getting hung up in is would you rather be in the budget 

pocket of OMB that rules you with an iron fist and treats you as 

not like a military service to where the plus-up that is happening 

right now with this administration does not even mention you. All 

right. 

You are talking about budgets, or where do you fit as an operational unit, basically, right? And I think we are getting those two 

things mixed up. Where would you best fit, if you had your druthers? And I understand you have the first Secretary of Homeland 

Security that knows, no joke, ran SOUTHCOM, who worked with 

Coast Guard every day, especially after the Navy left, Coast Guard 

became the Navy for him in Southern Command, and basically you 

were the assets for that combatant command in that area. 

You have John Kelly right now as your Secretary. There is nobody better, could be than Homeland Security Secretary for the 

Coast Guard’s budget and for just knowing what you all do, and 

you are still at a sustainment budget. That is with the best Secretary in the world in U.S. history for Homeland Security is in 

30 

there right now, and you are at a sustainment budget and not mentioned with the other services, right? 

Where—explain to me the differences between where you want 

to sit budgetarily and where you think that you fit in when it 

comes to your mission, your tempo, your base housing, your men 

and women, and what you do for this country, national 

securitywise. 

Admiral ZUKUNFT. I would just begin with an annually recurring $2 billion acquisition and construction budget, $2 billion. That is 

not a lot of money in the Pentagon. We need 5 percent growth in 

our annualized operation and maintenance, recurring 5 percent 

growth. We are bringing new assets on board, and it is great that 

our acquisition budget is being held up. We can’t lose sight of the 

outyear sustainment cost of that. 

As a Service Chief—and I sit with all the members of the Joint 

Chiefs and with the chairman and we help craft a national military 

strategy, the 4 plus 1 that addresses North Korea, Russia, China, 

Iran, the Mideast. It doesn’t address the Arctic. It does not address 

the Western Hemisphere. 

So I look at where the other services are and then where are 

they not and then where do our authorities resonate the most, and 

I have extreme agility. I don’t have to go through an ops step, I 

don’t have to go through a tank, I don’t have to write a dep board. 

I just move our ships because I am also the operational commander 

for the Coast Guard. 

I would lose all of that authority if I became a very small component within the Department of Defense. I would much rather be 

the largest component within the Department of Homeland Security. There will never be a perfect fit. With all of our other statutory authorities, there will never be a—we are a regulatory service. 

I doubt the Secretary of Defense wants to be dealing with boating 

safety. He has got higher priorities. 

So we always have this regulatory—and a lot of other authorities 

as well. But our best fit today, Chairman, is with the Department 

of Homeland Security, but we have got to speak for what our needs 

are. Part of it is in our culture. We come from a culture of austerity 

and a culture of offsets, and we need to think of being in a culture 

of prosperity and growing and not offsetting the Coast Guard, and 

that is just as much a responsibility of mine as it is for our Service 

Secretary. And as you mentioned, we have a Service Secretary who 

gets it, and this is a time for us to come out swinging. 

Mr. HUNTER. I mean, you are talking to a U.S. marine here, and 

they used to—the Marine Corps used to brag about doing more 

with less. You had 9/11 where operational tempo for everybody, including the Coast Guard, skyrocketed, and they finally realized we 

can’t do as much with less. 

They are now asking for the moon, and if they get a little bit less 

than that, then they are happy with it, and if they have to get 

what they had last year or just a very small plus-up, they can 

make do. But your funding requests and the President’s funding request in OMB does not match your op tempo and does not match 

your acquisitions. 

If you were in the Department of Defense, I think it would match 

that. You would be given what you needed to accomplish the misVerDate Aug 31 2005 11:24 Sep 08, 2017 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 P:\HEARINGS\115\CG\4-4-20~1\24911.TXT JEAN
31 

sions that are statutory for the U.S. Coast Guard. I think you are 

kind of stuck somewhere in the middle right now. And I think, if 

you are going to stay in Homeland Security, then you should get 

more DOD funding and take on more of a DOD role. 

If you go to DOD, you are not going to lose your other core competencies that are regulatory as opposed to warfighting, but if you 

stay out of DOD, then you will lose that warfighting edge. I think 

the best analogy that I have read from an article written by the 

U.S. Naval Institute is you would never send LAPD to Fallujah, 

but you can take National Guard from Fallujah and put them in 

L.A. If there is riots, same with Katrina. The military has the ability to come in and do a lot of the natural disasters and humanitarian work that the Coast Guard does. You would team nicely 

with the Navy as opposed to losing your warfighting capability but 

keeping those regulatory capabilities in Homeland Security. 

I think this is something—I mean, this kind of—people have 

been talking about this forever, and I—once again, I think you are 

in the best position you can be in with the Secretary of Homeland 

Security and this President, and yet you are not seeing—you aren’t 

seeing the rewards from that like other services are. So there has 

got to be a disconnect, and I think that that disconnect’s name is 

OMB. 

Would you like to comment on that? 

Admiral ZUKUNFT. Well, how did we get to where we are today? 

I will go back over the last 5 years, you know, since BCA came 

into effect, and we have been funded in our operations and maintenance budget below the BCA floor. So as we put our budget together, we are directed to identify a 5-percent excursion from what 

is already a minimalist budget, and now take 5 percent off of that 

as well. And we have done this iteratively for the last 5 years. 

I am not aware of my Service Chiefs, as they are doing their 

budget bill, say, well, now whack everything off the top. In fact, 

they are getting supplemental funding through OCO. 

Mr. HUNTER. In OCO funding. 

Admiral ZUKUNFT. And so if we just stop with these offset drills 

that we do year in and year out, we have squeezed everything out 

of the Coast Guard. The last time we went through this, I am tying 

up ships and I am grounding airplanes, because I have already 

taken everything else out of it. I have shut down pharmacies, I 

have shut down clinics, I have shut down galleys that affect quality 

of life at our field units. And every year we go back to say we need 

5 percent more, and I can’t continue to operate that way. 

So one, yeah, we need to change the rule set. This is vital to national security. We can’t offset national security. Someone is going 

to pay the price for it, and I am not willing to pay the price. What 

has helped us, Chairman, is the work that you have done, and it 

has been Congress who has restored the Coast Guard, and we will 

continue to work these relationships. 

We have an opportunity with this Service Secretary, who is already engaged at the highest levels, as we look at sustaining the 

Coast Guard in 2018, but we need to do more than just sustain. 

That keeps us on life support. Now we need to grow the Service 

and not continue to be in the ICU on life support. 

32 

Mr. HUNTER. Last question then. How then do you reconcile 

wanting a plus-up like the other services are now getting and 

knowing that you are not going to get it because of OMB? How do 

you reconcile those two things? 

Admiral ZUKUNFT. Well, that is predecisional right now, and so 

we will see how this plays out. 

Mr. HUNTER. OMB, first off, they weren’t going to leave you sustained. They were going to cut you massively, right. So now they 

are back to sustainment. But if you were part of the Department 

of Defense, you wouldn’t be seeing that. You would be seeing more 

money. 

So how do you—so how do you say that we fit the best in the 

organization that keeps cutting us so we can’t do our job? I just 

don’t think it—it doesn’t make sense to me. So how do you reconcile that? 

Admiral ZUKUNFT. Again, we are an instrument of national security. We cannot see these iterative cuts from the top. 

Mr. HUNTER. But you are not funded as an instrument of national security. 

Admiral ZUKUNFT. And these are the dialogues that we are having right now, you know, with our department, and so we don’t find 

ourselves surprised when we see a passback of this magnitude. 

Mr. HUNTER. Is it possible to be included in defense discretionary 

funding and still be under Homeland Security? 

Admiral ZUKUNFT. That is the option that we are exploring right 

now. 

Mr. HUNTER. Say it again? 

Admiral ZUKUNFT. We are exploring that option right now. 

Mr. HUNTER. What would it take to be considered non—or defense discretionary? 

Admiral ZUKUNFT. Defense discretionary. That, I don’t know. I 

mean, it would probably take authorization language to be able to 

do that. 

Mr. HUNTER. That is law? 

Admiral ZUKUNFT. Law. To fence off our budget so it does not become subjected to nondefense discretionary offsets. 

Mr. HUNTER. What if there were strings attached with that 

where if you are considered defense discretionary and you get extra 

money, that that money is put towards those capabilities, which 

are national security related? Would you have a problem with that? 

Admiral ZUKUNFT. I would not. What we do today or every mission set that we do, all 11 of them touch upon national security. 

Mr. HUNTER. All right. Thank you. 

Mr. Garamendi, you are recognized. 

Mr. GARAMENDI. Mr. Chairman, your discussion here is an extremely important one, and it seems to me the solution lies with 

us. OMB has done its thing, and that is fine. They can suggest, but 

we are the ones that are actually going to write the appropriation 

as well as the budgets. And you and I have, for the first time, I 

think, in a long, long time, you and I also sit on the Seapower and 

Projection Forces Subcommittee of the Armed Services Committee. 

And as members of that committee, I think we have an opportunity 

here to achieve what you said in your last couple of sentences, and 

that is to work with the Department of Defense budget so that 

33 

some portion of that plus-up, that additional money, is available to 

meet the needs of the Coast Guard, the national security issues of 

the Coast Guard, not degrading in any way the national security 

issues dealing with drug interdiction. But also, you are deeply engaged in what we might call specific defense issues in the Persian 

Gulf, for example, and other places. 

So I think we have an opportunity in that—in our role on the 

House Armed Services Committee to see that there is a certain 

level of funding, if it is $54 billion or whatever the additional funding is, that it becomes available to the Coast Guard for a couple 

of things, and they are on my mind, that the men and women of 

the Coast Guard have the same benefit package that the men and 

women of the Department of Defense have so that those needs, and 

that is housing and all of the rest of it. 

Secondly, that there is money for the ongoing development of the 

icebreakers, not one but three that we need to build in order to 

meet the needs that we have talked about so many times in the 

Arctic so that we have set in place in that Department of Defense, 

National Defense Authorization Act, and in the appropriations and 

money necessary to carry that out. And the other—and to provide 

specific money for those things that are specific for the military 

side of national defense, so that we can parcel out of the budget, 

whether it is 4 percent or 5 or 10 or 15 percent of your budget and 

say, OK, here is the OCO funding that you are doing in the Persian 

Gulf or wherever else that might be. 

So I think we have the opportunity, perhaps unique at this particular period of time, because, Mr. Chairman, you and I are on 

that Seapower and Projection Forces Subcommittee, and we already have a relationship with the Navy with regard to the Coast 

Guard. 

I have asked for some specific information, Commandant, for the 

scheduling of the money necessary to carry out the Coast Guard 

program year 1, 2, 3, 4, and so forth, and I want to collapse it into 

3 years. You can do it, right, if you had the money? 

Admiral ZUKUNFT. Big if. Yes, sir, I am all in. 

Mr. GARAMENDI. We understand the difficulties, sir. 

I want to move to what is, I guess, my—I don’t know, it has become an obsession, how to build ships in the United States, I mean, 

oceangoing ships. 

So, Mr. Szabat, if we could, I want to go through a series of questions with you. You have already spoken to the 78 vessels and 

probably going down. Has MARAD conducted a formal analysis of 

the needs and shortfalls it sees in the military sealift for both ships 

and seafarers? 

Mr. SZABAT. Congressman, yes, we have. 

Mr. GARAMENDI. Can you broadly describe it, what it is that 

you—what your analysis is? 

Mr. SZABAT. Yes, sir. So just building off of my testimony, and 

thank you for raising this because from our perspective, this is the 

single biggest issue that the Maritime Administration and our 

counterparts in sealift and military side are facing. 

So we have identified a shortfall, as I said of about 2,000 mariners, of qualified available mariners in the commercial sector, 

which equates to, roughly speaking, a shortfall of about 45 vessels 

34 

sailing under the U.S.-flagged fleet if we continue to rely, as our 

policy has been and as it makes sense to have a policy to do, to 

rely on the U.S.-flagged fleet to provide those mariners. 

So the first answer to your question, sir, is, yes, we have done 

the analysis, we have identified the shortfall, and we identified 

how many vessels would have to be employed, would have to be 

added to eliminate that shortfall. 

However, it does not address a point that Chairman Hunter had 

made. We are doing this all under the sealift requirements that are 

established by the Department of Defense, and those requirements, 

as the chairman mentioned, at the moment leave off two things. 

One is that they assume that all vessels would be available 100 

percent of the time if they are sailing, you know, commercially or 

activated in wartime, and we know that even in peacetime, no vessel is available 100 percent of the time. There is down time, there 

is scheduled maintenance, and there is some percentage of breakdowns. 

But the other important issue that the chairman identified for 

going forward for the next war plan is that up until this point, really since the end of World War II, we have always been able to assume no attrition with the merchant marine in our future conflicts, 

which is a bloodless way of saying that we have been able to assume that we would never have ships torpedoed or just bombed or 

destroyed by missiles and we would not have fleet merchant marines killed. 

Mr. GARAMENDI. OK. I am going to move along here. 

Mr. SZABAT. Yes, sir. 

Mr. GARAMENDI. We are getting near the end of all of this. Can 

you provide us with both of those scenarios, that is, a peacetime 

scenario of what our needs are and then a wartime scenario? 

Mr. SZABAT. Sir, I cannot provide you with the wartime scenario 

until we get that from the Department of Defense. I can certainly 

provide you with the information on the current scenarios that we 

plan for. 

Mr. GARAMENDI. Very good. I would appreciate it if you could do 

that. 

As you know, I have introduced a bill, H.R. 1240, which would 

expand the U.S.-flagged fleet by requiring a percentage of U.S. 

crude oil and LNG on American-flagged vessels. We talked to you 

about this. Would this make a difference? 

Mr. SZABAT. Congressman, yes, it would. 

Mr. GARAMENDI. How and why? 

Mr. SZABAT. So the Government Accountability Office indicated 

that, looking at your proposal, that by around 2025, it would be 

adding about 100 ships sailing under the U.S. flag for exporting 

LNG. If I recall correctly, your proposal would be for 30 percent of 

that to be sailing on U.S. flag, so that would add the equivalent 

of 30 vessels to the U.S.-flagged fleet, which is a huge cut into our 

deficit of about 45 vessels that we have today. 

Mr. GARAMENDI. Is that for the LNG? 

Mr. SZABAT. That is just for the LNG side. 

Mr. GARAMENDI. Crude oil, have you done an analysis of what it 

would mean for crude oil? 

Mr. SZABAT. A crude analysis, if you will, Congressman. 

35 

Mr. GARAMENDI. Very good. I will take that. 

Mr. SZABAT. So currently, we export the equivalent of about one 

large tanker a day of crude oil, and the challenge here is projecting 

with the volatility of prices. But if you assume that that stays 

roughly equal, you are looking at another, you know, 30 or so vessels being employed a year if they were all U.S. flagged. So again, 

30 percent of that is another 9 or 10 vessels that would be added 

to the U.S.-flagged fleet. 

Mr. GARAMENDI. So how many, once again, for LNG? 

Mr. SZABAT. For LNG, you are looking at 30. 

Mr. GARAMENDI. And crude? 

Mr. SZABAT. And again, a crude estimate for crude is about another 10, as things stand today. 

Mr. GARAMENDI. Another—— 

Mr. SZABAT. Ten. 

Mr. GARAMENDI. Ten. 

Mr. SZABAT. Yeah. 

Mr. GARAMENDI. All right. So some 40 ships that could be built 

if we were to pursue such a policy? 

Mr. SZABAT. That is what the numbers would say, yes, Congressman. 

Mr. GARAMENDI. We heard from Mr. Khouri the issue of bilateral 

negotiations. I think he mentioned China as an example of a bilateral negotiation. They are set to require that all of the importation 

of LNG and oil be on Chinese ships. Some of that may be American 

crude oil and American LNG. I suppose since the President is so 

intent on bilateral negotiations and he is such a good dealmaker, 

maybe it could be done. 

I think we have covered it here. You did talk about adding sailors with regard—on the military budget, so that is already covered 

here. I think we have covered those particular issues. 

The Ready Reserve capitalization. General McDew said that he 

would look for ships that are in the worldwide fleet that might be 

able to replace the Ready Reserve. Would those be American-built 

ships? 

Mr. SZABAT. The ships in the worldwide fleet, Congressman, no, 

sir. And the challenge with that is just the ships that we have that 

were built in American shipyards, I think the youngest ship that 

we have that is sailing currently under a foreign flag is about 34 

years old. 

So to General McDew’s testimony, as I have heard him talk 

about, is a mix of having some new built in U.S. shipyards, coupled 

with purchasing foreign-built vessels that would—much younger 

vessels than the average age of our Ready Reserve force or surge 

fleet ships today, which are nearly 40 years old. 

And I think just to underscore General McDew’s point, there has 

never been a time like there is today in terms of if you want to purchase ships in the international market on the cheap, now is the 

time to do that. There is a huge surplus on those vessels right now. 

Mr. GARAMENDI. We would be purchasing foreign-made ships for 

a tradition of American-built ships in the Ready Reserve? I think 

it has been more than the—is it also the law? 

Mr. SZABAT. So, Congressman, yes and no. Yes in the sense that 

we would be building foreign-flagged ships, and yes in the sense 

36 

that the law currently requires us to have them built in U.S. shipyards. No in the sense that the vast majority of the ships that we 

have in the Ready Reserve force today were not built in U.S. shipyards. They were brought on board under exceptions or before the 

law was put in place. 

Mr. GARAMENDI. So exception by exception and ship by ship not 

built in the United States. 

Mr. SZABAT. So again, I don’t want to speak for General McDew, 

but from what I have heard from his testimony, he is looking for 

a cost-effective mix, recognizing that it is hard to build—any proposal to replace, to recapitalize all 61 ships we have in the surge 

fleet, MSC has 15, we have 46, would be hard to justify for new 

construction for all 61 of those vessels, especially since all of those 

vessels, once built, would be going into reserve and would not be 

going into any sailing service. 

So I believe, again, his proposal or his vision is to have that mix 

of having a good mix of vessels that are built in U.S. shipyards as 

well as vessels that could be purchased inexpensively overseas to 

recapitalize the fleet. One way or the other, the fleet does need to 

be recapitalized. 

Mr. GARAMENDI. Well, I for one await his strategy. And I would 

appreciate your analysis of his strategy and what it means for lost 

jobs in American shipyards. Apparently, it would not mean for lost 

sailors on the ship or mariners on the ship, but it would be a problem. 

Mr. Chairman, you have already dealt with the issue of the maritime academy ships, which is an ongoing issue that we have, so I 

won’t go to that. 

The training vessels. We have heard about the small shipyard 

grant program. I will say that I was pleased to see how well it operated in the Bollinger yard as well as in the—one of the other 

yards. 

So with that, I think I have covered it. There may be some additional questions that I would like to put for the record at some 

time. And I thank—Chief, Admiral, Mr. Szabat, thank you so 

much. 

Mr. HUNTER. I thank the gentleman. 

I think we are moving forward. I think this is a great time for 

the Coast Guard. I think that the American people don’t know how 

blessed they are to have leaders like you leading America’s Coast 

Guard. And if we can get you in the right place with the right 

amount of money, you can do even greater things than you are 

doing now. So thank you very much for your service and leadership 

in being here. 

Mr. Szabat, thanks for not leaving early. I appreciate it. Maybe 

and hopefully in the next couple of months we will have more than 

acting administrators and so forth there. So thanks for being here. 

And with that, the subcommittee stands adjourned. 

[Whereupon, at 4:28 p.m., the subcommittee was adjourned.] 

37 


Insert offset folio 6 here 24911.006

STATEMENT OF 

THE HONORABLE JOHN GARAMENDI 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

HEARING ON 

"COAST GUARD MISSION NEEDS AND RESOURCE ALLOCATION" 

APRIL 4, 2017 

Thank you, Mr. Chairman. I appreciate your interest in 

beginning the process of v.rriting a new two-year O>ast Guard and 

Maritime Transportation authorization bill. I very much look 

forward to working with you again in that endeavor. 

I also would like to welcome our witnesses from the United 

States O>ast Guard, the Maritime Administration, and the Federal 

Maritime O>mmission, and thank them for their participation this 

afternoon. 

It is my expectation that this hearing will be but onlythe first of 

several exchanges as we work collaborativelyto build and shape U.S. 

maritime policy to meet the many challenges and uncertainties we 

face today. 

The fact of the matter is we are experiencing very, very 

turbulent and challenging times in the maritime world. 
38 


Insert offset folio 7 here 24911.007

Foremost, I remain extremely concerned about the reported 

cuts of $1.3 billion- or fourteen percent- to the Coast Guard that 

the new administration has floated. If ever there was an example of 

someone "knowing the cost of everything, but the value of nothing", 

this is it! 

There is little doubt that the administration heard the outcry 

from members of Congress. However, if the administration thought 

the release of its Fiscal Year 2018 "skinny' budget would allay 

concerns voiced by Chainnan Hunter, me and other members, they 

were sorely mistaken as they failed to detail anyfunding for the Coast 

Guard. 

If there is perhaps one thing we could do to respond to the 

present uncertainties we confront in the maritime domain, it would 

be to provide certainty in funding for the United States Coast Guard. 

Furthermore, if we are to be sincere in our commitment to 

protect our maritime borders, and as well, to ensure the reliability, 

safety and security of the U.S. maritime supply chain, we will need to 

work tirelessly to prevent such a shortsighted budget policy from 

becoming a reality. 

2 
39 


Insert offset folio 8 here 24911.008

Beyond Coast Guard funding, several different issues are 

roiling the waters and deserve our attention. 

For one, the global oversupply of container ships and the 

bottoming out of shipping rates have created turmoil in the global 

container shipping market. Resultant bankruptcies, mergers, 

acquisitions, and the recent formation of three new vessel-sharing 

alliances continue this transformation at a dizzying pace. 

We need to know: how will this transformation affect robust 

competition and fair pricing for marine transportation services in the 

U.S. foreign trade? In addition, what collateral effects on U.S. marine 

terminal operators, escort tugs and other marine service providers 

will result from these alliances? 

The status and future of the U.S. flag fleet in the international 

trade also remains a great concern, especially whether this fleet and 

the credentialed mariners onboard - will remain capable of providing 

reliable and secure sealift transportation for our military. 

In closing, Mr. Chairman, we must begin now to rebuild our 

merchant marine and the U.S. flag presence in global shipping. The 

United States has been, and remains, a maritime nation. Our future 

prosperity and security remains tethered to the sea. 

3 
40 


Insert offset folio 9 here 24911.009

I remain optimistic that the "Build America, Buy America" 

mantra of this administration applies equally to the U.S. maritime 

industry. Assuming so, I extend my hand in cooperation to help 

shape that new future and to reclaim our maritime heritage. 

Thank you. 

4 
41 


Insert offset folio 10 here 24911.010

U.S. Homeland Department~- Secunty ol' 

United States s: Coast Guard 

Commandant 

United States Coast Guard 

2703 Martin Luther King Jr Ave SE 

Washington, DC 20593-7000 

Staff Symbol: CCG 

Phone: (202) 372-4411 

FAX: (202) 372-8302 

TESTIMONY OF 

ADMIRAL PAUL F. ZUKUNFT 

COMMANDANT, U.S. COAST GUARD 

ON 

AUTHORIZATION OF COAST GUARD 

AND MARITIME TRANSPORTATION PROGRAMS 

BEFORE THE 

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

APRIL 4, 2017 

Good afternoon Mr. Chairman and distinguished members of the Subcommittee. I appreciate the 

opportunity to testify today and thank you for your enduring support of the United States Coast 

Guard. 

As the world's premier, multi-mission, maritime service, the Coast Guard offers a unique and 

enduring value to the Nation. The only branch of the U.S. Armed Forces within the Department 

of Homeland Security (DHS), a federal law enforcement agency, a regulatory body, a first 

responder, and a member of the U.S. Intelligence Community the Coast Guard is uniquely 

positioned to help secure the border, combat transnational criminal organizations (TCO), and 

safeguard America's economic prosperity. 

Indeed, the Coast Guard's combination of broad authorities and complementary capabilities 

squarely align with the Administration's priorities, and I am proud of the return on investment 

your Coast Guard delivers on an annual basis. 

I appreciate the unwavering support of this Subcommittee to address our most pressing needs. I 

will continue working with Secretary Kelly, the Administration, and this Congress to preserve 

momentum for our existing acquisition programs and employ risk-based decisions to balance 

readiness, modernization, and force structure with the evolving demands of the 21st century. 

Appropriately positioned in DHS, the Coast Guard is a military Service and a branch of the 

Armed Forces of the United States at all times.! We are also an important part of the modem 

Joint Force,2 and a force multiplier for the Department of Defense (DoD). I am proud of our 

enduring defense contributions to Combatant Commanders around the globe. 

t14USC§ 1. 

2 In addition to the Coast Guard's status as an Armed Force (10 U.S.C. § 101), see also Memorandum of Agreement 

Between the Department of Defense and the Department of Homeland Security on the Use of Coast Guard 

Capabilities and Resources in Support of the National Military Strategy, 02 May 2008, as amended 18 May 2010. 
42 


Insert offset folio 11 here 24911.011

In addition to the six cutters operating as part of Patrol Forces Southwest Asia (P ATFORSW A) 

since 2003, other defense operations include: 

• Port Security Units (PSUs) support Combatant Commanders with 24-hour protection of 

vessels, waterways, and port facilities. These specialized teams have deployed almost 

continuously to strategic ports in Kuwait and in Guantanamo Bay, Cuba, since 2002. 

• Deployable Specialized Forces Advanced Interdiction Teams support U. S. Central 

Command (CENTCOM) vessel board, search, and seizure operations. 

• Aircrews perform rotary-wing air intercept operations in support of the Nmih American 

Aerospace Defense Command (NORAD). Specially trained aviators intercept aircraft that 

enter restricted airspace in the National Capital Region and during National Security Special 

Events around the country. 

• Assets and personnel deploy worldwide in support of defense operations and fully participate 

in major international exercises. As the Coast Guard is similar in size, composition, and 

missions to most of the world's navies, we are a frequent engagement partner of choice to 

support Combatant Commander goals. 

Like the other military Services, the Coast Guard supports all efforts to rebuild the Arn1ed 

Forces. 

Secretary Kelly leads the Department's efforts to secure our borders, and the Administration's 

strategy "to deploy all lawful means to secure the Nation's southern border. .. "3 relies on the 

Coast Guard supporting a comprehensive security strategy. The Coast Guard protects the 

maritime border not just here at home, but also off the coast of South and Central America. As 

Secretary Kelly has stated, " ... the defense of the southwest border really stmis about 1,500 miles 

south ... "4 

We continue to face a significant threat from TCOs, and the Coast Guard is positioned to attack 

these criminal networks where they are most vulnerable, at sea. We leverage over 40 

international maritime law enforcement bilateral agreements to enable partner nation 

interdictions and prosecutions, and employ a robust interdiction package to seize multi-ton loads 

of drugs at sea before they can be broken down into small quantities ashore. 

In close collaboration with partner Nations and agencies, the Coast Guard works to engage 

threats as far from U.S. shores as possible. In 2016, Coast Guard and partner agencies interdicted 

more cocaine at sea than was removed at the land border and across the entire nation by all 

federal, state and local law enforcement agencies combin(..'d. A service record 201.3 metric 

tons of cocaine (7.1% of estimated flow)s was removed from the western transit zone, 585 

smugglers were detained, and 156 cases were referred for prosecution. 

3 Executive Order on Border Security and Immigration Enforcement Improvements, 25 January 2017. 

'Secretary Kelly Hearing Testimony, "Ending the Crisis: America's Borders and the Path to Security" before the 

House Homeland Security Full Committee and Subcommittee on Border and Maritime Security Joint Hearing on 

America's Borders, Panel 1, 07 February 2017. 

s [US Department of Homeland Security, Office oflnspector General, Review of U.S. Coast Guard·s Fiscal Year 

2016 Drug Control Peifonnance Summary. OIG Report, OIG-17-33, February l, 2017.] 

2 
43 


Insert offset folio 12 here 24911.012

Coast Guard readiness relies on the ability to simultaneously execute our full suite of missions 

and sustain support to Combatant Commanders, while also being ready to respond to 

contingencies. Your Coast Guard prides itself on being Semper Paratus - Always Ready, and 

predictable and sufficient funding is necessary to maintain this readiness in the future. Prudence 

also demands we continue investing in a modernized Coast Guard. Indeed, recapitalization 

remains my highest priority, and today's activities will shape our Coast Guard and impact 

national security for decades. Your support has helped us make tremendous progress, and it is 

critical we build upon our successes to field assets that meet cost, performance, and schedule 

milestones. I am encouraged by our progress to date. 

In 2016, we awarded a contract to complete build out of our fleet of 58 Fast Response Cuttersat an affordable price - and the last four ships (numbers 19 through 22) were delivered by 

Bollinger Shipyards with zero discrepancies. In September, we achieved a monumental goal with 

the award of a contract for Detail Design and Construction of the Offshore Patrol Cutter (OPC). 

These cutters will eventually comprise 70 percent of Coast Guard surface presence in the 

offshore zone. OPCs will provide the tools to more effectively enforce federal laws, secure our 

maritime borders by interdicting threats before they arrive on our shores, disrupt TCOs, and 

respond to 21st century threats. With the continued support of the Administration and Congress, 

we anticipate ordering long lead time material for the first OPC later this year, and plan for its 

delivery in 2021. 

We also generated momentum to build new polar icebreakers. In July of last year I sat before 

this subcommittee and made a commitment to partner with the Navy to establish an Integrated 

Program Office to acquire new heavy icebreakers. This approach leverages the expertise of both 

organizations and is delivering results. The recent award of multiple Industry Studies contracts 

a concept the Navy has utilized in previous shipbuilding acquisitions to drive affordability and 

reduce schedule and technical risk is an example of the positive results of this partnership. We 

will continue refining the system specification and prepare to release a request for proposal for 

Detail Design and Construction in FY 2018. 

W c arc also making progress with unmanned aerial systems. A recent small Unmanned Aerial 

System (sUAS) proof of concept aboard a National Security Cutter (NSC) validated this 

capability and will enhance the effectiveness of these cutters. In its inaugural month underway, 

STRATTON's sUAS flew 191 flight hours, providing real-time surveillance and detection 

imagery for the cutter, and assisting the embarked helicopter and law enforcement teams with the 

interdiction or disruption of four go-fast vessels carrying more than 5,000 pounds of contraband. 

In addition, we are exploring options to build a land-based UAS program that will improve 

domain awareness and increase the cued intelligence our surface assets rely upon to close illicit 

pathways in the maritime transit zone. While long-term requirements are being finalized, I can 

fully employ a squadron of six platfonns outfitted with marine-capable sensors now and am 

moving out to field this much-needed capability. 

In addition to the focus on recapitalizing our surface and aviation fleets, we are also mindful of 

the condition of our shore infrastructure. Investments in shore infrastructure are also critical to 

modernizing the Coast Guard and equipping our workforce with the facilities they require to 

meet mission. 

3 
44 


Insert offset folio 13 here 24911.013

America's economic prosperity is reliant on the safe, secure, and efficient flow of cargo through 

the Maritime Transportation System (MTS), which sees $4.5 trillion of economic activity 

annually. The Nation's maritime industry and the MTS face many challenges, including growing 

demands, a global industry-driven need to reduce shipping's environmental footprint, and the 

ever-increasing complexity of systems and technology. 

Coast Guard marine safety programs employ our unique capabilities to ensure a safe, secure, and 

environmentally sound MTS. We do this by developing risk-based standards, training and 

employing a specialized workforce, and conducting investigations into accidents and violations 

of laws so standards can be improved. We are mindful of the need to facilitate commerce, not 

impede it, and remain committed to our prevention missions. 

While readiness and modernization investments will improve cunent mission perfonnance, the 

right force is central to success. I am incredibly proud of our 88,000 active duty, reserve, civil 

service, and auxiliary members. I am working aggressively to validate a transparent and 

repeatable model to identify the appropriate force structure required for the Coast Guard to 

simultaneously respond to global, national, and regional events. 

Funding 21st century Coast Guard platforms and people is a smart investment, even in this 

challenging fiscal environment. Modern assets bring exceptional capability, but our greatest 

strength will always be our people. Coast Guard operations require a capable, proficient, and 

resilient workforce that draws upon the broad range of skills, talents, and experiences found in 

the American population. Together, modern platforms and a strong, resilient workforce will 

maximize the Coast Guard's capacity to meet future challenges. 

History has proven that a responsive, capable, and agile Coast Guard is an indispensable 

instrument of national security. With the continued support of the Administration and Congress, 

the Coast Guard will continue to live up to our motto. We will be Semper Paratus- Always 

Ready. Thank you for the opportunity to testify before you today and for all you do for the men 

and women of the Coast Guard. !look forward to your questions. 

4 
45 


Insert offset folio 14 here 24911.014

Question#: 

Topic: Marine Inspection Positions 

Hearing: Authorization of Coast Guard 

Primary: 

Committee: I 

I 

Question: The Coast Guard provided 500 new billets and increased funding for training 

between 2008 and 2012 to enhance the Coast Guard's capabilities to execute its statutory 

marine safety mission. Industry is concerned that the marine safety and vessel inspection 

function is degrading, with billets moving out through transfers or being left unfilled. 

How many marine inspection positions docs the Coast Guard anticipate for fiscal 2018? 

How many are military billets and how many arc civilian billets? 

Response: There are 670 marine inspections billets in FY18. Of those, 533 are military 

officers (including warrant officers) and 137 arc civilian marine inspectors. 

Approximately 3 7% (250) of the total marine inspector billets are apprentice marine 

inspectors, and 63% (420) are journeyman and advanced marine inspectors. 

Question: Can the Coast Guard provide, for the fiscal years 2013 to 2018, the total 

number of marine inspection positions, broken down between military and civilian 

workers? 

Response: Between fiscal years 2013 and 2018, the total number of marine inspectors 

averaged 673 billets. The annual break-down of billets is included below. 

FY20!6 __ +--

FY2017 532 

FY20!8 !37 
46 


Insert offset folio 15 here 24911.015

Question: Can the Coast Guard provide a Sector-by-Sector Prevention billet reallocation 

under the Reprogramming and Optimization of Sector Enterprise (ROSE) initiative? 

Specifically break out marine inspector and marine investigator billets by sector. Is 

ROSE complete or are more Prevention billets moving in the future? 

Response: Thank you for your interest in the ROSE initiative. The reallocation of billets 

across the Coast Guard's shore forces field units was a very complex endeavor, involving 

hundreds of billets across multiple career specialties. At your convenience, my shore 

forces staff can provide you a brief on the requested details. 
47 


Insert offset folio 16 here 24911.016

I Question#: ~- j 

~------:---+-c-:-:c-:--:-::~---------------------------1 i Topic: Additional Billets 

r--____:aring: Authorization oC Coast 

r Primary: The Honorable Duncan D. Hunter 

r-----,;::--:----l-=:-:-:-;c;-:;=-o=-:-=--·-----·· .. -----··------·--·-----·-·----··· 1 Committee: TRAi'ISPORTATION (HOUSE) 

Question: With the addition of nearly 6,000 towing vessels to the U.S. inspected fleet, is 

the Coast Guard seeking additional billets, both military and civilian. needed to carry out 

its marine safety mission? 

Response: The addition of nearly 6,000 towing vessels to the domestic inspected fleet is 

an example of the growing capacity on our nation's waterways. The Coast Guard is 

examining a variety of means by which to meet the challenges posed by this growing 

capacity. While we evaluate any potential personnel needs, the Coast Guard will 

continue to adapt our standards and compliance processes, enhance our technical 

competency, and increase the productivity of our workforce to keep pace with 

advancements in the maritime industry. 
48 


Insert offset folio 17 here 24911.017

Question: U.S. mariners were required to be up-to-date with their endorsements to 

comply with the International Maritime Organization's Convention of Standards of 

Training, Certification and Watchkeeping for Seafarers. Full implementation was 

required by December 31, 2016. However, the Coast Guard delayed implementation. 

Why did Coast Guard delay implementation? 

Response: The Coast Guard did not delay implementation. 

Question: What impact, if any, does the delay of these international requirements have 

on U.S. mariners? 

Response: The United States, in alignment with the global maritime community, 

voluntarily agreed to take a pragmatic approach to enforcement of certain provisions in the 

recent amendments to the International Convention on Standards of Training, Certification 

and Watchkeeping for Seafarers (STCW). during the period between January I and July 1, 

2017. The Coast Guard patiicipated in a global effort at the International Maritime 

Organization to develop guidance tor member states to recognize that many countries were 

facing the challenge of processing a large number of applications from mariners who 

waited until the final weeks before the January 1 implementation date to submit their 

applications. The relatively late submission of these applications caused backlogs in the 

credentialing evaluation processes of a number of countries, including the U.S. Factoring 

this infonnation into enforcement action helped to reduce the chances of detention of U.S. 

vessels trading internationally and foreign flagged vessels visiting U.S. potis. The 

economic repercussions of wholesale detentions for STCW-related issues would have been 

significant to the maritime industry as well as U.S. consumers. 

In advance of the implementation deadline, the Coast Guard published several documents, 

in which we encouraged mariners to continue their pursuit of compliance with the STCW 

requirements. 

We believe there were no detrimental impacts to U.S. mariners, vessels, or safe commerce 

brought on by this pragmatic approach to enforcement. 
49 


Insert offset folio 18 here 24911.018

Question: Does the current level of equipment available in theW AK COTP zone meet the 

needs of the Coast Guard? 

Response: The standards tor oil spill response capability and capacity are established in the 

National Planning Criteria. In cases where the National Planning Criteria cannot be met 

due to current resource and infrastructure challenges (as are found in Westem Alaska), the 

Coast Guard may accept Altemate Planning Criteria as a risk mitigation measure until the 

National Planning Criteria can be met. The current level of response equipment in Westem 

Alaska does not yet meet the National Planning Criteria. 

Question: If not, how will the Coast Guard achieve the level of equipment it believes is 

needed in theW AK COTP zone? Docs the Coast Guard expect a steady increase of 

equipment and response capability? 

Response: Yes, the Coast Guard expects industry to steadily increase response 

capability over time. This was, and remains, the clear intent of the VRP regulations. The 

Coast Guard will continue to facilitate and foster continued growth toward the national 

planning criteria. 
50 


Insert offset folio 19 here 24911.019

Question#: 6 

Topic: Equipment Build-out 

----~~-.----- Authorization of Coast Guard and Maritime Transportation Programs I "eanng: 

I Primary: The Honorable Don Young 

l Committee: TRANSPORTATION (HOUSEl 

------------'------"""" 

Question: Do you believe that equipment build-out in the WAK COTP zone is trending 

in the right direction? 

Response: Yes, the growth of response capacity within the Westem AK Captain of the 

Port Zone over the last 18-!- months is positive. The additional resources have not only 

added to oil spill response readiness, but have also been vital to other missions including 

search and rescue, and salvage responses. 
51 


Insert offset folio 20 here 24911.020

Question: How does the Coast Guard measure "equipment"? What are the curr-ent levels 

of equipment in the W AK COTP Zone? 

Response: The Coast Guard measures equipment and the planned ability to respond in 

accordance with the regulations, which include specific levels of response equipment and 

oversight based on vessel service, the type of oil carried, and the worst case discharge. 

This applies in Western Alaska as it does in other parts of the country. 

Question: How is ability to deploy equipment taken into account when measuring the 

level of equipment available? 

Response: The Coast Guard measures equipment and the planned ability to respond in 

accordance with the regulations, which include specific levels of response equipment and 

oversight based on vessel service, the type of oil carr-ied, and the worst case discharge. 

This applies in Western Alaska as it does in other parts of the country. 

For oil spill response equipment, the Coast Guard reviews contracts, funding aE,rreements, 

and certification statements between plan-holders and their contracted Oil Spill Removal 

Organization(s) (OSRO) stating their capability to respond to a worst case discharge in 

the COTP zones they operate. In addition, the Coast Guard measures the oil spill 

response equipment through an OSRO classification system managed by the National 

Strike Force Coordination Center. Traditionally, OSROs have voluntarily participated in 

the OSRO Classification system, which includes on-site verification of equipment by 

Coast Guard inspectors. 
52 


Insert offset folio 21 here 24911.021

Question: Arc the number of ships transiting the WAK COTP Zone increasing? How 

many of those ships are considered tank vessels as compared to nontank vessels'1 

Response: The number of transits across the great circle route grew from 2015 to 2016; 

from 7735 to 8680 transits. Of these transits, approximately 7% were made by tank 

ships. These numbers do not include fishing vessels or intra-Alaska tug/barge traftic. Of 

the above, approximately 15% of transits are ships on innocent passage. Ships on 

innocent passage are not required to maintain USCG-approved Vessel response Plans. 
53 


Insert offset folio 22 here 24911.022

Question: Is the Coast Guard tracking the overall level of revenue available in the WAK 

COTP zone for compliance with APC rules? If the revenue generated decreases, will the 

expected amount of equipment and level of response decrease? 

Response: No, the Coast Guard does not track data related to level of available revenue. 

The Alternative Planning Criteria policy has resulted in additional resources in Western 

Alaska. These resources have not only added to the response readiness of Western 

Alaska for oil spill response, but have also been vital to other missions including search 

and rescue responses, and salvage responses. 
54 


Insert offset folio 23 here 24911.023

0 

Topic: Marine Safety . Bulletin 

Hearing: Authorization of Coast Guard and Maritime Transportation Programs 

Primary: The Honorable Don Young 

------------ Committee: T , NSPm.TA TlON (HOUSE) 

Question: Are all APCs in theW AK COTP Zone required to comply with the current 

Marine Safety Information Bulletin and other regulatory requirements issued by the 

Coast Guard? 

Response: Yes, all APCs in W AK COTP Zone are evaluated against the guidance 

provided in the current MSIB and other regulatory requirements, including Policy Letter 

09-02. Once signed, the updated APC national policy guidance will replace Policy Letter 

09-02. 

I 
55 


Insert offset folio 24 here 24911.024

Topic: Coverage 

Question: Do the cun·ent APCs cover all of the WAK COTP Zone? If not, what is the 

requirement for coverage'? Docs it vary trom APC to APC and who ultimately decides 

the extent of coverage? 

Response: No, the cutTen! APCs do not cover all of WAK COTP Zone. Per the 

regulations, the requirement for coverage is determined by the vessel owner/operator as 

an area within which the National Planning Criteria are inappropriate and the vessel 

intends to operate. The Coast Guard evaluates each submission to ensure that the 

national planning criteria are, in fact, inappropriate for the areas that the vessel intends to 

operate. 
56 


Insert offset folio 25 here 24911.025

Question: Does the Coast Guard require that all equipment provided by approved APC 

providers be permanently positioned in theW AK COTP? If not, and if current APC 

providers reference equipment not located in the WAK COTP, can you tell me where that 

equipment is currently located and how it will be made available in timely manner to 

respond to a spill? 

Response: The Coast Guard evaluates each APC on its own merits, including its risk 

reduction and proposed gap mitigation strategies. In the case of the Alaskan APCs. those 

strategies all include a significant amount of response equipment located in the covered 

areas as well as a cascade proposal from elsewhere in Alaska and the lower 48. 

Similarly, oil spill response equipment in the lower 48 is based, to a certain extent, on the 

ability to cascade equipment from other locations. 
57 


Insert offset folio 26 here 24911.026

STATEMENT OF ACTING CHAIRMAN MICHAEL A. KHOURI 

FEDERAL MARITIME COMMISSION 

BEFORE THE 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

UNITED STATES HOUSE OF REPRESENTATIVES 

April4, 2017 

Chairman Hunter, Ranking Member Garamcndi. and Members of the Subcommittee, thank you 

for providing me with this opportunity to appear betore you today and discuss the mission of the 

Federal Maritime Commission. 

The Federal Maritime Commission is working to be a more efficient organization by making a 

concerted effort to reduce regulatory burdens on our constituents. The Commission is aggressively 

looking tor ways to make compliance with Commission requirements easier and more cost 

effective for shippers, carriers, and ocean transportation intennediaries. On March 6th, the 

Commission approved key changes to regulatory requirements for ocean carrier service contract 

filings and non-vessel-operating common carrier (NVOCC) service arrangement filings that will 

make it easier and more efficient for shippers and cmTiers to do business. 

I want to assure you, and those with business before the Federal Maritime Commission, that I am 

committed to continuing to identify mles that arc outdated or impede the efficient operation of 

business, and eliminating them whenever possible. I believe there are additional rclotms that can 

be made to existing regulations administered by the Federal Maritime Commission, and relief from 

tariff publication requirements immediately comes to mind as another obligation ripe for 

Commission consideration. 

Cu!Tently, ocean transportation intermediaries and vessel-operating common carriers are required 

to publish tariffs. even though the overwhelming majority of cargo moving across oceans docs so 

under the tenns of service contracts. In other words, current law and Commission regulations 

require companies to publish rates that have nothing to do with the actual market prices being 

charged to shippers. Continuing to mandate thousands of taritTs be published that do not ret1ect 

real conditions in the market, and have minimal, if any, usc by industry participants when 

negotiating service contracts. is a requirement and expense that regulated entities could be relieved 

of under the exemption authority provided to the Commission by Congress. 

Building on Executive Orders of both the prior and current administrations, the Commission is in 

the process of identifying requirements that should be changed or eliminated. It takes far too long 

to travel the road to regulatory relief. When we see a regulatory burden, we should be able to 

successfully address it as rapidly as possible, and by that, I have in mind a timeframe of months 

as opposed to years. Unshackling the market from artificial constraints on cfliciencies should be 

something we designate as a priority and work tirelessly to achieve. 

Page 1 of 6 
58 


Insert offset folio 27 here 24911.027

Toward that end, after consulting with my fellow Commissioners, on March 131

h I designated the 

agency's Managing Director, Karen V. Gregory, as the Regulatory Refonn Officer. Ms. Gregory 

will stand up a Regulatory Ref01m Task Force as contemplated by the .January 301

h ''Presidential 

Executive Order on Reducing Regulations and Controlling Regulatory Costs." The task force will 

identify those regulations that arc the most ineffective, would be the easiest to repeal, and then 

establish a definitive timeline within the agency to move those items to a vote before the 

Commission. Even if not technically required as an independent agency to take this step, I believe 

that it is the right action to take and is consistent with the broader deregulatory history and scope 

of the Shipping Act. 

This commitment to deregulation is essential. It is a critical factor in expanding America's 

economic competitiveness in the ocean container supply chain. If I can achieve only one thing as 

the Acting Chainnan of the Federal Maritime Commission, I would like our numerous 

stakeholders to view the agency's regulatory regime as fair and to view the FMC as a global leader 

in tenus of promoting a competitive and efficient ocean transportation system, with plimary 

reliance on a free and open market place, and a minimum of government intervention and 

regulatory costs. 

While my enthusiasm for achieving meaningful deregulation is genuine, no one should mistake 

that pri01ity as signaling decreased vigilance in meeting the Commission's core missionfostering a fair, efficient, and reliable international ocean transportation system while protecting 

the public from unfair and deceptive practices. We have been doing this work, as one entity or 

another, for one hundred years and we are at a particular juncture in the history of the container 

shipping industry where our work is all the more important. 

Since the Commission last appeared be lore you, there have been tremendous changes to the ocean 

transportation services marketplace. The recent past has been marked by considerable merger and 

acquisition activity among shipping lines that was topped off by the bankmptcy of a "top ten" 

canier late last sununer. As a result of these events, the number of major shipping lines operating 

in the international trades has dropped from 20 in 2015 to what will be 13 by next year when the 

three Japanese-based carriers create a new, consolidated container line. All of this activity has 

consequentially caused a reordering of the can·icr alliance system and the creation of two new 

organizations ("THE Alliance" and 'The OCEAN Alliance") that will join the already existing 

·'2M Alliance." 

Carner and marine terminal alliances can be very beneficial for U.S. exporters, importers, and 

consumers. Such alliances allow participants to obtain efficiencies and cost-savings that can be 

passed on to domestic consumers especially when healthy competition exists among vessel 

operators. Last, the benefits of alliances and other forms of joint commercial anangements arc 

recognized and addressed in the Shipping Act of 1984, as amended, and the contemporaneous 

Congressional record. 

Given the significant amount of change that has taken place over the past year, shippers are 

viewing the new commercial environment with many questions and perhaps even some 

trepidation. Put succinctly, shippers are concemed that fewer caniers, operating in fewer, yet 

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larger, alliances will not only equate to less service choices, but to a conunercial environment 

where shipping lines enjoy an advantage oflevcrage in contract negotiations. These apprehensions 

are not limited exclusively to cargo owners. We have heard similar sentiments voiced by tern1inal 

operators, equipment lessors, as well as various service providers. The industry is entering a new 

era and it is not surprising that there may be questions about whether carriers will be in a position 

to dictate rates. The current circumstances perfectly illustrate why the Federal Maritime 

Commission was created, what its job is, and how the agency provides a benefit to American 

shippers and to our economy more broadly. 

The mission of the Federal Maritime Commission is to facilitate an open and free market for ocean 

shipping services by bringing transparency to market forces and protecting against anti competitive 

behaviors. While the Conunission is always diligent in its duties to assure the marketplace remains 

competitive, we are aware and aleti that with the dawn of a new era, the oversight work of our 

professional transportation economists, attorneys, and analysts is all the more critical. It is vital to 

the interests of all parties involved in the movement of ocean commerce that the Commission 

provide confidence that America has a competitive, fair, and efficient marketplace. As the new 

alliances begin to operate commercially next month, we are positioned to monitor the marketplace 

more carefully than ever with a particularly keen eye focused on any behavior that might appear 

to produce an unreasonable increase in transportation cost or an unreasonable reduction in 

transportation services as a result of collective CatTier behavior under the respective alliance 

agreements. Toward that goal, the Cmm11ission has strengthened the economic review process of 

new alliance agreements filed with us. More specifically, we have required tighter limits on the 

scope of each agreement's authority, as well as expanded quarterly reporting requirements to be 

filed with the Commission. All of this is done to ensure the Commission's ability to detect and 

respond to any signs of anticompetitive behavior or abnmmal pricing trends. 

Our Annual Report will provide you with a comprehensive summary of the Commission's 

activities and industry developments in Fiscal Yem· 2016. While future predictions are difficult, 1 

will briefly address what we foresee as potential developments and trends in the coming months. 

Carriers are operating in an enviromnent where trade volumes are growing more sluggishly than 

has been typical of the sector. Concurrently, new vessels of the largest capacities continue to 

emerge f!,om shipyards and be deployed into the world's trade lanes. All things being equal, and 

with no other shocks to the business such as a spike in fuel costs or another shipping line 

bankruptcy, this is a fonnula for continued low rates, which ultimately benefits shippers, at least 

in the shorter term. 

As noted earlier, although there has been a contraction in the number of lines operating in the 

international ocean trades, competition between companies remains vibrant and shippers continue 

to benefit from low rates. Overall market share of even the largest oceangoing carriers remain 

diffused. In the U.S. export and import trades combined, CMA CGM holds a 12.42 percent market 

share followed closely by MeditcJTancan Shipping Company at 12.39 percent and Macrsk in third 

position with 10.62 percent. These arc far tl·om dominant market positions as recognized by 

established economic standards. We will, of course, monitor what impact the carriers operating in 

the new alliances have on market dynamics, rates, and services. A preliminary analysis conducted 

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Insert offset folio 29 here 24911.029

by FMC staff: and hopefully available for publication later this year, finds that shippers may enjoy 

certain benefits from larger alliances, particularly in tcm1s of what they pay for service. 

One factor to note is that some carriers receive govemment support, either directly or indirectly. 

The invisible hand is not the only force that guides the global shipping industry, and nations 

throughout the world go to great lengths to support national companies, including saving them 

from bankruptcy. At the moment such close links between a government and its national carrier 

can also benefit American shippers and consumers by virtue of lower freight costs and greater 

service choices. 

The ocean liner industry has been in a state of vessel oversupply for several years. The low freight 

rate stmcture in U.S. trade lanes is a direct reflection of that capacity supply/demand imbalance 

and American exporters and importers have been the beneficiary of those low fi·eight rates. Such 

supply imbalances will not last forever. The Federal Maritime Commission does not favor one 

competitor, sector, or industry stakeholder over another. We will continue to be vigilant for 

indications of rate increases that are products of market distorting, collusive carrier business 

practices; however, it is important to remember that rate increases in and of themselves are not 

proof of an uncompetitive marketplace. At some point in the future, higher freight rates will be a 

nonnal result of a more equalized and healthy supply/demand marketplace. 

Finally, I should note that the Commission is beginning to see mmine tenninal operators and port 

authorities show increased interest in how to use agreements filed with and reviewed by the 

Commission to their benefit. There is a realization among these parties that seeking an alternate 

antitmst enforcement regime available to them through an agreement filed at the FMC can lead to 

increased efficiencies and lowered costs. We welcome the application of any parties from the port 

and tenninal sector who want to use agreements to achieve goals that ultimately benefit the 

American shipper and consumer. 

Turning from the shipping industry to the Commission itself, I would like to note an FMC initiative 

that is making a meaningful contribution toward understanding, addressing, and mitigating port 

congestion- as well as enhancing supply chain efticiency for America's exporters and importers. 

I am referTing to our Supply Chain Innovation Team Initiative that is being led by my colleague 

and friend, Commissioner Rebecca Dye. 

This undertaking was launched in May of 2016 and focuses on challenges faced by America's 

international maritime supply chains. Commissioner Dye, with her volunteer teams of industry 

leaders composed of shippers, marine terminal operators, trucking companies, ocean caniers, port 

oflicials, labor representatives, logistics companies, and other stakeholders, have been working to 

develop actionable commercial solutions including in particular-· the key content for a national 

seaport information pm1al that could provide the necessary critical inf01111ation sought by all 

parties involved in moving containers to/from vessels, through seaports, and onward to a final 

destination. 

The team's consensus in Phase One was that if such a portal could be funded and implemented, it 

would make a meaningful contribution to both improved supply chain efficiency and to America's 

national economic competitiveness. 

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Phase One of the initiative addressed our country's import supply chains. This year, 

Commissioner Dye willlannch a second phase this time focusing on America's export supply 

chains. We are very much looking forward to the results of the work those teams will do. 

Commissioner Dye's work illustrates what can be accomplished with the right people working 

toward a common goal under effective leadership. A proven method of achieving strong 

perfonnance at an organizational level is through focused and meaningful strategic plmming. From 

my years in the private maritime sector, I experienced first-hand how strategic planning can be not 

just a tool, but a driving force in an organization's success. Govemment agencies can also benefit 

trom strategic planning that is focused, and designed to unite all agency team members to find 

ways to achieve our mission more effectively while delivering value to the taxpayer. Creating a 

strategic plan that is substantive and seeks to make the Commission an even better run agency is a 

task I welcome taking on as the Acting Chairman. To this point we arc now beginning work on 

a new five year strategic plan that will guide the Commission tln·ough Fiscal Y car 2022. 

Finding ways to conduct the Commission's business more efficiently is an important goal we 

share, Mr. Chai1man. I am very pleased to say we have made some definitive steps toward trying 

to find ways to make every dollar appropriated to us go as far as it can. The FMC is a small agency 

with a very technical mission and a need for a very specialized workforce. Our requested level of 

funding for Fiscal Year 2017 is $27,490,000. The part of the agency involved in the heart of the 

mission, you will lind a high percentage of transportation economists and attorneys cm·eer fields 

that tend to command more compensation in order to successfully recruit and retain qualified 

candidates. Overall, the great bulk of the Commission's budget, approximately 88 percent, is 

consumed by rent and salaries. ''Overhead" costs such as security fees, utilities. and govemment 

services account for most of the remaining budget dollars. The Commission has very little, if any, 

control over many of these costs. Year in and year out, the rent we are charged rises, the supplies 

and resources we purchase to support our economist and attorney's competitive analysis and legal 

research cost more, and infonnation technology costs-including IT security and 

telecommunications bills-rise. We constantly work to find a balance between our resources and 

our workload; however, if there is a surge of agreement filings, if a ''class" of plaintif[s choose to 

seek relief at the FMC, or if our building security requirements increase, then we \Vork to prioritize 

our mission-critical activity and reallocate resources to the extent possible. 

Another example of the challenge of controlling our costs is illustrated by the ongoing discussions 

we are having with the General Services Administration (GSA) regarding security requirements 

and related costs for our headquarters building in Washington D.C. The Conunission's projected 

security costs for FY2017 is $758,017. Of this total, only $71,983 can be categorized as being 

basic, necessary, and pertinent for the agency's headquarters building and its six regional Area 

Representative ot1ices. The additional $686,034 we estimate we will pay in security fees are 

incremental costs imposed upon us because of the building where arc onr hcadqum1ers is located. 

The $686,034 figure represents approximately 2.67 percent of our total FY 2017 budget. For an 

agency with a low security requirement and a desire to be accessible to the public, that money 

could be better used to hire the additional economists and analysts we need to help monitor the 

intemational ocean shipping marketplace. 

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Our building is a mix of government and non-government tenants. Two of our fellow government 

tenants are law enforcement agencies with higher physical security requirements than the Federal 

Maritime Commission. We arc concerned that we will be required to shoulder anticipated cost 

increases associated with maintaining security levels at the building that are dictated by the needs 

of other federal tenants co-located by GSA into our building subsequent to our original occupancy 

in 1991. Additionally, we are concerned that we will be directed to contribute toward the overall 

cost of new security upgrades to meet the desires or pro fesscd needs of other federal tenants in the 

building. These ever-increasing security costs are problematic in light of current budget realities. 

As I mentioned earlier in this testimony, the Federal Maritime Commission continues to faithfully 

pursue the purposes and mission of the Shipping Act that has been in place for I 00 years. In its 

First Annual Report, published on December I, 1917, a total of 83 employees were listed on the 

payroll of our predecessor agency, the United States Shipping Board. Today, a century later, with 

a vastly larger domestic economy and global trade, the Commission has only 127 employees 

working to maintain a competitive ocean transportation services marketplace that moves billions 

of dollars in commerce representing about one-third of America's Gross Domestic Product. I am 

proud of the work the Commission's stafT does each day to ensure a fair, efficient, and reliable 

international ocean transportation system, and to protect onr U.S. exporters, importers, and 

ultimately the American consumer from unfair and deceptive practices. 

Thank you for this opportunity to discuss the mission of the Federal Maritime Commission, cunent 

state and future challenges of the ocean shipping industry, as well as highlight some of the 

Commission's recent achievements and future priorities. I am always ready to be of any assistance 

to the Subcommittee and its Members. I would be pleased to answer any questiom you may have. 

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Response of Acting Chairman Michael A. Khouri to 

Questions for the Record (QFR) Submitted on behalf of Congressman Duncan Hunter 

Wlty did tlte FMC agree to allow a group of international car carriers to collectively negotiate 

wit/t U.S. tugboat service providers? 

Because attempting to stop the agreement in Federal District Court as a violation of the 

Shipping Act of 1984 would have been frivolous, and would have likely exposed the Federal 

Maritime Commission ("FMC" or "Commission") and its attorneys to sanctions under Rule II of 

the Federal Rules of Civil Procedure. 

When the Commission receives an agreement, several things happen. First, staff conducts 

a preliminary review to determine that the parties to the agreement are vessel operators or marine 

terminal operators, and that there are no overt prohibited acts on the face of the agreement. Next, 

after being satisfied that there are no facial defects, staff then conducts a competitive analysis using 

well-worn antitrust standards. The analysis defines the market- both product and geographic. For 

agreements with joint purchasing authority, staff examines whether the portion of goods or 

services that would be jointly purchased is so large, relative to total purchases of the good or 

service, that the parties could effectively exercise market power in the upstream market. 

In the case of the car carrier agreement amendment, the market being evaluated was the 

market for tug services for ocean going vessels that require tug assist in port docking. The 

geographic market was each relevant major port where the car carriers called. The FMC staff 

analyzed 12 U.S. ports on the west, east and gulf coasts. The basic assessment was that the car 

carriers did not have significant market purchasing power. Just as DOJ and FTC assess purchasing 

joint ventures under a rule of reason standard (testing whether the cooperative activities may 

produce efficiencies), the Commission assessed whether there would be efficiencies and cost 

savings that might flow to consumers. Unlike arrangements between competing sellers or between 

the competing service providers, which are judged skeptically using a per se test for illegality, 

joint ventures for purchasing are permitted - and even encouraged. 

Here, car carriers make up a comparatively small part of the entities that purchase tug assist 

services. It thus would have been beyond difficult to make the legal case, based on the present 

facts that the agreement would have caused an unreasonable reduction in transportation service, or 

an unreasonable increase in transportation costs (the standard that the Commission would have 

been required to meet in order to convince a judge to grant an injunction). 

When it determined that the legal case would have been fruitless, the Commission 

nevertheless implemented safeguards to ensure that the car carriers' agreement would not result in 

unexpected consequences. Specifically, the Commission notified the car carriers that before 

implementing any actual joint purchase, the car carriers would be required to bring that actual 

proposed tug assist agreement back to the Commission for review in order to ensure that the car 

carriers did not exercise any undue power in a particular port. Failure to do so would result in an 

investigation and potential enforcement proceeding. Further, the car carriers do not receive 

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antitrust immunity for agreements with tug providers. See 46 U.S.C. § 40307(b)(l). Additionally, 

the tug providers can file a complaint for adjudication at the Commission based on prohibited acts. 

See 46 U.S.C. § 41105(4). 

In sum, the Commission did not seek to enjoin the agreement because the parties are 

unlikely to be able to exercise market power in the tug services market, the Commission would 

have lost in court with further risk of court-imposed sanctions on the FMC, and the tug providers 

still have several adequate, currently existing remedies if they do not concur with the decision of 

the Commission. 

Given the increased consolidation we /1ave seen in tile foreign ocean carrier industry over tile 

past decade, do you tlrink tlte Sil/pping Act adequately protects t/1e U.S. maritime industry and 

tile public from the concentrated power of foreign shipping alliances? 

As I noted in my written testimony submitted for the May 3 hearing before the 

Subcommittee on Coast Guard and Marine Transportation, the Commission has ample authority 

under the Shipping Act of 1984 (Shipping Act) to address the competitive issues facing the 

international liner industry. As an independent agency with experience and specialized expertise 

in this legal area and particular familiarity with maritime matters, the FMC is well positioned to 

be sensitive to the concerns of U.S. participants in the international ocean transportation supply 

chain and the U.S. shippers who rely on a fair, efficient, and competitive, ocean transportation 

system. The FMC has been forward leaning in our use of our authority as we have reviewed new 

carrier agreements as they formed the new generation of alliances. We have also been careful to 

consider the concerns of parties affected by these agreements, including the U.S. maritime industry 

and shipping public, as well as the views of our sister competition agencies. 

Under the Shipping Act, cooperative or collaborative agreements between or among 

competitor international ocean liner carriers are filed with the Commission and reviewed under the 

Shipping Act's competition standard to prevent anticompetitive behavior in these agreements. This 

standard the Commission uses to review carrier agreements, 46 U.S.C. §41307(B)(l) -

"Anticompetitive Agreements," commonly referred to as 6(g), is analogous to the standard 

employed by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to review 

mergers, acquisitions, and competitor collaborations. Under 6(g), an agreement filed with the 

Commission goes into effect unless the Commission determines (and convinces a judge to agree) 

that the agreement is likely, by a reduction in competition, to produce an unreasonable reduction 

in transportation service or an unreasonable increase in transportation cost. In the event of such 

determination, the Commission then must go to a Federal District Judge as discussed below. 

Drafted by the House Judiciary Committee as a part of the deliberations leading to 

enactment of the Shipping Act, the process for agreement review under 6(g) is modeled on the 

Hart-Scott-Rodino Act of 1976 governing premerger clearance of proposed acquisitions and 

mergers. Congress adapted this process for the Commission as part of the Shipping Act to ensure 

that that potential efficiencies and cost-savings would not be lost by consumers because of delay 

in agreement effective dates. In order to prevent the agreement from going into effect, the 

Commission must bring a civil action in the United States District Court for the District of 

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Columbia and successfully obtain an injunction to halt the operation of the agreement. The burden 

of proof is on the Commission. 

If parties agree to undertake activities that are governed by the Shipping Act, but do not 

comply with the Commission's process of review, they risk not only Shipping Act sanctions, but 

also federal criminal sanctions prosecuted by DOJ under the Sherman Act. 

The success of section 6(g) in allowing the Commission to address concerns about 

potentially anticompetitive effects of filed agreements is evident in the Commission's successful 

efforts to mitigate or eliminate potentially anticompetitive provisions in pending agreements 

through detailed discussions with filing parties during the review process. By its terms, the 

Shipping Act provides an opportunity for the public, including U.S. maritime interests, to express 

concerns about filed agreements. The Commission takes these comments seriously, and uses them, 

together with its own economic analysis under 6(g), during the review process and in its ongoing 

review of trade conditions and carrier behavior under filed agreements to consider and address 

anticompetitive concerns. 

During the period of time following the filing of the 2M, OCEAN, and THE alliance 

agreements and the time they went into effect, Commission staff engaged in detailed discussions 

with the filing parties to understand the scope and ramifications of proposed agreement authorities. 

Of particular concern were the parties' ability to jointly contract with vendors and suppliers, the 

possibility of exchanging commercially sensitive information and any potential limitation on the 

ability of individual alliance carriers to make independent decisions regarding their vessel 

capacity. As a result of these discussions, the alliance parties for the 2M, OCEAN, and THE 

alliances submitted substitute language that either eliminated or mitigated these concerns. For 

example, 2M does not allow for joint contracting. Under THE Alliance and the OCEAN Alliance 

joint contracting for tug services would not take place in the United States; joint contracting with 

marine terminal operators will take place only if the marine terminal operator wishes to engage in 

joint negotiations, and the type of commercial information that can be exchanged between the 

Parties was clarified and narrowed. 

In addition to the review of carrier agreements for potentially anticompetitive effects under 

6(g), the Commission may use section 10, the "Prohibited Acts" provisions in the Shipping Act, 

to preserve competition. This section of the Shipping Act includes prohibitions on a number of 

business practices on concerted carrier conduct acting outside of approved authority (such as price 

fixing or market allocation), unreasonable practices, discrimination in price or accommodations, 

refusal to deal, retaliation, boycotts, predatory practices, and discrimination based on shipper 

affiliation. 46 U.S. Code § 41105(4), prohibits carriers from jointly negotiating with non-ocean 

carriers if doing so would violate antitrust laws (emphasis added). These prohibited practices 

mirror remedies found in other competition statutes, such as the Robinson-Patman Act of 1936. 

The Commission, of course, may enforce section I 0; but private litigants may also bring actions 

under these Shipping Act provisions to protect their interests. 

The international ocean liner industry has recently experienced some consolidation because 

of long-term structural issues in the industry and poor financial returns and the number of major 

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carriers serving the U.S. trade will decrease from 20 in 2015 to 13 by the end of2018. The number 

of m!ljor carrier alliances serving the U.S. trades decreased from four to three. The reduced number 

and increased size of these major alliances have raised new issues and concerns for the FMC and 

changed the way in which the Commission approaches these joint ventures. Broader authorities 

and language for small or limited slot sharing agreements or in a world with seven or eight alliances 

with much smaller market shares presented fewer and less complex competitive issues. Provisions 

that might have been acceptable in earlier agreements for smaller and more limited joint ventures 

have become increasingly problematic as the number of alliances serving the U.S. trades has 

shrunk to four, and now three. The FMC has increasingly insisted on narrower authorities, more 

specific language, and enhanced monitoring requirements. For some time now with respect to these 

larger alliances, the FMC has required more "clear and definite" authority language for alliances. 

Monitoring for these large alliances, requiring more details and more frequent filing of monitor 

reports has increased. 

Each of the relevant geographic and product markets in which an agreement or alliance 

would operate is reviewed and evaluated by the Commission using standard antitrust economic 

principles. This includes assessing whether the agreement or alliance parties would have the 

potential and the incentive to use unilateral or coordinated actions that may restrain competition 

in any of these markets. A large, high-volume, high-growth, market with many participants and 

numerous potential entrants ("contestability") may not be problematic, for example, but a lowvolume, low-growth, distant market with few current participants may raise competition concerns. 

When necessary, the Commission also evaluates whether the liner trade between any given foreign 

country and a specific U.S. coast (e.g. between Japan and the United States west coast) is its own 

separate market or is part of a broader geographic market. 

Because alliances are ongoing cooperative agreements rather than mergers, the 

Commission is charged by Congress with ongoing and continuous monitoring after the initial 

review and following the effective date of the agreements. The Commission checks for 

anticompetitive behavior that would violate the Shipping Act. The Commission may challenge an 

agreement at any time after the effective date. Our expert analysts, economists, and attorneys 

maintain a careful watch on industry trends, being vigilant for any indications of anticompetitive 

behavior by the participants operating within the filed agreements. 

As a general rule, subject to the competition standard of section 6(g) and the prohibited 

acts in section I 0, the Shipping Act permits joint ventures among ocean carriers, these vessel 

sharing agreements can create efficiencies and cost savings that are passed on to exporters, 

importers, and ultimately benefit the U.S. consumer. Historical data points indicate that cost saving 

initiatives are being passed over to shippers. For example, between 1998 and 2013, average 

container freight rates, as measured by the China Container Freight Index increased by three per 

cent. Yet, over the same fifteen year period, fuel price has increased by 790 per cent. According 

to Alphaliner, in 1998, fuel was eight per cent of total container freight costs. In 2013, it accounted 

for over twenty-five per cent oftotal freight cost. It is widely reported in the trade press that carriers 

are in a constant battle to find cost savings. This figure would be considerably higher but for the 

practice of slow-steaming, which is one tactic widely used by carriers in their constant battle to 

find operational cost savings. 

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Under the 2M, OCEAN, and THE alliance agreements, the parties are permitted to jointly 

contribute and share vessels, charter or swap space on each other's vessels, and engage in a variety 

of cooperative working arrangements pertaining to operating services and related equipment. The 

latter would include, for example, deciding the services to be deployed and their associated 

schedules, coordinating sailings, establishing service performance criteria, agreeing on vessel 

maintenance and repair schedules, and the substitution of vessels during dry-docking. The alliance 

parties may exchange information pertaining to vessel operations, market conditions, and thirdparty costs. They also may establish an operations coordination center to manage and monitor the 

service network to ensure schedule integrity and service quality. Services within the network are 

reviewed at least annually, and adjusted where necessary, to reflect each member's respective 

requirements for the movement of cargo. Moreover, each alliance permits its members to charter 

space from (or sell space to) non-alliance parties if needed. Parties to the OCEAN and THE 

alliances are even allowed to deploy additional services in alliance trade lanes (but not under the 

alliance agreement) provided they give their partners first right of refusal of any new capacity 

offered. 

Under the agreements as they went into effect, participants in these three alliances may not 

jointly contract with tug operators or other vendors of vessel-related goods and services in the 

United States. The parties will negotiate independently with marine terminal operators, except 

where the marine terminal operator is agreeable to a joint contract with the parties, in which case 

a joint contract with the marine terminal operator would be authorized, and subsequently filed with 

the Commission. 

These alliance parties do not have authority to discuss and agree on rates or to exchange 

information on freight rates, tariff items, service contract terms or bids, customer lists, individual 

marketing plans, or similar commercial matters. Therefore, within each alliance and among the 

three alliances, there continues to be intense rivalry to obtain cargo through vigorous price 

competition and quality service delivery. 

The Commission applies the Shipping Act's 6(g) competition standard to requests for joint 

purchasing authority just as it does for agreements seeking joint operational authority. The larger 

the market share of the participants to an agreement, the more concern the Commission will have 

about potential "market power" and potentially anticompetitive effects. Whether the Commission 

or any other antitrust enforcement agency will allow this joint purchasing authority to remain in 

an agreement depends on the specific facts of the agreement and an analysis of the potentially 

anticompetitive effects in each relevant geographic and product market The Commission's 

determination of the competitive impact of an agreement is based on the specific facts of the 

requested authority. Such review would be very similar, if not identical to the review by the 

Department of Justice for joint purchasing arrangements. If anything, the Commission's review of 

joint purchasing arrangements is more focused than its antitrust sister agencies. While DOJ might 

permit joint purchasing after a survey of a marketplace, the FMC not only surveys the general 

marketplace, but also looks at each individual agreement to assess the relevant product and 

geographic market at the time of the proposed procurement. For joint purchasing collaborations 

by competitors, the Commission does not use a "safe harbor" formula employed by DOJ and FTC. 

Employing its industry expertise, the Commission analyzes each agreement on a case-by-case 

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basis, requiring that contracts entered into pursuant to any agreement negotiating authority be 

brought back to the Commission for further review based on the specific facts. 

It is important to note that ocean carrier agreements filed with the Commission do not 

exempt them from application of the general antitrust laws (Sherman Act and Clayton Act) 

whenever the joint carrier group is dealing with certain domestic businesses, including tug-assist 

operators. Congress expressly considered these types of agreements and explicitly excluded these 

arrangements from the types of joint ocean carrier agreement that are not subject to general 

antitrust laws. Because they are cooperative working agreements with two or more ocean common 

carriers, these carrier joint purchasing agreements must be filed with the FMC for review, however, 

the agreements nevertheless do not receive immunity from the antitrust Iaws. 1 

In conclusion, under the Shipping Act, the Commission applies accepted antitrust standards 

and tests to evaluate the potential anticompetitive effects of ocean carrier agreements. The 

Commission is careful to consider the views and analyze the effects of concerted ocean carrier 

collaborations on all affected stakeholders. If unable to reach agreement with the filing carriers to 

remove potentially anticompetitive authorities from an agreement, the Commission will seek an 

injunction in U.S. District Court to prevent an agreement that allows the exercise of "market 

power" to the detriment of U.S. participants in the ocean transportation supply chain from going 

into effect. 

Additional statutory authorities added by Congress to the Shipping Act could assist the 

Commission in gathering necessary and relevant information to evaluate agreements, and could 

provide additional avenues and remedies, allowing the Commission to better ensure a competitive 

market-place, protecting the international ocean transportation supply chain, and providing 

affected private parties with additional avenues to protect their interests. Should Congress 

determine to amend the Shipping Act, I will commit to implementing and enforcing any change 

consistent with Congressional intent, just as the Commission had done with the 1984 Act and 1998 

amendments. 

1 This conclusion is reinforced by two statutory provisions: 

o 46 U.S. Code§ 40307- Exemption from antitrust laws 

{b) Exceptions.-This part does not extend antitrust immunity to-

(I) an agreement with or among air carriers, rail carriers, motor carriers, or common carriers by water not 

subject to this part relating to transportation within the United States; 

o 46 U.S. Code § 411 05 - Concerted action 

A conference or group of two or more common carriers may not-

( 4) negotiate with a non-ocean carrier or group of non-ocean carriers (such as truck, rail, or air operators) 

on any matter relating to rates or services provided to ocean common carriers within the United States by 

those non-ocean carriers, unless the negotiations and any resulting agreements are not in violation of the 

antitrust laws and are consistent with the purposes of this part, except that this paragraph does not prohibit 

the setting and publishing of a joint through rate by a conference, joint venture, or association of ocean 

common carriers; 

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STATEMENT OF 

JOELSZABAT 

E:XECUTIVE DIRECTOR 

MARITIME ADMINISTRATION 

U.S. DEPARTMENT OF TRANSPORTATION 

BEFORE THE 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TR-\.NSPORTATION 

U.S. HOUSE OF REPRESENTATIVES 

AUTHORIZATION OF COAST GUARD 

AND MARITIME TRANSPORTATION PROGRAMS 

April4, 2017 

Good afternoon, Chairman Hunter, Ranking Member Garamendi and members of the 

Subcommittee. I appreciate the opportunity to discuss the Maritime Administration's (MARAD) 

programs and how they support the agency's statutory mission to foster, promote, and develop 

the merchant maritime industry of the United States. 

The Maritime Administration (MARAD) implements programs that promote the economic 

competitiveness, efficiency, and productivity of the U.S. maritime transportation system and 

ensures sealift capability and capacity is available to support the national and economic security 

needs of the Nation. 

NATIONAL SECURITY 

MARAD traces its origins to the Shipping Act of 1916, which established the U.S. Shipping 

Board, the first Federal agency tasked with promoting a U.S. Merchant Marine and regulating 

U.S. conunercial shipping. Later, the Reorganization Act of 1950, which codified President 

Truman's Reorganization Plan No. 21, formally established the MARAD to ensure the 

maintenance of an adequate Merchant Ma1ine to support national security. By law and (I 0 

U.S.C. Chapter I 57) and Presidential National Security Directive 1'\o. 28 dated October 5, !989, 

the Department of Defense (DOD) must rely on U.S.-flag ships crewed by volunteer, civilian 

American mariners, to provide the sealift to support military deployments and respond to 

emergencies. MARAD's responsibility is to ensure that U.S.-flag ships and merchant mariners 

are available to meet DOD requirements. The U.S.-flag fleet of privately owned. commercially 

operated vessels, along with government-owned vessels, provide a critical public-private sealift 

surge and sustainment capacity to move equipment and matc1ials for the Armed Forces and 

Federal agencies when needed, and where needed, during times of conflict, humanitaiian crises, 

and natural disasters. 

1 
70 


Insert offset folio 39 here 24911.039

Three programs ensure that there are enough U.S.-flag vessels available to provide this capacity: 

the Jones Act, which ensures a role for the U.S.-flag fleet in domestic trade; and Cargo 

Preference and the Maritime Security Program (MSP) which, together, support a militarily 

useful, U.S.-flag fleet sailing internationally. 

MARAD and DOD also rely on the commercial fleet to employ enough qualified mariners to 

crew all the commercial ships tasked to suppOii military operations, as well as 1,300 additional 

mariners to crew the '"surge fleet" ofF ederally-owned cargo ships. As of today, the size and 

composition of the U.S.-flag cOirunercial fleet is adequate to meet i1mnediate military 

contingencies. However, due to the decline in size in recent years of both the domestic U.S.-flag 

fleet with unlimited horsepower and unlimited tonnage and the international U.S. flag 

commercial t1eet, both the U.S. Transportation Command and MARAD are concemed that there 

arc not enough qualified mariners to sustain an activation of the entire sealift fleet, though there 

has never been a full activation of the entire sealift fleet. 

Maritime Security Program 

The Maritime Security Act of 19961 established the MSP, which ensures access to U.S.-flag 

ships engaged in ocean-borne foreign commerce and the necessary inte1modallogistics 

capability to move military equipment and supplies during an armed conflict or a national 

emergency, while currently providing employment for up to 2,400 U.S. merchant mariners each 

year. Under this program, participating operators are required to conunit their ships, crews, and 

commercial transportation resources upon request by the Secretary of Defense during times of 

war or national emergency. The MSP provides direct annual stipends for 60 active, 

commercially viable, militarily useful, privately-owned U.S.-flag vessels and crews operating in 

international trade. The program is authorized up to $299,997,000 for Fiscal Year (FY) 2017 at 

an annualized stipend level of approximately $4.9 million per vessel2 . Of the 81 U.S.-flag 

vessels that cun·ently trade internationally on a full-time basis, 60 pmiicipate in the MSP 

program. 

National Defense Reserve Fleet I Ready Reserve Force3 

MARAD manages and maintains a fleet of govemment-owned merchant ships in the National 

Defense Reserve Fleet (NDRF)4 This includes 45 Ready Reserve Force (RRF) vessels that arc 

maintained ready for operation within five days for transport of cargo to the area of operation 

and one RRF off-shore petroleum discharge vessel maintained ready for operation within I 0 

1 Section 2 of the Act created the MSP, but that authorization is now codified and appears at 46 U.S.C. Chapter 

531. Authorized funding levels are at 46 U.S. C.§ 53111. 

2 The most recent amounts appropriated are found in the Consolidated Appropriations Act of 2016 (P.L. 114-113) 3 See, 50 U.S.C. §4405 and 46 U.S. C. Chapter 571. 

4 See, 50 U.S.C. § 4405. 

2 
71 


Insert offset folio 40 here 24911.040

days to meet critical military requirements. As required by law, our Nation has called upon RRF 

and NDRF vessels, which include training ships on loan to the six State Maritime Academics 

(SMAs) and the U.S. Merchant Marine Academy (USMMA), to respond to several disasters, 

including Hunicane Sandy in 2012 and Hunicane Matthew in 2016. Additionally, RRF and 

NDRF vessels can be configured to support other emergent situations as was the case in 

mobilizing the Motor Vessel CAPE RAY for use in the international effort to destroy the Syrian 

Government's declared chemical weapon stockpile. MARAD completed this mission in August 

of2014. 

MARITIME TRAINING5 

MARAD provides funding and oversight for mariner training programs to produce highly skilled 

U.S. Coast Guard (CSCG) credentialed officers for the U.S. Merchant Marine. Maintaining an 

adequate pool of American merchant mariners is vital to both the commercial success of the 

li.S.-flag fleet and to maintaining the capacity needed to project American sea power. The 

USMMA and SMAs graduate the majority of USCG-credentialed officers, consisting of the 

highest entry-level merchant marine officers who hold an unlimited tonnage or horsepower 

endorsement available to crew U.S.-flag ships. These graduates support our Nation as a cadre of 

well-educated and trained merchant mmincrs capable of serving in support of military 

emergency, national emergency, and humanitarian missions. 

United States Merchant Marine Academy6 

The USMMA is an accredited institution of higher education operated by the DOT and managed 

by MARAD. The USMMA offers a four-year maritime-focused program, centered on rigorous 

academic and practical technical training that leads to a Bachelor of Science degree, a USCG 

merchant mariner credential with an unlimited tonnage or horsepower officer endorsement, and, 

upon application and acceptance, a cmrunission as an officer in the Anned Forces or unifonned 

services (National Oceanographic and Atmospheric Administration (NOAA) Corps or the Public 

Health Service (PHS) Corps) of the United States. USMMA graduates incur an obligation to 

serve five years as a merchant marine oi1icer aboard U.S. documented vessels or on active duty 

with the U.S. An11cd Forces or unifon11ed services. In addition, they must serve as a 

commissioned officer in a reserve unit of the U.S. Armed Services for eight years. In 2017, 176 

midshipmen are expected to graduate from the Academy. 

5 The Secretary of Transportation is specifically authorized to provide education and training to U.S. citizens for the 

safe and efficient operation of the U.S. Merchant Marine in 46 U.S.C. § 51103(a). See also, 46 U.S. C. Subtitle v Part 

B. See Chapters 511, 513, 515 and 517. 6 See, 46 U.S.C. Chapter 513. 

3 
72 


Insert offset folio 41 here 24911.041

The USMMA's shipboard training program, or ··sea Year", exposes Midshipmen to life at sea on 

board commercial and military vessels and provides cost-effective hands-on seamanship and 

engineering sea time that is required to secure USCG mminer credentials. Midshipmen are 

required to have 360 days of sea service during their four-year program in order to obtain their 

USCG merchant mariner credentials. Shipping companies and the U.S. Navy are part of a 

cooperative effort to ensure that a Midshipman's shore based education is enhanced by the 

required on-the-job training at sea. 

Sea Year is critical to the education and training of Midshipmen at the USMMA, and all training 

must be conducted in a safe and respectful environment. In the wake of a series of reports that 

indicated problems with sexual assault and sexual harassment (SASH) and other coercive 

misconduct, both on campus and at sea, DOT and MARAD leadership suspended conunercial 

Sea Year until we developed a better understanding of the problem and could develop a strategy 

to ensure the safety of the Midshipmen. To address campus concerns, DOT con1111issioned a 

cultural audit of the USMMA and the Superintendent is implementing audit recommendations. 

In addition to the audit. MARAD brought together a eonsm1ium of fourteen leading maritime 

companies to find solutions. Just two weeks after the stand down, the consortium brought fm1h a 

proposal to address SASH. MARAD and DOT subsequently created a compliance team that 

established standards, and collaborated with the consortium and labor to lay out workable criteria 

for the companies to achieve those standards. 

Working collaboratively to resume the program, MARAD, industry, and the unions have adopted 

comprehensive new policies to ensure that the highest standards for behavior, leadership, and 

integrity are met. Together we have worked to establish requirements for companies providing 

Sea Year training opportunities for Midshipmen. To meet these requirements, companies must 

now show that they have written policies, procedures, and robust training demonstrating zero 

tolerance for SASH; that they will provide qualified mentors for Midshipmen onboard vessels; 

and have taken other measures to ensure the safety of Midshipmen. Implementation of these 

requirements will assist in ensuring both the quality of the anti-SASH programs and each 

company's accountability when it takes on Midshipmen. At present, four companies have met 

compliance requirements and resumed hosting Midshipmen on their vessels. 

MARAD is committed to doing everything it can to eliminate SASH at the USMMA, improving 

the reporting rate, taking appropriate action in each reported case, and ensuring Midshipmen 

subjected to assault or harassment receive the services they need. In addition to the efforts to 

improve the Sea Y car training experience, the USMMA has developed a comprehensive plan to 

reduce SASH on campus. The USMMA Sexual Assault Prevention and Response (SAPR) 

Program has significantly improved training across the Academy aimed at the prevention SASH, 

including online prevention training, case studies, videos, social media, professional speakers 

and small groups. Actions taken by the USMMA._ have included installation of new emergency 

4 
73 


Insert offset folio 42 here 24911.042

call boxes and security cameras, improvement of the security guard force, implementation of a 

24/7 hot line for reporting inappropriate behaviors, and victim assistance in obtaining medical or 

mental health treatment. Eftorts will continue to improve upon the SAPR Program as the 

USMMA implements recommendations from the cultural audit and responds to feedback from 

Midshipmen. 

State Maritime Academies7 

In addition to providing oversight of the USMMA, MARAD provides funding assistance to six 

State Maritime Academies (SMAs), which collectively graduate more than two-thirds of the 

entry-level Merchant Marine officers annually8 Approximately 972 Cadets are expected to 

graduate from the SMAs in 2017. MARAD provides annual direct payments to provide for 

operational support to each of the six SMAs as well as assistance to fund the enrollment of75 

new cadets in the Student Incentive Program (SIP) for a period of four years. The SIP program 

provides cadets with funds to be used for uniforms, tuition, books, and subsistence. Cpon 

graduation SIP students must maintain an unlimited USCG credential for six years, fulfill a 

three-year service obligation, and serve in a reserve unit of an Anned Forces or unifom1ed 

service for eight years. Assistance provided to the SMAs also includes funding for maintenance 

and repair costs for training ships on loan ti·om MARAD and funding to offset training vessel 

fuel costs. Unlike the USMMA Midshipmen. the SMA Cadets receive most of their sea time on 

these training ships, under the instruction of each school's faculty. 

The SMAs use MARAD funds for maintenance and repair projects. This work is paiiicularly 

important as the training ships age and approach or exceed their designed service life. Two 

training ships are over 50 years in service, which is twice the standard service life. Accordingly, 

MARAD is using the funds to address priority maintenance across all the training vessels, with 

emphasis on the Training Ship EMPIRE STATE, to ensure that they all meet safety and 

functional requirements and remain in service as long as necessary. As required by the 

Consolidated Appropriations Act, 2016, P.L. 114-113, MARAD has done a standard training 

ship design and is conducting an independent requirements and alternatives analysis of Cadet 

training ship needs as it explores options for replacing aging SMA training vessels; however, no 

decision has been made at this point regarding their replacement. 

7 See, 46 U.S.C. Chapter 515. 8 The six SMAs arc: California Maritime in Vallejo, CA; Great Lakes Maritime Academy in Traverse 

City, MI; Texas A&M Maritime Academy in TX: Maine Maritime Academy in Castine, ME; 

Massachusetts Maritime Academy in Buzzards Bay, MA; and State University of New York (SUNY) Maritime 

College in the Bronx, NY. 

5 
74 


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ENVIRONMENT AND COMPLIANCE 

Ship Disposal Program9 

MARAD is the ship disposal agent for Federal Government-owned merchant-type vessels of 

l ,500 gross tons or greater and has custody of a fleet of non-retention ships. When ships are 

determined to be no longer of sufficient value to merit the cost of further preservation, MARAD 

arranges for their responsible disposal on a worst-first basis. Currently, MARAD has 18 

obsolete vessels slated for eventual disposal. MARAD gives priority to expeditiously removing 

the vessels from the Suisan Bay Reserve Fleet (SBRF) as required by the April 20!0 U.S. 

District Court Consent Decree. Of the 57 obsolete vessels once in the SBRF, two ships remain. 

The Consent Decree requires MARAD to remove all non-retention vessels by the end ofFY 

2017. The decline in domestic scrap steel prices makes it difficult for MA.RAD to sell vessels to 

recyclers and results in the need to pay to recycle ships. As a result, funds will be needed to pay 

to dry dock, hull clean, tow to the Gulf Coast, and dismantle these vessels if we are to meet the 

Consent Decree. 

MARAD is also responsible for continuing the required protective storage activities for the 

inactive tonner Nuclear Ship SAVANNAH (NSS), including nuclear license compliance, 

radiological protection, ship maintenance and custodial care, and planning and preparation tor 

decommissioning. The NSS decommissioning is to be completed by December 2031, which 

coincides with the current Nuclear Regulatory Commission license tenn. 

INTERMODAL DEVELOPMENT 

Pmi Infrastructure Development 10 

Ports and the U.S. marine transportation system are critical to our economy. To better support 

our ports MARAD developed a port infrastructure development program called 

StrongPorts 11 • StrongPorts delivers tools and teclmical assistance to pmis and integrate ports and 

maritime transportation into the larger U.S. surface transpmiation system. l\.1ARAD also 

oversees funding tor pmi infrastructure projects provided through the Transpmiation Investment 

Generating Economic Recovery (TIGER) program authorized in the American Recovery and 

Reinvestment Act of2009 (P.L. 111-5), and the Nationally Significant Freight and Highway 

Projects program which was authorized in section 1105 of the Fixing America's Surface 

9 See, 46 U.S. C.§ 57102 for NDRF vessels and§ 57101(c) for authority for other agencies to transfer vessels into 

the NDRF for disposal. 

10 See, 46 U.S.C. § 50302(c). 

11 StrongPorts is a collection of the M<Jritime Administration's programs and efforts aimed at improving ports. 

MARAD authority for intermodal development is based on several authorities including those you have noted. 

Additionally, MARAD has promotional authority for short sea shipping found generally in chapter 556 of title 46. 

6 
75 


Insert offset folio 44 here 24911.044

Transpotiation Act (FAST Act), (P.L. 114-94). Since 2009, DOT awarded $578 million in 

TIGER funding for 48 port or marine highway projects in 27 states, and in FY 2016. awarded 

$115 million for five F ASTLANE grant projects. 

Short Sea Transportation Program (America's Marine Highways) 12 

Projects designated under the America's Marine Highways program make use of our Nation's 

vast network of waterways and coastlines to provide new export-based supply chain alternatives 

for our Nation's manufacturers and shippers. The mission of the program is to lead the 

development and expansion of services that move freight along our waterways and coastlines 

and to facilitate their integration into the U.S. surface transportation system. The program 

encourages partnerships with a variety of stakeholders including shippers and manufacturers, 

tluckers, ports and tcm1inals, ocean carriers, and domestic vessel operators to create new supply 

chain options that utilize our waterways. America's Marine Highway projects also allow for the 

optimization of equipment relocation and help to reduce wasteful movement of empty shipping 

containers. In FY 2016, MARAD awarded $4.85 million in Marine Highway Grants for six 

projects impacting nine states. 

SHlPBUILDING AND FINANCING 

Maritime Guaranteed Loan Program (Title Xl)ll 

MARA D's Title XI Program provides loan guarantees to enable successful applicants to secure 

long-tenn financing for shipyard modernization projects and for building vessels in U.S. 

shipyards. The loan guarantees provide applicants with long-term financing at favorable interest 

rates, while sustaining facilities for shipbuilding and ship repair within the United States. In FY 

2017, the Title XI program issued a Letter of Commitment for the constmction of two new LNG 

powered combination container roll-onlroll-offvessels. 

Assistance for Small Shipvards and Maritime Communities 14 

The Small Shipyard Grant program provides funding to support capital improvements and 

employee training at small U.S. shipyards. Small shipyards play a significant role in our 

Nation's shipbuilding and repair activity. The grants support efficiency improvements and 

modernizations that allow U.S. shipyards to compete more effectively in the global market place. 

Congress has provided approximately $177 million between FY 2008 and FY 2016 for the Small 

12 See, 46 U.S.C. Chapter 556. The Consolidated Appropriations Ct of 2016 (P.L. 114-113), provided specific funding 

for the Short Sea I ransportation Program. 13 See, Title XI of the Merchant Marine Act fo 1936, as amended, codified at 46 U.S. C. Chapter 537. 14 See, 46 U.S.C. § 54101. 

7 
76 


Insert offset folio 45 here 24911.045

Shipyard Grant program supporting 160 grants. In FY 2016, MARAD awarded $4.9 million in 

funding to 9 small shipyard projects. 

CONCLUSION 

We will continue to keep this Subcommittee apprised of the progress of our program activities 

and initiatives in these areas in the coming year. 

I appreciate the Subcommittee's continuing support for maritime programs and I look forward to 

working with you on advancing maritime transportation in the United States. I will be happy to 

respond to any questions you and the members of the Subcommittee may have. 

8 
77 


Insert offset folio 46 here 24911.046

Hearing on the "Authorization of Coast Guard and Maritime Transportation Programs" 

Subcommittee on Coast Guard and Maritime Transportation 

Tuesday April4, 2017 

2167 Rayburn House Office Building 

Washington, DC 

Apri14, 2017 

Submitted on behaf(o(Congressrnan Dunean Hunter (CA-50): 

Questions for the Record to MARAD: 

The 2017 National Defense Authorization Act, NOAA (P.L. 114-840) was enacted into law on 

December 23, 2016. Section 3517, directed the Maritime Administrator, in consultations with 

the Coast Guard Merchant Mmine Personnel Advisory Committee and the Committee on Marine 

Transportation System, to convene a working group to examine and assess the size of the pool of 

U.S. citizen mariners necessary to support the U.S. flag fleet in times of national emergency. 

The working group was required to convene 120 days (April26, 2017) after enactment: 

QUESTION 1. Has the working group been created? 

RESPONSE: A charter for Maritime Workforce Working Group (MWWG) was created in early 

calendar year 2017 as a subcommittee of the U.S. Maritime Transportation System National 

Advisory Committee (MTSNAC), which operates under the Federal Advisory Committee Act. 

MARAD hosted the first meeting on March l 0, 20 l 7. 

QUESTION 2: How many people have been appointed? 

RESPONSE: Twenty-six members, representing twenty-two stakeholder organizations, have 

been appointed to the MWWG. As specified in the 2017 NOAA the member organizations 

include MARAD, the U.S. Merchant Marine Academy, U.S. Coast Guard, the U.S. Navy and the 

U.S. Navy's Military Sealift Command, the State Maritime Academies, U.S.-flag fleet vessel 

owners operating in coastwise and international trades, and non-profit labor organizations 

representing licensed and unlicensed employees operating in the U.S.-flag fleet. Members of 

five organizations were also brought in as subject matter experts, including representatives from 

the U.S. Transportation Command, U.S. Army, and U.S. Department of Defense. 

QUESTION 3: Will the working group be able to produce the required report in one year, as 

directed'? 

RESPONSE: The MWWG is on target to complete its report within a year as mandated by 

C011!,'fCSS. 
78 


Insert offset folio 47 here 24911.047
79 


Insert offset folio 48 here 24911.048

THE MARITIME ADVISORY COMMITTEE 

ROUNDTABLE STEERING COMMITTEE: 

Captain Lynn Korwatch I Executive Director I Marine Exchange of the San Francisco Bay Region 

Captain Bruce G. Clark I California Marine & lntermodal Transportation System Advisory Council 

Dave Nolan I Marine Personnel Manager I Patriot Services 

Norman Fassler-Katz I California Marine & lntermodal Transportation System Advisory Council 

Christian Yuhas I Marine Engineers Beneficial Association 

Captain Tom Cullen I Administrator I California Office of Spill Prevention & Response 

Jon Haveman I Principal! Marine Economic Consulting, LLC. 

Steve Kreta I Vice President of Student Affairs I California State University Maritime Academy 

Laura Podolsky I Policy Director I UC Davis I National Center for Sustainability Transportation 

Jim Lites I Director I California Association of Port Authorities 

CongreJsman Garamtr~di addrew'np, his .\laritirn..' .ldrixo(r Commiftl:'e. 

Disclaimer: The roundtable was convened to sample the ideas and perspectives of maritime 

stakeholders in the Northern California regton. While the Office of Congressman John 

Garamendi attempted to invite as many stakeholders as possible, our database is certainly not 

exhaustive, and not every invitee was able to attend. We invite any thoughts and comments 

not featured in this publication, and welcome additional participation at future Maritime 

Advisory Committee events. The views expressed in this document were shared generally at 

the roundtable meeting and should not be taken as the endorsed beliefs or recommendations 

of any single participant or organization. 
80 


Insert offset folio 49 here 24911.049

Bd!Aboud1 

Danie!Sh~.a 

Mdton M·~mitt 

Denn1s Oe1:;inger 

Chri~topM~r ChriS-tensen 

JohnCo!ernan 

PetarBald!l!n 

Don Maddy 

Ca.ptain Lane Johnson 

Jef!Cowan 

ThornasCu!len 

R,JbyGrover 

Palin Berkana-Wyoff 

JamesDahke 

Steve Kreta 

SueOpp 

CynthiaMar.in 

TmothySchott 

KomeAJjSe 

Robert Oglesby 

JamesHausser.er 

Brur::eClark 

Norm.:~rl Fas$le,·-!Wu 

Robertkp 

lhvindraVarma 

PMillipDav!es 

R,chardCoy!e 

LCDR Collin Bronsor1 

~att G'rrpie 

B.J<.:k McDermott 

Mike O'Co'1i"Or 

TomWethl'trald 

JeffRobbirs 

W1lheAdarns 

Dr. Jon Havem.:m 

Chriscian Y1.1has 

Captain lynn Kotwat<'h 

Capt11in Ray Shipw<ty 

Jeremy Hope 

DonM;m;us 

PJ~.>I LcmdyMky 

TOfeyP•est• 

Ge•aldSwanson 

JobnMclaurin 

DaveNokln 

Samara Ashley 

Matt Davis 

M•ch<1eiGiari 

Rand;~ C0111gho 

Wii!ie Adams 

Rei; Toft 

StasMargaroni"~;C 

C.1ptain Joseph Long 

Nic'<Marrone 

MidlaeiSaeco 

Craig Dlied:n:: Dav•dGon.zaiez 

JoeC;m,:lo 

Bd!Fairchild 

Greg Murphy 

Dr.Manuellopet 

P!>terKell,.r 

Bdl Nicl<$on 

JimHe''lrf 

John Hummer 

ere John Morrow 

Fra,kJohnstOI" 

D<~~id Boyd 

Fred?eclo:er 

Johflleitner 

PamelaWayr.e 

Jiml..t~ 

Wuu1Podo!sky 

MaximA'per 

CONTRIBUTORS 

Pres!def'lt 

Execwtl'leVic.ePresident 

Pres;dent & CEO 

D.rector. Business Deve[Q~wnent 

Pre~tde'1t 

CEO 

Operattor'l~ MJn,~gf.!r, Valte;o 

E!<. Din>~tor, Legislative Affatr$ 

Ciuef 

NatiOnalf're:Hdent 

Adr.'Hn:stra<or 

Reprt!><N"ltativlil 

Execvt•ve D•nl'<:tor 

PresidE"1t and CEO 

Represl'lntat:ve 

Por: Business Manager 

Pres,del1t 

Pre~ide'll 

VicePreSJdentWestCoa;.t 

President 

GenerarManager 

Pr<'s,der'lt 

Reg•<.m<'ll Vice President, Northern CA 

ProJeCt Manager 

EJO.ec~.ot>VeD•rn<:tor 

Presrdent 

E .. ecwtwe Vke (>resid~nt 

Ger>e'al M<'lnager 

Chairman and f'ms,de:rt 

Gateway D·recto•, Norther" Cal>'ornia 

CommMdiOr, SF 011iti1Ct 

Ret1red RADM 

lead Operations Research Analyst 

Secretary-T·easurer 

Pr<~s:dcnt and CEO 

Ptesrdent 

D•re~tor 

Pol.cy Do ector 

Patrolman 

ABTrwcking 

Ame•ican Marilimll' Ofkers 

AMNAV Maritime Corporation 

BAE. Systems San Franc.isco Sh1p Repa>r 

Bay Area longsi:ore'fll.ll1'$ Memorial As5Qciation 

Bay Planning CoalrtiOtl 

SllleGold Fl!!et 

BNSF Rai!roild 

C41T DIVISion. Pacih:. Area Commard. USCG 

Council of Amer·can Master Manners 

Cai1fortua Office of Spoil Pre11ent10n and Response 

C<~iifomi;~ Stat>! Un!VI!rSity Maritime Academy 

Cai>fornia State Umv.:orsity Mantltne Au>demy 

Caiifomia State Univers•ty Ma'ltime Academy 

CJliifoMia State University Mantime Acadern~ 

Ca;ifoMia State UrliverSity Maritime Academy 

Caiiforma Air Resourc~ Board (CARB) 

C~>iifoHli<'l As:sociction of Port Authontoes 

Califorrua Department of Transportation 

C"iifor'li.J: Energy ComfT'izsiof1 

Ca!iforma Manne Aff,llfs & Navigation Conference 

Califor:1ia Marine and lntermodal Transportation Advisory Cou:'l("l! 

C.:~•iforrHa M.,, ine llnd Inter modal TrM!!pmtation A.d ... lsory Coundl 

Californra State Univers•:y Mantlme Academy 

Ca:ifomia State Ll'lds Commiss-on 

Chevron Sh,pplng Co LLC 

De11me lntermoda! 

Eleven:.!-, Co.:.~t G~.oilrd Di~trict 

Eleventh Coasc Guard Dts!rict 

V S. National Re~po,.,se Force~ ~c,.md<>ti<m 

Foss Marit:m<i! Company 

Genera! Dynami<:s NASSCO 

Ge•\er<~f Steamship Corp. 

!ntemat1ora! longshore ana Warehouse Unron 

Malin Econom1c Cr.m"'-'!tu.,g, llC 

M<lnlle E:'1g111eers B~nefcial A!\sociat•or. (AFL.ClOJ 

Manne Excha,..,g,. cf the SF Bi'ly Region 

!ntetndtiorM! 01ganildtion of r..A4sters. Mate::. & Pdots 

!nternat10ral Orgam~ation of Masters, Mattts & P.iots 

lntematior'.l! Organo~at1<:m of MJater,r,. Mates & P·icts 

Transrr<'lnne N""'gation Corp 

Transportat.onlnstitcrteMARAD, U.S. Oep¥tmen~ of TrJnsportation 

U.S. Army Corps of Erg•ne~rs 

U S. M;mt1me S<!'rviC!i' 

USCG P~.;if;.: An;;¢. (?A(-7) Resedn:h AN1!y'Si1 Branch 

Warehouse Union Local 6, tLWU 

WJ Byrne~ & Co 

r<aW$er Manne tl'lsura11ce Ser~;ices, LLC 

Ca!ilem<a A$:te<:iation of Port Authoriti"'"' 

lJC Dav1~ National Center for Sustaifldble Tra'lspor':ation. 

Manne E.nglfl@Elf$ B.;;onefcia! AsSO<.:<ation (AFl-C!O} 

2 
81 


Insert offset folio 50 here 24911.050

TABLE OF CONTENTS 

Steering Committee ................................................................................................. 1 

Contributors ............................................................................................................. 2 

Introduction .............................................................................................................. 4 

Working Groups ....................................................................................................... 5 

Priority Issue Survey ................................................................................................. 6 

Summary of Recommendations & Priorities ............................................................ 7 

Public Sector Priorities ............................................................................................. 9 

Private Sector Priorities .......................................................................................... 13 

Sustainability & Regulations Priorities ................................................................... 15 

Education Priorities ................................................................................................ 17 

Appendix - Focus Comments ................................................................................. 19 

3 
82 


Insert offset folio 51 here 24911.051

INTRODUCTION 

On April25, 2016, Congressman John Garamendi (D-Fairfield, Davis, Yuba 

City, CAl, Ranking Member of the Transportation and Infrastructure 

Subcommittee on the Coast Guard and Maritime Transportation, convened 

a roundtable discussion at the California State University Maritime 

Academy in Vallejo. More than 250 maritime stakeholders participated in 

this discussion, representing federal, state, and local agencies, maritime 

businesses, and labor unions. The roundtable had the following two goals: 

Broadly identifying key priorities of 

the many sub-sectors within 

Northern California's maritime 

industry: 

blue/brown water steamship 

companies, waterfront industry 

(terminal operators, stevedoring 

companies, cranes & equipment 

operators), employer associations 

(PMSA), employee associations (ILWU 

& MESA), ship servicing industry (Bar 

Pilots), and logistics & transportation 

industry (NVOCC, CA Trucking 

Association). 

Developing specialized working 

groups to discuss priority issues and 

goals in greater detail. Working 

groups included the following 

sectors/issue categories: 

Private Sector, Public Sector, 

Education/Workforce Sector, and 

Environmental. Each working group 

identified and addressed their priority 

issues through the following 4-prong 

methodology: 

(a) Description and explanation of 

the "state of issue" for each 

priority agreed upon by the 

sector working groups 

(b) Significance of the priority issue 

(implications to private & public 

sector, etc.) 

(c) Recommendations for 

Congressman John Garamendi 

regarding possible legislative 

solutions, best practices and/or 

action plans 

(d) Appendix of additional 

comments and suggestions from 

Advisory Committee Members 

4 
83 


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5 

WORKING GROUP ISSUE TOPICS 

A. Public Sector Funding & Initiatives (Working Group 1) 

1. 2016 Water Resources Development Act (WRDA) 

2. 2016 FAST Act Implementation in California ($23 Billion for CA) 

3. U.S. Port Security (Port Security Grant Program- FEMA) 

4. 2016 U.S. Coast Guard Re-Authorization 

5. M~580 Marine Highway Program 

6. Port & Terminal Congestion 

7. Federal agency response to the introduction of u!tra·large containerships 

8. MARAD Title XI Federal Loan Guarantee Program 

B. Private Sector Economic Opportunities (Working Group 2) 

1. Jones Act Provisions & Proposals 

2. Revitalizing the U.S. Shipbuilding Industry 

3. Make it in America & Buy America Provisions 

4. West Coast Maritime Industry Implications of Panama Canal Expansion 

5. U.S. Coast Guard Waterway Management Policies & Forecast 

6. Port & Terminal Congestion 

7. Land Use & Urban Port Planning {Regional Private/Public Sector Partnerships) 

C. Regulations & Environmental Sustainability Goals (Working Group 3) 

1. CA Exec Order B-32-1 5 (CA Freight Mobility Plan & Sustainability Plan) 

2. land-Use & Urban Port Planning (plans for building bulk commodity capacity) 

3. U.S. Endangered Species Act I WRRDA 2014 implications 

4. Terminal Emission Control Agency~ Fuel Transition Goals & Plans 

5. California Air Quality Board & U.S. Environmental Protection Agency 

6. The need for National Emission Standards for the Maritime Industry 

7. U.S. Clean Water Act (Foreign Ship Ballast Water Issues) 

D. Education & Workforce 

1. Educating policymakers on the importance of the maritime industry to U.S. 

national security and economic security 

2. Building future U.S. Maritime Workforce via apprenticeships & WIOA 

(Workforce Innovation Opportunity Act} industry~driven curriculum 

3. Funding for Merchant Marine Training Ship Programs 

4. Coast Guard Licensing & Certification for Merchant Marine 

5. Shipbuilding Naval Architecture & Ship Design Programs 

6. Implementation/Discrepancies in Jones Act Provisions 

(Working Group 4) 
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PRIORITY ISSUE SURVEY 

ISSUE CATEGORY DESCRIPTION OF PRIORITY TOTAL 

Private Sector Jones Act Provisions & Proposals 27 

Private Sector Port & Terminal Congestion (Private Sector Implications of Pier 15 

Pass & Oakland Pier Pass Proposal) 

Private Sector Revitalizing the US Shipbuilding Industry 14 

Education/Workforce Educating Policymakers on the importance of Maritime Industry 13 

to the local, regional, & national economy 

Private Sector Make it in America & Buy America Provisions 10 

Public Sector M-580 Marine Highway Program 8 

Regulations & Env. CA Executive Order B-32-15 7 

Regulations & Env. CA Air Ouality & US Environment Protection Agency 6 

Public Sector US Port Security (Port Security Grant Program - FEMA) 6 

Public Sector Federal Agency Response to the introduction of Ultra* Large 5 

Containerships 

Public Sector 2016 Water Resources Development Act (WRDA) 5 

Private Sector Land Use & Urban Port Planning (Regional Private/Public Sector 5 

Partnership) 

Education/Workforce Building future US Maritime Workforce {Ex· via apprenticeship 5 

program, etc.} 

Education/Workforce Coast Guard Licensing & Certification for Merchant Marine 5 

Regulations & Env. The Need for NTL Emission Standards for the Maritime Industry 4 

Private Sector West Coast Maritime Industry Implications of Panama Canal 4 

Public Sector MARAD Title XI Federal Loan Guarantee Program 4 

Public Sector 2016 Coast Guard Re-Authonzation 3 

Public Sector 2016 Fast Act Implementation in CA ($23 Billion for CA) 3 

Education/Workforce Implementation I Discrepancies in Jones Act Provisions 3 

Regulations & Env. Terminal Emission Control Agency Fuei Transition Goals & Plans 2 

Regulations & Env. US Clean Water Act 2 

Private Sector US Coast Guard Waterway Management Policies & Forecast 2 

(Coast Guard's Role in Ice-Breaking Efforts) 

Education/Workforce Shipbuilding Naval Architecture & Ship Design Programs 2 

Education/Workforce Funding for Merchant Marine Training Ship Programs 2 

Regulations & Env. Land Use & Urban Port Planning 1 

Regulations & Env. US Endangered Species Act/ WRRDA 2014 Implications 0 

6 
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7 

SUMMARY OF RECOMMENDATIONS & PRIORITIES 

PUBLIC SECTOR 

RECOMMENDATIONS & PRIORITIES 

1.Congress should adjust the definition of 

"'Donor Ports" within WRO~ to reflect a $5 

million contribution rather than the current $15 

million contribution to the Harbor Ma;ntenance 

Trust Fund. 

2.Congress should continue supporting 

legislation such as the FAST Act that 

emphasizes programmatic funding for 

multi-Modal freight transportation, such as rail, 

highways, marine-highways, and ports, as an 

interconnected and interdependent system of 

systems, and which provides a strategic 

framework for multi-modal transportation 

systems both at a natior'!a! and state leveL 

3.Congress should provide additional 

dedicated funding for "port security & 

maintenance" through additional discretionary 

funding programs and grant fund1ng dedicated 

to port authorities and port stakeholders, where 

contributory equity is a key factor in assuring a 

fair return and distribution of tax and fee payer 

rever:ues d.;dicated for these purposes. 

4.National and local policies/practices at our 

ports should include ''coordination" of 

infrastructure investments and implement 

practices such as: 1) Pre~Arrival Scheduling, and 

2) coordinated infrastructure development and 

deployment (federal, state, local, public and 

private), both landside and waterside to address 

port congestion issues. As a resu!t of this 

recommendation, Congressman Garamendi 

supported and monitored the activities of the 

Port Performance Freight StatistiCS Working 

Group authorized under the FAST Act, as well as 

the work of the FMC's Supply Chain Innovation 

Initiative. 

S.Both national and statewide leadership should 

revisit the deployment and implementation of 

the M~SSO program and similar strategies for 

coastwise short sea and inland river 

transportation as a means to address: 1) Port 

Congestion, 2) Compliance with 2016 California 

Freight Sustamabil;ty Goals and associated 

environmental target goals, and 3) economic 

opportunities to strengthen the economic 

viability of the marit1me industry. 

PRIVATE SECTOR RECOMMENDATIONS 

& PRIORITIES 

1 ,Congress should continue advancing the Jones 

Act. while considering revisions that can 

strengthen its original intent of promoting the 

U.S. maritime industry and protecting national 

security interests. Congress should consider: 1} 

possible revisions in the "build and charter" 

program; 2) revising the construction differential 

subsidy and operating differentia! subsidy; and 3} 

inc!uding provisions requiring American new sf1ip 

builds and American existing ship repairs. 

2,Congress should incentivize U.S. private sector 

leaders to construct additional U.S.·built vessels 

through Title XI tax incentives and 

implementation of additional policies, such as H.R. 

5270 (113th Congress), to ersure that crude oil and 

LNG exports are used to expand our U.S..f!ag fleet, 

U.S. mariner pool, and U.S. shipbuilding capabilities. 

Congress should incentivize the private sector to 

build US ships utilized in international trade, and 

should prioritize enforcement of cargo preference 

rules. In keeping with this recommendation, 

Congressman Garamendi introduced H,R. 1240, the 

Energizing American Maritime Act, requiring that 

30% of exported crude oil and LNG travel on 

U.S.-flag ship by 2025. 
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ENVIRONMENTAL SUSTAINABILITY 

RECOMMENDATIONS & PRIORITIES 

1.Congress and/or the state legislature should 

provide additional funding for tools and 

resources for the maritime industry to address 

the many environmental sustainability goals 

that have become increasingly burdensome and 

"ur1v1able" for the industry's capab;!ities. Without 

such funding and resources, it will not only come 

at the cost of the economic compet1tivenE>ss of 

the U.S. marit1me industry but wd! disrupt 

long-term comp!1a.nce of these sustainabi!ity 

goals. 

2.Congress should propose a nationwide 

freight sustainability standard that works in 

conjunction with state standards and is mindful 

of the national maritime industry's needs and 

goals. If sustainabi!ity goals are ambit1ous, 

additional funding should be provided to ensure 

that these goals can be achieved. 

3.Congress and state pol1cymakers shot1ld 

consider the following principles when 

developing new environmental policies: 

impacting the maritime industry: 1) Establish 

un1form standards across all states that accurately 

reflect existing Best Ava!lable Technology, and 

establish goals that are reasonably attainable. 2) 

For regulations reliant on the adoptio11 of new 

technologies, consider the viability and 

availability of respective technolog1es to the 

industry and adequate funding support for 

research & development. 3) For regulations that 

are performance-based, prov1de incentives and 

rewards for good actors 

EDUCATION & WORKFORCE 

RECOMMENDATIONS & PRIORITIES 

l.Congress, state po!icymak.ers, and mantme 

tndustry stakeholders should coordinate efforts to 

advance public discourse on the priorities and 

needs of the maritime industry by: 1) holding 

public hearings and add1tional roundtables that are 

work-focused and outcome-driven; 2) plannfng field 

tr:ps for students to ports; 3) hostrng larger lobbying 

efforts; 4) hostmg marit1me mdustry & policymaker 

lunch meetings. 

2.Congress should work with the Maritime 

Administration and tl-te U.S Coast Guard to ease 

licensing requirements and programs for 

veterans entering the maritime workforce, noting 

tl:at many veterans are currently not receiving credit 

for tram1ng completed during their military serv1ce. 

Many veterans already possess expert knowledge 

and traimng, but face delay in entering the mdustry 

following release from act;ve duty due to redundant 

hcens1ng requirements and fees that delay or 

comp!eteiy disrupt the trans1tron tnto the marit1me 

mdustry at a t·me when the mant1me workforce 

faces crit1ca! projected shortfaBs. In keep1ng wrth this 

recommendation, Coast Guard and Manti me 

Transportatron Cha1rrnan Duncan Hunter and 

Rankmg Member John Garamend1 convened two 

separate bstening sessions with Federal agencies 

and mar:t1me stakeholders on the 1ssue in 2016, and 

were successful 1n includ1ng "Mthtary to Mariner" 

language in the 2017 Nattonai Defense 

A.Jthor:zatton Act 

3.Cor.gress and US. pnvate sector interests sl':ould 

work together to develop a new era of 

life-saving equipment and updated requirements 

for U.S. mariners and U.S. vessels. With climate 

char:ge, s~gntf~eant weather events are growmg 

more severe every year, and new equipment and 

training will be cntica! in prevent,ng further loss of 

American lives and sh.pping tnfrastructure, along 

with the associated economic and social tmpacts. 

B 
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9 

PUBLIC SECTOR PRIORITIES 

Public Sector Working Group Facilitator: 

Captain Tom Cullen 

Administrator 

CA Office of Spill Prevention & Response 

PRIORITY ISSUE #1 -WATER 

RESOURCES-DEVELOPMENT ACT 

(WRDA)2016 

State of Issue: The Harbor Maintenance Trust Fund 

(HMTF) provides funding for port dredging ard 

maintenance paid for by a 0.125 percent user fee 

on the value of cargo shipped through a port. A 

port is considered a "donor port" if 1t collects a.t 

least $15 million in HMTF dollars annually, rece1ved 

less than 25 percent of collected HMTF dollars in 

the last five years, and is located in a state where 

over 2 mit!ton twenty·foot equivalent units were 

loaded or unloaded in FY 2012. Donor ports qualify 

for assistance from a $50 million set-aside that can 

be used for berth improvements and dredged 

materials disposal and reuse, environmen:a! 

reviews, and payments to importers. California.'. 

whose northern ports face a dire need for addrt1ona! 

dredging funding, is a major donor state that, as _of 

2015, received only 15 percent of the amount pa1d 

into the HMTF by shippers for the use of its harbors. 

For example, shippers at the Ports of Los .Angeles 

and Long Beach paid on average $250 mdlion each 

year into the HMTF, but those ports received an 

average of $2 million in return. 

Significance: California has many needs to maintain 

our ports and canals. Dredging operations, utili~ 

improvements, and infrastructure upgrades are JUSt 

a few of the many costs our ports face to remain 

competitive. 

ContaituT Ships in tlu Port qf Oaldand n~w &~ Bokmd, http:/ /rfllwh='~".tm/ 

Recommendations: Congress should put pressure 

on Appropriators to allocate additional funds for 

dredging, and should adjust the d•finltion of 

"Donor Ports" within WRDA to reflect a $5 

million contribution rather than the current $15 

miUion contribution to the Harbor Maintenance 

Trust Fund. The Sector Group particularly 

recognizes the efforts of the Port of San Diego 

and the Port of Hueneme in this regard, as 

shown in the following example: 

(a) San Diego contributes an average of 

between $6 mil!:cn and $8 miWon 

annually< 

(b) The current $15 mi!hon contribution 

requirement does not qualify the Port of 

San D1ego for "expanded use" of HMTF 

funds, which include berth dredging and 

maintenance projects and disposal of 

contaminated sod. 

(c) The Port of Hueneme also supports the 

ad1ustment of $5 million. 

(d) The Executive Directors of the Ports of Los 

Angeles ard Long Beach are not opposed. 

Congressional delegations representing 

San Diego and Ventura have expressed 

support. 

NOTE: With Congressman Garamend1's support, the 

Water Infrastructure Improvements for the Nation 

Act (WIIN), the 2016 version of WRDA, was passed 

and s1gned into law 1n December of 2016. It 

included a provision to expand the donor port 

program to in~l~de med,um.si~~ ports that collect 

between $5 mdhon and $15 mlll!on for the HMTF 

annually, rece1ved less than 25 percent of those 

funds back during the previous five years, and are 

located tn a state where more than 2 million 

shipp1ng containers were loaded or unloaded in 

2012. This lS a wm for the Port of San Diego, the 

Port of Hueneme, and all of California. 
88 


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PRIORITY ISSUE #2 - 2016 FAST ACT 

IMPLEMENTATION 

State of Issue: In December of 2015, a Hve-year 

surface transportation bill was signed into !aw after 

nearly a decade of short-term extensions. The $305 

billion plan, called the Fixing Amenca's Surface 

Transportation (FAST) Act. h'ghlighted fre,ght 

mfrastructure as a top national pnority with the first 

ever freight title and over $10 bilhon directed for 

freight programs. 

Significance: The FAST Act marks the first time the 

federal government proactively recognized the 

need to fund multi-modal port systems. Money for 

freight 1s incredibly important, supporting a larger 

statewide freight transportation system that serves 

America's businesses and consumers. Freight grants 

made available through the FAST Act, like the 

FASTLANE grant program, will be 1mportant in 

alleviating the h1gh demand for TIGER grants. 

Recommendations: Congress should continue 

supporting legislation such as the FAST Act that 

emphasizes programmatic funding for 

multi--modal freight transportation (rail, 

highways, marine-highways, etc.) and provides a 

strategic framework for mufti-modal 

transportation systems both on a national and 

state level. Such legislation must recognize the 

important role ports play in freight movement, 

and stakeholders should strive to get ports 

projects listed in the Transportation 

Improvement Program {developed by 

Metropolitan Planning Organizations) and 

Statewide Transportation Improvement Program 

(developed by California). 

PRIORITY ISSUE #3 - PORT SECURITY 

GRANT PROGRAM 

State of Issue: The Port Security Grant Program 

(PSGP) supports the building, sustainment, and 

delivery of core capabilities essential to national 

security, directly supporting marit1me transportation 

infrastructure security activ1ties. Over a five-year 

period from 2006 to 2010, a total of nearly $1.7 

billion in PSGP funds were allocated, averaging 

$340 million annually. But the program has seen 

significant cuts, and in FY2016 was funded at just 

$100 million for FY2016. Further, these funds are 

now a!!ocated on a purely competitive basis by a 

central panel in Washingto11, DC, rather than based 

on the needs assessments of regional partners most 

fam1liar with local priorities and requirements. 

Significance: Ports often lack the sophisticated 

lobbying efforts of other modes of transportation 

and are often unable to compete for scarce grant 

dollars. This grant program helps state, local, and 

private sector maritime partners improve port-wide 

risk management, maritime domain awareness, 

training, and recovery and resilience capabilit~es. 

Recommendation: Congress should provide 

additional dedicated funding for port security 

and maintenance, including through additional 

discretionary funding programs and grant 

funding dedicated to port authorities and port 

stakeholders. Congress should: 

(a) create a dedicated funding source for Cyber 

Security and Radiological/Nuclear Threats 

and Protections {RADNU) that focuses 

specifically on these threats 

(b) keep the Port Security Grant Program as a 

unique budget line item and resist moves to 

consolidate it into otr.er grant initiatives; 

(c) ensure tax dollars collected in California that 

fund the PSGP fairly and equitably benefit 

Ca!iforn1a Ports and Harbors, and that 

prioritized projects are selected using 

regional input as the primary consideratio'1; 

(d) streamline and revise the PSGP to extef'ld 

the grant expend1ture timeline (currently 

!irrited to a two year expenditure cycle) to 

improve obligation and expenditure rates for 

PGSP funds {some participants expressed 

v1ews that local project approvals and 

federal and state e~vironmenta! compliance 

requirements ca., erode the actual project 

performance schedule to an unattainable 

level, particularly for civil improvement and 

protection projects); and 

(e) expand the approved use of funds to 

include maintenance and replacement of 

critical port security equipment and 

infrastructure with a limited effective life 

cycle, wl)ether previously purchased with 

PSGP funds or not. 

NOTE: ln keeping with this recommendation, 

Congress convened two hearings in 2016 to gather 

additional background on port security threat 

assessment and security. 

10 
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11 

PRIORITY ISSUE #4- PORT & 

TERMINAL CONGESTION 

State of Issue: Outdated infrastructure, inefficient 

processes, labor disruptions, and changing market 

trends {including the introduction of ultra-large 

carrier vessels and the use of megaships) are 

among the many factors that contribute to port and 

terminal congestion. Federal assistance is needed 

to address channel depth, landside infrastructure, 

intermoda! connectors and other factors that can 

contribute to the smooth functioning of ports. 

Concerns include scheduling costs, overtime labor, 

labor management Issues, and insufficient access to 

ports and transactions. 

The Committee specifically identified concerns 

about Pier Pass, a program unique to the Port of LA 

and Port of Long Beach. They pointed out that Pier 

Pass Scheduling covers only two shifts during a 

five-day period and allows drayage companies and 

shippers to pay a "fee" for preferential assignment 

of a "pick-up" s!ot, when not a!! carriers and 

shippers have the resources and flexibility to do 

this. The Committee also noted that the 

warehousing and inland port staging areas often do 

not match extended gate hours at the port 

facilities, so that even if the port gates remain open 

for three shifts, drayage companies have no place 

to go with their loads. These elements limit the 

attainment of maximum efficiencies, resulting in 

port congestion and the accompanying economic 

and environmental impacts. 

Significance: Businesses, workers, and consumers 

across the U.S.-and the wodd-rely on the smooth 

and efficient flow of goods through our ports and 

terminats to remain competitive. Port and terminal 

congestion threaten the efficiencies of supply 

chains crucial to our global economy, and challenge 

implementation and attainment of rigorous "zero 

emissions" environmental goals. 

Recommendations: Noting that a proposed 

"increased fee" for usage negatively impacts the 

trucking industry, the Committee determined 

that a comprehensive approach is needed to 

address port congestion. Both national and local 

port decision makers should pursue 

"coordination" of infrastructure investments and 

implement practices such as: 1) pre--arrival 

schedufing; 2) coordinated infrastructure 

deployment both landside and waterside to 

addressing port congestion issues; and 3) 

avoidance of limited gate hourst including the 

avoidance of gate closures on Sundays. 
90 


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PRIORITY ISSUE #5- THE M-580 

MARINE HIGHWAY PROGRAM 

State of Issue: The M-580 Marine Highway 

Program was discussed at Congressman 

Garamendi's 2013 Maritime Roundtable and 

supported by the Congressman. Unfortunately, a 

series of issues led to the failure of the California 

Test Project on the Sacramento River between the 

Ports of Oakland and Stockton, including a lack of 

time and resources for full implementation. For 

instance, Virginia's Marine Highway Program was 

given three years of funding for private~market 

value sustainability and acceptance, whereas the 

M~S80 only received 14 months of funding. Some 

Committee members also offered the idea that the 

selection of this relatively short inland river route 

may not have been the best initial test of this 

concept in California. 

Significance! The Public Sector Group ident1f.ed 

multiple reasons to secure additional funding to 

revive this program, indud1ng: 

(a) Marine highways are proven tools that can 

address port congestion, roadway traffic, 

and general wear~and·tear on inland 

highway infrastructure, wh1!e promot1ng 

improvements and 1ncreased service by 

rail to currently underserved areas. 

(b) 'vVith the State of Cal1fornia mandating 

stricter Zero Emission sustainabd1ty goals, 

the marine h1ghway can be a valuable and 

effective alternative 

(cj Because the infrastructure for this program 

is a!ready tn place, subsidies are only 

req1Hed to assist with temporary cargo 

movement. 

(d) There is a strong buslness case for the 

M-580 Program when cons1denng cargo 

perishabil1ty ,ssues for conventional cargo 

transportation. 

Recommendations: Both national and statewide 

leadership should revisit the deployment and 

implementation of the M-580 program as a 

means to address port congestion, compliance 

with California's Freight Sustainability Goals, and 

opportunities to strengthen the economic 

viability of the maritime industry by 

development and construction of U.S.·made 

ships crewed by U.S. mariners. 

12 
91 


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13 

PRIVATE SECTOR PRIORITIES 

Private Sector \Vorkfng Group Facilitator: 

Jon Haveman 

Principal 

Marin Economic Consulting, LLC. 

PRIORITY ISSUE #1 -JONES ACT PRO¥isioills---~------

State of Issue: The Jones Act 1S vital to the U.S. 

maritime industry The Sector Group focused on the 

importance of protecting the Jones Act, as well as 

revisions that adhere to its original goals and 

strengthen many of the sub~sectors of the U.S. 

maritime Industry, including the revitalization of the 

U.S. shipbuilding industry. 

Significance: The Jones Act not only has major 

economic implications for the maritime industry, but 

also significant and seriollS irr.phcations for the 

national securl:y of our nat1on. The current 

composition of the Jones Act fleet is both 

insufficient for the long-term viab1Hty of the 

maritime industry and poses a national security 

co:1cern that must be addressed. 

Recommendation: Congress must continue 

advancing the Jones Act, while considering 

revisions that can strengthen its original intent 

of promoting the U.S. maritime industry and 

protecting national security interests .. including: 

(a) Possible revisions in the ubuild and 

charter" program. 

(b) Possible revisions to the construction 

differential subsidy and operating 

differential subsidy. 

(c) Revisions to require that all repair work 

on U.S ... flag Jones Act vessels-with an 

exception for emergency repairs-be 

done in the United States in U.S. 

shipyards with U.S. labor and materials. 

NOTE: In keeping with this recommendation, 

Congressman Garamendi and others were 

successful in fending off efforts in 2016 to weaken 

the Jones Act. 
92 


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PRIORITY ISSUE #2 - REVITALIZING THE 

!:l_,_S. SHIPBUILDING INDUSTRY 

State of Issue: In 1979, the United States had over 

576 U.SAlagged vessels operating in the foreign 

trade, Today, that number has plunged to under 90 

vessels. This slow decline in U.S. shipbuilding and 

ship operating capacity poses great concerns for 

America's long-term economic viability and national 

security. 

Significance: There are only nine remaining active 

blue-water (large vessel) shipyards capable of 

build1ng vessels for foreign trade. Moreover, as 

noted the current build (construction schedule) of 

"Jones Act Fleets" w:l! not be enough to fulfil! a!! 

economic needs and/or U.S. national security 

interests. Without enough Jones Act vessels, many 

ship owners are left to reflag foreign vessels, a 

practice that has short-term functional or economic 

value for civilian cargo but presents great national 

security risks and concerns for military cargo lift 

capacity over the long term, 

Recommendations: Congress should incentivize 

U.S. private sector leaders to construct 

additional U.S.·built vessels through Title XI tax 

incentives and implementation of additional 

policies such as H.R. 5270 to ensure Crude Oil 

and LNG oceangoing exports utilize U.S.~built, 

·crewed, and .flagged ships. Congress should 

provide incentives for private sector 

construction of U.S. ships utilized in international 

trade, and should prioritize enforcement of 

cargo preference rules. Congress should pursue 

and promote: 

(a) polides that encourage or require the 

use of U.S. ships for international trade; 

(b) policies and practices that include dual 

military vessel usages~ including 

incentivizing the development and use 

of coastal container and bulk carrier 

vessefs which, under Jones Act 

provisions, can be made available to 

the Department of Defense in times of 

war, and exploring other military and 

civilian joint usage ideas; 

(c) policies that provide better shipbuilding 

opportunities: 

(d) policies that increase U.S. qualified 

mariner base; 

(e) tax incentives that encourage the 

construction of U.S. ships; and 

(f) export trade policies that protect and 

promote the U.S. maritime industry~ 

including requirements that set volumes 

of export cargoes must travel on 

u.s .. flag vessels. 

Note: In keeping with this recommendation, 

Congressman Garamendi introduced H.R. 6544 and 

H.R. 6545 at the end of the 114th Congress, as well 

as H.R. 1240 in the 115th Congress. He also 

supported colleagues in the passage of a 2017 

National Defense Authorization Act provision 

authorizing the design and construction of a new 

multi-mission maritime training vessel for the U.S. 

Merchant Marine Academy and state maritime 

academies. 

14 
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15 

SUSTAINABILITY & REGULATIONS PRIORITIES 

Sustainability Working Group Facilitator: 

Laura Podolsky 

Policy Director, University of California, Davis 

National Center for Sustainabi!ity Transportation 

PRIORITY ISSUE #1 - FUNDING FOR 

NEARZEROEMissiOillseCilliPMENT 

State of Issue: California has the strictest 

environmental regulations for the maritime industry 

in the United States. The genera! consensus of the 

working group was that these are good and sound 

policies in atta1ning a balance between economic, 

commercial, and environmental goals. BJt because 

other states have been slow or reluctant to adopt 

simifar regulations, the stage has been set for 

uneven and unequitable competition. 

Significance: Federal preempt1on by establishing a 

set of national standards could help expand uniform 

application of environmental regulations and result 

in the following things: 

(a) California would not bear the entire cost 

of br;nging new and more efficient 

engines and water treatment systems to 

market, and maritime commercia! 

operators would not be required to 

purchase these systems to comply only 

with the requirements of a single state. 

(b) Cargo companies would not be tempted 

to forgo California ports for ports in other 

states because of the cost of compliance 

with California's environmental 

regulations. tf more cargo IS diverted to 

other ports, California is not fixing the 

problem of reducing greenhouse gases 

and is instead exacerbating the problem 

by transferring these issues to other 

regions and states. Greenhouse gases 

would be reduced on a nationwide level 

by the adoption of uniform national 

standards focused on attainable and 

realistic goals and using a "Best Available 

Technology" approach. 

(c) What shou:d come hst: more efficient 

products, or regulations that requtre more 

eft;cient products? Without stricter 

regulations, there is no incentive to create 

more efficient products, but regulations 

must come with funding for research and 

development, and incentives for bringing 

technologies to market. Regulations on 

vessel incidental discharges, descnbed in 

a subsequent section, are a good exarrple 

of the fragility of this balance. 

Recommendations: Congress and the state 

legislature should provide additional funding for 

tools and resources for the maritime industry to 

address the many environmental sustainability 

goals that have becoming increasingly 

burdensome and "unviable" for the industry's 

capabilities. Without such funding and resources, 

it will not only come at the cost of the economic 

competitiveness of the U.S. maritime industry 

but will disrupt long-term compliance of these 

sustainability goals. 

PRIORITY ISSUE #2- CALIFORNIA'S 

SUSTAINABLE FREIGHT ACTION PLAN 

State of Issue: Governor Jerry Brown's executive 

order B-32-15 directed the California Air Resources 

Board (CARS), the California Department of 

Transportation (Caltrans), the California Energy 

Commission (CEC), and the Governor's Office of 

Business and Economic Development "to develop 

an integrated action plan by Ju!y 2016 that 

estab!ishes dear targets to improve freig'lt 

effic:ency, transition to zero-em1ssion vehicles {ZEVs), 

and increase cor";lpetitiveness of Ca!iforn1a's freight 

system." The mtegrated plan must be informed by 

existing state agency plans, most notably the 

Caltfornia Freight Mobility Plan (produced by 

Ca!trans), Sustainable Freight Pathways to Zero and 

Neac-Zero Emiss>ons (produced by CARS), and the 

Integrated Energy Policy report (produced by CEC). 
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Significance: Current projections show that 

reconciliation of these plans will come at 

considerable cost to the California inter-modal 

transportation system. There are st:!l many 

questions that have yet to be answered, includmg: 

(a) How will the trucking and the freigh: 

industry at large transition to ZEVs? 

(b) Wd! the action pian be prescriptive? 

{c) Although many California agencies are 

work1r.g together, how will the state's 

efforts fit into the federal context? 1f 

California efforts do not sync with the 

federal dynamics, the Sector Group is 

concerned that the state may become less 

economical!y viable. 

(d) How wi!l regulations affect the cost of 

moving cargo? 

{e) What's next after the statewide plan is 

adopted? 

Recommendations: Congress should propose a 

nationwide freight sustainability standard that 

works in conjunction with the state standardsf 

and is mindful of the national maritime industry's 

needs and goals. If sustainabiUty goals are 

ambitious, additional funding should be provided 

to ensure that these goals can be achieved. 

PRIORITY ISSUE #3- RECONCILING 

TECHNOLOGICAL CAPACITY OF 

INDUSTRY WITH NATIONAL & STATE 

ENVIRONMENTAL REGULATIONS AND 

SUSTAINABILITY GOALS --------····---·------

State of Issue: With new environmental regulations 

and sustain ability goals being adopted both by the 

state and national government on an on-going 

basis, maritime industry sectors face challenges in 

the ambitious nature of many of these reforms, as 

we!! as inconsistencies between state and federal 

standards. Leaders in every sector of the maritime 

industry understand the importance of adopting 

sustainability goals, but request that policymakers 

consider strategies to assist in achieving 

sustainability goals while remaining economically 

competitive. One key issue is ensuring that 

regulations and goals are being established in 

consideration of the viable technology available to 

industry. Po!icymakers must also ensure that 

available technology is viable for large-scale 

commercialization and implementation to meet the 

demands of new regulations on a statewide and 

national scale. 

Significance: On July 17,2015, the Governor's 

Executive Order B~32-1 5 to coordinate the 

California Susta1nabil1ty Frefght Action P!an with the 

goals of improving freight efficiency, transitioni11g to 

zero-emission technologies, and increasing 

economic competitiveness in the state. While a 

posit;ve step forward, the Sector Group ident:fied 

concerns in the maritime industry of possible 

opportunity losses related to this order. After the 

order was announced, the California State University 

Maritime Academy Golden Bear Research Center 

began identifying segments of the freight sector 

that wou!d face challenges in adopting the 

mandated new technologies-an indication that 

regulations and sustainability goals were set without 

clear evidence that tf-:ey were reachable. The Sector 

Group notes that industry often takes a triple-hit 

when environmental regulat1'ons and standards 

change: once in up-front R&D costs, again for 

commercialization and implementation of the 

required technology, and ftnally in competitive 

impacts if the associated costs are not spread 

universally across the rationa: marketplace 

Recommendations: Federal and state policymakers 

should consider the fo!!owing principles when 

developing new environmental policies impacting 

the mantirne industry: 

(a) Strive for uniform standards across all 

states. 

(b) For regulations reliant on tho adoption of 

new technologies, cons1dcr the viability 

ard availability of respective tedmologles 

to the industry, provide adequate funding 

support for R&D, ar.d incentive 

partnerships for implementation. 

{c) For reg: .. dations that are 

performance·based, provide incentives 

and rewards for good actors. 

Note: Tl,e International Marit1me Organization's 

International Convention for the Control and 

Management of Ships' Ballast Water and Sediments 

{BWM) will enter ;nto force on September 8, 2017. 

Vessels operating under the flag of a signa~ory 

country must comply with those regulations, as we!! 

as with applicable port regulations issued by the 

U.S. Coast Guard, the U.S. Environmental Protection 

Agency, and any state-specific regulations. In 

December of 2016, the U.S. Coast Guard approved 

Optimarin AS' UVHbased treatment system for 

comp!:ance with its regulations, with expectations of 

two addttiona! approved systems sho··tly. Whi:e this 

is a pos1tive step forward in clanfylng this complex 

compliance environment, maritime stakeholders 

remain concerned about the evolving regulatory 

program and point out the need for a stable, 

uniform standard. 16 
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17 

EDUCATION & WORKFORCE PRIORITIES 

Education & Workforce Working Group Facilitator: 

Steve Kreta 

Vice President of Student Affairs 

California Maritime Academy 

PRIORITY ISSUE 111 - RAISE 

AWARENESS OF POLICYMAKERS AND 

THE GENERAL PUBLIC ON THE 

CkiTiCALiMi>ORi".ANceoF-ASTRONG 

U.S. MARITIME INDUSTRY TO OUR 

ECONOMY AND NATIONAL SECURITY 

State of Issue: The U.S. maritime 

contributes more than $649 billion 

national GDP, sustaining more than 13 jobs. 

Virtual:y 90 percent of a!! cargo comes through our 

ports via the maritime industry, touching the lives of 

every American on a daily basis. Yet most 

policymakers and members of the general pubilc 

are largely unaware of these vital contributions, the 

needs of the ir'dustry, and the various supply chains 

vital to its success {including trucking ar'Jd rail). 

Significance: Noting that the US. Maritime !ndus:ry 

is largely driven by legislative policies ("ncluding 

infrastructure funding, subsidies, and regulations), it 

is vita! for U.S. policymakers and for the public a: 

large to learn more about the value and impact the 

maritime industry has on our country's econom1c 

and national security. The economic footprint of this 

industry spans many sectors and is deeply tied to 

the strength of our local workforce. Expanding our 

U.SA!ag fleet and employing more workers, both 

on land and at sea. means more Mariner and 

manufacturing jobs strengthe11ing the entire U.S. 

economy. But due to a pattern of depreciating 

compet:tive value on a global scale, the percentage 

of U.S.-f!agged and operated ships continues to 

decrease, to the point that our maritime industry 

now falls far short of its potentiaL As a result, 

America falls short of its potentia! as weiL 

Recommendations: Efforts should be 

coordinated amongst Members of Congress and 

state policymakers to elevate public discourse 

on the priorities and needs of the maritime 

industry, including: 1) holding public hearings, 

2} additional roundtables, 3) planning field trips 

for students to ports, 4) hosting larger lobbying 

efforts, 5) maritime industry & policymaker lunch 

meetings, etc. 

Suggestions: 

(a) Hold More Public Events and HearingsCongressional meetings in the district are 

great ways to bring evertone together. 

Encourage poky makers to hold th€ir own 

district roundtables. This year's Roundtable 

format is a great model and format for 

future discourse 

(b) Lobby;ng and Marketi<'g Get 

policymakers physically on the ships, 

possib!y to include a lunch date with the 

labor un1ons. It makes a big d1fference 

when they're on tfle ship and see the 

various operations for themselves 

(c} Studert School Involvement- EncotJrage 

more f1eld trips to U.S. ports, train stations, 

railways, etc. Get the word out that there 

a~e good pay\ng jobs within the mar;time 

irdL.:stry. 
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PRIORITY ISSUE #2 - BUILDING THE 

MARITIME WORKFORCE 

State of Issue: The maritime industry lacks a 

sufficient workforce and work. opportunities. There is 

an insufficient number of ships and mariners to 

maintain the competitiveness and economic reeds 

of the maritime industry, notably described by a 

recent MARAD report indicating that thousands of 

additional mariners wi!! be needed in the near 

future to meet sealift requirements. To address 

these needs, we must build a pipeline by 

continually recruiting and training future mariners. 

Significance of Issue: Currently there are 

impediments in certain industry and education 

sectors which act to decrease the speed and 

efficiency of rebuilding this workforce pipeline, 

specifically the transition of sailors and mariners 

from the military into the commercial maritime 

industry. 

Recommendations: Congress should ease 

licensing requirements and programs for 

veterans entering the maritime workforce, 

noting that many veterans are currently not 

receiving credit for training completed during 

their military service. Many veterans already 

have the knowledge and training, but face delay 

in entering the industry due to redundant 

licensing requirements and/or fees. This can 

delay or completely disrupt the transition into 

the maritime industry. Congress should also 

focus on retention of those in the mariner 

industry# easing the many challenges mariners 

face in continuing an at-sea lifestyle. 

Suggestions: Congress should do the following: 

(a) provide more flexibility for students 

coming from different backgrounds to 

help meet STCW guidelines; 

(b) require the Coast Guard and Navy to 

streamline the ltcensing process involved 

in the milltary~to~mariner transition to 

provide a career track option supporting 

this goal; 

(c) continue encouraging industry to credit 

military transition to workforce; 

{d) increase availability and affordabitity of 

mandated Advanced Training, noting the 

many new courses mandated by Coast 

Guard and international regulations 

(courses should be made available online 

or outside of traditional working hours so 

participants are not forced to take time 

off); 

{e} eliminate federal income tax for mariners 

to encourage them to live at sea; continue 

advanced training to assist w1th mariner 

retent<on; ;:md 

(f) better marketing to future mariners, 

highlighting humanitarian efforts, and a 

focus on getting youth connected through 

social media marketing. 

PRIORITY ISSUE #3- NAVAL 

ARCHITECTURE (SHIP BUILDING & 

Q~~GN) 

State of Issue: The Sector Group notes that there is 

not enough life-saving equipment on ships. Recent 

incidents with American lives lost at sea, !ike the 

sir:king of the S.S. El Faro on October 1, 2015, 

should encoL.rage po!icymakers and the private 

sectcr to investiga~e ways to prevent such tragedies 

from occurring in the future. 

Significance: As climate change contmues to 

increase :he frequency and severity of storms, 

advances in !·fe~saving technologies are needed to 

keep pace. Improving suer. technologies will 

decrease loss of life associated w1th maritime 

professions, alleviate instances of pain and suffering 

for family members, ard improve the attractiveness 

of the marit:me industry at a time when the industry 

is aging out and must piace special emphasis on 

attractir,g young entrants. 

Recommendations: Life rafts are not the answer. 

As a world super-power, we must strive to build 

more effective and cost-efficient life-saving 

vessels and equipment for both commercial 

vessels and cruise ships. Congress and U.S. 

private sector interests should work together to 

develop a new era of life-saving equipment for 

U.S. mariners, leveraging the R&D of the 

International Maritime Organization and other 

worldwide maritime organizations when 

possible. 

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19 

APPENDIX ONE 

FOCUS COMMENTS FOR ClARIFICATION OF THE 2016 GARAMENDI MARITIME ROUNDTABLE REPORT 

PROVIDED BY CAPT BRUCE G. CLARK, USCG (RE1)- CHAIR, THE CALIFORNIA MARINE AND 

INTERMODAL TRANSPORTATION ADVISORY COUNCIL 

PUBLIC SECTOR RECOMMENDATION #1 "Adjust the definition of "Donor Ports" within WRDA" 

While it is advisable to evaluate the level of, and means test1ng for, financial support paid by each Port 

into the HMT fund, the more critical issue is to rebalance the payments from the fund to "spend down" 

the available funding as intended by Congress for dredging and harbor maintenance projects. Every 

year,. funds in the Harbor Maintenance Tax Fund (HMT Fund) go unspent while available approved 

projects remain undone or incomplete. Donor states contributing the most funding should receive 

prioritized return on investment commensurate with the taxes paid, 'L.'1ii the HMT fund should be paid 

down every fiscal cycle !2y_.f.i5tPLsiii.~f!.f9Jlf!Qrn...h9D9!ft;?_~ .. 2.®. .. rQ9~1atQEYSQq_l.li!gm.g_fJ!.: .. Each maritime 

~.@.!.~ (coastal, Great Lakes and inland and western rivers) should also be required to contribute to the 

HMT goafs and objeet1ves through annual assessment contribution of matching funds at some level 

established by Congress. This action assures an equality of stakeholder investment (federal, state, and 

local) and recognition of the maritime transportation system (MTS) as a region.al, state, and national 

asset- .and not simply a national (federaf) responsibility. 

PUBLIC SECTOR RECOMMENDATION #4 "Coordination" of infrastructure investments" 

Federal, state and focal agencies and authorities !I!.~~L~9!.k.!.Q9?th~r to manage public revenues 

targeted for MTS-related infrastructure mvestments. Funding in the past has been delayed, mired in 

competitive confusion, and "siloed," dependent upon agency focus and transportation mode bias. 

Clearinghouse activities to jointly prioritize and approve projects in an expeditious manner remains a 

critical challenge to assure maximum comprehensive benefit is obtained from the expenditure of limited 

public funds. A clear and effective approach to these complex issues can only be accomplished where 

the critical needs are evaluated acros.'i all modes of the MTS- not simply with a focus on a single mode 

requirement. As no transportation mode operates in isolation from the others, prioritiuttion of critical 

projects must consider effects and benefits to all modes- and this requires a concerted and sustained, 

organized and wefl~coordinated effort across a full spectrum of government agency, and MTS 

stakeholders. U.S. DOT MARAD should be fully empowered and funded to lead and manage this 

national effort, leveraging and utilizing the existing Maritime Transportation System National Advisory 

Council (MTSNAC) and the federal TIGER Grant process, but in direct consultation and coordination 

with state equivafents such as the California Marine and fntermoda! Transportation Advisory Council 

(CAlMITSAC- a state /eve/ MTSNAC counterpart). Ca/STA and CFAC should lead the state 

prioritization effort, and the state, regional. and key county municipalities (where there are direct 

benefits and port entities) must afl be willing to contribute infrastructure enhancement funding for 

selected critical projects. 
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PUBLIC SECTOR RECOMMENDATION #S "Revisit the deployment and implementation of the 

M-580 program" 

Complementing federal and local port initiatives, the State of California must join federal and local 

government and stakeholders to take a leadership role in supporting the development and trial of the 

M-580 concept over a sufficient timefine to assure a legitimate proof of concept. The State provided no 

funding supporting for the M-580 initiative and was only a marginal voice in attempting to reconcile 

differences between port vessel operators, and labor considerations. With the advent of California's 

new environmental goals and objectives that further restrict air and water emissions - specificaffy a 

renewed focus on reducing congestion and pollutant concerns associated with highway transportation 

from major urbanized port regions- it should convene a regional working group to evaluate lessons 

learned from the initial effort of the M-580 initiative, and should analyze success stories available from 

test programs in other regions of the country to revitalize and relaunch the effort. Because the majority 

funding would likely again stem from federal sources, the US Maritime Administration should again 

lead this process, supported and informed by an active and engaged coalition of state agencies (lead by 

CaiSTA and leveraging the California Freight Advisory Council) with the full partnership of labor and the 

trucking industry. Human nature often drives us a!/ towards personal interest decision making, and 

change often means a shift in economic beneficiaries and job creation, but the attainment of mutually 

desirable fong-term social and environmental goals and objectives requires a wiffingness to review the 

efficacy of practices and procedures to seek better solutions to urban goods movement challenges. 

Further:, a realistic exploration of an M-5 type offshore hub-and-spoke marine reception and distribution 

centers, such as the Portunus Project envisioned by researchers at the Lawrence Livermore National 

Laboratory (LLNL), might well address a combination of environmental, operational, and national 

security challenges that would completely rework traditional/and-based port operations and 

distribution mechanics, while promoting the development of smaller, cleaner coastwise feeder ships 

(U.S.-Fiag/Jones Act Crewed) and possible regional feeder ports {Humboldt Bay, Monterey Bay FT 

Ord/Seaside, Pismo Beach/San Luis Obispo). 

Where once California and other coastal states had a robust coastwise maritime industry along its long 

coastline, most of these once vibrant and active ports have declined or vanished with the advancement 

of rail and highway services. These smaller "ports" are now currently underdeveloped, underserviced, 

and economically vulnerable, but would significantfy benefit by increased land-based facility and goods 

management jobs likely to be union-organized and compensated at sustainable, middle class "living 

wage" standards. 

We expect these activities to change the transportation ecosystem while maintaining jobs tied to 

highway transportation, and to possibly revitalize short fine rail service in these regions. Both elements 

would directly reduce congestion in urban areas notorious for heavy truck traffic and add jobs in 

historically-impacted areas. Long haul firms would still be contracted to carry specific loads 

point-to-point to inland regions in competition with rail, but there would also be a reduction of 1-S, 99 

and 101 long haul transportation on traditionally dieseJ..fueied trucks over promotion of local and 

regional distribution via cleaner-fueled trucks such as LNG. Electric hybrid or future hydrogen power 

plants are currently deemed unfeasible for long haul, but possible for 120-mile radius operations. Main 

line and short rail opportunities would be enhanced under this plan as well, with an opportunity for 

clean or alternative fuel, or hybrid or electric operated systems. 

The governments' role at all levels is to encourage innovation in these areas, including direct research, 

development, and practical support for the testing of concepts. LLNL; transportation centers such as 

those located at SJSU, CSU Long Beach, and UC Davis; the National Transportation Research Board; 

and maritime subject matter experts from the California Maritime Academy would be a well-qualified 

team to explore options and potentials if properly funded and supported by federal, state and local 

governments. 

While all of these alternatives must be decades-long strategies to attain and realize the maximum public 

benefit through a deliberate planning process, elements of these programs are viable and ready to be 

implemented now, and should be funded to move the process forward. 

20 
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21 

PRIVATE SECTOR RECOMMENDATION #1 "Advancing the Jones Act, while considering revisions 

that can strengthen its original intent of promoting the US maritime industry and protecting 

national security interests" 

One of the major impacts to the U.S. shipping industry has been direct or indirect support of foreign 

flag carriers by flag state nations such as China, essentially resulting in the de facto ownership and 

control of otherwise commercial maritime assets. This situation is inherently unfair to commercial 

enterprises who are forced to compete with them, The Jones Act was envisioned to assure viabifity of 

coastwise trade in the waters of the United States and to assure a viable deep water capacity for 

national defense and national security military lift. With an increasing disappearance of the U.S.* flag 

oceangoing merchant fleet (currently less than 90 vessels), the ability of the United States to support 

rapid deployment of war materiai when and where needed is being significantly degraded and may weft 

resuft in a future dependence on foreign flag charters for this critical logistical effort- a seriously flawed 

process. Historically, no nation in the world has maintained its global influence and supremacy without 

a strong and flexible Naval and Merchant Marine fleet. This status can only be maintained through a 

robust shipbuilding and repair infrastructure, exceptional workforce skills training and domestic 

employment, the highest level of professional mariner education (such as that provided by the six state 

chartered maritime academies), and a full commitment to exploration, development, and deployment of 

the next generation of efficient ships. All of these elements cotJid be incorporated into a reinvigorated 

Jones Act for the maximum benefit of the nation and the maritime states. Attainment of these goals 

will provide the nation renewed control over our maritime borders, global goods movement, and 

implementation of effective foreign policy when and where maritime power projection and humanitarian 

assistance is needed. 

ENVIRONMENT SUSTAINABILITY RECOMMENDATION #3 "Congress & state policy makers to 

consider the following principles when developing new environmental policies impacting the 

maritime industry" 

California historically leads the nation in developing and implementing marine environmental protective 

standards- by some measures the toughest in the world. If its goals, which apply to eleven commercial 

ports and several private port operations within the state, are to be both socially desircble and 

technologicalfy attainable, Congress and the appropriate executive agencies of government on the 

national/eve/ should look to streamline and standardize national standards applicable to a/! states to 

assure a level field for competitiveness and attainment of a healthy environment for America as a whole. 

Industry cannot be expected to independently fund 100 percent of federally-mandated changes without 

significant impacts to business viability and the national economy. Therefore, state and federal incentive 

programs should be considered to ease the burden artd positively embrace required changes. if 

economic incentives are required to attain common standards, Congress should consider block grants 

directly to ports and their maritime stakeholders for the attainment and maintenance of common 

national environmental stand~rds. 

EDUCATION AND WORKFORCE RECOMMENDATION #2 "Easing licensing requirements and 

programs for veterans entering the maritime workforce" 

In consideration of the prevailing general circumstances, it is counterintuitive to expect the U.S. Navy 

and U.S. Coast Guard to invest millions of dollars training sailors, and then expect these organizations 

to fully embrace an easy exit program for the best of these men and women who are attracted to better 

working conditions, pay, and other incentives in the commercial maritime sector. Both organizations can 

and should consider obligation requirements, particularly for critical specialized skills, that encourage 

military personnel to remain in the service while CJ!so incentivizing them to stay as a fundCJmental way to 

attain an acceptable return on investment. Nevertheless, many sailors will choose to leave the maritime 

military services, and when they do, it is a national responsibility to assist these men and women to 

transition as efficiently and expeditiously as possible to commercial_ civilian jobs where these perishable 

skills can be retained for the benefit of the nation. The nation's six state maritime academies can be 

enlisted to validate and certify basic skiffs using existing USCG~certified training courses, but the 

services themselves must be wil!ing to certify practical sea time and PQS attainment. It is operationally 

and fiscally unwise and morally indefensible to install unnecessary barriers to the transition of qualified 

sailors from the military to the commercial sector where these skills can continue to be utilized for public 

benefit. 
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EDUCATION AND WORKFORCE RECOMMENDATION #3 "Work together to develop a new era of 

life~saving equipment" 

The USCG establishes the rules and regulations for required life safety systems and equipment in the 

United States utilizing minimum baseline recommendations established by the International Maritime 

Organization ({MO). For international routes, the IMO standards are the minimum requirements. The 

USCG can- and often does- require more restrictive requirements for U.S.4Jag vessels, but this process 

is often negotiated through alternative mitigation programs, policies, and procedures. It is dear that 

larger, state~of~the~art "blue water" ships require an equivalency in state-of-the-art life safety 

equipment, sized and sufficient to serve afl crew members in reliable, enclosed survival craft deployed in 

adequate quantity and extreme weather conditions. In addition, review of life safety equipment for 

coastwise and inland vessel operators is overdue for review and upgrade. For example, passenger ferry 

operators are provided multiple alternative options to support the reduction of numbers and types of 

survival craft, as wefl as the required number of crew members in ratio to the numbers of passengers 

carried, to the extent that woefully inadequate practical safeguards often exist to counter the effects of 

a major marine casualty, should one occur. The continued authorization for use of Inflatable Buoyant 

Apparatus (IBA's) on coastal and inland ferries, in numbers inadequate to safely manage the high peak 

numbers of passengers and crews aboard, virtually assures significant numbers of passengers will end 

up in the water if a major incident occurs. Significant changes in these practices are realistically possible 

and absolutely necessary to protect the seafarer and the general pubfic - before a major incident again 

makes clear the inadequacy of current practices. 

22 
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Statement of 

General Darren W. McDew, United States Air Force 

Commander, United States Transportation Command 

Before the House Armed Services Committee 

Readiness Subcommittee and the Scapower and Projection Forces Subcommittee 

On the State of the Command 

30 March 2017 
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Introduction 

The United States Transportation Command (USTRANSCOM) delivers National 

objectives on behalf of the United States, and has proudly done so for nearly three decades. As 

we near our 30th anniversary, we stand ready to deliver an innnediate force through our airlift 

and air refueling assets or a decisive force with our strategic sealift assets when and where 

needed. Our delivery of these forces assures an unparalleled global expeditionary capability and 

gives our Nation options when needing to respond to a variety of crises. Ultimately, this 

unmatched capability extends a helping hand or projects combat power anywhere, at any time 

and provides a key strategic advantage for our Nation. We must continue to invest in and 

preserve our edge. Our ability to sustain strategic power projection is challenged on several 

fronts by potential adversaries growing ever more capable. However, we continue to look 

forward and innovate as we face challenges, uncertainties, risks, and complex demands placed 

upon the unique capabilities we provide daily to our Nation. 

Mission 

USTRANSCOM delivers full-spectrum global mobility solutions supporting our Nation's 

requirements in peace and war. In the simplest tem1s, we provide viable national security 

options to the National Command Authorities. Those options range from immediate 

humanitarian or combat deliveries by our airlift and air refueling fleets, to the global delivery of 

the Nation's decisive combat power via our strategic sealift fleet. While ensuring the readiness 

and availability of these options on a daily basis, the command also leads the Joint logistics 

enterprise which is the foundation on which every other Department of Defense capability rides. 

Although transportation remains USTRANSCOM's core competency, our spa11 of 

influence extends from the source of supply, through each segment of the DoD supply chain to 

2 
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any designated point of need. Through logistics enterprise forums, the Services, Combatant 

Commands, DoD interagency partners and commercial providers, we continue to collaborate 

with logistics leaders in order to better identify, prioritize, and close capability gaps within the 

enterprise. Since 2009, these efforts have resulted in efficiencies and cost avoidances for the 

DoD distribution supply chain of nearly $1.6 billion, which translates to more buying power for 

the Services. 

In addition to our primary mission of providing full-spectrum global n1obility solutions, 

our subordinate command, the Joint Enabling Capabilities Command (JECC), provides decisive, 

rapidly deployable joint command and control capabilities. By doing so, they assist in the initial 

establishment, organization, and operation of joint force headquarters. 

The JECC is a unique total force joint organization that delivers highly effective, cost 

efficient, joint planning, public affairs, and communications capabilities to all combatant 

commanders. This Subordinate Command is alert-postured to respond across the full range of 

military operations. They routinely deliver high-impact mission-specific teams of experts who 

produce executable solutions for emergent global crises. In fact, they provided more than 40,000 

man-days of support that touched every combatant command in 2016; notably providing key 

Joint Task Force staff and planning expertise within 72 hours to assist Southern Command in 

responding to Hurricane Matthew. In addition, the JECC's robust support to the Chairman of the 

Joint Chiefs of Staff Combatant Command Exercise and Training program improved our 

National proficiency, knowledge, preparation, and response to emergent events. 

The JECC continues to have significant forces deployed in support of missions around 

the globe, including direct support to ongoing counterterrorism operations in Iraq and 

Afghanistan. Their ability to deliver highly effective joint planning, public affairs, and 
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communications capabilities have enabled better integration of DoD, U.S. government, and 

partner responses to strategic challenges in every part of the world. 

Operating Environment 

Today's diverse global security environment is dramatically different and more complex 

than the one we operated in for the last 30 years. China, Russia, Iran, North Korea, and violent 

extremist organizations continue to challenge us in new ways, ultimately demanding new and 

innovative solutions. As we look to the future, we expect trans-regional, multi-domain, and 

multi-functional conflicts will define our future operating environment. A global view is 

essential in such conflicts. Fortunately, USTRANSCOM has operated globally every day since 

its inception. 

We also expect that future conflicts will cross regional boundaries and potential 

adversaries and peer competitors will field numerically superior forces with near-technological 

parity. Those adversaries are aware the United States has become accustomed to geographicallyisolated conflicts and enjoyed technological superiority over its adversaries, so we expect 

contested global sea lanes and air routes to a degree we have not faced since World War II. 

Potential adversaries seek asymmetric means to cripple our force projection and sustainment 

capabilities by targeting critical militmy and civilian assets, both within the U.S. a11d abroad. 

Additionally, our enemies continue to use our dependence on the cybcr domain against us. With 

those challenges in mind, every Soldier, Sailor, Marine, Ainnan, Coast Guardsman and 

Department of Defense (DoD) Civilian ofUSTRANSCOM and its Component and Subordinate 

Commands recognizes it is our duty to ensure the Command remains postured to operate in such 

an environment and effectively answer the Nation's call, should it come. 

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Uur Approach 

To effectively operate in that future environment, we arc focused on four priorities: 

ensuring readiness today while advocating for future capabilities, advancing our capabilities in 

the cyber domain, evolving the command for tomorrow, and championing an innovative, diverse, 

and agile workforce. 

In prioritizing today's readiness while keeping an eye toward future capabilities, we are 

advocating for the right mix of personnel, platforms, systems and training to ensure we can 

provide the global transportation and logistics capabilities our Nation requires. By making the 

right investments today in enhancements for our air, sea and surface fleets, we will ensure 

USTRANSCOM delivers the Nation's objectives tomorrow. Through this pursuit, we posture to 

meet the full range of Unified Command Plan roles and missions in current and emerging transregional transportation, logistics, and patient movement requirements. 

Improving our cyber defense allows USTRANSCOM to operate freely and effectively. 

We continue to broaden our scope to actively evaluate and mitigate our command and control, 

weapon system, and infrastructure vulnerabilities, while identifying and advocating for the 

critical capabilities, policies, and procedures that ensure mission accomplishment. 

As a global Combatant Command charged with delivering national objectives in 

tomorrow's dynamic security environment, we must challenge our assumptions, accurately 

forecast trends that shape that fi.Iture envirorunent, and develop the tcclmologies and ideas that 

maintain our Nation's competitive advantage. In our pursuit to continuously evolve for 

tomon·ow, we established a relationship with the Defense Innovation Unit Experimental to 

expedite the implementation of logistics- and cyber-based technologies such as conunercial 

cloud-based technologies which can provide Infrastmcture-as-a-Scrvicc, Platform-as-a-Service, 

and Software-as-a-Service offerings to host USTRANSCOM's unique applications. These and 
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other initiatives will increase our responsiveness, agility, efficiency, and operational processes, 

while enhancing transparency with our customers and positioning us ahead of emerging 

challenges and threats. 

Finally, our approach recognizes USTRANSCOM requires a talent rich, diverse, creative, 

adaptive, and innovative workforce to survive today and thrive in tomorrow's dynamic 

environment. We will create this workforce by recruiting, developing, and retaining the best 

talent America has to ofter. We recognize that doing so requires us to remove cultural, 

procedural, and policy ban·iers along the way such as significant civilian hiring refonn. We 

appreciate the attention Congress has placed on this issue with the recent passage oflegislation 

in the 2017 NDAA creating a streamlined civilian on-campus recruiting authority, fast tracking 

the ability to hire talented personnel for critical positions in an ever-more competitive 

marketplace. Initiatives improving the speed at which talent can be hired, and opening aperture 

to additional fast-tracked hiring authorities and policy flexibility, ensures better access to streams 

of talent benefitting USTRANSCOM. 

State of Our Readiness 

Without reservation, US TRANS COM stands ready to deliver on behalf of the Nation 

today. However, as our approach to the future operating environment indicates, there are 

challenges that demand our attention to ensure our readiness is never called into question. These 

challenges fall into the following broad categories: airlift and air refueling, sealift, surface, 

budget, and workforce issues. 

Airlift/ Aerial Refueling 

Air Mobility Command (AMC), a Component Command ofUSTRANSCOM, provides 

an incredible capability to our Nation and the world. As one Total Force team with commercial 

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partners, AMC provides airlift, aerial refueling, air mobility support, and aeromedical evacuation 

around the globe, supporting eight combatant commands while operating in 23 countries. 

On average, tankers are conducting aerial refueling operations every five minutes over 

the skies of Iraq and Afghanistan. Additionally, AMC refuels fighter squadrons across the 

Pacific Ocean to ensure a constant presence throughout the Pacific and refuels nearly all of our 

North Atlantic Treaty Organization allies during operations and exercises around the globe. Yet 

the scarcity of forces and their current distribution, coupled with the high operations tempo 

placed upon them, comes at a cost to the health of the KC-10 and KC-135 fleets. 

Currently, the KC-46A program is on track to deliver 179 aircraft by 2028, which will 

enhance operational agility. The delivery of these aircraft over the next few years remains a 

critical investment to ensure we can continuously project power around the world, whether in 

support of humanitarian relief missions or combat operations. 

The delivery of the KC-46A alone, however, will not address present concerns with the 

allocation and distribution of the global tanker fleet. For example, since 2011, the authority of 

the USTRANSCOM commander to manage tankers globally has been constrained by 

congressional language prohibiting changes to command and control of scarce KC-135 forces. 

As global tanker requirements continue to expand, we are seeing more cases where the 

requirements of a given combatant command are in competition with others. At the same time, 

we recognize a trans-regional, multi-domain, and multi-functional operating environment 

combined with proliferating anti-access and aerial denial threats will only place greater strain on 

the air refueling force. Although we continue to work closely with AMC and the Joint Staff to 

mitigate the effects on the global tanker fleet, the restriction in place since 2011 continues to 

limit the USTRANSCOM commander's ability to exercise operational control of high demand 

Pacific and European tanker forces necessary to meet global and national defense requirements. 
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Also key to air mobility are our airlift assets and the additional capabilities commercial 

industry brings to the fight. For our part, the C-17 and C-5 continue to provide strategic airlift 

the world over while our C-130s meet tactical airlift needs in every region of the globe. We are 

seeing stress on the strategic airlift fleets and have some concerns about hard choices that have 

been made to close active duty C-17 squadrons with an eye toward buying that capability back in 

the reserve component. While both components are capable, maintaining the right balance is 

critical so we do not create a situation where mobilization is needed for every new mission that 

might arise. 

On the commercial airlift side, our Civil Reserve Air Fleet (CRAF) partners commit 

aircraft to augment DoD airlit1 during contingencies and/or emergencies in exchange for 

government airlift business while also providing conunercial airlift services to DoD during 

peacetime. USTRANSCOM closely coordinates with the Department of Transportation (DoT) 

in administering the CRAF program. This steadfast relationship has historically provided lift for 

roughly 40 percent of all DoD air cargo and 90 percent of all passenger movements in direct 

support of our warfighters. Our 24 CRAF carriers remain ready to support DoD readiness 

requirements with cargo and passenger support worldwide and we will continue to rely on viable 

and healthy CRAF program in the future. To ensure the relationship with our CRAF partners 

remains robust, we've begun contracting with them based on early demand signals, allowing us 

to move workload to them which would have otherwise been handled by our organic aircraft. 

This has the dual benefit of providing additional workload to our CRAF partners while also 

reducing flying hours in our organic fleet. 

Sealift 

Historically, nearly 90 percent of wartime transportation requirements arc delivered 

through strategic organic and U.S. flagged commercial sealift. In fact, our strategic sealit1 fleet 

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provides the ability to deliver a decisive force over great distances. Our U.S. Navy component, 

the Military Sealift Command (MSC), provides sealift capabilities through ship chartering, 

prepositioning, and sustainment operations while also executing operational command over the 

Maritime Administration's (MARA D) Ready Reserve Force ships during contingencies. 

Without a healthy and viable U.S. Commercial Sealift Fleet, MSC Surge Fleet, and MARAD's 

Ready Reserve Force, our Nation's military may not be able to deploy as quickly and efficiently 

as it can today. 

The National Security Directive on Sealift and the Sealift Emergency Response Programs 

provide assured access to U.S. flagged commercial sealift assets, Merchant Mariners, and the 

global interrnodal capability required to augment govermnent owned (organic) sealift capabilities 

during contingencies. This assured access is provided via the Voluntary Intermodal Sealift 

Agreement (VISA) which ultimately ensures the U.S. maintains its capability to meet sealift 

requirements in peace, crisis, or war. The VISA program provides a responsive transition from 

peace to contingency operations through pre-coordinated agreements for U.S. flagged 

commercial sealift capacity and systems to support DoD's contingency sealift needs. It allows 

USTRANSCOM to meet mobilization requirements in a rapid fashion. 

At the core of the VISA vessels are our Maritime Security Program (MSP) partners, who 

are essential to our wartime U.S. commercial sealift capability, and all are participants Sealift 

Emergency Response Programs. Over time, MSP has provided access to required commercial 

U.S. flag shipping assets, while also supporting the pool of Merchant Mariners needed to operate 

MSC's Surge and Ready Reserve Fleet. In this way, the MSP significantly contributes to the 

supply of Merchant Mariners available to serve on U.S. vessels in time of war while mitigating 

future risk to our national commercial capacity. 

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Along with MSP, The Merchant Marine Act of 1920, also known as the Jones Act, 

provides an additional pool of trained Merchant Mariners and sealift capacity. It does this, and 

contributes to national defense, by subsidizing a robust, domestic, maritime industry including 

U.S. industrial shipyard infrastructure for building, repairing, and overhauling U.S. vessels. 

Ensuring a healthy U.S. fleet has proven difficult in the larger global context where 

international shipping has slowed while the industry as a whole has ended up with an excess of 

ships. Excess supply has caused prices to fall, which has put considerable financial pressure on 

U.S. f1agged vessels. Unfortunately, the U.S. flagged international commercial fleet and Mariner 

pool has shrunk over time; while we have contingency plans, further reductions may cause us to 

investigate other options such as using more foreign flagged international cmmnercial vessels 

manned by foreign crews during crisis or war. American shipping companies continue to re-f1ag 

vessels to foreign nations, diminishing the size of our commercial fleet, although that fleet 

stabilized in recent years at around 80 today. While the U.S. flagged commercial fleet remains 

the most effective means for us to obtain the necessary sealift capability to meet national defense 

needs, we are considering a range of options to ensure that we retain the ability to deploy a 

decisive combat force at the time and place of our choosing. Those options may include new 

approaches to preserving essential capabilities in the Ready Reserve Force, which among other 

options, may include non-US built vessels. 

Sealift Fleet Recapitalization 

Since the 1990s, DoD mobility studies have indicated a requirement for nearly 20 million 

square feet of Roll-on/Roll-off (RO/RO) capacity to promptly transport materiel wherever 

needed in defense of the Nation's interests in major conflicts abroad. This includes over 15 

million square feet of organic RO/RO capacity on 65 total ships and nearly 4.5 million square 

feet of U.S. flagged commercial RO/RO capacity gained tbrough VISA. However, we are 

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projecting a loss of 4.5 million square feet of organic surge RO/RO capacity by 2033 as these 

vessels reach the end of their service life, with an accelerated loss expected between 2026 and 

2031. The organic vessels tasked to meet this requirement are becoming obsolete or 

unsustainable. Our organic surge vessels, for example, have an average age of39 years and will 

begin to reach their 50-year service life in the 2020s. This will result in a critical sealift capacity 

shortfall, which limits our ability to support the national security requirements. In addition to the 

RO/RO capacity loss, I 0 of 12 special-capability ships will age out of the fleet between 2020 and 

2024. These ships provide expeditionary capabilities such as over-the-shore fuel distribution and 

crane lift to austere or damaged ports, a critical necessity for the deployment of ground forces 

and for operations in a contested environment. The aging and loss of sealift capacity places a 

particular urgency on the need to explore options for maintaining critical capabilities, without 

which the Nation's strategic sealift capability to support future operations will be at risk. We are 

working closely with the U.S. Navy to maintain the full spectrum of strategic sealift capabilities 

required to move U.S. forces in current and future operational environments. 

In order to keep the recapitalization strategy on track and achieve success in the near 

tcnn, the used vessel acquisition component must start as early as fiscally possible. This 

component seeks to purchase vessels leaving MSP or other commercial vessels regardless of 

country of origin. The acquired vessels would replace the aging organic vessels for a fraction of 

the cost of new construction and could remain in service for several decades. Congressional 

support will be needed to gain the necessary authorities and funding for this effort. 

Additionally, DoD's current organic surge t1eet is composed of several steam-propelled 

ships. The manning of these ships with seasoned steam certified engineers is a growing coneem 

as commercial industry is expected to retire all steam ships by the early 2020s, while we need to 

operate them until 2035 unless recapitalization efforts allow us to replace them sooner. As 

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commercial industry retires their steam ships, our access to a civilian pool of steam-ce1tified 

engineers and mariners may fall severely (and eventually be) eliminated. 

Surface 

Since the first stage in delivering a decisive force happens on the ground, our Nation's 

infrastructure of roads, rails, and ports plays a fundamental and crucial role in the deployment 

and sustainment of the Joint force. USTRANSCOM closely partners with the Department of 

Transportation (DoT) and other Federal and State entities to ensure infrastructure within the 

continental U.S. is ready to support DoD deployment and distribution needs. 

USTRANSCOM, through its Anny component the Military Surface Deployment and 

Distribution Command (SDDC) represents the interests and requirements of the DoD to access 

and safely utilize both private and public transportation infrastructure and services. Currently, 

the public sector road network remains capable of meeting DoD ground transportation needs 

while providing adequate access to commercial trucking capacity to meet current and anticipated 

surface transportation needs. 

Just as the availability and safety of drivers and roadways are critical to national defense, 

our national rail system is of equal importance. Through our Railroads for National Defense 

Program, and close collaboration with civil sector rail officials and DoT's Federal Railroad 

Administration, we assess the ability of the U.S. rail system to support military needs. Currently 

the rail network required to deploy our force is in place and viable. In the next fifteen years, 

however, we face age-mandated retirements of some of our uniquely capable DoD railcars. We 

are developing a plan in close collaboration with the Department of the Anny to retain this 

critical transportation capability. 

To successfully execute our deployment mission, USTRANSCOM also relies on a 

collection of both DoD and commercially-owned U.S. seaports, designated as Strategic Seaports. 

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The primary mission of the Strategic Seaport Program is to ensure DoD has access to sufficient 

seaport infrastructure to meet contingency deployment needs. None are more important than the 

main West and East Coast ports of Military Ocean Terminal Concord (MOTCO) and Military 

Ocean Tc1minal Sunny Point (MOTSU). 

MOTCO on the West Coast is indispensable to USTRANSCOM's support of U.S. Pacific 

Command's operations and DoD's military capability in the Pacific Theater. Due to the nature 

and size of this mission, no suitable alternatives exist on this coast and MOTCO's infrastructure 

assets require critical upgrades and maintenance to remain relevant in the current military 

environment. Current efforts are centered on preserving the operability ofMOTCO's primary 

pier until it can be replaced. We are also examining additional options for MOTCO to become a 

modem ammunition port, fully capable of safe and efficient operations to enable uninteiTUpted 

delivery of ammunition to the Pacific theater. 

At MOTSU, significant infrastructure improvements within the last few years have 

enhanced our ability to support the EUCOM, AFRICOM, and CENTCOM Combatant 

Commanders' operations and allow the ten11inal to meet throughput requirements. We continue 

to work with the Department of the Army to preserve both seaports by finding and applying 

resources to reduce risk and prevent capability gaps. 

Although our nation's roads, rails, and ports play a fundamental role in the deployment 

and sustainment of our Armed Forces, nothing is more important than the people and their 

families who support and execute the mission, at home and abroad. The Defense Personal 

Property Program provides our Service members, DoD Civilians, and their families with an 

effective and efficient system for the relocation, storage, and management of their household 

goods and privately-owned vehicle (POV) shipments. As a testament to our partnership with the 

Deputy Assistant Secretary of Defense for Transportation Policy, the Services, and commercial 

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transportation service providers, the Defense Personal Property Program enables nearly 875 

service providers to support the movement of approximately 70,000 POV s and around 430,000 

household goods shipments globally each year. 

An initial review and analysis of the Defense Personal Property Program identified that 

the end-to-end household goods value chain lacked proper alignment to consistently produce 

high quality relocation services due to Jack of a single program manager and the need for more 

commercial capacity. Consequently, stakeholders from across the Department have collaborated 

on initiatives to recommend to key leaders from the military Services. Additionally, the Defense 

Digital Service recently assessed our primary software and customer interface within the Defense 

Personal Property System and found that while we are working toward reasonable solutions to 

the problems our customers have with the system, we are plagued by common problems that can 

be overcome by focused effort and assistance from the Defense Digital Service. Although still a 

work in progress, these initiatives are intended to improve the move experience for our Service 

members while simultaneously posturing the program for institutionalized and sustained 

continuous improvements. Addressing the challenges of program accountability, customer 

service, entitlements, standardization, and automation provides an opporttmity to incorporate 

updated technologies and processes that will improve the quality oflife and security of our 

Service members, DoD Civilians, and their families. 

Budget Uncertainties 

USTRANSCOM's mobility readiness depends highly on our financial health, which in 

tum relies on the financial posture of Services that provide the capabilities we use to execute our 

critical missions. Notably, the Budget Control Act and recent Continuing Resolutions have 

forced the Services to prioritize immediate operational needs over prudent long-term planning 

and investment, decisions that ricochet inefficiencies through the logistics and transportation 

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enterprises. More generally, sequestration's impact on readiness, mission operations, and 

modernization funding will result in the Services being unable to adequately man, train, and 

equip mobility forces thus presenting a significant readiness challenge. IJTegular budgets 

jeopardize critical mobility acquisition programs like the schedule for the KC-46A program 

which addresses significant challenges with our aging aerial refueling fleet. 

Additionally, our overall readiness and that of other combatant commands is influenced 

by the joint training and exercises conducted solely through resources provided by the 

Combatant Commander's Exercise Engagement and Training Transformation program. With an 

increased emphasis on trans-regional, multi-domain, and multi-functional operations, adequate 

support to combatant command joint training and exercise programs is as critical as ever. 

As we head into FYl8, we are projecting adequate financial levels to ensure our 

readiness, but remain vigilant in light of budget uncertainty. While maintaining our overall 

readiness, we continue to focus on onr commitment to becoming audit ready by complying with 

the initiatives of the Financial Improvement and Audit Readiness (FIAR) program. At the same 

time, as we move to multi-modal operations and new Plan, Order, Ship, Track and Pay 

processes, we are integrating FIAR throughout those processes to ensure audit compliance. 

Furthermore, we continue to work closely with our DoD counterparts to ensure Transpmtation 

Financial Audibility throughout the Depmiment. In an effmi to ensure our business processes 

remain relevant today and into the future, we are striving to be cost-competitive and more 

transparent with our customers while simultaneously seeking ways to provide a lower, more 

predictable rate structure. These actions enhance our coordinating role across the deployment 

and distribution enterprise and ultimately enhance the support we provide the warfighter. 

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Availability of the Transportation Workforce 

Each mode of our transportation network (air, surface, and sea) requires commercial 

and/or military operators such as truck drivers, aircraft pilots, and sealift mariners. These 

operators allow USTRANSCOM to transport torces and materiel to the point of need and to 

return our ill and injured to appropriate medical care. Worsening shortages of these operators 

limit our ability to successfully deliver required combat power across the globe. 

In order to respond anywhere in the world in a matter of hours, appropriate manning 

levels of both Air Force and commercial pilots are essential. In fact, all DoD aerial refueling and 

nearly all strategic aeromedical evacuation capability relies on the availability of the U.S. Air 

Force aircrews from the active and reserve components. Additionally, USTRANSCOM's 

organic and commercial airlift capabilities deliver roughly I 0 percent of all transportation 

requirements and continue to be a significant force multiplier for the Nation by delivering an 

immediate force overnight into an area of operations when needed. Pilot manning will remain 

vital for the near and long-term future of this critical USTRANSCOM capability. 

Our Mobility Air Forces and commercial airline partners, however, are experiencing 

manning shortages. Reduced undergraduate pilot training quotas, changes in force structure, and 

declining retention (along with aggressive airline hiring for the foreseeable future) will require a 

concerted effort if we are to mitigate potential negative impacts across the active and reserve 

components of the U.S. Air Force. By comparison, U.S. commercial airlines, including our 

partners participating in the CRAF program, expect a pilot shortage ofronghly 35,000 pilots 

through the year 2031. Contributing factors include retirements exacerbated by statutory age 

limits (i.e., max of 65 years old), an increase in new airline transport pilot certificate 

requirements, and the continuous growth of the global airline industry. 

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While monitoring the health of pilot manning, we are keenly focused on the strain the 

trucking industry continues to feel due to the commercial truck driver shortage ( cuiTent shortage 

of75,000 with a projection of890,000 by 2027). The industry's ability to attract and retain 

qualified commercial truck drivers required to move freight for the DoD and the Nation is a 

growing concern. Persistent shortages are caused by several factors such as quality oflife, 

younger generations not seeking out the truck driving profession, and the pursuit of more 

desirable job alternatives. Due to the shortage of operators, the trucking industry is currently 

operating at greater than 95% capacity leaving little to no surge capacity for DoD. In an effort to 

address and reverse the shortage of drivers, the DoT Federal Motor Carrier Safety 

Administration implemented initiatives such as granting test waivers for military members with 

previous commercial motor vehicle experience and expanding their experience validation 

timeline from 90 days to one year. These efforts are the first steps in addressing the shortage; 

however, they may not be sufficient to alleviate likely impacts in times of increased demand for 

DoD's surge requirements. To combat this issue, we are continuously engaged with industry and 

conducting ongoing analysis and reviewing plausible alternatives, such as increasing the use of 

multiple modes (rail and truck) and un-manned vehicles. 

We will continue to monitor and manage the manning shortages across our three 

fundamental domains. While supporting DoT's efforts in reversing current trends, we remain 

determined to ensure a sufficient pool of transportation operators are available to provide our 

Nation transportation options. 

Advancing the Cyber Domain 

The greatest challenge USTRANSCOM faces every day is the threat of attack from the 

cybcr domain. Although cybersccurity is a DoD-wide focus area, USTRANSCOM is distinctly 

vulnerable because the majority of the Command's transportation data resides within and travels 

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through the unsecure commercial internet. Furthermore, unsecure networks and systems of our 

commercial transportation service providers, coupled with critical infrastructure vulnerabilities 

around the globe, almost wholly reside outside our control and pose significant risk to mission 

assurance. Due to these challenges, USTRANSCOM is prioritizing our key cyber concerns. The 

Command is collaborating with U.S. Cyber Command, DoD Agencies, Federal cyber 

organizations, industry, and academia to identify and mitigate gaps and shortfalls, as well as to 

seize opportunities to advance our cyber domain capabilities. 

We have and will continue to encourage industry partners to join together in a 

transportation-related Infom1ation Sharing and Analysis Organization, focused on supporting 

DoD's transportation mission. Our current partnership with the National Defense Transportation 

Association (NDTA) Cybersecurity Committee and our semiannual Cybersecurity Roundtables 

that have drawn interest from across government, industry, and academia are cornerstones of our 

efforts to build a more responsive, aware, and collective approach to mission assurance. 

For example, through our partnership with the NDTA Cybersecurity Committee, we seek 

to address: cybersecurity issues of mutual concern, rapid sharing of threat infom1ation, the 

application of best practices, and, research on existing and emerging cybcrsecurity technology 

and development activity. The committee provides a mechanism to address urgent concerns, 

such as cybersccurity contract language and the exchange of unclassified and sensitive 

infonnation between USTRANSCOM and industry partners. 

However, there is still much more to do in order to address our current and future cyber 

capabilities. People, processes, and technology are all key areas where we can enhance our 

cyber resiliency. Specifically, we must grow and retain a highly skilled cyber workforce; clarify 

cybcrsecurity roles and responsibilities across the critical infrastructure sector; implement 

acquisition policy to provision cloud services and other innovative cyber solutions at the "speed 

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of need." We also need to ensure that DoD can rapidly share threat and vulnerability 

infonnation with our commercial partners while continuing to improve cybersecurity compliance 

repmiing that enables infonned risk management decisions appropriate to the situation at hand. 

We will continue to work with U.S. Cyber Command, DoD Agencies' cyber organizations, 

Department of Homeland Security, and commercial transportation partners to mitigate cyber 

risks to global distribution operations. 

Evolving for Tomorrow 

Beyond the contested cyber domain, we recognize we will face new challenges across the 

other domains as well. As mentioned, we expect future conflicts are increasingly likely to occur 

in an environment contested across all domains, subsequently restricting our freedom of action. 

Adversaries and geopolitical competitors have the ability today to challenge our freedom of 

movement from deployment to employment using kinetic and non-kinetic means to dismpt, 

delay, or deny operations. This creates an environment that places our strategic assets at great 

risk. As our Joint force prepares to face this challenge, operational plans must reflect the 

anticipated attrition of both combat and mobility assets and associated persmmel. 

Future conflicts within the contested environment will also greatly challenge global 

patient movement operations. USTRANSCOM cunently operates the best patient movement 

system in the world, safely and efficiently moving thousands of our nation's ill and injured 

Service members to the medical care they need every year. We are not content, however, to rest 

on our successes. Recognizing future adversaries might be able to limit onr access to the air and 

cyber domains, we arc ag~orressively exploring snrface movement solutions to ensure we remain 

the best in patient movement no matter the threat or environment. We continue to pminer with 

the Services to expand maritime patient movement capabilities and we arc working to rebuild our 

ability to move patients by rail. Our Nation's joint casualty stream must be supported by joint 

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patient movement capabilities that are interoperable, multi-modal, and capable of functioning in 

a cybcr-compromised environment. Synchronized policies, training, and research and 

development are needed across the DoD to ensure we remain the best in safely moving our ill 

and injured whenever and wherever needed. 

We also conducted a Future Deployment and Distribution Assessment focused on 

deployment and distribution in a contested environment. This assessment solidified our concerns 

about the challenges of conducting operations in contested environments and again highlighted 

that our global network (to include partners and allies) is at risk from threats in all domains 

land, sea, air, space, and cyberspace. 

Finally, we hosted our inaugural contested environment war game aimed at creating a 

common understanding of our operations in contested environments. We also sought to 

recognize the enterprise-wide challenges and develop prioritized mitigation efforts to enable 

future operations in those environments. The war game also addressed the necessary 

investments in planning and collaboration with the entire DoD logistics enterprise necessary to 

develop appropriate mitigation strategies for these threats. Finally, the war game highlighted the 

need for multiple operating options to ensure resiliency, agility, and responsiveness in future 

conflicts. An important insight from the war game is that operational plans and fleet sizing 

considerations must account for the loss of capital assets. These vital principles ensure realistic 

planning and aligned with risk, resulting in operational resiliency across all domains in future 

contested environments. 

Based on these findings and published defense guidance, we will work with the Office of 

the Secretary of Defense, CAPE to initiate a new mobility requirements study once defense 

strategic guidance and the supporting elements, such as defense planning scenarios, mature. 

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Championing an Innovative, Diverse, & Agile Workforce 

In light of all of the challenges and opportunities ahead of us, we recognize our people 

are our greatest resources and are the ones who will rise to those challenges and seize the 

opportunities. At the sarne time, it is clear the competition for talent is becoming more acute. 

Given that, we are working to recruit, develop, and retain the best talent America has to offer. At 

the heart of that effort we completed our first-ever headquarters Human Capital Strategic Plan 

setting short and long term goals for cultivating and managing our large professional civilian 

workforce. We also entered into an agreement with Defense Logistics Agency that created an 

individual civilian experiential development opportunity. Goal of effort is to address how 

USTRANSCOM and Defense Logistics Agency can work together to collectively develop the 

skills, knowledge, and effectiveness of our civilian workforce. We expect this initial agreement 

to serve as a baseline we can expand upon in the future. Beyond these early accomplishments, 

we are positioning ourselves to remain competitive in attracting future talent by identifying and 

establishing developmental positions within USTRANSCOM. 

Our Commitment 

For nearly three decades, our Nation has turned to USTRANSCOM's strategic power 

projection capability to respond rapidly to global threats and disasters. Today, USTRANSCOM 

continues to deliver 21st century, enterprise-wide, global expeditionary capabilities to the joint 

force. Anticipating and adapting to challenges will allow us to perfonn our missions in an everchanging security environment. These missions continue to trend toward non-pennissive, 

remote, austere, and widely-dispersed locations, but this team of transportation and logistics 

professionals always finds a way to deliver our national objectives. Our continuous focus on the 

resiliency and preservation of the Joint logistics enterprise while advocating for the right 

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investments in our cyber-enabled air, sea, and surface fleets ensures we can deliver the Nation's 

objectives tomorrow. 

Continued Congressional support, coupled with the hard work of the professional men 

and women ofUSTRANSCOM and our components, will ensure we are ready to deliver the 

Nation's Objectives. We will continue to address challenges and vulnerabilities and advocate for 

innovative solutions as we provide the joint force options for delivering an immediate force 

tonight and a decisive force when needed. "Together, we deliver!" 

22