```

[Senate Hearing 107-965]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-965

 NOMINATION OF CAPTAIN WILLIAM G. SCHUBERT TO BE ADMINISTRATOR OF THE 
      MARITIME ADMINISTRATION AT THE DEPARTMENT OF TRANSPORTATION

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 15, 2001

                               __________

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

87-496              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
RICHARD H. BRYAN, Nevada             OLYMPIA J. SNOWE, Maine
BYRON L. DORGAN, North Dakota        SAM BROWNBACK, Kansas
RON WYDEN, Oregon                    GORDON SMITH, Oregon
MAX CLELAND, Georgia                 PETER G. FITZGERALD, Illinois
BARBARA BOXER, California            JOHN ENSIGN, Nevada
JOHN EDWARDS, North Carolina         GEORGE ALLEN, Virginia
JEAN CARNAHAN, Missouri
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                  Mark Buse, Republican Staff Director
               Jeanne Bumpus, Republican General Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 15, 2001................................     1
Statement of Senator Breaux......................................     1
Prepared statement of Senator McCain.............................    19

                               Witnesses

Schubert, William G., nominated to be administrator of the 
  Maritime Administration at the Department of Transportation....     3
    Prepared statement...........................................     4
    Biographical Information.....................................     5
    Knapp, Rosalind A., letter dated October 19, 2001............    13

                                Appendix

Response by William G. Schubert to written questions submitted by 
  Hon. John McCain...............................................    21

 
                   NOMINATION OF CAPTAIN WILLIAM G. 
  SCHUBERT TO BE ADMINISTRATOR OF THE MARITIME ADMINISTRATION AT THE 
                      DEPARTMENT OF TRANSPORTATION

                              ----------                              

                      THURSDAY, NOVEMBER 15, 2001

                               U.S. Senate,
         Committee on Commerce, Science, and Transportation
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building, Hon. John B. 
Breaux presiding.

           OPENING STATEMENT OF HON. JOHN B. BREAUX, 
                  U.S. SENATOR FROM LOUISIANA

    Senator Breaux. The Committee will please come to order. 
Good morning, everyone.
    Senator Hutchison from Texas was going to be here, Captain, 
to present you, but was unavoidably not able to do it, with the 
aviation security conference going on, which is why a number of 
our Members happen to be absent, because we are trying to get 
that important legislation out before we leave for the recess.
    This morning we are here to consider the nominee for 
Maritime Administrator, Captain William Schubert. I appreciate 
very much that the Administration has nominated an individual 
who has actual experience in this particular area dealing with 
the merchant marine. Captain Schubert has previously worked at 
the Maritime Administration and brings a great deal of 
knowledge and experience in that very important field. It is 
very difficult to come into this type of a job without having 
experience. We are very fortunate to have someone who has 
actually worked there. You helped facilitate the sealift 
operation during the Persian Gulf effort, which was very 
difficult, indeed.
    I strongly support your confirmation and supported the 
nomination, as well. I think it is important that we get you in 
place as soon as possible and hope we can take this to the 
floor this week.
    I understand you are joined today by your wife Gail.
    Gail, are you here? Thank you very much for being here and 
letting him do this job again. Also by your parents, 
apparently, Earl and Nancy. Thank you for your contribution in 
allowing Earl to serve.
    He is a 1968 graduate--1965?
    Mr. Schubert. 1969.
    Senator Breaux. 1969 graduate of King's Point Merchant 
Marine Academy and we will not hold it against you, but your 
brother-in-law is one of our former colleagues, Senator Bill 
Brock. Bill, glad to see you back in these chambers.
    My home state of Louisiana obviously is one that is very 
concerned about the merchant marine, the maritime, and what we 
do at the Maritime Administration. We are obviously very 
heavily dependent on maritime industry and maritime 
transportation in general. It is not something that just 
benefits Louisiana. It benefits the entire country. Louisiana 
is the bottom of the funnel through which two-thirds of this 
nation drains all of their waterways and obviously that creates 
some problems, but it also creates enormous economic benefits 
for the state and also for the nation.
    We live near and are on the waterways and the Gulf of 
Mexico, so we certainly in our areas understand the importance 
of ports, understand the importance of a strong maritime 
industry, and know quite well in my state, and I would hope the 
rest of the Congress feels the same, that this is something the 
government needs to be involved in.
    We cannot just say to the U.S. maritime industry good luck, 
pat you on the back, and hope you are successful, because, in 
fact, our industry has to compete not just with fellow American 
companies, but we have to compete throughout the world. Many 
times we find our industries having to compete, not with other 
companies alone, but other companies who work with their 
governments very closely and in many cases are partially owned 
by their governments.
    So it is a very unlevel competitive field that our industry 
must face as we ply the oceans of the world. I think that there 
are many of us that recognize that, while we are free 
enterprise supporters, that we have to recognize that you have 
to deal with the hand that you have been dealt, and until all 
the world operates as we do that there is a very legitimate 
role for the U.S. government in helping to guarantee that we 
remain strong as a maritime nation.
    That is one of the challenges, Captain, that you are going 
to be facing. This is not an easy job. The Congress does not 
have a 100 percent view of the importance of some of the things 
the Maritime Administration does. In fact, some of the folks in 
the Administration do not like some of the programs that you 
administer. Title 11 obviously is one of these, where they 
recommended, as I remember, zero funding for the Title 11 
program, which is a program where we have had the ability to 
aid our U.S. industries, not through giving them money or 
giving them grants or giving them construction subsidies, but 
rather giving them loan guarantees whereby they can go to the 
private markets and borrow money to build ships in U.S. yards 
that will have U.S. sailors on board, and that that loan has to 
be repaid by the private company and only if they default would 
the government have to participate in picking up a portion of 
that loan, and it is only a portion of the loan.
    We regularly fund the differential or the risk factor in 
getting a loan that is guaranteed by the government. That is a 
program that has worked very well and it has worked very well 
for a very long time. It has particular challenges now because 
of the economy and particularly in some of the civilian cruise 
ships that we are watching very closely.
    This is going to be on your watch, and it is going to be 
tough, because you are going to be in the middle. You have the 
Congress that supports this and an Administration that does 
not. You work for the Administration, but you also have to 
follow the laws of the Congress, and the Congress has said very 
strongly that the Title 11 program is one that we support, this 
Committee supports, this Congress supports, and it is the law 
of the land.
    So we would hope very much that you would aggressively 
enforce it, do not drag your feet. It is going to be tough. You 
have somebody downtown on Pennsylvania Avenue looking over your 
shoulder and you are going to have Congress looking over your 
shoulder, and you have to carry forward.
    But you have done that, you have been there, and I strongly 
support your confirmation.
    With that, it is your turn and we would be happy to hear 
from you. Welcome.

   STATEMENT OF CAPTAIN WILLIAM G. SCHUBERT, NOMINATED TO BE 
                 ADMINISTRATOR OF THE MARITIME 
              ADMINISTRATION AT THE DEPARTMENT OF 
                         TRANSPORTATION

    Mr. Schubert. Thank you, Mr. Chairman and Members of the 
Committee. Thank you for the opportunity to appear before you 
today as President Bush's nominee to be the next Administrator 
of the Maritime Administration. It is a great honor to be 
called to serve the President and our nation in these 
challenging times.
    The President's long-term commitment to defeat terrorism 
will require significant support from all segments of the 
maritime industry. In this regard, the Maritime Administration 
will play an integral role in providing sufficient commercial 
and government-owned sealift to support our military overseas 
operations. These programs include the 115-ship Voluntary 
Intermodal Sealift Agreement program, better known as VISA, the 
76-ship Ready Reserve Force, and the highly skilled U.S. 
citizen mariners to crew these ships.
    At home, the Maritime Administration will coordinate with 
private industry, labor, and various government agencies in an 
effort to ensure that the United States has secure ports, 
adequate shipbuilding and repair capabilities, efficient 
intermodal transportation systems to support our ongoing war 
against terrorism. If confirmed by the Senate, I will devote my 
experience, my knowledge, and my sincerest passion for this 
industry to accomplish these objectives.
    I do want to emphasize the importance I attach to the role 
of our agency in the current situation. Governor Ridge has 
called for a comprehensive and coordinated multi-agency effort 
to ensure our homeland security. The potential for maritime-
related terrorism poses an unacceptable threat to our homeland 
security. The Maritime Administration is the primary conduit to 
the maritime industry and has substantial capabilities to 
advise Secretary Mineta on this critical issue.
    The Maritime Administration's knowledge, experience, and 
industry relationships will help to ensure that an appropriate 
balance is struck between proposed security measures and the 
efficient flow of commerce. If confirmed, I look forward to 
working with Secretary Mineta, Governor Ridge, and my DOT 
colleagues at the Department to develop short and long-term 
enhancements to port and maritime security.
    More broadly, the Maritime Administration is the 
promotional agency for the U.S. maritime industry. I am 
committed to managing the agency's staff and resources in a way 
that provides the best value to our government and to industry. 
I will also strive to achieve a consensus amongst our 
stakeholders for a renewal of the Maritime Security Fleet 
program sufficient to meet our national security requirements.
    If confirmed, I look forward to working and advising 
Secretary Mineta in furthering his domestic maritime 
transportation initiative. The Secretary has rightly said that 
``transportation is the key to productivity and therefore the 
success of virtually every business in America.'' New and 
revitalized domestic maritime transportation infrastructure is 
essential to meet our nation's domestic transportation needs, 
to support our economy into the twenty-first century.
    In summary, a strong maritime industry is essential to our 
national defense in time of war or declared emergency, such as 
we have now, and a fundamental bulwark to our United States 
economic well being. If the United States is to maintain our 
position as the world's preeminent international trading power, 
we must also promote and maintain our position as a viable 
maritime power. If confirmed, I look forward to working closely 
with the Members of this Committee in developing maritime 
policy tailored to meet our strategic objectives.
    Let me conclude by thanking the Committee for its 
consideration for my nomination and repeating my promise to 
work closely with you. I would be pleased to answer any 
questions.
    [The prepared statement and biographical information of 
Captain Schubert follow:]

  Prepared Statement of William G. Schubert, Administrator-Designate, 
   Federal Maritime Administration, U.S. Department of Transportation

    Mr. Chairman, Senator McCain, Members of the Committee, thank you 
for the opportunity to appear before you today as President Bush's 
nominee to be the next Administrator of the Maritime Administration. It 
is a great honor to be called to serve the President and our Nation in 
these challenging times. Thank you Senator Hutchison for your kind 
introduction. I am honored and grateful to have your support.
    The President's long term commitment to defeat terrorism will 
require significant support from all segments of the US maritime 
industry. In this regard, the Maritime Administration will play an 
integral role in providing sufficient commercial and government-owned 
strategic sealift to support our military's overseas operations. These 
programs include the 115-ship Voluntary Intermodal Sealift Agreement 
program (VISA), the 76 ship Ready Reserve Force, and the highly skilled 
U.S. citizen mariners to crew all these vessels. At home, the Maritime 
Administration will coordinate with private industry, labor and various 
government agencies in an effort to ensure that the United States has 
secure ports, adequate shipbuilding and repair capabilities, efficient 
intermodal transportation systems, to support our ongoing war against 
terrorism. If confirmed by the Senate, I will devote my experience, 
knowledge and passion for this industry to accomplish these objectives.
    I do want to emphasize the importance I attach to the role of this 
agency in the current situation. Governor Ridge has called for a 
``comprehensive and coordinated'' multi-agency effort to ensure our 
homeland security. The potential for maritime related terrorism poses 
an unacceptable threat to our homeland security. The Maritime 
Administration is the primary conduit to the maritime industry, and has 
substantial capability to advise Secretary Mineta on this critical 
issue. The Maritime Administration's knowledge, experience and industry 
relationships will help to ensure that an appropriate balance is struck 
between proposed security measures and the efficient flow of commerce. 
If confirmed, I look forward to working with Secretary Mineta, Governor 
Ridge, and my DOT colleagues at the Department to develop short and 
long-term enhancements of port and maritime security.
    More broadly, the Maritime Administration is the promotional agency 
for the US Maritime Industry. I am committed to managing the agency's 
staff and resources in a way that provides the best value to the 
government and industry. I will also strive to achieve a consensus 
among the stakeholders for a renewal of the Maritime Security Program 
sufficient to meet our national security requirements.
    If confirmed, I look forward to working with and advising Secretary 
Mineta in furthering his domestic Maritime Transportation System 
initiative. The Secretary has rightly said that ``transportation is key 
to the productivity and therefore the success of virtually every 
business in America.'' New and revitalized domestic maritime 
transportation infrastructure is essential to meet our nation's 
domestic transportation needs to support our economy into the 21st 
Century.
    In summary, a strong US maritime industry is essential to our 
national defense in time of war or declared emergency, and a 
fundamental bulwark of United States economic well being. If the US is 
to maintain our position as the world's preeminent international 
trading power, we must also promote and maintain our position as a 
viable maritime power. If confirmed, I look forward to working closely 
with the members of this committee in developing maritime policy 
tailored to meet these strategic objectives.
    Let me conclude by thanking the Committee for its consideration of 
my nomination and repeating my promise to work closely with you. I 
would be pleased to respond to any questions you may have at this time.

                                 ______
                                 
                        BIOGRAPHICAL INFORMATION

    1. Name: (Legal Name): William Grant Schubert. (Nick Names Used): 
Captain Bill Schuber.
    2. Position to which nominated: Maritime Administrator.
    3. Date of nomination: N/A.
    4. Address: (Information not available to the public).
    5. Date and place of birth: March 18, 1952.
    6. Marital status: Married to Gail Marlene Becker since 9/16/78.
    7. Names and ages of children: Chris Schubert (biological son) age 
19; and Jessica Mathis (adopted daughter) age 22.
    8. Education: U.S. Merchant Marine Academy, attended 1970-1974; 
Bachelor of Science granted on June 24, 1974; Obtained USCG Unlimited 
Master License any Oceans; and served 10 years as a commissioned 
officer in the US Navy Reserve.
    9. Employment record: (1974-1984--Worldwide) Reynolds Metals 
Company--10 years experience performing the duties and responsibilities 
of a USCG licensed deck officer including planning and stowage of cargo 
loading and discharge, assuring compliance with all USCG and ABS rules 
and regulations, implementing ongoing maintenance and repair program, 
shipyard operations, and structural and cargo surveys; (1984-1986--
Scotland & Houston, Texas) Global Marine Drilling--Master/Offshore 
Installation Manager--Overall responsibility for the safe, legal and 
efficient management of three (3) US-flag Mobile Offshore Drilling 
Units operating in the UK sector of the North Sea. Also, managed the 
marine operations of twelve (12) US-flag drillships located worldwide; 
(1986-1995--Washington, D.C. & Houston, Texas) Maritime Administration 
(MARAD)--1986-1990 Appointed offshore industry expert to advise the 
Maritime Administrator in formulating policy for the management, 
maintenance and liquidation of over $2 billion in marine assets 
acquired through defaults under the Federal Ship Financing Program. 
From 1990-1995, served as MARAD's regional representative for all of 
MARAD's program interest in the southwestern US. During Operation 
Desert Shield/Desert Storm, was responsible for monitoring the Port 
Readiness Program, vessel load out operations and interagency planning 
meetings for the Port of Houston; (October 1995-Present, Houston, 
Texas) President of International Trade & Transportation, Inc.--
Provides transportation related consulting services to ocean carriers, 
project exporters, freight forwarders, and lending institutions. Since 
1995, have provided direct consulting services for major international 
infrastructure projects valued at over $7 billion dollars. These 
projects generated approximately $50 million in revenue for the US-flag 
ocean carriers.
    10. Government experience: Served on the Transportation Advisory 
Committee to the Bush-Cheney Transition Team.
    11. Business relationships: From October 1995, held the position of 
President of International Trade and Transportation, Inc. As per the 
requirements of Schedule D, Part II of SF-278, the following companies 
were provided direct consulting services by William Schubert: (1) 
Accroven SRL, (2) MWI Corporation, (3) Brown & Root International, (4) 
American Bechtel, Inc., (5) Bechtel International, Inc., (6) Petrobras, 
(7) Gas TransBoliviano S.A., (8) Panalpina, Inc, (9) Transoceanic 
Shipping, (10) Zust Bachmeier Inc., (11) Circle Freight, (12) Alaska 
Cargo Transport, (13) Enron, (14) Danzas AEI.
    12. Memberships: (1998 to Present) Cofounder of the US Exporters 
Competitive Maritime Council; (1995 to Present) US Gulf Coast Chamber 
of Commerce; (2001--Present) National Industrial Transportation League; 
(1990 to Present) US Merchant Marine Academy Alumni Association (past 
Vice President--Houston Chapter); (1996 to Present) Vice President & 
cofounder of the Interscholastic Hockey Association (non profit youth 
sports); Navy League (past member) NDTA (past member); International 
Traffic Managers Association (past member); Council of Logistics 
Management (past member); International Customs House Brokers and 
Freight Forwarders Association (past member); American Association of 
Port Authorities (past member).
    13. Political affiliations and activities: (a) Elected delegate to 
the Texas Republican Party Precinct & Senatorial District Conventions 
in 1992, & 2000. Elected delegate to Texas Republican Party State 
Conventions in 1992, 1996 & 2000. (b) Member the Republican Party of 
Texas and the National Republican Party. (c) $1,000 contribution to 
Bush for President, Inc., in fall of 1999.
    14. Honors and awards: (1994) US Merchant Marine Outstanding 
Professional Achievement Award; (1989) Secretary of Transportation 
``Silver Medal'' for Meritorious Achievement; (1985) Global Marine 
``President's Excellence Award'' for preventing loss of life and 
property during a severe well blowout in the North Sea.
    15. Published writings: None.
    16. Speeches: I have participated as an invited speaker at numerous 
industry functions, however, I have not delivered any ``formal 
speeches'' during the past 5 years.
    17. Selection: (a) To my knowledge, I have been chosen for this 
nomination due to my extensive experience twenty-seven (27) year 
working within the public and private sectors of the maritime industry. 
In addition, I am a graduate of the US Merchant Marine Academy (USMMA), 
and have 12 years operational experience sailing as an officer aboard 
US-flag vessels. (b) A strong US maritime industry (i.e. international 
& domestic fleets, shipyards, ports and intermodal infrastructure) is 
essential to our national defense in time of war or declared emergency. 
In addition, if the US is to maintain our position as a great 
international trading power, we must also promote and maintain our 
position as a viable maritime power. The Maritime Administration 
(MARAD) plays an instrumental role in facilitating the above 
objectives. In this regard, my background and experience affirmatively 
qualifies me to carry out the mission of MARAD as follows: In 1974, all 
graduates of the USMMA were required to fulfill a service obligation by 
sailing a minimum of four (4) years on US-flag vessels, and 
concurrently maintain a commission in the US Naval Reserve. Upon 
graduation from the USMMA, I exceeded the required service obligation 
by sailing 12 (12) years as a USCG licensed deck officer (including two 
(2) years as Master), and serving 10 years as a commissioned US Naval 
Reserve Officer. The above ``hands on'' shipboard experience will be a 
valuable asset in administering MARAD's Ready Reserve Fleet (RRF) 
functions, and effectively handling maritime labor and training issues. 
In addition, manpower projections indicate that there may be a 
significant shortage of qualified seamen to fulfill strategic sealift 
requirements during a declared national emergency. I believe that my 
first hand knowledge of ship operations will provide credible 
leadership to the MARAD staff in developing creative contingency plans 
to address the anticipated labor shortfalls. My working knowledge of 
the economics of shipboard operations is also a valuable resource in 
developing policy and strategy to increase the size of the US-flag 
commercial fleet; Many newly confirmed political appointees must 
initially allocate valuable time to familiarize themselves with their 
agency's programs, organizational staffing, and overall mission. 
However, in view of my experience working at MARAD from 1986 through 
1995,1 acquired an intimate working knowledge of all MARAD's programs. 
After confirmation, I would be able to immediately focus my attention 
on properly administering and improving the agency's programs, and 
providing direction in advising the Secretary in developing sound 
maritime policy. In addition, MARAD has been assigned certain national 
security functions during a declared national emergency. Based on my 
previous tenure at MARAD, I am completely cognizant of MARAD's national 
security functions and can provide the necessary leadership immediately 
upon confirmation; As President of International Trade & 
Transportation, Inc. (ITT), I provided specialized project consulting 
services to the major U.S. engineering, procurement and construction 
(EPC) contractors in the following key areas: Critical path logistical 
planning, Transportation risk analysis & mitigation, Marine and DSU 
insurance, Planning to insure effective utilization of available 
financial resources, Planning to insure safe and timely transportation 
of cargo, Cost-benefit analysis of available ocean and intermodal 
transportation options, US Government regulations governing foreign and 
domestic ocean transportation; Under my direction, ITT has provided the 
above consulting services to international EPC projects valued over $7 
billion dollars. The successful completion of these projects involved a 
high degree of planning and coordination between the exporter's 
procurement and transportation departments, financial institutions, 
port operations, trucking/rail providers, freight forwarders and ocean 
carriers. These projects generated approximately $50 million in revenue 
for the US-flag ocean carriers. My broad based experience in these 
areas will be a valuable asset to MARAD in developing a maritime policy 
tailored to our nation's requirements into the 21st century.

                   B. FUTURE EMPLOYMENT RELATIONSHIPS

    1. Will you sever all connections with your present employers, 
business firms, business associations or business organizations if you 
are confirmed by the Senate? Yes.
    2. Do you have any plans, commitments or agreements to pursue 
outside employment, with or without compensation, during your service 
with the government? If so, explain. No.
    3. Do you have any plans, commitments or agreements after 
completing government service to resume employment, affiliation or 
practice with your previous employer, business firm, association or 
organization? No.
    4. Has anybody made a commitment to employ your services in any 
capacity after you leave government service? No.
    5. If confirmed, do you expect to serve out your full term or until 
the next Presidential election, whichever is applicable? Yes.

                   C. POTENTIAL CONFLICTS OF INTEREST

    1. Describe all financial arrangements, deferred compensation 
agreements, and other continuing dealings with business associates, 
clients or customers. Please refer to the opinion letter of the 
Assistant General Counsel.
    2. Indicate any investments, obligations, liabilities, or other 
relationships which could involve potential conflicts of interest in 
the position to which you have been nominated. Please refer to the 
opinion letter of the Assistant General Counsel.
    3. Describe any business relationship, dealing, or financial 
transaction which you have had during the last 10 years, whether for 
yourself, on behalf of a client, or acting as an agent, that could in 
any way constitute or result in a possible conflict of interest in the 
position to which you have been nominated? Please refer to the opinion 
letter of the Assistant General Counsel.
    4. Describe any activity during the past 10 years in which you have 
engaged for the purpose of directly or indirectly influencing the 
passage, defeat or modification of any legislation or affecting the 
administration and execution of law or public policy. In 1998, I worked 
on behalf of Alaska Cargo Transport of Seattle, Washington, to re-
establish coastwise trading privileges for the US-flag offshore tug 
ENFORCER. This was successfully accomplished through special ``Chain of 
Title'' legislation introduced by the Honorable Senator Kay Bailey 
Hutchison.
    5. Explain how you will resolve any potential conflict of interest, 
including any that may be disclosed by your responses to the above 
items. (Please provide a copy of any trust or other agreements.) Please 
refer to the opinion letter of the Assistant General Counsel.
    6. Do you agree to have written opinions provided to the Committee 
by the designated agency ethics officer of the agency to which you are 
nominated and by the Office of Government Ethics concerning potential 
conflicts of interest or any legal impediments to your serving in this 
position? Yes.

                            D. LEGAL MATTERS

    1. Have you ever been disciplined or cited for a breach of ethics 
for unprofessional conduct by, or been the subject of a compliant to 
any court, administrative agency, professional association, 
disciplinary committee, or other professional group? If so, provide 
details. No.
    2. Have you ever been investigated, arrested, charged or held by 
any Federal, State, or other law enforcement authority for violation of 
any Federal, State, county, or municipal law, regulation or ordinance, 
other than a minor traffic offense? If so, provide details. No.
    3. Have you or any business of which you are or were an officer 
ever been involved as a party in interest in an administrative agency 
proceeding or civil litigation? If so, provide details? No.
    4. Have you ever been convicted (including pleas of guilty or nolo 
contendere) of any criminal violation other than a minor traffic 
offense? No.
    5. Please advise the Committee of any additional information, 
favorable or unfavorable, which you feel should be considered in 
connection with your nomination. Throughout my career in both the 
public and private maritime sectors, I have strived to maintain the 
highest ethical & legal standards. If confirmed by the Senate, I would 
endeavor to maintain these high standards for myself, senior staff, and 
the Agency as a whole.

                     E. RELATIONSHIP WITH COMMITTEE

    1. Will you ensure that your department/agency complies with 
deadlines set by congressional committees for information? Yes, to the 
best of my ability.
    2. Will you ensure that your department/agency does whatever it can 
to protect congressional witnesses and whistle blowers from reprisal 
for their testimony and disclosures? Yes, to the best of my ability.
    3. Will you cooperate in providing the committee with requested 
witnesses, to include technical experts and career employees with 
firsthand knowledge of matters of interest to the committee? Yes.
    4. Please explain how you will review regulations issued by your 
department/agency, and work closely with Congress, to ensure that such 
regulations comply with the spirit of the laws passed by Congress. Laws 
passed by the Congress represent the will of the people as expressed 
through their duly elected representatives. As such, every effort 
should be made by the department/agency to implement regulations that 
conform to the spirit and the intent of the law.
    To that end, I will establish a section in the Office of the Chief 
Counsel to review all regulations issued by the Maritime 
Administration. It will coordinate with all the subject matter branches 
of MARAD to insure that our agency has a proper understanding of the 
intent of the law, and that all regulations issued by MARAD comply with 
the provisions of the Administrative Procedure Act (APA). The 
legislative section, the Chief Counsel's office, the Secretary, Deputy 
Secretary, General Counsel, and the congressional liaison officer in my 
office, will interact with the appropriate entities in Congress to make 
certain that MARAD's regulations are being promulgated in accordance 
with the particular intent of Congress.
    It is important to note that MARAD is not the only Federal agency 
that issues regulations having an impact on U.S. maritime policy. 
Therefore, I shall work to insure that MARAD, as the Administration's 
representative for maritime policy, consults with and provides 
expertise to those agencies formulating their own regulations to be 
consistent with MARAD and DOT's policies and procedures.
    5. Describe your department/agency's current mission, major 
programs, and major operational objectives. The overall mission of the 
Maritime Administration is to promote the development and maintenance 
of an adequate, well-balanced, United States merchant marine, 
sufficient to carry the Nation's domestic waterborne commerce and a 
substantial portion of its waterborne foreign commerce, and capable of 
serving as a naval and military auxiliary in time of war or national 
emergency. MARAD also seeks to ensure that the United States enjoys 
adequate shipbuilding and repair service, efficient ports, effective 
intermodal water and land transportation systems, and reserve shipping 
capacity in time of national emergency. The major programs and 
objectives are as follows: National Security.--In view of the tragic 
events of September 11, MARAD's Office of National Security will play 
an integral role in providing the necessary auxiliary support for our 
operations overseas. This office administers all of MARAD's national 
security related programs. These programs provide commercial and 
government-owned shipping capability in times of national emergency and 
to meet Department of Defense strategic sealift requirements. The Ship 
Operations office manages and maintains the fleet of inactive, 
Governmentowned vessels in the National Defense Reserve Fleet (NDRF), 
including the Ready Reserve Force (RRF). The RRF currently has 76 
vessels. It provides a ready source of ``surge'' shipping, available 
when needed by the Department of Defense's U.S. Transportation Command 
(USTRANSCOM), to support rapid deployment of U.S. military forces. The 
National Security Planning office develops and maintains plans for 
carrying out transportation support activities for any military 
mobilizations required due to a war or a national emergency. The office 
also maintains emergency resource evaluation data; helps formulate 
international and national plans for maritime emergency and 
mobilization activities; and operates MARAD's emergency operations and 
telecommunications centers. The Sealift Support office manages the 
Maritime Security Program and the Voluntary Intermodal Sealift 
Agreement. These programs are designed to assure the availability of 
sufficient U.S. commercial sealift capability and the U.S. intermodal 
system to sustain U.S. military operations overseas in an emergency. 
This office also administers the transfer of U.S. ships to foreign 
interests, the disposal of obsolete vessels in the NDRF, and the 
transfer of vessels to states and other governmental bodies and 
qualified nongovernment parties, as required; Financial Approvals and 
Cargo Preference.--The Cargo Preference program provides the necessary 
base cargoes required to sustain a viable US-flag commercial fleet. 
This office manages the Government cargo preference program and 
conducts financial analysis and approval activities in support of a 
variety of MARAD programs, including the shipbuilding and shipyard 
modernization loan guarantee program. The MARAD cargo preference and 
financial assistance programs require current data on the cost of 
operating oceangoing ships under both U.S. and foreign flags. The 
Financial and Rate Approvals office collects and analyzes this type of 
data. The office determines `fair and reasonable' guideline shipping 
rates for Government cargoes to insure that the Government isn't 
overcharged. In addition, the office conducts financial analyses to 
support other MARAD offices in determining the financial qualifications 
of contractors and applicants for financial assistance, reviews 
contractor audit appeals, determines the financial acceptability of 
documents provided to MARAD and provides financial management services 
in support of several MARAD-administered programs. In addition to 
serving as MARAD's coordinator for all customer service activities, the 
Associate Administrator directs the Ship Operations Cooperative 
Program, a cost-shared partnership between government and industry, 
that focuses on solving common ship operations problems and developing 
products that meet the common needs of the program members; 
Shipbuilding.--This office manages several MARAD programs designed to 
support American shipbuilding. The Shipbuilding and Marine Technology 
office promotes the construction of ships in U.S. shipyards for both 
foreign and domestic trades. They seek to improve the competitive 
position of U.S. shipyards by serving as a ``think tank'' on ship 
design, ship engineering, ship construction facilities and 
technologies, and methods for reducing shipbuilding costs. The Ship 
Financing office administers the Federal Ship Financing loan guarantee 
program for ship construction and reconstruction in U.S. shipyards, and 
for U.S. shipyard modernization efforts. The office also manages the 
capital construction fund (CCF) and construction reserve fund (CRF) 
programs. These funds allow shipping companies to accumulate earnings 
over time in order to replace their U.S. flagged ships with new ships 
constructed in U.S. shipyards. The Insurance and Shipping Analysis 
office administers MARAD's marine insurance and marine war risk 
insurance activities and works with the insurance industry to 
strengthen the domestic marine insurance market; Port, Intermodal, and 
Environmental Activities.--This office manages a variety of MARAD 
programs to ensure that U.S. waterways, ports and intermodal 
connections are able to compete in the global economy of the 21'' 
Century. The Ports and Domestic Shipping office seeks to improve the 
use of U.S. ports, port facilities, and domestic shipping. The 
principal areas of concern include: coordinating domestic and 
international port activity with a variety of public and private 
entities, and creating and promoting advanced methodologies to enhance 
the competitive position of the domestic waterborne transportation 
industry. The office also identifies and demonstrates agile port and 
high-speed technologies; analyzes commodity flows and traffic patterns 
in the domestic trades; and ensures the ability of ports to operate 
effectively under emergency mobilization conditions. The Intermodal 
Development office promotes the development and improved utilization of 
marine-related intermodal transportation systems and provides technical 
assistance to other agencies and to organizations concerned with 
intermodal development. The primary areas of emphasis include improving 
intermodal access to ports, and conducting pilot projects to 
demonstrate improved techniques or technologies that will enhance 
intermodal transportation. The Office of Environmental Activities 
develops and coordinates MARAD's environmental activities. The primary 
areas of concern to MARAD include improving the control and abatement 
of ship-generated pollution, and helping to eliminate environmental 
problems at U.S. ports and MARAD-operated facilities; Policy and 
International Trade.--This office assists the Maritime Administrator in 
developing MARAD's strategic and performance plans, conducts studies 
and evaluations of MARAD programs, supports the Administrator's 
negotiation of multilateral and bilateral maritime agreements, and 
conducts statistical and economic analyses of the shipping industry. 
Recent legislation requires Government agencies to create and use 
strategic and performance plans. The Office of Policy and Plans serves 
as the focal point for these planning activities as well as for program 
evaluations. The office also prepares general policy papers and reviews 
proposed legislation and regulations to determine their impact on the 
Government's maritime policies. MARAD participates in a wide variety of 
international activities concerned with shipping matters. The 
International Activities office analyzes foreign economic and political 
developments that may affect U.S. shipping and maritime industry 
interests; identifies and establishes contact with U.S. and foreign 
government and maritime industry representatives, and the principal 
international governmental and private organizations concerned with 
shipping matters. It also develops MARAD policy positions on 
international activities of interest to the U.S. maritime industry and 
takes action to present the U.S. Government's position in these 
matters. The office also serves as Executive Secretary for coordinating 
all matters pertaining to maritime bilateral agreements and related 
negotiations with foreign governments and international organizations. 
The Statistical and Economic Analysis office procures, maintains and 
disseminates highquality, timely and consistent trade, vessel and 
related data; assists maritime data users to define their needs; and 
provides responsive data support at the lowest possible cost. In 
partnership with the U.S. Army Corps of Engineers, the office produces 
the official monthly U.S. Foreign Waterborne Transportation Statistics. 
It also produces economic analyses, principally in-depth market reviews 
of the major industry segments, and informative maritime system reports 
to support other MARAD offices in their program responsibilities, 
policy analysis and informed decisionmaking.
    6. Are you willing to appear and testify before any duly 
constituted committee of the Congress on such occasions as you may be 
reasonably requested to do so? Yes.

                  F. GENERAL QUALIFICATIONS AND VIEWS

    1. How have your previous professional experience and education 
qualifies you for the position for which you have been nominated. My 
degree from the US Merchant Marine Academy (USMMA) has provided the 
initial tools and a solid foundation to pursue an active career in the 
maritime industry. During my 20 seven (27) year career within the 
maritime industry, I have made every effort to exemplify the highest 
tradition of the USMMA Corps which is embodied by our motto ``Acta Non 
Verba'' (i.e. Deeds Not Words). The Maritime Administrator advises and 
assists the Secretary of Transportation on commercial maritime matters, 
the U.S. maritime industry, and strategic sealift. My comprehensive 
maritime experience provides the necessary background to advise the 
Secretary in all matters related to the maritime industry and strategic 
sealift requirements. In view of my 20 seven (27) year career working 
directly with all segments of the industry, I will be in a strong 
position to provide assistance to the Secretary in developing sound 
maritime policy tailored to our nation's requirements into the 21St 
century. The Administrator also serves as the Director of the National 
Shipping Authority when the President has declared a national 
emergency. This specific responsibility is especially critical at this 
time. In this regard, my previous experience administering MARAD's 
national security responsibilities in the field during Operation Desert 
Shield/Desert Storm has given me the necessary ``first hand'' knowledge 
to properly execute the functions of the National Shipping Authority 
(when authorized). In addition, my 12 (12) years active ship 
operational experience has provided the necessary qualifications to 
advise the Secretary on strategic sealift requirements. The Maritime 
Administrator maintains liaison with public and private organizations 
concerned with the U.S. maritime industry. Working as an 
internationally recognized maritime industry consultant has provided 
the opportunity to work directly with virtually all segments of the 
industry. These industry segments include foreign & domestic carriers, 
shippers, freight forwarders, shipyards, trade organizations, maritime 
labor interest, ports, and various government entities. In addition, I 
have five (5) years experience working in the capacity as MARAD's 
regional liaison to the public and private organizations concerned with 
the U.S. maritime industry in the SW United States. As the U.S. 
maritime policy advisor to the Secretary, the Administrator also 
maintains contact with international maritime groups, conducts 
negotiations, and maintains effective relations with other agencies of 
the Federal Government and the public. My previous tenure at MARAD 
involved preparing trade statistics and analysis to insure compliance 
with maritime bilateral trade agreements. Over the last 15 (15) years, 
I have also actively participated in industry trade associations, 
international negotiations related to project activity, and was 
assigned to various interagency working groups. My consulting activity 
required communications, negotiations, and interactions with 
international entities in twenty-one (21) different countries.
    2. Why do you wish to serve in the position for which you have been 
nominated? There is no greater honor than to serve our President, the 
Secretary and country in these challenging times. Prior to the tragic 
events of September 11, my overall objectives, were to provide 
leadership in developing effective maritime policy, and improving 
employee moral at MARAD. Subsequent to the attack on America, it has 
become a priority to ensure that the military has sufficient strategic 
sealift to fulfill upcoming mission requirements. To this end, I will 
devote all my time, energy and resources to accomplish these 
objectives.
    3. What goals have you established for your first 2 years in this 
position, if confirmed? If confirmed by the Senate, I have established 
the following specific goals within the first 2 years in this position: 
Develop a consensus between the Department of Defense, US-flag 
carriers, maritime labor, Congress and. the Administration for renewal 
of the Maritime Security Program sufficient to meet our national 
security requirements; Provide recommendations to the Secretary of 
Transportation on developing policy furthering the domestic Maritime 
Transportation System initiative; With regards to the negotiations of 
Bilateral Maritime Agreements, provide counsel to the Secretary of 
Transportation that accurately reflects the best interest of the US 
maritime industry; Over the last 10 years, there has been an 
unprecedented decline in US-flag breakbulk tonnage. Over the next 2 
years I will work diligently with industry and labor to encourage new 
US-flag breakbulk tonnage to enter the commercial market. The new US-
flag breakbulk tonnage would also represent valuable additional assets 
to our strategic sealift; MARAD is the promotional agency for the US 
Maritime Industry. To this end, I am committed to managing the agency's 
staff and resources in a way that provides the best value to the 
industry; Develop an environmentally sound and economically viable 
action plan to dispose the vessels in the National Defense Reserve 
Fleet; As the official advocacy agency responsible for US maritime 
policy, I will ensure that MARAD provides the necessary assistance to 
other US government agencies that may be engaged in developing 
policies, legislative initiatives or regulations that have an impact on 
the maritime industry.
    4. What skills do you believe you may be lacking which may be 
necessary to successfully carry out this position? What steps can be 
taken to obtain those skills? I will rely on senior MARAD/DOT staff to 
advise the proper protocol in working with the legislative branch.
    5. Who are the stakeholders in the work of this agency? Congress 
and the maritime industry represented by US-flag carriers, shipyards, 
ports, intermodal transportation providers, shippers and trade 
associations. In addition, those who labor in this crucial area. The US 
armed forces, and the people they protect--our fellow citizens.
    6. What is the proper relationship between your position, if 
confirmed, and the stakeholders identified in question No. 10. The 
Maritime Administrator is the official spokesperson for US maritime 
policy. As such, I will insure that the relationship with the 
stakeholders, my actions, as well as MARAD's employees are consistent 
with the highest legal and ethical government practices. As is the case 
with any agency of government, MARAD has the highest responsibility to 
maintain the economic well being and security of the American people.
    7 The Chief Financial Officers Act requires all government 
departments and agencies to develop sound financial management 
practices similar to those practiced in the private sector. (a) What do 
you believe are your responsibilities, if confirmed, to ensure that 
your agency has proper management and accounting controls? My 
responsibilities are absolutely clear. They include the need to seek 
out and draw upon the assets available within the agency itself, the 
Transportation Department, OMB, and, where appropriate, the private 
sector to make sure the Maritime Administration has the most precise, 
accurate, and effective management and accounting controls possible. 
(b) What experience do you have in managing a large organization? I 
have two (2) years experience managing the overall safe, legal and 
efficient operations of Mobile Offshore Drilling Units operating in the 
UK sector of the North Sea. Each unit utilized as many as 100 
multinational employees. The North Sea represented one of the harshest 
marine environments in the world in which a high degree of management 
and leadership skills was required. In my consulting capacity, I have 
provided management expertise for international projects valued over $7 
billion dollars within 21 different countries. I was required to 
simultaneously provide these management and consulting services for 
several different projects at the same time. The successful completion 
of these projects involved a high degree of planning and coordination 
between several departments including procurement, transportation, 
finance, port operators trucking/rail providers, freight forwarders and 
ocean carriers. I believe this experience constitutes the management of 
``large organizations'' for the purpose of this question.
    8. The Government Performance and Results Act requires all 
government departments and agencies to identify measurable performance 
goals and to report to Congress on their success in achieving these 
goals. (a) Please discuss what you believe to be the benefits of 
identifying performance goals and reporting on your progress in 
achieving those goals. The private sector operates on the principle of 
identifying measurable goals, and institution of accountability to 
insure that reasonable progress has been made in achieving those goals. 
The American people should expect the same high performance standards 
from their Government, and report to Congress their success in 
achieving measurable performance goals. (b) What steps should Congress 
consider taking when an agency fails to achieve its performance goals? 
Should these steps include the elimination, privatization, downsizing 
or consolidation of departments and/or programs? The oversight role of 
the Congress in assuring that all agencies meet the highest standard is 
of crucial importance in seeing that the American people get full value 
for their tax dollar. While the remedial steps the Congress might take 
when any agency falls short of this goal will of necessity vary to meet 
the needs of the specific situation, these steps should be accomplished 
quickly to assure that the public interest is well served. There is no 
question but that these steps could include everything mentioned above, 
simply because some functions of the Federal Government may have 
outlived their original purpose. (c) What performance goals do you 
believe should be applicable to your personal performance, if 
confirmed? If confirmed, my personal performance should be directly 
related to my ability to provide effective leadership to accomplish the 
overall mission and strategic goals of the Maritime Administration. To 
this end, I would be committed to maximize the resources of the agency 
to achieve these goals. My personal performance should also be measured 
by my ability to maintain the highest ethical & legal standards for 
myself, senior staff, and the agency as a whole.
    9. Please describe your philosophy of supervisor/employee 
relationships. Generally, what supervisory model do you follow? Have 
any employee complaints been brought against you? The supervisor should 
provide leadership by example, and be accessible to his/her employees. 
Whenever possible, the supervisor should always provide the best tools 
and resources available to perform a particular task, and should not 
assign responsibilities that they are not willing to perform 
themselves. The supervisor should consistently encourage and reward 
his/her employees for a job well done, and provide guidance and 
constructive direction when job performance requires improvement. I 
generally try to follow the ``supervisory model'' as exemplified by the 
leadership skills demonstrated by the great Antarctic explorer Sir 
Earnest Shackleton [Shackleton's Way, Margot Morrell and Stephanie 
Capparell]. I have never had any employee complaints brought against 
me.
    10. Describe your working relationship, if any, with the Congress. 
Does your professional experience include working with committees of 
Congress? If yes, please describe. Except as noted in question C(4), I 
have not had any significant previous relationship working with the 
Congress.
    11. Please explain what you believe to be the proper relationship 
between yourself, if confirmed, and the Inspector General of your 
department/agency. As head of MARAD, I will ensure the fullest 
cooperation between my agency and the Inspector General with regards to 
any periodic audits, or investigations into allegations of fraud, waste 
or abuse.
    12. Please explain how you will work with this Committee and other 
stakeholders to ensure that regulations issued by your department/
agency comply with the spirit of the laws passed by Congress. I will 
establish a section in the Office of the Chief Counsel to review all 
regulations issued by the Maritime Administration. It will coordinate 
with all the subject matter branches of MARAD to insure that our agency 
has a proper understanding of the spirit of the law, and that all 
regulations issued by MARAD comply with the provisions of the 
Administrative Procedure Act (APA). The legislative section of MARAD, 
and the General Counsel's office, will interact with the appropriate 
entities in Congress to make certain that MARAD's regulations are being 
promulgated in accordance with the particular intent of Congress.
    13. In the areas under the department/agency's jurisdiction, what 
legislative action(s) should Congress consider as priorities? Please 
State your personal views. Under MARAD's jurisdiction, I consider the 
following legislative actions a priority: Continued annual 
appropriations of the Maritime Security Program (MSP) until the program 
expires in 2005. Prior to the program's expiration, I will strive to 
achieve a consensus among the stakeholders for a revised MSP sufficient 
to meet our national security requirements; U.S. flag carriers operate 
under a significant disadvantage compared to their foreignflag 
competition because foreign ship operators pay little or no taxes and 
their vessels are not subject to the same health, labor, and 
environmental standards as U.S.registered vessels. There are currently 
ongoing efforts by Congress and the industry to reform the U.S. tax 
code, including a tax alternative similar to the ``tonnage tax'' regime 
successfully utilized by many European nations. In addition, to 
encourage and retain an adequate seagoing labor base, tax code 
revisions (to IRC Section 911) have been introduced in Congress that 
would exempt a portion of U.S. seamen's income earned while working 
outside the U.S. As the advocacy agency responsible for U.S. maritime 
policy, I would wish to see our agency evaluate and participate in any 
efforts, such as these initiatives, that would level the playing field 
for U.S.-flag carriers; The Administration and Congress should work 
together to develop legislation and policy to further the domestic 
Maritime Transportation System initiative. These efforts will be 
required to meet our nation's domestic transportation needs to support 
our economy well into the 21St Century.
    14. Within your area of control, will you pledge to develop and 
implement a system that allocates discretionary spending based on 
national priorities determined in an open fashion on a set of 
established criteria? If not, please State why. If yes, please State 
what steps you intend to take and a timeframe for their implementation. 
Striving to keep within the high standards, goals and budget parameters 
of the Maritime Administration (MARAD), I will see that my agency 
develops a system that allocates discretionary spending based on 
national priorities and conforming to the statutory intent of Congress. 
To this end, I will delegate senior MARAD staff within the agency's 
budget (financial) office the task of examining all expenditures to 
ensure that our discretionary spending is based on national priorities. 
This will, of course, be accomplished within the open budget process 
and in accordance with pertinent criteria developed and used by the 
staff delegated this responsibility.
                                 ______
                                 
                                                   October 19, 2001
Rosalind A. Knapp
Designated Agency Ethics Official
U.S. Department of Transportation
Washington, DC.

Dear Ms. Knapp:

    The purpose of this letter is to describe the steps that I intend 
to take to avoid any actual or apparent conflict of interest in the 
event that I am confirmed for the position of Administrator, Maritime 
Administration, at the Department of Transportation.
    Upon confirmation, I will resign my position as President of 
International Trade & Transportation (ITT) Inc., Pinehurst, Texas. 
Also, I will divest my ownership interest in ITT, Inc., by transferring 
my interest to my spouse. In addition, my Simplified Employee Pension 
Plan with ITT, Inc., terminates upon my resignation from ITT, Inc.
    My spouse and I are the only employees in ITT, Inc. I provide 
consulting services to shippers and carriers. These services would end 
upon my resignation from ITT, Inc. My spouse operates a business 
information service for shippers and other organizations with 
international business interests. This service provides weekly market 
related information to subscribers. Accordingly, pursuant to 18 U.S.C. 
Sec. 208, I will not participate personally and substantially in any 
particular matter that will have a direct and predictable effect on the 
financial interests of ITT, Inc., unless I first obtain a written 
waiver or qualify for a regulatory exemption. Pursuant to 5 C.F.R. 
Sec. 2635.502, for a period of one year after I provided services to a 
former client, I will not participate in any particular matters 
involving specific parties in which any of my former clients is a party 
or represents a party, unless I am authorized to participate.
    As a former employee of Reynolds Metal Company, I am a participant 
in the Alcoa, Inc., defined benefit retirement pension plan. Therefore, 
I will not participate personally and substantially in any particular 
matter that will have a direct and predictable effect on the ability or 
willingness of Alcoa, Inc., to provide this contractual benefit unless 
I first obtain a written waiver or qualify for a regulatory exemption.
    Upon confirmation, I will resign my position as Vice President of 
the Interscholastic Hockey Association, Inc., Spring, Texas.
        Sincerely,
                                        William G. Schubert

    Senator Breaux. Thank you very much, Captain. I am glad to 
hear your statement. It is strong and it is very positive.
    Obviously, I would not expect you to be saying anything 
else.
    You are not going to come up here and say, I do not know 
anything about ships, I am not for an American fleet, and I am 
not for an American flag, I am not for American seamen. So we 
are starting in the right direction.
    But we want to make sure, and I think you are that type of 
person, that it is more than words. It has got to be a real 
commitment, that you know this is an opportunity for you, it is 
an opportunity for this country, because you have a great 
challenge and every challenge presents great opportunities if 
we accept them.
    I think it is going to be really important. You are the 
voice of the maritime industry. Norm Mineta, the Secretary, a 
good friend of mine, former colleague of mine, he was happy 
when I left the House because it moved him up one seat and he 
became Chairman of the Public Works and Transportation 
Committee. He was one of my most enthusiastic backers to run 
for the Senate, so he could become Chairman of the Public Works 
Committee in the House, and now he is Secretary of the 
Department.
    But he has got a lot of other things on his plate, and 
there has got to be a voice that nags at him constantly. You 
have got to be the nagger for the oceans, the nagger for the 
maritime industry, and the nagger for the programs, because 
nobody else is going to be the advocate over there.
    Mr. Schubert. I understand that, Mr. Chairman, and I would 
like to for the record just remind yourself and the Committee 
that the motto of the U.S. Merchant Marine Academy is ``Acta 
non verba,'' which means ``Deeds, not words.'' I have tried to 
live my 27-year career in the maritime industry with that in 
mind.
    Senator Breaux. Let me ask a couple of questions that deal 
with where we are. The maritime transportation system, the 
Department of Transportation did a recent report that talked 
about the fantastic growth in the maritime trade worldwide, but 
at the same time they spoke of the rapid decrease in capacity 
that we have. So on the one hand the maritime trade worldwide 
is really increasing, but the U.S.'s ability to participate in 
that is decreasing in the sense that we are rapidly running out 
of ships, they are becoming older, more aged, and being 
retired.
    What are your thoughts about that problem? What do we do? 
Do we just say, all right, we will have all the trade in the 
world, we will ship everything, but we will just ship it on 
tankers from Third World countries under flags of convenience? 
What do we do?
    Mr. Schubert. Mr. Chairman, before I attempt to answer that 
question, I would like to give a personal perspective. I have 
had, as I said before, 27 years in the maritime industry and 12 
years actually sailing on U.S. flag ships. Also I have five 
members of my own immediate family that have chosen the 
honorable profession of going to sea.
    I have a grandchild which is about 3 years old now and I 
sincerely hope that we have a U.S. flag merchant marine, that 
he can choose to go to sea and follow in our footsteps. He has 
to have ships to do that. So I mention this only because this 
job, it is an honor to serve the President and people with 
exceptional leadership like Secretary Mineta, but it is more--
the task of rebuilding the U.S. flag merchant marine, at least 
to me, is more of a mission. It is in my blood. I could not, I 
guess, express it any better than that. It is important to me, 
and I wanted you and everybody else to know that.
    Unfortunately, the U.S. flag today--you cannot expect U.S. 
flag carriers to operate ships if it is not profitable to do 
so. So from the Administration's point of view and also working 
closely with this Committee, we have to develop sound maritime 
policy that will make it economical for vessels to operate in 
the U.S. flag. It is really that simple.
    I am committed, Mr. Chairman, to working with this 
Committee to develop sound maritime policy that will accomplish 
that.
    Senator Breaux. Suppose the Office of Management and Budget 
Director Mitch Daniels calls you up and says: Bill, come down; 
I want to talk to you about Title 11; I want you to go down to 
the White House and sit with the President and tell him what 
you think about it; I have recommended that it be zero-funded. 
You go in the Oval Office and President Bush says: Captain, I 
am trying to get rid of this maritime program called Title 11; 
what should I do?
    Mr. Schubert. Well, first of all, I am a very strong 
advocate of the U.S. shipbuilding industry and I understand the 
concerns that they have and the need to renew and to modernize 
many of our yards. I could just promise you this: that I would 
be a strong advocate for the industry. That includes labor and 
all the stakeholders in this regard. I will make the best 
arguments that I can for the industry.
    Senator Breaux. Well, what would those arguments be? Would 
you tell him that--what would you tell him about how it has 
worked?
    Mr. Schubert. Well, this is somewhat of a difficult 
question to answer.
    Senator Breaux. I think it is real easy.
    Mr. Schubert. Well, it is easy, but the Administration's 
position, as you know, Mr. Chairman, is currently that the 
Title 11 program needs to be zeroed out.
    Senator Breaux. I understand. That is why I phrased the 
question, if the President calls you in and says, Captain, what 
do you think about this program.
    Mr. Schubert. Well, I would respectfully, Mr. Chairman, 
given the fact that the official position of the Administration 
is that the Title 11 program has to be zeroed out, I would have 
to answer your question by saying that I have to support the 
President's position.
    Senator Breaux. We have got to get into more detail on 
this. My question to you is if the President says, Captain, 
what do you think about the Title 11 program, am I right or am 
I wrong? Are you just going to be a yes person and say, yes, 
sir, you are right?
    Mr. Schubert. No, sir.
    Senator Breaux. What would you tell him?
    Mr. Schubert. I would definitely not be a yes person and 
anybody that knows me personally would----
    Senator Breaux. So he asks you for your opinion of it.
    That is what I am trying to get. What would you tell the 
President? He is going to want some advice. If he only listens 
to people that are landlubbers, they are going to say zero it 
out, it is not needed. I want somebody can say why he should 
keep it.
    Mr. Schubert. Well, instead of just making a statement we 
should keep it, I think what we need to do is do some cost-
benefit analysis that would be really reflective of the way the 
industry is and especially the competition that we have in 
foreign yards, with the tremendous amount of subsidies that 
they receive.
    I think that we could put together a very credible cost-
benefit analysis of the shipbuilding industry and their needs 
and requirements. I would as the Administrator, if confirmed, 
would make that a priority. It will not be just--I will not be 
a yes man. I will make very strong arguments.
    Let us face it, the Title 11 program is historically since 
1994, has had a 3 percent default rate, which compared to the 
small business loan program, which is around 12 to 13 percent, 
stacks up pretty good. But I do believe that there are 
improvements that can be made in how the program is 
administered, and that will be a priority for me. I am speaking 
for the next year, because it does look like there is funding 
in the program. And I will commit that the program is run 
wisely and we use our government assets wisely.
    Senator Breaux. Well, I know you are trying to dance on 
this thing and I understand. You have to support the 
Administration's position.
    Mr. Schubert. Correct.
    Senator Breaux. If they say eliminate it and that is my 
final decision, you have to carry out those recommendations.
    But in reaching those recommendations and deciding on those 
positions, if they call you and ask you what do you think, I 
would hope that the person in charge of the Maritime 
Administration would be in a position to advocate a program 
that I think Congress has always said is important and has been 
successful.
    Because let me tell you, if you do not advocate it there 
ain't going to be nobody else down there. You are it. For the 
maritime, we do not have anybody else that is higher up dealing 
with ships and the maritime industry than you are going to be. 
So we have to depend on you for making arguments as to why we 
should have programs that help these areas, because if you do 
not there is not going to be anybody else there that will. You 
are it.
    Mr. Schubert. Mr. Chairman, I hope that my previous comment 
about my background in the industry and how it has been my 
lifeblood for 27 years would be I think sufficient to at least 
represent to you that I will be an advocate for the maritime 
industry.
    Senator Breaux. I accept that and want to give you all the 
help you can and give you all the support you can in making 
those arguments. But a lot of times you are going to be the 
only one in the room that is going to have the opportunity to 
speak aggressively for this industry and we are counting on you 
to do that.
    There is another area that I have become increasingly 
concerned with. It is the amount of money that the industry 
contributes and does not get back. If you look at the programs 
that are trust fund programs that we have, we have a trust fund 
for the highway program. You pay your gas tax, 100 percent of 
it goes into the trust fund and it is used for things that are 
important to people who pay the tax.
    In this industry it is not that way. You have got an 
aviation trust fund, dollar in, dollar out; highway trust fund, 
dollar in, dollar out. It is for airlines, airports, etcetera; 
it is for highways, roads, etcetera. But the maritime industry, 
according to some of the earlier figures that I have seen, is 
contributing through taxes about $22 billion annually, $22 
billion, and we are getting back about $5 billion.
    So if you look at what we are doing with things that fly, 
things that are on roads, they get back what they put in. But 
this industry is significantly different in that people who 
ship things, who pay fees and taxes, fuel taxes and taxes for 
the intercoastal waterways, inland waterways, the customs 
duties--and what else?
    See how important the staff is. Remember that, Bill?
    What else? The tonnage tax. If you add up all these various 
taxes that are paid for the maritime industry, we are not 
getting back anywhere anything that compares with what these 
other areas are getting. It is something I want to really 
concentrate on. That is legislation. What happens is because we 
have allowed this to happen.
    But when you kick in $22 billion and you only get back $5 
billion, something is wrong, because in aviation it is not like 
that, in highways and roads it is not like that. So do you have 
any thoughts about that, any suggestions? Maybe not now. You 
did not know I was going to ask this question. But what do you 
think?
    Mr. Schubert. I think this is part of--your question kind 
of lends itself to even a larger issue, which is that most 
Americans are not aware of the size and the overall impact of 
the maritime industry on our economy. Even living in a place 
like Houston, which is a major metropolitan area, there is a 
lot of people that you could talk to on the street that might 
not even be aware that there is a port in the city of Houston.
    For example, the maritime industry contributes----
    Senator Breaux. It is not as good as the port in New 
Orleans.
    Mr. Schubert. Well, I was not ranking the ports, Mr.
    Chairman I just was making a point that there needs to be a 
greater awareness of what the maritime industry does contribute 
to the economy. Just for an example, these are numbers that I 
came across recently, that the maritime industry contributes 
approximately $742 billion annually to our U.S. GDP. That is a 
significant amount of money.
    Ninety-five percent of our annual foreign commerce moves in 
ships through our ports. I think that, unfortunately, there is 
a lot of Americans that just are not aware of that.
    But to answer your question, I am sure you are aware that 
Secretary Mineta has been talking about TEA-21 in the overall 
scope of the meeting transportation system. Now, I view this 
initiative that he has as it is not just transportation policy 
to relieve our congested corridors or make better use of our 
inland waterways, but it is also an energy policy. I think we 
can sell it as an energy policy, because obviously if you are 
moving--I am just picking it out of the air--5,500 trucks in 
some sort of way on the intermodal system, you are not 
relieving congestion, but you are saving energy at the same 
time.
    I also believe that this initiative is a very effective 
environmental policy and I think we can sell that, too, with 
very credible numbers. With less trucks--and we are not 
displacing trucks, by the way, because with the growth expected 
to be 100 to 200 percent of our trade in the next 10 years or 
so, we are not displacing trucks. We are just making better use 
of our infrastructure.
    But from an environmental point of view, we are taking 
trucks that are, let us say, adding to the hydrocarbons in the 
air and we are taking them off the road. So I think there is a 
lot of reasons to look at a TEA-21 or an NTS initiative.
    As you probably are aware, Secretary Mineta has convened an 
NTS National Advisory Board and they very soon will be making 
some very credible recommendations to Secretary Mineta, which 
will be the basis for a TEA-21 legislative initiative, I 
believe.
    Senator Breaux. Are you part of that at all?
    Mr. Schubert. The NTS national Advisory Board? No, I am 
not. I am not yet, but I will be very soon.
    Senator Breaux. As Administrator you would be?
    Mr. Schubert. As Administrator I would be.
    Senator Breaux. I just wanted to make sure you were in the 
room.
    Mr. Schubert. Yes, I will be. I would like to say that 
issues like this--I will not delegate important things like 
this to just staff members. I have an interest in this myself. 
I will be there actively participating, contributing.
    Senator Breaux. I would like you to raise the point that I 
raised. We are going to raise it and I really would like to 
work cooperatively with the Administration to see whether we 
cannot get a more reflective and balanced system for money 
contributed from this industry and getting it back, in terms of 
whether it is seaport security or whether it is in terms of 
port development or whether it is in terms of U.S. maritime 
fleet expansion.
    We are giving up a lot and we are getting back only a 
fraction of what we contribute. You know, I think a lot of 
people think that, well, all these tonnage taxes and all these 
other things are coming right back to the industry, and it is 
really not. It is going in other places. I think that is not 
how it is in all those other trust funds. This is something to 
raise and we are going to be doing more about it.
    Just give me a statement on your thoughts about the Jones 
Act.
    Mr. Schubert. I am 100 percent in support. Not only myself, 
but the President has issued previous statements in support of 
maintaining the Jones Act or, better known, our cabotage laws. 
I cannot say any more than that. It is black and white.
    Senator Breaux. I think we have just about covered it. 
There are some grave challenges out there. I think that you 
uniquely bring some qualifications to this job that are in 
keeping with what this Committee and this Congress wants to see 
in a Maritime Administration. I congratulate the President for 
nominating you.
    I will tell you a little side story. My daughter works with 
a law firm in New Orleans and called me yesterday, because I am 
in the Hart Building--well, I am not really in the Hart 
Building. I am supposed to be in the Hart Building, but the 
Hart Building is closed, so we have not been getting all of the 
mail. One of the clients in their law firm has written a very 
strong letter of support to me on your behalf, asking that I 
support you for Maritime Administrator. Since we had not 
responded because we had not gotten the letter, they got my 
daughter to call me and to say----
    Mr. Schubert. I see what it takes, Mr. Chairman.
    Senator Breaux. That is it. I tell you, when your daughter 
calls you have got to call her back. I thought she was calling 
asking for money, but she was calling to ask me to support your 
nomination.
    I said, ``Well, call the people back and tell them not only 
am I supporting it, I am chairing the confirmation hearing, so 
you are in really good shape''.
    So thank you for being with us. Thank your family for being 
here. Thanks, Senator Brock, for being your brother-in-law and 
being supportive, as well.
    With that, we hope that this Committee will--I would 
imagine we will try and have something off the floor whereby we 
will report this nomination and get it to the floor so you can 
get to work, Captain, and good sailing.
    Thank you.
    [The prepared statement of Senator John McCain follows:]

     Prepared Statement Hon. John McCain, U.S. Senator from Arizona

    Good Morning. I want to thank Chairman Hollings for moving swiftly 
in scheduling this nomination hearing. I know the Administration, and 
in particular, Captain Schubert, are very appreciative of our 
Chairman's leadership.
    The primary mission of the Maritime Administration (MARAD) is to 
promote the United States merchant marine and ensure that our nation 
has a merchant fleet capable of carrying the Nation's waterborne 
commerce and sufficient to meet our needs during time of war or 
national emergency. MARAD is also responsible for promoting U.S. 
shipbuilding. While MARAD's mission is simply stated, it is no easy 
task. I appreciate Captain Schubert's willingness to serve as its 
Administrator.
    As part of its mission, MARAD operates various promotion programs 
such as the Maritime Security Program, the Title XI Loan Guarantee 
Program, and the U.S. Merchant Marine Academy, which I note Captain 
Schubert is a graduate. MARAD also maintains the Ready Reserve Force 
sealift vessels. These diverse programs and others present a wide range 
of challenges for the Administrator, who is tasked with providing firm 
management polices for these programs, as well as providing day-to-day 
supervision of MARAD staff activities.
    Given the importance of maritime in our international commerce and 
its potential impact on our nation's security, MARAD and its 
Administrator play an important role in the federal government. On a 
number of occasions during the last century, our nation appeared to 
forget the key role maritime transportation has in ensuring our 
economic independence and our national security. Only the great build-
ups of our merchant fleet during time of war kept the U.S. a maritime 
power.
    The U.S. maritime industry today faces great challenges both in the 
domestic and international trade. Over the last decade the makeup of 
the U.S. merchant fleet has changed dramatically. Domestic carriers, 
faced with sky-high shipbuilding cost, have refused to replace vessels. 
International carriers have fled burdensome over regulation and 
anticompetitive corperate treatment under the U.S. flag for flags of 
other nations. These changes have occurred despite the numerous support 
programs administered by MARAD.
    The greatest task ahead of the next Administrator of MARAD maybe 
determining why these programs have failed in their purpose of building 
a strong and self-supportive merchant fleet. I want to take this 
opportunity to point out some of the risk associated with support 
programs.
    In 1999, the Maritime Administration (MARAD) approved a Title XI 
loan guarantee for American Classic Voyages, Co. (AMCV) for the 
construction of two cruise ships for service in the Hawaiian trade. The 
principal and interest amount presently outstanding is approximately 
$185 million. Additionally, MARAD approved other Title XI loan 
guarantees for American Classic Voyages on smaller coastal cruise 
vessels with the current principal and interest amount outstanding of 
approximately $182 million--for a total outstanding loan guarantee 
balance of $367 million.
    On October 19, 2001, American Classic Voyages voluntarily filed a 
petition for reorganization under Chapter 11 of the U.S. Bankruptcy 
Code leaving the tax payer holding the bag for the total of $367 
million. While it is unclear at this time what the total loss to the 
American taxpayer will be, one thing is very clear: the Title XI loan 
guarantee program is in serious trouble. In addition to the current 
problems with American Classic Voyages, the Title XI program has 
already cost taxpayers more than $78.1 million this year alone due to 
the default of the Searex project.
    Currently, the Title XI program has an outstanding loan guarantee 
portfolio of approximately $4.7 billion consisting of 86 projects 
covering more than 100 vessels, several hundred barges, and seven 
shipyard modernization projects. What that means is that the American 
taxpayer could, as happened in the 1980's, be burdened with billions of 
dollars in debt if an industry downturn occurs. With that much at risk, 
I think we owe it to the American taxpayers to do all we can to ensure 
that this program, and all support programs as a matter of policy, have 
oversight that adequately protects the interest of the taxpayer.
    I know Captain Schubert was personally responsible for the 
liquidation of many of the assets acquired as a result of heavy 
defaults in the 1980's, and I hope his leadership at MARAD will prevent 
you having to repeat those liquidation sales.
    Our nation maritime history has dimmed in recent years due to a 
dependence on government programs that do not foster a progressive and 
competitive attitude in what is clearly become a global market. As 
Administrator, it will be your job to set a new course for the U.S. 
maritime industry.
    I congratulate Captain Schubert on his nomination. I look forward 
to working with you knowing that MARAD is gaining a knowledgeable and 
capable leader.

    [Whereupon, at 10:32 a.m., the Committee was adjourned.]

                            A P P E N D I X

      Response to Written Questions Submitted by Hon. John McCain 
                         to William G. Schubert

    Question 1. Captain Schubert, as you may be aware, the Maritime 
Administration has granted a loan guarantee for the construction of two 
large passenger vessels to American Classic Voyages. As I pointed out 
in my opening statement, American Classic Voyages has filed bankruptcy 
leaving the taxpayer holding the bag for $367 million total. In 
response to my request, the Department of Transportation Inspector 
General will audit the Maritime Administration's Title XI shipbuilding 
loan guaranty program. The investigation also will review Title XI to 
make sure ``procedures are adequate and effectively implemented in 
order to protect the interests of the United States,'' according to 
Thomas Howard, deputy inspector general. If you are confirmed as 
Maritime Administrator, what initiative will you implement to increase 
oversight of the Title XI program and ensure it is protected?
    Answer. I am mindful of MARAD's fiduciary responsibilities to the 
taxpayers and will seek to improve the oversight of the Title XI due 
diligence process as necessary. For this reason, I welcome the 
Inspector General's review of the Title XI program. After the review is 
completed, I will implement appropriate initiatives based on the 
Inspector General's recommendations so that the taxpayers' interests 
are protected. In addition, I intend to conduct my own internal review 
of the program to evaluate other possible initiatives to improve 
program operations and oversight.
    Question 2. What can and should be done to address the relatively 
high operational costs of American-flagged maritime carriers? Do you 
support subsidies to offset the high costs of these operations? If so, 
why? If not, why not?
    Answer. Over the last six (6) years, I have participated in three 
(3) private sector feasibility studies that involved re-flagging new 
tonnage into the US-flag fleet for specific markets. As such, I have 
first hand knowledge of economic realities of operating US-flag vessels 
in the international trade. The cost of US-flag vessel operations 
reflects America's high standard of living and its business-operating 
environment. This includes our Nation's tax laws, employment standards, 
labor laws, environmental protection laws, as well as ship construction 
and USCG requirements. Our US-flag fleet must compete against 
shipowners operating in low cost countries, including ``open registry'' 
or ``flag of convenience'' countries such as Panama, Liberia, or Malta, 
which are essentially tax-havens that have minimal standards for vessel 
operations. Indeed, the merchant fleets of all traditional maritime 
countries with high living standards, regulatory standards, and tax 
rates (such as those in the European Union and Japan) have been in 
serious decline as a result of the same cost and regulatory 
disadvantages that face the US-flag fleet.
    I have never supported subsidy regimes such as the ``Operating-
Differential Subsidy'' program that failed to promote the efficient 
operation of US-flag vessels. However, programs such as the Maritime 
Security Program/Voluntary Intermodal Sealift Agreement, and cargo 
preference provide important benefits to our economic and national 
security by ensuring the availability of a US-flag privately-owned 
merchant fleet to carry U.S. domestic and international waterborne 
commerce. This fleet also enhances our nation's sealift capability to 
meet the unique responsibility of the United States as the world's only 
military superpower. I will strive to develop a consensus among the 
Department of Defense, US-flag carriers, maritime labor, Congress, and 
the Administration for renewal of the Maritime Security Program 
sufficient to meet our national security requirements, and work for 
effective administration and enforcement of cargo preference laws.
    Additionally, we can continue to implement regulatory reforms to 
conform outdated U.S. laws and regulations to internationally accepted 
norms. I am aware that other traditional maritime nations in Europe 
(e.g., United Kingdom, Netherlands, Germany, and Greece) have 
implemented reforms to reduce the tax burdens on their vessel owners 
and mariner income earned abroad. I will be evaluating similar 
proposals to determine if such reforms can enhance the international 
competitiveness of the US-flag fleet. If the US-flag merchant marine is 
to serve America's foreign trade, then we must promote sound maritime 
policy that enables US-flag carriers to operate profitably in the 
global marketplace.
    Question 3. Following Operations DESERT SHIELD and DESERT STORM, 
changes were made to the operation of the Ready Reserve Fleet (RRF) and 
the Voluntary Intermodal Sealift Agreement (VISA) Program and Military 
Security Program (MSP) were created to ensure we could better meet the 
demands of such a large scale military operation in the future. Please 
explain how you view these programmatic changes
    Answer. Subsequent to DESERT SHIELD and DESERT STORM, MARAD and DOD 
jointly reviewed the ``lessons learned'' from these operations and made 
specific enhancements to the RRF program. In addition, MARAD and DOD 
recognized the need to increase the use of the available US-flag liner 
service and improve the reliability and responsiveness of Government 
owned assets.
    With respect to Government owned assets, MARAD implemented a 
``Reduced Operational Status'' (ROS) level of readiness on our high 
priority vessels. This change in program management provided for an 
increase in personnel performing maintenance work on board these ships, 
and periodic sea trials, resulting in significant improvements to 
vessel reliability. These improvements have been verified by USTRANSCOM 
through annual performance evaluations. For example, the ratio of 
operating to non-operating days program-wide for the RRF in FY01 was 
99.2 percent.
    Based on my twelve (12) years operational experience as a licensed 
deck officer, I strongly support the rigorous use of the sea trial 
program for RRF vessels. It is only by the physical testing of 
equipment that its true material condition can be determined. 
Additionally, it provides an opportunity for a full merchant marine 
crew to gain valuable training in the operation of the vessel. In view 
of the unknown duration and magnitude of our current war on terrorism, 
we must take all steps necessary to properly maintain our current 
sealift capabilities.
    The VISA and MSP programs also have made a substantial contribution 
to the strategic sealift capabilities of the US-flag commercial fleet 
to respond to national security emergencies. The MSP requires 
participants to commit militarily useful ships, intermodal capacity, 
personnel, equipment and systems to an Emergency Preparedness Program 
(EPP) which is implemented through VISA. The VISA program provides 
``assured access'' and a smooth transition from peace to war, 
particularly in the critical early phases of a deployment. From a 
maritime security standpoint, the MSP and VISA programs also provide 
the added assurance that critical military cargoes are handled by 
vessels that are crewed with qualified U.S. citizens.
    In addition to providing strategic sealift capacity from the 
commercial maritime industry, MSP and VISA vessels also provide a 
substantial pool of mariners available to crew the government owned 
and/or controlled fleet during contingencies. Reliance on anything 
other than U.S. owned, U.S. flagged, and U.S. crewed ships increases 
the risk of delayed delivery of military cargoes to the U.S. troops on 
the battlefield.
    The MSP/VISA programs provide the US taxpayers significant value 
from a cost benefit perspective. USTRANSCOM has informed MARAD that the 
estimate for duplicating the commitments already made by the US-flag 
fleet under the MSP/VISA programs could be as much as $9 billion in 
initial construction costs. There are additional savings of $1 billion 
in annual operations and maintenance costs if assets equivalent to 
those committed through MSP/VISA assets were totally owned and operated 
by the US military.
    Another important element of the VISA program was the establishment 
of a planning forum for matching Department of Defense (DOD) 
requirements to industry capabilities. This planning forum is the Joint 
Planning Advisory Group (JPAG). Through JPAG, Government and industry 
jointly identify DOD's requirements, recommend concepts of operations 
to meet requirements, and comply with antitrust requirements for 
pooling and teaming arrangements. It is important to note that prior to 
Operations DESERT SHIELD and DESERT STORM, the maritime industry did 
not formally participate in the DOD contingency planning process.
    Question 4a. Through much of the last century, our nation's 
maritime policy was directed toward supporting our national defense 
needs. While meeting our defense needs should and must remain a top 
priority, changes in the global market and advances in the maritime 
industry have clearly put new pressures on the industry that were not 
contemplated during the development of many of the laws and regulations 
that form our current maritime policy. What specific changes would you 
propose to bring our nation's maritime policy in line with the maritime 
industry of today?
    Answer. US-flag vessels compete globally based on service quality, 
and providing timely and reliable intermodal transportation to shippers 
at reasonable prices. Providing such premium services, however, does 
not mean that costs can be appreciably higher than those of direct, 
lower-cost competitors in the world market. If U.S.-companies do not 
earn sufficient returns to cover costs and the continuing investments 
required in this extremely capital-intensive industry, these companies 
will not be able to competitively operate US-flag vessels in a global 
market.
    In view of the above marketplace realities, if confirmed I will be 
carefully analyzing and assessing the options which might be available 
to us in the near term. These options may include: enhancements to the 
MSP/VISA programs; revisions to the cargo preference regulations 
affecting the movement of food aid cargoes; and revisions to the 
Capital Construction Fund program which will attract capital investment 
(see 4b below). As part of my overall review of our current maritime 
policies, I will also examine the U.S. tax burdens on our merchant 
marine and maritime workforce relative to those of their international 
competitors. By implementing a fair tax policy, we would begin to 
promote cost parity with the rest of the shipping world.
    Question 4b. How would these proposed changes provide growth 
opportunities for our nation's merchant marine and allow it to compete 
better in the global market?
    Answer. The MSP and VISA programs have successfully arrested the 
unprecedented decline in the US-flag commercial fleet. These programs 
have also significantly modernized our fleet and maintained investment 
in the US-flag merchant marine. Between 1996-2001, 17 modern (less than 
10 years old) vessels were added to the US-flag liner fleet in order to 
participate in MSP, and another four were re-flagged under U.S. 
registry and enrolled as non-MSP, VISA vessels. The addition of these 
vessels halted the evident decline in a modern US-flag liner fleet, and 
contributed to a nearly 30 percent increase in average vessel carrying 
capacity. The MSP program has achieved many strategic objectives, 
however, a thorough review should be made to determine necessary 
changes to insure growth opportunities for the US-flag fleet prior to 
the program's reauthorization in 2005.
    In addition, I support the Administration's efforts to provide a 
limited exemption to what is known as the ``three year rule.'' This out 
dated provision in the cargo preference regulations excludes US-flag 
foreign built vessels from participating in US-sponsored food aid 
programs for a period of three years after re-flagging to the US 
registry. This provision discourages new tonnage from entering the US 
registry, and increases the cost of handling US-sponsored food aid 
(i.e. less competition for cargo).
    If confirmed, I would also explore possible changes to the Capital 
Construction Fund program that would permit qualified withdrawals for 
construction of new vessels (in US yards) for the contiguous US trade. 
This would increase the financial resources available in the US market 
without increasing the burden on the US taxpayers.
    Question 4c. How would these proposed changes balance our defense 
needs with our commercial needs in today's global market?
    Answer. A competitive US-flag international fleet of militarily 
useful vessels crewed by U.S.-citizen mariners serves a dual purpose of 
economic and national security. The presence of US-flag vessels in 
international trade promotes economic security by providing American 
shippers with an alternative to foreign-flag operators. The fleet also 
provides the U.S. Government with legal standing to protect the 
interests of American businesses and consumers in international 
negotiations over shipping and intermodal transportation. Additionally, 
this fleet serves as a vital national security asset for executing the 
Nation's forward defense strategy, with a central role in military 
sealift during national emergencies and provides the pool of mariners 
necessary to crew the government's organic fleet during contingencies. 
As we move to shape our maritime policy in the years ahead, we will 
remain focused on the unique dual role of the U.S. merchant fleet, and 
our need to maintain both the economic and national security interests 
of the Nation.
    Question 5a. As you may be aware, I prefer to eliminate restraints 
on U.S. business competitiveness rather than provide subsidies that 
remove incentives for businesses to find new ways to operate and 
compete in the world market. I continue to believe that U.S. companies 
are struggling to compete in the international maritime industry in 
part because of the prevalence of subsidies by other flag states. What 
are your views on maritime subsidies?
    Answer. Foreign government subsidies to national industries and 
restrictions and barriers to free trade have hurt U.S. companies in 
global markets. U.S. companies will continue to operate at a 
disadvantage compared to foreign flag shipping lines as long as their 
governments maintain policies that distort or restrict market access.
    Question 5b. If confirmed, how would you propose to help improve 
the competitiveness of the U.S. maritime industry?
    Answer. The Administration will continue to press foreign 
governments to eliminate practices that distort the operation of a free 
marketplace for shipping services and remove restrictions and barriers 
on U.S. companies so that they can compete fairly in the world market.
    Question 6a. Regardless of exaggerated reports on the size of the 
U.S. merchant fleet issued by the previous Administration, the Jones 
Act fleet continues to face an up hill battle in meeting the needs of 
our nation's domestic waterborne commerce. Most users of the domestic 
water transportation system, except for those of our inland waterway 
system, face high costs and lack of adequate service. This is not true 
of our inland waterway system because operators in these areas face 
competition from road and rail service not available to shippers in 
areas such as Hawaii and Puerto Rico. While I have attempted to bring 
about reasonable debate on the issue for several years, domestic trade 
vessel operators and shipbuilders who benefit from the barriers created 
by the Jones Act continue to lobby for the status quo. As with other 
areas of our nation's transportation system, it is important that we 
bring change to the maritime industry that will allow for a more 
competitive environment for the domestic maritime industry. What are 
your views on the Jones Act?
    Answer. The President has publicly stated that the Jones Act should 
be maintained. If confirmed, I will enthusiastically support the 
President's position on this issue.
    Like domestic rail and truck carriers, domestic vessel operators 
incur ``U.S. costs'' to operate under the same legal structure 
affecting tax, labor, immigration and naturalization, and the 
protection of public safety and the environment--as do all other 
American businesses. Many foreign-flag carriers can operate at lower 
cost than US-flag shipping companies in foreign trade, because the 
former can operate under lower international safety and wage standards, 
and reduced or negligible tax burdens. However, if foreign-based 
shipping companies seeking to do business in the United States were 
required to comply with the same laws as American companies, then the 
cost differential between U.S. and foreign waterborne carriage would 
likely disappear. This is true for all domestic modes of 
transportation--air, rail, truck, pipeline, or water. Moreover, most 
major maritime countries maintain some form of cabotage policies.
    In recent years, legitimate concerns have been raised regarding the 
availability of qualified seamen necessary to crew our Ready Reserve 
Fleet (RRF) if a full activation was required. The Jones Act fleet 
represents a pool of vessels and, more importantly, a pool of seamen 
that would be available in time of national emergency. If the Jones Act 
were eliminated, the necessary US-flag vessel resources would quickly 
disappear. Consequently, we would lose the reserve of U.S. merchant 
marine officers and crew now employed in the U.S. domestic trade.
    Question 6b. How would you propose to improve competition in the 
domestic market and bring about growth in the domestic trade?
    Answer. Due to the geography of the continental United States, 
waterborne transportation usually does not provide the most direct 
routing for domestic shipments moving from an inland origin to an 
inland destination. Expensive and time-intensive intermodal transfers 
to truck and rail feeder carriers on circuitous routes are often 
necessary to move shipments from land-locked originating points to 
their final destinations. As a result, some shippers find themselves 
captive to rail and truck transportation, which move cargo at faster 
speeds, but in smaller lots and at much higher cost for each ton-mile 
traveled.
    On the other hand, even with intermodal transfers, water transport 
can be competitive for moving relatively low-value, time-insensitive 
bulk goods because it is so cheap, as is the case in the inland river 
and Great Lakes trades. In the oceangoing trades to Alaska, Hawaii, 
Guam, and Puerto Rico for relatively high-value general cargo, large 
tug/barges, roll-on/roll-off trailerships, and containerships continue 
to be competitive against air cargo services. In recent years, tug/
barges and even larger and faster containerships have begun to compete 
effectively against rail and truck carriers in the medium-distance 
coastwise trades, as north-south rail and highway corridors become 
increasingly congested.
    If confirmed by the Senate, I will be evaluating ways to encourage 
market entry by U.S. vessel operators into the Nation's domestic trade 
to ease landside congestion as part of Secretary Mineta's MTS 
initiative.
    Question 7a. The U.S. Maritime Administration (MARAD) has a 
statutorily mandated deadline for the disposal of obsolete National 
Defense Reserve Fleet (NDRF) vessels. MARAD currently has 114 vessels 
awaiting disposal, of which 91 are targeted for scrapping, many of 
which pose an environmental hazard to the waterways in which they are 
now moored. What is it going to cost the federal taxpayer to dispose of 
these obsolete vessels?
    Answer. MARAD believes the cost projections for conventional, 
domestic ship dismantling that were provided in the Report on the 
Program for Disposing of Obsolete Vessels (Report to Congress) are 
still valid. That Report was provided to the Congress, June 5, 2001 
pursuant to Section 3502 of the Appendix to Public Law 106-198, The 
National Defense Authorization Act of 2001. MARAD estimated an average 
cost of $2.5 million per ship. Based on these projections the total 
cost for disposing of 122 vessels domestically through conventional 
scrapping methods is $305 million.
    MARAD has commenced evaluating proposals submitted by industry 
through a Program Research & Development Announcement (PRDA), which was 
posted October 19, 2001. That announcement invited industry to propose 
innovative long-term solutions for the backlog of obsolete NDRF 
vessels. The costs of ship disposal options identified by industry will 
not be known until the evaluation of the proposals is completed. If 
confirmed, I will give full attention to these proposals.
    MARAD is also investigating alternatives to domestic scrapping that 
have the potential to be more cost-effective, such as artificial 
reefing of vessels. I understand that the Navy and the EPA are 
currently engaged in studies on the long-term effects of artificial 
reefs on the environment. Favorable results would allow MARAD to work 
with EPA to develop national standards for preparing ships for reefing. 
Such standards would allow MARAD to develop reasonable cost estimates 
for a reefing program. MARAD and the Department of Transportation could 
then recommend appropriate changes to existing legislation to promote 
artificial reefing initiatives, if judged to be a best value disposal 
method for the Government.
    Question 7b. How long will it take MARAD to rid our nation's 
waterways of these vessels?
    Answer. MARAD's schedule for disposal of 155 obsolete ships by 
September 30, 2006, as outlined in the Report to Congress, was for 7 
vessels in FY `01, 8 in FY `02, and 35 for each FY `03-06. This 
schedule was based on the expectation that the disposal method would be 
predominately procurement of domestic scrapping services, with 15 
vessels disposed of as artificial reefs or through donations. MARAD met 
its FY `01 goal with contracts for the disposal of 7 vessels in FY `01. 
The Conference Report on HR 2500 included no funding in FY `02 for 
disposal of NDRF obsolete ships. MARAD will continue to vigorously 
pursue the disposal of obsolete ships on a ``cost recovery basis''. If 
confirmed, I will work to identify feasible and cost effective ship 
disposal alternatives.
    Question 8a. In the 1970s, there were 30 domestic ship-scrapping 
companies. Today, MARAD considers only four companies to be viable, and 
concerns have been expressed regarding those. Does MARAD have the tools 
and personnel required to meet its statutory obligation to dispose of 
these vessels in a safe and cost effective manner?
    Answer. I have first hand experience scrapping vessels which will 
be useful in formulating an action plan to dispose of the NDRF obsolete 
ships is a safe and cost effective manner. In addition, MARAD appears 
to have the adequate personnel required to dispose of our obsolete 
ships. For FY `02 and beyond, MARAD will utilize a core team of 
industry-experienced professionals to manage the ship disposal program. 
MARAD also appears to have the acquisition tools necessary to apply to 
the disposal problem. They have employed Invitations for Bid (IFB), 
Requests for Proposal (RFP), Simplified Acquisitions, and Program 
Research & Development Announcements (PRDA), as appropriate, to 
facilitate consideration of vessel disposal alternatives.
    Question 8b. What actions would you direct MARAD to take in order 
to draw additional companies to the ship scrapping industry and reduce 
disposal costs for the American taxpayer?
    Answer. Based upon recent solicitations, we have already seen the 
emergence of new entities, into the ship disposal market. In addition, 
entities that in the past have failed to meet MARAD requirements have 
made improvements to their scrapping processes. In addition, the 
Program Research & Development Announcement (PRDA), referred to in 
Question #7 above, is an excellent step to draw additional companies 
into ship disposal efforts and to reduce costs. This announcement 
invites industry to propose innovative long-term solutions that address 
financing, production methods and applied technology in the context of 
affordable and safe disposal alternatives. Evaluation of the PRDA 
proposals will determine if there are innovative, cost-effective 
strategies to pursue.
    In addition, MARAD is currently working with the EPA to discuss the 
potential for renewed foreign disposal of its ships. MARAD is also 
planning to conduct a feasibility study of government-owned, 
contractor-operated (GOCO) disposal/recycling facilities as a potential 
cost-effective vessel disposal option. Moreover, MARAD is evaluating 
responses to a draft FY `02 RFP for ship disposal contracts. If 
confirmed, I will keep these good initiatives going with a focus on 
what existing industry has to offer in order to attract new companies 
with innovative and more cost-effective solutions.
    Question 9a. Over the past two years, the United States and China 
have been negotiating a new bilateral maritime agreement. 
Representatives from the U.S. and their Chinese counterparts recently 
met in Beijing, and the Chinese subsequently have expressed an interest 
in moving forward with negotiations. What are your views regarding 
bilateral maritime agreements?
    Answer. Over the years, the Maritime Administration has 
successfully negotiated a number of bilateral maritime agreements with 
such countries as Russia, Brazil and Venezuela. If negotiated properly, 
bilateral maritime agreements are useful devices for promoting 
reciprocity in the carriage of trade between the two countries, and 
potentially increasing trade itself. These agreements have generally 
helped to open up opportunities for U.S. carriers while at the same 
time increasing competition in the trade. For example, the U.S./
Venezuela maritime equal access agreement was successful in increasing 
service in the trade and lowering the transportation cost to the U.S. 
exporter. In addition, bilateral maritime agreements should be used to 
encourage the elimination of discriminatory practices in a particular 
trade.
    Question 9b. What should be done to ensure that our nation's 
maritime industry does not continue to be subjected to needless 
discriminatory practices because we can't reach agreements on maritime 
with our trading partners?
    Answer. Our nation should always be vigilant to remove needless 
discriminatory and predatory practices sponsored by our trading 
partners. Unfortunately, over the years we have had a plethora of 
difficulties involving discriminatory practices with various trading 
partners. With respect to China, where U.S. carriers' operations are 
significantly burdened by government restrictions, a new agreement 
would help to ensure that such restrictions are eliminated. The 
overriding objective is to achieve removal of restrictions on U.S. 
carriers' activities in China and any other trading partner that does 
not respect the spirit of reciprocity. Over the years, executive branch 
agencies working in parallel with the Federal Maritime Commission 
(FMC), have achieved removal of restrictions that U.S. carrier's faced 
in foreign markets. If good faith bilateral negotiations fail to remove 
restrictive trading practices, then I believe FMC sanctions would be 
appropriate.
    Question 9c. Will you commit to reaching a bilateral maritime 
agreement with China by scheduling high-level talks on the matter soon 
after being confirmed?
    Answer. If confirmed by the Senate, I will make it a priority to 
initiate high level bilateral maritime talks with China.
    Question 10. Earlier this year, the U.S. Customs Service issued new 
rules governing repairs to U.S.-flagged vessels that altered its 
treatment of ``spare parts.'' The new regulations make the purchase for 
or repairs made to US-flag vessels by crew members when they are 
outside the United States, including maintenance and repair while these 
vessels are on the high seas by the crew, subject to declaration, entry 
and payment of a 50 percent ad valorem duty. Moreover, equipment 
imported into the United States and duty paid thereon will now also be 
subject to an additional ad valorem duty if the item is installed while 
underway and not installed in the United States. How do you view these 
new rules and what is the competitive impact on U.S.-flagged vessels? 
Would you support repeal of these new rules?
    Answer. The U.S. Customs Service published a Final Rule last March 
regarding revisions to the Vessel Repair Statute. The Final Rule makes 
virtually all supplies and parts used in routine repairs and 
preventative maintenance performed by American crew members subject to 
the 50% ad valorem duty. The US maritime industry found this rule to be 
a radical departure from previous Customs policy and contrary to the 
spirit and intent of Congress. In response to the new rule, over 40 US-
flag interest filed a protest petition in July 2001, requesting the 
repeal of the new rule. The industry rightly believes that the new rule 
severely penalizes the US-flag carriers and provides an even greater 
advantage to foreign-flag carriers which are not subject to such 
arbitrary duties and regulatory burdens. In addition, the new rule also 
discourages new US-flag tonnage from entering the market. In recent 
weeks, the Deputy Secretary of Transportation has written to the Deputy 
Secretary of the Treasury requesting Customs to reconsider this rule. 
In view of the above, I fully support this position, and if confirmed, 
will meet with the new Commissioner of Customs to discuss the 
expeditious resolution of this matter.
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