```

[Senate Hearing 115-155]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 115-155

                        MARITIME TRANSPORTATION:
                    OPPORTUNITIES AND CHALLENGES FOR
                      THE MARITIME ADMINISTRATION
                    AND FEDERAL MARITIME COMMISSION

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON SURFACE TRANSPORTATION
                  AND MERCHANT MARINE INFRASTRUCTURE,
                          SAFETY AND SECURITY

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 9, 2017

                               __________

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

  
                                            

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                          Washington, DC 20402-0001

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
MIKE LEE, Utah                       GARY PETERS, Michigan
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

      SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE 
                  INFRASTRUCTURE, SAFETY AND SECURITY

DEB FISCHER, Nebraska, Chairman      CORY BOOKER, New Jersey, Ranking
ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  AMY KLOBUCHAR, Minnesota
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 9, 2017......................................     1
Statement of Senator Fischer.....................................     1
Statement of Senator Booker......................................     3
    Prepared statement...........................................     3
Statement of Senator Wicker......................................    30
    Letter dated May 8, 2017 to Hon. Deb Fischer and Hon. Cory 
      Booker from Paul Doell, National President, American 
      Maritime Officers..........................................    30
Statement of Senator Young.......................................    34
Statement of Senator Baldwin.....................................    40
Statement of Senator Blumenthal..................................    42

                               Witnesses

Hon. Michael A. Khouri, Acting Chairman, Federal Maritime 
  Commission.....................................................     4
    Prepared statement...........................................     5
Hon. Rebecca Dye, Commissioner, Federal Maritime Commission 
  Supply Chain Innovation Teams..................................     9
    Prepared statement...........................................    10
Joel Szabat, Executive Director, Maritime Administration, U.S. 
  Department of Transportation...................................    12
    Prepared statement...........................................    13
Rear Admiral James Helis, U.S. Maritime Service Superintendent, 
  United States Merchant Marine Academy..........................    17
    Prepared statement...........................................    19
Hon. Mario Cordero, Commissioner, Federal Maritime Commission....    22
    Prepared statement...........................................    25

                                Appendix

Response to written questions submitted to Joel Szabat by:
    Hon. Todd Young..............................................    45
    Hon. Tammy Baldwin...........................................    45

 
                        MARITIME TRANSPORTATION: 
                    OPPORTUNITIES AND CHALLENGES FOR  
                      THE MARITIME ADMINISTRATION  
                    AND FEDERAL MARITIME COMMISSION

                              ----------                              

                          TUESDAY, MAY 9, 2017

                               U.S. Senate,
         Subcommittee on Surface Transportation and
            Merchant Marine Infrastructure, Safety and Security,   
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:33 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Deb Fischer, 
Chairman of the Subcommittee, presiding.
    Present: Senators Fischer [presiding], Booker, Wicker, 
Young, Baldwin, Blumenthal, Cantwell, Klobuchar, Gardner.

            OPENING STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    The Chairman. The hearing will come to order. Welcome. 
Thank you all for being here today for our fourth hearing of 
the Surface Transportation and Merchant Marine Infrastructure, 
Safety and Security Subcommittee. Today's hearing is entitled, 
``Maritime Transportation: Opportunities and Challenges for the 
Maritime Administration and Federal Maritime Commission.''
    As I mentioned before in this Subcommittee, the United 
States has a rich maritime heritage. In fact, shipbuilding is 
one of our country's oldest industries, dating back to the 
early colonial period. From the beginning, America's coastal 
and inland waterways were used for exploration, commerce, 
transportation, defense, and recreation.
    Today, ocean transportation and seaports remain critical to 
the economy and our Nation's transportation system. According 
to the International Maritime Organization, over 90 percent of 
global trade is transported by ocean carriers.
    The Bureau of Transportation Statistics has found that 
freight tonnage on our Nation's transportation network will 
grow by 40 percent over the next 30 years. As our freight flows 
grow, seaports will serve as a key connection point for all 
modes of transportation.
    In Nebraska, our agriculture producers work hard to feed a 
hungry world, but in order for these producers to compete 
internationally and meet customer needs, they rely on efficient 
ports and access to maritime carrier services.
    Today, our Subcommittee will examine the activities of the 
U.S. Maritime Administration, U.S. Merchant Marine Academy, and 
Federal Maritime Commission. The Maritime Administration plays 
an important role in our national security. MARAD manages the 
Department of Defense Ready Reserve Force, which serves to 
transport combat support, resupply, and unit equipment to the 
Army and Marine Corps.
    Senator Booker and I have authored and passed significant 
reforms to strengthen MARAD over the past 2 years. In addition 
to reauthorizing MARAD's national security vessel programs, we 
included measures recommended by the DOT Inspector General to 
improve workforce management at the agency. Our 2016 MARAD 
legislation, which was included in the annual National Defense 
Authorization Act, also provided greater flexibility for joint 
DOT and DOD vessel management programs.
    Importantly, we also included significant measures to help 
address instances of sexual assault and harassment at the U.S. 
Merchant Marine Academy. The Academy's 2015 anonymous survey of 
midshipmen found that as many as 28 women and 24 men had been 
sexually assaulted on campus. However, the Academy noted there 
was only one officially reported case of sexual assault.
    Because of our legislative efforts, midshipmen will have 
greater access to victim advocates and a 24/7 hotline. 
Moreover, the Academy is now required to employ sexual assault 
response professionals and provide preventative training to 
midshipmen.
    As one of our five service academies, the USMMA plays a 
vital role in developing future leaders in the maritime 
industry, including many who will go on to serve in our 
nation's armed forces. I am thankful for their service to our 
country. Moving forward, we must continue to work toward 
ensuring a safe environment on campus and during the Sea Year 
program.
    We are also going to hear testimony from three 
Commissioners of the Federal Maritime Commission. The FMC is an 
independent Federal agency tasked with fostering a fair, 
efficient, and reliable international ocean transportation 
system for U.S. exporters, importers, and consumers. The FMC is 
responsible for regulating ocean carrier activities, approving 
ocean carrier alliances, and monitoring ocean transportation, 
operation, and rates. The FMC also has an important role in 
overseeing freight activities at our Nation's port terminals.
    As many here are aware, the 2015 West Coast ports slowdown 
caused massive congestion and gridlock. According to a study by 
the National Retail Federation and National Association of 
Manufacturers, a 5-day West Coast ports stoppage would reduce 
U.S. GDP by $9.4 billion and disrupt 73,000 jobs. Greater 
information is essential to improving the efficiency of our 
ports.
    I want to commend Commissioner Rebecca Dye, who has led in 
this area by establishing the Supply Chain Innovation Teams 
initiative. Better communication between stakeholders and real-
time data sharing will go a long way toward addressing 
bottlenecks and enhancing the flow of goods through our ports.
    I look forward to learning more about how the FMC is 
working to strengthen ocean transportation. Thank you again to 
our witnesses for being here today.
    And I would now turn to my colleague and Ranking Member 
Senator Cory Booker for his opening remarks.
    Senator Booker.

                STATEMENT OF HON. CORY BOOKER, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Booker. Chairman Fischer, this is going to 
disappoint my colleagues, but I'm just going to submit my 
testimony for the record. They can get it from me if they would 
like. And we have a big panel, we should probably get to it.
    [The prepared statement of Senator Booker follows:]

  Prepared Statement of Hon. Cory Booker, U.S. Senator from New Jersey
    Thank you, Chairman Fischer for holding this important hearing on 
the opportunities and challenges facing the Maritime Administration and 
the Federal Maritime Commission.
    The country's ports, vessels, and mariners are critical to our 
Nation's economic growth, military preparedness, and disaster relief 
efforts.
    Our nation's ports and marine terminals, as well as the rail and 
road networks that support them, are essential for getting American 
products to overseas markets and generating U.S. jobs.
    Residents of my home state of New Jersey know this as well as 
anyone.
    New Jersey is home to the Port of New York and New Jersey, which 
has moved more than 120 million tons of cargo annually in recent years, 
and is the busiest port in the East Coast.
    Overall, New Jersey's ports and the trade industries that rely on 
them, employed 285,000 people in New Jersey in 2014, and generated $60 
billion in family incomes and business revenues for New Jersey's 
economy.
    In the past few years, the public and private sectors have helped 
fund more than $2 billion in infrastructure improvements at the Port of 
New York and New Jersey to expand the region's economic capacity.
    And this is in addition to the more than $1 billion invested by the 
Port Authority to raise the roadway of the Bayonne Bridge to allow 
larger and taller ``post-Panamax'' ships to serve the region.
    While investments like these are essential, and offer long-term 
benefits to our regional economy, they cannot--by themselves--reduce 
the congestion caused by our Nation's outdated infrastructure.
    That's why I'm proud of the work this Committee did last Congress 
to pass the FAST Act and establish the Nation's first multimodal 
freight grant program.
    Last year, the FASTLANE multimodal freight grant program, when 
combined with the important TIGER grant program, invested more than 
$850 million in our Nation's port infrastructure.
    While the FAST Act was a substantial achievement, there is more 
that we must do.
    For many decades, the United States has relied upon the U.S. 
Merchant Marine, with its fleet of commercial vessels and crew of U.S. 
mariners, to assist the military during times of war or national 
emergency.
    But as the U.S. international fleet has diminished, U.S. Mariners 
lose employment and the opportunity to remain certified to crew large 
ocean-going vessels.
    And as we lose U.S. mariners, we lose sealift capacity to support 
the U.S. military during times of war or in national disasters.
    We must also address challenges that could prevent students from 
wanting to enter the field in the first place.
    I know the U.S. Merchant Marine Academy has been focused on 
preventing sexual assault and harassment at the Academy and during Sea 
Year.
    I appreciate the changes that have occurred at the Academy under 
Admiral Helis' leadership.
    However, there is more work to be done. Each year I nominate 
promising young women and men from New Jersey to attend this academy, 
and we must ensure that every cadet has an environment of respect, 
safety, and dignity.
    Last but not least, delays in the freight network remain a serious 
concern.
    The maritime industry is experiencing significant changes that 
impact how and where goods are moved.
    Unfortunately, when one part of the network experiences a problem, 
it can have ripple effects that spread through every part of the 
network.
    That's why it is important that we aren't looking at changes in a 
vacuum.
    Whether it's changes that impact ports, shipping, rail or 
trucking--these changes must be viewed by how they impact the whole 
system.
    I look forward to hearing from each of our witnesses about these 
and other issues that the Committee should consider as we work to 
improve our Nation's maritime transportation system.

    The Chairman. Thank you, Senator Booker.
    Next I would ask our witnesses to please give their opening 
statements. We will begin with the Acting Chairman, Michael 
Khouri--did I pronounce that correctly?--with the Federal 
Maritime Commission. Chairman Khouri has served as an FMC 
Commissioner since 2009 and as Acting Chairman since January 
2017.
    Welcome.

 STATEMENT OF HON. MICHAEL A. KHOURI, ACTING CHAIRMAN, FEDERAL 
                      MARITIME COMMISSION

    Chairman Khouri. Chairman Fischer, Ranking Member Booker, 
Senators, thank you for the opportunity to appear today on 
behalf of Federal Maritime Commission.
    First, I am pleased to be joined by my colleague, 
Commissioner Rebecca Dye.
    And we want to especially recognize our friend, 
Commissioner and former Chairman Mario Cordero, and thank him 
for his commendable service and leadership of the FMC. This is 
his last week with us, and he moves on to become the Executive 
Director of the Port of Long Beach, California. We look forward 
to his comments today. We wish him well as he takes the helm of 
a major seaport that is a critical part of our Nation's 
maritime supply chain.
    I would like to address a number of matters about the 
Commission and the Shipping Act that are of current interest to 
the Subcommittee. The FMC is a specialized competition agency 
charged by Congress to prevent anticompetitive behavior by 
competitor collaborations in the international ocean liner 
industry. Since 1916, Congress has recognized that special 
factors affecting this international industry, which transports 
65 percent of our Nation's waterborne international exports and 
imports, and requires a dedicated agency of specialized 
expertise to ensure certain national objectives are met. The 
Shipping Act of 1984 provides the Commission with authority to 
address the issues under our jurisdiction and protect a 
competitive marketplace.
    2016 was a financially challenging year for international 
open shipping with ongoing consolidation and a major carrier 
bankruptcy. By mid-2018, there will be 10 companies arranged 
into three major operating joint ventures called ``alliances,'' 
that, combined, will carry 82 percent of containerized cargo 
across all U.S. ocean trade lanes.
    Even with these developments, however, the liner industry 
is still relatively unconcentrated by traditional antitrust 
standards. It is important to note that these alliances are not 
permanent mergers. Alliances provide the carriers with 
flexibility, cost savings, and efficiencies. There is vigorous 
price and capacity competition within alliances, and 
participants can and do change quickly in response to market 
forces, as we have seen in the last year. As long as they do 
not exercise market power, alliances are widely recognized as 
potentially beneficial and pro-competitive and ultimately 
benefiting U.S. shippers and consumers. And as noted by the 
Supreme Court, these carrier joint ventures can help prevent 
outright mergers, thus preserving competition.
    Concerns about these trends, however, have been expressed 
by U.S. cargo interests as well as other participants in the 
ocean cargo supply chain. As larger alliance agreements have 
been filed at the Commission, we have strengthened our economic 
and competition review process and require tighter limits on 
the scope of each agreement's authority. We will continue to 
review and monitor these agreements carefully for 
anticompetitive behavior to safeguard against harm to shippers 
and consumers.
    As Congress directed the Commission in both the 1984 Act 
and the 1998 amendments, the FMC remains committed to finding 
additional ways to reduce unnecessary regulatory costs and 
burdens, and obtaining greater efficiencies for the regulated 
community.
    Most recent, March 6, the Commission unanimously approved a 
new rule to reduce the complexity, burden, and cost of contract 
filings for the 165 ocean carriers and the 6,200 ocean 
transportation intermediaries who submit 53,000 service 
contracts and over 730,000 contract amendments with the agency 
each year.
    I intend for this deregulatory effort to continue as we 
take up other pending and proposed issues. After consulting my 
fellow Commissioners, I designated the FMC's Managing Director, 
Karen Gregory, as the Regulatory Reform Officer. She is now 
standing up a task force to execute on the regulation review 
process.
    Commissioner Dye will address her commendable efforts to 
help the industry develop information-sharing protocols that 
should prove extremely beneficial in integrating the global 
supply chain and providing a boost to the American economy.
    To close, the Federal Maritime Commission, with its 
industry expertise and experience, is well positioned to 
understand the unique dynamics of the shipping industry and all 
of its stakeholders, to apply the competition laws fairly in 
this area, and to prevent anticompetitive behavior in these 
carrier agreements, all to ensure maximum benefit for the U.S. 
shipping public.
    Thank you for your attention. And I respectfully ask that 
my full written remarks be accepted into the record. I'll be 
pleased to answer any questions you may have.
    [The prepared statement of Chairman Khouri follows:]

    Prepared Statement of Hon. Michael A. Khouri, Acting Chairman, 
                      Federal Maritime Commission
    Chairman Fischer, Ranking Member Booker, Senators, thank you for 
the opportunity today to discuss issues related to the Federal Maritime 
Commission.
    I am pleased to be joined at the table by my colleague, 
Commissioner Rebecca Dye. And I want to especially recognize our 
friend, Commissioner and former Chairman Mario Cordero and thank him 
for his exemplary service and leadership of the FMC. This will be his 
last week with us as he moves on to become the Executive Director of 
the Port of Long Beach, California. We look forward to his comments 
today and wish him well as he takes the helm of a seaport that is such 
a critical part of our Nation's maritime supply chain.
    The United States has always been a nation that has engaged in 
trade, even from the earliest days of our existence as a group of 
colonies. Transporting goods of all descriptions by ocean, coastal and 
inland ships is an integral part of American commerce. There is simply 
no more efficient or economical way to move large volumes of 
commodities than aboard vessels, and the sectors of our economy tied to 
international trade depend on an efficient global intermodal 
transportation system. As the Acting Chairman of the Federal Maritime 
Commission, I am proud of the dedicated men and women of our agency and 
the work they do every day to safeguard competition in ocean 
transportation for the benefit of the America's exporters, importers 
and ultimately, our Nation's consumers.
    One of the most positive ways to benefit our American consumers is 
by helping to keep the end cost paid for goods as low as possible. 
Identifying and addressing regulations in the ocean transportation 
sector that are out of date with current commercial practices and 
technology or have become unreasonably burdensome will always increase 
consumer choices and lower costs. At the Federal Maritime Commission, 
we view a commitment to deregulation in the ocean container supply 
chain as an essential and critical factor in expanding America's 
economic competitiveness.
    As such, we are working to be a more efficient organization by 
making a concerted and focused effort to reduce regulatory burdens on 
our constituents. The Commission is aggressively looking for ways to 
make compliance with its statutory and regulatory requirements easier 
and more cost effective for shippers, carriers, and ocean 
transportation intermediaries. An example of the sort of common sense 
deregulatory action the Commission can take was exhibited on March 6 
when we approved key changes to regulatory requirements for ocean 
carrier service contract filings and non-vessel-operating common 
carrier (NVOCC) service arrangement filings. The Commission will make 
it easier and more efficient for shippers and carriers to do business.
    Further toward the goal of eliminating or reforming regulations, we 
have designated Ms. Karen V. Gregory, the Managing Director of the 
Commission, as our Regulatory Reform Officer. Ms. Gregory is now 
leading an internal team that is identifying those regulations that 
have become less relevant in today's fast moving commerce, are more 
burdensome than current business needs require, and otherwise need 
updating and revision. They will then establish a definitive timeline 
within the agency to move those items to a vote before the Commission. 
This initiative is consistent with the January 30 ``Presidential 
Executive Order on Reducing Regulations and Controlling Regulatory 
Costs.'' While the Commission may not be technically required as an 
independent agency to take this step, I believe that it is the right 
action to take and is consistent with the broader deregulatory history 
and scope of the Shipping Act.
    Over the past two to three years, there have been tremendous 
changes to the ocean transportation services marketplace. This period 
has been marked by considerable merger and acquisition activity among 
shipping lines, as well as the bankruptcy of a ``top ten'' carrier late 
last summer. As a result of these events, the number of major shipping 
lines operating in the international trades has dropped from 20 in 2015 
to what will be 13 by next year when the three Japan-based carriers 
create a new, consolidated container line. Of equal consequence, 
consolidation among the liner carriers has led to a reordering of the 
carrier alliance system and the creation of two new organizations--
``THE Alliance'' and ``The OCEAN Alliance''--that will join the already 
existing ``2M Alliance.''
    Some stakeholders have expressed concern about these changes, 
especially developments related to alliances. It is important to note 
that the evidence shows that carrier and marine terminal alliances can 
be very beneficial for U.S. exporters, importers, and consumers. 
Alliances are not permanent mergers like those reviewed by DOJ, but are 
much more dynamic arrangements that--number one--preserve price and 
service competition between and among participants. The ocean common 
carrier members of the alliance do obtain efficiencies and cost-savings 
that have historically been passed on to domestic consumers especially 
when healthy competition exists among vessel operators. The benefits of 
alliances and other forms of joint commercial arrangements are 
recognized and addressed in the Shipping Act of 1984, as amended, and 
the contemporaneous Congressional record.
    A reassuring data trend that we receive through our alliance 
monitoring programs shows us that the individual ocean carriers within 
each alliance continue to independently and vigorously compete on 
pricing. Further, individual ocean carriers within the alliances 
continue to add and withdraw vessels from trades both inside and 
outside the alliances in which they participate, demonstrating that 
competition remains in both vessel capacity decisions and pricing 
decisions within the alliances. Finally, these joint ventures provide 
ocean carriers with flexibility and may facilitate the survival of 
independent companies, preserving competition and averting further 
industry concentration. The interests of the American shipping public 
and the American consumer will not be well served if carrier 
consolidations ultimately result in only a handful of mega-carriers 
remaining to transporting the Nation's cargo.
    Clearly, the industry is entering a new era and it is not 
surprising that some question whether ocean carriers will move into a 
position to exert some level of market power on freight rates. In fact, 
by all economic benchmarks used by the Department of Justice (DOJ), the 
Federal Trade Commission (FTC), and the FMC, the ocean liner 
marketplace is not concentrated. Concentration is assessed using the 
Herfindahl-Herschman Index (HHI). The greater the degree of market 
concentration by virtue of fewer competitors, then the HHI rises. In 
DOJ's merger guidelines, their Antitrust Division regards markets as 
not concentrated if the HHI is below 1,500. Following the last ocean 
common carrier merger, the HHI for the container shipping industry in 
the international U.S. trades today is 752, far down into the ``safe 
harbor'' area.
    The reduced number and increased size of the major alliances (2M, 
THE Alliance, and OCEAN Alliance) has indeed changed the way in which 
the Commission approaches these joint ventures. The Commission 
carefully and thoroughly reviews filed agreements and engages in 
extensive consultations with filing parties to assure that an agreement 
that ultimately goes into effect is narrowly crafted and only permits 
specific authorities that provide specific operational benefits. Broad 
agreements with imprecise authority language will not go unchallenged.
    Since these are ongoing cooperative agreements rather than mergers, 
the Commission is further charged by Congress with continuous 
monitoring after the initial review and following the effective date of 
the agreements. The Commission checks for anticompetitive behavior that 
would violate the Shipping Act. The Commission may challenge an 
agreement at any time after the effective date. Just as the marketplace 
has changed, so has how the Commission monitors agreements. Over the 
past five years, the FMC has been steadily refining reporting 
requirements mandated of agreement parties both in terms of the 
information our economic analysis team wants to review, as well as how 
often data must be provided to the Commission. Additionally, we are 
working to reinforce our already very capable team of economists and 
analysts in order to increase our capacity to review and monitor 
agreements and the marketplace. Finally, I would note that in recent 
months, the Commission has twice rejected agreement filings, one on 
jurisdictional grounds and the second for failing to meet the clear and 
definite disclosure standard required by law, demonstrating that we are 
far from being a rubberstamp agency.
    The current circumstances in the international container industry 
perfectly illustrate why the Federal Maritime Commission was created, 
what its job is, and how the agency provides a benefit to American 
shippers, to our citizen consumers, and to our economy more broadly. 
The FMC is an independent agency of specialized expertise that 
administers an antitrust regulatory regime tailored to the special 
factors affecting the international ocean liner trade. The Shipping Act 
of 1984, and the Federal Maritime Commission that administers the Act, 
are related to, but separate from Department of Justice and the Federal 
Trade Commission and the competition and antitrust statutes they 
administer.
    Under the Shipping Act, cooperative or collaborative agreements 
between or among competitor international ocean liner carriers are 
filed with the Commission and reviewed under the Shipping Act's 
competition standard to prevent anticompetitive behavior in these 
agreements. This standard the Commission uses to review carrier 
agreements, 46 U.S.C. Sec. 41307(B)(1)--``Anticompetitive Agreements,'' 
commonly referred to as 6(g), is analogous to the standard employed by 
DOJ and the FTC to review mergers, acquisitions, and competitor 
collaborations. Under 6(g), an agreement filed with the Commission goes 
into effect UNLESS the Commission determines (and convinces a judge to 
agree) that the agreement is likely, by a reduction in competition, to 
produce an unreasonable reduction in transportation service or an 
unreasonable increase in transportation cost. In the event of such 
determination, the Commission then must go to a Federal District Judge 
as discussed below.
    The Commission's process for agreement review under 6(g) is modeled 
on the Hart-Scott-Rodino Act of 1976 governing premerger clearance of 
proposed acquisitions and mergers. Congress adapted this process for 
the Commission as part of the Shipping Act of 1984. Prior to 1984, the 
Commission reviewed and approved agreements under a broad ``public 
interest'' standard. Because approval became a lengthy process 
sometimes stretching into years, Congress put a Hart-Scott-Rodino type 
framework in place for Commission review of carrier agreements under 
the Shipping Act to ensure that that potential efficiencies and cost-
savings would not be lost by consumers because of delay in agreement 
effective dates. Agreements filed with the Commission go into effect 
automatically in 45 days unless the Commission determines (and a judge 
agrees) that the agreement is anticompetitive under the 6(g) standard 
referred to above. Under certain circumstances, the Commission may ask 
for additional information necessary to make a determination under 
6(g), extending for an additional 45 days after receiving that 
information the time before the agreement becomes effective. In order 
to prevent the agreement from going into effect, the Commission must 
bring a civil action in the United States District Court for the 
District of Columbia and successfully obtain an injunction to halt the 
operation of the agreement. The burden of proof is on the Commission.
    If parties agree to undertake activities that are governed by the 
Shipping Act, but do not comply with the Commission's process of 
review, they risk not only Shipping Act sanctions, but also Federal 
criminal sanctions prosecuted by DOJ under the Sherman Act.
    Some claim that section 6(g) is ineffective because it presents too 
high a bar to a successful court challenge of an anticompetitive 
agreement by the Commission. On the contrary, the paucity of 6(g) cases 
and the historical absence of the Commission's need to challenge 
agreements in court is testament to the Commission's successful efforts 
to mitigate or eliminate potentially anticompetitive provisions in 
pending agreements through detailed discussions with filing parties 
during the review process. One need only look at the THE Alliance and 
the OCEAN Alliance to see recent examples of cases where the major 
carrier alliance agreements, as originally filed, requested authority 
to jointly negotiate for goods and services. Following Commission 
review, however, the agreements lacked these joint purchasing 
authorities when they went into effect. By its terms, the Shipping Act 
provides an opportunity for the public to express its concerns about 
filed agreements. The Commission takes these comments seriously, and 
uses them together with its own economic analysis under 6(g) during the 
review process to consider and address anticompetitive concerns.
    In addition to the review of carrier agreements for potentially 
anticompetitive effects under 6(g), the Commission may use section 10, 
the ``Prohibited Acts'' provisions in the Shipping Act, to preserve 
competition. This section of the Act includes prohibitions on a number 
of business practices on concerted carrier conduct acting outside of 
approved authority (such as price fixing or market allocation), 
unreasonable practices, discrimination in price or accommodations, 
refusal to deal, retaliation, boycotts, predatory practices, and 
discrimination based on shipper affiliation., 46 U.S. Code 
Sec. 41105(4), prohibits carriers from jointly negotiating with non-
ocean carriers if doing so would violate antitrust laws (emphasis 
added).
    These prohibited practices mirror remedies found in other 
competition statutes, such as the Robinson-Patman Act of 1936. The 
Commission, of course, may enforce section 10; but private litigants 
may bring actions under these Shipping Act provisions to protect their 
interests.
    Since 1916, Congress has recognized that the international ocean 
liner industry, which transports a large percentage of the 
international exports and imports so essential to this Nation's 
economy, requires special consideration because of the industry's 
critical role in our international commerce, its international 
dimension, and the competing and potentially conflicting regulatory 
regimes and interests of our international trading partners. The FMC 
reviews and monitors international ocean liner carrier joint 
collaborations or agreements under the Shipping Act to ensure that 
procompetitive efficiencies and cost savings are obtained for the 
benefit U.S. consumers and anticompetitive effects are prevented or 
properly mitigated.
    The global supply chain that has been built around the ocean 
container is essential to the modern American economy and the 
competitiveness of the Nation. The Federal Maritime Commission plays a 
vital role in assuring a fair, efficient, and reliable international 
ocean transportation system. Thank you for your attention and interest 
in the work of the Commission, I am happy to answer any questions you 
might have.

    The Chairman. Thank you, sir.
    Next we have Rebecca Dye, Commissioner with the Federal 
Maritime Commission. Ms. Dye has served on the FMC since 2002. 
She previously served as a law instructor at the U.S. Coast 
Guard Academy and an attorney at MARAD.
    Welcome.

          STATEMENT OF HON. REBECCA DYE, COMMISSIONER,

   FEDERAL MARITIME COMMISSION SUPPLY CHAIN INNOVATION TEAMS

    Ms. Dye. Thank you, Chairman Fischer, Ranking Member 
Booker, and members of the Subcommittee. I appreciate the 
opportunity to appear before you today on behalf of the members 
of the Federal Maritime Commission Supply Chain Innovation 
Teams. And on their behalf, I thank you for the kind 
recognition, Chairman Fischer.
    To accompany my statement, I submitted a list of the 
companies represented on our Innovation Teams, and the port 
directors, business, and academic advisors, and trade 
association consultants who supported the initiative.
    I would like to take the opportunity to publicly thank the 
talented individuals and their companies who volunteered their 
time and resources to advance this project.
    After issuing a report in 2015 on the results of the port 
congestion and supply chain forums the Commission held at ports 
around the country, we asked ourselves: Should the Commission 
become more involved in international supply chain challenges? 
And if so, how could we add value?
    As you know, the Commission has broad statutory authority 
over international ocean carriers, ports, marine terminal 
operators, and ocean transportation intermediaries. As a result 
of our work with them, we understand the commercial realities 
that our stakeholders face. The overall goal of the 
Commission's competition enforcement program under the Shipping 
Act of 1984 is to provide competitive ocean transportation 
rates and service for American exporters and importers, 
ultimately to the benefit of American consumers.
    Our programmatic responsibilities give us a vital 
perspective on the international supply chain challenges of 
American exporters and importers.
    We concluded that the Commission could add value and help 
address the challenges of America's international supply chain, 
but rejected the idea that performance of the commercial supply 
chain would be improved by additional government regulation.
    The approach we adopted for this initiative is built on two 
concepts: small teams and process innovation. We heard from 
industry groups that many business leaders were anxious to roll 
up their sleeves and actively engage across the table to 
address end-to-end global supply chain issues. To respond to 
this desire for active engagement, we organized small teams of 
industry leaders representing key supply chain industries: 
ocean carriers, U.S. ports, marine terminal operators, 
warehouse operators, chassis providers, longshore labor, 
trucking, railroads, intermediaries, and American exporters and 
importers.
    Second, we directed our teams to focus on actionable 
process innovation. We asked them to step out of their business 
silos and identify one key process innovation that they 
believed and agreed would improve overall international supply 
chain reliability and resilience.
    At our launch of our Supply Chain Innovation Teams last 
May, our three teams quickly identified supply chain visibility 
as one of the most effective ways to increase supply chain 
performance. Integrated information systems provide visibility 
that encourages businesses to act in a more coordinated and 
effective way.
    Our Innovation Teams identified the development of a 
national seaport information portal as the one process 
innovation that could be adapted for use by ports around the 
United States. Our import teams developed standardized 
information for each actor in the chain, and determined when 
that information should be made available to them. In July, our 
export teams will begin developing standardized information for 
the export supply chain.
    The collateral benefits of our initiative include the 
insights that team members have gained into the business 
reality of other actors in the supply chain teams--in the 
supply chain system. There were plenty of aha moments, and, 
``Do you really do it like that?''
    We've also gained great insights into the strengths of U.S. 
ports from interviews we have organized with ten directors of 
major container ports on the East Coast, the West Coast, and 
the Gulf. Their professionalism, dedication, and commitment is 
impressive.
    Chairman Fischer, we believe that information 
infrastructure that will increase the performance of the 
country's international supply chain is key to America's 
economic competitiveness.
    We have suggested to you legislative authority for the 
Commission to develop a demonstration project for a national 
information portal.
    We do not recommend that the Federal Government build or 
maintain an information system. However, while our teams are 
intact and available for consultation, we believe the time is 
right to take the next step and test the concept of a national 
seaport information portal.
    Thank you so much, Chairman Fischer and members of the 
Subcommittee. I'm pleased to answer your questions. Thank you.
    [The prepared statement of Ms. Dye follows:]

         Prepared Statement of Hon. Rebecca Dye, Commissioner, 
       Federal Maritime Commission Supply Chain Innovation Teams
    Chairman Fischer, Ranking Member Booker, and Members of the 
Subcommittee, thank you for the opportunity to appear before you today 
on behalf of the members of the Federal Maritime Commission Innovation 
Teams.
    To accompany my statement, I submitted a list of the companies 
represented on our Innovation Teams, and the port directors, business, 
and academic advisors and trade association consultants who have 
supported the initiative.
How to Add Value to Supply Chain Debate
    After issuing a report in 2015 on the results of the port 
congestion and supply chain forums the Commission held at ports around 
the country, we asked ourselves: Should the Commission become more 
involved in international supply chain challenges? And if so, how could 
we add value?
Why the Federal Maritime Commission
    As you know, the Commission has broad statutory authority over 
international ocean carriers, ports, marine terminals, and ocean 
transportation intermediaries. As a result of our work with them, we 
understand the commercial realities our stakeholders face.
    The overall goal of the Commission's competition enforcement 
program under the Shipping Act of 1984 is to provide competitive ocean 
transportation rates and service for American exporters and importers, 
ultimately to the benefit of American consumers.
    Our programmatic responsibilities give us a vital perspective on 
the international supply chain challenges of American exporters and 
importers.
No Additional Government Regulation
    We concluded that the Commission could ``add value'' and help 
address the challenges of America's international supply chain, but 
rejected the idea that the performance of the commercial supply chain 
would be improved by additional government regulation.
    Nor should we look over the shoulders of port officials and attempt 
to duplicate or second-guess the tough decisions they are making to 
combat supply chain problems.
Team Work and Process Innovation
    The approach we adopted for this initiative is built on two 
concepts: team work and process innovation.
    We heard from industry groups that many business leaders were 
anxious to ``roll up their sleeves'' and actively engage ``across the 
table'' to address end-to-end global supply chain issues together.
    To respond to this desire for active engagement, we organized teams 
of industry leaders representing key supply chain industries: ocean 
carriers, U.S. ports, marine terminal operators, warehouse operators, 
chassis providers, longshore labor, trucking, railroads, 
intermediaries, and American exporters and importers.
    Second, we directed our teams to focus on ``actionable'' process 
innovation. We asked them to ``step out of their business silos'' and 
identify one key process innovation that would improve overall 
international supply chain reliability and resilience.
Innovation Teams Recommendation
    At the launch of our Supply Chain Innovation Teams initiative last 
May, our three teams quickly identified supply chain visibility as one 
of the most effective ways to increase supply chain performance.
    Integrated information systems provide supply chain visibility that 
encourages businesses to act in a more coordinated and effective way.
National Seaport Information Portal
    Our Innovation Teams identified the development of a national 
seaport information portal as the one process innovation that could be 
adapted for use by ports around the United States.
    Our import teams developed standardized information for each actor 
in the international import supply chain and determined when that 
information must be available.
    In July, our export teams will begin developing standardized 
information for our export supply chain.
Port Director Interviews
    Collateral benefits of our initiative include the insights team 
members have gained into the business realities of other actors in the 
supply chain system.
    We have also gained a great insights into the strengths of and 
opportunities for U.S. ports. We have organized interviews with many of 
our American port directors and are impressed by their professionalism 
and dedication.
Information Infrastructure Key to American Economic Competitiveness
    Chairman Fischer, we believe that information infrastructure that 
will increase the performance of our country's international supply 
chain is key to America's economic competitiveness.
    We have suggested to you legislative authority for the Commission 
to develop a demonstration project for a national seaport information 
portal.
    We do not recommend that the Federal government build or maintain a 
national seaport information system. However, while our teams are 
intact and available for consultation, we believe that the time is 
right to take the next step and test the concept of a national seaport 
information portal.
    Thank you, Chairman Fischer and members of the Subcommittee. I'm 
pleased to answer your questions.

    The Chairman. Thank you, Commissioner.
    Next we have Mr. Szabat, who is the Executive Director of 
the Maritime Administration.
    And previously you served as Chief of Staff for the Small 
Business Administration and Transportation Counselor to the 
U.S. Ambassador to Iraq. Welcome.

         STATEMENT OF JOEL SZABAT, EXECUTIVE DIRECTOR,

                    MARITIME ADMINISTRATION,

               U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Szabat. Good afternoon, Chairwoman Fischer, Ranking 
Member Booker, and members of the Subcommittee. Thank you for 
the invitation to testify.
    The Department of Defense relies on U.S.-flag ships, crewed 
by volunteer American civilian mariners to move our 
warfighters' equipment and supplies whenever and wherever they 
need to go. This U.S.-flag fleet of privately owned, 
commercially operated vessels, along with government-owned 
vessels, provide the sealift for the armed forces during times 
of conflict and also responds to humanitarian crises and 
natural disasters.
    MARAD is responsible for ensuring that enough U.S.-flag 
ships are available to meet these Department of Defense sealift 
requirements and that there are enough qualified merchant 
mariners to crew the entire sealift fleet of commercial and 
government-owned vessels.
    Three programs are essential to our sealift mission and to 
the commercial success of the U.S.-flag fleet: the Jones Act, 
which ensures the U.S.-flag fleet domestic trade; and Cargo 
Preference and the Maritime Security Program, which together 
provide an international U.S.-flag fleet supporting the U.S. 
military.
    As of today, the U.S.-flag commercial fleet is adequate to 
meet immediate military contingencies, but as the commercial 
fleet has declined in size in recent years, it no longer 
employs enough qualified American mariners to sustain an 
extended military sealift.
    To begin to address this shortfall, the most recent 
National Defense Authorization Act established a Maritime 
Workforce Working Group. This group has already begun to assess 
and define the pool of U.S. citizen mariners necessary to 
support the U.S.-flag fleet in times of national emergency.
    Nearly all of our merchant mariner officers qualified to 
crew commercial and government sealift ships graduate from the 
State Maritime Academies or from the Federal United States 
Merchant Marine Academy. Following incidents of sexual 
harassment and sexual assault at the U.S. Merchant Marine 
Academy, both on campus and at sea, the Department of 
Transportation and MARAD leadership suspended the USMMA's 
critical commercial Sea Year training component. In the 
Maritime Administration, we look after our people. Any sexual 
violence or coercion against any of our people, especially 
including midshipmen at Kings Point, is unacceptable.
    During the suspension, a cultural audit of the Academy was 
conducted by the Department of Transportation to study the 
reasons for sexual harassment, sexual assault, and coercive 
behaviors. From that audit came recommendations for 
establishing strict criteria that commercial shipping companies 
must meet to participate in Sea Year. Superintendent Helis will 
discuss actions taken on campus in greater detail.
    Shortly after the Sea Year stand-down, a consortium of 14 
leading maritime companies came together with MARAD and 
proposed ways to ensure that Sea Year training is conducted in 
a safe and respectful environment. Those proposals have been 
developed into strict requirements for companies to meet and 
apply in to participate in Sea Year. To date, eight companies, 
representing 82 percent of the commercial Sea Year training 
prior to stand-down, have met these requirements and resumed 
hosting midshipmen on their vessels.
    Going forward, MARAD will continue to work with industry 
through the Ship Operations Cooperative Program, made up of 
maritime industry professionals focused on safety. The SOCP 
will develop computer-based sexual assault prevention and 
response training that companies can use to educate and equip 
their vessel crews. This summer, we will review these measures 
and make changes or improvements as needed.
    The NDAA also required MARAD to establish a Sexual Assault 
Prevention and Response Working Group to examine methods of 
improving the shipboard climate during Sea Year. The SAPR 
Working Group had its first meeting on January 31, with over 50 
members from industry, labor, the Merchant Marine Academy, the 
State Maritime Academies, and Federal Government 
representatives also participating.
    Finally, the Fiscal Year 2017 NDAA set deadlines for 
completing actions identified by the Department of 
Transportation's Inspector General in a December 2015 
management control audit. DOT and MARAD have completed 13 of 
the 16 recommendations, and we are committed to meeting the 
remainder.
    A final note, with me today, in pink, is my better half, 
best friend, and wife, who has two Commerce connections. 
Chiling Tong is a former Deputy Assistant Secretary in the 
Department of Commerce, and she is now President of the 
National AAPI Chamber of Commerce and Entrepreneurship.
    Thank you for your interest. I ask that my written 
statements be submitted into the record. And I'm happy to 
answer any questions you may have.
    [The prepared statement of Mr. Szabat follows:]

        Prepared Statement of Joel Szabat, Executive Director, 
       Maritime Administration, U.S. Department of Transportation
    Good afternoon, Chairwoman Fischer, Ranking Member Booker and 
members of the Subcommittee. Thank you for the invitation to testify on 
issues under the jurisdiction of the Maritime Administration, with an 
emphasis on the implementation of recent statutory requirements and the 
examination of topics relevant to upcoming reauthorization bills. This 
testimony will cover the current state of the U.S.-flag fleet and 
mariner workforce and implementation of the recent MARAD 
reauthorization bill, including measures affecting the U.S. Merchant 
Marine Academy (USMMA or Academy).
The U.S.-Flag Fleet and Mariner Workforce
    MARAD is responsible for ensuring that U.S.-flag ships and merchant 
mariners are available to meet Department of Defense (DOD) sealift 
requirements. The U.S.-flag fleet of privately-owned, commercially-
operated vessels, along with government-owned vessels, provide a 
critical public-private sealift surge and sustainment capacity to move 
equipment and materials for the Armed Forces and Federal agencies when 
needed, and where needed, during times of conflict, humanitarian 
crises, and natural disasters.
    Three programs ensure that there are enough U.S.-flag vessels 
available to provide this capacity: the Jones Act, which ensures a role 
for the U.S.-flag fleet in domestic trade; and Cargo Preference and the 
Maritime Security Program (MSP) which, together, support a militarily 
useful, U.S.-flag fleet sailing internationally.
    MARAD and DOD also rely on the commercial fleet to employ enough 
qualified mariners to crew all the commercial ships tasked with 
supporting military operations, as well as enough additional mariners 
to crew the ``surge fleet'' of Federally-owned cargo ships. As of 
today, the size and composition of the U.S.-flag commercial fleet is 
adequate to meet immediate military contingencies. However, due to the 
decline in size in recent years of both the domestic U.S.-flag fleet 
with unlimited horsepower and unlimited tonnage and the international 
U.S. flag commercial fleet, both the U.S. Transportation Command 
(USTRANCOM) and MARAD are concerned that there are not enough qualified 
mariners to sustain an activation of the entire sealift fleet, though 
there has never been a full activation of the entire sealift fleet.
    The National Defense Authorization Act for Fiscal Year 2017 (FY 
2017 NDAA) required the establishment of a Maritime Workforce Working 
Group (MWWG) to examine and assess the size of the pool of U.S. citizen 
mariners necessary to support the U.S.-flag fleet in times of national 
emergency. The MWWG has been established and has begun meeting. The 
MWWG is comprised of more than 50 members that include representatives 
from industry, labor, the USMMA, State Maritime Academies, and Federal 
Government representatives, as well as subject matter experts from 
USTRANSCOM, DOD, and the Army. In addition to member meetings, a 
Federal Register Notice will be published to collect input from the 
public, as the MWWG prepares a report to Congress due in December 2017.
Maritime Training
    Another MARAD responsibility is to provide funding and oversight 
for mariner training programs to produce highly skilled U.S. Coast 
Guard (USCG) credentialed officers for the U.S. Merchant Marine. 
Maintaining an adequate pool of American merchant mariners is vital to 
both the commercial success of the U.S.-flag fleet and to maintaining 
the capacity needed to project American sea power. The USMMA and the 
State Maritime Academies (SMAs) graduate nearly all USCG-credentialed 
officers. These are merchant marine officers who hold an unlimited 
tonnage or horsepower endorsement available to crew U.S.-flag ships. 
These graduates support our Nation as a cadre of well-educated and 
trained merchant mariners capable of serving in support of military 
emergency, national emergency, and humanitarian missions.
Addressing Sexual Harassment and Sexual Assault at the U.S. Merchant 
        Marine Academy
    The Academy is America's flagship school for educating licensed 
merchant mariners capable of serving our Nation in peace and war. DOT, 
MARAD, and the USMMA take sexual assault and sexual harassment at sea 
and on campus very seriously. We adopted an approach to this problem 
similar to that used at the other Federal service academies. As best 
and as fast as we can, we are introducing policies to change the 
behavior and culture at the Academy to combat all kinds of abusive or 
coercive behaviors. This testimony discusses the actions MARAD has 
taken in conjunction with maritime industry, while testimony from 
Superintendent Helis will discuss actions taken to combat sexual 
assault and harassment on the USMMA campus.
Criteria For Vessel Operators to Participate In Sea Year
    The USMMA's shipboard training program, or ``Sea Year,'' gives 
Midshipmen experience of life at sea on board commercial and military 
vessels and provides cost-effective hands-on seamanship and engineering 
sea time that meets the requirements to secure USCG mariner 
credentials. Midshipmen are required to have 360 days of sea service 
during their four-year maritime education to obtain their USCG merchant 
mariner credentials. Shipping companies and the U.S. Navy are part of a 
cooperative effort to ensure that a Midshipman's shore based education 
is enhanced by the required on-the-job training at sea.
    Sea Year is critical to the education and training of Midshipmen at 
the USMMA, and all training must be conducted in a safe and respectful 
environment. In the wake of a series of studies and surveys that 
indicated problems with sexual misconduct and other coercive behaviors, 
both on campus and at sea, DOT and MARAD leadership suspended 
commercial Sea Year so we could develop a better understanding of the 
problem and a strategy to ensure the safety of the Midshipmen. An 
independent external consultant assessed the organization and made 
recommendations in December 2016.\1\
---------------------------------------------------------------------------
    \1\ Logistics Management Institute (LMI). December 2016. 
``Department of Transportation U.S. Merchant Marine Academy Culture 
Audit.'' Available at: https://www.usmma.edu/sites/usmma.edu/files/
docs/USMMAReport%20508.pdf
---------------------------------------------------------------------------
    Last year, Secretary Foxx's decision to stand down commercial Sea 
Year over concerns about Midshipmen being subjected to sexual 
misconduct stirred vocal disagreement from industry leaders. Those same 
leaders, including many USMMA alumni, worked with MARAD through an 
extended stand down of Sea Year while the cultural audit was conducted. 
A consortium of 14 leading maritime companies came together with MARAD 
to examine ways to ensure that Sea Year training is conducted in a safe 
and respectful environment. Just two weeks after the stand down, the 
consortium brought forth a proposal to address sexual assault and 
harassment prevention and response. MARAD and DOT subsequently created 
the Shipboard Climate Compliance Team (SCCT) to establish standards and 
collaborate with industry, labor and the consortium, and lay out 
workable criteria for the companies to achieve those standards. The 
SCCT is led by a MARAD Senior Executive Service leader, who is a USMMA 
graduate. The team is made up of 10 experienced mariners and sexual 
harassment and sexual assault prevention experts and civil rights 
professionals. The SCCT has established stringent new requirements that 
companies must meet to be eligible to participate in Sea Year training. 
This strong working relationship between MARAD and these maritime 
leaders resulted in six companies, representing 75 percent of the 
commercial Sea Year training provided prior to the stand down, being 
reinstated to accept Midshipmen as of today. The SCCT standards meet 
the requirement in Section 3514 of the FY 2017 NDAA for MARAD to 
establish, in consultation with operators of U.S.-flag vessels, 
criteria that vessel operators must meet to participate in Sea Year and 
a process for verifying compliance with the criteria.
    MARAD's ``Sea Year Eligibility'' criteria include the following:

        Company-Wide Zero Tolerance Message--Shipping company CEOs will 
        issue an annual company-wide message outlining specific rules 
        for the workplace, strongly stating that sexual assault and 
        sexual harassment, including any retaliation based on a 
        complaint, are unacceptable, and committing the company to 
        eradicate such behavior and enforcing a zero-tolerance policy.

        Annual Sexual Assault and Sexual Harassment Prevention Training 
        Requirement for Crew--Annual sexual assault and harassment 
        prevention training will ensure that crewmembers clearly 
        understand what constitutes sexual assault and sexual 
        harassment, its negative impact, the importance of prevention, 
        and the penalties for engaging in prohibited behavior.

        Mentors with Enhanced Selection Criteria and Duties--Mentors 
        for each ship play a crucial role in the success and 
        development of cadets. Per enhanced mentor qualifications, a 
        mentor must certify that he/she does not have any pending 
        complaints or history of violations of any other company's 
        Sexual Assault Sexual Harassment policies. The mentor must be 
        of good character, and know, support, and advocate for the 
        company's sexual assault sexual harassment prevention and 
        response policies.

        Verify Annual Sexual Assault and Sexual Assault Prevention and 
        Response Training--Each company will provide MARAD documents 
        describing company-specific training protocols; the company's 
        anti-discrimination, harassment, retaliation and sexual 
        misconduct policies, including complaint reporting policies and 
        procedures; a description of the company's investigation 
        process and enforcement procedures; and, a mechanism for 
        verifying their understanding of the issue.

        Zero-Tolerance Policy Regarding Romantic or Sexual 
        Relationships--Companies will actively support the USMMA Sea 
        Year Conduct policy for Midshipmen, which prohibits romantic or 
        sexual relationships between Midshipmen and crewmembers, and 
        the consumption of alcohol by Midshipmen under 21 years old. 
        Companies will immediately report known Midshipmen violations 
        to the USMMA. A violation of the USMMA Sea Year policy may 
        result in counseling or punishment pursuant to the Midshipmen 
        Regulations.

        MARAD Will Maintain a Record of all Relevant Company Policies--
        Companies will submit all relevant policies and documentation 
        to MARAD, and MARAD will verify compliance annually. Required 
        documentation includes, but is not limited to, sexual assault 
        and harassment prevention and response policies; a description 
        of company's complaint reporting process and procedures; 
        policies related to confidentiality, enforcement, and 
        retaliation and investigation procedures; and, the location of 
        sexual misconduct prevention policies onboard the vessel.

        Company Debrief--Currently, both Midshipmen and the Vessel 
        Masters evaluating them provide a report to the USMMA upon 
        completion of an individual's Sea Year training. In addition to 
        these reports, the new criteria require the company to provide 
        the Academy a sexual assault and sexual harassment debrief at 
        the completion of the Midshipmen's Sea Year time with the 
        company.

    The requirements outlined above will be reviewed in September this 
year, and annually thereafter. The SCCT has implemented a company-by-
company review process to recommend eligibility for carrying USMMA 
Midshipmen aboard their commercial ship. The SCCT will review documents 
provided by carriers to ensure compliance with the criteria. Once that 
process is complete, the USMMA Superintendent may issue an eligibility 
letter. MARAD Headquarters will coordinate with USMMA to board vessels 
and visit companies to conduct Shipboard Climate Compliance Team (SCCT) 
audits. The audit priority will be driven by review of company 
documentation that pertain to sexual misconduct. Additional feedback 
from the companies will be provided in accordance with the SCCT 
requirements. This is in addition to current reporting from the 
Midshipmen to the USMMA Department of Shipboard Training Academy 
Training Representative Midshipman Assignment Report, which provides 
feedback from the cadet about the company and Sea Year experience. Each 
of these reports and opportunities for feedback will specifically 
addresses sexual harassment and sexual assault.
    At present, six companies have met compliance requirements and 
resumed hosting Midshipmen on their vessels. MARAD is also reviewing 
the packages of several other companies which have applied to meet the 
Sea Year requirements. Collectively, the companies that have been 
approved, or are applying, represent 84 percent of the commercial Sea 
Year training provided before the suspension.
Sexual Assault Prevention and Response Working Group
    Section 3517 of the FY 2017 NDAA required MARAD to establish a 
Sexual Assault Prevention and Response Working Group (SAPR WG) to 
examine methods to improve the shipboard climate during Sea Year, 
including prevention and response to sexual assault, sexual harassment, 
and other inappropriate conduct. The SAPR WG had its first formal 
meeting on January 31, 2017. With over 50 members, the WG includes 
members from industry, labor, the USMMA, SMAs, and Federal Government 
representatives in accordance with the FY 2017 NDAA requirements. In 
addition to member meetings, public input is being sought through a 
Federal Register Notice which was published May 1, 2017. The WG will 
report its findings to Congress by September 25, 2017 as required by 
the FY 2017 NDAA.
    In an additional effort to work with industry to address the 
problems of Sexual Harassment and Sexual Assault, MARAD has entered a 
cooperative agreement with the Ship Operations Cooperative Program 
(SOCP) to develop computer-based sexual assault prevention and response 
training that will be made available for companies to train their 
vessel crews. SOCP is a trade association made up of maritime industry 
professionals focused on safety. MARAD is also working with SOCP to 
roll out management `best practices' this summer. These efforts will 
especially benefit smaller companies without the resources to develop 
robust programs of their own.
School Ships
    In addition to providing oversight of the USMMA, MARAD provides 
funding assistance to six State Maritime Academies (SMAs), which 
collectively graduate more than two-thirds of the entry-level Merchant 
Marine officers annually.\2\ Approximately 972 Cadets are expected to 
graduate from the SMAs in 2017. Assistance provided to the SMAs also 
includes funding for maintenance and repair costs for training ships on 
loan from MARAD. Unlike the USMMA Midshipmen, the SMA Cadets receive 
most of their sea time on these training ships, under the instruction 
of each school's faculty.
---------------------------------------------------------------------------
    \2\ The six SMAs are: California Maritime Academy in Vallejo, 
California; Great Lakes Maritime Academy in Traverse City, Michigan; 
Texas A&M Maritime Academy in Galveston, Texas; Maine Maritime Academy 
in Castine, Maine; Massachusetts Maritime Academy in Buzzards Bay, 
Massachusetts; and State University of New York (SUNY) Maritime College 
in the Bronx, New York.
---------------------------------------------------------------------------
    The maintenance and repair projects are particularly important as 
the training ships age and approach or exceed their designed service 
life. Two training ships have been in service over 50 years, which is 
twice the standard service life. Accordingly, MARAD is using the funds 
to address priority maintenance across all the training vessels, with 
emphasis on the Training Ship EMPIRE STATE, to ensure that they all 
meet safety and functional requirements and remain in service as long 
as necessary.
                    Other FY 2017 NDAA Requirements
Ship Disposal Program
    MARAD is responsible for the disposal of obsolete Federal 
Government, merchant-type vessels that are 1,500 gross tons or greater. 
A portion of the funds generated by the sale of these vessels is 
dedicated for maritime heritage preservation, including funding the 
National Park Service's National Maritime Heritage Grant Program. 
Section 3507 of the FY 2017 NDAA established a new formula for 
distributing these sales proceeds to increase the amount of funds 
available for the NPS grant program. MARAD is prepared distribute any 
new funds received from ship recycling sales pursuant to this 
allocation. In addition, MARAD will provide a report to Congress on the 
management of MARAD's ship disposal program as required under Section 
3507.
Workforce Plans and Onboarding
    In a December 2015 audit,\3\ the DOT OIG made recommendations for 
improvements in MARAD's management controls related to workforce 
development and uniform policy. Sections 3519, 3520, and 3521 of the FY 
2017 NDAA set deadlines for completing the actions recommended in this 
audit. MARAD is committed to meeting these deadlines. The MARAD 
Workforce Analysis, Leadership Succession Plan, and Strategic Human 
Capital Plan are currently being updated. MARAD expects completion of 
this requirement by the deadline set in the FY 2017 NDAA. MARAD has 
performed the review related to new hire orientation, training, and 
misconduct, and the OIG recommendation regarding onboarding policies 
and procedures was closed on January 10, 2017.
---------------------------------------------------------------------------
    \3\ Office of Inspector General. 2015. Report Number ST-2016-011. 
Audit report: Weaknesses in MARAD's management controls for risk 
mitigation, workforce development, and program implementation hinder 
the agency's ability to meet its mission.
---------------------------------------------------------------------------
Drug and Alcohol Policy
    In compliance with Section 3520 of the FY 2017 NDAA, MARAD has 
reviewed its drug and alcohol policies, developed training, and 
established a system to track training sessions. The OIG recommendation 
to address these issues was closed on August 1, 2016.
Vessel Transfers
    As recommended by the OIG, MARAD conducted a review and revised its 
Vessel Transfer Office (VTO) procedures to reflect the current range of 
VTO responsibilities and processes. This recommendation was closed on 
May 10, 2016. In accordance with Section 3521 of the FY 2107 NDAA, 
MARAD will submit a report to Congress in September 2017 detailing the 
updated VTO procedures to process vessel transfer applications.
    DOT and MARAD are committed to implementing the changes outlined in 
the NDAA and we intend to build upon the improvements that have been 
made in recent years. We appreciate the support this Subcommittee has 
provided and look forward to working with you to ensure the Maritime 
Administration's progress.
    Thank you for your interest, and I am happy to answer any questions 
you may have.

    The Chairman. Thank you, sir.
    Next we have Rear Admiral James Helis, Superintendent, the 
United States Merchant Marine Academy.
    Welcome, Admiral.

 STATEMENT OF REAR ADMIRAL JAMES HELIS, U.S. MARITIME SERVICE 
     SUPERINTENDENT, UNITED STATES MERCHANT MARINE ACADEMY

    Admiral Helis. Thank you, Senator. And good afternoon, 
Chairman Fischer, Ranking Member Booker, and members of the 
Subcommittee. Thank you for the opportunity to testify on the 
implementation of the recent Maritime Administration 
reauthorization bill's measures affecting the United States 
Merchant Marine Academy.
    The Academy's mission is to educate and graduate licensed 
merchant mariners and leaders of exemplary character to serve 
our Nation's marine transportation and national security needs. 
The Academy attracts quality young men and women who meet 
rigorous admission standards. They demonstrate superior 
character and leadership qualities to complement a strong 
academic record.
    In compliance with the Fiscal Year 2017 NDAA, I will post a 
public profile of each class's demographics by state, country, 
gender, race, and ethnicity, and prior military service this 
August. I'm glad to say that in recent years, the quality and 
diversity of our incoming classes have improved considerably, 
which feeds into our efforts to build a healthy, respectful 
campus culture.
    This culture is an important dynamic that supports my top 
priority, of ensuring the Academy is a safe learning 
environment for all students. This committee has also made this 
a priority, and several requirements of the Fiscal Year 2017 
NDAA addressed the prevention of sexual assault, sexual 
harassment, and other coercive behaviors on campus and during 
Sea Year training.
    Sexual assault and sexual harassment are unacceptable 
behaviors at any institution of higher education, especially 
one committed to developing our Nation's future leaders. To 
that end, we have taken a number of aggressive steps since 2012 
to address the problem.
    In Fiscal Year 2012, the Merchant Marine Academy hired its 
first Sexual Assault Response Coordinator, or SARC, and 
established a 24/7 victim hotline. The Academy also works 
closely with a local victim advocacy agency to provide another 
confidential reporting option.
    We have beefed up mandatory training for our faculty, 
staff, and midshipmen on sexual assault, sexual harassment, 
dating violence, stalking, and bystander intervention. We also 
have implemented recommendations made by the Department of 
Transportation's Inspector General in Fiscal Years 2013 and 
2014 after a thorough evaluation of the Academy's Sexual 
Assault Prevention and Response program.
    In addition, a campus cultural study commissioned by the 
Department of Transportation in 2016 generated more valuable 
recommendations that are also being implemented.
    The Defense Manpower Data Center continues to administer a 
Gender Relations Survey and conduct focus groups across our 
campus. While we've made progress in increasing midshipmen 
awareness and understanding of sexual assault and sexual 
harassment, we are extremely disappointed that the surveys show 
we are not seeing a decrease in the number of incidents.
    In 2016, we redoubled our efforts by recognizing that the 
core issue is the culture of the Academy and providing a safe 
learning environment which values and respects every midshipman 
and allows them to develop into exemplary leaders.
    Additionally, this past fall, we created a Sexual Assault 
Prevention Response Office, or SAPRO, and we are hiring two 
victim advocate educators and a Sea Year coordinator to plan 
and execute training for victim services and prevention.
    A special team of staff, faculty, and midshipmen 
participated in a cultural change conference in February 2017 
and are now drafting a comprehensive campaign to transform the 
Academy's culture. Another committee is working to overhaul all 
Sea Year policies and training.
    Other actions this past year include vetting maritime 
companies through a MARAD Shipboard Climate Compliance Team to 
enact standards preventing sexual assault and harassment from 
happening at sea.
    All of our efforts are focused on building a community with 
zero tolerance for sexual assault, sexual harassment, 
retaliation, bullying, hazing, coercion, victim blaming, and 
alcohol misuse and abuse. We know that our leadership, staff, 
faculty, and midshipmen must work together to eliminate these 
behaviors and hold those who violate Academy standards 
accountable.
    I have a very personal stake in solving this problem, as my 
own experience in assisting victims of sexual assault dates 
back to the 1990s when I served in the Army as a battalion 
commander. I know firsthand from working with victims the 
lifelong harm these crimes inflict. It undermines unit 
readiness and cohesion and hurts our ability to accomplish our 
mission. As a Federal service academy, the U.S. Merchant Marine 
Academy should be setting an example for eliminating sexual 
assault and sexual harassment. Anything less is a failure on 
our part.
    The work we've done to improve sexual assault prevention 
and response also addresses one requirement the Academy must 
meet for reaccreditation. In June 2016, the Middle States 
Commission on Higher Education placed the Academy in a warning 
status for not meeting 5 of their 14 standards of 
accreditation. As detailed in my written testimony, the Academy 
is taking actions to correct the deficiencies identified by 
Middle States, and we submitted a required report on our 
progress to them on March 1. The Academy remains fully 
accredited as we work to address the recommendations made by 
Middle States, and we anticipate their next final report in 
July.
    Thank you for inviting me to testify today. I ask that my 
written statement be entered into the record. I appreciate your 
interest and continued support for the Academy and will be 
happy to answer any questions you may have. Thank you.
    [The prepared statement of Admiral Helis follows:]

 Prepared Statement of Rear Admiral James Helis, U.S. Maritime Service 
         Superintendent, United States Merchant Marine Academy

    Good afternoon, Chairwoman Fischer, Ranking Member Booker 
and members of the Subcommittee. Thank you for the invitation 
to testify on issues under the jurisdiction of the Maritime 
Administration, with an emphasis on the implementation of 
recent statutory requirements and the examination of topics 
relevant to upcoming reauthorization bills. This testimony will 
cover the implementation of the recent MARAD reauthorization 
bill's measures affecting the U.S. Merchant Marine Academy 
(USMMA or Academy).
    The mission of the Academy is to educate and graduate 
licensed merchant mariners and leaders of exemplary character 
who will serve America's marine transportation and defense 
needs in peace and war. Each year the Academy graduates highly-
qualified U.S. Coast Guard (USCG) credentialed mariners 
committed to serving the Nation as officers in the Armed Forces 
and the Merchant Marine.
    The Academy provides a comprehensive four-year leadership 
development experience. All graduating Midshipmen will receive 
a Bachelor of Science degree, a USCG-issued Merchant Marine 
officer's license, and a commission in an Active or Reserve 
Component of one of the Armed Forces. They can meet their 
service obligation in one of two ways: twenty to twenty-five 
percent will choose to serve five years on Active Duty as an 
officer in any branch of the Armed Forces, while the remaining 
majority of the class will sail for five years as a Merchant 
Marine officer on US-flagged commercial ships or with a Federal 
agency, which can include the Military Sealift Command or the 
National Oceanographic and Atmospheric Administration.
    The Academy's mission begins with the men and women who 
pass through its gates in late June to begin their four-year 
journey. The Academy has a highly competitive and selective 
admissions process. Candidates must have a strong academic 
record and demonstrate superior character and leadership 
potential through their participation in co-curricular 
activities, athletics, and community service. They must meet 
rigorous medical and physical fitness qualifications for 
military service. And they must receive a nomination from a 
Member of Congress or qualify for one of fifty direct 
appointments by the Secretary of Transportation by 
demonstrating qualities deemed to be of special value to the 
Academy.
    My top strategic priorities for the Academy are preventing 
sexual assault and sexual harassment and other coercive 
behaviors, reaccreditation by the Middle States Commission on 
Higher Education (MSCHE), continuing our work to modernize and 
renovate campus infrastructure and facilities, and 
strengthening Midshipmen leadership development. I will focus 
my testimony today on the actions which the Academy has taken 
on meeting the requirements of the National Defense 
Authorization Act for Fiscal Year 2017, P.L. 114-328, (FY 2017 
NDAA) to address sexual assault and harassment.
    The FY 2017 NDAA requires that the superintendent post a 
public profile of each class' demographics by state, country, 
gender, race and ethnicity, and prior military service. The 
USMMA will post this report on the Academy's website by August. 
I believe that enhancing the diversity of the Regiment of 
Midshipmen will strengthen our efforts to improving the campus 
culture, which in turn is critical to eliminating sexual 
assault, sexual harassment, and other coercive and unacceptable 
behaviors. Over the past six years the quality and diversity of 
the incoming classes has improved considerably. Comparing the 
classes of 2014 and 2020, the most recently admitted, we saw 
the mean score on the Scholastic Aptitude Test improve from 
1215 to 1280. The percentage of women admitted rose from 12.9 
percent to 19.7 percent. Admission of individuals who represent 
racial minorities similarly rose from 15.2 percent to 24 
percent. Other indicators of the quality of our incoming 
candidates include class rank and grade point average, as well 
as candidates who have held key leadership positions in student 
government, athletics, and co-curricular and community 
activities. We are pleased with the progress we are making and 
expect to see continued improvements in the quality and 
diversity of future classes.
    Sexual assault and sexual harassment are unacceptable 
behaviors that have no place at any institution of higher 
education, especially one committed to developing our Nation's 
future leaders. I am committed to the elimination of sexual 
assault and harassment on our campus and improving the 
environment at the Academy so that victims are comfortable 
reporting all incidents and they are confident that Academy 
personnel will respond appropriately to reported incidents. The 
steps we have taken since 2012 to address sexual assault and 
harassment are included in our annual reports to Congress. We 
welcomed an evaluation of our programs by the Department of 
Transportation's (DOT) Inspector General in FY 2013 and FY 
2014, which provided another set of eyes on our programs and 
useful recommendations which we have implemented. In addition, 
the FY 2017 NDAA requires the DOT Inspector General to report, 
by March 31, 2018, on the effectiveness of the sexual assault 
and sexual harassment prevention and response program (SAPR) at 
the Academy. As required in the NDAA, the Defense Manpower Data 
Center continues to administer the Service Academy Gender 
Relations Survey in even numbered years, and conducts focus 
groups with Midshipmen, staff and faculty in odd-numbered years 
as they do for the other four Federal Service Academies. The 
next focus group study will be conducted in 2017. Additionally, 
the results of the study commissioned by the Department of 
Transportation in October 2016 on the Academy culture have been 
reviewed, and we are incorporating the suggestions across 
campus.
    I am personally committed to solving this problem. My 
experience in assisting victims of sexual assault dates to the 
1990s when I served in the Army as a battalion commander. I 
know from working firsthand with victims the immeasurable, 
lifelong harm these crimes inflict, and how they undermine unit 
readiness and cohesion. Sexual assault and harassment are 
fundamentally at odds with our values as a Nation--values that 
we are obligated as leaders to live by, model, and expand on. 
They undermine our ability to accomplish our mission. The 
USMMA, a Federal service academy, should be setting the example 
for the Nation in eliminating sexual assault and sexual 
harassment. Anything less is a failure on our part.
    At the Academy, we established a multi-disciplinary Sexual 
Assault Review Board (SARB), which meets monthly, to provide 
executive oversight and procedural guidance for the SAPR 
program by reviewing ways to improve processes, system 
accountability and victim access to quality services. The SARB 
has implemented standard operating procedures entitled 
``Investigating an Unrestricted Report of Sexual Assault; 
Processing a Restricted (confidential) Report of Sexual 
Assault; and, Maintenance of Restricted and Unrestricted 
Reports.''
    In FY 2012, USMMA hired its first Sexual Assault Response 
Coordinator (SARC). The SARC resides at the Academy, and is 
available to Midshipmen 24/7 through a victim hotline. Victims 
are provided with information and referrals, and assistance in 
obtaining any necessary medical or mental health treatment at 
the Academy or at an appropriate facility in the local 
community and/or victim advocacy agency. Victims have access to 
confidential (also known as restricted) reporting through the 
SARC, Health Clinic counseling staff, the Chaplain and a small 
number of specially trained staff and faculty victim advocates. 
The Academy works closely with the local victim advocacy agency 
to provide an additional confidential reporting option. A 
victim may also make an unrestricted report, which will result 
in the initiation of a criminal and administrative 
investigation.
    The SARC, working with the Superintendent, Commandant and 
Dean of Academics, has significantly improved training across 
the Academy aimed at the prevention of sexual assault and 
sexual harassment. Faculty and staff receive mandatory training 
annually. Incoming Midshipmen receive mandatory training in the 
first three weeks in small group settings (20-25 midshipmen per 
training) covering the topics of sexual assault, sexual 
harassment, dating violence, stalking, and bystander 
intervention. Beginning with the Class of 2019, we increased 
training to three hours from the one hour that previous classes 
received. The SARC and Commandant continue to provide quarterly 
training throughout each Midshipman's academic career in both 
small and large group settings. To meet the NDAA's requirements 
for awareness training programs, the SARC and the Department of 
Professional Development and Career Services provide special 
training sessions prior to departure for Sea Year (sophomores 
spend four months at sea and juniors spend eight months at 
sea). Training focuses on where to seek help or assistance 
(captain, designated person ashore, SARC's 24/7 hotline), 
situational awareness, risk reduction, and bystander 
intervention. In 2016, the Academy adopted the Green Dot 
Bystander Intervention Program, which teaches students to 
identify volatile situations in which there could be the 
possibility of sexual violence and to defuse those situations 
through diversion or distraction. In addition, the SARB 
recently decided to increase our training on sexual assault and 
proper conduct for Midshipmen prior to their departure for sea 
training this summer.
    Our survey results since 2012 indicate that Midshipmen have 
much better awareness and understanding of sexual assault and 
sexual harassment, and appreciate the commitment of everyone 
from the Secretary of Transportation through MARAD, the 
Academy's senior leadership, and Midshipmen Regimental officers 
to eliminate this scourge from the Academy. We are extremely 
disappointed that we are not seeing a decrease in incidents in 
the survey results. In 2016, we redoubled our efforts to 
address this problem.
    As a first step, we analyzed the available data and 
feedback from the Advisory Board and our own conversations with 
Midshipmen. It became clear to me that we needed to more 
closely examine the Sea Year and its potential effects, as that 
is the component of our program that sets USMMA apart from the 
other Federal service academies. MSCHE affirmed this concern in 
their report last year, highlighting a need for the USMMA to 
address the issues of sexual assault and harassment at sea and 
on campus. After further analysis and discussion among the 
senior leadership at USMMA, MARAD, and DOT, as MARAD Executive 
Director Joel Szabat discussed in his testimony, former 
Secretary Foxx decided to stand down Sea Year training until 
procedures were in place to better assure a safe climate for 
our Midshipmen. The combined efforts of USMMA, MARAD, DOT, and 
industry and labor resulted in the certification process 
described by Mr. Szabat, which we have now implemented.
    In addition to the Sea Year stand down, Secretary Foxx 
directed a deep dive into USMMA culture to identify other 
factors that could be contributing to our challenges with 
sexual assault and harassment and other unacceptable behaviors. 
The study has provided useful analysis that will inform our way 
forward.
    We have implemented policies and programs based on best 
practices adopted in the military and higher education, 
including procedures for disciplinary action. However, we have 
not seen the results we desire or expect. The core issue we 
must address--that we are now addressing--is the very culture 
of USMMA. We must take actions to transform the USMMA culture 
such that every Midshipman is respected, valued, and can 
develop to her or his fullest potential to serve the Nation as 
a leader of exemplary character. The entire USMMA community 
must have zero tolerance for sexual assault and sexual 
harassment, retaliation, bullying, hazing, coercion, victim 
blaming, and alcohol misuse/abuse. Leadership, staff, faculty, 
and Midshipmen must all unite to eliminate this behavior and 
support victims, and hold those who violate Academy core values 
and standards accountable for their actions, when incidents 
take place.
    In the fall of 2016, we determined that the work related to 
managing USMMA's sexual assault prevention and response program 
had become more than one individual could reasonably handle. 
Accordingly, we created a Sexual Assault Prevention and 
Response Office (SAPRO) and are converting the SARC position, 
which became vacant in December 2016, to a SAPRO director. We 
are hiring two Victim Advocate-Educators who will assist the 
SAPRO director in planning and executing training and providing 
victim services. We have also added a Sea Year coordinator to 
the SAPRO.
    Additional steps we have taken over the past six months 
include a reintegration program for Midshipmen when they return 
from sea and the addition of mandatory online interactive 
sexual assault and alcohol abuse prevention training. A special 
team made up of staff, faculty, and Midshipmen participated in 
a cultural change conference at the United States Air Force 
Academy in February 2017 and are now drafting a comprehensive 
campaign plan to transform USMMA culture. The Deputy 
Superintendent led an effort which has produced a comprehensive 
and integrated Sexual Assault Prevention and Response 
Framework. A committee also has begun work to overhaul Sea Year 
policies and all training in preparation for Sea Year.
    In addition to the efforts to improve the Sea Year training 
experience, the USMMA has developed a comprehensive plan to 
reduce sexual assault and sexual harassment on campus. The 
USMMA SAPR Program has significantly improved training across 
the Academy aimed at the prevention of sexual assault and 
sexual harassment, including online prevention training, case 
studies, videos, social media, professional speakers and small 
groups. Actions taken by the USMMA have included installation 
of new emergency call boxes and security cameras, improvement 
of the security guard force, implementation of a 24/7 hotline 
for reporting inappropriate behaviors, and victim assistance in 
obtaining medical or mental health treatment. Efforts will 
continue to improve upon the SAPR Program as the USMMA 
implements recommendations from the cultural audit and responds 
to feedback from Midshipmen.
    The Academy's work to improve sexual assault and sexual 
harassment prevention and response addresses one of the 
recommendations made by MSCHE, which accredits the Academy's 
academic degrees. In June 2016, MSCHE placed USMMA in a warning 
status because USMMA was not meeting five of MSCHE's fourteen 
standards of accreditation. We are presently taking action to 
meet the requirements identified by MSCHE to be granted full 
accreditation. Actions taken over the past year include MARAD's 
establishment of the Maritime Education and Training Executive 
Review Board, which serves as a formal governing and oversight 
body for USMMA; requesting and receiving relief from 
Congressional legislation constraining the Academy's budget 
during the interim Continuing Resolution period; developing 
templates for budget development and tools for linking 
resources with the Strategic Plan.
    Thank you for inviting me to testify today. I appreciate 
your interest and continued support for the Academy and will be 
happy to answer any questions you may have.
    The Chairman. Thank you, Admiral.
    Next we have Mario Cordero, the Commissioner, Federal 
Maritime Commission. Mr. Cordero has been a Commissioner on the 
FMC since 2011 and served as Chairman from April 2013 till 
January 2017.
    Welcome, sir.

STATEMENT OF HON. MARIO CORDERO, COMMISSIONER, FEDERAL MARITIME 
                           COMMISSION

    Mr. Cordero. Chairman Fischer, thank you, Ranking Member 
Booker, and members of the Subcommittee. Thank you for 
providing me this opportunity to appear before you today.
    As noted, President Obama designated me to serve as 
Chairman of the Commission on April 1, 2013, and I had the 
honor to serve in that role for nearly 4 years. I wish to 
congratulate my colleague, Michael Khouri, on his recent 
appointment as Acting Chairman of the Federal Maritime 
Commission earlier this year.
    During my time as Chairman, the FMC navigated the Hanjin 
bankruptcy, the implementation of the VGM container weight 
issue, and aggressively advocated for the maritime industry on 
high-level trade talks, and engaged in rulemaking that 
protected the American shipping consumer and streamlined rules 
to promote competition. Importantly, we also investigated and/
or monitored port congestion, demurrage and detention, and 
carrier alliances and consolidation. I thank you for your 
support throughout my tenure.
    I will touch upon four topics today: the current state of 
the industry, the alliance agreements, the supply chain, and 
other issues of relevance to U.S. exporters and importers, and 
the American shipping consumer.
    First, the industry. The international shipping community 
has experienced some dramatic challenges in the last decade. 
These challenges have been twofold. First, in 2008, the 
economic global recession and its severe impact on the 
international maritime transportation carriers, who continue to 
struggle with unsustainable transportation rates.
    Second, what many today regard as a geopolitical recession 
as a result of the global dialogue on protectionism and 
isolationism. Today, international trade is an integral part 
and a critical part of the U.S. economy. More than one-third of 
our Nation's GDP is tied to global commerce, and this figure is 
only predicted to become more significant in the coming years.
    Ocean transportation of goods and commodities is the 
backbone of our trading system. Indeed, 90 percent of world 
trade is transported by shipping lines. Each of us, as 
consumers or investors, benefit from the competitive 
marketplace the Commission works to maintain.
    In the last decade, we have seen the rise of very large 
container vessels, that is, vessels that exceed 10,000 TEUs, to 
more than 398 in the current worldwide fleet as of April 2017, 
which includes 20,000 TEU vessels. Our investments in maritime 
infrastructure have slowly tried to match that growth. We must 
invest in ports to remain competitive, plain and simple.
    Although we acknowledge the importance of trade in the 
American economy, and the obvious imbalance of the export-
import question, we still need to realize that our export 
growth is dependent on the global consumer.
    For example, recent reports indicate that U.S. exports of 
beef, pork, oil, gas, and LNG have grown consistently in the 
last few years. Within the next 3 years, the U.S. may be the 
largest exporter of LNG. Overall, containerized exports grew, 
and the value of exports transported by vessel in 2016 was in 
excess of $475 billion.
    Perhaps the most significant development in the 
international shipping industry is carrier consolidation. In 
2011, the year I commenced my service here at the FMC, there 
were approximately 21 major global water transportation 
carriers. Today, essentially we have 13, and next year, 2018, 
this may be down to 10, which will account for 70 percent of 
the containerized global capacity, each belonging to one of the 
three alliances that commenced in April of this year: the 2M, 
the OCEAN, and THE ALLIANCE. Frankly, I am not sure we have 
seen the end of carrier consolidation.
    An alliance agreement between carriers, which requires a 
filing with the Federal Maritime Commission, essentially is a 
vessel-sharing agreement. Motivated by economies of scale, the 
carriers focus on achieving cost savings given the challenge of 
securing sustainable transportation rates. The vessel-sharing 
alliance concept is not a new concept. However, the current 
level of debate and scrutiny within the industry commenced when 
the three largest carriers--Maersk, Mediterranean Shipping 
Company, and CMA-CGM--filed the P3 agreement back in October 
2013. That filing began what I term as the second generation of 
alliances.
    The P3 agreement was eventually withdrawn by the parties. 
However, the two largest carriers, Maersk and MSC, subsequently 
filed and moved forward as the 2M alliance and thus commenced 
the rush to achieve economies of scale by the major water 
transportation carriers.
    A question for the maritime shipping community and the 
supply chain is, what will be the impact of these second-
generation alliance? I believe it will be in cost savings and 
efficiencies. For the carriers, cost savings is a paramount 
concern, especially given the need for investment in cutting-
edge technology.
    To be clear, I am a supporter of the alliance model. 
However, legitimate concerns by stakeholders do remain. These 
second-generation alliances have introduced us to the concept 
of operation centers, information sharing, and joint 
contracting. The last two concepts have been raised as serious 
concerns by some stakeholders in the shipping community because 
of the potential of anticompetitive behavior.
    In addition to the formation of new alliances, we have 
witnessed generational changes in the shipping industry, 
including carrier acquisition, consolidations, bankruptcies, 
and joint ventures. The international shipping industry will 
continue to evolve, whether as to structure, service delivery, 
or cost-saving efficiencies.
    Finally, I want to discuss industry progress on the 
incorporation of technology, another way in which our industry 
partners have tried to save costs. Both Amazon and Alibaba are 
starting to establish themselves as movers of cross-border 
freight. Indeed, earlier this year, Amazon announced its 
intention of becoming an NVOCC. This is not to say that they 
are going to own or operate vessels, but, rather, they will aim 
to increase buying power with the ocean common carriers. I note 
that many ocean common carriers are maintaining close links to 
cloud-based supply chain specialists like INTTRA, GT Nexus, and 
CargoSmart, who were all early adapters of e-commerce.
    Currently, much of the focus on technology in containerized 
trade is in tracking logistics, such as real-time information 
on container movements. I believe this year will see an 
escalation in the number of digital and e-commerce applications 
designed to provide more visibility and transparency in the 
movement of containerized freight and implementing cost-
effective solutions in the supply chain.
    Earlier this year, the Journal of Commerce reported that 
Maersk and IBM are teaming up to digitize the global container 
supply chain using blockchain technology to improve efficiency 
and cost. This technology will result in enhancing visibility 
in container transport. In addition, both Maersk and CMA-CGM 
have moved to partner with e-commerce entity Alibaba to 
integrate transportation and logistics. Actions such as these 
can reduce cost and improve the reliability of supply chain 
systems. In sum, many believe we are on the course of the 
fourth industrial revolution, which essentially is the 
acceleration of the implementation of technology and 
digitalization in a rapidly changing industry.
    The supply chain has been a central focus for the Federal 
Maritime Commission for several years now. More efficient 
supply chains increase not only the volume of trade by lowering 
the cost of goods, but it also increases the distances over 
which these goods can be transported. We noted in our----
    The Chairman. Commissioner, I would ask you to wrap it up, 
please.
    Mr. Cordero. Yes, Madam Chairman.
    So in summation, as we noted in our congestion study in 
2015, this industry is rapidly evolving, and there are 
certainly concerns with regard to congestion and mitigating 
congestion. And in that regard, I'll be happy to answer any 
questions that the Committee may have. So thank you so much for 
your time.
    [The prepared statement of Mr. Cordero follows:]

        Prepared Statement of Hon. Mario Cordero, Commissioner, 
                      Federal Maritime Commission
    Chairman Fischer, Ranking Member Booker, and Members of the 
Subcommittee, thank you for providing me with this opportunity to 
appear before you today.
    President Obama designated me to serve as Chairman of the 
Commission on April 1, 2013. I had the honor to serve in that role for 
nearly four years. I congratulate my colleague, Michael Khouri, on his 
appointment as Acting Chairman of the FMC earlier this year. During my 
time as Chairman, the FMC navigated the Hanjin bankruptcy, the 
implementation of VGM (the container weight rule), aggressively 
advocated for the maritime industry in high-level trade talks, and 
engaged in rule-makings that protected the American shipping consumer 
and streamlined rules to promote competition. Importantly, we also 
investigated and/or monitored port congestion, demurrage and detention, 
and carrier alliances and consolidation. I thank you for your support 
throughout my tenure.
    I will touch upon four topics today: the current state of the 
industry, alliance agreements, the supply chain, and other issues of 
relevance to the U.S. exporters, importers, and the American shipping 
consumer.
    First, the industry. The international shipping community has 
experienced some dramatic challenges in the last decade. These 
challenges are twofold: first, the 2008 economic global recession and 
its severe impact on the international maritime transportation carriers 
who continue to struggle with unsustainable transportation rates; and 
second, what many today regard as a geopolitical recession, as a result 
of the global dialogue on protectionism and isolationism. Today, 
international trade is an integral and critical part of the U.S. 
economy. More than one-third of our Nation's GDP is tied to global 
commerce and this figure is only predicted to become more significant 
in the coming years. Ocean transportation of goods and commodities is 
the backbone of our trading system. Indeed, 90 percent of world trade 
is transported by shipping lines. Each of us, as consumers or 
investors, benefit from the competitive marketplace the Commission 
works to maintain. In the last decade, we have seen the rise of Very 
Large Container Ships (VLCS)--vessels of 10,000 TEUs or more--to more 
than 398 in the current worldwide fleet as of April 2017, which 
includes 20,000 TEU vessels. Our investments in maritime infrastructure 
have slowly tried to match that growth. We must invest in ports to 
remain competitive--plain and simple.
    Although we acknowledge the importance of trade to the American 
economy, and the obvious imbalance on the export-import equation, we 
still need to realize that our export growth is dependent on a global 
consumer. For example, recent reports indicate that U.S. exports of 
beef, pork, oil, gas, and LNG have grown consistently in the last few 
years. Within the next three years the U.S. may be the third largest 
exporter of LNG. Overall, containerized exports grew, and the value of 
exports transported by vessel in 2016 was in excess of $475 billion.
    Perhaps the most significant development in the international 
shipping industry is carrier consolidation. In 2011, the year I 
commenced my service at the FMC, there were 21 major global water 
transportation carriers. Today, we essentially have 13 carriers 
accounting for 70 percent of containerized global capacity with each 
belonging to one of three alliances that commenced in April of this 
year: 2M, OCEAN, or THE ALLIANCE. Frankly, I am not sure we have seen 
the end of carrier consolidation.
    An alliance agreement between carriers, which requires a filing 
with the FMC, essentially is a vessel sharing agreement. Motivated by 
economies of scale, the carriers focus on achieving cost savings given 
the challenge in securing sustainable transportation rates. The vessel 
sharing alliance concept is not new. However, the current level of 
debate and scrutiny within the industry commenced when the three 
largest carriers--Maersk, Mediterranean Shipping Company (MSC), and 
CMA-CGM--filed the P3 vessel sharing agreement with the Commission in 
October 2013. That filing began what I term as the second generation of 
alliance agreements. The P3 agreement was eventually withdrawn by the 
parties. However, the two largest carriers, Maersk and MSC, 
subsequently filed and moved forward as the 2M Alliance and thus 
commenced the rush to achieve economies of scale by the major global 
water transportation carriers.
    A question for the maritime shipping community and the supply chain 
is what will be the impact of the second generation of alliances? I 
believe it will be in cost savings and efficiencies. For the carriers, 
cost saving is a paramount concern, especially given the need for 
investment in cutting-edge technology. To be clear, I am supportive of 
the alliance model. However, legitimate concerns by stakeholders do 
remain. These second-generation alliances have introduced us to the 
concepts of operations centers, information sharing, and joint 
contracting. The last two concepts have been raised as serious concerns 
by stakeholders in the shipping community because of the potential for 
anticompetitive behavior.
    In addition to the formation of new alliances, we have witnessed 
generational changes in the shipping industry, including carrier 
acquisitions, consolidations, bankruptcies, and joint ventures. The 
international shipping industry will continue to evolve, whether as to 
structure, service delivery, or cost-saving efficiencies.
    Finally, I want to discuss industry progress on the incorporation 
of technology, another way in which our industry partners have tried to 
save costs.
    Both Amazon and Alibaba are starting to establish themselves as 
movers of cross-border freight. Indeed, earlier this year, Amazon 
announced its intention of becoming an NVOCC. That is not to say that 
they will own or operate vessels, but rather that they will aim to 
increase buying power with ocean common carriers. I note that many 
ocean carriers are maintaining close links to cloud-based supply chain 
specialists like INTTRA, GT Nexus and CargoSmart who were all early 
adapters to e-commerce.
    Currently, much of the focus on technology in containerized trade 
is in tracking logistics, such as real time information on container 
movements. I believe this year will see an escalation in the number of 
digital and e-commerce applications designed to provide more visibility 
and transparency in the movement of containerized freight and 
implementing cost-effective solutions in the supply chain. Earlier this 
year, the JOC reported that Maersk and IBM are teaming up to digitalize 
the global container supply chain--using block chain technology to 
improve efficiency and cost. This technology will result in enhancing 
visibility in container transport. In addition, both Maersk and CMA-CGM 
have moved to partner with e-commerce entity Alibaba to integrate 
transportation and logistics. Actions such as these can reduce cost and 
improve the reliability of supply chain systems. In sum, many believe 
we are on course to the fourth industrial revolution--the acceleration 
of the implementation of technology and digitalization in a rapidly-
changing industry.
    The supply chain has been a central focus of the FMC for several 
years now. More efficient supply chains increase not only the volume of 
trade by lowering the cost of goods, but it also increases the 
distances over which those goods can be transported. We noted in our 
congestion study in 2015 that in many ways, ``the elimination of 
congestion is today's most critical and relevant trade-related issue.'' 
As Chairman, I launched an initiative to address congestion in three 
phases. The first phase, beginning in September 2014, was the port 
forums which were held on the U.S. West Coast, the mid- and north 
Atlantic coast, the south Atlantic ports, and the Gulf Coast ports. 
These one-day listening sessions were each led by at least one 
Commissioner, and served as an opportunity for the FMC to hear 
firsthand the problems that ports, their customers, and other partners 
in the U.S. intermodal system were facing that were related to port 
congestion, including detention and demurrage issues. Our takeaway from 
those forums was that we need to look beyond the docks, at the entire 
supply chain, and find common ground amongst the various players in the 
chain. Our second phase was the detention and demurrage study issued in 
April 2015, and the congestion study issued in July 2015. Finally, with 
the issue of port metrics on the minds of legislators, we launched the 
last phase in February 2016: our Supply Chain Innovation Team 
initiative, led by Commissioner Dye. During that phase, we brought 
together industry leaders to work on teams to develop process 
innovations that will improve the reliability, resilience, and 
competitiveness of America's global supply chain. The teams announced 
in December 2016 that critical information delivered to supply chain 
actors via a national portal will improve port performance and increase 
American economic competitiveness. This national portal will further 
the goal of collecting data on port metrics.
    Finally, more than a year ago, I testified before your House 
counterpart on the paramount concern of having a well-funded and 
resourced FMC. I explained then that the Commission's statutory mandate 
to regulate the international ocean transportation system for the 
benefit of domestic exporters and importers is ever more important in 
the second decade of the 21st century. I stand by that testimony today. 
Further, I believe that the Commission's authorities need to be 
improved and updated to match the current state of the industry. Our 
monitoring responsibilities under the Shipping Act are crucial today, 
and I appreciate that the Committee has taken an interest in the FMC in 
that regard. I look forward to seeing what is included in the 
authorization bill, and would be happy to provide you with further 
insight.
    Thank you, again, for inviting me to testify. It has been a 
pleasure to work with you on matters of mutual concern over these many 
years, and I want to thank you again for your support. It has been an 
honor to serve the people of the United States, to advance the stature 
of the Commission, and to protect the American shipping public. I am 
grateful for my time at the FMC.

    The Chairman. Thank you very much, sir. Appreciate that.
    Chairman Khouri, in your written testimony, you mentioned 
that the FMC is expanding its team of economic analysis to 
increase capacity to review and monitor the three major ocean 
carrier alliances. Can you elaborate on some of the ways that 
the FMC conducts that continuous monitoring of the agreements?
    Chairman Khouri. Yes, Chairman. In several different ways. 
First, when the newer agreements are coming in, we have been 
much more strict, much more aggressive, in tightening the terms 
of the agreements' various authorities, meaning that if they 
want to come back and do something different, they have to come 
back with an amendment. So the terms themselves have become 
much tighter.
    The monitoring is where we would be looking at things like 
once every 45 days or 3 months, and with a period of time 
following, that they would report on TEU--or excuse me--
container boxes along trade lanes, volumes, rates that have 
been charged, a number of different operational pieces. It has 
been brought down to they have to report every 30 days, 
promptly afterwards so that we can keep a very tight watch on 
what other exogenous events may be happening in the world 
economy, what's happening to the rates within each member of 
each alliance.
    We're also very much interested in the decisionmaking as to 
capacity. So the alliances, there's a part of an alliance 
operation that has to have some capacity rationalization. In 
other words, if they're operating at 70 percent load rate, 
something is going to have to give, they're going to take a 
ship out. But do you also have each member of the alliance 
making independent decisions about bringing equipment in 
outside of the alliance operation or taking it back out outside 
of the alliance operation? And is pricing continuing to be 
clearly independent? These are the type of things that we're 
monitoring on a very close basis to make sure----
    The Chairman. And as you monitor, what do you do then with 
all the data you're collecting? Because it's continuous. So do 
you issue orders? Do you react to it? What do you do with it 
all then?
    Chairman Khouri. Well, as long as we continue to see every 
indicia of an open, free, and competitive marketplace, then 
there is nothing for us to do. It is if we start seeing--for 
instance, right now, there is overcapacity in all of the 
trades. If we started seeing a rise in rates that didn't make 
any sense as to the larger capacity overhang, then we would say 
something is not right here, we would go in and do more strict 
investigation----
    The Chairman. You could investigate and ask questions. OK.
    Chairman Khouri. And let me emphasize, we have not seen 
that.
    The Chairman. Great. Thank you.
    Chairman Khouri. So thank you.
    The Chairman. Commissioner Dye, with few exceptions, the 
United States has been, I think, pretty slow to adopt 
autonomous technologies at our port terminals. And this is in 
contrast to ports such as Rotterdam and also Sydney's Patrick 
Terminal, which I was fortunate to visit last year. Given your 
work to enhance supply chain efficiency, do you think that the 
autonomous infrastructure technologies at our nation's ports 
would contribute to faster freight flows and have less 
bottlenecks?
    Ms. Dye. Yes. Thank you, Chairman Fischer. Businesses all 
over the world are moving to digitize their businesses. I just 
finished a book called ``Data-ism,'' which describes this move. 
Suddenly technology has caught up with the ability for us to 
aggregate data. And I was fortunate enough to get a briefing of 
the new Maersk system using IBM blockchain, and that's just one 
of the moves by our ocean carriers to move forward in 
digitizing their supply chain business.
    More and more of our ports are moving, as you know, to 
appointment systems to try to control the supply chain 
obstacles at the gates. It's expensive. And so, company-by-
company, they're making their decisions based upon their 
ability to invest.
    We see our project as being able to hook up to each port's 
information infrastructure. We wouldn't compete with their 
technologies, and they would continue to offer those sorts of 
systems on their own, and compete on those for business. So I 
think all of this has moved to the maritime industry finally, 
and it's a very good sign. Thank you.
    The Chairman. Thank you very much.
    Senator Booker.
    Senator Booker. Thank you very much. Appreciate that. I 
literally just went on my Amazon and pulled up that book. Thank 
you for the recommendation.
    And, Mr. Cordero, just in case I forget, I want to just say 
publicly how much we appreciate your service to our country. I 
know this is going to be your last Senate hearing, or at least 
in this capacity, and I'm very grateful for your service.
    Mr. Cordero. Thank you, Senator.
    Senator Booker. And Rear Admiral Helis, I'm really--your 
testimony was very thorough, both written and--so I would like 
to drill down a little bit deeper obviously on the issues of 
sexual harassment. I'm grateful for your commitment to dealing 
with this issue.
    Let's just jump right to the issue of culture change that 
you talked about, which I think is one of the challenges that 
we have. We still have a problem, not only with the data that 
you're collecting about the existence of sexual harassment, but 
even the issue of people feeling comfortable enough to report 
that. And you've implemented a lot of changes to try to address 
reporting.
    I want to know, what kind of sort of responses are you 
getting from students? What are the changes that you think that 
are creating a more open environment? And then ultimately that 
2017 report that you mentioned in your testimony, do we need to 
do anything as a Congress to support the resources you might 
need for any report issues that need to be implemented?
    Admiral Helis. Senator Booker, thank you for the question. 
To the last, we're appreciative of the support that the 
Congress is providing us in dealing with this very important 
issue.
    In terms of the culture change and how people are taking to 
it, I mentioned we sent a team to the Air Force Academy in 
February for an all academy conference on culture change to 
address the problem. That was a staff and faculty event. When 
they returned, they began organizing into a committee for 
developing a culture change plan. They received many midshipmen 
volunteering to step into it. So we have some senior--rising 
senior midshipmen who are involved. They are involved in 
socializing the plan and the ideas amongst the regiment, and 
we're getting good feedback, good participation, from the 
midshipmen.
    The focus of the culture plan I would put into two areas. 
One is institutional pride and the second is treating everyone 
with dignity and respect, which would go along with being an 
institution in which we have pride. The challenge is that the 
behaviors are in a way tolerated, and that's why you don't see 
the reporting, you see instances of shunning or ostracism of 
reporters, of victims who report. The evidence so far, early 
it's anecdotal, but this year, this academic year, we've seen 
an uptick in restricted reports, which are the confidential 
reports, and so that we're able to provide the victims better 
services and have a better handle on some description of what 
the events are. We have also had two unrestricted reports this 
year, which have allowed us to investigate, and I've 
administered appropriate discipline based upon those reports. 
And those are the first unrestricted or open reports we've 
received since 2014.
    So I think in terms of reporting, again, early, but the 
early evidence is in the last several months, the attention 
we've given to the issue, the attention we've addressed to 
culture, and about taking care of your classmates, your 
teammates, your shipmates, when they become victims seems to be 
taking hold. And, again, two unrestricted reports where the 
victims felt confident that they could come forward and report 
and be treated fairly and that we deal with the incident. And I 
can say from speaking with both of the victims, there are folks 
around them who are providing them support----
    Senator Booker. I'm going to have to cut you off there.
    Admiral Helis.--classmates, teammates, coaches, members of 
their chain of command. So I think, again, early and anecdotal, 
but positive.
    Senator Booker. OK. And I obviously look forward to hearing 
more as it develops. Just real quick on the accreditation 
challenges that you've had. I know you have a final report 
coming out in July. Do you anticipate needing more resources 
from Congress to deal with the accreditation issues?
    Admiral Helis. Senator, at this point, I would say the 
biggest--and again appreciation to Congress--is the progressive 
lifting of the financial restrictions that were imposed on the 
Academy about 10 years ago in lifting some of the continuing 
resolution, some in the full Fiscal Year 2017 budget, that has 
restored most of our--the normal financial operations to the 
Academy, the Federal agencies, and all. And that has been very 
critical in our dealings with Middle States because one of 
their concerns was the Academy having sufficient responsibility 
and control over processes.
    I can't say what the official report is going to say. I can 
say that the Commissioner's visiting team told us that they 
found significant and substantial progress in all areas for 
which we were found falling short a year ago, and that those 
appear sustainable, we're moving in the right direction. So I 
was confident a year ago that we would meet the full 
reaccreditation requirements within time, and after the initial 
visit and the progress that our team at the Academy, working 
also with the Maritime Administration, DOT, and the support 
from the Congress, I am extremely confident now that we will 
make the reaccreditation.
    Senator Booker. Thank you, sir. I just want to be 
respectful of Senator Wicker.
    Admiral Helis. Right. I understand, sir.
    The Chairman. Thank you, Senator.
    Senator Wicker.

              STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. Superintendent Helis, I have a letter here 
from Paul Doell, National President of the American Maritime 
Officers, dated May 8, 2017. I ask unanimous consent that it be 
admitted into the record at this point.
    The Chairman. Without objection.
    [The information referred to follows:]

                                 American Maritime Officers
                                       Dania Beach, FL, May 8, 2017

Hon. Deb Fischer,
Chairman,
Subcommittee on Surface Transportation, Merchant Marine, 
Infrastructure, Safety and Security,
Washington, DC.

Hon. Cory Booker,
Ranking Member,
Subcommittee on Surface Transportation, Merchant Marine, 
Infrastructure, Safety and Security,
Washington, DC.

Dear Senators Fisher and Booker:

    On behalf of the private sector U.S. merchant marine officers I am 
privileged to represent, I welcome this opportunity to comment on the 
prevention of sexual abuse and sexual harassment at the venerable U.S. 
Merchant Marine Academy at Kings Point, N.Y. This is an increasingly 
important issue with extensive implications--U.S. national security 
among them--and I am pleased to provide relevant perspective.
    Since June 2016, the Maritime Administration has on several public 
and private occasions discussed its strategy to curb sexual assault, 
harassment and abuse on the USMMA campus. MARAD has focused heavily on 
an ongoing reform strategy to assist victims, deter offenses and 
improve a USMMA ``culture'' said to encourage inappropriate or even 
illegal behavior.
    We appreciate the intent, and we support completely. We do not 
abide such conduct within our membership ranks, and we support 
constructive measures to create safe, comfortable living and learning 
environments for USMMA cadets.
    However, we are troubled by the persistent underlying premise 
driving this effort. MARAD has for nearly asserted that sexual assault, 
abuse and harassment are routine at sea in the commercial U.S. merchant 
fleet, that USMMA Midshipmen are influenced and corrupted by the 
alleged actions of the career mariners they work with while training 
aboard ship, and that these students return to USMMA believing that 
sexual misconduct is accepted and even expected on campus.
    This dubious, deficient argument was used by the Department of 
Transportation in June 2016 to justify suspension of hands-on ``Sea 
Year'' training of USMMA Midshipmen in their sophomore and junior 
years.
    In a senseless twist just weeks later, DOT exempted government 
ships from Sea Year suspension--USMMA Midshipmen were placed in the 
MARAD, Military Sealift Command and National Oceanic and Atmospheric 
Administration vessel fleets.
    It is difficult to reconcile the official rationale behind Sea Year 
suspension with the lack of conclusive evidence supporting it.
    It is also difficult to align MARAD's position with our direct 
experience representing seagoing professionals licensed and vetted by 
the U.S. Coast Guard, including many USMMA alumni serving on both 
commercial and government vessels. In American Maritime Officers, there 
were no known cases of sexual assault and only one documented case of 
sexual harassment in at least the last 20 years--and, in the latter 
example, the proven offender was expelled from our union.
    Moreover, U.S. shipping companies have strict, longstanding ``zero 
tolerance'' sexual assault and harassment policies, which are supported 
fully by the seagoing unions these companies employ. What makes this 
specific point especially noteworthy in this context is an industry 
consensus that the need to invoke these policies is rare.
    Nor can the Sea Year suspension exemption carved out for government 
vessels be squared logically with the fact that many of the mariners 
employed on these vessels had worked previously in the commercial fleet 
said by MARAD to provide safe harbor for sexual predators. If a 
merchant mariner is inclined to sexual misconduct aboard a ship 
operating in domestic or international trade, is this mariner also 
inclined to restrain harmful impulse and check personal proclivity at 
the gangway when he boards a government vessel.
    Ironically, the only known current or at least recent case of 
sexual assault at sea under the U.S. flag involved civil service 
Military Sealift Command employees on an MSC ship assigned to the Diego 
Garcia outpost in the Indian Ocean.
    Today's commercial U.S. merchant mariner workforce is comprised 
typically of decent, hones, responsible, well-trained and hard-working 
men and women of strong character. Because they live where they work 
during long rotations at sea, they are essentially ``family,'' and they 
treat each other accordingly.
    These merchant mariners have no patience for anyone among them 
whose behavior compromises morale or threatens the safe and efficient 
operation of the vessel. Each of these mariners is aware that 
professional misconduct of any kind can cost them not only their 
credentials and careers, but also their families and friendships. 
Despite these qualities and the values they reflect, mariners must now 
endure having been stigmatized unjustly as morally unfit for work at 
sea.
    These merchant mariners are also the first to ``turn to'' for 
strategic sealift and other military support services in defense 
emergencies, both for surge shipping and longer term delivery of combat 
equipment and day-to-day supplies to U.S. Armed Forces overseas. But 
their numbers are falling quickly in direct proportion to the unabated 
decline of the privately owned and operated commercial U.S. merchant 
fleet, which delivered 95 percent of defense cargoes to the war zones 
during Operations Enduring Freedom in Afghanistan and Operation Iraqi 
Freedom under the Maritime Security Program.
    USMMA--the only Federal service academy with its own battle 
standard--is a reliable source of qualified, reliable mariners, and any 
interruption of training on campus or at sea would seal off this 
pipeline and aggravate the mariner shortage that jeopardizes U.S. 
mobilization capabilities.
    In our view, the scandal here is not widespread sexual misconduct 
at sea in the commercial U.S. merchant fleet, but the unfair, 
fabricated perception of it. Just as there is no specific, verifiable 
data from within the commercial U.S. merchant fleet to support MARAD's 
assertions, there is no evidence to support the official argument that 
government vessels are safer physically and emotionally for USMMA 
midshipmen. Under thee circumstances, we cannot help but be skeptical 
of official motives.
    Nevertheless, we are relieved to know that Sea Year at USMMA has 
been reinstated at a gradual rate as it applies to the private sector 
American merchant fleet. But we remain frustrated by the approach taken 
by MARAD, and by the casual way in which the collective reputation of 
American merchant mariners was tarnished. Our hope now is that USMMA 
commencements will not be delayed and that enrollment at the Academy 
will not decline.
    I ask respectfully that you include this letter in the official 
record of your hearing on Maritime Transportation: Opportunities and 
Challenges for the Maritime Administration and Federal Maritime 
Commission.
    Thank you for your time and attention.
            Sincerely,
                                                Paul Doell,
                                                National President,
                                            American Maritime Officers.

    Senator Wicker. Mr. Superintendent, following up on the 
line of questioning about sexual assault and the Sea Year 
stand-down last year, in this letter here, the officers aboard 
the commercial vessels object to the suggestion that the stand-
down was somehow because a major portion of the sexual assault 
problem stemmed from the Sea Year program aboard commercial 
vessels. So I want to point out what they tell us in the 
letter.
    In the commercial vessels, according to this letter, there 
were no known cases of sexual assault and only one documented 
case of sexual harassment in at least the last 20 years, and in 
that case, the proven offender was expelled from the union.
    The letter also points out that the only known case of 
sexual harassment at sea was aboard a government-owned vessel. 
And so I would like for you to comment about that. And did you 
mean to suggest last year when you announced the stand-down 
that the problem in sexual assault was aboard the commercial 
vessels? Because I have data here that only 4 percent of 
midshipmen at the Academy indicated they had experienced 
unwanted sexual contact, and of that 4 percent, 73 percent 
indicated that the location of that was on Academy grounds.
    So what is your response to that, Admiral?
    Admiral Helis. Senator, thank you for the question. My 
response to that was the intention was not at all to signal in 
any way that the majority of seafarers and mariners engage in 
sexual harassment or sexual assault. That was not the message. 
That never has been the message.
    Senator Wicker. Well, that wasn't the allegation. The 
question is that the majority of the assault was taking place 
during the Sea Year, and I think the facts are to the contrary.
    Admiral Helis. Senator, I think I would say that whether or 
not the majority of the assaults occur at sea, one is too many, 
one is too many. And we say zero tolerance, we mean zero. And 
what our data told us was that a disproportionate--midshipmen 
spend a quarter of their time at sea, and our data told us and 
continues to tell us that a disproportionate number of the 
events occurs during the Sea Year during maritime duty.
    Senator Wicker. So you dispute the preliminary 2015 and 
2016 Service Academy Gender Relations Survey, which says that 
73 percent occurred on Academy grounds. You dispute that, sir?
    Admiral Helis. Senator, I say that that's accurate, but 
that still puts over a quarter of the incidents off campus.
    Senator Wicker. But isn't that contrary to what you just 
testified?
    Admiral Helis. Senator, I can also say that the 2016 final 
data results show that over a third of the incidents were 
reported by midshipmen to have occurred during maritime duty, 
and that will be in our final report to Congress, which right 
now is in the staffing process. But--go ahead, Senator.
    Senator Wicker. Well, it seems to me that the facts are 
coming out at this hearing that most of the problem occurred on 
Academy grounds, and yet your response was to stop the Sea 
Year, and that seems disproportionate to me. And so I would 
associate myself with the comments of these American Maritime 
Officers. And perhaps you would like to expand further on the 
record.
    But let me, in the 20 seconds I have left, we are told that 
midshipmen are being threatened with disenrollment because they 
haven't been able, because of your policies, to do the Sea 
Year. And so can you guarantee that no midshipmen will be 
prevented from graduating or be disenrolled or be otherwise 
negatively affected by their inability to acquire days at sea 
or complete their Sea Year?
    Admiral Helis. Senator, that's a great question, and it has 
been of great concern to us. And right now, we are 
extraordinarily confident that none of our midshipmen in the 
two class years, the classes of 2018 and 2019, who were 
affected by the stand-down, will be delayed from graduation due 
to a lack of sea days.
    As far as the projects go, there have been no cases of 
midshipmen who have been disenrolled or disciplined in any way 
for failure to complete Sea Year projects due to either 
shortage of days or the vessels that they were on, for example, 
not having the equipment they could have to do the project. If 
there was a case where they were unable to perform the projects 
due to either days or, again, equipment on the vessel is a 
common occurrence that occurred before the stand-down, those 
projects are simply delayed, deferred, until their next 
sailing.
    Senator Wicker. I hope that's correct. Let me ask you just 
briefly--and I'm imposing on the time--did the accreditation 
problem catch you by surprise?
    Admiral Helis. Senator, the points that the accreditation 
team pointed out were not a surprise to us, that we were 
laboring under restrictions that were imposed on our financial 
management, on human resources, on procurement, was not a 
secret to anybody. It was just----
    Senator Wicker. You know, I'm on your Board, and I just 
hadn't heard that. It is interesting to me that this would not 
have been mentioned to the Board, that we could expect this 
coming down the pike.
    Admiral Helis. Senator, I think we were surprised that we 
were found in noncompliance on as many of the standards we 
were, that was a surprise, but we were not surprised when we 
looked at the reasons, the factual justification, a lack of 
controls and governance being a key part of it. That was not a 
surprise. We knew we had difficulties with that. That was in 
our self-study. It had been in advisory board reports in 
previous years. So that components of it that they highlighted, 
you know, that we did not have the normal authorities expected 
of an institution of higher education, did not surprise us.
    Senator Wicker. Thank you, Madam Chair.
    The Chairman. Thank you, Senator Wicker.
    Senator Young.

                 STATEMENT OF HON. TODD YOUNG, 
                   U.S. SENATOR FROM INDIANA

    Senator Young. Thank you, Madam Chair.
    As a graduate of one of one our Nation's service academies, 
I take the issue of sexual assault at the academies quite 
seriously. And it's clear we have to strive to eradicate 
instances of sexual assault and harassment from the academies.
    Admiral Helis, Director Szabat, I'm pleased you both 
recognize the gravity of this situation. I'm also thankful to 
my colleagues, who have given due attention in this hearing, 
and it's clear they also take this matter very seriously.
    In prior years, in the National Defense Authorization Act, 
Congress worked to enact certain sexual assault provisions. As 
this committee works on reauthorization bills, I would urge you 
both to dialogue with us to communicate further authorities you 
believe necessary to rectify this issue.
    Director Szabat, in your testimony, you referenced the 
independent cultural audit that DOT completed in December of 
last year proposing six key action steps for the Academy to 
take. And I would like you to just give us an update on 
implementation of those recommendations, please.
    Mr. Szabat. Thank you, Senator. With your permission, I'll 
touch on the recommendation that focused mostly on the Maritime 
Administration. Admiral Helis will talk about the 
recommendations that focused on what the Academy's actions have 
to be.
    Senator Young. Certainly. Proceed.
    Mr. Szabat. The single most important recommendation, the 
overwhelming recommendation, that the LMI made, the 
department's study, was for the Maritime Administration to 
create standards for eligibility for commercial companies to be 
able to participate to employ and to train our midshipmen. This 
had been a policy that the Maritime Administration had actually 
proposed before LMI's--the study had started. So we were in a 
position after the study was finished in December.
    In January, then Secretary Foxx told the Maritime 
Administration to go ahead and implement that recommendation. 
By February, we had those standards developed, and those 
standards are actually in my written testimony. I'm happy to 
talk about any of those in more detail that you would like to 
talk about.
    And since then, so from February until the present, we've 
now had eight different companies, both some Jones Act 
companies, some sailing international, representing over 82 
percent of our pre-stand-down capacity, have met those 
standards.
    And I think also from my oral testimony, what I have found 
most impressive is, to Senator Wicker's point, that there were 
people in the industry, in fact, I would say a unanimous 
reaction in the industry, that they did not agree with the 
decision that Secretary Foxx made, that Secretary Foxx 
announced, for a Sea Year stand-down. But they all took the 
opportunity to say, as Superintendent Helis has said, that even 
one incident is one too many.
    And rather than walking away from providing training for 
our cadets, which was our fear, 14 companies came back to us 
within 2 weeks and said, ``We want to find a way to work 
together.'' And that has been the spirit that the companies and 
the labor unions have adopted in working with us going forward, 
which is why we've been able to get so much of the industry to 
be Sea Year eligible so quickly. And we look forward to 
additional companies that are applying to being accepted in the 
program as well.
    Senator Young. Thank you. In my remaining 2 minutes, Rear 
Admiral, could you speak to action on those recommendations, 
please?
    Admiral Helis. Yes, Senator, I'd be happy to. Just taking 
down some, we published in January an action plan with a 
substantial number of requirements. I'm not going to go through 
all of those for the sake of time. I would say broadly, 
building and aligning a leadership team. We're expanding the 
SAPRO office. We've brought on a new director of civil rights 
diversity to focus on those issues on campus.
    As I described earlier in my testimony and in my written 
testimony, that we are working to develop an integrated, long-
term cultural change campaign for the Academy that will enhance 
dignity and respect on the campus. We have, as Mr. Szabat has 
said, developed a credentialing process for companies for Sea 
Year for the safety of going out.
    And, again, I say we are making--without belaboring and 
going through the entire list, that we are making progress on 
all items on the action plan to implement the recommendations 
from the LMI study.
    Senator Young. Well, thank you, Admiral and Mr. Szabat. I 
would only ask that you keep this committee duly informed of 
progress moving forward. I have no doubt that you will do so. I 
know the Chairman and Ranking Member are attentive to this 
issue as well.
    So with that, I yield back.
    The Chairman. Thank you, Senator Young.
    We're waiting for a couple members to join us, and I'm 
going to take advantage of the wait by asking a couple other 
questions.
    Mr. Szabat, in your written testimony, you mentioned that 
MARAD and TRANSCOM have concerns that there are not enough 
qualified mariners to sustain the activation of the entire 
sealift fleet. You also mentioned that MARAD has convened the 
Maritime Workforce Working Group. How does MARAD hope to 
address this concern? And do you expect the working group to 
provide some meaningful solutions?
    Mr. Szabat. Thank you for that vitally important question, 
Senator Fischer. Your question gets to kind of the reason for 
the existence of the Maritime Administration, is to ensure that 
our commercial U.S. merchant marine is large enough, is vibrant 
enough, to meet all of our national needs, for economic 
security, for military security.
    As you've indicated, both we and our colleagues at the U.S. 
Transportation Command, one of the component commands of the 
Department of Defense, are concerned that we no longer have 
enough mariners to meet those surge sealift needs. In order to 
activate all of the vessels in the sealift fleet, of which the 
core sealift is about 147 ships, commercial and military, we 
estimate a need of a little over 11,000 commercial mariners 
because commercial mariners crew all those vessels, both 
military and civilian--I'm sorry, and commercial. And then we 
need 14,000 mariners if, in fact, we're going to--strike that--
13,000 mariners if we're going to sustain an activation and 
rotate some crews over time.
    Currently, we have just over 11,000 mariners, but one of my 
colleagues in the Transportation Command called, we are at the 
ragged edge of the ability to activate the fleet, let alone 
keep the fleet going for a long period of time.
    So we have two approaches going forward on this. One is the 
working that the NDAA required us to do, which frankly we thank 
you for. One of the issues that we have is a definition of, 
what is a mariner? What is an available mariner? That working 
group will provide valuable resource to us because it's pulling 
all of the involved Federal agencies together so that we can 
show the walk-down from what the Coast Guard calls 200,000 
mariners to what the GAO Report had identified at one point as 
57,000 potentially available mariners to meet sealift 
requirements to the 11,000 mariners who we know currently have 
unlimited tonnage and unlimited horsepower credentials and are 
eligible to serve in our fleet.
    So that will be important to be able to do that walkthrough 
so we can identify exactly if, in fact, we're missing any pools 
of mariners, although I don't think that we are, but it will 
allow all of the Federal Government agencies to work together 
and be speaking off the same sheet.
    Second, we are also putting together what we're calling 
``courses of action,'' which are, what are the options that we 
have for addressing the mariner shortage? And I'll cut off at 
this point in case anybody wants to ask that as a subsequent 
question.
    The Chairman. Why don't you answer it?
    [Laughter.]
    Mr. Szabat. I'll take that as a question, Senator. Yes, I 
will answer it. Thank you for the question.
    Broadly speaking, there are three different courses of 
action that we can take. Currently, both by law and by national 
security directive, the U.S. Government, the U.S. military, has 
to rely on the U.S. commercial fleet, both for the vessels and 
for the mariners it needs for sealift. So if we continue to 
rely on that, obviously, the solution that we have to employ 
enough mariners is to increase the size of the U.S.-flag fleet 
through steps like--so, for example, in the Jones Act, Customs 
and Border Protection is looking at a letter, a rule through 
letter, that they've done before, which, if they change, would 
add, we estimate, about 14 ships under the U.S. flag to the 
Jones Act.
    You look at cargo preference, we used to have a 75 percent 
requirement for domestic cargos, not military cargos, to go--of 
civilian cargos, not military cargos, to go on U.S.-flag. That 
was dropped in 2012 to 50 percent. If that would go back up to 
75 or to 100 percent for civilian agencies, we're talking about 
adding another 10 or 15 vessels to the U.S.-flag fleet.
    And then the most blunt force but expensive way of doing 
it, of course, would be to expand something like the Maritime 
Security Program, which currently provides stipends to 60 
vessels specifically for their military value, that you could 
expand the number of ships in a program like that and offer 
stipends to sail under the U.S. flag because of the mariners 
that they employ and the value of those mariners for our 
sealift experience.
    So that's the way that we can continue to meet what the law 
requires now and get to what we estimate to be about 45 extra 
vessels we would need to have sailing under the U.S. flag to 
meet our sealift requirements.
    The Chairman. Thank you very much.
    Ranking Member Booker, do you have questions?
    Senator Booker. I do. Thank you for the opportunity, 
Chairperson.
    Just again, Honorable Cordero, you're almost done, so I'm 
going to grill you a little bit if you don't mind, especially 
because I'm very jealous of your hair, sir.
    [Laughter.]
    Senator Booker. So this consolidation issue, clearly you 
mentioned it, and I would like to just ask you very bluntly, 
how do these consolidation alliances impact portions of our 
freight network? Is this something that you think we should be 
greatly concerned about? And particularly for me in a port 
state, what impact does this specifically have on ports and 
port shippers?
    Mr. Cordero. Well, I think at this point, as I indicated in 
my testimony, Senator, I support the alliance model. In terms 
of what impacts down the line they may have that are positive 
or negative, I think my answer at this point, and has been, the 
jury is still out. And for that matter, that's why I believe 
that it's extremely--it's of paramount importance to have a 
well-funded FMC, as Chairman Khouri has indicated, and 
Commissioner Dye. Our primary responsibility is to monitor 
these agreements and these alliances, and I think part of that 
monitoring is going to have those answers down the line.
    So I think my answer is we don't know. I do believe that, 
again, eventually they will create cost inefficiencies, and I 
think ports will adjust with regard to what's coming down the 
line in terms of these three alliances. And I think the major 
ports that we have, the containerized ports, at this point, 
part of what we've done as a country is to continue investment 
in infrastructure in these ports, and we're going to continue 
to do so.
    Senator Booker. So on that note, you would say, and I guess 
the other two commissioners, TIGER grants are urgently 
important in terms of the quality of our ports?
    Mr. Cordero. In my view, absolutely, absolutely, because 
TIGER grants not only go in terms of the importance of 
infrastructure, but, you know, there has been some commentary 
on security. I think our port gateways, you're never going to 
have a safe, a failsafe system. Security is of utmost 
importance. And in the past, TIGER grants have been relied on 
by port authorities.
    And last, I think the rail system, the rail connectivity, 
intermodal connectivity, whether you're on the East Coast or on 
the West Coast, is very important, and a TIGER grant can go a 
long way to help mitigate the expense of what that may be 
incurred by the marine terminal operators and our port 
authorities.
    Senator Booker. My last question then would be just on, 
sort of, the issues of just improving efficiencies. In the last 
Congress, we gave a lot of attention to congestions at our 
ports on the labor issues, and I thought that that was a--talk 
about proportionality, that was a way disproportionate sort of 
focus. In fact, it could be said to be a lot of, sort of, 
unintended consequences, let's say, of those proposals that I 
saw during that time. But you guys have spent a lot of time, 
the Commission as a whole, looking at relieving this 
congestion.
    My final question would be then, what are some of the 
challenges? But more importantly, as was said already by Ms. 
Dye about the data, are there any specific, Mr. Cordero, 
parting words that you would say about this idea of relieving 
the congestion, the most important areas that we can focus on? 
Archimedes said, ``Give me the right lever, I can change the 
world.'' What's the right lever there in our ports?
    Mr. Cordero. Well, I think the parting words for me would 
be for people to review our congestion study that we released 
back in 2015, and I think that outlines the various factors 
that cause congestion and what we should do to mitigate 
congestion.
    So I think, again, it takes stakeholders to, as 
Commissioner Dye has indicated in her supply chain innovation 
project, to get out of their silos, but it also is very 
important, extremely important, to remember that the more 
investment in infrastructure is of paramount importance to 
relieve congestion because, again, infrastructure at the end of 
the day is going to be what's key to every gateway.
    And I think one last thing, we have to also look into, as 
our congestion study referenced, very specific operational 
issues. One that I, Senator, think you are familiar with, 
whether it's New York-New Jersey, or better said, New Jersey-
New York----
    Senator Booker. Thank you, sir.
    [Laughter.]
    Mr. Cordero.--or whether it's Long Beach, LA, we have 
issues with regard to making efficiencies in terms of the 
equipment. You know, here I'm specifically making reference to 
chassis. That is one aspect of the congestion that was, outside 
the industry, little talked about, but it's a major. Within the 
industry, everybody understands it's a major problem. The good 
news is I think the FMC has done well to facilitate to some 
solution in our gateways, again whether you're in the Gulf, in 
the East, or in the West, I mean, the parties, the 
stakeholders, are taking this serious, and I see good news 
ahead in terms of bringing solutions to these equipment 
problems.
    Senator Booker. Mr. Cordero, thank you very much.
    Madam Chairman, I'm done, but I do want to--just my 
horrible admission that I did not ask a question to the person 
with the best name, Mr. Khouri.
    [Laughter.]
    The Chairman. You are shameless.
    [Laughter.]
    The Chairman. Senator Wicker.
    Senator Wicker. Back to education, Mr. Szabat. MARAD funds 
six ships that are on loan to the State Maritime Academies as 
training platforms for their students. Five of the six State 
Maritime Academies have stated that their ships are aging and 
are in dire need of repair. Is this true? And can you describe 
the current state of these ships? Do they need to be replaced 
with a more modern training vessel?
    Mr. Szabat. Senator Wicker, thank you for that question. 
It's an existential question from in the State Maritime 
Academies. Frankly, I'm surprised that only five of the six 
Academies indicated to you that they have a need--that they 
have an aging training ship. All of the ships that we provide 
to the State Maritime Academies are ships that we have in the 
past, the Maritime Administration has pulled out of our 
national defense reserve fleet and retrofitted for training. 
They were old when they began, and they were converted for a 
purpose that they were not originally intended to do. Several 
of them are already long past their original useful life. The 
oldest of the vessels and the largest of the vessels, 
Maritime's Empire State, is now past its 55th birthday.
    So these are old ships. They're good ships. But it is time, 
and through both direction of the Congress, but also through 
common sense, we in the Maritime Administration, working with 
the State Maritime Academies, have been looking at, what are 
the options to replace these training ships going forward? If 
no action is taken, three of the six State Maritime Academies 
will need replacement training ships by 2024. I mentioned the 
SUNY Maritime ship, she ages out in 2019. Mass Maritime loses a 
ship in 2024. And Texas Maritime is currently borrowing the 
training spots on the large ships of the other Merchant 
Marine--of the other Maritime Academies.
    Our own Department of Transportation's own Beyond Traffic 
Study says going forward, there will be a shortage of mariners. 
And we've also identified that the bottleneck for having more 
mariner training is not the school size themselves, but the 
availability of the training ships.
    Senator Wicker. When do the ships go out of service?
    Mr. Szabat. The first ship is scheduled to go out of 
service, if no action is taken, her licensing would expire in 
December 2019.
    Senator Wicker. Might it be unscheduled?
    Mr. Szabat. Yes. It's----
    Senator Wicker. Might something occur that would cause it--
--
    Mr. Szabat. It could happen with any ship of any age, but, 
yes, the older a ship gets, the more likely it is that an 
incident would occur that would take her out of service.
    Senator Wicker. Thank you.
    The Chairman. Thank you, Senator Wicker.
    Senator Baldwin.

               STATEMENT OF HON. TAMMY BALDWIN, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Baldwin. Thank you. I wanted to start by 
highlighting the Small Shipyard Grant program. I am glad to 
report that the omnibus spending bill doubled funding available 
for assistance to small shipyards and maritime communities in 
the Fiscal Year 2017 thanks to bipartisan support for the 
program. And in the next week or two, I plan to introduce a 
bipartisan bill to reauthorize the program, and I hope that we 
can move the legislation through this committee.
    Across the nation, small shipyards build and maintain 
commercial workboats, government ships, and ferries in the 
U.S.-flag fleet. In this way, our small shipyards are essential 
in maintaining commerce in the U.S. and throughout the world. 
To support the shipyards, their workers, and their communities, 
the Small Shipyard Grant program provides incentives for 
infrastructure improvements, equipment upgrades, and worker 
training programs.
    Mr. Szabat, could you describe the benefit small shipyard 
assistance provides for workers and communities whose economies 
are tied to the maritime industry?
    Mr. Szabat. Senator Baldwin, thank you very much for that 
question, and thank you and the Members of Congress for your 
efforts for the support for the Small Shipyard Grant program. 
As you say, the communities that are dependent, that have the 
small shipyards, and the communities that do work that support 
the small shipyards are very much dependent on this. It's a 
very small but vital program.
    The Federal Government has very limited roles to do with 
shipbuilding, and for small shipyards, really this is the only 
opportunity that they have. The Small Shipyard Grants are 
normally only $5 million or $10 million each year when they are 
appropriated, and generally they are awarded in buckets of 
close to $1 million. So we're only talk about 5 to 10 people--5 
to 10 companies will get these each year.
    It's a fairly young program. It started in 2008, 2009, and 
with the Recovery Act. So we've only had roughly little over 
200 yards nationwide that are eligible for this program. We've 
given out 170 grants to 145 different shipyards. And these are 
competitive grants. People have to earn them.
    And one of the key components of them, which we believe 
makes them useful, is the matching requirement. By law, by the 
law that you've required, is they have to bring at least a 25 
percent match, but the reality is, in order to be competitive, 
most of them are providing a 50 percent or more match, so 
bringing in local private funds to meet these needs.
    And so these benefits go not just to the workers in these 
individual shipyards, but as I mentioned also, to other 
companies that receive the work that goes in these shipyards. 
So, for example, two companies in Wisconsin that have benefited 
strongly from this work all over the country: Marine Travel 
Lift in Sturgeon Bay provides many of the travel lifts for 
small boats and small shipyards across the country; and 
Manitowoc Cranes--and I hope I'm pronouncing that correctly--
which has manufacturing facilities both there and Shady Grove, 
Pennsylvania. So places that are off the water are also 
benefiting from these programs as well.
    Senator Baldwin. Sticking with you, Mr. Szabat, I want to 
focus on the Maritime Administration role addressing the need 
for more skilled workers to support and grow our Nation's 
domestic maritime industry. It's a critical issue in Wisconsin, 
where our shipbuilding and Great Lakes shipping interests can 
make significant contributions to the economy and the security 
of our state and the entire nation.
    Historically, the focus of the Merchant Marine Academy and 
federally-designated State Maritime Academies has been on 
training individuals to support international shipping and 
ocean-going vessels, but not our domestic shipping needs. Our 
nation's community and technical colleges, like Northeastern 
Wisconsin Technical College, for example, have stepped in to 
provide that training, but I think they need greater support 
from the administration in order to meet the needs of the 
industry.
    So last Congress, I introduced bipartisan legislation that 
would designate and support centers of excellence for domestic 
maritime workforce training, and I plan to reintroduce the bill 
again soon. I wonder if you could describe the value that 
legislation to support developing our domestic maritime 
workforce would provide.
    Mr. Szabat. Senator, thank you again both for the question, 
but also for taking action to address what is a vital concern. 
I've spoken mostly in my testimony about the military 
requirements, about the reason for the Federal academy, for 
having our licensed programs, is to ensure that we have 
unlimited credentialed-licensed mariners because these are the 
ones who are available to serve in our military sealift needs. 
But there's an economic security component that goes along with 
that, one of the reasons we have the Jones Act and one of the 
reasons we have programs along the lines of what you are 
describing here.
    I would like to think that we at the Maritime 
Administration got a jump on this, it was just a couple of 
years ago. We established out of hide, unfunded, but an Office 
of Maritime Education and Training, which has the unfortunate 
but memorable acronym of MEAT, but it is specifically to 
address the kind of issues that you're talking about.
    As always, if you're a Federal program and you're not 
funded to get grants or other support, so what we can do, 
though, is we can give guidance, expertise, provide--be a 
clearinghouse for information and national training 
requirements, and also help people work with industry to find 
opportunities for internships and career opportunities. This is 
something that we found that has actually been, from the work 
that we've been doing on sexual assault and sexual harassment 
with the industry's SOCP, which is their training experts, this 
has been something that kind of fell out as an extra benefit, 
as we've required that working through them, we also have 
opportunities to identify these kind of training opportunities 
for workforce development elsewhere.
    The other thing that I would mention is that we have also 
reached out to many Historically Black Colleges and 
Universities, but other minority institutions, about ways of 
recruiting more people into a future maritime workforce and 
providing this kind of economic--this kind of workforce 
training to them. So I think foremost among them, San Jacinto 
College in Houston, the Southeast Maritime and Transportation 
Center at Tidewater College in Norfolk.
    And then the last thing I would say finally is on a small 
scale, as we have surplus equipment that comes out of our 
national defense reserve fleet from our own schools, we can 
provide, as we did to the--we provided firefighting equipment 
to Owens Community College in Toledo, Ohio, as well as the 
Northwest Regional Fire Training Center in Michigan.
    And it would be remiss of me if I didn't give a shout-out 
to one of our six State Maritime Academies, but the Great Lakes 
Maritime Academy, which does provide many of the pilots up in 
the Great Lakes.
    Senator Baldwin. Thank you.
    The Chairman. Senator Blumenthal.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thanks, Madam Chairman, and thanks to 
you and Senator Booker for having this hearing. Connecticut has 
three significant ports--New London, New Haven, and 
Bridgeport--and I have been committed to improving them and 
also to improving the kind of service that we see in those 
ports. And I also want to mention right at the outset that I 
know you've been asked about the Sea Year, and that the summer 
program is being restored, correct, Admiral Helis?
    Admiral Helis. Yes, Senator. Starting we established a 
credentialing program with the Maritime Administration. The 
first companies were credentialed in late February. We're now 
up to eight companies and about 82 percent of the pre-stand-
down capacity. So midshipmen are now--the majority of 
midshipmen are now sailing commercial, and we're beginning to, 
as we transition back into the commercial vessels by this 
summer, we should be back to pre-stand-down operations.
    Senator Blumenthal. Will any of the midshipmen be in any 
way set back or in effect penalized because of the delay or the 
stand-down?
    Admiral Helis. No, Senator. We've been carefully monitoring 
their training records and using all of the platforms we have 
available, and we're confident that none of the midshipmen 
affected in the classes of 2018 and 2019 will be delayed from 
licensing or graduation because of a shortage of sea days. If 
for some reason, either due to the equipment on the ships or 
just number of days they have been unable to complete some of 
their sea projects, we have deferred those until a subsequent 
sailing period.
    Senator Blumenthal. I ask because I have been approached by 
some of the midshipmen and their families to ask about the 
consequences to their careers from this issue. And I understand 
what was done as a result of the reports of sexual harassment 
and appreciate the steps that you're taking to eliminate sexual 
harassment at the Academy.
    Let me ask you, what--speaking generally, putting aside the 
major ports of New York and Newark, at ports the size of New 
London and Bridgeport and New Haven, what do you think are the 
major steps that need to be taken? Because these are immense 
resources for our nation, and they're underutilized, in my 
view, and I would be interested to give you the platform to 
just talk about what our nation should be doing.
    Mr. Szabat. Senator, who is the question directed to?
    Senator Blumenthal. Any of you who care to answer it.
    [Laughter.]
    Mr. Szabat. I'm going to violate my own edict, which is 
never volunteer to answer a question at a hearing that you 
don't have to.
    Senator Blumenthal. Well, this is directed to you, so----
    [Laughter.]
    Senator Blumenthal.--you don't have to violate your edict.
    Mr. Szabat. OK. Well, I still stepped into it, but thank 
you, Senator.
    It's a great question, and it's one that we wrestle with. 
The Maritime Administration, unlike, say, our brother in the 
Federal Highway Administration, where in the past they had 
direct control over the roads that were built, and now they 
have a great involvement in funding the vast majority of the 
projects, and a great say in how these projects are done, 
ports, like freight railroads, are primarily privately run, 
privately operated, and primarily make their own decisions. And 
yet when you have some seminal incidents, like we just had with 
the widening, almost simultaneous widening of the Suez Canal 
and the Panama Canal, that affects the operations of all of the 
ports.
    And the question is, how do they change? Not every port is 
going to become a recipient of Panamax vessels. Every port 
would like to. And so they have to work together. And what 
we've discovered is that first, through our own offices within 
the Maritime Administration, but also through the actions of 
Congress, where you were kind enough that since 2009, a couple 
of key changes in the law have not only allowed, but required 
us to coordinate together and develop a national freight 
strategic plan, develop a national multimodal freight highway, 
that we find ourselves working together in concert with the 
other agencies within the Department of Transportation and our 
sister agencies, the Coast Guard, the Army Corps of Engineers. 
And we give information flows back to the ports about this is 
where the freight is going, this is what's happening, and this 
is information that they can use to help inform their own 
decisions. So information is a key point.
    I think the second key point that we have, of course, as 
always, people like to come to the Federal Government for 
sources of funding. Before 2009, the Maritime Administration 
had nothing to offer to ports when it came to funding. But 
first through the TIGER grant program and then through 
FASTLANE, we now have ports that will come to us in consortiums 
of ports, local communities, or consortiums of ports, and say, 
``Here is what we propose to do. Will you give us the funding 
to make this work?'' And like any competitive grant program, 
the better proposals tend to be the ones that get funded and 
move forward.
    Senator Blumenthal. And they are likely to be better if 
they are the result of consortiums, that is, coming together 
rather than singly or solely.
    Mr. Szabat. Senator, that has been my experience. I was the 
designated Federal official responsible for the TIGER grant 
program when that was first established in the Recovery Act. 
And certainly if you look at the first several years of the 
TIGER grant program and the FASTLANE program now, if you wanted 
to look at indicators for success, it was how big the 
consortium was, and, as importantly, how much matching money 
were they willing to bring to the project?
    It's the old line about ``put your money where your mouth 
is.'' That has certainly been the point, been shown to be the 
point, where we've talked about port projects, and especially 
when we talk about partnerships. When you have private sector 
operators or railroads or states and local governments who are 
willing to put their money in as well as the ports, that shows 
a strong signal for local commitment to the success of the 
project.
    Senator Blumenthal. Thank you.
    Thank you very much to the entire panel for your service. 
And, Mr. Cordero, good luck in the future. I understand you're 
nearing the end of your service, and a special thank you to 
you. Thank you.
    Mr. Cordero. Yes, thank you, Senator. And thank you for the 
Committee for all your support for the maritime community.
    Senator Blumenthal. Thank you.
    The Chairman. Thank you, Senator.
    I also would like to thank the panel today, and best wishes 
to you, Commissioner.
    The hearing record will remain open for 2 weeks, and during 
this time, Senators are asked to submit any questions for the 
record. Upon receipt, the witnesses are requested to submit 
their written answers to the Committee as soon as possible.
    And with that, we are adjourned.
    [Whereupon, at 4 p.m., the hearing was adjourned.]

                            A P P E N D I X

     Response to Written Question Submitted by Hon. Todd Young to 
                              Joel Szabat
    Question. Mr. Szabat, in your written testimony you state, ``both 
the U.S. Transportation Command and MARAD are concerned that there are 
not enough qualified mariners to sustain an activation of the entire 
sealift fleet.'' I understand from your written testimony that the 
Maritime Workforce Working Group will release a report on this issue in 
December 2017. In advance of this report, can you please provide 
specific recommendations for how MARAD and the Department of Defense 
can improve collaboration to address the issues confronting our 
national sealift program?
    Answer. MARAD is consulting with the U.S. Transportation Command 
(USTRANSCOM) in analyzing the mariner shortage and developing options 
to address it. USTRANSCOM has taken the following steps to better 
integrate MARAD into their strategic plan:

   One of the USTRANSCOM component commands is Military Sealift 
        Command (MSC). MARAD and MSC will coordinate in matters of 
        common concerns--training, contracting, adequacy of supply, 
        etc.

   MARAD and USTRANSCOM co-chair the Voluntary Intermodal 
        Sealift Agreement Executive Working Group that works with 
        senior representatives from industry (both domestic and 
        international ocean carriers) and maritime labor to understand 
        carriers' challenges and work to find common solutions that can 
        be proposed by either department to strengthen sealift for 
        national security. This body meets three times a year.

   USTRANSCOM, Navy, and MARAD have been working extensively to 
        develop a sealift recapitalization plan for the Nation's aging 
        sealift forces.

   MARAD, with USTRANSCOM support, has been taking steps to 
        improve mariner resilience. Such efforts have included the 
        Military-to-Mariner initiative to assist departing/retiring 
        armed service members to earn their U.S. Coast Guard mariner 
        credential to allow a transition to civilian life as a merchant 
        mariner. MARAD has also employed steam engineers during Ready 
        Reserve Force ship activations to increase the available pool 
        of mariners with these specialized skills.

    MARAD will continue to look for other opportunities while awaiting 
the results of the Maritime Workforce Working Group Report; which 
includes participation by senior USTRANSCOM (Flag-officer level) 
leadership.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Tammy Baldwin to 
                              Joel Szabat
    Since 2012, the number of foreign trading vessels has been 
dramatically reduced and 60 ships currently fill all Maritime Security 
Program operating agreements. This diminished pool of well-trained 
civilian mariners necessary to deploy and sustain sealift during a 
military conflict poses a threat to national security.
    MARAD has testified in recent years about the ability to meet 
sustained needs. Further, MARAD has testified that cargoes are key to 
maintain and grow a modern U.S.-flag fleet.

    Question 1. What impact has the 2012 reduction in cargo preference 
requirements had on the U.S.-flag fleet? Further, please describe 
proposals that could result in realistic mechanisms to grow the fleet.
    Answer. Since 2012, the number of foreign trading vessels has been 
dramatically reduced and 60 ships currently fill all Maritime Security 
Program operating agreements. This diminished pool of well-trained 
civilian mariners necessary to deploy and sustain sealift during a 
military conflict poses a threat to national security. MARAD has 
testified in recent years about the ability to meet sustained needs. 
Further, MARAD has testified that cargoes are key to maintain and grow 
a modern U.S.-flag fleet.
    Further study would be required before any recommendations could be 
made. The Administration has not yet taken any position.

    Question 2. Please describe MARAD's enforcement of U.S.-flag fleet 
requirements.
    Answer. The responsibility for compliance with requirements to use 
U.S.-flag vessels (i.e., cargo preference) rests with the Federal 
programs seeking transportation of preference cargo. The Duncan Hunter 
National Defense Authorization Act for FY 2009, P.L. 110-417 authorized 
MARAD to impose remedies for non-compliance by allowing for civil 
penalties of up to $25,000 per violation/per day on violators and 
authorizing MARAD to direct agencies to provide ``make up cargoes.'' 
MARAD also seeks to educate program managers on the basics of ocean 
freight--when and how it is used--and also has developed computer-based 
training to assist various civilian and military agencies' contracting 
officers with these compliance requirements and what specifically they 
should require in their prime and subcontracting clauses to improve 
reporting by their contractors regarding compliance.
    MARAD determines compliance based on the regulatory requirement 
that programs subject to cargo preference provide MARAD with receipt of 
both U.S. and foreign-flag bills of lading evidencing that the at-
least-50-percent threshold has been satisfied. Information derived from 
these bills of lading forms the basis of the performance metric, which 
in turn may lead to dialogue with agencies should the subject program 
be at risk of failing to meet cargo preference requirements.

    Question 3. As the Nation's highways and other transportation 
systems become increasingly congested, ports and waterways provide an 
alternative for the efficient movement of freight. MARAD's Marine 
Highway Program is meant to stimulate the development of new regional 
shipping services. Congress provided $5 million in FY16 and FY17 
appropriations for Marine Highway Program Grants. Is this an adequate 
level of funding to accomplish the program's goals? If not--what amount 
can be justified?
    Answer. At the current funding level, the Marine Highway Program 
Grants can alleviate some of the start-up capital risk associated with 
any new marine highway service venture, including new transportation 
services such as marine highway services for freight movement. By 
funding planning efforts, demonstration projects, and infrastructure 
and equipment to support new services or expand existing services, the 
Marine Highway Program can attract private marine highway service 
operators to enter this market who otherwise would not be willing to 
shoulder the full risk of this unknown market. Through the injection of 
existing grant funding, we can build new services, which in turn are 
offering our manufacturing base and distribution new competitive 
transportation options while at the same time, providing public 
benefits in the form of reduced congestion and highway maintenance 
costs. The funds appropriated in FY 2016 have been awarded to six 
projects that will support new service development in the following 
areas:

   Virginia, Maryland and the District of Columbia,

   New York and New Jersey;

   Illinois and Missouri; and

   within the State of Louisiana.

    MARAD is developing the Notice of Funding Opportunity for FY 2017.

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