[Senate Hearing 107-965]
[From the U.S. Government Printing Office]
S. Hrg. 107-965
NOMINATION OF CAPTAIN WILLIAM G. SCHUBERT TO BE ADMINISTRATOR OF THE
MARITIME ADMINISTRATION AT THE DEPARTMENT OF TRANSPORTATION
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 15, 2001
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska
Virginia CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana KAY BAILEY HUTCHISON, Texas
RICHARD H. BRYAN, Nevada OLYMPIA J. SNOWE, Maine
BYRON L. DORGAN, North Dakota SAM BROWNBACK, Kansas
RON WYDEN, Oregon GORDON SMITH, Oregon
MAX CLELAND, Georgia PETER G. FITZGERALD, Illinois
BARBARA BOXER, California JOHN ENSIGN, Nevada
JOHN EDWARDS, North Carolina GEORGE ALLEN, Virginia
JEAN CARNAHAN, Missouri
BILL NELSON, Florida
Kevin D. Kayes, Democratic Staff Director
Moses Boyd, Democratic Chief Counsel
Mark Buse, Republican Staff Director
Jeanne Bumpus, Republican General Counsel
C O N T E N T S
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Page
Hearing held on November 15, 2001................................ 1
Statement of Senator Breaux...................................... 1
Prepared statement of Senator McCain............................. 19
Witnesses
Schubert, William G., nominated to be administrator of the
Maritime Administration at the Department of Transportation.... 3
Prepared statement........................................... 4
Biographical Information..................................... 5
Knapp, Rosalind A., letter dated October 19, 2001............ 13
Appendix
Response by William G. Schubert to written questions submitted by
Hon. John McCain............................................... 21
NOMINATION OF CAPTAIN WILLIAM G.
SCHUBERT TO BE ADMINISTRATOR OF THE MARITIME ADMINISTRATION AT THE
DEPARTMENT OF TRANSPORTATION
----------
THURSDAY, NOVEMBER 15, 2001
U.S. Senate,
Committee on Commerce, Science, and Transportation
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m. in
room SR-253, Russell Senate Office Building, Hon. John B.
Breaux presiding.
OPENING STATEMENT OF HON. JOHN B. BREAUX,
U.S. SENATOR FROM LOUISIANA
Senator Breaux. The Committee will please come to order.
Good morning, everyone.
Senator Hutchison from Texas was going to be here, Captain,
to present you, but was unavoidably not able to do it, with the
aviation security conference going on, which is why a number of
our Members happen to be absent, because we are trying to get
that important legislation out before we leave for the recess.
This morning we are here to consider the nominee for
Maritime Administrator, Captain William Schubert. I appreciate
very much that the Administration has nominated an individual
who has actual experience in this particular area dealing with
the merchant marine. Captain Schubert has previously worked at
the Maritime Administration and brings a great deal of
knowledge and experience in that very important field. It is
very difficult to come into this type of a job without having
experience. We are very fortunate to have someone who has
actually worked there. You helped facilitate the sealift
operation during the Persian Gulf effort, which was very
difficult, indeed.
I strongly support your confirmation and supported the
nomination, as well. I think it is important that we get you in
place as soon as possible and hope we can take this to the
floor this week.
I understand you are joined today by your wife Gail.
Gail, are you here? Thank you very much for being here and
letting him do this job again. Also by your parents,
apparently, Earl and Nancy. Thank you for your contribution in
allowing Earl to serve.
He is a 1968 graduate--1965?
Mr. Schubert. 1969.
Senator Breaux. 1969 graduate of King's Point Merchant
Marine Academy and we will not hold it against you, but your
brother-in-law is one of our former colleagues, Senator Bill
Brock. Bill, glad to see you back in these chambers.
My home state of Louisiana obviously is one that is very
concerned about the merchant marine, the maritime, and what we
do at the Maritime Administration. We are obviously very
heavily dependent on maritime industry and maritime
transportation in general. It is not something that just
benefits Louisiana. It benefits the entire country. Louisiana
is the bottom of the funnel through which two-thirds of this
nation drains all of their waterways and obviously that creates
some problems, but it also creates enormous economic benefits
for the state and also for the nation.
We live near and are on the waterways and the Gulf of
Mexico, so we certainly in our areas understand the importance
of ports, understand the importance of a strong maritime
industry, and know quite well in my state, and I would hope the
rest of the Congress feels the same, that this is something the
government needs to be involved in.
We cannot just say to the U.S. maritime industry good luck,
pat you on the back, and hope you are successful, because, in
fact, our industry has to compete not just with fellow American
companies, but we have to compete throughout the world. Many
times we find our industries having to compete, not with other
companies alone, but other companies who work with their
governments very closely and in many cases are partially owned
by their governments.
So it is a very unlevel competitive field that our industry
must face as we ply the oceans of the world. I think that there
are many of us that recognize that, while we are free
enterprise supporters, that we have to recognize that you have
to deal with the hand that you have been dealt, and until all
the world operates as we do that there is a very legitimate
role for the U.S. government in helping to guarantee that we
remain strong as a maritime nation.
That is one of the challenges, Captain, that you are going
to be facing. This is not an easy job. The Congress does not
have a 100 percent view of the importance of some of the things
the Maritime Administration does. In fact, some of the folks in
the Administration do not like some of the programs that you
administer. Title 11 obviously is one of these, where they
recommended, as I remember, zero funding for the Title 11
program, which is a program where we have had the ability to
aid our U.S. industries, not through giving them money or
giving them grants or giving them construction subsidies, but
rather giving them loan guarantees whereby they can go to the
private markets and borrow money to build ships in U.S. yards
that will have U.S. sailors on board, and that that loan has to
be repaid by the private company and only if they default would
the government have to participate in picking up a portion of
that loan, and it is only a portion of the loan.
We regularly fund the differential or the risk factor in
getting a loan that is guaranteed by the government. That is a
program that has worked very well and it has worked very well
for a very long time. It has particular challenges now because
of the economy and particularly in some of the civilian cruise
ships that we are watching very closely.
This is going to be on your watch, and it is going to be
tough, because you are going to be in the middle. You have the
Congress that supports this and an Administration that does
not. You work for the Administration, but you also have to
follow the laws of the Congress, and the Congress has said very
strongly that the Title 11 program is one that we support, this
Committee supports, this Congress supports, and it is the law
of the land.
So we would hope very much that you would aggressively
enforce it, do not drag your feet. It is going to be tough. You
have somebody downtown on Pennsylvania Avenue looking over your
shoulder and you are going to have Congress looking over your
shoulder, and you have to carry forward.
But you have done that, you have been there, and I strongly
support your confirmation.
With that, it is your turn and we would be happy to hear
from you. Welcome.
STATEMENT OF CAPTAIN WILLIAM G. SCHUBERT, NOMINATED TO BE
ADMINISTRATOR OF THE MARITIME
ADMINISTRATION AT THE DEPARTMENT OF
TRANSPORTATION
Mr. Schubert. Thank you, Mr. Chairman and Members of the
Committee. Thank you for the opportunity to appear before you
today as President Bush's nominee to be the next Administrator
of the Maritime Administration. It is a great honor to be
called to serve the President and our nation in these
challenging times.
The President's long-term commitment to defeat terrorism
will require significant support from all segments of the
maritime industry. In this regard, the Maritime Administration
will play an integral role in providing sufficient commercial
and government-owned sealift to support our military overseas
operations. These programs include the 115-ship Voluntary
Intermodal Sealift Agreement program, better known as VISA, the
76-ship Ready Reserve Force, and the highly skilled U.S.
citizen mariners to crew these ships.
At home, the Maritime Administration will coordinate with
private industry, labor, and various government agencies in an
effort to ensure that the United States has secure ports,
adequate shipbuilding and repair capabilities, efficient
intermodal transportation systems to support our ongoing war
against terrorism. If confirmed by the Senate, I will devote my
experience, my knowledge, and my sincerest passion for this
industry to accomplish these objectives.
I do want to emphasize the importance I attach to the role
of our agency in the current situation. Governor Ridge has
called for a comprehensive and coordinated multi-agency effort
to ensure our homeland security. The potential for maritime-
related terrorism poses an unacceptable threat to our homeland
security. The Maritime Administration is the primary conduit to
the maritime industry and has substantial capabilities to
advise Secretary Mineta on this critical issue.
The Maritime Administration's knowledge, experience, and
industry relationships will help to ensure that an appropriate
balance is struck between proposed security measures and the
efficient flow of commerce. If confirmed, I look forward to
working with Secretary Mineta, Governor Ridge, and my DOT
colleagues at the Department to develop short and long-term
enhancements to port and maritime security.
More broadly, the Maritime Administration is the
promotional agency for the U.S. maritime industry. I am
committed to managing the agency's staff and resources in a way
that provides the best value to our government and to industry.
I will also strive to achieve a consensus amongst our
stakeholders for a renewal of the Maritime Security Fleet
program sufficient to meet our national security requirements.
If confirmed, I look forward to working and advising
Secretary Mineta in furthering his domestic maritime
transportation initiative. The Secretary has rightly said that
``transportation is the key to productivity and therefore the
success of virtually every business in America.'' New and
revitalized domestic maritime transportation infrastructure is
essential to meet our nation's domestic transportation needs,
to support our economy into the twenty-first century.
In summary, a strong maritime industry is essential to our
national defense in time of war or declared emergency, such as
we have now, and a fundamental bulwark to our United States
economic well being. If the United States is to maintain our
position as the world's preeminent international trading power,
we must also promote and maintain our position as a viable
maritime power. If confirmed, I look forward to working closely
with the Members of this Committee in developing maritime
policy tailored to meet our strategic objectives.
Let me conclude by thanking the Committee for its
consideration for my nomination and repeating my promise to
work closely with you. I would be pleased to answer any
questions.
[The prepared statement and biographical information of
Captain Schubert follow:]
Prepared Statement of William G. Schubert, Administrator-Designate,
Federal Maritime Administration, U.S. Department of Transportation
Mr. Chairman, Senator McCain, Members of the Committee, thank you
for the opportunity to appear before you today as President Bush's
nominee to be the next Administrator of the Maritime Administration. It
is a great honor to be called to serve the President and our Nation in
these challenging times. Thank you Senator Hutchison for your kind
introduction. I am honored and grateful to have your support.
The President's long term commitment to defeat terrorism will
require significant support from all segments of the US maritime
industry. In this regard, the Maritime Administration will play an
integral role in providing sufficient commercial and government-owned
strategic sealift to support our military's overseas operations. These
programs include the 115-ship Voluntary Intermodal Sealift Agreement
program (VISA), the 76 ship Ready Reserve Force, and the highly skilled
U.S. citizen mariners to crew all these vessels. At home, the Maritime
Administration will coordinate with private industry, labor and various
government agencies in an effort to ensure that the United States has
secure ports, adequate shipbuilding and repair capabilities, efficient
intermodal transportation systems, to support our ongoing war against
terrorism. If confirmed by the Senate, I will devote my experience,
knowledge and passion for this industry to accomplish these objectives.
I do want to emphasize the importance I attach to the role of this
agency in the current situation. Governor Ridge has called for a
``comprehensive and coordinated'' multi-agency effort to ensure our
homeland security. The potential for maritime related terrorism poses
an unacceptable threat to our homeland security. The Maritime
Administration is the primary conduit to the maritime industry, and has
substantial capability to advise Secretary Mineta on this critical
issue. The Maritime Administration's knowledge, experience and industry
relationships will help to ensure that an appropriate balance is struck
between proposed security measures and the efficient flow of commerce.
If confirmed, I look forward to working with Secretary Mineta, Governor
Ridge, and my DOT colleagues at the Department to develop short and
long-term enhancements of port and maritime security.
More broadly, the Maritime Administration is the promotional agency
for the US Maritime Industry. I am committed to managing the agency's
staff and resources in a way that provides the best value to the
government and industry. I will also strive to achieve a consensus
among the stakeholders for a renewal of the Maritime Security Program
sufficient to meet our national security requirements.
If confirmed, I look forward to working with and advising Secretary
Mineta in furthering his domestic Maritime Transportation System
initiative. The Secretary has rightly said that ``transportation is key
to the productivity and therefore the success of virtually every
business in America.'' New and revitalized domestic maritime
transportation infrastructure is essential to meet our nation's
domestic transportation needs to support our economy into the 21st
Century.
In summary, a strong US maritime industry is essential to our
national defense in time of war or declared emergency, and a
fundamental bulwark of United States economic well being. If the US is
to maintain our position as the world's preeminent international
trading power, we must also promote and maintain our position as a
viable maritime power. If confirmed, I look forward to working closely
with the members of this committee in developing maritime policy
tailored to meet these strategic objectives.
Let me conclude by thanking the Committee for its consideration of
my nomination and repeating my promise to work closely with you. I
would be pleased to respond to any questions you may have at this time.
______
BIOGRAPHICAL INFORMATION
1. Name: (Legal Name): William Grant Schubert. (Nick Names Used):
Captain Bill Schuber.
2. Position to which nominated: Maritime Administrator.
3. Date of nomination: N/A.
4. Address: (Information not available to the public).
5. Date and place of birth: March 18, 1952.
6. Marital status: Married to Gail Marlene Becker since 9/16/78.
7. Names and ages of children: Chris Schubert (biological son) age
19; and Jessica Mathis (adopted daughter) age 22.
8. Education: U.S. Merchant Marine Academy, attended 1970-1974;
Bachelor of Science granted on June 24, 1974; Obtained USCG Unlimited
Master License any Oceans; and served 10 years as a commissioned
officer in the US Navy Reserve.
9. Employment record: (1974-1984--Worldwide) Reynolds Metals
Company--10 years experience performing the duties and responsibilities
of a USCG licensed deck officer including planning and stowage of cargo
loading and discharge, assuring compliance with all USCG and ABS rules
and regulations, implementing ongoing maintenance and repair program,
shipyard operations, and structural and cargo surveys; (1984-1986--
Scotland & Houston, Texas) Global Marine Drilling--Master/Offshore
Installation Manager--Overall responsibility for the safe, legal and
efficient management of three (3) US-flag Mobile Offshore Drilling
Units operating in the UK sector of the North Sea. Also, managed the
marine operations of twelve (12) US-flag drillships located worldwide;
(1986-1995--Washington, D.C. & Houston, Texas) Maritime Administration
(MARAD)--1986-1990 Appointed offshore industry expert to advise the
Maritime Administrator in formulating policy for the management,
maintenance and liquidation of over $2 billion in marine assets
acquired through defaults under the Federal Ship Financing Program.
From 1990-1995, served as MARAD's regional representative for all of
MARAD's program interest in the southwestern US. During Operation
Desert Shield/Desert Storm, was responsible for monitoring the Port
Readiness Program, vessel load out operations and interagency planning
meetings for the Port of Houston; (October 1995-Present, Houston,
Texas) President of International Trade & Transportation, Inc.--
Provides transportation related consulting services to ocean carriers,
project exporters, freight forwarders, and lending institutions. Since
1995, have provided direct consulting services for major international
infrastructure projects valued at over $7 billion dollars. These
projects generated approximately $50 million in revenue for the US-flag
ocean carriers.
10. Government experience: Served on the Transportation Advisory
Committee to the Bush-Cheney Transition Team.
11. Business relationships: From October 1995, held the position of
President of International Trade and Transportation, Inc. As per the
requirements of Schedule D, Part II of SF-278, the following companies
were provided direct consulting services by William Schubert: (1)
Accroven SRL, (2) MWI Corporation, (3) Brown & Root International, (4)
American Bechtel, Inc., (5) Bechtel International, Inc., (6) Petrobras,
(7) Gas TransBoliviano S.A., (8) Panalpina, Inc, (9) Transoceanic
Shipping, (10) Zust Bachmeier Inc., (11) Circle Freight, (12) Alaska
Cargo Transport, (13) Enron, (14) Danzas AEI.
12. Memberships: (1998 to Present) Cofounder of the US Exporters
Competitive Maritime Council; (1995 to Present) US Gulf Coast Chamber
of Commerce; (2001--Present) National Industrial Transportation League;
(1990 to Present) US Merchant Marine Academy Alumni Association (past
Vice President--Houston Chapter); (1996 to Present) Vice President &
cofounder of the Interscholastic Hockey Association (non profit youth
sports); Navy League (past member) NDTA (past member); International
Traffic Managers Association (past member); Council of Logistics
Management (past member); International Customs House Brokers and
Freight Forwarders Association (past member); American Association of
Port Authorities (past member).
13. Political affiliations and activities: (a) Elected delegate to
the Texas Republican Party Precinct & Senatorial District Conventions
in 1992, & 2000. Elected delegate to Texas Republican Party State
Conventions in 1992, 1996 & 2000. (b) Member the Republican Party of
Texas and the National Republican Party. (c) $1,000 contribution to
Bush for President, Inc., in fall of 1999.
14. Honors and awards: (1994) US Merchant Marine Outstanding
Professional Achievement Award; (1989) Secretary of Transportation
``Silver Medal'' for Meritorious Achievement; (1985) Global Marine
``President's Excellence Award'' for preventing loss of life and
property during a severe well blowout in the North Sea.
15. Published writings: None.
16. Speeches: I have participated as an invited speaker at numerous
industry functions, however, I have not delivered any ``formal
speeches'' during the past 5 years.
17. Selection: (a) To my knowledge, I have been chosen for this
nomination due to my extensive experience twenty-seven (27) year
working within the public and private sectors of the maritime industry.
In addition, I am a graduate of the US Merchant Marine Academy (USMMA),
and have 12 years operational experience sailing as an officer aboard
US-flag vessels. (b) A strong US maritime industry (i.e. international
& domestic fleets, shipyards, ports and intermodal infrastructure) is
essential to our national defense in time of war or declared emergency.
In addition, if the US is to maintain our position as a great
international trading power, we must also promote and maintain our
position as a viable maritime power. The Maritime Administration
(MARAD) plays an instrumental role in facilitating the above
objectives. In this regard, my background and experience affirmatively
qualifies me to carry out the mission of MARAD as follows: In 1974, all
graduates of the USMMA were required to fulfill a service obligation by
sailing a minimum of four (4) years on US-flag vessels, and
concurrently maintain a commission in the US Naval Reserve. Upon
graduation from the USMMA, I exceeded the required service obligation
by sailing 12 (12) years as a USCG licensed deck officer (including two
(2) years as Master), and serving 10 years as a commissioned US Naval
Reserve Officer. The above ``hands on'' shipboard experience will be a
valuable asset in administering MARAD's Ready Reserve Fleet (RRF)
functions, and effectively handling maritime labor and training issues.
In addition, manpower projections indicate that there may be a
significant shortage of qualified seamen to fulfill strategic sealift
requirements during a declared national emergency. I believe that my
first hand knowledge of ship operations will provide credible
leadership to the MARAD staff in developing creative contingency plans
to address the anticipated labor shortfalls. My working knowledge of
the economics of shipboard operations is also a valuable resource in
developing policy and strategy to increase the size of the US-flag
commercial fleet; Many newly confirmed political appointees must
initially allocate valuable time to familiarize themselves with their
agency's programs, organizational staffing, and overall mission.
However, in view of my experience working at MARAD from 1986 through
1995,1 acquired an intimate working knowledge of all MARAD's programs.
After confirmation, I would be able to immediately focus my attention
on properly administering and improving the agency's programs, and
providing direction in advising the Secretary in developing sound
maritime policy. In addition, MARAD has been assigned certain national
security functions during a declared national emergency. Based on my
previous tenure at MARAD, I am completely cognizant of MARAD's national
security functions and can provide the necessary leadership immediately
upon confirmation; As President of International Trade &
Transportation, Inc. (ITT), I provided specialized project consulting
services to the major U.S. engineering, procurement and construction
(EPC) contractors in the following key areas: Critical path logistical
planning, Transportation risk analysis & mitigation, Marine and DSU
insurance, Planning to insure effective utilization of available
financial resources, Planning to insure safe and timely transportation
of cargo, Cost-benefit analysis of available ocean and intermodal
transportation options, US Government regulations governing foreign and
domestic ocean transportation; Under my direction, ITT has provided the
above consulting services to international EPC projects valued over $7
billion dollars. The successful completion of these projects involved a
high degree of planning and coordination between the exporter's
procurement and transportation departments, financial institutions,
port operations, trucking/rail providers, freight forwarders and ocean
carriers. These projects generated approximately $50 million in revenue
for the US-flag ocean carriers. My broad based experience in these
areas will be a valuable asset to MARAD in developing a maritime policy
tailored to our nation's requirements into the 21st century.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections with your present employers,
business firms, business associations or business organizations if you
are confirmed by the Senate? Yes.
2. Do you have any plans, commitments or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, explain. No.
3. Do you have any plans, commitments or agreements after
completing government service to resume employment, affiliation or
practice with your previous employer, business firm, association or
organization? No.
4. Has anybody made a commitment to employ your services in any
capacity after you leave government service? No.
5. If confirmed, do you expect to serve out your full term or until
the next Presidential election, whichever is applicable? Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Describe all financial arrangements, deferred compensation
agreements, and other continuing dealings with business associates,
clients or customers. Please refer to the opinion letter of the
Assistant General Counsel.
2. Indicate any investments, obligations, liabilities, or other
relationships which could involve potential conflicts of interest in
the position to which you have been nominated. Please refer to the
opinion letter of the Assistant General Counsel.
3. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years, whether for
yourself, on behalf of a client, or acting as an agent, that could in
any way constitute or result in a possible conflict of interest in the
position to which you have been nominated? Please refer to the opinion
letter of the Assistant General Counsel.
4. Describe any activity during the past 10 years in which you have
engaged for the purpose of directly or indirectly influencing the
passage, defeat or modification of any legislation or affecting the
administration and execution of law or public policy. In 1998, I worked
on behalf of Alaska Cargo Transport of Seattle, Washington, to re-
establish coastwise trading privileges for the US-flag offshore tug
ENFORCER. This was successfully accomplished through special ``Chain of
Title'' legislation introduced by the Honorable Senator Kay Bailey
Hutchison.
5. Explain how you will resolve any potential conflict of interest,
including any that may be disclosed by your responses to the above
items. (Please provide a copy of any trust or other agreements.) Please
refer to the opinion letter of the Assistant General Counsel.
6. Do you agree to have written opinions provided to the Committee
by the designated agency ethics officer of the agency to which you are
nominated and by the Office of Government Ethics concerning potential
conflicts of interest or any legal impediments to your serving in this
position? Yes.
D. LEGAL MATTERS
1. Have you ever been disciplined or cited for a breach of ethics
for unprofessional conduct by, or been the subject of a compliant to
any court, administrative agency, professional association,
disciplinary committee, or other professional group? If so, provide
details. No.
2. Have you ever been investigated, arrested, charged or held by
any Federal, State, or other law enforcement authority for violation of
any Federal, State, county, or municipal law, regulation or ordinance,
other than a minor traffic offense? If so, provide details. No.
3. Have you or any business of which you are or were an officer
ever been involved as a party in interest in an administrative agency
proceeding or civil litigation? If so, provide details? No.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? No.
5. Please advise the Committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination. Throughout my career in both the
public and private maritime sectors, I have strived to maintain the
highest ethical & legal standards. If confirmed by the Senate, I would
endeavor to maintain these high standards for myself, senior staff, and
the Agency as a whole.
E. RELATIONSHIP WITH COMMITTEE
1. Will you ensure that your department/agency complies with
deadlines set by congressional committees for information? Yes, to the
best of my ability.
2. Will you ensure that your department/agency does whatever it can
to protect congressional witnesses and whistle blowers from reprisal
for their testimony and disclosures? Yes, to the best of my ability.
3. Will you cooperate in providing the committee with requested
witnesses, to include technical experts and career employees with
firsthand knowledge of matters of interest to the committee? Yes.
4. Please explain how you will review regulations issued by your
department/agency, and work closely with Congress, to ensure that such
regulations comply with the spirit of the laws passed by Congress. Laws
passed by the Congress represent the will of the people as expressed
through their duly elected representatives. As such, every effort
should be made by the department/agency to implement regulations that
conform to the spirit and the intent of the law.
To that end, I will establish a section in the Office of the Chief
Counsel to review all regulations issued by the Maritime
Administration. It will coordinate with all the subject matter branches
of MARAD to insure that our agency has a proper understanding of the
intent of the law, and that all regulations issued by MARAD comply with
the provisions of the Administrative Procedure Act (APA). The
legislative section, the Chief Counsel's office, the Secretary, Deputy
Secretary, General Counsel, and the congressional liaison officer in my
office, will interact with the appropriate entities in Congress to make
certain that MARAD's regulations are being promulgated in accordance
with the particular intent of Congress.
It is important to note that MARAD is not the only Federal agency
that issues regulations having an impact on U.S. maritime policy.
Therefore, I shall work to insure that MARAD, as the Administration's
representative for maritime policy, consults with and provides
expertise to those agencies formulating their own regulations to be
consistent with MARAD and DOT's policies and procedures.
5. Describe your department/agency's current mission, major
programs, and major operational objectives. The overall mission of the
Maritime Administration is to promote the development and maintenance
of an adequate, well-balanced, United States merchant marine,
sufficient to carry the Nation's domestic waterborne commerce and a
substantial portion of its waterborne foreign commerce, and capable of
serving as a naval and military auxiliary in time of war or national
emergency. MARAD also seeks to ensure that the United States enjoys
adequate shipbuilding and repair service, efficient ports, effective
intermodal water and land transportation systems, and reserve shipping
capacity in time of national emergency. The major programs and
objectives are as follows: National Security.--In view of the tragic
events of September 11, MARAD's Office of National Security will play
an integral role in providing the necessary auxiliary support for our
operations overseas. This office administers all of MARAD's national
security related programs. These programs provide commercial and
government-owned shipping capability in times of national emergency and
to meet Department of Defense strategic sealift requirements. The Ship
Operations office manages and maintains the fleet of inactive,
Governmentowned vessels in the National Defense Reserve Fleet (NDRF),
including the Ready Reserve Force (RRF). The RRF currently has 76
vessels. It provides a ready source of ``surge'' shipping, available
when needed by the Department of Defense's U.S. Transportation Command
(USTRANSCOM), to support rapid deployment of U.S. military forces. The
National Security Planning office develops and maintains plans for
carrying out transportation support activities for any military
mobilizations required due to a war or a national emergency. The office
also maintains emergency resource evaluation data; helps formulate
international and national plans for maritime emergency and
mobilization activities; and operates MARAD's emergency operations and
telecommunications centers. The Sealift Support office manages the
Maritime Security Program and the Voluntary Intermodal Sealift
Agreement. These programs are designed to assure the availability of
sufficient U.S. commercial sealift capability and the U.S. intermodal
system to sustain U.S. military operations overseas in an emergency.
This office also administers the transfer of U.S. ships to foreign
interests, the disposal of obsolete vessels in the NDRF, and the
transfer of vessels to states and other governmental bodies and
qualified nongovernment parties, as required; Financial Approvals and
Cargo Preference.--The Cargo Preference program provides the necessary
base cargoes required to sustain a viable US-flag commercial fleet.
This office manages the Government cargo preference program and
conducts financial analysis and approval activities in support of a
variety of MARAD programs, including the shipbuilding and shipyard
modernization loan guarantee program. The MARAD cargo preference and
financial assistance programs require current data on the cost of
operating oceangoing ships under both U.S. and foreign flags. The
Financial and Rate Approvals office collects and analyzes this type of
data. The office determines `fair and reasonable' guideline shipping
rates for Government cargoes to insure that the Government isn't
overcharged. In addition, the office conducts financial analyses to
support other MARAD offices in determining the financial qualifications
of contractors and applicants for financial assistance, reviews
contractor audit appeals, determines the financial acceptability of
documents provided to MARAD and provides financial management services
in support of several MARAD-administered programs. In addition to
serving as MARAD's coordinator for all customer service activities, the
Associate Administrator directs the Ship Operations Cooperative
Program, a cost-shared partnership between government and industry,
that focuses on solving common ship operations problems and developing
products that meet the common needs of the program members;
Shipbuilding.--This office manages several MARAD programs designed to
support American shipbuilding. The Shipbuilding and Marine Technology
office promotes the construction of ships in U.S. shipyards for both
foreign and domestic trades. They seek to improve the competitive
position of U.S. shipyards by serving as a ``think tank'' on ship
design, ship engineering, ship construction facilities and
technologies, and methods for reducing shipbuilding costs. The Ship
Financing office administers the Federal Ship Financing loan guarantee
program for ship construction and reconstruction in U.S. shipyards, and
for U.S. shipyard modernization efforts. The office also manages the
capital construction fund (CCF) and construction reserve fund (CRF)
programs. These funds allow shipping companies to accumulate earnings
over time in order to replace their U.S. flagged ships with new ships
constructed in U.S. shipyards. The Insurance and Shipping Analysis
office administers MARAD's marine insurance and marine war risk
insurance activities and works with the insurance industry to
strengthen the domestic marine insurance market; Port, Intermodal, and
Environmental Activities.--This office manages a variety of MARAD
programs to ensure that U.S. waterways, ports and intermodal
connections are able to compete in the global economy of the 21''
Century. The Ports and Domestic Shipping office seeks to improve the
use of U.S. ports, port facilities, and domestic shipping. The
principal areas of concern include: coordinating domestic and
international port activity with a variety of public and private
entities, and creating and promoting advanced methodologies to enhance
the competitive position of the domestic waterborne transportation
industry. The office also identifies and demonstrates agile port and
high-speed technologies; analyzes commodity flows and traffic patterns
in the domestic trades; and ensures the ability of ports to operate
effectively under emergency mobilization conditions. The Intermodal
Development office promotes the development and improved utilization of
marine-related intermodal transportation systems and provides technical
assistance to other agencies and to organizations concerned with
intermodal development. The primary areas of emphasis include improving
intermodal access to ports, and conducting pilot projects to
demonstrate improved techniques or technologies that will enhance
intermodal transportation. The Office of Environmental Activities
develops and coordinates MARAD's environmental activities. The primary
areas of concern to MARAD include improving the control and abatement
of ship-generated pollution, and helping to eliminate environmental
problems at U.S. ports and MARAD-operated facilities; Policy and
International Trade.--This office assists the Maritime Administrator in
developing MARAD's strategic and performance plans, conducts studies
and evaluations of MARAD programs, supports the Administrator's
negotiation of multilateral and bilateral maritime agreements, and
conducts statistical and economic analyses of the shipping industry.
Recent legislation requires Government agencies to create and use
strategic and performance plans. The Office of Policy and Plans serves
as the focal point for these planning activities as well as for program
evaluations. The office also prepares general policy papers and reviews
proposed legislation and regulations to determine their impact on the
Government's maritime policies. MARAD participates in a wide variety of
international activities concerned with shipping matters. The
International Activities office analyzes foreign economic and political
developments that may affect U.S. shipping and maritime industry
interests; identifies and establishes contact with U.S. and foreign
government and maritime industry representatives, and the principal
international governmental and private organizations concerned with
shipping matters. It also develops MARAD policy positions on
international activities of interest to the U.S. maritime industry and
takes action to present the U.S. Government's position in these
matters. The office also serves as Executive Secretary for coordinating
all matters pertaining to maritime bilateral agreements and related
negotiations with foreign governments and international organizations.
The Statistical and Economic Analysis office procures, maintains and
disseminates highquality, timely and consistent trade, vessel and
related data; assists maritime data users to define their needs; and
provides responsive data support at the lowest possible cost. In
partnership with the U.S. Army Corps of Engineers, the office produces
the official monthly U.S. Foreign Waterborne Transportation Statistics.
It also produces economic analyses, principally in-depth market reviews
of the major industry segments, and informative maritime system reports
to support other MARAD offices in their program responsibilities,
policy analysis and informed decisionmaking.
6. Are you willing to appear and testify before any duly
constituted committee of the Congress on such occasions as you may be
reasonably requested to do so? Yes.
F. GENERAL QUALIFICATIONS AND VIEWS
1. How have your previous professional experience and education
qualifies you for the position for which you have been nominated. My
degree from the US Merchant Marine Academy (USMMA) has provided the
initial tools and a solid foundation to pursue an active career in the
maritime industry. During my 20 seven (27) year career within the
maritime industry, I have made every effort to exemplify the highest
tradition of the USMMA Corps which is embodied by our motto ``Acta Non
Verba'' (i.e. Deeds Not Words). The Maritime Administrator advises and
assists the Secretary of Transportation on commercial maritime matters,
the U.S. maritime industry, and strategic sealift. My comprehensive
maritime experience provides the necessary background to advise the
Secretary in all matters related to the maritime industry and strategic
sealift requirements. In view of my 20 seven (27) year career working
directly with all segments of the industry, I will be in a strong
position to provide assistance to the Secretary in developing sound
maritime policy tailored to our nation's requirements into the 21St
century. The Administrator also serves as the Director of the National
Shipping Authority when the President has declared a national
emergency. This specific responsibility is especially critical at this
time. In this regard, my previous experience administering MARAD's
national security responsibilities in the field during Operation Desert
Shield/Desert Storm has given me the necessary ``first hand'' knowledge
to properly execute the functions of the National Shipping Authority
(when authorized). In addition, my 12 (12) years active ship
operational experience has provided the necessary qualifications to
advise the Secretary on strategic sealift requirements. The Maritime
Administrator maintains liaison with public and private organizations
concerned with the U.S. maritime industry. Working as an
internationally recognized maritime industry consultant has provided
the opportunity to work directly with virtually all segments of the
industry. These industry segments include foreign & domestic carriers,
shippers, freight forwarders, shipyards, trade organizations, maritime
labor interest, ports, and various government entities. In addition, I
have five (5) years experience working in the capacity as MARAD's
regional liaison to the public and private organizations concerned with
the U.S. maritime industry in the SW United States. As the U.S.
maritime policy advisor to the Secretary, the Administrator also
maintains contact with international maritime groups, conducts
negotiations, and maintains effective relations with other agencies of
the Federal Government and the public. My previous tenure at MARAD
involved preparing trade statistics and analysis to insure compliance
with maritime bilateral trade agreements. Over the last 15 (15) years,
I have also actively participated in industry trade associations,
international negotiations related to project activity, and was
assigned to various interagency working groups. My consulting activity
required communications, negotiations, and interactions with
international entities in twenty-one (21) different countries.
2. Why do you wish to serve in the position for which you have been
nominated? There is no greater honor than to serve our President, the
Secretary and country in these challenging times. Prior to the tragic
events of September 11, my overall objectives, were to provide
leadership in developing effective maritime policy, and improving
employee moral at MARAD. Subsequent to the attack on America, it has
become a priority to ensure that the military has sufficient strategic
sealift to fulfill upcoming mission requirements. To this end, I will
devote all my time, energy and resources to accomplish these
objectives.
3. What goals have you established for your first 2 years in this
position, if confirmed? If confirmed by the Senate, I have established
the following specific goals within the first 2 years in this position:
Develop a consensus between the Department of Defense, US-flag
carriers, maritime labor, Congress and. the Administration for renewal
of the Maritime Security Program sufficient to meet our national
security requirements; Provide recommendations to the Secretary of
Transportation on developing policy furthering the domestic Maritime
Transportation System initiative; With regards to the negotiations of
Bilateral Maritime Agreements, provide counsel to the Secretary of
Transportation that accurately reflects the best interest of the US
maritime industry; Over the last 10 years, there has been an
unprecedented decline in US-flag breakbulk tonnage. Over the next 2
years I will work diligently with industry and labor to encourage new
US-flag breakbulk tonnage to enter the commercial market. The new US-
flag breakbulk tonnage would also represent valuable additional assets
to our strategic sealift; MARAD is the promotional agency for the US
Maritime Industry. To this end, I am committed to managing the agency's
staff and resources in a way that provides the best value to the
industry; Develop an environmentally sound and economically viable
action plan to dispose the vessels in the National Defense Reserve
Fleet; As the official advocacy agency responsible for US maritime
policy, I will ensure that MARAD provides the necessary assistance to
other US government agencies that may be engaged in developing
policies, legislative initiatives or regulations that have an impact on
the maritime industry.
4. What skills do you believe you may be lacking which may be
necessary to successfully carry out this position? What steps can be
taken to obtain those skills? I will rely on senior MARAD/DOT staff to
advise the proper protocol in working with the legislative branch.
5. Who are the stakeholders in the work of this agency? Congress
and the maritime industry represented by US-flag carriers, shipyards,
ports, intermodal transportation providers, shippers and trade
associations. In addition, those who labor in this crucial area. The US
armed forces, and the people they protect--our fellow citizens.
6. What is the proper relationship between your position, if
confirmed, and the stakeholders identified in question No. 10. The
Maritime Administrator is the official spokesperson for US maritime
policy. As such, I will insure that the relationship with the
stakeholders, my actions, as well as MARAD's employees are consistent
with the highest legal and ethical government practices. As is the case
with any agency of government, MARAD has the highest responsibility to
maintain the economic well being and security of the American people.
7 The Chief Financial Officers Act requires all government
departments and agencies to develop sound financial management
practices similar to those practiced in the private sector. (a) What do
you believe are your responsibilities, if confirmed, to ensure that
your agency has proper management and accounting controls? My
responsibilities are absolutely clear. They include the need to seek
out and draw upon the assets available within the agency itself, the
Transportation Department, OMB, and, where appropriate, the private
sector to make sure the Maritime Administration has the most precise,
accurate, and effective management and accounting controls possible.
(b) What experience do you have in managing a large organization? I
have two (2) years experience managing the overall safe, legal and
efficient operations of Mobile Offshore Drilling Units operating in the
UK sector of the North Sea. Each unit utilized as many as 100
multinational employees. The North Sea represented one of the harshest
marine environments in the world in which a high degree of management
and leadership skills was required. In my consulting capacity, I have
provided management expertise for international projects valued over $7
billion dollars within 21 different countries. I was required to
simultaneously provide these management and consulting services for
several different projects at the same time. The successful completion
of these projects involved a high degree of planning and coordination
between several departments including procurement, transportation,
finance, port operators trucking/rail providers, freight forwarders and
ocean carriers. I believe this experience constitutes the management of
``large organizations'' for the purpose of this question.
8. The Government Performance and Results Act requires all
government departments and agencies to identify measurable performance
goals and to report to Congress on their success in achieving these
goals. (a) Please discuss what you believe to be the benefits of
identifying performance goals and reporting on your progress in
achieving those goals. The private sector operates on the principle of
identifying measurable goals, and institution of accountability to
insure that reasonable progress has been made in achieving those goals.
The American people should expect the same high performance standards
from their Government, and report to Congress their success in
achieving measurable performance goals. (b) What steps should Congress
consider taking when an agency fails to achieve its performance goals?
Should these steps include the elimination, privatization, downsizing
or consolidation of departments and/or programs? The oversight role of
the Congress in assuring that all agencies meet the highest standard is
of crucial importance in seeing that the American people get full value
for their tax dollar. While the remedial steps the Congress might take
when any agency falls short of this goal will of necessity vary to meet
the needs of the specific situation, these steps should be accomplished
quickly to assure that the public interest is well served. There is no
question but that these steps could include everything mentioned above,
simply because some functions of the Federal Government may have
outlived their original purpose. (c) What performance goals do you
believe should be applicable to your personal performance, if
confirmed? If confirmed, my personal performance should be directly
related to my ability to provide effective leadership to accomplish the
overall mission and strategic goals of the Maritime Administration. To
this end, I would be committed to maximize the resources of the agency
to achieve these goals. My personal performance should also be measured
by my ability to maintain the highest ethical & legal standards for
myself, senior staff, and the agency as a whole.
9. Please describe your philosophy of supervisor/employee
relationships. Generally, what supervisory model do you follow? Have
any employee complaints been brought against you? The supervisor should
provide leadership by example, and be accessible to his/her employees.
Whenever possible, the supervisor should always provide the best tools
and resources available to perform a particular task, and should not
assign responsibilities that they are not willing to perform
themselves. The supervisor should consistently encourage and reward
his/her employees for a job well done, and provide guidance and
constructive direction when job performance requires improvement. I
generally try to follow the ``supervisory model'' as exemplified by the
leadership skills demonstrated by the great Antarctic explorer Sir
Earnest Shackleton [Shackleton's Way, Margot Morrell and Stephanie
Capparell]. I have never had any employee complaints brought against
me.
10. Describe your working relationship, if any, with the Congress.
Does your professional experience include working with committees of
Congress? If yes, please describe. Except as noted in question C(4), I
have not had any significant previous relationship working with the
Congress.
11. Please explain what you believe to be the proper relationship
between yourself, if confirmed, and the Inspector General of your
department/agency. As head of MARAD, I will ensure the fullest
cooperation between my agency and the Inspector General with regards to
any periodic audits, or investigations into allegations of fraud, waste
or abuse.
12. Please explain how you will work with this Committee and other
stakeholders to ensure that regulations issued by your department/
agency comply with the spirit of the laws passed by Congress. I will
establish a section in the Office of the Chief Counsel to review all
regulations issued by the Maritime Administration. It will coordinate
with all the subject matter branches of MARAD to insure that our agency
has a proper understanding of the spirit of the law, and that all
regulations issued by MARAD comply with the provisions of the
Administrative Procedure Act (APA). The legislative section of MARAD,
and the General Counsel's office, will interact with the appropriate
entities in Congress to make certain that MARAD's regulations are being
promulgated in accordance with the particular intent of Congress.
13. In the areas under the department/agency's jurisdiction, what
legislative action(s) should Congress consider as priorities? Please
State your personal views. Under MARAD's jurisdiction, I consider the
following legislative actions a priority: Continued annual
appropriations of the Maritime Security Program (MSP) until the program
expires in 2005. Prior to the program's expiration, I will strive to
achieve a consensus among the stakeholders for a revised MSP sufficient
to meet our national security requirements; U.S. flag carriers operate
under a significant disadvantage compared to their foreignflag
competition because foreign ship operators pay little or no taxes and
their vessels are not subject to the same health, labor, and
environmental standards as U.S.registered vessels. There are currently
ongoing efforts by Congress and the industry to reform the U.S. tax
code, including a tax alternative similar to the ``tonnage tax'' regime
successfully utilized by many European nations. In addition, to
encourage and retain an adequate seagoing labor base, tax code
revisions (to IRC Section 911) have been introduced in Congress that
would exempt a portion of U.S. seamen's income earned while working
outside the U.S. As the advocacy agency responsible for U.S. maritime
policy, I would wish to see our agency evaluate and participate in any
efforts, such as these initiatives, that would level the playing field
for U.S.-flag carriers; The Administration and Congress should work
together to develop legislation and policy to further the domestic
Maritime Transportation System initiative. These efforts will be
required to meet our nation's domestic transportation needs to support
our economy well into the 21St Century.
14. Within your area of control, will you pledge to develop and
implement a system that allocates discretionary spending based on
national priorities determined in an open fashion on a set of
established criteria? If not, please State why. If yes, please State
what steps you intend to take and a timeframe for their implementation.
Striving to keep within the high standards, goals and budget parameters
of the Maritime Administration (MARAD), I will see that my agency
develops a system that allocates discretionary spending based on
national priorities and conforming to the statutory intent of Congress.
To this end, I will delegate senior MARAD staff within the agency's
budget (financial) office the task of examining all expenditures to
ensure that our discretionary spending is based on national priorities.
This will, of course, be accomplished within the open budget process
and in accordance with pertinent criteria developed and used by the
staff delegated this responsibility.
______
October 19, 2001
Rosalind A. Knapp
Designated Agency Ethics Official
U.S. Department of Transportation
Washington, DC.
Dear Ms. Knapp:
The purpose of this letter is to describe the steps that I intend
to take to avoid any actual or apparent conflict of interest in the
event that I am confirmed for the position of Administrator, Maritime
Administration, at the Department of Transportation.
Upon confirmation, I will resign my position as President of
International Trade & Transportation (ITT) Inc., Pinehurst, Texas.
Also, I will divest my ownership interest in ITT, Inc., by transferring
my interest to my spouse. In addition, my Simplified Employee Pension
Plan with ITT, Inc., terminates upon my resignation from ITT, Inc.
My spouse and I are the only employees in ITT, Inc. I provide
consulting services to shippers and carriers. These services would end
upon my resignation from ITT, Inc. My spouse operates a business
information service for shippers and other organizations with
international business interests. This service provides weekly market
related information to subscribers. Accordingly, pursuant to 18 U.S.C.
Sec. 208, I will not participate personally and substantially in any
particular matter that will have a direct and predictable effect on the
financial interests of ITT, Inc., unless I first obtain a written
waiver or qualify for a regulatory exemption. Pursuant to 5 C.F.R.
Sec. 2635.502, for a period of one year after I provided services to a
former client, I will not participate in any particular matters
involving specific parties in which any of my former clients is a party
or represents a party, unless I am authorized to participate.
As a former employee of Reynolds Metal Company, I am a participant
in the Alcoa, Inc., defined benefit retirement pension plan. Therefore,
I will not participate personally and substantially in any particular
matter that will have a direct and predictable effect on the ability or
willingness of Alcoa, Inc., to provide this contractual benefit unless
I first obtain a written waiver or qualify for a regulatory exemption.
Upon confirmation, I will resign my position as Vice President of
the Interscholastic Hockey Association, Inc., Spring, Texas.
Sincerely,
William G. Schubert
Senator Breaux. Thank you very much, Captain. I am glad to
hear your statement. It is strong and it is very positive.
Obviously, I would not expect you to be saying anything
else.
You are not going to come up here and say, I do not know
anything about ships, I am not for an American fleet, and I am
not for an American flag, I am not for American seamen. So we
are starting in the right direction.
But we want to make sure, and I think you are that type of
person, that it is more than words. It has got to be a real
commitment, that you know this is an opportunity for you, it is
an opportunity for this country, because you have a great
challenge and every challenge presents great opportunities if
we accept them.
I think it is going to be really important. You are the
voice of the maritime industry. Norm Mineta, the Secretary, a
good friend of mine, former colleague of mine, he was happy
when I left the House because it moved him up one seat and he
became Chairman of the Public Works and Transportation
Committee. He was one of my most enthusiastic backers to run
for the Senate, so he could become Chairman of the Public Works
Committee in the House, and now he is Secretary of the
Department.
But he has got a lot of other things on his plate, and
there has got to be a voice that nags at him constantly. You
have got to be the nagger for the oceans, the nagger for the
maritime industry, and the nagger for the programs, because
nobody else is going to be the advocate over there.
Mr. Schubert. I understand that, Mr. Chairman, and I would
like to for the record just remind yourself and the Committee
that the motto of the U.S. Merchant Marine Academy is ``Acta
non verba,'' which means ``Deeds, not words.'' I have tried to
live my 27-year career in the maritime industry with that in
mind.
Senator Breaux. Let me ask a couple of questions that deal
with where we are. The maritime transportation system, the
Department of Transportation did a recent report that talked
about the fantastic growth in the maritime trade worldwide, but
at the same time they spoke of the rapid decrease in capacity
that we have. So on the one hand the maritime trade worldwide
is really increasing, but the U.S.'s ability to participate in
that is decreasing in the sense that we are rapidly running out
of ships, they are becoming older, more aged, and being
retired.
What are your thoughts about that problem? What do we do?
Do we just say, all right, we will have all the trade in the
world, we will ship everything, but we will just ship it on
tankers from Third World countries under flags of convenience?
What do we do?
Mr. Schubert. Mr. Chairman, before I attempt to answer that
question, I would like to give a personal perspective. I have
had, as I said before, 27 years in the maritime industry and 12
years actually sailing on U.S. flag ships. Also I have five
members of my own immediate family that have chosen the
honorable profession of going to sea.
I have a grandchild which is about 3 years old now and I
sincerely hope that we have a U.S. flag merchant marine, that
he can choose to go to sea and follow in our footsteps. He has
to have ships to do that. So I mention this only because this
job, it is an honor to serve the President and people with
exceptional leadership like Secretary Mineta, but it is more--
the task of rebuilding the U.S. flag merchant marine, at least
to me, is more of a mission. It is in my blood. I could not, I
guess, express it any better than that. It is important to me,
and I wanted you and everybody else to know that.
Unfortunately, the U.S. flag today--you cannot expect U.S.
flag carriers to operate ships if it is not profitable to do
so. So from the Administration's point of view and also working
closely with this Committee, we have to develop sound maritime
policy that will make it economical for vessels to operate in
the U.S. flag. It is really that simple.
I am committed, Mr. Chairman, to working with this
Committee to develop sound maritime policy that will accomplish
that.
Senator Breaux. Suppose the Office of Management and Budget
Director Mitch Daniels calls you up and says: Bill, come down;
I want to talk to you about Title 11; I want you to go down to
the White House and sit with the President and tell him what
you think about it; I have recommended that it be zero-funded.
You go in the Oval Office and President Bush says: Captain, I
am trying to get rid of this maritime program called Title 11;
what should I do?
Mr. Schubert. Well, first of all, I am a very strong
advocate of the U.S. shipbuilding industry and I understand the
concerns that they have and the need to renew and to modernize
many of our yards. I could just promise you this: that I would
be a strong advocate for the industry. That includes labor and
all the stakeholders in this regard. I will make the best
arguments that I can for the industry.
Senator Breaux. Well, what would those arguments be? Would
you tell him that--what would you tell him about how it has
worked?
Mr. Schubert. Well, this is somewhat of a difficult
question to answer.
Senator Breaux. I think it is real easy.
Mr. Schubert. Well, it is easy, but the Administration's
position, as you know, Mr. Chairman, is currently that the
Title 11 program needs to be zeroed out.
Senator Breaux. I understand. That is why I phrased the
question, if the President calls you in and says, Captain, what
do you think about this program.
Mr. Schubert. Well, I would respectfully, Mr. Chairman,
given the fact that the official position of the Administration
is that the Title 11 program has to be zeroed out, I would have
to answer your question by saying that I have to support the
President's position.
Senator Breaux. We have got to get into more detail on
this. My question to you is if the President says, Captain,
what do you think about the Title 11 program, am I right or am
I wrong? Are you just going to be a yes person and say, yes,
sir, you are right?
Mr. Schubert. No, sir.
Senator Breaux. What would you tell him?
Mr. Schubert. I would definitely not be a yes person and
anybody that knows me personally would----
Senator Breaux. So he asks you for your opinion of it.
That is what I am trying to get. What would you tell the
President? He is going to want some advice. If he only listens
to people that are landlubbers, they are going to say zero it
out, it is not needed. I want somebody can say why he should
keep it.
Mr. Schubert. Well, instead of just making a statement we
should keep it, I think what we need to do is do some cost-
benefit analysis that would be really reflective of the way the
industry is and especially the competition that we have in
foreign yards, with the tremendous amount of subsidies that
they receive.
I think that we could put together a very credible cost-
benefit analysis of the shipbuilding industry and their needs
and requirements. I would as the Administrator, if confirmed,
would make that a priority. It will not be just--I will not be
a yes man. I will make very strong arguments.
Let us face it, the Title 11 program is historically since
1994, has had a 3 percent default rate, which compared to the
small business loan program, which is around 12 to 13 percent,
stacks up pretty good. But I do believe that there are
improvements that can be made in how the program is
administered, and that will be a priority for me. I am speaking
for the next year, because it does look like there is funding
in the program. And I will commit that the program is run
wisely and we use our government assets wisely.
Senator Breaux. Well, I know you are trying to dance on
this thing and I understand. You have to support the
Administration's position.
Mr. Schubert. Correct.
Senator Breaux. If they say eliminate it and that is my
final decision, you have to carry out those recommendations.
But in reaching those recommendations and deciding on those
positions, if they call you and ask you what do you think, I
would hope that the person in charge of the Maritime
Administration would be in a position to advocate a program
that I think Congress has always said is important and has been
successful.
Because let me tell you, if you do not advocate it there
ain't going to be nobody else down there. You are it. For the
maritime, we do not have anybody else that is higher up dealing
with ships and the maritime industry than you are going to be.
So we have to depend on you for making arguments as to why we
should have programs that help these areas, because if you do
not there is not going to be anybody else there that will. You
are it.
Mr. Schubert. Mr. Chairman, I hope that my previous comment
about my background in the industry and how it has been my
lifeblood for 27 years would be I think sufficient to at least
represent to you that I will be an advocate for the maritime
industry.
Senator Breaux. I accept that and want to give you all the
help you can and give you all the support you can in making
those arguments. But a lot of times you are going to be the
only one in the room that is going to have the opportunity to
speak aggressively for this industry and we are counting on you
to do that.
There is another area that I have become increasingly
concerned with. It is the amount of money that the industry
contributes and does not get back. If you look at the programs
that are trust fund programs that we have, we have a trust fund
for the highway program. You pay your gas tax, 100 percent of
it goes into the trust fund and it is used for things that are
important to people who pay the tax.
In this industry it is not that way. You have got an
aviation trust fund, dollar in, dollar out; highway trust fund,
dollar in, dollar out. It is for airlines, airports, etcetera;
it is for highways, roads, etcetera. But the maritime industry,
according to some of the earlier figures that I have seen, is
contributing through taxes about $22 billion annually, $22
billion, and we are getting back about $5 billion.
So if you look at what we are doing with things that fly,
things that are on roads, they get back what they put in. But
this industry is significantly different in that people who
ship things, who pay fees and taxes, fuel taxes and taxes for
the intercoastal waterways, inland waterways, the customs
duties--and what else?
See how important the staff is. Remember that, Bill?
What else? The tonnage tax. If you add up all these various
taxes that are paid for the maritime industry, we are not
getting back anywhere anything that compares with what these
other areas are getting. It is something I want to really
concentrate on. That is legislation. What happens is because we
have allowed this to happen.
But when you kick in $22 billion and you only get back $5
billion, something is wrong, because in aviation it is not like
that, in highways and roads it is not like that. So do you have
any thoughts about that, any suggestions? Maybe not now. You
did not know I was going to ask this question. But what do you
think?
Mr. Schubert. I think this is part of--your question kind
of lends itself to even a larger issue, which is that most
Americans are not aware of the size and the overall impact of
the maritime industry on our economy. Even living in a place
like Houston, which is a major metropolitan area, there is a
lot of people that you could talk to on the street that might
not even be aware that there is a port in the city of Houston.
For example, the maritime industry contributes----
Senator Breaux. It is not as good as the port in New
Orleans.
Mr. Schubert. Well, I was not ranking the ports, Mr.
Chairman I just was making a point that there needs to be a
greater awareness of what the maritime industry does contribute
to the economy. Just for an example, these are numbers that I
came across recently, that the maritime industry contributes
approximately $742 billion annually to our U.S. GDP. That is a
significant amount of money.
Ninety-five percent of our annual foreign commerce moves in
ships through our ports. I think that, unfortunately, there is
a lot of Americans that just are not aware of that.
But to answer your question, I am sure you are aware that
Secretary Mineta has been talking about TEA-21 in the overall
scope of the meeting transportation system. Now, I view this
initiative that he has as it is not just transportation policy
to relieve our congested corridors or make better use of our
inland waterways, but it is also an energy policy. I think we
can sell it as an energy policy, because obviously if you are
moving--I am just picking it out of the air--5,500 trucks in
some sort of way on the intermodal system, you are not
relieving congestion, but you are saving energy at the same
time.
I also believe that this initiative is a very effective
environmental policy and I think we can sell that, too, with
very credible numbers. With less trucks--and we are not
displacing trucks, by the way, because with the growth expected
to be 100 to 200 percent of our trade in the next 10 years or
so, we are not displacing trucks. We are just making better use
of our infrastructure.
But from an environmental point of view, we are taking
trucks that are, let us say, adding to the hydrocarbons in the
air and we are taking them off the road. So I think there is a
lot of reasons to look at a TEA-21 or an NTS initiative.
As you probably are aware, Secretary Mineta has convened an
NTS National Advisory Board and they very soon will be making
some very credible recommendations to Secretary Mineta, which
will be the basis for a TEA-21 legislative initiative, I
believe.
Senator Breaux. Are you part of that at all?
Mr. Schubert. The NTS national Advisory Board? No, I am
not. I am not yet, but I will be very soon.
Senator Breaux. As Administrator you would be?
Mr. Schubert. As Administrator I would be.
Senator Breaux. I just wanted to make sure you were in the
room.
Mr. Schubert. Yes, I will be. I would like to say that
issues like this--I will not delegate important things like
this to just staff members. I have an interest in this myself.
I will be there actively participating, contributing.
Senator Breaux. I would like you to raise the point that I
raised. We are going to raise it and I really would like to
work cooperatively with the Administration to see whether we
cannot get a more reflective and balanced system for money
contributed from this industry and getting it back, in terms of
whether it is seaport security or whether it is in terms of
port development or whether it is in terms of U.S. maritime
fleet expansion.
We are giving up a lot and we are getting back only a
fraction of what we contribute. You know, I think a lot of
people think that, well, all these tonnage taxes and all these
other things are coming right back to the industry, and it is
really not. It is going in other places. I think that is not
how it is in all those other trust funds. This is something to
raise and we are going to be doing more about it.
Just give me a statement on your thoughts about the Jones
Act.
Mr. Schubert. I am 100 percent in support. Not only myself,
but the President has issued previous statements in support of
maintaining the Jones Act or, better known, our cabotage laws.
I cannot say any more than that. It is black and white.
Senator Breaux. I think we have just about covered it.
There are some grave challenges out there. I think that you
uniquely bring some qualifications to this job that are in
keeping with what this Committee and this Congress wants to see
in a Maritime Administration. I congratulate the President for
nominating you.
I will tell you a little side story. My daughter works with
a law firm in New Orleans and called me yesterday, because I am
in the Hart Building--well, I am not really in the Hart
Building. I am supposed to be in the Hart Building, but the
Hart Building is closed, so we have not been getting all of the
mail. One of the clients in their law firm has written a very
strong letter of support to me on your behalf, asking that I
support you for Maritime Administrator. Since we had not
responded because we had not gotten the letter, they got my
daughter to call me and to say----
Mr. Schubert. I see what it takes, Mr. Chairman.
Senator Breaux. That is it. I tell you, when your daughter
calls you have got to call her back. I thought she was calling
asking for money, but she was calling to ask me to support your
nomination.
I said, ``Well, call the people back and tell them not only
am I supporting it, I am chairing the confirmation hearing, so
you are in really good shape''.
So thank you for being with us. Thank your family for being
here. Thanks, Senator Brock, for being your brother-in-law and
being supportive, as well.
With that, we hope that this Committee will--I would
imagine we will try and have something off the floor whereby we
will report this nomination and get it to the floor so you can
get to work, Captain, and good sailing.
Thank you.
[The prepared statement of Senator John McCain follows:]
Prepared Statement Hon. John McCain, U.S. Senator from Arizona
Good Morning. I want to thank Chairman Hollings for moving swiftly
in scheduling this nomination hearing. I know the Administration, and
in particular, Captain Schubert, are very appreciative of our
Chairman's leadership.
The primary mission of the Maritime Administration (MARAD) is to
promote the United States merchant marine and ensure that our nation
has a merchant fleet capable of carrying the Nation's waterborne
commerce and sufficient to meet our needs during time of war or
national emergency. MARAD is also responsible for promoting U.S.
shipbuilding. While MARAD's mission is simply stated, it is no easy
task. I appreciate Captain Schubert's willingness to serve as its
Administrator.
As part of its mission, MARAD operates various promotion programs
such as the Maritime Security Program, the Title XI Loan Guarantee
Program, and the U.S. Merchant Marine Academy, which I note Captain
Schubert is a graduate. MARAD also maintains the Ready Reserve Force
sealift vessels. These diverse programs and others present a wide range
of challenges for the Administrator, who is tasked with providing firm
management polices for these programs, as well as providing day-to-day
supervision of MARAD staff activities.
Given the importance of maritime in our international commerce and
its potential impact on our nation's security, MARAD and its
Administrator play an important role in the federal government. On a
number of occasions during the last century, our nation appeared to
forget the key role maritime transportation has in ensuring our
economic independence and our national security. Only the great build-
ups of our merchant fleet during time of war kept the U.S. a maritime
power.
The U.S. maritime industry today faces great challenges both in the
domestic and international trade. Over the last decade the makeup of
the U.S. merchant fleet has changed dramatically. Domestic carriers,
faced with sky-high shipbuilding cost, have refused to replace vessels.
International carriers have fled burdensome over regulation and
anticompetitive corperate treatment under the U.S. flag for flags of
other nations. These changes have occurred despite the numerous support
programs administered by MARAD.
The greatest task ahead of the next Administrator of MARAD maybe
determining why these programs have failed in their purpose of building
a strong and self-supportive merchant fleet. I want to take this
opportunity to point out some of the risk associated with support
programs.
In 1999, the Maritime Administration (MARAD) approved a Title XI
loan guarantee for American Classic Voyages, Co. (AMCV) for the
construction of two cruise ships for service in the Hawaiian trade. The
principal and interest amount presently outstanding is approximately
$185 million. Additionally, MARAD approved other Title XI loan
guarantees for American Classic Voyages on smaller coastal cruise
vessels with the current principal and interest amount outstanding of
approximately $182 million--for a total outstanding loan guarantee
balance of $367 million.
On October 19, 2001, American Classic Voyages voluntarily filed a
petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code leaving the tax payer holding the bag for the total of $367
million. While it is unclear at this time what the total loss to the
American taxpayer will be, one thing is very clear: the Title XI loan
guarantee program is in serious trouble. In addition to the current
problems with American Classic Voyages, the Title XI program has
already cost taxpayers more than $78.1 million this year alone due to
the default of the Searex project.
Currently, the Title XI program has an outstanding loan guarantee
portfolio of approximately $4.7 billion consisting of 86 projects
covering more than 100 vessels, several hundred barges, and seven
shipyard modernization projects. What that means is that the American
taxpayer could, as happened in the 1980's, be burdened with billions of
dollars in debt if an industry downturn occurs. With that much at risk,
I think we owe it to the American taxpayers to do all we can to ensure
that this program, and all support programs as a matter of policy, have
oversight that adequately protects the interest of the taxpayer.
I know Captain Schubert was personally responsible for the
liquidation of many of the assets acquired as a result of heavy
defaults in the 1980's, and I hope his leadership at MARAD will prevent
you having to repeat those liquidation sales.
Our nation maritime history has dimmed in recent years due to a
dependence on government programs that do not foster a progressive and
competitive attitude in what is clearly become a global market. As
Administrator, it will be your job to set a new course for the U.S.
maritime industry.
I congratulate Captain Schubert on his nomination. I look forward
to working with you knowing that MARAD is gaining a knowledgeable and
capable leader.
[Whereupon, at 10:32 a.m., the Committee was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. John McCain
to William G. Schubert
Question 1. Captain Schubert, as you may be aware, the Maritime
Administration has granted a loan guarantee for the construction of two
large passenger vessels to American Classic Voyages. As I pointed out
in my opening statement, American Classic Voyages has filed bankruptcy
leaving the taxpayer holding the bag for $367 million total. In
response to my request, the Department of Transportation Inspector
General will audit the Maritime Administration's Title XI shipbuilding
loan guaranty program. The investigation also will review Title XI to
make sure ``procedures are adequate and effectively implemented in
order to protect the interests of the United States,'' according to
Thomas Howard, deputy inspector general. If you are confirmed as
Maritime Administrator, what initiative will you implement to increase
oversight of the Title XI program and ensure it is protected?
Answer. I am mindful of MARAD's fiduciary responsibilities to the
taxpayers and will seek to improve the oversight of the Title XI due
diligence process as necessary. For this reason, I welcome the
Inspector General's review of the Title XI program. After the review is
completed, I will implement appropriate initiatives based on the
Inspector General's recommendations so that the taxpayers' interests
are protected. In addition, I intend to conduct my own internal review
of the program to evaluate other possible initiatives to improve
program operations and oversight.
Question 2. What can and should be done to address the relatively
high operational costs of American-flagged maritime carriers? Do you
support subsidies to offset the high costs of these operations? If so,
why? If not, why not?
Answer. Over the last six (6) years, I have participated in three
(3) private sector feasibility studies that involved re-flagging new
tonnage into the US-flag fleet for specific markets. As such, I have
first hand knowledge of economic realities of operating US-flag vessels
in the international trade. The cost of US-flag vessel operations
reflects America's high standard of living and its business-operating
environment. This includes our Nation's tax laws, employment standards,
labor laws, environmental protection laws, as well as ship construction
and USCG requirements. Our US-flag fleet must compete against
shipowners operating in low cost countries, including ``open registry''
or ``flag of convenience'' countries such as Panama, Liberia, or Malta,
which are essentially tax-havens that have minimal standards for vessel
operations. Indeed, the merchant fleets of all traditional maritime
countries with high living standards, regulatory standards, and tax
rates (such as those in the European Union and Japan) have been in
serious decline as a result of the same cost and regulatory
disadvantages that face the US-flag fleet.
I have never supported subsidy regimes such as the ``Operating-
Differential Subsidy'' program that failed to promote the efficient
operation of US-flag vessels. However, programs such as the Maritime
Security Program/Voluntary Intermodal Sealift Agreement, and cargo
preference provide important benefits to our economic and national
security by ensuring the availability of a US-flag privately-owned
merchant fleet to carry U.S. domestic and international waterborne
commerce. This fleet also enhances our nation's sealift capability to
meet the unique responsibility of the United States as the world's only
military superpower. I will strive to develop a consensus among the
Department of Defense, US-flag carriers, maritime labor, Congress, and
the Administration for renewal of the Maritime Security Program
sufficient to meet our national security requirements, and work for
effective administration and enforcement of cargo preference laws.
Additionally, we can continue to implement regulatory reforms to
conform outdated U.S. laws and regulations to internationally accepted
norms. I am aware that other traditional maritime nations in Europe
(e.g., United Kingdom, Netherlands, Germany, and Greece) have
implemented reforms to reduce the tax burdens on their vessel owners
and mariner income earned abroad. I will be evaluating similar
proposals to determine if such reforms can enhance the international
competitiveness of the US-flag fleet. If the US-flag merchant marine is
to serve America's foreign trade, then we must promote sound maritime
policy that enables US-flag carriers to operate profitably in the
global marketplace.
Question 3. Following Operations DESERT SHIELD and DESERT STORM,
changes were made to the operation of the Ready Reserve Fleet (RRF) and
the Voluntary Intermodal Sealift Agreement (VISA) Program and Military
Security Program (MSP) were created to ensure we could better meet the
demands of such a large scale military operation in the future. Please
explain how you view these programmatic changes
Answer. Subsequent to DESERT SHIELD and DESERT STORM, MARAD and DOD
jointly reviewed the ``lessons learned'' from these operations and made
specific enhancements to the RRF program. In addition, MARAD and DOD
recognized the need to increase the use of the available US-flag liner
service and improve the reliability and responsiveness of Government
owned assets.
With respect to Government owned assets, MARAD implemented a
``Reduced Operational Status'' (ROS) level of readiness on our high
priority vessels. This change in program management provided for an
increase in personnel performing maintenance work on board these ships,
and periodic sea trials, resulting in significant improvements to
vessel reliability. These improvements have been verified by USTRANSCOM
through annual performance evaluations. For example, the ratio of
operating to non-operating days program-wide for the RRF in FY01 was
99.2 percent.
Based on my twelve (12) years operational experience as a licensed
deck officer, I strongly support the rigorous use of the sea trial
program for RRF vessels. It is only by the physical testing of
equipment that its true material condition can be determined.
Additionally, it provides an opportunity for a full merchant marine
crew to gain valuable training in the operation of the vessel. In view
of the unknown duration and magnitude of our current war on terrorism,
we must take all steps necessary to properly maintain our current
sealift capabilities.
The VISA and MSP programs also have made a substantial contribution
to the strategic sealift capabilities of the US-flag commercial fleet
to respond to national security emergencies. The MSP requires
participants to commit militarily useful ships, intermodal capacity,
personnel, equipment and systems to an Emergency Preparedness Program
(EPP) which is implemented through VISA. The VISA program provides
``assured access'' and a smooth transition from peace to war,
particularly in the critical early phases of a deployment. From a
maritime security standpoint, the MSP and VISA programs also provide
the added assurance that critical military cargoes are handled by
vessels that are crewed with qualified U.S. citizens.
In addition to providing strategic sealift capacity from the
commercial maritime industry, MSP and VISA vessels also provide a
substantial pool of mariners available to crew the government owned
and/or controlled fleet during contingencies. Reliance on anything
other than U.S. owned, U.S. flagged, and U.S. crewed ships increases
the risk of delayed delivery of military cargoes to the U.S. troops on
the battlefield.
The MSP/VISA programs provide the US taxpayers significant value
from a cost benefit perspective. USTRANSCOM has informed MARAD that the
estimate for duplicating the commitments already made by the US-flag
fleet under the MSP/VISA programs could be as much as $9 billion in
initial construction costs. There are additional savings of $1 billion
in annual operations and maintenance costs if assets equivalent to
those committed through MSP/VISA assets were totally owned and operated
by the US military.
Another important element of the VISA program was the establishment
of a planning forum for matching Department of Defense (DOD)
requirements to industry capabilities. This planning forum is the Joint
Planning Advisory Group (JPAG). Through JPAG, Government and industry
jointly identify DOD's requirements, recommend concepts of operations
to meet requirements, and comply with antitrust requirements for
pooling and teaming arrangements. It is important to note that prior to
Operations DESERT SHIELD and DESERT STORM, the maritime industry did
not formally participate in the DOD contingency planning process.
Question 4a. Through much of the last century, our nation's
maritime policy was directed toward supporting our national defense
needs. While meeting our defense needs should and must remain a top
priority, changes in the global market and advances in the maritime
industry have clearly put new pressures on the industry that were not
contemplated during the development of many of the laws and regulations
that form our current maritime policy. What specific changes would you
propose to bring our nation's maritime policy in line with the maritime
industry of today?
Answer. US-flag vessels compete globally based on service quality,
and providing timely and reliable intermodal transportation to shippers
at reasonable prices. Providing such premium services, however, does
not mean that costs can be appreciably higher than those of direct,
lower-cost competitors in the world market. If U.S.-companies do not
earn sufficient returns to cover costs and the continuing investments
required in this extremely capital-intensive industry, these companies
will not be able to competitively operate US-flag vessels in a global
market.
In view of the above marketplace realities, if confirmed I will be
carefully analyzing and assessing the options which might be available
to us in the near term. These options may include: enhancements to the
MSP/VISA programs; revisions to the cargo preference regulations
affecting the movement of food aid cargoes; and revisions to the
Capital Construction Fund program which will attract capital investment
(see 4b below). As part of my overall review of our current maritime
policies, I will also examine the U.S. tax burdens on our merchant
marine and maritime workforce relative to those of their international
competitors. By implementing a fair tax policy, we would begin to
promote cost parity with the rest of the shipping world.
Question 4b. How would these proposed changes provide growth
opportunities for our nation's merchant marine and allow it to compete
better in the global market?
Answer. The MSP and VISA programs have successfully arrested the
unprecedented decline in the US-flag commercial fleet. These programs
have also significantly modernized our fleet and maintained investment
in the US-flag merchant marine. Between 1996-2001, 17 modern (less than
10 years old) vessels were added to the US-flag liner fleet in order to
participate in MSP, and another four were re-flagged under U.S.
registry and enrolled as non-MSP, VISA vessels. The addition of these
vessels halted the evident decline in a modern US-flag liner fleet, and
contributed to a nearly 30 percent increase in average vessel carrying
capacity. The MSP program has achieved many strategic objectives,
however, a thorough review should be made to determine necessary
changes to insure growth opportunities for the US-flag fleet prior to
the program's reauthorization in 2005.
In addition, I support the Administration's efforts to provide a
limited exemption to what is known as the ``three year rule.'' This out
dated provision in the cargo preference regulations excludes US-flag
foreign built vessels from participating in US-sponsored food aid
programs for a period of three years after re-flagging to the US
registry. This provision discourages new tonnage from entering the US
registry, and increases the cost of handling US-sponsored food aid
(i.e. less competition for cargo).
If confirmed, I would also explore possible changes to the Capital
Construction Fund program that would permit qualified withdrawals for
construction of new vessels (in US yards) for the contiguous US trade.
This would increase the financial resources available in the US market
without increasing the burden on the US taxpayers.
Question 4c. How would these proposed changes balance our defense
needs with our commercial needs in today's global market?
Answer. A competitive US-flag international fleet of militarily
useful vessels crewed by U.S.-citizen mariners serves a dual purpose of
economic and national security. The presence of US-flag vessels in
international trade promotes economic security by providing American
shippers with an alternative to foreign-flag operators. The fleet also
provides the U.S. Government with legal standing to protect the
interests of American businesses and consumers in international
negotiations over shipping and intermodal transportation. Additionally,
this fleet serves as a vital national security asset for executing the
Nation's forward defense strategy, with a central role in military
sealift during national emergencies and provides the pool of mariners
necessary to crew the government's organic fleet during contingencies.
As we move to shape our maritime policy in the years ahead, we will
remain focused on the unique dual role of the U.S. merchant fleet, and
our need to maintain both the economic and national security interests
of the Nation.
Question 5a. As you may be aware, I prefer to eliminate restraints
on U.S. business competitiveness rather than provide subsidies that
remove incentives for businesses to find new ways to operate and
compete in the world market. I continue to believe that U.S. companies
are struggling to compete in the international maritime industry in
part because of the prevalence of subsidies by other flag states. What
are your views on maritime subsidies?
Answer. Foreign government subsidies to national industries and
restrictions and barriers to free trade have hurt U.S. companies in
global markets. U.S. companies will continue to operate at a
disadvantage compared to foreign flag shipping lines as long as their
governments maintain policies that distort or restrict market access.
Question 5b. If confirmed, how would you propose to help improve
the competitiveness of the U.S. maritime industry?
Answer. The Administration will continue to press foreign
governments to eliminate practices that distort the operation of a free
marketplace for shipping services and remove restrictions and barriers
on U.S. companies so that they can compete fairly in the world market.
Question 6a. Regardless of exaggerated reports on the size of the
U.S. merchant fleet issued by the previous Administration, the Jones
Act fleet continues to face an up hill battle in meeting the needs of
our nation's domestic waterborne commerce. Most users of the domestic
water transportation system, except for those of our inland waterway
system, face high costs and lack of adequate service. This is not true
of our inland waterway system because operators in these areas face
competition from road and rail service not available to shippers in
areas such as Hawaii and Puerto Rico. While I have attempted to bring
about reasonable debate on the issue for several years, domestic trade
vessel operators and shipbuilders who benefit from the barriers created
by the Jones Act continue to lobby for the status quo. As with other
areas of our nation's transportation system, it is important that we
bring change to the maritime industry that will allow for a more
competitive environment for the domestic maritime industry. What are
your views on the Jones Act?
Answer. The President has publicly stated that the Jones Act should
be maintained. If confirmed, I will enthusiastically support the
President's position on this issue.
Like domestic rail and truck carriers, domestic vessel operators
incur ``U.S. costs'' to operate under the same legal structure
affecting tax, labor, immigration and naturalization, and the
protection of public safety and the environment--as do all other
American businesses. Many foreign-flag carriers can operate at lower
cost than US-flag shipping companies in foreign trade, because the
former can operate under lower international safety and wage standards,
and reduced or negligible tax burdens. However, if foreign-based
shipping companies seeking to do business in the United States were
required to comply with the same laws as American companies, then the
cost differential between U.S. and foreign waterborne carriage would
likely disappear. This is true for all domestic modes of
transportation--air, rail, truck, pipeline, or water. Moreover, most
major maritime countries maintain some form of cabotage policies.
In recent years, legitimate concerns have been raised regarding the
availability of qualified seamen necessary to crew our Ready Reserve
Fleet (RRF) if a full activation was required. The Jones Act fleet
represents a pool of vessels and, more importantly, a pool of seamen
that would be available in time of national emergency. If the Jones Act
were eliminated, the necessary US-flag vessel resources would quickly
disappear. Consequently, we would lose the reserve of U.S. merchant
marine officers and crew now employed in the U.S. domestic trade.
Question 6b. How would you propose to improve competition in the
domestic market and bring about growth in the domestic trade?
Answer. Due to the geography of the continental United States,
waterborne transportation usually does not provide the most direct
routing for domestic shipments moving from an inland origin to an
inland destination. Expensive and time-intensive intermodal transfers
to truck and rail feeder carriers on circuitous routes are often
necessary to move shipments from land-locked originating points to
their final destinations. As a result, some shippers find themselves
captive to rail and truck transportation, which move cargo at faster
speeds, but in smaller lots and at much higher cost for each ton-mile
traveled.
On the other hand, even with intermodal transfers, water transport
can be competitive for moving relatively low-value, time-insensitive
bulk goods because it is so cheap, as is the case in the inland river
and Great Lakes trades. In the oceangoing trades to Alaska, Hawaii,
Guam, and Puerto Rico for relatively high-value general cargo, large
tug/barges, roll-on/roll-off trailerships, and containerships continue
to be competitive against air cargo services. In recent years, tug/
barges and even larger and faster containerships have begun to compete
effectively against rail and truck carriers in the medium-distance
coastwise trades, as north-south rail and highway corridors become
increasingly congested.
If confirmed by the Senate, I will be evaluating ways to encourage
market entry by U.S. vessel operators into the Nation's domestic trade
to ease landside congestion as part of Secretary Mineta's MTS
initiative.
Question 7a. The U.S. Maritime Administration (MARAD) has a
statutorily mandated deadline for the disposal of obsolete National
Defense Reserve Fleet (NDRF) vessels. MARAD currently has 114 vessels
awaiting disposal, of which 91 are targeted for scrapping, many of
which pose an environmental hazard to the waterways in which they are
now moored. What is it going to cost the federal taxpayer to dispose of
these obsolete vessels?
Answer. MARAD believes the cost projections for conventional,
domestic ship dismantling that were provided in the Report on the
Program for Disposing of Obsolete Vessels (Report to Congress) are
still valid. That Report was provided to the Congress, June 5, 2001
pursuant to Section 3502 of the Appendix to Public Law 106-198, The
National Defense Authorization Act of 2001. MARAD estimated an average
cost of $2.5 million per ship. Based on these projections the total
cost for disposing of 122 vessels domestically through conventional
scrapping methods is $305 million.
MARAD has commenced evaluating proposals submitted by industry
through a Program Research & Development Announcement (PRDA), which was
posted October 19, 2001. That announcement invited industry to propose
innovative long-term solutions for the backlog of obsolete NDRF
vessels. The costs of ship disposal options identified by industry will
not be known until the evaluation of the proposals is completed. If
confirmed, I will give full attention to these proposals.
MARAD is also investigating alternatives to domestic scrapping that
have the potential to be more cost-effective, such as artificial
reefing of vessels. I understand that the Navy and the EPA are
currently engaged in studies on the long-term effects of artificial
reefs on the environment. Favorable results would allow MARAD to work
with EPA to develop national standards for preparing ships for reefing.
Such standards would allow MARAD to develop reasonable cost estimates
for a reefing program. MARAD and the Department of Transportation could
then recommend appropriate changes to existing legislation to promote
artificial reefing initiatives, if judged to be a best value disposal
method for the Government.
Question 7b. How long will it take MARAD to rid our nation's
waterways of these vessels?
Answer. MARAD's schedule for disposal of 155 obsolete ships by
September 30, 2006, as outlined in the Report to Congress, was for 7
vessels in FY `01, 8 in FY `02, and 35 for each FY `03-06. This
schedule was based on the expectation that the disposal method would be
predominately procurement of domestic scrapping services, with 15
vessels disposed of as artificial reefs or through donations. MARAD met
its FY `01 goal with contracts for the disposal of 7 vessels in FY `01.
The Conference Report on HR 2500 included no funding in FY `02 for
disposal of NDRF obsolete ships. MARAD will continue to vigorously
pursue the disposal of obsolete ships on a ``cost recovery basis''. If
confirmed, I will work to identify feasible and cost effective ship
disposal alternatives.
Question 8a. In the 1970s, there were 30 domestic ship-scrapping
companies. Today, MARAD considers only four companies to be viable, and
concerns have been expressed regarding those. Does MARAD have the tools
and personnel required to meet its statutory obligation to dispose of
these vessels in a safe and cost effective manner?
Answer. I have first hand experience scrapping vessels which will
be useful in formulating an action plan to dispose of the NDRF obsolete
ships is a safe and cost effective manner. In addition, MARAD appears
to have the adequate personnel required to dispose of our obsolete
ships. For FY `02 and beyond, MARAD will utilize a core team of
industry-experienced professionals to manage the ship disposal program.
MARAD also appears to have the acquisition tools necessary to apply to
the disposal problem. They have employed Invitations for Bid (IFB),
Requests for Proposal (RFP), Simplified Acquisitions, and Program
Research & Development Announcements (PRDA), as appropriate, to
facilitate consideration of vessel disposal alternatives.
Question 8b. What actions would you direct MARAD to take in order
to draw additional companies to the ship scrapping industry and reduce
disposal costs for the American taxpayer?
Answer. Based upon recent solicitations, we have already seen the
emergence of new entities, into the ship disposal market. In addition,
entities that in the past have failed to meet MARAD requirements have
made improvements to their scrapping processes. In addition, the
Program Research & Development Announcement (PRDA), referred to in
Question #7 above, is an excellent step to draw additional companies
into ship disposal efforts and to reduce costs. This announcement
invites industry to propose innovative long-term solutions that address
financing, production methods and applied technology in the context of
affordable and safe disposal alternatives. Evaluation of the PRDA
proposals will determine if there are innovative, cost-effective
strategies to pursue.
In addition, MARAD is currently working with the EPA to discuss the
potential for renewed foreign disposal of its ships. MARAD is also
planning to conduct a feasibility study of government-owned,
contractor-operated (GOCO) disposal/recycling facilities as a potential
cost-effective vessel disposal option. Moreover, MARAD is evaluating
responses to a draft FY `02 RFP for ship disposal contracts. If
confirmed, I will keep these good initiatives going with a focus on
what existing industry has to offer in order to attract new companies
with innovative and more cost-effective solutions.
Question 9a. Over the past two years, the United States and China
have been negotiating a new bilateral maritime agreement.
Representatives from the U.S. and their Chinese counterparts recently
met in Beijing, and the Chinese subsequently have expressed an interest
in moving forward with negotiations. What are your views regarding
bilateral maritime agreements?
Answer. Over the years, the Maritime Administration has
successfully negotiated a number of bilateral maritime agreements with
such countries as Russia, Brazil and Venezuela. If negotiated properly,
bilateral maritime agreements are useful devices for promoting
reciprocity in the carriage of trade between the two countries, and
potentially increasing trade itself. These agreements have generally
helped to open up opportunities for U.S. carriers while at the same
time increasing competition in the trade. For example, the U.S./
Venezuela maritime equal access agreement was successful in increasing
service in the trade and lowering the transportation cost to the U.S.
exporter. In addition, bilateral maritime agreements should be used to
encourage the elimination of discriminatory practices in a particular
trade.
Question 9b. What should be done to ensure that our nation's
maritime industry does not continue to be subjected to needless
discriminatory practices because we can't reach agreements on maritime
with our trading partners?
Answer. Our nation should always be vigilant to remove needless
discriminatory and predatory practices sponsored by our trading
partners. Unfortunately, over the years we have had a plethora of
difficulties involving discriminatory practices with various trading
partners. With respect to China, where U.S. carriers' operations are
significantly burdened by government restrictions, a new agreement
would help to ensure that such restrictions are eliminated. The
overriding objective is to achieve removal of restrictions on U.S.
carriers' activities in China and any other trading partner that does
not respect the spirit of reciprocity. Over the years, executive branch
agencies working in parallel with the Federal Maritime Commission
(FMC), have achieved removal of restrictions that U.S. carrier's faced
in foreign markets. If good faith bilateral negotiations fail to remove
restrictive trading practices, then I believe FMC sanctions would be
appropriate.
Question 9c. Will you commit to reaching a bilateral maritime
agreement with China by scheduling high-level talks on the matter soon
after being confirmed?
Answer. If confirmed by the Senate, I will make it a priority to
initiate high level bilateral maritime talks with China.
Question 10. Earlier this year, the U.S. Customs Service issued new
rules governing repairs to U.S.-flagged vessels that altered its
treatment of ``spare parts.'' The new regulations make the purchase for
or repairs made to US-flag vessels by crew members when they are
outside the United States, including maintenance and repair while these
vessels are on the high seas by the crew, subject to declaration, entry
and payment of a 50 percent ad valorem duty. Moreover, equipment
imported into the United States and duty paid thereon will now also be
subject to an additional ad valorem duty if the item is installed while
underway and not installed in the United States. How do you view these
new rules and what is the competitive impact on U.S.-flagged vessels?
Would you support repeal of these new rules?
Answer. The U.S. Customs Service published a Final Rule last March
regarding revisions to the Vessel Repair Statute. The Final Rule makes
virtually all supplies and parts used in routine repairs and
preventative maintenance performed by American crew members subject to
the 50% ad valorem duty. The US maritime industry found this rule to be
a radical departure from previous Customs policy and contrary to the
spirit and intent of Congress. In response to the new rule, over 40 US-
flag interest filed a protest petition in July 2001, requesting the
repeal of the new rule. The industry rightly believes that the new rule
severely penalizes the US-flag carriers and provides an even greater
advantage to foreign-flag carriers which are not subject to such
arbitrary duties and regulatory burdens. In addition, the new rule also
discourages new US-flag tonnage from entering the market. In recent
weeks, the Deputy Secretary of Transportation has written to the Deputy
Secretary of the Treasury requesting Customs to reconsider this rule.
In view of the above, I fully support this position, and if confirmed,
will meet with the new Commissioner of Customs to discuss the
expeditious resolution of this matter.