Maritime Administration Acting Administrator Lucinda Lessley told lawmakers that she observed “obvious disrepair” at the U.S. Merchant Marine Academy that has sparked an investigation including reviews from health and safety inspectors.
In last week’s budget hearing before the House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation, members of Congress were also told that the supply chain strain on maritime shipping and ports is only getting more intense.
“The United States has brought in more ocean freight in less time than ever before in our nation’s history,” Federal Maritime Commission Chairman Daniel Maffei said. “In fact, the U.S. imported more containers in the first five months of 2021 than in any previous entire year. Exports are also up substantially, including agricultural exports, and that increase only looks modest when compared with the explosion of imports.”
“The American demand for consumer goods, which started largely due to online shopping during COVID, continues to increase,” he continued. “This spike in demand for imports has pushed cargo rates to record highs… for example, the July spot rate to move a 40-foot container from Shanghai to Los Angeles is approaching $10,000 and is more than five times higher than July of 2019, pre-COVID. Depending on the specific circumstances, the actual rate to book a trans-Pacific box could cost even more than that.”
Maffei stressed that “there is not enough space on ships for all the shippers that want space and so some are having to wait for a future sailing, and once on a ship, it may even be days or weeks of delay before it actually gets there.” Even with “some gains in capacity in our ports and maximization of the global container fleet, the overall capacity system is still limited by truck, rail, and warehouse space shortages.”
Lessley said that MARAD, which is supporting President Biden’s task force on supply chain disruption, participated in a recent roundtable with stakeholders from the ports of Los Angeles and Long Beach to discuss port and supply chain congestion.
The president’s fiscal year 2022 budget proposal requests just over $1 billion for MARAD, including $318 million in funding for the Maritime Security Program that gives the Defense Department access to 60 ships for sealift.
The budget also requests $10 million for a new tanker security program as there is “insufficient tanker fleet capacity in the U.S.-flagged fleet to meet defense requirements.”
“MARAD also maintains 41 Ready Reserve vessels that together with the Military Sealift Command vessels provide sealift surge capabilities in support of our military,” Lessley said, adding that the budget request “will enable MARAD to continue to provide the sealift’s support and to advance essential recapitalization of this fleet whose vessels’ average age is more than 46 years.”
MARAD recently awarded a contract for a vessel acquisition manager to lead the modernization of the Ready Reserve fleet.
The budget request also includes $358 million to assist the six state maritime academies, including funding to buy the fifth and final national security multi-mission vessel; delivery of the first ship is expected in fiscal year 2023.
In addition, $230 million is requested for the Port Infrastructure Development Program and $20 million for MARAD’s Small Shipyard Grant Program. The budget request also includes funding for America’s Marine Highway Program to support increased maritime shipments.
And $10 million is requested to support alternative-energy and technological research in the Maritime Environmental and Technical Assistance Program.
The budget also requests $90 million for the U.S. Merchant Marine Academy.
Lessley said when she visited the academy last month for graduation ceremonies she was “deeply concerned” about the state of the facilities. “I observed obvious disrepair and what appeared to be either severely deferred maintenance or poorly performed maintenance attempts or both,” she said.
“In the wake of my visit, the department in MARAD has acted immediately to begin to investigate these concerns, including dispatching teams of building management and health and safety professionals to conduct reviews of the campus,” she added. “We are seeking professional assistance from GSA in developing plans to undertake a comprehensive building report.”
Chairman Salud Carbajal (D-Calif.) pressed Lessley on when Congress can expect an update on problems at the Merchant Marine Academy.
“MARAD is the preeminent federal institution that oversees the academy, and any deferred maintenance is unacceptable,” Carbajal said. “I’m disappointed it has gotten to the point where DOT has needed to institute these measures. I’m very concerned and anxiously await immediate and ongoing reports from DOT as they conduct their assessments.”
Lessley said she understands the information needed. “You have my commitment that I will update you as I learn things. You also have my commitment that we are right now working to get to the bottom of that,” she said.
“We have another team up there this week,” she added. “I’ve done investigations for a long time. I have a lot of unanswered questions. I want to get to the bottom of all of it. I want to understand both what the cause is, what the extent of the deferred maintenance is, what the immediate needs are, and to move to address the immediate needs and to get systems in place to ensure that this never happens again.”
Rep. Alan Lowenthal (D-Calif.) said he was “extremely concerned that we’re not increasing funding to help address historic backlogs” described by Maffei, “which are interrupting the flow of goods.”
“We work with the funding that is appropriated to us,” Lessley replied. “As I mentioned, we understand there’s a severe backlog… we also understand there is an extraordinary challenge right now to move freight through the ports of Los Angeles and Long Beach and through the entire supply chain.”
“This is getting the highest priority from MARAD, from the department,” she added. “As I mentioned, we just held a roundtable last week. We were able to meet with stakeholders across the entire spectrum, the port directors, the mayors of Los Angeles and Long Beach, Secretary Kim from CalSTA, rail trucking, the ILWU, terminal operators, PMA. We recognize the extensive needs for infrastructure, but we also recognize that there are opportunities to reduce friction and improve goods movement right now.”