As Prepared: ABS Annual Council Remarks
REMARKS AS PREPARED BY
MARITIME ADMINISTRATOR REAR ADM. (RET) ANN PHILLIPS
AT ABS Annual Council Remarks
Thank you, Christopher [Wiernicki], for the opportunity to join you today to discuss my priorities (year 2) for the Maritime Administration.
Not to spoil the surprise here…much of the areas of focus that I shared last year during this Council’s meeting, remain my focus this year—the difference being that over the past year, my team and I have intensified our focus on these priorities in ways that have had, or will have a measurable effect on the future of the maritime industry.
Big picture. My priorities are grouped into three buckets:
Growing the U.S.-flag fleet;
Growing the mariner workforce; and
Strategically planning for the future of the maritime industry.
We have a lot of ground to cover so lets get to it.
GROWING THE U.S.-FLAGGED FLEET
First, maintaining and Growing the U.S. flagged fleet.
MARAD is in its 77th year of maintaining the Nation’s reserve of sealift ships, including the Ready Reserve Force fleet, which as of today, is a fleet of 50 vessels that we maintain on a reduced operating status—ready to sail within five days of activation. As we speak, 7 of these vessels are underway supporting US TRANSCOM Missions. We also maintain two ships of the National Defense Reserve Fleet for the Missile Defense Agency and 8 public nautical schoolships.
When we met last MARAD was in the midst of becoming the Nation’s sole surge sealift provider and we were about start our recapitalization effort with the purchase of two second-hand ships. Earlier this year we completed the transition to the nation’s sole surge sealift provider as the seventh LMSR was transferred by MSC, and within months of that transition we moved past the initial two ship purchase by acquiring 3 more vessels using our VAM process.
The last of those three vessels (CAPE Starr, plus CAPE Sable, CAPE San Juan) was purchased in Sept, and we are working with ABS and the Coast Guard on the reflagging those three to US-registry.
The two vessels acquired from (ARC) American Ro/Ro Carriers - CAPE ARUNDEL and CAPE CORTES have received their COI’s and we recently moved them to their homeport in Pascagoula, Mississippi. This makes for a total of 12 vessels added to the RRF between 2022 and 2023.
MARAD will continue to work closely with Navy, DOD, and USTRANSCOM to continue this procurement action as 9 used vessels are currently authorized for purchase, which leaves us with four more vessels to go. (2 / yr authorized, funding levels support one /yr)
The biggest challenge to this recapitalization effort is the higher than anticipated cost of RO/ROs on the commercial market, thus our choices are going to be limited to the amounts appropriated. This will likely mean that the pace may drop to only one ship buy a year, when we need to be at a minimum of 2 per year.
ON the commercial side of things, last year when I met with you the U.S.-flag fleet was climbing the ladder up from a low point of 85 ships up to 87. Today we are continuing to show growth as the U.S.-flag fleet now has over 90 privately owned, commercially operated internationally trading U.S.-flag vessels. Most of these commercial vessels participate in the Maritime Security Program (MSP), the Tanker Security Program (TSP) or the Cable Fleet Security (CSF) program—all of which, I am happy to share, are fully subscribed. Within the Tanker Security Program, the last two vessels will be under U.S. registry by the end of this month, and the final vessel in the Maritime Security Program is expected to reflag by the end of February 2024.
Congress has authorized MARAD to increase the Tanker program to 20 vessels, but the full appropriation has not yet been made available.
AND In the FY2023 NDAA, MARAD received authorization to consider the third prong, building 10 strategic sealift vessels. If funded, MARAD will use the Vessel Construction Manager process currently in use to build our NSMV’s to build these new strategic sealift vessels.
In addition to sealift support provided by the MSP, TSP, and CSP, cargo preference requirements ensure we have capacity to carry 100% of our DOD Cargo and at least 50% of our non-DOD cargo, and Cargo Preference helps to keep vessels operating under the U.S.-flag and ensure availability in times of crisis.
On the topic of Cargo Preference, MARAD is
In the midst of preparing for a cargo preference rulemaking, as directed by the 2023 NDAA, and
For the past two years, MARAD has been coordinating with the Department of Energy Loan Program Office to ensure compliance with cargo preference requirements. MARAD’s coordination with DOE should result in significant cargo opportunities for the U.S.-flag fleet.
(where are we on the 1$ rule? As in what qualifies under cargo preference?)
MARAD’s work to maintain the Maritime Security Program, Tanker Security Program, Cable Fleet program and effectuate the Cargo Preference rules ensures demand for US Flag vessels, (pause) - Cargo preference, and DOD Cargo Sealift requirement in particular, ensure demand for the U.S. mariners who crew these ships, which ultimately improves the Nation’s overall sealift readiness. Which brings me to my next priority—GROWING THE WORKFORCE.
GROWING THE WORKFORCE
I have done a lot of international engagement over the last few months, meeting with leaders from the IMO, the UK, Vietnam and Korea. In all of these engagements the one consistent throughline that everyone spoke about was the critical nature of the mariner workforce—and more to the point, the mariner workforce shortage.
For our part, the Maritime Administration is engaging this problem in two big ways:
We are enhancing the educational experience of our young people at the USMMA and the State Maritime Academies; and
We are working to Change Culture to help recruit, train, and retain mariners by reducing barriers to entry.
First, Mariner Education. It is imperative that we, the government, industry and labor make the maritime industry attractive to young people so that they view it as a viable career option from the start. MARAD is working this on two fronts:
I’ll start with the USMMA. The US. Merchant Marine Academy plays a huge role in maintaining the U.S. mariner workforce as it places, on average, 200 to 230 licensed mariners into the industry each year.
Protecting the health, safety, and welfare of our midshipmen; and ensuring that the USMMA has appropriate staff and infrastructure to support an environment conducive to learning are my top priorities for the Academy. With this in mind, MARAD has undertaken massive investments in the Academy’s physical plant, and we have done a lot of hiring.
Specifically, among other things we are:
Renovating existing academic facilities, including the main engineering training building, Fulton Gibbs Hall, and renovating Samuels Hall - a space that will serve as an expanded dedicated simulator and training facility where Midshipmen can practice and gain experience in ship handling,
We are improving maintenance and habitability of facilities campus wide under our new campus wide maintenance program, and
We have made a lot of new hires, including a Sexual Assault and Prevention Officer, a new head of Human Resources, a new Chief of Staff, and a new Director of Facilities – and will soon announce our new Deputy Superintendent.
As for our support of the State Maritime Academies, in addition to direct funding support, we are providing 5 of the six state schools with brand new, state-of-the -art training ship vessels, the National Security Multi-mission vessel –the first of which EMPIRE STATE (seven) was delivered to SUNY Maritime - September 22nd. The last of which will be delivered to the California State Maritime Academy in 2026.
These purpose-built vessels are our maritime future. They will—
revolutionize the Nation's maritime training capabilities,
better equip the United States to increase our ranks of a well-trained, highly efficient maritime workforce,
improve our security interests at home and around the world,
all while bolstering critical sectors of our economy—thereby securing our spot as a global leader in the maritime industry!
AND they have shown the VCM Model works.
CENTERS OF EXCELLENCE
I also want to highlight our Centers of Excellence for Domestic Maritime Workforce Training and Education, or CoE, program. The National Defense Authorization Act for 2018 provided this authority that allows me to designate certain eligible and qualified training entities as Centers of Excellence. These designations serve to assist the maritime industry in obtaining and maintaining the highest quality workforce. This is a significant broadening of MARAD’s authority and will, if funds are appropriated, allow us to support maritime workforce training beyond the traditional blue water mariners. MARAD designated 27 COEs in 2021 and is currently reviewing applicants for our 2nd round of COE designee institutions.
MARAD’s investments in people and facilities, will attract students of the highest caliber who will go on to serve our nation and provide innovative leadership for the industry.
MARAD is also working on growing the workforce by facilitating positive change to the culture of this industry. This ties in very closely with work that ADM Fagan and her team are doing – we are honored to be partners here.
All of you are likely familiar with MARAD’s efforts to improve the culture within our industry, with EMBARC—Every Mariner Builds a Respectful Culture. With EMBARC, MARAD, along with vessel owners and operators are working to prevent sexual assault and sexual harassment—and in doing so we are creating safer work environments for all mariners. EMBARC is now codified in LAW - including the codification of the basic tenets of EMBARC in 46 U.S.C. § 51322
19 Companies are enrolled with more who have applied.
Further - These policies and procedures must be documented in the operator’s Safety Management System. Inclusion in the SMS ensures that compliance checked by our very own MARAD Office of Cadet Training At-Sea Safety and authorized agents like ABS.
My team is currently working on a rulemaking for EMBARC and we hope to have it published soon.
In addition to EMBARC I am beginning to focus more keenly on quality of life for all mariners. Salaries for entry-level merchant mariners are at an all-time high. However, despite the competitive pay, our industry continues to grapple with a mariner shortfall.
While most acutely felt in the efforts to recruit and retain women--who are woefully underrepresented at about 8% of the maritime community-- the downward trend in the number of mariners across all demographics, demands our attention. With that in mind, over the next several months I am going to focus on quality-of-life issues and work with industry on the sharing of best practices.
Family/work-life balance could help stem the tide of a dwindling workforce, as many mariners indicate they want the flexibility necessary to be actively engaged parents and family members. I have spoken with many of you, carriers, and labor, about this – I know you are thinking about it – and I know it will take time. But, I truly believe that to attract today’s workforce we must change the “way we have always done it” - Mariners who want careers and families can indeed have both if a pathway is mapped out in an effective family policy and embraced by industry and labor.
My last major bucket focuses on the future, and in this area MARAD is not only investing hundreds of millions of dollars in infrastructure and research on green technologies, but we are also developing strategies critical for the future of the U.S. Maritime sector.
INVESTMENTS FOR THE FUTURE
Earlier I mentioned that I’ve had a lot of international engagement over the past few months. I’ll tell you this—while my conversations always started with the mariner shortage, they nearly always ended with what stakeholders are doing about decarbonization of the maritime sector. As my Executive Director would say, MARAD is “rowing hard” on this topic, but greening this industry is going to take not only a whole of government effort, but it must be government and industry coming together on this so that we can collectively make real change that will positively impact the next several generations of mariners.
With that in mind I want to take a moment to applaud ABS on their work to aid in fielding dual fuel methanol ships and conducting bunkering studies to determine how best to ensure these vessels have fuel when they arrive at their port of call. I have no doubt that meeting the environmental goals of the future will depend on the work undertaken by ABS and others, today, and I just want to say thank you for your work in this space.
For MARAD’s part, we have a list of items that will ultimately help move the needle toward the Biden-Harris Administration’s decarbonization goals.
FIRST, THE PORT INFRASTRUCTURE DEVELOPMENT PROGRAM. About 10 days ago the Maritime Administration awarded over $653 million across the nation to fund 41 port improvement projects. (25 states and one territory) More than $123 million in awards include a focus on electrification of port equipment to improve air quality, and nearly $145 million will advance wind related projects.
SECOND, under our SMALL SHIPYARD GRANT program MARAD can, among other things, help U.S. shipyards with the acquisition of equipment that reduces climate impacts and adapts technologies that reduce shipyard power consumption, in addition to supporting workforce development. This year the Maritime Administration awarded $20.8 million in grant awards to 27 small shipyards in 20 states.
THIRD, through our MARITIME ENVIRONMENTAL AND TECHNICAL ASSISTANCE program, or META, MARAD is funding research and development with industry, and we are actively engaged on domestic and international policy efforts. MARAD is also an active collaborator on several US government efforts such as Zero Emission Shipping Mission and Green Corridor development as well as serving on the US Delegation to the IMO serving as technical advisors to the Greenhouse Gas working group.
LASTLY, TITLE XI. The Maritime Administration provides loan guarantees to support ship construction in U.S. shipyards. Through Title XI, we are able to provide full faith and credit guarantees to promote the growth and modernization of U.S. shipyards. Since 1993, Title XI has provided $9.3 billion in loan guarantees. Last year, I designated vessels that support offshore wind, as vessels of national interest, and since that time MARAD has seen a surge of interest in the program.
NATIONAL MARITIME STRATEGY
So, I have talked about what I am working on right now but let me briefly discuss our work underway for the future. First, MARAD has begun work to develop a National Maritime Strategy, as directed by the FY 2023 NDAA.
To assist in that work, we MARAD has selected the Center for Naval Analyses, or CNA, to identify and examine the key components of an enduring national maritime strategy – that may inform a national maritime strategy -, that can be leveraged for decades to come.
MARAD, working with CNA and numerous stakeholders from across government, industry, labor, academia, and other partners will identify the commercial sealift requirements to meet our nation’s future economic and security needs, identify shortfalls and challenges in current capabilities that need to be addressed, and provide MARAD with options to address any shortfalls in capacity and capability – from which we then develop our strategy.
This includes addressing any shortfalls in the areas of focus I mentioned earlier such as our strained workforce and the modest presence of U.S. flag commercial ships in international trade.
In addition to this, and also at the direction of Congress, we are in the process of finalizing a Diversity Recruitment Strategy for USMMA as well as the SMAs, which will guide these institutions to more effectivity recruitment a diverse candidate pool of students.
Lastly, at the direction of the FY 2021 NDAA, and working with stakeholders, MARAD has developed a five-year strategic Mariner Workforce Development Plan to recruit, train, and retain merchant mariners.
Overall, the Plan addresses four elements:
Merchant mariner recruitment,
Merchant mariner training,
Merchant mariner retention, and
Demonstration and research priorities related to the above three elements.
We are close to a release date on this report, and it will be posted on MARAD’s website.
I applaud the industry’s work by labor and management on their “Operation Mariner” task force to collectively examine challenges and propose solid recommendations for implementation by its participants. Many of those actions mesh with those we are considering for inclusion in our workforce development strategy.
All the above will complement the work our USMMA, and SMA’s, as well as labor schools, and other stakeholders do to grow out most critical resource - our mariners - every day!
All of what I shared with you just now is only a small segment of what my team and I are working on. And while it sounds like a lot—because it is—I want to share with all of you that I am excited about all of it. That is because I know that MARAD’s work, combined with that of other federal agencies and our industry partners, will ultimately enhance and improve the experiences of future generations of mariners as well as the U.S. maritime industry at large!
I look forward to seeing where this work takes all of us. I thank you for your leadership in this industry, and I thank you again for the opportunity to join you today.