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Congressional Testimony
February 26, 2002 Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2639 words
COMMITTEE:
SENATE JUDICIARY
HEADLINE: PORT
SECURITY
TESTIMONY-BY: CAPT. WILLIAM G. SCHUBERT,
MARITIME ADMINISTRATOR
AFFILIATION: UNITED STATES
DEPARTMENT OF TRANSPORTATION
BODY: Testimony of
Capt. William G. Schubert Maritime Administrator United States
Department of Transportation
February 26, 2002
Good Afternoon
Madam Chairman and members of the Subcommittee. I am Captain William G.
Schubert, Maritime Administrator. I am pleased to be here today to address the
important issue of seaport security on behalf of the Department of
Transportation.
The Department of Transportation (DOT) has always sought
to maintain secure transportation within every mode. We continue to do so with a
greater sense of urgency and with more focus through the newly created
Transportation Security Administration. My own agency, the Maritime
Administration (MARAD), has always played a critical role in port security. One
of our duties is to provide port security guidance to the commercial ports in
the United States and to coordinate government and commercial port stakeholders
in their security efforts. MARAD Co-Chaired the Presidential Commission on Crime
and Security in U.S. Seaports, and, as Chair of the National Port Readiness
Network, plays a lead role with the military in assuring port security and
protection of critical infrastructure during mobilization. We have developed an
Inter-American Port Security Training Program in which nearly 300 port personnel
have been trained in the Western Hemisphere, and the Merchant Marine Academy at
Kings Point provides security training to industry. We have also been working
with the port community to advance uses of technology that have positive
security benefits both within the port and through its landside intermodal
connections. I welcome the opportunity to continue our efforts to improve port
security.
Today, I would like to address several recent developments led
by Secretary Mineta in the area of port security in which DOT has been actively
involved - grants for the improvement of port infrastructure, cargo and
container security, credentialing for transportation workers and the
availability of maritime
insurance against
terrorism-related losses. Admiral Venuto will then brief the
Committee on specific Coast Guard initiatives to secure our ports and protect
shipping. Grant Program for Improvement of Port Infrastructure
As you
know, the Department of Defense Appropriations Act for FY 2002 (Act)
appropriated $
93.3 million to the Transportation Security
Administration (TSA) to award competitive grants to critical national seaports
to finance the cost of enhancing facility and operational security. Such grants
are to be awarded based on the need for security assessments and enhancements as
determined by the Under Secretary of Transportation for Security, the
Administrator of the Maritime Administration, and the Commandant of the Coast
Guard (USCG).
Discussions among TSA, MARAD, and the USCG resulted in
agreement that MARAD and the USCG would work cooperatively, on behalf of TSA, to
administer the emergency seaport security funding contained in the Act. MARAD
and the USCG have met, and we expect final approval of our implementation plan
very quickly.
MARAD and USCG will act as "agents" of TSA for the
distribution of grants from the $
93.3 M appropriation. The
final grant approval body will be a board consisting of the Under Secretary of
Transportation for Security, myself as Administrator of the Maritime
Administration, and the Commandant of the Coast Guard, or our representatives.
Determination of grant awards will be based on consideration of the most urgent
needs from a homeland security perspective. It is anticipated that initial
awards will commence in June 2002. We are moving very quickly to put this money
to work.
We intend to use a small amount of this money to fund "proof of
concept projects"; we will focus on critical seaports. Preference will also be
given to ports that have already begun port security enhancement through some
demonstrated action.
Cargo and Container Security
An analysis of
our transportation system in the aftermath of the events of September 11, 2001
clearly laid bare the susceptibility of container shipments as a delivery system
for an enemy's weapons, with over 12 million TEU's/year arriving at our shores.
Prior to September 11th, from a DOT perspective, our primary concern was the
efficient movement of these containers through the transportation system. The
advent of just-in-time business processes and the use of the transportation
system as a rolling inventory tied the transportation system even more
integrally into the economic vitality of this country.
In order to
address the security issues surrounding the movement of marine cargo containers
through the international, intermodal transportation system, an interagency
Container Working Group was established in December 2001. The effort is
co-chaired by the Departments of Transportation and Treasury (U.S. Customs). The
Container Working Group's activities are focused in four subgroups: Information
Technology, Security Technologies, Business Practices, and International
Affairs. Just this month, the Working Group provided recommendations to the
Office of Homeland Security on Ensuring the Security of Cargo Container
Transportation. Recommendations addressed improving the coordination of
government and business efforts as they relate to container security; enhancing
data collection; improving the physical security of containers; initiating
activities on the international front; and considering all possible uses of
advanced technologies to improve the profiling of containers and to increase the
physical security of containers.
Even with our best efforts, our current
transportation system is groaning under capacity constraints and congestion in
many ports is increasing. To further complicate matters, container traffic, even
with the current economic slowdown, is predicted to double in the next twenty
years. Improving efficiency is one of the key ways to help solve these capacity
and congestion problems. Yet efficiency improvements must now be looked at
through a security lens. Our transportation system will need to operate both
efficiently and securely. These twin goals of efficiency and security need to be
addressed simultaneously.
We are working jointly with U.S. Customs,
exporters, importers, carriers, and governments to establish business and
security practices which will push the nation's virtual borders outward to the
point of loading of the containers. Security must be established before the
vessel carrying the container or cargo begins its international travel.
Technology and information are also essential to container security. For that
reason, we strongly support the accelerated implementation of the U.S. Customs
ACE and Integrated Trade Data System (ITDS) to bring it online as quickly as
possible.
Credentialing for Transportation Workers
Security
background checks and credentialing of all who move or have access to cargoes
has never been more important. This includes everyone from facilities and
conveyances to the destination warehouse. Thus, the Department established an
interagency "Credentialing Direct Action Group" (CDAG), co- chaired by MARAD, to
examine the feasibility and process for conducting background checks and issuing
an identification card for all transportation workers and other persons who
require access to secure areas of transportation facilities.
The primary
goal of the CDAG is to fashion a nationwide transportation worker identity
solution that verifies the identity of transportation workers, validates their
background information, assists transportation facilities in managing their
security risks, and accounts for personnel access to transportation facilities
and activities of authorized personnel. The CDAG is primarily concerned with
private-sector transportation workers, and has held numerous meetings that have
included many representatives from the transportation industry and
transportation labor. Such outreach efforts are necessary. They are experts in
transportation, and we have found they are anxious to contribute their knowledge
to solving the difficult issues surrounding personnel identification. We are
building industry buy-in at the front end to ensure the success of this effort.
The most difficult issue is to define the appropriate levels of security
for the broad spectrum of transportation facilities and operations and how these
should be applied. There have also been some concerns regarding the anticipated
background check process. Various models are being investigated by several
groups to try and improve responsiveness, lower cost and improve consistency
over present practices for credentialing. We also face the privacy issues
presented by the collection and maintenance of databases containing personal
information.
The CDAG has already developed a functional requirements
document, which identifies the principal attributes that a credentialing system
must have to achieve the interoperability necessary to reach across the
transportation industries. This document has been shared with many of the major
transportation industry associations. They have begun to provide their comments.
Under a maritime cooperative program called the Ship Operations
Cooperative Program (SOCP) that is administered by the Maritime Administration,
industry, in partnership with multiple government agencies, is currently working
to evaluate and test a Mariner Administrative Smart Card credentialing system to
reduce fraud, track mariner training, facilitate shipboard sign on/sign off and
enhance shipboard security. The Smart Card Administrative Project started in
October of 2000 and is a 50/50 cost sharing initiative between the 43-member
SOCP and the Maritime Administration.
As a result of the September 11,
2001 events, added emphases within the project are being placed on the potential
of smart card applications for addressing security concerns. Members of the
cooperative including MARAD and USCG are engaged internationally with the
International Maritime Organization, International Labor Organization,
International Transport Workers' Federation and others to discuss security and
credentialing issues. In addition, SOCP is coordinating with DOT entities that
are currently working maritime security issues to ensure the project is in line
with currently discussed directions. SOCP is working closely within DOT, and
with other agencies including the General Services Administration, to ensure
interoperability through standardization. This project has the potential for
demonstrating the effectiveness of smart card technology to improve efficiency,
reduce fraud and increase security in the maritime industry.
Insurance Against
Terrorism-Related
Losses
The Merchant Marine Act, 1936 (Act), authorizes the Secretary of
Transportation to ensure the availability of adequate insurance for vessels
engaged in the waterborne commerce of the United States. This authority,
delegated to MARAD, provides coverage for vessels, their cargoes, crews, and
third-party liabilities against war risks, including acts of
terrorism, if commercial
insurance is not
available on reasonable terms and conditions. The
insurance may
be made available to both U.S. and foreign flag vessels.
There are two
basic forms of war risk insurance. Section 1202 of the Act addresses commercial
vessels in commercial trade while, Section 1205 pertains to vessels that are
under charter or in the employ of the Department of Defense. Recently, President
Bush authorized DOT to provide war risk insurance under Section 1202. The
insurance is available for areas currently excluded in commercial war risk
trading warranties: the Persian or Arabian Gulf and adjacent waters, Israel,
Lebanon, Gulf of Aqaba and the Red Sea, Yemen, Pakistan, Oman, Syria, and Egypt.
Authority under Section 1205 for the Middle East has remained in effect since it
was authorized by Then-President Bush in August 1990. Since February 20, 2002,
MARAD has written Section 1205 insurance on five vessels in the employ of the
Military Sealift Command.
Although the combined losses arising out of
the attacks of September 11th are estimated in the tens of billions of dollars,
we are seeing an excellent response all across the insurance industry in
responding to the coverage of these losses. While the losses are of catastrophic
proportions, the industry is financially sound and most property/casualty
insurers are highly reinsured with major reinsurers with excellent reserves.
The insurance industry has taken a major hit as a result of September
11th events and what we are seeing is a major restructuring of
terrorism risks. Many primary property/casualty
insurance coverages, which would include port infrastructure,
had reinsurance renewals on January 1st of this year and it appears that most
reinsurers have excluded terrorism risks from their renewal coverage. A few
major primary insurers are offering to write terrorism risks on fixed property,
but with very limited cover (up to $
50 million on some risks)
at very, very high premiums. As a result of this, we have been advised by a
number of insurance brokers and underwriters that upon
insurance renewal many companies and properties are
underinsured or uninsured for
terrorism risks.
The
situation is somewhat better with regard to vessel
insurance, where
terrorism risks are generally covered under the war risk policy.
Terrorism coverage is still available for vessels and cargoes,
but the cost has increased significantly. For example, war risk underwriters
issued cancellation notices on war risk policies on all vessels worldwide on
September 19th, (which they were permitted to do under their seven-day
cancellation clauses). They reinstated these policies on September 26th with
increases of annual premium of 200 to 300 percent on most fleets, except for
cruise vessels, which we understand faced a 1,000 percent increase in annual
premiums. In addition, war risk underwriters published new excluded zones,
extending from Egypt to Pakistan, where vessels and cargoes may not enter
without paying thousands or even hundreds of thousands of dollars of additional
premium. Marine war risk/
terrorism insurance is still available
from the commercial market, although at much higher premium rates and with much
more limited coverage on the liability side since September 11th. The Protection
and Indemnity Clubs, a mutual arrangement of shipowners, which provide vessel
liability coverage, now limit coverage for terrorism risk as of February 20th to
$
200 million per vessel--an amount far lower than previously.
Vessels and cargoes are still moving worldwide, but the cost is higher and the
terms more limited. In addition, we understand that one of the mutual clubs that
provides insurance for terminals, stevedores, port authorities and transport and
logistics companies for handling equipment and property was able to reinstate
terrorism cover as of February 1st, but it is not clear on what terms or cost.
In summary,
insurance covering risks of
terrorism is still in a state of flux and we expect this to
continue for some time to come.
Conclusion
The Department of
Transportation does not need to be convinced that port security is a good idea.
We have recognized it as a critical component of our maritime industry and our
national security for many years. Nevertheless, achieving appropriate levels of
security in our seaports and seeking to educate our international partners as to
the need and benefits of seaport security is no small undertaking. DOT is
aggressively pursuing all aspects of transportation security in all modes
utilizing our own resources and tapping the best minds in the industry and
labor.
I would be happy to answer any questions you or the other
Committee members may have.
LOAD-DATE: March
29, 2002