27 February 2002
Maritime Administration Wants to Expand Port Security Zone
(Cargo security a key issue, administrator says) (2840)
The U.S. Maritime Administration (MARAD) intends to push the U.S.
seaport security perimeter overseas to the point of cargo and
container loading, Maritime Administrator William Schubert says.
MARAD, part of the Transportation Department (DOT), is working with
the U.S. Customs Service, traders, carriers and foreign governments to
establish security of U.S.-bound cargo before the ship carrying it
sets out to sea, he said.
The U.S. Customs has recently announced a container security
initiative that aims at identifying high-risk containers and screening
them before they depart from foreign ports.
Testifying February 26 before a Senate Judiciary subcommittee Schubert
reviewed other programs related to port and maritime security.
He said that many companies and properties, including ports and
port-related businesses, are currently uninsured or underinsured for
terrorism risk because most insurers and reinsurers have started
excluding such risk from their renewal coverage or have drastically
increased premiums. While terrorism risk coverage is still available
for vessels, Schubert added, premiums went up by 200-300 percent and
new exclusion zones were added to policies.
Recently, president Bush authorized DOT to provide terrorism insurance
to both U.S. and foreign-registered commercial vessels when commercial
insurance is not available on reasonable terms and conditions. This
insurance covers areas excluded from commercial policies.
Schubert said that MARAD and the U.S. Coast Guard will soon start
distributing grants to improve security of port infrstructure. He
emphasized that priority will be given to critical seaports that have
already demonstrated commitment to increased security.
Schubert said that an interagency action group is examining the
feasibility and procedures for conducting background checks. The group
also is looking at creating an identification card for all
transportation workers and other personnel who require access to port
secure areas.
While subcommittee chairwoman Diane Feinstein, Democrat of California,
complimented MARAD and other agencies for their efforts to make U.S.
ports more secure, she voiced her concerns about the lax information
on who owns and operates ships.
"What if Osama Bin Laden is operating one of them?" she asked.
U.S. Coast Guard Director of Operations Policy Rear Admiral Kenneth
Venuto, also appearing before the subcommittee, assured the senator
that the United States is working with a U.N. maritime organization on
international standards concerning ownership information. But, he
said, establishing effective standards will not be easy.
Also testifying, Bonni Tischler, a U.S. Customs assistant
commissioner, urged Congress to help make the submission of advanced
shipping manifests to the U.S. Customs Service obligatory. Currently,
these manifests are voluntary.
"We cannot rest our nation's homeland security on the vagaries of
haphazard advance information that is often incomplete and often
inaccurate," she said.
Following is the text of Schubert's testimony:
(begin text)
DEPARTMENT OF TRANSPORTATIONDEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
STATEMENT OF WILLIAM G. SCHUBERT
MARITIME ADMINISTRATOR
BEFORE THE COMMITTEE ON THE JUDICIARY
SUBCOMMITTEE ON TECHNOLOGY, TERRORISM AND GOVERNMENT INFORMATION
UNITED STATES SENATE
ON THE SECURITY OF OUR SEAPORTS
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 [container units]/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 aritime 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.
(end text)
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