2010 Review and 50th Anniversary Outlook from Chairman Lidinsky

The Federal Maritime Commission expects a busy 2011 focused on protecting consumers and strengthening the supply chain to support more U.S. exports, stated Chairman Richard A. Lidinsky, Jr.” We plan to stay at full steam ahead as we embark on our 50th year,” said Chairman Lidinsky. “As we continue our mission for a fair and efficient ocean transportation system, I’ll be closely watching the ‘three C’s’: containers, contracting practices, and capacity. None of these issues should prevent an American exporter from completing a sale overseas.”

2010 Highlights

2010 was an active year for the Commission, which concentrated on supporting U.S. exports and the economic recovery, protecting American consumers, encouraging a sustainable ocean transportation industry, enhancing safety and security, and monitoring foreign practices to protect American jobs.

1. 1. Supporting U.S. exports and the economic recovery: Following the worst year in the maritime industry since the invention of the containership, the year 2010 began with a recovery in ocean trade that was stronger than many anticipated. Demand for cargo space and containers outstripped supply, and American exporters and importers saw supply chain disruptions such as abruptly cancelled bookings, cargo rolled to the next sailing, and successive surcharges and price increases. The year also began with President Obama announcing his National Export Initiative to double exports over the next five years, and directing agencies “to use every available federal resource” in pursuit of that goal.

The FMC conducted an aggressive search for solutions to supply chain problems that could stand in the way of increased exports and the continued recovery. In March, the Commission began a fact finding investigation into vessel capacity and container availability issues, led by Commissioner Rebecca F. Dye. The fact finding team held more than 170 interviews with a wide variety of companies and organizations involved in international ocean shipping, led a series of best-practices discussion pairs between shippers and carriers, and began internet-based collaborative efforts to develop solutions to container availability issues. Commissioner Dye’s team issued an interim report and recommendations in June, and a final report and recommendations in December. The Commission took several steps following those recommendations:

1. 1. • Rapid Response Teams: In June, the Commission established Rapid Response Teams  to provide prompt solutions for commercial disputes between carriers and their customers. Sixteen ocean carriers have named high-level liaisons to work with the Rapid Response Teams to cut through red tape and respond to specific concerns within 24 hours. The Commission strongly encourages shippers, ocean transportation intermediaries, and ocean carriers to contact the Commission’s Rapid Response Teams with commercial disputes that need immediate attention.

1. 1. • Increased TSA and WTSA oversight: In September, the Commission ordered that members of the rate discussion agreements in the United States’ largest tradelane — the Transpacific Stabilization Agreement (TSA) and Westbound Transpacific Stabilization Agreement (WTSA) — file verbatim transcripts of their meetings. The order stated that it was intended to “provide the Commission with critical information relating to whether member carriers are improperly discussing capacity.”

1. 1. • Increased carrier alliance oversight: The Commission directed its staff to prepare recommendations for increasing oversight of global vessel alliances, which have authority to set capacity collectively. The Commission is reviewing a recommendation, and a decision is expected in early January.

1. 1. • International Ocean Transportation Working Group: In December, the Commission voted to form two working groups. The first is an International Ocean Transportation Working Group, which will focus on: (1) booking cancellations and rolling cargo; (2) improving shipper forecasting and minimum quantity estimates; (3) export capacity forecasting; and (4) other ways to improve the shipper-carrier relationship, including collaboration on major supply chain changes.

1. 1. • Intermodal Container Availability Working Group: The second group that the Commission approved will focus on issues with container availability for U.S. exporters.

1. 1. • Service Contract Enhancement Project: The Commission also voted in December to move forward with a project focused on helping small U.S. exporters and importers improve their service contracting practices through education and outreach. The project will include a web-based educational tool.

In addition to implementing these recommendations, the Commission has been assisting ocean carriers, the U.S. Department of Agriculture’s Agricultural Marketing Service, and agricultural exporters on a pilot project to give more transparency and visibility to the chronic problem of locating empty containers for exports. The Agricultural Marketing Service has completed the initial phase of this pilot project to show container availability at 18 U.S. port and inland locations. Plans for the next phase have been submitted to the Office of Management and Budget for review and approval. Following approval, the Agricultural Marketing Service plans to collect container availability data from at least ten leading ocean carriers, which will assist U.S. exporters in determining nearby container availability for the reported week along with projections for two weeks in the future.

Finally, the Commission has been preparing a rule to relieve more than 3,300 licensed Non-Vessel Operating Common Carriers (NVOCCs) from the costs and burdens of publishing in tariffs the rates they charge for cargo shipments. The Commission issued a proposed rule in April, held a hearing in May, and received comments  through June. Commission action on a final rule is likely in January. According to comments filed with the Commission, this regulatory relief could save many NVOCCs up to $200,000 per year. Most NVOCCs are small businesses who can use these savings to create jobs.

1. 1. Protecting American consumers: In 2010, the Commission was also active in its mission to protect American consumers who ship their personal goods overseas or take cruises.

In June, the Commission began a fact finding investigation, led by Commissioner Michael A. Khouri, into issues that individual consumers have experienced when shipping their personal household goods overseas. Each year, the FMC receives a substantial number of complaints from individuals who have experienced problems with their international household goods shipments. Between 2005 and 2009, the Commission received over 2,500 such consumer complaints related to household goods moving companies transporting personal effects and vehicles. In December, the Commission approved several interim recommendations from the fact finding team, including:

1. 1. • Consumer education: The Commission voted to upgrade its website to better assist customers shopping for international shipping options; engage in formal cooperation with other governmental agencies who protect consumers moving household goods; enhance cooperation with trade associations representing household goods movers; develop information for ocean transportation intermediaries to distribute to consumers moving household goods; target outreach to local communities that regularly ship household goods overseas; and encourage household goods movers to link their websites to the FMC’s website for consumer information.

1. 1. • Industry best practices and model forms: The Commission also voted to work with industry groups and consumers to develop a set of best practices and model shipping forms that address issues consumers have encountered when shipping household goods.

1. 1. • Licensing issues: As the Commission works to update its licensing regulations, it will include recommendations for adjustments that specifically address issues with household goods shipments.

1. 1. • Enforcement: The Commission voted to enhance joint law enforcement efforts to protect consumers and address problem household goods movers. The Commission also voted to develop enforcement strategies that focus on entities offering services related to household goods shipments.

1. 1. • Alternative Dispute Resolution: The Commission also decided to move forward with initiatives to better promote alternative dispute resolution services to assist consumers who experience problems when moving their household goods overseas.

Commissioner Khouri’s fact finding team is currently working on the second phase of the investigation, and will submit a final report and additional recommendations on February 15, 2011.

In addition, the Commission has been conducting a Notice of Inquiry to update its financial protections for cruise passengers. In March, the Commission conducted a hearing on the issue, and the Commission is currently developing a proposal to update its rules for the protection of passengers.

The Commission’s Bureau of Certification and Licensing also worked to ensure that passengers in its jurisdiction were compensated when the cruise line Cruise West ceased operations and cancelled sailings in September. It worked with the cruise line and its claims processor, and issued consumer advisories to keep passengers informed of their rights and options.

1. 1. Encouraging an efficient, sustainable ocean transportation system: In January, the Commission allowed the TSA’s member lines to work together to implement slow steaming and other environmental initiatives. Slow steaming, or operating at reduced speeds, allows vessels to save fuel, which reduces their emissions and affords substantial cost savings during this period of financial stress. TSA member lines have indicated that they may also use their new authority to work to increase use of alternative fuels, cold ironing, and other pollution-reducing technologies. While these practices hold promise for reducing vessels’ emissions, the Commission will closely monitor slow-steaming arrangements to ensure that they do not cause unreasonable constraints now that international shipping demand has recovered.

1. 1. Preventing fraud and enhancing safety and security: The Commission’s Bureau of Enforcement and Area Representatives continued their efforts to prevent practices that are unfair and deceptive. The targeted violations included misdescription of cargo, which also poses a serious safety and security risk because it prevents vessel operators and port officials from knowing when dangerous goods are being transported on vessels into the United States. During 2010, the Commission collected more than $1.1 million in penalties for such violations.

1. 1. Monitoring foreign practices to protect American jobs: The Commission was also vigorous in carrying out its charge to monitor and prevent practices by foreign governments or entities that adversely affect American commerce. Following concerns raised by U.S. shippers, Chairman Lidinsky and the FMC’s General Counsel Rebecca Fenneman visited the Shanghai Shipping Exchange to seek and obtain assurances regarding protections for confidential information of U.S. companies that must be filed with the Exchange. The FMC’s General Counsel also raised these issues and concerns of U.S. NVOCCs in October as part of the U.S. delegation to bilateral consultations with the Chinese Ministry of Transport under the U.S.-China Maritime Agreement. The FMC will continue to follow these and related developments in China closely to ensure that no unreasonable conditions exist that would impair U.S. commerce.

The Commission is also studying the effects in the U.S. trades of the European Union’s repeal of its block exemption for liner conferences. In November, the Commission requested input from all interested parties, and the deadline for submitting information or comments is January 18, 2011.

A Look Ahead at 2011

In its 50th year, the FMC will commemorate its history as a leader in the global intermodal revolution. But Chairman Lidinsky also intends that the Commission will be busy making new history on the critical issues of shipping capacity; container availability; supporting increased exports; protecting consumers; encouraging efficient, sustainable ocean transportation practices; enhancing safety and security; reducing regulatory burdens; and keeping a close watch for foreign maritime policies and practices that could harm U.S. commerce.

1. 1. January 2011 Commission Meeting: The Commission’s next meeting is scheduled for January 26, 2011. Chairman Lidinsky announced at the prior meeting that the January agenda will likely include: (1) whether to discontinue the Commission’s open docket item on Port Restrictions and Requirements in the U.S.-Japan Trade; (2) the impacts of slow steaming on the U.S. supply chain and environment; and (3) potential updates to the Commission’s financial protections for cruise line passengers. “I would welcome any comments the public would like to submit on any of these issues before our January meeting,” said Chairman Lidinsky.

1. 1. Implementing recommendations from the Vessel Capacity and Container Availability investigation: Now that Commissioner Dye’s investigation has made final recommendations, the Commission will spend 2011 working hard to implement them by assisting U.S. exporters and importers with capacity, contracting, and containers. With new monitoring requirements in place, the Commission will give unprecedented scrutiny to discussions and decisions by TSA, WTSA, and the global alliances that could affect U.S. exporters and importers. The Commission will continue to encourage exporters and importers to report any evidence of improper activities or collusion for a prompt response.

The Commission will also work to implement its project of helping small U.S. exporters and importers improve their service contracting practices. This project will be a top priority as shippers enter the service contract negotiation season in late Spring. In addition, the Commission will be working to form and begin meetings of its new International Ocean Transportation and Intermodal Container Availability working groups.

When, despite these efforts, disputes do arise, Chairman Lidinsky encourages parties to bring their issues to the Commission’s Office of Consumer Affairs and Dispute Resolution Services (CADRS) for a resolution that avoids the cost and delay of litigation.

1. 1. Focus on serving exports better: In 2011, Chairman Lidinsky plans to keep a sharp focus on how the FMC and the ocean transportation industry can support President Obama’s goal of doubling exports over the next five years. Chairman Lidinsky would like to solicit public comments and input on current efforts and potential improvements.

1. 1. Protecting consumers: A central part of the FMC’s mission is to “protect the public from unfair and deceptive practices.” In 2011, the Commission will continue its efforts to protect individual consumers who ship their personal, household goods overseas. Following its December vote, the Commission will be working to implement the interim recommendations by Commissioner Khouri’s fact finding investigation that focuses on these issues. Commissioner Khouri and his fact finding team will be working to develop a final report and recommendations to be issued in February.

Chairman Lidinsky has also set forth a goal of improving financial protections for cruise line passengers in 2011. This issue has been the subject of a Notice of Inquiry and Commission staff analysis during the past year.

1. 1. Efficiency and sustainability: Chairman Lidinsky plans to continue the Commission’s efforts to encourage an efficient, sustainable ocean transportation industry. Led by the Commission’s Maritime Environmental Committee, these efforts will include a look at slow steaming, environmental initiatives at the nation’s ports, and close monitoring of international climate change negotiations under both the United Nations Framework Convention on Climate Change and the International Maritime Organization’s Marine Environment Protection Committee.

1. 1. Safety and security: The Commission will continue to act vigorously to detect and punish the threats to safety and the shipping public posed by cargo that ships under a false description. The Commission will also continue to work closely with U.S. Customs and Border Protection to protect both safety and commerce.

1. 1. Modernizing and reducing burdens: In December, Chairman Lidinsky announced the formation of a new staff working group to modernize the Commission’s Rules of Practice and Procedure to make them more efficient, less burdensome on parties, and more useful for consumers trying to resolve disputes through informal or alternative resolution proceedings. The working group will provide initial proposals in February, and final proposals later in the year.

In addition, Chairman Lidinsky said that the Commission will likely be busy monitoring the implementation of any final rule it issues to exempt NVOCCs from the requirement of publishing their rates in tariffs.

1. 1. Foreign practices: Chairman Lidinsky intends to continue the Commission’s dialogue with China’s Ministry of Transport and the Shanghai Shipping Exchange in 2011. The Commission will also be working to complete its study of the effects of the European Union’s repeal of its block exemption for liner conferences. The study is currently scheduled to be released in late 2011.

1. 50th Anniversary events: Finally, in 2011 the Commission will celebrate the 50th anniversary of its creation as an independent agency by President John F. Kennedy. The Commission will hold a series of events looking at trends in the maritime industry and the FMC’s history as a leader in developing the efficient intermodal practices that revolutionized global trade. The next event in 2011 will be a roundtable of former FMC Chairmen on February 2, 2011.

The Federal Maritime Commission (FMC) is the independent federal agency responsible for regulating the nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer. The FMC’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices.