Chairman Cordero Remarks at 2013 Western Cargo Conference

Chairman Mario Cordero
Federal Maritime Commission
Remarks at the 2013 Western Cargo Conference
Rancho Mirage, CA – October 19, 2013

Thank you for the kind introduction and for inviting me to speak to your organization. I always enjoy the opportunity to speak directly with the OTI industry, and, of course, to come home to Southern California. Before I begin, please note that my comments are my own personal views and do not necessarily reflect the views of the Federal Maritime Commission.

When I was asked to speak here this afternoon, I was asked to provide you with a look at the Federal Maritime Commission, how it works with the transportation industry, and what may lie ahead. I will try to touch on each of these as I speak about the Commission, infrastructure, and the environment. The Commission is responsible for regulating oceanborne transportation in the foreign commerce of the United States. The FMC takes an active role in cultivating a regulatory system that protects competition, commerce, and U.S. exporters and importers while minimizing government intervention and regulatory costs. Presently, the FMC’s primary focus is on supporting U.S. exports and economic growth, reducing regulatory burdens, and monitoring foreign shipping practices.

On exports, I want to highlight that the President’s Council on Exports met last month and the Secretary of Commerce, Penny Pritzker, reported that there are 30,000 more exporting businesses today than in 2009. In addition, Secretary of Agriculture, Tom Vilsack, advised that the number of farm exports in recent years have been the best in U.S. history.

Moving on to the FMC, we are hoping to update and integrate our internal databases and external web portals so that we may circulate public information more efficiently and provide increased web-based accessibility. We hope this approach will enhance Commission services, facilitate public interaction, and provide better protection for the shipping community.

The Commission continues to partner with other agencies to fulfill its regulatory mission. The Commission has a longstanding relationship with U.S. Customs and Border Protection (CBP). I am very pleased to announce that in July; the two agencies renewed their partnership through the signing of an updated Memorandum of Understanding to share data from CBP’s Automated Commercial Environment (ACE) and to continue its longstanding cooperation.

As many of you know, our mission is to foster a fair, efficient, and reliable international ocean transportation system and protect the public from unfair and deceptive practices. The Commission takes an active role in protecting the shipping public from unqualified, insolvent, or dishonest companies. One way the Commission fulfills this responsibility is through the licensing of ocean transportation intermediaries (OTIs). Congress mandated the licensing of OTIs under The Ocean Shipping Reform Act of 1998. Accordingly, the Commission reviews all OTI (non-vessel-operating common carriers and ocean freight forwarders) applications and issues licenses to qualified applicants. Part of this licensing process also requires that OTIs demonstrate a degree of financial responsibility to protect the shipping public.

In May of this year, as part of the Commission’s plan for retrospective review of existing rules, the Commission issued an Advance Notice of Proposed Rulemaking (ANPR) seeking changes to our OTI regulations. The Commission’s intent is to establish a credible licensing and renewal program and I would like to point out how some of the changes are designed to streamline the Commission’s regulatory process. The proposed changes in the ANPR aid the Commission in upholding a responsible licensing process and enable it to do so more efficiently for all. Furthermore, it ensures a credible licensing system and the value of your license is protected and enhanced.

For example, a small but important item in the ANPR addresses the emergence of LLCs as a business model. Under current regulations, the business entity “LLC” is not specifically named in the definition of “person” making it unclear as to whether the LLC is eligible to be a license holder or who may serve as the Qualifying Individual. The addition of references to LLCs to both 46 C.F.R §§515.2(n) and 515.11(b) will clarify these questions, making the application process more efficient, both for the FMC and the transportation industry. This example illustrates the Commission’s intention for the OTI regulations to address current and changing industry conditions. Another example would be the clarification on the use of agents in the ANPR. The proposed changes attempt to clarify the obligations of the licensee and agent under the Shipping Act, thus adding greater efficiency to the regulatory process.

The Commission received numerous comments in response to the ANPR and is in the process of reviewing them.Your input and perspective is valuable as the FMC continues its regulatory mission. I thank you for your participation and as many of you may be aware, I have reached out to the OTI community, and will continue to do so, in order to further a dialogue and achieve common ground on important policy perspectives. On this note, I ask that you embrace the policy considerations the FMC has communicated. Again, I am hopeful that together we can further review the ANPR and place our best efforts to identify language that is mutually acceptable.

That is the job the Commission has been doing since 1961. That is the job the Commission will continue to do. We are now, however, being challenged to do the same job with less. A challenge that many federal agencies have before them in today’s fiscal environment. To meet that challenge, the Commission is seeking ways to make its processes more efficient.

On the horizon, pursuant to Presidential Executive Order 13579, the Commission also will be reviewing its rules as they relate to service contracts. As with the current ANPR, the Commission will look to bring more efficiency to the regulatory process and recognize changing industry conditions while continuing to fulfill our mission by ensuring the flow of commerce and protecting the shipping public.

From my experience serving first as a Commissioner and now as Chairman of the FMC, as well as my eight years of service on the Board of Harbor Commissioners for the Port of Long Beach (POLB), I understand fully how a poor or failing infrastructure can affect the competitiveness of the ocean transportation industry. In this regard, 21st century maritime infrastructure is paramount. In my view, international trade begins at the ports. I also understand that in an era of tight budgets and reduced spending; investing in infrastructure is often problematic. However, the good news is that in the last few years, the maritime and goods movement industry has been center stage at both the executive and congressional levels.

President Obama has recognized that a sound operational infrastructure is critical to today’s businesses. The President’s FY2013 budget called for the establishment of a task force on ports to address a federal strategy for port related infrastructure. In July 2012, President Obama signed the $105 billion transportation bill, MAP-21, which affirms the Administration’s commitment to freight transportation and its importance to the nation’s economy. The bill established a Freight Policy Council to engage with freight transportation leaders and it requires a National Freight Strategic Plan. On this note, I will say the need for a national transportation policy was highlighted in the FMC’s Study of U.S. Inland Containerized Cargo Moving through Canadian and Mexican Seaports given its finding that both Canada and Mexico have national freight policies.

The FMC’s study also looked at the impact of the Harbor Maintenance Tax, a topic that is getting Congressional attention this year. Last month U.S. Senators Patty Murray and Maria Cantwell introduced legislation entitled The Maritime Goods Movement Act for the 21st Century to replace the HMT tax with a Maritime Goods Movement User Fee which would apply to all points of entry into the U.S.

In an effort to utilize the funds already collected through the Harbor Maintenance Tax, U.S. Congressional Ports Caucus founder, Congresswoman Janice Hahn, introduced a bipartisan resolution in May which expressed the critical importance of strong ports to the country’s economy. The resolution called for the immediate full utilization of the Harbor Maintenance Trust Fund. The resolution was referred to the House Committee on Transportation and Infrastructure for consideration.

The House Transportation and Infrastructure Committee acted on the Water Resources Reform and Development Act of 2013. Chairman Shuster moved the bipartisan measure and as many know, the Chairman has been a passionate supporter of maritime infrastructure. The Senate passed their version, S.601, with amendments, in May entitled the Water Resources Development Act of 2013. Title VII of the Senate bill addresses the Harbor Maintenance Trust Fund and its use. On this note, Rep Bill Shuster, Chairman of the House Transportation and Infrastructure Committee, has received high marks for his efforts to bring forth a bipartisan water-resource bill. In addition, Chairman Shuster has the task of moving forward next year a highway and transit bill.

Executive branch and congressional involvement and support are extremely important. Local support and involvement are critical as well. In my experience with the Port of Long Beach, I obtained firsthand experience on how trade begins at the port. Ports are the gateway to approximately 80% of the volume of international trade. The President’s task force on ports will address a federal strategy for port related infrastructure/gateways. Accordingly, ports are continually working to modernize and remain competitive.

Currently motivating the push to modernize the port infrastructure is the expansion of the Panama Canal. Announced in 2006, the expansion, including the addition of a third set of locks, is slated for completion in 2015. The new larger locks will accommodate 13,000 TEU vessels; more than double the current maximum vessel size of 5,000 TEUs. Seen as a significant change to shipping and international trade, the Panama Canal expansion has generated a great deal of interest – and action. The U.S. Senate Committee on Commerce, Science, and Transportation held a hearing in April 2013 specifically on this issue and its impact on American freight and infrastructure. The East Coast ports of New York and New Jersey, Baltimore, Savannah, and Jacksonville all have either completed, or are in the midst of, projects that will ready their ports for post-Panamax vessels. The major West Coast ports have harbors deep enough and have begun servicing post-Panamax vessels, and so are focusing on other areas impacted by the expansion.

Presently there has been much discussion with regard to the proposed P3 Alliance. The Alliance consists of the three largest international container carriers which cover Asia to Europe as well as transpacific and transatlantic routes to the United States. Given the potential impacts, I intend to call on fellow regulators in the European Union and the People’s Republic of China, to join me in a Global Regulatory Summit. I will suggest the summit be held in Washington, DC in order to have a dialogue with fellow global regulators on respective regulatory roles and impact of alliances.

This month the FMC will attend the China Bilateral meeting in Chicago. The Commission has acknowledged concerns, expressed by both the shipping and carrier communities, as to China’s new value added tax (VAT).

Equally important to the infrastructure is the environment. Consistently today, all participants in the transportation and maritime industries are seeking ways to incorporate environmental sustainability in daily operations. In ports across the nation, sustainable practices are now commonplace.

The POLB and POLA have been forerunners in this regard. While Commissioner at POLB, I helped create the Green Port Policy, a policy aimed at reconciling economic growth and environmental stewardship to achieve long-term, sustainable port development. In 2006, the San Pedro Bay ports implemented their Clean Air Action Plan (CAAP). The plan is not only a model for ports to reduce harmful air emissions and to mitigate health risks associated with their operations, it is an example of bringing the various interested stakeholders together to address environmental mitigation.

In its role as regulator, the FMC reviews and monitors agreements among marine terminal operators and ocean common carriers to ensure the agreements do not cause substantial increases in transportation costs or decreases in transportation services. Here, in the LA/LB port complex, the West Coast Marine Terminal Operator Agreement, referred to as PierPASS, is one example of agreements filed with the FMC which are closely monitored by our staff. In that role, the FMC has seen environmental issues become increasingly central to the agreements and shipping practices.

The FMC plays a vital liaison role with port authorities, shipping companies, and the shipping public. As such, we are uniquely positioned to facilitate these parties’ cooperation in the development and adaptation of new technologies and practices. Working together, we can maximize economic efficiency while minimizing the environmental costs of global commerce.

The FMC’s own Maritime Environmental Committee (MEAC) was created to provide a clearing house for ports, terminal operators, and other stakeholders in the maritime industry to gain access to and discuss environmentally friendly standards and practices. By facilitating this discussion, the FMC can see that environmental progress, business development, and regulatory compliance can all move forward hand-in-hand.
Recently, the Committee facilitated a discussion among ports at its Second Annual Port Environmental Initiatives Forum. Representatives from Maryland, Washington, and Georgia ports shared their plans and best practices concerning water quality issues and initiatives at the ports. Moderated by the President of the American Association of Ports Authorities, the discussion covered ballast exchange innovations, maintenance dredging challenges, storm water management, and terminal structure impact.

The future of the international maritime transportation industry will be impacted by factors such as the expansion of the Panama Canal, an uncertain global economy, and environmental pressures. In the face of these challenges, the industry is well positioned to thrive; investing in infrastructure, cultivating public-private partnerships, and committing to compete in an environmentally sustainable fashion.

Whatever comes from these challenges, the FMC will be ready to work with all facets of the maritime transportation industry. The FMC will monitor carrier and port practices and assist where possible. As always, the FMC will continue to investigate and pursue violators of the Shipping Act, and ensure a fair, efficient, and reliable ocean transportation system.

Thank you again for the opportunity to address you here this afternoon. I would be happy to answer any questions you may have at this time.