Chairman Cordero’s Remarks at NAWE October 26, 2015

November 2, 2015

As Chairman of the Federal Maritime Commission, the question I get asked the most is: “What does the FMC do?” I know that this group is very familiar with the FMC. However, let me briefly address our composition and mission. The FMC is a five-member bipartisan Commission appointed by the President and subject to Senate confirmation. The President designates the chairman of the Commission who acts as the chief administrative officer. We are a small agency with a very highly qualified and dedicated staff. Our mission is to foster a fair, efficient, and reliable oceanborne international transportation system and to protect the U.S. shipping public from unfair and deceptive ocean transportation practices.

The FMC is an independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer. The Commission licenses ocean transportation intermediaries, regulates ocean common carriers, and monitors agreements filed pursuant to the Shipping Act.

On October 26, 2015, the Commission voted to issue a final rule on ocean transportation intermediary licensing and financial responsibility requirements, and directed staff to prepare an advanced notice of proposed rulemaking concerning service contracts and NVOCC service arrangements. Under the new rules, ocean transportation intermediaries will be required to renew licenses every three years through a convenient online portal beginning in late 2016, and an expedited hearing process will be provided for license denials, revocations, or suspensions. The Commission received extensive comments from the industry throughout the rulemaking process and based on the comments, the FMC moved forward with a final rule with industry considerations where possible.

On June 18, 2015, I met with representatives from the maritime regulatory authorities of the European Union and the People’s Republic of China in Brussels to discuss antitrust and regulatory issues in maritime transport. As regulatory bodies, we confirmed our renewed intention to cooperate on these matters where possible. This was the second official meeting between the three global regulatory authorities, who first met in December 2013.

On another significant note, in September, I participated in U.S.-Japan maritime discussions and delivered remarks focused on trends in container shipping at the U.S.-Japan international shipping forum. As the latter two events demonstrate, the work of the FMC has a global reach.

I invite you to visit our website to ascertain further information about the FMC and the work we are engaged in on behalf of the maritime industry.

I would like to share with you this evening a few matters we are focused on today at the FMC and our objectives for tomorrow. Congestion in the supply chain is of serious concern. I am sure you will agree on the urgency to find solutions to mitigate and/or prevent congestion. Here, at the Nation’s largest port complex, there are both lessons learned and models to learn from. The recent period of labor negotiations brought forth a number of factors which contribute to port congestion (including intermodal related congestion) – many of which are common to other port gateways. Specifically, such factors include the evolution of the carrier industry to larger alliances and use of mega-vessel containers, issues of chassis shortages and /or misallocation, truck queue time, extended gate operations, and the list goes on.

John McLaurin, president of the PMSA, in a recent speech delivered at WESCCON noted as follows:

“Absent a willingness by all elements of the supply chain to change, if we maintain our current culture and cargo delivery systems, our current practices will not be sustainable over time. Unless all of us are willing to take a hard and honest look in the mirror and are willing to be open about changing business practices throughout the supply chain, we are simply putting off the inevitable – more congestion, less reliability, higher cost, loss of reputation, diversion of cargo, and fewer opportunities.”

I agree with Mr. McLaurin’s observation and as I visit various port gateways, my message has been – if you believe there is no congestion at your port gateway and have aspirations for growth, congestion will come to you absent a proactive management logistics plan and recognition of industry trends.

In the summer of 2014, staff at the FMC moved forward to address the issue of congestion. As staff has heard me say, are you going to lead or are you going to follow? I firmly believe the Federal Maritime Commission needed to lead the congestion discussion in order to stay true to our mission – to foster a fair, effective, and reliable international ocean transportation system in the U.S. trades. The Commission moved forward to host congestion forums at four identified regional gateways. Thereafter, the Commission produced two important documents. The first was released in April 2015 and titled “Report: Rules, Rates, and Practices Relating to Detention, Demurrage, and Free Time for Containerized Imports and Exports Moving Through Selected United States Ports.” This was followed by the second report entitled “U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges.” As Chairman, I am very  proud of the work that FMC staff did to produce these reports, and I believe they are essential reading for those interested not only as to the prospective challenges we face with congestion at our port gateways, but in addition – solutions.

According to the China Daily, in 10 years, U.S. trade with China is expected to increase from the present $500 millionbillion value to $1 trillion! There is no question that a significant portion of that cargo will come through the west coast ports. A question for us as maritime stakeholders, but specifically to the West Coast, is “can you handle it?” Given the leadership I see here at the West Coast ports, I believe you can. Again, the transpacific trade route will grow and modern day mega vessels will be destined to deep water ports.

In preparation for the expected growth, there must be a discussion on the need for terminal operations to adjust to the ongoing evolution of the industry to include application of the latest technology. One area of specific interest to me relative to handling growth and congestion going forward is PierPass. Judging by the numerous comments the Commission has received from stakeholders, I presume it is of concern to you. Ten years ago the FMC facilitated for the terminal operators at this port complex to come together to address congestion related issues.  The MTOs were allowed to develop solutions under the antitrust immunity process granted by the FMC – the agreement filed with the Commission was the west coast marine terminal operators’ agreement, otherwise known as WCMTOA. PierPass was created pursuant to the aforementioned agreement and was inaugurated in 2005. Ten years later, concerns remain as to congestion, gate hours, off peak operations, truck queuing, and increased costs. In addition, the lack of transparency has been raised as a serious concern by a number of stakeholders.

PierPass promised to revolutionize the industry and solve many of the problems that we faced with pollution and congestion. And, 10 years later the industry looks very different. Thanks primarily to the ports’ clean truck plan, emissions from trucks have been significantly reduced.  Off peak and night gate operations have been embraced by the industry. Yet, 10 years after its creation, there are legitimate questions regarding whether PierPass is fulfilling the mission it was authorized to fulfil. At the very least, there is a question as to whether it has maximized its potential.

Presently, unacceptably lengthy truck lines continue, which result in prolonged truck idling. This issue is one which PierPass was specifically designed to address. In addition, associated fees continue to increase, and stakeholders assert the costs have increased while services have decreased. Let me be clear, we have heard from every major stakeholder group asserting this claim. The stakeholders’ views call into question expectations for this agreement.

There is a chorus of distrust and stakeholders demand transparency. In my personal opinion, the only way to address their concerns is through an independent, third-party audit. I have proposed that the local port authorities and PierPass stipulate to an independent, third-party audit.

The FMC is leading, and I ask you for your leadership in partnering in our mutual objectives. Together, all of us, including PierPass if they choose to, can keep the U.S. economy strong by reducing congestion in preparation for the $1 trillion economic boom. Let us lead and not follow – let us not accept what just works for today, but work to guarantee our success for tomorrow.

Thank you again for having me here this evening and thank you all for striving to keep the U.S. economy strong.