Comments of FMC Commissioner Michael A. Khouri at the International Trade Symposium: Charting New Horizons

Good morning. My thanks to the Virginia Maritime Association and American Shipper for the opportunity to join this panel discussion. My remarks today reflect my personal views and thoughts and are not offered as the official position of the United States or the Federal Maritime Commission.

The Federal Maritime Commission is an independent agency with responsibility for the regulation of ocean borne transportation in foreign commerce between the U.S. and our trading partners. The FMC’s mission is to administer the laws assigned by the Congress and to develop and administer policies and regulations that foster a fair, efficient and secure maritime transportation system.

Among the various maritime statutes assigned to the FMC is the Shipping Act of 1984. The Shipping Act provides, on one hand, that liner carriers will have a limited antitrust immunity for certain discussions that occur within agreements that are filed with and monitored by the FMC. On the other hand, the Commission is responsible for monitoring and ensuring that such agreements do not result in unreasonable increases in transportation costs or decreases in transportation services. We also monitor service contracts between ocean common carriers and shippers and joint vessel operating efficiency agreements with a view to guard against detrimental affects to shipping in the U.S. foreign trade.

A major issue that is currently under investigation at the Commission is the capacity and equipment shortages that are being experienced in the U.S., especially in interior areas that are not close to large metropolitan areas.

U.S. exporters of agricultural products are particularly exercised about the impact of capacity limitation, equipment unavailability and rate increases on their ability to compete internationally. The media is giving attention to these concerns. Among numerous articles, the Wall Street Journal published a front page story on this issue on March 12th. The day before this article, President Obama launched the National Export Initiative to facilitate the creation of jobs in the United States through the promotion of exports.

The capacity, equipment availability and rate increase issues and their impact on U.S. shippers are of great concern to the FMC. On March 3rd, the Commissioners voted to initiate a Non-Adjudicatory Fact Finding Investigation into the current conditions concerning vessel and equipment availability in the U.S. export and import liner trades.

The Investigative Officer for the Fact Finding is Commissioner Rebecca Dye, who for the past several weeks has been conducting confidential interviews with beneficial cargo owners, ocean transportation intermediaries and ocean carriers. She is meeting with importers as well as exporters. She has conducted interviews in San Francisco, Portland, Oregon, San Antonio, New York and Washington, D.C. She is also considering a trip to the mid-west later this Spring.

Interested parties are invited to contact Commissioner Dye at the FMC should they wish to provide testimony, or evidence, or contribute in any other manner to the development of the factual record.

Commissioner Dye will issue an interim report of findings and preliminary recommendations on June 15th. The Commission’s final report of findings and recommendations will be issued by July 31, 2010. I want to stress that this Commission Fact Finding is not a judicial or blame assessment process. Commissioner Dye is gathering information in an effort to shed light on the issue, to assist all parties in finding mutual solutions as well as making recommendations on possible future actions.

As additional assistance, the FMC’s Office of Consumer Affairs and Dispute Resolution Services provides a variety of dispute resolution processes designed to counsel and help shippers, carriers, and other industry participants resolve commercial disputes. Our dispute resolution program is available to help parties with any complications that arise related to U.S. import/export issues. I invite you to visit our website, fmc.gov to review this program and other export and import issues.

One final comment — recent reports of increases in annual transpacific contract rates have heightened shipper concerns that these rate hikes are facilitated by carriers using, first, their legal authority to discuss voluntary general rate guidelines with, second, discussions to agree on capacity restriction. The first discussion would be legal under the Shipping Act. The second discussions — if they occurred — would be outside of the Shipping Act purview and would therefore be a violation of the Sherman Act.

While the FMC’s Fact Finding is not focused on the vessel operator’s antitrust immunity, the Commission is mindful of these concerns and plans to closely monitor the carriers’ collective activities. If there is any indication that capacity issues and higher freight rates are credibly linked to any improper use of antitrust immunity by foreign-flag or U.S. flag liner carriers, the Commission will take action. We may also see renewed attention by Congress and the Administration.

Again, it is a pleasure to be here today and I look forward to participating in the panel discussion.