Comments of FMC Commissioner Rebecca F. Dye at the 2010 NCBFAA Annual Conference

• Thank you for inviting me to your Association’s 36th Annual Conference. I have enjoyed speaking to your Association a number of times over the past several years, and I was very pleased when Ed asked me to be here today.
• My remarks today reflect my own individual views and are not offered as the official position of the Federal Maritime Commission.
• Ocean transportation intermediaries are critical players in determining American success in international trade. Your companies are working with U.S. importers and exporters to develop complete logistics operations which allow American companies to thrive in a fiercely competitive world market.
• During 2009, the maritime industry, like every other sector of the global economy, faced the most significant economic challenges of at least a generation.
• International trade volumes shrunk dramatically. During 2009, U.S. liner exports fell by 14 percent and imports fell by 16 percent. Freight rates fell as carriers laid up more than 500 vessels worldwide. Carriers estimate they lost a collective twenty billion dollars during 2009.
• Fortunately, global trade has improved in recent months, reflecting the moderate worldwide improvement in economic activity during the fourth quarter of 2009 and early 2010.

FACT-FINDING NO. 26

• Shipping rates have increased recently, but many liner ships remain idle.
• The Commission has received a growing number of reports from shippers and intermediaries that importers and exporters have had difficulty obtaining vessel space, particularly in the U.S.-Asia trades.
• The Commission has also received reports of U.S. exporters experiencing problems with the distribution and availability of shipping containers for their goods on those same Asian trades.
• Due to our concerns about the causes of these container vessel capacity and equipment constrains as well as concerns about whether those constraints could hinder the U.S. economic recovery, the Commission has ordered an investigation into these practices.
• On March 17th, the Commission announced an investigation into current conditions and practices in the U.S. liner trades, and into potential impediments to the flow of ocean-borne import and export trades.
• I was named the Commission’s Fact-Finding Officer.
• Also on March 17th, I was pleased to appear with Chairman Lidinsky before the House Subcommittee on Coast Guard and Maritime Transportation to discuss this problem.
• The Commission will use the information obtained in the investigation and the recommendations of Fact-Finding 26 to determine its policies with respect to vessel and equipment capacity related issues.
• Last week, I conducted Fact-Finding interviews in San Francisco and Portland, Oregon.
• I encourage everyone with potential solutions to these problems to participate in the Fact-Finding investigation including carriers, U.S. exporters and importers, intermediaries, ports, and other industry participants.
• I intend to interview everyone who wishes to participate in the investigation.
• My interim report of findings and recommendations is due to the Commission no later than June 15th.
• At the March 17th Subcommittee hearing, Chairman Cummings announced a follow up hearing for July 2nd to review the interim report.
• I appreciate working with your organization and individual companies in preparing this important report.

REGULATORY RELIEF

• The Federal Maritime Commission may use the liberalized exemption authority that Congress gave us under the Ocean Shipping Reform Act of 1998 to grant certain regulatory relief.
• If the Commission identifies regulatory relief measures that would not substantially reduce competition or be detrimental to commerce, I believe we may and, that we should, provide this relief.
• I strongly support the Commission’s use of this exemption authority to reduce unnecessary regulatory burdens on American businesses.
• Especially under today’s economic conditions, we should grant reasonable exemptions to simplify the business processes of American companies, put cash back into businesses, and generate additional American jobs.
• NCBFAA petitioned the Commission to exempt NVOCCs from the provisions of the Shipping Act requiring NVOCCs to publish and adhere to rate tariffs in those instances where an NVOCC has individually negotiated rates with its shipping customers.
• As most of you know, on February 18th of this year, the Commission approved a motion to initiate a rulemaking that would relieve NVOCCs from the costs and burdens of publishing in tariffs the rates they charge for cargo shipments.
• As I have stated a number of times in recent years, given what appears to be the lack of practical usefulness of the current tariff system, I believe it is time to revisit the traditional notion of tariff filing and enforcement. Over 90 percent, and in some trades 95 percent, of freight carried to and from the United States is currently under contract.
• According to comments filed with the Commission, this action could save many NVOCC businesses up to $200,000 per year.
• I am extremely pleased that the Commission has begun the process to grant the National Customs Brokers and Freight Forwarders Association’s petition for exemption from tariff publication and adherence.
• The Commission directed the staff to prepare a notice of proposed rulemaking that would relieve licensed NVOCCs from publishing and adhering to rates in tariffs while imposing several conditions on this regulatory relief.
• After the proposed rule is published, we look forward to receiving your comments about the scope of the proposed rule and your views on the proposed conditions.

ANTITRUST IMMUNITY

• I know that many of you are interested in how the European Commission’s decision to repeal the exemption from the ban on restrictive business practices for liner conferences will affect carrier antitrust immunity in the United States.
• Although I support moving forward on the deregulatory path, I think it is unwise to implement major reform in the U.S. system of ocean transportation regulation under current economic conditions.
• However the E.U. ultimately decides to treat the international liner industry, I expect the U.S. will continue to rely on certain aspects of our current ocean regulatory system.
• The U.S. ocean shipping regulatory system is comprehensive, and includes not only antitrust immunity for vessel operators, but also for marine terminals, and certain port authorities. Antitrust immunity is offset in the Shipping Act by the “”prohibited acts”” contained in section 10 of the act.
• Also, the Federal Maritime Commission has the authority to seek injunctive relief against agreements that are substantially anticompetitive because they either unreasonably increase prices or decrease service.
• Terminal operators, port authorities, maritime labor, freight forwarders, cargo consolidators, not just ocean carriers and shipper organizations, are affected by comprehensive shipping reform efforts. The impact of legislative change, and the potential for unintended consequences, is great.
• Currently, the Commission is collecting data and stakeholder information for our study of the impact of the E.U.’s October, 2008, repeal of its liner conference block exemption.
• Our study will cover five complete calendar years, from January 1, 2006, to December 31, 2010.
• We appreciate that the global economic downturn creates substantial challenges for any effort to isolate the effects of the E.U.’s elimination of the conference exemption from broader economic trends. Consequently, we are looking at ways to develop a comparative analysis addressing the issue.
• In order to learn about stakeholder’s experiences before and following the E.U. block exemption repeal, we are having discussions with shippers, shipper councils, ocean transportation intermediary organizations, representatives of port authorities, and ocean carriers.
• Also, the Commission has plans for a possible Notice of Inquiry to solicit an even broader range of insights and views this fall. Those comments and the other data we are gathering would be used to prepare the final report.
• Thank you again, I look forward to working with you to ensure that our country has the most efficient ocean shipping environment possible.