Commissioner Dye Addresses NCBFAA Annual Conference

Remarks of Commissioner Rebecca Dye
NCBFAA Annual Conference
Rancho Mirage, California

Thank you for that kind introduction, and for the invitation to be here today to talk about the FMC’s demurrage and detention fact-finding investigation, and the Proposed Rulemaking on NVOCC Service Agreements and Negotiated Rate Arrangements.

I recently returned from China as part of the delegation on the U.S./China bilateral agreement on transportation, and have spent the last couple of days in Los Angeles talking with port officials and trucking companies about Fact-Finding Investigation 28.

Those interviews were part of the first steps in our fact-finding. And, I understand that while I’m here in Palm Springs, I’ll have the opportunity to talk with some of you to learn about your experiences and ideas, as well.

As you know, the Commission is considering a demurrage and detention petition filed by the Coalition for Fair Port Practices, a group of 26 trade associations that included NCBFAA. Public comments on the petition were followed by two days of public hearings, and – subsequently – the Commission’s unanimous decision to launch an investigation.

At those public hearings, NCBFAA was ably represented by Rich Roche, from Mohawk Global Logistics. Rich advocated an approach that, as he put it, could be applied fairly, with more transparency and greater standardization.

As I said at the Commission hearing, my focus is how ocean carrier and marine terminal demurrage and detention approaches can optimize, not diminish, the performance of the overall American international freight delivery system

The Investigation

In its petition, the Coalition asked the Commission to issue a policy guidance statement that would clarify what the Commission would take into account when deciding if certain demurrage and detention practices should be deemed unreasonable.

Shippers, intermediaries and drayage companies supported the request; carriers and terminal operators opposed it. After considering a variety of options, my colleagues and I unanimously elected to initiate an investigation.

Meaningful improvement in demurrage and detention practices would require closer coordination and accommodation among carriers, marine terminals and American importers and exporters. Industry leaders will not only need to look carefully at the challenges we face in the US, but compare our practices with how detention and demurrage are addressed in Europe and Asia.

As the trade press has reported, the Commission has already issued extensive information demands to liner companies serving U.S. trades, and we are in the process of doing the same for container terminals serving our top container ports.

Although the investigation’s central focus will be on the interaction of carriers, terminals and shippers, I believe it is also important to include the perspective of port authorities. So I will be interviewing leaders of major American container ports as well.

Encouragement from Shippers and Trucking Companies

Because the demurrage and detention controversy is as much about customer service as about risk allocation, shipper participation in the investigation is crucial. Consequently, I have scheduled a number of meetings with shipper groups.

Originally, it was drayage truckers who urged us to take up this issue. Soon thereafter, beneficial cargo owners and ocean transportation intermediaries asked us to become involved with these practices. The participation of shippers, truckers and intermediaries in the investigation phase is essential.

We expect shippers and other interested parties to establish the nature and extent of their detention and demurrage problems. In particular, we need a better quantitative understanding, supported by documentation, of the challenges they face.

Our emphasis in the investigation will be on organizational behavior – analysis of specific practices, legal obligations and responsibilities, and the actual control and transfer of cargo. We will be looking into the reasons for and consequences of today’s demurrage and detention practices in U.S. trades; whether those practices – to the extent they may be legacy approaches, for example – still make sense in today’s system of increasingly high-tech supply chain networks;

While we’re aware that some parties may have initial concerns about any potential impact on commercial costs and risks – our aim will be to improve the freight delivery system as a whole. By reducing unnecessary operational complexity. By promoting throughput efficiency. And by minimizing misunderstandings between service providers and their customers.

However, let me emphasize that we’re still at the information phase. We’ve demanded a huge amount of information from ocean carriers and marine terminals, and we appreciate their willingness to provide the information. We also expect a large quantity and quality of participation from our shippers, truckers, and intermediaries.

Supply Chain Innovation Teams

At this point, I should note that, before the demurrage and detention issue arose, the Commission’s involvement with port and terminal issues had been expanding. In part, that is due to our regulatory mandate regarding marine terminal operators – a mandate that includes ports, not just terminals – which has led to significant FMC expertise in the area. But it’s also, in part, owing to our past and on-going interactions with American exporters and importers, drayage trucking companies, and chassis providers.

Experience related to our direct regulatory responsibilities — coupled with our knowledge of, and relationships with related industries — made our role as a catalyst possible.

Serious port congestion problems in New York and New Jersey in 2013 and 2014, and in Southern California in 2014 and 2015, led groups to encourage the Commission to give port operations greater attention. We began our involvement with a series of four Commission regional port forums in the Fall of 2014.

In response to further stakeholder prompting, the Commission issued an Order directing me to form supply chain innovation teams – ultimately there were six teams, three import and three export – composed of leaders of all sectors of the supply chain to develop commercial solutions to port congestion and related supply chain challenges.

Let me repeat that: To help develop commercial solutions, not promulgate federal regulations.

That Order resulted in a two year initiative in which we worked closely with small, multi-stakeholder teams of industry leaders to develop a systems perspective on our supply chain problems.

By the time the Coalition for Fair Port Practices submitted its petition on demurrage and detention, our preliminary research and our work with industry-wide teams had provided many useful insights into the commercial relationships, operational practices, and organizational challenges involved.

In short, the Commission’s supply chain initiative provided an excellent foundation for the current fact finding investigation.

Both our import and export team members told us that supply chain visibility was their key concern, and that each supply chain actor had specific pieces of critical information that they needed. Not large amounts of data, but specific pieces of “actionable” information.

For example, U.S. import shippers said their key critical information need was accurate and timely notification of when the import container was available for pickup. Export shippers, on the other hand, needed to know when and where empty containers were available, and when was the earliest time they could deliver loaded containers to the terminal.

Which may sound simple, but it’s not.

A fuller account of the supply chain actor critical information needs that the teams identified is available in the final report. And I’d encourage you to go to the FMC’s website and read it.

The key point, however, is that the knowledge and relationships developed during our supply chain project prepared us to undertake this deeper dive into demurrage and detention issues.

Questions We Will Address

So, Fact Finding 28 has been launched. Information demands, document requests, interviews and related activities have commenced. We have provided a dedicated e-mail address – FF28@FMC.gov — for those who are willing to share relevant, specific information and supporting documentation. We need this evidence!

And we have imposed two deadlines on ourselves: An interim report to the Commission by September 2nd. A final report by December 2nd.

As for the questions we will be asking — some are designed to clarify what the American detention and demurrage landscape looks like today. Some to identify where and why detention and demurrage may be a recurring concern for the affected parties.

As the ocean carriers highlighted in their hearing testimony, situations that give rise to demurrage and detention are often a problem for all the parties – not just shippers or truckers. Carriers need their equipment back in productive use. Terminals want improved throughput velocity and should not be serving as unwilling de facto storage sites.

That being so, we expect there to be a common interest among carriers, marine terminals, shippers and drayage trucking companies in alleviating frustrations, delays and unnecessary administrative costs all around.

As the saying goes, however, “If it was easy to do, someone else would already have done it.”

Nevertheless, with the active cooperation of industry leaders from shippers, marine terminals, port authorities and the container lines, I believe that we can surmount today’s demurrage and detention challenges, and reap the economic benefits of a more efficient international ocean freight transportation system.

I looking for industry leaders to step up and participate in our effort!

Proposed Rule on NSAs and NRAs

And finally, before I close and take questions, I want to bring you up-to-date on your NCBFAA petition on NVOCC Negotiated Rate Arrangements and NVOCC Service Arrangements and the FMC Proposed Rulemaking on the petition.

Under that Proposed Rule, the Commission would provide an exemption to remove NSA filing and publication requirements – as you know, I have strongly supported the exemption and look forward to its implementation.

Let’s hear it for “no more contract filing!”

The Rule would also permit NRAs to be modified at any time and provide for shipper acceptance by booking under an NRA.The Proposed Rule’s comment period closed at the end of January, and I am expecting a staff analysis and final recommendations later this month.

In the comments that Ed Greenberg submitted on the Proposed Rule, he mentioned a jesting remark that a past FMC Chairman once made at a previous NCBFAA meeting to the effect that “You can always tell when it’s April. The swallows return to Capistrano and the NCBFAA files another petition.”

And it’s a good thing, too!!

I am optimistic that your perseverance will pay off. I agreed with and supported your earlier efforts to eliminate obsolete regulatory requirements.

So naturally, I am looking forward to voting for the deregulatory reforms embodied in the Proposed Rule.

Thank you for your kind attention. If time allows, I’ll be happy to take a few questions.

And later, I hope to hear from you about your experiences with demurrage and detention issues.