Remarks of Chairman Khouri Delivered at American Association of Port Authorities Spring Conference Session “Ports and the Federal Maritime Commission”, Wednesday, March 20, 2019

Good afternoon. I want to thank Kurt Nagle and Jean Godwin for the invitation to join you this afternoon together with my colleague, Commissioner Rebecca Dye. Kurt and Jean do a terrific job for AAPA here in Washington. We always appreciate their knowledge, expertise, and input on Shipping Act matters. As standard disclaimer, my remarks today reflect my personal thoughts and opinions. I do not speak on behalf of the Federal Maritime Commission as a federal agency or the Administration. Commissioner Dye and I will talk about current issues at the FMC, how our work relates to ports, and how our programs might help address some issues and concerns that you face.

FMC ROLE

The FMC’s mission is to ensure a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices. The short version – our job is to ensure competition and integrity in America’s ocean supply chain.

Ports and terminals are among the most important stakeholders that the FMC regulates. Your organizations manage and facilitate the flow of our country’s waterborne commerce and serve as a critical link in the international ocean supply chain.

Ports and the FMC

AAPA and its members have long been among the staunchest supporters of the Commission and its mission. Ports have long felt that it was important to maintain the Shipping Act structure and the Commission. In 2006, AAPA provided important testimony at the Antitrust Modernization Commission, supporting the Shipping Act and how it permits ports and marine terminal operators to work cooperatively to address various challenges. AAPA’s 2006 testimony was quite far-sighted in pointing to the importance of cooperative agreements in achieving operational efficiencies, as opposed to rate discussions.

Since 2006, the FMC has seen increased interest by ports and marine terminal operators in how to use cooperative agreements filed with and reviewed by the Commission to address challenges and issues. The nature and complexity of these agreements have increased considerably in recent years in concert with the increasing complexity of port operations and higher demands on port infrastructure. Due to the unique nature of these types of agreements, FMC staff monitoring of terminal agreements is tailored to the agreement’s scope, authority, and the potential competitive impact of the agreement.

As trade volumes continue to grow and ports need to find ways to make their facilities operate at higher levels of efficiency and productivity, we expect to see more of these port agreements filed at the Commission to increase their operational efficiencies, facilitate trade and to better serve customers.

The Challenges

No surprise here for any of you. Both worldwide containerized trade volumes and container ship capacity continue to grow, with over 5,000 vessels deployed globally providing over 22 million TEUs of carrying capacity. The size of ships serving the U.S. market has grown dramatically in the last decade. And, at the end of 2018, the three global alliances controlled 80% of vessel capacity in the two largest U.S. trades, the transpacific and the transatlantic.

The demands of significantly bigger vessels unloading larger numbers of containers at each port call demands more of ports in terms of productivity and infrastructure. As a result, ports and marine terminal operators have filed agreements to combine aspects of their operations, finance necessary infrastructure improvements, increase terminal velocity, develop collective solutions to mitigate cargo bottlenecks, and a host of other activities, all aimed at enhancing their ability to compete against other ports for cargo. Ports understand that the flexibilities available to them through an agreement filed at the FMC can lead to increased efficiencies and lower costs.

Responding to Challenges, Achieving Efficiencies, and Enhancing Competitiveness

Ports can use agreements to work together to better serve their customers in light of changing market conditions, carrier deployment of larger vessels, and the introduction of new carrier alliances, with the aim of enhancing the competitiveness of the ports.

As an example, the East Coast Gateway Terminal Agreement between the Virginia Port Authority and Georgia Port Authority authorized the ports to engage in cooperative discussions concerning marketing and commercial opportunities regarding carriers, operating systems and cargo handling.

Another example, the Port of Seattle/Port of Tacoma Alliance Agreement allows the two ports to jointly operate container and other facilities to help improve the competitiveness of the Puget Sound gateway.

Addressing Concerns that Require a Collective Solution

The supply and condition of truck chassis available to ports has increasingly become a matter of concern to ports around the country. Agreements at the FMC can be helpful in addressing these chassis issues that have so many moving parts and different parties.

As an example, in 2018, the Southern States Chassis Pool agreement authorized the Georgia Ports Authority and the South Carolina Ports Authority to establish a common chassis pool in order to improve cassis availability and roadability conditions.

Environmental and community impact issues that require coordination within a port or region

In recent years, it has become increasingly important for ports and marine terminal operators to address and mitigate air quality and traffic congestion impacts on their local communities.

In the West Coast MTO Agreement, the marine terminal operators at the Ports of Los Angeles and Long Beach collectively created an off-peak gate program to address cargo-related congestion and pollution in the port area. The Pier Pass program was developed to incentivize the utilization of night and weekend shifts as a way to alleviate day-time traffic congestion and diminish local air pollution attributed to idling trucks awaiting access to the terminals.

Last year, the WCMTOA parties amended the agreement and implemented a new flat fee program applied to all terminal gate users and implemented a new appointment system.

The Los Angeles and Long Beach Port Infrastructure and Environmental Programs Cooperative Working Agreement allows the ports to jointly form Supply Chain Optimization Working Groups that meet periodically to discuss possible measures designed to expedite the flow of containers moving through the ports’ terminals.

All of the above are examples of how different ports and marine terminal operators are using cooperative business agreements filed at the FMC to jointly address port operating challenges. We would review with interest the application of any agreements filed with the FMC to achieve goals that address port issues, facilitate commerce, and ultimately benefit the American exporter, importer and consumer.

Commercial Solutions Rather than Regulatory Responses – Detention and Demurrage

As a brief closing topic – Supply chain efficiency is a leading public policy issue of concern to the Commission and Commissioner Dye will be addressing this topic in a moment.

In December 2016, an organization of trade associations representing shippers, OTIs, and domestic transportation companies named the Coalition for Fair Port Practices, filed a Petition asking the Commission to begin a new rulemaking proceeding to address practices by marine terminal operators and vessel-operating common carriers related to demurrage, detention, and related fees. In response to the petition, the Commission launched a formal investigation to examine practices related to detention, demurrage, and per diem charges and Commissioner Rebecca Dye was named as the Investigative Officer.

As an opening observation, a “one size fits all” regulatory response is most often not the best solution to operational problems, and especially, when we are dealing with a wide variety of business and operational practices in over 300 different ports and marine terminals along the U.S. coastline from Maine around to Alaska and over to Hawaii. A valuable and important role for the Commission is its ability to bring stakeholders together and facilitate commercial rather than regulatory solutions to problems.

And that is what the Commission is doing with respect to port detention and demurrage charges. So, I will turn things over to Commissioner Dye to talk about what she is doing with her Innovation Teams. Thank you.