Testimony of Chairman Maffei before Congress: “Executive Session and Ocean Shipping Reform Act Hearing”

Testimony of
Daniel B. Maffei
Chairman
Federal Maritime Commission

Before the
U.S. Senate
Committee on Commerce, Science, and Transportation

Good morning Chair Cantwell, Ranking Member Wicker, and Members of the Committee. I am honored to appear today with my colleague Rebecca Dye to discuss the authorities of the Federal Maritime Commission, and legislative proposals to strengthen them.

The dramatic surge in ocean cargo spurred by the COVID-19 pandemic has led to reduced reliability, higher costs, and port congestion, not just in America but around the world.

Pictures of lines of hulking containerships and ports crowded with high stacks of containers draw media attention but can be misleading. Because what you see at America’s ports is largely a manifestation of inland supply-chain problems such as inadequate inland cargo facilities, shortages of equipment such as chassis and containers, and shortages of warehouse workers and truckers.

In fact, America’s ports have handled safely and efficiently millions more containers of cargo in 2021 than ever before in U.S. history. The record numbers of throughput are a tribute to the port companies and workers that have never stopped, even in the worst days of COVID.

But even with increased productivity at our ports, the epochal demand for ocean freight services has overwhelmed the capacity and freight rates have gone up dramatically compared to pre-COVID levels.

Unfortunately, the biggest increases are hitting the smaller & medium-sized shippers and farmers who do not have the shipping volumes that the Nation’s biggest retailers have – and thus, lack the bargaining power with the ocean carriers and terminal operators.

The situation defies easy answers. The usual answer to high rates would be to incentivize the containership lines to add more vessels to address demand. But they have added more capacity on the water and all it seems to do is contribute to longer lines of ships outside our Nation’s largest ports.

The Commission has responded to supply chain challenges as aggressively, creatively, and comprehensively as we can. We have:

• Intensified enforcement, paying particular attention to ocean carriers.
• Challenged the fees and surcharges some carriers slap on top of already high freight rates.
• Increased the monitoring requirements on ocean carrier alliances.
• Provided guidance to shippers on bringing complaints to the FMC.
• Implemented a program to audit the nine largest container carrier lines.
• AND we continue to work to achieve compliance with our interpretive rule on demurrage and detention.

Personally, my highest priority as Chairman is for the FMC to promote access to export markets for U.S. producers, including farmers. The supply chain situation is especially difficult for agricultural exporters who are put at the greatest disadvantage due to the scarcity of equipment in agricultural regions and the unpredictability of when ships will come into ports and be ready to take on export boxes.

As part of Fact Finding 29, Commissioner Dye is working with stakeholders to find ways to make it easier for exporters to get their boxes on ships. I leave it to her to discuss her recommendations, but know that I fully support them.

One recommendation we implemented earlier this year was appointing a veteran of the ocean shipping industry as an in-house export advocate within our consumer affairs bureau.

Also, I am announcing that the FMC’s audit team will expand its scope to get information from carriers on their handling of exports and how to do better. AND our Bureau of Enforcement is especially prioritizing cases involving exporters.

I sincerely believe we are now pushing up to the limits of our authority under the current shipping laws. Since the enactment of those laws – The Shipping Act of 1984 and The Ocean Shipping Reform Act of 1998 – global containerized trade has grown exponentially.

Over the years, consolidation of ocean shipping carrier companies means that there are now less than half the major competitors in the market now than there were in the late nineties and – as some of you aptly pointed out – not one major global container ship line is based in America any longer. In my view, the laws governing container shipping needed updates, even before the current COVID-triggered demand surge.

That’s why I’m grateful to Senators Klobuchar & Thune and the co-sponsors of their bill as well as to Chair Cantwell & Ranking Member Wicker for holding this hearing. The bill includes new authorities that would provide the FMC with additional leverage over regulated entities and better protect shippers from unfair and deceptive practices.

While the FMC can do some needed rulemaking even without enacting new legislation, updating our statute would remove any ambiguity about Congress’ priorities on matters such as detention and demurrage, export issues, and ocean shipping contract reform.

To be clear, any new law should minimize unintended consequences such as disruption of trade, service reductions, or needless new compliance costs. It should be a balanced approach applicable both now and in the future when we do eventually get past the supply chain disruptions and freight rates come down again.

Thank you for your attention, and I look forward to answering your questions.

Updated 3/7/2022: Statement updated as delivered to Committee