Winds of Change: Summary of Address on Recent Developments in Maritime Policy and Competition Law

September 7, 2010

Richard A. Lidinsky, Jr.

Chairman, U.S. Federal Maritime Commission

Winds of Change: Summary of Address on Recent Developments in Maritime Policy and Competition Law

Global Shippers’ Forum

Macau

September 6, 2010

            In the Summer of 2009, President Obama appointed me to join the Federal Maritime Commission, and nearly one year ago he designated me to serve as Chairman. In my conversations with the White House and during my confirmation hearing before the U.S. Senate, I identified three goals for my tenure on the Commission:

·        First, to use the Commission’s regulatory authority to provide economic relief and assist the economic recovery for job growth — both within our ocean transportation industry and among the exporting and importing businesses they serve;

·        Second, to facilitate green efforts and job-creating environmental innovations among our ports, terminals, carriers, and overall supply chain, in a manner consistent with the Commission’s authority;

·        Third, to remain at all times vigilant to protect against activities that can harm vital trade, with a focus on protecting our shipping community, and above all the American consumer.

            During the past year, the Commission has taken several important steps on each of these fronts:

·        Economic relief: The Commission has voted to relieve licensed Non-Vessel Operating Common Carriers (NVOCCs) from the expense and burden of publishing or filing individual rates they negotiate with their customers. We issued a proposed rule for comment in April 2010. We have been considering the numerous comments that were submitted, and I am hopeful that the Commission can issue a final rule in the coming weeks. This relief should result in significant cost savings for nearly 3,300 licensed NVOCCs, most of whom are small businesses. Much of these savings should be passed along to the hundreds of thousands of exporting and importing businesses the NVOCCs serve.

·        Environment and sustainability: In my initial Commission meeting in August 2009, the Commission voted unanimously to withdraw its prior opposition to the Clean Trucks programs at the ports of Los Angeles and Long Beach and allow their clean air measures to proceed. In November 2009, we announced the formation of a staff committee to help the Commission become a clearinghouse for information on current and proposed environmental initiatives by the ports, the shipping industry, and other agencies.  The Commission’s Maritime Environment Committee has begun to review the filings at the agency for best environmental practices that the Commission can put forward as models for adoption by other ports and companies. In January 2010, the Commission reviewed and allowed to become effective a proposal by the Transpacific Stabilization Agreement (TSA) to discuss initiatives to reduce vessel-related pollution. This helped them implement slow steaming, which has allowed fuel savings, reduced emissions, and cost savings.

·        Protecting shippers and consumers: In December 2009, the Commission began proceedings to gather information and update its regulations that ensure cruise line financial responsibility to protect consumers. In March 2010, the Commission launched an investigation into vessel capacity and equipment shortages, led by Commissioner Rebecca Dye. The Commission’s investigation is ongoing, but it has led to several steps and proposals by the Commission, as I’ll discuss more fully. In June 2010, the Commission began an investigation, led by Commissioner Michael Khouri, into unfair and deceptive practices by entities that arrange or carry overseas shipments of household goods or personal property. Commissioner Khouri will have interim findings and recommendations in November 2010, and final findings and recommendations in February 2011. Finally, the Commission has been monitoring recent filing requirements issued by the People’s Republic of China Ministry of Transport and the Shanghai Shipping Exchange, so that we can work with China to avoid inconsistencies in our regulatory regimes.

            In 2010, additional events have given heightened importance to these initiatives. In January 2010, President Obama announced a National Export Initiative to double U.S. exports over the next five years, and he then directed U.S. agencies to use every available resource to assist this effort. At the same time, demand for liner shipping services returned more quickly than expected this year, and the Commission has been working to address the resulting space and equipment shortages that have been plaguing shippers on all sides of our trades.

            In March 2010, the Commission initiated its fact-finding investigation into difficulties U.S. exporters and importers have been experiencing due to the lack of available ocean vessel capacity and shortages of containers for exporters. On June 30, 2010, Commissioner Dye and I testified to the U.S. Congress on her interim findings and recommendations. We reported that the Commission had voted to move forward on the following recommendations:

·        Increase oversight of the TSA and its counterpart the Westbound Transpacific Stabilization Agreement by requiring that they submit transcripts of their meetings. This new transcript requirement will be in place for their next meeting in Seattle next week.

·        Increase oversight of global carrier alliances. Commission Staff has been meeting with and questioning the alliances about their activities, and is actively working on recommendations for additional reporting requirements.

·        Establish rapid response teams. Teams within the Commission’s Office of Consumer Affairs and Dispute Resolution Services (CADRS) have been organized to respond quickly and help resolve disputes between shippers and carriers – particular problems involve canceled bookings, rolled cargo, and container unavailability. I encourage you to contact our CADRS office if you experience these problems in the U.S. trades.

            The Commission extended Commissioner Dye’s investigation until November 30, 2010, so that she could continue to monitor issues with space shortages, surcharge impositions, cargo rolling, and equipment shortages through the peak seasons for importers and exporters. As her investigation continues, Commissioner Dye’s team has been working on developing the following responses to these issues: best practices discussion pairs between shippers and carriers, designation of carrier representatives to work with Rapid Response Teams, development of model service contract terms, and the establishment of industry and FMC staff working groups to address export capacity and container availability. In addition, the Commission has been working with the U.S. Department of Agriculture to develop a pilot project that will give U.S. agricultural exporters visibility into locations of empty containers available for their products.

            In addition to the Federal Maritime Commission, the U.S. Congress has taken a keen interest in addressing the problems shippers have been experiencing as trade has recovered this year. At the June 30, 2010 hearing on the Commission’s investigation before the U.S. House of Representatives subcommittee on Coast Guard and Maritime Transportation, the subcommittee chair, Congressman Elijah Cummings, requested that I submit a ” short menu” of amendments to the U.S. Shipping Act. During the same month, Congressman James Oberstar, chairman of the full U.S. House Committee on Transportation and Infrastructure, told a U.S. shippers association luncheon that the time was at hand to end the ocean carriers’ antitrust immunity in the United States.

            Last month I submitted a list of legislative proposals to Congressman Cummings. The heart of my list is to reform the service contract dispute resolution process to allow more timely and inexpensive assistance from the Commission’s CADRS office. I also proposed prohibiting unfair or deceptive practices in such areas as excessive cargo rolling, excessive booking cancellations, imposing surcharges, or refusing to accept third-party or ” shipper-owned” containers. Finally, I proposed adding some visibility into the container leasing companies that according to some reports control more than 60% of the world’s container inventory. My proposals did not address the issue of carrier antitrust immunity.

            At the same time, Congressman Oberstar has said that he is preparing legislation that would end carriers’ antitrust immunity for conferences and rate discussion agreements such as TSA or WTSA. Although a more detailed analysis will have to await introduction of his legislation, it appears he would handle the antitrust issues for other types of carrier agreements in a manner similar to the European Union’s approach to consortia. Because he recognizes that antitrust law alone will not solve the recent problems experienced by shippers, Congressman Oberstar has also proposed addressing excessive cargo rolling and booking cancellations, unfair or deceptive surcharges, and refusals to accept third-party containers.

            At this time, the Federal Maritime Commission has not taken a position on the antitrust immunity issue that will be debated this Fall. In 2007, a bipartisan Antitrust Modernization Commission in the United States recommended that in debates on antitrust exemptions, the burden of proof should fall on those parties who are arguing the exemption is still necessary. The Commission is in the process of studying the impacts of the European repeal of its block exemption and looks forward to providing Congress the best information possible during the coming debate.

            As is evident from the proposals I have submitted to Congress, during the coming debates I personally will keep a focus on improving the service contract process — most importantly the clarity, certainty, and dependability of service contracts, and the availability of practical remedies for disputes over those contracts. Recently, we have seen reports of some carriers attempting to impose early or multiple peak season surcharges before the ink was dry on annual service contracts. These episodes reveal that some treat the service contract as something more like ” guidelines.” Service contracts need to be improved if they are to come close to the vision that Congress had for them when it passed the Ocean Shipping Reform Act in 1998. I also will focus on ending deceptive practices — a core mission of the FMC and any regulatory agency that protects customers and consumers, whether or not antitrust exemptions survive. Without diminishing the antitrust issue, I do not believe that it is the only part of U.S. shipping laws that shippers should examine in your efforts to strengthen and expand the supply chain.

            I look forward to working with shippers, intermediaries, carriers, terminals, ports, and my government counterparts in other nations to ensure an efficient and reliable ocean transportation system that supports a sustained recovery in trade and the global economy.