The Containerization & Intermodal Institute Conference - August 13, 1997
August 13, 1997
Remarks of Commissioner Harold J. Creel, Jr.
The Containerization & Intermodal Institute Conference
August 13, 1997
Thank you. I'm pleased to be here today to participate in the Institute's summer conference. I intend to be brief in order to stick to the planned schedule and perhaps provide a little more time to answer any questions you may have.
My remarks will focus on two areas: the ongoing legislative reform effort, and the Commission's responsibility to address the restrictive trade practices of foreign governments. Let me begin with maritime regulatory reform.
The statutory reform initiative has had a beneficial effect on the maritime industry. I say that because the various segments of the industry actually are speaking with one another. I readily acknowledge that the high stakes involved are forcing industry representatives to do more than give the necessary lip service to each other's needs and views. But the key players are meeting and exchanging ideas. I have argued for the longest time that that is the only way meaningful reform of any kind will be accomplished.
Additionally, the continuing dialogue has highlighted the major issues facing the industry, facilitated a clear articulation of all opposing views, and put the policymakers in a position to make decisions in the best interest of our nation's maritime commerce. The process has focused on four central issues: (1) the extent of flexibility required for contractual arrangements and rate negotiations, or, said differently, the amount of transparency needed for carrier pricing and service practices; (2) whether current filing requirements are too burdensome or unnecessary; (3) the degree of government oversight necessary, along with the organizational structure of the oversight agency; and (4) the need for continued protection for U.S. interests from the restrictive practices of foreign governments.
Throughout the debate I consistently have emphasized the importance of the transparency issue. My belief is that any reduction in public transparency increases the need for government oversight. That oversight requires access to all relevant information. I am pleased that the Commerce Committee has seen the wisdom in requiring all service contracts to be filed confidentially with the Commission. And, the Committee's most recent draft requires that minimum cargo volumes be included in a service contract's list of publicly available essential terms. Other essential terms include: the commodity, the contract's duration, and the involved U.S. port range.
I also have spoken out on the need for the FMC to retain its decisional independence. In my view, that is best accomplished by maintaining a free-standing FMC, or, at a minimum, creating an independent maritime board in the Department of Transportation similar to the Surface Transportation Board. Most in the industry are in agreement on this issue. The Senate Commerce Committee has been informed by the shipping public that it is crucial to the protection of U.S. interests that the FMC's decisional independence be maintained, and that the best vehicle for accomplishing that is to retain a free-standing FMC. The Committee still has not been convinced on this point, since its most recent draft does combine the FMC with the STB into the new Intermodal Transportation Board. I continue to raise the issue, and I am hopeful that it will be included in any continuing deliberations. And, as I have said repeatedly over the past year, we at the Commission will continue to address our responsibilities with the same degree of effectiveness that you all have come to expect from us regardless of our organizational structure.
And finally as to reform legislation, I am pleased that as this process has evolved from the initial House effort back in the spring of 1995, practically all involved in the debate have come to realize the effectiveness and importance of the Federal Maritime Commission. If you will recall, the Transportation and Infrastructure Committee of the House of Representatives would have abolished the FMC and placed its functions in other agencies of the U.S. Government. This proposal, along with other drastic initiatives, passed the full House, but lost momentum once the Senate proposed a similar bill and held hearings.
Will legislation pass this year? Several months ago my answer to that question was: absolutely, yes. At this point, I must admit to absolute uncertainty! Certain Senators have voiced their intention to stop any legislation, at the behest of constituents who feel they'll be injured by it. Majority Leader Lott, on the other hand, reportedly has linked the revised Shipping Act with the OECD shipbuilding legislation in an attempt to facilitate the Shipping Act's passage. Which effort will win out is just too difficult to predict at this point, although I do believe that as time passes chances for passage are decreased. As final deals are struck, however, the bill just may end up with enough to offer all segments of the industry and slide right through. We at the Commission will continue our impartial advisory role, in an attempt to objectively inform Congress and those involved of the potential ramifications of all options being discussed.
I now turn briefly to the Commission's responsibility to address restrictive trading practices. As I am sure you know, the Commission is authorized to adjust conditions unfavorable to U.S. shipping in general, to address adverse conditions affecting U.S. carriers in any U.S. foreign trade, and to take appropriate action if a foreign government or carrier unduly impairs a U.S.- flag vessel from accessing a foreign-to-foreign trade. These are without question important and powerful authorities bestowed upon the Commission.
I continue to be amazed at the reaction of those who become aware of the Commission's foreign practices authority for the first time. All of a sudden we become the "mouse that roared". The Commerce Committee recognizes that foreign governments' policies to promote their national-flag carriers have resulted in an industry "which is not completely driven by economic objectives." And so the Senate bill specifically strengthens the Commission's authority to enable it to provide greater protection from certain discriminatory actions.
These trade statutes have several beneficiaries. To begin with, U.S. government executive agencies, in particular the Departments of State and Transportation, consistently have cited these authorities in their negotiations to remove restrictive shipping practices of various foreign governments. These agencies point to the broad authority the Commission maintains, its decisional independence, and the severe sanctions and retaliatory action it can effectuate in response to a foreign government's unfair practices. We have been told on a number of occasions that the mere threat of Commission investigation and action has either facilitated discussions or actually influenced a foreign government to remove a restrictive practice.
In the same vein, foreign governments whose national shipping lines face the same restrictions U.S. companies face in a given trade, traditionally have supported the FMC's actions to remove unfair trade practices. Most nations do not have similar statutory authority, and these governments recognize the lead role the FMC takes for the benefit of all trade participants.
Additionally, the Commission's actions in this area have clear benefits to U.S. companies operating in our oceanborne commerce. A Commission investigation or proposed action can directly benefit carriers, shippers, intermediaries, and the like. It is no coincidence, as I just mentioned, that most sectors of the industry recognize the Commission's effectiveness in this regard. Over the years we have initiated numerous actions to address foreign laws, regulations or practices that create unnecessary operating burdens which have a negative impact on U.S. interests.
And finally, successful Commission action in any particular case enhances the free flow of U.S. commerce, with the attendant benefits that flow throughout the U.S. economy. It goes without saying that trade barriers harm commerce. Commission actions to remove unfair trade barriers in the maritime field benefit not only those companies directly involved in that commerce, but the businesses that rely on their services and ultimatelly - the consumer. That is why the Commission has been so vigilant in identifying unfair practices and developing the most appropriate means of removing them.
On that point, I must emphasize that the Commission's policy objective is not to implement sanctions or impose penalties. That always is a last resort. Much as our efforts to address commercial malpractices focus on compliance as opposed to penalties and enforcement, our goal in carrying out our restrictive practices authority always begins with this question: what is the best means to remove the unfair practice or barrier? That is why you will see the Commission use an array of approaches in such matters since the best mechanism for freeing up U.S. commerce differs from trade to trade.
As you may know, we have several cases in the works at this very time. Probably the most prominent involves our trade with Japan. I am sure you are well aware that we deferred sanctions against the Japanese flag carriers this past April based on a last minute agreement reached between our Maritime Administration and the Japanese Ministry of Transport. The complained of practices, involving a complex prior consultation system on all carrier port activities in Japan, as well as the difficulty U.S. companies have experienced in obtaining stevedoring licenses in Japan, appeared to be on the path to resolution. The Commission deferred its imposed sanction -- which was a fine of $100,000 per voyage against Japanese-flag carriers -- until September 4. Progress reports were required on July 1 and August 5. I am concerned, after reading the most recent carrier reports, that the anticipated progress towards resolution has not taken place. The U.S. carriers have flatly said that the commitments made in April have not been met by the Japanese. The Japanese carriers, on the other hand, have pointed to significant progress and anticipated resolution in the very near future. The Commission will consider these reports and any subsequent developments prior to determining its final action. I must tell you, however, that barring a significant degree of progress in the next few weeks, the Commission's sanctions will take effect on September 4. I remain cautiously optimistic that the situation will improve, but we are prepared to implement the stated sanctions if resolution is not achieved.
The Commission also has stepped up its investigation into alleged discrimination by Brazil against foreign carriers serving its ocean trades. The Commission has been looking into allegations that Brazilian laws and regulations improperly favor Brazilian-flag ships, preclude U.S. carriers from operating warehouses in Brazil, and foreclose these carriers' service to other trades with Brazil. We recently broadened our investigation after bilateral talks between our two Governments failed to show any significant progress. The Commission issued information demand orders to the carriers in the trade and warned Brazil that its carriers are subject to retaliatory action should the Commission find practices in violation of the underlying statutes. The Commission will be reviewing the responses to these orders in the very near future and at that time will determine its next step. Our hope is that the Brazilian Government will initiate the action necessary to remove any unfair trade barriers; however, I do not have sufficient reason for optimism at this point that such action will take place without formal Commission intervention.
Two other trades also have hit our radar screen in the past several months, although no formal action has yet been initiated. The Commission has been monitoring conditions in the U.S./China trade which appear to hinder access to the trade, preclude foreign companies from opening branch offices, and frustrate the handling of cargo. A concern also exists over the Shanghai Shipping Exchange and the extent to which it could exert control over foreign shipping lines' pricing practices in the U.S./China trade. Bilateral discussions do not appear to have made much progress in resolving these concerns, and you may have read recent press reports that U.S. carriers perceive a need for FMC action. We will determine whether any type of formal action is necessary in the upcoming months.
Additionally, key Senators on the Senate Commerce Committee brought to our attention the Government of Panama's recent award of terminal development and operation rights in the Ports of Balboa and Cristobal and the bidding process involved therein. We are in the process of reaching a preliminary conclusion as to both our jurisdiction and whether there were unfair shipping practices within the meaning of our statutes. The Commission should be considering this matter shortly.
You can see that we have a full agenda in this area. Those who are disadvantaged by these trade practices have my commitment that we will pursue all of these matters to successful resolution.
That concludes my prepared statement. Thank you for listening to me this morning. I would be more than happy to address any questions you may have.