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Remarks of Steven R. Blust, Chairman, to the National Customs Brokers and Freight Forwarders Association Annual Conference, San Antonio, TX - March 17, 2003

March 17, 2003

Remarks of Steven R. Blust, Chairman,
Federal Maritime Commission
to the National Customs Brokers and Freight Forwarders Association
Annual Conference

March 17, 2003

San Antonio, TX


I am very pleased to be here. I would like to introduce the other members of the FMC staff here today: Vern Hill, Director of the Bureau of Enforcement, Anne Trotter, Director of Passenger Vessels and Information Processing, and Ralph Friebert, Director, Office of Transportation Intermediaries. The relationship between the FMC and the NCBFAA is longstanding and critical. Your organization represents each of my organization's most significant constituencies - shippers, carriers, and OTIs. I spoke in September to the NCBFAA Government Affairs Conference. I had been in my job about 6 weeks at that time. I've got 6 months under my belt now and can say that I continue to be impressed by the opportunity I've been given to see the maritime industry from Uncle Sam's perspective. Because the FMC has such a wide view of the industry I can see clearly the interdependence between each player in that industry and the significance of that relationship.

What's New

Let me first give you a brief overview of what is new at the FMC.

One new initiative the Commission is undertaking to enhance our outreach is a series of seminars hosted by our five field offices to help educate the industry and the public about our functions and services and to provide instruction regarding the regulatory obligations of providers and users of ocean liner shipping services in the U.S. foreign trades. The first of such seminars was held in Miami on February 25th and was quite well attended. The second will be in New Orleans on this coming Wednesday, March 19th. Our area representatives in New York, Miami, New Orleans, Los Angeles and Seattle have always functioned as a kind of "help desk" for the industry and we hope to formally expand this role through these seminars. Topics will likely range from the assistance the Commission can offer in day-to-day business to issues of timely interest to the industry as a whole. I hope that these seminars will also provide a forum for continuing and enhancing dialogue between the industry and the Commission. We offer our services to you and hope that you will continue to educate us in turn.

We've been very busy at headquarters as well. Our day-to-day functions in licensing, trade analysis and enforcement are as busy as ever. Commissioner Brennan is working towards issuing his Fact Finding report on TSA April 11th. The Commission recently issued proposed rules to strengthen Passenger Vessel Operator financial responsibility to ensure that passengers are indemnified for nonperformance of a voyage.

We've had a recent surge in petitions for Commission action and I'm sure you're aware of most of those. While I can't comment on any of those in detail, I will say that I believe this general trend is reflective of the challenging times the industry is currently facing. And the Commission is at the industry's disposal, to the extent of our jurisdiction, to help resolve disputes that inevitably arise in tough times.

In that vein, the Commission also offers several informal dispute resolution programs, including consumer complaint ombudsman-type assistance and more structured forms of alternative dispute resolution, such as mediation. Should the opportunity and need arise, I encourage you to take advantage of this service - the efficiency and economy of alternative dispute resolution is now well established in the business world. I firmly believe that particularly when a conflict between two parties is rooted in differing expectations of their commercial relationship, a collaborative resolution with the assistance of a mediator may be preferable to a formal legal proceeding.

Security

I know you'll be talking a lot about security in the coming days and what the recent changes mean to your industry. What the FMC offers to the homeland security effort is primarily to ensure that commercial entities perform their business in a proper manner. The FMC reduces the haystack of potential bad actors in the industry each time we license a new OTI, audit current licensees, or hear a complaint against a carrier for example. The FMC has a great wealth of knowledge and information about the various entities in the supply chain which we share with the front line agencies. We continue to cooperate with customs in identifying cases of cargo misdescription. With regard to our OTI licensees, we are amending the application form to get more information including the identity of all owners and officers. Particularly relevant to the issue of transportation security is the FMC's responsibility to ensure that ocean common carriers do not contract with nor accept cargo from intermediaries that have failed to comply with statutory licensing and financial responsibility requirements.

To assist in the process, we have just posted on our website, a list of OTI's which have met our licensing and financial guarantee requirements. Anne Trotter has been responsible for its development and will provide weekly updates to the list in the future.

I believe that the FMC's best contribution to maritime security is to firmly hold each industry player accountable for meeting its legal obligations to its customers and business partners. Likewise, it is essential that each entity in the supply chain do its own part towards securing the chain, and there must a balance of supply chain security with trade facilitation - balance risk and return, control and cost. I urge you to get to better know your customers and your service providers and to ensure that you are working as a team. The transportation system must continue to work. I believe that all of the entities involved in ocean transportation, including government agencies, must form a collaborative and integrated system to ensure the safety and efficiency of the supply chain.

Technology will be a major component of future security initiatives, but it must be combined with solid business processes performed by trusted and trained people to make the process secure.

China

As you all are well aware in December of 2001 the People's Republic of China issued a new law covering international maritime transportation. The Commission continues to have concerns about whether the law may create or perpetuate differing requirements for, and treatment of, Chinese and non-Chinese carriers and intermediaries, or creates or perpetuates unreasonable barriers to those who provide transportation services to and from China.

The FMC, as an independent regulatory agency, does not have the authority to negotiate with foreign governments - that is the job of MARAD, the Department of State and other executive agencies. However, we can and do offer technical expertise and independent analysis to those negotiators when appropriate. And, while we are independent of the executive agencies, of course we welcome their views and their efforts to remedy the restrictive practices addressed in our own proceedings.

The Maritime Administrator, Captain William Schubert, and many private industry groups raised their concerns with the Chinese government's Ministry of Communications (MOC). They requested further clarification of the meaning and impact of the law and asked for a more transparent process in the development of the rules which will implement the law. Back in June of last year, the Commission learned that the MOC issued a set of draft rules to implement the new law and provided an opportunity for the industry to comment on those draft rules. We were gratified that organizations such as yours took the initiative to submit such comments to the Chinese. Of special interest to your membership, we note that MARAD has and continues to explore several options to address the barrier represented by difficulties presented by the Chinese law, including the preliminary MOC draft rules' requirement that NVOCCs deposit cash in a Chinese bank account available to cover non-performance or fines arising from violation of Chinese shipping law. We're hopeful of continued progress in the bilateral discussions, because the final regulations, which became effective March 1st, contain indications that the Chinese have, at a minimum, recognized the barriers that such a requirement may represent to small- and medium-sized NVOCCs. We are also hopeful that we will continue to have industry assistance from organizations such as yours in determining whether those rules reflect or address the concerns you raised to the Chinese, Marad and the FMC.

As you know, the Commission is authorized to address restrictive foreign shipping trade practices. Section 19 of the Merchant Marine Act of 1920 and the Foreign Shipping Practices Act of 1988 empower the Commission to make rules and regulations governing shipping in the foreign trade to adjust or meet conditions unfavorable to shipping and to address adverse conditions that affect carriers, OTIs and shippers in the foreign trade, but which conditions are not otherwise applied to foreign entities operating in the U.S. The Commission's ultimate aim is to use its authority to ensure that you can serve your customers wherever they may be with the widest range of services on a level global playing field.

The FMC's mission is generally to ensure that fair competition exists in the ocean transportation industry. We do so by ensuring that there are no undue controls, influences, or non-market barriers imposed by any nation, carrier, cargo owner or intermediary, which can adversely affect U.S. oceanborne trade. Our mandate is to help remove impediments to fair competition and thereby allow you to conduct business as effectively as possible.

The Commission is extremely proud of its excellent track record for using the tools we have at our disposal to ensure U.S. oceanborne trade flows unencumbered. Our structure and mandate have given us the ability to be nimble and creative in our responses -- and our mission is focused and clear. I believe that the Commission is a uniquely effective tool, well qualified to achieve the tasks Congress has put before it. The clarity of the Commission's mission and its unique ability to focus on issues affecting this industry alone have certainly played important roles in our past successes.

The Commission's continued success in this area, however, will depend on the willingness of groups such as this one, to talk to us candidly about the "hows, wheres and whys" of any foreign practices that either unreasonably limit your ability to serve your customers or encumber your ability to compete fairly with your business rivals. We rely on your frank and sincere identification of such barriers, and the information you provide assists us to be effective in eliminating those barriers. While the Commission is always hopeful that a diplomatic solution to the foreign practices it identifies as restrictive may be reached, it stands prepared to use its regulatory authorities when such diplomacy fails.

Balance and Cooperation

I don't think many would argue that the industry faces many challenges in today's world - from security to trade imbalance to general economic downturn. I would like to propose that these difficult times can be more easily weathered if the industry continues to seek balance - balance between shipper and carrier interests, balance between governmental and commercial interests, balance in the international trades, and so forth. Further, it is my hope and prognostication that we are entering an era where the industry will come to value cooperation and collaboration over confrontation. Unilateral efforts on the part of any segment in the ocean shipping industry will not work as effectively as what can be achieved through collaboration and cooperation among the parties involved.

The industry, the shipping public and the government must work together to balance the need for secure and high quality shipping services with the need for an efficient and economical transportation system as a whole. Each industry player has an important role to play in ensuring the efficient and safe functioning of ocean commerce.

Conclusion

With recognition of this need for interdependence, our industry can thrive in these challenging times. Thank you for asking me to be here with you today. I wish you a safe and successful future.