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Chairman Blust Addresses the International Propeller Club October 10, 2002

October 10, 2002

Remarks of Steven R. Blust, Chairman
Federal Maritime Commission

International Propeller Club Conference
Charleston, South Carolina


October 10, 2002


Thanks for the kind introduction Hal. Hal's term as Chairman was notable - he shepherded the agency through some interesting times - from the threat of abolishment of the FMC to the passage and implementation of OSRA and strengthening of the FMC. I am honored to follow him and I thank him for the outstanding work he has done over the years.

And my thanks to the Propeller Club for giving me the opportunity to address you this morning. I note that our topic for this morning's events is "Shipping in a New Era." Indeed, it is a unique time in which we find our industry. On the one hand, projections for cargo growth look very good. The Department of Transportation released a study just last week indicating that tonnage volume in the nation's transportation system should increase by about 70% by the year 2020. Most of that will be in international freight which is expected to double. Even now, cargo volumes are high, ships are full on many key trade lanes and rates from a shipper's perspective are low. However, on the other hand, there are many looming challenges to the smooth and efficient flow of business. The trade imbalance in the transpacific and other trades such as South America will likely continue to plague carriers. Infrastructure constraints of roadways, railways and ports could limit the ability to handle the increased volumes. Reduced regulations have liberalized and changed the rules of the game. And security concerns and new requirements related to security are changing the way we do business.

I hope this morning to provide you with a brief picture of our role in this evolving business environment and what is new, besides me, at the FMC. I've had a lot of questions in recent weeks about my "agenda" as Chairman of the Federal Maritime Commission. My "agenda" is simply to ensure that the Commission continues the role of ensuring "Fair Maritime Competition" that was envisioned for it by Congress upon creation of the agency 41 years ago, and more recently with the passage of the Ocean Shipping Reform Act of 1998 (OSRA). The FMC's primary mission is to ensure that fair competition exists in the ocean transportation industry, resulting in maximum benefits to the nation, with a minimum of government intervention and regulatory cost. The intent of our governing laws is to let market forces guide the growth and development of U.S. international trade. The Federal Maritime Commission is charged with 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. And through this role, I am certain that the FMC will play a significant part in helping the industry reach a balance in this new environment. I believe that this industry will continue to shape itself around the new statutory mandates and the new, and evolving, marketplace.

The FMC does not have a promotional role; rather, our mandate is to help remove impediments to fair competition and thereby allow you to conduct business as efficiently and effectively as possible. However, I would like to pick up on an idea Hal has mentioned several times over the past year and encourage all of you as members of the Propeller Club and as individuals to take on a self-promotional role.

It seems to me that there has never been a better time to raise the public profile of the maritime industry. The public is newly aware of the potential vulnerability of our ports and ships to terrorist activity, which in turn should bring to the forefront the importance of the industry and international trade generally in the day to day lives of the American people. For better or worse, the west coast port shutdown may help to do this. However, particularly in light of that event, it may behoove all of you to be sure that the public image of the industry is both accurate and positive.

In the interest of helping all industry players adjust to the new maritime regulatory environment, I intend to build on the FMC's already fine reputation for responsiveness to our stakeholders. We have a number of programs and services available to the shipping public. Our website, www.fmc.gov, offers information about our programs, our regulations, decisions by Administrative Law Judges and the Commission, a link to our service contract system, a list of common carrier tariff locations, and numerous other features. We recently updated our Frequently Asked Questions to include information for ocean transportation intermediaries.

Most of you are aware of our formal proceedings before ALJs, however the FMC also offers several informal dispute resolution programs, including consumer complaint ombudsman-type assistance and more structured forms of alternative dispute resolution, such as mediation. I encourage everyone to take advantage of this service - the efficiency and economy of alternative dispute resolution is now well established in the business world.

One new initiative I hope many of you will take advantage of is a series of seminars hosted by our five field offices to help educate the industry and the public about our functions and services. Our area representatives in New York, Seattle, Miami, New Orleans, and Los Angeles, 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 you in your day to day business to topics of timely interest to the industry as a whole.

I know that maritime security and port security legislation is a topic of much interest to this group and I understand that you will discuss it in great detail tomorrow morning. Our role at the FMC is primarily to ensure that commercial entities perform their business in a proper manner. As such, among other functions, we license OTIs and collect service contract information to allow us to monitor activities as may be required. These commercial compliance and enforcement processes can help deter and limit potential security violations. We also use our expertise and vast collection of commercial information to assist the various entities on the front lines of securing our ports and vessels. The Commission maximizes the benefits of our efforts through participation on multi-agency task forces and direct communications with other agencies, such as Customs when cargo misdeclarations are identified.

As many have said before, it is essential that each entity in the supply chain do its own part towards securing the chain. 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. I support the government initiatives including C-T PAT - Customs-Trade Partnership Against Terrorism. I encourage you to avail yourselves of this opportunity. By working with trusted partners, you can help to ensure the safe and expedient transportation of cargo.

When Hal was last in Charleston, he bravely spoke on a case pending before the U.S. Supreme Court - South Carolina State Ports Authority v. Federal Maritime Commission and the United States of America. A Fourth Circuit opinion overturned a Commission decision in which the Commission found that the Eleventh Amendment and principles of state sovereign immunity from suit do not bar privately-initiated administrative adjudications against state-run marine terminal operators, in this instance the South Carolina State Ports Authority. In other words, the court found that state sovereign immunity kicks-in when private parties bring a formal complaint against a State before a federal government agency. Accordingly, the Fourth Circuit ordered the Commission to dismiss the privately-filed complaint against the Port Authority. The Commission asked the Supreme Court to review the matter and was granted that opportunity.

While it may have taken a little extra nerve on Hal's part to discuss it here in South Carolina, I do so with great ease - because the Court in fact ruled in favor of the Port Authority. No longer can private individuals use the Commission as a forum to file a formal complaint against state entities. The practical effect of the Court's decision has been to put the responsibility solely on the Commission to decide whether to go forward against state entities based on our own investigatory responsibilities. However, the Commission will rely greatly on private individuals and entities to bring such cases to our attention. In reality, most cases brought by the Commission on its own initiative arise from complaints received informally. And by informal, I mean that people pick up the phone and call us to let us know of a troubling situation. With regard to state entities, we will rely on all of you to alert us to problems.

As you all are likely aware, in December of last year the People's Republic of China issued a new law which took us all by surprise and raised concerns about whether it would create or perpetuate differing requirements for, and treatment of, Chinese and non-Chinese carriers and intermediaries, or create new and unreasonable barriers to those who provide transportation services to and from China.

The Maritime Administrator, Captain William Schubert, and many private industry groups have raised their concerns with the Chinese government's Ministry of Communications (MOC). They have 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. In response to these new laws, the Commission issued a Notice of Inquiry earlier this year asking for input from the shipping public on this new law and particularly how it would affect business in the industry. At the moment, we are in the process of reviewing the comments from the industry and shipping public. The FMC will continue to closely scrutinize the impact of this law as well as MOC rules and the practices that result from it.

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, as always, stands ready to use the tools at its disposal should adverse conditions arise from this new initiative.

I hope I've been able to contribute to your discussion of the "new era" here. I would like to reiterate that you can expect the Federal Maritime Commission to continue to do its part to help keep the interests of the various players in the maritime trades balanced. That mission is not new, but rather, longstanding. The industry drives the new developments - it is the government's role to find ways to accommodate, encourage and support new initiatives and to provide assistance to the industry as they navigate through new economic circumstances, while, at the same time, safeguarding the public interest.

I thank you again for having me here and I welcome any questions you may have.