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Speech Of Commissioner Richard A. Lidinsky, Jr., to The Northeast Trade and Transportation Conference

April 1, 2015

Thank you for inviting me to speak at the Northeast Trade and Transportation Conference. I am also happy to be back in beautiful Newport.

Like most of you, my first views and education in ocean trade centered on the historic Atlantic. From this coast, from 1500-the time of our Revolution that important ocean trading lanes were built. It was 1814 that a waterfront fort in Baltimore ensured our freedom as a new nation, it was from piers here in Newport and New England that our China trade began, and it was from a terminal in New Jersey that a ship sailed to Houston sparking a new intermodal container age. As "Atlanticists"…if a word…we must now recognize the vital impact of the Pacific Ocean and West Coast ports on our daily activities. The recent vessel congestion and port terminal delays, particularly in Los Angeles and Long Beach, hold many lessons for all U.S. port ranges, and I hope to convey this morning the FMC views on its current and future roles in confronting these issues.

Surprisingly, the challenges that face us are not new. Today, they are a legacy through the years of conferences, super conferences, mega ports, load centers, talking agreements, stabilization agreements and now new Alliances. The first reality is that our country, through long and complicated history, has virtually no U.S. flagged vessels to serve our international waterborne trade. And almost 100 years ago, Congress recognized this situation that is still with us today. 94% of our containerized cargo moves in foreign vessels, creating a situation where very often foreign flagged carriers from Alliances, who establish rates, congest and dominate U.S. port terminals. With its large regulatory mandate the Commission has a staff of 119, with an annual budget of approximately $25 million. A key function of our agency is to detect and monitor global waterborne trades.

Two years ago, as the new alliances were being formed, there were some concerns expressed. I warned that alliances were positioning themselves to exercise authorities beyond the reach of governments. Other commentators expressed concern from a shipper’s point of view. I also cited as one of the reasons for voting against that such arrangements will "negatively congest terminals and landside infrastructure."

In the process leading up to our Alliance votes last year, certain carriers displayed disrespect with regulators, talked of creating a several hundred staff office to handle simple slot charters, and put undue pressure on our ports and services to meet their unreasonable demands. Currently, there are 4 major Alliances operating, or intending to operate, in the U.S.’s waterborne commerce.

While we’ve yet to feel their full impact here on the Atlantic, much of the port congestion troubles that just took place on the West Coast, reportedly resulted from Alliance cargo, stowed to reflect new Alliance ties, rather than previous stowage practices, so it had to be directed to a specific terminal or trucker, thus exacerbating the overall problems.

At the root of Alliance formation are the increasing number of mega ships of such size that they cannot today, and very likely not tomorrow, call U.S. ports. The larger ships that can call at U.S. ports have also contributed to the congestion. Currently under construction, there are 66 vessels in the 15,000-19,000 teu range, and 4 ships over 20,000 teu. Large vessels, besides creating imbalance in certain trades, presuppose huge investments by local, state, and national governments of countries being served. You will hear shortly from Jon Slangerup, CEO of the Port of Long Beach, on the impact of larger vessels in the Alliances which have also contributed to port congestion. Instead of an organized system where containers assembled by destination, the larger Alliance ships have left containers randomly on the terminals and getting the right cargo to the right place can involve moving the container an excessive amount of times as opposed to the usual two or three.

In response to the growing congestion at our nation’s ports, the Commission held four port congestion forums at the Port of Baltimore, the Port of Charleston, the Port of New Orleans, and the Port of LA/Long Beach. The purpose of the forums was to identify the causes of congestion experienced at U.S. Ports, and possible steps the Commission could take to help solve the problem.

In the U.S. supply chain, in the movement of a container from China to Boston via the Suez Canal, the regulatory reach of our government covers every party except one…the owner or lessor of marine chassis equipment. And all the analyses of what just took place on the West Coast point to this simple piece of equipment causing severe problems for recipient of the cargo.

If we are to come to grips with Alliances impacting our country’s waterborne commerce we must have the regulatory conviction to say to Alliance cross traders, "enough is enough, and you will serve our importers, exporters, ports, inland transport network, and above all, our consumers with fair rates and efficient vessel practices." As ships begin to gather at anchor off San Pedro Bay, a group of carriers came to us seeking a green light to impose congestion surcharges they had just published in their tariffs. We said to them, "What? You are trying to collect on a condition you caused?" NO was our answer.

The final message I want to leave with you this morning, particularly to carriers, as the FMC moves to take on detailed port congestion findings and proposed solutions, is very simple: Don’t use larger vessels, self-imposed terminal chaos, equipment shortages, "blame the trucker" games, etc. to justify unwarranted charges to anyone in the American supply chain.

Each of you, as participants in our waterborne commerce, have an obligation not only to recognize these historic changes in your daily activities, but also to work together with the Commission to solve these problems for the sake of our foreign waterborne commerce as any solution we fashion will have an impact on all involved. Be assured that we will continue to consult our global counterparts, as we prepare for our second summit meeting with the EU and PRC, to ensure that Alliances do not become supra national forces.

Thank You very much for your attention, and thank you for your service to the United States’ international waterborne commerce.