Chairman Cordero Participated in the Finished Vehicle Logistics North America Conference
I would like to thank Louie Yakumi for the kind introduction and the invitation to be here at the Finished Vehicle Logistics Conference. The success of your industry is very important to the growth our nation’s economy. The Federal Maritime Commission, as many of you may be aware, is a strong advocate for both the export and import communities.
The Federal Maritime Commission is an independent regulatory agency, with the primary responsibility of regulating ocean carriers, marine terminal operators, and port authorities. Our stated mission at the FMC is to foster a fair, efficient, and reliable international ocean transportation system and to protect the U.S. shipping public from unfair and deceptive ocean transportation practices. The Commission does this by supporting a regulatory system that ensures competitive and reliable ocean transportation service to U.S. exporters and importers but one that also minimizes government intervention and costs.
Exports in the motor vehicle industry are increasing, with the sector recently experiencing record numbers. This strong sales growth is also expected to continue in the future. When looking at value, U.S. vehicle exports amounted to $25 billion in 2009, and by 2012, the total value had doubled to over $51 billion. The volume of new vehicle imports is also on the rise. The volume of new vehicles transported by sea in 2011 exceeded levels experienced before the recession and reached 10 million metric tons (or $38 billion) across approximately 40 ports – U.S. imports accounted for about 6 million of the 10 million tons. The United States imported 3.4 million units in 2010, up from 2.7 million in 2009. For example, the Port of New York and New Jersey – the largest port in the U.S. for automobile imports and exports – handled 640,820 new and used vehicles in 2014.
The automotive parts industry tends to follow the automotive industry; it changes according to demand and sales of vehicles. Mexico is the largest supplier of U.S. auto parts imports, with no U.S. duties through the North American Free Trade Agreement and close access to the U.S. market. Mexican auto parts manufacturers are on the road to experience record output in 2015 – a growth due in part to the proliferation of automotive OEMs in Mexico and the strength of the U.S. car market. There has been an increase in U.S. demand for auto parts imports (everything from brakes to carburetors), and Mexico has been gaining a larger share of that market.
In 2010, automotive parts imported by United States increased for almost every importing country, from a total of $63 billion in 2009 to $90.9 billion in 2010. The top five suppliers of auto parts to the United States were Mexico, Canada, Japan, China, and Germany – accounting for $71 billion; Mexico alone accounted for $28.1 billion worth. The main destination for Mexican auto parts exports is the United States – around 90 percent of their export market, and in 2014, Mexican automotive parts imports accounted for 34 percent of U.S. auto parts – up 86 percent since 2008. Today, vehicles built in the United States may contain more than $4,000 worth of Mexican-made parts.
The Shipping Act authorizes the Commission to take actions to protect the shipping public. Carriers must file agreements that affect carrier working relationships in the U.S. trades with the Commission. The Commission reviews and monitors these agreements in order to prevent substantial increases in transportation costs and decreases in transportation services. While many high profile agreements involve container shipping, such as the carrier alliances, the Commission also receives a substantial number of agreement filings focused solely on ro/ro transportation. Ro/ro transport companies can and do qualify for limited antitrust immunity, and they have been taking advantage of that immunity at a growing rate. Of the approximately 350 vessel operating common carrier agreements filed with the Commission, over twenty percent apply to ro/ro cargo, and most of these are operational and space-sharing agreements. Perhaps more telling is the fact that, since January 2014, almost one in three new agreements filed with the Commission has been for the ro/ro industry. These operational agreements can allow the ro/ro market to operate more efficiently and further meeting the needs of their customers.
In addition to reviewing agreements, the FMC has also acted as a maritime technical advisor in the ongoing trade negotiation between the U.S. and the European Union, the Transatlantic Trade and Investment Partnership (TTIP). TTIP could help preserve U.S. international competitiveness, jobs, and growth – including additional opportunities for the U.S. automotive industry as cargo volumes continue to expand. FMC’s goal of protecting American exporters and consumers continues to remain the foundation of its efforts.
Due to increasing traffic from trade, congestion is a recurring problem at many of our nation’s ports, which is not limited to the West Coast. Furthermore, congestion also occurs inland at intermodal cites – a key component to an efficient supply chain. Clearly, congestion negatively affects our import and export communities. Today, addressing the cause and effect of congestion remains a priority for the Commission. In late 2014, the FMC held four forums on U.S. port congestion to initiate dialog by stakeholders: public port authorities, terminal operators, trucking companies, railroads, and maritime labor. The forums explored the causes and implications of port congestion experienced around the country.
The FMC is keenly aware that the infrastructure component is important; that in order to move cargo off the docks and onto their destinations quickly and efficiently, the first mile is key. Many ocean carriers have cut non-core business expenses, including truck chassis, and the unavailability of chassis at ports has contributed to much of the congestion experienced. Equipment sharing agreements filed with Commission have enhanced intermodal chassis operations, and the Commission will continue to monitor these agreements to help combat the problem of chassis shortage.
The FMC recently completed its review of the Los Angeles and Long Beach Port Infrastructure and Environmental Programs Cooperative Working Agreement, which would allow the ports to discuss projects and programs that address transportation infrastructure needs including port congestion and terminal productivity, chassis availability, and drayage truck turn-times. As a result, the ports have moved forward with the creation of working groups addressing terminal optimization in order to strengthen the competitiveness of the Southern California port complex. Agreements among ports who serve a shared region are necessary to improve problems related to transportation infrastructure and to assist cargo movement.
We will also continue to facilitate discussions between the ports and various stakeholders to increase overall intermodal efficiency. The Pacific Ports Operational Improvements Agreement was reviewed by the FMC and became effective in April. It represents an agreement between the Ocean Carrier Equipment Management Association, the West Coast MTO Agreement, and most vessel-operating carriers and marine terminal operators serving U.S. West Coast ports. It authorizes the discussion and exchange of information in order to reduce congestion and improve efficiency of operations at U.S. West Coast port facilities. The Commission works regularly with other federal, state, and local transportation and law enforcement agencies as well – collaborating on how to address specific transportation-related issues.
In order to explore the causes of cargo delay and associated charges, a problem related to congestion, the FMC released an internal report on Detention, Demurrage, and Free Time in April. Given the many factors that play a part in delay and congestion – which may be beyond the control of the shippers – the Commission is looking at the responses to the report in order to help stimulate solutions to problems created by severe port congestion. We will continue to serve and protect American shippers and consumers.
FMC facilitates and encourages cooperative efforts to keep U.S. ports viable and efficient and will continue to do so. This will help ensure greater service and reduced costs to all members of the import and export communities. International trade represents a vital pathway to our nation’s economic growth – a path that begins at our nation’s ports and continues to the landside transportation systems on which our American import and export communities depend. Ports need our full policy and funding attention. Today’s national decisions regarding infrastructure investments – or absence of such decisions – will directly impact America’s ability to compete in the global economy for years to come.
Thank you again for the opportunity to be here this morning, and I look forward to answering any questions you may have.