Commissioner Dye Addresses AgTC Annual Conference

Remarks by Commissioner Rebecca Dye
Agricultural Transportation Coalition 30th Annual Meeting
Tacoma, Washington

Colleagues, old friends, thank you for the opportunity to be here today to discuss FMC Fact Finding 28, and to talk with some of you individually about your demurrage and detention challenges. Those individual interviews are an important part of our investigation.

As you know, last March the Commission opened an investigation into demurrage and detention practices in U.S. trades in response to a petition filed by the Coalition for Fair Port Practices, a group of 26 U.S. trade associations.

First, we sought public comment on the petition. That was followed by two days of public hearings in Washington DC, at which Peter Friedman testified. After which, the Commission unanimously voted to launch a fact-finding investigation.

At those public hearings, several shippers called for an approach to free time, demurrage and detention that could be applied fairly – and with greater transparency. As I said at the hearing, my interest is in how demurrage and detention practices can optimize, not diminish, the performance of the overall American international freight delivery system

Getting the Facts

Under section 10(d)(1) of the Shipping Act of 1984, no common carrier, transportation intermediary, or marine terminal may fail to establish, observe and enforce just and “reasonable” practices relating to delivering property.

The Coalition’s petition called for a policy guidance statement from the Commission to clarify what we would take into account when determining if certain demurrage and detention practices are “unreasonable.”

After considering a variety of options, my colleagues and I unanimously elected to initiate an investigation of detention and demurrage practices. Although the investigation is entitled a “fact-finding” investigation, I have authority to make recommendations to the Commission for action.

In broad terms, I believe that any meaningful improvements in demurrage and detention practices likely will require closer coordination and accommodation among carriers, marine terminals and American importers and exporters.

We will need to carefully consider the challenges we face here in the United States, and also compare our own practices with how detention and demurrage are addressed internationally.

You may be interested to know that I recently spoke at the Global Shippers Forum conference in Melbourne, Australia, and many shippers there discussed with me their demurrage and detention complaints that are very similar to those we have heard from American shippers.

As you know, the Commission began Fact Finding 28 by issuing extensive information demands to liner shipping companies serving U.S. trades, and to container terminals at our top ports. The ocean carrier responses came due in the first week of June – and they are currently being evaluated for completeness. Marine terminal responses are due this week and next.

We’ve demanded a considerable amount of information from ocean carriers and marine terminals, and I very much appreciate their willingness to provide the information in a short time frame. I need to get this information from a broad representation of our largest container ports in a timely manner in order to finish the investigation this year. And just as important to our deliberations will be the quantity and quality of information provided by shippers, truckers, and intermediaries.

In particular, we need a better quantitative understanding, supported by documentation, of the challenges shippers face. The demurrage and detention controversy is as much about customer service as about risk allocation, so shipper participation – including by agricultural product exporters — is crucial. For that reason, I have been conducting meetings with a variety of shipper groups.

In addition, to encourage maximum participation, we are providing a dedicated e-mail address – FF28@FMC.gov — for those of you who are willing to share relevant, specific information and supporting documentation, all confidential.

We need this evidence! Participation by shippers, truckers, and intermediaries in the investigation is essential. Thank you to those of you who have volunteered for investigation interviews with me during this conference.

Truckers’ and Shippers’ Roles

Originally, it was drayage truckers who urged the Commission to become involved in port congestion generally, and demurrage and detention in particular. Soon thereafter, beneficial cargo owners and ocean transportation intermediaries also asked us to actively address these practices. And we are responding.

Our investigation will analyze specific practices, legal obligations and responsibilities, and the actual control and transfer of cargo in our complex “ecosystem” of freight delivery. We will be looking into the reasons for and consequences of today’s demurrage and detention practices in U.S. trades; And whether those practices – to the extent they may be legacy approaches – still make sense in today’s system of increasingly complex, high-tech supply chain networks.

We’re aware, of course, that some parties may have concerns that Commission action could have an impact on commercial costs and risks. Our aim, however, will be to improve the freight delivery system as a whole, not to target the specific business models of any company.

Supply Chain “Systems” Perspective

On a personal note, I agreed to serve as fact-finding officer in this investigation because of the perspective on the freight delivery system I developed in preparation for the Commission’s Supply Chain Innovation Teams Initiative. And, in particular, the experience of working with committed industry leaders who were willing to volunteer their time and expertise to work together toward a shared goal.

Many of you participated in our export teams, and I appreciate the great expertise and commitment you brought to our discussions. Ultimately there were six teams, three import, and three export, composed of leaders of all sectors of the supply chain who sought commercial solutions to port congestion and related supply chain challenges.

By the time the Coalition for Fair Port Practices submitted its petition on demurrage and detention, our past research and our work with cross-industry teams had provided many useful insights into the commercial relationships, operational practices, and organizational challenges involved. Our teams determined that end-to-end supply chain information visibility was the key operational innovation needed to increase American freight delivery system performance.

In that regard, although the Commission is not identified with any particular port or company, I encourage you to learn about the new GE information project that is ongoing in the ports of Los Angeles and Long Beach. As I often repeat, without information visibility, we are “flying blind” in the global supply chain.

But the most important perspective we gained from the Supply Chain Innovation Teams project is that our American commercial supply chain is a complex system, interdependent and vulnerable to cascading disruption. Decisions made in one part of the system may have unintended, disastrous consequences downstream in our freight delivery system.

This perspective and other knowledge developed during our supply chain project prepared us for this investigation – and gave me confidence that there was value to undertaking this deeper dive into demurrage and detention issues.

We will focus on ways to make our international freight delivery system stronger, and more dependable, and more adaptable to the dynamic requirements of global trade.

Questions We Will Address

So, Fact Finding 28 has been launched. Information demands, document requests, interviews, and related activities have commenced. And we have imposed two deadlines on ourselves: An interim report to the Commission by September 2nd. A final report by December 2nd.

As for the questions, we will be asking — some are designed to clarify what the American detention and demurrage landscape looks like today. Some are to identify where and why detention and demurrage may be a recurring concern for the affected parties.

As the ocean carriers emphasized in their hearing testimony, situations that give rise to demurrage and detention are often problems for all the parties involved – not just shippers or truckers. Carriers need their equipment back in productive use. And terminals want improved throughput velocity and are unprepared to serve as de facto storage sites.

That being so, we believe there are common interests among carriers, marine terminals, shippers and drayage trucking companies that can help alleviate frustrations, delays and unnecessary administrative costs for all parties.

However, as the saying goes, “If it was easy to do, someone else would already have done it.”

I have made no decisions on any matter related to this investigation, and won’t make any decisions until my staff and I have thoroughly analyzed the information we have requested. Still, with the active cooperation of shippers, marine terminals, port authorities and the container lines, I believe that we can surmount today’s demurrage and detention challenges, and reap the economic benefits of a more efficient international ocean freight transportation system.

I’m looking for industry leaders to step up and express a willingness to make this system work for all parties in our global supply chain.

Thank you for your kind attention. In my remaining time, I will be happy to answer any questions.