Commissioner Dye’s Prepared Remarks to the Propeller Club of the United States, Port of Washington, D.C. - Federal Maritime Commission
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Commissioner Dye’s Prepared Remarks to the Propeller Club of the United States, Port of Washington, D.C.

June 25, 2014

Thank you for the generous introduction. It is a great pleasure for me to be here today with so many colleagues and old friends. I appreciate Commissioner Khouri’s being here today. I also appreciate our Commission staff who are in attendance. Our disagreements from time to time do not affect my respect and appreciation for their work at the Commission.

The opinions I am offering today are my own, and do not represent the views, official or unofficial, of the Federal Maritime Commission.

Today, I will briefly discuss several topics involving the Commission that have been in the news lately:

  • Truckers’ request last week for the FMC’s assistance in facilitating a solution to port congestion;
  • My personal favorite, the FMC’s “track record” of eliminating unnecessary regulatory compliance costs; and
  • The Commission’s competition analysis under section 6(g) of the Shipping Act of 1984.

Truckers’ Port Congestion Request

The Federal Maritime Commission provides a forum for members of the shipping public to obtain relief from ocean shipping practices or disputes that impede the flow of international commerce or otherwise cause economic harm. This is especially appropriate when a solution to a complex transportation problem does not lie neatly within an existing regulatory framework. The Commission’s breadth of responsibility in three areas gives us the global transportation perspective to facilitate market-based solutions to the problems in the international supply chain.

First, the FMC’s responsibility to enforce competition among ocean carriers operating with restricted antitrust immunity in U.S. trade lanes gives the Commission an appreciation of the market realities that drive supply and demand in international ocean shipping.

Second, the Commission’s similar responsibilities regarding more than 150 port, marine terminal and chassis pooling agreements give us an understanding of the challenges facing ports and terminals in the United States.

Third, the Commission’s licensing and financial responsibility system for nearly 6000 ocean transportation intermediaries provides another dimension to our understanding of the global supply chain.

My experience in 2010 as the Investigating Officer for Fact-Finding Investigation No. 26, Vessel Capacity and Equipment Availability in the United States Export and Import Liner Trades, strengthened my confidence in conflict resolution with market participants engaged in confidential collaboration.

Federal regulatory or law enforcement procedures are not generally conducive to a successful resolution of problems in dynamic and complex supply chain circumstances. Last week, the Commission received testimony from representatives of the American Trucking Associations and the Harbor Trucking Association of Los Angeles about the increasing problem of congestion in major U.S. ports.

Long lines at the gates and long wait times in the terminals have had a devastating impact on the Nation’s harbor truck drivers, ocean transportation intermediaries, and beneficial cargo owners, who are not receiving timely deliveries. The ATA and the Harbor Trucking Association requested the Commission’s assistance in facilitating a solution to the problem of port congestion.

I look forward to the Commission’s involvement with interested stakeholders to help reduce port congestion.

Cut Government Compliance Costs

When I came to the Federal Maritime Commission over 11 years ago, I looked forward to building on the success of the Ocean Shipping Reform Act by using the Commission’s amended exemption authority under section 16 of the Shipping Act of 1984 to continue incremental deregulation. To facilitate additional deregulation, the Reform Act repealed a key phrase in section 16 that the Commission had used to justify the failure to eliminate certain regulatory requirements in the past.

As I approach the end of my third term at the Federal Maritime Commission next year, I regret that the agency has not moved forward to eliminate the remainder of a regulatory system originally designed for a common carriage regime that no longer exists.

The Commission is currently engaged in an ongoing review of our regulatory requirements under Executive Order 13563. The Executive Order requires agencies to review regulatory programs to make them more effective and less burdensome.

As we review our regulatory programs, I believe that we should remove all unnecessary government compliance costs and regulatory impediments to efficiency in the international supply chain. We have an obligation to revise our regulations so that carriers can deliver services with their customers’ needs in mind. The Commission must ensure that our regulations are not maintained mainly for our law enforcement convenience.

In this regard, I opposed additional regulatory burdens on the intermediary industry, such as our recent Advance Notice of Proposed Rulemaking regarding Ocean Transportation Intermediaries. I support elimination of our regulations concerning tariff publication and enforcement, and service contract and NSA amendment filing.

Our service contract and NSA amendment filing regulations are not only costly but directly interfere with the reasonable business needs of ocean carriers and ocean transportation intermediaries and their customers. The Commission staff is currently discussing these service contract and NSA amendment filing procedures, and I look forward to their report to the Commission.

Section 6(G) Competition Analysis

The Commission analyzes the competitive effects of agreements filed with the Commission under section 6(g) of the Shipping Act of 1984. The Commission must analyze agreements to determine if “by a reduction in competition,” an agreement is likely to produce or has produced “an unreasonable reduction in transportation service or an unreasonable increase in transportation cost.”

Agreements are required to be analyzed promptly, and unless special problems are present, the Commission is allowed only a 45-day period to complete a competition analysis. The Commission may seek additional information from the agreement parties, but only when necessary to make the competition determination required by section 6(g).

If the Commission does request additional information to complete its competition analysis, the agreement goes into effect on the 45th day after the information is submitted.

The Commission does not “approve” agreements.

An agreement takes effect by law, and the burden is on the Commission to take action to enjoin operation of a substantially anticompetitive agreement in the U.S. District Court for the District of Columbia. After an agreement becomes effective, the Commission also aggressively monitors the operation of the agreement with regular consultation and reporting requirements.

The competition analysis employed by the Commission is similar in most respects to the merger guidelines and the joint venture or competitor collaboration guidelines employed by the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice. For example, in their analysis of a joint venture under a “rule of reason,” pro-competitive efficiency benefits and other benefits of cooperative ventures are balanced against possible harm due to a reduction in competition.

Many factors are relevant to a competition analysis under section 6(g). These include market concentration, the potential for new entrants, current supply and demand dynamics in the relevant market, efficiency benefits, innovations and capacity management. Agreement efficiencies and innovations may give shippers higher quality shipping services, more choices, and customer service innovations.

Operational agreements, such as vessel sharing agreements or alliances, may promote organizational and technological innovations within the ocean transportation system. Operational coordination may also produce efficiencies and cost savings that allow carriers to offer a more extensive network of services to their customers and reduce service disruptions, such as cancelled sailings.

And, by the way, the Commission used the same approach in evaluating the P3 Alliance, the expansion of the G6 Alliance, and the discussion agreement regarding the CKYH Alliance.

P-3 Alliance

As you know the Chinese Ministry of Commerce announced last week that the P-3 Alliance was not approved to operate in China. The P-3 Network Vessel Sharing Agreement took effect in the United States on March 24, 2014 and remains in effect absent a withdrawal of the agreement by the parties.

G-6 Alliance

The G6 member lines are APL, Hapag Lloyd, Hyundai Merchant Marine, Mitisui, NYK, and OOCL. The original G6 operated in trades between ports in the Far East and ports on the U.S. East Coast, and between ports in the Mediterranean and ports on the U.S. East Coast.

The expanded G6 agreement became effective on April 4, 2014, and extended its geographic scope to allow cooperation in the trades between ports in the Far East and ports on the U.S. West Coast, and between ports in Northern Europe and ports on all U.S. coasts.

CKYH Alliance

A third global alliance agreement is the CKYH Alliance. It covers the operations of Asian carriers COSCO, K-Line, YangMing, and Hanjin in the U.S. trades. The CKYH Alliance covers the east and west transpacific trades as well as the transatlantic trades between Northern Europe, the Mediterranean and the U.S.

The Commission is considering a new CKYHE Alliance Discussion Agreement filed on May 22, 2014, to allow the CKYH Alliance members to discuss the possibility of adding Evergreen to the Alliance agreement. The parties would be required to file a specific operational agreement before the new alliance becomes effective.

Thank you for your invitation and your kind attention.