FMC Commissioner Rebecca Dye Remarks at the NCBFAA Conference
Good morning! It is so good to see you again—colleagues and old friends. Thank you for inviting me.
One of my favorite business authors is Jim C. Collins, who discusses the importance of getting the right people on the bus.
Today, you’ll hear from some of the best people on the FMC bus, and I am sure you’ll find it worthwhile.
Today I’ll also discuss another piece of Jim Collins’ advice, the need for organizations to have a BHAG: a Big Hairy Audacious Goal.
And what the particular BHAG is that guides the work we’ve been doing to boost the performance of the American freight delivery system.
The phrase “new normal” became popular following the 2007-2008 financial crisis and the global recess in its aftermath.
The implication being that something previously abnormal—a slow recovery and a lasting trend toward slower growth—was supposedly becoming the economy’s future hallmark.
Thank goodness we don’t hear THAT anymore.
The shippers I’ve spoken to most recently want our American freight delivery system to be prepared, strengthened, to support increased economic activity, especially under the US-Mexico-Canada Agreement.
And at the FMC, there are positive changes that are newly normal.
Of course, Chairman Khouri and I welcome our wonderful colleagues Commissioner Dan Maffei and Commissioner Lou Sola. And we look forward to welcoming recently nominated Carl Bentzel.
And as far a substantive “new FMC normal”, the first candidate has to do with the Commission’s role as a competition law enforcement agency.
In recent years, the more complex and problematic agreements the FMC has reviewed have been marine terminal and port agreements.
As a result, the Commission will continue building our supply chain expertise on port and terminal operations, and the industries with whom they interact—such as drayage trucking and intermodal equipment providers.
A second candidate for “new normal” follows the use of the Commission’s enhanced authority, under the Ocean Shipping Reform Act, to grant exemptions to our regulations.
The amendment to the Shipping Act exemption authority was intended to encourage granting exemptions that did not reduce competition or harm commerce, and likewise encourage the Commission to look critically at its own legacy regulatory approaches.
It’s an authority we exercised, after long delay and several intermediate baby steps, to end the requirement that NSAs be filed with the Commission and to remove unnecessary restrictions on NRAs.
When I was with you in San Antonio in April, we discussed the reasons I was so gratified to grant your request for relief, because it makes the American freight delivery system more agile and responsive.
Finally, there’s a “new normal” candidate related to macro-developments in the liner shipping industry.
The FMC’s competition enforcement approach has evolved from a relatively narrow focus, primarily on carrier freight rate activity, to a much broader perspective.
A perspective that should consider the ocean freight delivery system as a whole.
Not that long ago, our central competition concern was traditional liner conference agreements. Conferences with rate-making authority and the ability to regulate their members’ use of service contracts.
Following the passage of the Ocean Shipping reform Act of 1998 (OSRA), as those of us involved expected, liner conferences virtually disappeared.
The new concern was voluntary rate discussion agreements—of which the Transpacific Stabilization Agreement (TSA) was the dominant example.
Rate discussion agreements had no ability to regulate members’ contracting activities and involved only voluntary participation in any announced general rate increases.
Like conferences, rate discussion agreements are proving unsustainable, and have largely given way to a decidedly different approach—cooperative vessel operations.
To survive in today’s difficult business environment, even the largest lines have joined strategic operational alliances in the main East/West trades to remain competitive and to control the flow of red ink.
Over time, those alliances have dwindled to the current three—2M, the Ocean Alliance, and THE Alliance—while smaller lines have tended to be absorbed by their larger competitors.
The rise of carriers’ strategic multi-trade alliances has inland consequences.
We see, for example, initial efforts by some ports and/or terminals to find ways to collectively address challenges that carrier strategic alliances are creating for landside operations.
Consequently, I am encouraging the Commission to pay greater attention to the international ocean freight delivery system as a whole, not simply the node represented by ports and terminals.
This greater attention is reflected in our investigation of demurrage and detention practices in U.S. container trades.
Our demurrage and detention investigation reports concluded that:
- Demurrage and detention problems in U.S. trades are not limited to past weather or labor-related port congestion,
- nor to a small sub-set of major ports, nor to episodic events unrelated to potentially systemic issues.
- The problems have been, and are, on-going.
- The U.S. international container freight delivery system would benefit from:
- Transparent, standardized language for demurrage and detention practices;
- Clarity, simplification and accessibility regarding demurrage and detention billing practices and dispute resolution processes;
- Explicit guidance regarding types of evidence relevant to solving demurrage and detention disputes;
- Consistent and accurate notice to shippers of container availability; and
- A Shippers Advisory Board for the Federal Maritime Commission.
Already, there has been progress made:
- In response to our demurrage and detention investigation, the OCEMA ocean carriers have published a “best practices” proposal that offers an excellent approach to clear and accessible VOCC demurrage and detention dispute resolution processes.
- Their proposal also includes explicit guidance on the evidence needed to resolve disputes as part of the dispute resolution process.
- Finally, although not directly addressed in this investigation, it is clear that today’s chassis provisioning practices too frequently contribute to serious inefficiencies in the ocean freight delivery supply chain.
- Lack of timely and reliable access to roadworthy chassis is a source of systemic distress.
There is no lack of ideas regarding ways to improve chassis availability. The challenges are deeper than that.
If you are interested, I refer you to my statement to the Surface Transportation Board posted on my web page on summarizing the work of the Memphis Supply Chain team.
Our December Demurrage and Detention report authorized me to organize industry teams to refine the ideas developed in the investigation.
Not to seek a consensus or control my recommendation, but to discuss ways that the concepts in the investigation reports should be implemented.
We hosted two teams that had valuable and candid discussions.
Now the investigation staff and I are in the process of putting together a recommendation for the full Commission for action.
I don’t think my recommendation—once put to paper—will come as a shock to anyone.
Carriers and marine terminals, many of whom have participated in the investigation, will find the recommendations are indeed general guidance—not micro-managing via specific, detailed requirements.
The overarching principle, as explained in the December report, is incentive-based.
There are times when a shipper has done everything reasonable to pick up cargo or return a container, but yet is unable to get access to the cargo or return the container.
In those cases, the purpose of demurrage and detention charges—to incentivize prompt pickup of cargo from the port or terminal or to return equipment on time—doesn’t work and charges should not apply.
Under this overarching principle are the five concepts: standardized language, transparent dispute resolution practices, explicit evidentiary requirements, notice of container availability, and Shippers Advisory Board to keep the latest developments before the Commission.
Of course, the additional facts of particular demurrage and detention cases will continue to be important under this guidance.
Actual cargo availability. And the Big Hairy Audacious Goal. That is, to tell shippers the one thing we’ve learned that they most want to know: When is my cargo ready to pick up.
It’s not easy. There are other underlying challenges to making cargo available in the seaports. Chassis availability is only one of them.
But I understand from west coast truckers that one of the Los Angeles terminals is embarking on a pilot for pushing out the notice of container availability. Isn’t that great?
If we can achieve this goal, it will strengthen the cargo delivery system in the United States and increase American economic competitiveness.
Thank you, enjoy the day!