Acting Chairman Khouri Addresses the 44th Annual Conference of the National Custom Brokers and Forwarders Association of American (NCBFAA)in New Orleans
April 5, 2017
NCBFAA Annual Meeting
New Orleans, Louisiana
Good morning. Thank you for the introduction and I am pleased to be with you today in New Orleans.
I have the opportunity to talk with your Washington representatives, Ed Greenberg and Jon Kent on a regular basis and I recently had the opportunity to sit down with Jan Fields and Geoff Powell to discuss regulatory issues. And I always find it helpful to address NCBFAA’s membership, share what we are doing at the Federal Maritime Commission, and hear directly from the membership about your interests and priorities.
I was honored to be designated by the President to serve as Acting Chairman of the Federal Maritime Commission. Like my predecessors, however; I am still one of five voting members, so my thoughts and views shared with you this morning are my own and do not represent the official position of the Commission or the President’s Administration.
Yesterday afternoon, I presented testimony before the U.S. House Transportation and Infrastructure’s Sub-committee on Coast Guard and Marine Transportation. I started out by noting that we are now in the 100th year of operation under the Shipping Act. By far, we are the oldest maritime regulatory agency in the world and – perhaps, along the way – through case decisions, statutory updates, and periodic revisions to our regulations; we have gained some experience and institutional wisdom to help guide us into the future.
I should also note that, while we enter a new centennial, we are now joined by many other maritime regulatory agencies. Counsel for one of the alliances informed me that they had to register their alliance agreement with over eighty different regulatory bodies around the globe. Later this month, I travel to China for a third session of the triparty sessions started several years ago between the European Union’s competition office, China’s Ministry of Transport and the FMC.
I also spoke about the past year in the industry and the various mergers and realignment of the alliances – all of which you are quite familiar with. I did note that – even with these developments, the vessel liner industry is still relatively unconcentrated. The top three carriers in the U.S. trades have market shares of 12.42 percent (CMA CGM), 12.39 percent (MSC), and 10.62 percent (Maersk) respectively.
These are far from market dominate positions. In fact, we are not close to a "concentrated market" in accepted economic regulatory terms.
While we recognize that alliance members may not coordinate on marketing and pricing under their operational agreement, I noted that the Commission has strengthened our economic review process and we have required tighter limits on the scope of each agreement’s authority.
Last, I spoke to the members of the committee on the issue of seaport efficiency and port congestion and current Commission initiatives. The Supply Chain Innovation Teams led by Commissioner Rebecca Dye have been developing information sharing protocols that should prove extremely beneficial in integrating the global supply chain and providing a boost to the American economy.
Today, the FMC stands forward to Safeguard America’s Maritime Supply Chain. We carry out this mission in a number of areas. As Acting Chairman, my priorities to guide the Commission will be as follows:
- An evenhanded and fair regulatory process, meaning, we do not favor one stakeholder over the lawful interest of another stakeholder. We follow the law, as given to us by Congress, to the best of our understanding and ability.
- We will utilize a minimum of government intervention and, in those areas that require regulatory oversight, seek to minimize the costs and burdens on the stakeholder community.
- We will place greater reliance on a free, open, and competitive marketplace as the primary federal regulator.
These principles are embedded in the stated statutory policy and purposes of the Shipping Act. I believe efficiency, innovation and optimal economic conditions thrive in a marketplace that is not overly regulated and competition is encouraged and preserved.
During my tenure as Acting Chairman of the Commission, I intend to make a meaningful contribution to regulatory reform at the agency. The FMC must focus its resources on programs and initiatives that facilitate and foster competition, thus leading to lower prices, innovation in services and operations throughout the supply chain, and creating increased choices for consumers of ocean transportation services.
Regulatory and statutory reform is a front and center news story in the Washington D.C. press virtually every day. Before I get into current initiatives, let me touch on a bit of Shipping Act history.
Congress expressed its intention for the Commission to proactively look for additional ways to reduce unnecessary regulatory costs and burdens in Section 16 of the Shipping Act of 1984. The Act was part of an overall effort to deregulate all modes of transportation that began in the late 70’s with the railroad industry and then in the 80’s with the inland and coastal marine industries and the truck and airline sectors. While Congress did not go as far in 1984 towards deregulating international ocean liner shipping as it did with some of the mentioned domestic industries, the deregulatory bent of the 1984 legislation was evident in the statute. Congress gave the Commission the authority, based on its expertise and experience with the Shipping Act, to provide an exemption from the application of the act under certain circumstances. In 1998, Congress made clear that it expected – some might say mandated - the Commission to more aggressively use this Section 16 exemption authority whenever possible by liberalizing that authority and making it easier for the Commission to use. The Commission recently examined regulatory requirements for service contracts and NVOCC Service Arrangements in light of current commercial practice and voted unanimously to eliminate a number of burdensome regulatory requirements that served as obstacles to efficient ocean transportation arrangements, added unnecessary transactional costs, and served no regulatory purpose.
This recent action by the Commission to reduce regulatory burdens to provide more realistic filing requirements for service contract and NSA amendments demonstrates the benefits that can be achieved by simply asking, "is there a better, less burdensome, less intrusive, less costly way to do this?"
I intend that the Commission make that question standard operating procedure and look for additional opportunities to provide regulatory relief within our authority. We will:
- Work to identify rules and regulations of the Commission that are outdated, burdensome, and/or add unnecessary costs to doing business;
- Determine a path how to best address those targets for regulatory reform; and
- Establish a timeline for remedy that is as rapid as possible—ideally months as opposed to years.
Toward these objectives and with the concurrence and support of my fellow commissioners, I designated the agency’s Managing Director, Karen Gregory, to serve as Regulatory Reform Officer. Ms. Gregory is standing up a Regulatory Reform Task Force that will work to identify burdensome, unnecessary, and outdated directives and recommend how they should be remedied. Ms. Gregory and her task force is in the final stages of drafting a charter and a process that will take on the very course of work I just outlined. This will be an internal agency group, but I have discussed with her my preference that the public must have reasonable opportunity to provide input to the process – and by that I mean input on the front end, not just input after we issue the normal publication in the Federal Register of a notice of proposed rulemaking.
This action is in the spirit of and consistent with the President’s recent executive order directing agencies to explore opportunities for regulatory reform, and recent executive orders highlighting the benefits of reducing unnecessary and costly regulations.
So, what rules are we looking at?
NCBFFA submitted a petition to amend Commission rules addressing NVOCC Negotiated Rate Agreements and NVOCC Service Arrangements on April 18, 2015. The Commission approved moving forward with consideration of the petition on August 2, 2016. As the petition is under active agency consideration, I am prohibited from discussing the matter. But please be assured that your petition is front and center, we are in the standard cross office and bureau process of evaluating the various requests in the petition and considering possible action by the Commission.
Where else in our regulatory section of title 46, Code of Federal Regulations might we look ? The answer is – all of it.
An example could be rate tariff filing by all regulated entities. When one asks the question – where and how does the "filed rate doctrine" fit with twenty- first century container shipping practices - the answers get weaker and weaker, down to faint whispers. I understand and appreciate the utility of rules tariffs, but rate tariff – not so clear. And there will be other equal examples as the regulatory reform task team works through their assignment.
I am committed to continuing to identify rules that are outdated, or impede the efficient operation of business, and eliminating them whenever possible. And further, I am committed to facilitating a process that petitions for relief filed with the Commission get more expeditious consideration.
I want to thank you for the opportunity to be here with you today and share some thoughts. If we have time, I would be happy to entertain questions and hear from you all.
Michael A. Khouri is the Acting Chairman of the U.S. Federal Maritime Commission. The thoughts and comments expressed here are his own and do not necessarily represent the position of the Commission.