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Remarks of Commissioner Dye, Association of Transportation Law Professionals, Transportation Forum XV

November 5, 2018

Two Recent Initiatives

It's a pleasure to be here today.

I've just returned from Miami, discussing demurrage and detention, and before that, from the International Bar Association conference in Rome, and the European Maritime Law Organization meeting in London, discussing the FMC competition law enforcement program.

I appreciate this opportunity to outline for you first, the Commission's recent port performance initiative, the FMC Supply Chain Innovation Teams project; and second, the Commission's Fact Finding 28 investigation, concerning demurrage and detention practices and related charges at U.S. ports.

I've selected these two, not only because they're illustrative of some interesting work the Commission has been doing lately, but because elements of the approach we used can be useful to address transportation challenges beyond those in the maritime arena.

The first project - our supply chain innovation teams -- grew out of a Commission effort, in response to stakeholder requests, to help alleviate serious port congestion problems that peaked in 2014 and 2015 at our largest West Coast and East Coast container ports.

The second - our current fact finding investigation -- was ordered by the Commission in response to a petition from 26 transportation and shipper trade associations concerning certain allegedly unreasonable practices and charges.

In both these situations we were:

  • Responding to requests from American shippers and other stakeholders; 
  • Seeking practical commercial, rather than government imposed, solutions;
  • Actively engaging a broad range of industry leaders - shippers, container lines, marine terminal operators, drayage trucking companies, public port authorities, ocean transportation intermediaries, and waterfront labor - to implement needed operational change; and
  • Focusing systemically on improvements to the supply chain by increasing supply chain visibility through accurate and timely sharing of key, actionable information.

In these two projects, the Commission doesn't try to tell our stakeholders what to do or how to do it. We work with them to develop their own innovative ways to improve the ocean freight delivery network.

It is our goal that industry leaders actively and cooperatively develop the proposed solutions and commit to implementing them, things are unlikely to get better. This doesn't mean that all supply chain actors will agree on every approach.

It does mean that implementation of the best ideas promoted by industry leaders, refined through serious and thoughtful engagement with the Commission and other supply chain actors, will improve supply chain performance.

Supply Chain Innovation Teams

The Commission's supply chain teams were initially formed in 2016 with the creation of three small multi-industry teams looking at import supply chains.

In 2017 we expanded that by creating three additional teams focused on export supply chains.

Currently, I'm involved with an industry team in Memphis to address chassis availability.

A detailed view of our process and its outcomes is available on our website. I've left copies of our report on the registration desk.

I encourage you to read the final report to get a broader and deeper perspective.

This morning, I'm going to limit my remarks to four points that I think were the supply chain teams' most important takeaways. They are:

  • Addressing the supply chain as a system-- not just terminal operations or port congestion.
  • The overarching goal of our six teams was to choose one process improvement that would increase the reliability and resilience of the U.S. international freight delivery system.
  • Process innovation - that is, identify and pursuing incremental improvement on past operational success;
  • Small Team Engagement: We insisted on no more than 12 members to a team, often fewer - all of whom were senior industry leaders, with the broad-based experience that allowed them to engage knowledgeably on a range of operational and management issues.
    This approach is at the cross-roads of team leadership, process innovation, and supply chain theory.
    Not brain-storming, but focusing on a defined goal. Not collaboration, but engagement. Not large groups with subcommittees, but carefully guided small teams.
    And finally, the process improvement that the team agreed upon:
  • The importance of visibility and sharing critical information. Once the teams had identified improved visibility as the path forward - it became clear that what each participant needed was specific, accurate and timely actionable information, not just access to more data.

Critical information needs varied by supply chain actor -- and, in the case of shippers, whether it was an import supply chain or an export supply chain.

For example, importers most needed to know: When can I pick-up my cargo from the terminal? When it is available? Exporters: Where can I get an empty container for my cargo? And, how early can I drop it at the terminal?

Our teams worked through each member's critical information needs; who could provide that information or produce it; and exactly when was it needed.

This a different approach to supply chain visibility. This approach defines the critical information needs first, to harmonize supply chain behavior.

Meeting specific critical information needs, while it may sound simple and straight forward, rarely is.

Often operational changes must be made to allow critical information needs to be met. The Los Angeles/Long Beach/ GE supply chain visibility project was conceptualized in the Innovation Teams. We're closely following their progress.

Which brings me to the second initiative:

Fact Finding Investigation 28

In Fact Finding No. 28, we are focusing on demurrage and detention practices and charges, with which the Commission has had years of experience.

Following extensive public comments on the Petition for Fair Port Practices, and two-days of public hearings, the investigative order was issued by the Commission in March of this year.

The charges for use of terminal space and carrier equipment in question are assessed - in principle - to incentivize shippers to promptly move cargo off dock and return containers to the shipping lines for future use, all to increase port fluidity.

Our first step in this investigation wasn't to form multi-industry teams - because we needed to quickly establish what the nature and extent of the alleged unreasonable practice might be.

Our first step was to obtain extensive data and information directly from the ocean carriers and US marine terminals.

At the same time we interviewed many shippers and intermediaries and created an e-mail account for information from shippers and other affected parties to use in providing us information on their experiences.

That data and information provided the basis for establishing, as explained in our interim report issued in early September, the six approaches that we will pursue.

Those areas, in broad terms, included establishing:

  • Transparent, standardized language for demurrage and detention practices for customers.
  • Clarity, simplification, and accessibility regarding demurrage and detention billing practices; and dispute resolution processes;
  • Explicit guidance regarding evidence relevant to resolving demurrage and detention disputes;
  • Consistent, notice to shippers of container availability and reasonable opportunity to retrieve cargo;
  • An optional billing model wherein:
    • MTO's bill shippers directly for demurrage; and
    • VOCC's bill shippers for detention; and
  • An FMC Shipper Advisory Board or Innovation Team.

So far, I have found that, as with the Supply Chain Teams', addressing demurrage and detention concerns benefits from active participation of industry leaders - particularly, but not exclusively, liner companies and marine terminal operators, who want to address their customers concerns.

At the moment, we are still in the field investigation stage - during which I am discussing with a wide variety of affected parties (and especially terminal operators, liner companies and shippers) how best to refine and implement the ideas laid out in the September report.

I appreciate the many industry leaders who took the opportunity to give us the information we need, and have engaged with us in a cooperative way.

I leave for discussions in the Port of NY/NJ tomorrow, and will visit LA/Long Beach the following week.

We remain on course to complete FF28 by early December.

So on that note, let me thank you for your kind attention. I appreciate it. Thank you.