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Remarks by Commissioner Louis E. Sola National Industrial Transportation League San Antonio, TX

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Thank you very much.  It is my honor to be here today with all of you.  In my time at the FMC, I have had the opportunity to meet with many of our stakeholders and have visited many ports on the gulf coast, east coast and the great lakes; but today is a special treat – it is my first repeat visit.

Last year I attended NIT League’s Annual Summit as a newly sworn-in Commissioner; and now I am honored to be here again today after spending the past year serving on the Federal Maritime Commission.

Prior to joining the Commission, I sat in your shoes while shipping cargo internationally for many years – so I can personally relate to many of the challenges you are facing.

As a Commissioner, it is our responsibility to ensure a competitive and reliable ocean transportation system that the supports the US economy and protects the public from unfair and deceptive practices.  In short – we are here to protect the supply chain; and we are here to ensure that the U.S. freight delivery system continues to serve your needs.

I don’t think I need to impress upon anyone how vital international trade and the maritime industry is to our national economic interests.

Gulf Coast Trade Statistics

As a native Floridian, I have long appreciated the importance of Florida in the north/south trades.  But as we sit here in the heart of gulf coast country, I wanted to highlight how dynamic the gulf coast trades have been in recent years.

Volume growth along the gulf coast has been strong since 2015, when the Panama Canal expansion project was completed.  Overall, there has been a 23% increase in the trades.  However, the break-out in the different markets is striking, there has been:

  • 71% growth in Asia cargo; compared with
  • 10 % for Europe; and
  • 3% growth in north/south trades.

In 2015, the last full year before the completion of the Panama Canal expansion project, the largest share of cargo moving through Gulf Coast ports was in the North-South trades.  Today, the largest share is in the Asia trades.

  • 2015
    • North-South: 32%
    • Asia: 26%
  • 2019 (through October)
    • North-South: 25%
    • Asia: 38%

More generally, we are seeing trade patterns shift in response to the Chinese tariffs.  In 2018/2019, Chinese exports are down by 19%; and imports have declined by 11%.  The tariffs seemed to have spurred a shift in cargo towards Southeast Asia, including Indonesia, Malaysia and Singapore.  Once trade patterns normalize, we’ll see if the Chinese tariffs result in long term shifts in cargo flows, or whether the trades return to normal.

As cargo volumes continues to grow, we all must work together to ensure an efficient supply chain system that is able to meet the demands of tomorrow.

So let me take a few minutes to address some of the recent steps we have taken.

Regulatory Reform

Over the course of the past year we have worked to reduce regulatory burdens while continuing to ensure a competitive marketplace.

We have:

  • reviewed the agreement filing process,
  • modernized service contract filing, and have
  • updated OTI licensing regulations.

I applaud the Commission’s reform-minded actions in all of these areas.

However, I would like to see us continue the process.  I believe we should continue to review our regulations to reduce regulatory burdens to the maximum extent possible while ensuring that we are able to protect the competitive landscape of the ocean shipping industry.

We also must remain prepared to enforce the Shipping Act as we work to protect the American public.

Over the course of the next year, my hope is that the Commission will both consider additional regulatory areas ripe for review; and to return to some areas where additional reforms may be warranted.

Detention and Demurrage

I would like to commend Commissioner Dye for her efforts during the detention and demurrage factfinding.  I strongly supported Commissioner Dye’s approach to working collaboratively with the industry in order to find workable solutions.  I know that many of you worked closely with Commissioner Dye throughout the process; and I would like to thank all of you for your efforts as well.

The Commission recently issued a proposed interpretive rule which will provide necessary guidance to the industry.  Just like NIT League, I strongly support the rule and hope that we will be able to issue a final rule soon.

While there will be exceptions, as a starting point, I agree that shippers should not be charged detention or demurrage when cargo is unavailable for pickup (or return) – especially when it is through no fault of the shipper.

The interpretive rule provides guidance and clarity on how the Commission will review detention and demurrage practices; and provides indications of when such practices are more likely to be found to be unjust or unreasonable.

Importantly, the rule does not create specific new regulatory requirements or obligations.  I am a strong supporter of the Administration’s policy of reducing regulatory burdens – not adding to them.

Hopefully the carriers will take a hard look at their detention and demurrage practices with an eye towards providing greater certainty, clarity and fairness.  While these charges can be justified, they should never be utilized as an independent source of revenue.

IMO 2020

We are also closely watching the implementation of IMO 2020.  Given the scale of the increased costs, ocean carriers will try to pass these added costs on to shippers.

Individual carriers are still developing strategies to attain compliance with the new standards and establishing new bunker surcharge levels.  However, there is currently no platform under which the carriers can collectively discuss or set an industry-wide bunker surcharge.

Similar to detention and demurrage charges – the proper purpose of a bunker surcharge is cost-recovery.  It should not become an independent revenue stream unfairly adding costs to an already burdened supply chain.

The Commission is monitoring this issue to ensure that carrier cost recovery efforts do not violate the Shipping Act and do not unfairly harm U.S. importers and exporters.

With that, let me again say thank you for the opportunity to be here today.  I look forward to working with all of you in the days ahead.  I’m happy to answer any questions you may have.