Remarks of Commissioner Rebecca Dye at WESCCON in San Diego
Hello, thank you for inviting me to be with you today. It’s good to see you all again! Our Managing Director, Lucy Marvin, is also here and will speak to you tomorrow. She’ll give you more details about OSRA rulemakings and our implementation schedule.
For about 8 years, I’ve been focusing on the performance of our international ocean freight delivery “system.” I’ll share a few conclusions I’ve developed from years of experience with the most knowledgeable industry leaders in our U.S. ocean freight delivery system, including many of you here today. I’ll also discuss a few of my Fact Finding 29 recommendations and give you a brief update on the Commission’s OSRA 2022 implementation.
International Ocean Freight Delivery System
Our international ocean freight delivery “supply chain” is actually a complex, dynamic system composed of American importers and exporters and other supply chain actors, continually making business decisions. For this reason, I take a “systemic” approach to freight delivery performance.
In a complex, dynamic system, the business interactions that drive freight delivery performance exist in an environment more like an ecosystem, than a “chain” that only intersects at certain points. Decisions made upstream, perhaps to respond to customer requests, may have disastrous consequences downstream.
So, be skeptical when someone tells you there’s ONE root cause of supply chain disruptions. And in making decisions affecting operations of companies involved in our freight delivery system, including ocean carriers and ocean transportation intermediaries,
First, DO NO HARM! We can make it worse.
Change of Perspective
I think it is critical that we change our collective “perspective” on our ocean freight delivery system. Especially concerning how we view our major seaport gateways. Our “perspective” governs the decisions you make in business and your personal life.
Recently, I saw an item featured in the Wall Street Journal, and I said to myself “I’m going to get that!” I made my order and received an order confirmation, and then nothing for weeks. I wrote that company a blistering email: ”Why haven’t I heard anything…I’m going to write the Wall Street Journal.” Then I got a return email that said “We are so sorry about this delay. Your order is stuck on a ship at anchor off the coast of the Port of Oakland, and as soon as we get the shipment, we will rush your order to you”. I wrote back “Oh, thank so much for letting me know. I understand completely”.
What I was thinking is “thank goodness those people don’t know who I am!” Of all people, I should have had a wider perspective on the problems involving freight delivery. But we’re all vulnerable to slipping back into our personal “silo” that keeps us from acting in ways that improve the freight delivery system.
When I conduct FMC Innovation Team discussions, I insist that team members “step out of their silos” and look at the freight delivery system as a whole. Some people are really good at this. They bring to the table great ideas. Others, not so much. They can’t get beyond their personal experiences and perspectives to envision what will improve the freight delivery system performance.
These are a few observations that I’ve refined since I began to focus systemically on the international ocean supply chain.
- Our international ocean transportation “supply chain” is actually a dynamic, complex system, more like an ecosystem than a chain;
- The bottlenecks on the land and the resulting congestion that we are experiencing are not new. They occur during every cargo surge or peak season. Of course, with a literally unprecedented demand surge like we have experienced, the bottlenecks paralyzed portions of the system; and
- No supply chain actor alone can fix the worst of the recurring bottlenecks. These are the places in the supply chain, like earliest return date practices, merchant haulage and carrier haulage confusion, or container return chaos, that no one “owns” completely. These are the processes that I recommend in Fact Finding 29 for Commission consideration.
My goal is to bring clarity and predictability to these seaport practices using our statutory authority to require ocean carriers and marine terminals to enforce reasonable practices; and
- Mutual commitment in freight agreements will provide greater certainty and “forecasting” of capacity requirements from shippers to ocean carriers.
Many people know what the supply chain problems are, few people know why they occur.
That’s my interest: Why do some of these bottlenecks continue to be a problem? In my experience, in general round table-type discussions, people talk past and over each other and degenerate into confrontations. There’s that “perspective” thing again. If you’re stuck in your “silo,” you might miss a good idea.
I am especially aware that the government must be careful. Remember, in a complex system, you can make it worse. The challenge is, not to become paralyzed, but to choose places to intervene that have the greatest potential for to increase clarity and predictability and do not interfere with business competition or innovation.
Fact finding 29 Investigation and Report
The Fact Finding 29 Report, including my Final Recommendations, is posted on the Commission’s website.
Since I started at the Federal Maritime Commission, I’ve emphasized that we must aggressively reach out to discover what’s really going on in our international freight delivery system. The Commission has started a new Compliance Outreach program, a huge step forward for the Commission, complementing one of my recommendations that ocean carriers appoint compliance officers to work directly with us.
Among my most important Fact Finding recommendations are those I have already briefly discussed: bring greater clarity and predictability involving earliest return date practices for exporters and container return practices for truckers and shippers, and also, clarification of merchant haulage and carrier haulage. I look for bottlenecks in the supply chain, that nobody “owns” and determine whether we can intervene using our “reasonable practice” authority to increase operational clarity and predictability.
Carefully, without making it worse!!
We’ve held many Innovation Team discussions in these areas during Fact Finding 29, and our Shipper Advisory Committee has also done great work in these areas. We’re ready to “set the table” with the ideas developed from our Innovation Teams and Advisory Committee in a notice of inquiry to see what a wider audience thinks of them.
For example, container return. I emphasized during our Fact Finding 29 Innovation Teams discussions that the container return process must be clear and predictable for shippers and their truckers. It should fit on a t-shirt! One of our Commission staff gave me a t-shirt with the container approach I emphasized in our Team discussions. Do you know what it says! TAKE THE BOX!!
I’m pleased to say that the Commission has started to implement another of my recommendations, a small, full-time, international ocean transportation supply chain program! More about that in the future.
We’re on track to meet the OSRA deadlines.
I was most involved with the Demurrage and Detention billing rule that’s out for comment until December 13, but I’m also closely following implementation of the other sections of the Act, especially those that involve demurrage and detention.
My 2017 Innovation Teams Report that addressed the reasons for many of the enduring international ocean freight delivery challenges is posted on my webpage. Take a look at the Innovation Teams Report. You will see some of my 2017 Innovation Team conclusions reflected in the demurrage and detention billing rule.
Now that we have had experience and made decisions under the Demurrage and Detention Interpretative Rule, we are in a position to issue regulatory clarifications in certain areas under OSRA22.
I look forward to discussions with our Shipper Advisory Committee on that matter. And, of course, I’m always interested in your comments!
As demand for cargo space has sharply declined, ocean shipping rates have “plunged,” according to a recent Wall Street Journal headline. We see a market in transition, a substantial drop in demand in the Transpacific. The Atlantic is affected by events in Europe and the shift in cargo from the west to the east ports. As always, The Commission is carefully monitoring capacity in our markets, especially involving our Alliances, our most intensively scrutinized agreements.
I am most concerned about an observation from one of the most respected authorities on ocean shipping that we could be in for a “hard-landing” and “welcome to 2009.” To refresh your memory, at the end of the home mortgage crisis in 2009, demand collapsed and there were over 500 container ships laid up worldwide. And at the beginning of 2010, every importer in the United States decided to restock at the same time!
My first (of four) Fact Finding investigations that began in March 2010 was focused by Commission Order on ship container and capacity availability for U.S. importers and exporters. All too familiar.
I encourage you to stay in touch with your ocean carriers and keep them informed about your forecasts for upcoming shipments. Good forecasting is essential for your carriers to be prepared to meet your needs.
Change to Grow
We know that if we don’t change, we can’t grow. And we all want strong economic growth. We must change our perspective on our seaports and our American freight delivery system. Shippers must promptly pick up cargo from seaports and return equipment within days allotted. Cargo must be picked up promptly–the ports may not be used for storage. No more 30 days free time. Ocean carriers must also manage their equipment to allow ports to maximize the efficient use of their real estate.
With your support, I am confident that we can make the changes necessary to increase our freight delivery system performance and prepare the system to weather future shocks.
Thank you, and I’ll be glad to answer your questions.