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Remarks of Commissioner Rebecca Dye NCBFFA Annual Conference San Antonio, Texas

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It’s a pleasure to be here with you, colleagues and old friends. Thank you for recognizing the work that we do at the Federal Maritime Commission.

The Commission has changed since I last spoke with you.  Doubled, in fact.

We have two additional Commissioners.  I hope you’ve had the chance to meet Commissioner Louis Sola from Florida, who is, of course, here today.   As you heard him say this morning, he understands your business perspective.

And returning Commissioner Dan Maffei from upstate New York has re-joined the Commission.

I’m delighted to have these two distinguished colleagues, and I can say from personal experience that they’re great additions to the Federal Maritime Commission.

NSAs, NRAs, and Service Contracts

How are the changes the Commission made to NRAs and NSAs working out for you?

Let’s hear it for regulatory relief and business flexibility!

I’m afraid that, too often, regulators are overly reluctant to critically evaluate their processes and programs.

With the NRA and NSA liberalization, we’ve seen how critical review can serve the greater good of our freight delivery system.

When the government retains unnecessary, out-of-date requirements, our global freight delivery system becomes heavy and inflexible, for everybody!

When we remove unnecessary rules and costs, our international ocean transportation system becomes more flexible and agile.

The NRA and NSA exemption can offer a model for reform.

Pending before the Commission is the petition to exempt the filing of ocean carrier service contracts.

We received the World Shipping Council petition to exempt service contracts from filing last September.

In 1998, statutory changes to the Shipping Act were enacted to refocus the Commission on marketplace competition rather than on existing Commission regulatory preferences.

The idea was to encourage exemptions that did not reduce competition or harm commerce, and likewise encourage the Commission to look critically on potentially outdated regulatory approaches.

I’m ready to grant the service contract exemption petition, and look forward to reviewing other regulatory reforms in areas like tariff publication and enforcement!

Global Freight Delivery System

Recently, I was in the Port of Baltimore, with Dave Thomas, Deputy Executive Director, and a group of terminal, trucking, and logistics company officials to talk about port operations and detention and demurrage charges.

When the discussion started, one of the group leaned over the conference table and said to me, “Commissioner, it’s an ecosystem.”

I was delighted to hear that, because I emphasized in our FMC Supply Chain Innovation Teams project that our international ocean transportation supply chain is a COMPLEX SYSTEM, like an ecosystem, with continual interactions that are GLOBAL in nature.

As you know, our Innovation Teams agreed that end-to-end supply chain visibility would be the most effective way to improve supply chain reliability and resilience.

The Port of Los Angeles GE system was conceptualized in our Innovation Teams project.

In the case of supply chain performance, “What you DON’T know, WILL hurt you.”

There’s a lot of information on our Commission website about the Innovation Teams project.

Much of it’s relevant to the FMC Demurrage and Detention investigation that’s ongoing now, because we’re building on the insights into port operations that we gained in the earlier Innovation Teams project.

For example, we learned in our Innovation Teams initiative that the most important thing that American shippers want to know is when their container is ready—actually accessible—for pickup from a seaport.

Getting notice of availability or “accessibility” to shippers in a timely and accurate way is one of the crucial keys to improving throughput velocity and freight fluidity in our international freight delivery system.

FF28 Demurrage and Detention

When last we met the Interim Demurrage and Detention report had recently been released.

The investigative record supported consideration of several potential benefits to the U.S. international freight delivery system. Those included:

  1. Transparent, standardized language for demurrage and detention practices;
  2. Clarity, simplification and accessibility regarding billing practices and dispute resolution processes;
  3. Guidance on types of evidence relevant to resolving disputes;
  4. Consistent notice to shippers of actual container availability; and
  5. A Federal Maritime Commission Shipper Advisory Board.

We “test-marketed” those topics in the second phase of the investigation.

During phase two, I met in-person or by phone with representatives from over 25 ports and marine terminals, as well as many representatives of shippers, liner companies, ocean transportation intermediaries and drayage truckers.

And railroads—if you’re interested the Memphis FMC Innovation Team organized under this investigation, see me after this.

In some cases, like the recent decision by the Ocean Carrier Equipment Management Association (OCEMA) to establish a best practices regime for dispute resolution processes, we are already seeing the first practical steps being taken to produce improvements in a key area we had identified.

The last phase of the investigation is ongoing, including discussions in Washington among small, multi-industry teams.

The point is not to achieve a consensus on future changes – although, we recognize that if such a consensus were possible, that would be great.

The point was to get these various supply chain actors together to talk candidly (and perhaps creatively) about whether today’s demurrage and detention practices are working as intended, as incentives to shippers to pick up cargo and return equipment?

In fact, in my letter to the team participants, I included a paragraph from our December Report that highlighted the point:

The respondents, in both phases of the investigation, generally indicated that the primary purpose of demurrage and detention is to establish a financial incentive to encourage the productive use of assets (containers and terminal space) and promote optimal velocity of cargo flow across the terminal and out of the port. 

For demurrage and detention to be effective, and for demurrage and detention practices to be reasonable, they must be tailored (and limited) to those situations in which the container is actually available.

I’m happy to report that the comments, insights and information exchanged at our team sessions were, indeed, helpful in further clarifying when charges were creating the desired incentives – and when not.

The latest information and clarification, in addition to all the other information and discussions we’ve had involving free time, demurrage and detention in phases one and two, will contribute to my final recommendations to the Commission.

I am confident that we can develop practical  guidance in this area that will address customer frustration and improve the operation of our freight delivery system to move more cargo!!

That’s in everybody’s interest!

IMO’s Low Sulfur Fuel Regulations

Finally, a brief observation or two about the International Maritime Organization’s 2020 sulfur cap and the role of the Federal Maritime Commission.

The new IMO rules will ban the use of ships using fuel with a sulfur content higher than 0.5 percent, compared to 3.5 percent now (1.0 percent in the North America Emissions Control Area) unless the vessel uses special equipment to clean up its sulfur emissions.

There are three widely discussed ways to meet the IMO’s new standard:

  • By using low-sulfur distillates in place of traditional higher-sulfur bunker fuel.
  • By refitting vessels with scrubber technology that captures sulfur exhaust gas, and
  • By building more vessels that operate using Liquid Natural Gas.

LNG is a longer-term option because of the need to develop additional infrastructure to support LNG distribution and storage.

For the immediate future, the choice is using low-sulfur fuel or installing scrubbers.

The main concerns of container lines and their shipper customers – and consumers—are about (1) possible service disruptions and (2) the potential commercial impact of higher fuel costs and fuel surcharges.

Will sufficient low-sulfur fuel be available in areas where and when it’s needed?

If so, at what cost?  And how – and by whom — will any cost increases be absorbed?

Will the move to low-sulfur fuel result in higher costs for other low-sulfur distillates such as home heating oil?

We already hear that, in the current round of carrier/shipper annual service contract negotiations, future fuel costs are an issue.

In the recent past, a now defunct carrier agreement in the trans-Pacific trades published a well-known annual bunker fuel adjustment formula.

Now, I understand, each line has created its own individual formula.

The FMC is, primarily, a competition enforcement agency.  We have no direct role in how the implementation of the IMO’s rule unfolds.

Nevertheless, if the implementation of the IMO rules seriously affects freight rates and service levels, I would not be surprised if the Commission were to receive complaints about, for example, ocean carrier fuel surcharges.

Should that turn out to be the case, the Commission staff is prepared to appropriately evaluate the situation.

Thank you so much for your kind attention. I’ll be happy to answer any questions.