The Federal Maritime Commission Newsroom


Remarks of the Honorable Harold J. Creel, Jr., Commissioner, Federal Maritime Commission, Before the South Carolina International Trade Conference, Charleston, South Carolina

May 28, 2008

Thank you for that kind introduction Rick. And special thanks to Lulu for so kindly inviting me back to Charleston once again.

It's always a pleasure to be back home in South Carolina , and it's a distinct honor to have been asked to be a keynote speaker at the 35th annual South Carolina International Trade Conference… I must confess… however, that as soon as I saw who was scheduled to be today's other keynote speaker - - comedian and song-writer Tim Wilson, I was struck with a case of resume envy.

Tim Wilson, if you noticed, is listed as: comedian, songwriter, philosopher, musicologist, theologian - wanna be, producer and recording artist.

Me? I'm listed as Commissioner, Federal Maritime Commission.

Tim … I assume… is going to get to tell funny stories and sing amusing songs about God, Country, politics and the meaning of life – and then, probably, bring out a CD.

I'm here to talk about what's happening in one of the more OBSCURE government regulatory agencies in Washington, DC .

So let that be a lesson. After college, Tim was driving around in Atlanta , saw a sign for a comedy club, and showed up for open mic night. The rest is history.

After college, I was walking around Charleston , admiring the ships sitting in the harbor, and showed up for law school with an interest admiralty law. The rest is MY history.

However, the Commission's relative obscurity is no indication that the laws it enforces are unimportant. Our statutory responsibilities do, after all, involve addressing serious and significant issues that go well beyond the more conventional carrier and shipper disagreements over freight rates and service.

Recently, for example, issues concerning the public health consequences of port-related air pollution – and the economics of the port drayage industry – have found their way to center stage at the Commission.

The topic of port-related air emissions is, of course, attracting attention at ports all across the country. Here in Charleston, for example, the South Carolina State Ports Authority has been working with the state's Department of Health and Environmental Control to: reduce truck idling; retire dirty equipment; and purchase cleaner engines. Most recently, there was the announcement that by this fall all port facilities will be burning cleaner ultra-low sulfur diesel fuel.

That's certainly good news. And I applaud Bernie Groseclose and the South Carolina State Ports Authority for their foresight and commitment in addressing the problem.

Out on the West Coast, a number of major ports are currently devoting a great deal of time, attention, and effort to finding ways to mitigate the impact of their own air emissions on their localities.

Two of those ports, the Port of Los Angeles and the Port of Long Beach , are doing so through a joint Clean Air Action Plan they have developed under an agreement filed with the Commission. That plan, when fully enacted through filed amendments to the Ports' basic agreement, will address the air pollution problems caused by drayage trucks, ocean-going vessels, railroads serving the ports, tug boats and their own cargo handling equipment.

As their first initiative under their Clean Air Action Plan, the two neighboring ports worked closely and intensely together, for what is now almost 16 months, to develop a common Clean Truck Program. And their hard work has captured the attention of other ports on both Coasts.

Not only do the two San Pedro Bay ports account for a huge share of US container imports and exports themselves – which alone would make the impact of any port drayage program nationally significant. But, because of their size and influence, the San Pedro ports' approach could well establish a broader precedent.

Interestingly enough, after all that shared research and joint planning, the two ports have elected to pursue dramatically different approaches to dealing with port drayage. For example: The Los Angeles program would establish drayage concessions limited to a relatively small number of licensed motor carriers that agree to phase in a mandated employee-only driver workforce – and LA officials insist that implementing an "employee mandate," and thereby closing the port terminals to independent owner-operator drivers, is necessary to meeting their environmental goals.

On the other hand, Long Beach, with access to the same research and planning information, concluded that such an "employee mandate" is unnecessary to achieving the same environmental goals. Indeed, some of the Harbor Board commissioners at the Port of Long Beach publicly commented that no one had connected the issue of who drives the truck – the proposed employee mandate-- with reducing pollution.

So it would seem fairly clear from the divergent approaches taken by the two Harbor Boards that, although there may be strong agreement on the health benefits of their common environmental goals and emissions standards, the ""employee mandate"" remains somewhat problematic.

There are other significant differences with respect to concession fees, as well. The Port of Long Beach , for example, has established an initial application fee of $250 per licensed motor carrier – one that their staff identified as a nominal fee designed to cover the basic administrative costs of the concession program but without creating any type of barrier to entry. The Port of Los Angeles , on the other hand, has elected to go with a $2,500 initial application fee.

There are also some interesting differences in the fee exemptions each port's program allows.

But, given their close association over so many months, there are also many commonalities in their respective programs as well – especially with respect to the environmental goals they are pursuing, the air emissions standards they have set, and the anticipated administration of the programs.

I mention the significant differences mainly to illustrate the challenges that the Commission will be facing when it reviews the two Clean Truck Programs. And I hasten to add that that review has not yet occurred. We have been closely following the progress of the Ports' collaborative work these many months, but have been waiting for them to finish the process of developing and approving the programs' key elements.

We at the Commission fully appreciate the important public health concerns that the Clean Air Action Plan was established to address. We fully understand the reasons for conducting the cooperative research and planning efforts the Ports have undertaken, and will continue to undertake, with respect to other port-based emissions problems.

We are not - as those un-familiar with our statutory responsibilities and our commitment to public service might speculate - merely a group of bureaucrats interested in making sure everyone jumps through the required hoops. Quite the contrary.

The Commission has a statutory responsibility to review agreements filed with us to ensure that they will not likely give rise to significantly anticompetitive conduct – that is, produce an unreasonable increase in transportation costs or reduction in service. We also have a responsibility to ensure that common carriers, intermediaries, and marine terminal operators – including public ports – do not establish unreasonable regulations and practices. These are important protections for the shipping public. We take them very seriously.

Having made that point, let me add that we at the Commission strive to accomplish the work Congress assigned us with a minimum of intervention. We need to review agreements conscientiously, but we have no interest in unnecessary delays. And, in that spirit, our staff has been working closely with the staff of the two ports and with other interested parties to get all necessary information to make our determinations. Our staff recently wrote to the two Ports to encourage them to file amendments to their basic agreement setting forth the key provisions of their recently approved Clean Truck Programs as soon as possible. Timely filing, we believe, can help avoid any unnecessary delays in program implementation. Last Thursday my fellow Commissioners and I met with Dr. Geradline Knatz, Executive Director of the Port of Los Angeles , to clarify the FMC's role in addressing Port's proposed program. This is a very complex program and we will continue to commit significant agency resources to our analysis.

There is one other topic I'd like to briefly mention this morning: Europe 's impending removal of the bloc exemption for liner shipping.

I've been asked many times what I think is likely to happen in the US trades when the liner bloc exemption in Europe is removed in October 2008.

The conventional wisdom is: "Not very much." And I believe that, in this case, the conventional wisdom is probably correct. After all, even though the Trans-Atlantic Conference Agreement ("TACA") is nominally a traditional rate-setting conference, that designation is largely a legal fiction.

In practice TACA, and the rest of the operators in the Atlantic trades, have been subject to the deregulatory effects of the Ocean Shipping Reform Act ("OSRA") for the last decade. OSRA established a regime based on confidential service contracting and, in effect, deregulated traditional rate-setting conferences – including TACA.

There may be some minor impact on carrier surcharges – but we'll have to wait and see.

Practically speaking, the impact of Europe ending its liner block exemption likely will show up mainly in the Europe/Asia trades and possibly the Africa trades – if anywhere.

More important, I believe, will be what happens when the European Commission reviews the exemption that exists for consortia – or what we in the tend to refer to as alliances and vessel-sharing agreements – in 2010. These operational agreements – as opposed to rate- setting conferences – tend to enhance efficiency, restrain carrier consolidation, and extend available services. In short, they are the sorts of agreements even shipper organizations support.

Which brings me to a related point: Some of you may remember the hearings held, back in 2006 - - by the Antitrust Modernization Commission - - into the nation's antitrust policies and the various exemptions to them – including the limited exemption granted by the Shipping Act of 1984.

Ultimately, the Modernization Commission declined to make any recommendation to Congress to change the Shipping Act. And given that OSRA had already further limited carrier antitrust immunity and provided for confidential service contracts, I wasn't surprised that no changes were recommended.

However, I would note that, in testimony that they submitted to the Modernization Commission, the National Industrial Transportation League – along with voicing support for efficiency-enhancing operational agreements among ocean carriers – suggested that it would be appropriate for the federal government to undertake a broad-based, independent review of Shipping Act immunity, and – in particular – an analysis of the impact that the changes in Europe will have on the shipment of goods in U.S. liner trades.

We at the Commission share NIT League's view on the importance of assessing the impact of Europe's removal of the liner exemption on the trades. And, I'm pleased to say that the Commission's staff is already at work outlining how such an analysis will be conducted.

My discussion, brief as it was, of these two topics – the LA and Long Beach ports' Clean Trucks programs, and the impact of Europe 's repeal of the liner exemption – has, I hope, given you a sense of some of the work that lies ahead for us. They involve issues that may well have profound impact on the Port of Charleston , this country's ocean transportation and inter-modal supply chains, and the American shipping public.

Even if grappling with such issues isn't as much fun as stand-up comedy or as emotionally satisfying as a good ol' country ballad, it does have its rewards. One of those rewards is the opportunity, from time-to-time, to come back to Charleston and participate in events like today's.

Thanks again for inviting me. And thank you for your kind attention.