Comments of Commissioner Rebecca Dye at NITL Spring Policy Forum

April 9, 2008

Thank you for inviting me to your spring policy forum to discuss ocean transportation issues.
The Commission’s mandate is to regulate international ocean shipping in accordance with the statutory policies of the Shipping Act with a minimum of governmental intervention and regulatory costs.
While the Commission continues to enforce Federal laws dealing with international ocean transportation, I have supported using our regulatory and exemption authorities under the law to substantially reduce the burdens of governmental regulation on the shipping industry
I believe the Commission must continue to use its regulatory and exemption authorities to increase competition in international trade. International trade is vital to the American economy and I support using the Commission’s authorities to create an environment that fosters an increase in the volume of U.S. exports while decreasing the price of our imports.
Organizations that do not adapt with the times will become extinct. At the very least, the Commission must not become an impediment to U.S. economic growth.
As many of you know, I had the privilege of serving as the Counsel to the House Transportation and Infrastructure Committee’s Coast Guard and Maritime Transportation Subcommittee during the development of the Ocean Shipping Reform Act. As a representative of shippers, the National Industrial Transportation League was one of the earliest and strongest supporters of this important legislation.
The Ocean Shipping Reform Act substantially deregulated ocean transportation by allowing shippers and ocean common carriers to work together on an unprecedented level.
American businesses had argued that they were losing international sales because they were required to reveal their transportation costs to their competitors.
In response, the most important change contained in the Ocean Shipping Reform Act allows ocean common carriers to enter into confidential contracts with one or more shippers.
Today, the vast majority of imported and exported goods move under confidential contracts between shippers and common carriers.
As passed by Congress, the Ocean Shipping Reform Act did not grant non-vessel operating common carriers the right to offer service contracts in their capacity as carriers with their shipper customers. NVOCCs were required to provide service pursuant to their tariffs, which are required to be publicly available electronically.
Many ocean transportation intermediaries and their trade associations strongly believed that the requirement to publish tariffs and the inability to offer service contracts to their customers put them at a significant disadvantage to their competitors.
The Commission received a number of petitions from a number of ocean transportation intermediaries seeking various forms of Commission action to address what they saw as a burdensome regulatory structure.
Under section 16 of the Shipping Act, the Commission has the authority to consider exemptions to the Act if the Commission finds that the exemption would not substantially reduce competition or be detrimental to commerce.
In 2005, the Commission issued final regulations which exempt NVOCCs offering NVOCC Service Arrangements or “NSAs” from the tariff publication requirements of the Shipping Act.
While I strongly supported this exemption from the Shipping Act which allows NVOCCs acting as carriers to offer NSAs to non-NVOCC shippers, I believe it is time for the Commission to consider further tariff publication reforms.
I believe that the practical usefulness of tariffs is ending. Almost 90 percent of freight carried to and from the United States is currently under contract.
I believe the Commission, under section 16 of the Shipping Act, has the authority to exempt vessel operators and non-vessel-operating common carriers from the tariff publication provisions in the shipping Act. The Ocean Shipping Reform Act broadened the Commission’s exemption authority for actions such as this.
I think it is time that we begin a discussion on tariff reform. I think we should consider tariff publishing relief for NVOCCs as well as vessel operating carriers. I am not prepared to endorse any particular approach today, but I believe that the time has come to consider tariff reform.
The economist Thomas Sowell writes often in his newspaper column about the unintended consequences of certain governmental actions. I think that the best way to avoid unintended consequences is to listen to the advice of people on all sides of an issue.
In another move to reduce the regulatory burden on the shipping industry, the Commission has implemented new regulations governing agreements among ocean common carriers and marine terminal operators.
The new regulations reduce the cost and burden of complying with the agreement filing requirements of the Shipping Act while maintaining the Commission’s important oversight rolls.
As you may know, the Commission recently issued an order denying a petition before the Commission seeking verification that ocean transportation intermediaries licensed by the Commission could utilize agents to perform some services on their behalf without a separate license.
I strongly opposed this decision and issued a dissent to the Commission order.
I disagree with the majority of the Commission because I believe neither section 19 of the Shipping Act nor the Commission’s current regulations prohibit the use of unlicensed agents by licensed NVOCCs as long as the agent does not hold out to provide ocean transportation intermediary services in its own right.
Our current regulations and common law agency principles ensure that the shipping public is protected by requiring that any NVOCC licensed by the Commission is responsible for the actions of its agent.
I do not believe that our regulations should be applied in such a way that unduly interferes with business activities. In fact, when the Commission issued the regulations to implement the Reform Act’s requirements applicable to NVOCCs, it stated that it did not want to interfere with business innovations and changes in the industry. I support an approach that imposes minimal burdens on industry while protecting the public interest.
I also believe this decision puts U.S. businesses operating in China at a disadvantage. U.S. NVOCCs operating in China are concerned about how recent Chinese rules apply to their use of agents to perform ocean transportation intermediary services for them in China.
I know that many of you are interested in how the European Commission’s decision to repeal the exemption from the European Commission Treaty’s ban on restrictive business practices for liner conferences on routes to and from the European Union will affect carrier antitrust immunity in the United States. I do not think the U.S. needs to radically change its regulatory system in response to the European action.
The Ocean Shipping Reform Act balanced carrier antitrust immunity with confidential contracting in 1998. Following this action, conferences, once the dominant pricing forum, have lost much of their influence. Last year, price-fixing agreements declined to less than one percent of agreements filed at the Commission.
The Commission continues to regulate the use of antitrust immunity in the U.S. international trade. The Commission analyzes what impact a carrier or terminal agreement will have on competition, in particular, whether it is likely that the agreement will result in an unreasonable increase in transportation costs or decrease in service.
As the end of European antitrust immunity nears, the FMC staff plans to assess what competitive impacts the change will have on the U.S.-E.U. liner trades.
The Commission staff also plans to undertake an analysis of the utilization of antitrust immunity by vessel operators to enable the Commission to develop policies and revise regulations, if necessary, to better reflect market conditions and activities.
Finally, I am aware that many of your members are very concerned about the implementation of the recently approved Ports of Los Angeles and Long Beach clean truck program.
As you may know, a new agreement between the Cities and Ports of Los Angeles and Long Beach and a number of marine terminal operators has been filed with the Commission.
One of the authorities of this new agreement would implement, administer, and enforce any measure designed to minimize the environmental impact of port operations including the clean truck program.
Under the Shipping Act, any agreement which complies with section 5 of the Act will take affect unless the Commission determines, and the U.S. District Court agrees, that the agreement is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost.
The agreement was due to take effect on March 30^th. However, the Commission has decided to ask the parties to the agreement for additional information to further our analysis of the potential competitive problems created by this agreement.
There is also a possibility that the Los Angeles and Long Beach clean truck program could lead to a private party filing a formal complaint against the Ports with the Commission. For this reason, I cannot comment on the merits of this matter.
I look forward to working with you to ensure that our country has the most efficient ocean shipping environment possible.