Remarks of Chairman Daniel B. Maffei at the NCBFAA Annual Conference
A previous version has been replaced and is updated to reflect the remarks as delivered on May 5, 2021.
Thank you Melzie and the NCBFAA Transportation Committee for inviting me to speak with you today.
The NCBFAA is an important stakeholder in America’s ocean transportation system. I always appreciate the opportunity to address you but knowing what is on your minds is even more valuable so I will try to keep my initial remarks brief.
I note what I am about to share with you, and any responses to questions I provide, are my views and mine alone. They do not necessarily represent the policies and positions of the FMC, nor those of any other Commissioner.
That said, I am confident that all five of us are deeply concerned by the insufficient capacity of the intermodal freight delivery system to deal with the current influx of imports to the United States. The challenges that each of you – and so many of your clients – face as the result of worldwide congestion and lack of reliability issues are top of mind.
The fact that this volume is unprecedented and unexpected does not mean these issues are acceptable, but it does mean that solving them is likely to require systemic solutions that cannot be implemented quickly. These include infrastructure improvements, rethinking labor and resource allocation, changes in governmental regulation – and perhaps even changes in the shipping laws.
In the meantime, the Federal Maritime Commission is committed to doing whatever it can, within the boundaries of its current statutory authority, to address the circumstances impeding the flow of cargo and providing some relief wherever possible.
First, the Commission has increased its monitoring activities in response to the current situation. All agreements on file at the FMC are monitored and analyzed for potential anticompetitive behavior, none more closely than ocean carrier alliance agreements.
Even under normal circumstances, the three liner agreements are required to provide extensive information on a more frequent basis than any other class of agreement. Last fall, the Commission directed the alliances to provide new information to support its monitoring efforts and directed all information to be reported even more frequently. If need be, we can adjust these requirements again. We are committed to keeping the marketplace free of anti-competitive manipulation.
Second, all five of us independently appointed Commissioners are digging deep into the situation not just at Los Angeles/Long Beach but in countless other ports that have been affected. Where appropriate, a commissioner might reach out informally to carriers and terminal operators to ensure a full understanding of the situation and to encourage the industry to be as flexible as possible in a given situation.
Sometimes, we act as a convener to bring stakeholders together. Sometimes, we provide (quote) friendly reminders (unquote) of the provisions of the Shipping Act. At the same time, we have also worked hard to inform other parts of the Federal government and members of Congress of the complexities of the situation.
Third, we have launched a formal investigation of issues at the San Pedro Bay and at New York/New Jersey involving detention demurrage charges, requirements placed on container returns and lack of containers being made available for export. This investigation, called Fact Finding 29, is led by our most experienced Commissioner, Rebecca Dye, and is examining carrier and MTO behavior and practices.
Following the FMC’s issuance last April of a Final Rule on Detention and Demurrage, we became aware thanks to you and many other stakeholders that many carriers and marine terminals did not seem to be heeding the rule. This was no surprise to me since, at the time of the rule’s issuance, I praised the rule but also pointed out that several things were necessary for it to be truly effective – including FMC enforcement measures. I must be honest – formal complaints filed by shippers and NVOCCs would be a powerful incentive for the industry to curb abuses of detention and demurrage charges. But, understanding the fear of retaliation and concern about legal costs, the FMC must also consider robust enforcement measures.
I am hopeful that our FF29 investigation itself is starting to deter detention and demurrage practices that do not align with our interpretative rule and I am confident it will start to root out the non-compliance that may continue. Rest assured, the investigation, supplemented by the other measures we have taken, is the FMC’s number one policy priority right now. The measures I have mentioned today are not an exhaustive list. Along with my colleagues on the Commission and the FMC professional staff, we are considering various things we can do that – while they may not grant immediate relief or enhanced enforcement in the near term – will help ensure the FMC can take actions if a crisis such as the current one were to occur again. This may include future hearings, additional fact finding investigations, reassessment of Commission resources and more explicit guidance from the Commission to our operating bureaus.
However, I also want to be candid with you about the limits of what the FMC can do both immediately and in the long term. The legislation governing ocean shipping and determining the powers of the FMC make it clear that our job is to make certain the marketplace for ocean transportation services operates with integrity.
Congress has given us the capacity to guard against certain anticompetitive behavior. However, rising freight costs, no matter how high or how quickly they might have risen, are not in themselves indicators of manipulation of the marketplace any more than rising retail prices are.
The law allows us to take action only if that high price is arrived at due to prohibited anticompetitive behavior, unlawful deception, or some other unreasonable or prohibited practice. Sky-high prices due to sky-high demand are not within our purview to fix, particularly when all of the evidence suggests that the steamship liners have – rather than artificially limited supply – instead put every available ship on the water and have increased orders for new ships.
So, if we can’t fix it under our current authority, what then? Is it time to rewrite the shipping laws?
The main provisions of our shipping laws date back to 1984 and even the Ocean Shipping Reform Act is about to turn 23 years old. In those decades, we have gone from more than two dozen major carriers to about nine with no large container line is based in the U.S., and the capacity of the world’s largest container ship has tripled. We now face an unprecedented import boom with no immediate end in sight.
So if you ask me, it’s time for my former colleagues in Congress to have that discussion and that has been my consistent position since coming to the FMC five years ago.
But I will also say that the ocean freight transportation system is complex, intermodal, international and interconnected in such a way that an incident a half-world away can have global ripple effects.
In this context, rewriting legislation simply in reaction to the current crisis is not wise. For example, informed by the current high profits carriers are reporting, you might be thinking that carriers should no longer be allowed to form alliances. However, in the long run, getting rid of alliances might force more mergers and more bankruptcies resulting in far less competition on price than we have today.
I do believe better solutions to move more cargo more efficiently through the system are out there, but they are most likely to be found if all of the stakeholders in the system work together to find the long-term solutions that can benefit everyone.
Daniel B. Maffei is the Chairman of the U.S. Federal Maritime Commission. The thoughts and comments expressed here are his own and do not represent the position of the Commission.