Remarks of Commissioner Rebecca Dye 2021 South Carolina International Trade Conference
Thank you so much for inviting me to be here today. What a pleasure to be with you…really with you! I read that Nassim Taleb, author of the Black Swan, said that the global pandemic is not a Black Swan, because we had prior warnings … But what’s been going on globally sure seems like a Black Swan to many of us.
Today, I’d like to share with you my perspective on the supply chain dislocations that we’ve experienced, and what I plan, going forward, with the Fact Finding 29 Investigation.
My goal not to find fault, or to place blame, but to change critical port congestion and supply chain bottlenecks. To increase supply chain reliability and resilience requires closer coordination and visibility among exporters, importers, ocean carriers, truckers, marine terminals and seaports, longshore labor, railroads and rail ramps, chassis providers, ocean transportation intermediaries, warehouses, and distribution centers, and everybody in between!
There are three major obstacles to increasing operational harmony to address congestion and other supply chain dislocations in the United States today:
- The major operational problems we are experiencing today are not new and will not necessarily resolve when the pandemic has subsided. They are exacerbated in every cargo “surge” or “peak season;”
- No supply chain actor alone, not ocean carriers, or seaports, or shippers, can improve supply chain performance without a coordinated, harmonized approach among them. Everyone owns and is responsible for a piece of the puzzle; and
- The lack of mutual understanding and commitment among parties in the supply chain, especially parties to service contracts for freight, will keep us from harmonizing our freight delivery system and improving supply chain performance.
Without mutual commitment, a “meeting of the minds” there is no contract. Without that, shippers cannot obtain price and space certainty and ocean carriers cannot be prepared to meet their customers’ needs. It’s as if negotiating parties shake hands and say, “we really hope this works out.” I’ve told shipper groups that they must get greater price and volume certainty in their freight contracts to protect themselves. Contractual certainty will go a long way to addressing this persistent problem of uncertainty surrounding forecasting of capacity needs that keeps ocean carriers from planning capacity for their customers.
Fact Finding 29 is my fourth major Commission investigation. My first investigation started in March 2010, when American companies decided to restock all at the same time, following the extreme drop in demand at the end of the home mortgage crisis. Ocean carriers had laid up over 500 ships worldwide and some had been carrying freight on certain trade lanes for free simply to avoid a ship layup. My main finding from that investigation was that a lack of mutual understanding and commitment between ocean carriers and their customers stands in the way of shippers and carriers realizing their business goals.
The current Commission Order on Fact Finding 29 authorizes me, as investigating officer, to form FMC Supply Chain Innovation Teams to develop commercial solutions to port congestion and related supply chain challenges during the pandemic. Why commercial solutions? Because in a complex system, like our international ocean freight delivery system, commercial solutions minimize the risk of unintended consequences in the marketplace. We could make it worse!
Identifying problems is the easy part. We can see the obvious bottlenecks that cause the supply chain to fail. Identifying the commercial decisions and the related commercial reactions that disrupt the system and contribute to the problems, is the hard part.
FMC Supply Chain Innovation Teams is an approach I designed to find innovative solutions for supply chain challenges. FMC Innovation Teams are not round tables or advisory boards. These small Teams are selected from industry leaders with the knowledge, the experience, and the willingness to change the system. Team members are asked to “step out of their silos” and engage with other supply chain actors from the perspective of the overall freight delivery system, not their company perspective.
As a continuation of Fact Finding 29, I am assembling “mini” Innovation Teams on container availability, container return, and earliest return date. Like so many others, I’ve found that virtual meetings are not successful for tough team engagement. Now that we can travel, I plan to hold meetings of ocean carrier and port terminal executives in Washington, starting after Thanksgiving.
I continue to support the work of the Federal Maritime Commission’s Memphis Supply Chain Innovation Team, that works to promote better chassis availability processes in the Memphis rail ramps and possibly to address other related problems.
The FMC has reformed our enforcement approach of the FMC’s demurrage and detention rule with additional enforcement investigations, new complaints processes, and a new FMC carrier compliance program. I certainly wouldn’t have chosen to propose a change in the international system of demurrage and detention charges, for the first time in the world, in the middle of a pandemic shutdown. But we’re determined to enforce the law and change the way these charges are applied.
I have recently submitted Interim Fact Finding 29 Recommendations to the Commissions and to Congress and will also submit Final FF29 Recommendations for future Commission action.
Future Change to Grow
Today, our extreme supply chain disruptions have showed us that our international ocean freight delivery system is unprepared to deal with growing volumes of cargo flowing through our major seaports. We also know that there is no easily identifiable solution to major supply chain dislocations. Rather, there are complex interactions among supply chain actors, and each actor plays a part in improving or impairing supply chain performance.
We should move forward with supply chain solutions developed with today’s challenges in mind not backwards to failed proscriptions from a common carriage regulatory regime of the past. A supply chain innovation that holds promise for future supply chain performance is the National Port Information System, envisioned by the first FMC Innovation Teams. These teams met in Washington following the major congestion in the ports of Los Angeles/ Long Beach beginning in 2014.
Three FMC Innovation Teams composed of major US shippers, ocean carriers, railroads, truckers, seaports, and others agreed that end-to-end visibility is key to greater supply chain reliability and resilience. You often hear people say, “they just need to learn to share information.” That’s not really the problem.
To harmonize the supply chain, our freight delivery system, supply chain actors must be informed of exactly what they need to know, when they need to know it. Business processes may need to change to be able to tell people what they need know. People don’t behave irrationally, at least not people who manage to stay in business. They behave according to what they know at any one time.
Today, we’re flying blind and it’s no surprise that we’re crashing into each other. We all know that if we don’t change, we can’t grow. But if we can change, no, when we change, our international economic competitiveness will grow, and the United States will prosper.
Good day and thank you again.