Remarks of Commissioner Rebecca Dye AAPA Annual Convention
Thank you. It’s a pleasure to be here at AAPA’s annual convention today.
FMC Focused on Ports
As my good friend, former colleague, and Port of Long Beach Executive Director, Mario Cordero, will attest, American seaports have become increasingly central to the work we do at the Federal Maritime Commission.
For example, FMC agreements like the one between the Ports of Los Angeles and Long Beach allow them to discuss and agree on projects and programs to address supply chain optimization issues. Or the one between the Ports of Seattle and Takoma that allows them to establish an operating partnership as the Northwest Seaport Alliance. Also, the East Coast Gateway Terminal Agreement between the Georgia Ports Authority and the Virginia Port Authority to share operational information. These agreements help regional ports cooperate strategically as they adjust to the changing dynamics of liner shipping.
Another port-related FMC activity is the Supply Chain Innovation Teams initiative that I’ve been leading on behalf of the Commission since last year. This initiative grew out of four FMC ports forums we held around the country in the fall of 2014. The project employs small teams of industry leaders from all of the key supply chain organizations to work together to improve supply chain reliability and resilience.
We mobilized three import-oriented teams and three export-oriented teams. We kept them small enough to be productive, but inclusive enough to ensure that all major perspectives were involved. The project was conducted under an FMC Order to allow for non-public meetings that would support mutual candor and give-and-take. The participants worked conscientiously and productively together, and the process was enlightening to them – and to us.
I would also like to address a second topic today. One that should be of interest to the entire international shipping community: the Commission’s long overdue review of existing regulations. In this review, we will be reassessing the fundamentals of our regulatory framework from the ground up.
But first, the Teams:
Supply Chain as System
I believe that adoption of process innovations that apply new information technologies to the “ecosystem” of international supply chain networks is the route to transforming our international freight delivery system.
To accomplish this, all supply chain actors – from ocean carriers to cargo owners – must be willing to change the way they think about international shipping—and adopt a systemic perspective on our increasingly complex international supply chain. By the way, this includes government regulators, too.
The complexity of our system of international liner shipping and freight delivery is growing. As systemic complexity grows, the solutions to supply chain operational challenges often appear less obvious.
Process Innovation and Small Team Engagement
Everyone I’ve talked with who is involved with liner shipping is anxious to see the overall performance of the U.S. international shipping supply chain improved. And, because of that interest, the Federal Maritime Commission launched the Commission’s Supply Chain Innovation Teams project in May, 2016.
Our Teams contain industry leaders from seaports, marine terminals, liner companies, cargo owners (importers and exporters), ocean transportation intermediaries, drayage trucking companies, warehouses, and longshore labor. I have provided copies of our team participants list for you. They are an impressive group.
The foundation of our project rests on two basic concepts: process innovation and small team engagement. Process innovation: incremental improvement on past operational success; and Small team engagement: no more than 12 members to a team, direct engagement with a specific goal. The overall purpose of the project is to develop commercial solutions to supply chain challenges, not government regulatory requirements.
Team Challenge: One Significant Operational Innovation
I encouraged our Teams to “step out of their enterprise silos” and choose one significant operational innovation that would improve supply chain reliability and resilience. Infrastructure and port performance metrics were “off the table.”
We asked them to keep in mind that the international shipping – both for imports and exports – supply chain is a complex system that consists of interrelated components that continually affect one another. There are lots of interdependent pieces. With that in mind, our Teams agreed that dramatically increasing supply chain visibility among major supply chain actors is the operational innovation that would make the greatest improvement in overall supply chain system reliability and resilience.
Critical Information Visibility.
Our initiative is different from other IT projects you may have heard discussed lately – most of which focus on gaining efficiencies from digitizing specific individual business operations.
Our teams focused on using information technology to provide critical information visibility to major supply chain actors, allowing them to act in harmony, not at cross purposes, in the supply chain “ecosystem.” Improved supply chain visibility requires identifying ways to provide the critical information needed by each supply chain actor. Critical information – not maximum data.
Critical Information Not Maximum Data.
Large data bases exist and may be useful to ports, terminals and liner companies for their own business purposes. But what the teams were developing in their face-to-face discussions and debates was the key information they needed to interact effectively.
To support our teams’ discussions, I spoke with many consultants. It’s very “current” to stress the need for more information sharing in our ports. One consultant emphatically insisted that: “They just need to learn to share information!” My response was: “What information?” and “For what reason?” The IT systems that assist information sharing are expensive.
So our teams’ challenge was to define the types of information (not data) they needed to share and what would change if they received the information when they needed it. It is import ant to understand that defining critical information is not as easy as it sounds. It requires supply chain actors, especially cargo owners, to carefully identify what they need to know, when they need to know it and how it will improve operations.
For example, we found that for U.S. importers a key question is: When can I pick up my container from the marine terminal? For exporters, the questions are: When and where can I get an export container, and when is the best time to deliver the full container to the marine terminal? Those seemingly simple and straightforward questions can be surprisingly difficult to answer.
To tell a cargo owner when an import container is available for pick up, for example, a marine terminal operator must know about, for example, chassis availability, terminal yard operations, customs clearance and other relevant port activities – for each shipment. These underlying challenges have to be addressed before critical information can be made available.
Our initiative has been well received by our stakeholders and by our Congressional Committees. We intend to publish the final report on the project this fall. We also hope to obtain authorization for a concept design for the seaport information portal.
Recently, this quote was picked up from another of my presentations. It’s an accurate quote, but it doesn’t fully explain my regulatory approach at the FMC. I believe the FMC has plenty of authority to accomplish our missions; our focus today should be on removing unnecessary government compliance costs from our international supply chain.
When I joined the Federal Maritime Commission, after my legislative role developing the Ocean Shipping Reform Act, I expected that the Commission would continue incremental shipping deregulation. I was, unfortunately, too optimistic, but, nonetheless, I have continued to advocate for reducing government compliance costs across the board.
In recent years, however, the Commission has begun reviewing existing regulations – the first fruit of which was our recent decision to relax requirements that tied service contracts to the filing of those contracts with the Commission. Then, last March, following the Trump Administration’s executive orders on deregulation, the Commission established a Regulatory Reform Task Force to identify ineffective or unnecessarily burdensome regulations and make recommendations for their revision or elimination.
So far, we’ve had roughly 40 responses to the Notice of Inquiry that we published at the end of May, offering suggested changes that our stakeholders would like to see. The Commission staff is currently reviewing them.
As thing stand at the moment, I expect to see several central questions arise in the early reform process. First: Is the FMC’s tariff publication requirement – and its efforts to enforce those tariffs – a regulatory activity that has outlived its usefulness? Second: Do benefits accrue from our unique legal requirement that service contracts, and similar instruments, continue to be filed with the Commission? And also: (One of my favorites) Whether the Commission should publish competition and regulatory enforcement guidelines?
I encourage all of you whose organizations and businesses are affected by the Shipping Act and FMC regulations to pay attention to, and get involved in this new regulatory reform initiative. Removing obsolete regulatory requirements will allow the liner industry to develop commercial practices that meet their customers’ needs.
I believe that increasing supply chain reliability and resilience through critical information visibility and removing unnecessary compliance costs from the supply chain by repealing obsolete regulations will strengthen the performance of our international freight delivery system and provide a strong boost to American economic growth.
Thank you all for your attention. If we have time for questions, I’ll be happy to address them.