Remarks by Commissioner Louis E. Sola, Federal Maritime Commission, at the Florida Customs Brokers and Forwarders Association in Fort Lauderdale, FL
Thank you very much. It is my honor to be here today with all of you. In my time at the FMC, I have had the opportunity to meet with many of our stakeholders and visit several different ports; but coming home to Florida is always a special treat. It is good to be home; and I am excited to be here in my role as a Commissioner of the Federal Maritime Commission.
While I am most looking forward to meeting all of you, I thought I would take the opportunity to introduce myself, briefly discuss the broader role of the Federal Maritime Commission and then provide a few comments about some of the current events at the Commission.
I don’t think I need to impress upon you how vital international trade and the maritime industry is to our national economic interests. All of you play a critical role in facilitating the U.S. freight delivery system – and allowing our importers and exporters to efficiently get their products to market.
Florida Trade Statistics
Recent trade statistics underscore the importance of Florida and the North/South trades to our national economy.
So far in 2019, approximately:
- 10% of all exports have moved through Florida; 5 % of imports
- 26% of all North-South cargo enters or exits the U.S. through Florida
- 31% of exports; 21% of imports
- North-South volume makes up 45 percent of Florida’s total volume
- Exports are 53 percent; Imports are 37 percent
- North-South volume in Florida has increased by 2.9 over the past year, and by 5.7 percent nationally.
- Florida’s three largest ports in terms of volume are Port Everglades, Miami, and Jacksonville
- Combined, these three ports handle 95 percent of all volume that moves through Florida
- And in the North-South trades, they – handle 98 percent of all volume that moves through Florida
As trade continues to grow, we all must work together to ensure an efficient supply chain system that is able to meet the demands of tomorrow. So let me take a few minutes to discuss what we do, including some of the recent steps we have taken to meet our mission.
Our mission is to ensure a competitive and reliable international ocean transportation system – a system which supports the U.S. economy while protecting the public from unfair and deceptive practices. To carry out that mission, we focus on promoting competition, not individual competitors.
As it relates to the Carriers and the MTOs, and on the 10,000-foot level, the Commission administers a focused antitrust regime by continually monitoring cooperative agreements which are filed at the Commission. These collaborative agreements among competitors allow operating efficiencies and cost savings; and affords the Commission the ability to monitor for signs of improper collusion or overly anticompetitive behavior. Our ongoing monitoring and compliance systems are constantly evolving in response to changes in the industry and the marketplace.
On the 100-foot level, in the land where many of you operate, Ocean Transportation intermediaries operate as the vital middlemen linking shippers and the carriers. We regulate by ensuring OTIs are licensed, financially responsible and are following the ground rules. Our goal is to make sure that the system is working for all of you. We work to ensure that your cargo moves when it should and is available for pick up when it is supposed to be.
We also work with other federal agencies by sharing information so that we can all meet our missions most effectively. Some of the other federal agencies we collaborate with include:
- S. Customs and Border Protection (Automated Commercial Environment)
- S. Census (Automated Export System and the International Trade Data System)
- S. Immigration and Customs Enforcement (Member of the National Intellectual Property Rights Coordination Center).
Collaboration with other federal agencies is a win-win. It provides efficiencies for the shipper by eliminating redundancy in the collection of information – and affords the federal agencies access to information which may otherwise be more difficult to obtain. At the end of the day – we (federal agencies and commercial operators) have common interests. We all want our maritime transportation networks to operate on a level playing field and to protect our vital national economic and security interests.
Detention and Demurrage
I noticed that FCBF’s mission “is to act as a forum for the interchange of ideas, promote greater knowledge and understanding among its members, encourage unity of purpose, ideals and ethics.” Your mission seems to capture Commissioner Dye’s approach to addressing concerns relating to detention and demurrage practices.
As all of you know well, there had been concerns raised regarding the detention and demurrage practices of some carriers and marine terminal operators. Commissioner Dye, who has my utmost respect for tackling this issue head on – brought the industry together in a collaborative effort. Through many long hours and months, Rebecca pulled together teams representing every segment of the industry. These teams sat down together and gave their bests efforts to find a workable solution. The culmination of those efforts resulted in the recent issuance of our Interpretive Rule of Detention and Demurrage.
I was very pleased to see that the FCBA supported the rule – and I agree with you. I too believe the rule is in line with our core mission to ensure a competitive and reliable ocean transportation supply system that supports the US economy and protects the public from unfair and deceptive practices.
The Commission received over 100 comments from every segment of the industry – both by trade associations and by any individual companies. Overall, the comments are widely supportive of our efforts to bring transparency to the marketplace.
The interpretive rule provides guidance and clarity on how the Commission will review detention and demurrage practices, and how and when those practices are more likely to be found to be unjust or unreasonable. Importantly, the rule does not create specific new regulatory requirements or obligations. I am a strong supporter of the Administration’s policy of reducing regulatory burdens – not adding to them.
The rule provides guidance in several key areas. These include:
- Establishing the incentive principle that detention and demurrage practices should serve their intended purpose to promote efficient movement of cargo;
- Providing guidance in order to clarify the types of practices which may be found to be unreasonable, including practices relating to:
- Cargo availability
- Empty container returns
- Notice of cargo availability
- Government inspections
- It also Identifies:
- some of the evidentiary standards needed to support Detention and Demurrage charges (billing practices), and
- stresses the need for transparent terminology.
Overall, the Rule underscores the idea that while such charges are appropriate at certain times, they should not become an independent revenue stream.
We are also closely watching the implementation of IMO 2020. As you know, the mandate begins in January 2020 and it is estimated that industry-wide compliance costs will run as high as $15 billion a year. Given the scale of the increased costs, ocean carriers can be expected to pass these added costs on to shippers.
It will understandably take time for the individual carriers to figure out how best to meet the new requirements, and how to set their surcharge levels accordingly. However, there is currently no platform under which the carriers can collectively discuss or set an industry-wide bunker surcharge. Similar to detention and demurrage charges – the proper purpose of a bunker surcharge is cost-recovery. It should not become an independent revenue stream unfairly adding costs to an already burdened supply chain.
The Commission is monitoring this issue to ensure that carrier cost recovery efforts do not violate the Shipping Act and unfairly harm U.S. exporters and consumers.
With that, let me again say thank you for the opportunity to be here today. I look forward to working with all of you in the days ahead. I’m happy to answer any questions you may have.