Since the outbreak, the trade scales have been heavily stacked against US importers and exporters. On Thursday, President Biden is set to sign the Ocean Shipping Reform Act. Importers are hoping that this reform, which gives the Federal Maritime Commission more authority, would help restore that balance. SONAR charts depict ocean carriers’ current behavior in rejecting container orders, which has harmed US exports.
American Shipper spoke with Federal Maritime Commissioner Dan Maffei on the bill’s passing and what trade participants should be aware of.
LL: To begin with, some are concerned that this law will not provide the FMC with sufficient regulatory authority to implement all 12 of FMC Commissioner Rebecca Dye’s final recommendations after her two-year fact-finding inquiry into ocean shipping supply chain issues during the pandemic. Do you think it will?
Maffei: I believe this will be quite beneficial, particularly with regard to the D&D [detention and demurrage] rule, which we all unanimously passed. D&D should not be used to generate revenue. It should serve as a disincentive to moving cargo. I am optimistic about the measure and its ability to restore trust in the supply chain. In terms of D&D, [the bill] provides us with the necessary authority. We don’t want to take things too far. Not all D&D is irrational. You have terminals full with containers that are being used as shortfall facilities due to a lack of warehouse space. You must have the fee. We’ll draft the best rule we can and revise it if necessary. You won’t know unless you try. The interpretive rule was good in my opinion, but it is still a work in progress. This legislation is not the be-all and end-all, but it will reestablish trust in the supply chain.
For years, importers have struggled with detention and demurrage. The Department of Justice was incorporated over the summer. Did that help to speed up the process in any way? Are you expecting additional submissions as a result of shifting the burden of evidence regarding the appropriateness of detention or demurrage charges from the billed party to the ocean carrier, and if so, will the FMC be able to handle the load?
Maffei: I’m hoping for more filings, more cases in which shippers come forward. That being said, you have no idea. Another plus is that this bill addresses the fear of retaliation. Will we catch every dishonest carrier? No, but I can assure you that they will not get away with it indefinitely. Can we handle it with our current personnel? No, but I anticipate additional funding, as suggested by [congressional] committees and with the president’s cooperation.
LL: My reporting and study on the decline in US exports revealed that the two Chinese government-owned Ocean Carriers-OOCL are decreasing the most in US exports. The Chinese have never honored their Phase One responsibilities, despite having two carriers that could readily transport the agreed-upon trade articles. How quickly will this shift occur?
Maffei: There are a few steps involved here. There has been some progress since Congress has taken it seriously and we have begun to inquire about exports. Even asking about it encourages several carriers to strengthen their export initiatives. Passing this measure sends a strong message, and we must have a regulation in place within the first six months. I believe that progress will be made. When carriers learn the rules, they often want to be ahead of them. This bill may not be as drastic as the House plan, but it represents the most significant overall shift in exports.
LL: What about the newcomers? When will we see these put into action?
Maffei: Yes, but with a qualifier. This rule will take some time to implement. It is a major priority, but even at maximum speed, we are looking at a six-month timeline due to administrative procedures. I honestly don’t know if any of these will be around in the future. They must be fair to exports if they want to stay in this business.
Long-dwelling chassis is an issue in ports on both the West and East Coasts. This is a mirror of a crowded warehouse. It takes time to study. How quickly will the industry receive suggestions on chassis best practices? Will you examine the agreements between chassis providers and ocean carriers? Maffei: We will undoubtedly carry out the bill as drafted.
LL: Are there any limits on empty containers?
Maffei: We are well aware that equipment concerns will continue to be a major hindrance to exports. The House bill addressed it, but it doesn’t mean the FMC isn’t. There are several options. FMC’s Rebecca Dye and Carl Bentzel’s teams are searching for methods to assist, but it is a more difficult problem.
LL: FMC Commissioner Carl Bentzel has advocated for the FMC to have greater authority over railroads. One of the main causes for the ports’ inability to transfer containers quickly is the West Coast’s issues. In addition, carriers are transporting fewer intermodal containers onshore. What can we expect to see here?
Maffei: There is a significant amount of precedent that the FMC has authority over containers that come from the ocean. We are still working on the problem.
LL: For efficient commercial movement in the United States, a digital line of sight into the supply chain and logistics is required. Has there been any conversation with the ports about how this may be done collectively? You may have noticed the Port of Oakland and AWS collaborating. The Port of Long Beach’s activities with the Utah Inland Port. Many isolated bubbles exist within ports, impeding efficiency. Isn’t it time to pop these bubbles?
Maffei: The FMC and the bill have no jurisdiction over this. We are providing a venue for the port parties to meet. As an independent commission, we strive to be a trustworthy broker. This law contains a data gathering clause, which is now being examined.
LL: Finally, we’ve discussed the container rate previously. You stated that it is the free market and that it reflects supply and demand. How will the FMC deal with the rising cost of containers?
Maffei: You have a lot on your plate. Rates are falling, which is partly due to a drop in demand. One step back equals two steps forward. We continue to look for any artificially reduced supply as a possible infringement. The Justice Department is investigating. If we discover that alliance members are negotiating prices that are not in their agreement. We are conducting an extensive investigation, but there is no smoking gun. Today’s market is more consolidated. When the president says “20 to nine,” he is referring to market carriers. Importers and exporters now have nine options rather than twenty. We must ensure that the industry operates on a level playing field.
