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43–117 PDF 2008

FEDERAL MARITIME COMMISSION 

MANAGEMENT AND REGULATION 

OF INTERNATIONAL SHIPPING 

(110–144) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 19, 2008 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia, Vice 

Chair 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

LAURA A. RICHARDSON, California 

ALBIO SIRES, New Jersey 

VACANCY 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

ROBERT E. LATTA, Ohio 

(II) 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

ELIJAH E. CUMMINGS, Maryland, Chairman 

GENE TAYLOR, Mississippi 

RICK LARSEN, Washington 

CORRINE BROWN, Florida 

BRIAN HIGGINS, New York 

BRIAN BAIRD, Washington 

TIMOTHY H. BISHOP, New York, Vice Chair 

LAURA A. RICHARDSON, California 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

STEVEN C. LATOURETTE, Ohio 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

WAYNE T. GILCHREST, Maryland 

FRANK A. LOBIONDO, New Jersey 

TED POE, Texas 

JOHN L. MICA, Florida 

(Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Berzon, Michael, President, Mar-Log, Inc., Chairman, Ocean Transportation 

Committee, National Industrial Transportation League .................................. 28 

Brennan, Commissioner Joseph E., Commissioner, Federal Maritime Commission ........................................................................................................................ 4 

Cole, Donald A., Management Consultant ............................................................ 19 

Creel, Jr., Commissioner Harold J., Commissioner, Federal Maritime Commission .................................................................................................................. 4 

Dye, Commissioner Rebecca F., Commissioner, Federal Maritime Commission 4 

Friedmann, Peter, Executive Director, Agriculture Transportation Coalition ... 28 

Froelich, Win, General Counsel, National Association of Waterfront Employers .......................................................................................................................... 28 

Muoio, Mary Jo, President, National Customs Brokers and Forwarders Association of America, Inc. ........................................................................................ 28 

Sher, Stanley O., Acting President, World Shipping Council .............................. 28 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Cummings, Hon. Elijah E., of Maryland ............................................................... 43 

Oberstar, Hon. James L., of Minnesota ................................................................. 57 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Berzon, Michael ....................................................................................................... 60 

Cole, Donald A. ........................................................................................................ 76 

Creel, Jr., Harold J. ................................................................................................. 86 

Dye, Rebecca F. ........................................................................................................ 92 

Friedmann, Peter ..................................................................................................... 96 

Froelich, Win ............................................................................................................ 106 

Muoio, Mary Jo ........................................................................................................ 127 

Sher, Stanley O. ....................................................................................................... 139 

ADDITIONS TO THE RECORD 

American Association of Port Authorities, Jean Godwin, Executive Vice President and General Counsel, written statement .................................................. 157 

Household Goods Forwarders Association of America, Terry R. Head, President, written statement ....................................................................................... 166 

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43117.006
(1) 

FEDERAL MARITIME COMMISSION MANAGEMENT AND REGULATION OF INTERNATIONAL SHIPPING 

Thursday, June 19, 2008 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:45 p.m., in Room 

2167, Rayburn House Office Building, Hon. Elijah E. Cummings 

[Chairman of the Subcommittee] presiding. 

Mr. CUMMINGS. The hearing is called to order. 

Let me apologize to all of you. We have a record of starting our 

hearings on time, if not early, but we had some votes and the 

swearing in of a new Member from Maryland. And I am from 

Maryland, so I had to be there. 

So we will get started now. We will move this hearing along, and 

I just told Mr. LaTourette we will try to expedite the hearing as 

best we can. 

Today, the Subcommittee convenes for a second hearing on the 

Federal Maritime Commission. The Subcommittee held its first 

hearing on the Commission in the 110th Congress in April of this 

year. At that time, there were four Commissioners; and, in the absence of a chairman, all four were collectively responsible for administrative decisions as well as for deciding on the regulatory 

issues brought before the Commission. However, the Commission 

rarely held public hearings, and testimony suggested that four 

Commissioners had limited visibility over the functioning of the 

Commission. 

Additionally, responses to the Federal Human Capital Survey 

suggested that employees at the Commission had deep concerns 

about a number of issues, including the effectiveness of the management exercised by senior leadership. They were also concerned 

about fairness in the resolution of disputes and complaints and the 

ability of the Commission to recruit qualified personnel. 

Between April and today’s hearing, the Commission has begun 

convening regular public meetings. Further, Mr. Paul Anderson, 

who had been serving as a Commissioner and had been nominated 

by the President to be the chairman of the Commission, has resigned from the Commission and withdrawn his nomination for the 

chairmanship. 

2 

We look forward to hearing the testimony of the three current 

Commissioners regarding the steps that they are taking to effectively administer the Commission and conduct the Commission’s 

business. 

We will also receive testimony from Mr. Donald Cole, a consultant who had been hired by FMC’s former chairman to lead a strategic planning initiative at the Commission. As a prelude to the 

strategic planning effort, Mr. Cole conducted an organizational 

analysis that uncovered findings that in many ways echo the concerns expressed by the Commission employees in the Federal personnel survey. 

The effective functioning of the Commission is critical, because it 

must be prepared to respond to the dramatic changes that are occurring in the international shipping arena. The organization of the 

maritime industry and the pricing of carrier services are unique 

and are, to be frank, generally contrary to the standards of competitiveness within an open market system that most other industries are required to observe. 

Tariffs for ocean freight transportation have historically been set 

by cartels of liner services, often called conferences. 

In 1916, Congress passed a Shipping Act that formally sanctioned the existing cartel system by granting immunity from antitrust requirements in certain circumstances for the tariff decisions 

and other actions taken by ocean common carriers acting in collusion with one another. 

In 1961, Congress enacted legislation to require that the agreements decided by cartels be filed with the Federal Maritime Commission, which was established by legislation as the successor to 

the United States Shipping Board. The FMC was empowered to reject those agreements that were found to be contrary to the public 

interest, but many in the industry complained that the FMC often 

took years to grant approval. 

Congress revisited the regulation of ocean shipping by enacting 

the Shipping Act of 1984. This Act took a first step towards the introduction of pro-market competition in rate setting by allowing 

carriers to enter into service contracts with shippers. However, the 

cartels still often limited the ability of carriers to sign such agreements. 

At the same time, the Shipping Act altered the FMC’s authorities 

by eliminating the power of the Commission to reject agreements 

that were not found to be in the public interest. Instead, agreements filed with the Commission were allowed to go into force unless challenged by the Commission as being unlikely to reduce competition or lead to an unreasonable reduction in transportation 

service or an unreasonable increase in transportation cost. 

The Shipping Act of 1984 was subsequently amended by the 

Ocean Shipping Reform Act of 1998, which allowed carriers to establish confidential service contracts without the approval of conferences and without the disclosure of the negotiated rates. Nonetheless, the Act did not eliminate the conference system; and the 

Act continued to grant antitrust immunity to many acts taken by 

carriers acting in collusion with one another. 

The European Union is now taking the next step in the deregulation process and will eliminate its so-called ′′block immunity′′ for 

3 

ocean carriers in October of this year. As a result, carriers will no 

longer be able to collude in the establishment of tariffs for service 

to Europe. 

At present, antitrust immunity will continue to be granted by the 

European Union for other types of agreements among carriers relating to service provision. The full effects that this move will have 

on international shipping and particularly on ocean carrier service 

to the United States market remain to be seen but will certainly 

be critical. 

The witnesses who will appear on our third panel today will 

present multiple perspectives on this issue. Some will argue that 

the maritime transportation market continues to have characteristics that require it to be exempted from competition requirements, 

and they will argue that antitrust immunity enables carriers and 

other actors in the maritime industry to address critical public policy issues such as congestion and air quality around ports that they 

would not or could not address on their own. 

Others will argue that the United States should follow the EU’s 

move by eliminating antitrust immunity for ocean common carriers 

because carriers are not constraining the ability of shippers to 

move their products to foreign markets and because the antitrust 

immunity allows them to charge rates higher than would be 

charged in a purely competitive market. This is one of the most 

critical issues facing not only international shipping today but really the American economy, which is so dependent on ocean common 

carrier services to move the cargos that keep our economy moving. 

So it is, and I look forward to the testimony of today’s witnesses. 

I want to thank you all for being here. I want to thank you for your 

patience. We also look forward to continuing to examine this issue 

as data recording the impact of the EU’s actions become available. 

And now it is my honor to grant such time as he may consume 

to the distinguished Ranking Member, Mr. LaTourette. 

Mr. LATOURETTE. Mr. Chairman, thank you for yielding and 

thank you for holding this hearing. I will move through my statement quickly so we can get to the witnesses. 

This Subcommittee is meeting this afternoon to continue its oversight of the Federal Maritime Commission and to examine conditions that impact U.S. interests in the maritime trades. Since our 

last hearing, the Commission has begun making significant 

changes in the way that it conducts its business; and I want to 

commend the Commissioners for making positive changes since our 

last hearing. A lot of times you come before the Congress and people express disappointment. I want to express my appreciation for 

your taking the last hearing seriously and doing the things that 

you can. 

However, as we are aware, during the time since our last meeting, there is another vacancy on the board, leaving only three members, and I would be interested to hear the Commissioners’ observations about how that is going to impact the work before the Commission. 

The FMC has responsibilities to oversee U.S. interests in maritime trade and to enforce international and domestic shipping regulations. Recently, the Commission took action to approve a plan 

to reduce air pollution from trucks servicing the Ports of Los AngeVerDate Aug 31 2005 09:58 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\43117 JASON
4 

les and Long Beach. As I understand, the Commission’s approval 

is based solely on the plan and that the FMC will monitor the implementation of the plan in the future. I look forward to hearing 

the Commissioners’ views on that as well. 

I am also interested in discussing how conditions in foreign markets and practices by foreign industries are impacting U.S. maritime interests today and in the future. 

I want to thank you for coming, and I look forward to your testimony, and I yield back my time. 

Mr. CUMMINGS. Thank you very much. 

Ms. Richardson. 

Ms. RICHARDSON. I will waive my opening comments if I can be 

first up with questions, given the time frame. 

Mr. CUMMINGS. Thank you very much. 

We will now hear from Ms. Dye, and it is my understanding that 

Mr. Creel will have a brief statement. Is that right, Mr. Creel? 

And, Mr. Brennan, you will not have an opening statement; is 

that correct? 

Mr. BRENNAN. I would like to make a very brief statement. 

Mr. CUMMINGS. Very well. 

We will start with Ms. Dye. Thank you all very much for being 

here and again, thank you for your patience. 

TESTIMONY OF COMMISSIONER REBECCA F. DYE, COMMISSIONER, FEDERAL MARITIME COMMISSION; COMMISSIONER 

HAROLD J. CREEL, JR., COMMISSIONER, FEDERAL MARITIME COMMISSION; AND COMMISSIONER JOSEPH E. BRENNAN, COMMISSIONER, FEDERAL MARITIME COMMISSION 

Ms. DYE. We appreciate it. 

Mr. Chairman and Members of the Subcommittee, thank you for 

opportunity to appear before you today. Of course, with me are my 

fellow Commissioners, Hal Creel and Joe Brennan. 

We have made significant operational and management changes 

at the Commission since the last hearing. We have begun regularly 

scheduled meetings of the Commission, which facilitate public access and provide a forum for the Commission to conduct its dayto-day business efficiently in the absence of a chairman. We have 

previously provided you and Members of the Subcommittee with information on additional concerns raised at our last hearing. 

I want to emphasize to you, Mr. Chairman, and to the other 

Members of the Subcommittee our sincere commitment to improving the working environment at the Federal Maritime Commission 

and our desire to work with you and the Members of the Subcommittee to address any additional concerns you may have about 

the management of our agency. 

We are appearing before you today at an interesting time not 

only for the Commission but also for the industry at large. Due to 

international economic conditions, we are facing dramatic increases 

in demand for U.S. exports on the eve of shifting ocean competition 

policies by one of our largest trading partners. 

The Ocean Shipping Reform Act of 1998 significantly deregulated 

U.S. ocean shipping and eliminated some of the regulatory obstacles between shippers and ocean carriers. Competition in the U.S. 

5 

trades has increased because of the success of confidential contracting. 

The Commission has been closely monitoring recent developments in the U.S. export trade, particularly since the United States 

is one of the world’s largest exporters, a fact little recognized because of the volume of imports. 

Due to a variety of international economic conditions, U.S. exports have experienced strong growth, while imports have slightly 

declined. This growth, however, has not come without corresponding challenges. Shippers in some parts of the country have 

had difficulty in obtaining enough equipment and service to ship 

their goods abroad. 

One of the purposes of the Shipping Act, which we enforce, is to 

promote the growth of U.S. exports. The Commission is reaching 

out to carriers and shippers to assist the industry in overcoming 

the challenges of shifting trade dynamics and finding a workable 

solution to our exporters’ problems. We are pleased that a meeting 

among interested exporters and ocean carriers is scheduled for next 

week, and we will be monitoring the results of that meeting. 

Concurrently, in the European Union, like the United States— 

the European Union, like the United States, grants antitrust immunity to certain ocean carrier agreements. On October 17, the European Union’s antitrust immunity for ocean carrier agreements is 

scheduled to expire. Agreements that improve efficiency in ocean 

transportation will continue to be immunized under European regulations. We estimate that six agreements in our trades that are 

currently filed with the Commission may need to be restructured 

or eliminated to comply with the new European competition laws. 

But to put this figure into perspective, there are 234 ocean carrier 

agreements of all types on file with the Commission, and the majority of these agreements increase efficiency of the ocean carriers 

involved. 

The Commission will monitor this transition and will study the 

impacts of the European Union’s elimination of immunity for ocean 

carrier agreements. The Commission encourages members of the 

maritime industry and the shipping public to participate in our 

study and to provide their insights into this transition. 

The Commission has focused most recently on many agreements 

among marine port terminal operators. These agreements include 

those that address operational issues such as port congestion, security, and air pollution. 

One of these agreements involves the Clean Trucks Program in 

the Ports of Los Angeles and Long Beach. The Ports of L.A./Long 

Beach filed an agreement with the Commission to allow them to 

discuss and agree upon joint programs to address environmental 

issues. 

The Port of Los Angeles has announced its intention to limit access to port terminals to qualified trucking companies who must 

use only employee drivers to the exclusion of independent owner/ 

operators. In order to implement the Clean Truck Program, the 

ports and their marine terminal operators filed an agreement with 

the Commission providing authority for the parties to cooperate on 

the implementation of the programs. Last week, the Commission 

concluded an expedited review of the implementation agreement 

6 

and allowed the agreement to go into effect, but it is our position 

that there was no basis at this time to determine that the implementation agreement would result either in an unreasonable increase in transportation or a decrease in service. 

We will continue to closely monitor developments at the ports to 

ensure that the agreement activities do not violate the Shipping 

Act. We have emphasized to the parties the need to immediately 

file with the Commission all substantive aspects of the Clean Truck 

Program. 

Mr. Chairman, we hope these comments have provided you with 

an overview of some of the most important issues the Commission 

is currently addressing; and we are, of course, happy to answer any 

questions you may have. Thank you so much. 

Mr. CUMMINGS. Thank you very much, Ms. Dye. 

Mr. Creel. 

Mr. CREEL. Thank you, Mr. Chairman and Members of the Subcommittee. 

I apologize for the late notice of this statement, but I thought it 

might be helpful—after being mired down in the details for this 

hearing, preparing for this hearing, I thought it might be helpful 

to step back and take a larger look at some of these issues. I offer 

the following thoughts on some of the issues being faced by the 

ocean shipping industry and being addressed by the Committee 

today. 

Having worked on shipping issues virtually my entire career, as 

Merchant Marine Counsel in the Senate and then as Chairman 

and Commissioner at the Federal Maritime Commission for 14 

years, I want to share these perspectives. 

Antitrust immunity for shipping companies to agree on rates is 

the most significant issue that has been raised. It has been raised 

in the context of the European Union that is altering its treatment 

of carrier rate making under its antitrust laws. Honestly, I don’t 

think that what Europe is doing much matters in how we regulate 

the industry in this country. Their shipping regulation system, in 

my opinion, was arcane. They gave full immunity for rate making 

by conferences only, but there was no government oversight. Extremely anti- competitive, in my opinion. 

We, on the other hand, changed our regime 10 years ago to introduce more competition between carriers and to allow carriers to 

contract directly with their shipper customers. 

Will the Europeans’ actions have an effect in U.S. trades? Some. 

Carriers trading between the U.S. and Europe can’t set rates collectively, but the vast majority of cargo carried in that trade is not 

carried under collectively set rates but, rather, under individual 

contracts between shipper and carriers. So, very few agreements on 

file with the Commission will be affected. 

While I am not so concerned about what Europe is doing, I do 

think that it provides a case study for review of our own regulatory 

system of international shipping. It has been 10 years since we did 

such a review. We made major pro-competitive changes to our laws 

and regulations 10 years ago. It has worked better than anyone 

ever would have imagined. But 10 years is 10 years, and a lot has 

changed in the world and in the industry since then. 

7 

I caution you, however, not to throw the baby out with the bath 

water. This has been the challenge faced by every Committee or 

commission that has looked at these issues since the first liner conference was formed in 1875. Shipping is a unique international industry, and it’s a means by which most of our trade is conducted. 

So we have to be careful and make the right decisions. 

Congress has wrestled over these issues since the Merchant Marine Committee hearings in 1912 to 1914, 1959, 1984, and 1998; 

and, in each of these hearings, antitrust immunity has been the 

focus. 

Some of these old questions may have new answers, but some of 

the questions are new. The industry has changed, and the focus of 

the Commission has evolved over the last several years. 

Much of our focus is now on port operations. Why is that? Well, 

the numbers of containers moving in and out of this country in the 

last 10 years has doubled, and they all come through the same 

ports that have been serving ships since the early sailing days. 

So why all this focus on ports? I believe that is because there has 

been exponential growth in trade, meaning container volume, and 

with that growth an exponential increase in problems related to 

growth. More volume, more problems that come with more volume, 

but the same geography. And there are huge problems now: congestion, pollution, degrading infrastructure. 

Just imagine what it will be like in the next 10 years when trade 

is expected to double yet again. What will be the effect on roads 

and bridges? What will be the effect on non-port traffic, pollution? 

These are all issues on which ports, terminal operators, and carriers will need to discuss and agree upon in order to frame a common plan of action. 

Specifically, as to antitrust immunity, of course, it is generally 

anti-competitive. That is why Congress has gone to great pains 

over the years to determine if it is necessary and has been extremely careful in granting immunity in order to limit its impact. 

Does immunity serve a vital role in some circumstances? I would 

say absolutely. For example, carriers and shippers alike concur 

that carriers should be able to agree on sharing space on ships or 

coordinating service that creates efficiencies, thereby lowering cost. 

Is there a good reason that competing ports or terminal operators 

should be able to get together and agree on issues that benefit the 

environment or that reduce congestion or that enhance security? I 

believe so. 

My point is that we need to figure out what is broken and fix 

that. Not everything is broken. In fact, I would say very little is 

broken. But this is a complicated issue. 

For example, some will testify today that you need to do away 

with antitrust immunity and let there be wide-open competition, 

but that you should keep the provisions of the Act that will protect 

them from carriers who refuse to deal with them or who discriminate against them. That doesn’t sound like wide-open competition 

to me. I am not saying that the point is not valid or that I don’t 

agree with it. I am saying that individual issues should be viewed 

in the context of the totality of the industry. 

I feel strongly that we should take a good look at the industry 

and the Commission’s regulation of it. I view this as a very positive 

8 

project. We should be looking at new initiatives to increase exports 

and facilitate imports in a business environment that is fair and 

a physical environment that is clean and safe. In fact, I think we 

are obligated to do that. 

Has the Ocean Shipping Reform Act been successful in carrying 

out its primary purposes in creating a more competitive shipping 

environment? Indeed, and in spades. Could more be done? You bet. 

Can the Federal Maritime Commission help you achieve those 

goals? Absolutely. 

There is just one last thing I would like to say; and that is that 

the working environment among affected parties, especially the 

shippers and carriers, is vastly better than it was 10 years ago. 

And the reason for that I believe is that 10 years ago they were 

given the ability to work one-on-one and craft confidential contracts. This I believe creates an environment in which positive 

change that is beneficial to all is possible. 

Finally, we at the Federal Maritime Commission will do our part 

in helping identify any changes that should be made to the regulation of international shipping and assist you in bringing about 

those changes. 

Thank you very much. 

Mr. CUMMINGS. Thank you very much. 

Mr. Brennan. 

Mr. BRENNAN. Mr. Chairman and Members of the Committee, at 

the last hearing in April the Committee questioned employee morale and agency operations in general. In general, the idea was 

that it must have been a terrible place to work. Well, I think some 

of the criticism was, frankly, based on out-of-date information. 

When I returned to the Commission, I talked with a good number 

of the employees, and they were stunned by all the criticism. 

The fact is that the 2006 Federal Capital Survey of employees 

showed that the FMC’s results were better than the average of 

most of the Federal Government. The 2007 results were even better 

than 2006. But we are not going to rest on our laurels. 

And I will say this, Mr. Chairman: You were very effective in 

motivating us to have more meetings and hearings, and we have 

been having them every other week, and I think they have been 

very effective in building morale. But we are proud of the direction 

that we are going. 

I said I would be brief, and I will be available for questions. 

Mr. CUMMINGS. I want to thank all of you for being here and 

thank you for your testimony. 

Mr. Brennan, I had not intended to start with you, but I will. It 

is good to know that we were able to do a hearing to help push the 

process along, and you say that you believe morale is up; is that 

right? 

Mr. BRENNAN. That’s what I believe, and there are some studies 

that reflect that. 

Mr. CUMMINGS. Now, can you discuss specific changes you have 

made to strengthen the management—and when I say ′′you′′ I am 

directing this to all of you—to strengthen the management of the 

Commission and to respond to the findings of the Federal Human 

Capital Survey conducted by the Office of Personnel Management? 

9 

Because it seemed as if having to manage with four people was 

a bit much. It seemed as if you all had to meet on every little thing 

and it was difficult. So now I guess it is better in a sense because 

now there are only three. 

But I am just wondering what all did you all do and what things 

have you done which you see remaining in place so that it does not 

take a hearing and does not take the Congress of the United States 

to push you along? That is not our job. And, as I say to my staff, 

if I have to do your job, then I don’t need you. I have to do my own 

job. 

So I am just wondering if you would just give us an idea, any 

of you. But, Mr. Brennan, since you were kind enough to address 

the morale, you might want to start. 

Mr. BRENNAN. I think, for a start, we are meeting every other 

week and many members of the Commission are there. Half of it 

is a public meeting; half of it are closed meetings. The SCS is meeting more among themselves. They are meeting among the Commission. 

I think there is a tremendous increase in morale. But, as I said, 

the surveys, as I look at it, as I read it, we weren’t doing badly 

compared with the rest of the government, but we know we want 

to do more, and that is what we are going to continue to do. 

Mr. CUMMINGS. Ms. Dye, did you have some comments? 

Ms. DYE. Yes. Mr. Chairman, we have established a working 

group to review some of the concerns that were raised in the ’07 

study; and we intend to take back additional concerns from some 

of the things that you had sent over to us and anything that we 

hear today, for that group to consider and make recommendations 

to us. We have a lot of vacancies to fill, and we have made sure 

that the staff is working as soon as possible to get people on board. 

We also have a few SCS positions to fill that report directly to us. 

Mr. CUMMINGS. How many vacancies would you say you have 

now to fill? Do you know? 

Mr. CREEL. Fifteen. 

Ms. DYE. We have two that report directly to us, plus a few other 

decisions that we have to make, and hopefully we will make those 

if there is an agreement among us. So I am very pleased about 

that. 

An additional point about the Federal Maritime Commission is 

that it is in our charter that, even though we have gone down to 

three members, two of us is a quorum. So we can continue to do 

business regardless the fact that we are down to three. 

Mr. CUMMINGS. Mr. Creel, you seemed like you were about to 

jump out of your seat. Did you have something? 

Mr. CREEL. You said that last time. I will try to restrain myself. 

I didn’t mean to act like that. 

I don’t have anything to add to what my colleagues have said except—I just can’t tell you how different things are now. The difference is palpable. I mean, you can feel it in the staff, the senior 

staff, and also—— 

Mr. CUMMINGS. First of all, tell me this so that we can put what 

you are saying in context. When you are saying ′′I can’t tell you 

what the difference is′′, difference from what? 

Mr. CREEL. Well, from before. I mean—— 

10 

Mr. CUMMINGS. What was before? That is what I am trying to 

get to. Before our last hearing? 

Mr. CREEL. Right. I think the point is having our meetings provides a forum for us to hear each other talking, not only us but also 

for the senior and junior staff to hear us talking. And then what 

happens is, after we have a meeting, everybody is on the same 

page or understands where the Commission is coming from so 

there is no sort of behind-the-scenes manipulation of what they 

think a member was saying or they thought a member was saying. 

It is all out there in the open. 

And then the senior staff gets together immediately after our official meeting and discusses what happens. There is an agreement 

on what was said and also what their marching orders are. So, at 

that moment, there is an understanding of exactly what the Commission decided and where it is going from there. 

And the value of that is tremendous, because it takes care of a 

lot of stuff, and it is all out in the open. It’s all done. Everyone is 

planning for these meetings ahead of time. They know 2 weeks 

from now they had better get their issues on board because it is 

coming up. And if it doesn’t come up in this meeting, it is going 

to be carried over to the next one. So that is very helpful for planning purposes. 

But the other thing, as I mentioned last time, Mr. Chairman, is 

one of my concerns is about upward mobility. And just mentioning 

that at this hearing last time and subsequently in our meetings, 

I have had a number of employees come up to me and talk to me 

about that in my office. And I don’t have the answer to that yet, 

but it is of concern to me and to us and we have identified it. 

Through this working group, this ad hoc working group, we hope 

to address that. So just by getting the word out, giving folks hope 

that there is some way for them to move up the ladder I think is 

extremely beneficial. 

Mr. CUMMINGS. Is it because basically it is a kind of dead-end 

agency—— 

Mr. CREEL. I don’t like the sound of that. It is not a dead-end 

agency. 

Mr. CUMMINGS. What I meant was there are certain agencies 

that are structured in a way where there is simply nowhere to go, 

and I am just wondering are you looking at possibly trying to figure out a way to restructure it so that people can feel they can 

move up within the agency? 

Mr. CREEL. It is not so much restructuring as it may be retraining. And, remarkably, I have had people there that are in jobs that 

you would not expect them to be reading the regulations and they 

tell me they have read the regulations over and over. And these are 

people who don’t need to read the regulations for what they do necessarily. 

So my point is that I think the training is essential. And slots 

do come available. Things do open up. So if you provide the training and education, then I think we can provide—we are not going 

to fill every job with someone from below that we would like to, but 

there is the opportunity there, I think. So I would say, yes, there 

is opportunity. 

11 

Mr. CUMMINGS. There are two words that I want you to zero in 

on, and that is effectiveness and efficiency. Effectiveness and efficiency. If we have a situation—going back to the training that you 

just talked about, where we can do a much more effective and efficient job and training would help us do that—in other words, we 

don’t want five people doing a job where really we should have just 

three doing and two others doing something else to make the agency more effective and efficient. So you all are seeking outside expertise on that? 

Mr. CREEL. Not yet. We are identifying the issues. We are talking to the staff. We haven’t committed to that. That is certainly an 

option. You mentioned that last time. That is certainly an option. 

Mr. CUMMINGS. But I would ask that you look at effectiveness 

and efficiency, please, sir. 

Mr. CREEL. And I would add one more thing. What I have always 

found is people who are motivated make the best workers, and if 

you give the people an opportunity, they are motivated. 

Mr. CUMMINGS. I just want to ask two more questions, and then 

I am going to turn it over to Mr. LaTourette. 

I just want to go back to one of the issues that we are dealing 

with today. Would you all agree that the primary purpose of regulating international shipping is to protect shippers that import and 

export cargos to and from the United States? 

Ms. Dye? 

Ms. DYE. Mr. Chairman, I think that is obviously one of the main 

concerns of all transportation regulation. But I have always 

thought that our regulatory scheme is to promote growth in our 

economy, which benefits consumers directly. Now, of course, the 

Shipping Act of 1984, the major law that we enforce, one of the 

purposes is for us to encourage the growth of exports, which is one 

of the reasons we are so concerned about the problems that our exporters are having right now obtaining the equipment service to 

get their goods sold. 

Mr. CUMMINGS. Well, if 95 percent of U.S. imports and exports 

are shipped by contract carriage and not by common carriage, do 

the remaining shippers need to be protected by having tariffs filed 

and publicly available? 

Ms. DYE. I am on record, Mr. Chairman, as saying that I believe 

it has been 10 years, we have had a lot of experience with the ’98 

Act, and it is time for us to consider the next phase of deregulation. 

What that involves—— 

I also believe that reason that the ’98 bill was effective was because all the parties were involved. It was a comprehensive bill, 

and everybody bought into the result. 

Whether tariff filing or publication should be eliminated in that 

context is a good question. I am on record as favoring our considering at the Commission eliminating tariff publication, because I 

understand that not a lot of people use tariffs that are publicly 

filed or available anymore because 90 or 95 percent of cargo goes 

by contract. That is an undeniable conclusion. 

What other types of reforms would be included in a comprehensive package I would be grateful to talk to you about if you ever 

start to consider something like that. 

Mr. CUMMINGS. Mr. Creel? 

12 

Mr. CREEL. Mr. Chairman, I guess there are two issues on that, 

and one is there has been a lot of questions about whether the Federal Maritime Commission can exempt tariff publication by regulation. There is a legal question there. Quite frankly, I am a little 

skittish about stepping on the toes of Congress. I am not sure that 

we can do it by regulation. So I think there is a valid question 

there. 

The other issue is whether it’s good policy; and, as you said, that 

is a remnant of common carriage. And, in the trans-Pacific, I think 

about 5 percent of all cargo is carried under tariff; trans-Atlantic, 

5 to 10 percent; Caribbean, 10 to 15 percent. So those are some significant numbers. 

So before prejudging myself on something like that—we may get 

a petition at the Commission to do this, so I don’t want to prejudge 

myself, but those are all things to consider, I think. And the role 

of common carriage is a valid concern. As I mentioned in my statement, I think you have to look at everything in totality. It is all 

related. 

Mr. CUMMINGS. All right. I am going to go to Mr. LaTourette. 

Mr. LATOURETTE. Thank you very much, Mr. Chairman. 

Thank you again for your testimony. Thanks for coming back. 

I just have three areas that I want to explore. 

First, Mr. Creel, I understood you to say in your written and oral 

testimony that, in your opinion, the actions of the European Union 

aren’t going to have a huge impact on our shipping trades, and it 

would be your recommendation—I think I heard Ms. Dye say this 

as well—that we revisit the ’98 Act. And you are not on the side 

of the repealers, and you are not on the side of the do-nothings, 

and, like in most things, the totality of the circumstances, I guess— 

I guess my question is—I think I got what you think—Mr. Brennan, do you agree with that? 

Mr. BRENNAN. Philosophically, I am opposed to antitrust immunity. I think the right thing to do now is we will be working on 

that. We will be watching what happens with the European Commission. 

I don’t like it for the simple reason that people are in business 

to make money, and they want to maximize profits. And to maximize profits it is kind of a pretty good deal if you can set rates. 

I used to wonder—when I first came to the Commission, I would 

talk to carriers, and they said they weren’t making any money, and 

I was sort of stunned. How is it you don’t make money when you 

can fix rates? 

So, generally, I am opposed to it, but I think at this stage it 

might be instructive what happens with the European Commission. 

Mr. LATOURETTE. Ms. Dye, do you agree with that as well? 

No. 

Ms. DYE. I am not going to prejudge my study, the study that 

we are holding. But I do believe that it is time for the Congress 

or for us to look at rate making in the ocean transportation system. 

Yes, sir, I do believe the time has come. 

I am probably not as prepared to go as far as Mr. Brennan in 

saying we should get rid of all of it. We frankly didn’t start deregulation of ocean transportation until ’98. So that would be a huge 

13 

step. But it is definitely time to start considering whether or not 

we should do something about rate making. 

Mr. LATOURETTE. Thank you. 

The Subcommittee has heard from a number of folks in the industry that are having trouble getting containers, particularly if 

they are not located near ports or near container depots. And I 

guess the question is, is there something that any of you feel the 

Commission can do to solve or help alleviate this problem? 

Mr. Creel, you first. 

Mr. CREEL. Yes, sir, that is a problem. We met with Pacific shippers a few weeks ago, and they expressed some serious problems 

about being able to get their exports moved. 

There are a number of issues. I mean, one thing is the cost of 

shipping a container into the country and outside of the country is 

vastly different. The revenue, I should say. It is more than double 

coming in than it is going out. So there are some carriers that have 

a vested interest in trying to move their container back to China 

where they can fill it up and ship it back and get more revenue 

than shipping wastepaper or hay from the United States. But there 

also are agricultural commodities and beef and other things that 

need to be moved. Yes, there is a problem there. 

The additional problem is where the containers are located. Containers coming into the country go to the port, and they get stuck 

there, and the cargo gets loaded into 53-foot trailers and moved to 

the hinterlands. When you are tying to move cargo from the hinterlands to the ports, you have got 53-foot containers which won’t go 

on a ship. You have to transload it back into a 40-foot. These are 

all additional costs. 

In addition, we are exporting mostly not to China but to Taiwan, 

Japan, Korea; and that is not where we are importing from. So you 

also have a problem with the containers being in the wrong place 

internationally. So the container displacement is a big issue. 

And as to the role of FMC, we have been talking to the carriers 

and the shippers in trying to get them together. As Commissioner 

Dye mentioned, they are meeting next week, some of them, to try 

to address this problem amongst themselves, but we stand ready 

to help mediate any of these issues that we can help with. 

Mr. LATOURETTE. I guess I would ask after that meeting occurs, 

with the good offices of the chairman, if somebody could share back 

to the Subcommittee what progress you are making and if there is 

any assistance you need in that. 

Mr. CREEL. You bet. 

Mr. LATOURETTE. Before my time goes, on the next panel is Mr. 

Cole, and we talked about Mr. Cole and his contract at the last 

hearing. I know he is going to share his thoughts. 

I have a document that is a page and a third, and my question 

was I think the last time we all got together that the Commission 

had not received a report. Apparently, the Senate Democratic staff 

had received a report that made its way over here. So, today, as 

we sit here in June, have you all received a report? 

Mr. CREEL. Yes, sir. We received that a couple weeks ago, 2 or 

3 weeks ago. And it is not dated, but it seems like that report is 

from 2003. I am not sure. 

14 

Mr. LATOURETTE. Is it different from the document that I have 

described? Is it a lengthy thing? 

Mr. CREEL. It’s a page and less than a quarter, I think. 

Mr. LATOURETTE. Okay. And are discussions ongoing between 

the Commission and Mr. Cole’s representatives relative to outstanding contract items? 

Mr. CREEL. They are. He has hired counsel. There is potential 

litigation. 

Mr. LATOURETTE. And just for my purposes, when did you all receive the document? You didn’t have it when you were here last. 

Mr. CREEL. No. It was 2 or 3 weeks ago. 

Mr. LATOURETTE. All right. Thank you. 

Mr. CUMMINGS. Ms. Richardson. 

Ms. RICHARDSON. Thank you, Mr. Chairman. 

And, Commissioners, I am the new kid on the block, so if you 

could make your responses as brief as possible because we have 

only got 5 minutes here. 

I am going to focus my questions primarily on what Mr. 

LaTourette referred to and, Ms. Dye, you mentioned, which is your 

decision of the FMC on Friday regarding particularly the Ports of 

Long Beach and Los Angeles. Mr. Rohrabacher represents those 

ports specifically, but one foot outside of the Port is my district. So 

45 percent of the entire Nation’s cargo goes through my district, 

and your decision was very pertinent to my role in this Committee 

today. 

Number one, in your press release, it said that you contemplate 

future discussions to determine the extent to which terminal operators will administer certain aspects of this plan. What is the 

timeline to do so? 

Ms. DYE. Ms. Richardson, the parties are under obligation when 

they have actually discussed the implementation of the plan, and 

they will file the amendment to that agreement with us, and then 

we will look at that under the same process. 

Ms. RICHARDSON. You also stated in your press release that the 

Commission noted that its decision today does not foreclose future 

actions with respect to the AIA. So does that mean that if that 

amendment was not satisfactory you might change your decision? 

Ms. DYE. We could. 

Mr. CREEL. And if I could add there, what was filed—what we 

agreed to was to allow the agreement to discuss basically—for the 

ports to discuss with the marine terminal operators may be required to do. It does not lay out the specifics of exactly what they 

are going to do. Once they decide on what they are going to do with 

the MTOs, it is our opinion that they will have to file another 

amendment which we will then review as well. 

Ms. RICHARDSON. Okay. Now, I started off on the City Council 

in Long Beach, and when we originally had this idea, we were told 

we couldn’t do it because there was a difference between intrastate 

and interstate. So I found it kind of interesting that the FMC took 

this position honoring local bodies, especially given the point that 

you were coming before this body one week later. Can you tell me 

how you view that this is an appropriate jurisdiction within your 

body of allowing intrastate to take the lead versus an interstate 

overall nationwide proposal? 

15 

Mr. CREEL. I will address that. 

We have jurisdiction because, under the Shipping Act, the agreements that are filed are both between marine terminal operators. 

There are two agreements; one between the two ports who are acting as marine terminal operators and between the two ports and 

the Association of Marine Terminal Operators. Because there are 

agreements on file, the parties are able to discuss with antitrust 

immunity and also to be able to facilitate any sort of program, we 

have jurisdiction, and can conduct both a competitive analysis 

under 6(g) or review under section 10 of the Act. If perhaps any 

action is an unreasonable refusal to deal or we believe they are operating under an unfiled agreement, that gives us authority. 

Ms. RICHARDSON. Are you aware of Mr. Calvert’s bill that’s on 

file? 

Mr. CREEL. No, I am not. 

Ms. RICHARDSON. What I would like to do—I have got about 1- 

1/2 minutes. I have one more question I would like to ask. 

But, for the record, I had an opportunity to speak with the 

Chairman and hope to work with both him and Mr. LaTourette and 

other Members of this Committee to conduct a hearing on this very 

issue in our particular area no later than the end of July; and I 

hope that you would participate and be involved and testify and 

share your reasons. 

Because Mr. Calvert’s bill, which has gained some discussion 

here on the Hill—in fact, Chairman Oberstar was looking into 

what these potential implications could be. And the fact that a lot 

of this is stemming from my area, I think it is important everyone 

is hearing all pieces, what the Port of Los Angeles and Long Beach 

proposed, what Mr. Calvert is proposing. 

And then, also, which leads me to my final point, what do you 

anticipate the impacts being of the potential legal action of the Port 

of Los Angeles’ plan and also State Senator Lowenthal’s legislation? 

Mr. CREEL. Well, I will just say that the difference between the 

Long Beach plan and the L.A. Plan is, for the most part, that Los 

Angeles—— 

Ms. RICHARDSON. I am familiar with that. 

Mr. CREEL. Okay. I am sorry. 

Ms. RICHARDSON. My question to you is, what do you foresee as 

being the impact? Because, if I am not mistaken, there is potential 

pending litigation on the one plan because they are leaving out 

independent operators; isn’t that correct? 

Mr. CREEL. That’s correct. 

Ms. RICHARDSON. So my question was, what do you anticipate 

that legal action to be and what do you anticipate the impact of 

State Senator Lowenthal’s legislation? 

Mr. CREEL. I don’t know what Senator Lowenthal’s legislation is, 

but I—— 

Ms. RICHARDSON. It has been going on for at least 3 years now. 

I look forward to seeing you at that hearing. Thank you. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Mr. Taylor. 

16 

Mr. TAYLOR. Mr. Chairman, I have no questions, but I want to 

welcome my first next-door neighbor in Washington, Congressman 

Brennan, back to town. 

Mr. BRENNAN. Thank you very much. 

Mr. TAYLOR. And just a matter of curiosity, I know you had a relative, I believe it was a sister, who lived in south Mississippi. I am 

curious how she did in the storm. 

Mr. BRENNAN. She did well, actually; and she speaks very strongly about your representation. 

Mr. TAYLOR. I am glad she did. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. It sounds like a commercial to me. 

Mr. Coble, I apologize. I didn’t realize you snuck back in on me. 

Mr. COBLE. That is okay. I have been in and out, Mr. Chairman; 

and I hope I won’t repeat a question. 

Ms. Dye, let me start with you. Since the Committee’s last hearing, an additional vacancy has been created on the Commission, 

leaving only three of you sitting members. How does the current 

status impact the Commission’s abilities to conduct oversight and 

make decisions on pending matters? 

Ms. DYE. Thank you, Mr. Coble. 

In our charter, we have authority to conduct business even 

though we go down to three members because two of us can constitute a quorum. So we still—if two out of three of us agree on any 

matter, then that is the Commission’s position; and we found that 

that is working well. We are holding public meetings now and 

doing all of our major and our routine business in meetings, and 

things are working very well. 

Mr. COBLE. Very well. 

Mr. Brennan, are U.S. maritime interests currently playing on a 

level playing field internationally? 

And let me put a second question to you. And are there specific 

areas that the Commission is focusing on to improve conditions 

internationally? 

Mr. BRENNAN. Mr. Coble, we had ongoing, long-term problems 

dealing with getting certain type services for some of our people, 

you know, in the Far East, in Asia, in Japan and in China, but we 

are working on it. And I know Mr. Creel, even before I came on 

the Commission, took major steps to advance that. 

Mr. COBLE. Mr. Creel, do you want to add anything to that? 

Mr. CREEL. I would agree with Mr. Brennan. Yes, we still have 

an outstanding proceeding on the Japan harbor practice issue that 

carriers that serve the U.S. were not treated the same way in Japanese ports—as Japanese vessels are in U.S. ports. That is still an 

open proceeding. We are monitoring that. There are some issues in 

China regarding freight forwarding. We worked closely with the 

Maritime Administration, who negotiates on behalf of the administration. So we are actively involved with them. 

Mr. COBLE. Let me put this question to you. Since you are operating apparently effectively with three, do you think that we 

should stay with three or should we go back to five? 

Mr. CREEL. As long as it is these three, we are okay! 

Seriously, clearly, we can do the job with three. But one thing 

that is interesting, because of the Sunshine Laws, two of us cannot 

17 

get together and talk about substance. So whenever we get together, we can’t make decisions or talk about our decisions or how 

we might come to a decision. So we have to be very mindful of that 

with just two of us. Where you have 5 members, for the 14 years 

I have been there, two members would get together and talk and 

then you talk to another member and of course then decide things 

in public, but we are not able to do that. So we are frustrated in 

that way. 

Mr. COBLE. I got you. Thank you all for being with us. 

Thank you very much, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Just two items. Again, as I said a little bit earlier, I was impressed by the fact that you all have now moved more towards addressing some of the leadership issues and morale and staff issues, 

and one of my concerns is that you stay on course. So, therefore, 

I am going to ask that you all come back to us—not come back to 

us but give us a report in 90 days. Let us take a look at it to see 

where you are. In particular I am concerned about the issues 

raised by Mr. Cole. 

I just want to—what is the matter, Mr. Brennan? What is 

wrong? 

Mr. BRENNAN. I would just like to make a brief comment on the 

Mr. Cole matter. 

Mr. CUMMINGS. Sure. 

Mr. BRENNAN. Some of the things that you read in his talking 

points, that was done about 5 years ago. 

Mr. CUMMINGS. I understand. 

Mr. BRENNAN. And if you give a lot of weight to that, it would 

be like grading somebody who was in the eighth grade on what 

happened in the third grade, to use an analogy. That’s 4 or 5 years 

ago. I think there is a substantially different Commission at this 

time. 

Mr. CUMMINGS. I understand. 

What we will do is we will put together a set of questions. And 

we need some benchmarks. We need some benchmarks, and then 

we need to measure, to see where we are going. I don’t want a situation where we are talking about these same issues 6 years from 

now. If we are talking about them, I want us to be talking about 

the progress that we made. 

So what we want to do, the way the Subcommittee operates is 

that we try to—I am going to say this in a nice way—keep your 

feet to the fire. So we will check back with you in 90 days. Staff 

will work with us on both sides—and, Mr. LaTourette, I am sure 

you all will work with us—to come up with some questions as to 

where we are on these issues. 

Because we want the agency to function properly. And now that 

you all are meeting and it sounds like you are one big family of 

three and you are moving forward, we want to see that you continue to do that. 

Is that all right, Mr. LaTourette? 

Mr. LATOURETTE. Just one thing, I want to thank you for the 

positive progress that you have made since our last get-together. 

Mr. CUMMINGS. I do, too. 

18 

Mr. LATOURETTE. And, Mr. Brennan, I would say that I could tell 

without knowing that you are not only a former Member of this 

House but the former Governor of Maine. Because in your observation about Mr. Taylor, a lot of us have strong feelings about his 

representation, and you didn’t say which way those strong feelings 

went. 

Thank you very much for being here. 

Mr. CUMMINGS. The only other thing I would have is I just want 

to know to what extent do you all believe that ocean common carriers are colluding with regard to guidelines or the floors and the 

rates—with regard to the rates that are being charged even under 

confidential service contracts, and what impact, if you believe that 

there is such collusion, would you say such collusion is having on 

prices? 

Ms. Dye, we will start with you, if you have a response. Did you 

understand the question? 

Ms. DYE. Yes, I believe I did, Mr. Chairman. 

Part of our job is to monitor all of the discussions that agreement 

parties have. Anytime they actually get together and hold meetings 

and operate under their agreements under which they get antitrust 

immunity, they have to report to us; and our folks make sure that 

they are operating within the agreement and not in ways that concern the worst of anti-competitive process, like capacity, rationalization. 

Also, confidential contracting at the option of the shipper starves 

any cartel from information, and without information the group 

can’t hold it together because they cheat on each other. And that 

is one of the reasons that we began by pulling the rug out from 

under the system of collusion in ’98 by keeping information confidential between the shipper and the carrier. When 90 to 95 percent is carried confidentially, there is not a lot of information on 

which to collude. 

Mr. CREEL. I would agree with that, and I would just add for 

those agreements that have antitrust immunity, whether it is discussion agreements or the very few conferences that exist, they 

have to file minutes with us. 

Now, you might say, why don’t they just file what they want us 

to hear? You would be surprised what we find out from the minutes. That is not a justification for antitrust immunity or anything. 

It is just a statement. 

The other thing I would say is that, on service contracts, back 

in ’98 and prior to ’98, some of the carriers went kicking and 

screaming to agreeing to service contracts. They did not want to 

have service contracts. And, lo and behold, they actually like it 

now. They use them. They are able to tailor their contracts with 

their customer shippers, and it works. 

Mr. CUMMINGS. I want to thank you all very much, and we will 

look forward to hearing from you in 90 days. I just want you to understand if we review that document and we are not satisfied, you 

will get an invitation to come back. 

Thank you very much. 

Mr. CREEL. Thank you. 

Ms. DYE. Thank you, Mr. Chairman. 

19 

Mr. CUMMINGS. We will now hear from Mr. Donald Cole, who is 

the management consultant who worked with the FMC under the 

direction of his former chairman. 

Thank you very much, Mr. Cole. You have 5 minutes. 

TESTIMONY OF DONALD A. COLE, MANAGEMENT 

CONSULTANT 

Mr. COLE. Mr. Chairman and Members of the Subcommittee, I 

am pleased to be here at your request to testify on issues at the 

Federal Maritime Commission. 

In December 2003, Chairman Blust sought outside assistance because he wanted two things: to transform the agency focusing on 

compliance rather than enforcement, and to create an agency that 

would work in partnership with industry. 

Among the major issues that I identified for the FMC during the 

diagnostic phase of my work were: there was no vision and no positive operational values; that the Commissioners rarely met as a 

group to deliberate on internal/external issues; that there was a 

lack of basic communication from the leadership to the staff, people 

were starved for information; there was a lack of trust; there was 

serious conflict and resistance to change. 

In June 2005, the first phase ended with the chairman and the 

senior staff accepting my findings. We scheduled a retreat to set up 

groups to work on each of the major issues. The Commissioners 

were invited to attend that retreat. All attended except Commissioner Anderson. They were invited to be full participants, so they 

were certainly aware of staff efforts to improve the organization. 

Their support and engagement has not been strong, but they have 

been aware. 

In November 2006, Chairman Blust and his director of administration left the agency. My contract was cancelled and my final invoice was not paid by FMC, because the Inspector General was beginning an audit and raised issues about my contract with the new 

director of administration, Peter King. 

My contract with FMC was standard in the consulting industry, 

both the scope of work and the fee schedule. From 2003 to 2006, 

each of my invoices was paid without question and without concern. Again, it was a normal agreement, and progress was being 

made. I earned my fees, provided insight and recommendations for 

changes, and worked with the staff to implement improvements. 

The audit of my contract and the behavior of the IG have been 

puzzling, and the IG has compromised his independence in the 

process. He directed management not to pay my final invoice. This 

instruction is clearly beyond his authority. He was directly involved 

in the cancellation of my contract, which occurred at the very beginning on this audit and was not appropriate. After meeting with 

congressional staff, he reported his discussion back to the Commissioners. 

Since the chairman’s departure, Mr. King has claimed to be the 

sole authority of FMC, stating that the Commissioners will not 

meet with me. Certainly the Commissioners are all aware of this 

controversy, even though they wanted to deny knowledge of it during your April 15 hearing. 

20 

The controversy about me and my work has cost me and the 

agency time, energy and money. It has caused angst for the staff. 

But the real issue for me, as a 37-year public servant and a 6-year 

consultant to Federal agencies seeking change, is that the FMC has 

serious problems that need to be addressed. To a large extent, the 

issue of my contract being cancelled acts as a diversion from the 

real issues. 

Since Blust left the public service, inside FMC has struggled. 

They have toiled without leadership, lived in fear, and worked 

where conflict abounds. The Commissioners and SES have not 

stepped up to fill the leadership role. Those who could leave the 

agency have, due to the toxic environment. Among those who have 

left: four of the six employees selected for the SES Candidate Development Program, the next generation of senior leaders, the deputy general counsel, the deputy for administration, the director of 

EEO, the senior IT supervisor, the secretary and others. 

People have reached out to me and to others for help and support 

because there is none to be had inside FMC’s leadership. 

The April 15th hearing precipitated changes, some for the better, 

some not. On the positive side, Commissioner Anderson resigned in 

May. Sadly, his counsel is being considered for permanent Federal 

employment. On the positive side, the EEO case that was filed by 

the agency’s general counsel is being settled. Sadly, no such case 

should have ever had to be filed. 

On the positive side, the Commissioners called the staff together 

to tell them what happened at the hearing. Sadly, they stated that 

some disloyal employees provided information to congressional staff 

and added, ′′This, too, will pass.′′ 

On the positive side, work may have started on the results of the 

Human Capital Survey. Sadly, the report lay dormant until this 

Committee, you, brought attention to it. 

Commissioner Dye stated today, as well as the others, that 

changes are under way. I am encouraged to hear that. The bottom 

line is, your oversight is beginning to show through. Now, industry 

watches, the employees watch. 

The future is where we must focus. The FMC needs leadership 

and a strategy to produce outcomes that meet stakeholders’ expectations. The requisite skills for change not available within the 

FMC can be brought in. The Human Capital Survey and my findings and recommendations identify the challenges and offer direction. The value of those and the work of the staff can, again, be 

useful. 

I am an optimist, but I know that hope is not a strategy. Your 

involvement is FMC’s only chance to bring the agency back into 

alignment both for the staff within and to the industry it serves. 

Mr. Chairman, this concludes my statement, and I will be 

pleased to answer your questions. 

Mr. CUMMINGS. Thank you very much, Mr. Cole. 

In your testimony, you provide what you indicate are the results 

of the organizational assessment you conducted as a prelude to intended strategic planning exercises at FMC. You then indicate that 

you were working closely with the chairman to address these 

issues, including visiting each office at the FMC together to meet 

with all employees to explain the issues and concerns. 

21 

Are the issues that you found in your organizational assessment 

a reflection of the leadership or lack thereof at the top of the organization? 

Mr. COLE. Yes, sir, it was. 

Mr. CUMMINGS. And how do you think that things got so bad? 

And was the then-chairman solely responsible? And what led him 

to seek to hire an organizational consultant in the first place, if you 

know? 

Mr. COLE. I do not actually know his decision process. But I certainly think his observations, after being there for a few months, 

gave him an understanding of the leadership team and the skill 

level he had. And he knew that he needed outside help to bring 

about the change that he wanted to do. 

Mr. CUMMINGS. Now, you heard the testimony from at least one 

of the Commissioners, I think it was Mr. Brennan, when I asked 

him a question, when I was talking about wanting him to go back 

and take a look at what you had done and then give us a report 

in 90 days. And if you will recall, he said just a few moments ago, 

sitting I think in the very chair you are sitting in, that he felt that 

your concerns were not relevant today. 

Now, you know, I don’t know whether you feel comfortable or you 

think you can answer the question, since you haven’t been around 

there this year or the last few years. Right? 

Mr. COLE. I haven’t. 

Mr. CUMMINGS. But the things that you saw—I guess what concerns me is that it seems as if Mr. Brennan tried to paint a nice 

picture. Basically, what he was saying was this: that either, one, 

it is not as bad as you made it out to be; and, two, that even if 

it were, this is a new day, and that is old stuff, and we don’t need 

to really pay too much attention to what you have said since it is 

old. 

Now, I know that sometimes when people look at these kinds of 

situations, they see certain things that are systemic, and they see 

things that they can almost pretty much bet every single professional talent that they have, that at least remnants of those things 

will go on, if not results from those problems. 

And I just wanted to know, do you feel like you can render an 

opinion with regard to that? Do you understand my question? 

Mr. COLE. I understand your question perfectly, Mr. Chairman. 

I would say that certain patterns exist, from my findings in 2003 

to the last two Human Capital Surveys. As you well know, trust 

is fundamental in all relationships. And if trust has been broken, 

it takes a long time to restore that. You can’t do it in 60 days or 

90 days and sometimes in 6 months or a year or sometimes even 

in a lifetime. 

So while I am glad to hear Commissioner Brennan’s views, I 

don’t necessarily believe that. I would have to be there and see the 

results myself or have somebody else that I trusted be able to do 

that to say that everything is on the up and up. 

These are significant fundamental issues about taking care of 

people, stewardship, respecting others. And it takes a long time to 

build that, Mr. Chairman. 

Mr. CUMMINGS. And so, in all your findings, what are the things 

that, kind of, caused you the greatest concern? Remember what I 

22 

said a few minutes ago, is that what we are talking about is effectiveness and efficiency, effectiveness and efficiency. What were 

your major concerns? 

And one of the things that has been brought up is the whole 

question of people who feel, having a sense of morale, that morale 

being high at the institution. One of the reasons that has been presented is that people have nowhere to go, that they have sort of 

a dead-end situation or they don’t feel that they can go anywhere. 

Can you talk about that and talk about what your major findings 

were, in a limited amount of time, please, sir? 

Mr. COLE. Yes, sir. I would say that there was no leadership 

team. There was no vision. And, as you know, with no vision, that 

people perish. There was no support and development of people. 

There was a sense that people were not valued, their opinions. I 

think the employees there—and they have some really great employees, or they did before the great exodus—had valuable information to provide and improve the operation. They just were not honored and asked for their opinion. 

So in a nutshell, those three or four things: honoring the people, 

leadership, having a vision, and communication. Communication is 

always a big thing. In the absence of communication, people make 

up stuff. 

Mr. CUMMINGS. Now, you indicated in your written testimony 

that you completed an interview as part of the organizational assessment with all the Commissioners, except for Mr. Anderson, 

who left in the middle of your interview. 

Did he just get up and leave, or did you make him upset? I 

mean, what happened? 

Mr. COLE. No, sir, I did not make him upset. Although I could 

do that, I think. He got up after 20 minutes and said he had to 

get a plane. So I said, okay. And then, as I put in my testimony, 

I tried to reschedule. 

Mr. CUMMINGS. Okay. Well, how closely did you work with the 

Commissioners other than the chairman to develop and implement 

responses to the findings of your organizational assessment? 

Mr. COLE. I met with each of the Commissioners twice or more, 

except Commissioner Anderson. As I stated, I invited them to the 

retreat to be full participants in the work of the Commission. 

One of my findings, as I said, was I considered the four Commissioners and their counsels extremely valuable resources that I 

didn’t think the Commission was using. 

Mr. CUMMINGS. Say that again? 

Mr. COLE. One of my findings was that there was not very much 

use, in my opinion, of what I saw, of the four Commissioners and 

their counsel, all of whom are very bright, smart people. So I considered that a huge underutilization of resources for the operation 

of the Commission. 

Mr. CUMMINGS. That goes to effectiveness and efficiency. 

Mr. COLE. Yes, sir. 

Mr. CUMMINGS. Yes, so basically you have talent, but the talent 

is not being pulled together. 

Mr. COLE. Mr. Chairman, I believe in something that is called 

stewardship of the whole. That is where everybody in the organization is responsible for and accountable for the expenditure of the 

23 

resources that the agency is given. So no one part succeeds or no 

one part fails, and it is okay, everybodyis in it together. 

Mr. CUMMINGS. Were you pleased to hear that the Commissioners are now meeting? 

Mr. COLE. Very pleased, sir. 

Mr. CUMMINGS. And if you were, since at least one of them—oh, 

they are all three here. Since you are sitting here and they are sitting here, they have expressed their desire to be effective and efficient, and if you were to give them a message, what would it be 

today? 

I am not trying to mess with you. I really want to know. I am 

trying to make sure your testimony is effective and efficient to help 

us make them effective and efficient. 

Mr. COLE. Mr. Chairman, I would have them develop a 12-month 

plan with goals, objectives, plans of action, and milestones which 

would identify and address the issues raised here, plus the operational parameters for their mission as chartered. In other words, 

are there backlogs? How are they dealing with that? Are they efficiently utilizing the resources? Is there an overload in one area and 

an underload in another, where they could become efficient and effective by moving people around to execute their mission? 

That would be the message I would give them: Come up with a 

12-month plan; report back to you in 90 days. They ought to report 

to you voluntarily on a monthly basis. If I was in their position, 

I certainly would do that. 

Mr. CUMMINGS. All right. Thank you very much. 

Mr. LaTourette? 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

Welcome, Mr. Cole. 

The document that I referred to when the Commissioners were 

still here but when they were testifying, I have with me a document called ′′Thorough Maritime Commission Organizational Analysis for Discussion with Chairman Blust and the SES and Rachel.′′ 

Are you familiar with that? 

Mr. COLE. Yes, sir. 

Mr. LATOURETTE. And am I correct in my observation that it is 

a full page and then a part of a second page? 

Mr. COLE. Correct, sir. 

Mr. LATOURETTE. When was that document prepared? 

Mr. COLE. My handwritten document was prepared in, I believe, 

December 2003. 

Mr. LATOURETTE. And was it subsequently converted—mine is 

typewritten; it is not handwritten. So when did you type it on the 

computer? 

Mr. COLE. I am not certain when I typed it. But I can tell you 

that, when I was asked for it, I went back to my handwritten notes 

and produced it. 

Mr. LATOURETTE. Okay. And let’s go through that. When you 

were asked for it by whom? 

Mr. COLE. By the Senate, sir. 

Mr. LATOURETTE. And that was earlier this year? 

Mr. COLE. That is correct. 

Mr. LATOURETTE. Okay. And who over in the United States Senate asked you for your report? 

24 

Mr. COLE. The Senate Committee, I guess, on Transportation. 

Mr. LATOURETTE. A member of the Democratic staff of the Senate Committee of jurisdiction? 

Mr. COLE. I believe that is correct, sir. 

Mr. LATOURETTE. Okay. And prior to that request, you had not 

prepared a typewritten document? It was your handwritten notes? 

Mr. COLE. Actually, I was in the process of preparing a document 

after my contract was cancelled for my meeting which I thought 

was going to take place with the Commissioners. 

Mr. LATOURETTE. And that was at the end of 2006? 

Mr. COLE. That is correct, sir. 

Mr. LATOURETTE. When is the last time that you performed an 

act or a service on behalf of the Commission that you would have 

been entitled to bill and receive compensation for? 

Mr. COLE. In November, December 2006. 

Mr. LATOURETTE. Okay. I ask you that because I had understood 

you to say—I don’t know if it was in response to a question by the 

Chairman or maybe in your—you made some observations about 

things that went on at the Commission after our last hearing. And 

I think that you specifically indicated that the Commissioners—you 

praised the Commissioners for having a meeting with employees, 

but said it wasn’t such a good idea. And I am paraphrasing now, 

that some bad eggs were responsible for this. 

Do you remember saying that? 

Mr. COLE. I do, sir. 

Mr. LATOURETTE. How is it that that information comes to your 

attention if you are not under contract with the FMC today? 

Mr. COLE. Well, Mr. LaTourette, I worked in that agency for 3 

years, and I developed relationships. I think I am a good listener, 

and a lot of people came to me and asked for help. I think that I 

am fairly empathetic and nonjudgmental, and therefore I developed 

a great deal of trust with the employees at the Commission. 

Mr. LATOURETTE. So basically they felt comfortable calling you, 

today, still today, calling you and just chatting about things that 

are happening at the shop. Is that right? 

Mr. COLE. I would say that lots of people would feel comfortable 

contacting me. 

Mr. LATOURETTE. Okay. 

Back to the inception of the contract, because I am going to be 

straight-up with you, when you said that you earned all the money 

that you billed for, I believe you, and I am sure you do good work 

and you are good in your field and everything else. I have difficulty, I think, understanding how this contract came to be initially, and in particular on page 1 of your testimony that, ′′We 

agreed that I would only report to the chairman.′′ 

Now, this is a Commission made up of multiple members. And 

I don’t think I am aware, and I guess I would ask you, are you 

aware of contracts like this where—and I get sole source and all 

this other business—but that you didn’t have to report to all the 

other members of the Commission ever? 

Mr. COLE. Mr. LaTourette, any top-notch consultant will only report to the top of the organization. They will not report to lower 

levels in the organization, because it, based on my experience and 

the experience of others in the field, is problematic. So my point 

25 

in putting that there was to emphasize that I would only work for 

the top person in the organization. 

Mr. LATOURETTE. Okay. And I—— 

Mr. COLE. Does that make sense to you? 

Mr. LATOURETTE. Sure, it makes perfect sense. And I guess I 

would understand that better—and I am not disputing that that is 

your belief and that is your practice—but I would understand that 

better if we were dealing with a Fortune 500 company and you only 

dealt with the president or the CEO or chairman of the board of 

directors perhaps. But these men and women are all presidential 

appointees, and they have been appointed by different Presidents 

of both parties. And each of them, even though they may be a 

nominal chairman confirmed by the United States Senate, each of 

these folks has a responsibility to the organization. 

I guess—and this is not a ′′you.′′ I guess I am questioning the 

former chairman and his acceptance of an agreement where he had 

his own consultant that reported only to him. 

And to that point, because I think I have made the point I wanted to make, but did you—I heard what you said about your handwritten notes, converted at the request of the Senate Democratic 

staff before this last hearing. But did you report to the chairman 

in writing on a regular basis? 

Mr. COLE. I was typically there 2 days a month. I did an in-brief 

and an exit brief with the chairman most every visit. Because of 

the nature of some of the work that I did, there were not a lot of 

written reports. We were in constant communication with one another. 

Mr. LATOURETTE. Okay. 

And the last question—and thank you for your indulgence, Mr. 

Chairman. 

Mr. Creel was a Commissioner that you would have sat down 

with and answered all your questions and so forth and so on. Did 

any of the Commissioners ever say to you, ′′Are you going to tell 

us what you are doing, or are you just talking to Blust?′′ 

Mr. COLE. No, sir. 

Mr. LATOURETTE. Okay. 

Mr. COLE. As I said, I met with each Commissioner, save Commissioner Anderson at the time, at least twice. I met with Commissioner Creel on more than two occasions. 

Mr. LATOURETTE. And the meeting that got cancelled when Blust 

was leaving, and then you got the call from somebody in SES who 

said, ′′Don’t come, because there is this IG thing, and we took a 

vote, and we are going to cancel your contract,′′ was it your intention at that meeting, if it had not been cancelled, to report to the 

full Commission? 

Mr. COLE. It was my intention. The chairman had asked me if 

I would stay on through the transition to the next chairman, and 

I had agreed to do that. 

Mr. LATOURETTE. And if your deal was you were only going to 

report to the chairman—I mean, what we saw with Mr. Anderson, 

nominated by the President a very long period of time, still not confirmed, and now he has resigned—who would you have reported to 

then under this contract? 

26 

Mr. COLE. I guess I would have reported to the four Commissioners. 

Mr. LATOURETTE. Okay. 

Thank you very much, Mr. Chairman. 

Mr. CUMMINGS. Thank you. 

I just want to—staff was trying to find, Mr. LaTourette, the reference, but it is our understanding that, under the law, he can only 

report to the chairman. And we will find that reference for you, but 

apparently that is—— 

Mr. LATOURETTE. Will the Chairman yield? 

Mr. CUMMINGS. Yes, of course. 

Mr. LATOURETTE. Mr. Cullather there has a great stage voice, so 

I have heard what he said. And that is, I agree with him that the 

chairman is responsible for the administrative and the head of the 

board. 

But I would very much like to see a Federal citation that says 

that these Commissioners aren’t co-equal, in terms of—I mean, for 

Christ’s sake, they have been appointed by the President of the 

United States to oversee the agency. 

Mr. CUMMINGS. I am not trying to defend anybody. All I am saying is we are going to try to find the citation for you. And Mr. Cole 

may not even know this. Apparently there is law that says there 

are certain people that he has to deal with, period, and doesn’t 

have to deal with the others. 

But this is probably a very unique situation in that we didn’t 

have a chairman. But we are trying to look at that cite and just 

see exactly what it says so that we can all be clear. I was just trying to see if I could bring a little clarification to it. And we will find 

that cite. 

Mr. LATOURETTE. Thank you. 

Mr. CUMMINGS. One other thing. Do you believe that—I mean, 

this whole morale thing, part of the question that you didn’t address is this upward mobility issue. Did you look at that part of 

the organization, the structure? 

Mr. COLE. Yes, sir. 

Mr. CUMMINGS. And what is that about, this whole thing of upward mobility? Are the positions not there? 

Mr. COLE. It is as you said. There are some people who are in 

dead-end jobs. We tried to do some reconstruction to expand duties 

and to do some retraining. There is at least one FMC member in 

this room who was in a dead-end job who is now in another much 

better job, I can tell you that. 

But I think there are certain jobs—and I don’t care what agency 

you are in—that are just flat out dead-ended, Mr. Chairman. 

Mr. CUMMINGS. What can be done about that, though? They 

talked about retraining. 

Mr. COLE. It depends on the skill that is in the individual and 

whether they can develop other skills. If we can train them, you 

know, that is one option. But there are just flat-out some deadended jobs. 

And the pity of it is that a lot of them are in the lower ranks, 

from GS-9 and -10 on down, the secretaries and the staff assistants 

and that kind of thing. And it is not a good thing. People need to 

27 

earn a living wage in this country, and people in dead-end jobs feel 

disenfranchised when they don’t do that. 

Mr. CUMMINGS. What do you think other agencies do? 

As you were speaking, I could not help but think about the University of Maryland professional schools which are in my district. 

And one of the things that they do, let’s say, for example, a guy 

comes in as a parking attendant. And they will go to that guy and 

say, ′′Look, you have been a great employee for 2 or 3 years. We’ve 

got the hospital over here. We need orderlies. We will train you to 

do that. And you won’t stay under the parking situation, but you 

will move up.′′ And they have a wonderful system where people see 

themselves moving up. They have hope. They are making more 

money, and they see themselves progressing from one point to another. 

And the program has been around 10 or 15 years now. You have 

somebody who would have been stuck almost at minimum wage 

who is now making maybe $50,000, $60,000 and feeling better 

about themselves, able to do more for their family, and just moving 

up in life. 

And, you know, I am assuming that there are people like you 

and others who consult with folks and say, you know, ′′These are 

the kinds of things you might want to do.′′ And I just was wondering, did you do any of that? 

Mr. COLE. A little. It requires a huge horizon. It requires a lot 

of networking. It requires individual communication, knowing what 

people’s desires and capabilities are and seeking those out and 

doing exactly what you said when you find somebody that is bright. 

Mr. CUMMINGS. But I guess you have to have a good human resources person, too. 

Mr. COLE. I think it is just a function of leadership, Mr. Chairman. It is not a function of human resources. I wouldn’t want to 

put that on them. The leadership has got to pay attention and 

know the people. 

Mr. CUMMINGS. Thank you very much. 

Mr. COLE. Thank you, sir. 

Mr. CUMMINGS. By the way, do you think, in the Commissioners 

that you have gotten to know, do you think they have the potential 

to do that, to do what you just said? 

In other words, you said a little bit earlier that you have very 

bright people and they are sharp, and it is a question of them having a vision. 

Mr. COLE. A lot of their talent has left, Mr. Chairman. There is 

something seriously wrong when you spend a couple hundred thousand dollars, I must think, to develop the next generation of your 

senior leadership, your SES and a candidate development program, 

and four of them leave. That is a huge message. 

So I think, you know, they have a leadership void. 

Mr. CUMMINGS. And I would assume that—do exit interviews— 

I mean, for some people like what you just said, I assume that 

somebody in your position would say, ′′You have to really sit down 

and find out why these people left.′′ 

Mr. COLE. Absolutely. I do exit interviews at a number of agencies. 

Mr. CUMMINGS. Are they helpful? 

28 

Mr. COLE. Very helpful, especially in the Ph.D. Community, 

where lots of people come and stay for 2 or 3 years and then leave. 

And they leave for primarily the same two reasons. 

Mr. CUMMINGS. What are those? 

Mr. COLE. Those are lack of leadership and lack of support and 

understanding the culture in which they enter into. There is nobody that explains to them how to travel, how to do all the basic 

things that you want people to do. So they get disenfranchised. And 

for those people who are post-docs, it is easy for them. But the feelings are the same, Mr. Chairman. 

Mr. CUMMINGS. You know, I read once that the greatest thing 

that destroys relationships between human beings are two things: 

one, the expectations that each party has but that are never communicated with each other. And that leads to disappointment. And 

they don’t even know what they expected from each other. And the 

other part is they are assuming that the other person knows. 

Mr. COLE. That is the communication and the clear expectations. 

You are absolutely correct, Mr. Chairman. 

Mr. CUMMINGS. Anything else? 

Thank you very much. 

Mr. COLE. Thank you, sir. 

Mr. CUMMINGS. We will now hear from Mr. Peter Friedmann, 

who is executive director of the Agriculture Transportation Coalition; Mr. Michael Berzon, president of Mar-Log, Inc., and chairman 

of the Ocean Transportation Committee of The National Industrial 

Transportation League; Mr. Win Froelich, who is the general counsel for the National Association of Waterfront Employers; Mr. Stanley O. Sher, who is acting president of the World Shipping Council; 

and Ms. Mary Jo Muoio, who is the president of the National Customs Brokers and Forwarders Association of America. 

Thank you all for being with us. We are not going to ask that 

you use your whole 5 minutes. You don’t have to. We are not forcing you. 

Mr. Friedmann? 

TESTIMONY OF PETER FRIEDMANN, EXECUTIVE DIRECTOR, 

AGRICULTURE TRANSPORTATION COALITION; MICHAEL 

BERZON, PRESIDENT, MAR-LOG, INC., CHAIRMAN, OCEAN 

TRANSPORTATION COMMITTEE, NATIONAL INDUSTRIAL 

TRANSPORTATION LEAGUE; WIN FROELICH, GENERAL 

COUNSEL, NATIONAL ASSOCIATION OF WATERFRONT EMPLOYERS; MARY JO MUOIO, PRESIDENT, NATIONAL CUSTOMS BROKERS AND FORWARDERS ASSOCIATION OF AMERICA, INC.; STANLEY O. SHER, ACTING PRESIDENT, WORLD 

SHIPPING COUNCIL 

Mr. FREIDMANN. Thank you, Mr. Chairman. I will try not to. 

First of all, I want to say that, while I may not personally agree 

with every position that the three Commissioners have, I respect 

all three Commissioners. I think they are doing a good job. They 

all three take their job seriously. 

And they have also initiated a program where they help your 

constituents, who I represent, in dealing with the steamship lines 

or, as you call them, and the cartels, because sometimes your constituents are small businesses and need a Government regulatory 

29 

agency such as the FMC to step in, sometimes on seemingly minor 

matters but are major to your constituents. And so we appreciate 

that. And I can explain what that function is later, if you want. 

Secondly, Mr. Chairman, I want to say that I am really encouraged by something you said that I gleaned out of your opening 

statement. You know, when you get into the Ocean Shipping Act, 

that sometimes takes several years of debate on Capitol Hill. You 

said something there that gave me an idea that maybe we have 

some sort of path to a solution that could get to a solution much 

faster. And that will take a little while to describe, but I will be 

happy to discuss that. But I am encouraged. 

The Agriculture Transportation Coalition represents, really, the 

most fundamental form of the positive balance of trade of this 

country, the exporters. 

And I will say this: There are few issues that come before this 

Subcommittee that warrant top-of-the-fold, front-page coverage in 

the Wall Street Journal, the Los Angeles Times, the Seattle Times, 

and every newspaper around the country in the last few weeks. I 

have attached to my submitted testimony the Wall Street Journal 

and the Los Angeles, but there are dozens of other newspapers that 

have been covering this issue. 

And it is an issue that this Subcommittee can play an effective 

role in addressing. And I think you may be hearing from other colleagues of yours and other Committees, Agriculture and so forth, 

who are going to be looking to this Subcommittee and the Senate 

counterpart to start addressing some specific components. 

So this is a rare issue, and I think you are going to see more in 

the international publications about this issue, the issue being the 

lack of capacity to handle U.S. exports. 

So, whether it is cotton from Mississippi, whether it is poultry 

or pork producers in the Carolinas and poultry folks in Maryland, 

horticulture in Washington State, we all had a meeting, and we 

have had several meetings throughout this year, over the current 

crisis. We could be exporting maybe 20, sometimes 30 percent—depending on the sector, and particularly in poultry—more if there 

was more shipping capacity out of this country. 

Now, we are working with the ports and others, and there are 

many reasons why there is insufficient capacity right now in the 

United States. And it is North America, East Coast, Gulf Coast, 

West Coast, Canada and the United States, there is insufficient capacity. And I laid out in my testimony some of the reasons. 

So what is the issue that is before this Subcommittee? Is this a 

temporary blip, all these exporters? Is it due to the exports? Is it 

due to the low value of the dollar? The answer is, no. The agriculture exporters and other exporters reported that the surge of demand for U.S. exports preceded the decline in the U.S. dollar. The 

consuming nations—China, India, Korea and so forth—their ability 

to consume more and better food or the products that we manufacture in this country are indeed growing, their ability to consume 

is growing and will continue to grow. We are going to be an exporter. 

So, what can we do about that? Well, there are only limits on 

what Congress can do to increase capacity. But one of our concerns 

is that we have a system of regulation of international ocean transVerDate Aug 31 2005 09:58 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 P:\DOCS\43117 JASON
30 

portation of containerized, not the bulk ships, but the containerized 

cargo that is now out of synch at least with Europe, coming in October, and perhaps other countries as well. 

The European Union has terminated the exemption from the 

antitrust immunity because they believe that it hurts the economy 

of Europe, the exporters and the importers. That antitrust immunity is the law that is under the jurisdiction of this Subcommittee. 

Now, we, the agriculture exporters, want to work with the individual ocean carriers, and we have constructive relationships. We 

have put together—actually, we met in Memphis with a group of 

the cotton folks from the Southeast—and meeting with the individual ocean carrier and then again with another individual ocean 

carrier or how we can improve service, how they can improve revenues, and so forth. 

Our concern is that, in transportation today, we are dealing 

through the filter of, well, you called it a cartel, and people don’t 

like to be called a cartel; they like to be called an agreement or a 

stabilization agreement and so forth. But let me just read to you 

the specific law under the jurisdiction of this Subcommittee. 

′′The law allow ocean carriers to discuss, fix or regulate transportation rates; to control, regulate or prevent competition in international ocean transportation; to limit the volume or character of 

cargo that is to be carried; to restrict and regulate the number and 

character of sailings between ports.′′ 

That is what the law says. People say, well, we don’t do those 

things. But the law allows them to do that, and they may or may 

not be doing it. We suspect—that is what the law allows, and we 

don’t blame ocean carriers for doing those things. 

The act also states at the beginning the purposes of this shipping 

act. And this, again, is under this Subcommittee’s jurisdiction. ′′The 

purposes of the act are to stimulate exports, to support the U.S. 

Merchant Marine, and to be consistent with international shipping 

practices.′′ 

Well, today, as Commissioner Creel said, 10 years have gone by. 

This act now is inconsistent with the European Union’s regulatory 

scheme. Under this antitrust immunity and the Shipping Act, most 

of the U.S. flag liner fleet has gone out of business, unfortunately. 

And the act is currently, we believe, the exporters believe, undermining the growth of exports from this country. So we believe this 

act can and should be looked at by this Committee, and we will 

stand by. 

I would say that we strongly support, also, the position of other 

constituents of yours that are represented by the NIT League and 

by the National Customs Brokers and Freight Forwarders and the 

Pacific Coast Council of Customs Brokers and Freight Forwarders, 

the people that are the travel agents for U.S. cargo exports. Those 

folks are all in agreement with the need for this Subcommittee to 

review the act. 

Thank you very much. 

Mr. CUMMINGS. Thank you very much. 

Mr. Berzon? 

Mr. BERZON. Thank you, Mr. Chairman. I am Michael Berzon, 

and I am here today representing the National Industrial TransVerDate Aug 31 2005 09:58 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 P:\DOCS\43117 JASON
31 

portation League, which is the Nation’s oldest and largest association of companies engaged in freight transport. 

As a member of the League, I serve as chairman of our Ocean 

Transportation Committee, whose members are concerned with the 

transportation of goods via vessels, including liner carriers regulated by the Federal Maritime Commission. 

The League is no stranger to the issue of international shipping 

and the oversight of this industry by the FMC. We were actively 

engaged in past reforms of U.S. International Shipping that led to 

the adoption of the Shipping Act of 1984 and, more recently, the 

Ocean Shipping Reform Act of 1998. 

The League today, as it has in the past, supports a competitive, 

robust transportation environment which delivers timely and efficient ocean transportation services to importers and exporters who 

rely upon these services. We strongly believe in an ocean transport 

system where competition is encouraged among carriers and the 

forces of supply and demand determine the level of rates and 

charges assessed to the carriers’ customers. 

The reforms brought forth by OSRA, most significantly the introduction of confidential contracting between liner carriers and shippers and later with third-party intermediaries, have resulted in 

commercial benefits for both carriers and their customers, as well, 

and has improved the working relationship between them. 

Despite these significant statutory and regulatory reforms, we do 

not believe it is appropriate to stand aside and admire our past accomplishments. Ocean liner carriers still engage in collective discussions regarding supply and demand, as well as establishing 

benchmarks for rates and surcharges for the U.S. trades through 

carrier organizations known as discussion agreements. This ability 

leads shippers to question why liner carriers cannot establish their 

pricing based on individual costs plus a reasonable return on investment, like other industries that operate internationally. 

We believe that Congress should conduct a comprehensive review 

of the Shipping Act. The international liner shipping industry has 

changed substantially over the last 10 years, in part driven by the 

Shipping Act reforms of the 1980s and 1990s. Additionally, the 

forthcoming deregulation of the maritime industry in Europe will 

eliminate the ability of carriers to fix prices and will give European 

companies a distinct advantage over their U.S. counterparts. 

It is important to note that the independent Antitrust Modernization Commission told Congress last year that the antitrust 

immunity afforded to liner carriers has outlived any utility and 

should be repealed. Finally, where antitrust immunity has in the 

past existed for other transport modes, action by two executive 

branch agencies in the last year has resulted in repealing antitrust 

immunity for sectors of the aviation and motor carrier industries. 

The League believes there are serious questions on whether carrier liner immunity should be continued in the U.S. trades. If Congress agrees with this conclusion, it is clear that other reforms will 

be necessary. For example, service contracts must now be filed with 

the FMC. Service contracts are by far the dominant way that liner 

shipping is conducted today. This filing requirement was designed 

to facilitate enforcement of certain prohibited acts in the Shipping 

Act and to monitor joint carrier activities. 

32 

While the FMC rarely reviews these contracts except in the case 

of a complaint, contract filing is an expensive administrative burden and cost to the carriers that ultimately falls back on their customers. In our view, this requirement has devolved to a make-work 

project that has little or no value and could easily be eliminated 

or modified. 

We have already submitted the list of modifications that the 

League suggests to the Shipping Act, and I won’t go through them 

here. But if the reforms that we propose in that context were 

adopted, the proper role and structure of the FMC would then need 

to be addressed by Congress. 

In conclusion, we believe the time is right for Congress to review 

the Shipping Act and to determine whether additional reforms 

could result in greater competition, efficiencies and other benefits 

to U.S. businesses. The review should examine the value of antitrust immunity in light of changes in the industry, the great 

strides that have taken place in Europe, a major trading partner 

and competitor, the recommendations of the AMC, as well as repeal 

the antitrust immunity in other modes of transportation. 

We believe this review will result in changes which will lead to 

a more efficient competitive and vibrant maritime industry which 

will be best suited to serve our Nation’s needs. Thank you. 

Mr. CUMMINGS. Thank you very much. 

Mr. Froelich? 

Mr. FROELICH. Thank you, Mr. Chairman and Members of the 

Committee. My name is Win Froelich, and I am the general counsel 

of the National Association of Waterfront Employers. NAWE represents the marine terminal operators and stevedores who load and 

unload the ships in virtually all of the Nation’s ports. 

Let me make three quick points. I have gone into great detail in 

the written testimony. One, the first one goes without saying. We 

are a maritime nation. Twenty percent of the world’s maritime 

commerce comes to or from the country. Fifteen percent of the U.S. 

GDP goes through our ports. That, I think, under-represents the 

impact that our ports have on the U.S. economy, because that 15 

percent goes and creates other jobs in every State and every city 

and every county in America. 

Second point: The regulation of the maritime commerce of the 

United States is exclusively a Federal responsibility. The reason 

our Constitution was founded was to take regulation of maritime 

commerce away from the original 13 colonies and give that responsibility to the Federal Government. Now I believe that any review 

of the Shipping Act should include a review of that Federal responsibility, and that Federal role in regulating maritime commerce 

needs to be strengthened. 

Third and finally, I know the Committee is considering changes 

related to antitrust immunity. Mr. Chairman, you mentioned tariffs. Let me request that the Committee consider any changes related to ocean common carriers separate and apart from changes 

related to marine terminals. 

The reason is the economic environment and the legal structure 

that marine terminals operate in are very different than the issues 

confronting ocean common carriers. And NAWE members believe it 

33 

is important that those be considered separately and distinctly to 

have the merits addressed on their own basis. 

So, with that, I will stop and turn it over to the next witness. 

Mr. CUMMINGS. Thank you very much. 

Ms. Muoio? 

Ms. MUOIO. Thank you, Mr. Chairman. I am Mary Jo Muoio, 

president of the National Customs Brokers and Forwarders Association of America. And I am senior vice president of Barthco, 

International, a division of Ozburn-Hessey Logistics, a company 

providing international logistics services. 

Members of the NCBFAA provide U.S. exporters and importers, 

both large and small companies, with the transportation and logistic services that are essential to the movement of their goods in 

international trade. 

By the way, Mr. Chairman, let me tell you how appreciative our 

Baltimore members are of the attentiveness you have to the port 

and the shipping issues. And they asked me to send you their regards. 

The Shipping Act refers to us as ocean transportation intermediaries. The members of the NCBFAA are an essential cog in arranging for international ocean shipping both into and out of the 

United States. Ocean freight forwarders and NVOCCs arrange for 

the actual movement of cargo aboard the vessels owned or operated 

by the steamship lines but are regulated somewhat differently. 

Without getting into too much detail at this point, suffice it to say 

that both ocean forwarders and NVOCCs are subject to extensive 

regulation by the Federal Maritime Commission. 

We have numerous issues before the FMC that we address in full 

in our written testimony, such as the anachronistic retention of 

antitrust immunity and the puzzling conclusion emanating from 

the FMC last Friday. However, in the interest of observing the 

time limits, let me address our most pressing concern. 

At the outset, it is worth noting that ocean freight forwarders 

and NVOCCs are the only entities that are subject to the licensing 

and bonding requirements of the Shipping Act. More specifically, 

the Shipping Act requires that any company in the United States 

providing services as an ocean freight forwarder or under the 

NVOCC must be licensed by the Commission and otherwise obtain 

a bond or other proof of financial responsibility that would be available to pay claims to the public or Government arising out of their 

ocean transportation-related activities. 

In addition, although foreign-based NVOCCs are not subject to 

the Commission’s licensing requirements, they are also required to 

maintain FMC-mandated levels of financial responsibility. The 

NCBFAA has long-supported the Commission’s implementation of 

its statutory licensing and bonding requirements. 

Another aspect of the current policy, however, does carry undue 

and totally unnecessary burdens; namely, the requirement that 

NVOCCs publish and maintain rate tariffs. 

Section 8 of the Act requires that both the vessel operators and 

NVOCCs publish the rates to be charged the shipping public for 

moving cargo in international commerce. This is the embodiment 

of the concept of common carriage that was originally established 

for ocean shipping. The idea behind common carriage, of course, 

34 

was to prevent undue discrimination so that all similarly situated 

shippers would be entitled to receive comparable rates from any 

carrier. 

The passage of the Shipping Act of 1998, however, substantially 

transformed the ocean shipping industry in a number of ways. Perhaps chief among these changes was the rapid and almost total 

shift from the public rates applicable to comparably situated shippers through the system of common carriage created by the Shipping Act of 1916, to the privately negotiated contract carriage that. 

Now, through the introduction of confidential service contracts, 

carriers may negotiate individualized rates with each of their various customers. And, unlike before, carriers no longer have to file 

extensive publicly available information with the FMC outlining 

the details of their charges. 

OSRA did not authorize NVOCCs to enter into confidential service contracts with their customers, but the changes brought by the 

Act were just as significant for us. 

In the post-OSRA environment, shippers no longer rely on preestablished rates in determining how or when to ship or in selecting which carrier or NVOCC to utilize. Four years ago, the 

NCBFAA petitioned with the FMC asking for regulatory relief by 

exempting NVOCCs from having to publish and maintain freight 

tariffs in those situations where they have separately negotiated 

rates with their customers. The FMC ultimately did agree to utilize 

its exemption authority, but only to authorize NVOCCs to enter 

into what are called NVOCC service arrangements, or NSAs, and 

denied the broader relief sought by the NCBFAA. 

The granting of NSA authority has been little utilized by the industry for many reasons but primarily because they are of little use 

to both the shippers and NVOCCs. Consequently, these anachronistic regulatory requirements compel NVOCCs to continue to memorialize negotiated rates by publishing rate tariffs despite the 

clear record that these rate tariffs are almost never reviewed or 

used by customers; the NVOCC rates are almost uniformly negotiated individually with individual customers and only later published; and that the cost of tariff publication needlessly increases 

NVOCC costs, thereby reducing flexibility and competitiveness. 

In the view of the burden and unnecessary costs resulting from 

continuing this mandated tariff rate publication, the NCBFAA will 

in the near future again request the FMC to utilize the liberalized 

exemption authority. 

Mr. Chairman, this concludes my remarks, and I would happy to 

respond to questions. 

Mr. CUMMINGS. Thank you very much. 

Mr. Sher? 

Mr. SHER. Thank you, Mr. Chairman, Members of the Subcommittee. My name is Stanley Sher. I am the acting president of 

the World Shipping Council. 

Essentially, the World Shipping Council’s members are the carriers that you have heard discussed here earlier. We are, of course, 

the carriers that are regulated by the agency. Therefore, we have 

a very, very definite and strong interest in seeing that the regulatory system be clear, fair and flexible. That is our main objective. 

35 

I have explained the role of the FMC in my testimony, and I 

have extensively gone into certain things we think the Commission 

can do and where it is headed over the future time. In the few moments I have, I would like to, if I can, talk about three things. 

The first one is there is general agreement that the major congressional overhaul of the Shipping Act of 1998 achieved exactly 

what Congress desired. What has happened is that the objectives 

of the Congress were achieved. The ocean carriers’ authority over 

rates were significantly decreased, and the negotiating powers of 

the shippers were significantly increased. 

The amendments are a true success. The system in the United 

States, since the revisions in 1998, is competitive, commercial and 

flexible. And, indeed, the major beneficiaries of the revisions to the 

Shipping Act in 1998 are the U.S. exporters. That isn’t completely 

due to the act, but it is due in part to the act and in part to the 

economics. 

U.S. exporters, for the last 10 years, or at least the 9 1/2 years, 

have shipped their goods all over the world from the United States 

on container carriers with service on 2 to 3 days’ notice at exceedingly low rates. The rates have been so low that I would term them 

to be noncompensatory. 

As a matter of fact, I will make the more broad statement, and 

that is, on virtually every voyage over the last 10 years that has 

left the United States with U.S. exports, the carriers lost money. 

So the U.S. exporters have been the beneficiaries, partly because 

there was significant excess capacity for those 9 1/2 years. That has 

changed over the last 6 months, and I will talk about that in a 

minute. 

The second point I want to talk about briefly is the change in the 

European law. Two points. 

The first point is that, even after the European repeal, the majority of countries in the world will still grant an antitrust exemption of different types to liner operators. In other words, Europe 

will be in the minority; the United States will still be in the majority. 

But the point I want to make, and maybe it is the most important point, is this. This debate over antitrust immunity has been 

going on for years. The arguments are always the same. The one 

thing that is lacking and has been lacking since the 1960s, 1984, 

1997, have been involved in the situation in Europe, and that is we 

don’t have any real facts. The repeal of the European system gives 

us that opportunity. Because the system has been in effect for 140 

years worldwide, we have never had an opportunity to say, what 

does it look like when you don’t have this system? In Europe, we 

now have that opportunity. 

The Maritime Commission is going to study it. It seems to us— 

and we are not dogmatic on this—that makes all the sense in the 

world. Let’s look at this, let’s get the facts, and then take a look 

at the system and see how it has worked in Europe. If it hasn’t 

worked or there are problems, we can learn from them. We don’t 

have to learn on the job ourselves. If it turns out that there are 

benefits to it, we are perfectly prepared to look at them. 

36 

Our point, though, is the system works, works well now. And it 

seems to us that people that want to change it should have the 

burden to establish the need for change. 

My last point is the export situation that Mr. Friedmann spoke 

about. I guess if I had one point I would leave with the Subcommittee on, it is this: this is a sharp turn of events that has 

come about over the last 6 months. But our customers are struggling, and we are also struggling with them to provide the type of 

space they have been used to on 2 and 3 days’ notice. It has been 

difficult. 

So the point I would like to leave with you is this: The ocean carriers are concerned about this. We are working to do something 

about this. We are not ignoring it. But we must be realistic. There 

are significant economic forces going on in the world right now— 

and I describe those in my testimony—that make this flexibility 

very difficult to achieve. 

I think there are things we can do. I think we will sit down with 

our exporters, and we will make some changes. But this is a joint 

problem. It is their problem, and it is our problem. At the end of 

the day, it is a commercial problem. Each of these shippers has 

contracts with us. We must address it as such. I know that carriers 

intend to do it, and do it in good faith. I think we can find some 

solutions, but they are not going to be easy. 

Thank you. 

Mr. CUMMINGS. Thank you very much. 

Mr. LaTourette? 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

I thank all of you for coming. 

Before I ask this panel any questions, Mr. Chairman, I just want 

to thank you and Mr. Cullather for your courtesy. And Mr. 

Cullather has shown me the citations you were referring to. And, 

although I perhaps don’t agree with it, I will concede the point. 

But I just want the record to be clear, my concern is not with 

Mr. Cole. I think my concern is that, if this is the law or the regulation, that the chairman of a commission where all members are 

appointed by the President of the United States can enter into his 

own contract for a person that reports solely to him, and then—but, 

in this instance, when there was no chairman, apparently we don’t 

know who he is going to report to, one; and, two, that the first time 

that this document, which I guess I would ask unanimous consent 

to be made part of the record—— 

Mr. CUMMINGS. So ordered. 

Mr. LATOURETTE. —Mr. Cole’s report is seen by the Commission 

after it is delivered to the United States Senate. And I think that 

it doesn’t matter who is in charge, I think that is a strange way 

to do business. 

And so that is the point I want to make. But I thank you for your 

courtesy. 

Mr. LATOURETTE. I want to talk about this container shortage, 

because, Mr. Sher, I was very interested in your last point. What 

we are hearing, when you say things like 2 to 3 days, some of the 

shippers that we have talked to indicate that they can’t find containers if they are not near a port or a container storage facility. 

37 

And then they can’t get on a ship unless they have a reservation 

for as far as away as 6 weeks. And I think that is of a concern. 

And I guess I would ask you, is the sharp turn that you are talking about in the last 6 months, again, I have been told that it is 

more cost-efficient, if you will, or you can make more money. And 

I heard what you said, that they sort of got a free ride for 9 1/2 

years. But that it is better from a profit standpoint to send empty 

containers back to Korea and China than it is to put, I think as 

one of the Commissioners indicated, American agricultural products on board. 

Mr. Sher, I guess I would start with you. 

Mr. SHER. Well, I think, first of all, what I would start with is 

this. And it is more a question of a little bit of common sense. And 

that is, the carriers are in the shipping business. They are in the 

shipping business to transport cargo. There would be no reason for 

them to do anything that would interfere with the growth of their 

customers, and that is, the growth of our customers is also our 

growth. 

What has happened here is that there is a combination of things. 

One, the exports have boomed, absolutely boomed. Some commodities have gone up 100 percent. 

The second aspect of this is that you have to look, you can’t generalize on this, because you have to look at each geographic area 

because they are different. And that is, in Europe the situation is 

different; in Asia, the situation is different; in South America, it is 

a little bit different. But let me talk about Asia, because that is the 

biggest trade. 

What is happening here is that the ships are full; they are full 

going out. I think this is going to get a little bit better now, because some additional capacity is coming into the trade. The head 

haul part of the trade is the inbound; that is where the money is. 

That essentially subsidizes the outbound, the export. That trade is 

seasonal, and the season is now picking up, so I expect additional 

capacity to come in. I don’t think it will necessarily solve the problem, but I think it will go some ways to alleviating it. 

The problem is partly an operational problem. When the ships 

are going out, outbound, they are full. We, unfortunately, in the 

United States export a lot of heavy, low-value goods: metal scrap, 

wastepaper. Those commodities are so heavy compared to what is 

coming in that you can’t load some of these ships more than 60, 

65 or 70 percent, because the dead weight is such that you create 

safety or stability problems. So we have this constraint. That constraint was not a problem for 9 or 10 years because there were so 

little exports that, even filling 50 percent of the ship, we still didn’t 

fill the ship. 

Mr. SHER. Now we are filling the ship. There are some empties 

on that are going back to Asia. But that is part of the service. If 

you can’t get those containers back to Asia, you can’t service the 

U.S. retailers that are bringing the cargo back. So it is a balance. 

And we are trying to get it into a little better shape, but it’s going 

to take some time. 

I mean, this isn’t unique to us. You have all sorts of businesses 

where there is a sudden and violent shift in the marketplace and 

38 

they are overwhelmed at times. We have to deal with it, and we 

are dealing with it the best we can. 

But the point is you can’t—one more point and I will quit. What 

adds to the problem is the cost of fuel. There may have been a time 

in the cost of cheap fuel that maybe you would put a ship in and 

you would say, well, it won’t be used efficiently and we will bring 

it back half empty. Our fuel costs have gone up so rapidly, just 25 

percent since the beginning of the year, that to send a container 

ship from the United States’ west coast round trip on a 28-day voyage to Asia costs more than $4 million in fuel alone. So if we are 

going to be here, we have also got to be very careful and make sure 

that we use our assets efficiently and effectively. So there is the 

weight constraint, the operational constraint, and the economic 

constraint. 

Mr. LATOURETTE. Right. I get all that, and I think my concern 

is these empty containers. And I have heard what you said. I am 

not unmindful of the difficulties that you have, but there is something wrong in the trade of balance equation when we have got all 

this stuff coming in and it is more cost effective for your shippers 

to take empty containers back than it is to load them with American goods and send them back over to Asia. 

And on the fuel we are having a rather spirited discussion here 

on Capitol Hill about the cost of energy, and I expect it will continue on. And I can just tell you on this $4 million for a voyage, 

I was with the Commandant of the Coast Guard on Monday. He 

was kind enough to come to Ohio, and he indicates that, as a result 

of some of the melting of the polar ice cap, we may have a transSiberian route opening up in the near future that could save you 

$2 million. So I hope, should that occur and you are now able to 

sail more directly and save 2 million bucks in gas, that you take 

some more American-made stuff and less empty containers. 

But thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you. 

I only have a few questions. 

Mr. Sher, outside of the possible need for the ability to engage 

in collective discussions regarding the rationalization of certain 

services, under what basis and justifications should Congress maintain antitrust exemptions? 

Mr. SHER. I think there are a number of considerations. 

One—and I go back to—I think it would be very informative to 

see what the FMC study is of the European system versus ours, 

so you may get some benefit from that. But, beyond that, I would 

say this: 

First of all, I think, one, there is a question of comity. That is 

that our major trading partners, except for Europe—all over the 

world. I am talking about Australia. I am talking about China. I 

am talking about Japan, Canada—all maintain an exemption. So 

there still the balance tips in favor of comity. 

I would say the other thing to weigh is that the antitrust immunity is not just for carriers. You have heard the marine terminal 

operators in the United States have an antitrust immunity and 

want to maintain it. The ports, U.S. ports, that have filed a statement with the Subcommittee have an antitrust immunity and want 

to maintain it. 

39 

But I think that my principal argument would be that it has created a competitive, robust environment and that before one 

changes something that is working you ought to look very carefully 

at what the reason is, what the grounds are, and what you expect 

to get. 

I think that, in terms of the immunity itself, one also has to look 

at what we are really talking about. And that is, as the Maritime 

Commission pointed out and we pointed out to some extent in our 

testimony, there must be 200 or 300 antitrust-exempt agreements 

on file with the Maritime Commission, and I would say probably 

less than 15 have to do with rates. 

So the antitrust immunity does not just deal with rates. It deals 

with a number of other things. One of the things it deals with is— 

and the ocean carriers probably have 200 of these on file. They deal 

with what I would call asset-sharing agreements. These are efficiency promoting agreements, and this is the exemption that the 

Europeans have continued. 

So, Mr. Chairman, in response to your question, what I would 

say is that one aspect of the antitrust immunity which is very important is it promotes efficiency in terms of providing broader multipurpose services; and I would say, without that exemption, our 

problem with U.S. exporters would be worse, not better. 

Mr. CUMMINGS. All right. 

Mr. Froelich, you have argued in your testimony that antitrust 

immunity remains critical for marine terminal operators; is that 

right? 

Mr. FROELICH. Yes, sir. 

Mr. CUMMINGS. Couldn’t that antitrust immunity be retained for 

terminal operators even if the antitrust immunity for ocean common carriers were removed? 

Mr. FROELICH. It could. And NAWE’s position certainly is the 

two need to be considered separately. Again, the economic issues, 

the legal issues are very different when it comes to terminals located in the United States versus ocean common carriers that obviously travel the world. 

Mr. CUMMINGS. Ms. Muoio, vessel-sharing agreements have generally been viewed as positive for importers and exporters because 

they allow a carrier to offer a service every day of the week, even 

if it is not on a carrier’s own ships but is instead on a ship owned 

by someone in the agreement. For example, in the aviation world, 

this is called ′′co-chairing.′′ Do you think that these types of agreements are good or do they ultimately limit the best and increase 

prices? 

Ms. MUOIO. We actually support anything that will lead to efficiencies, Mr. Chairman. 

However, with respect to antitrust immunity, we see that there 

is certainly an opportunity for negative consequences to come out 

of this, that being opportunities for setting prices, limiting competition, driving down service to the United States, which could actually exacerbate the container shortage situation. 

We also find in our sphere of the world that it has the result of 

driving up the prices for the NVOCCs. 

Mr. CUMMINGS. Now, Mr. Friedmann and Mr. Berzon, just one 

quick question. Are there some activities by carriers in conferences 

40 

for which antitrust immunity should be retained because they benefit importers and exporters, such as the ability to charter space 

on each other’s vessels? 

Mr. FRIEDMANN. This is something that gets a little bit closer to 

your initial point in your opening statement that I think gets us 

to a pathway. We have talked to the Justice Department. We have 

talked to the Judiciary Committee. They have been involved in it. 

Last week, we had our meeting and we had the soy and specialty 

grain exporters from the Midwest, and we talked about all these 

issues. 

The fact of the matter is you can do joint ventures without having antitrust immunity. Anybody who is familiar with any of the 

transportation modes under the jurisdiction of this Committee or 

construction and so forth can have joint ventures. So these efficiency enhancing initiatives, which are very good—vessel sharing 

and slot charters and all the rest—fine. Good. And they can clearly 

function without antitrust immunity. You see that in all industries, 

and the Justice Department and the Judiciary Committees here on 

the Senate side will confirm that. 

So, yes, efficiency enhancing is good, but it doesn’t request antitrust immunity. Antitrust immunity is needed to collectively get 

everybody together to fix the prices, to discuss the terms, even the 

terms that find their way into the so-called confidentially negotiated service contracts. And all you need to do is read the press 

releases from the ocean carrier agreements to see exactly what 

they agree on doing and then you can judge for yourself whether 

you want them to do that. 

Mr. CUMMINGS. Mr. Berzon. 

Mr. BERZON. I agree with what Mr. Friedmann has said. We feel 

that the ocean carriers should be able to make money. I mean, if 

they make money, then they can invest in ships. They have got to, 

at the very least, earn their cost of capital. And it is capitalism, 

and it is the way American business thinks. We have no problem 

with that. 

What we have a problem with, though, is price fixing, fixing the 

service terms, the surcharges, and other ancillaries. And what happens is that when the—even with contracts, as long as the ocean 

carriers have the opportunity to get together and talk about these 

issues of—— 

Let’s take the fuel surcharges, for instance. There is no question 

that the price of fuel is going up, but do the carriers need to have 

benchmarks to then use when they come to the shipper to write 

contracts? We think they should not be able to do that. 

We want to work one on one. We want to be fair. There is no 

question about that. But we don’t want the carriers to come in with 

a benchmark that four or five or how many of them have put together. We want to negotiate that from scratch. 

Mr. CUMMINGS. Mr. LaTourette. 

Mr. LATOURETTE. Thank you, and I will be brief. 

But, Mr. Friedmann, on my container question, I had to leave 

the room to meet some constituents. Did you have an observation 

about empty containers that you wanted to make? 

Mr. FRIEDMANN. Yes. The world changes. For the last 20 years, 

imports have been flooding into this country. That was the ′′head 

41 

haul′′. The ocean carriers allocated containers—allocated ships to 

this service to handle the imports. Whatever exports went on the 

way back, that was fine. 

Things have changed. It may well soon be—and we had exactly 

this discussion with the Midwest grain exporters—that the head 

haul may soon be the exports. And if you see the dramatic increase 

in the costs being agreed to or charges being agreed to by the 

agreements, by the conferences, cartels, whatever you want to call 

them, that generate increases and the fuel surcharges, and you see 

upon whom those are being imposed, they are being imposed on 

U.S. exporters more than they are being imposed on the importers. 

So the stuff coming in from China, the manufactured parts coming in from China, may not be paying all the fuel surcharges that 

the collectors have agreed to being imposed. They may not be paying them all, but the U.S. exporters are paying them. 

So we don’t know exactly what the revenues are; and, frankly, 

we don’t care to know what the carriers collectively are doing. We 

want to deal with an individual carrier. Let them each decide how 

much fuel should be charged and so on. 

Now, on the containers going out, we believe that this long-term 

trend, this is not—you talk to your agriculture folks throughout the 

country. None of them believe this is due to the temporary blip of 

the dollar going down. The dollar comes up, and this demand will 

continue for a long time, therefore justifying more revenue to the 

carriers because the people in this country will be willing to pay. 

Now, here is our problem with the conference deal collectively, 

and we heard it just 2 days ago when the largest cotton exporters 

out of this country said, do you know what I want? I want to talk 

to my ocean carrier one on one, and I want to tell him how much 

more I would be willing to pay, if that is more. 

And we took a survey in our workshops. We asked exporters, 

how many of you would be willing to pay more, 50 percent, 100 

percent more, if you could get the containers, the vessels? You 

know what? Virtually every hand went up. But you know what? 

The carriers acting at the conference agreements aren’t talking to 

the individual exporters. The individual carriers aren’t talking. It 

is the conference talking. And they set sort of a benchmark, and 

they don’t know what the demand is for your exporters for a space. 

And if they did, we believe there would be more containers and 

more ships allocated to this trade if they could talk individually 

without going back. 

Mr. LATOURETTE. Thank you for that. 

And, Mr. Chairman, I think I need to ask you to respond to that. 

Because if Mr. Friedmann is accurate, that troubles me. Are shippers charging American exporters more in tariffs, fuel surcharges, 

other fees to send our stuff overseas than you are to bring it into 

the country? 

Mr. SHER. Categorically not. The facts are these. What Mr. 

Friedmann has just said, as far as I am concerned, is something 

I have never heard; and I don’t relate to it all. 

First of all, it doesn’t make any sense. All these contracts are negotiated one on one, the shipper and the carrier. They sit down together, and they negotiate. I cannot believe, as it runs contrary to 

common sense, if a shipper comes to one of our carriers and says 

42 

I want to pay 50 percent more and what does our carrier say? No? 

I mean, I don’t understand that. 

Mr. LATOURETTE. I hear you. That doesn’t make sense to me either, but I think their observation—— 

Mr. SHER. But let me give you the facts. 

Mr. LATOURETTE. Let me just finish my thought. I think their 

observation is that that is right, that there is a contract negotiated 

but everybody has gotten together ahead of time and set the floor, 

maybe not the ceiling but the floor. That’s the allegation I heard. 

Mr. SHER. Let me go back and mention one point. Because this 

discussion, as I indicated before, where I thought it was good for 

the FMC or somebody who was studying to get the facts because 

we get these sweeping generalizations without the facts—the facts 

are the last time I looked at it the average rate coming inbound 

to the west coast for the imports, the average rate was in the 

$2,000 category; and in the outbound the export rate, the average 

rate was in the $1,000 category. So $1,000 differential or 100 percent, depending on how you do your math. The rates are not higher 

going out than they are coming in. That hasn’t been the case for 

at least a decade. 

Mr. LATOURETTE. Thank you very much. 

Mr. Chairman, I guess I know why they are seated at the opposite ends of the table. 

Mr. SHER. You noticed that. 

Mr. CUMMINGS. Ladies and gentlemen, we are bringing this hearing to an end. We want to thank all of you for your presentations. 

There may be some follow-up questions to some of you, if not all 

of you. 

We will continue to be vigilant. If you have heard anything during this hearing that you want to add—in other words, if there are 

things you need to add to what you have already said, we welcome 

your comments. 

The hearing is adjourned. 

[Whereupon, at 5:05 p.m., the Subcommittee was adjourned.] 

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