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57–249 PDF 2010

UPDATE ON FEDERAL MARITIME 

COMMISSION’S EXAMINATION OF 

VESSEL CAPACITY 

(111–126) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

June 30, 2010 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

(II) 

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 

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 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ARCURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

LAURA A. RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

SOLOMON P. ORTIZ, Texas 

PHIL HARE, Illinois 

JOHN A. BOCCIERI, Ohio 

MARK H. SCHAUER, Michigan 

BETSY MARKEY, Colorado 

MICHAEL E. MCMAHON, New York 

THOMAS S. P. PERRIELLO, Virginia 

DINA TITUS, Nevada 

HARRY TEAGUE, New Mexico 

JOHN GARAMENDI, California 

HANK JOHNSON, Georgia 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

VERNON J. EHLERS, Michigan 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

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 

CONNIE MACK, Florida 

LYNN A WESTMORELAND, Georgia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BRETT GUTHRIE, Kentucky 

ANH ‘‘JOSEPH’’ CAO, Louisiana 

AARON SCHOCK, Illinois 

PETE OLSON, Texas 

TOM GRAVES, Georgia 

(III) 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

ELIJAH E. CUMMINGS, Maryland, Chairman 

CORRINE BROWN, Florida 

RICK LARSEN, Washington 

GENE TAYLOR, Mississippi 

BRIAN BAIRD, Washington 

TIMOTHY H. BISHOP, New York 

STEVE KAGEN, Wisconsin 

MICHAEL E. MCMAHON, New York, Vice 

Chair 

LAURA A. RICHARDSON, California 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

FRANK A. LOBIONDO, New Jersey 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

VERNON J. EHLERS, Michigan 

TODD RUSSELL PLATTS, Pennsylvania 

PETE OLSON, Texas 

(V) 

CONTENTS Page 

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

TESTIMONY 

Dye, Rebecca F., Commissioner, Federal Maritime Commission ........................ 3 

Lidinsky, Richard A., Chairman, Federal Maritime Commission ....................... 3 

PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS 

Richardson, Hon. Laura, of California ................................................................... 16 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Dye, Rebecca F. ........................................................................................................ 21 

Lidinsky, Richard A. ................................................................................................ 27 

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(1) 

HEARING ON UPDATE ON FEDERAL MARITIME COMMISSION’S EXAMINATION OF VESSEL CAPACITY 

Wednesday, June 30, 2010 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:03 p.m. in room 

2167, Rayburn House Office Building, Honorable Elijah E. 

Cummings [Chairman of the Subcommittee] presiding. 

Mr. CUMMINGS. This hearing will come to order. 

The Subcommittee comes together today because back on March 

14th, the Subcommittee convened to consider the shortage of shipping services and of shipping containers available to carry U.S. 

trade, particularly exports. 

I convened that hearing because shippers were reporting rapidly 

rising rates and surcharges and they reported numerous instances 

when cargo was left on the docks even when a signed contract was 

in place. 

Our last hearing gave us a good opportunity to develop a comprehensive view of the state of the shipping industry in recent 

months and many of the complaints that had been raised to the 

Subcommittee were confirmed by the testimony that we heard. In 

2008 and 2009, the world economy suffered a severe downturn. Imports to and exports from the United States experienced a decline 

that mirrored overall reductions in world shipping volumes and 

shipping companies responded to steep declines in rates by laying 

up ships and sailing more slowly to conserve fuel. Demand for U.S. 

exports began an unexpected rise late in 2009 and recent statistics 

indicate that import demand also began to rise in the early part 

of 2010. 

That said, at the time of our last hearing, there was not enough 

data to determine any clear trend in imports or exports, and the 

shipping lines appeared to be wary of restoring capacity too quickly 

lest the small increases that had been observed in trade proved to 

be unsustainable. As a result, although some ships were reentering 

trading routes, capacity remained tight and rates were quickly rising. 

That said, while the volatility that has characterized the overall 

economy, and by extension the shipping industry, has been of great 

significance to U.S. exporters and importers. Many of the recent 

2 

trends in shipping services are at least partially the result of what 

had been unprecedented upheavals in our domestic economy and, 

indeed, in the world economy. 

As the economy continues to rebound and as clear trade trends 

emerge, capacity will respond, as appears to be happening right 

now. Put simply, ships will go where they can get the cargo. Perhaps of greater concern over the longer term is the impact of our 

Nation’s expanding trade deficit on the very shipping services we 

need to reduce the deficit. 

During our March hearing, Mr. Robert F. Sappio, Senior Vice 

President with APL Limited, testified that the facts are that because of some structural differences in the trade or structural facts 

that exist in the trade, imports pay more historically because they 

are manufactured goods, fashion goods, consumer electronics and 

so forth, and the physical makeup of these goods is that they are 

light, so you can load a lot of them on a ship. 

The witness continued by saying, I believe for most carriers the 

economics are such that the imports are going to drive the deployment of additional ships and containers. In essence, the witness’s 

perspective is that United States exports are essentially hostages 

to shipping capacity that is made available as a result of the carriage to the U.S. of foreign imports. Put simply, ships will go where 

they can get the cargo, but they will go first where they can get 

the best-paying cargo. And if that isn t the United States, our export cargo will not receive priority service. 

Such business trends will only compound our trade deficit, and 

regardless of our other economic developments, will make it very 

difficult for the United States to achieve the doubling of export over 

the next five years for which President Obama has called. This reality has serious implications that urgently need to be addressed 

by comprehensive policy responses, not just in the maritime arena, 

but frankly in the industrial and manufacturing arenas as well. 

That said, we are here today to receive an update from the FMC 

on current trends in ocean-going shipping capacity. At the time of 

our last hearing, Mr. Richard Lidinsky, the Chairman of the Federal Maritime Commission, announced that the FMC had voted to 

initiate a fact-finding investigation to examine the extent of space 

and equipment shortages. The fact-finding has been led by Commissioner Rebecca Dye. 

In response to Chairman Lidinsky’s announcement, I promised 

that the Subcommittee would reconvene to examine the result of 

that fact-finding effort and here we are today as promised. Chairman Lidinsky and Commissioner Dye are here to update us on the 

result of their investigation. We anxiously look forward to their testimony. 

And with that, I yield to the distinguished Ranking Member, Mr. 

LoBiondo. 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

And to our panel, thank you for being here. 

As was stated last March, the Subcommittee initiated a review 

of the conditions in the maritime trades which have restricted opportunities for U.S. producers to export their products by vessel. 

Following the hearing, the Federal Maritime Commission estabVerDate Aug 31 2005 11:33 Mar 23, 2011 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 P:\DOCS\57249.TXT JEAN
3 

lished a fact-finding investigation to examine vessel capacity equipment availability in the import and export trades. 

The Commission has provided the Subcommittee with its preliminary results which suggest that capacity shortages are likely to 

continue for some time. In recent years, the demand for U.S. exports has significantly increased at the same time that vessel capacity has been withdrawn to save operational costs. 

While some carriers have expressed their intent to place more 

vessels into service in the U.S. foreign trades, the FMC’s report 

suggests that the capacity levels are not rising fast enough to meet 

the demand for U.S. shippers. As a result, many U.S. exporters are 

left in a situation where they cannot secure space for their products aboard a vessel for weeks. 

Additionally, many U.S. exporters face challenges in obtaining 

shipping containers to transport their goods to port. The FMC report notes there is a worldwide shortage in container supply and 

manufacturing of new containers has largely been suspended in 

Asia. 

I commend the Commission for seeking solutions to this problem 

and hope they will continue discussions with producers, shippers 

and carriers to broaden the availability of maritime containers 

which are a necessity in modern day trade. 

Ultimately, vessel capacity levels will rise as the global economy 

recovers and trade returns to normal levels. As we prepare for 

these increases, it is in our national interest to strengthen the capabilities of domestic producers and shippers to quickly move their 

products to port and to sustain the increase in American exports 

to the rest of the world. 

I want to commend the FMC for the recommendations presented 

in the preliminary report and I look forward to working with the 

Commission and all segments of the maritime industry on short 

and long-term solutions to these problems. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

We will now hear from Mr. Richard A. Lidinsky, the Chairman 

of the Federal Maritime Commission, and Commissioner Rebecca 

F. Dye of the Commission. 

Mr. Lidinsky, welcome back. 

TESTIMONY OF RICHARD A. LIDINSKY, CHAIRMAN, FEDERAL 

MARITIME COMMISSION; AND REBECCA F. DYE, COMMISSIONER, FEDERAL MARITIME COMMISSION 

Mr. LIDINSKY. Time flew quickly from our hearings of St. Patrick’s Day to the 4th of July, and we are here and we thank you 

both for your kind welcome. 

The FMC appreciates this opportunity to update the Committee 

on the critical issue of ocean vessel capacity and shipping container 

availability since we last testified in March. As in that previous 

hearing, I am joined today by Commissioner Rebecca Dye and the 

Commission’s General Counsel Rebecca Fenneman. We also have 

Commissioner Michael Khouri in the audience, as well as senior 

members of the staff and your former colleague, Commissioner Joe 

Brennan is back manning the ship, as we say, and sends his best 

regards. 

4 

At the hearing on March 17, we announced that Commissioner 

Dye would be leading a fact-finding investigation into the difficulties that plagued our industry at that time. During the intervening 

three months, Commissioner Dye and her team have done an impressive amount of work, including reviewing extensive data and 

documentation, holding interviews with a comprehensive array of 

representatives from all sectors of the ocean shipping industry. 

In March, President Obama also directed agencies to use every 

available Federal resource to increase U.S. exports over the next 

five years. That directive dovetailed with the Shipping Act’s goal 

for the FMC to promote the growth and development of United 

States exports through the competitive and efficient use of ocean 

transportation. As you survey the Government-wide responses to 

the President’s goal, I cannot think of a better example than the 

extraordinary efforts of Commissioner Dye and her team. 

Today, the Subcommittee will receive an update on Commissioner Dye’s investigation and the current interim recommendations she has made. But before I turn the microphone over to her, 

I would like to share a few observations on what has occurred since 

March. 

First, the maritime economy and trade have continued to improve since that date. As we look at the statistics for cargo growth, 

both imports and exports, our Nation’s ports are surging. The 

growth over 2009, which was admittedly a horrible year of economic development, is quite impressive. In May of this year, for example, the Port of Long Beach saw total container volumes increase 25 percent; Seattle, 57 percent; Savannah on this coast, 25 

percent in May; New York-New Jersey, 18 percent in April. The list 

goes on. 

I begin with these figures to remind us that we should keep in 

mind that the problems that we face today are the consequences 

of a broad recovery that was not at all certain last year. In 2009, 

both ocean carriers and shippers would have felt fortunate to be 

where we are today. 

When we last met in March, and even as late as May, certain 

ocean carriers were claiming that they were not sure that the uptick in trade was just temporary or a restocking before its second 

dip. Now, they appear to accept that the upturn is for real and they 

have moved to impose peak season surcharges earlier than normal, 

despite expressions of uncertainty. The growing pains and problems that we confront are serious, but they are far preferable to the 

severe economic pain that preceded them. 

Second, vessel capacity is returning and I believe in thanks no 

small part to this Subcommittee’s vigilant focus on these issues 

since March. In the Nation’s largest trade lanes, the Transpacific 

between the U.S. and Asia, we are projecting capacity for July to 

be 18.7 percent higher than when we testified in March. Some of 

this increase is seasonal, but we also notice peak harvest season 

is coming for exports so we must continue to increase capacity. 

On a year by year basis, July 2010 capacity in the Transpacific 

will be 5.8 percent larger than the year before. Whereas in March, 

capacity was still 7.8 percent below March of 2009. Capacity has 

not returned to 2008 levels. We project the July 2010 capacity to 

be 3.5 percent below July 2008 levels. 

5 

Third, as capacity returns, the more pressing issue has become 

shortage of containers. In March, much of the problem was the location of empty containers. Agricultural exporters in the upper 

Midwest and rural Pacific had trouble obtaining containers bringing exports to our ports for large metropolitan distribution centers. 

Now, this recurring problem of positioning of empty containers has 

been exacerbated by a worldwide container shortage. 

During the recession in 2009, major container manufacturers in 

China suspended production. During the past few months, production has not ramped back up to keep pace with new orders from 

ocean carriers and container leasing companies. Analysts forecast 

the global output of containers this year to be only at 1.5 million 

to 2 million 20-foot equivalent units, down from 4.2 million in 2007. 

As a result, we have seen reported prices rise as high as $2,750 for 

20-foot containers in China, the highest price levels in 20 years. 

I know that Commissioner Dye and her team have looked closely 

at this issue, which I believe might eclipse the vessel capacity issue 

in severity during the coming peak season. 

On that same subject, I would like to give the Committee a brief 

update on a project that I mentioned back in March: our initial discussions with the U.S. Department of Agriculture and a group of 

ocean carriers in the Westbound Transpacific Stabilization Agreement, WTSA. 

This was to develop a pilot project to give inland agricultural exporters more information on locations and availability of empty 

shipping containers. Since March, work on this project has progressed at a good and steady pace. The FMC has worked with the 

USDA, WTSA, and we have also had input from the U.S. Army’s 

experts on container tracking in the Surface Deployment and Distribution Command. 

At this point in time, a group of six agricultural exporters and 

four ocean carriers has been assembled to provide data and present 

what would be most helpful to the exporters. The carriers have 

submitted a first round of data. The USDA has run this data and 

exporters have submitted initial comments. We will continue to assist USDA and the ocean carriers on their project to give them 

more transparency regarding container location. This is in addition 

to the FMC proposal on container issues that Commissioner Dye 

will share with the Subcommittee this afternoon. 

With these preliminary thoughts, I will hand things over to Commissioner Dye, who has been living and breathing these issues 

with importers and exporters over the last few months. After she 

shares her updates, we will be most pleased to answer any questions you might have. 

Again, thank you, Mr. Chairman, for this opportunity, and Members of the Committee, thank you for allowing us to be here today. 

Mr. CUMMINGS. Thank you very much. 

Commissioner Dye? 

Ms. DYE. Thank you, Mr. Chairman, Mr. LoBiondo, Mr. Coble. 

Thank you very much for allowing me to appear before you today 

to deliver to you our interim report on the Federal Maritime Commission’s Fact-finding Investigation Number 26. 

I want to thank my colleagues on the Federal Maritime Commission for their support and advice during these few months that we 

6 

have been investigating. I especially want to thank the Chairman 

for his devoting substantial resources from the Commission’s budget to support this investigation because we all agree it is a very 

high priority. 

And of course, I want to thank the members of my staff who are 

here today. My team, they have done a great job and we are all 

going to continue to work on this and I am grateful to have their 

support. 

I especially want to thank the many American exporters and importers who committed their time and resources to this investigation so far. Many of them discussed not only their current problems 

with ocean transportation, but also their suggestions for improvements in the efficiency of the global supply chain. 

I also want to thank the executives of the ocean carriers who 

participated in our investigation. They have provided us with valuable information on current capacity problems and have been forthcoming and cooperative in this investigation. 

And finally, I want to thank the Burlington Northern Santa Fe 

Railroad, the American Association of Railroads, and the Surface 

Transportation Board, who have been very helpful to us so far. We 

look forward to their continued participation as we develop a solution to the inland container shortage. 

The first phase of our investigation, Mr. Chairman, has involved 

an intensive series of confidential interviews with American exporters and importers. We also interviewed executives of 14 ocean carriers which operate in the United States-Transpacific trades. 

In addition, we have interviewed shipper associations, ocean 

transportation intermediaries, freight software providers, chassis 

pool experts, container lessors, transportation academics, and international ocean carrier investment consultants. We talked to port officials and railroad executives and consulted with certain other 

railroad trade associations. 

We conducted interviews in Portland, Oregon; San Antonio, 

Texas; New York, New York; twice in San Francisco; and of course, 

here in Washington, D.C. During our interviews, shippers in the 

eastbound Transpacific trade expressed the opinion that ocean carriers continue to withhold vessel capacity from the market in a collective effort to raise prices by leveraging access to scarce capacity 

and equipment. They believe that carrier practices involving rolled 

cargo, canceled bookings, and successive price increases were in 

conflict with protections in their existing service contracts. 

Carriers responded that they were making business decisions on 

an individual basis, and were reluctant to bring vessel capacity 

back into the United States trades quickly, given the precariousness of their financial positions and the lack of certainty that unanticipated increases in demand would be sustainable. They believe 

the problems with rolled cargo and canceled bookings were exacerbated by multiple bookings made by shippers. 

In the westbound transportation trade, our export trade, shippers and carriers agree that U.S. exporterss face additional problems obtaining capacity. In the Transpacific, average freight rates 

are higher eastbound than westbound, as you had mentioned, Mr. 

Chairman. For this reason, ocean carriers deployed vessel capacity 

based upon demand for U.S. imports. 

7 

Obviously, when available capacity for imports is limited, U.S. 

exporters also experience higher levels of vessel capacity shortages. 

Another vessel capacity problem facing exporters concerns the 

issue of vessels weighing out. U.S. exporters such as forestry products and grain can weigh on average twice as much as imports, and 

this weight disparity limits the number of filled export containers 

that may be carried on an outbound vessel. 

During interviews, shippers and carriers agreed that export container shortages exist throughout the Country for a number of reasons, including the fact that many containers carrying imports arrive at distribution centers that are far away from export locations. 

There has been a virtual halt in container manufacturing from late 

2008 through 2009. Imports are increasing trans-loaded into larger 

domestic containers near ports of entry, increasing the likelihood 

that those empty containers will be turned around and placed on 

ships empty back to Asia for higher paying imports. 

Finally, our investigation found that many shipper service contracts did not contain provisions which adequately protected them 

from many rate and surcharge increases. In certain cases where 

shippers had negotiated rates and contracts that did not allow the 

imposition of rate increases and surcharges, they stated that some 

carriers still attempted to impose rate increases or deny space. 

Our interim report recommends approaches for timely action to 

address the severe disruptions in the ocean leg of the global supply 

chain. As you know, Mr. Chairman, the Federal Maritime Commission does not have the statutory authority to require ocean carriers 

to add vessel capacity. Also, unless the parties agree otherwise, the 

exclusive remedy for breach of contract under the Shipping Act is 

an action in an appropriate court. 

However, we believe there are actions that the Commission can 

take immediately within our statutory authority to intervene in 

this situation and produce positive results. 

At the Commission meeting held on June 23rd, the Commission 

took action in four areas. We established what we are calling rapid 

response teams within the Commission’s Office of Consumer Affairs 

to quickly address and help resolve disputes between shippers and 

carriers. These problems include canceled bookings, rolled cargo, 

and container unavailability, and we encourage shippers to call our 

Consumer Affairs Office. It is located on our website, and we promise they will get a prompt call back, and hopefully a prompt resolution. 

We have also increased our Commission oversight of the Transpacific Stabilization Agreement and the Westbound Transpacific 

Stabilization Agreement. We increased oversight of these agreements by requiring verbatim transcripts of certain agreement 

meetings. And of course, our staff in our Bureau of Trade Analysis 

had already increased its oversight of these agreements. 

We have also asked the staff to explore additional oversight of 

the global alliances and get back to us as soon as possible so we 

can act on that matter if the Commission so decides. 

We extended our fact-finding investigation to the end of the peak 

shipping season so that we can continue to monitor the capacity 

and price situation in the U.S.’s international ocean transportation; 

and also to work on some additional solutions within the confidenVerDate Aug 31 2005 11:33 Mar 23, 2011 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 P:\DOCS\57249.TXT JEAN
8 

tiality of the fact-finding investigation. And as we develop what we 

think are good approaches, we can then recommend them to the 

Commission for action. 

We are going to organize what I call best practice discussion 

pairs between one shipper and one carrier to consider ways to resolve the most pressing problems with recent carrier practices. The 

initial problems are booking cancellations and cargo rolling. 

To work with our rapid response teams, we are going to ask our 

carriers to designate representatives who will be available to work 

directly with our staff to quickly address capacity problems and 

other urgent problems. 

We have already developed some model contract terms that we 

are going to share with the shipping public to help them address 

some of the most pressing contract issues. We want to provide improvements in ocean service contracting and allow shippers and 

carriers to enjoy the full benefits of contracting envisioned in the 

Ocean Shipping Reform Act. 

One of the most important solutions that we want to develop, 

Mr. Chairman, is to organize an Export Capacity Working Group. 

We are going to establish a group of shippers and carriers to meet 

with the Commission and discuss availability of vessel capacity for 

U.S. exports. These discussions will be held regularly, but only 

under the direction of the Commission. The working groups appear 

to be one of the more promising approaches to assure enough capacity for export cargo. 

Finally, we have already started organizing a working group on 

container availability. Based upon our discussions with ocean carriers, shippers, intermediaries, chassis pool experts and railroad 

representatives, we are going to organize an Intermodal Group to 

meet at the Commission very soon to address the chronic unavailability of export containers. 

Today, Mr. Chairman, freight rates from Asia to the United 

States have rebounded to close to where they were at the high 

point in August, 2008. U.S. export rates exceed 2008 levels. A number of carriers have recently announced decisions to increase vessel 

capacity in several U.S. trade lanes, particularly the U.S.-Asia 

trades. Transpacific capacity, as the Chairman had mentioned, has 

increased at least 17 percent since January. 

Nevertheless, growth in demand for container imports and exports in the upcoming peak shipping season may strain current 

vessel capacity. Container availability for export cargo in some regions of the Country likely will continue to be difficult and expensive to arrange. 

Mr. Chairman and Members of the Subcommittee, we realize 

that we have laid out an extremely ambitious agenda for the next 

few months for ourselves. As you know, Mr. Chairman, we only 

have 130 people, but we are committed to this endeavor. We will 

keep you and your staff informed of our progress in these areas. 

Thank you so much for your continued involvement and support. 

I will be glad to answer any questions you may have. 

Mr. CUMMINGS. Thank you very much. 

First of all, I want to thank you and your staff for all that you 

have done. We really appreciate it. 

9 

Let me just ask you, Commissioner Dye, do you believe that the 

Chinese are intentionally holding back on the production of shipping containers to drive rates higher? 

Ms. DYE. I can’t speak to their intention, Mr. Chairman. What 

we have discovered is that the plants shut down at one point, completely. Whether or not they are moving fast enough to retool, we 

don’t know. We don’t know why or what exactly is happening. But 

let me say we do believe it is not fast enough for our American 

businesses who need the equipment. 

Mr. CUMMINGS. Now, Chairman Lidinsky, while Commissioner 

Dye’s investigation continues, exporters and importers are continuing to report cargo rolling, cancelled bookings, container shortages, and attempts to force charges that were not agreed in contracts that were just executed last month. What else can the FMC 

do to address these problems? 

Mr. LIDINSKY. Thank you, Mr. Chairman. We have heard these 

unfortunate reports of occurrences where contracts were negotiated 

just a month ago and changes have already been made. I think the 

Commission can do two things. One is that we work within the confines of what Commissioner Dye has described, but we also have 

an open door for those shippers who have experienced these unfortunate incidents so that we can go directly to the carriers and try 

to get them resolved. 

The ultimate solution, though, I believe is a legislative one, and 

this complements Commissioner Dye’s study. We have to change 

the Shipping Act’s exclusive remedy provision for these service contract issues to initially go to the Commission. Let the Commission 

mediate and arbitrate these disputes immediately. Don’t put an importer and exporter in a position where they have to wait 18 

months for a decision to come from a court, and then come to the 

Commission for relief. 

So I think if we work to that goal, we can resolve much more 

quickly these issues that shippers are confronting. 

Mr. CUMMINGS. Commissioner Dye just said that you are working with 130 people. Let’s say the Congress were to give you that 

kind of authority and that kind of responsibility, would you be able 

to carry that out with the present staff that you have now? 

Mr. LIDINSKY. We would not, Mr. Chairman, because I would see 

that we would virtually have to double the size of our Consumer 

Affairs Division, create a hearing officer, a situation where we 

would have people, expert at arbitrating, mediating, and we might 

look at an increase of possibly another 20 employees for that function. 

Mr. CUMMINGS. And I take it that because you would then be 

able to resolve these issues quickly so that commerce might flow, 

I take it that it is your belief, and I am not trying to put words 

in your mouth; I am just curious, that the expenditure would be 

worth it to try to accomplish that? 

Mr. LIDINSKY. Absolutely, Mr. Chairman, because again, we are 

all working towards the goal of the President of doubling our exports. We are particularly committed to exports. And to the extent 

that anyone leaves the export business out of frustration over 

treatment by an ocean carrier, that is a loss for the Country. So 

10 

any investment we make in speeding these cases along is an investment well made. 

Mr. CUMMINGS. Now, Commissioner Dye, do all carriers try to 

work with shippers whose cargo is being bumped to help ensure 

that the shipper’s transportation needs can be met? Or have some 

carriers just bumped cargo without regard to the shipper’s needs 

to get their imports or exports delivered on time? What have you 

found? 

Ms. DYE. When we started this investigation, Mr. Chairman, I 

described the import and export trades as chaotic. Why that occurred, we don’t know. But we heard situations in which there 

were multiple cargo rollings. Carriers normally must overbook 

their vessels because of what they call the fall-down rate of exports 

can be on average 30 percent. 

So sometimes there is a need to roll some cargo, but what we had 

heard described was unacceptable. Part of what we want to explore 

in best practices is for us to be able to listen to the interchange between shippers and carriers, and hopefully get to a resolution that 

we can institutionalize at the Federal Maritime Commission in 

some way, and allow shippers more transparency in the situation, 

and plan for any cargo rolling that may occur for one vessel in one 

week. 

Normally, it has worked out. In the past, it has been my understanding, that that has been worked out with a fair resolution between a carrier and a shipper. Whether or not it is the economic 

situation or the inefficiencies in the system, we are not sure. 

Mr. CUMMINGS. Before we get to Mr. LoBiondo, let me just ask 

you this, Mr. Lidinsky. Carriers have been implementing surcharges for cargoes moving under service contracts. Have all of 

these surcharges been based on increased carrier costs such as an 

increase in fuel costs? Or has some of the surcharge has been noncost based, perhaps in an attempt to increase revenues to offset 

their losses from the past year? Should surcharges only reflect actual changes in the carrier costs for which the surcharge is being 

assessed, such as increased fuel costs? 

Mr. LIDINSKY. Mr. Chairman, surcharges should be for the specific purpose for which they are made, for the fuel increase, and for 

other purposes. Now, when the service contract is formed, the shippers have an opportunity to protect themselves against certain surcharge increases and unfortunately a lot of times they don t. So the 

carriers, in an attempt to make up lost revenue, have imposed additional surcharges to bring them back to where they wanted to be 

from two years ago. 

But the core of the issue remains this, that service contracts 

have been around for about a dozen years now in their present 

form. Nobody doubts they have been a success in terms of numbers. 

There are over two million of them on file today, individual deals 

between the importer-exporter and the carriers. Both sides are responsible for the state of being where they have not fully taken advantage of these opportunities in the service contract to negotiate 

provisions to insulate against surcharges, or for carriers to protect 

themselves against phantom bookings by shippers. 

So if Commissioner Dye’s Best Practices Committee can form a 

model service contract, we can have that in place, encourage people 

11 

to use that as a model, and then change the law to say that when 

a dispute arises, come directly to the FMC. We will deal with it 

and we will solve the issue immediately. So I think that is the path 

ahead for the surcharge, for rolling cargo, for auctioning cargo, and 

for other problems that exist. 

Mr. CUMMINGS. And what kind of training would those folks 

have to have, the people that you talk about resolving the issues? 

Would they be more like administrative judge type folk? 

Mr. LIDINSKY. No, I don’t think you need to be that level of expertise. I think you need to have worked within the Commission 

or within the industry. I would envision people who have worked 

for carriers, who have worked for shippers, worked for port authorities, who understand the transition and the process of cargo movement so that they can read a service contract and apply what is 

the fair solution. 

So we don’t need Ph.Ds. in the arbitration dispute area, but we 

need people who have common sense and who can quickly resolve 

the issue. 

Mr. CUMMINGS. Mr. LoBiondo? 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

A couple of the questions I had you have asked. I am going to 

yield my time to Mr. Coble. 

Mr. COBLE. I thank the gentleman from New Jersey for yielding. 

Chairman, Commissioner, Counsel, it is good to have you all with 

us. 

In your report, you note that many shippers believe that carriers 

were withholding capacity despite surging demand to raise rates to 

collectively determined amounts. You furthermore note that many 

carrier groups have or have attempted to impose rate increases and 

surcharges even when the contracts appeared to have precluded 

their use. 

Do you see signs or evidence or indicators that carriers are working with each other to establish uniform price levels? 

Ms. DYE. Mr. Coble, we did not actually design this investigation 

with that sort of focus in mind. But I can say that we have no evidence that the carriers are actually exceeding the authority that 

they currently have in their agreements. 

But we have already increased our oversight to make sure that 

we have done everything that we could do to make sure that that 

is not going on. 

Mr. COBLE. Mr. Chairman? 

Mr. LIDINSKY. Mr. Coble, back in March, this issue was touched 

on by one of the shipper witnesses. And we have said our door is 

open, we are anxious to talk to anybody who can bring us evidence 

of collusion or other illegal activities and we will certainly work 

with them to stop it. 

Mr. COBLE. I thank you both. 

In your report, you further recommended that the FMC explore 

ways with carriers and shippers to solve chronic unavailability of 

containers for U.S. exporters. What can the FMC do in cooperation 

with shippers and carriers to enhance the availability of containers 

to areas far from major ports? 

Ms. DYE. Yes, Mr. Coble, we have already started, actually. We 

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viders and the carriers to discuss ways to serve areas like the Pacific Northwest and the upper Midwest. And I am very encouraged 

by the solutions that they have proposed. 

We don’t want to interfere with any business relationships that 

are working. To the extent that people are being served, we want 

to stay out of their way. 

Mr. COBLE. How are costs associated with the transport of the 

container to the point of loading and to the port of departure split 

between the producer on the one hand, the shipper on the other 

hand, and finally the carrier which ultimately transports the cargo? 

Ms. DYE. The carrier usually arranges the delivery of the container to the shipper to the agreed upon destination. The problem 

is that the containers usually arrive at population centers far removed from where the export cargo is located. And it is expensive 

to get the container relocated where it is needed. 

Mr. COBLE. Has there been a change recently in how the costs 

are shared for containerized vessel exports? 

Ms. DYE. There has been an increase in the types of cargo that 

is carried in containers such as increased use of containeers by agricultural products. As far as the costs go, the expense is shared 

by the carrier and the exporter. But in difficult economic times, the 

carrier expects the export shipper to pay more of those relocation 

costs. And sometimes these costs are too much for the export shipper to bear. 

Mr. COBLE. And finally, Mr. Chairman, one final question. 

And Mr. Chairman, I don’t mean to be cutting you out. You feel 

free to put your oars into these waters as well. 

Finally, how can the Federal Government and United States importers and exporters influence foreign operators plans to better 

suit domestic trade needs? And I ask this question because much 

of the shipping is done by foreign-based vessels. 

Mr. LIDINSKY. Thank you. Let me respond to that. 

I think we have to stress, first of all, that this is the foreign waterborne commerce of the United States. And a report that was 

done two years ago for the Congress pointed out that our importers 

and exporters should be first served by those shipping lines that 

freely choose to come to this Country. 

Now, let me give you a couple of examples, Mr. Coble. First of 

all on this increasing export box use. I think we can work through 

vehicles like the USDA project I talked about to increase the visibility of boxes. I think we can stress to exporters they have to pay 

their fair share for positioning and other costs associated with moving that box inland and moving it back to the port area. 

Another factor is, and I was very troubled to learn this, that a 

number of carriers refused to take what we call third party boxes. 

Now, this is a situation where a leasing company may own a box 

and a shipping line will come to that leasing company and say I 

need extra boxes for this move. They will take those boxes. The exporter then says, ‘‘I need a box’’. The line says sorry, we don’t have 

a box. The exporter says I will go to a leasing company and get the 

same box to put on the ship. The ship says we don’t want that box 

on our ship. 

So now, the exporter has been discouraged in two ways. He has 

been told he doesn’t have a box, and if he goes out and gets a box 

13 

he is refused. So I think we have to clarify our regulations or 

maybe clarify the law that that carrier must take that box in our 

trade. 

When you come to these shores as a foreign carrier, you have to 

honor the Coast Guard regulations, Customs, and other things. I 

think you should honor the exporter’s needs. 

Mr. COBLE. Sounds not unreasonable to me, Mr. Chairman. 

I thank the gentleman from New Jersey and I yield back, Mr. 

Chairman. 

Mr. CUMMINGS. It doesn’t sound unreasonable to me either. 

Mr. Lidinsky, this reform that you are calling for, this is major 

stuff. 

Mr. LIDINSKY. Well, I think it would depend on how we approach 

it, Mr. Chairman. In other words, we could fine tune or we could 

wait a bit and look at a possible list of other changes and put them 

in under a sort of re-regulation bill of the year. So I think it is up 

to the Committee’s wisdom how we should proceed, but we are certainly willing in the context, again, of Commissioner Dye’s report, 

to come back to the Committee with a shopping list of what we feel 

is needed to fix the bill. 

Mr. CUMMINGS. Well, I would appreciate it if you would do that. 

I would like to see both approaches, the fine tuning and what 

you think that fine tuning would yield, sort of like an a la carte 

sort of thing. And then the big fix. We just have to figure it out. 

Up here things move very slowly and sometimes in order to get 

something done you have to do it in pieces, although it might make 

sense to do the bigger deal. 

Do you follow me? 

Mr. LIDINSKY. I understand you completely. 

Mr. CUMMINGS. So we would like to hear from you on that. 

How soon can I hear from you on that, with regard to that? 

Mr. LIDINSKY. Well, I think we could be back to you within a 

month with the preliminary list. 

Mr. CUMMINGS. That would be fine. 

Now, you indicated, Mr. Lidinsky, that the FMC has continued 

to work with the USDA and other partners to discuss the best way 

of tracking available containers. Will a central registry be developed to report the location of empty shipping containers? And if so, 

when? Because that seems like one of those tweaking things that 

you talked about. I am just wondering. 

Mr. LIDINSKY. Well, again, this project, Mr. Chairman, as I outlined it, is of course paid for and being directed by the Department 

of Agriculture. There is no FMC funds in it. But my understanding 

is once the pilot project is underway, it takes additional testing, 

but sometime later this summer there will be established a central 

registry where agricultural exporters can look at that. And then 

whether it is broadened, of course, will be a judgement of the 

USDA as to whether it is worth broadening. 

But I think this could be of great advantage to exporters in the 

agricultural area, but also other areas as well. We could focus it 

on States that are not getting served. And it is an opportunity for 

both the carriers and the exporters for additional business. 

So it is certainly worth pursuing and we are working very closely 

with USDA to make sure it moves quickly as possible. 

14 

Mr. CUMMINGS. And so you anticipate that if that proved to be 

effective and efficient, that I guess it would be your recommendation to the USDA that they expand that. 

Mr. LIDINSKY. Yes, expand it. But again, it is their judgment call. 

I think it is not a solve all problems issue because as most things 

in life, it gets us part of the way there, but it is certainly better 

than what we have today. And we have encouraged them, we have 

praised them for these efforts. We praised the carriers for their efforts because they are the key people putting these numbers into 

the system. 

Mr. CUMMINGS. Now, you indicated in the hearing that members 

of the Westbound Transpacific Stabilization Agreement were to 

meet in a forum on April 19. Is that right? 

Mr. LIDINSKY. That is correct. 

Mr. CUMMINGS. To discuss U.S. exporter needs and that the FMC 

was to participate in the meeting. Did they? 

Mr. LIDINSKY. They did. The way the meeting was held, Mr. 

Chairman, was that I believe Commissioner Khouri, and I am not 

sure whether Commissioner Dye was there or not. 

Ms. DYE. I was not there. 

Mr. LIDINSKY. She was not there. We attended the opening of the 

session and heard the luncheon address. We then left and left senior staff there to work with some of the details of that meeting. But 

I understand it was a very good exchange, and again to the extent 

that dialogue takes place to explain the situation and efforts are 

made to reconcile problems, it was a very worthwhile meeting and 

we commended them for that meeting. 

Mr. CUMMINGS. I am intrigued by this whole resolution situation. 

You indicated that FMC’s Office of Consumer Affairs and Dispute 

Resolution Services can assist shippers and carriers in resolving 

service disputes. How many disputes has the office helped to adjudicate this year? And what are the typical types of cases brought 

for adjudication? 

Mr. LIDINSKY. Well, I couldn’t give you an exact number, and we 

will provide that for the record, but there are many, many cases 

that have been brought to us. And it would be things as simple as 

misunderstanding contract terms, containers being delivered to the 

wrong place. Cargo rolling issues have come to them where the 

staff has called the carrier, and worked to reconcile these issues. 

When the carrier gets a call from the FMC, they are quickly 

going to respond, as opposed to a call from the shipper. So it is sort 

of like a hotline kind of approach. And if we get the authority to 

be the first party to come to, we would see these cases multiply 

dramatically and we would be up to handling them. 

Mr. CUMMINGS. Mr. LoBiondo? 

Mr. LOBIONDO. I have nothing else. 

Mr. CUMMINGS. Mr. Coble, did you have something else? 

Mr. COBLE. No, sir. 

Mr. CUMMINGS. All right. I just have two more questions. 

Ms. DYE. Yes, sir. 

Mr. CUMMINGS. Commissioner Dye, you stated in your written 

testimony that the FMC has voted to increase oversight of the 

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pacific Stabilization Agreement by requiring verbatim transcripts 

of certain agreement meetings. 

Ms. DYE. Yes, sir. 

Mr. CUMMINGS. How can you ensure that you receive verbatim 

transcripts if the meetings are held in foreign countries and are not 

attended by FMC reps? 

Ms. DYE. Well, we don’t have any reason to doubt that they will 

comply, Mr. Chairman, but I can assure you if we do have any indication that they are not fully complying, then we would move to 

the next step. 

Mr. CUMMINGS. So the Pacific conferences, they don’t hold their 

meetings in the United States. Is that right? 

Ms. DYE. They do not, as a rule. 

Mr. CUMMINGS. Do you think that is on purpose? 

Ms. DYE. I think that is probably for their convenience, Mr. 

Chairman. 

Mr. CUMMINGS. What did you say? 

Ms. DYE. I think that is for their convenience. 

Mr. CUMMINGS. Oh, I see. All right. 

Again, we want to thank you all for doing a great, great job. I 

thank you all for also having me to celebrate the 50th anniversary. 

I was very pleased to be there. 

And I want to thank you, Mr. Chairman, for bringing a lot of morale to your institution there. I have gotten a number of emails 

from folks who after I spoke there who said some very, very kind 

things. And so I want to thank you. And please let everybody know 

there that we truly appreciate their work. 

We are going to be calling you back so that we can get those recommendations. OK? 

Mr. LIDINSKY. Very good. 

Mr. CUMMINGS. I may not do it in the form of a hearing, but I 

want to see if we can get it within a month. Do you believe that 

will give you enough time to do what you need to do? 

Mr. LIDINSKY. I think it will do for us, Mr. Chairman. 

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

Mr. LIDINSKY. Thank you for your continued support. 

[Whereupon, at 2:52 p.m., the Subcommittee was adjourned.] 

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