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Competition and Integrity for America’s Ocean Supply Chain

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# Comments of U.S. Federal Maritime Commissioner Rebecca Dye at NCBFAA Annual Conference

- Thank you for inviting me to your Association’s 35th Annual Conference. I have enjoyed speaking to your Association a number of times over the past several years, and I was very pleased when Ed asked me to be here today.
- My remarks today reflect my own individual views and are not offered as the official position of the Federal Maritime Commission.
- Ocean transportation intermediaries are critical players in determining American success in international trade. Your companies are working with U.S. importers and exporters to develop complete logistics operations which allow American companies to thrive in a fiercely competitive world market.
- I do not need to tell any of you that the maritime industry, like every other sector of the global economy, is facing the most significant economic challenges of at least a generation.
- International trade volumes have shrunk dramatically and overcapacity in liner ocean shipping has grown to a point where it is estimated that nearly 500 container ships lay idle around the world.
- The Federal Maritime Commission is carefully monitoring the effects of the global recession on all sectors of the maritime industry, including shippers, intermediaries, ports and carriers, to allow us to accurately evaluate the circumstances surrounding any regulatory actions we may take.

**Antitrust Immunity**

- I know that many of you are interested in how the European Commission’s decision to repeal the exemption from the ban on restrictive business practices for liner conferences will affect carrier antitrust immunity in the United States.
- In fact, earlier this month I spoke at the Global Liner Shipping Conference in London about this very issue.
- Although I support moving forward on the deregulatory path, I think it is unwise to consider major, comprehensive reform in the U.S. system of ocean transportation regulation under current economic conditions.
- However the E.U. ultimately decides to treat the international liner industry, I expect the U.S. will continue to rely on certain aspects of our current ocean regulatory system for several reasons.
- One reason involves U.S. antitrust law. The potential chilling effect of exposure to U.S. antitrust law is considerably greater than to European Union competition law.
- There is the threat of treble damages for violation and the fact that private parties may also bring antitrust actions.
- U.S. antitrust laws are also criminal statutes. Executives of companies found guilty of violating these laws can face substantial jail terms and fines.
- Many shipping executives may shun even potentially legal partnering activities due to the severity of U.S. antitrust law.
- In addition, the Shipping Act is broader and more complex than the E.U.’s conference exemption.
- The U.S. ocean shipping regulatory system is comprehensive, and includes not only antitrust immunity for vessel operators, but also for marine terminals, and certain port authorities. Antitrust immunity is offset in the Shipping Act by the “”prohibited acts”” contained in section 10 of the act.
- Finally, the Federal Maritime Commission has the authority to seek injunctive relief against agreements that are substantially anticompetitive because they either unreasonably increase prices or decrease service.
- Terminal operators, port authorities, maritime labor, freight forwarders, cargo consolidators, not just ocean carriers and shipper organizations, are affected by comprehensive shipping reform efforts. The impact of legislative change, and the potential for unintended consequences, is great.
- With the end of European antitrust immunity, the Commission staff plans to assess what competitive impacts the change will have on all U.S. liner trades.

**Regulatory Relief**

- While I have concerns about comprehensive statutory reforms at the present time, I believe the Federal Maritime Commission can use the liberalized exemption authority that Congress gave us under the Ocean Shipping Reform Act to consider certain regulatory relief.
- As many of you know, I had the privilege of serving as a Counsel to the House Transportation and Infrastructure Committee during the development of the eleven year old Ocean Shipping Reform Act.
- As everyone here knows, the Reform Act allows ocean common carriers to enter into service contracts with one or more shippers. The Reform Act permits these contracts to be filed confidentially with the Commission.
- As passed by Congress, the Reform Act did not grant non-vessel operating common carriers the right to offer service contracts in their capacity as carriers with their shipper customers.
- After a number of petitions were filed at the Commission, including one from your organization, the Commission issued regulations which exempt NVOCCs offering NVOCC Service Arrangements from the tariff publication requirements of the Shipping Act.
- Our staff reports that 724 NVOCCs have registered with the Commission to offer NVOCC Service Arrangements since the inception of the program. As of March 31st, the Commission has received approximately 2,874 NVOCC Service Arrangements and 3,952 amendments filed by 124 NVOCCs taking advantage of this new contracting option.
- Recently NCBFAA petitioned the Commission to exempt NVOCCs from the provisions of the Shipping Act requiring NVOCCs to publish and adhere to rate tariffs in those instances where an NVOCC has individually negotiated rates with its shipping customers.
- Our staff is currently examining the comments received on the petition and will come to the Commission shortly with a recommendation for action.
- Since this petition is currently pending before the Commission, I must limit my comments about the Petition.
- However, I would like to comment on the FMC’s exemption authority generally as well as reiterate my past comments about tariff reform.
- Besides introducing confidential contracting, and eliminating conference regulation of members’ service contracts, the Ocean Shipping Reform Act contained a third potentially deregulatory element, more liberal exemption authority.
- By liberalizing the terms under which the Commission can exempt entities that are subject to the Shipping Act from particular regulatory requirements, Congress allowed the Commission to reduce unnecessary regulatory burdens. If the Commission identifies regulatory relief measures that would not substantially reduce competition or be detrimental to commerce, I believe we may and, that we should, provide this relief.
- As I have stated a number of times in recent years, given what appears to be the lack of practical usefulness of the current tariff system, I believe it is time to revisit the traditional notion of tariff filing and enforcement. Over 90 percent, and in some trades 95 percent, of freight carried to and from the United States is currently under contract.

**Ports of Los Angeles and Long Beach**

- I am aware that many of your members as well as a number of other shipper organizations are concerned about the implementation of the Ports of Los Angeles and Long Beach Clean Truck Program that was devised as part of the port’s Clean Air Action Plan.
- Last September 24th, the Commission initiated an investigation to determine whether certain practices of the Ports of Los Angeles and Long Beach violate the Shipping Act of 1984. Among practices cited in the Commission’s Order of Investigation are the employee-driver mandate, incentive payments and provisions denying access to marine terminal facilities to certain harbor trucking providers. The Commission continues to investigate these potentially anticompetitive practices.
- Last October 29th, the Commission determined that implementation of certain portions of the Clean Truck Program by the Ports of Los Angeles and Long Beach, under an agreement filed at the Commission, are likely, by a reduction in competition, to produce an unreasonable increase in transportation cost or an unreasonable reduction in service.
- On October 31st, the Commission filed a complaint with the U.S. District Court for the District of Columbia to enjoin aspects of the agreement, under section 6(g) and 6(h) of the Shipping Act, including the requirement that mandates exclusive use of employee-drivers.
- On April 15th of this year, U.S. District Court Judge Leon denied the Commission’s motion for a preliminary injunction against the Ports of Los Angles and Long Beach.
- We are disappointed by Judge Leon’s ruling. Nonetheless, the core elements of our case under section 6(g) of the Shipping Act have been preserved for a determination on the merits.
- We are examining our prospects for an appeal and a permanent injunction.
- Last month in a directly related matter, the U.S. Court of Appeals for the Ninth Circuit ruled that many elements of the Ports of Los Angeles and Long Beach programs, specifically the Los Angeles requirement for all drivers to be employees and the restrictions on the street parking of trucks, should be overturned.
- The 9th Circuit panel ordered U.S. District Court, Central District of California, Judge Snyder to grant a preliminary injunction to the American Trucking Association, which filed the request, finding that the truckers had met their burden of showing irreparable harm.
- The 9th Circuit ruling left it up to Judge Snyder as to whether or not to enjoin the Ports’ entire concession programs or just portions of each. The Ports have argued for an issue-by-issue review that seeks to continue in place as much of their concessions programs as possible. A further hearing is scheduled in Los Angeles on April 27th.
- Thank you again, I look forward to working with you to ensure that our country has the most efficient ocean shipping environment possible.

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