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COMMENTS OF FEDERAL MARTIME 

COMMISSIONER REBECCA F. DYE

AMERICAN METAL MARKET SCRAP AND SCRAP 

SUBSTITUTES CONFERENCE

OCTOBER 19, 2010

Thank you for inviting me to speak to you. 

My remarks reflect my own individual views and 

are not offered as the official position of the 

Federal Maritime Commission.

As you may know, the Shipping Act of 1984 

exempts common carriers from the tariff 

publication requirements and the service 

contract filing requirements of the Act when 

they carry “recycled metal scrap.” 

However, scrap metal shippers are protected by

the Shipping Act’s prohibitions contained in 

chapter 411 of title 46, United States Code.
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ECONOMIC DOWNTURN

During the economic downturn, U.S. importers,

exporters, and ocean carriers, like every other 

sector of the global economy, faced the most 

significant economic challenges of at least a 

generation. 

During 2009, U.S. liner exports fell by 14 percent 

and imports fell by 16 percent. Freight rates 

plummeted as carriers laid up over 575 vessels 

worldwide. 

FACT-FINDING NO. 26

Early this year, the Federal Maritime Commission 

received reports that importers and exporters

had difficulty obtaining vessel space, particularly 

in the U.S.-Asia trades. 

We also received reports that U.S. exporters 

were losing sizable overseas sales due to the 
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distribution and availability of shipping 

containers.

Due to our concerns about the causes of these 

vessel capacity and equipment constraints, as 

well as concerns about whether those 

constraints could hinder the U.S. economic 

recovery, the Commission ordered the FactFinding Investigation on Vessel Capacity and 

Equipment Availability in the United States 

Export and Import Liner Trades. 

As you know, I was named the Fact-Finding 

officer.

The Commission authorized a full and fair “nonadjudicatory” investigation to explore ways to 

address the current vessel capacity situation, in 

light of our limited statutory authority in this 

area.

One of my goals in this investigation is to 

prevent any American exporter from losing an 
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international sale because he was unable to 

secure ocean vessel space or equipment to ship 

his goods.

Investigation Background

The first phase of my investigation involved an 

intensive series of confidential interviews with 

American exporters and importers, including 

some of the country’s largest companies. We 

also interviewed executives of 14 ocean carriers 

operating in the U.S. transpacific trade. 

In addition, we interviewed shippers’

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. We consulted with the American 

Association of Railroads and the Intermodal 
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Association of America. Finally, we had an 

extremely valuable discussion with the Surface 

Transportation Board.

I especially appreciate the willingness of the 

Burlington Northern Santa Fe Railway to 

participate in the investigation. 

Investigation Findings

Both shippers and carriers identified the 

fundamental problem as a lack of additional 

capacity to handle the increase in cargo as 

international trade began to recover from the 

industry crisis of 2008 and 2009. 

Shippers expressed the opinion that the ocean 

carriers continued to withhold vessel capacity 

from the market in a collective effort to raise 

prices by leveraging access to scarce capacity 

and equipment.

They believed that carrier practices involving 

rolled cargo, cancelled bookings, and successive 
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price increases were in conflict with protections 

in their existing service contracts. 

Shippers also reported that their service 

contracts did not protect them from numerous 

rate and surcharge increases. Their service 

contracts also did not provide the volume 

forecasting specificity necessary to assure them

of vessel space and equipment. 

Carriers responded that they were reluctant to 

bring vessel capacity back into the U.S. trades 

quickly, given the precariousness of their 

financial positions and the lack of certainty that 

recent, unanticipated increases in import and 

export demand would be sustainable.

They explained their capacity decisions as sound 

business decisions made by individual lines, and 

said they believed that problems with rolled 

cargo and cancelled bookings were exacerbated 

by multiple bookings by shippers
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Westbound Pacific Trade

In the westbound Pacific trade, shippers and 

carriers agreed that U.S. exporters face 

additional problems obtaining vessel space and 

equipment. Although these problems were 

exacerbated by the economic turmoil, they are 

chronic and serious. 

In the transpacific, average freight rates are 

higher eastbound than westbound. For this

reason, ocean carriers deploy vessel capacity 

based on demand for U.S. imports. When 

available capacity for U.S. 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. exports, such as scrap 

metal and grain, can weigh, on average, twice as 

much as imports. This weight disparity limits the 

number of filled export containers that may be 
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carried on an outbound vessel.

During the interviews, shippers and carriers 

agreed that ocean container shortages exist 

throughout the country for a number of reasons, 

including the fact that many containers carrying 

imports arrive at distribution centers far 

removed from many export locations. 

A shortage of containers worldwide was also 

exacerbated due to the virtual halt in container 

manufacturing from late 2008 though 2009. 

The practice of transloading imports into 

domestic containers near ports of entry may 

increase the likelihood that empty ocean 

containers will be shipped back to Asia to be 

used for higher paying Asian exports.

FMC ACTION

At the FMC meeting held last June, the 

Commission adopted the recommendations of 
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my interim report, and took action in several 

areas to provide positive changes in U.S. ocean 

transportation.

Increased Commission Oversight

The Commission voted to increase oversight of 

the Transpacific Stabilization Agreement (TSA) 

and the Westbound Transpacific Stabilization 

Agreement (WTSA) by requiring verbatim 

transcripts of certain Agreement meetings. 

The Commission further directed our staff to 

prepare recommendations for prompt 

Commission action on ways to increase oversight 

of Global Vessel Alliances. 

Rapid Response Teams

The Commission has established “Rapid 

Response Teams” within the Commission’s 

Office of Consumer Affairs and Dispute 

Resolution Services to provide solutions for 

disputes among shippers, ocean transportation 
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intermediaries, and carriers.

If you are involved in a dispute with an ocean 

carrier, intermediary, or shipper, go to our 

website at www.fmc.gov and click on Rapid 

Response Teams on the right hand column. 

Identify your problem as urgent, and our staff

will handle these complaints as quickly as 

possible. We want to provide practical, “real 

time” solutions to make your problems “go 

away!”

The staff has formal mediation training to 

address your problems with a more formal 

approach, if necessary. 

All public contact with our Office of Consumer 

Affairs and Dispute Resolution Services is 

handled on a confidential basis, and we only 

contact the ocean carrier with the shipper’s 

permission. The best and fastest outcomes 

usually result from a shipper with the most 
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specific and detailed information about the 

problem.

Even if you decide that you do not want the 

Commission to take action on your problem, 

please give us a call.

Although we cannot give legal opinions about 

service contractual obligations, we are available 

to discuss other options with you.

For the first time, ocean carriers have each 

named representatives to work directly with our 

Rapid Response Teams to quickly address 

capacity and other urgent problems that arise 

between shippers and carriers. We currently 

have 16 carriers in the program. 

The carrier representatives have guaranteed that

they will respond to a specific complaint brought 

to their attention by the Commission within 24 

hours. 
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Of course, this process is available for carriers 

and intermediaries who have disputes with their 

customers.

I am very excited about the possibilities for this 

new program. We believe this approach will 

promote business relationships and avoid costly

legal processes. 

Best Practices

We have also held “best practices” discussions

between shippers and carriers to consider ways 

to resolve the most pressing problems with 

current carrier practices.

Six exporter and six carrier representatives 

travelled to Washington last month to engage in 

discussions on various carrier customer service 

topics. These one-on-one discussions were 

productive, and I believe the direct carriercustomer discussion format will be extremely 
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useful for future discussions.

Export Capacity Working Group

The Commission has also held initial discussions 

of an Export Forecasting Working Group 

composed of shippers and ocean carriers who 

have met with the Commission to discuss the 

availability of future vessel capacity for U.S. 

exports.

 

The Commission intends to organize future 

meetings of this type to assure that accurate 

export capacity forecasting is available to ocean 

carriers.

Contract Enhancements

Based upon our discussions with shippers and 

carriers about the shortcomings of certain ocean 

service contracts, our Commission staff has 

developed suggestions for service contracts that 

will improve the mutuality of understanding that 

is necessary for successful business 
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arrangements.

We will publish these suggestions on our website 

later this year.

Export Equipment Availability

The Commission is also organizing an intermodal 

working group to address the chronic 

unavailability of export containers for certain 

American exporters.

VESSEL CAPACITY AND TRADE FORECASTS

Transpacific vessel capacity deployed in 

September, 2010, is 27 percent higher than in 

January, 2010, and 15 percent higher when 

compared to September of 2009. This has

mitigated some of the most severe problems 

encountered by shippers earlier this year.

Import volumes have remained relatively strong 

through early October. Following the Chinese 
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National Day holidays in early October, the 

picture of import trade volume is unclear. 

Although there are reports of declining spot 

rates in certain China to West Coast trades,

future import demand is difficult to predict. 

Industry experts predict that approximately 1.5 

million containers will be manufactured during 

2010. While this is a substantial increase over 

2009, it is still only about half as many which 

were produced in 2008. 

ANTITRUST IMMUNITY

I know that many of you are also interested in

the European Commission’s decision to repeal 

the exemption from the ban on restrictive 

business practices for liner conferences and 

how that affects the U.S. liner trades.

Currently, the Commission is collecting data 

and stakeholder information for our study on
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the impact of the E.U.’s October, 2008, repeal 

of its liner conference block exemption.

Our study will cover five complete calendar 

years, from January 1, 2006, to December 31, 

2010. 

The global economic downturn creates 

substantial challenges for our effort to isolate 

the effects of the E.U.’s elimination of the 

conference exemption from broader economic 

trends. Consequently, we are looking at ways 

to develop a comparative analysis addressing 

the issue.

In order to learn about stakeholder’s 

experiences before and following the E.U. 

block exemption repeal, we are having 

discussions with shippers, shipper councils, 

ocean transportation intermediary 
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organizations, representatives of port 

authorities, and ocean carriers.

Conclusion

My authority under Fact Finding 26 ends at the 

end of next month. As we move forward, I am 

keeping two goals in mind:

1) The United States must have a reliable 

international supply chain for U.S. importers and 

exporters, and 

2) No American exporter should lose an 

international sale due to the unavailability of 

ocean transportation.

I am honored to have been re-nominated by 

President Obama for another term at the 

Commission.
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I also appreciate the support of Senate Minority 

Leader Mitch McConnell.

If confirmed, I intend to pursue these goals with 

your continued assistance and support.

Thank you very much.