FEDERAL MARITIME COMMISSION

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 INTERNATIONAL SUPPLY CHAIN EFFICIENCY:

 CHALLENGES FACING SOUTH ATLANTIC PORTS

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 THURSDAY, OCTOBER 30, 2014

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 The meeting of the Federal Maritime

 Commission convened in North Charleston, South

 Carolina, pursuant to notice at 9:50 a.m., Michael

 A. Khouri, Commissioner, presiding.

 PARTICIPANTS:

 Welcome:

 MICHAEL A. KHOURI, Commissioner

 Federal Maritime Commission

 Motor Carrier/Trucking:

 KEN KELLAWAY

 JOSHUA OWEN

 PHIL BYRD

 DAVE MANNING

 CURTIS WHALEN

 Ocean Carriers:

 JOHN TRONTI
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 1 PARTICIPANTS (CONT'D):

 2 EDWARD MCCARTHY

 3 JOHN FOERTSCH

 4 Railroads:

 5 TRISH HAVER

 6 PHIL NOURY

 7 CARL WARREN

 8 Chassis:

 9 BERNARD VAUGHAN

 10 VAL NOEL

 11 PHILIP WOJCIK

 12 BERNARD VAUGHAN

 13 Labor:

 14 KENNETH RILEY

 15 Shippers & Logistics:

 16 DON PISANO

 17 ANDREW MORELLI

 18 MARLON JONES

 19

 20 * * * * *

 21

 22
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 1 P R O C E E D I N G S

 2 COMMISSIONER KHOURI: We have a pretty

 3 tight agenda, and if we can work in a break

 4 schedule or two, especially for old fellows like

 5 me, it's helpful. I think Curtis and the group

 6 were deciding on what order they were going to

 7 speak, and a couple like the podium, which I do

 8 too, so I'm just going to let each one get up, and

 9 they can introduce themselves and speak in

 10 whatever order they are comfortable.

 11 So motor carriers, we heard from the

 12 port community, you're critical on the entire

 13 supply chain, and look forward to hearing your

 14 comments.

 15 MR. KELLAWAY: Well, thank you,

 16 Commissioner, and thank you to everybody that's

 17 here today from the international community.

 18 My name is Ken Kellaway. I know a lot

 19 of you here today, and I'm going to try and make

 20 sure my comments are nice for the Southeast ports,

 21 because I really do enjoy Hall's, it's a great

 22 restaurant, and I don't want you to throw me out
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 1 of the Southeast area.

 2 So a lot of my comments are focused on

 3 some other ports around the country, where a lot

 4 of you know the challenges are today, but we have

 5 somewhat of a formal written agenda here to go

 6 through, so I'll work through it and open up for

 7 comments if we need to.

 8 First of all, I appreciate everybody's

 9 time here today. I've been in the industry for

 10 about 30 years now. Our company, RoadOne

 11 Intermodal Logistics, runs about a thousand trucks

 12 around the country. We're in 40 locations,

 13 servicing both ports and rail ramps around the

 14 country.

 15 And clearly, I think it's an important

 16 date today. We're here because we're starting to

 17 see a turning point in the industry, that the

 18 weakest link in the international supply chain,

 19 the drayage industry, needs to finally be heard.

 20 I believe one of the key reasons is that

 21 all of our predictions are starting to become

 22 reality. For many years in the drayage industry,
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 1 we have warned the international community that

 2 the key industry trends would ultimately result in

 3 significant decline in driver capacity that would

 4 eventually impede the flow of goods to and from

 5 our ports and terminals.

 6 When we look at our import supply chain

 7 today, we see and we realize that our estimated $7

 8 trillion sector is directly impacted by the

 9 highly-fragmented financially fragile $10 billion

 10 intermodal drayage industry, and as a result, I

 11 think we're justified in being here today.

 12 During my career, I've witnessed a lot

 13 of changes throughout the industry and have worked

 14 very closely with groups such as ATA and others to

 15 try and find sustainable solutions for the

 16 business going forward. However, over the past

 17 few years, we've seen an escalation of events that

 18 have developed on multiple fronts that have

 19 created the perfect storm in wiping out both

 20 drivers and drayage capacity, from government

 21 regulations and hours of service, CSA score

 22 programs, to growing steamship vessels sharing
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 1 alliances and larger vessel launches, down to the

 2 conversion of chassis ownership and management

 3 from the steamship lines to the pool operators and

 4 drayage providers.

 5 We have argued extensively about these

 6 changes and the challenges and have lived with the

 7 problems they have created within our industry and

 8 have witnessed firsthand the meltdowns these

 9 changes have had in key ports like New York/New

 10 Jersey last year and most recently now in Los

 11 Angeles.

 12 We have seen the effects that many of

 13 the similar issues had in Vancouver earlier in the

 14 year and the aggressive action that finally

 15 resulted in per port drayage drivers and the

 16 economic impact a port drivers strike can have.

 17 This key event demonstrates that the weakest link

 18 in the supply chain, if taken advantage of and if

 19 not treated properly, can suddenly become the most

 20 important link in the supply chain.

 21 We must challenge ourselves to work

 22 together as a community within the industry to
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 1 find a path forward that allows for all

 2 stakeholders to share in the risk and to take

 3 responsibility for the issues our operations

 4 create. The drayage communities and the drivers

 5 within this community cannot continue to bear the

 6 economic burden that is being pushed downstream

 7 from the stronger members within our industry.

 8 With less than 90,000 drivers in the drayage

 9 sector today working for over 5,000 companies, and

 10 no one player really being over $250 million in

 11 revenue, this industry is fragile and extremely

 12 volatile.

 13 The drayage community is going to

 14 continue to be negatively impacted by radically

 15 increased per diem costs, demurrage costs, chassis

 16 Maintenance and Repair costs, pier delay costs,

 17 equipment repositioning costs, along with normal

 18 increased operating costs, and this industry will

 19 be unsustainable to remain in for many years due

 20 to the lack of return on vested capital and the

 21 lack of interest from strong, smart investors to

 22 continue to invest in the business going forward.
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 1 Our fellow community members must step

 2 up and take responsibility for their own actions,

 3 as the drayage community has done. The same quid

 4 pro quo has not really been applied in this

 5 industry.

 6 I know that as a drayage provider and

 7 transportation company, if I'm late trying to pick

 8 up equipment at a terminal, I'm going to get

 9 assessed demurrage; however, if there's late turn

 10 times and slow turn times at the gates, and I

 11 don't mean when we get to the front of the gate, I

 12 mean when we get in line, that we're not being

 13 compensated and the drivers are not being

 14 effectively compensated for that time in queue,

 15 and that needs to change.

 16 We know, on the chassis side of things,

 17 that we pick up equipment that's damaged, and

 18 we're being penalized when we return that

 19 equipment back to repair, that we're not being

 20 paid when there are no chassis available or when

 21 that equipment is damaged out on the street at no

 22 issue of ours, that we didn't create. So those
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 1 things have to change. These are just a few

 2 examples, of course, but they have to change.

 3 And at the end of the day, the business

 4 is really all about driver economics. The simple

 5 fact is we've built a significant part of the

 6 supply chain around an independent driver model,

 7 and we need to support these entrepreneurs in

 8 their effort to make a fair wage.

 9 With the continued reductions in

 10 productivity at the port -- in certain ports, not

 11 the Southeast in some instances, I'll highlight

 12 that -- increased pressure to perform and the

 13 quality of their equipment demanding them to be

 14 more sustainable in their equipment, along with

 15 stagnant rate levels, it is becoming virtually

 16 impossible for drivers to succeed.

 17 The result is being witnessed as we see

 18 driver capacity continue to decline as drivers

 19 move to new industries, and this overall blue

 20 collar work force continues to erode. We need to

 21 restore this model and make it more attractive to

 22 drivers, one where they can be productive, be
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 1 respected, be profitable, and live the American

 2 dream.

 3 We at RoadOne have worked hard to help

 4 our drivers accomplish their business goals by

 5 helping to obtain new equipment through equipment

 6 lease programs we put in place for them, provide

 7 them with good quality freight that pays fair

 8 rates for the requested service, and save -- and

 9 focus on conserving terminals and regions that

 10 have the necessary infrastructure and systems to

 11 properly allow for good, efficient turn times.

 12 Like all our partners in the community,

 13 we want to succeed, and we want to see our drivers

 14 succeed. It is critical that we all work together

 15 to understand the underlying impact systemic

 16 changes have on all stakeholders within this

 17 import community.

 18 To better understand what driver

 19 turnover issues are on the marketplace, we

 20 continue to poll our drivers consistently upon

 21 exit interviews, and over the past eight months,

 22 since the bad winter of last year, we've seen our
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 1 driver turnover increase over 25 percent, and now

 2 it's up over 100 percent for the first time in our

 3 company's history.

 4 And the top two reasons we see that

 5 turnover escalating, according to our driver poll,

 6 is our rates and respect, and the respect is the

 7 respect that they get at the ports.

 8 And I am happy to report we polled all

 9 of our drivers, and we polled all of them on the

 10 Southeast terminals before I came today, and the

 11 scores in the Southeast terminals were the highest

 12 in how they were treated than anywhere in the

 13 United States, so I was very pleased to report

 14 that, that the drivers feel they're being treated

 15 better at the gates here in the Southeast than any

 16 other ports in the United States, so that was very

 17 nice to see.

 18 But we have to continue to work on the

 19 rate side of things, and we have to continue to

 20 work on the respect side of things, mostly in my

 21 own backyard up in the Northeast. We have some

 22 significant challenges up there.
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 1 But on the rate side of things, we have

 2 to continue to work on that. We've all witnessed

 3 Consumer Price Index (CPI) changes over the last

 4 five years of over 12 percent. We've seen

 5 dramatic increases in operating costs in the

 6 drayage community as we're working with neutral

 7 chassis pools, doing more and more equipment

 8 repositioning on terminals, things such as that,

 9 but yet rates have barely moved 3 percent over the

 10 past year or two, so we need support in that.

 11 We also need to increase community

 12 awareness of the importance in drivers. I was

 13 very pleased to hear all the port operators talk

 14 about drivers in the community today, because they

 15 are a key catalyst to success today, and we need

 16 to do that both internally within our

 17 organizations and externally.

 18 And we have our own challenges

 19 internally at RoadOne of making sure our people

 20 embrace our drivers better and understand that

 21 they're the catalysts to success even internally,

 22 so we need to push for that.
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 1 So in our opinion, there really are five

 2 key things that need to take place both in the

 3 short term and the long term in order to create

 4 stability and sustainability in the industry.

 5 We need to improve gate hours. In our

 6 polls, all the positive things took place in the

 7 South. One thing they did request was extended

 8 gate hours, especially due oftentimes to the

 9 congestion that takes place during the normal

 10 workday, not necessarily on the terminal, but

 11 dealing with traffic congestions out on the

 12 street. It's a challenge. And we've seen -- the

 13 one successful thing we've seen on the West Coast

 14 has been the night gates. Of course, we've

 15 supported that, to let the drivers work in

 16 noncongested times.

 17 Gray chassis pools. I know Dave's going

 18 to talk about chassis, but we can no longer be

 19 burdened with repositioning chassis around

 20 terminals. We can't have chassis in silos. It

 21 creates tremendous complexity for us, especially

 22 where we're working for a large importer that
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 1 might have seven different steamship lines, using

 2 different types of chassis. We have to get that

 3 streamlined, and it has to be more of a gray

 4 pool-type concept, in our opinion.

 5 We need rate relief, not only because

 6 the cost of service has come up, but the

 7 requirements of service have gone up dramatically

 8 in the drayage industry, the off-dock chassis

 9 pools now, with multiple chassis pools taking

 10 place, with the Maintenance and Repaircosts now

 11 being moved from the steamship lines more to our

 12 side. We're paying a significant amount of

 13 Maintenance and Repaircosts when the chassis are

 14 on the street. These things need to be

 15 compensated for in rates, and we dramatically need

 16 rate relief on that, and we need to make sure we

 17 get these drivers a fair rate of pay in order to

 18 attract them back into the industry as we did

 19 before.

 20 Extended equipment free time. Again, we

 21 can't be burdened with penalties on equipment both

 22 on demurrage on terminal as well as per diem off
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 1 terminal if we can't get in and out and don't have

 2 the fluidity to get in and out and especially as

 3 larger vessels come into play. Of course, it's

 4 virtually impossible to us to dramatically change

 5 the number of drivers in any one day. It's a

 6 finite number of drivers. They can only move so

 7 many loads, regardless of how many loads of

 8 discharge in a port in any one day. We need

 9 extended free time help.

 10 And most importantly, again, we need the

 11 drivers to be treated like customers at the

 12 terminal. Jim Newsome highlighted it. It was

 13 great to hear him highlight that. That's the

 14 first time I've ever heard it said in this

 15 industry, and we appreciate that, Jim. These

 16 drivers want more respect. Candidly, they deserve

 17 more respect in some areas. And again, we have to

 18 do it internally at RoadOne at our own companies,

 19 but we need you folks to help us on the terminal

 20 side and to get them through the process easier.

 21 When we bring in new drivers, our

 22 turnover is over 200 percent within the first 90
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 1 days. Now, that's mostly new drivers coming into

 2 the intermodal sector that have never experienced

 3 the process they have to go through when they get

 4 to the terminal, and within 30 days, they decide

 5 they don't want to do it, and a lot of it's

 6 because of the difficulties of getting through the

 7 amount of terminals and the process and how

 8 they're treated on the dock. So anything we can

 9 do to improve that would be greatly appreciated.

 10 So that's it. I thank you all for your

 11 time. These are my comments, and appreciate the

 12 opportunity to speak today. Thank you.

 13 COMMISSIONER KHOURI: Thank you, Ken.

 14 MR. OWEN: Thank you, Commissioner, for

 15 the opportunity to make comments today.

 16 Originally, I was going to just -- I had

 17 a couple points, a couple anecdotes I was going to

 18 freely speak to, but I realized on my flight in

 19 that I didn't want to miss anything, so I actually

 20 wrote my comments down.

 21 My name is Joshua Owen. I'm the

 22 president of Ability Tri-Modal. We're a third
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 1 generation privately-held trucking and warehousing

 2 company based in Southern California since 1947.

 3 Beginning November 1st, 2014, we'll be expanding

 4 our company and building a warehouse here in North

 5 Charleston, just about 15 miles up the road here.

 6 I serve on several of the industry and

 7 academic boards as related to logistics. These

 8 include the American Trucking Association's

 9 Intermodal Motor Carriers Conference, Cal State

 10 Long Beach's Operations and Supply Chain

 11 Management Undergraduate and Master's Advisory

 12 Board, The Center for International Trade and

 13 Transportation, along with Port of Long Beach

 14 Harbor Commissioner Rich Dines, and I teach a

 15 class in trucking and intermodal at Cal State Long

 16 Beach in the global logistics specialist

 17 credential program.

 18 My comments today will primarily come

 19 from the operational environment of the San Pedro

 20 Bay port complex, which includes the landward

 21 ports, Los Angeles and Long Beach, and the 13

 22 tenant marine terminals.
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 1 There's a saying in our industry that

 2 the cancer tends to start in California and

 3 spreads to the east. My hope is that my comments

 4 today will prevent this from happening and also to

 5 begin chemotherapy on the existing sickness.

 6 I believe in logistics, there are three

 7 central factors: Accessibility, predictability,

 8 and uniformity. In Southern California, we have a

 9 couple characteristics that differentiate us from

 10 other port operations. One is that we have a

 11 landlord/tenant relationship that makes it

 12 difficult and limits the ability of the Port of

 13 Long Beach and the Port of Los Angeles to control

 14 productivity and operations at the 13 marine

 15 terminals.

 16 And the most obvious differentiator is

 17 PierPASS. PierPASS was created in 2005 as a

 18 response to then assembly member Alan Lowenthal's

 19 traffic and congestion mitigation bill, 80-26-50,

 20 which was designed to expedite truck throughput in

 21 the port complex. PierPASS was a marine terminal

 22 operator's response to traffic mitigation by
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 1 opening up nighttime operations at a port

 2 historically operated during the daytime.

 3 The initial response from the trucking

 4 community was negative, due to the fact that

 5 previous attempts to open nighttime gates was a

 6 disaster, due to poor staffing. Not having any

 7 other recourse, the trucking community was thrust

 8 into PierPASS.

 9 I believe the original daytime penalty,

 10 or traffic mitigation fee which it's called, was

 11 around $80 per 40-foot container FEU. The

 12 original draft of the PierPASS, with the

 13 waterfront coalition's input, called for a sunset

 14 of the fee after three years or when nighttime

 15 gates reached 30 to 35 percent utilization.

 16 Supposedly, that sunset clause was lost in the

 17 final Marine Terminal Operator (MTO) adoption of

 18 PierPASS under West Coast Marine Terminal Operator

 19 Agreement (WCMTOA). Not only has this sunset

 20 clause been scoffed at by PierPASS, the fee today

 21 is about $133 per Forty-Foot equivalent unit

 22 (FEU).
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 1 This fee is charged directly to the

 2 beneficial cargo owner (BCO), who then dictates to

 3 the trucker that we only pull their containers

 4 after 6:00 PM when the traffic mitigation fee

 5 (TMF) penalty goes away. We are now nine years in

 6 the PierPASS program, which, by the way, hit over

 7 35 percent night gate utilization within weeks in

 8 2005. Today it operates more along the lines of

 9 60 percent night/40 percent day.

 10 The real problem with how the nighttime

 11 gates are run is that they are unpredictable and

 12 not uniform. Different terminals choose to staff

 13 night gates during certain times of the week.

 14 Some may close night gates on a Thursday or Friday

 15 and then not open back up until Monday. That's up

 16 to five days of inaccessibility for BCO containers

 17 that have limited dock time and at some point will

 18 begin to accrue demurrage, regardless of

 19 accessibility to the containers.

 20 Staffing hours are a gamble as well.

 21 PierPASS night gates are supposed to run from 6:00

 22 PM to 3:00 AM. This is just not the case. We
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 1 experience times when a terminal will cease

 2 operations at midnight or at 1:30 AM to allow the

 3 terminals to process and clear so labor can go

 4 home at 3:00 AM. We have had drivers hooked up to

 5 loaded containers and sitting in the exit queue be

 6 told to return the container to the terminal

 7 because exit gates were closing.

 8 Of all 13 terminals at San Pedro, rarely

 9 are any of them open and operating at the same

 10 time. That means I have yards filling up with

 11 empty containers and drivers bobtailing to

 12 terminals because the terminal isn't open to

 13 return empties while I'm trying to coordinate

 14 pickups from another terminal, or, like we've been

 15 experiencing lately, terminals send out

 16 announcements telling truckers to not return the

 17 empties at all.

 18 Last month we were notified some

 19 terminals were going to operate Saturday gates.

 20 We had our independent contractors come in to

 21 operate on that day. Gates opened at 1:00 PM and

 22 closed at 3:00 PM that afternoon. That equated to
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 1 one container per driver. That was a driver that

 2 committed to work over his family in the middle of

 3 a Saturday. He came to work at 11:00 AM to begin

 4 pretrip and dispatch procedures, and then he's

 5 told by the marine terminal that they decided to

 6 close due to congestion.

 7 The port drayage business is

 8 predominantly independent contractor based. These

 9 drivers are paid on the number of loaded

 10 containers they bring in and the empty containers

 11 they return to the marine terminal. We calculated

 12 that on average, a driver needs four loaded

 13 containers, or loads, per shift. The first covers

 14 the tractor expenses -- insurance, maintenance, et

 15 cetera -- the third container sees profit, the

 16 fourth container sees pure profit.

 17 My warehouses in southern California are

 18 situated seven to ten miles outside of the Port of

 19 Los Angeles (LA) and the Port of Long Beach. My

 20 drivers are averaging anywhere between 1.4 and 2.8

 21 containers per shift. Cherry-picking the most

 22 productive terminals, we can get the driver to
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 1 pull four to five containers per shift, but we

 2 average the productive terminals -- but we average

 3 the poor-performing terminals and the

 4 better-performing terminals across our driver

 5 pool, to be fair to all of them. You're going to

 6 get a plum, and you're going to get a dog, and

 7 that's just the way it goes.

 8 Imagine driver morale in a 1.4- to

 9 2.8-container-per-shift environment. These men

 10 and women aren't working any less. If anything,

 11 they're working as hard as they can within the

 12 ever-shrinking hours they are federally allowed to

 13 operate and getting shortchanged by unproductive

 14 marine terminals.

 15 We have had about seven drivers walk

 16 away from their leases on their equipment. I

 17 don't lease the trucks to them; they have a lease

 18 agreement with a third party that secured grants

 19 on their own to provide owner/operators with

 20 affordable leases. But when you're basically

 21 working to pay your lease, what's the point?

 22 One of the most productive gates in port
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 1 history, in my opinion, was the hoop gate. This

 2 was a gate open from 3:00 AM to about 7:00 AM. We

 3 turned and burned those hoop gates, and our

 4 drivers were the happiest and most productive I've

 5 ever seen them.

 6 There is a belief that if PierPASS went

 7 away, truckers would shift back to day only. No

 8 way. As long as you have an open, accessible,

 9 productive gate, I don't care what time it is,

 10 truckers will be all over it.

 11 When the Port of Los Angeles and Port of

 12 Long Beach Clean Truck Program was enacted in

 13 2008, many trucking companies saw their fleets cut

 14 in half. The silver lining to the simultaneous

 15 recession was that the capacity adjusted to the

 16 declining volumes. And I truly believe we have

 17 the right amount of trucks in the ports today, but

 18 that's only if productivity is good, which it is

 19 not.

 20 In June of this year, I received an

 21 email from one of my larger BCO customers based in

 22 Atlanta, Georgia. The email notified my company
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 1 that they would be diverting 100 percent of their

 2 container volume away from the West Coast until

 3 there is a contract signed by the Pacific Maritime

 4 Association (PMA) and the International Longshore

 5 and Warehouse Union (ILWU).

 6 A week following this email, I happened

 7 to be having lunch with some friends that work at

 8 the Port of Long Beach. While we were there, Port

 9 of Long Beach Harbor Commissioner Rich Dines

 10 walked in, and we chitchatted for a bit. Then I

 11 asked Rich: So when are your brothers going to

 12 sign that contract so that my customer can bring

 13 their freight back to its ports?

 14 Rich is a friend of mine, and we've

 15 known each other for years, serving on the CITT

 16 advisory board at Cal State Long Beach. Rich,

 17 being an ILWU employee, and me a trucker, we have

 18 been able to have a working friendship where we

 19 can chide each other from time to time. But this

 20 time his response was disappointing. He

 21 commented: Why would they do that? I can't

 22 believe -- why would they do that? As a harbor
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 1 commissioner, I would have expected something more

 2 along the lines of: How do we get that freight

 3 back to the West Coast?

 4 In summary, it's actually unfortunate

 5 the ILWU isn't on strike right now. For the past

 6 several months, it is very apparent that labor is

 7 slowing down and staffing more casual labor, but

 8 even though nearly every truck has Global

 9 Positioning System (GPS) tracking and turn time

 10 management programs in place, I'm still just

 11 turning two containers per shift, and my terminal

 12 is seven to ten miles away, but until someone is

 13 standing with a picket sign blocking gates and

 14 driveways, slowdowns are opinions and hearsay.

 15 Just really quickly, I was at lunch, and

 16 I received a phone call from a gentleman from

 17 Family Dollar. His first response was: I think I

 18 know the answer to this question, but I'm going to

 19 ask it anyway. Do you have any dray capacity?

 20 And I said: Unfortunately, I don't.

 21 As an example, the previous night, I had

 22 140 containers that were customer containers on
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 1 the last free day, and we figured with the

 2 productivity in the port, we could probably get 81

 3 of those 140. We only got 71. The gentleman from

 4 the Family Dollar said: I'd take that any day.

 5 Try having 300 containers on the port and only

 6 getting 40 last night.

 7 So just in summary, I would stress that

 8 the three points in port operations, as far as a

 9 trucker is concerned, that need to be addressed:

 10 Accessibility, predictability, and uniformity.

 11 Thank you, Commissioner.

 12 COMMISSIONER KHOURI: Thank you.

 13 MR. BYRD:: : Good morning,

 14 Commissioner Khouri. I sincerely appreciate this

 15 opportunity to discuss the very critical issue of

 16 congestion in America's vital South Atlantic

 17 seaports.

 18 My name is Phil Byrd, and I'm the

 19 president and chief executive officer of Bulldog

 20 Highway Express. Bulldog is a 55-year-old

 21 asset-based trucking firm domiciled here in

 22 Charleston, South Carolina; therefore, a lot of my
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 1 comments this morning will be specific to

 2 operations of the South Carolina Port Authority.

 3 Our company has four operating units:

 4 Flat bed long haul, specialized heavy haul,

 5 contract dedicated, and intermodal. Our

 6 intermodal division primarily serves the ports of

 7 Charleston, South Carolina, and Savannah, Georgia.

 8 In Charleston, we typically make or move 500

 9 container drayage moves per port day, Monday

 10 through Friday. We perform this service for

 11 numerous customers with the use of approximately

 12 80 assigned asset company trucks serving the Port

 13 of Charleston on a daily basis.

 14 Each of these trucks utilize

 15 state-of-the-art technology to garner operational

 16 efficiencies, such as computerized dispatch

 17 vehicle tracking, enhanced communications

 18 capability, and two-way radio communications. Our

 19 trucks are staffed by experienced, well-trained,

 20 professional asset drivers that have, on average,

 21 18 years of container drayage experience. I am

 22 also the immediate past chairman of the American
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 1 Trucking Association, ATA, and the current

 2 chairman of ATA's executive committee. ATA is the

 3 trucking industry's leading voice of

 4 representation for safety, advocacy, essentiality,

 5 sustainability, and research.

 6 Having been intimately involved in

 7 leading ATA over the last five years, I am keenly

 8 aware of our industry's most alarming issue

 9 currently and well into our future: The looming

 10 driver shortage.

 11 ATA has studied this issue extensively

 12 and predicts that by the year 2022, there will be

 13 a shortage of 239,000 commercial motor vehicle

 14 drivers. Further studies have indicated that over

 15 the next ten years, this industry will need to

 16 hire 96,000 new drivers per year, just shy of 1

 17 million drivers over this time period, just to

 18 provide our economy with the same capacity it does

 19 today.

 20 The American trucking industry across

 21 all sectors currently moves 68.5 percent of all

 22 the total tonnage manufactured, imported,
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 1 exported, and distributed in the United States.

 2 This percentage is expected to grow over the next

 3 ten years to 72.5 percent. Having knowledge and

 4 being in possession of such alarming data makes

 5 these discussions extremely timely.

 6 Productivity is, in large part, driven

 7 by efficiencies up and down the logistics supply

 8 chain; therefore, it is critical that all types of

 9 congestion and causes of lost productivity be

 10 thoroughly studied and remedied.

 11 My comments to this body are not to be

 12 taken as negative criticism on the part of South

 13 Carolina State Port Authority or any other port,

 14 as I have worked closely for decades with all

 15 aspects of the South Carolina State Port Authority

 16 and know that they are eager to increase volumes

 17 across their docks and through their gates, which

 18 means continually improving truck productivity, so

 19 the following comments and observations hopefully

 20 will be helpful in this process.

 21 First, truck gate wait times. It is a

 22 common practice for ports to start the measurement
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 1 of in-and-out time, turn time, when a driver

 2 reaches the interchange booth, meaning time

 3 waiting in line to get to the interchange booth is

 4 not measured. This practice, in my opinion, skews

 5 the actual process time considerably, creates

 6 considerable driver dissatisfaction, and motor

 7 carrier economic loss.

 8 At Bulldog, we measure our operational

 9 costs on a per-hour basis based against our known

 10 operating costs. It is common to see extreme

 11 variations in this measurement from week to week

 12 of up to 20-percent deviation.

 13 At Bulldog, our drivers are paid on an

 14 hourly production and safety matrix scale. This

 15 scale ranges from $20 an hour to $27 an hour, a

 16 $7-per-hour differential, based on productivity

 17 and safety measurements from the prior month.

 18 Their pay can actually fluctuate on a monthly

 19 basis, this hourly compensation.

 20 Because of port-related inefficiencies,

 21 our drivers, as well as our company, are

 22 monetarily impacted. These inefficiencies are not
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 1 just at the port, but extend to warehouses, rail

 2 ramps, container repair facilities, and most

 3 noticeably on our state's overly-congested

 4 highways.

 5 Another huge factor in port terminal

 6 turn time is the road readiness of steamship line

 7 and chassis providers' equipment, as well as its

 8 availability of this equipment. Motor carriers

 9 routinely find themselves draying equipment to

 10 on-dock repair shops to have another party's

 11 equipment made safe and Department of

 12 Transportation (DOT) road ready. We find that

 13 this is a major loss of productivity and another

 14 economic burden to the motor carrier. Of course,

 15 the motor carrier is not compensated for draying

 16 bad-order equipment to on-dock repair. Neither is

 17 the motor carrier compensated for delay time at

 18 the port.

 19 Here in Charleston, we have limited

 20 access to our gates during the lunch hour, and

 21 this creates a backup of trucks and a loss of

 22 approximately one-half hour of truck production.
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 1 Additionally, another problem unique

 2 that we see that could be easily remedied is that

 3 drivers will line up in specific lanes to work

 4 through the gate process, and, while in line and

 5 without notice or warning, have that line shut

 6 down, causing the driver to fall out of that line

 7 and be required to take the last position in

 8 another line. Once again, this causes driver

 9 frustration. A simple remedy to this might be to

 10 post a sign stating when you're going to close a

 11 certain lane down.

 12 We also observe that Monday truck

 13 productivity is reduced because of the weekend

 14 vessel discharges. Container ships work

 15 throughout the weekend, but typically, there is

 16 little to no truck outbound activity.

 17 Chassis ownership and deployment. We

 18 find the gray chassis pool model to be beneficial

 19 in improving productivity and efficiency. For a

 20 motor carrier to find a roadworthy chassis at the

 21 beginning of a workday and use it for the duration

 22 of the day, serving numerous steamship lines, is
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 1 extremely productive. However, this process has

 2 created a cumbersome chassis rental reconciliation

 3 audit for the motor carrier.

 4 At Bulldog, the chassis reconciliation

 5 process volume has required us to hire numerous

 6 additional personnel to do nothing but audit

 7 chassis builds. We, at our company, are

 8 aggressively adding to our already large

 9 Bulldog-owned chassis asset pool.

 10 Congestion factors outside the port

 11 gates. It is important to understand that the

 12 water side of the port operation runs 24 hours a

 13 day, 7 days a week, while the truck gates only

 14 work eight to ten hours a day, typically, Monday

 15 through Friday. This imbalance of operating time

 16 is, in large part, a major reason for production

 17 losses and operational inefficiencies.

 18 Private sector warehouses, distribution

 19 centers, rail ramps, steamship line offices, and

 20 government agencies most normally conform to

 21 schedules that are reflective of the port's truck

 22 gate hours. This disallows trucking firms to
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 1 double staff or stagger their equipment and

 2 personnel to extend the given workday; therefore,

 3 exacerbating congestion during the eight- to

 4 ten-hour workday.

 5 The South Carolina State Port Authority,

 6 in particular, has worked extremely hard to grow

 7 our port volumes, with considerable success, to

 8 the delight of all of our port vendors.

 9 It has been quite obvious to us at

 10 Bulldog that the two rail ramps serving Charleston

 11 have not adequately beefed up their operations to

 12 effectively handle this increased volume. We

 13 experience longer delays at the rail ramps than we

 14 do at any of the Charleston port terminal

 15 facilities. There is simply not enough container

 16 handling equipment in place to move the trucks in

 17 and out with any degree of efficiency. This is,

 18 and I emphasize, this is a major cause of lost

 19 productivity in the entire port process.

 20 Additionally, we see our highway

 21 infrastructure as another major impediment to port

 22 productivity. I applaud the management of the
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 1 South Carolina State Port Authority and our state

 2 legislative body for their work in getting funding

 3 to deepen the Charleston Harbor and to modernize

 4 all phases of the port operations inside the

 5 gates; however, South Carolina roads need to be

 6 addressed and need to be addressed adequately.

 7 Interstate 26, the major artery into and

 8 out of the South Carolina State Port Authority, is

 9 incapable of effectively handling the traffic

 10 volumes of today. This interstate needs to be

 11 expanded from start to finish. Interstate 26

 12 intersects, as you know, with Interstate 526 in

 13 North Charleston and runs to Mount Pleasant, South

 14 Carolina, where the South Carolina State Port

 15 Authority's largest terminal facility is located,

 16 the Wando Welch Terminal. Interstate 526 is a

 17 much newer highway than is I-26, but is,

 18 nonetheless, overcongested and adds to the loss of

 19 port productivity. At the intersection where

 20 these two interstates connect is a major

 21 bottleneck. At certain times of the day, this

 22 congestion can turn a 12-mile trip into an hour
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 1 transit each way.

 2 It is obvious to the American Trucking

 3 Association and to the trucking industry at large

 4 that we are past due, as a nation, in increasing

 5 the Federal Motor Fuel Tax and indexing it to

 6 inflation to offset fuel efficiency gains and the

 7 use of alternatively-fueled vehicles to fund our

 8 federal highway system. It is my opinion that

 9 this commission would do well to encourage

 10 Congress to address America's highway needs by

 11 stabilizing the highway trust fund by increasing

 12 the Federal Motor Fuel Tax.

 13 This funding mechanism allows 98 percent

 14 of the collected funds to flow directly to our

 15 nation's highways, while all the other funding

 16 mechanisms require a major portion of the

 17 collection revenue to go to administering the

 18 collection process, and not to our roads.

 19 I'm thankful for the forum and the

 20 opportunity to participate. Hopefully, through

 21 the process of the efforts of the many dedicated

 22 entities making up America's logistic supply
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 1 chain, we will improve productivity and greater

 2 operating efficiencies that will benefit America.

 3 Thank you all for your time.

 4 MR. MANNING: Good morning, and thank

 5 you, Commissioner Khouri, for the opportunity to

 6 speak today.

 7 My name is Dave Manning, and I wear

 8 multiple hats today. My paying job is president

 9 of TCW and Tennessee Express, an intermodal

 10 company that was established in 1948. We're also

 11 a third generation motor carrier operating

 12 primarily in the Southeast.

 13 I'm also privileged to serve as a vice

 14 chairman of the American Trucking Association and

 15 as the chairman of the North American Chassis Pool

 16 Cooperative. It's a cooperative of motor carriers

 17 that has formed a chassis pool to offer an

 18 alternative for chassis provisioning as this model

 19 is continuing to develop. And so what I would

 20 like to address today are our views, the motor

 21 carrier views, on what that chassis model would

 22 look like that would be most efficient and
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 1 productive for our ports.

 2 So from a motor carrier perspective, the

 3 chassis model adopted at each port must allow for

 4 a maximum opportunity for marketplace competition

 5 both at the pool management level and at the end

 6 user level. We strongly believe that a free

 7 market will provide the proper environment for the

 8 best chassis model to evolve and at the lowest

 9 cost.

 10 Sadly, today, that's not the case in any

 11 of the existing models. A single chassis pool

 12 forced upon the chassis contributors by a port,

 13 even like we have here in the South Atlantic

 14 Chassis Pool, or SACP, while it gets kudos for the

 15 gray and improving efficiency, it falls far short

 16 of some of the benefits that come from free market

 17 competition.

 18 A single port-directed pool like this

 19 actually takes on a form of socialism. It stifles

 20 innovation and free market competition, which are

 21 needed to drive investment in new and modernized

 22 chassis, to improve cost containment, and for more
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 1 efficient operations.

 2 Moreover, the failure of the marine

 3 carriers to completely exit the chassis market and

 4 the restrictions they exercise today that prevent

 5 the trucker from being able to choose their

 6 chassis provider, even when they pay the bill,

 7 leaves the day of the rental charges subject to

 8 little or no competitive rate pressures.

 9 So the North American Chassis pool

 10 Cooperative, LLC (NACPC) was actually formed

 11 because of this noncompetitive market that was

 12 created by the marine carriers, and I want to talk

 13 a little bit more about sort of how this current

 14 unacceptable market primarily operates.

 15 When the marine carriers sell their

 16 chassis to the leasing companies, the marine

 17 carriers still dictate to the motor carriers, when

 18 moving their boxes, that leasing company has to be

 19 used for the chassis, even if the motor carrier's

 20 paying the bill.

 21 Here in the South Atlantic Chassis Pool

 22 (SACP), there are only six of the 20 steamship
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 1 lines serving this region that allow a motor

 2 carrier choice. Because these generally tend to

 3 be the smaller lines, it only represents about 8

 4 percent of the chassis moves that are taking place

 5 in this region. The other 92 percent of the

 6 chassis moves are dictated by the steamship lines,

 7 and that's a problem.

 8 Another reality of this controlled

 9 market, in many cases, the sale of the chassis was

 10 for a price far above the fair market value. The

 11 sale included millions of dollars of termination

 12 costs, typically, 5- to $700 per chassis, for

 13 those leased chassis that had to be terminated.

 14 It included a favorable rate, at many times below

 15 cost for marine carriers when they pay for chassis

 16 use, and in some instances, the sale included free

 17 on-terminal use for the marine carrier.

 18 In return for those generous

 19 concessions, the marine carriers signed agreements

 20 guaranteeing the leasing company 100 percent

 21 exclusive use of their chassis. Because of this

 22 anticompetitive market, these sale terms drove up
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 1 the daily use rate charged to the motor carrier

 2 and ultimately paid for by our customer.

 3 The lack of free market competition

 4 facilitated the adoption of these terms because

 5 the motor carrier had no chance to negotiate price

 6 or interchange terms with their providers. So in

 7 an effort to challenge that closed market

 8 environment and to create an alternative, 12 motor

 9 carriers formed the North American Chassis Pool

 10 Cooperative (NACPC) and applied for and received

 11 pooling authority from the Surface Transportation

 12 Board (STB). NACPC has a four-part mission.

 13 First, we think that chassis ought to continue to

 14 be a utility and provided to the market with a

 15 transparent, at-cost use fee, but to enable NACPC

 16 to enter the market and to grow, there must be

 17 open, free market competition, and those who pay

 18 for the chassis have to have a chance to select

 19 their chassis provider 100 percent of the time.

 20 Because of the current market

 21 restrictions, NACPC is unable to enter every

 22 market. In this market, in the SACP, we have a
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 1 presence of about 1,200 chassis out of a greater

 2 than 50,000 chassis pool, a paltry 2 percent of

 3 the market, although our cost is significantly

 4 below the other chassis providers.

 5 We believe daily chassis rate

 6 competition could be encouraged by ensuring the

 7 motor carriers have the ability to select their

 8 chassis provider each time they're paying the bill

 9 for the chassis use.

 10 The second part of NACPC's mission is to

 11 ensure that there's an adequate supply of chassis

 12 to meet future needs in the US. Again, only with

 13 open market competition will chassis providers be

 14 encouraged to provide the investment necessary to

 15 accomplish this. No new chassis have been added

 16 to the market over the last seven or eight years,

 17 and new chassis are going to be required to meet

 18 future volume needs and to replace the

 19 deteriorating chassis that are in our fleet. Only

 20 with open market competition will this happen, and

 21 also only with open market competition enable

 22 NACPC to obtain and grow a national footprint.
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 1 The third part of our mission is that we

 2 want to ensure that chassis are modernized, to

 3 include radial tires, light emitting diode (LED)

 4 lights, anti-lock breaking systems (ABS), and auto

 5 inflation. This will serve to address the current

 6 problems with over-the-road violations which still

 7 threaten motor carriers' Compliance, Safety,

 8 Accountability (CSA) safety scores.

 9 Brakes, lights, and tires make up the

 10 overwhelming majority of roadside violations.

 11 Chassis with LED lights, disk brakes, and radial

 12 tires will eliminate most roadside repairs and CSA

 13 violations. If motor carriers can choose their

 14 chassis provider, motor carriers will choose a

 15 provider whose chassis have these components on

 16 them and are priced at a reasonable rate. The

 17 quality of the chassis is a major factor in

 18 retaining drivers to our industry.

 19 Fourth, NACPC's mission is we strongly

 20 believe that chassis should be interchanged

 21 according to the Uniform Intermodal Interchange

 22 Agreement interchange rules (UIIA). The UIIA is a
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 1 multi-modal negotiated interchange agreement and

 2 serves as the standard interchange agreement for

 3 most intermodal interchanges except chassis.

 4 Chassis leasing companies continue to force motor

 5 carriers to sign their proprietary interchange

 6 agreements.

 7 So NACPC's vision of how to accomplish

 8 its mission is within a chassis model that ensures

 9 several things, first, a gray pool of chassis

 10 within each port because of the improved

 11 efficiency. Contributory gray pools, like those

 12 managed by the Consolidated Chassis Management,

 13 LLC (CCM), here in the SACP, allow users to draw

 14 chassis from the pool, regardless of ownership.

 15 The contributory pool model eliminates duplicate

 16 costs and mixes the use of limited space and

 17 maximizes the use of limited space at the port by

 18 eliminating the need for a contributor to have its

 19 own chassis footprint. It also ensures an

 20 adequate supply of chassis for all users and

 21 increases productivity for motor carriers by

 22 enabling a motor carrier to use any chassis for
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 1 any box. Pool managers oversee the chassis

 2 logistics, billing, inventory supply, maintenance

 3 repair, and the repositioning of the chassis, but

 4 usage agreements are determined between the

 5 chassis contributor and its users.

 6 Gray pools, such as the ones you see are

 7 managed here in the SACP, foster an environment

 8 for improved competition for chassis users by

 9 including more than one chassis provider in a

 10 particular pool, and that works as long as the

 11 marine carrier allows the motor carrier to

 12 exercise choice.

 13 But there's a new concept. It's called

 14 pool of pools, which is facilitated by the recent

 15 Department of Justice (DOJ) decision, and that is

 16 an improvement, a further improvement, on the gray

 17 chassis model. Pool of pools also allows all the

 18 chassis in a port area to be gray, but with

 19 multiple pool managers, thus creating competition

 20 in pool management, which fosters innovation and

 21 further cost containment.

 22 Pool managers would be able to settle
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 1 costs for over- or underuse amongst themselves.

 2 The pool of pools concept is an improvement in the

 3 gray chassis model because it introduces

 4 competition into the chassis pool management while

 5 protecting the gray chassis model.

 6 Also important to us is that the motor

 7 carriers are able to designate their chassis

 8 provider at one place and at one time. It's way

 9 too complicated today, and that needs to be

 10 simplified.

 11 The pool has to take driver productivity

 12 issues into consideration -- we've heard a lot

 13 about the drivers today -- but being able to pick

 14 up any chassis at any place and terminate at any

 15 place and use it for any piece of equipment.

 16 It also ought to improve the

 17 over-the-road process that we have today,

 18 including the cost for tire repairs into that

 19 lease rate so that the provider has an opportunity

 20 to control the quality of the repair that's made

 21 on the roadside and basically put out of business

 22 this cottage industry of used tire vendors that
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 1 have cropped up.

 2 So we see four absolutes that need to be

 3 in any chassis model: First, that it's gray;

 4 second, that it's 100-percent motor carrier

 5 choice; third, that there's free market

 6 competition at both the pool management and the

 7 chassis use level; and finally, that the UIIA is

 8 used to govern interchange rules.

 9 Thank you.

 10 COMMISSIONER KHOURI: Thank you.

 11 Curtis, are you going to wrap up?

 12 MR. WHALEN: Yes. I'm going to also

 13 stay here in my seat.

 14 Just in terms of full disclosure, I am

 15 Curtis Whalen. I'm executive director of ATA's

 16 Intermodal Motor Carrier Conference (IMCC). It's

 17 basically the ATA members that are dealing in the

 18 intermodal sector or vendors that support that as

 19 such.

 20 Also, in terms of full disclosure, these

 21 four gentlemen here are all on my board of

 22 directors, so they are my bosses, so hopefully, as
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 1 I think you've seen, we've got a fairly unified

 2 view of what's going on here.

 3 I think one of the things that I found

 4 very useful so far in this very short period of

 5 time with the Federal Maritime Commission's (FMC)

 6 efforts on setting up these forums is it's only

 7 been -- what, we're working on six weeks now, and

 8 they will have had four after that six weeks.

 9 There certainly has been a very good

 10 focusing of the issues from all of the various

 11 sectors that are involved in this big issue. I

 12 think if you look at what we're saying, and I

 13 think we'll hear later on from the other sectors,

 14 we pretty much know where the problems are, how

 15 they are manifested within the movement of the

 16 containers and the movement of freight in and out

 17 of the port system, but what I found somewhat

 18 different than I have over the years that I've

 19 been doing this, there is now a realization that

 20 as it relates to the movement of the container and

 21 all of the various stakeholders, the trucker right

 22 now is probably the one that's bearing the most
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 1 burden as we look at some of these congestion

 2 issues, and by and large, again, I think there's a

 3 realization that that issue has to be addressed

 4 sooner as opposed to later.

 5 One of the things that, again, all of

 6 these gentlemen have touched on, we operate within

 7 an environment where a lot of our work rules are

 8 very much dictated under federal law, and what has

 9 become apparent in that, and, again, part of ATA,

 10 we are challenging those laws, but in the short

 11 term, they obviously are the law. We have to

 12 comply with the various requirements in terms of

 13 total hours of service, how we structure our

 14 weeks. There's something called the 34-hour

 15 restart, where a driver has to declare and set up

 16 a system where their eight hours of back-to-back

 17 rest are programmed into their schedule and

 18 adhered to.

 19 What is now becoming apparent, as we've

 20 seen congestion in areas particularly on the East

 21 Coast and also West Coast, is that the ability of

 22 a port or a terminal to all of a sudden try to
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 1 respond to a container issue or a congestion

 2 issue, we've seen, particularly in the last six

 3 months in both New York, New Jersey, and Norfolk,

 4 they will announce they're going to stay open on a

 5 Thursday or run Saturday gates. Well, the problem

 6 is when they do that, there are no trucks

 7 available, and it would be nice if we could show

 8 up.

 9 Certainly, the drivers and their

 10 companies would like to continue to try to

 11 generate revenues in these trying times, but you

 12 cannot do that. So the ability for us to react,

 13 as we have often reacted to some of these dictates

 14 from our brethren within the container moves, we

 15 just don't have that ability anymore. That has to

 16 be programmed in much more than it has

 17 historically been done.

 18 I also think, as we look at the

 19 congestion issue for those ports that are

 20 experiencing it right now, and they are very

 21 visible, they have to deal with certain things in

 22 a very short-time basis, and there are clearly
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 1 things that can be done, but some of them perhaps

 2 will alleviate the short-term issues, but the

 3 long-term, there has to be some really major

 4 rethinking of how the processes have worked.

 5 And I think in the first panel, there

 6 was reference to 1960 operational things that are

 7 still being followed here, and generally, when you

 8 talk to people in a noncongestion time, you ask:

 9 Well, why are you doing it that way? Well, the

 10 answer is usually: Well, we've always done it

 11 that way. It's one thing to say that. We have a

 12 lot of new things that are coming on board in

 13 terms of the actual business, but we also have

 14 issues with chassis and how they're programmed in,

 15 but it does get down to a data-driven system.

 16 We, again, as an industry, while each

 17 sector works in its own silo and may be developing

 18 their data sources and such, there is still a huge

 19 reluctance to share that information, so in the

 20 context of what a terminal has for its metrics or

 21 what's going on at the terminal operation on a

 22 given day, well, they want to know that. It would
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 1 be very useful for the motor carriers who dispatch

 2 truckers to be able to get that information in

 3 real time and be able to more efficiently use that

 4 challenged resource of the driver to be able to

 5 move in and out of the process a little better.

 6 I understand there are competitive

 7 issues there, but I do think, particularly in the

 8 port area down here where you all are not in that

 9 crush right yet, and I hope you don't get there,

 10 but it would probably behoove you, and I know a

 11 lot of you are, to be starting to work on

 12 developing sort of operational metrics for your

 13 various facilities that will be tested and proven

 14 and accepted in the broader range for when you do

 15 get into some of these problems, if you do, in the

 16 future.

 17 Right now, trying to do it in -- sort of

 18 in the scramble mode, where nobody trusts anybody

 19 else's numbers and are reluctant to make them

 20 visible, I think, is causing some problems to try

 21 to solve at least the short-term issues in the

 22 other ports around the country.
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 1 On hours of service, as I said, while

 2 we, as an industry, are trying to address and have

 3 some of the provisions changed, in the short term,

 4 one of the things that we are looking at is

 5 potentially filing waivers to the process where

 6 the port trucker, in specific ports, could get

 7 some relief in a 90-day mode to be able to drive

 8 more hours, particularly be able to adjust the

 9 34-hour restart. That process, I think, is being

 10 aided by what we are doing here today and the rest

 11 of the week and have done in the past.

 12 I am reasonably confident, as one who

 13 would participate in that, that I could get

 14 comments, letters of support from the other

 15 stakeholders within the industry, because, again,

 16 I think there is a wide recognition now that the

 17 driver, particularly in the short term, but also

 18 in the long term, has to be able to be able to

 19 function correctly, so the entire maritime

 20 transportation system, as it relates to the

 21 container moves, can still function and get out of

 22 the current problem that we're in.
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 1 I might also, at that stage, ask for

 2 some comment from the FMC as it relates to their

 3 views which they will be putting together in terms

 4 of the crisis mode that we are in. While I

 5 appreciate there are a variety of jurisdictions

 6 that deal with trucking, and FMC is not directly

 7 one of them, the other agencies, particularly

 8 Federal Motor Carrier Safety Administration

 9 (FMCSA), fully understands and I think is feeling

 10 somewhat uncomfortable by its role in the chassis

 11 safety issue. They have not enforced the law

 12 that's been on the books since '05 and enforced

 13 since '08.

 14 One of the issues is we deal with where

 15 are those chassis? Are there enough? I

 16 continually have to stress the issue that it's not

 17 just the number. Those chassis are required under

 18 law to be roadable and safe, and in many areas,

 19 even where you can find a chassis, it is not in

 20 that condition.

 21 So if a driver is lucky enough to find a

 22 chassis on a particular day, he is faced with the
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 1 option of trying to go out, after waiting some

 2 unknown period of time in a line, with or without

 3 a particularly safe chassis. That's not a fair

 4 position to put them in. That is a position where

 5 the law states that the chassis is supposed to be

 6 roadable when it gets there, but they are not.

 7 So again, I think the emphasis now

 8 through these FMC activities has very much

 9 heightened the awareness and made it a far more

 10 discussed issue as you go around the country every

 11 week as we do all meetings with various port

 12 entities that discuss it.

 13 So I think they are feeling the heat,

 14 the FMCSA, and I think that approach, as we

 15 potentially file for waivers, would be very useful

 16 in that whole context of when it should be part of

 17 the solution and not the problem.

 18 I think the other area to look at, as we

 19 look at the driver issue particularly, again, that

 20 is a fungible commodity. If I'm a truck driver,

 21 whether I'm an employee or an owner/operator, I

 22 have a good driving record, I have a valid
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 1 Commercial Driver's License (CDL), this industry,

 2 and that's the entire trucking industry, is

 3 historically driver challenged. We don't have

 4 enough. And the drivers now who have historically

 5 wanted to be the port driver, the daily driver,

 6 shorter distances, get home at night and the

 7 weekends to be with the family, they are basically

 8 now in a problem where I can take that CDL, with

 9 or without the truck, and find a gainful

 10 employment elsewhere. And it is unknown at this

 11 time whether they will come back to the port

 12 business if we get into a situation where there is

 13 not congestion as the normal process.

 14 So it's very complicated, there are a

 15 lot of moving pieces, and a lot of them are new.

 16 And I again very much want to thank the FMC for

 17 jumping into this issue and providing a very good,

 18 much-needed focus and rallying point around the

 19 country to look at this issue.

 20 COMMISSIONER KHOURI: Thank you all so

 21 much. I appreciate it. You're obviously a key

 22 part of all of the issues. We're a few minutes
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 1 behind. If we could kind of shift real quick.

 2 And we have three carriers, vessel carriers, who

 3 agreed to come up today, and thanks again.

 4 We have to get done with the other three

 5 panels. I've spent a lot of time reading the

 6 curriculum vitaes and introductions. If we could

 7 just keep moving through the agenda. We have two

 8 more to go between the period of lunch.

 9 Another perspective is that of the ocean

 10 carriers themselves, so let's take off.

 11 MR. TRONTI: Thank you, Commissioner

 12 Khouri. Good morning.

 13 My name is John Tronti, with Crowley

 14 Maritime Corporation, out of Jacksonville,

 15 Florida. I have the fortunate pleasure to spend a

 16 great deal of my time here in Charleston, as my

 17 daily function is as the managing director of

 18 Marine Transport Lines (MTL) here in North

 19 Charleston. I can't miss them.

 20 I'm happy to say that port congestion

 21 isn't really an issue for us, because we haven't

 22 been operating a whole lot. That could change
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 1 soon. A couple of marine reserve force ships were

 2 actually activated this past week for operation of

 3 unified assistance, so we're standing by.

 4 But under my Crowley Maritime hat, we do

 5 have owned and managed vessels that call here in

 6 Charleston, and in speaking with the reps that

 7 manage those vessels rightfully, they report is

 8 all is well here in the Port of Charleston, and

 9 congestion in lay time is not an issue.

 10 My experience here in Charleston, very

 11 aligned and energized maritime community who seem

 12 to be well in control of their economic destiny,

 13 so that's good.

 14 Crowley Maritime, if I can just tell you

 15 about us a little bit, a very diverse company,

 16 started back in the late 1800s. Tom Crowley had a

 17 smaller fleet back then, started with an 18-foot

 18 row boat in the San Francisco Bay ferrying

 19 supplies out to vessels at anchor. Now it's a $2

 20 billion diverse company with over 260 vessels,

 21 owned and managed terminals, and rather diverse

 22 line providing shipping and logistics, project
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 1 logistics, global freight, Alaska fuel sales and

 2 distribution, petroleum and chemical

 3 transportation, power ship assist, tanker escort,

 4 project management solutions, ocean towing and

 5 barge transportation, vessel design and

 6 construction management, ship management, and

 7 marine salvage wreck removal, and emergency

 8 response. So the service line is extensive and

 9 spans various sectors.

 10 Today I want to focus -- today's focus

 11 is on line of service in the petroleum fleet,

 12 which I'll talk a little bit about, which we

 13 routinely call here on the Southeast ports and

 14 trade in the Jones Act. And Crowley Maritime is a

 15 Jones Act US flag-centered carrier, and it's

 16 important to our business.

 17 With that, the petroleum and chemical

 18 transportation business is really in a Renaissance

 19 right now, clean products side of it. The shale

 20 oil and fracking that's occurring in the Midwest

 21 and around the US is really creating a situation

 22 where petroleum transportation in the Gulf and
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 1 around various oceans around the US is really

 2 growing. So we presently -- or recently --

 3 completed a 17-vessel construction program, 17

 4 articulated tug barges (ATB) that are all under

 5 time charter and operating. We have five

 6 additional US-flagged tankers under construction

 7 in Philadelphia right now.

 8 So I guess the theme here is that the

 9 Jones Act is alive and well. Ships are being

 10 built in US yards. That's good for the US

 11 shipyard base, because the military construction

 12 is dwindling, so it keeps their work force alive

 13 and well for the time. There are a total of 26

 14 tank ships currently under construction in US

 15 shipyards at the moment.

 16 Crowley purpose and values, it probably

 17 only has three values: Safety, integrity and high

 18 performance. And I'm happy to say that personally

 19 and professionally, I identify in a line with

 20 those values, and I don't think I'd want it any

 21 other way.

 22 Safety's very important. It costs
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 1 money, but sending people home to their families

 2 after they've been in the terminal, been at work,

 3 or been aboard a vessel, I think that's the least

 4 we owe them in commitment.

 5 Integrity speaks for itself, and it's a

 6 behavior that will stand on its own merit. And,

 7 of course, without high performance and a

 8 high-performing team, there is no profit in the

 9 business, and there's no growth.

 10 The growth that we're seeing in the

 11 US-flagged Jones Act sector at the moment, it

 12 takes people to operate the ships, so that they

 13 can come to the terminals and cargo can move,

 14 whether that be in petroleum or in dry bulk or

 15 certainly container, and growing fleet means we

 16 need mariners. Similar to what I've heard this

 17 morning about the drivers and driver shortages,

 18 those shortages exist in the US-flagged mariner

 19 fleet.

 20 Maritime academies have diversified

 21 their curricula over the years. I happen to be a

 22 graduate of one out in Massachusetts. When I went
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 1 through school there, you were either a marine

 2 transportation major or a marine engineer. I'm an

 3 engineer. Now there's seven different majors up

 4 there focusing on facilities, emergency

 5 management, engineering design. So the license

 6 track cadets that are coming out of the academies,

 7 they know it's plentiful.

 8 And shipping is cyclical, so it comes

 9 and goes. Right now, we're having trouble manning

 10 a fleet like we should, so incentives are needed,

 11 not only on the terminal side, with drayage and

 12 drivers, but we need them on our side as well to

 13 man the ships and man them effectively,

 14 efficiently, and safely.

 15 So one of the missions there is military

 16 maritime. Recently in Jacksonville, there was a

 17 military maritime seminar where the local naval

 18 stations and local military organizations, a

 19 conference was held, and that's a transition where

 20 those skills, people who are in the Navy and have

 21 been to sea, those skills are easily transferred

 22 through the Coast Guard licensing process and the
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 1 credentialing to man the fleet. And I would think

 2 that the US Army has lots of transportation

 3 battalions, so perhaps that's a place where future

 4 drivers can come.

 5 But it's a cultural thing, as a lot of

 6 you know. Technology, the younger generation is

 7 into technology. My kids certainly run an iPad

 8 and the iPhone and everything a lot better than I

 9 do, so technology's out there in our industry.

 10 Hopefully, they'll come.

 11 Just to wrap up, and the reason we're

 12 here, challenges in and around the Southeast US

 13 ports, for Crowley Maritime, again, none here in

 14 Charleston, as I already mentioned.

 15 On the broad scale, public terminal

 16 congestion can be relaxed with new railheads, and

 17 turntables have reduced drayage time, and that's

 18 happening here and in Jacksonville, as I know it.

 19 Making public agency technology-based

 20 grants to ports and terminals for increased

 21 efficiency and throughput can certainly help all

 22 lines and shippers. Again, it's a technology
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 1 thing.

 2 Pool chassis providers, which I know was

 3 recently discussed, in certain locations make

 4 sense, only in limited applications. Cost per day

 5 may be double what Crowley is currently paying in

 6 some applications, and I guess it doesn't work for

 7 everybody is the message. Maintenance costs may

 8 very well rise, and the lack of pure chassis

 9 ownership is diminished.

 10 Truck power affected by regulatory

 11 tightening, fuel classifications on drivers,

 12 actual time in the port and at the customer's

 13 facility affect work ratios. And similar to the

 14 commercial mariner problem, recruiting new drivers

 15 is difficult. Incentives are not there, and they

 16 need to be.

 17 Thank you for the opportunity to

 18 comment. I look forward to the rest of the day.

 19 COMMISSIONER KHOURI: Thank you.

 20 MR. MCCARTHY: Thank you, Commissioner

 21 Khouri. I have some prepared statements here.

 22 I appreciate the opportunity to address
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 1 the FMC on the supply chain efficiencies and

 2 challenging the issues of the industry and

 3 stakeholders that are wrestling with the logistic

 4 supply chain today.

 5 I'm Ed McCarthy, senior vice president

 6 of CMA CGM and vice chairman of the Ocean Carrier

 7 Equipment Management Association (OCEMA), which

 8 represents -- which is an organization that has 19

 9 major carriers within it. Since CMA CGM has not

 10 commented in these forums before, my comments do

 11 encompass a little bit more than the Southeast

 12 Region, so I appreciate your bearing with me a

 13 little bit.

 14 After spending nearly two decades on

 15 both the East and West Coast in port operations

 16 with APM Terminals, I have now spent the last

 17 three years on the carrier side of the business,

 18 giving me an even greater insight into the

 19 challenges that occur outside the gates.

 20 As everyone knows, the smallest bit of

 21 congestion at the ports have a trickle-down effect

 22 through the entire supply chain. Even brief
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 1 periods of congestion can lead to days or weeks of

 2 recovery. With the sustained congestion that we

 3 have seen this year, the supply chain is seriously

 4 at risk of grinding to a halt, which will impact

 5 our economy. I think that the stakeholders here

 6 today know that I'm not exaggerating when I say

 7 that the challenges we're here to discuss today

 8 have reached a crisis level in other port regions

 9 other than South Atlantic.

 10 I followed previous port congestion

 11 forums with great interest, and I've appreciated

 12 Commissioner Khouri and the other commissioners

 13 providing these opportunities for discussion.

 14 Unfortunately, it seems to me that at the previous

 15 meetings, many stakeholders have been too anxious

 16 about their own point of view and not

 17 collaborative with other stakeholders.

 18 We need to stop working against each

 19 other and for our own interests to come together

 20 with solutions. I recognize that each stakeholder

 21 here today has competing priorities, but at the

 22 same time, we all share the same key goal: To
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 1 keep the cargo moving while making a profit.

 2 I hope we can agree that we each need to

 3 make a profit in order to build infrastructure and

 4 reinvest in our own individual organizations for

 5 sustainability. Keeping that in mind, I'd like to

 6 highlight a few areas where I think investment is

 7 the key to resolving the current issues.

 8 Port authorities. Port authorities we

 9 have heard from here today need to invest into

 10 capital infrastructure to ensure competitive

 11 capabilities and to develop jobs in each of their

 12 space. The large capital investments necessary to

 13 develop facilities have been slow to develop and

 14 are currently behind the industry demands. We

 15 hear a lot about East Coast port authorities and

 16 the introduction of big ships. That can't happen

 17 without the critical infrastructure developments

 18 that we need today.

 19 Terminal operators. Terminal operators

 20 need to invest in container handling equipment to

 21 ensure they can grow their operations to eliminate

 22 congestion. In 2004, when I built the APM
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 1 facility in Virginia, we knew that the EEE class

 2 of the Maersk Line was coming back in 2004. Ten

 3 years later, the majority of the ports on the East

 4 and West Coast cannot handle these vessels.

 5 They also need to work with the chassis

 6 providers to develop programs for ensuring

 7 resources are available for timely repair in

 8 terminals that currently have more equipment out

 9 of service than in service. Terminals must

 10 develop innovative ways to promote gate

 11 flexibility and cannot simply rely on solutions

 12 such as PierPASS, which have only pushed gate

 13 congestion to peak periods in the evening.

 14 Motor carriers. Motor carriers need to

 15 invest in their drivers to ensure there's a future

 16 for the drayage and in the trucking. We've heard

 17 a tremendous amount from the motor carriers today,

 18 and I echo their concerns.

 19 Motor carriers also need to invest in

 20 equipment and taking responsibility for chassis in

 21 line with the model followed elsewhere in the

 22 world. The owner/operator has been squeezed
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 1 through years on rates to a point where the

 2 driver's living wage is unsustainable. A lot of

 3 that is indicative of the carriers and our

 4 contracts, and this will be the demise of the

 5 industry unless we take action now.

 6 Shippers. Shippers, NVOs, and BCOs need

 7 to invest in service levels they demand. Shippers

 8 are demanding the best service while driving rates

 9 down. Cargo is compressed into seasonal windows,

 10 straining peak capacity. Warehousing hours and

 11 drop-and-pick operations do not meet the demand

 12 for the cargo surges, so shippers are holding

 13 equipment and asking for more free time. Carriers

 14 usually grant the additional free time to secure

 15 the business, but this contributes to further

 16 equipment shortages around the country.

 17 Railroads. Railroads and TTX companies

 18 need to invest in equipment and infrastructure and

 19 also look at operational practices that add to

 20 congestion and equipment shortages. For example,

 21 the wheel chassis operations required by railroads

 22 to minimize operational costs has a negative
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 1 impact on already overutilized chassis capacity.

 2 Also, there's insufficient railcar supply in the

 3 network, causing railcar shortages and delays

 4 throughout the network. While railroads want to

 5 protect their individual interests overusage of

 6 railcars by one company to protect the interest

 7 against competition is a negative impact to the

 8 supply chain.

 9 Chassis management and leasing

 10 companies. They also need to invest into an aging

 11 fleet in new equipment and resources needed for

 12 timely repair of this equipment, as well as to

 13 reposition equipment from the surplus locations.

 14 Depots are holding chassis that could be deployed

 15 to mitigate chassis shortages in other areas.

 16 Better positioning of equipment to meet demand, as

 17 occurs in regional gray pools, such as CCM and the

 18 SACP pool here in Charleston and Savannah, also

 19 work well and are important growth opportunities.

 20 The United States Maritime Alliance

 21 (USMX), International Longshoremen's Association

 22 (ILA), PMA, and the ILWU. Cyclical availability
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 1 in the work force and stronger internal leadership

 2 in each organization is required to meet the

 3 demands of the industry. I applaud what has been

 4 done in the USMX and the ILA to increase the work

 5 force in New York and New Jersey this past summer,

 6 including the ILA's efforts this year to limit

 7 vacation time in the Northeast to meet the demands

 8 of peak freight. Labor availability has notably

 9 improved in New York/New Jersey over 2013, but

 10 these initiatives need to be formalized in

 11 agreements with the PMA and USMX to ensure the

 12 industry's provided with consistent, skilled, and

 13 efficient labor force for long term. Certainly,

 14 the labor supply plays an important role in our

 15 confidence of shippers and carriers alike.

 16 Last, but not least, the ocean carrier.

 17 Ocean carriers need to invest in large ships to

 18 take advantage of economies of scale. Economies

 19 of scale need to provide superior service and

 20 competitive prices. At the same time, carriers

 21 are barely afloat, losing money in the industry

 22 year after year. There is a relationship between
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 1 eroding rates and the ability to sustain needed

 2 service levels. To mitigate the bleeding, the

 3 carriers have adopted a variety of cost-saving

 4 measures, such as slow steaming. However, this

 5 means that vessels, when they are delayed in a

 6 port due to congestion, it is cost prohibitive to

 7 spend the money on bunker fuel to make up the time

 8 for the carrier.

 9 Carriers must also invest in equipment

 10 by ensuring a strong supply of containers,

 11 including specialized containers. We need to

 12 invest our time and effort into finding solutions

 13 for container imbalance so that containers are not

 14 only available, but available where they're

 15 needed.

 16 Ocean carriers, through cooperation

 17 under the OCEMA FMC agreement have improved

 18 efficiencies at ports and inland rail terminals

 19 through the creation of regional gray cooperative

 20 chassis pools, which have freed up space on

 21 terminals, increased trucking and rail turn times,

 22 and increased competition and customer options by
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 1 allowing multiple chassis providers participation.

 2 At the same time, carriers must continue to

 3 educate stakeholders on the new chassis provisions

 4 and management options available in this new

 5 paradigm, so that equipment can be managed more

 6 efficiently by other stakeholders who are in a

 7 better position to maximize efficiencies.

 8 None of these issues are new to the

 9 industry, and the stakeholders here today, they

 10 are working on all of these to some degree, but

 11 they are exacerbated by the slow investment that

 12 we've seen to date. Volumes are growing quicker

 13 than the investment can be deployed.

 14 I do not pretend to think that these

 15 comments are all-inclusive for each of the

 16 stakeholders, but I do hope I've identified a few

 17 of the competing challenges and areas where we can

 18 reach common ground and stop working in different

 19 directions. Until we, as an industry, identify a

 20 common path and accept that we all need to take

 21 responsibility for our financial piece of the

 22 solution, the cyclical nature of congestion will
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 1 persist and only get worse.

 2 I recommend to the FMC an industry-wide

 3 CEO-level task force encompassing all stakeholders

 4 be formed to address the issue and work towards

 5 the common industry solution. We all know the

 6 challenges, and we have the power to influence the

 7 solution, but no one of us can solve it

 8 separately.

 9 I thank you again for your time and

 10 opportunity to discuss solutions of change.

 11 COMMISSIONER KHOURI: Thank you.

 12 MR. FOERTSCH: I'm John Foertsch with

 13 Orient Overseas Container Line (OOCL), and I'd

 14 like to speak about terminal velocity here and how

 15 to improve that.

 16 We speak to motor carriers pretty

 17 regularly here. We get their input. We talk to

 18 the drivers. We have them talk to the drivers and

 19 give us the feedback. And just a couple comments.

 20 And as we know, the industry has really

 21 evolved in the last decade or so from a horizontal

 22 model, where everything was spread all over the
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 1 terminal, to a vertical model where everything now

 2 is up in the air, and we pretty much -- the

 3 density has improved by at least 400 percent, I

 4 think. At that same time, the gates probably

 5 didn't keep up with that. We've heard that the

 6 motor carriers had to move.

 7 So with that, we need to identify the

 8 chokepoints, improve all that. The areas of

 9 concern which we spoke to the motor carriers

 10 about, number one was not enough good-order

 11 chassis when they come into the terminals. It's

 12 not a designated yard where you can go in -- they

 13 compare it to like a rental car place. You go in,

 14 your car's ready, hook up, and you go. That's a

 15 problem. They're floating around the terminals

 16 looking for these chassis. They can't find one or

 17 they get one with the least amount of damage they

 18 can, so they've got to spend the least amount of

 19 roadability they've got on those lines.

 20 In some cases, one of the problems, they

 21 said cargo's not released. That could be the

 22 liner's fault, it could be a terminal system, or
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 1 maybe the carrier didn't check. Is it

 2 insufficient staffing? Once you get in the gate,

 3 you've got to go to another gate sometimes or

 4 you've got to go to an RDG. Then you've got to

 5 wait in line again. So you're waiting in line to

 6 wait in another line is the problem. So is it

 7 insufficient staffing inside the terminal or just

 8 a shortage of yard equipment?

 9 Another big one that hit them was the

 10 delays at the Maintenance and Repair roadability

 11 lanes. Who wants to get behind a guy with -- when

 12 you need a couple inches, and you got a guy

 13 changing tires in front of you. It's like being

 14 at the toll booth, and a guy's counting out

 15 pennies while you're trying to get through the

 16 tunnel.

 17 So there's a couple suggestions they

 18 made for this, and one was create express lanes

 19 for empties. That way you don't have all the

 20 administration, is the booking good, is the thing

 21 overweight, things like that. So if you can flow

 22 them empties in and out, you're going to improve
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 1 that velocity.

 2 A designated yard location near the port

 3 facility -- there's an option -- for good-order

 4 chassis, and based on minor damage only.

 5 Prioritize what is minor damage and what's heavy

 6 damage. Any with heavy damage should be removed

 7 completely from the terminal so the drivers don't

 8 hook up to these things and find out now they got

 9 a big problem, probably, pulling this thing out,

 10 going through roadability. You're going to be

 11 stuck there.

 12 Express lanes for roadability for just

 13 lights and lenses, maybe mudflaps, and minor

 14 problems. And like I said, drivers with minor

 15 issues shouldn't be delayed behind a driver with a

 16 major problem. That's what's bottlenecking

 17 everything up.

 18 Cargo plan. In some cases we mount

 19 cargo directly from the vessel onto chassis, maybe

 20 it's got to be expedited or it's a hazardous

 21 materials (HazMat) load or something like that.

 22 But cargo planned to mount direct from the vessel
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 1 to a chassis should be preinspected and held in a

 2 designated area so he doesn't have a problem when

 3 he goes to pull that box out of there.

 4 Chassis that need major repair should be

 5 removed from the terminal for termination or sale,

 6 and that should be managed by the chassis pool or

 7 the chassis owners.

 8 And our motor carriers reported even

 9 though we do flex hours, they said during the meal

 10 break, they see a substantial drop in the

 11 productivity there. They'd like to see that fully

 12 staffed and manned, if that can be managed, to

 13 keep the numbers flowing.

 14 And then some terminals reported having

 15 problems because maybe multiple lanes feed down

 16 into just a few, and once again, there's another

 17 bottleneck.

 18 So like these guys were saying, there's

 19 nobody coming out of school these days saying:

 20 When I graduate, I want to be a truck driver. So

 21 it's got to be attractive. It's got to be a

 22 win-win for everybody I think.
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 1 That's my observations on the motor

 2 carriers as well.

 3 COMMISSIONER KHOURI: Thank you so much.

 4 We appreciate that. I think we have another mode

 5 of transportation ready to go. And again, I hope

 6 everyone has flexibility to stay for the afternoon

 7 open microphone give and take, which I hope is

 8 some robust conversation.

 9 This is our railroad panel, and again,

 10 thanks for all of them coming in. And in full

 11 disclosure, I worked with Curtis Whalen for a

 12 number of years, and I worked with a company that

 13 was owned by CSX Corporation for several years.

 14 There's certainly no favoritism here in any

 15 description, so kick it off, and I'll start with

 16 the mean, bad Norfolk Southern. Just joking.

 17 MS. HAVER: Thank you for having us

 18 today. My name is Trish Haver, and I am the

 19 market manager for ports and international with

 20 Norfolk Southern (NS). My primary responsibility

 21 is the Southeast port, so this is where my area of

 22 expertise lies.
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 1 Just to give you some background on

 2 Norfolk Southern and how we fit into this, we

 3 operate 22,000 route lines in 22 states and the

 4 District of Columbia, which allows us to support

 5 international trade routes. It gives us the

 6 ability to serve every major eastern seaport, ten

 7 river ports, and nine lake ports. We operate the

 8 most extensive intermodal network in the east and

 9 also have major coal, automotive, and industrial

 10 product franchises.

 11 We invest in projects designed to expand

 12 the rail network and to increase freight capacity

 13 for our customers, and this is in support of our

 14 vision to be the safest, most customer-focused and

 15 successful transportation company in the world.

 16 We're committed to delivering product efficiently

 17 and reliably, which is one of the reasons why

 18 we've been able to experience a 5 percent volume

 19 growth year over year and year-to-date for 2014.

 20 We've seen this growth primarily in the

 21 intermodal segments. We've seen a lot of highway

 22 conversions due to congestion. We see a
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 1 continuation of our Crescent Corridor initiatives

 2 and significant growth in international shippers.

 3 We've seen some -- we've experienced some nice

 4 growth in the merchandise area as well, but it's

 5 primarily related to energy, so fracking, crude

 6 oil, steel, and construction energy markets have

 7 really been the growth engine there, and a lot of

 8 that goes into the Northeast.

 9 We have strong growth in the automotive

 10 network, which is primarily in the Southeast, and

 11 are expecting strong corn and soybean growth this

 12 year from the robust crops. Coal continues to see

 13 a downturn, primarily due to utility -- decreases

 14 in utility mode, but that's going to be because of

 15 depressed natural gas prices.

 16 In order to support this growth, in

 17 turn, we are very aware and sensitive to the

 18 congestion issues and how important the rail

 19 network fluidity is and velocity is to the overall

 20 supply chain.

 21 In 2014, we adopted a $2.2 billion

 22 capital investment program, 66 percent of which
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 1 will go back into investment to core network

 2 projects. These projects are primarily focused in

 3 the Illinois, Indiana, Ohio, and New Jersey areas,

 4 which also coincides with our major freight routes

 5 and our highest-density lanes and our large-volume

 6 lanes, so we are very aware of where the pinch

 7 points are and where we need to focus our efforts.

 8 It's important to note this is a 12-percent

 9 increase over 2013.

 10 Also, in support and improving velocity

 11 in the network, which will ultimately support the

 12 ports and the international shipping, we're

 13 looking at improvements in train and engine (T &

 14 E) services as well. Through this, we're hiring

 15 new folks, we are taking advantage of retirement

 16 delays and transfers, and we're also offering

 17 vacation buy-back programs, which allows us to

 18 increase the number of crews that we have

 19 operating in the network.

 20 It really goes back to velocity.

 21 Velocity is the key for rail support. If your

 22 network is fluid, and you are able to turn the
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 1 equipment, then you're going to see service

 2 improvements.

 3 We also have taken -- we'll begin

 4 delivery of 50 locomotives, new electric and

 5 diesel locomotives, beginning in November and

 6 December, and also begin to take delivery of 100

 7 SMD-90 Mack locomotives to support this.

 8 We're very sensitive to what's going on

 9 in the country right now, but I'd like to say it's

 10 pretty good to be in the Southeast as it stands

 11 today. We do not see nearly the issues in the

 12 Southeast as in the Northeast. Our biggest

 13 percentage of on-time starts as far as crew

 14 availability, locomotive usage, all of our numbers

 15 in the Southeast are significantly better than

 16 they are in the Northeast.

 17 I think it's a function of a couple of

 18 things. We don't have the weather-related issues,

 19 we're not catching up from the problems that we

 20 had, and really, we coordinate very closely with

 21 our short-line partners and our port partners in

 22 the Southeast to make a fluid, successful
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 1 transition with the rail.

 2 Again, we are committed to keeping

 3 everything as fluid for you as possible, and

 4 you're our partners, and that's where we stand.

 5 MR. NOURY: The little guy next?

 6 COMMISSIONER KHOURI: You're an

 7 important part of the panel.

 8 MR. NOURY: Commissioner, thank you for

 9 inviting Florida East Coast Railway (FEC) to be

 10 part of this panel, and also, I'm very pleased to

 11 be up here with our two distinguished railroad

 12 partners, the CSX and the NS, and we have a

 13 tremendous relationship with those folks, and I'll

 14 talk about that a little bit more.

 15 I want to talk a little bit first about

 16 an overview of the FEC railroad. We're a little

 17 bit different beast than the Class I railroads and

 18 operate somewhat differently, and then I'll go on

 19 and talk about some of the challenges that we face

 20 and are looking at and how we're overcoming them.

 21 And since I'm a salesman and I'm the

 22 vice president of national sales for the FEC
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 1 Railway, I have a little bit more positive

 2 perspective. I'd like to put on rose-colored

 3 glasses, and besides, I live in the Sunshine

 4 State, where the sun always shines.

 5 So anyhow, the FEC, we run 351 miles of

 6 mainline track between Jacksonville and Miami. We

 7 are the only railroad along Florida's east coast.

 8 We are the sole and exclusive provider of

 9 intermodal rail services connecting the South

 10 Florida markets and the South Florida Gateway

 11 force with the southeastern United States, and

 12 vice versa, and we have inline relationships with

 13 these two folks right here.

 14 And again, reliability and service are a

 15 keynote for us, as well as safety. We run one of

 16 the safest railroads in the country. Our

 17 reliability is well-known. One of our major

 18 customers is United Parcel Service (UPS), and they

 19 run on many of our trains that move daily, and

 20 we've had 2,000 days of service without a service

 21 failure with UPS. In this industry, that's fairly

 22 exceptional, particularly with such a demanding
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 1 client.

 2 We run 12 trains a day, six trains

 3 scheduled southbound, six trains northbound.

 4 These are mixed trains. We mix cargo with

 5 intermodal. 78 percent of our business is

 6 intermodal. Of that, about 40 percent is

 7 international intermodal, and that is growing,

 8 particularly with what we're seeing in the South

 9 Florida ports, in particular, with their increase

 10 in vessel colonies and freight coming through all

 11 those ports and also with the growth in the

 12 demographics in Florida.

 13 As Brian mentioned earlier, Florida is a

 14 very popular state. It's number four in terms of

 15 TEP in the United States, and it's also now the

 16 third largest state. And the two biggest

 17 population centers are in Central Florida, with

 18 about 9 million people, and South Florida and the

 19 Greater Miami area with close to a little over 7

 20 million people, so a tremendous demand state.

 21 And then as also Brian mentioned, we get

 22 an influx of 100 million tourists a year. That's
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 1 a tremendous amount of consumption, both in

 2 Central Florida and South Florida, primarily.

 3 Those folks are buying a lot of goods to take home

 4 with them, and a lot of that stuff comes from the

 5 Far East and the Far East trades, and so it's very

 6 important that we have the proper infrastructure

 7 in place to be able to serve that growth and

 8 maintain it.

 9 Lots of conversations tell you about

 10 issues in trucking and chassis. We believe that

 11 we are in a better position in South Florida. We

 12 have our own trucking company, Florida East Coast

 13 Highway Services. We run about 250 trucks,

 14 owner/operators, and we also have our own chassis

 15 fleet. We have about 260 international chassis

 16 and another 350 domestic chassis of various sizes,

 17 depending on the requirements. We also -- our

 18 sister company is Track Leasing, so during peak

 19 season times, we were able to expand that

 20 capability significantly as the needs arise.

 21 Again, I mentioned we're running mixed

 22 cargos down there. We run aggregate, we run
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 1 ethanol tanks and automobiles, so we run 9-,

 2 10,000-foot trains. Our track is a continuous

 3 weld, and it's also all concrete ties, which

 4 allows us to run these heavier trains at safe

 5 speeds to meet schedules day in and day out.

 6 And again, we have excellent

 7 connectivity with the Southeast, with our inline

 8 connections. We are now servicing the markets in

 9 the Southeast -- Nashville two days, Atlanta two

 10 days, Charlotte two days -- a time-critical

 11 business and particularly apparel coming out of

 12 Charlotte, going down into South Florida, for both

 13 Crowley and Seaboard, who are heavy in the garment

 14 business, the 807 business.

 15 As far as being prepared for the future,

 16 we have been working very, very closely with the

 17 ports developing infrastructure. And again, as

 18 was mentioned earlier, we've been favored in

 19 Florida. Regardless of the transgenesis in the

 20 federal government, the state government has been

 21 very good to us, and we also have been working

 22 very closely with the ports in infrastructure
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 1 development. We are now on dock at the Port of

 2 Miami, and at the end of last year, we opened up

 3 our first spur on the Port of Miami, and now, at

 4 the end of September, we have 9,000 feet of

 5 operating track on the Port of Miami. This has

 6 incredibly improved the efficiency of the vessel

 7 services there and the ability to eliminate that

 8 crosstown trade to get to the rail. We load the

 9 trains right there. It's simply a move from the

 10 marine terminal onto the track, onto the train.

 11 It doesn't get grounded, and so it moves out very

 12 quickly, very efficiently.

 13 Seaboard Marine is using that right now

 14 for all of their business, and they're heavy in

 15 the garment business, as I mentioned, and move

 16 several high-volume trains northbound to

 17 southbound in a week to service that business, and

 18 they are now appreciating a great savings in

 19 reduced trucking costs, reduced use of trucking,

 20 and certainly have gained efficiencies on the

 21 port.

 22 We have the same situation in Port
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 1 Everglades. I don't know if Steve is still here

 2 or not. Steve, we've been watching, and we know

 3 it's been a long, long road for you guys, and the

 4 goal line keeps getting stretched out, but we

 5 think you're in the red zone, and we think you're

 6 going to be very close in the very near future to

 7 get that infrastructure completed. We appreciate

 8 the fact that you worked so hard initially with

 9 the railroad. We now have and opened this spring

 10 a 42-and-a-half-acre, state-of-the-art domestic

 11 and intermodal container transport facility

 12 adjacent to Port Everglades. It has both a

 13 domestic gate, and it has an international gate

 14 that opens up directly onto the port, providing

 15 similar efficiencies, and proceeding down the Port

 16 of Miami.

 17 The northern gates, the domestic gates,

 18 there are four gates, two in/two outbound. These

 19 are fully automated with optical readers, and the

 20 trucks are able to get in and out in 15 minutes

 21 and the reason why that is, they go through the

 22 optical readers, everything is scanned, they know
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 1 who the truck is, the billing's already in the

 2 system, they go to the kiosk, pull the ticket, it

 3 tells them where to drop what they're pulling in

 4 and where to pick up the next.

 5 All our terminals are fully mounted on

 6 wheels, so there is no lifting or sitting or

 7 waiting, no defective chassis, bring it over here,

 8 and some are loaded on, so it's very quick. We do

 9 the same thing in the international gate. We run

 10 seven gates. And the reason we have an extra

 11 gate, because we have one gate that can go in

 12 either direction, depending on how the traffic

 13 flow is at the particular time of day, whether

 14 it's inbound or outbound traffic, so great

 15 flexibility there.

 16 And again, that opens immediately onto

 17 the port. Crowley's terminal is right there,

 18 another big player, another major customer of

 19 ours. They have also been able to reduce their

 20 reliance on truck capacity, and they have also

 21 improved their efficiencies and reduced costs

 22 because of this capability.
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 1 The other thing it's allowed us to do is

 2 open new markets. By having on-dock rail at the

 3 Port of Miami and having a rail gate at Port

 4 Everglades that opens onto the pier, we are now

 5 able to service that huge market in Central

 6 Florida. We have a ramp at Cocoa. By having

 7 these facilities, we eliminate the front-end

 8 crosstown dray. That doesn't exist anymore. It

 9 goes right on the train, goes up to Cocoa. Cocoa

 10 is 35 miles from Orlando.

 11 And that is growing very rapidly for us

 12 and, again, opens up new markets. It does a

 13 couple of wonderful things. It takes truck

 14 traffic off the roads in a highly-congested

 15 corridor in South Florida, and so that's another

 16 piece of this is reducing congestion.

 17 Another thing that we're doing is we've

 18 just purchased 44 new General Electric (GE) Tier 3

 19 locomotives that are going to meet the

 20 Environmental Protection Agency (EPA) standards

 21 going forward. The nice thing -- they will be

 22 delivered in the first quarter of next year. The
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 1 nice thing about these is they are also

 2 convertible to liquid natural gas (LNG). We are

 3 working with GE, and they have conversion kits

 4 that are going to allow us to run 80-percent LNG

 5 and 20-percent diesel. We also have the

 6 capability of switching back to full diesel,

 7 because these are 30-year assets, and we never

 8 know, in ten, 15 years, what that market's going

 9 to look like, so we have to have flexibility.

 10 Now, we think that's going to make us even more

 11 friendly environmentally, with fewer emissions,

 12 and can certainly create a lot of efficiency and

 13 reduced costs.

 14 So we think we have a lot of good things

 15 going on, and we see a bright future. We think

 16 we're prepared for what's happening now, and we

 17 are looking for and excited about opening the new

 18 Panama Canal, because we think -- we're expecting

 19 to see large vessels come in. It's one thing to

 20 have -- get the dredging done, and congratulations

 21 to the Port of Miami. They will be the first port

 22 south of Norfolk in 2016 that can handle those
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 1 larger vessels, and we fully expect that the

 2 8,000-plus twenty foot equivalent (TEU) vessels

 3 will start cascading from the Suez service and

 4 start coming through the outer water up through

 5 the Panama Canal, and we think that will be --

 6 that impetus to do that will be even greater with

 7 all the issues going on in Southern California

 8 right now.

 9 I just spent some time in Asia talking

 10 to the Asian steamship lines. They are very, very

 11 concerned and are looking for alternatives, and

 12 certainly, they're looking at the Southeast ports

 13 as an alternative.

 14 COMMISSIONER KHOURI: Thank you.

 15 MR. WARREN: Well, good morning. My

 16 name is Carl Warren. I'm director of ports and

 17 industrial development for CSX Transportation,

 18 based in Jacksonville, Florida. I focus on the

 19 East Coast ports, as well as industrial

 20 development in Virginia and North Carolina, South

 21 Carolina, and Georgia.

 22 My comments actually are going to sound
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 1 a little bit like Norfolk Southern's in that we

 2 have very similar footprints, and I think from the

 3 perspective of the network issues that the eastern

 4 railroads have encountered, they look very

 5 similar.

 6 In our case, clearly, the energy

 7 Renaissance, both in terms of crude oil and things

 8 that we move related to fracking, pipe, frack

 9 sand, all that kind of stuff, has had a major

 10 impact on our northern network. We have

 11 subdivisions outside of Chicago which, over the

 12 past six months, have seen increases of 35 percent

 13 in volume, which, for a rail operation, is a

 14 tremendous stair step to have to overcome.

 15 Typically, on our system overall, we

 16 usually plan for the general activity level to

 17 increase by about two-and-a-half percent, and so

 18 what we have found in the last few months is that

 19 we've had to respond very quickly to system levels

 20 which are now up 9 percent overall.

 21 And where the rubber hits the roads on

 22 those things is really in three areas: One is in
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 1 terms of hiring more crews, the other getting more

 2 locomotives, and the other getting additional line

 3 capacity in place.

 4 So if you were to look at a map of our

 5 line capacity projects, not surprisingly, you'd

 6 see a lot of them in the northern corridor between

 7 Chicago and New York. You would also see a couple

 8 of projects coming into the Southeast, especially

 9 for our line that comes out of Chicago.

 10 The trick, of course, is that when

 11 you're building sidings and double track, the lead

 12 time for those things can sometimes be 12, 18

 13 months, sometimes longer, to get that work done,

 14 so capacity is usually the last thing that you can

 15 bring up to speed quickly.

 16 In terms of the other capacity, the

 17 crews and locomotives, which, in turn, impact

 18 velocity, when Ed McCarthy was talking about his

 19 concerns with TTX Company railcars, all of these

 20 things play together. If that rail network slows

 21 down, you need more locomotives and more crews and

 22 more cars, and you get to a point where nobody's
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 1 really happy, including us, because we're not able

 2 to do the things for our customers that we need

 3 to.

 4 So when you look at crews in particular,

 5 you're in a little bit better position there,

 6 because you can, within six months to a year, get

 7 a lot of the people that you need back in place.

 8 We're hiring aggressively to achieve that goal.

 9 Locomotives are tough. We've got 300 on

 10 order. We've got about half that order coming on

 11 at the beginning of next year, which will

 12 certainly help, but as you could hear from

 13 listening to the other railroads, locomotives are

 14 in short supply.

 15 Realistically, we think that our system

 16 will be under stress until the end of the second

 17 quarter of 2015. We'd like to think that it's

 18 going to happen sooner, but realistically, I think

 19 that's where we are.

 20 I think the focus of a lot of that

 21 pressure, though, is going to be in the Midwest

 22 and Chicago and the Northeast, so with our focus
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 1 on congestion issues in the Southeast, we're

 2 actually in a fairly enviable position here,

 3 especially as it relates to Jacksonville and

 4 Charleston and Savannah.

 5 If you were to look at our on-time train

 6 originations, you'd see that most of our terminals

 7 in the Southeast are north of 85 percent

 8 originating their trains. There's a couple of

 9 trouble spots. You know, when Brian Taylor

 10 mentioned that he was concerned about his auto

 11 trains in Jacksonville, that was in part because

 12 we have -- the network that serves him goes

 13 through Waycross, where we've had some issues from

 14 time to time driven by resource availability, but

 15 we also see that situation improving as we go into

 16 the peak and into next year.

 17 I would say that, generally speaking, in

 18 the Southeast, we're fluid at all the ports. We

 19 have had issues that we're managing, and I want to

 20 take a little bit of time to talk about that,

 21 because I think that really gets to the heart of

 22 how we can be successful in addressing congestion
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 1 at these locations.

 2 So, for example, in Jacksonville, we

 3 move a pretty substantial quantity of intermodal

 4 traffic through the port, a lot of it focused on

 5 Puerto Rico and the Caribbean. And right now, in

 6 terms of service issues, they're not very

 7 substantial on the intermodal side, but what we're

 8 doing there is we're looking ahead.

 9 JAXPORT has invested in an Intermodal

 10 Container Transfer Facility (ICTF) very close to

 11 its terminals at Blount Island and at Dames Point,

 12 and even though the terminal is under

 13 construction, we're already in dialogue with the

 14 port and the operator to figure out what that

 15 operating plan is going to look like and figure

 16 out how we can best leverage that asset to the

 17 advantage of our mutual customers.

 18 In Savannah, we have a hard-working team

 19 from our short-line partners at Genesee Wyoming,

 20 as well as from the Georgia Ports Authority,

 21 keeping a close eye on the interface between the

 22 Chatham ICTF, which the Georgia Ports Authority
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 1 (GPA) built a few years ago, which we're able to

 2 use, and our Savannah yard, where we partner

 3 intermodal trains from.

 4 There's a group which meets several

 5 times a month. They review where the strengths

 6 and weaknesses are in the operation, and we're

 7 constantly working to improve that product to

 8 deliver the reliability our customers require.

 9 Then finally in Charleston, it's

 10 interesting. When I heard some of the comments

 11 from Bulldog, and I've heard a few from our

 12 customers and the port as well, clearly, the issue

 13 there is the interface at our gate at the

 14 Charleston terminal.

 15 And over the course of the past year,

 16 we've seen a pretty dramatic transformation in

 17 Charleston. We went from having an operation that

 18 was doing about 65,000 containers a year to one

 19 that was handling near 100,000, so an explosive

 20 growth in terms of container traffic, and it

 21 strained our resources pretty badly. We had to

 22 replace three of our lift machines, we had to
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 1 purchase two new ones, and we had to redesign our

 2 operation to be better able to accommodate that

 3 volume.

 4 As we go into 2015, we'll be making

 5 additional changes to the operation there at the

 6 physical plant to minimize -- and this is one of

 7 the things that's been kind of a cause of delays.

 8 We have a stacked operation there. What we're

 9 trying to do is minimize the instances where it's

 10 necessary for our operators to dig deep into a

 11 stack that's got three or four containers in it to

 12 bring that back out for the truckers.

 13 So we think by making some simple

 14 adjustments and continuing to focus on process

 15 improvement at that terminal, that we'll be able

 16 to keep it in line with what the local community

 17 expects.

 18 So I guess what I would take away from

 19 what we're seeing so far is, one, we're fortunate

 20 that we're in the Southeast, because even though

 21 there are some spillover effects from the general

 22 congestion on the network, we're in a pretty
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 1 stable place in terms of capacity, but to protect

 2 that, I don't think I can underscore enough how

 3 important collaboration is.

 4 We've seen this with what we're doing at

 5 an operating level in Charleston and Savannah, but

 6 I also think that looking forward, as we have been

 7 in Jacksonville and have started to also do in

 8 Charleston and Savannah, in terms of planning new

 9 infrastructure and thinking about what the future

 10 looks like and mapping that together is going to

 11 be critical for making sure that we're more

 12 successful as the population grows, the ships get

 13 busier, and we all have more to do.

 14 So that's all I have to say for now, and

 15 thank you very much for your time and attention.

 16 COMMISSIONER KHOURI: Thank you very

 17 much. That brings another whole perspective, I

 18 guess, especially for what's referred to as

 19 discretionary cargo that's going inland, you all

 20 are the folks that make that happen, a great note

 21 of perspective.

 22 Thank you. One more panel, the chassis
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 1 providers, and then we'll break for lunch.

 2 I'm from Kentucky and a horse racing

 3 fan, so we're coming around the far turn and down

 4 the home stretch here for this morning. I have

 5 the group of chassis providers and their

 6 perspectives, and we'll kick off with --

 7 Bernie, do you want to get it started?

 8 MR. VAUGHAN: Sure. Good morning.

 9 Thank you, Commissioner Khouri, for the

 10 opportunity to address this group.

 11 I had the pleasure of also participating

 12 in the panels in LA/Long Beach with Chairman

 13 Cordero and in Baltimore, with Commissioner Doyle,

 14 and I also took -- we run the Los Angeles Basin

 15 Chassis Pool (LABP), it's about 38,000 chassis,

 16 and everyone's aware of all the problems they're

 17 having now, so I had the privilege of taking

 18 Chairman Cordero and some other FMC members on a

 19 tour of the facility. I think they all ran out

 20 screaming. It was quite a dramatic event.

 21 But in any event, I'm the chief legal

 22 officer and executive vice president of
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 1 administration of Flexi-Van Leasing. I've had

 2 that position since 1986, so I've had the

 3 opportunity to participate in and witness some of

 4 the dramatic changes that have occurred in the

 5 chassis leasing business. It's become much more

 6 challenging, I can assure you, from our

 7 perspective.

 8 Flexi's one of three major leasing

 9 companies, our colleagues from TRAC Intermodal and

 10 Direct ChassisLink (DCLI), and also we actively

 11 work with the CCM, the OCEMA chassis management

 12 company.

 13 Flexi's perspective is a little bit

 14 different in the sense that we wear many different

 15 hats in that we're a chassis provider, we're a

 16 chassis leasing company, we contribute to the CCM

 17 pools, and what is unique to us, at least

 18 historically, is we also run service centers in

 19 nine of the major ports, and we deal with four

 20 different unions and have nonunion shops as well.

 21 So we're cognizant of the issues that we face, so

 22 we deal with our union members in the ILA on the
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 1 East Coast and the ILWU and the union mechanics on

 2 the West Coast. We also have depot relationships

 3 with probably 35 independent depots. Some of

 4 those relationships go back decades.

 5 By way of example, in the Southeast,

 6 we've done business -- I saw Vince Marino's here

 7 from Container Maintenance. We've done business

 8 with that company, hopefully mutually

 9 successfully, for the last 20-odd years.

 10 In any event, the issues that are facing

 11 us -- and the business is really in transition,

 12 but the issues that are facing us are somewhat

 13 common. The good news is in the Southeast, where

 14 we principally participate through the CCM pool,

 15 those states are not facing the problems to the

 16 magnitude that we certainly are currently facing

 17 in Southern California, and to a lesser extent

 18 that we face in New York, but I think there's some

 19 lessons to be learned, and clearly, some of those

 20 problems may result in diversional cargo to the

 21 Southeast.

 22 You have your own projected growth, you
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 1 have the issues related to the Panama Canal, and

 2 certainly, the issues on the West Coast may cause

 3 the ocean carriers to rethink some of their

 4 deployments.

 5 I live in New Jersey. I've spent four

 6 days there in the past two months. Half of my

 7 time has been spent in LA/Long Beach sort of

 8 getting yelled at about the LABP pool, and I see

 9 those issues, frankly, continuing in the short

 10 term. I'll talk a little bit later of what we've

 11 done and what TRAC and DCLI have done to try our

 12 share to ameliorate the problem, but the truth of

 13 the matter is there were a whole series of factors

 14 contributing to the situation that now exists.

 15 In terms of understanding the

 16 transition, maybe I'll step back for a second and

 17 just give a one-minute history of where we got to

 18 where we are. When I joined the company, 85

 19 percent of our revenue, up until five years ago,

 20 came from 22 shipping lines, so we basically had

 21 22 customers basically driving our business model.

 22 Now we have over 5,000 customers, principally
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 1 motor carriers, added to the mix.

 2 Those of you who run businesses,

 3 Flexi-Van and our competitor companies have had to

 4 change dramatically to meet that business need,

 5 and the cost structure really just went through

 6 the roof in terms of the cost of doing business.

 7 Flexi-Van is owned by David Murdock,

 8 TRAC by Fortress Investment Company, and DCLI by

 9 Littlejohn, and these investors expect a fair

 10 return on their investment. I can assure you,

 11 while we're private companies, we are all in a

 12 very challenging environment because many of the

 13 costs that we have are absolutely beyond our

 14 control.

 15 Now, when you look in the business

 16 change, what happened was, as everyone knows, the

 17 ocean carriers decided to exit the business of

 18 owning chassis and then subsequently to exit the

 19 business of providing chassis, and I think it's

 20 safe to say that that transition occurred much

 21 quicker than we in the industry thought.

 22 Dave Manning mentioned a complicating
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 1 factor was a lot of these acquisitions were the

 2 result -- or had an ancillary condition of

 3 continued chassis usage, and those agreements, the

 4 individual contracts will be expiring, so the

 5 market will change. Certainly, from our

 6 perspective, we want an open competitive market.

 7 We're happy to compete. We just want a level

 8 playing field.

 9 But in any event, let me talk about some

 10 of the issues that face us as leasing companies

 11 and some of the things that we've done to address

 12 those issues.

 13 As everyone knows, we've switched over

 14 to, essentially, this trucker model, and to the

 15 maximum extent possible, the ocean carriers want

 16 to shift to varying degrees and varying locations,

 17 and it's going to take a while to sort out, but

 18 from what we call the sort of store door merchant

 19 versus carrier haulage, so more and more motor

 20 carriers are becoming our customers.

 21 I should add a caveat to that. Because

 22 of some sort of problems with service and because
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 1 there were some other good driving factors, we've

 2 actually seen a growth in a relatively new

 3 business, and those businesses are -- while this

 4 industry historically, the truckers were

 5 essentially mom-and-pop entrepreneurial

 6 operations, there are a fair number of larger

 7 players, and they have seen it to their interest

 8 either to purchase chassis or to lease chassis, so

 9 we see that market of leasing chassis to motor

 10 carriers as a growing market.

 11 The other is leasing chassis to the

 12 beneficial cargo interests. A good example in the

 13 Southeast is we have a relationship with Lowe's

 14 and Georgia-Pacific, and those are dedicated

 15 fleets. The benefit to the customer is

 16 readily-available chassis. It's a closed system,

 17 so you can put -- and our competitors offer the

 18 same thing. If you want radial tires, if you want

 19 LED lights, if you want airing-up systems, that's

 20 all available, because it is a closed fleet. You

 21 have a lot more control over the quality of your

 22 asset.
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 1 In terms of the issues facing the pools,

 2 the largest cost, by far, to a pool is maintenance

 3 and repair expense. And just by way of example,

 4 in Los Angeles, we have about 37,000 chassis in

 5 this one pool, and our expense is north of $40

 6 million and trending upwards.

 7 The complaint or concern that I have,

 8 and those people report to me, eventually, is

 9 there's a huge disconnect between paying the bill

 10 and having control over the asset. We have huge

 11 challenges getting our inspectors on terminal

 12 having access to the equipment. We have issues

 13 with respect -- and Curtis Whalen and I have

 14 talked about this. You want to provide a trucker

 15 with a safe, roadable chassis when he shows up,

 16 not that most of the work gets done in mandatory

 17 roadability.

 18 I mean, I'm sure most of us travel a

 19 lot. Can you imagine picking up your Hertz rental

 20 car and getting to the gate and they say:

 21 Everything's good to go, except you need a

 22 headlight and two tires, why don't you go stand
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 1 over there? I mean, it just really is a crazy

 2 system.

 3 And I've been at other terminals where I

 4 asked to see the available pile, and I'll see

 5 dozens of lights missing and obvious flat tires

 6 and cut to cord, and they say: Oh, well, we deal

 7 with those issues at roadability. It's sort of

 8 crazy talk.

 9 We're trying to work that through, but

 10 in reality, other than writing a check, since so

 11 much of the work is done on the marine terminal,

 12 we effectively have very little control over that.

 13 We're trying to change that, I mean, it's really a

 14 partnership, but it's really one of our driving

 15 challenges.

 16 The second biggest cost in running a

 17 pool is repositioning cost, and that means moving

 18 bare chassis from Point A to Point B, a nonrevenue

 19 move, but with an attending cost of drayage.

 20 I don't know if Joshua's still here. We

 21 were having huge problems. We move thousands of

 22 bare move chassis every week in the West Coast,
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 1 and we'll ask to have a gate open on Saturday, and

 2 we'll line up 250 moves, and then they'll say:

 3 Sorry. We don't have the manpower. Go away. I

 4 mean, that just happened last week. That's a

 5 huge, huge inconvenience to the trucker and really

 6 wrecks our logistics.

 7 One thing that we've done to try to

 8 ameliorate that is we've gotten agreements from

 9 certain terminals to have a separate lane just to

 10 funnel these chassis in and out. Another thing

 11 is, with limited success, to have extended hours

 12 just to do the repositioning.

 13 And the third thing which most of you

 14 probably are aware of, Flexi-Van, in the capacity

 15 as the manager of the LABP pool, and I should say

 16 Flexi-Van, that pool, we manage it, but TRAC and

 17 Flexi and China Shipping are the contributors. So

 18 as a pool manager, we got together with DCLI, who

 19 also manages pools in the West Coast, and went to

 20 the Department of Justice and recently reviewed --

 21 obtained a favorable business review letter. It's

 22 what people commonly call the pool of pools
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 1 concept, such that a trucker can now pick up

 2 either a DCLI-managed chassis or an LABP-managed

 3 chassis, and all the start/stop locations become

 4 common.

 5 So the trucker can keep the chassis,

 6 instead of having to get rid of a chassis when

 7 he's going to pick up a DCLI-managed pool box, and

 8 furthermore, at the end of his series of trips, he

 9 doesn't have to dead-head a chassis back because

 10 it has to go back to an LABP location, and he's at

 11 a DCLI-managed location.

 12 We think that will be a material

 13 incremental improvement in terms of helping the

 14 trucker out, and furthermore, you run into these

 15 -- in terms of a cost of repositioning, you sort

 16 of have this anomalous situation where LABP was

 17 going into Terminal A to pull 300 chassis out, and

 18 DCLI, for its customers, were putting 200 chassis

 19 back into the same pool.

 20 So since we do not have any trust

 21 amenity, like my good friend Phil, I thought it

 22 was good to go to the DOJ, where I used to work,
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 1 and we had no objections, but it took nine months

 2 to get the letter. Go figure. I don't feel as

 3 bad after hearing about how long it takes to get

 4 an Army Corps of Engineers permit.

 5 But in any event, that process will go

 6 into place early next year. We've retained a

 7 third-party vendor to sort of be the scorekeeper

 8 and to be the arbiter if there's an issue where

 9 one leasing company says it's my motor carrier

 10 customer, and we all have the same customer base,

 11 in general, with the major players. So in any

 12 event, hopefully, that will help out.

 13 And you hear about this problem of

 14 chassis supply. Let me just sort of clue you in,

 15 a couple of things that were also creating

 16 problems. The first was we were getting --

 17 there's a problem with getting accurate data from

 18 the terminals. In some areas, only 40 percent of

 19 our data comes electronic data interchange (EDI).

 20 That creates lots of problems. We never had a

 21 data cleansing department -- it's now our largest

 22 department -- to deal with bad data and make sure
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 1 that the billing is correct.

 2 The issue with these grand alliances, it

 3 wreaks havoc when you have a large ship say: I'm

 4 coming to Terminal A Week 1, and Week 2 I'm in

 5 Terminal B, and Week 3 I'm back in Terminal A.

 6 This sort of moving equipment around like drunken

 7 sailors, that really is a huge challenge.

 8 In terms of the future, in the leasing

 9 companies, both TRAC and Flexi and DCLI, we have

 10 been moving thousands of chassis from -- by way of

 11 example, we're moving 1,000 from Houston now to

 12 the West Coast. That is a huge expense that,

 13 frankly, isn't justified in terms of as soon as

 14 there's a downturn, the terminals are going to say

 15 get these chassis off the terminal, and that's

 16 going to be another problem we'll have to face.

 17 We're all private companies. I can only

 18 speak for Flexi. We are building now in China and

 19 at Hyundai in Mexico and in New Jersey, we have

 20 five-year plans. Without getting into details,

 21 we're going to spend hundreds of millions of

 22 dollars. We compete for capital with Murdock's
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 1 other companies.

 2 And just one final point: There is a

 3 challenge in the pool environment, and Dave

 4 Manning also spoke about this, that you want LED

 5 lights, you want airing systems, you want radial

 6 tires. It's not new. We've been offering that to

 7 our customer base since the '80s. We own Dole

 8 Food Company. They've been running radials and

 9 LEDs forever. The problem or the challenge is how

 10 you introduce those enhancements into a pool

 11 environment.

 12 Now, on these -- like Lowe's, we have

 13 all the bells and whistles, but that's really a

 14 challenge for us to do, and the Driver Vehicle

 15 Inspection Reports (DVIR) program has been a total

 16 failure. You have chassis coming in. We've done

 17 pilot projects where we'll do 250 chassis. The

 18 LED lights for a pool are all gone in two months.

 19 I mean, that's really the challenge, but we're

 20 happy to make the commitment.

 21 An LED light costs $450, and I'm paying

 22 $136 an hour to put a light in at a marine
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 1 terminal in LA. It's not the cost of the radial

 2 of the LED. It's the question of how do you

 3 integrate that, maybe have a dual pricing

 4 structure, but there are clear issues of doing

 5 that in a pool.

 6 Thanks.

 7 COMMISSIONER KHOURI: Thank you.

 8 MR. NOEL: Good morning. My name is Val

 9 Noel. For those of you that don't know me, I

 10 joined TRAC Intermodal about one year ago. Prior

 11 to that, I spent 20 years at CSX, responsible for

 12 terminal operations, rail operations, equipment,

 13 and then my last position at the organization was

 14 the president of the intermodal group.

 15 I left CSX, joined Pacer International

 16 for nine years, and at Pacer International, I was

 17 responsible for the intermodal piece as well as

 18 the trucking operation. In those nine years, I

 19 gained a greater appreciation for what the

 20 intermodal industry was all about from an

 21 owner/operator's perspective and understood what

 22 it meant to be able to make an owner/operator
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 1 profitable.

 2 We ran a little bit over 1,100 power

 3 units at Pacer when I was there, with almost 500

 4 of those based in Southern California under three

 5 different flags, and it was a real eye-opener for

 6 me. It really prompted me to become more active

 7 in the Intermodal Association of North America,

 8 and I've been active with the operations committee

 9 on a task force called Road Ready. And Road

 10 Ready's all about making sure that when an

 11 owner/operator or company driver arrives at a

 12 facility, whether it's a marine facility or an

 13 intermodal facility, sea line or depot, that that

 14 chassis and that box is ready to go. We have to

 15 stop using company drivers or independent

 16 owner/operators as free valet services or free

 17 quality control for our industry.

 18 Even though I started this when I was on

 19 the truck side of the business, a lot of people

 20 say to me: Well, now that you're on the equipment

 21 side of business, I'm sure you're going to change

 22 hats, and my answer to them has been absolutely
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 1 not. I still believe in my heart, the only way

 2 this industry is ever going to get better is that

 3 we all have to work together. Everybody has to be

 4 successful, not just one piece or the other piece.

 5 Everybody's got to be successful for this industry

 6 to ultimately achieve what it needs to do.

 7 What I'd like to try to do quickly is

 8 give you a little bit of overview of TRAC

 9 Intermodal and then talk specifically about some

 10 of the issues or challenges that we have as an

 11 industry.

 12 TRAC Intermodal is North America's

 13 largest intermodal equipment provider and chassis

 14 pool operator. We operate a little over 272,000

 15 chassis, both internationally and domestically.

 16 TRAC offers intermodal chassis to motor carrier

 17 communities. We've got a product that we call

 18 TRAC Connect. We have a little bit over 3,500

 19 draymen and/or trucking companies under contract

 20 and renting about a little bit over 38,000 chassis

 21 a day.

 22 Our customer bases include ocean
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 1 carriers, trucking companies, both large and

 2 small, railroads, NBOCCs and BCOs, and our mission

 3 as an organization is to try to provide the right

 4 chassis at the right place at the right price.

 5 TRAC's one of the largest contributors

 6 to the CCM pool here in the Southeast, the South

 7 Atlantic Chassis Pool, or SACP, and we have a

 8 little bit over 15,000 chassis in this pool.

 9 TRAC also has chassis in the Southeast,

 10 our product called TMEP, or TRAC Marine Eastern

 11 Pool, and those chassis are primarily domiciled at

 12 rail ramps both in Charleston and the Savannah

 13 area.

 14 We're here today to talk a little bit

 15 about what's going on in our industry,

 16 specifically port congestion. From our viewpoint,

 17 there's five contributing factors that I'll

 18 highlight quickly.

 19 First is big ships. While big ships

 20 provide economy of scale and a lower supply cost

 21 for the ocean carriers, they do create issues on

 22 the inland side, and on the ports, with increasing
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 1 spikes in volume, which contribute to equipment

 2 supply, drayage availability, and other operating

 3 dynamics.

 4 Vessel bunching puts an enormous

 5 pressure on the system. The supply chain as a

 6 whole is suffering from pressure of bunching on

 7 intermodal services on the road, rail, and barge

 8 dealing with increased box volumes. What appears

 9 to be overcapacity may, in reality, be

 10 overcapacity that creates a situation that we have

 11 to work together on with the shipping lines and

 12 port operators.

 13 Number three, alliances between ocean

 14 carriers. The bigger ships encourage broader

 15 alliances to fill vessels in order to achieve

 16 economy of scale. The alliance creates disbursed

 17 operations. By that I mean vessels landing and

 18 container movement across multiple port terminals.

 19 I've already talked a little bit about

 20 what's going on in Southern California. What

 21 originally started as the G6 Alliance at five

 22 marine terminals is now operating out of nine
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 1 marine terminals, so it creates real challenges

 2 for us about moving assets around the port complex

 3 in LA/Long Beach when we originally planned on

 4 five, and it's now nine.

 5 Fourth item that we think is important

 6 is inconsistent operating conditions at many ports

 7 and/or port terminals. There are no standard port

 8 terminal operating hours. Port terminal gates are

 9 opened and closed at different hours at many

 10 ports. Different port terminals use different

 11 handling practices, wheel versus live operations.

 12 Not many operations use an equipment system to

 13 manage when and where containers are available for

 14 drayage. For the most part, drayage is still a

 15 random process.

 16 And then finally, chassis availability.

 17 There are a few primary factors that drive chassis

 18 availability: One, actual fleet size; two,

 19 out-of-service levels; three, chassis supply being

 20 in the wrong location versus chassis demand; four,

 21 the number of days a chassis is used on the

 22 street; and five, the number of days a chassis is
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 1 used on a port terminal.

 2 The actual fleet size can be adjusted to

 3 accommodate many of the operating characteristics

 4 I described, but a variable that is absolutely

 5 critical for chassis availability is the

 6 out-of-service level. When this goes up, the

 7 immediate consequence is fewer chassis available

 8 to the trade.

 9 A few of the key drivers of

 10 out-of-service levels are consistent availability

 11 of chassis mechanics to repair equipment. Chassis

 12 mechanics at times are diverted to perform other

 13 work at the port deemed to be a higher priority

 14 than repairing a chassis. The mechanics aren't

 15 always at the locations where the out-of-service

 16 chassis are.

 17 For instance, in the Port of New York

 18 and New Jersey complex, we have a large capacity

 19 of chassis mechanics at one facility that do a

 20 tremendous job for us with great productivity.

 21 Unfortunately, we have chassis that are trapped at

 22 other marine locations in the complex that don't
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 1 have resources. It creates a real problem for us,

 2 and then as a result, what we wind up usually

 3 doing is flat-bedding chassis from one location to

 4 the other. It adds cost, but more importantly, it

 5 takes dray capacity away from doing pickup and

 6 delivery. To move and bear chassis around creates

 7 huge inefficiencies for our industry.

 8 So what are some of the solutions that

 9 we could look at as organization? Number one, on

 10 the big ships, find ways to mitigate displacing

 11 volume for the big ships. Better inbound volume

 12 forecasting is needed so that we can plan supply

 13 more effectively. Not knowing what's coming

 14 focuses us to be reactive, instead of proactive,

 15 and by that I mean this: I find it amazing that

 16 we wake up each morning in this industry on the

 17 chassis side, and we don't know what consumption's

 18 going to be, so as a result, we look at

 19 historicals.

 20 I'll give you an example. On a Monday

 21 in New York/New Jersey, our normal historical

 22 consumption is 524 chassis. We work every weekend
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 1 in an effort to be able to prep that. This past

 2 weekend, we prepped 844 chassis for Monday morning

 3 open-up. By Tuesday morning, I was sold out. Go

 4 figure. We thought we were going to consume 524.

 5 We consumed almost 900 chassis this past Monday,

 6 and as a result, Tuesday we had some shortages

 7 that we had to react to.

 8 We, as an industry, have to figure out

 9 how everybody in the supply chain knows when

 10 they're looking to come to pick up the cargo. The

 11 way it works today, this random process of just

 12 showing up is a recipe for disaster, in my

 13 opinion.

 14 Second, on the alliance side, again,

 15 better forecasting and communication about volumes

 16 and where ships would be landing would help the

 17 pool manage to adjust the locations of the chassis

 18 supply.

 19 I won't talk about the rest of the

 20 comments that I had because Bernie touched on most

 21 of those, but I'll wrap up real quick by saying

 22 that from a TRAC perspective, we continue to make
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 1 a significant investment in this industry.

 2 We have a refurb program that's going on

 3 currently. We're looking to try to refurb 6,000

 4 chassis this year. We're taking an older 44-foot

 5 marine chassis that was sitting on the sidelines

 6 in what we would call out-of-service status, and

 7 we're upgrading that chassis so that it has proper

 8 integrity and putting LED lights on it, radial

 9 tires, new brakes, basically new plumbing through

 10 the entire chassis. So that's a project that we

 11 started in 2014, and we will continue going

 12 forward into '15 and beyond.

 13 This year we built 4,800 new chassis,

 14 all on the domestic side. We continue to look at

 15 doing that over the next three years. That's

 16 going to be a major investment from our company

 17 standpoint.

 18 And then finally, the one thing that we

 19 have done a fair amount of this year is we have

 20 bought some fleets, and some of those fleets were

 21 in surplus markets, and we've taken those fleets,

 22 at great expense, and we've redeployed those to
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 1 markets where we need them. We've moved almost

 2 2,000 chassis so far off the Pacific Northwest

 3 into the New York/New Jersey marketplace. We just

 4 acquired a recent fleet in the Pacific Northwest,

 5 and we're going to move some of those to Chicago.

 6 And we have a fair amount of chassis in Northern

 7 California that we're trying to repair to move to

 8 Southern California as well. So we're trying to

 9 do everything that we can from a capital

 10 investment standpoint to be able to address the

 11 needs of the marketplace.

 12 I'll turn it over to Phil.

 13 MR. WOJCIK: Thank you, Commissioner

 14 Khouri, for offering me this opportunity to speak

 15 at the forum.

 16 The subject of the forum, supply chain

 17 efficiency and challenges, clearly describes what

 18 we face with chassis. There's been a lot of

 19 publicity about chassis effects on supply chain in

 20 the Northeast and more prominently in LA/Long

 21 Beach, chassis shortages, chassis dislocations,

 22 lack of repaired chassis. The news has not been
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 1 good. I hope that this forum allows the

 2 opportunity to actually look at what seems to be

 3 working in the Southeast and as a prospective

 4 possibly for some best practices.

 5 Consolidated Chassis Management (CCM),

 6 of which -- by the way, I work for Consolidated

 7 Chassis Management. My name is Phil Wojcik.

 8 Consolidated Chassis Management manages

 9 over 140,000 chassis in the US. Our volumes are

 10 pretty impressive. It represents about 13 million

 11 gate moves of chassis annually. We do not cover

 12 the Northeast, and we do not cover the West Coast.

 13 We have over 50,000 chassis in our

 14 regional South Atlantic pool. CCM manages the

 15 stocks and the maintenance and repair of the

 16 chassis that service Savannah, Charleston,

 17 Jacksonville, Wilmington, and the inland regions.

 18 It's been said that ocean carriers

 19 exiting from chassis provision is an underlying

 20 cause that contributes to current ocean terminal

 21 inefficiencies. Chassis ownership has

 22 transitioned in the Southeast, yet we don't hear
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 1 the same comments in the Southeast as we do in

 2 other regions. Clearly, it's not a change in

 3 chassis ownership that adds to inefficiencies.

 4 The reality is that it has more to do with

 5 operating models, and those are continuing to

 6 evolve.

 7 The seasonal surge of cargo is also

 8 mentioned as a common cause of service issues. In

 9 looking at 2013 versus 2014, our Southeast pool

 10 has experienced a 19-percent increase in

 11 movements, while our fleet was actually reduced by

 12 4.8 percent in the last year without having any

 13 major service issues. Is it really a surge in

 14 freight causing problems? That's a question.

 15 Back to the subject matter,

 16 efficiencies. Service levels, the gate-to-gate

 17 turn time for load to load in Savannah and

 18 Charleston, our two largest locations, are

 19 consistently under an hour. Wait times outside

 20 the gates are minimal.

 21 CCM measures service levels at all our

 22 locations. Year-to-date, we have successfully
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 1 provided chassis when and where they are needed at

 2 a measure of 99.92 percent of the time. We have

 3 had minimal shortages. We communicate with BCOs,

 4 motor carriers, ocean carriers, leasing companies,

 5 ocean terminals, and railroads on a daily basis.

 6 These open channels of communication help us

 7 address the issues before they can occur.

 8 Here are some attributes that we see

 9 that make the Southeast more efficient than other

 10 areas of the country. Number one, port

 11 authorities are service and customer focused.

 12 Service standards are a priority, held at the

 13 highest level. GPA and South Carolina State Port

 14 Authority are operating ports, rather than a

 15 landlord port. For CCM, this eliminates other

 16 layers of stakeholder interests that complicates

 17 the efficiency of the operation.

 18 Number two, port authorities had the

 19 foresight to regionalize a chassis pool many years

 20 ago. They filed an agreement with the FMC back in

 21 2006 that they could discuss, along with CCM and

 22 OCEMA, in establishing a regional pool. They took
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 1 the leap to commonly support one gray chassis pool

 2 in the region.

 3 Number 3, a single regional port, for

 4 example, GPA is a great example, is more efficient

 5 than multiple terminals. Chassis dislocations are

 6 minimal. But with over 50 locations where we

 7 balance equipment within the South Atlantic scope,

 8 multiple terminals are manageable when chassis

 9 pool management and communication is developed and

 10 processes developed over time.

 11 Number 4, prior to the South Atlantic

 12 Chassis Pool, GPA was operating with over 10,000

 13 chassis on terminal. At GPA today, we can handle

 14 9,500 gate moves a day with our current

 15 on-terminal stock averaging 2,500 chassis.

 16 Five, at the South Carolina State Port

 17 Authority, chassis are assigned by unit number,

 18 first in/first out. That is the fleet manager's

 19 ideal procedure. Mobile trucks are set up in the

 20 available chassis rows for any minor repairs the

 21 drivers may request, so that they don't have to go

 22 through the roadability lanes.
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 1 We have approximately a 20-minute turn

 2 time on a one-way move at Wando terminal, our

 3 biggest terminal in the Charleston area. This is

 4 a prime example of how the terminal and the

 5 chassis provider addresses the motor carrier

 6 community needs.

 7 No. 6, ports continuing to develop

 8 inland hubs, where short-distance rail alleviates

 9 the need for long-haul drayage and reduces port

 10 gate congestion. The chassis operations model

 11 instituted in the Southeast was a CCM pool

 12 management concept. In this pool, the core

 13 operational features are, first and foremost, gray

 14 chassis fleet operations, and secondly, at no

 15 profit or a cost pass-through. CCM becomes a

 16 single point of contact for all chassis service

 17 and operations.

 18 CCM pool members offer independent

 19 retail model products to motor carriers, ocean

 20 carriers, or others. Rather than depend solely on

 21 market forces, the CCM pool rules instill good

 22 behavior, in other words, adequate supply of
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 1 chassis through incentives and penalties. That is

 2 in contrast to other provision models, where

 3 individual chassis providers may provide service

 4 levels based on their own business priorities.

 5 The CCM model also preserves competition

 6 through its unique offering of customer choice

 7 where shippers, motor carriers, and others may use

 8 a gray pool chassis and select which chassis

 9 provider in the pool it wishes to do business

 10 with.

 11 A single gray pool has tremendous

 12 advantages. Critics contend there is no product

 13 differentiation between chassis providers in a

 14 gray fleet pool, and therefore, the CCM model

 15 sometimes lacks full support.

 16 Lacking product differentiation because

 17 of back room operations is a mental block that has

 18 been overcome in other business models. The ocean

 19 carriers, car rental companies, airlines, and

 20 others have all developed beyond running their own

 21 unique asset operation.

 22 The chassis marketing differentiation is
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 1 not on the equipment itself or back room functions

 2 of a gray operation, but on the company itself,

 3 its customer service, billing accuracy, price, et

 4 cetera. The chassis providers are close to

 5 differentiating themselves, but are not there yet.

 6 Now that we've established that the

 7 Southeast has performed better than others, let's

 8 look at how we can stay ahead of the pack. The

 9 challenges: Although it's not a headline today,

 10 the labor force used to repair chassis in the

 11 South Atlantic is stretched thin. It takes time

 12 to hire and properly train the mechanics. It is a

 13 challenge to increase the labor force that handles

 14 spikes in volumes. Gradual growth is manageable,

 15 but communication needs to improve between all

 16 stakeholders when substantial increases in volumes

 17 are forecasted.

 18 The terminal configurations of rail

 19 facilities and ocean terminals are designed for

 20 handling loaded containers. Most often, there's

 21 been little consideration on yard layout for

 22 chassis operations and improving motor carrier
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 1 efficiency. Improving the physical layout on the

 2 terminal can improve the velocity of repairs and

 3 improve driver turn time. The cooperation enjoyed

 4 with the terminals in the Southeast could be seen

 5 as unique compared to other regions, and this

 6 cooperation needs to continue.

 7 In almost all terminals throughout the

 8 US, the terminal out gate controls are container

 9 based. The lack of validations on the chassis

 10 leads to unauthorized usage, stolen chassis, and

 11 billing discrepancies. This lack of necessary

 12 controls directly affects chassis operations,

 13 stymies the profitability of the chassis retail

 14 business model.

 15 In the current environment, the chassis

 16 providers and chassis pools are still considered

 17 chassis provider agents for the ocean carriers.

 18 As such, until the chassis pools have direct

 19 relationships with the terminals and/or the

 20 terminals adapt more precisely to chassis

 21 management, the chassis provision models

 22 throughout the entire US will still have gaps and
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 1 growing pains.

 2 The lack of a proper inbound inspection

 3 and the lack of motor carriers reporting FMCSA

 4 regulation-required driver inspection reports at

 5 the inbound gate leads to some chassis being

 6 deposited to terminals in an unidentified

 7 condition. About 70 percent of the chassis

 8 returned bare to the terminals are in damaged

 9 condition, without being reported as being damaged

 10 to us. To plug this gap, we've hired additional

 11 labor to check and tag the chassis in the drop

 12 blocks.

 13 The velocity of the operation that we

 14 have at the terminal results in occasional release

 15 of a damaged chassis to the next motor carrier who

 16 comes in, and with motor carrier driver shortages

 17 caused much by the idle time and the hours of

 18 service restrictions, the drivers end up having to

 19 go to roadability, and it slows it down. It

 20 affects everyone in the supply chain. If drivers

 21 would communicate damages to us, we could all

 22 improve their productivity, which is so essential
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 1 to all the stakeholders.

 2 States within the United States --

 3 Alabama, Virginia, West Virginia, South Carolina

 4 -- have allowed heavier container loads through

 5 permits to reach 90- to 100,000 gross vehicle

 6 weight. They never considered the capacity of the

 7 chassis. There's an effective accelerated wear

 8 and tear and potential damage to the chassis

 9 components. Specifically, the typical tires on a

 10 chassis are not made to repeatedly handle this

 11 weight. In the future, before changes to existing

 12 regulations are enacted, more investigation should

 13 be made by the regulators, who are the

 14 stakeholders.

 15 There is a reluctance of chassis owners

 16 to upgrade chassis to radial tires, LED lights,

 17 mainly radial tires. It sounds very minor, and we

 18 talked about it, about how important it is with

 19 the motor carriers. I'll just summarize this,

 20 because we've gone over this before. It comes

 21 down to when there is a feasible business model

 22 where I see the chassis providers in the retail
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 1 market, because we're just doing the back room

 2 operations -- Bernie and Val run the retail models

 3 up front -- it has to be feasible and a good

 4 investment.

 5 And the transition that we're going

 6 through in the industry, there is -- in many

 7 locations, it doesn't pay to -- it isn't a sound

 8 business investment to do a lot of upgrades in a

 9 pool type of environment. So although physically,

 10 it would take a long time, the whole transition

 11 needs to be more successful all around before

 12 we're going to see a major change in the

 13 investments.

 14 And finally, Federal Motor Carrier

 15 Safety Administration is the agency in charge of

 16 regulating chassis safety. Their recommended

 17 practice is to provide ready rows of chassis on

 18 terminal to lessen the dependency on roadability

 19 repairs. In many terminal operations, it's not

 20 physically possible to have ready rows.

 21 CCM is fully committed to systemic

 22 maintenance inspection programs and has processes
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 1 in place to meet all the federal regulations. In

 2 CCM's opinion, the FMCSA enforcement practices

 3 reaching into on-terminal operations may add a new

 4 challenge to the terminals and chassis providers,

 5 and although it's well intended, it could

 6 negatively affect the productivity of the

 7 terminals by requiring structural and procedural

 8 changes to the terminal operations, thus

 9 potentially adding to the congestion.

 10 Thanks.

 11 COMMISSIONER KHOURI: Okay. Thanks so

 12 much.

 13 Bernie, you had a couple points you

 14 wanted to close with.

 15 MR. VAUGHAN: Yeah, just sort of a

 16 follow-up.

 17 At the end of the day, we take our cost

 18 structure, we take a model, and it's reflected in

 19 the pricing. And I can't -- Phil touched on it.

 20 This lack of gate control is really adding all

 21 kinds of unreasonable and unnecessary costs.

 22 We're in a container center market now, and
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 1 there's really not much focus on the chassis.

 2 There needs to be more focus on the chassis.

 3 The industry, the leasing industry, has

 4 developed sort of a red light/green light in terms

 5 of stopping a trucker, an unauthorized trucker.

 6 It hasn't been implemented for a whole variety of

 7 reasons, but as a consequence of that, you have

 8 all these unauthorized truckers getting access to

 9 chassis.

 10 In the worst case, in Southern

 11 California two years ago, there was an organized

 12 crime ring that stole roughly $2 million worth of

 13 chassis, 99 percent out of rail yards, because of

 14 the lack of control, and established chop shops.

 15 Law enforcement didn't have sufficient resources.

 16 We hired our own private investigators, and then,

 17 after a month of work, caught these guys, and

 18 they're now in jail, but all those costs

 19 eventually will filter through to the pricing

 20 model.

 21 And this lack of gate control creates

 22 additional credit risk for us and a liability
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 1 risk. In terms of credit risk, Flexi-Van had to

 2 up its bad debt reserve by 600 percent in the past

 3 two years. And secondly, because of the liability

 4 risk for these few bad apples, we had to buy a

 5 supplemental $50 million insurance policy. All

 6 those added costs eventually will percolate into

 7 the rate. So gate control is something which

 8 doesn't get headlined, but I think is a huge sort

 9 of hidden driver of our cost.

 10 And then the final thing, and you

 11 touched on it, it's a crazy system. You set up

 12 the deal where chassis comes off hire, and there's

 13 supposed to be a DVIR. Someone's supposed to have

 14 identified this chassis as being damaged. We got

 15 five DVIRs in a year, the first year in operation,

 16 and maybe it's double that now.

 17 So you have this crazy situation where

 18 mobile trucks fan out on the terminal looking for

 19 work to do, and, of course, when the driver -- and

 20 you have to be practical. The mechanic has to get

 21 his hours, so he stops, and he's going to get his

 22 hours, you know. It's absolute lunacy that these
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 1 guys have to just go out into the wasteland to

 2 find chassis to fix. That really needs to change

 3 because it's just a crazy system.

 4 Thank you.

 5 COMMISSIONER KHOURI: Thank everybody

 6 this morning. I appreciate it.

 7 We're going to break for lunch. We're

 8 going to start at 1:45. We have Mr. Riley, with

 9 the ILA, will do a presentation, then we'll hear

 10 from the shippers and some logistics providers at

 11 2:00, and then what I hope will be a robust

 12 discussion, we have plenty of time for open public

 13 comment, discussion, open mic. I hope those who

 14 have done presentations this morning, their

 15 schedule allows them to come back this afternoon

 16 and perhaps be ready to respond to questions from

 17 the floor.

 18 So thanks again. See you at 1:45.

 19 (Recess)

 20 COMMISSIONER KHOURI: For a bunch of

 21 logistics guys, we're going to start on time --

 22 and ladies, excuse me. Thank you all again.
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 1 Thank you for coming back to the afternoon

 2 session. And our first panel is a representative

 3 from labor, Mr. Ken Riley with the International

 4 Longshoremen's Association (ILA). So take it

 5 away.

 6 MR. RILEY: Thank you. I thought I was

 7 participating on a panel, but I guess I'm it.

 8 Well, I want to talk about the

 9 challenges facing labor, because there are some.

 10 And I'll primarily be speaking about, I guess we

 11 call it the longshore side of the industry, not

 12 the maintenance, not clerical. Clerical is a part

 13 of it. And I will primarily be speaking about

 14 Charleston, because that's where I reside. That's

 15 the workforce that I manage, even though I'm

 16 familiar with others in this region, because we

 17 operate under a district contract, the South

 18 Atlantic District contract, that covers North

 19 Carolina, South Carolina, Georgia, Jacksonville,

 20 and Tampa. The ports south of that, from Cape

 21 Canaveral down to Miami, operate under another

 22 regional contract, South Florida Ports. And so
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 1 our contracts, while they're similar, they're

 2 distinctly different.

 3 So the reason why labor is experiencing

 4 challenges during these times is because of what

 5 we are required to do. We are required to provide

 6 a well-trained, well-skilled workforce on a

 7 temporary basis, under short notice, during down

 8 times, and during peak times. And coupled with

 9 that is that, now, almost every single position

 10 that we cover, there is mandatory certification

 11 and training. In a typical 22-men container

 12 operation, there is only three positions that you

 13 can possibly hold in that operation that does not

 14 require some type of training, special training,

 15 or certification. There is a tremendous challenge

 16 of maintaining an optimum level of manning.

 17 We are no more than an organized temp

 18 service. You may order as many men and women you

 19 need for an operation today, one employment, or up

 20 to 200 men and women today. Tomorrow, they may

 21 only need two, or they may call tomorrow and say

 22 they don't need anyone. So how do you maintain a
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 1 workforce ready for peak times in that kind of

 2 environment?

 3 There are workers with little to no

 4 seniority that may have been out here only a

 5 couple of years, versus some that have been out

 6 here for 20, 30, 40 years. Certainly if there is

 7 a downturn in business, those workers with

 8 seniority will probably still have enough work in

 9 the port to maintain a decent living, and they

 10 will remain in the workforce. Others with less

 11 seniority will have to move on to other things and

 12 find jobs in order to support their families.

 13 Therefore, we lose a tremendous amount of those

 14 workers. So as the economy rebounds and the

 15 borrowings rebound, as they are right now, when

 16 you need these workers, they are not readily

 17 available. They have gone on to other employment.

 18 And whereas they may be able now to come back and

 19 pick up a day or two, it's not enough to sustain

 20 their families. Just recently here in the Port of

 21 Charleston, about a year and a half ago, we were

 22 experiencing labor shortages to the tune of maybe
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 1 20 to 30 workers a week. And that was becoming

 2 consistent. And no one wants to lose those jobs.

 3 And certainly the carriers want their ships in and

 4 out on time. They don't want their vessels

 5 working short of labor. So we were met with the

 6 challenge of having to bring new workers into the

 7 industry.

 8 Well, the only thing, if it's only 20 to

 9 personnel short, you can't put out an open

 10 application for just 20 to 30 workers. So my

 11 members and I, we got together in a meeting and

 12 tried to figure out how many people we were going

 13 to bring in. Some wanted to bring in about 200.

 14 Well, how do you have open enrollment and narrow

 15 it down to 20 workers? Almost impossible. In our

 16 industry, most of us have second and third

 17 generations that are longshore workers. Our

 18 family members brought us down. So every one of

 19 those members sitting in that room had at least

 20 two siblings or sons or daughters that were

 21 welcome to come into the industry if the

 22 opportunity was there. So if you multiply that by
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 1 about 700 members, you're talking about 1400

 2 applications that you have to process. We opened

 3 it from Monday to Friday. 1950 people came down.

 4 We processed 1950 applications. We probably

 5 netted about 1300 new workers.

 6 Now, that puts a very significant strain

 7 on the resources that our employers have for

 8 training. So now you have to, first, before they

 9 can even enter the port's facilities, they have to

 10 be HAZMAT'd. They have to have their

 11 Transportation Worker Identification Card (TWIC).

 12 They have to, in Charleston, have a physical,

 13 hearing, drug test, you name it, you name it, you

 14 name it.

 15 And then once -- before you can operate

 16 a truck, to be certified, before you can go

 17 onboard the vessels to go up and unlock the locks,

 18 you've got to be certified. To move the bins that

 19 hold the locking mechanism on the dock, you have

 20 to be certified.

 21 So like I said, there are only three

 22 positions where once you have met your HAZMAT and
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 1 all your training and your testing, that you can

 2 possibly hold without certification. And you'll

 3 have to sit there and wait for the job to even

 4 have to go vacant until you actually receive that

 5 certification.

 6 So there are significant challenges and

 7 pressure being put, not only on labor, but on our

 8 employers who have to provide those training,

 9 because, you know, training is expensive. There

 10 is a cost associated with that. And when you

 11 provide the training to so many people, only to

 12 lose 50 to 60 percent of those people to other

 13 industries, moving on, that's pretty significant.

 14 And that's the kind of challenges that we are

 15 facing.

 16 So the only way we can possibly maintain

 17 a suitable workforce is that the work must get to

 18 a level where it's consistent. Consistent work

 19 means consistent labor pool. Without that, as the

 20 work fluctuates, so does the workforce. But

 21 certainly if there is a surge in work all of a

 22 sudden, we're going to be caught short.
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 1 That was not the case prior to 9/11,

 2 because prior to 9/11, you didn't have to have all

 3 these credentials. I can simply call a neighbor

 4 and say, what is your son doing today? Can you

 5 send him down? What's your daughter doing today?

 6 Send them down. We need them. On a peak day,

 7 find who may be off from work that day. That's

 8 not the case anymore. If they don't have those

 9 credentials, then it's impossible for them to

 10 enter the terminal or to get on any piece of

 11 equipment or fill any job category.

 12 So someone with a Commercial Driver

 13 License (CDL) may not be driving a truck anymore.

 14 Can they come onto the dock and drive a truck?

 15 No. You have to meet the certification approved

 16 under the Collective Bargaining Agreement between

 17 the management and labor. Whether the person is

 18 transporting from another port, can you bring your

 19 credentials with you? No, you have to still meet

 20 the criteria established in that particular port.

 21 So those are some of the challenges that

 22 we face in order to keep track with the volumes to
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 1 be able to service our customers in the most

 2 efficient manner possible. So while we actually

 3 do quite well, it is a significant challenge.

 4 So that's pretty much what I have to say

 5 in short order. But I'm certain I'll be around,

 6 too, if there are questions.

 7 COMMISSIONER KHOURI: Okay. We've got a

 8 couple of minutes. Does anyone want to do a

 9 question?

 10 MR. WHALEN: Actually, it was a very

 11 excellent presentation, and I guess maybe I just

 12 missed it in the past. I never heard the

 13 description about the temporary hiring nature of

 14 it, which really does put certain things in

 15 perspective. But given the need and desire to

 16 sort of have a more balanced flow, projective flow

 17 of work, do you ever engage the terminals in

 18 issues like the bunching of ships where you get

 19 feast or famine? I'm with a trucking industry,

 20 and we have a big problem with that, because all

 21 of a sudden, everything arrives. They try to

 22 clear the port, they can't do it in a set period
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 1 of time, so fees start generating, and everybody

 2 gets backed up. So with the union's persuasive

 3 nature in negotiations, do you ever get involved

 4 with the terminals on this?

 5 MR. RILEY: Not on that issue.

 6 SPEAKER: Can you start?

 7 MR. RILEY: Certainly. We do have

 8 collaborations. We consider ourselves a part of

 9 the overall maritime community. We realize that

 10 port issues impact us. So if there is some input

 11 we can have, a suggestion based on our experience,

 12 we certainly offer that, yes.

 13 COMMISSIONER KHOURI: And for the court

 14 reporter, that question was Curtis Whalen. And

 15 for people who do come in with questions later, if

 16 you just identify yourself for the reporter. But,

 17 thank you, Curtis, for the question. All right.

 18 Thank you so much. I appreciate it. Like Curtis,

 19 I learned something here too.

 20 All right. 2:00, and we're one minute

 21 ahead of schedule. Shippers and logistic

 22 providers.
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 1 These are our shippers and logistics

 2 providers panel. Again, as you start, just

 3 introduce yourself for the benefit of the reporter

 4 and the crowd. So, please, you're first up. Let

 5 her rip.

 6 MR. PISANO: Thank you. Hi, good

 7 afternoon. I prefer to stand to give my

 8 presentation, if you don't mind. Otherwise, if it

 9 doesn't go well, somebody might give me the excuse

 10 that I was sitting on my brains.

 11 So let me just introduce myself. Good

 12 afternoon. My name is Don Pisano. I am president

 13 of American Coffee Corporation of Jersey City, New

 14 Jersey. We are importers of green coffee beans,

 15 which are the raw coffee beans that are imported

 16 and distributed to the manufacturers here in the

 17 United States for roasting, grinding, packaging,

 18 and distribution. We actually only just recently

 19 starting bringing significant volumes of coffee

 20 into the Port of Charleston. So things are going

 21 fairly well so far.

 22 I'm on the board of directors of the
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 1 National Industrial Transportation League (NITL),

 2 and I chair its Ocean Transportation Committee.

 3 I'm also on the board of the Green Coffee

 4 Association and chair its Traffic and Warehouse

 5 Committee. So on behalf of both organizations,

 6 I'd like to express our appreciation to the

 7 Federal Maritime Commission for organizing and

 8 sponsoring these forums which allows all

 9 stakeholders the opportunity to provide

 10 constructive dialogue. We do think these forums

 11 have raised the level of attention to the problems

 12 and are an important part of the process to

 13 eventually achieve a long-term solution.

 14 You know, I often think of -- I am a big

 15 fan of Ronald Regan, and he often used to say:

 16 One of the most dreaded words to hear from anybody

 17 was "I'm from the government, and I'm here to

 18 help." I think there is a tremendous exception

 19 here for the Federal Maritime Commission. The

 20 Federal Maritime Commission is here, and they are

 21 here to help, and we welcome them. So thank you

 22 very much for hosting these forums.
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 1 Everyone here knows firsthand of the

 2 significant congestion that our ports are

 3 experiencing around the country. So I'll forego

 4 stating a litany of issues, and, instead, try to

 5 simply provide the shippers' perspective.

 6 Although the congestion and delays

 7 affect everyone, it is actually the shipper who

 8 pays the freight bills which covers the cost of

 9 the ships, the equipment, the terminal operations,

 10 the drayage, and many cases, unfortunately,

 11 demurrage and detention charges. As an importer,

 12 I always consider our drayman as a direct

 13 extension of ourselves, the shipper. Whether

 14 handling import or export cargo, the drayman is

 15 really the shipper's representative at the ocean

 16 terminals. So what affects the drayman affects

 17 the shipper.

 18 A significant problem with our industry

 19 and the structure of it is the fact that there is

 20 no real commercial relationship between the

 21 shipper or his drayman and the terminal operator

 22 upon whom we both depend for efficient
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 1 performance, although neither of us has any means

 2 to impact its level of service.

 3 The ocean carriers have been aggressive

 4 in the pursuing of profitability by driving down

 5 our unit cost and have more than tripled the size

 6 and capacity of their vessels over the years.

 7 There have been tremendous efforts to accommodate

 8 these ultra-large vessels by port authorities,

 9 terminal operators, the Army Corps of Engineers,

 10 and even of course the lowly taxpayer, who has

 11 very little to say in how his money gets spent.

 12 But, clearly, too little planning and investing

 13 has been made to ensure the efficient throughput

 14 of the cargo out of the terminals and into the

 15 commerce for which it is intended.

 16 Terminal operators are provided

 17 inadequate resources to their gate operations.

 18 Local states and federal governments have failed

 19 to direct funds in developing direct links from

 20 our ports to the interstate highway system and on

 21 to an on-dock rail where it is obtainable.

 22 The current capacity crunch has
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 1 stimulated a lot of attention, and everyone has

 2 their opinions about the causes and even some of

 3 the solutions. But some of them are truly absurd

 4 and should be given little credence. To be clear,

 5 port congestion -- and I will say that some of the

 6 comments that I heard here today seem to be a lot

 7 more directly associated with the problems and not

 8 really casting blame on anybody. And it seems

 9 like we're -- the panel today is seriously

 10 interested in collaborating and reaching

 11 solutions. But over the past couple of months,

 12 what we've seen in both the press and at other

 13 types of forums have been people making comments

 14 which I think that are absurd, and they should be

 15 responded to.

 16 So to be clear, one of the comments that

 17 I thought was ridiculous is that port congestion

 18 is due to shippers demanding lower freight rates

 19 so the carriers are struggling to survive and meet

 20 the service demands. The carriers made their own

 21 decisions to invest in ultra-large container

 22 vessels increasing their capacity well prior to
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 1 the demand ever materializing. They've done this

 2 years ago. The decisions were made maybe eight,

 3 nine, ten years ago. So that's not on the

 4 shippers. That's on them.

 5 The freight levels are mostly impacted

 6 by supply and demand, just like most any other

 7 business. Surely carriers know this well, since

 8 they have demonstrated their ability over the

 9 years to manipulate capacity when rates fall below

 10 acceptable levels. It's the war of supply and

 11 demand. It's basic -- it's business dynamics.

 12 Bringing in extra high volumes on a

 13 single ship well beyond the terminal's current

 14 capacity to handle smoothly is something they

 15 themselves need to better coordinate with the

 16 terminal operators together. So it's not the

 17 shipper's fault for the poor economics or

 18 planning.

 19 Another misdirection of blame for port

 20 congestion is a lack of truck drivers. The lack

 21 of truck drivers is an effect of the situation.

 22 It's not a cause. Any day you can see lines of
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 1 draymen waiting outside the terminals trying to

 2 get in to pick up or deliver their loads. The

 3 draymen in fact may be fleeing the industry, but

 4 that is due to their inability to get in and out

 5 of the terminal in a timely manner so that they

 6 can make a living. And who can blame them.

 7 Improving the terminal and gate operations now

 8 will go a long way in preserving the truckers we

 9 still have and hopefully reverse the trend which

 10 is now heading into a crisis.

 11 And, finally, one of the most ridiculous

 12 suggestions I've heard over the past several

 13 weeks, and it has been in print, is that current

 14 free time is too generous, and that causes the

 15 backup at the terminals. And I really have to

 16 say, I don't know any shipper that really looks to

 17 store their cargoes at the marine terminals. They

 18 really just can't get to them. What we have now

 19 is that the shippers are being penalized for

 20 demurrage charges for the terminal's own lack of

 21 efficiency. If anything, the lack of terminal and

 22 equipment free time may in fact contribute to the
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 1 congestion, as there is little allowance for

 2 schedule accommodations.

 3 So making false arguments, whether in

 4 conferences or to the media, I don't find it to be

 5 constructive, and it only serves as an impediment

 6 to really finding a solution, and it only serves

 7 as fodder for the media.

 8 So from a shipper's perspective, what we

 9 need is for the carriers and the terminal

 10 operators to understand, that cargo is king. They

 11 are in business to serve the beneficial cargo

 12 owner who ultimately pays the bills. They are not

 13 in business to simply serve each other.

 14 We need labor to be part of the solution

 15 and to work with management to get us through the

 16 more difficult periods particularly of abnormally

 17 high volumes. We need U.S. Customs in all

 18 examination sites to be completely electronically

 19 integrated and eliminate any need for a hard copy

 20 premise to transfer or other documentation. We

 21 are well beyond the need for paper documentation

 22 between either the carriers, the terminal
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 1 operators, and U.S. Customs or other government

 2 entities. It just bogs down the process and holds

 3 back containers from moving out to the set exam

 4 sites or other dock examination sites. And it's

 5 -- you know it's silly at this point.

 6 We need gray chassis pools where they

 7 currently don't exist. I think that where you've

 8 seen gray chassis pools, most of the participants

 9 believe that it has improved situations

 10 tremendously and really should be the model for

 11 the nation.

 12 We also need to factor in systems that

 13 are designed to allow for street turns so that

 14 truckers can use the same import equipment,

 15 perhaps just been recently unloaded, for an

 16 outbound export load, as long as the equipment is

 17 compatible.

 18 In longer term, we need to influence

 19 investment towards our gateways to improve the

 20 traffic patterns in and out of the port areas to

 21 provide easy access to rails, state, and the

 22 interstate highways.
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 1 Again, I thank the Federal Maritime

 2 Commission, Commissioner Khouri, and all of you in

 3 attendance for your time. Thank you.

 4 COMMISSIONER KHOURI: Thank you.

 5 MR. MORELLI: I'm going to stay seated.

 6 Thank you, Commissioner Khouri, for having us.

 7 This has been a great day for me. My name is Andy

 8 Morelli. I am with Rayonier Advanced Materials.

 9 We are a high-end specialty chemical pulp

 10 producer. I'll try to keep my comments brief. I

 11 didn't prepare anything formal. I have some notes

 12 I had written down before I came the other day. A

 13 lot of what I was going to say we've kind of heard

 14 today. I also think if you had 20 different

 15 shippers up here, you may hear 20 different

 16 formulations to some of the same things that Don

 17 just mentioned. So I agree with a lot of what he

 18 said, put it that way.

 19 One thing, a couple of notes I had in

 20 there, key, better communication. You mentioned

 21 it in your comments there with electronics. I

 22 think if everybody is communicating a little bit
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 1 better, you know, with when the vessels are

 2 showing up, when they're leaving, late gates, no

 3 late gates, when they're closing, things like

 4 that, that would really help turn times.

 5 We heard a lot about the trucking

 6 companies today. They're all struggling. We all

 7 know that. Why are they struggling? There are a

 8 myriad of reasons. Most drayage are short hauls;

 9 right? So these guys are making their money on

 10 turns. If they can't get one, two -- you know,

 11 two, three, and four turns, depending on location,

 12 they don't make any money.

 13 Shippers like us, we are being tasked to

 14 do more with less, as everybody else is doing.

 15 Right? You're doing more with less, and you're

 16 trying to do the more with more efficiency. So I

 17 think working together like we're trying to do

 18 today to raise some of these concerns, how do we

 19 become more efficient.

 20 Some of the items I have down as what

 21 I'd like to see, I heard -- I think one of the

 22 trucking companies made mention today flexibility
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 1 on the late gates and extended gates doesn't

 2 really help get those turns up.

 3 Equipment, our business is pretty

 4 particular with the equipment. We need relatively

 5 clean equipment, not pristine clean, but clean.

 6 So maybe some separate spots in the terminals that

 7 have general use equipment anyone can take, and

 8 maybe a separate section where it's a little bit

 9 better, because that's a problem when a driver

 10 comes in. They have to inspect their container.

 11 If it's poor, has a bad smell, too much oil,

 12 grease on the floor, they reject it. They have to

 13 get back in line a lot of times, which can take

 14 hours, to get another container. That's a

 15 problem. Why not have a separate section where

 16 they can come in and they know that the box is

 17 probably going to pass their first point

 18 inspection.

 19 That's one of the biggest complaints I

 20 get from our drayage company, is that consistency

 21 is an issue. I think we are lucky in the

 22 Southeast right now. We don't have big delays as
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 1 we're hearing up in the Northwest and the West

 2 Coast. But I do hear from our drayage company

 3 that there is inconsistencies. Some days it will

 4 be an hour, some days it will be two, some days it

 5 will be 30 minutes. It all depends. How do we

 6 get that to be more consistent? Maybe better

 7 communication will help with that.

 8 Other big concerns, I've heard it

 9 mentioned again today, the large vessels, are they

 10 just going to come into the East Coast dumping

 11 large, large, volumes of containers that's going

 12 to congest and convolute the pool as it is now?

 13 The vessel sharing, while it sounds like

 14 a good thing, it can also be a really bad thing.

 15 Is that going to commoditize the export market?

 16 You can only have so many players that are going

 17 to be controlling our freight going across the

 18 world. Maybe some of the smaller carriers will

 19 get booted out, and you won't have as much

 20 competition. That's a little bit of a fear.

 21 With all that said, one of my main

 22 concerns -- one of my main points I wanted to make
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 1 today was all of this is happening right now. The

 2 East Coast is in pretty good position. We know

 3 what is going on on the other coasts. Is the

 4 ports and supporting cast of members that help the

 5 ports, are they getting prepared enough for this

 6 influx of business, and are we taking the right

 7 steps to be ready for the large vessels, the extra

 8 growth?

 9 You know, the State of Georgia is really

 10 pushing growth for their ports, big time, bring a

 11 lot of businesses in. Are they going to be ready

 12 when the channels get deepened and the new vessels

 13 come in? As a shipper, that's a fear to me, that

 14 we're going to be in that situation that the West

 15 Coast is in, four- or five- or six-hour wait

 16 times. Our business can't survive with that. A

 17 lot of facilities run 24/7. We made product we

 18 have to put somewhere. So if you can't get it to

 19 the port, you've got to put in a warehouse or

 20 we're going to put it in your warehouse, and

 21 that's just extra cost.

 22 So I think with that, that pretty much
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 1 ends most of the thoughts I had. I'm really

 2 concerned about the future. I'd really like to

 3 focus today on how we're going to make sure the

 4 Southeast ports are ready for this massive

 5 expansion that we're expecting. And thank you

 6 again, Commissioner Khouri, for having me.

 7 COMMISSIONER KHOURI: Thank you for

 8 coming.

 9 MR. JONES: Good afternoon. I'm Marvin

 10 Jones, International Paper. We are a fairly large

 11 exporter. We ship about 180,000 TEU on an annual

 12 basis. Fortunately for us, about 140,000 of those

 13 TEUs come out of the Southeast. And to be quite

 14 honest with you, we do not have any major issues

 15 in the Southeast due to congestion. We have good

 16 partnerships.

 17 However, the other 40,000 of those TEUs,

 18 we have lots of congestion issues in the Northeast

 19 and on the West Coast that's contributing to

 20 problems with our dray carriers. We've seen in

 21 excess of two-, three-, four-hour turn times at

 22 some ports. Of course that costs us money,
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 1 eventually in rates. And it also costs us money

 2 when we're sitting down and our dray carriers are

 3 having turnover, and they can't keep qualified

 4 drivers. That eventually leads to us having to

 5 give them some type of incentive so that we can

 6 run our business.

 7 For those who do not know the paper

 8 business, it's a continuous process. So all of

 9 our facilities have trailer pools, and it's not

 10 for storage. We don't store. It's really for

 11 surge capacity in order for us, as we're making

 12 our product to come off the line, in order to put

 13 that product in it. So some would say that's a

 14 contributing factor, but our term rates are about

 15 six days, which is pretty darn good for a process

 16 like that. So it's really something that, if --

 17 as we get bigger ships in and especially in the

 18 Southeast where we have the majority of our

 19 product, if we would experience anything the way

 20 we're seeing on the West Coast and on the

 21 Northeast, it can be detrimental to our business.

 22 Other thing we're doing, we have to
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 1 adjust our machines around, which impacts our

 2 customers. We're also sometimes -- well,

 3 fortunately, we have not had to shut down, but we

 4 got close to shutting down our machines before.

 5 And to shut down a paper machine, you're talking

 6 hundreds and thousands of dollars immediately when

 7 you have to shut these things down. We definitely

 8 roll a lot of shipments which impact our

 9 customers, and it eventually catches up with us,

 10 because then our customers will get a lot of paper

 11 at one time; hence, that's an inventory concern,

 12 and trying to smooth out that supply chain has

 13 been very difficult for us.

 14 The equipment issues I think you touched

 15 on is a big deal for us. I've actually been

 16 involved, when we go in to pick up -- and we know,

 17 for example, paper is extremely heavy. We

 18 understand what the International Organization for

 19 Standardization (ISO) specifications are on

 20 containers. We try our best to get those

 21 containers inspected at the ports. Unfortunately,

 22 when you're spending two, three hours in line
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 1 trying to get a container, your driver is

 2 frustrated. You see a box, realistically, that

 3 driver is not going to take that box over to the

 4 maintenance line. That driver is going to grab

 5 that box and hope like heck, by the time he gets

 6 back to the mill, that something is going to be

 7 done.

 8 So I actually tried to debate on what's

 9 the best way to handle this, and actually in

 10 discussions with one of our large carriers about,

 11 hey, what can we do at the ports? I said, this is

 12 costing me anywhere between 500 and a million

 13 dollars a year in repair costs and dray costs. So

 14 I'm sure there is something we can work out to

 15 where it helps both of us, and we'd be willing to

 16 share those costs. So we're in the middle of

 17 talking about those things. I think that helps,

 18 you know, with port congestion as well with those

 19 drivers getting the right boxes, and we're moving

 20 through very well.

 21 The other big impact that we've seen or

 22 the other thing that we're doing is we try to
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 1 split our break bulk volume out. That helps with

 2 congestion. We're about 20 percent right now in

 3 the break bulk side, and we can hopefully continue

 4 around that mark. Our intermodal shipments, which

 5 we consider helping our carriers move boxes back

 6 to the West, at least empties, have been impacted

 7 tremendously on the West Coast. And we're

 8 currently working through that, and we may have to

 9 change that supply chain.

 10 That's really all I had. Again, you

 11 know, appreciate the partnership, and we're

 12 willing to sit down and talk to anyone if there is

 13 anything that we need to do differently. We don't

 14 think that we're -- you know, we know everything

 15 and we're always willing to open up our books for

 16 those that we can and talk about what we need to

 17 do together. We're not out to try to nickel and

 18 dime suppliers, both dray and our ocean carriers,

 19 our partners. We're looking for the long haul,

 20 and I think our reputation states that. That's

 21 it.

 22 COMMISSIONER KHOURI: Okay. Do you all
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 1 want to -- we're definitely ahead of schedule on

 2 this panel. What do you see as your top one or

 3 two, if you had a blank sheet of paper, suggestion

 4 for improvement?

 5 MR. JONES: Wow, put me on the spot. I

 6 would think that maybe some of the ports, I think

 7 they really need to go back and re-evaluate and

 8 look at their traffic flows and look at their

 9 systems and look at the way they're scheduling

 10 vessels in, look at their volumes, and fully

 11 understand what they can handle. And the

 12 difference between what they can handle and what

 13 they think they can handle is a big difference.

 14 And I think maybe they shouldn't bite off so much

 15 until they have the fundamentals down. I think

 16 that's the biggest --

 17 COMMISSIONER KHOURI: My wife has been

 18 telling me that for 30 years.

 19 MR. JONES: I think that's really the

 20 biggest concern. And I think the other thing is

 21 the boxes is a real big concern. I fully

 22 understand that because this box cannot -- you
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 1 can't load paper in it, but you can load lumber in

 2 it or you can load something else. I fully get

 3 that. And maybe we should have separate areas.

 4 And it does cost. It's a labor cost. But when

 5 you put all the cost in it, it's probably going to

 6 save a tremendous amount of money and time when we

 7 all partner together. So that would be my five

 8 things.

 9 MR. MORELLI: I'm trying to think of a

 10 couple of different ones as Marlon was speaking.

 11 I was going to raise the box issue, probably

 12 number one for our particular business. We're not

 13 a paper company, but we're a similar process.

 14 Continuous flow and container integrity is

 15 important. We spend a lot of time on loading

 16 patterns, how to load it correctly so you don't

 17 have these issues. And we spend a lot of money as

 18 well returning the containers to the port because

 19 they made it all the way to our facility, got to

 20 the loading point, and the warehouse loader has

 21 last right of refusal on that box. If it's not

 22 safe, they're going to back out and not load it.
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 1 So we've had brief discussions in the past with

 2 the Port Authority about that. So I would be more

 3 than willing to participated with you, if you're

 4 having any conversations with the ports about

 5 that. We're not as large a shipper as you are,

 6 but we're pretty big.

 7 I guess number two, if I could list two,

 8 maybe the consistency factor. How do we get that,

 9 because it's very inconsistent today, even week to

 10 week with the same vessels, supposedly calling the

 11 same days. We have a part in that as well. We're

 12 the ones bringing the boxes to the ports. How do

 13 we work together to make it consistent? We can

 14 plan shipments for our customers based on any lee

 15 time we want. But when it's not consistent, it

 16 makes it very difficult to service them.

 17 COMMISSIONER KHOURI: When I hear you

 18 say consistency, am I hearing schedule integrity

 19 from the vessel operators?

 20 MR. MORELLI: That's a fair way to put

 21 it, yes, wolf calling and then actually further

 22 out into delivery sections in other parts of the
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 1 world. That's a big factor for us, but trying to

 2 focus more on the Southeast. Thank you.

 3 MR. PISANO: I agree that some of the

 4 comments that were stated earlier, as far as the

 5 inspections of the equipment, whether it's

 6 outbound empty boxes or the chassis, and we spoke

 7 about that earlier, discussion about the

 8 inspection of the chassis. I think that really is

 9 important to get the -- make sure that before the

 10 equipment is tendered to a driver, that the driver

 11 is getting the right equipment, that there is no

 12 reason why a driver should be repositioning stuff

 13 inside the terminal. That's not his job, and he

 14 shouldn't have to do that.

 15 The other thing is, I would say from the

 16 Northeast -- I come from Jersey, so I'm very

 17 familiar with the New Jersey port operations, and

 18 we also do a lot of cargo on the West Coast. And

 19 I see there is a big difference, which I find

 20 remarkable, on the operations of the ports that

 21 are administered by a government or state entity,

 22 such as here in Charleston and other areas,
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 1 Savannah, of course, versus the landlord ports.

 2 It's striking to me because it's one of those

 3 instances where you -- you always hear that

 4 private industry does things so much better than

 5 the government. But why when it comes to port

 6 operations it seems to me as an individual quite

 7 the opposite. It seems like the Port Authorities

 8 that are run by either state entities or

 9 quasi-government agencies are actually much more

 10 efficient, probably because they have the ability

 11 to control it, and they're not competing amongst

 12 themselves. They may be competing among the ports

 13 in trying to get the best operations or best

 14 reputation as the port servicing the industry.

 15 But I think that's quite remarkable.

 16 But I think that some of the other ports

 17 should have radio-frequency identification (RFID)

 18 technology on the trucks so that you can manage --

 19 you know, in our industry, we say you can't manage

 20 it, if you can't track it; right? If you can't

 21 measure it, you can't manage it, and so you've got

 22 to track it. They're able to track the time in
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 1 and outside their own terminal operations. But

 2 what about the two and a half hours that the guy

 3 is sitting outside on the street trying to get

 4 into the terminal in Port Elizabeth or Newark or

 5 out in Los Angeles.

 6 So I think that the technology exists,

 7 and I think that it should be deployed nationwide.

 8 And even in a more efficient port, shall I say

 9 such as in Charleston or in Georgia, why not

 10 monitor it and see if you are falling down, see

 11 where you are this year as far as the lines

 12 outside the gate versus next year or the year

 13 since. So I think the technology exists. And

 14 it's a reasonable cost, and I think everybody

 15 would benefit from that, you know, the shippers,

 16 the truckers, the Port Authorities, and the state

 17 entities that may govern those government

 18 authorities.

 19 So those are my two things. And I would

 20 just reiterate that I think that the gray pool

 21 model seems to be the best model that exists

 22 around the country. And that, I think, should be
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 1 the basis for the models or, you know, through all

 2 the ports that don't have it now, they should

 3 adopt those.

 4 COMMISSIONER KHOURI: Very good. Thank

 5 you so much. Hopefully all of you will be

 6 available to answer questions in case some come

 7 your way too.

 8 We are a few minutes ahead of schedule,

 9 and we've only been at this 45 minutes. I don't

 10 know that we need to take a break. We're ready

 11 for open public comment and discussion, and kind

 12 of -- let me stand up.

 13 I think, rather than me try to at this

 14 point summarize what I've heard so far and try

 15 direct Q and A, I will just comment, there has

 16 been a few words that have just run through all

 17 this morning and this afternoon, and that's

 18 collaboration. And the very last comment,

 19 serendipity, that Mr. Pisano was talking about,

 20 there is technology out there to help us. I was

 21 talking to Brian Taylor and, I think, to Jim

 22 earlier that we have so many disparate parts that
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 1 have to work together. Whether they communicate

 2 with one another or not, I think, it's fair to say

 3 there are parts that aren't talking with one

 4 another. Maybe it's surprising that it works as

 5 well as it does.

 6 Let me just stop with that and see what

 7 questions and comments come up from the audience.

 8 Everyone who has spoken agreed to answer

 9 questions, if you want to direct it to a certain

 10 person. If you want to just make a general

 11 comment, it's all good. And for the court

 12 reporter, again, if you would just identify

 13 yourself when you start. And I open it up, see

 14 how long this wants to go, ten minutes or two

 15 hours.

 16 MS. FIELDS: Hi, Commissioner Khouri.

 17 My name is Jan Fields. I work with John S. James

 18 Company in Savannah. I'm also the National

 19 Customs Brokers & Forwarders Association of

 20 America, Inc.

 21 (NCBFAA) Transportation Committee

 22 chairman. Thank you for holding
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 1 this forum.

 2 One of the questions I'd like to discuss

 3 is when there is an impending hurricane in the

 4 Southeast or there is a storm or a labor contract

 5 or something, we just seem to all be, oh, my gosh,

 6 what are we going to do, what are we going to do.

 7 The carriers, I know you have your intentions

 8 coming in. Are you going to come into the port if

 9 the port is going to be so congested? Is there

 10 some kind of relief for the shippers who can get

 11 their cargo in and out or not face huge demurrage

 12 and huge issues? I realize it's a challenge for

 13 everyone, but it seems like sometimes we're

 14 reactive to it instead of being proactive and

 15 planning and saying, if this happens, this is what

 16 we're going to do. I don't know who that is

 17 connected to. Just a question for discussion.

 18 COMMISSIONER KHOURI: Anyone want to try

 19 and answer that?

 20 MR. NEWSOME: I'm Jim Newsome with the

 21 South Carolina Ports. I think a lot of what you

 22 heard today is that we are more reactive than we
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 1 need to be. We do need to be more proactive

 2 across a lot of fronts. And I mentioned that in

 3 my opening comments. And it's not quite where you

 4 were going, Jan, but, I mean, we -- if you think

 5 we run a terminal -- Wando Terminal has 6000 truck

 6 moves a day. I don't know today what's happening

 7 tomorrow. We go home today, we do not know what

 8 is happening tomorrow. We're a major asset. If

 9 you just step back and think about that, that's

 10 impossible. I mean, that is really impossible.

 11 So we've got to -- I think what we might

 12 take away from this is we do have to plan -- the

 13 reason we run the port is to be proactive. And it

 14 gets people irritated sometimes. But that's the

 15 reality of life. We're an expensive asset. We

 16 have to manage it appropriately. So we do have to

 17 be more proactive, not in isolation.

 18 Hurricanes frighten me -- I don't even

 19 want to talk about it. Hurricanes frighten me in

 20 the port industry. You can just imagine.

 21 Everyone from Hugo that was here -- I wasn't here,

 22 but that's a special case.
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 1 As far as demurrage goes, our view on

 2 demurrage is the lines control that. It's about

 3 their container. Our relationship is with them in

 4 terms of storage. So the lines have to decide and

 5 tell us what they need. And of course we're

 6 reasonable. If we have an extenuating

 7 circumstance, I would not cite many examples where

 8 I don't think we've been reasonable. And I think

 9 people ask us.

 10 You know, you come in to me, like this

 11 morning, and say, wow, I think we've done a great

 12 job here. And then you leave and say, wow, we've

 13 got to do more, we've got a lot more to do. And

 14 that's kind of my view, takeaway as we go away

 15 from here.

 16 MS. FIELDS: And I guess, understanding

 17 from a carrier's point of view, it is hard to say,

 18 okay, there is a hurricane there. I remember one

 19 time I had a call, and there was a hurricane

 20 coming into Wilmington, and the lady was frantic.

 21 "But you don't understand. I have a sale

 22 tomorrow."
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 1 You know, "There is a hurricane coming."

 2 So I realize that you have to take the

 3 precautions. But a lot of times it's like, we get

 4 like, oh, there is going to be this tremendous

 5 port congestion charge that's going to be

 6 implemented. I know they have to file them like

 7 30 days in advance. So there are complications

 8 there. But there is a great variance of when it's

 9 charged, and who is charging it, and who is not

 10 charging it. And the exporters and importers just

 11 have to be -- sometimes feel taken advantage of,

 12 so just from that perspective.

 13 MR. TAYLOR: Brian Taylor, Jacksonville

 14 Port Authority. I would just like to say that

 15 hurricane preparedness and disaster recovery is

 16 all about collaboration, just like we talked about

 17 the different parts of the supply chain working

 18 together. So it's the city, it's the Coast Guard,

 19 it's the port authorities, it's the shipping lines

 20 regularly collaborating on disaster recovery plans

 21 and hurricane plans. I know that's what we do.

 22 I'm sure that's what Jim does and the other ports
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 1 do. And if you do those on a regular basis and

 2 you actually do the exercises and the modeling,

 3 when the actual disaster happens, you're pretty

 4 well prepared. I think a number of the ports, and

 5 I would say certainly Jaxport and City of

 6 Jacksonville, based on the work we do in this

 7 area, I feel that we would be very welcome here in

 8 the event of a hurricane.

 9 SPEAKER: That's true. But if I may,

 10 there is a really good study that came out in

 11 Sandy. I'm retired from the Coast Guard. So what

 12 I wanted to say is, that's true, but there is a

 13 very good study that came from Hurricane Sandy

 14 under the auspices of Florida, New Jersey, New

 15 York, the ports. And basically your question,

 16 which is -- the Coast Guard has studied this, and

 17 the Coast Guard has a complete setup of how to

 18 reconstitute the port. And you're right, it's all

 19 about collaboration.

 20 But what was learned from that study is

 21 that we did a really good job -- I'm not with the

 22 Coast Guard any more, but the Coast Guard did a
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 1 really good job at getting working, partnering,

 2 and getting the port back open. It's the next

 3 stage, which is what you guys are pretty much

 4 focused on here, which is what do you do to get

 5 everything shifting again through the supply

 6 chain. There is not really that aspect in

 7 government that is looking at that, that

 8 coordination piece on getting the goods moving

 9 back and forth through the system again. So

 10 that's a really worthwhile -- but you're right,

 11 sir, on what you're saying with respect to the

 12 port. But as far as from a policy perspective,

 13 looking at that, it's nonexistent; whereas the

 14 Coast Guard had the authority to be able to do

 15 that from its level. There is a report, though,

 16 that you can look at. It has a great follow-up on

 17 that. Tom Wakeman is the author of that.

 18 MR. CERNAK: Steve Cernak, Port

 19 Everglades. I also have a dubious distinction of

 20 bringing a port back to recovery from Hurricane

 21 Ike. I was in Galveston. So demurrage, last

 22 thing on my mind. Last thing on the port's mind.
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 1 It was a nonissue. We were busy trying to get

 2 jump started again. So I don't think demurrage

 3 charges are a big issue.

 4 I had a great -- you know, from a

 5 practical standpoint, we had great hurricane

 6 recovery plan. It really wasn't worth anything

 7 the day after the storm though. I'm standing

 8 there looking at it, and I'm trying to figure out

 9 what am I going to do next. So we can plan all we

 10 want to, but I think if you've seen one hurricane,

 11 you've seen one hurricane. So you don't know what

 12 is going to happen, what the issues are you're

 13 going to deal with. So I don't know if you can

 14 plan for that. So I just wanted to weigh in,

 15 having lived that and having to work out of a

 16 trailer for six months. I understand, you know,

 17 what's going on.

 18 But while I'm here, I agreed to talk and

 19 we had talked before, I think one of the things we

 20 look to you for at the Federal Maritime Commission

 21 is to provide some sort of leadership around the

 22 wrap-aroundness. I think one of the recurring
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 1 themes I've heard here today is we need to look at

 2 things from the system-wide approach. I hear the

 3 little pieces, but they all fit together. We have

 4 to look at it like we're all one big system and

 5 how do the pieces fit.

 6 I've heard technology come through here.

 7 Well, there are a lot of issues with

 8 implementation of technologies. I think everybody

 9 needs to be at the table for that discussion. And

 10 then certainly the ports, we need some sort of

 11 funding model or some sort of way to get creative

 12 so that we can do the improvements that everybody

 13 seems to think that we need to do at the ports.

 14 And a lot of that is going to fall to the Port

 15 Authorities. But that's expensive, and how that

 16 model takes place, we all sit there and have a

 17 discussion.

 18 One of the things that John Walsh and I

 19 talked about after we were up there this morning

 20 was -- and if you look at the cost of dredging,

 21 for example, very subtly, every port here, we've

 22 looked to deepen, but the courts come back and
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 1 said, well, we're not going to authorize you for

 2 50 feet, but we'll authorize you for 47 or 48, and

 3 you can buy down the extra two feet. Well, that's

 4 a subtle shift of the traditional percentages of

 5 responsibility that's always been in the model.

 6 And that's just the subtle shift of cost. So I'll

 7 leave it at that.

 8 COMMISSIONER KHOURI: Thank you, thank

 9 you. Just as a quick aside, when I was working

 10 for a carrier a number of years ago, this was

 11 inland, we had four hurricanes come into the Gulf

 12 and shut down New Orleans in one fall, one after

 13 another. We had a very well developed hurricane

 14 recovery system. And you just -- you work through

 15 it. We saw four hurricanes in four months. It is

 16 a process. I'm not going to comment on demurrage.

 17 It's a commercial issue. I think the last thing

 18 that anybody in this room or any of your

 19 colleagues want is the Federal Maritime Commission

 20 or other government agencies to come in and tell

 21 you commercially how to run your business. And I

 22 can assure you, and I've had this conversation
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 1 with the Chairman, that is not what we are about.

 2 It's not what these forums are about.

 3 But you bring up another issue that --

 4 let me see if I can tee this up in this way. I

 5 serve on a subcabinet group called the Committee

 6 for the Marine Transportation System (CMTS).

 7 Virtually every cabinet department has a

 8 representative at the CMTS. General Peabody from

 9 Corps of Engineers is currently the chairman. It

 10 rotates around between different agencies. John

 11 is a very good guy, and I assure you, he shares

 12 your frustrations. If you just give him a few

 13 more billion dollars, he would be there doing what

 14 he would like to do. The budget is what it is.

 15 The economy is what it is.

 16 But in terms of collaboration, in terms

 17 of how many different agencies that we've heard

 18 talked about today and a couple that haven't come

 19 up yet, FMCSA, Surface Transportation Board, Coast

 20 Guard, Customs, United States Department of

 21 Agriculture (USDA), some of which was folded into

 22 Customs with Homeland Security, but there are
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 1 still other USDA functions in terms of some

 2 inspection on the reefer cargo coming in is still

 3 independent, what kind of coordination would you

 4 all like to see of all of these agencies, and do

 5 you think a group like CMTS to facilitate that

 6 interagency cooperation -- I mean, think about a

 7 room like this and think about the agenda we had

 8 today, if you had every single government agency

 9 sitting down in one room and trying to talk

 10 through the issues and focusing on, you know, what

 11 you all are -- there is somebody out there called

 12 the American citizen that's our customer, how can

 13 we do our jobs better? Any comments or reactions

 14 to that?

 15 MS. ZARESK: Hi, my name is Pam Zaresk,

 16 and I'm currently the president of the Maritime

 17 Association here in Charleston. I'm so glad to

 18 hear you say that, because I was just getting

 19 ready to get up and say the very same thing. One

 20 of the things I heard sort of mentioned but not

 21 really delved into is some of the environmental

 22 issues that all of our folks are having to do.
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 1 That's the U.S. Environmental Protection Agency

 2 (EPA). The trucking industry and the

 3 overregulation or the tremendous regulation

 4 they're under, now we're talking transportation.

 5 I mean, the breadth of federal agencies that touch

 6 all of these things. And you look at some of the

 7 initiatives that are going on like, for instance,

 8 with Customs and Border Protection doing a single

 9 window and the initiatives in the federal

 10 government that say, hey, we'll have a single

 11 window for all of your information that's coming

 12 in, and that includes the U.S. Food and Drug

 13 Administration (FDA), and that includes Customs,

 14 and that includes all those 47 federal agencies

 15 that have some role in the import and export of

 16 cargo. That's only one little piece of the whole

 17 thing though.

 18 So I think that when the federal

 19 government starts in with EPA regulations,

 20 trucking regulations, maritime regulations, all of

 21 those things, I think one of the things that came

 22 out of this forum very, very clear is that
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 1 everybody has their own challenges with it. And

 2 until the federal government puts that all

 3 together and looks at it as an issue-related

 4 thing, we're all going to still have some

 5 problems.

 6 COMMISSIONER KHOURI: Thank you. And

 7 The U.S. Maritime Administrator, Chip Jaenichen,

 8 by the way, your boss, is on that CMTS with me,

 9 and he does a fantastic job. He really does.

 10 Thank you.

 11 MR. CERNAK: That just brought one thing

 12 to mind that is attached right onto that. What

 13 I've seen through the regulatory process and what

 14 I'm dealing with, very clearly some of the federal

 15 agencies don't get involved until the very end.

 16 So perhaps having a dialogue in the room, so

 17 everybody understands how it all fits together up

 18 front will maybe lead to a pathway to where

 19 everybody knows what's going on at the beginning

 20 rather than at the end, because you get to the end

 21 and then go, you've got to do this, and then it

 22 gets kicked back to the beginning, and then it
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 1 gets to the end again. And that's how we've

 2 gotten into the big circular argument on trying to

 3 advance projects moving forward.

 4 COMMISSIONER KHOURI: And to pick up on

 5 what Jim mentioned, the agencies -- not to

 6 over-generalize, but agencies in general, by their

 7 very nature, tend to be reactive just by how it

 8 works; and, secondly, they don't seem -- normally

 9 don't react quickly. So it's just part of that

 10 DNA, and it's something that needs to be improved,

 11 without question.

 12 MR. BYRD:: : Commissioner, Phil Byrd.

 13 I just -- Pam's brought up a particular matter so

 14 clear in my mind, I thought I would share it with

 15 this audience and with you, sir.

 16 Recently, as the Chairman of the

 17 American Trucking Association, I was called to

 18 Washington to meet with President Obama with

 19 respect to the Phase II technology coming out on

 20 meeting duty and Class 8 heavy duty commercial

 21 motor vehicles. Prior to going into the audience

 22 with the President, I was standing in a prep room
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 1 with Administrator McCarthy of the EPA and

 2 Secretary of Transportation, Anthony Foxx. While

 3 we were standing there for about 40 minutes, the

 4 conversation came up from Ms. McCarthy, she said,

 5 "Mr. Byrd, how can our two agencies work together

 6 better to help your industry?"

 7 And I said, well, I thank you first of

 8 all for the question, because it's very important.

 9 On one hand, you have the FMCSA making regulations

 10 that restrict the free full movement of America's

 11 cargo, while at the same time, an unintended

 12 consequence of the new hours of service regulation

 13 is emissions control, because as Curtis mentioned

 14 in his remarks on the hours of service

 15 regulations, the 34-hour restart -- and I don't

 16 know if this audience is aware of this or not --

 17 but the 34-hour restart requires that a motor

 18 carrier company now, today, only after 168 hours

 19 of elapsed work time from his first restart to his

 20 second restart can he even take a 34-hour restart.

 21 And then that regulation says that they have to be

 22 down from 1 a.m. to 5 a.m. two consequence nights,
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 1 which means our industry, the trucking industry,

 2 operates much like seaport industries,

 3 manufacturing, and distribution. Monday through

 4 Friday, we serve our customers. This new

 5 regulation says that it's not until 5:01 a.m. on a

 6 Monday morning can a commercial motor vehicle

 7 highway driver move out on the roads. We're in

 8 the most congested periods of time, the most

 9 unsafe periods of time on the highway system

 10 delivering America's goods, and we're exacerbating

 11 the environment because we're sitting in

 12 congestion. We do need the agencies of government

 13 talking to each other on the front end of these

 14 other issues.

 15 The other point, while I've got the

 16 microphone, I'd like to make and just reiterate

 17 the fact that the common thing I've heard this

 18 morning throughout this whole session is the

 19 trucking industry and how important it is to the

 20 entire process. I know that most ports, the

 21 majority of the freight moves by truck.

 22 Demographically over the next ten years, we're
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 1 going to lose 37 percent of America's truck

 2 drivers, 37 percent, with almost zero inbound

 3 coming in. Those 37 percent are going to move out

 4 because of age and because of retirement. Another

 5 36 percent will leave because of nonvoluntary

 6 retirements. We have a critical, critical

 7 situation on our hands, not to mention the fact

 8 that we've already shrunk as an industry from a

 9 capacity standpoint by approximately 5 percent.

 10 So with what we're looking at in the

 11 future, I would just challenge this audience and

 12 the industries involved here to ramp up the

 13 respect that they have for the American truck

 14 driver and their facilities. That's the first

 15 thing we can do, and Jim alluded to it this

 16 morning in his remarks. But we have to make this

 17 industry a desirable industry so that we can

 18 attract people. The first step is respect. The

 19 second step is they have to be adequately

 20 compensated, incentivized, motivated, and

 21 delegated. And if we don't do that, just think

 22 about it. How do we move America's freight? It's
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 1 a big, big, big concern. Thank you.

 2 COMMISSIONER KHOURI: Thank you. If I

 3 can also comment about the people issue, if

 4 everyone was really paying attention, clearly the

 5 truck area is number one. And Curtis has talked

 6 with me about this. It's self-evident. But we

 7 also heard from the maritime side that getting

 8 good crewmen onto vessels and the training process

 9 they have to go through, the rail panel was

 10 talking about their crew issues, et cetera. This

 11 seems to be an issue that runs all the way through

 12 the transportation system in every mode that, with

 13 peaks and valleys, they said, okay, well, now we

 14 need more crewmen to run the trains. We need a

 15 lot more rail folks. We need a lot more maritime

 16 folks, and they think they're just going to come

 17 off the streets. And they have to have training,

 18 they have to have qualifications, et cetera, and

 19 they need steady employment.

 20 MR. BYRD:: : Just one final comment

 21 with respect to capacity. What we see today and

 22 what this industry, the seaport industry and
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 1 intermodal industry, needs to realize is that the

 2 manufacturing industry and the domestic industry

 3 of our nation is tying up capacity with long

 4 three- to five-year commitment contracts on a

 5 contract basis, and that is the move that's at

 6 hand today with every motor carrier existing. So

 7 that capacity is being shrunk from another angle

 8 as well.

 9 MR. NEWSOME: Jim Newsome with the port

 10 in South Carolina. It's been mentioned to me

 11 several times, and as late as yesterday, I mean,

 12 the highest unemployment group of people we have

 13 in this country are like 21- to 25-year-olds, the

 14 Millennials. I think I'm right that you have to

 15 be 25 to drive a truck. So would that not -- is

 16 that wrong?

 17 MR. BYRD:: In interstate commerce, you

 18 can be 21 years of age. But here's the problem,

 19 Jim. Just two weeks ago, I was invited to be

 20 keynote speaker at the annual collection of

 21 insurance industries insuring motor carriers in

 22 the America, and my discussion and the purpose of
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 1 being there was that very issue. Most midsize and

 2 small-size carriers today cannot employ a driver

 3 because of the pre-requirement insurance

 4 restrictions that say they have to have a minimum

 5 of two to five years' experience, a minimum age of

 6 23 to 25. Large carriers who have large high

 7 self-deductible insurance levels are able to

 8 leapfrog that requirement because they're writing

 9 on their own funds.

 10 So what we have been trying to challenge

 11 the insurance industry to do and what we've been

 12 successful in our private company in doing is

 13 designing a model that is so robust from a

 14 curriculum standpoint from increasing deductible

 15 costs on people that go through these problems,

 16 but we have to -- you're exactly right. This

 17 industry has to produce drivers. It has to make

 18 drivers. And we are missing out on veterans,

 19 people that can fly and protect our country and

 20 fly our jets and do all kind of neat things in

 21 other industries, we can't bring them back home

 22 and put them in the trucking industry, and it's a
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 1 shame.

 2 MR. OTTERBEIN: Thank you, Commissioner.

 3 My name is Fred Otterbein. I'm with First Coast

 4 Logistics. And the gist of my statement is we're

 5 talking about productivity being the ports, the

 6 infrastructure of the highways. I would like to

 7 address it to the carriers. As far as my history

 8 is, we have gray chassis now. We basically have

 9 gray ships because it's very hard to find a ship

 10 without everybody's boxes on it. Why don't we

 11 have gray boxes? When is the carriers going to

 12 address gray boxes? Why are we taking empties in

 13 to come out with empties? Why are we going up and

 14 down the highways with these empty boxes? Could a

 15 carrier rep tell me that?

 16 SPEAKER: They all left.

 17 MR. NEWSOME: Well, I'm a reforming

 18 ocean carrier, emphasis on I-N-G, because you're

 19 never totally reformed. I mean, it's hard to get

 20 it out of your system. But I would say probably

 21 never. I think that's just too close to the heart

 22 of the product that carriers offer, which is their
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 1 container. And they see that as an imbalance cost

 2 or a significant percentage of their cost

 3 structure. And how they would apportion that in a

 4 gray box world, I just -- we talked about it many

 5 times. There are examples where carriers did

 6 bilateral box exchange within alliances. It never

 7 really got off the ground, because the sales force

 8 said, well, wait a minute, you gave them my box,

 9 and I could have sold that box. Right, Jim? I

 10 mean, that box is in Atlanta, and who paid to put

 11 it there? We can't even organize basic things

 12 sometimes. I mean, to do that, I think, would be

 13 -- I'm just straightforward about it.

 14 MR. OTTERBEIN: Why can't we do it with

 15 the trucking industry, with the steamship

 16 industry, if the railroads can do it with the

 17 railcars?

 18 SPEAKER: That's a good question. Jim,

 19 do you want --

 20 SPEAKER: I'm also a reformed steamship

 21 guy. I know that the leasing companies years ago

 22 tried to do that with the gray boxes, and Rayonier
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 1 was one of them. It goes beyond our country. It

 2 goes overseas as well. And the ocean carriers

 3 feel that's part of their sales tool. That's part

 4 of the ships. I realize we put everything

 5 together now, which is different than certainly

 6 when I started in this business 40 years ago. But

 7 I think it's because it's proprietary. I think

 8 it's an emotional issue that's just not to become

 9 overcome -- it's not going to be overcome.

 10 COMMISSIONER KHOURI: Any other

 11 perspectives out there?

 12 MR. PISANO: I'd like to say I find it

 13 gratifying that there is so many reformed

 14 steamship representatives here. That means that

 15 there is hope for many more, hopefully.

 16 MR. NEWSOME: Never totally reformed.

 17 MR. PISANO: Actually, I'd like to

 18 address this to you, Commissioner Khouri. And I

 19 think that everybody here sees the Federal

 20 Maritime Commission as an independent neutral body

 21 with regulatory authority over both the carriers

 22 and the terminal operators. But, also, as a
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 1 representative of the government, you're perceived

 2 as a neutral body looking over the interests of

 3 the American shippers and the American public.

 4 And I think these forums are great. I know there

 5 is one more coming up in New Orleans next week. I

 6 hate to put you on the spot here, but I'm really

 7 interested in the end game.

 8 I mean, I think it's great that the FMC

 9 is engaged in this process. And we would like to

 10 see, you know, the continuation of the FMC

 11 involved in this. And as you said earlier, you

 12 can't dictate how people run their businesses, and

 13 we respect that. But I think that there is an

 14 ongoing role for the FMC in getting all the

 15 parties together and, you know, facilitating the

 16 discussion on a national basis and help to move

 17 our nation's transportation infrastructure

 18 forward. So what I don't know, I'd be interested

 19 to know in this future point what FMC's eventual

 20 role will be in this process.

 21 COMMISSIONER KHOURI: Thank you for the

 22 question, and that's part of my job description,
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 1 to be on the spot. So I don't shrink from it. I

 2 have two more issues here that I'd like to throw

 3 out. But your exact point is my third issue. So

 4 if I can just defer until the third issue, and

 5 I'll answer your point directly.

 6 The next point I wanted to -- I don't

 7 know how many of our port directors we still have

 8 here. I hope most of them. The Federal Maritime

 9 Commission, as you just pointed out, has agreement

 10 authority with marine terminal operators. There

 11 is a whole lot more in the press about agreement

 12 authority with vessel operators with all the

 13 alliances. It's been -- I don't know what

 14 happened to the trade press circulation, if they

 15 didn't have some of that to write about, they'd

 16 lose half of their pages. But marine terminal

 17 operators can also get together, file an agreement

 18 with the commission to discuss various things.

 19 Most recent in the press was Seattle and

 20 Tacoma realized they needed -- they were close

 21 enough, they needed to talk with one another. Los

 22 Angeles, Long Beach have various agreements where
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 1 they can chat. This is an area that -- I

 2 introduced Florence Carr, the FMC's Director of

 3 the Bureau of Trade Analysis, earlier. This is

 4 her area that she's responsible for. Have the

 5 port operators considered filing larger -- when I

 6 say larger, geographic in scope, larger agreements

 7 with the commission to enable them to talk about

 8 some of the issues that we -- we've had here today

 9 and bring in some of the various outside -- or

 10 other groups -- I don't want to say outside;

 11 they're here in the room -- to help facilitate the

 12 collaboration that we've been talking about? Any

 13 of the port directors want to address that?

 14 Interest?

 15 MR. TAYLOR: Brian Taylor, Jacksonville

 16 Port Authority. I can really only speak on behalf

 17 of several of the ports that are here from

 18 Florida. Although we have not gotten to the stage

 19 of engaging in direct -- call them regional

 20 discussions about collaboration, cooperation in

 21 Florida, we do have Florida Ports Council. And

 22 since we have a state that has 15 seaports, we've
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 1 used that as a vehicle to allow us to get together

 2 and discuss and collaborate on common issues that

 3 affect all of the ports. And I think that model

 4 has worked in my brief time there pretty well. We

 5 still obviously compete, as all ports compete.

 6 But the ability to actually sit in a room and talk

 7 about common issues that we can address

 8 collaboratively through the Florida Ports Council

 9 I think has been very beneficial to the overall

 10 model that has worked very well in the state of

 11 Florida. So while we have not engaged directly

 12 with the Federal Maritime Commission, I think

 13 we've got a model that has demonstrated an ability

 14 to work very well.

 15 COMMISSIONER KHOURI: Okay. Jim, if you

 16 want to --

 17 MR. NEWSOME: We have used it on

 18 specific issues, such as chassis pooling. We

 19 worked together with Georgia to come up, I think,

 20 with a very useful solution, the gray common

 21 chassis pool that served not only ports

 22 individually, but the entire region of the
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 1 Southeast. But more -- I think your point is more

 2 toward addressing the fact that we're in a world

 3 of mega alliances today. We can say what we want

 4 about them, but they're all cost focus. They're

 5 all 100 percent about reducing cost. That's what

 6 the industry has become.

 7 So the logical question that you ask is

 8 does then it make sense for ports who face big

 9 investments to collaborate more closely

 10 commercially. You know, I've been pretty public

 11 about it. We think it's something that we'll have

 12 to consider over time, you know, depending on how

 13 the industry goes, because we're investing a lot

 14 of public sector dollars. If you look just

 15 between Georgia and South Carolina, the two states

 16 alone, if we build the Jasper terminal, which

 17 we're intent on doing, we're going to invest over

 18 $10 billion in port facilities and channel

 19 deepening in 25 years.

 20 And we don't have a common viewpoint on

 21 that, or we may have done something by now. But

 22 you ask yourself, are you better to do that in the
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 1 way we do it today, or better to find a way to

 2 work more closely together? So it's an open

 3 question, something that I think has to be

 4 considered if we're going to invest the sums of

 5 money that are at stake.

 6 COMMISSIONER KHOURI: Well, and in terms

 7 of sustainability, in terms of port efficiency --

 8 I'm going to try to clean this up a little bit,

 9 just to, as they say, protect the innocent. But a

 10 group of port representatives were in my office

 11 not too long ago -- my counsel is already starting

 12 to go, oh, my God, where is he going? But they

 13 did a presentation, one of which had efficiencies

 14 in turn times in their port and different metrics.

 15 And I asked the question, I said, "If you looked

 16 at this metric over the last ten years, what would

 17 it tell you?"

 18 And they kind of looked at each other

 19 and said, "Well, it's been about the same."

 20 And I looked at him, I said, "I

 21 apologize. What I'm getting ready to say may be a

 22 little harsh. I come from private business. Name
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 1 me a single industry anywhere in the United States

 2 or the world where they had one of their most

 3 important performance metrics and they have not

 4 figured out to improve on them over ten years."

 5 And they just had a look on their face,

 6 like I understand I wouldn't have a job. I mean,

 7 there is not an industry in the United States that

 8 has not managed to figure out how to become more

 9 efficient, more productive, do it at a lower cost.

 10 If you have a major production metric and you

 11 haven't improved on it in ten years, you really

 12 have to scratch your head.

 13 So I want to use that as kind of a

 14 lead-in, which my penultimate question is, what I

 15 heard -- stress, what I heard -- less problems

 16 here in the Southeast. People who have

 17 experience, you know, North, South, East, West,

 18 what I heard was less problems with the -- in

 19 these local ports. And why is that? Is it

 20 discretionary cargo, meaning that more is just

 21 going inland and not trying to be delivered

 22 drayage locally? The comment about managing the
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 1 real estate and managing the volumes, why -- are

 2 there lessons learned? And maybe giving the

 3 opportunity once again for some of the ports to

 4 toot their own horn, if you would, but why are

 5 they doing so much better?

 6 MR. CERNAK: That's the $50,000 question

 7 here. Steve Cernak, Florida Ports Authority.

 8 There have been a lot of investments going on.

 9 Places you have the problems are areas that are

 10 already high-volume ports, that are just how this

 11 congestion issue that keeps manifesting itself. I

 12 think it's a couple of factors.

 13 COMMISSIONER KHOURI: Do you mean by

 14 that -- excuse me -- is it diseconomy of scale

 15 when you get too big? Is that your point?

 16 MR. CERNAK: Not necessarily. I think

 17 the industry is evolving. It's changing. We can

 18 see it. I can see how it's starting to change.

 19 You see these alliances at the shipping lines.

 20 They're the first ones out of the gate. They're

 21 looking for their economies of scale, and they're

 22 developing that.
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 1 I think, you know, if we don't be

 2 proactive about how we evolve ourselves in the

 3 Southeast going forward, I think we could fall

 4 victim to the same things we see elsewhere. I

 5 think that's one point I want to make. I think we

 6 can take a step back and look at what's going on

 7 there and perhaps collaboratively, going back to

 8 your last comment, work together smarter to try to

 9 keep those things from happening. That probably

 10 would be a good start for the ports to have that

 11 dialogue to go on.

 12 I have no idea what an agreement would

 13 look like if we were to talk about things. I

 14 think that's something that everybody has their

 15 own comfort level. We'd have to walk into that

 16 eyes wide open and slowly to see how that would

 17 evolve.

 18 But I just think that maybe we've

 19 learned from others' mistakes. Maybe we've been

 20 more careful with some of the investments in the

 21 more recent vintage. I know that's one of the

 22 steps that I go through in my port. We ask the
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 1 questions internally, and we go through and we

 2 evaluate what investments we're going to make, and

 3 how does that help us going forward. We do a

 4 20-year plan, and it's updated every two years.

 5 So I like to think that's part of what's going on

 6 in my world. I can't take all of the credit,

 7 other than I'm sitting in that seat right now.

 8 MR. PISANO: I'll take a stab at it.

 9 Don Pisano again, American Coffee. I think that

 10 the Northeast terminal operators, they're all

 11 independent. And same goes for Southern

 12 California, they're all independent. They're both

 13 -- well, Southern California, Los Angeles and Long

 14 Beach, they're both landlord ports, as is Newark,

 15 New Jersey. And I have to say that I think the

 16 independent terminal operators have a relationship

 17 with the ocean carriers, and they have not given

 18 too much concern about the cargo owner or the

 19 truckers. And all of their investment and

 20 intentions has been on the water side, not on the

 21 land side of the operations. And I may be wrong,

 22 and I know I'm going to get a lot of arguments
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 1 against that. But that, I have to tell you,

 2 clearly is the perception of the shippers that are

 3 operating in and out of the ports of the Northeast

 4 and Southern California.

 5 COMMISSIONER KHOURI: Very good.

 6 MR. TAYLOR: So if I may, I'll respond

 7 to that. Jacksonville, Jacksonville Port

 8 Authority is also a landlord port. So we don't

 9 operate the terminals, but we do have several

 10 major terminal operators that are running those

 11 facilities for us. But the State has actually had

 12 a lot of influence and foresight in investing in

 13 exactly what Don was just describing, which is

 14 this connective infrastructure that allows freight

 15 to get in and out of the ports, connect to the

 16 highways and connect to the rail yards.

 17 I think the challenge you have in some

 18 of these places in the Northeast and on the West

 19 Coast, these are developed cities that it's very

 20 difficult to add that infrastructure very late

 21 into the process. And so I think having a state

 22 that invests proactively in that connective
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 1 infrastructure to ensure that you're not just

 2 investing in the port, in the infrastructure of

 3 the port, but you're also investing in the road

 4 infrastructure to allow the freight to move from

 5 the port to where it needs to go. That's what I

 6 see is the difference right now in the South

 7 Atlantic, specifically in Jacksonville. I believe

 8 the same thing is happening in South Carolina, in

 9 Georgia. I know it's more difficult down in

 10 Florida, because you also have a fairly well built

 11 out city. But, still, rail infrastructure is

 12 being put in, and I think it's that foresight that

 13 is allowing the South Atlantic to avoid some of

 14 the issues that we're seeing elsewhere.

 15 MR. CERNAK: I want to add one thing to

 16 that. Being in Fort Lauderdale -- I playfully

 17 call it the sixth borough, being an ex-New Yorker

 18 -- it's very congested around the port. But my

 19 reaction to that comment was exactly the opposite.

 20 The State has given funds, and they have invested

 21 heavily in the road side and rail infrastructure.

 22 And I feel, looking at the port, that my water
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 1 side infrastructure is lagging, and I have to

 2 react to that. So I think it's a matter of

 3 philosophy. The State has come in and made a lot

 4 of investments. So that's a big part of the

 5 picture.

 6 MR. PISANO: Well, I'd say that the Port

 7 of New York, the Port Authority of New York and

 8 New Jersey, has made investments. They are making

 9 investments. But I was speaking more directly to

 10 the terminal operators who are responsible for

 11 their gate operations and trying to smooth control

 12 of the outbound. It doesn't require the state

 13 government or the Port Authority to make

 14 investments in the road if you've got a mile long

 15 line trying to get into the gate. That's on the

 16 terminal operator. That's not the Port Authority.

 17 MR. CERNAK: I just recently

 18 renegotiated a new agreement with one of the

 19 shipping lines. If you look at that agreement --

 20 and they're all public -- it's designed to

 21 encourage investment in the terminals. So we

 22 negotiated through that. So I think that's the
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 1 way -- something else to look at going into the

 2 future.

 3 COMMISSIONER KHOURI: And you raise the

 4 other point -- and I say this not totally

 5 humorously -- but sometimes it is worthwhile to

 6 restate the obvious. Ports are sitting on what is

 7 otherwise known as beachfront property, and

 8 there's other people that would very much like to

 9 live there as well. And I forget who it was that

 10 talked about real estate management. I know it's

 11 a big issue in the San Pedro Bay area. There are

 12 alternate uses for that property.

 13 Yes, sir, please.

 14 MR. RICHARDSON: Albert Richardson,

 15 United Arab Shipping. I'll take a stab at this

 16 whole capacity issue. There is no question as

 17 alliances move forward, we're looking for

 18 economies of scale. I think the South Atlantic

 19 has done a really good job at keeping congestion

 20 away, et cetera, et cetera. However, that

 21 potentially can change very rapidly.

 22 Vessels are getting larger. For
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 1 example, we currently operate two services to the

 2 South Atlantic. Those vessels are Mideast,

 3 Mediterranean. Indian subcontinent service will

 4 go from 4000 TEUs to 7000 TEUs very shortly.

 5 Additionally, our trans-Pacific service will

 6 divert from a Panama service to a Suez, and the

 7 vessel size will go from 4000 to 8000. So just by

 8 -- I think on the West Coast, we've seen the 8000

 9 TEU vessels for years now, for a couple of years.

 10 And I think we're going to get to that phenomenon

 11 on the East Coast very, very soon. Four or five

 12 years ago, as most of us on the carrier side know,

 13 Suez services were not viable. And, now, because

 14 of economies of scale, you'll see larger vessels

 15 to the South Atlantic, which potentially can

 16 create some problems long term for you if we don't

 17 plan accordingly.

 18 COMMISSIONER KHOURI: And the point you

 19 raise -- and this goes back to that group I

 20 mentioned earlier, the Committee For the Marine

 21 Transportation System -- I was called on to talk

 22 about some of the ship issues, and I was trying to
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 1 explain how the ships were cascading from one

 2 trade to another and how the 18,000 TEU ships are

 3 in Asia to Europe and what their slot cost was,

 4 you know, per slot, and how the ships you just

 5 described are now cascaded into the U.S. trade.

 6 And I was right in the middle of a sentence, and a

 7 fellow from the Department of Commerce interrupted

 8 me to say, "So what you're saying, Mike, is we're

 9 at a comparative competitive disadvantage to our

 10 trading partners."

 11 I said, "Yes, sir. You've got it."

 12 Understand on a global scale that our trading

 13 partners are paying a lower cost per slot because

 14 we cannot handle the other ships. And when I say

 15 can't --

 16 SPEAKER: Just one additional comment.

 17 Our book, our new bill book, we're building eleven

 18 18,000s and eleven 14,000s. So carriers aren't

 19 building 8000s anymore. And you're absolutely

 20 correct. When those vessels come off the

 21 production line the end of this quarter and all

 22 next year, we will see 8000 and 9000 vessels
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 1 cascade to the trans-Pacific or to other services.

 2 Personally, I don't think the North/South services

 3 can handle those kind of capacities now. So that

 4 would be the East/West services to the U.S.

 5 COMMISSIONER KHOURI: Yes, ma'am.

 6 MS. ARGENTINE: Hi. Latisha Argentine.

 7 Looking at this issue from a broad perspective,

 8 I've been studying this for a while. Attorney,

 9 maritime, and consultant. Bringing it forward,

 10 we're looking at it from an interim right now, but

 11 there has been a lot of facts brought out, brought

 12 out from American trucking. You know, there is

 13 just so much of a desire and need for a capacity

 14 in movement. We've got so many more TEUs coming

 15 in. And within a decade, two decades, three

 16 decades, you know, we're going to increase, and

 17 we're not going -- as far as the freight, and

 18 we're not going to have anyplace to move it,

 19 whether it's on our ports or in our infrastructure

 20 of our surface, and even in our rails.

 21 And so the reason why I started bringing

 22 that portion up is that one area that's been --
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 1 that I'm looking at is -- that we have not been

 2 looking at in federal government is a real hard

 3 look at domestic movement of freight on vessels

 4 themselves. And if you look -- and it not even

 5 seems to have been that much of a topic in federal

 6 government to be looking at it. And as you look

 7 back at CMTS to have that dialogue, there has been

 8 the marine highway transportation system that

 9 they've been talking about, and it really hasn't

 10 been -- and everybody is going to have to partner.

 11 Trucking is going to need it and rail as well. So

 12 I bring that up as far as part of the comments.

 13 If you look over at the European Union

 14 (EU), 35 percent of the freights moving on ships

 15 domestically, and we are only using about 4

 16 percent. And yet we're not looking at another

 17 alternative, or at least we're not talking about

 18 it. And there are a number of reasons. But we've

 19 got to think broader, and we're not going to be

 20 competitive.

 21 We're bringing in the big ships for the

 22 exports, but we don't have various modes to move
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 1 them on. We're already congested. We're going to

 2 continue to be congested. And our population has

 3 grown from the past 25 years by 25 percent. We're

 4 going to continue to have more and more of a need

 5 to ship and move our goods. So I throw that out

 6 to think even broader. It's going to get bigger.

 7 It's not going to get less. Thank you.

 8 MR. BYRD:: Commissioner, I'm Phil Byrd,

 9 again, from the American Trucking Association, to

 10 respond to highway capacity. Recently, I was --

 11 earlier this year, I testified before Congress on

 12 the impacts of the expansion of the Panama Canal

 13 with respect to the East Coast infrastructure. It

 14 was quite an education for me to get up to speed

 15 to be able to do that.

 16 As a result of that testimony, the

 17 Panamanian government extended an invitation for

 18 me to come over and visit the canal, and some of

 19 my colleagues joined me at that. We met with the

 20 Panama Canal Authority. Their number one concern

 21 is, when the tsunami of freight hits the East

 22 Coast, it's not whether our harbor is going to be
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 1 deep enough, not whether our terminals are going

 2 to be able to handle the capacity or not, but

 3 where does the cargo go when it hits the highway

 4 system?

 5 At the American Trucking Association, we

 6 also have an arm which is known as the American

 7 Transportation Research Institute, ATRI, which is

 8 domiciled and headquartered in Atlanta. I've had

 9 the privilege of chairing that policy committee

 10 for a number of years. And I will tell you that

 11 we recently did a very high-level study on what

 12 the economic impact of highway congestion is

 13 costing our industry today. That release is

 14 public. You can get a copy of that through our

 15 website. $7 billion dollars under today's

 16 standards.

 17 So when this freight continues to come

 18 to us and our highways get even more congested,

 19 it's going to drive greater capacity out of this

 20 segment. So highway finding, stabilizing the

 21 Highway Trust Fund is a major factor in how we

 22 move America's commerce, and we have to pay
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 1 attention to it.

 2 COMMISSIONER KHOURI: Thank you. I'll

 3 address just briefly, what you're talking about is

 4 essentially -- thank you for your comment, the

 5 lady before -- the short sea shipping that the

 6 U.S. Maritime Administration has that as one of

 7 their tasks, I was at a conference two weeks ago

 8 and spoke right after Administrator Chip Jaenichen

 9 talked. He raised short sea shipping. The person

 10 who spoke after me was from Europe and talked

 11 about their short sea shipping issues, and they

 12 have a different system. We'd be here until this

 13 time tomorrow trying to talk about short sea

 14 shipping.

 15 Let me just briefly say, they do have

 16 some different issues in Europe than we have here.

 17 Is there a potential for short sea shipping? Yes.

 18 It's going to take a lot of different things

 19 coming together. But I can assure you, it is not

 20 off the board. I can assure you that it's

 21 something that the Maritime Administration, part

 22 of the U.S. Department of Transportation (DOT),
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 1 continues to look at and work with, and I think

 2 where it makes sense, provide seed funding and

 3 other encouragement.

 4 Let me leave it with that. And unless

 5 someone else -- I'm ready for Don's third

 6 question, or my third point, Don's question that

 7 he left me with. Does anyone have anything else

 8 they'd like to add? Certainly.

 9 SPEAKER: John Tronti, Crowley Maritime.

 10 A question came up early, and I heard a comment

 11 about all the ocean carriers had left. Not

 12 exactly true. I'm still here. But just the same,

 13 I'm not on the cargo side, so the question that

 14 was posed about the inter-use of containers and

 15 boxes is not really in my swim lane, but I'd like

 16 to give that answer for this gentleman.

 17 I suspect it's a capital investment

 18 inventory control co-chair type of dilemma. But

 19 if anybody can solve that -- and I don't mean to

 20 boast -- Crowley Maritime has logistics and a

 21 liner service. They're separate, but they're

 22 together. So I'm certainly going to challenge
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 1 those folks to give me the right answer on that.

 2 With that said, I'd like to ask the

 3 shippers here what they consider when they're

 4 utilizing an ocean carrier besides cost, because

 5 everybody knows that's the bottom line. But do

 6 you consider safety records? You obviously must

 7 consider speed to destination, service to

 8 destination. But does it matter to you that your

 9 commodity cargo merchandise would be carried on a

 10 U.S.-flagged, U.S.-owned, U.S.-crewed vessel?

 11 Because the more of that we have, the greater our

 12 national security is. So I'd just like to hear

 13 from the shippers what they think about when their

 14 cargo is crossing the ocean and what ship it's on.

 15 Thanks.

 16 MR. MORELLI: Andy Morelli. That's a

 17 pretty detailed question. We do look at more than

 18 just cost. Value is very important to us. I have

 19 a very detailed score card that we rate our

 20 carriers on. I actually recently just finished

 21 our annual contract negotiations that are going

 22 into place Saturday.
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 1 And I'll step back. To answer your

 2 other question on U.S.-crewed lines, we don't look

 3 at that much detail with the crews and things like

 4 that, if I understood your question. It's neither

 5 here nor there. It's an interesting point though,

 6 something to think about in the future. Safety is

 7 very important, obviously, for our company.

 8 But to get to that, yes, it's more than

 9 just cost. Cost is extremely important, but we

 10 look at customer service, booking turnaround,

 11 documentation turnaround, you name it. It's a

 12 six-lettered score card with weighted averages on

 13 each piece. Schedule integrity right now is 25

 14 percent of that 100 percent score. And when we

 15 make our awards, I sit down with a team, and we

 16 list them in order. Who is our top rank, middle

 17 rank, third rank.

 18 When I put my route guys together, we

 19 actually have a performance factor. So I might be

 20 paying you $1000 to get it to Shanghai. But if

 21 you're a high-paying carrier, you'll rate at 95

 22 percent or something like that. So I'm paying
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 1 more for your value than just the cost; however,

 2 cost is still a big piece of that. Right? We're

 3 all in business to make some money.

 4 So I don't know if that answers your

 5 question a little bit more, but value is important

 6 for us.

 7 MR. TRONTI: Would you pay 5 cents more

 8 on a dollar if you knew U.S. citizens and ships

 9 were carrying your cargo? Is there any relative

 10 cost factor there? I guess the reason I bring it

 11 up is the U.S. flag deep sea right now is below

 12 100 ships. I'm not talking about Jones Act,

 13 domestic vessels that are carrying clean products

 14 or other cargo around the U.S. Gulf and East and

 15 West Coast. As far as minor, foreign, we're below

 16 100 ships. The mariners, after World War II,

 17 there were 2000. They were much smaller in that

 18 situation, Liberty ships and Victory ships from

 19 World War II. They are a lot different than the

 20 8000, 10,000, 12,000 TEU ships we're talking about

 21 building. But things have changed, and the

 22 mariners are not there.
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 1 In a time of national emergency, to man

 2 the governmental fleets that we have, like the

 3 ones I manage here in North Charleston, we need a

 4 surge from a manning standpoint so that those

 5 vessels can carry military cargo to the theater,

 6 to wherever the threat is. And those mariners are

 7 not there because we don't have the deep sea

 8 fleet. Most U.S.-flagged mariners are working six

 9 to seven months a year, and they're on the beach.

 10 But when the bell goes, the fire alarm rings, and

 11 we've got to fight a war somewhere, those mariners

 12 are coming off vacation and manning the reserve

 13 force and other governmental vessels.

 14 So there is a tie-in there, and Chip

 15 Jaenichen is one of the people, the U.S. Maritime

 16 administrator who is working the matter at the

 17 highest levels. We need to do something about the

 18 deep sea U.S. Flag that we don't have anymore.

 19 And it comes back to shippers, commodity, and

 20 cargo, because our cargo, it doesn't -- you know,

 21 you don't need a ship, whether it's a U.S. flag or

 22 a flag of convenience, you know, with the Marshall
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 1 Islands flag on it. So that's really my question.

 2 MR. PISANO: I just want to follow up on

 3 what Andrew was stating. There's a lot of

 4 calculations that go into choosing a carrier

 5 between particular port payers and where you're

 6 shipping your cargo and what carrier you're using.

 7 You're certainly looking at your overall cost.

 8 You're looking at your experience, you're looking

 9 at the transit time, you're looking at their claim

 10 settling. You're also looking at their website.

 11 You know, can you get the information, you know,

 12 easy and quickly. Can you -- if you have multiple

 13 trans-shipments, can you see when your cargo is

 14 going to be loaded in Tanjung Pelepas for

 15 trans-shipment before it gets trans-shipped again

 16 and heads to the United States. A lot of lines

 17 don't have the websites, you know, refined to the

 18 level where you can actually track the containers

 19 from the origination forward. They can tell you

 20 where it's been, but not necessarily always going

 21 to tell you where the trans-shipment is going to

 22 take place, when is it going to take place, what
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 1 the on-carrying vessel is going to be.

 2 But to answer your question, is there a

 3 value to the American flag vessels, and it used to

 4 be more. I'm in the coffee business, and there

 5 are not a lot of American flag vessels carrying

 6 coffee these days. But there used to be years

 7 ago. And there certainly was a value put on that,

 8 and there certainly was a favor or favoritism

 9 toward American flag vessels back when we had the

 10 options to use American flag vessels.

 11 I'd also like to just go back to one of

 12 the points about the short sea shipping and

 13 perhaps barge services. I think what we've seen

 14 is over the years a number of barge services come

 15 and go, because it's really difficult for them to

 16 actually turn a profit in running a barge service.

 17 And I think it's something that, you know, it's a

 18 service that, for it to actually have a long-term

 19 presence in the U.S. industry in our trade here,

 20 it's got to be something that's probably got to be

 21 subsidized for a period of time until it actually

 22 gets up and running and actually gets to the point
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 1 of getting sufficient volume. Like any industry,

 2 you've got to get to that critical mass level

 3 where you can actually turn a profit and have a

 4 long-term sustainability.

 5 I remember even a few years ago, we had

 6 a barge service running up and down from New York

 7 up to Albany. And, you know, I think they gave it

 8 like three years to make a profit. They didn't do

 9 it in three years, and they killed it. But it

 10 would have taken a lot of freight off of the

 11 roadways, particularly in congested areas such as

 12 the New York metropolitan area.

 13 So we're certainly in favor of it, but

 14 it's something that has got to actually be --

 15 probably be subsidized for a period of time until

 16 it can actually sustain its own.

 17 COMMISSIONER KHOURI: Okay. Anything

 18 else? I'll answer your last point then, Don, is

 19 what was the outcome that I'm looking for and that

 20 the commission is looking for.

 21 The Federal Maritime Commission is an

 22 independent agency, and I talked about this very
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 1 issue with Chairman Cordero before I took on the

 2 assignment to do one of these forums. As you

 3 mentioned, Commissioner Dye is doing the fourth

 4 one next week down in New Orleans for the Gulf

 5 Coast ports. We will then, all five of us, all

 6 five commissioners, have participated in a forum

 7 at that point. We'll be putting our heads

 8 together as to what kind of report or next actions

 9 may be coming out of that. I don't want to say,

 10 well, this is what is not going to happen, but

 11 because of some prior press issues, initially and

 12 then again before I came down here, I confirmed

 13 that with Chairman Cordero, we are not looking at

 14 doing -- opening up a rule making of any

 15 description. This is not an area we're looking at

 16 regulating. Again, what I said earlier in the

 17 day, the last thing you, the business public,

 18 want, is the government to come in and tell you

 19 how in any way, shape, form, or fashion, how to

 20 run your business.

 21 President Gerald Ford famously said, if

 22 the government was in the business of brewing
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 1 beer, we'd probably be $50 a six-pack. Applying a

 2 Producer Price Index (PPI) to that 1978 or '76

 3 comment, that would probably be $200 a six-pack at

 4 this point. That's not what we're looking at, nor

 5 are we looking at doing a fact-finding that is on

 6 the table.

 7 So Chairman Cordero and I talked about

 8 that. This was initially how do we provide a

 9 forum for everyone to come together. It was an

 10 issue that has been -- ever since these were

 11 announced, it's been more and more around the

 12 globe. If we have problems, just look at

 13 Rotterdam, and not to pick on them, but other

 14 ports. It is not an issue that's going to go away

 15 easily. There is not a magic wand. There is not

 16 pixie dust. And there is not going to be a

 17 cost-free solution.

 18 A famous mariner and pilot was quoted as

 19 saying, "For every complex problem, someone will

 20 come up with one singular and simple answer, which

 21 is almost always wrong." And I think Mark Twain

 22 had, among all of his wisdom and witticisms, I
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 1 mean, this is a complex issue. There are a lot of

 2 inputs. There are a lot of pieces that have to

 3 come together and work better. And I think we had

 4 some really good dialogue today. And there will

 5 probably be a report of some type that we will

 6 come out with and then see what the next steps

 7 are. But I'm confident when I'm saying there is

 8 not a regulatory rule making getting ready to come

 9 out of this.

 10 I think the first thing to come out of

 11 it is, from the bottom of my heart, thank you so

 12 much. You all are a bunch of busy people with

 13 important jobs, and thank you so much that you

 14 took the time to spend with us all day long. And

 15 I really appreciate it. The Federal Maritime

 16 Commission appreciates it. So I want to, again,

 17 thank John Moran, all the staff. They've been

 18 great. And I want to thank Jim Newsome and his

 19 staff. They were just fantastic in supporting

 20 this endeavor today. Thanks. With that, unless

 21 someone else has any other closing comments, let's

 22 go home. Thank you.
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 1 (Whereupon, the PROCEEDINGS were

 2 adjourned.)

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 1 CERTIFICATE OF NOTARY PUBLIC

 2 COMMONWEALTH OF VIRGINIA

 3 I, Carleton J. Anderson, III do hereby

 4 certify that the forgoing electronic file when

 5 originally transmitted was reduced to text at my

 6 direction; that said transcript is a true record of

 7 the proceedings therein referenced; that I am

 8 neither counsel for, related to, nor employed by

 9 any of the parties to the action in which these

 10 proceedings were taken; and, furthermore, that I am

 11 neither a relative or employee of any attorney or

 12 counsel employed by the parties hereto, nor

 13 financially or otherwise interested in the outcome

 14 of this action.

 15

 16 (Signature and Seal on File)

 17 Notary Public, in and for the Commonwealth of

 18 Virginia

 19 My Commission Expires: November 30, 2016

 20 Notary Public Number 351998

 21

 22