Remarks of Steven R. Blust,
Chairman, Federal Maritime Commission

February 26, 2003

National Industrial Transportation League
Chicago, IL

Thanks for having me here today.

Ed asked that I speak on three subjects, security, service contract confidentiality and what the FMC is doing now. I'd like to start with the easy one and let you know what's going on at the FMC right now.

The FMC's mission is generally to ensure that fair competition exists in the ocean transportation industry. We do so by ensuring that there are no undue controls, influences, or non-market barriers imposed by any nation, carrier, cargo owner or intermediary, which can adversely affect U.S. oceanborne trade. Our mandate is to help remove impediments to fair competition and thereby allow you to conduct business as effectively as possible.

Seminars

One new initiative the Commission is undertaking to enhance our outreach is a series of seminars hosted by our five field offices to help educate the industry and the public about our functions and services and to provide instruction regarding the regulatory obligations of providers and users of ocean liner shipping services in the U.S. foreign trades. The first of such seminars was held yesterday, February 25th, in Miami. The second will be held in New Orleans on March 19th. Our area representatives in New York, Miami, New Orleans, Los Angeles and Seattle, have always functioned as a kind of "help desk" for the industry and we hope to formally expand this role through these seminars. Topics will likely range from the assistance the Commission can offer in day to day business to topics of timely interest to the industry as a whole. I hope that these seminars will also provide a forum for continuing dialogue between the industry and the Commission. We offer our services to you and hope that you will continue to educate us in turn. The more we communicate about current and future issues, the better we can work together to improve our industry.

ADR

Most of you are aware of our formal proceedings before ALJs, however the FMC also offers several informal dispute resolution programs, including consumer complaint ombudsman-type assistance and more structured forms of alternative dispute resolution, such as mediation. I encourage everyone to take advantage of this service - the efficiency and economy of alternative dispute resolution is now well established in the commercial sector.

Agency Functions

Let me briefly tell you about a few of our most important functions and then give you my views on how those functions support and relate to maritime security.

The Shipping Act of 1984 requires that any person in the United States who operates as an ocean transportation intermediary ("OTI") obtain a license from the Federal Maritime Commission. The FMC currently licenses approximately 3500 OTIs. OTIs include both ocean freight forwarders, which have historically been licensed by the Commission, as well as non-vessel operating common carriers (NVOCCs). Licenses are granted on the basis of the experience and character of the applicant. Moreover, all OTIs, whether in the U.S. or foreign based but engaged in the U.S. foreign commerce, must furnish evidence of financial responsibility in the form of a surety bond, guarantee or insurance. This is available to pay for damages arising from the OTIs' transportation related activities. On our website, under the heading "View Carrier List," you will find a list of the locations of tariffs of licensed OTIs. We intend soon to post a comprehensive list of licensed OTIs.

All ocean common carriers register with the FMC by letting us know the location of their tarrifs and providing access to those tariffs. Currently there are 366 vessel operators and 2703 NVO's on the list. If a marine terminal operator maintains a tariff, they must register with the FMC as well.

The Commission also issues certificates of financial performance and casualty to cruise lines which have sufficient financial responsibility to pay judgments for personal injury and death or for nonperformance of a voyage. There are currently 173 vessels operated by 44 companies certified under this program.

The Commission reviews operational and pricing agreements between ocean common carriers to ensure they do not produce excessive anticompetitive effects and that the parties entering into such agreements are eligible and entitled to do so.

The Commission also receives all service contracts entered into by ocean common carriers and shippers, and maintains a database of those service contracts. It makes sure that carriers' electronic tariffs are published in an accessible manner. The Service Contract Filing System can be accessed from our website, though the database is of course not public. Over three quarters of a million service contracts and amendments have been received since OSRA became effective 5/1/99. As you know, service contract confidentiality has led service contracting to become the most prevalent business model. Service contracts allow carriers to be very focused and responsive to customers needs, and thus should lead to a closer working relationship between carriers and customers. Service contracts offer flexibility to meet changing customer demands.

Further, as part of our mandate to protect against discriminatory, unfair, or unreasonable rates, charges, classifications, and practices of ocean common carriers, terminal operators, and freight forwarders, the Commission has jurisdiction to hear complaints brought against any party subject to the Shipping Act of 1984. Private parties can bring complaints before an administrative law judge, or the Commission may initiate investigations or other enforcement proceedings on its own initiative.

Security

Most of you are aware that the Federal Maritime Commission is not a front line agency in maritime security, but we regularly provide technical expertise and assistance to the various entities in Washington that are on the front lines of securing our ports and vessels. Our goal at the FMC is to help reduce the "haystack" that is before all of us.

As many have said before, it is essential that each entity in the supply chain, including government agencies, do its own part towards securing the supply chain. The FMC does its part by helping to ensure the integrity of the business processes of the entities under our jurisdiction. The FMC reduces the haystack of potential bad actors in the industry each time we license a new OTI, audit current licensees, or hear a complaint against a carrier for example. The FMC has a great wealth of knowledge and information about the various entities in the supply chain which we share with the front line agencies. We continue to cooperate with customs in identifying cases of cargo misdescription. With regard to our OTI licensees, we are amending the application form to get more information including the identity of all owners and officers. Particularly relevant to the issue of transportation security is the FMC's responsibility to ensure that ocean common carriers do not contract with nor accept cargo from intermediaries that have failed to comply with statutory licensing and financial responsibility requirements.

I believe that the FMC's best contribution is to firmly hold each industry player accountable for meeting its legal obligations to its customers and business partners. And in the same vein, you as shippers must remain diligent in conducting your business and in selecting your business partners and service providers.

And I believe the effort must be collaborative and integrated through the entire international business process - from the initial buyer/seller agreement, to the sourcing of the product at its origin, to the cargo handling and transportation legs, through to delivery of the product to its destination. By working with trusted partners and being "involved in the process", you can help to ensure that safe and expedient transportation of the cargo will occur. In practice, the burden falls heavily on all of you at the local level to keep those of us in the great seaport of Washington, D.C. informed of the business realities in this new era.

I am certain that new technologies and business processes will be a major part of our future. But it must be remembered that any new system is only as good as the people using them.

Unilateral efforts on the part of any segment in the ocean shipping industry will not work as effectively as what can be achieved through collaboration and cooperation among the parties involved. The industry, the shipping public and the government must work together to balance the need for secure and high quality shipping services with the need for an efficient and economical transportation system as a whole. Each industry player has an important role to play in ensuring the efficient and safe functioning of ocean commerce. With recognition of this interdependence, our industry can thrive in these challenging times.

Conclusion

Thanks again for asking me to be here today. I look forward to any questions.