Remarks of Commissioner Harold J. Creel, Jr.

The American Association of Port Authorities Sawgrass

September 23, 1997

It is a real pleasure to be here in Jacksonville for the AAPA's Annual Convention. I wish my schedule permitted me to take advantage of this beautiful setting but unfortunately I must scurry back to Washington. I am particularly pleased to have the opportunity to address you in the U.S. Delegation. I know you have some important topics to discuss and I appreciate the invitation to speak with you about the maritime legislative reform effort and recent events at the FMC.

I want you to know that I have some hot new information! I was just on the phone with the Senate staff and they told me the bill has passed the Senate. In the reform bill carriers keep antitrust immunity. Shippers get totally confidential contracts. Freight Forwarders get guaranteed compensation of 25%. And longshoreman have jurisdication over all cargo within 500 miles of the port!

Well, now that I have your attention with that big fat lie let's talk about what's really going on.

I hope I don't disappoint any of you when I say that I am not here today with the inside scoop or any startling revelations on the Senate's draft bill. We've all heard the various rumors and reports on where things stand, but I defy anyone besides the Senate staffers doing the actual drafting to provide accurate details on the current version of the bill's key provisions. And I certainly do not envy the staffers who must listen to the positions of all the parties, weigh one against the other, and then somehow resolve the differences and arrive at statutory changes that make good policy sense and benefit our country's overall ocean commerce. No easy task, to say the least.

Over the past six months the debate has moved from haggling over the exact language required to reflect the desired policy, to a reassessment of the potential ramifications of those policies. Those most apprehensive about possible consequences have influenced members to stop further action on the bill pending resolution of their concerns. We know that the blueprint for change that all of us have been working from is being altered, and none of us can be quite certain how closely it resembles the last version we've seen. But it is unclear whether basic objections and concerns will be resolved to enable the Senate even to consider a revised bill.

How did the situation come to this point? The answer, in a word, is "involvement." What began in February 1995 as an attempt by two parties to radically alter the way business is conducted in our ocean trades, has progressed to a situation where all affected parties are weighing in - and I mean all. As time has passed, every sector of the maritime industry has joined the debate. You in the port industry are a prime example.

You have been a player throughout, with the AAPA presenting your consensus positions. But recently, the Senate has heard from several individual ports who have raised some important policy issues. These ports clearly articulated their positions and voiced their concerns over those provisions that they find particularly troubling. I commend those of you who have advised the Senate of the impact that the bill will have on your particular port community. For many of you, I know that it was a difficult task. Aside from the political factors involved, ports, perhaps more than any other segment in the maritime industry, have the most at stake.

That's because you have to rely on most of the other sectors of the industry for successful operations. You have to convince carriers to come to your port. That marketing effort is difficult enough without the added complications caused by carrier consolidations and many operators' desire to establish a few select load centers. But you have to go out there and sell the transportation efficiencies you have to offer.

Ports also have to count on freight forwarders, stevedores and others for successful business operations. Many of these companies have offices on all coasts, and you have to convince them of the benefits of moving cargo though your port.

Your marketing efforts also have to reach shippers, and importers/exporters. Those are the entities that own the cargo and often control the routing. You have to explain why you offer the best option for them, and how you can meet their unique transportation needs. Consequently, any opinions or proposals you express have a good chance of displeasing at least one of your important stakeholders.

Nevertheless, your prosperity -- and in some cases, your continued viability -- as a port will be greatly affected by the regulatory system in which you and your customers operate. So it is incumbent upon the port community to help shape the process, and not simply accept a system designed to benefit only others. So again, I encourage you to remain in the debate. Use the tools you have at your disposal to present your views, whatever they may be, and maintain an open dialogue with all of your customers and transportation partners. I should also add that the port industry has spoken out in one voice on both the need for, and effectiveness of, the Federal Maritime Commission. I thank you for that. We consistently strive for excellence and we appreciate your recognition.

As to the legislation itself, while I admit that we are dealing with uncertainty as to specifics, we certainly know the central issues being addressed. They are: (1) added contracting flexibility or, how much transparency is required for carrier prices and services; (2) whether filing requirements should be reduced, and if so, how; and, (3) ensuring appropriate government oversight, and the future of the FMC.

We at the Commission have been consistent when addressing these issues. At this time I should repeat my standard disclaimer that we are neither advocates nor policy makers - thankfully, others fill those roles. Our job is to offer objective views on the potential effects of proposed changes, and to assist in drafting language to reflect the decisions of the policymakers.

As to substance though, we continually have emphasized that as long as carriers retain antitrust immunity any reduction in public transparency increases the need for government oversight. To effectively perform that oversight, access to all relevant information is a must.

We also have maintained that any information to be made public should be readily accessible and easily understandable. Any results to the contrary we would consider a step backwards.

And we have spoken out on the need for the oversight agency to maintain its decisional independence. We believe such independence to be crucial to the effective protection of U.S. interests. Practically all in the industry agree with us on this point, and have supported a continued, free standing FMC for that purpose.

I'll end my discussion about the legislative reform effort with the same comment I made to a group last month - one thing that I am certain of is that I am totally, unequivocally, irrevocably and undeniably uncertain if legislation will pass this year! Senator Lott's apparent linkage of the bill with the OECD shipbuilding legislation, along with reported meetings among key Senators and industry representatives, may eliminate the current impasse and permit a viable compromise to be reached. Perhaps that will be enough to enable the legislation to gain broad industry acceptance and Congressional approval. But it is just as possible that the necessary deals will not be cut or adamant opponents will remain recalcitrant. Who will prevail? Stay tuned.

Before I close, I would like to discuss briefly the Commission's efforts to remove restrictive practices existing in Japanese ports. I'd like to give you a status report and perhaps clarify some misperceptions.

Let me begin by stating that we know how important this issue is to many of you. The Japanese carriers in many cases are reliable customers who provide both important revenues and job stability for your operations. The Commission recognized that, and considered it and a host of other factors in reaching its decision.

However, we were faced with a longstanding problem (over 14 years, in fact) that simply was not being resolved. Despite diplomatic pressure, bilateral negotiations, and ongoing discussions among the Japanese Ministry of Transport, the Japan harbor group (JHTA), and all involved carriers, the Japanese failed to live up to the commitments they made to DOT in April. Carriers serving Japan remain hamstrung in their operations. They can't choose their stevedore or terminal, and they can't make any operational changes without JHTA's approval. As a result, carriers must deal with higher costs and forced inefficiencies. Japanese companies face no such restrictions or impediments here. In fact, they are free to conduct their own terminal operations, and they all do.

Given our statutory mandate to combat foreign government restrictions that impair free trade or adversely affect U.S. interests, the Commission imposed the $100,000 per voyage sanction. It was our hope that this response would influence the Japanese Government to remove the restrictions which impede open and efficient business operations at its ports.

We were encouraged when our two governments negotiated a memorandum of consultation in April in which the Government of Japan committed to grant U.S. carriers stevedoring licenses and develop a framework to simplify the system, known as prior consultation, that restrains carrier operations. We responded by deferring sanctions for five months. But we were dismayed when the July 31st date for completing that framework passed with no reform plans in place. And we were further discouraged when the September 4th date for sanctions came and went with no meaningful progress.

It is unfortunate that the situation has come to this. However, the Commission has taken a measured response and tried to strike a balance between removing the injurious effects of these trade barriers on the one hand, and ensuring no harm to U.S. industry on the other. That is why the level of the fees is only $100,000. Our statutory authority permits us to assess fees as high as a million dollar per voyage, or limit the amount or type of cargo the Japanese carry, or even bar sailings of Japanese ships to and from U.S. ports. In fact, we have broad authority to take whatever action we deem necessary to address these types of unfair conditions. However, the end result we are seeking is not additional revenue for the U.S. Treasury. We simply seek the removal of these trade restrictions that prevent non-Japanese carriers from enjoying the same rights in Japan as Japanese carriers enjoy in America. Fair is fair!

We are confident that our action will not disrupt trade or cause cargo to be diverted or rerouted from U.S. ports. In fact, we modified our rule to prevent double billing when calling in places such as the Pacific Northwest or Hawaii. You may have read in the press recently that the Japanese carriers have made very general allegations that they are experiencing cargo diversion. These claims, made without any factual support, were contained in an affidavit supporting the Japanese carriers' request for a stay of the FMC sanctions. These unsupported allegations are not surprising. The carriers must make this argument to persuade the court that there will be irreparable harm to them if the sanctions are allowed to remain in effect. But the carriers have made many public comments that the fees will not cause them to change their services. They continue to assure their customers that they do not expect there to be any service disruptions, as indeed it would not be in their interest for there to be any.

By the same token though, absent significant progress on this matter, we will need to reassess the effect that sanctions are having. As we stated in our rule, the sanctions can, and will, be increased if these issues are not addressed in a timely manner or if there is retaliation. We are hopeful that it won't come down to this.

One last clarifying point. These sanctions are in effect and the fees are debts owed to the U.S. Government - right now that total is close to $3 million. Although these fees are not required to be paid until October 15, the debt already is incurred. Those who believe the parties have until October 15 to settle this matter, are simply mistaken. The Commission has no authority to waive collection of these fees, and the total owed can be compromised to a lower amount only under extraordinary circumstances. At this point, I don't see anything that even resembles extraordinary circumstances. Therefore, I encourage the Japan Ministry of Transport to work quickly toward an agreement that eliminates the practices that are hampering trade with Japan.

Thank you for having me here today. I wish you a productive conference.