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

to WESCCON, presented by the Pacific Coast Council of Customs Broker & Freight Forwarders Assn's.

Las Vegas, NV

October 26, 2002

I have a great respect for the creativity and entrepreneurial spirit that embody your sector of the maritime industry. At the same time, I recognize the competitive challenges you face and realize that the recent economic downturn, continuing trade imbalances, particularly in the transpacific, and most recently, the disruptions brought about by the West Coast labor situation have challenged you even further. I believe that the Federal Maritime Commission has a responsibility to your members as a part of the ocean transportation community to ensure fairness and balance, particularly in these times.

The Commission's various functions likely touch each one of your businesses in some way. The Shipping Act of 1984, our operating statute, provides the Commission with some jurisdiction over just about every player in the maritime trades. The Federal Maritime Commission plays a crucial role in the marketplace by ensuring that "Fair Maritime Competition" exists in the ocean transportation industry, resulting in maximum benefits to the nation, with a minimum of government intervention and regulatory cost. The intent of our governing laws is to let market forces guide the growth and development of U.S. international trade. The Federal Maritime Commission is charged with 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.

The Ocean Shipping Reform Act of 1998 (OSRA) changed the rules of the game and four years after enactment, OSRA is still in its infancy. The industry is still striving to reach a balance in this new environment. Among the most significant changes have been the emergence of voluntary rate discussion agreements, the establishment of confidential service contracts between shippers and individual ocean common carriers, and the licensing of NVOCCs. I am aware that your community did not get everything it sought in OSRA, but I believe that if we all work together, your industry will successfully shape itself around the new statutory mandates and the new and evolving marketplace.

Of relevance to many of you, the FMC is obligated, through our licensing function, to ensure that only qualified persons hold themselves out as ocean transportation intermediaries. The Shipping Act requires that any person in the United States who operates as an ocean transportation intermediary ("OTI") obtain a license from the Commission. OTIs include both ocean freight forwarders, which have historically been licensed by the Commission, as well as NVOCCs. 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 an OTI's transportation related activities. This licensing provision, as well as your financial responsibility requirements, help to ensure that unqualified or unscrupulous operators do not undermine those of you who fairly and honestly compete in a tough marketplace. For your information, the Commission staff is now in the process of revising the OTI license application form to clarify and simplify the process. You can look forward to seeing that soon.

The FMC has a good reputation for being responsive to its stakeholders, and I would encourage all of you to take advantage of the resources we have to offer. We have a number of programs and services available to the shipping public. Our website, www.fmc.gov, offers information about our programs, our regulations, decisions by Administrative Law Judges and the Commission, a link to our service contract system, a list of common carrier tariff locations, and numerous other features. We recently updated our Frequently Asked Questions to include information for ocean transportation intermediaries. Our staff is finalizing the editing of our list of licensed and bonded OTI's which will be added to our website in the near future. And, of course, we welcome your phone calls or letters on issues of specific concern to your business or on more general policy concerns. As much as we are here to serve you, we realize that you can provide valuable information on the state and practices of the industry.

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 business world.

One new initiative I hope many of you will take advantage of is a series of seminars hosted by our five field offices to help educate the industry and the public about our functions and services. Our area representatives in Los Angeles, Seattle, Miami, New Orleans, and New York, 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 you in your day to day business to topics of timely interest to the industry as a whole. Two or our West Coast area representatives are here at the conference, Ollie Clark from Los Angeles and Mike Moneck from Seattle - I encourage you to get to know them.

On to current events . . .

Foremost on all of our minds right now is the West Coast situation. The Commission does not deal directly with labor-management issues, but I am hopeful that the issues can be ironed out between the two in time to prevent another stoppage. The economic and logistical impact of this problem will be felt for many months to come. It is my understanding that carriers OTIs and their customers are working hard now to get the cargo moving again and to sort out some of the challenges created by the stoppage or diversion of cargo to alternate ports. The Commission has received a number of inquiries regarding the propriety of certain remedial actions - and we are doing our best to provide guidance where possible. Vern Hill the Director of our Bureau of Enforcement and his staff are the primary points of contact for fielding the inquiries. Early next week we will be issuing an Advisory reminding carriers, OTIs and shippers of the basic rules for application of rates and surcharges. It appears that much of the conflict created by this problem will need to be dealt with between carriers and customers on a service contract by contract basis. However, in many cases, service contracts refer to tariff rules and rates which have specific timing and application rules that must be followed. I would encourage the entire West Coast community to review their agreements and conduct contingency planning to protect yourselves and your customers should this or another type of disruption occur again in the future.

With regard to the fact finding proceeding that has begun as a result of the petition filed by the NCBFAA concerning contracting practices of the TSA - I am certain that you know that the West Coast hearings originally scheduled for October were postponed due to the West Coast lockout situation. I can report that Commissioner Brennan intends to reschedule the hearings for the latter part of November. I encourage you to participate in the hearings, and would like to remind all of you that any information you give in this fact finding will be held confidentially to the fullest extent of the law. Again, we rely on you to provide us with information to facilitate our efforts to ensure fair competition.

I know that maritime security and port security legislation are topics of much interest to you and to the industry in general. Commissioner Bonner did an excellent job of updating you on the Customs efforts earlier this morning. Our role at the FMC is primarily to ensure that commercial entities perform their business in a proper manner. As such, we license OTIs and collect service contract information to allow us to monitor activities as may be required. These commercial compliance and enforcement processes can help deter and limit potential security violations. We also use our expertise and vast collection of commercial information to assist the various entities on the front lines of securing our ports and vessels. The Commission maximizes the benefits of our efforts through participation on multi-agency task forces and direct communications with other agencies, such as Customs when misdeclarations are identified.

As many have said before, I believe it is essential that each entity in the supply chain, including government agencies, do its own part towards securing the chain. I believe that all of the entities involved in ocean transportation, must form a collaborative and integrated system to ensure the safety and efficiency of the supply chain. I support the government initiatives, especially the C-T PAT - Customs-Trade Partnership Against Terrorism - and see that Customs is now accepting applications from OTIs to participate in this program. I encourage you to avail yourselves of this opportunity. By working with trusted partners, you can help to ensure the safe and expedient transport of cargo.

Today, our economy and quality of life are based upon dependable and cost effective international commerce. It seems to me that there has never been a better time to raise the public profile of the maritime transportation industry, and I ask your collective assistance in this effort. The public is newly aware of the potential vulnerability of our ports and ships to terrorist activity, which in turn should bring to the forefront the importance of the industry and international trade in the day to day lives of the American people. For better or worse, the disruption of the West Coast port shutdown may have helped to do this. However, particularly in light of that event, it may behoove all of you to be sure that the public image of the industry is both accurate and positive.

In closing, thank you again for having me here today, and I want to reiterate my commitment to serve you and the entire shipping public. Our door is always open to provide assistance and counsel to the industry. And likewise, we always appreciate your feedback to let us know how we can serve you better. Best wishes to all of you for success in your future endeavors. . . . and I look forward to your questions.