Marine Transportation System

Posts Tagged ‘shippers’

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A Transparent FMC Strategy

In Federal Maritime Commission, Ports, Uncategorized, Vessels on September 21, 2018 at 9:08 am

The Federal Maritime Commission met this week to hear Commissioner Rebecca Dye describe her interim report on the Fact Finding No. 28 (FF28) examination of detention, demurrage and free time practices of ocean carriers and marine terminal operators (MTOs). Dye reported to Acting Chairman (and only other seated commissioner) Michael Khouri. Her report was publicly released on September 5. A final report on the investigation, prompted by petitioning cargo and drayage interests who fault carrier and terminal practices and fees, is scheduled to be delivered on December 2.

The 19-page interim report on the non-adjudicatory investigation is based substantially on information obtained through FMC “served orders comprising questions and document requests on twenty-three ocean carriers and forty-four marine terminal operators and operating ports, and solicited evidence concerning demurrage and detention practices from cargo interests (shippers and consignees).”  The FMC also held two days of hearings in January of this year. The report’s conclusion points to both a stated desire to avoid issuing regulatory prescriptions — that some have argued the FMC would not have authority to do — and an inclination to reprise Commissioner Dye’s prior experience of shepherding industry people to develop a solution that the agency has no power to require.

Based on the volume of valuable information provided by VOCCs, MTOs, shippers, OTIs, drayage providers, and others in the industry, it is apparent the industry’s demurrage and detention practices can be improved with the involvement of industry leaders.

Commissioner Dye sees the experience of the complaining parties as more widespread than episodic.

The resulting record strongly suggests that concerns about demurrage and detention in U.S. trades are not limited primarily to weather-or-labor-related port congestion in 2014-2015, a small subset of large ports, or episodic events unrelated to potentially systemic issues.

Examples are cited as to how current carrier and MTO practices vary in many respects, including even how detention and demurrage are defined. According to the commissioner, the collected data suggest “six areas to be developed” by the FMC as approaches to improve current practices in the market:

  1. Transparent, standardized language for demurrage, detention, and free time practices;
  2. Clarity, simplification, and accessibility regarding demurrage and detention (a) billing practice, and (b) dispute resolution processes;
  3. Explicit guidance regarding types of evidence relevant to resolving demurrage and detention disputes;
  4. Consistent notice to shippers of container availability;
  5. An optional billing model wherein (a) MTOs bill shippers directly for demurrage; and (b) VOCCs bill shippers for detention; and
  6. An FMC Shipper Advisory or Innovation Team.

One can’t help noting in the last item the reference only to “shipper” (cargo interest) in the FMC’s summary version. The somewhat longer version is phrased similarly, suggesting that Dye would give special status — and the agency’s ear — to shippers.

The record supports the need for continual input from U.S. shippers into issues affecting the international freight delivery system, including the potential future formation of a Shipper Advisory Board or Innovation Team after the close of the investigation. The Commission will also consider Advisory Boards or Innovation Teams comprised of Ports and FMC stakeholders as well. [emphasis added]

“Innovation team” is a reference to a tool employed by Commissioner Dye in her follow-up to the FMC’s 2015 report, “U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges.” In that instance, the commissioner invited supply chain stakeholders to participate in closed-door deliberations intended to identify both the central cause of the “congestion” problem and how to solve it. Doubtless, many participants thought it better to be in the room than not.

In her 2017 report, “The Commission’s Supply Chain Innovation Initiative,” she summarized the work of the six “supply chain innovation teams” (three each addressing import and export trades).

[T]he “Value Proposition” for increasing supply chain performance is providing visibility of critical information throughout the commercial supply chain.

~ ~ ~

[Such visibility] across the American freight delivery system was the one operational innovation that would most increase US international supply chain performance. It was not about information technology per se – but an effort to (a) achieve changes in perspective and in behavior to “harmonize” the operation of the freight delivery system and to (b) increase systemic efficiency and performance. Without the right information, supply chain actors are essentially “flying blind.”

A web-based portal for the sharing of cargo status information was the suggested solution by the import teams. The kind that is being tested in the San Pedro ports now.

Note the similarity of the commissioner’s conclusion in the above 2017 report and the direction that her new interim report on terminal and carrier practices is taking. Both look for transparency and standards. Both aim to corral [one or more] stakeholders to have them devise a potentially system-wide solution.

At the FMC meeting this week, Commissioner Dye wrapped up her oral report by asking and answering, “how will the investigation proceed?” She said the commission wants to “determine how to ensure that reasonable notice of cargo availability and reasonable opportunity to pick up cargo can be achieved.” In developing the final report, she said she “will not be repairing to a regulatory ivory tower to reflect in solitude on these issues” but will seek input from the practitioners.

Dye will look for those who have been “most helpful and thorough” during phase one of the investigation. She said she already has heard from “quite a few” carriers and MTOs who want to help, and she firmly indicated she want to hear from people. To emphasize her availability, the commissioner will post her travel schedule to facilitate outreach by persons outside the Washington Beltway.

Acting Chairman Khouri followed Dye’s remarks by encouraging stakeholders to participate. He said that any recommendation for a rulemaking would be “premature,” but he isn’t ready to rule one out.

[That is not] a first choice but…at the end of the day, if there are persistent practices that are found unjust and unreasonable, and stakeholders do not want to listen and proactively adjust business practices for other stakeholders, it will remain on the list.

One hears both commissioners issue more than a cordial invitation to stakeholders to help them bring the FF28 examination of carrier and terminal practices to a satisfactory conclusion. Their message is clear. Fix it — (we’ll gladly facilitate) — or be regulated.

Carriers and terminals consider detention and demurrage fees, and free time practices, to be wholly a matter of the commercial relationship. Nothing the FMC need involve itself in. Regardless of whether they have the necessary statutory authority to regulate this aspect of the commercial relationship, the commissioners have hit upon a non-regulatory way. They are empowered with the expectation that the concerned parties, terminal operators and carriers included, will be willing to address supply chain problems as Rebecca Dye’s report depicts them.   Pbea

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Port Performance Under the Microscope

In Congress, Labor, Legislation, Ports on September 1, 2015 at 5:07 pm

I last wrote of how Washington policy makers and agencies grew more interested in the port sector and how ports, small and large, benefited by that attention. So let’s consider some recent and largely unwelcome attention.

The messy, prolonged West Coast contract talks and negotiating tactics that resulted in a dysfunctioning supply chain at the waterfront elicited a strong and prolonged backlash from the importers, exporters and others whose own operations depend on reasonably well-functioning ports. (“After all, shippers crave certainty, and they crave reliability,” the recently released Pacific Maritime Association annual report acknowledges.) Not that the shippers were taken by surprise. With the 2002, ten-day shutdown of the ports fresh in mind, they expected the worse and were diverting some cargo to gateways of other coasts (or countries) months into the talks.

You are familiar with the recent history. The talks between the PMA and International Longshore and Warehouse Union started in May 2014. A year later the ILWU rank and file gave the new contract its final approval. In between is where it got interesting and “port congestion” came to be reported in main stream media. Management pointed to the intentional shorting of the workforce by union leadership. The union countered saying the terminals brought the problem on themselves by not being prepared for big ships with more cargo. In any event, port congestion was amplified at the largest Pacific gateways.

Export apples were not making it overseas markets in time. Retailers decried the slow flow of their freight from ship to gate and finally to shelves. But first the ship had to get to berth. By February, when the tentative agreement was reached, there were over 30 ships waiting at anchor off Los Angeles and Long Beach. POLA executive director Gene Seroka told the Wall Street Journal that he expected “it will be about three months before we return to a sense of normalcy.”

Over the nine months that the negotiations were underway the cargo interests were active and vocal. A coalition of companies and trade associations formed and periodically met with and issued joint letters to policy makers. They asked for intervention or at least for official Washington to pressure negotiators to make it quick. Their major complaint over time was that President Obama was just, in the White House’s word, “monitoring,” not acting. Members of Congress eventually expressed their concern about the effect of the prolonged talks.

Meanwhile the Port of Portland had its own particular low productivity problem where a continuing multi-year dispute, if anything, wasn’t helped by the prolonged contract talks. By February, a frustrated Hanjin Shipping announced it would end service there, leaving Portland and its ICTSI terminal operator in search of a willing container line.

Leading up to and long after the conclusion of the contract talks the shipper community lobbied for “a tool that will help provide certainty to future negotiations.” Letters seeking legislation to provide that tool typically would carry over one hundred organizations’ names. Some bills eventually were introduced. But from the perspective of most ports, the bill represents more problems than potential solutions.

Congressional advocates for the cargo interests have taken two approaches in their legislation. The first to emerge was the “Port Performance Act” (S.1298) by Senator John Thune (R-SD). He chairs the Commerce, Science & Transportation Committee that eventually approved the measure. Noting that the port sector had yet to be plumbed for the sort of “condition and performance” data that Congress and transportation planners say are needed to better evaluate the national freight system, Thune’s bill prescribes the annual collection of monthly terminal operations data. It’s the sort of data that terminal operators keep for themselves to improve terminal functions and that port authorities are reluctant to have out there to be used by the competition. In the version that ultimately was approved as a provision in the Senate’s surface transportation bill is the requirement for data on vessel, train and truck time in port, lifts per hour, and cargo dwell time. Those and other metrics are required to be used for the annual reports to USDOT.

What is not in the Senate-passed bill is a provision, original to S.1298, that would require monthly reports of port performance data to USDOT and Congress during collective bargaining periods when contracts have expired. Organized labor and ports don’t like the bill and the unions lobbied especially hard to have that particular provision excised.

The other type of bill that was introduced—first in the Senate and more recently in the House—would amend labor law. Whereas Thune’s Port Performance Act is premised in part on the idea that data would be useful in documenting when port cargo operations and cargo interests suffer during contract negotiations, the other legislation is to provide a means to engage the government and the courts in bringing closure to prolonged negotiations i.e., a market for that data.

Freshman Senator Cory Gardner (R-CO) introduced his “Protecting Orderly and Responsible Transit of Shipments (PORTS) Act” (S.1519) to amend the Taft-Hartley Act to make slowdowns an unfair labor practice and empower governors to initiate boards of inquiry and seek court injunctions. (The House version was introduced in July by Dave Reichert (R-WA) and others.)

Senator James Risch (R-ID) takes a somewhat similar approach to the Gardner bill, with added inspiration from the Portland terminal operator who wants parties responsible for slowdowns to be penalized. Risch’s “Preventing Labor Union Slowdowns (PLUS) Act” (S.1360) makes slowdowns an unfair labor practice, defines slowdowns, declares US policy as one to “eliminate the causes and mitigate the effects” of port disruptions, and prescribes penalties for violators including decertification of labor organizations.

So what are the prospects for these bills in this Republican-led Congress? Amendments to labor law are sought by Republicans and opposed by Democrats. While the former has solid majorities in both chambers, the latter is in a position to slow and stop bills in the Senate where 60 votes routinely are needed to assure passage of just about any bill of substance. We may see hearings on the PORTS and PLUS Act legislation, and we definitely will see GAO reports—already requested—on the economic consequences of the West Coast talks. But between the Senate rules and the Democrat in the White House (see Secretary Perez comments), those bills will have trouble becoming law, perhaps even getting floor time in Congress.

Thune’s Port Performance Act is quite another matter. The diluted version of the bill passed the Senate, tucked away in the 1024-page, appropriately labeled DRIVE Act (H.R.22). It is the Senate’s version of a must-pass highway and transit bill. Key House legislators have yet to weigh in on the issue of port performance metrics and data collection, much less produce their own 6-year transportation infrastructure bill. Some action on the larger bill is inevitable, perhaps to the point of becoming law.

When the House side takes up the question, cargo interests will again point to the West Coast experience and seek restoration of frequent data reporting during contract talks. Port interests will explain why the Thune language is generally impractical and unwelcome. Labor will ask the House transportation leaders to flatly oppose the entire Port Performance section that is in the Senate passed bill.

More to come on this matter of the performance and condition of ports, and how and whether to measure it.   Pbea

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The Murray-Cantwell Approach to Problem Solving

In Competition, Congress, Infrastructure, Intermodal, Water Resources on September 23, 2013 at 7:05 pm

This past week State of Washington Senators Patty Murray and Maria Cantwell introduced the Maritime Goods Movement Act of 2013 (S. 1905). Their inspiration for legislation came from what I have described as the unintended consequences of the Harbor Maintenance Tax, starting with complaints from the ports of Seattle and Tacoma that the Canadian competition to the north and the shippers, who are obliged to pay the Harbor Maintenance Tax when entering U.S. ports, were taking full advantage of the cost-differential where the HMT does not apply.

It is a complaint that was given some appearance of validity in a Federal Maritime Commission report issued last year and, a bit more convincingly, by data comparisons published by The Journal of Commerce last month.

At the request of the senators the FMC studied the role played by the HMT (0.125% of cargo value) in decisions to use the Vancouver and Prince Rupert gateways. The report, adopted by the FMC commissioners on a party line vote, didn’t make a strong case as to cause and effect. It did suggest that if an equivalent of the tax were applied in Canada “a portion of the U.S. cargo…likely would revert to using U.S. West Coast ports.” The report concluded by suggesting any remedy is in the hands of Congress not the regulatory agency.

The JOC looked at the issue by comparing market share within the PNW and among U.S. West Coast ports, where the HMT is uniformly applied. This is their finding in a nutshell:

Port data collected by The Journal of Commerce shows clearly that while Seattle and Tacoma have lost no market share relative to U.S. West Coast ports, their market share in the Pacific Northwest, a region that includes the Canadian ports of Vancouver and Prince Rupert, has slipped significantly in recent years.

That may not be conclusive of HMT culpability but it is indicative of competitive weakness just south of the 49th Parallel.  The comparative strength in British Columbia could be attributed to the HMT in addition to other factors, among them the efficient intermodal delivery system established as part of Canada’s ongoing Pacific Gateway Transportation Strategy.

Enter the Maritime Goods Movement Act User Fee proposed in the bill. The HMT would be repealed and then, for all practical purposes, recreated as the “MGMA User Fee.” In virtually every respect it would be like the HMT. The principal difference is that it also would be applied to U.S. bound cargo that first enters North America through Canada or Mexico.  Shippers would pay when the cargo crosses the land border.  On this bill rest the hopes of Puget Sound’s largest ports.

But the senators didn’t stop there. They also decided to try to fix the issue that is troubling most U.S. ports—the Harbor Maintenance Trust Fund. The bill would make several changes—including expanded uses of the HMTF such as are found in the Senate-passed WRDA (S. 601)—but let’s here focus on the greatest failing of the law as it now stands. That is the under-spending of HMTF funds.

Unlike the RAMP Act that would rely on a parliamentary mechanism to leverage full funding over the objections of appropriators, and unlike the WRDA bills of the Senate and House that set funding targets at which appropriators might aim, the MGMA bill uses a direct approach. At the bottom of page 10 is this: “[N]o fee may be collected…except to the extent that the expenditure of the fee [for allowable activities] is provided for in advance in an appropriations Act.” It is a rarely used means tying revenue collections to the spending of those revenues. The transaction would occur outside the section 302 allocations that cap appropriations committee spending. In doing so it would remove the incentive for appropriators to limit allocations and would treat the HMTF more like a dedicated trust fund.

This approach is employed in other areas of government where a user fee is collected to support a specific function of government. The only downside is that to meet the requirements of budget rules Congress also would have to identify offsetting revenue to fill the hole that would be created when, as a first step to creating the new MGMA User Fee, the HMT would be repealed, thereby eliminating 10 years of projected revenue.  Yes, it gets murky down deep in the budget process. But the result would be the very easily understood concept of “dollars in, dollars out,” as a Murray aide summarized.

Finding the offset, in the range of billions of dollars, presents a real challenge to the bill sponsors. There is a reason why other attempts at legislative solutions have produced little more than “sense of Congress” statements of principle and funding targets that are…well…just targets. The climb up this legislative Hill is very steep and the obstacles—including leadership objections and the search for offsetting revenue—have been daunting.

While we are noting the degree of incline ahead, let’s add to this particular bill the likelihood of complaints to the State Department from Mexico and Canada, who are major U.S. trading partners, and opposition from shippers and the railroads that carry their cargo into the U.S.

But that doesn’t mean it is the wrong solution to an HMTF problem that has existed since the early 1990s. It is the right one because it would be a more effective and lasting way to link the revenue to the reason for the revenue, which is to keep American harbor channels maintained and our ports competitive.  Pbea

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An Opportunity, Not Just An Optimist’s Musing

In Green Transportation, Marine Highway, Surface Transportation Policy on July 6, 2010 at 11:22 pm

I couldn’t pass up this tease question in an emailed promotion for a conference (in Marseille, if anyone has a spare ticket on the QM2 to offer a humble blogger).

Is Climate Change a challenge or an excellent incentive to facilitate the renaissance of the shipping and maritime industries?

Okay, I’ll bite.  My answer is yes.  It’s a challenge and it presents a generational opportunity that the maritime sector can’t afford to pass up.

Can climate change actions revitalize the shipping and maritime industries?  (Another question posed by the conference organizers.)   That not only is a timely question but it is the right question along with some others:

Will the American maritime sector will take proper advantage of the persistent national environmental and energy imperatives?  Will the U.S. industry only tinker around the edges of design and technology?  Or will it aggressively leverage global climate policy concerns to transform marine transport and services into  a new market opportunity?  Moreover, will the industry actually try to engage the interest of the US government in such a major transformation?

Marine transportation has some natural advantages.  It tends to avoid little things like 10-mile backups on the turnpike.  Its carrying capacity makes it the most efficient on a ton mile basis.  That efficiency can also mean some comparative environmental benefits, along with some less pleasing emissions.

But as we have seen those pluses are not sufficient to move UPS to adopt coastal water routes or to convince government to integrate marine highways into surface transportation policy.  Nor have various studies as to those benefits convinced shippers and other skeptics of Jones Act shipping.

After all, notwithstanding some attractive plans for new marine highway service, the industry has been slow to present concrete evidence that it has the will to leverage climate and energy policy drivers in order to bring about its own “renaissance.”  I reach once again for a convenient contrast: the railroads.

The Class Ones could see the time was ripe.   They have advertised the public benefits of  rail freight , they have  leveraged Federal support for the building of “green” locomotives, and they came up with a major bid to Congress,  anyone who would listen, for a 25 percent investment tax credit for infrastructure improvements to their systems.

I know none of this is simple stuff for the maritime sector.  And of course the economics are daunting to companies that operate on thin margins.  But does the industry–especially the US flag stakeholders–have a vision as to what it can be?   What the vessels can look like?  What cleaner fuels can be burned to make the environmental benefits of marine transport undeniable?   What visible improvements can be made to demonstrate that change is taking place to transform 20th century operations into 21st century wow!

As I have noted elsewhere in this blog, give the Sailor and the Secretary good reason to say “cutting edge” when talking about a vessel or a major advance in maritime goods movement.

We are handed an opportunity when Congress debates climate action measures and major reforms to energy policy.  Pbea

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Transformational Transportation, Part 2

In Green Transportation on July 31, 2009 at 11:21 pm

Persons famliar with Secretary LaHood’s meeting with public and port officials in Oakland tell me that folks might be surprised to know which California official was most enthusiastic  about the prospects for Bay Area marine highway service.  Among those at the meeting were two California cabinet members (Food & Agriculture and Business, Transportation & Housing) and the director of Caltrans.

The Eco Transport project has been in development for a few years.  The business plan is to reduce the need for  truck moves into Oakland by deploying barges to move containers between Oakland and the Ports of Stockton, initially, and Sacramento.  The company notes that such an operation also will make unnecessary a great many empty container moves and the associated costs of fuel and exhaust.   Export containers could be loaded heavier in Stockton because they would not have to meet road weight restrictions.  And carbon counters are sure to like the shrinking of the significant carbon footprint of trucks carrying imports into the central region, and California exports to Northern California’s principal international gateway.  Indeed the company has done its due diligence to substantiate the environmental benefits of their new marine highway service.  And the result has been the endorsement of regional and State air quality agencies.

So which official at the meeting revealed great eagerness and anticipation about the green barge service?  It was Food and Agriculture Secretary A.G. Kawamura.  He and the growers/shippers of the Central Valley are enthusiastic about the prospects for barges carrying goods to Oakland and then on to a ship for the export market.  And when a shipper is looking forward to taking  its goods to the water that’s a very encouraging sign.