The Shipping Act: Its Impact on U.S-Flag Tug Operators and other Domestic Maritime Service Providers

Thank you for inviting me to speak on the Shipping Act. There certainly is a lot going on in the area of third party joint contracting and the Shipping Act.

On May 3, 2017, the House Subcommittee on Coast Guard and Maritime Transportation held a hearing on Maritime Transportation Regulatory Issues wherein the views of Federal Maritime Commissioners were solicited with regard to U.S. industry concerns about allowing ocean carriers to jointly and collectively negotiate rates with American-based maritime service providers, including tugboat operators. These U.S. maritime service providers claim they would be disadvantaged because domestic maritime service providers have no counterbalancing ability to take collective action.

I offered offer my views and support for a proposal articulated by the U.S.-Flag tug and barge industry to delete certain language from the Shipping Act, 46 U.S.C. § 41105(4): “unless the negotiations and any resulting agreements are not in violation of the antitrust laws and are consistent with the purpose of this part.” This would make it clear that the FMC cannot grant limited antitrust immunity to ocean carriers to collectively bargain with individual American maritime service providers. This legislative proposal has additional support of many maritime service providers including the Intermodal Motor Carriers Conference of the American Trucking Association, the Institute for International Container Lessors and the American Waterways Operators. I support the removal of this language from the Shipping Act.

This legislative improvement to the Shipping Act is consistent with the President Trump’s stated goal of creating and preserving jobs for the American people. It also strikes a fair balance between world trade and U.S. jobs. Finally, by removing this clause from the Shipping Act, it further eliminates the regulatory burdens placed upon American companies doing business with foreign entities.

To be clear, I strongly support vessel sharing and slot sharing agreements among two or more ocean carriers i.e., ocean carrier alliances. Ocean carrier alliances are absolutely necessary to support the movement of goods worldwide. These alliances allow the carrier companies to make more port calls than would otherwise be available to single carrier services. That said, the alliances should not be allowed to use their collective market power to disrupt and disadvantage stable functioning suppliers and service providers in the United States. These same U.S. based service providers and suppliers do not have the counterbalancing ability to collectively negotiate back against the foreign flag alliances.

There have been significant changes in the nature of the industry since the last amendment to the Shipping Act and I believe the authorities granted to the Federal Maritime Commission should better fit the reality of the maritime industry today. Within my lifetime the two largest ocean common carriers in the world were SeaLand and U.S. Lines, both U.S. companies. In 1998, at the time of the last significant amendment to the Shipping Act, which added the aforementioned legislative language in question, there were still U.S. ocean carriers operating. The reality today is there are no significant U.S. ocean carriers; the top carriers are all foreign. Importantly, the international ocean carrier industry today involves new and unprecedented consolidation and alliances among the largest ocean carriers in the world.

In the past three years, four separate alliance proposals involving the world’s largest ocean carriers have attempted to include agreement language to allow the foreign carriers to use their collective market power to jointly negotiate contracts with individual U.S. maritime service providers including tugs, truckers, chassis providers, and container lessors. Each time I urged the carriers to withdraw the language, which they ultimately did.

The maritime business community operating in and around the American waterways – rivers, coasts, Great Lakes, and harbors – have shared with the Commission and me their objections to the collective negotiating and contracting by the foreign ocean carriers. Tens-of-thousands of family wage jobs are supported by these marine service providers on the U.S. coastal and inland waterways. In addition, the Intermodal Conference of the American Trucking Association is concerned with the use of joint contracting authority by the ocean carrier alliances. Some trucking companies have informed me they have recently been approached by ocean carriers asking to renegotiate their contracts to bring them in-line with ocean carrier alliance partner’s trucking contracts. The truckers object to this practice.

I support the Shipping Act and recognize the important role of the Commission in granting limited antitrust immunity to foster a fair, efficient and reliable international ocean transportation system. The FMC promotes the interests of American importers and exporters and the American consumer. With the proposed legislative change, Congress will bring added fairness to American maritime service providers and their commercial relationships between individual international ocean carriers.

In summary, I believe the proposed change to 46 U.S.C. § 41105(4) will better fit the commercial reality of the international ocean carrier industry today and strengthen our domestic marine service providers that are equally if not more critical to our nation’s international supply chain.

My views expressed in these remarks are my own and should not be construed to represent the position of the Commission or my fellow Commissioners.