FMC needs proper funding to fulfill maritime mandate

By: | Issue #625 | at 08:00 AM | Channel(s): Liner Shipping  

The Federal Maritime Commission (FMC) has the mission to administer the nation’s ocean borne commerce. Last year, 31.5 million TEUs passed through the nation’s ports and that number is certain to double within 14 years. But the FMC’s challenge isn’t just with ports and terminals – it’s about how the U.S. will handle a lengthy supply chain. FMC Chairman Mario Cordero knows the FMC’s job is big and getting bigger, and he has set his sights on preparing the Commission for the sizable demands of the future. Commissioner Cordero has asked for a budget of $27.49 million. Given the task, is it enough?

As ships get bigger, responsibilities rise but for the FMC (Federal Maritime Commission), budgets and staffing are failing to keep pace.

The mandate to monitor and administer this vast array of maritime trade issues falls on a staff of less than 125 employees with a budget in FY 2015 and 2016 of only $25.6 million. Recently, the FMC made a budget submission of $27,490,000 to support 134 full-time equivalent employees. The real question is less about budget approval and more about whether this increase is enough.

At this writing (May 4, 2016) the FMC has launched (see box on page 10) a “Supply Chain Innovation Team Initiative” to examine the challenges of the global supply chain of the nation. This holistic vision of the maritime trade is a commercial imperative for the U.S. to economically keep pace with the dramatic changes in the maritime industry including the deployment of significantly larger ships, and the consolidation and shifting of alliances. But it isn’t just about the ocean carriage – every mile outside of the terminal gates is just as critical to the supply chain as those at sea. What happens on rail and road and with data processing and how to go green is just as critical to the supply chain as every nautical mile plied by the box ships. This is the real challenge of the global supply chain.

The FMC’s sizeable task is to referee the supply chain stakeholders (at home and abroad). In a sense the FMC’s overriding mission statement is to provide a level playing field to enable the smooth flow of cargo. That playing field changes all the time.

Recently the container weight (VGM-SOLAS) controversy hit the headlines while truck congestion remained an unresolved problem at many U.S. ports. Environmental and socio-economic concerns potentially can kink each link of the supply chain. Straightening out these knotty problems has become the new role of the FMC. Compared to many other U.S. government agencies, the FMC is playing major league ball with double A league funding.

Nobody understands this dynamic better than FMC Chairman Mario Cordero. In April 2016 at the CONECT (Coalition of New England Companies for Trade) annual Northeast Trade & Transportation Conference in Newport, Rhode Island, Commissioner Cordero said, “Last year [2015] 31.5 million TEUs moved in the nation’s liner trades, up 2% from the previous year…[representing] nearly 17% of the global container trade.”

FMC Chairman Mario Cordero
FMC Chairman Mario Cordero

How important are the liner trades to the economic well being of the U.S.? According to studies the liner trades now account for over 30% of the nation’s GDP and as Cordero remarked, “Some predict that by 2030 this figure may rise to 60%.” The FMC’s own studies (a middle scenario 5% growth basis) suggest by 2030 - less than fourteen years from now – the nation will be handling 60 million TEUs. But this is a conservative number, and a throughput of 70-75 million TEUs is quite conceivable.

And the task is building. Cordero in an interview told the AJOT, the FMC in just the first quarter of FY 2016, (October, November, and December 2015) processed 8,491 new service contracts and another 177,382 service contract amendments. In 2015, the FMC received 51,109 new service contracts and 653,315 service contract amendments.

The Continental Divide

These numbers translate into a massive mission statement for the FMC.

This is a more complex task than the average man-in-the street or the elected officials easily recognize. The real reason for the difficulty is the North American version of the Continental Divide. As a continental power, it often seems like the weight of economic activity drains towards the middle, like rivers draining into the Mississippi. There is at every turn a tendency to look inward. How do you explain the value of an ocean port to the millions who live in the middle of the nation and will never see one? The mindset of the continental vastness prevails, despite being a contradiction to the nation’s actual economic structure, as the world’s most important trading nation.

Cordero understands this socio-economic dilemma. He expressed in remarks to the AJOT that until his appointment in 2003 to the Board of Harbor Commissioners (BOHC) for the Port of Long Beach (POLB) the idea of importance, the sheer immensity of the impact of global trade on his own community (LA-LB) and the nation at large hadn’t really hit him. Over the years on the BOHC, Cordero began to not only appreciate but also embrace what a port (and maritime industry) brings to a community. He describes those years as an educational experience. During Cordero’s tenure the POLB was in the midst of balancing robust growth against the very real need to go green.

In some respects, the reason the FMC (although they are not alone) hasn’t had more Congressional support (funding, etc.) is deregulation. It might be argued that the importance of the FMC’s role in international trade via administering ocean carrier tariffs was collateral damage from both the “Shipping Act of 1984” (ending shipping conferences) and the subsequent OSRA (Ocean Shipping Reform Act of 1998) which opened up the era of the “secret contract”.

While these acts were an overdue revamping of the terms of engagement between shipper and ocean carrier, a regular post-implementation question at many trade conferences was what regulatory role does the FMC now play?

With the FMC’s new holistic approach, Chairman Cordero has answered the question. The supply chain end-to-end is the FMC’s regulatory ballpark. The next question is whether the Congressional support now and in the future will match the mission.

George Lauriat's avatar

American Journal of Transportation