Shipping regulation should be reviewed with an eye towards examining whether ocean carriers should continue to enjoy antitrust immunity, the Maritime and Coast Guard Subcommittee of the House Committee on Transportation and Infrastructure was told. "We believe that Congress should conduct a comprehensive review of the Shipping Act. The international liner business has changed substantially in last 10 years, in part driven by the shipping act reforms of the 1980s and 1990s," said Michael Berzon, chairman of the ocean transportation committee of the National Industrial Transportation League.
The hearing focused on management of the Federal Maritime Commission and regulation of international shipping. It followed one held in April where some committee members were critical of management of the commission. On Thursday the three commissioners described steps they have taken to improve morale and management of workers at the agency, and Congress asked for a further update in three months.
But the hearing focused largely on broader issues about liner shipping regulation under the Shipping Act of 1984 as revised by the Ocean Shipping Reform Act of 1998.
Elijah E. Cummings, chairman of the subcommittee, noted the European Union in October will eliminate its so-called "block immunity" for ocean carriers and as a result they will no longer be able to collude in the establishment of tariffs.
That change "will give European companies a distinct advantage over their U.S. counterparts," said Berzon, a former DuPont executive who is now president of the consulting firm Mar-Log Inc.
"The Antitrust Modernization Commission told Congress last year that the antitrust immunity afforded liner carriers has outlived any utility and should be appealed," he added.
Peter Friedmann, executive director of the Agriculture Transportation Coalition, questioned whether regulation was meeting the goals stated in the Shipping Act: stimulate exports, support the U.S. merchant marine, and to be consistent with international shipping practices.
Instead, he contends that U.S. regulation is undermining exports, has not reversed the decline of the U.S.-flag liner fleet, and will, as of October, be inconsistent with regulation by the European Union.
Friedman complained that carriers are failing to give agriculture shippers the capacity they need to ship their products abroad.
They "could be exporting 20 percent to 30 percent more depending on sector, particularly poultry if there was more shipping capacity out of this country."
He contended it was a problem facing shippers trying to move containerized cargo out U.S. and Canadian ports on all coasts.
He also said he did not believe the problems agricultural exporters were facing was a "temporary blip" attributable to the weak dollar, saying that demand for U.S. food is growing because of increased wealth in the Asia and developing countries.
But Stanley Sher, acting president of the World Shipping Council, a group that represents the liner shipping industry, said it was a "very unusual situation" that has developed in recent months with export capacity on liner services leaving the United States becoming tight for the first time in a decade.
He told members of Congress that their objectives when they passed OSRA have been achieved, and the major beneficiaries being U.S. exporters who have been able to ship cargo on days notice at extremely low rates -- rates that for most exports were lower at the end of 2007 than they were seven years ago.
Sher also told Congress that while the EU is eliminating antitrust immunity for carriers, most other countries in the world will grant some sort of antitrust immunity.
While the debate over shipping regulation has been going on for years, there has been a lack of facts on what would happen if regulation was eliminated. He suggested the country should wait to see what the European experience is before taking action.
"We've never had an opportunity to say ‘what does it look like when you don't have this system.' In Europe we now have that opportunity," he said.
"Let's get the facts and then take a look at the system and see how it has worked in Europe," he said. "If it hasn't worked and there are problems we can learn from it, We don't have to learn on the job ourselves. It turns out that there are benefits, we are perfectly prepared to look at it. Our point is that the system works, works well now and it seems to us that the one changing should have the burden."
FMC Commissioner Harold J. Creel Jr. agreed that the European will provide a good "case study" for review of shipping regulation, though he cautioned Congress that European regulation was "extremely anticompetitive" because it gave carriers full immunity with no government oversight in contrast to the United States where the industry is regulated by the FMC.
While it had been a decade since shipping regulation was changed, he said the OSRA reforms have "worked better than anyone ever imagined. He urged Congress not to "throw the baby out with the bathwater."
Creel also noted that much of the FMC's focus is now on port operations, such as its review of the Los Angeles-Long Beach clean trucks project. The exponential growth in trade is likely to make that role more important in the future, he noted.
Win Froelich, general counsel of the National Association of Waterfront Employers, said that if Congress is going to review antitrust immunity, then review of immunity for ocean carriers should be separate from review of immunity for terminal operators represented by his organization.
Marine terminal operators, he noted, are increasingly asked to solve public policy problem not directly within their control, and need to collaborate. He pointed to successful efforts to increase the use of terminals at night in Los Angeles and Long Beach -- without antitrust immunity, he said that change never would have occurred.
The hearing focused on management of the Federal Maritime Commission and regulation of international shipping. It followed one held in April where some committee members were critical of management of the commission. On Thursday the three commissioners described steps they have taken to improve morale and management of workers at the agency, and Congress asked for a further update in three months.
But the hearing focused largely on broader issues about liner shipping regulation under the Shipping Act of 1984 as revised by the Ocean Shipping Reform Act of 1998.
Elijah E. Cummings, chairman of the subcommittee, noted the European Union in October will eliminate its so-called "block immunity" for ocean carriers and as a result they will no longer be able to collude in the establishment of tariffs.
That change "will give European companies a distinct advantage over their U.S. counterparts," said Berzon, a former DuPont executive who is now president of the consulting firm Mar-Log Inc.
"The Antitrust Modernization Commission told Congress last year that the antitrust immunity afforded liner carriers has outlived any utility and should be appealed," he added.
Peter Friedmann, executive director of the Agriculture Transportation Coalition, questioned whether regulation was meeting the goals stated in the Shipping Act: stimulate exports, support the U.S. merchant marine, and to be consistent with international shipping practices.
Instead, he contends that U.S. regulation is undermining exports, has not reversed the decline of the U.S.-flag liner fleet, and will, as of October, be inconsistent with regulation by the European Union.
Friedman complained that carriers are failing to give agriculture shippers the capacity they need to ship their products abroad.
They "could be exporting 20 percent to 30 percent more depending on sector, particularly poultry if there was more shipping capacity out of this country."
He contended it was a problem facing shippers trying to move containerized cargo out U.S. and Canadian ports on all coasts.
He also said he did not believe the problems agricultural exporters were facing was a "temporary blip" attributable to the weak dollar, saying that demand for U.S. food is growing because of increased wealth in the Asia and developing countries.
But Stanley Sher, acting president of the World Shipping Council, a group that represents the liner shipping industry, said it was a "very unusual situation" that has developed in recent months with export capacity on liner services leaving the United States becoming tight for the first time in a decade.
He told members of Congress that their objectives when they passed OSRA have been achieved, and the major beneficiaries being U.S. exporters who have been able to ship cargo on days notice at extremely low rates -- rates that for most exports were lower at the end of 2007 than they were seven years ago.
Sher also told Congress that while the EU is eliminating antitrust immunity for carriers, most other countries in the world will grant some sort of antitrust immunity.
While the debate over shipping regulation has been going on for years, there has been a lack of facts on what would happen if regulation was eliminated. He suggested the country should wait to see what the European experience is before taking action.
"We've never had an opportunity to say ‘what does it look like when you don't have this system.' In Europe we now have that opportunity," he said.
"Let's get the facts and then take a look at the system and see how it has worked in Europe," he said. "If it hasn't worked and there are problems we can learn from it, We don't have to learn on the job ourselves. It turns out that there are benefits, we are perfectly prepared to look at it. Our point is that the system works, works well now and it seems to us that the one changing should have the burden."
FMC Commissioner Harold J. Creel Jr. agreed that the European will provide a good "case study" for review of shipping regulation, though he cautioned Congress that European regulation was "extremely anticompetitive" because it gave carriers full immunity with no government oversight in contrast to the United States where the industry is regulated by the FMC.
While it had been a decade since shipping regulation was changed, he said the OSRA reforms have "worked better than anyone ever imagined. He urged Congress not to "throw the baby out with the bathwater."
Creel also noted that much of the FMC's focus is now on port operations, such as its review of the Los Angeles-Long Beach clean trucks project. The exponential growth in trade is likely to make that role more important in the future, he noted.
Win Froelich, general counsel of the National Association of Waterfront Employers, said that if Congress is going to review antitrust immunity, then review of immunity for ocean carriers should be separate from review of immunity for terminal operators represented by his organization.
Marine terminal operators, he noted, are increasingly asked to solve public policy problem not directly within their control, and need to collaborate. He pointed to successful efforts to increase the use of terminals at night in Los Angeles and Long Beach -- without antitrust immunity, he said that change never would have occurred.