FMC: 40 Years of Lessons Learned

We tend to look at the history of U.S. maritime regulation as a series of discrete points in time: the Shipping acts of 1916 and 1984, the Ocean Shipping Reform Act of 1998, and regulations aimed at making the ocean shipping marketplace more open and competitive.

A panel of eight past chairmen of the Federal Maritime Commission showed that over a span of 40 years, changes came more by evolution than revolution.

Chairman Richard A. Lidinsky invited his predecessors to the chairmen’s reunion as part of the commission’s 50th anniversary. Helen Delich Bentley, 1969 – 1975, Richard J. Daschbach, 1977 – 1981, Elaine L. Chao, 1988 – 1989, Christopher L. Koch, 1990 – 1993, Harold J. Creel, 1996 – 2002, Steven R. Blust, 2002 – 2006, and Joseph E. Brennan, 2009, presented a living history of maritime regulation’s ups and downs. William D. Hathaway, 1993 – 1996 bowed out at the last minute.

The container revolution was just five years old when the FMC was chartered on Aug. 12, 1961. One of the first battles of the intermodal age was the “50-mile” rule, an agreement between management and the International Longshormen’s Association that gave the union jurisdiction over container stuffing and stripping within 50 miles of a port.

After one court ruling against the ILA, Bentley said that union president Teddy Gleason blamed her for the setback. He called to “chew me out. You didn’t need a telephone – you could have heard him all the way from New York.”

The U.S. Supreme Court struck down the rule in 1987, but by then the FMC was on the sidelines. Daschbach said that a court order “had the words ‘peace on the waterfront’ written five times, and I took that as a signal, we’re getting out of this. The smartest thing we did was to get out of it. It was a labor agreement, and let the labor board deal with it.”

Koch said that shippers began to grow restive under the tariff system in the early 1990s. OSRA was the biggest change in the FMC’s history. No longer custodian of tariffs, the FMC was charged with protecting the marketplace from forces that could skew the market. Shippers and carriers could keep service contracts confidential for the first time. “Carriers complained,” Creel said, “but at the end of the day both benefited.”

When NVOs began pushing for contracting privileges of their own, Blust said that a number of petitioners, beginning with UPS, filed for an exemption to the Shipping Act. They staggered their petitions so that a new one appeared about the time the commission’s 45-day review period was ending for the previous petition. It was a way to keep the NVOs’ case fresh in the minds of commissioners. The commission issued rules allowing NVO “service arrangements” with customers.

The chairmen said they occasionally found themselves battling their own government as well as inequities in the marketplace. The FMC stood up to the Soviet Union’s merchant fleet’s predatory pricing that threatened to destroy the market – against the State Department’s counsel. The standoff ended in the Controlled Carriers Act. State also was furious when the commission exercised its authority to force fair treatment of U.S. carriers at ports in Japan, something that threatened an all-out trade war.

The past half century shows that the maritime industry has grown more complex, changed by technology and the global marketplace. Still, some things remain constant, and the chairmen believed there is still a place for the FMC.

“The industry has changed lot, the laws have changed a lot, but what the FMC looks over is the same group of people, the importers, exporters, steamship lines, terminal operators,” said Koch.

Blust noted that the FMC had just published online all its annual reports, plus reports of its predecessor agencies back to 1917. That first volume showed that regulators were already dealing with fairness and market access. “Some of the issues are still issues in the market, competition and fairness and access to markets and discriminatory practices.”

“We don’t know what the technology will be, but I think you can safely assume that in 25 years or 50 years there will be ocean carriers,” Lidinsky said. “There is a role for the FMC as long as there is ocean transportation.”

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