Newly appointed Federal Maritime Commission Chairman Mario Cordero spoke with The Journal of Commerce on how he envisions the agency potentially overhauling ocean transportation intermediary rules, promoting exports and assisting port authorities. The following is a lightly edited transcript of the conversation:
JOC: Your predecessor, Richard Lidinsky, was widely seen in the industry as an activist FMC chairman. Do you see yourself continuing such an approach or will you take a different direction?
CORDERO: Our agenda over the last several years has called us to be more active in regards to issues such as infrastructure, and issues linked to port authorities and marine terminals. So my vision is to continue with the whole drive of making sure we have an efficient and responsible transportation system. In today’s world, what we are talking about is the infrastructure issues as it relates to our nation and specifically port authorities. In my mind, trade begins at the port. It is safe to say I come from a port authority perspective. The eight years I served as a commissioner at (the Port of) Long Beach was certainly a valuable experience. Being chairman of the FMC, I need to be very cognizant of the challenges facing port authorities.
JOC: How can the FMC aid port authorities?
CORDERO: I think the answer to the question has to be divided into two parts. With regard to our specific regulatory purview, we need to be very cognizant of practices, agreement and policies that raise costs and rates. As it relates to the issue of infrastructure, I think it’s ever more important for the FMC to comment on these issues as a stakeholder.
JOC: How does the FMC’s regulation of rates affect port authorities?
CORDERO: We need to make sure our port authorities — whether on the East Coast, West Coast or Gulf Coast — remain competitive. The indirect impact on a port authority in regard to cost, rates and transportation could mean that a particular port authority could be affected.
JOC: What is an example of this?
CORDERO: Let me give you a good example of that specifically to the role the FMC has taken: the Harbor Maintenance Tax issue and the study that we released here two years ago known as the Canadian study. That study the FMC undertook as a result of inquiry from members of Congress with regard to the diversion of cargo and what impact that does or doesn't have. As it relates to the Harbor Maintenance Tax, certain port authorities think that they give a certain amount of revenue they create through the HMT and they don’t get back their percentage. That impacts their operations. The FMC is not taking a specific position to the issues relating to the HMT. The study did recommend options for Congress to consider. We have valuable resources at this agency who can study these issues and provide guidance in regard to congressional inquiries.
I give that example because there is a great example of how certain ports are impacted. We have had lot of activity in Congress over this issue. Certainly No. 1, nearly everyone agrees that "let's use the funds for their intended purpose." I would like to think that because of the study and the work the FMC did, congressional members have looked at this and are addressing the relevant issues. Our staff, including myself, has reached out to Congress, to provide ourselves as resources. Looking at the Canadian study, what was the common denominator when we looked to the north to Canada and to the south to Mexico? The common element in both the scenarios was that those countries have a national freight policy. I think the Obama administration and Congress and the Department of Transportation are doing a lot of work on that issue. I reference the drive for a national freight policy because that is another issue the FMC has weighed in on.
JOC: How will the FMC handle the recently announced P3 Network?
CORDERO: There has been no agreement that has been filed with the FMC, although I suspect one will be. Once that agreement is filed, our staff will scrutinize that as they do all agreements in terms of how it may affect cost, but more specifically, we are talking about how this impacts capacity, how this impacts sailings, and how this impacts transportation times.
JOC: What is the status of the proposal to create an agriculture index to help U.S. exporters?
CORDERO: It is an ongoing discussion and I think comes under the caption of "what the FMC can do to facilitate exports." There has been a lot of discussion on that. I am certainly interested in what the industry thinks. But one thing we have for sure is this whole issue of volatility of rates. Whatever we can do to mitigate that I think should be up for discussion. What is interesting to see from the carrier perspective is that I haven’t seen any specific carrier totally dismiss this concept.
JOC: The World Shipping Council came out strongly against the agriculture index proposal, and agriculture export associations I spoke to were optimistic about the index but unsure what value it would bring.
CORDERO: You hit the nail on the head regarding the agriculture issue and stakeholders. They are still debating among themselves.
JOC: But couldn't part of the reason they are still debating be that they don’t have enough information from the FMC on what an agriculture index would look like?
CORDERO: What we do know for sure is that grain and agriculture commodities are going to be key in the future in regards to exports. The question is whether these models will facilitate and lower the cost, and I’m hopeful that as the discussion continues, I will listen to (shippers') concerns. Again, I don’t see the issue as one that has been categorically dismissed by the industry. With regard to the commodity of grain and agriculture, I will say that whether you are the World Shipping Council or a carrier, everybody agrees this is going to be a valuable commodity.
JOC: Commissioner Lidinsky has indicated that he wanted to look into what the FMC could to aid in the chassis industry. Do you plan to do the same?
CORDERO: We are looking into the chassis issue. There have been some discussions among the stakeholders and parties in regard to chassis pool agreements. The ports of (Los Angeles) and Long Beach are moving forward to put together some type of chassis pool model, and I’m sure that once they do that they will file that with the FMC. I think this another example how as an agency we will look to whatever we can to promulgate models or policies to further the movement of cargo. Various regions have different (chassis pool) models. There is a question of whether we should have a national model. I don’t see any short-term answer to that, but what I have seen is the move to relook at this model of having a carrier-dominated one to one that works with other people in the industry to take that part of the business. It will be interesting to see what Southern California does on that.
JOC: Do you see FMC regulating the chassis industry?
CORDERO: The agreements that will be made will ultimately be filed with the FMC, so we are going to look at those agreements in the same way we look at other agreements (in terms) of the cost result (and) the impact on rates. On the other hand, I feel comfortable that the various stakeholders — whether it be the truck drivers, carriers and leasing companies — will come together and provide the models, in the end, will result in an efficient model.
JOC: The FMC is considering overhauling rules pertaining to non-vessel-operating common carriers and forwarders. Would you explain why the agency is looking to change the rules, how they could change and for what effect?
CORDERO: We are looking at the OTI regulations to see if there are any unreasonable or burdensome regulations that we can remove. That is one of the (Obama) administration’s guidelines for all agencies. The issue in regard to the OTI that I think is very important is making sure we have a responsible, reliable and credible licensing process. The Shipping Act requires OTIs to have a license. It’s in the book. We are doing nothing to change that. There have been some issues with unlicensed entities. We are looking to tighten up the licensing process, so that it comes very clear to those operating without a license that the message is: We are going to enforce the Shipping Act. No. 2, it is my hope that we have a renewal process to protect the shipping public and to make sure people are licensed and bonded as required.
JOC: There is some concern in the industry that the proposal will complicate, not streamline, the OTI licensing process. There are also doubts about whether the FMC has the manpower to take on the plan. Your response?
CORDERO: All we are doing is making sure we are enforcing the (Shipping Act) and to make sure the shipping public isn’t hurt by the activities of unlicensed OTIs. For those who have been very responsible in getting licensed and bonded, there is a question whether it’s fair to those entities when others don’t take those steps.
We are a small agency and as we are speaking, we are dealing with budget issues that any small agency has to address. It’s important that Congress understands that if there ever was an example of an agency that can operate on lean budget, the FMC is one.
JOC: There has been some criticism in the industry that the FMC has largely been unsuccessful in grasping a larger mission. They point to what they call the lack of impact or follow-through related to the Canada diversion study, the agriculture index and OTI overhaul. What is your response?
CORDERO: I will clearly say that the FMC has definitive mission, and that mission is to make sure we have a responsible transportation system in regard to international containers. On that alone, I think we have been very effective as an agency. In reference to the HMT and the Canadian study, that came about when Congress asked us to weigh in. When you think about it from that perspective, who has the resources and the know-how to really weigh in on that? The FMC did. For those who have that view, look at the issue alone and the impact the FMC has had. Whether it is the Water Resources Development Act, whether it’s on the congressional side or the Senate side, there is a lot of talk about the HMT.
JOC: Is there anything else you’d like to highlight?
CORDERO: When we talk about sustainable development and efficiency, that has really been a big topic in the maritime/port industry. Coming from the Port of Long Beach, where I believe that discussion commenced many years ago, it’s interesting how all the major port authorities in the nation have some form of environmental initiative to reduce emissions as a result of port operations. As an agency, we have been in a position to address that in the form of presenting best practices.
In 2012, our nation had a 20-foot-equivalent unit count of upwards of 20 million. That figure when you look at it is better than the best year in 2007. What is interesting about those statistics is that they show the trans-Pacific trade route is highly important. But who is No. 2? Latin America at 3.8 million TEUS. The region has now superseded Europe in terms of trade with our nation. When we talk about our economy, our trade and container movement, Latin America becomes ever more important to work with as a trade partner. Is the FMC involved in trade agreements? No. But certainly we are a stakeholder on the importance of those agreements. I think we need to look at that and highlight that. Part of it again is to be resource and educate the public about the importance of certain trade routes.