It's time to decide

It's time to decide

What is shaping up as the most significant development in U.S. ocean transport regulation since the late 1990s is officially under way. Five petitions from non-vessel-operating common carriers seeking the confidential contracting rights their industry was denied in the 1998 Ocean Shipping Reform Act are on file with the Federal Maritime Commission. They came from UPS, BAX Global, Ocean World Lines, C.H. Robinson and the National Customs Brokers and Forwarders Association of America, each one making its case in a slightly different way.

Nearly 300 comments pursuant to those petitions - submitted by everyone from FedEx to ocean carriers to longshoremen, to members of Congress - are also on file at the FMC offices at 800 North Capitol St. The comment period closed on Oct. 10. With the door now shut, it's in the hands of Steven Blust and his fellow FMC commissioners to decide what they plan to do. A final decision may not come until early next year.

Of course, it's not just four NVOs and a trade group that have beaten a path to the FMC, but rather the industry itself, as significant changes in international trade and transportation have occurred since 1998. As the petitions suggest, the time may have come for the regulatory structure to adjust accordingly. Globalization has only accelerated in the past five years. Now, more than ever, multinational companies are conducting their manufacturing, sourcing and distribution in multiple countries. They are demanding their logistics vendors provide flexibility and visibility to their supply chains, and that they do so cheaply. Hence the long-term acceptance of ocean transport as a reality in modern logistics.

The main question confronting the FMC is whether to create two classes of NVOs - one with the right to sign confidential contracts like vessel-operating ocean carriers do, and the other without that right. All of the NVOs petitioning the FMC are essentially saying that large third-party logistics companies that happen to function as NVOs when it comes to ocean container transport are fundamentally different from smaller NVOs whose operations are more limited. BAX gets specific about it, saying that the right of confidential contracting should go to asset-based transport companies that have at least $100 million in operating revenue and a clean record of compliance with FMC rules.

The petitions of UPS, BAX and C.H. Robinson favor that general idea, naturally putting themselves in the privileged class. UPS and C.H. Robinson are asking for individual exemptions from existing rules for themselves only, while BAX says the FMC should initiate a formal rule-making.

The petition by the NCBFAA raises a somewhat different issue, asking that NVOs be relieved of the burden of publishing tariffs - relief that if granted would be tantamount to giving all NVOs the right to sign confidential contracts.

It should not be surprising that container lines speaking through their Washington trade group, the World Shipping Council, would be highly skeptical of these petitions. It was only five years ago that NVOs were explicitly denied the right to sign confidential contracts as part of the political deal that created OSRA. The carriers believe the law is clear that, contrary to what UPS suggests, the FMC does not have the ability to read a confidential-contracting right for NVOs into the law. The carriers have their own suggestion for UPS - become an ocean carrier, and in doing so obtain all the benefits of confidential contracting by chartering a single ship and putting it into service.

It's also no surprise that the International Longshoremen's Association would show little sympathy for the NVOs' petitions, as it was NVOs who years ago took away their off-dock container stuffing and stripping work.

But ultimately, a strict legal reading of OSRA by FMC staffers is not what's likely to determine the outcome of these cases. Laws have been stretched to the limit before in service of politics, and there is no reason OSRA won't be this time. As we've predicted before, the FMC will ultimately have little choice but to grant the big NVO transportation companies a substantial level of satisfaction. Otherwise, the NVOs will simply take their case to Congress, where 161 lawmakers have already made clear whose side they are on. You guess whose.

If it goes to Congress, confidential contracting for NVOs will not be the only issue lawmakers take up. Many on the Hill would love to get another whack at antitrust immunity, and others I'm sure wonder who the FMC is and why it even exists. No agency in its right mind would be that cavalier with its own future.

Peter Tirschwell is editor of The Journal of Commerce. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.