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First interview with new Federal Maritime Commission chairman

‘I am not throwing the book at anyone, but we need to find solutions to help everyone,’ Maffei says

(Photos: Daniel Maffei/LinkedIn and Jim Allen/FreightWaves)

Earlier this week, President Joe Biden tapped Daniel B. Maffei to become chairman of the Federal Maritime Commission. Maffei, who had been an FMC commissioner, replaces previous Chairman Michael A. Khouri.

Maffei’s appointment comes at a time of massive disruption in the world of trade. The list of challenges is long and costly: historic volume clogging ports, U.S. exports being denied by the carriers in favor of empty containers, costly detention and demurrage fees, and the persistent urging of vaccines for truckers and longshoremen.

In his first interview since becoming FMC chairman, Maffei touches on several topics that await him.

Initial challenges

AMERICAN SHIPPER: Thank you for sitting down with me and congratulations on your appointment. In your acceptance comments, you mentioned the nation’s supply chain is facing a critical time and challenges. As chairman, what will be one of the first challenges you will be addressing?

MAFFEI: “We are in the midst of an unprecedented import boom, which is one of the ripple effects of COVID, and the things most concerning us at the commission are the inabilities of exporters to have full access to ships. The congestion that is occurring is unfortunately unavoidable with this kind of stress on the system. We are concerned about abuses here and there that are real problems — looking at all these things to see where we can make a difference. And as you now we are in the middle of an investigation.”

AMERICAN SHIPPER: You, along with FMC Commissioner Carl Bentzel, wrote a letter to the World Shipping Council about this back in December. You called for “vigorous action” to protect access to service for U.S. exporters. Have you seen any change over these last several months?

MAFFEI: “I can’t tell you much at what the investigation is looking at. Commissioner [Rebecca] Dye has decades of experience in this and we expect to hear some conclusions from her very soon. What I can say is the kinds of concerns I had when myself and Commissioner Bentzel wrote that letter [to WSO] is exports. I know you have done a lot of reporting on this and it matters a lot to me.

“We have seen hundreds and thousands of export containers that have been rejected for the last several months. This is not ideal. … We want to promote exports.

“So the question is if there is wrongdoing, we want to get to the bottom of it. As a commission, we want to enforce our rules. If there is unproper willingness to negotiate or if there is unreasonable conduct by the carriers, we want to get to the bottom of it. That’s what our investigative process is. That said, if there are other areas where we simply cannot enforce, I want to know it.

“I am a former member of Congress. My colleagues need to know coming out of this situation where are the areas where there is no ability to make room for exports?

“No one is, quote, ‘doing nothing wrong,’ but because of market forces, it is creating a situation that is a huge disadvantage to American exporters — particularly U.S. ag exporters. Congress would not want this to continue, even another occurrence that would create another port boom to happen again. The investigation is a vital piece to this. As chairman I am looking closely at this.”

AMERICAN SHIPPER: This is a complicated process. Congress takes time. What can be done over the short term?

MAFFEI: “There are certain things we can do right now. We can put in charge the most credible person across all stakeholders — Rebecca Dye — and we have. Hopefully, we can create a big disincentive against unreasonable acts.

“Often carriers assume they are following the rules as long as it is not a competitive disadvantage for them. The clearer we can make it, the better. Last year, we had the interpretive rule pass on the unreasonable detention and demurrage charges. This is why we have been clearer in our language … the more we can be communicating in this current crisis [the better].

“But what is happening in this current crisis is the Shipping Act of 1984 and the 1998 amendment were 20 years ago. No one imagined the size of the ships, the kinds of port products and infrastructure we have today — even trade relationships. So there are lessons to be learned here for Congress and the Biden administration.

“I am not throwing the book at anyone, but we need to find solutions to help everyone, changes we must make in our whole system to be less vulnerable. This is beyond the ports. It’s all through the supply chain. We need to be less vulnerable in the future.”

AMERICAN SHIPPER: What kind of penalties should be levied against the carriers?

MAFFEI: “If there is a violation in the statute, to make such demands and order a change, we would need to show proof they are being unreasonable. That’s difficult to do under current law. I am not a legal expert, but that is a tough standard to reach. We communicate with the carriers as much as we can. They are good to talk to us. We can do a lot of good behind the scenes. The situation is better than what it was. But in terms of laying down that kind of demand, I’m not saying we don’t have that authority, but it would be difficult under the present law.”

AMERICAN SHIPPER: Does the law need to evolve?

MAFFEI: “Part of the challenge to the law itself. While it says our main job is to protect exports, it also says we need to consider market forces. And as you have written so well and understandably, we have a huge market problem. It’s not that the carriers are refusing exports because they do not want to make money. In some cases, it is clearly not a discrimination issue.  Some cases we do need to investigate but it not a discrimination issue. 

“This is just dollars and cents. This is an issue and is a problem for the current law. It was a good law when it was passed. I am not criticizing the members of Congress and people who put these laws together in 1984 and1998 but so many things have changed in the industry since then. It is understandable that we want to look at a new rule to ensure space for exports.”

Biden and Buttigieg

AMERICAN SHIPPER: How supportive is the Biden administration on this? Have you spoken with Transportation Secretary Pete Buttigieg yet?

MAFFEI: “I am thrilled he is the secretary. I have not spoken with Secretary Buttigieg or the administration yet to indicate a direction for me to share with you. We are on the same page in promoting exports. The Biden plan laid out [Wednesday] makes sure American producers have a level playing field which would help exports.

“To pull it off, we need those investments the Biden administration laid out. I was very pleased to see the $17 billion for ports and waterways. We are included in the mix. But you know this is the beginning stages and this is a proposal.” 

“I’m from a Great Lakes state. This is just a proposal. No one knows better than the president that Congress makes changes. I’ll be available to advise as they go through the plan.”

AMERICAN SHIPPER: One of the biggest hurdles facing the U.S. maritime industry is better data sharing. The Port of Los Angeles has its Port Optimizer. What are your thoughts on a national freight portal?

MAFFEI: “I think it is so vital. It would have to be something the secretary of transportation would have to be the main leader on and I hope to speak with him soon on it.

“We need more transparency. It’s not a competitive disadvantage to make available certain logistical information. Even if it has no inherent value, they sit on it because they don’t know if it will have future value. Companies need to make available information

“We have come a long way in a short period of time for ocean shipping. One of my biggest hopes we can get that moving. The FMC would only have a small piece, but it will be an important piece.

“Containers don’t know whether it’s on a train, railroad, 20,000-TEU ship or barge. It doesn’t mean we have to reinvent the wheel, but it does mean we need better coordination with companies that handle the supply chain.

“I do know a lot about transportation and government after serving Congress. I come from an area where dairy, soybean and apple exports are important. Famers from all over the country are facing the same issues.

“I come with an understanding of the issues these shippers are facing in the midst of this crisis.”

AMERICAN SHIPPER: The surge of containerized trade has not only been costly for importers, it has crippled global port productivity. Based on the rates being paid, shippers are not receiving the quality service they are paying for. In the fourth quarter of 2020 based on MDS Transmodal data, services performance plummeted. Do you believe the FMC has the tools to adequately tackle the detention and demurrage issues?

MAFFEI: “The commission’s interpretive rule on detention and demurrage couldn’t be more clear about how we will determine whether practices are reasonable. We expect that if the concepts of the rule are followed, that it should alleviate most of the issues faced by industry participants. And if the rule is not followed, we have the authority to address it, and we will.”

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The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.

Lori Ann LaRocco

Lori Ann LaRocco is senior editor of guests for CNBC business news. She coordinates high profile interviews and special multi-million dollar on-location productions for all shows on the network. Her specialty is in politics, working with titans of industry. LaRocco is the author of: “Trade War: Containers Don’t Lie, Navigating the Bluster” (Marine Money Inc., 2019) “Dynasties of the Sea: The Untold Stories of the Postwar Shipping Pioneers” (Marine Money Inc., 2018), “Opportunity Knocking” (Agate Publishing, 2014), “Dynasties of the Sea: The Ships and Entrepreneurs Who Ushered in the Era of Free Trade” (Marine Money, 2012), and “Thriving in the New Economy: Lessons from Today’s Top Business Minds” (Wiley, 2010).