House Members Goad Marad, FMC on Regulation
WASHINGTON, D.C. — U.S. legislators on Sept. 10 vowed to strengthen the nation’s maritime industry, as the Merchant Marine faces rough waters and many in the ocean shipping industry are pushing back against a proposed Federal Maritime Commission rulemaking.
The Maritime Administration has been “dragging its feet” in rewriting cargo preference rules, as called for in 2008 legislation, said Rep. Duncan Hunter, R-Calif. The chair of the House of Representatives’ Coast Guard and Maritime Transportation Subcommittee said he was concerned that an FMC proposal to overhaul regulations for forwarders and non-vessel-operating common carriers would bring limited consumer protection but hamper business. Rep. John Garamendi, D-Calif., echoed Hunter’s enthusiasm for helping the U.S. maritime industry and noted it was one issue on which Democrats and Republicans could come together.
“We are in unison here,” said Garamendi, the subcommittee ranking member. “We are going to use this subcommittee to strengthen the U.S. maritime industry.”
Marad is writing new rules regarding cargo preference for U.S-flag vessels and expects to hand them off to Department of Transportation for review by the end of the month, said Paul “Chip” Jaenichen, the agency’s acting administrator.
Rigorous enforcement of cargo preference rules is critical, as many federal agencies skirt the requirement, said Capt. William Schubert, of USA Maritime, a coalition of ship owning companies, maritime labor organizations and maritime trade association. He told the House subcommittee that Marad held a listening session in September 2011, in which the industry demanded stricter enforcement of the rules.
“Now it’s two years later and nothing has been done,” Schubert said in a prepared statement. “The industry can no longer wait for Marad and implores this subcommittee and the full committee to use its influence to institute the long overdue regulations.”
Jaenichen said Marad plans to host a public meeting by the end of year that will focus on how to improve the Merchant Marine, considering factors such as transportation, speed, reliability, capacity, cost-effectiveness and the labor force. He added the agency is looking at how the cost of operating a U.S.-flag vessel compares with the cost of operating a foreign-flag vessel, and what can be done to make U.S. vessels more competitive.
The latest round of federal sequestration put the Merchant Marine at a “tipping point,” Jaenichen said, as budget tightening could reduce the number of vessels in the Ready Reserve Fleet and the Maritime Security Program. A maritime union has warned that the U.S. Merchant Marine could lose up to 15 vessels through the next wave of sequestration.
“If those mariners are lost, it’s unlikely for them to come back,” Jaenichen said. “We might not be able to man all (Department of Defense) sealift capacity.”
The latest round of sequestration cuts has already hit the Merchant Marine, and the Obama administration is attempting to cut direct foreign food aid, which would result in less cargo for the fleet to ship.
“It would appear by their actions that this administration simply does not understand or care about the very critical role that the U.S. flag industry plays in expanding our economy and ensuring our security,” Hunter said.
FMC Commissioner Mario Cordero defended the agency’s decision to consider overhauling ocean transportation intermediary regulations, pointing out those rules haven’t been substantially revised since 1999. Cordero noted the agency has been making regulatory modifications to rules that are obsolete, counterproductive or unnecessarily burdensome.
Cordero said the latest review of OTI regulations is a continuation of that push, and it has been transparent, with the FMC seeking industry opinion. The FMC is still reviewing the 52 comments made regarding the proposed overhaul, which would require licensed intermediaries to renew their licenses every two years.
Under the proposed changes, FMC also would be able to review the character of a qualifying individual and reject anyone who violated shipping laws, and the financial responsibility levels for forwarders and domestic NVOCCs would increase.
Financial responsibility levels would increase by $25,000 for forwarders to $75,000, and from $75,000 to $100,000 for domestic NVOCCs. The proposed rules could affect roughly 5,700 domestic and foreign NVOCCs and forwarders.
“The commission noted that even these adjustments to the levels of financial responsibility set in 1999 would not, for the most part, fully reflect an inflation-adjusted increase (for example, the NVOCC bond adjusted for inflation would be calculated at $105,000),” Cordero said in a prepared statement. “These bond levels have been unchanged by the FMC for 14 years.”
Cordero said the proposal would reduce regulatory burdens on licensed OTIs by recognizing the use of agents and by cutting the additional $10,000 bond required for licensed OTIs’ branch offices. On concerns that the proposal would overburden OTIs with paperwork, he said the proposal calls for a two-page online form.
He said a revision of OTI regulations is needed as there is “definitive problem” with forwarders and NVOCCs not updating their information with the FMC. A recent analysis of OTI filings that sampled 2.5 percent of filers showed that nearly a quarter had failed to comply with regulatory requirements.
The proposed OTI overhaul is a result of the FMC hearing consumer complaints about the movers of household goods, but the new rules would affect forwarders and NVOCCs that have nothing to do with commercial cargo transport, said Geoffrey Powell, vice president of the National Customs Brokers and Forwarders Association of America. He said the proposed changes won’t streamline agency processes as the FMC claims but will cost OTIs more time and money, he told the House subcommittee.
Powell also took issue with the proposal because it raises the surety bond requirement beyond what was called for by Congress in the recent surface transportation bill. Under MAP-21, freight brokers and forwarders are required to have a $75,000 surety bond and renew their license every four years.
“The commission’s proposals will increase OTI costs and impair efficient operations for no apparent reason other than to create greater regulatory scrutiny over thousands of companies, many of which are small businesses, without any advance input from the stakeholders or evidentiary justification for the significant new regulatory burdens,” he said in a prepared statement.