[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]






                      CAPACITY OF VESSELS TO MEET
                         U.S. IMPORT AND EXPORT
                              REQUIREMENTS

=======================================================================

                                (111-96)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             March 17, 2010

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure





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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             VERNON J. EHLERS, Michigan
JERROLD NADLER, New York             FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida               JERRY MORAN, Kansas
BOB FILNER, California               GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas         HENRY E. BROWN, Jr., South 
GENE TAYLOR, Mississippi             Carolina
ELIJAH E. CUMMINGS, Maryland         TIMOTHY V. JOHNSON, Illinois
LEONARD L. BOSWELL, Iowa             TODD RUSSELL PLATTS, Pennsylvania
TIM HOLDEN, Pennsylvania             SAM GRAVES, Missouri
BRIAN BAIRD, Washington              BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington              JOHN BOOZMAN, Arkansas
MICHAEL E. CAPUANO, Massachusetts    SHELLEY MOORE CAPITO, West 
TIMOTHY H. BISHOP, New York          Virginia
MICHAEL H. MICHAUD, Maine            JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          JEAN SCHMIDT, Ohio
TIMOTHY J. WALZ, Minnesota           CANDICE S. MILLER, Michigan
HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York          VERN BUCHANAN, Florida
HARRY E. MITCHELL, Arizona           ROBERT E. LATTA, Ohio
CHRISTOPHER P. CARNEY, Pennsylvania  BRETT GUTHRIE, Kentucky
JOHN J. HALL, New York               ANH ``JOSEPH'' CAO, Louisiana
STEVE KAGEN, Wisconsin               AARON SCHOCK, Illinois
STEVE COHEN, Tennessee               PETE OLSON, Texas
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
JOHN GARAMENDI, California
VACANCY

                                  (ii)



        SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

                 ELIJAH E. CUMMINGS, Maryland, Chairman

CORRINE BROWN, Florida               FRANK A. LoBIONDO, New Jersey
RICK LARSEN, Washington              DON YOUNG, Alaska
GENE TAYLOR, Mississippi             HOWARD COBLE, North Carolina
BRIAN BAIRD, Washington              VERNON J. EHLERS, Michigan
TIMOTHY H. BISHOP, New York          TODD RUSSELL PLATTS, Pennsylvania
STEVE KAGEN, Wisconsin               PETE OLSON, Texas
MICHAEL E. McMAHON, New York, Vice 
Chair
LAURA A. RICHARDSON, California
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)











                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Berzon, Michael, President Mar-Log Inc., Chairman, Ocean 
  Transportation Committee, The National Industrial 
  Transportation League..........................................    12
Lidinsky, Jr., Richard A., Chairman, Federal Maritime Commission.     4
Mullally, Chris, President, Mohawk Trading Company...............    12
Sappio, Robert F., Senior Vice President, Pan American Trade, 
  American President Lines Limited...............................    12
Swofford, Hayden, Executive Director, Pacific Northwest Asia 
  Shippers Association...........................................    12

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Larsen, Hon. Rick, of Washington.................................    29

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Berzon, Michael..................................................    83
Lidinsky, Jr., Richard A.........................................    41
Mullally, Chris..................................................    45
Sappio, Robert F.................................................    54
Swofford, Hayden.................................................    66


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
     HEARING ON CAPACITY OF VESSELS TO MEET U.S. IMPORT AND EXPORT 
                              REQUIREMENTS

                              ----------                              


                       Wednesday, March 17, 2010

                  House of Representatives,
          Subcommittee on Coast Guard and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 9:57 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Elijah 
E. Cummings [Chairman of the Subcommittee] presiding.
    Mr. Cummings. The Subcommittee will come to order.
    Today, the Subcommittee convenes to consider the shortage 
of shipping services, and regional shortages of shipping 
containers, available to carry United States trade, 
particularly exports.
    A recent article in the Wall Street Journal succinctly 
summarizes the basic problem. The United States has 
traditionally received more imports--which are typically 
comprised of finished consumer goods such as clothes, 
electronics, and furniture--than we have shipped exports, which 
are typically comprised of bulk products, including 
agricultural products.
    The recession that occurred in 2009 reduced our Nation's 
demand for imports and reduced the total worldwide shipping 
volumes, causing shipping rates and, thus, carriers' profits, 
to plummet. Carriers have responded by pulling ships off global 
trade routes and laying them up at anchor. They have also 
responded by sailing more slowly to reduce fuel costs.
    Now, just as demand for United States goods abroad has 
begun to rise, shippers are finding that outbound capacity is 
limited and that containers are scarce, particularly in the 
United States interior, where many agricultural exports are 
produced. U.S. exporters also report that when service is 
available, carriers are often assessing extra surcharges in an 
attempt to raise their revenues.
    That said, the problems we are currently experiencing are 
not entirely new. While the reduction in shipping capacity is a 
direct result of recent economic trends, container shortages 
were not uncommon in some U.S. regions even before the economic 
downturn.
    While the limited availability of shipping capacity and of 
empty containers would be serious concerns at any time, these 
current capacity constraints are occurring just as President 
Obama has announced the goal of doubling United States exports 
over the next five years. Increasing our Nation's level of 
exports is critical to reducing our unsustainable trade 
deficits and to carrying our recovery economy forward.
    That said, if individual economic trends in the maritime 
industry do not support the increased carriage of products from 
the United States to destinations abroad, our Nation's ability 
to expand its exports may be threatened even if there is 
increased demand for such products.
    Today's hearing will enable us to assess the true extent of 
the shipping capacity problem, as well as the options that are 
available to the United States to deal with this problem.
    Before we hear from our witnesses, let me take just a brief 
moment and place this current challenge in a broader historical 
context.
    As is recounted in several excellent studies, such as The 
Way of the Ship and The Abandoned Ocean, in the decades prior 
to the United States Civil War, more than two-thirds of U.S. 
foreign commerce was carried in U.S.-flagged ships.
    During the Civil War, U.S.-flagged vessels became the 
targets of raiding attacks carried out by the Confederacy. 
Although the United States lacked adequate naval forces to 
protect merchant shipping, when insurance premiums began to 
rise, the United States Government generally refused to offer 
subsidies or assistance to cover these premiums. United States 
shipowners responded by selling their vessels to foreign 
entities or by reflagging their vessels in foreign nations, 
predominantly Britain.
    Laws in existence at the time prohibited ships sold foreign 
from returning to the United States flag and, shortly after the 
Civil War ended, the Congress passed a law explicitly 
prohibiting U.S.-owned ships that had been flagged foreign from 
returning to the United States flag.
    It is estimated that more than half of the ships that had 
been under the United States flag at the start of the Civil War 
left our flag. By 1880, the already reduced U.S.-flagged 
merchant fleet had begun a continual decline that has never 
effectively been reversed, even with the ship construction 
booms that occurred during World War I and World War II.
    In the 20th century, as global economic forces have shaped 
the environment in which the United States-flagged vessels have 
sailed, the U.S. has pursued and discarded a number of policies 
in what has been presented as an ongoing effort to accomplish 
what the Maritime Administration now describes as its mission 
of improving and strengthening the United States maritime 
transportation system to meet the economic, environment, and 
security needs of our Nation.
    These policies, which have included construction subsidies, 
operating subsidies, the Title XI program, cargo preference 
programs, and now the Maritime Security Program, have been 
individually designed to pursue specific, narrow objectives. 
However, they have utterly failed in their stated objective of 
maintaining a U.S.-flagged fleet capable of carrying U.S. 
trade.
    Next week we will hold a hearing to examine in more depth 
the state of the U.S.-flagged fleet. However, let me provide a 
few statistics to set the stage for today's hearing.
    According to a study produced in 2009 by IHS Global Insight 
for the United States Maritime Administration, in 1975 there 
were 857 ocean-going U.S.-flagged ships with a carrying 
capacity of more than 17.6 million deadweight tons. At the end 
of 2007 there were 89 U.S.-flagged ships operating in the 
foreign trades, and these ships are highly dependent on U.S. 
Government-impelled cargoes. As a result, the U.S.-flagged 
fleet is estimated by IHS to be carrying less than two percent 
of U.S. foreign trade.
    Consequently, as we will discuss today, U.S. exporters, as 
well, of course, as U.S. importers, are subject to the business 
decisions and practices of foreign-flagged carriers when they 
move their products.
    Throughout the 20th century, these carriers have jointly 
set rates and have coordinated other business activities, a 
practice sanctioned by U.S. law, which grants the carrier 
cartels immunity from many antitrust provisions that would 
typically apply in the United States.
    Over the past century, as the U.S.-flagged carrying 
capacity has continued its steep decline, there have been many 
voices warning that this decline constituted both a security 
risk and an economic risk. These risks remain real today. At a 
minimum, they must be acknowledged for what they are, but I 
would certainly hope that, as we work to expand U.S. exports, 
we also work to formulate meaningful U.S. maritime policy that 
will revitalize our merchant marine and expand the percent of 
U.S. trade carried in United States ships.
    With that, I recognize our distinguished Ranking Member, 
Mr. LoBiondo.
    Mr. LoBiondo. Thank you very much, Mr. Chairman.
    Like nearly every part of our economy, the maritime 
transportation sector has been significantly impacted by the 
recent economic downturn. During this time, demand for imported 
goods has declined and many ocean carriers have been forced to 
respond by reducing the number of vessels in operation and 
route service in order to minimize cost and keep their 
businesses afloat.
    While this may have been necessary to keep carriers solvent 
in the near term, some in the transportation community complain 
that it is becoming increasingly difficult to transport goods 
in and out of U.S. ports. The concern appears to be especially 
strong for exporters, who have seen an increase in demand for 
U.S. goods and products.
    Recently, due to a weak dollar and other economic factors, 
U.S. exports have grown significantly. As economic conditions 
begin to stabilize, in the coming years, U.S. manufacturers may 
be in a position to further increase volumes of exports and, in 
so doing, create new American jobs.
    I hope today's hearing will give the Subcommittee an 
opportunity to hear from all parties and to lay out strategies 
that will support carriers, shippers, and U.S. producers in the 
long-run. It is in the interest of all parties to work through 
these issues and strengthen maritime commerce between the 
United States and our trading partners.
    I thank you, Mr. Chairman, and I yield back my time.
    Mr. Cummings. Thank you very much, Mr. LoBiondo.
    Now we will hear from our panel, and we welcome Mr. Richard 
Lidinsky, who is the Chairman of the Federal Maritime 
Commission. This is your second appearance, I think, as 
Chairman. This is the second one, right? And we congratulate 
you. I see that you are joined by Ms. Dye and?
    Mr. Lidinsky. Our Deputy General Counsel, Ms. Fenneman.
    Mr. Cummings. Glad to have both of you. I understand that 
you will be testifying?
    Mr. Lidinsky. They will assist me with questions and 
answers.
    Mr. Cummings. Very well. Thank you very much. And, again, 
congratulations.
    Mr. Lidinsky. Thank you very much, Mr. Chairman.
    Mr. Cummings. Before you even start, I want to recognize a 
woman who has just been just so wonderful to me and one who has 
spent just a phenomenal amount of time working on maritime 
issues, former Congresswoman, always Congresswoman Helen 
Bentley. I am so pleased that you have taken a moment to spend 
some time with us. Thank you, and thank you for all that you 
have done not only for me, but for our Nation and certainly the 
maritime industry.
    Thank you.

   TESTIMONY OF RICHARD A. LIDINSKY, JR., CHAIRMAN, FEDERAL 
                      MARITIME COMMISSION

    Mr. Lidinsky. Thank you, Mr. Chairman. Good morning to Mr. 
LoBiondo as well.
    With me this morning is our Commissioner, Rebecca Dye; our 
Deputy General Counsel, Rebecca Fenneman; and also in the 
audience Commissioner Michael Khouri.
    The Commission is keenly aware of complaints by U.S. 
exporters and, more recently, importers about the difficulty of 
obtaining space to ship their products. Over the past few 
months, Commission staff, Commissioners and I have held a 
number of meetings with various carriers, shippers, and 
representatives of the Transpacific Stabilization Agreement, 
which is the largest ocean carrier agreement, and of the 
Westbound Transpacific Stabilization Agreement as well. We have 
met with the National Industrial Transportation League, 
National Retail Federation, the Agriculture Transportation 
Coalition, and the Pacific Coast Council of Brokers and Freight 
Forwarders.
    Reports from shippers have been remarkably similar. Many 
say they have been forced to amend their service contracts and 
commit to higher, and at times, auction rates in order to have 
their cargo carried. Many have complained of their cargo being 
delayed or rolled to future sailings. Exporters, particularly 
agricultural exporters, have had difficulty in obtaining 
containers. Carriers, on the other hand, point immediately to 
losses incurred over the past two years due to economic 
conditions, claiming that they collectively lost $15 to $20 
billion and have just begun stabilizing at this point.
    Over the last few turbulent months, we as a Country have 
emerged from economic conditions the likes of which we have not 
seen for 70 years, and the shipping industry is no exception.
    It appears that the core of the problem is that carriers 
removed vessels from service after a dramatic drop in demand in 
the depths of the recession in late 2008 through 2009. 
Recently, demand for container transportation has increased as 
the American economy has begun to recover. But, by all reports, 
vessels have not been redeployed as fast as demand for space 
has increased.
    Ocean carriers advise us that they do anticipate moderate 
capacity increases, bringing in new vessels and expanding 
service. But according to respected forecasters, there will be 
an increase of approximately 2 percent this April in capacity. 
Two new lines will work in the Pacific, but, nevertheless, the 
projected April capacity is still more than 6 percent below 
where capacity stood in April of 2009.
    The ocean carriers' cautious reaction might be explained by 
the tremendous impact the recession had on their finances, as 
well as economists' uncertainty over how much the recent uptick 
resulted from restocking of low inventories, as opposed to a 
sustained increase in demand. On the other hand, available 
shipping space is a key ingredient for the financial recovery 
of American exporters and importers.
    The Commission understands the aftershock of the tremendous 
economic swings of the past two years affecting both parties. 
We know from experience that trades are almost never in perfect 
balance as to imports and exports. From the outset of 
containerization 50 years ago, there have been fluctuations 
between undercapacity and overcapacity.
    However, we are also mindful of the increased demand for 
cargo space representing a good sign for the economy and this 
industry overall. In this regard, cargo shipments in the 
January-February time period of 2009 saw a 32 percent increase 
for the Ports of Los Angeles and Long Beach as opposed to a 
year ago. Liner imports increased 13 percent in that period as 
well.
    Nevertheless, we are seriously concerned with the current 
situation, particularly with reports of U.S. exporters unable 
to obtain space. As you know, it is expressly stated in the 
Shipping Act that this agency is to ``promote growth and 
development of United States exports through competitive and 
efficient ocean transportation and by placing a greater 
reliance on the marketplace.'' And, as the Chairman mentioned 
in his statement, the President has directed all Federal 
agencies to ``use every available resource'' to increase 
exports over the next five years.''
    The Commission is doing its part to advance Congress's and 
the President's proposals in two key areas. We are pursuing a 
number of avenues, but we have recently met with the Department 
of Agriculture staff and the Westbound Transpacific 
Stabilization Agreement in an effort to develop an information 
system that would enable agricultural shippers to identify the 
locations of available empty shipping containers.
    Insufficient container availability has been a recurring 
problem affecting our agricultural exporters. Addressing the 
current problems with container availability and the location 
of equipment for exporters will require coordination among 
several modes of transportation and the agencies that regulate 
them.
    My fellow Commissioners and I have recently met with Mr. 
Young Min Kim, the CEO of Hanjin Shipping and the new Chairman 
of the TSA agreement, as well as executives of other carrier 
members. I have communicated shipper grievances to Mr. Kim and, 
today, the TSA meeting in Taipei has reviewed our complaints 
and has assured us that these issues will be discussed in 
detail.
    Just a few hours ago, I also received a message from Mr. 
Kim stating that members of the WTSA agreement are willing to 
meet in a forum in Washington on April 19th to discuss 
specifically U.S. exporter needs, with the FMC participating in 
this meeting.
    In all our discussions, both with shippers and carriers, we 
have stressed the need to be ``partners in recovery'', as each 
is dependent on the other for economic recovery and growth. The 
Commission will continue to serve as an honest broker between 
these partners, working to achieve the results that we all 
want.
    I am also pleased to announce that on March 11th, the 
Commission unanimously voted to initiate a non-adjudicatory 
fact-finding investigation into the space and equipment 
shortages. The fact-finding investigation will be headed by 
Commissioner Rebecca Dye. She will conduct a full and fair 
analysis of the circumstances, explore ways in which the 
Commission can help resolve the current situation in light of 
our current limited ability and authority, and report results 
to the Commission along the way, with any recommendations of a 
policy or regulatory nature, as well as suggestions for any 
possible legislation that might be needed. We will be sure to 
keep the Subcommittee apprised of how the investigation is 
proceeding and we will be happy to share our report and 
recommendations when the investigation is complete.
    Finally, the Commission has consistently reminded all 
parties that issues between individual shippers and carriers 
can be resolved with the assistance of our Consumer Affairs and 
Dispute Resolution Services Office, which specializes in 
resolving disputes through mediation and other alternative 
dispute resolution services. We encourage carriers and shippers 
alike to use these services.
    Mr. Chairman and Members of the Subcommittee, thank you 
very much for the opportunity, and we look forward to answering 
your questions.
    Mr. Cummings. Thank you very much. I really appreciate your 
testimony.
    Let me start off by saying that I do commend the Commission 
for launching an investigation into the conditions in our 
import and export trades in the shortage of capacity for 
importers and exporters. Mr. Lidinsky, as you may remember, we 
had a real morale problem at the FMC and people were 
complaining, and I can tell you that I have heard from a number 
of your employees who feel a lot better about things since you 
have been there.
    Mr. Lidinsky. Thank you very much, Mr. Chairman.
    Mr. Cummings. Apparently, you must have come in, working 
with Ms. Dye and others, to turn around that issue, and I do 
thank you. I think this kind of effort is something that 
certainly makes people feel good about what they are doing.
    Mr. Lidinsky. Exactly.
    Mr. Cummings. Because it shows them that they can have an 
impact, possibly. And I know that you haven't gotten into the 
research yet, but do you believe that the United States 
exporters are currently experiencing a lack of vessel capacity, 
and will that lack of vessel capacity affect the achievement of 
the President's goal of increasing the Nation's exports over 
the next five years? Further, could you explain how your fact-
finding will help the current crisis, or how you think it might 
help?
    Certainly, Ms. Dye, if you want to chime in, you are 
certainly welcome to do so.
    Mr. Lidinsky. Thank you, Mr. Chairman. First of all, let me 
say thanks again for your comment about the agency. As you 
know, I returned to the Commission after a short absence of 35 
years, where I trained under Helen Bentley, so I am back at 
home. But I was struck by the fact that the same spirit and 
dedication is there, although the agency is half the size of 
what it was in those days. But it was just a matter of 
redefining our mission; it was always there and the Commission 
staff is energized on some of these issues and you are going to 
see real results from the Commission in the coming days. So 
thank you for that.
    Now, as to the question of capacity, there is no doubt 
there is a capacity shortage and there is no doubt that it is 
hurtful for exporters. The carriers agree with that, the 
exporters agree with that, and, unless we get the situation 
fixed, there is no way that we will be able to meet the 
President's goals that he has stated.
    Now, as to the fact-finding mission itself, I would like 
Commissioner Dye to respond to that.
    Ms. Dye. Thank you, Mr. Chairman. This type of proceeding 
is well suited for this situation because it is not designed to 
assess fines or penalties, but to determine a factual situation 
upon which we may act. We have given ourselves a short time 
frame during which to complete an initial report because----
    Mr. Cummings. And what is that time frame?
    Ms. Dye. June the 15th.
    Mr. Cummings. June the 15th you plan to have finished your 
report?
    Ms. Dye. An initial report.
    Mr. Cummings. Initial report. Okay.
    Ms. Dye. Because we wanted to make sure that if there is 
something that we could do to remedy this urgent problem, that 
we identify it now.
    Mr. Cummings. Right.
    Ms. Dye. And not in a year.
    Mr. Cummings. Well, you know, when you said that, that 
automatically made my ears perk up, because you know I love 
deadlines. I love them, because there is no way we can measure 
things unless we have timetables and deadlines, and that is why 
we are going to have a hearing.
    Ms. Dye. I knew you were going to say that. And I will take 
that challenge, Mr. Chairman.
    Mr. Cummings. Okay. We are going to figure out how we can 
have that hearing sometime after June 15th, but no later than 
July 15th. We just have to look at the schedule. Because we 
want you to come back so we can see where we are on that. And I 
do appreciate your saying that, because things can go on and on 
and on.
    And as I told a group of mariner folks yesterday, I said 
that when it comes to business decisions, business people need 
decisions. The last thing they need is to be trying to predict 
what is going to go on. They either need to hear a yea or nay, 
and then they can move on and do what they have to do. So it 
would be good for us to begin to look at it. But go ahead.
    Ms. Dye. Yes, sir. And we may have matters that we need to 
consider further, and, of course, that will be for the 
Commission to determine, if we wanted to extend the deadline 
for any particular assessment. But the Commission had looked 
into this matter in the summer of 2008.
    Of course, in the fall of 2008 everything changed for the 
entire global economy. But I am pleased to look into it again 
for the benefit of our American importers, and certainly we 
don't want an exporter who has anything to sell on the global 
marketplace to lose a sale for lack of transportation.
    Thank you, Mr. Chairman.
    Mr. Cummings. Were you finished? Has the Commission 
received reports of container shortages? Do you all receive 
those kind of reports?
    Mr. Lidinsky. We do, Mr. Chairman. We receive them in 
direct complaints from shippers that have been deprived of 
containers. We also have several services that we use, economic 
experts who give us weekly reports of container shortages.
    Mr. Cummings. And do you know whether lines have been 
cutting export shipments so they can ship empty containers back 
to Asia?
    Mr. Lidinsky. Well, we have heard reports of that, and this 
is a shipping pattern that is not new to this crisis, because 
lines will be dedicated to a particular service and require the 
movement of empties. Now, empties have to move or cargo comes 
to a stop. But we have had, in recent weeks, accelerated 
reports of cargo shortages, particularly on the West Coast, of 
container capacity.
    Mr. Cummings. Now, do you believe that FMC has all of the 
legal authority it needs to address the problems faced by U.S. 
exporters regarding current container capacity?
    Mr. Lidinsky. Well, we do at the moment, and we would hope 
that Commissioner Dye's study would point to where we might be 
short on that. But at the moment we feel we do have adequate 
authority.
    Mr. Cummings. Just one more thing, then I will come back 
after Mr. LoBiondo finishes. Has FMC ever ordered more capacity 
of vessels or more containers into trade or to a part of the 
United States?
    Mr. Lidinsky. We have not, Mr. Chairman, and the reason for 
that is that in the decision-making process of the Commission, 
we don't micromanage companies in terms of what they have to do 
in terms of containers or vessels. Now, theoretically there 
could be a complaint brought, there could be a proceeding, an 
investigation where that might be a remedy, but it has never 
happened before in the history of the Commission.
    Mr. Cummings. So, in other words, you have the authority to 
do it. Do you think you have the authority to do that?
    Mr. Lidinsky. I would defer to our legal counsel in that.
    Ms. Fenneman. Thank you, Mr. Chairman. I think it would be 
a very close question of a matter of fact. If, for example, the 
Commission found that carriers were coordinating their services 
in a way, under a filed agreement, that would violate the 
standards of Section 6(g) of the Shipping Act, the Commission 
could order a remedy, which would be the dissolution of this 
kind of collaboration.
    And, necessarily, probably what would happen was each 
carrier would have to put in its own capacity and, thereby, 
capacity would enter the trade. But, of course, I don't 
believe, as a particular remedy, the Commission could order 
specifically that containers be placed or capacity be placed in 
a trade.
    Mr. Cummings. Thank you very much.
    Mr. LoBiondo.
    Mr. Lobiondo. Thank you, Mr. Chairman.
    Sort of following up with this container problem, do 
shippers have the ability to identify and locate empty 
containers that may be available to exporters?
    Mr. Lidinsky. That is a tough situation, Mr. LoBiondo. 
Larger shippers do. Larger shippers are very often in contact 
with not just the carriers, but with NVOCCs, other equipment 
suppliers, container leasing companies that do have access to 
empty containers. So each shipper, each exporter has to fashion 
their own export strategy, but there is no central repository 
to come to in order to say here are 500 containers sitting in 
Newark or 600 sitting in Baltimore. That does not exist.
    Now, the USDA has held meetings with us to try to talk 
about such a system, particularly for agricultural exports, and 
those talks are in their early days. But that is the gist of 
what they would like to do.
    Mr. LoBiondo. Does your agency, can your agency come up 
with a plan to help facilitate, bring that into reality for 
identification of where the empties are?
    Mr. Lidinsky. I would think that would be an achievable 
goal that we could work on, but I would defer to Commissioner 
Dye on that question.
    Ms. Dye. Yes, Mr. LoBiondo, that is the type of thing I 
think that, those type of solutions exactly that we are looking 
for; and if we can be a facilitator in that matter, that is 
something that we will consider. I think it is appropriate for 
this fact-finding.
    Mr. LoBiondo. So that would be something you will be 
looking at between now and June 15th?
    Ms. Dye. Yes, sir.
    Mr. LoBiondo. Okay.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much.
    Let me just go to a few other things. Mr. Lidinsky, you 
indicate that you and other commissioners have personally met 
and expressed our concerns with Mr. Young Min Kim, the CEO of 
Hanjin?
    Mr. Lidinsky. Hanjin, yes.
    Mr. Cummings. Hanjin Shipping and new Chairman of TSA, as 
well as executives of other carrier members, and you 
communicated a number of grievances we have heard from 
shippers. What response did you receive and did Mr. Kim or 
other executives with whom you met specify the actions they 
would take in response to the concerns you raised?
    Mr. Lidinsky. We have had a very encouraging response, Mr. 
Chairman, and each carrier company, each agreement that we have 
met with acknowledges there are problems and, as I mentioned in 
my statement, that it is not unusual to see, the day-to-day 
shipping process is not a science, it is an art. If it was a 
science, we would have all trades perfectly balanced with no 
container missing.
    I worked for 20 years for a container manufacturer and 
supply company, and the toughest aspect of that is getting it 
right between the carriers and the shippers. So it is not easy, 
but I am very encouraged and I think our fellow commissioners 
are very encouraged by the response that we have had from Mr. 
Kim and others; and this meeting that we will have in April 
with the exporters and carriers is going to be very important 
to bring this thing into focus and to do what both sides have 
to do to get the job done.
    Mr. Cummings. Now, you indicate that the Commission staff 
recently met with the Department of Agriculture staff and the 
WTSA in an effort to develop an information system that would 
enable agricultural shippers to identify the locations of 
available empty shipping containers. What is the outcome of the 
meetings and will a container information system be developed, 
and when will it be online, and how do you envision that 
working?
    Mr. Lidinsky. Well, the meetings are still going on in 
progress, but the USDA envisions such a system as you describe. 
Now, I can't give you any deadlines today as to when it might 
be finalized or what would be the reality of it, but 
agricultural exporters are in a much more difficult position 
than regular exporters, of course, because they have crops, 
which at times are unpredictable. They can't give a date 
certain, very often, for moving of the goods, moving of the 
grains and different things.
    So we would work with USDA, and what we envision is that 
the carriers would work through a central registry to report 
empty containers in this region or that region so that the 
agricultural shippers can hook up with those empty containers 
and move to port.
    Mr. Cummings. I know it is a difficult problem to address, 
but do you have any idea of when you think you might be able to 
have it resolved? I am not trying to hold you to a date.
    Mr. Lidinsky. Well, I would think that in the context of 
Commissioner Dye's fact-finding and going to two or three more 
meetings with USDA, I would certainly look at a summer time 
frame to see whether this plan is feasible or not, and what we 
would need to bring it about.
    Mr. Cummings. Ms. Dye, that is such a major problem. I hope 
that that will be, I am sure it already is, on the top of your 
list, trying to figure that one out. Staff just told me that we 
will be able to hold that hearing on July the 2nd, so that 
gives you an additional 17 days beyond your self-imposed 
deadline, by the way. But I just think that is very important 
to our agricultural community.
    The carrier cartels indicate, Mr. Lidinsky, that their 
announcements are non-binding on members; however, a witness on 
our second panel has written in his testimony that there is not 
much variance among the actions taken by cartel members. What 
assessments do you undertake to compare the actions of cartel 
members and what results have you found?
    Mr. Lidinsky. Well, I would defer to counsel, but I would 
say that we very carefully look at the minutes of each of the 
agreement groups; we then follow up by our own field 
representatives observing in various ports what is happening, 
economic reports, studies that indicate any kind of activity 
that might be outside the scope of the approved agreement.
    I would turn to Ms. Fenneman for any additional remarks.
    Ms. Fenneman. Mr. Chairman, if I can just add. Our Bureau 
of Trade Analysis closely monitors all filed carrier agreements 
and their impacts. Depending on the authority of the agreement, 
there are different levels of monitoring and minuting 
requirements, with the agreements that discuss rates 
particularly having the highest scrutiny of monitoring. Other 
agreements are monitored as well for their activities with 
regard to capacity, deployment, and other activity. We have a 
team of economists that watch for particular effects as well as 
to predict likely effects of these agreements that are filed 
with the Commission, so they are closely monitored.
    Mr. Cummings. And how many challenges has the FMC brought 
against an agreement filed with it on the ground that they are 
anti-competitive since enactment of the Shipping Act of 1984?
    Ms. Fenneman. There has been one such challenge.
    Mr. Cummings. And what type of matters has the Commission 
addressed in past fact-finding actions?
    Ms. Fenneman. In past fact-finding actions, the Commission 
has addressed a wide variety of matters, but several had to do 
with the coordinated activities of carriers. In the past we 
have had fact-finding proceedings concerning particularly the 
Transpacific Stabilization Agreement and its activities with 
relation to service contracting, how they treat their shippers, 
whether they are acting in a coordinated fashion to 
discriminate against certain types of shippers and those sorts 
of matters.
    We have looked, in the past, at particular trade lanes and 
we have looked at particular commodity issues. There have been 
a wide variety of fact-findings. Some have resulted in 
settlement agreements, some have resulted in further 
enforcement action, and some have not resulted in any further 
action. So there is a wide variety of outcomes that we have 
seen from fact-findings.
    Mr. Cummings. Just one last question before we get to Mr. 
Larsen.
    What legal authority does the FMC have to further 
deregulate international shipping, such as eliminating tariff 
filing and publication requirements?
    Ms. Fenneman. The Commission has quite broad authority 
under Section 16 of the Shipping Act to deregulate where it 
finds that no substantial harm to competition or unreasonable 
detriment to commerce will result. So it has quite broad 
authority to deregulate under the Shipping Act.
    Mr. Cummings. Mr. Lidinsky, just a few more things. I 
understand Mr. Larsen doesn't have any questions of this panel.
    What percentage of United States exports move under 
contract versus under common carriage agreements? Do you know 
that?
    Mr. Lidinsky. I would supply the Committee with the exact 
number, but my feeling, Mr. Chairman, would be the vast 
majority are moving under contract.
    Mr. Cummings. And to what extent do you believe that ocean 
common carriers are colluding in setting the rates that are 
being charged even under confidential service contracts, and 
what impact is such collusion having on prices?
    Mr. Lidinsky. Well, I would answer the question this way, 
Mr. Chairman. I think the service contracts that came out of 
the 1998 Ocean Shipping Reform Act have been a tremendous 
success. There are over two million of these contracts filed, 
and I think that most individual shippers feel that they are 
negotiating one-on-one with the carrier, with the service that 
they are involved with. If there was any evidence of any kind 
of collusion or any kind of anti-competitive activity, any kind 
of excessive negotiating power over the shippers, we want to 
know about it and we will act to stop it.
    Mr. Cummings. Very well.
    Mr. LoBiondo, did you have anything else?
    Mr. LoBiondo. No.
    Mr. Cummings. Again, I want to thank you all for being 
here. Mr. Lidinsky, I do plan to visit the agency to talk to 
the employees.
    Mr. Lidinsky. Very good, Mr. Chairman. You are most 
welcome. We will work out a date and Commissioner Dye wrote 
down that July 2nd date, but drew some fireworks around it for 
the 4th.
    [Laughter.]
    Mr. Lidinsky. That will keep her focused.
    Ms. Dye. We look forward to it.
    Mr. Cummings. I look forward to seeing you all. Thank you 
very much.
    Mr. Lidinsky. Thank you, everyone.
    Mr. Cummings. We will now hear from our second panel.
    The second panel is Robert F. Sappio. He is Senior Vice 
President, Pan American Trade with APL Limited; Chris Mullally 
is President of the Mohawk Trading Company; Hayden Swofford is 
the Executive Director of the Pacific Northwest Asia Shippers 
Association; and Michael Berzon is President of Mar-Log Inc. 
and Chairman of the Ocean Transportation Committee of The 
National Industrial Transportation League.
    I want to thank all of you for taking time from I know what 
are extremely busy schedules to be with us this morning. We 
will hear from Mr. Sappio first.

   TESTIMONY OF ROBERT F. SAPPIO, SENIOR VICE PRESIDENT, PAN 
    AMERICAN TRADE, AMERICAN PRESIDENT LINES LIMITED; CHRIS 
 MULLALLY, PRESIDENT, MOHAWK TRADING COMPANY; HAYDEN SWOFFORD, 
      EXECUTIVE DIRECTOR, PACIFIC NORTHWEST ASIA SHIPPERS 
   ASSOCIATION; AND MICHAEL BERZON, PRESIDENT MAR-LOG INC., 
    CHAIRMAN, OCEAN TRANSPORTATION COMMITTEE, THE NATIONAL 
                INDUSTRIAL TRANSPORTATION LEAGUE

    Mr. Sappio. Mr. Chairman, I have a written statement that, 
with your permission, I would like to submit for the record.
    Mr. Cummings. So ordered.
    Mr. Sappio. And I have some material that I would like to 
use, use that material to summarize some remarks, sir.
    Mr. Cummings. Very well.
    Mr. Sappio. Good morning, Mr. Chairman and Mr. LoBiondo. 
Thank you for giving me an opportunity to speak with you today.
    My comments today are from an ocean carrier's perspective, 
from APL's perspective. I am not representing other carriers; I 
am not representing other carrier groups. And my appearance 
today is part of APL's ongoing efforts. My company has been a 
leader in trying to have more transparency and more engagement 
with our shippers, our shipper groups, and regulators like the 
Federal Maritime Commission.
    APL, American President Lines, is the fourth largest 
container shipping company in the world. We are 160 years old, 
and 160 years we have been a U.S. flag carrier. We have 146 
ships deployed in global trade, 20 of which fly the U.S. flag. 
We employ 640 U.S. merchant seamen. Since before World War II, 
we have served our Nation proudly in peace and in war. I have 
been with APL for 28 years, and I am very proud of our 
industry. I am very proud of my company's history and legacy.
    We are emerging from two years of truly unprecedented 
events in the global economy that has impacted global shipping. 
Historically, global shipping grows at about 10 percent per 
annum. In 2009, containerized imports to the United States were 
down by 15 percent. We have never seen anything like that 
before. Exports were down just a little bit, about 1 or 2 
percent.
    At the same time, carriers had been taking in the delivery 
of new ships to keep up with customer supply chain needs, so 
there was a disequilibrium, if you will, in terms of demand for 
container space and too many ships.
    During that time, also, I would like to point out that the 
price of fuel doubled, from $250 a metric ton to nearly $500 a 
metric ton. So ocean carriers, frankly, were facing a perfect 
storm.
    My company lost $750 million, the largest loss we have ever 
posted, and the industry lost upwards of $20 billion.
    We had no choice but to take action, unprecedented action, 
and carriers moved quickly to try and reduce costs. We did lay 
up ships and we idled capacity because, frankly, in 2009, there 
wasn't enough cargo moving to fill that capacity.
    What we are seeing now, however, sir, is late in the fourth 
quarter we started to see a rebound in U.S. exports, and in the 
last eight or ten weeks we are seeing some light at the end of 
the tunnel on U.S. imports. U.S. imports are growing for the 
first time in over a year.
    I think also what exacerbates the problem with the U.S. 
exports is that for agricultural products, which is a big 
driver of U.S. exports, historically, only 1 or 2 percent have 
moved on container vessels. Lately, in the last couple of 
years, 10 percent have moved on container vessels, and they 
have moved away from bulk ships. These bulk ships have left the 
U.S. trades and gone to foreign-to-foreign trades, from Brazil 
and Australia in and out of China. So that has left the U.S. 
exporter a little bit in a lurch, and the container companies 
have come in and, frankly, provided a solution.
    There are structural issues in the trade that really are 
beyond the control of shipper or carrier. We bring in 12 
million TEUs into the United States from Asia and we only 
export 6 million. There is an imbalance in the trade. Where the 
cargo wants to go to. Imports want to go to consuming 
locations, metropolitan areas, where the people are, because we 
import consumer goods. Exports from the United States, the 
largest export from the United States is waste paper. The 
second largest is scrap metal, followed by things like 
agricultural products. They come from more rural areas. So 
there is a need for containers, frankly, where they don't 
necessarily go to.
    Also, the weight is different. You talked about moving 
empty containers. We have no choice but to move empties because 
we can only carry back half as many exports as we put on a ship 
coming in. The average weight of an inbound container is 10 
metric tons; the average weight of an export container, because 
of raw material and its lumber and scrap metal and waste paper, 
is over 20 metric tons. You deadweight out the ship. And we 
also have to move empties back so the empties are available for 
importers like J.C. Penney and Sears and Target to move their 
products to market.
    We acknowledge there have been some shipper complaints, and 
we acknowledge that there have been some container shortages, 
and this is not unusual. But we believe that as demand comes 
back and as we recover from 2009, and as rates begin to go to 
compensatory levels, carriers will be able to reimplement 
capacity and alleviate this shortfall. We also want to continue 
our engagement with our customers.
    We are going to have a meeting here on the 19th of April. 
It is one of many meetings we have had in the last three years, 
frankly, under my company's leadership and working hand-in-hand 
with the FMC to hear directly from shippers and to try and 
reach a better understanding between both parties.
    Thank you very much.
    Mr. Cummings. Thank you.
    Mr. Mullally?
    Mr. Mullally. Mr. Chairman, Members of Congress, thank you 
for allowing me to speak here today. The reason I am here today 
is because I am basically at the end of my rope. Situations 
that have occurred in recent times with exporting my product, 
which is cattle hides, a $2 billion and valued product from the 
United States annually, has just become impossible.
    And while there is much talk at this table about the 
problem with getting enough containers, I would like to say 
that the bigger problem is even when we can get these 
containers today, we can't get them on a ship. I cannot ship my 
product to the customers who have bought it. The delays have 
become tremendous. The customers are complaining they cannot 
manufacture their goods overseas from the goods they depend on 
from my raw material.
    Basically, the fact is that exports are not the priority 
for the shipping companies, and that needs to be said. We are 
second. The exports of foreign companies to this Country are 
the priority.
    Vessel capacity is definitely insufficient, and now we have 
to plan our shipments four to six weeks in advance, whereas, 
before it was just one or two weeks. And while you may think 
that is not a big deal--and it isn't; we can plan that out--
what is happening is that the space reservations that we make 
for these vessels are being canceled at the last moment.
    Case in point, on February 22nd I had bookings or shipping 
space reservations made with one shipping company I have been 
doing business with for more than 12 years, and they just sent 
us an email that all of those bookings were canceled. We had 
already made these bookings weeks in advance, planned it out 
for four to six weeks in advance. We did what we were supposed 
to do and reserved the space, and the carrier just decided that 
we couldn't have that space anymore.
    In the current shipping environment, there is nowhere for 
me to go because everybody else has a full ship. So, 
essentially, they blew a big hole into my schedule and I was 
unable to do what I said I was going to do.
    As a businessman, I fully understand the needs of the 
carriers to make revenue. I also need to make revenue. The 
problem is you cannot wreck other people's businesses to save 
your own. That is just wrong. And this carrier that I was 
working with had been moving this same cargo for us weekly for 
the last 9 and 10 months, and suddenly they were not going to 
take it anymore. It left me in a devastated position.
    The booking reservations that we make have no meaning, and 
that is a problem that needs to be solved, because with any 
other industry, any other business, when you make a reservation 
and the day comes for that reservation to take place, you have 
that reservation. But that is not true in the shipping company 
booking system.
    Basically, even if we can get a container and we can keep 
our space reservation, our cargo gets to the loading port and 
we only find out two days after the vessel sails that they left 
it behind or they left part of it behind and they can't even 
tell you when they are going to ship the rest of it, even 
though it is loaded and sitting at the port.
    But we are not consulted about that whatsoever. And I have 
asked carriers for years and years, please, just call us, 
because sometimes, if you need to cut our cargo, there may be 
three other containers that we would rather have cut than the 
three you chose, or, when you split our shipments, it creates a 
lot of problems also, because we are an agricultural product; 
we need to have documents signed and issued by the USDEA. A lot 
of foreign governments require them to be signed prior to 
sailing, not after, and when they have to be reissued, we run 
into these situations where the dates can't match up and it 
becomes an importing problem for our customer in the foreign 
country.
    So essentially there is no more reliability in the shipping 
industry. I have been doing this for almost 30 years, and the 
reason I came here today, truly, is because I don't know what 
to do any more. When that shipping company canceled my booking 
reservations for all 75 of those containers, I literally begged 
them, please do not cancel all of them; I need to ship at least 
something to my customers. Please, just cancel half if you 
don't have the space. They wouldn't do it. Didn't even want to 
hear it.
    The problem is that I don't understand how I can reserve 
the space and I can plan it out, but they can't. It is their 
ship. They know how much fits on it; they know the weight of my 
commodity and all the other commodities. If you take that 
reservation, why can't you keep it? That is the big problem. We 
cannot ship our products. We compete with other people in the 
world. If they cannot buy my product, they will buy it from 
Brazil, they will buy it from Australia, they will buy it from 
South America.
    Mr. Cummings. Thank you very much.
    Mr. Swofford.
    Mr. Swofford. Mr. Chairman, thank you very much for 
inviting us here. I am pleased to speak before you and the 
Committee. I would like to thank Mr. Larsen, my congressman, 
for attending today; I appreciate that very much. Mr. LoBiondo, 
I appreciate your being here as well.
    I can only reiterate what Mr. Mullally is saying about the 
circumstances he is up against and what he has to deal with. I 
work with a shippers association; we are 16 members. We are 
fairly small shippers as individuals, but as a group we 
represent a fair amount of cargo that has moved.
    I can tell you a story about one of our members. I had a 
couple things here, but it is a smaller member who ships and 
has struggled for years to gain a foothold in the export market 
and has finally been able to develop strong relationships with 
foreign buyers for his lumber products. And as things go, he 
goes along and makes his space reservations six weeks in 
advance to sailing, and he has to go through all the processes 
of procurement of the material, purchasing it from the supply 
source. His buyer will then go out and, of course, arrange for 
the financing and make sure that the terms of that sales 
transaction is ready to be completed.
    We have come into cases very often where that booking or 
space reservation, sometimes the day of or two days prior to 
the sailing of that vessel, is canceled. He is out of business 
that week. That represents his income for that week, that 
shipment, and that carrier arbitrarily has canceled that with 
no remedy or recourse, and there will be no space for him to go 
back to try to re-book that cargo to get on a vessel for six 
weeks, which is the first time the carrier will open up new 
space for new sailings.
    It is an untenable situation for us to deal with as 
exporters in this Country. But it is not just exports, it is 
the imports as well that have them. Some of our members will 
import, and they cannot get their goods onto vessels at foreign 
ports to bring them in. Capacity has been over-reduced and is 
far below what our needs are to conduct the commerce of the 
Country.
    I have to admit that while Mr. Sappio here said he is proud 
to be part of APL, they are a Singapore-based carrier, and they 
may have some U.S.-flagged ships under their management, but 
they are not a U.S. merchant marine carrier any more. And Bob 
also mentioned fuel prices doubling, but he failed to recognize 
the fact that the cost of the fuel has been passed on to the 
shipper. Our rates, our rates will have an ocean freight rail 
and it will have a fuel charge as well, so we are helping them 
pay for that variable cost on every container that we ship.
    Since July of last year, we have also faced five rate 
increases that we have had to deal with, and mostly these 
increases come in a short period of time. In my written 
testimony I explain to you the sales cycle that we deal with; 
it is usually about a 90-day cycle from the execution of a 
sales agreement between the buyer and the seller, and then we 
manage to go out and procure the goods and get them ready for 
shipment, the reservation is made to actually execute that 
shipment, and under the current maritime law rate increases can 
take place 30 days in advance to the time that rate is to take 
place.
    Well, that 30 days short-shifts our shippers and our 
exporters because the execution of that contract, that sales 
agreement has already been in place, and somebody has to make 
that adjustment. The buyers are unable to do that because their 
financial instruments are already in place, and most of our 
business runs on letters of credit, and once those are issued, 
the terms are usually inalterable. They may be amended 
sometimes to allow for changes in shipment dates, but that is 
very difficult and costly. So the exporter then absorbs that 
rate increase.
    I have been working with carriers for quite some time, 
saying give us some predictability so we can work this into the 
sales cycle and make this work and pass those on to our buyer. 
For the most part the carriers have a deaf ear; they really 
don't care. There are a few that are willing to work with us 
and say, well, we will help you in this regard. And I will 
admit APL is one of those that understands the cycle, but, for 
the most part, of the 15 major carriers that are all foreign-
owned, foreign-flagged carriers, they really pay no attention 
to what our needs are that way.
    Thank you for the opportunity to speak. I appreciate it.
    Mr. Cummings. Thank you very much.
    Mr. Berzon.
    Mr. Berzon. Thank you, Mr. Chairman. Good morning. I am 
Michael Berzon and I am here today representing the National 
Industrial Transportation League, the Nation's oldest and 
largest association of companies engaged in freight transport. 
As a member of the League, I served as the Chairman of our 
Ocean Transportation Committee, whose members are concerned 
with the transportation of goods via vessel carriers, including 
liner carriers regulated by the Federal Maritime Commission. We 
have submitted a formal statement and I would ask that it be 
included in the hearing's record.
    The League is no stranger to the issue of international 
shipping and the oversight of the industry by the Federal 
Maritime Commission. We were actively engaged in past reforms 
of U.S. international shipping that led to the adoption of the 
Shipping Act of 1984 and, more recently, the Ocean Shipping 
Reform Act of 1998, or, as it is commonly referred to, OSRA.
    The reforms brought forth by OSRA, most significantly the 
introduction of confidential contracting between liner carriers 
and shippers, and later with third-party intermediaries, have 
resulted in commercial benefits for both carriers and their 
customers, as well as improved working relationships between 
them. Despite these significant statutory and regulatory 
reforms, we do not believe it is appropriate to stand on the 
sideline admiring past accomplishments.
    Ocean liner carriers still engage in collective discussions 
regarding supply and demand, as well as establishing benchmarks 
for rates and surcharges for the U.S. trades through carrier 
organizations known as Discussion Agreements. The deep economic 
recession this past year has impacted both shippers and 
carriers. Both have had to control costs and adjust their 
operations in response to a decline in freight volumes.
    It should be noted that, during this downturn, the 
carriers, through one Discussion Agreement known as the 
Transpacific Stabilization Agreement, or TSA, in early 2009, 
sought authority from the Federal Maritime Commission to expand 
on their filed operating agreement to permit collective 
discussion and coordination over utilization of inbound vessels 
by approximately 85 percent of the market participants.
    It was and is the League's view that the TSA proposal for 
collective discussion would have permitted carriers to 
substantially reduce capacity in a concerted fashion. That 
action would in turn artificially decrease service options and 
increase transportation rates.
    After further inquiries from the FMC regarding the TSA's 
plan, the TSA ultimately chose to withdraw its proposal. 
Nevertheless, its Chairman, Ronald D. Widdows, stated at that 
time, ``TSA members remain convinced that today's unprecedented 
trade conditions justify exporting a coordinated approach to 
operate more efficiently.''
    The League is in total disagreement with this philosophy 
and believes a continuation of limited antitrust immunity for 
Discussion Agreements to engage in rate and service options is 
a barrier to achieving an even more robust, competitive, and 
efficient maritime industry.
    Since the TSA's withdrawal of their request for authority 
to manage capacity, shippers are seeing higher price increases 
to carry their goods, and these increases are noted in our 
prepared testimony.
    While we recognize that this is the result of a higher 
demand for space against a substantial reduction in capacity, 
shippers generally believe that these terms should be 
determined by each individual carrier rather than through a 
Discussion Agreement.
    It should also be noted that in the call for this hearing, 
we requested several shippers to ascertain whether they would 
be available to publicly share their recent operational 
experiences with carriers regarding prices, capacity, and 
services. Without exception, all declined. The March and April 
time frame of every year marks the period that most shippers 
and carriers normally begin negotiations for the new contract 
period, typically beginning on May 1. The delicate nature of 
these commercial discussions presents an enormous incentive at 
not upsetting these talks through a public dissemination.
    Additionally, the League applauds the recent announcement 
of the FMC to review the impact on U.S. trade from the decision 
taken by European officials to eliminate the ability of 
carriers to fix prices in that regime's international trades. 
While that review takes place, we would like to note that, 
unlike the U.S., European regulations have never permitted 
Discussion Agreements to operate in their respective 
international liner trades. It is our belief that the European 
system presents a more market-based environment than the U.S. 
and, as a result, the system provides European companies a 
distinct advantage over their U.S. counterparts.
    In conclusion, while the economic recession has been hard 
for both carriers and their customers, the reduction in vessel 
capacity in the Eastbound Transpacific Trade has made it 
difficult for the supply of space to meet the upturn in demand. 
Moreover, in today's economic environment, the recent pricing 
practices of TSA members are straining the commercial 
relationship between shippers and carriers.
    Mr. Cummings. Thank you very much.
    Let me say this from the outset. We have three votes, so we 
are going to start our questioning and then we are going to 
have to come back, and we will see how far we can get.
    Mr. Swofford, you indicate that if there was sufficient 
space and equipment, that members would be able to ship 15 to 
20 percent more containers than last year. What efforts have 
you undertaken with carriers to secure additional space and if 
you have approached carriers, what responses have you received?
    Mr. Swofford. Thank you, Mr. Chairman. I have spoken to 
every carrier that we deal with, and even those that we don't 
have direct contracts with, trying to gain space allocations or 
regular space on every sailing out of the Puget Sound, where we 
have experienced a 45 percent decline in our capacity since 
September of last year. To a carrier, they have all stated we 
can't do that; we don't know how to do that; we can't give you 
allocated space; you will just have to go ahead and continue to 
book as you do; we can't guarantee you anything.
    In the meantime, just yesterday, while I was traveling 
here, one of our members said we have a facility that if we can 
find space, we can book another 100 containers a month going to 
foreign markets, and utilize and bring this facility online and 
employ 90 people full-time in the production of lumber. But if 
we can't find space, if you can't tell me there is a carrier 
available for me to ship this, we are not going to enter into 
an agreement with this mill to produce the lumber that we need 
to have.
    Mr. Cummings. I am going to yield my time to Mr. Oberstar, 
the Chairman of our full Committee, then we will go to Mr. 
LoBiondo.
    Mr. Oberstar. Thank you, Mr. Chairman. I will take just a 
moment. I was delayed at a meeting of cities this morning. But 
this hearing is very, very timely and very important, and I 
appreciate you and Mr. LoBiondo getting together on it and the 
interest of our members, but also of the shipping public.
    The President announced a national export initiative, but 
at the very time he is putting an emphasis on exports, there 
aren't enough vessels and apparently not enough containers 
available to move those exports. We have had rising numbers of 
reports about a shortage of containers in the inland areas of 
the United States; cargo being rolled over for weeks; cargo 
sitting on the docks, some of which we have heard this morning.
    And concurrently with that is the decline of the U.S.-flag 
fleet. When I was elected to Congress in 1974, we had hearings 
in the Merchant Marine and Fisheries Committee on the status of 
the U.S.-flag fleet, and in that same time frame I notice in 
the audience is Helen Delich Bentley, who was Commissioner and 
was a Member of Congress and a very strong advocate for the 
U.S.-flag fleet. We had 800 American flagged vessels in 1975. 
That was down from 5,500 at the end of World War II and 25 
million deadweight tons of shipping.
    By 1975 we had 800 flagged vessels, we were eighth in the 
world, and that was dead last after the Polish Atlantic fleet 
or the Baltic Atlantic fleet, the Polish fleet. And now, 35 
years later, we have 83 vessels in the American flagged 
service. After millions of dollars in construction differential 
subsidies, operating differential subsidies, all sorts of 
incentives to keep the American flagged fleet going, and we 
keep falling further behind.
    Our witness from the NIT League addressed the antitrust 
issue. I met on that matter just yesterday with a committee of 
the European Parliament, the Transport Committee, the European 
Parliament, and I pointed out to them the antitrust immunity in 
aviation is devastating, and so was it in maritime.
    So these are issues we need to address and this hearing is 
a foothold on the future as Mr. Cummings, in his typical 
fashion, will be very aggressive and very engaged and pursue 
this matter to its fullest. We will have another hearing next 
week and we are going to continue pursuing these matters. 
America cannot lose its place in world shipping. But we 
certainly are falling ever further behind. We need to find ways 
we can move ahead.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    It is good to see Mr. Swofford from Langley, Washington, a 
wonderful place in Whidbey Island. It is the first place both 
of us would rather be, but this is the certainly the second 
place both of us would rather be today.
    But continuing on a little bit from your testimony and from 
your written testimony as well, in your eyes and your members' 
eyes, would you characterize this problem as an issue of market 
demand, where there is increased market demand now that the 
market seems to be turning around, and it is outstripping the 
supply, that is, the supply of containers and vessels; or is 
this something that is structural in the market, where, despite 
increased demand, there will not be an increase in supply of 
vessels and containers to supply your members and other 
members, other shippers?
    Mr. Swofford. I think the best way to answer that, Mr. 
Larsen, is since last September we have seen carriers withdraw 
services from the trade, Transpacific trade. It started even 
before that. Currently, I believe there are over 500 vessels at 
anchor and lay up around the world that are unemployed, and 
they have done this in response, of course, to the economic 
downturn, and all the carriers coming into the United States, 
all foreign-flagged carriers predicate their services on the 
import market, not the export market.
    As exporters, we have seen the reduction of our capacity 
severely, like I mentioned, in the Northwest by 45 percent, 
which impacts not just our ability to export, but it impacts 
all agricultural shippers' ability to export. I had the honor 
of consulting with the Minnesota Shippers Association several 
years ago and worked with their soybean exporters in trying to 
help them find ways to export their soybeans. One of the 
gateways was the Northwest, and that has virtually been 
withdrawn from them; they have to go through Los Angeles. We 
have had other occasions where, just recently, a carrier 
decided to suspend a service out of Seattle in order to move 
empties back to Asia, and we are losing those 800 containers 
that everybody relied on weekly.
    So it is almost a false situation of supply for us. At the 
same time, our demand is up, the weak dollar is helping us find 
ways to export product and employ people, frankly, and we can't 
get the containers out. And it is not just empty containers, it 
is sheer capacity availability. We have had canceled bookings 
two days before we need to go. Like I mentioned, everything was 
in place, all things were in motion, and there is no way to 
replace that space that we have lost through an arbitrary cut 
of the cargo.
    Mr. Larsen. On that last point, do you have the top three 
things, the top three ideas that we ought to be considering, 
then, as a fix?
    Mr. Swofford. Well, our main--I will be honest with you, I 
really don't. But I think our main concern is that the carriers 
find a way to equalize their capacity to our demands. I have to 
disagree with Mr. Berzon on antitrust immunity. I don't think 
that the current circumstances allows for the communication 
between the customer and the carriers to be as large as it 
should be, because they would rather have their meetings as 
they have had for the last 100 years, in kind of a secretive 
situation and discuss with themselves industry circumstances 
than get to know their customers as well as they should.
    There was a comment at a recent conference that I attended 
that who knew that everybody would be pushing their buttons at 
the same time to resupply inventories. I think anybody who 
spends time with their customers would have known that. And 
while we are searching for capacity out there, the carriers as 
a whole are reticent to find anything for us, to bring in any 
solutions.
    We do see a little bit of things coming out that have been 
discussed that there may be more ships coming in May, but we 
hold our breath waiting to see that happen.
    Mr. Larsen. In response, Mr. Sappio, from the carrier side 
of things, what do you see as a fix?
    Mr. Sappio. Thank you for your question, Mr. Larsen. I 
can't speak for all carriers, but I can speak for my company. 
We took capacity out in 2009 because the trade dropped 15 
percent and because exports were down. That is why we took 
capacity out. The imports were down throughout all of 2009 and 
exports only began to recover in the fourth quarter.
    This year we are starting to see a rebound in imports over 
the last 10 weeks. Ten weeks. We are seeing a rebound in 
imports. Is that rebound sustainable or not? Is the economy 
truly recovering or is it simply a restocking of very low 
inventories?
    I talk to my customers every day. I spent time walking 
through my customers' warehouses in Southern California last 
month. Those warehouses are one-third full. Inventories have 
never been this low for U.S. retailers.
    So the question, is do I over-correct, do I put back more 
capacity on the heels of a $700 million loss, or do I see if in 
fact there is a sustainable growth that would warrant the 
addition of more capacity?
    Also, on the subject of rates, rates dropped last year 30 
percent. The average rate for an inbound container from Asia to 
the United States dropped by 30, 35 percent; and exports rates 
dropped last year. It wasn't until the end of the year that we 
started to go back and talk to customers about rate increases. 
All the rate increases that are done are done on a voluntary 
basis. Every carrier is free to negotiate with each individual 
shipper any rate they want. It is voluntary and it is non-
binding.
    Also, with regard to service contracting, it has been 10 
years, 12 years since the OSRA has taken effect and we have 
seen--frankly, I agree with Chairman Lidinsky--we have seen a 
wonderful success in carrier and shipper sitting down and 
negotiating individual contracts. But all too often, ladies and 
gentlemen, it has been, I will give you this many containers if 
you promise me this rate.
    We haven't yet matured the process to talking about service 
specifics. Why is that? I personally believe it is because it 
takes too much time. It takes time for the carrier and the 
shipper to sit down and talk about forecasts, specific needs, 
specific equipment types from port to port, whether it be 
import or export. That is a lot of work. But, frankly, it is 
where the industry has to go.
    Believe me, if my company could deploy more ships, we build 
ships not to park them; we build them to fill them with cargo 
and support the commerce of this Country.
    Mr. Cummings. The gentleman's time has expired.
    We are going to have to go vote. We have one minute left, 
but the members are still 316 people who haven't voted, 
including us. So we will be back in somewhere around about a 
half an hour, probably a little less than that.
    Thank you very much.
    But ten minutes after the last vote, Members, we will be 
back in session. Thank you very much.
    [Recess.]
    Mr. Cummings. Call the hearing back into order.
    Mr. Sappio, Mr. Swofford wrote in his testimony that 
``Exports, while contributing some revenue to the carriers, was 
not and is not a motivating trade for the carriers.'' You wrote 
in your testimony that deployed vessel capacity is driven by 
import demand, and you explained that import rates, in effect, 
subsidize much of the cost of exports.
    Does this mean that exports are essentially hostage to 
imports and that shipping economics are fundamental impediments 
to the achievement by the U.S. of a more balanced trade 
pattern?
    Mr. Sappio. Sir, the facts are that because of some 
structural differences in the trade or structural facts that 
exist in the trade, imports pay more historically because they 
are manufactured goods, fashion goods, consumer electronics, 
and so forth; and the physical makeup of these goods is that 
they are light, so you can load a lot of them on a ship.
    So in very simple terms, I can carry a whole lot of imports 
at a high price, and I can't carry physically, because of 
weight constraints, a lot of raw materials, or exports, which 
really only can bear a lower price. Historically, the price 
difference between an import box and an export box has been as 
high as $2500 per 40-foot container. Right now it is more about 
$1300 because rates have come down in both trades.
    The fact remains that, for my company, and I believe for 
most carriers, the economics are such that the imports are 
going to drive the deployment of additional ships and 
containers. So we are going to have to see if import or inbound 
volumes increase and rates go to compensatory levels. Then we 
can redeploy capacity, which will alleviate the export 
shortages.
    Mr. Cummings. Now, you work for one of the last remaining 
U.S.-flagged container carriers. However, American President 
Lines is owned in Singapore, is that right?
    Mr. Sappio. Yes, sir, we are owned by the NOL Group.
    Mr. Cummings. And do you think that the U.S.-flagged 
carriers should be more responsive to the needs of the U.S. 
economics, security in the U.S. manufacturers and exporters 
than foreign-flagged vessels?
    Mr. Sappio. Sir, I believe that regardless of what flag you 
fly on a ship, a company has to be able to employ a vessel and 
make a proper return. So regardless if we had--if every one of 
our ships were U.S.-flagged ships or they were all foreign-
flagged ships--and we have 20 U.S.-flagged ships out of the 146 
ships we deploy--the economics are such that you simply have to 
be able to make a return. So the import cargo is important to 
allow to deploy capacity so you can carry exports.
    Mr. Cummings. And do you believe there is a shortage of 
containers in the United States?
    Mr. Sappio. Sir, I don't believe that necessarily there is 
a shortage of containers in the United States. Frankly, 
exporters didn't have problem getting space and equipment last 
year. This year they are because there has been a rebound since 
the fourth quarter. The shortage of containers always exists, 
as I mentioned in my opening testimony, because inbound boxes 
go to consuming locations and most of the export boxes go for 
more rural locations. So there is some inherent imbalances in 
the system that exist.
    I think once capacity is reintroduced, if the economics 
justify it, those shortages can be alleviated.
    Mr. Cummings. Now, have you ever heard of carriers leaving 
cargo on the dock? Have you heard of that?
    Mr. Sappio. Yes, sir, I have. I have heard of carriers that 
roll containers and don't load containers to their intended 
vessel, and there are a lot of reasons for that. This is a 
complex operation. But, also, some of the reasons, as it 
relates to bookings, customers making bookings. A lot of 
customers book cargo and then cancel the bookings. When space 
is tight, a lot of customers book cargo with a number of 
shipping companies in the hopes that they are going to secure 
some ship, and then cancel those bookings. We call them ghost 
bookings.
    So it is difficult. There is always a fall-down, so we 
know, as an example, that from Shanghai to LA there is 
generally about a 20 percent fall-down of cargo booked that 
actually materializes in loaded containers to go to the ship. 
So we over-book the ship, accounting for what is a historical 
fall-down. And we do the same thing on exports; we over-book 
the ship, knowing that there will be some fall-down, some 
shippers will cancel bookings.
    We are not always 100 percent precise.
    Mr. Cummings. Mr. Larsen?
    Mr. Larsen. Earlier, before the break, I asked Mr. Swofford 
kind of for the top three things we could do, and for Mr. 
Mullally, based on your experience, I wanted to give you the 
opportunity to try to answer that question. Based on your 
experience, if there are three things that you think, from your 
perspective, in a vacuum, we can do?
    Mr. Mullally. Thank you, Mr. Larsen. First of all, one of 
the things I think we could do--and it was proposed I think 
about two years ago from the export side--that there should be 
some kind of agreement between carrier and shipper of a penalty 
system for eliminating, for example, these ghost bookings, as 
we just heard, and versus, also, not supplying the space that 
you said you would.
    We, as exporters, put that out there to the shipping 
community and it never went anywhere. So I think that that 
would still be some type of viable solution to at least 
guaranteeing both sides that, if we say we are going to do 
something, we are going to do it. Otherwise, there is a penalty 
for not doing it.
    As far as the container shortage issue, there are many 
times, as we heard, that the loaded containers go to major 
cities, for example, let's say Chicago, and by choice, because 
there is not that many exports out of Chicago, many times the 
carriers will return all those empty containers on the rail all 
the way to the West Coast and put them on ships empty. Whereas, 
if they could just maybe send them to another city, for 
example, Kansas, Kansas City, I can load cargo from Kansas City 
in various places in Kansas, where the rural areas are, and I 
can use those containers.
    So while there is a cost to ship it back to the West Coast, 
there is also a cost to ship it to Kansas City, and I just 
think that there should be some solution for that. Let's put 
them where we can use them, rather than just sending them back 
empty, because we need them. We absolutely need them.
    And I think one thing that maybe this Government can look 
at is some incentives, maybe to the carriers for providing some 
support to shippers of agricultural products that are in hard-
to-load areas.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you.
    Let me just go to you again, Mr. Sappio. Do carriers that 
are members of a conference share data regarding their 
projections for the economy or container volumes?
    Mr. Sappio. Yes, sir. APL is a member of two Discussion 
Agreements, the WTSA and the TSA, and we certainly share our 
forecasts, our economic outlook, if you will, for the trade, 
where we expect things to go, whether we expect trade to be up 
or down. Yes, sir.
    Mr. Cummings. Then while carriers can't jointly limit 
capacity, can't their sharing of economic and container volume 
data lead them to all limit capacity based on the same economic 
projections?
    Mr. Sappio. No, sir, I don't believe that is the case. 
Carriers are in business, and certainly APL is in business--and 
I don't want to speak for carriers, but I believe it to be so--
we are in business to build ships and move cargo. We are not in 
the business of limiting capacity. The sharing of broad 
economic data, the sharing of information around growth or lack 
thereof in various trade lanes around the world or U.S. foreign 
commerce is absolutely not something that leads to a 
restriction of capacity.
    Mr. Cummings. Okay.
    Mr. Swofford. Mr. Chairman, if I might interject. I was at 
a recent meeting between the carriers and the ITC in San 
Francisco, where the carriers were kind enough to share with us 
some of their projections that they had as far as export cargo 
was concerned. Their projections on this came not from the 
carriers themselves, as it turned out, but a third-party 
provider of this, and they were able to base what they are 
going to do as far as deployments and their allocations on 
this, and there were 35 exporters, I believe, that are members 
of the ITC there, and not one of them could agree with the 
small projections that they were making their decisions on as a 
group. And it was information that they were all utilizing to 
base decisions on.
    All of us felt that we would be, at a minimum, 10 to 12 
percent type of growth pattern on the exporter side and I 
believe their projection at that time was about 4.1 percent. So 
we can see there was a large dichotomy of opinion there based 
on what they were dealing with.
    Mr. Cummings. Mr. Swofford, how has the practice of 
repositioning containers within the United States changed over 
the past few years?
    Mr. Swofford. Carriers are reticent to move containers to 
anyplace other than where they end up, because it costs them a 
great deal of money. And from that point of view it is easy to 
understand that they don't want to move them to Kansas, because 
it will cost them several hundred dollars. But, at the same 
time, if they were moving that same container back to the West 
Coast, that would probably cost them a great deal more without 
any revenue in it.
    Mr. Cummings. So what regions of the U.S. have the greatest 
shortage of containers? I understand why it is, but which areas 
have the greatest shortage?
    Mr. Swofford. I am sorry, I am not able to answer that. I 
can tell you from my own experience that we have more space and 
equipment issues in the Northwest, but I have to believe that 
Midwest, those shippers, in particular in Minnesota or in 
Kansas or some other non-urban areas, all face similar 
problems.
    Mr. Cummings. Mr. Sappio?
    Mr. Sappio. Thank you, Mr. Chairman. In my testimony I 
included a map of the United States and I showed where the 
major inbound destinations are for inbound cargo and where the 
major export origins are. Places like Los Angeles, New York, 
there is rarely container shortage. I wouldn't say never, but I 
would say rarely container shortages in those major locations.
    But in the heartland of the U.S., in the farm areas, yes, 
in the Pacific Northwest, because we export more from the 
Pacific Northwest than we bring in to the Pacific Northwest. 
While it is a vibrant and important part of the United States, 
it is not the biggest consuming location, and we ship a lot 
more lumber and logs out of the Pacific Northwest than we do 
bringing in wearing apparel or e-goods. There are some chronic 
locations where there are container shortages.
    My company spends almost $400 million a year moving empty 
containers around the world because we try to get containers to 
where the cargo is. If there are empty containers in the United 
States, I assure you I would much rather put a load of cargo in 
that that pays me some revenue than have to move it empty. But 
the fact is the trade imbalance, the structural imbalance 
doesn't leave us any choice but to have to move empty 
containers around.
    Mr. Cummings. Mr. Mullally or Mr. Swofford, have you 
examined the possibility of obtaining shipper-owned containers?
    Mr. Swofford. Mr. Chairman, yes, I have looked at that 
possibility. We happen to be in a position where there are 
leasing companies available to us who are willing to work with 
us on a very low cost or no cost basis. The other side of that, 
though, is that every carrier I have talked to about this--now, 
I haven't talked to APL, I admit, but every carrier I have 
talked to about this has said we are not willing to take 
shipper-owned containers, period.
    So that is not a solution for us either short-term or long-
term. It is a situation where they are going to move their own 
equipment and not somebody else's, even when they don't have 
equipment for us available.
    And if I might take a moment to set the record straight, I 
wanted to apologize to Mr. Berzon. I misunderstood his comments 
concerning antitrust immunity. We are actually on the same 
page; we both feel that the antitrust immunity is a situation 
that should be taken a look at and should not be there any 
longer. It doesn't help us at all.
    Mr. Cummings. Mr. Mullally?
    Mr. Mullally. Yes, Mr. Chairman. I don't have the 
opportunity to use shipper-owned containers for the product I 
ship.
    Mr. Cummings. Okay.
    Mr. Berzon, and this will be my final two questions, the 
European Union has eliminated its block immunity for carriers' 
rate-setting activities. What has been the impact of this 
action on routes between the United States and the EU, and can 
you comment on what the impact of this action has been on 
carrier services into the EU?
    Mr. Berzon. Thank you, Mr. Chairman. The elimination of the 
block exemption on the part of the EU has helped the shippers 
in Europe to compete much more favorably on negotiating with 
the separate ocean carriers than we have here in the United 
States. So that when it comes to let's call it fair trade, the 
EU does have an advantage over us here, and I think this is 
something that the Federal Maritime Commission is going to be 
looking into shortly.
    Regarding the Transatlantic Trade right now, it is pretty 
much in balance, and what you find, for instance, with regard 
to equipment--and, Bob Sappio, if I am going off on a tangent, 
please correct me, but there seems to be enough equipment on 
both sides of the ocean to be able to keep the importers and 
the exporters on both sides happy.
    Mr. Cummings. Finally, do you believe, Mr. Berzon, that the 
carriers are colluding to limit capacity specifically so that 
they can charge emergency charges?
    Mr. Berzon. Mr. Chairman, it certainly seems to be that 
way, and when we talk to shippers here in the United States--
and as I mentioned in my oral testimony, we weren't able to get 
live shippers to attend here because of the fact that most of 
them are working on their service contracts at this point.
    But we do have anecdotal comments from many shippers who 
are very, very concerned about the availability of equipment, 
and they also feel that there is collusion, and they get very 
upset when, all of a sudden, the contract rate which they have 
signed with an ocean carrier, the ocean carrier suddenly says, 
no, it is not that any more, it is this, much more. And that 
does not happen only with one carrier, but it happens, from 
what we are told, with several.
    Mr. Cummings. Now, in fairness to Mr. Sappio, Mr. Sappio, 
you look like you are getting ready to leap out of your seat.
    Mr. Sappio. Thank you, sir. I appreciate your letting me 
speak.
    Mr. Cummings. I am very observant.
    Mr. Sappio. Mr. Chairman, thank you for being observant. 
Sir, frankly speaking, the current regulatory regime has 
absolutely nothing to do with the problem our shippers are 
experiencing right now. Absolutely not. And, frankly, the block 
exemption or the elimination of the block exemption in Europe 
is interesting. It is something that should be studied and 
requires further review.
    But it is one year old, and it doesn't mean just because 
Europe did it the United States should rush to follow them. In 
the last year, there has been more disruption and volatility in 
prices and service in the European trade than ever before, when 
they allowed conferences or Discussion Agreements. And in my 
discussions with shippers, what they want most importantly, 
whether they are importers or exporters, is predictability of 
service and predictability of rate, and that can be gotten at 
by carriers working together and working hand-in-hand with our 
shippers.
    On the point of collusion to keep space out, we have no 
authority to agree on or implement any space capacity under the 
Discussion Agreements, TSA, and WTSA. Those meetings are 
minuted, they are under the auspices of the Federal Maritime 
Commission and Council, and we do not collude to keep capacity 
intentionally out of the trade.
    Mr. Cummings. All right, we are going to close the hearing 
now, but let me say this. First of all, let me go back to the 
first panel.
    Mr. Lidinsky, and to Ms. Dye and to counsel, I want to 
thank you all, first of all, for sticking around. What we see 
too often is that the first panel comes on, then they leave, so 
they don't stick around for the testimony. And considering this 
is something that you are getting ready to look into, it is 
helpful that you are here, and I thank you for doing that. And 
I mean that.
    Second, I hope that you gentlemen, I don't know exactly how 
Ms. Dye's investigation will go, but you all have said a number 
of things here that might be very helpful to her. I would urge 
you to make sure that she has your comments, because I think 
they may be helpful in her coming up with a balanced 
investigation and one which is thorough, because we want to be 
effective and efficient.
    Finally, let me remind all of us, as I say quite often, we 
are all for the home team. We are all just trying to make 
things work well so that we can make sure that our exports are 
at the highest level they can be and that we are doing 
everything right and we are doing things in an effective and 
efficient manner. So the one thing I love about being the 
Chairman of this Subcommittee--and I told Congresswoman Bentley 
this many times--is that it seems that just about everybody 
wants to get something done and they want to get it done right. 
So I think we need to just make sure that we go in with that 
attitude.
    Now, one last thing. Mr. LoBiondo had asked unanimous 
consent that the National Retail Federation have 15 days to 
submit a statement for the record of today's hearing. There is 
no objection to that, so that is so ordered.
    Finally, let me say this, that we really do thank you all 
for your testimony. We will come back here on July 2nd and see 
where we are.
    Now, Ms. Dye, I understand that you are talking about a 
possible interim sort of report, so I got that. I don't want 
you to think that I didn't hear you. I did. But I think it is 
very important that we measure our progress. So I look forward 
to that.
    And, again, this is an opportunity where we all can play a 
part in coming up with a solution to a difficult problem, so 
again I thank you and have a great day.
    [Whereupon, at 12:22 p.m., the Subcommittee was adjourned.]

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