Interview: Daniel Maffei, chairman of the FMC – new power, new responsibilities

Daniel Maffei Photo: Federal Maritime Commission

The Federal Maritime Commission (FMC) may have more teeth than before the pandemic, but chairman Daniel Maffei is keener on baring them than chomping down. He tells The Loadstar that having the new power is like being a referee, rather than a judge.

“Since the ‘80s, the commission has set the rules of the game, and then the game was played; and if you thought it wasn’t played fair, you could lodge a complaint afterwards.

“Now, with the Ocean Shipping Reform Act, I think the better analogy would be that it is the game, and we are the refs on the field and can call the yellow cards and the red cards as they occur.

“And that, I think, is very important to creating the right atmosphere and to making sure that there’s a level playing field. Many of the carriers say, ‘look, we’re fine with these rules as long as you enforce them’.”

To illustrate the collaborative approach of the FMC, chairman Maffei, in London for International Shipping Week, points to the VOCC audit programme.

“It’s actually not mandated, but all the major carriers participate and I think they all appreciate participating. And it’s basically a way to say what we’re going to be looking at. So if you don’t want to run foul of us, just do X, Y and Z, and we’ll make sure you have the information.

“We’re not your law school professor who is trying to trip you up by giving you something in the exam you’ve never seen. We’re the professor who’s saying, okay, this is going to be on the test, folks. You want a good grade? Just pay attention.

“And so, in that sense, we are a regulator and obviously sometimes we bring cases and we can be oppositional, but we also try to be collaborative with the industry.”

And, he adds – although not everyone would agree – the industry is good at self-regulating. The FMC’s latest initiative to name and shame non-compliant NVOCCs, for example, helps effect change.

“The good news about this maritime world is that it’s image conscious. They want their customers to appreciate what they do. They care about whether they get a bad rap. So, in a way, shaming one particular carrier for one particular kind of ancillary fee has a good effect.

“But, yes, if they don’t move, we will file cases. As a practical matter, though, most things are settled.

“We don’t feel a need to win a case, have it appealed and then go to the Supreme Court or whatever. If there is a matter of principle involved, it’ll come up. And the interesting thing is, when the principle does come up, it almost doesn’t matter how much money it is. We’ve got a case being appealed where the judgment was $500. But the precedent is huge for the industry, because it involves when you’re allowed to charge, what kind of fee are you allowed to charge over a weekend.”

Demurrage and detention fees remain a source of contention, with small companies in particular frustrated. The FMC has an interim procedure which fast-tracks objections, but, admits chairman Maffei, it may need formal regulation at some point. The FMC’s sole aim is to get cargo moving, and it is adamant that fees should incentivise that rather than become a revenue stream – an approach that lost “credibility” in the whole D&D system during the pandemic.

The main headline news, of course, has been the Ocean Shipping Reform Act (OSRA), triggered by the severe disruption over the pandemic.

“It’s really all about Covid and the consequence of Covid, which was this huge demand boom in the United States – many people in government didn’t even know we existed.

“What we do is very important to the supply chain, but not necessarily a thing that the average American, or even the average member of Congress, would think about. It did sort of redefine some of the things we had to do. And it also gave this opportunity to pass the first legislation enhancing our authority and our resources in almost 25 years.

“We still don’t have the power to set law, but they gave us more tools for our toolbox, in terms of policy setting and regulations. And also mandated that we do a lot of stuff too.”

But along with the new power, came new responsibilities. The number of dockets the FMC has had to manage increased by 88% between 2021 and 2022. Does it have the resources to cope?

Chairman Maffei explains that it’s like being asked if you are hungry when you are still eating.

“That’s how we feel. We’re spending so much time and resources implementing new things, that I just don’t know right now. I wouldn’t want to ask for more without knowing for sure that it could be efficiently utilised.”

Chairman Maffei, a Democrat ex-Congressman, is keen to point out that the FMC is non-partisan, but says it has a good relationship with the Biden administration.

“Given the size of our agency, I think we get a disproportionate amount of attention from the National Economic Council and in the White House generally. That’s not necessarily a bad thing. They do respect our independence, which I appreciate.

“You know, most of the issues in ocean shipping don’t divide along party lines, and they understand that part of being bipartisan is when we can find consensus – it means that we’ve got an even more powerful hand to play in terms of our regulated entities understanding that, no, these policies aren’t going to just change if the administration changes or if the chairman changes.”

Chairman Maffei sits on the competition council, which has a meeting once every six months with the President. Competition is of course always under scrutiny, in particular the shipping line alliances. He explains that the FMC is not able to share the details, so there remain complaints about transparency, “but we monitor them very, very closely”. The FMC also meets with the EU’s DG Competition [Commission], as well as the Chinese Transportation Authority every two years.

“So there’s really three entities in the world that don’t have to have the same policy by any means, but have to have compatible policies for the international system to work. You don’t want, for regulatory reasons, to have to stop in the mid-Atlantic and transfer all your stuff from one ship to another.”

But he says the shipping alliances can be a force for good.

“Would I like to see 25 shipping lines like we had 20 years ago, and four based in the US? Yes, of course I would. And I certainly thought that there were some abuses of their market power during the pandemic. But there were also a number of other issues that they were blamed for, that they really couldn’t do much about. It was the inland infrastructure and capacity that was the issue. So the lines do sometimes do get a bad rep. That said, though, they do have a lot of power. They’re very, very large organizations. And they’re increasingly now gaining other kinds of things like ocean transportation intermediaries, logistic services, etcetera.

“The key thing then is to make sure there’s sufficient competition that will drive prices down and hopefully service up. My concern is not so much the current alliance structure, but that’s changing, with the 2M disappearing. Will it potentially set forth a new wave of mergers and acquisitions which would reduce competition and then therefore be an issue?

“But for the most part, as much as I may be concerned about it, I’m also concerned they’re going to go away because there’s a lot of pro-competitive effects of alliances. For example, if you’re in a medium-sized port you’re not going to be served by every carrier. But if two carriers can serve you and share a ship, there’s more choices.

“And that is really what the alliances allow, and provided we do our job well and make sure that there is no price collusion or something else that’s not allowed, then the bigger concern in my mind is, well, what happens if they do break up and one of the 2M or some other line gets to be so large that the only way other carriers can survive is to combine – or potentially they don’t survive.”

And with that, chairman Maffei is off, this time to talk shipping with the UK government.

Luckily, he’s attuned to disfunctional organisations.