Senate passes ship deregulation; Debate now shifts to
House
How 2 lawyers pulled the final deal together
By Tim Sansbury
Journal of Commerce
Staff
WASHINGTON - Mystery, intrigue and even patriotism are all
part of the story of how shippers and the fractious maritime industry forged an unlikely
compromise that led to Senate approval Tuesday of a landmark ocean shipping reform bill.
| Ocean Shipping Reform Act Changes to the landmark Shipping Act of 1984 provide greater contract
flexibility in international containerized cargo shipping.
Sen. Kay Bailey Hutchinson’s bill:
- Allows confidential contracting between vessel operators and
shippers.
- Makes the dock movement terms of all confidential deals
disclosable to longshore unions.
- Lets carriers negotiate different deals with different
customers.
- Prohibits conferences from restricting individual rate
actions; shortens notice from 10 days to five.
- Freight consolidators must continue to issue public tariffs.
- Maintains an independent Federal Maritime Commission.
- Eliminates tariff filing system at the FMC; replaces it with
electronic publishing.
Sen. Slade Gorton’s amendment:
- Would extend confidential contracting rights to freight
middlemen known as non-vessel-operating common carriers, or NVOCCs. (Amendment defeated)
Sen. Tom Harkin’s clarification:
- States that carriers cannot discriminate against shippers
associations or ocean freight intermediaries by unreasonably refusing to deal or
negotiate.
|
Less glamorously, the story also is about long meetings
in smoke-free conference rooms, drafts and redrafts of proposals, mistrust and,
ultimately, trust.
Seats at the negotiating table were filled by a small army of
lobbyists and lawyers for shipping lines, ports, maritime unions and shippers. All have a
stake in revamping the 1984 Shipping Act, the law governing international container
shipping in and out of U.S. ports.
Emerging as heroes, according to accounts given by some of
those involved in negotiations, are attorneys Stan Sher and Marc Fink of the prominent
Washington maritime law firm Sher & Blackwell.
Deal
The two lawyers, representing foreign shipping lines and
maritime labor, respectively, capitalized on their expertise and longstanding personal and
professional relationships to pursue a carefully designed strategy that led to a deal,
according to one set of views.
A slightly different perspective emerges from others involved
in tailoring the compromise. They spread the credit much more broadly, to the leaders of
interest groups who were smart enough to sacrifice some of what they wanted in the
deregulation bill in order to achieve their top priorities.
Names to mention
Any list must include Edward Emmett, president of the
National Industrial Transportation League; Christopher Koch, general counsel for Sea-Land
Service Inc.; and Edward Wytkind, executive director of the AFL-CIO’s Transportation
Trades Department, according to this second school of thought.
Of greater significance than the action of any individuals,
some sources say, were changes made to the Senate bill late last year, which hopelessly
complicated the treatment of confidential freight contracts, a core issue.
At that point, the draft of the legislation was so onerous to
foreign shipping lines - key opponents of the bill - that they decided to cut their
losses. That decision set the compromise in motion.
Since mid-1995, the National Industrial Transportation
League, representing manufacturers, retailers and other cargo shippers, and the leading
U.S. flag ship operators, Sea-Land Service Inc., APL Ltd. and Crowley Maritime Corp., had
been pressing for deregulation.
The pro-deregulation side wanted a new container shipping
market based on more specialized relationships between shippers and carriers. It wanted,
for the first time, confidential contracting.
Opposing interests
Standing in the way were the foreign carriers of the Council
of European and Japanese National Shipowners’ Associations, the American Association
of Port Authorities and the AFL- CIO’s Transportation Trades Department, representing
primarily dockworker unions.
Foreign lines were fighting to preserve the age-old system of
collective rate-setting by carrier groups known as conferences -- or as some shippers call
them, cartels. Labor was an ally, fighting deregulation on principle.
With U.S. flag lines and foreign carriers on opposite sides,
port officials found themselves caught between the two groups they consider their chief
customers.
In mid-1995, the House passed a sweeping deregulation bill,
but the Senate considered it too radical. Senate staff struggled over numerous rewrites
for the next two years. Each change seemed to help one segment of the industry while
putting another at a disadvantage. The debate turned acrimonious and, occasionally,
personal.
The axiom, “It’s easier to stop legislation than to
pass it,” applied to the deregulation bill in the early weeks of 1998. On Feb. 24,
however, that outlook changed dramatically.
That day the NIT League told its members in an Internet
bulletin that a breakthrough had been achieved. After three years of struggle,
deregulation combatants had given pledges of support for a six-point legislative
compromise, the shipper group said.
On the key point, the parties simplified confidential
contracting. They agreed to extend to the traditional form of maritime contracting --
agreements that shippers sign with groups of carriers -- the same confidentiality that
would now apply to the new one-on-one, shipper-carrier contracts.
The NIT League didn’t say so in its bulletin, but the
private-sector compromise had been the product of nearly four months of secret and
intricate negotiations dating back to congressional adjournment in November.
Lobbyists interviewed consistently said that a degree of
confidentiality had been necessary to get the negotiations off the ground. The discussions
at the outset involved senior officials of the many interest groups.
No public announcements
Everyone agreed not to broadcast the effort, but nobody was
asked to burn any documents after reading them, a Washington representative said.
“You didn’t want people shooting at you”
before the ideas had time to build momentum, he said.
Another lobbyist said, “The hardest thing was to pin
down ports, foreign carriers and labor,” who all were leery of deregulation.
“There was a lot of distrust at the beginning, but there was remarkable good faith at
the end.”
That was the product of improved personal relations among the
major players, and a willingness to give all sides some of what they wanted. “Ed
Emmett, Ed Wytkind and Kurt Nagle (of the American Association of Port Authorities) were
all sitting around, working together,” said a source close to the talks.
The “marriage ceremony,” as one lobbyist
characterized the no-turning-back session in which the six-point compromise deal was
sealed, occurred Feb. 16 at the Sher & Blackwell offices. Most of Washington was
celebrating a holiday - Presidents Day.
Sen. John Breaux, D-La, later called the unlikely union a
delicate balance.
Although the agreement was fashioned by the private sector,
smart lobbyists did what they always do: They allowed law-makers to take credit, and the
deal officially was unveiled within a week by Senate Majority Leader Trent Lott, R-Miss.,
Sen. Breaux and Sen. Kay Bailey Hutcbison, R-Texas.
“It was important to get everyone working
together,” said Sen. Lott, who had wanted nothing less than a bill so airtight he
could pass it under a shortcut voting procedure known as unanimous consent.
Not quite everyone
Sen. Lott’s “everyone,” however, fell short of
everybody. On the outside looking in, by their own admission, were freight consolidators
and small shipper pools known as shipper associations.
The compromise had nearly been chased out of the closet a
week earlier by Conrad Everhard, the recently retired chairman of Korea’s Cho Yang
America Inc.
Mr. Everhard, a fierce deregulation critic, used a Feb. 12
speech to the Propeller Club here to expose the compromise negotiations, possibly to
torpedo them.
He complained bitterly that the Sher & Blackwell firm had
ties to both foreign carriers and maritime labor, and that Stan Sher was working behind-the-scenes to encourage
the groups to accept a deal that would pave the way for Senate approval.
Fight promised
Mr. Everhard vowed to fight Mr. Sher’s efforts, but he
failed.
Lobbyists recalled seeing a stamp, or fax notation,
indicating the original compromise outline had come from the Sher & Blackwell firm.
“Sher & Blackwell did the legwork They approached
the groups individually, dealt with them one to one, and played intermediary,” said a
lobbyist.
“You know, the ones spear- heading this
legislation,” the lobbyist said in reference to the NIT League and Sea-Land,
“we’re not the ones who accomplished it.” In a remark directed at Mr.
Everhard, an official closely involved in the compromise said that all Stan Sher is guilty
of is “having accomplished what his clients asked him to do.”
The shape of the bill at the end of 1997, with its unwieldy
confidential contracting requirements that would have steered cargo away from shipping
conferences, “called the foreign carriers’ bluff,” said an executive.
It was tantamount to saying “the hell with you,” he
said, although he used a different choice of words.
That version “flushed out foreign carriers and
ports.”
Acted out of fear
Another executive said the Senate’s message to foreign
carriers at the end of last year was, “This train is going to leave the
station.” The lines “acted out of total fear” that a harmful bill would be
passed, he said.
In the end, foreign carriers avoided Senate changes that
would have hurt shipping conferences the most. Indeed, all carriers are happy to retain
their collective rate-setting authority and to preserve the Federal Maritime Commission as
an independent agency.
Once the House acts -- if it acts -- carriers will benefit
from the closure of a period of regulatory uncertainty that has hampered planning.
Shippers, for their part, won the right to sign confidential
contracts with carriers of their choice, a change they expect to undermine the power of
conferences.
Dockworkers will gain a mechanism to obtain information about
the movement of cargo, a tool they say will help enforce collective bargaining agreements
with carriers.
Ports get to move on to issues they consider more directly
pressing, like funding for channel maintenance and improvements.
Within the compromise group, there is some sympathy for
consolidators, but not much.
“The intermediary community was pissing on this tent
from the outside no matter what” idea was offered, said a lobbyist.
Adding another member of the group, “We couldn’t do
anything with them. Their agenda is that …they are at odds with doing anything”
to change the current law.
