Washington Watch

Looking Forward and Aft at the Maritime Political Landscape

With the election (largely) settled, we turn our attention to the challenges and opportunities that the new Administration and Congress hold for maritime stakeholders.

By Jeff Vogel

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Maritime Challenges Out (and at) the Gates

On October 3, 2024, the United States Maritime Alliance (USMX) and the International Longshoremen's Association, AFL-CIO (ILA) reached a tentative agreement on wages, extending their Master Contract until January 15, 2024. The tentative agreement reopened ports stretching from Maine to Texas following a three-day strike. Larger issues impacting marine terminal efficiency and safety remained on the table for subsequent discussions. However, as of November 13, discussions have again broken down and the parties are yet to return to the negotiating table, increasing the risk of another strike.

The expiration date of the extended Master Contract is notable, set to occur five days before President-elect Trump’s inauguration. If the parties fail to return to the negotiating table and reach an agreement before the expiration date, the Trump Administration may be put to the test on day one in handling an ongoing strike that could have significant economic impacts. The timing is further impacted by the fact that the strike would fall right before Chinese New Year, which begins on January 29, 2025. This is typically a period of high cargo volumes as Chinese exporters prepare for slower periods during the holiday. Volumes during this period could be further increased by efforts to land Chinese exports in the U.S. prior to the inauguration in an effort to avoid threatened tariffs on such goods.

This perfect storm could place pressure on the Trump administration to exert its influence in bringing USMX and ILA back to the negotiating table. Failing such measures, if a strike continues and has measurable economic impacts, the new Administration may be forced to consider invoking the Taft-Hartley Act to compel ILA longshoremen back to work. Either way, a port strike could prove to the first important test for the President-elect’s second term.

Tariffs & the FMC

The dual threats of a potential ILA strike and the tariffs noted above have caused some frontloading of imports into U.S. ports throughout November and December, buoying freight rates during this period. However, the longer-term impact of the Trump Administration’s threats of increased tariffs are unclear. The Administration’s goal behind the tariffs is, of course, an increase in U.S. manufacturing production and a corresponding decrease in U.S. reliance on imported goods, particularly from China. Regardless of whether this lofty goal can achieved, there is an appreciable chance that the imposition of the planned tariffs will impact ocean trade.

From a carrier and marine terminal operator perspective, the focus of such impact could land squarely with the Federal Maritime Commission (FMC). The Biden Administration was extremely harsh on international ocean carriers, blaming freight rates for increasing inflation and criticizing ocean carriers’ handling of the ILA Master Contract in the lead up to the strike in October. This view helped, in part, to lead to the passage of the Ocean Shipping Reform Act of 2022 (OSRA), which granted the FMC with additional authorities to regulate certain aspects of marine transportation. The FMC implemented these authorities throughout the past year in various rulemakings, including new regulations governing the imposition of demurrage and detention charges.

A change in Administration will also mean a change in leadership for the FMC, with the new chairman likely to be a republican. Current FMC Commissioner Lou Sola recently endorsed his fellow Commissioner, Rebecca Dye, to serve as a chair. In his November 26 letter to President-elect Trump, Commissioner Sola asserts, “Commissioner Dye’s appointment as Chairman would send a powerful message of stability and resolve to shippers, port operators, and international trade partners. It would demonstrate to the world that the United States is prepared to protect its supply chains, mitigate economic disruptions, and uphold the principles of fair and efficient trade.” Commissioner Dye’s work throughout Fact Finding 28 helped to usher in the new regulation of demurrage and detention practices. She has also proposed reforms to various ocean supply chain practices including empty contain returns, early return dates, and notices of container availability.

The President-elect is yet to nominate a chairman, and the FMC will soon have a vacancy with the departure of Commission Carl Bentzel, who is taking the helm at the National Association of Waterfront Employers. Once in place the new chairman will undoubtedly have a busy agenda assessing the impact of the new Administration’s tariff regime on ocean transportation, and seeking to balance the appropriate regulatory approach in supporting U.S. international trade.

A Critical Congress for the Domestic Maritime Industry

As the Administration’s leadership continues to take focus, so too is the Congressional leadership that will impact maritime policy during the upcoming Congress. On December 3, Rep. Sam Graves (R-Mo.) was granted a waiver to continue serving as chairman of the House Transportation and Infrastructure Committee. House GOP rules require a waiver to be the top member on a committee for more than six years. In addition, current ranking member of the Senate Committee on Commerce, Science, and Transportation Sen. Ted Cruz (R-TX) will become the Committee’s new chair.

Both committees hopefully will be busy in the coming months taking up the anticipated bipartisan Ships for America Act led by Sen. Mark Kelly (D-AZ) and Rep. Mike Waltz (R-FL). The bill would be the most comprehensive support package for the U.S. maritime industry (including the Merchant Marine, shipbuilding, and U.S.-flag carriers) since the Merchant Marine Act of 1970. Rep. Waltz has been nominated to serve as the National Security Advisor to President-elect Trump. The Senate Republican co-sponsor of the bill, Sen. Marco Rubio (R-FL) has also been tapped to serve as Secretary of State. While the bill will need new Republican leads, it is certainly a positive sign that two key international policy and national security officials view the U.S. maritime industry as critical to our Nation’s economy and security. Let’s hope that their view of the importance of our industry is shared by both the incoming Administration as a whole, as well as the incoming Congress.

Jeff Vogel

About the Author

Jeff Vogel is a shareholder in Cozen O’Connor’s Transportation & Trade Group. He focuses his practice on strategic and operational matters affecting the United States maritime industry and on government contracts across all industries. Jeff can be reached at jvogel@cozen.com.

Marine News Magazine
December 2024
RW Fernstrum