Episode 7: Lauren Beagen
In this episode of "Maritime Means...", Blythe is joined by maritime industry expert and Maritime Professor Lauren Beagen. Lauren is an attorney and legal consultant specialised in translating Federal Maritime Commission regulation and breaking down supply chain silos. Lauren talks about detention and demurrage, the Jones Act, and some of the legal issues the maritime industry is facing today.Listen now (00:54:01)
Full episode transcript
- She's known as the Maritime Professor on social media, but she's also a lawyer and a content creator. So we're excited to break down the top legal issues facing the maritime industry today. So let's go ahead and get started. Hello again, I am your host Blight Brumleve and I'm proud to welcome in Lauren Beagen as our next guest of Maritime Means…, a podcast by Spire Maritime dedicated to building a community of innovators. Lauren, welcome to the show.
- Thanks so much for having me Blythe. This is so fun, I'm so excited to be here today.
- Likewise you are one person on this list, you know, when we decided that we wanted to start up this podcast that was high on my list of getting on the show. So I'm super excited to have this conversation with you because I think it's really timely. I think it's a lot of important issues facing the industry both now and in the future. But before we get into all of that, and as I mentioned in your intro, you're, you're a lawyer, you're a business owner and you're also a maritime creator, but take us back to two little Lauren, how did you get drawn into the maritime industry?
- Yeah, so I'm from Michigan originally, so even though I'm out in, in the Boston area now, I'm from Michigan originally and grew up on the Lakes. So I just found an affinity for sailing with my dad. You know, we would sail, I'm from Traverse City, so it's up north, so it's kind of, it's beautiful, there's, there's always sailing around and just found that I really took to it. So then I, I started to kind of figure out, okay, go to college, I went down to Hope College, which is in Holland, Michigan. There, I was International Political Science and International Studies because I kind of figured, well, if I, I was really into languages because I'm just a communicator, I just figured if I knew languages, I could talk to more people out there. And so, so I was kind of trying to like pull everything together, but then I joined the sailing team at Hope and I mean, gosh, I was just, so nothing else mattered. All I want to do is go sailing all day every day. And so I figured well how can I combo that with like this international thing. And I was like you know what maritime transportation is inherently international and maritime right? Like the ocean is what connects us all. So it kind of, I kind of accidentally bumped into maritime laws as to where I wanted to go. And so I was international political science international studies like I said. But I was like you know I don't wanna go to DC. So I was like well maybe I'll go to law school for a little while. But my sole intention going to law school was to stay in maritime law. I figured you know I maybe I won't hate what I do If I stay on content and on the topic that I like. So I did that I found a law school in Rhode Island. Roger Williams University School of Law. They have a joint degree program where it was a Masters of Marine Affairs and a JD Law degree. And so it was maritime all throughout. So I came out of law school speaking the language of the law all because I used to like to sail with my dad on the weekends.
- Oh well so not only have, you have the experience of you know running a business and being a lawyer on you know I guess quote the admin side of the maritime industry, but you also have that firsthand knowledge of what it's like to be out on, you know the lake or the ocean or the sea and so you have that sort of you know that experience as well.
- Yeah, so you know I didn't actually go to sea in the same way that merchant mariner go to sea. So I you know, I didn't, I certainly haven't spent months out on the ocean. But I mean everybody gets a little gumption when you kind of, I mean the wind does its own thing, the waves do their own thing, you kind of have to just turn yourself over to the natural elements that you're kind of subjecting yourself to. So you know the sail team did that a lot. I mean it was bathtub sailing, right? It was a small boat, so it wasn't too much of a major thing. But you know, one time I actually had to swim, this isn't, this wasn't what happened in the sailing team, but a couple of my friends and I, we had gone up to my nana's house, my uncle's teeny tiny little sailboat was out on the beach. So we decided to go sailing, I forgot to put the plug in the back and so it was taking on water, I mean we were sailing, so we were doing okay but it was taking on water, it was a beautiful day, it was like kind of, we were about to leave for the weekend, it was like sunday right? And so we get like kind of halfway across the lake and like we're up to our knees in water in the boat. It was like I think I'm sinking the boat like how is this happening, realized that I forgot to put the plug in. But like in that moment there's no reset button, there's no like you know you somebody can come bail you out necessarily and I was like oh my god like I don't I don't wanna have to buy my uncle a new boat. You know, like I was in college and so luckily there was some fishermen who like came and saved my friends but I was like, no, like the captain goes down with the boat right? So I obviously didn't go down but I was like how do I, how do I figure this out? It's one of those moments like I said gumption that kind of gets attached to anybody who's in the maritime industry and you figure it out. So I tied a couple of lines on the front and was like it's not that heavy of a boat, I don't have too far to go before I can get to somebody's shore station which is in fresh water, it's like you can lift the boat right up and out of the water, that's kind of how you store it. There's no salt erosion that happens obviously in freshwater. So I found somebody at the shore station, put the boat on that, lifted it up out of the water, let it drain out, but the way that we got to the shore station was I had to like put the line over my shoulder and swim it in. So like I said, it was a small boat, but like, you have to figure it out.
- Wow, what a great story.
- Yeah, like of course, it’s that kind of world that, like anybody who's in maritime, that's actually spent any time in the water, whether it's small boats or big boats, you have to figure it out. And so that that really yields itself well to any industry really.
- Yeah, I love that because that's really the crux of anybody who's working in global supply chain, maritime logistics, for any aspect of supply chain. It's at some point, you have to figure it out.
The formation of maritime alliances
Lauren explains how ‘normal’ takes a new form every 10 to 15 years in the maritime industry. The latest change saw the rise of vessel sharing agreements and the formation of ocean alliances.
- And I think that that is a perfect segue to get into sort of, you know, the meat and potatoes of why we wanted to have you on this show and on this episode is because we know that ninety percent of everything moves by ocean shipping. But I'd like to tackle some big picture questions that are affecting the maritime industry today. And one of those things that I think is kind of an oxymoron of a question to ask, but I'm gonna ask it anyway, but what does normal look like an ocean shipping especially after the last couple of years?
- Oh gosh! Well so normal kind of takes a new form every 10 to 12, 10 to 15 years. So the most recent normal that we saw was really the alliance formation. So that happened in kind of early 20 tens where the alliances were all combined, right? So we didn't have vessel sharing agreements of these alliances prior to that. And so they were filed with the FMC as agreements. And so that's what they have to do. So let's break it down a little bit. So we have these ocean alliances there, there's some major ones, there's 2M, there's the Ocean Alliance, there's THE Alliance, THE which I think is supposed to be like The High Efficiency alliance. It's like an acronym actually. So we have, and so all of the major carriers for the most part are in these alliances and really what they are as their vessel sharing agreements. So it's similar to airline alliances and that's probably the best example of how to understand it. Airline alliances, you might book a ticket on Delta, but then you get your actual ticket and it says, you know like Eagle Air doing business as Delta. That's the same idea behind the ocean alliances, you might need to send your goods from Vietnam to Oakland. But the line that you usually work with doesn't service that route and so you might be on a codeshare essentially or a vessel share with somebody else in the Alliance and so you might have booked through Maersk but really your stuff is moving on an MSC vessel, so it's the same idea. You know, so the whole idea of the Alliance's back when they first started was so that they could help the shipper have more options, have more more routes, you know, make it a better environment. And honestly kind of keep the rates down to because or or keep the rates at kind of a good level because what was happening in the early 2000s with some of these alliances or some of these carriers were I mean they were losing money. In an entire year we saw billions of dollars of profits last year, but prior to that they might have had a negative year. And so you know, I think nobody was more surprised by the billions of dollars than the ocean, the ocean carriers themselves. But so normal, you know, normal like a China to West Coast route might have been 1000 bucks, maybe 1200 bucks per box at the height of the pandemic and congestion getting or whatever you wanna call it. It ended up being up to $20,000 for that same box. So I mean that was nuts and it wasn't, you know, I'm of the mind that it was still there was still competition in the market. It was just crazy demands, crazy, you know, unavailability of space. I mean you know it was just everything was a perfect storm combo it all together and so a lot of people are calling you know cartels and price fixing and collusion and all of that. I mean it even made it into the White House, the State of the Union. But really the FMC came out, the Federal Maritime Commission came out and said no it was competitive, it was competition. It was just the nature of the market at the time. And so normal before was these carriers were competing tooth and nail to try to get your business, try to get these shippers business. Now the carriers were able to get billions of dollars and they're buying airlines and they're buying you know they're kind of diversifying their portfolios as well so that they won't get back to that, losing money. Like their P and L statement had a negative at the end of the year prior to this will shake up.
- And so moving into the coming years there's a little bit more balance, especially among that alliance or how that alliance operates. Is that fair to say?
- Yeah, so you know, moving into the, it's a pendulum right? So the pendulum swings pretty far over onto the carrier side. It was really benefiting them because they had the space. They had the vessels and everybody needed space to move their stuff. People were buying like crazy, you know, all the spending power that used to be going to services like dining out was now going to goods and so everybody was just competing to get on those boats to bring their stuff over and so that's what we saw and then you know, the ports couldn't handle that much volume. So it all came down to reduce capacity. We're shooting up the rates. Now we're seeing it swing back over. I even saw a report that basically said that some of these shippers are saying don't ship any more stuff. Our warehouses are full, like we're good for Christmas, leave us alone. So if you start moving into that world, you're gonna have too much capacity, right? Like all, a lot of the carriers were buying new vessels throughout all of this when they were making billions of dollars, which only adds more space, more capacity. Which you know in turn is gonna drop those rates. So we're seeing that pendulum swing over to the shipper side right now, where kind of shippers or king again. I think we're gonna see the pendulum move back, you know, I think it's gonna, it's gonna go back and forth until it evens out. It's gotten such a whiplash that I don't think we're gonna even out for, I mean, unfortunately probably not another year or two or maybe, I mean even heard maybe five years. I think probably in the next two’ish years we'll get back to normal ish. But I also don't know if we'll get back to pre-pandemic normal because the game's changed a little bit right. I mean, people now know a little bit more about ocean shipping where previously they might have been happy to just say cool, it's showing up at the door. You know, people are a little bit more engaged in the specifics of the maritime side.
Labor struggles in the maritime industry - the concept of the empowered employee
The issues the maritime industry is facing today is certainly not limited to the United States only. Other parts of the world such as Canada, Europe and China are having issues too. Some of those issues are related to labor struggles.
- And so when we're seeing these issues or you know, as the return of the shipper, whether the shippers market in this case, what is going on? I guess on a global scale or these problems only specific to the United States, or are there other, you know, countries all over the world that are experiencing the same level of, you know, consumer buying habits and port congestion and not able to find carriers and things like that, or is this mostly isolated to the United States?
- No, it's certainly happening all over the world. Yeah, it's definitely happening all over the world and really, I mean it's kind of a perfect example of how one area can affect another. I mean, so the Zero China or Zero Covid policy of China was shutting down those ports. And so I mean that's where you know, 90% of everything moves by ocean transit. I don't know what the number is coming out of china specifically, but it's a very high number. And so all of those goods aren't only coming to the US right there. They're going to Canada, they're going to, you know, anywhere else in North America. They're also going to Europe, Europe saw some significant I guess stoppages and congestion moments as well. They also, Europe also has labor struggles. So I was just reading this morning a report on the Port of Rotterdam having some labor negotiations struggles similar to ILWU, the International Longshore Warehouse Union that's happening on the West Coast with an hour in the US system the contract expired July 1st and so they're currently going through negotiations for that. They're seeing a similar type thing happening over in Rotterdam where they're trying to make contingency plans for how do we kind of move away from some of these terminals that might have stoppages or might have labor related delays. Similar to how the US is dealing with it.
- And I'm glad you brought that up because I heard you say in one of your interviews that that it's more or less trending towards, you know, the concept of the empowered employee and it's not just the United States thing, but, you know, ports strikes are, you know, in rail strikes are happening all over the globe. Do you think this is more indicative of, maybe laws or legal ramifications, you know, things like that that need to change within the industry itself? Or is this more or less outside pressure, outside purchasing habits that are affecting the role of those jobs today?
- Yeah, I mean, I'm so, I'm, I'm pretty pro business in general. I mean, you know, I'm, but I want to see fairness across the board and the thing that's happened in the past two years is there wasn't a lot of fairness for kind of throughout the employee side of it. Right. I mean, we had, we had emergency workers who are essential personnel who were working every single day throughout the height of the scariest parts of the pandemic. And yet they never really got a break. Everybody just kind of came back to the office or came back to help them, but they never really got a break and then you kind of pair that with maybe they're a little bit disenchanted by the fact that they never got their moment of a, of a pause of a relief of a or, or even like a true appreciate for the dangerous situation that they were in. You know, and I think that we also saw, see, especially on the rail side, one of the main sticking points with the rail discussions was that they were basically on call seven days a week. They might not be working seven days a week, but like even on their off days, they could be called in. I mean that's, you never get a break, right? I mean like, like doctors, I feel like doctors that are on call, like they might go out for dinner and they're like, I can't have a drink because I'm on call, right? Like the same thing would probably happen on the rail side, I can't have a drink. I'm on call. Like, I mean, so can you never relax or you never off? And so to me that feels like, that's unfair, right? Like that's a moment of like, well that needs to be corrected. And so I'm, I wasn't surprised to see the rail workers really kind of standing their ground on that because they were required, similar to port workers, similar to health care workers to be there throughout the entire pandemic, but then they weren't really given like, wouldn't you think that that would be a first starting point of like, look, you guys have done great. Also let's correct this, like imbalance that's always been there, you know, this is the moment, let's give a little bit here, because, I mean, look, it's always gonna be difficult. Labor is always probably gonna be the highest cost of any business. Salaries, you know, whatever it is, but it also has to be fair, I mean, people still need to live their life and I think that's what we saw, the hustle culture was reduced a little bit, or at least muted and and kind of that return to family, which I think everybody like to see a return to family and friends is, I guess that's what I call the empowered employee or the empowerment of the employee that we're seeing right now is, you know, trying to just make it a little bit more fair so that you can balance it out. It's not an overreach by the employees from what I'm seeing, but it is trying to balance it out and that's not all the way true. I mean, you know, ILWU is talking about some other issues, not only, you know, some of that, that I guess time off. There's some larger issues that have been looming for quite a few years there.
- As we talk about, you know, sort of the growing, I guess labor struggles and with the empowered employee and then couple that with a holiday shopping season, that wasn't really the boom that I think a lot of retailers expected. What does the story of, I guess global shopping or ocean shipping tell us about the holiday shopping season and what you know how that sort of ties into all of the other things that are affecting the maritime industry, you know, in the coming years.
- Yeah, I mean I think this is part of the pendulum swing, so I think this is why the shippers are going to be king for a little bit because you know, if they're not asking for more goods to be shipped, the carriers are gonna have to start playing the game of, well how do we how do we convince them to ship? How do we drop the rates so that they want to ship to put it in these overstuffed warehouses or to replenish these warehouses? They probably figured some things out where they were able to take on extra warehouses during the pandemic when everybody had too much stuff. But you know, I mean, I think that's the game. How do we, we had such a high movement of goods for so long, but then we're seeing a not, a connection of the demand for those goods. And so with the demand lower, we're gonna have this offset of just too much stuff hanging around and so with too much stuff, I mean I'm not an economist, but you know, with too much stuff, people aren't gonna be shipping as much and so that's gonna keep those rates lower. Yeah, it's, it's gonna be, it's gonna be interesting, you know, usually there's a peak season right before Chinese New Year of all the shippers trying to get their stuff in. So the Chinese New Year means that the factories over in China will shut down for two weeks, sometimes a month. I mean they shut down for a while and so during that time, usually we see a big bump right before and we're not seeing that bump happen. And so again, this just all kind of shows me that it's gonna be in the shipper's favor for a little while. And unfortunately a lot of shippers felt burned by carriers for some time because the carriers were also trying to be smart about getting their profits and so, you know, they were trying to make it so that, I mean rightly or wrongly, but they were trying to get people to pay the $20,000 per box instead of their pre negotiated rate of maybe it was 3000 or 4000, you know, whatever it was. And so that's where they were having trouble and and hopefully I just keep saying it's the long game here, right. Like it's let's keep these relationships, you know, like I hope people don't feel too burned, it turned into a very emotional thing. You know, because there's millions of dollars at stake here and they felt burned by these otherwise partners. There's only so many carriers out there. And so I don't know, it sucks, but you know, a little bit, you wanna figure out what happened, you know, kind of get some resolution, but then also figure out a way to move forward.
- 100% very well said.
The Ocean Shipping Reform Act
A historical overview. Lauren explains that the Ocean Shipping Reform Act is based on the Shipping Act of 1984 and provides the US Federal Maritime Commission (FMC) its authority.
- And getting into the legal side of things. You mentioned negotiations. Let's get into the legal, you know, area of your expertise. I know that I have a few, you know, loaded questions here and it might take up, you know, the majority of the rest of this interview, but I'd love for you to be able to break down some of these bigger big picture legal issues that are facing the maritime industry. And first, you know, I'll mention a few of them. So the Ocean Shipping Reform Act, the Jones Act, the FMC open rulemaking, then also the detention - demurrage rule. So all of these things, give us sort of the, I guess the backstory and ultimately why changes were made to each of these. So, let's start with the Ocean Shipping Reform Act.
- Yeah, so the Ocean Shipping Reform Act is a reform of the Shipping Act. And so the Shipping Act of 1984 is what the FMC gets their authority from. But it basically sets out like how the Federal Maritime Commission regulates and provides limited antitrust. So basically, you know, these alliances were able to form or service contracts were able to be filed with the FMC, basically these kinds of secret negotiations that otherwise might have been considered monopolies are allowed to be kind of monitored to make sure monopolistic behavior doesn't happen. And so that's what the Federal Maritime Commission in part does is make sure that like in the interest of the global shipping world and certainly the US consumer importer and exporter, we want these relationships to form. But on the other hand, we don't want to make it so that they start, you know, monopolizing the whole thing. And so, as you can imagine, they keep a close eye on China. And some of the behaviors there because China is often backed by its government. And so that's where you get into controlled carrier. And so when you have kind of mean, when you have oodles and oodles of money to put behind a business, that's not a fair environment, right? And so that's kind of why that gets watched a little bit more. But so, so that's the Shipping Act generally that gives the FMC its regulatory authority. So it was first amended in 1989 actually. So previously it was conferences that these shipping companies these carriers were forming into, but they were member based. And they were setting rates and so we're kind of setting rates. And so they were conferences, now 1998 deregulated a lot of that. And basically took a shift of, now these conferences it was no longer beneficial to have the conferences. And so we saw conferences go out and so that's when we saw all the carriers were kind of doing their own thing. And then it wasn't until like I said the 2010s they decided okay well let's form back together but now it's, I mean, illegal to be setting rates and so that's why it's vessel sharing but they're not allowed to talk about rates. And then flash forward to 2022. We had the Ocean Shipping Reform Act which was now trying to put a little bit more regulations. From 1990 to 1998. It was eight years of negotiation. The Shipping Reform Act of 1998. And like I said it deregulated a lot of the industry and then here we flash forward to 2022. It was maybe six months, maybe a year of negotiations and they came out with this new set of what they wanted a little bit more prescriptive control over the industry. Some of the things that came out and there were, Congress set out 13 different items that they wanted included in all invoices for detention demurrage. Which was good because previously I kind of uses my example, it could be a bar napkin that says 5000 bucks D and D. And like it gets slid across the table and you're like what is this for? Like what container, what time period like there was no there were no rules over what needed to be on that invoice. And so under the old rules you probably could have slid a bar napkin with a number on it. Now, thanks to Congress and certainly kind of thanks to the follow up work of the Federal Maritime Commission, it's a little bit more prescriptive. You have to have a container number. You have to have the dates that demurrage or detention were for, you have to base the rules. So tariffs and schedules are where you'll find the rates published and so you have to see where you're getting that rate from so that you can actually go and check it and say okay, this invoice looks good. You're right, it's based on the correct rule. So there's 13 different kinds of specific items that are just very basic that you're like how is this not a rule or requirement before. So those are some of the things. Then there were also rule makings that were created from the Ocean Shipping Reform Act as well.
Detention and demurrage
Lauren explains the concepts of detention and demurrage, and the role the FMC played in regulating it. She also shed some light on how detention and demurrage became a revenue stream for some companies.
- When you you're talking about detention and demurrage is that separate from I guess the overall I guess detention and demurrage from the FMC open rule makings are all of those kind of all tied together all tied together?
- Yeah. All tied together. So that was one of the things that came out as a major problem once we hit the congestion. So let's break it down. So detention demurrage. So because everybody kind of has different terms for the same things here. So demurrage essentially the box comes off the vessel and it sits on the yard and so you might get a couple three days a week maybe of you don't have to be there right the day that the vessel shows up at berth. But you get maybe five days if it comes off the vessel, it's somewhere in the yard and then it's supposed to be an incentivization charge. And so basically it's okay, it's been here for five days. Look you gotta pick your stuff up and so then for the next five days you might get charged 50 bucks, 75 bucks a day. It's like a little nudge. Like, you gotta move your stuff, it's been here now seven days, eight days like you gotta move it. This is a, this isn't a warehouse, it's a loading zone, right? Like keep it moving. And then after an additional five days, you know or whatever whatever the terms are, you might pop up to $250 a day. And so that's where we're seeing some of the hyper demurrage. And so if you have 10 containers stuck, you're not allowed to go get them. You know that you, your tracker can't get an appointment or the terminal is saying we can't get it right now. It's buried in the back underneath 20 others. And oh by the way, we have a ship coming today so you can't pick it up today. So that's what was happening during container getting or congestion getting, basically they were making it impossible for the shipper or the beneficiary cargo owner to go get it, but they were still charging them. And so we saw a lot of shippers have millions of dollars of demurrage and detention is essentially the same principle but for the use of the box. So you know, most of the boxes are rented or leased or whatever basically borrowed. They're not owned by the beneficial cargo owner. The people, the person, the shipper who's not moving the stuff. So the same kind of principle applies. It's supposed to be incentivizing you to come pick it up. Look, you might have forgotten about it, but I'm going to get your attention so that you don't forget about it. You now have, you know, 1000 bucks worth of demurrage charges because you haven't picked it up yet. That'll kind of spur somebody into action. The trouble is there's a balance at some point, the demurrage could become more than the value of the goods inside the box. And so you might have abandonment issues or spoilage issues, especially if it's a reefer. I mean you might have shrimp that's packaged and ready to be sent to, you know, the local grocery store. But like if, if it gets past that date, then that's worthless shrimp and now that it's either the terminals problem to get rid of it or you know, the shipper might say, I'm just gonna write it off. I mean, look, I don't need to pick up that shrimp. So that's where you get into some of those problems and it's less about the spoilage or the, or that's less of what we saw during the congestion. People still wanted their goods, they were so desperate to get their goods. But they were having these millions of dollars of demurrage or detention charges and they're like, we, we can't keep going this way. So that's when Congress stepped in and said, look, we, we have some ideas on how to fix this. The funny part was the FMC, the Federal Maritime Commission was already starting to kind of dive into that. And so Congress was like, hey FMC, you should look into this and they were like, got it already doing it.
- Thanks guys! Real quick follow up question, what happens to that kind of merchandise or if it's, provided that it's unspoiled, but the demurrage fees are worth more than the actual merch or whatever is inside the container itself. What happens to that stuff if the shipper decides that we don't want it anymore?
- Yeah, so I mean that's kind of what happened when, when Hanjin went bankrupt, right? Remember the ocean carrier Hanjin, what was it, 2014’ish 2015? They went bankrupt and their containers were just all over the world. It went through bankruptcy court, I believe in New Jersey. And so basically it made us that the terminals were able to sell it off or basically anybody who had ownership or I should say possession of the Hanjin stuff was able to sell it, but at that point it was like, what's in this stuff, like what's in these boxes? So sometimes you might see, you know, like gov deals dot com or what I like, that they might go up there if it's like a quasi public or public terminal. There's a whole different, like empty boxes, you can usually kind of find a donation program into the local community of people who might want them. The goods inside, I mean that it's, it's always kind of case by case. You don't want to get stuck with spoiled food, you don't want to get stuck with spoiled…
- Yeah, when you were talking about the shrimp, I'm like, oh, that's disgusting. I hope that they have like proper, you know, disposal requirements, do they have proper disposal requirements for something like that? If, if it goes.
- I'm sure they do. You know, I'm sure they do. And so you might even get like, I mean, I don't, I don't, I don't know. It's usually, there's some sort of like, it's oftentimes prepackaged. And so it's kind of usually, maybe it might even be pre labeled to wherever it's going.
- Probably burned up or something. Incinerated.
- Yeah, yeah, yeah.
The fate of containers lost at sea
Lauren explains that the terms of the insurance is important when it comes to the fate of containers lost at sea.
- What about the containers that are lost at sea? I follow a lot of those, you know, mariner Tiktok videos and I see, you know, random, like containers just dropping off in the middle of the ocean. One Tiktok video actually showed, you know, another boat finding a container in the middle of the ocean and they opened it up to find, you know, it filled with cigarettes and so all the, you know, the people on the boat are taking cigarettes from the abandoned container. What happens to a container out at sea? Is it just, you know, a free for all for whoever grabs it first.
- It kind of depends on like what the terms of the insurance were. I mean, that's, that's certainly something that's part of it. But sometimes it's finders keepers, like as the like childhood. It's, that's a real thing that, that's kind of rooted in, maritime.
- I love that.
- Sometimes that, that happens actually right now. I guess there's a container that went offshore, off the, off the coast of Alaska. And so there's just a bunch of Yeti coolers that are washing ashore and people, I mean it's kind of like, I don't know, I guess you could try, it's kind of like does the owner claim ownership and maybe you have a certain number, you know, there's kind of, how can you prove that that actually came like serial numbers and all that. But yeah, I mean, I, I think for the most part there's a lot of lucky people that are saying…
- Yeah, because I mean I immediately thinking like Alaska doesn't need to keep stuff cold in a Yeti cooler. I wish that thing would have, you know, been abandoned off the coast of Florida.
- I know right. I know. Well, I mean, I guess they have more bears. Right? So like maybe they do have the very true ruggedness of the Yeti.
The Jones Act
The Jones Act is the act that protects the US flag fleet. Lauren provides an overview of the pros and the cons.
- Last one on this list is the Jones Act, which I know is probably one of the more, it feels like the most complex out of all of these that, but, but maybe correct me if I'm wrong, give us a back story of the Jones Act because I hear a lot of people calling for it to just be dismantled altogether. And then other people, Sal Mercogliano, former guest of Maritime Means…, has, you know, debated on this subject as well. Give us the backstory of the Jones Act and how it's still needed or not needed in today's time.
- Yeah, so the Merchant Marine Act of 1920 is what the Jones Act is rooted in. And so it's been around for quite some time, obviously. Right, Merchant Marine Act of 1920. There's a couple different layers. What it's kind of in short known for is the promotion of the US flag fleet. And so promotion said another way is kind of protection of the US flag fleet and so that they're in kind of lies the trouble. Some people see the Jones Act as, so it's a requirement for US trade to be US flagged, US owned, US mostly built because I think that there's some, there's some exceptions that can happen. What that does is provides jobs for merchant mariners. Right? So we have all of these maritime academies, we have them all over the country and then we have the king's point as well. And so we're cranking out these mariners but then we maybe don't have as many jobs for them and certainly there's some benefit to the Jones Act as well because so okay, you say, well what does it matter if we have a US flag vessel going? You know, we have these foreign flag vessels that are moving goods from China to LA. Why can't we just have them doing LA to Oakland? Well they do but they don't actually move the goods from LA to Oakland. They might transship but they're not allowed to pick up in LA and drop off in Oakland. That's part of what the Jones Act protects against. So that's where you have kind of a dedicated cabotage is what it's called. But basically like domestic trade of just a US flagged vessel could do that. So that could either be over the road, you know, trucking, that could be barged or that could be a US flagged vessel. And so we see the US flag a lot like Hawaii to the West Coast or even Puerto Rico to Florida. And so what that does is okay so maybe you kind of start to think, well what does it matter for that? But would you want a foreign flag vessel traversing up the Mississippi or like having the entire Mississippi just flooded with maybe not so friendly flag vessels coming in. You know there's kind of like national security element to, okay well yeah maybe I want to protect that. Maybe I don't want these foreign vessels carrying oil up the Mississippi. You know, I want them stopped at Houston. Okay so that's kind of one way to protect it in general. I mean it's providing the opportunities for the mariners. And it provides us this opportunity to have a ready reserve fleet. So we have a litany of naval vessels out there and and we have a litany of just general DOD, Department of Defense, and just general kind of military based vessels. But if we're in war, I mean you know certainly aviation has a big component to kind of any modern day war, but also you have to get a lot of stuff to be fuel or equipment or whatever that's probably gonna be going over the ocean. And so what we need is some of those vessels that are US flagged to be able to flip over and turn into kind of a defense based vessel. And so that's another reason for the kind of promotion of a US flag fleet and building it up. And so the trouble is really that it used to be well funded. We used to have a really robust shipbuilding kind of society. And we've just lost the funding to support this kind of otherwise protecting legislation. And so legislation without that funding is creating this imbalance or at least I think in part is creating this imbalance. And so if we're gonna have the Jones Act, if we're gonna stick by it, we have to support it. If we're not gonna stick by it, then get rid of it right? Like you know, and I'm certainly not by any means proposing, suggesting that we get rid of it, but I am saying we need to support it, like, we can’t have a hobble along like it's doing right now. We really need to have a more robust and more rigorous shipbuilding society that can handle cranking out these vessels. We're seeing in the offshore wind industry right now because that's something that is going to be Jones Act kind of adjacent. And I say adjacent because they are allowing for a vessel to go from a US port out to a platform. And then they're gonna have to drop off some of the goods to this platform so that a foreign vessel can come pick it up and install it. Because we just don't have US flag installation vessels. And we can't build them fast enough for all these offshore wind projects that are coming on deck. And so how sad, right? Like this could have been a great US flag fleet building up moment. And okay so what is a cable layer or a turbine installer vessel going to do for this ready reserve fleet? You'd be surprised, right? It's another vessel, it's another vessel that we could potentially be using. But more than that it would be providing great opportunities for our merchant mariners that were like I said cranking out in the industry in the US here. So it is controversial but I think that it really kind of comes down to the controversy of we've let it kind of float out there with no gas anymore, you know, like and so like we can't just let it become a ghost ship, you know, part of the metaphor but we we have to kind of go support it and if we're if we are gonna keep it let's support it. And let's see, you know, let's get behind that.
- Do any other countries have a similar sort of Jones Act? Or is this kind of like US based or relative to the US only?
- Yeah, they do actually. So it was, I believe roughly based off a UK prior law. And so I was actually gonna be covering that in one of my, after the new year, because I just came across some information saying that kind of our Jones Act was roughly rooted in UK previous kind of protectionistic type activities. But cabotage, so like domestic trade, certainly isn't unique to the US, where you know from going from one domestic port to another is required to be without exception you know a domestic flag vessel that's seen elsewhere.
The Maritime Transportation Data Initiative
Lauren gives an overview of what The Maritime Transportation Data Initiative (MTDI) aims to achieve. In summary it is cataloging maritime data elements, metrics, transmission and access.
- Alright, so so last one on this list as far as like the big picture, you know, legal areas of maritime is this Maritime Transportation Data Initiative. Give us the backstory, why it's important if any, you know, changes need to be made to it or if it's fairly new, I believe it's fairly new.
- Very new. Yeah. So this is an initiative out of the Federal Maritime Commission. So it was directed by the chairman Dan Maffei. He directed one of the commissioners, so there's five commissioners at the FMC. And so there's the chairman and then four commissioners. And so Commissioner Carl Bentzel is the one who's standing this up essentially. So it's the Maritime Transportation Data Initiative and what he's been trying to do, he's put out that there's three key objectives that he's kind of diving into. So it's cataloging the status quo and maritime data elements, metrics, transmission and access. It's identifying key gaps in data definitions and classification. And third developing recommendations for common data standards and access policies and protocols. So essentially, I mean, to kind of distill all that down, he's trying to figure out what data do we already have available that we're just not sharing with each other that we have no problem sharing with each other. Right? I mean, it's just like, oh you didn't you didn't know that, that this is when it came in. Why? How didn't you know? Well, I don't have a password dear system. You know, like it's kind of so he's trying to find where we have those missed opportunities. Kind of like the I don't know like the classifieds like you know redhead looking for brunette on train 5 to 8 like on saturday at 10 a.m. So you know like he's kind of trying to find those moments so instead of having these like lost in passing he wants to figure out okay who has what data and is it cool to share it with each other? To trying to find some of those moments. But then also as I kind of talked about earlier there's a few different definitions that kind of run rampant in the total overall freight industry, detention demurrage being kind of two great examples of that because demurrage and detention are often called per diem. Or you know, like I don't know, dwell fees or there's all these different things and the FMC is kind of in general coming out and saying look quack like a duck we're gonna call it a duck. I don't care what you call it but we're calling it demurrage and if it's quacking, I don't care what you're calling it instead. We're all calling it demurrage now. And so that's kind of the starting point of where this MTDI through commissioner Bentzel is going. They’re working with a couple different classification kind of societies out there, some associations that are already creating some standards. So I know that the MTDI has been working with the Digital Container Shipping Association. There was an article that came out on the DCSA’s website talking about, they're working with the FMC on this. There's a lot of stakeholders that are involved here and really they are trying to kind of come up with those common data standards, those common data moments to figure out how we can move forward as an industry. And really make things faster. Right? I mean if we can at least get definitions in sync, if we can get the data like what we already know that people aren't protective over, you know that they don't have any kind of business secrets to it. That's, I mean, it's a big ask, right, this is a big project out of Commissioner Bentzel’s office but that's what this is doing. And he interviewed a whole host of different stakeholders from December 2021 all the way through June 2022. And actually they're all up on the FMC’s YouTube channel if you would like to kind of see what stakeholder conversations he was having. We'll see where this goes. I'm really interested. He's been doing a lot of fact finding, kind of he's still kind of in that research stage. But I think he's starting to turn it into, well where do we take it next? What do we turn this into? Is this a regulation? Is this guidance, you know, what is all this information? How do we, how do we use it?
- I love that because there's so many different, you know, we speak you know, just within any in any industry about the importance of data but is that data standardizes it, you know, are we all working off of the same definition? So it sounds like this is something that probably should have been, you know, typical government form probably should have been done 10, 20 years ago but it's finally getting addressed so that's good news at the end of the day that we do have, you know these types of initiatives that are going on switching gears a little bit as we kind of, you know, round out this interview.
The need for greater awareness about the maritime industry
In this chapter Lauren explains the importance of discussing maritime topics. The more people understand maritime, the less mysterious the supply chain gets and the less likely we are to have these real big problems that we've had over the past few years.
- Let's talk about the creator side of things because you're a creator, you've entered the, you know, the maritime industry for or you've been in the industry for a long time. The owner of Squall Strategies and so you're using your different, you know, social media platforms and things like that in order to you know promote whatever is going on in the industry and part of that is having conversations like this. But I wonder where did that passion start for you to say, you know, there needs to be greater awareness, there needs to be greater education out within the maritime industry. What made you get started with creating that general awareness?
- Yeah great great question. So you know I worked for the Federal Maritime Commission for a while. I was down in DC. Working there, loved it. I just had a great time but had, you know, had a boyfriend who didn't live in town, you know, so we were doing long distance and so we got engaged and I mean this is all the personal side of how the business came to be. But we were trying to decide do we stay local, or do we go up to Rhode Island, where he was living or do we stay in DC. You know we ultimately decided to move up north. I was so fortunate to get a job at the Port of Boston. So I got to see kind of the helicopter federal regulatory side of the Federal Maritime Commission. But then I got to see the boots on the docks portside, which gave me a really interesting perspective of what it felt like to be a user of the industry. And they say if you've seen one port, you've seen one port. But to actually see the inside workings of a port, was really just so, I told anybody who was down kind of on the docks, let me know when anything interesting happens if a vessel comes in and just wants to take water. I want to see it. Like if they're offloading cargo, I want to see it. I want to see every piece of it. I wanna smell it, I want to see it. I wanna feel it. So I just became this like, okay, someone called Lauren, she wants to see it, you know. So I just like consumed it and then Covid happened and everybody kind of got sent home and you know, I was, I was also kind of longing for the days of having the national international conversation. So when I was at the Federal Maritime Commission, I was an attorney advisor in the general counsel's office and I was our international affairs attorney. I was part of the US government team for negotiating international bilateral multilateral. You know, if the politicians weren't going themselves, I was either prepping them to go or I was the kind of principle from the agency and so it gave me great opportunities at a really young age. But then I kind of found that I was missing that once I, I kind of scooted over into regional. And then Covid happened, like I said, I wasn't really able to see, you know, the docks anymore. And, and you know, just the whole reshuffle of Covid, I'd always wanted to do this consulting thing. I thought I probably was going to have to wait until I like pseudo retired. But I thought, you know what a great opportunity, everybody's comfortable with virtual meetings, I wouldn't have to travel. We have a fairly young family. So I was like, how do we, how do I make this work? So I hung out a shingle at 8.5 months pregnant with my second and was just like, let's just do it. And so I kind of sat there and I thought, look, I have the resume, I have the experience. I certainly have the know-how, and I have a unique perspective, but how do I sell that to people? How do I tell people? And you know, I was also annoyed at all the LinkedIn, you know, promotional messages that people get and I was like, I'm a free agent, nobody can tell me what I'm allowed to or not allowed to say like I'm no longer a government or pseudo government employee.
And so I was like, oh man, like the world is my oyster now. So, I think I had done a couple podcasts, I think my first one actually was with Dooner and The Dude. Dooner had just kind of found me, I think I started to kind of dabble in type and some, you know, putting some maritime content out there, just like, here's what I think, what do you guys think, but I was so nervous that somebody was gonna come after me saying you're saying it wrong or you're doing it wrong. And I remember those first few months just through and through my head, I just kept saying, fear is the thief of success, like pushed through it, fear is the thief of success, like you're just because you're afraid of, it doesn't mean that it's real. So I just kind of kept pushing and like, you know, you get a couple of people being like, oh I want to correct something you said and I was like, okay, but 80% of the people that I'm saying it to don't know anything about it, so like even if it's a little bit wrong, it's still mostly right and I'm educating somebody, so that's kind of where I took, it was initially, it became this telling people the things I know to try to get their attention to be like, oh she's somebody that maybe I could hire. But then I found a lot of the questions I was getting weren't necessarily legal. They were like, we love you, we think you're great, but we don't really have a reason to hire you as a lawyer, so that's why I created the second company, the Maritime Professor, because I found there was really this appetite for understanding more about, you know, a lot of times, the other side of the freight industry. So because I kind of connected with Dooner early, I got a lot of attention from the surface side. So I got a lot of attention from truckers or, you know, shippers that just wanted to know more about this mysterious ocean side of things. And kind of, they, you know, demurrage detention, these charges were racking up. So they wanted to know what the heck does that mean? What is moving right now? Like what's, what's happening in the, on the Federal side of it? And so, that's what I started to do. And so I started doing LinkedIn Lives. I started doing some YouTube, you know, you kind of just throw things at the wall, see what sticks. And so some of my, my initial, my original YouTube's are pretty bad, but I mean you gotta start somewhere right.
- I love that, mine are too, you got to start somewhere and the only way you get better is is by getting those reps in. You've mentioned, you know, Dooner and The Dude a couple of times for folks who don't know, they're the host of What the Truck over on Freightwaves mostly on, on the trucking side of things. But I was a lot like them, you know, I, I come from the trucking side of things. So this podcast Maritime Means…, you know, it's been a really, it's been a really fun journey into the world of maritime and being able to talk to folks like you who have that area of expertise where we can continue, you know, the learning process of learning the intricacies of the global supply chain. So really, really thankful for, for you and all of your expertise that you are sharing with us today.
What’s on the horizon for 2023
Lauren shares her views on what is on the horizon for 2023. She thinks we're gonna see a lot more cleaning up. It used to be the Wild Wild West. Now there's gonna be a few rules, it's gonna be light touch.
- As we kind of, you know, close out this conversation and this chat, what do you have on the horizon for 2023? Are there any stories that, you know, maritime professionals should be on the lookout for? What are you on the lookout for? That we should be on the lookout for? You know, all that kind of good stuff.
- Right off the bat, I just want to say I'm so excited for, for Spire to have this Maritime Means… podcast because I love the attention, there's so much room for everybody here to, to be discussing maritime and the more that people understand about it, the less mysterious the supply chain gets generally and the less likely we are to have these real big problems that we've had over the past few years, I mean we got to break down these silos and so that's what I kind of always try to do and I love that this is a maritime focused podcast. So, so the things that I'm looking for is I think detention demurrage gets cleaned up. You know, maybe not big big moves, but I think that there's some broad brush strokes that the FMC is going to be putting out there. We have the 13 invoice requirements that came out from Azra. But I think we're gonna see a lot more of really just kind of cleaning it up. It used to be the Wild Wild West. Now there's gonna be a few rules and not a lot of rules, it's gonna be a light touch. But I think we're gonna be surprised to see how fast that cleans up the industry at least from that side because detention demurrage, they're supposed to be incentivizing people not just leaving their stuff everywhere, you know, getting their stuff out of these boxes, it became a profit line. It's not supposed to be a profit line, it's supposed to be found money. And I think it was relied on to be a profit line and that's just not how it should be treated. I think we're gonna see finally some movement on the ILWU and the Pacific Maritime Association, the Labor Agreement on the West Coast. I'm not sure what it's gonna look like though. I think that that's really the big X factor. I think that's why we're seeing New York, New Jersey is our number one import port in America right now or I don't know if they're important, but the busiest port in America right now. I think because in part people wanted to move away from the, you know, mystique or not mystique but the not knowing that what was gonna happen on the West Coast and so there's a little bit more reliability. The East Coast ports have met that challenge. They've been investing in infrastructure for years now. I mean right, they can't just flip a switch and have a new crane, that those takes years of planning and they just happen to be kind of hitting at all at the right time. So I think we're gonna see that, I think we're gonna see a lot more diversification of ports of entry. You know, maybe people are going to be starting to use some medium sized carriers instead of just the big big guys. Just because that makes it more options for which ports they can come into. So if we do have backups, you can still come into a smaller port with your goods. So I don't know, I think we're gonna see, and I think a return to normal. I think we're gonna see a balance in the power struggles that were shippers and carriers previously. I think everybody's looking forward to that nobody's gonna walk away entirely happy. But I think we're gonna have a lot less real bad heartburn that we've had over the past two years but I'm hopeful, I think that we are, I love the attention on the maritime industry. I think that that's such an important step. I love podcasts like this Spire Maritime Means… because I think that this is really, really bringing light to the area of the industry that was kind of a forgotten sector for a while. So I'm happy to be here. Happy to be part of this.
- Very well said, love that. I love all the compliments for Spire because obviously we're a little biased over here. Now Lauren, where can folks follow you? Follow more of your work Squall Strategies, you know, all your platforms.
- Sure. So Squall Strategies is my legal company. So, certainly if you have any legal questions, feel free to reach out to me there: squallstrategies.com. And then I also have the Maritime Professors that's that non legal e-courses are gonna be dropping soon. Just kind of trying to help the industry and just help anybody who's interested in learning a little bit more about the maritime side. You know, if you want a 1-0-1 on what the Federal Maritime Commission is, I'm gonna have a course for that. And so it's the maritimeprofessor.com. I also host a podcast on Fridays. It's LinkedIn live at 1pm on Fridays. And then it gets posted to the podcast later in the afternoon. It's called By Land and by Sea, presented by the Maritime Professor. It's an attorney, breaking down the week in the supply chain. So we kind of cover everything. I'm all about translating the industry for everybody to understand. It shouldn't be a mysterious thing. It shouldn't be only legalese, it should be like, okay, here's what's going on, here's what's happening, here's why it's complicated and here's, here's what it actually means.
- Love that. That's a big reason why we wanted to have you on the show. So, so appreciate all of your time, Lauren and sharing all of your insights. You've given us a lot to be on the lookout for in 2023. So I encourage everybody to go and follow more of your work. We will list, you know, all of your, your links in the show notes, just to be sure. But thank you again, Lauren for coming on Maritime Means…
- Thanks so much Blythe. This is great.